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I. THEORY QUESTIONS: This will help you indicate the classification of cost.
Instructions:
Answer the following questions and provide the necessary requirements.
II. PROBLEM SOLVING: This will help you develop your analytical capabilities and
judgment.
Instructions:
Read each problem carefully and provide the necessary requirements.
Problem 1. Classify each of the following costs of Bug Company in two ways:
(a) as variable (V) fixed costs (F); (b) as inventoriable costs (I) or period costs
(P): (20 points)
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
Problem 2 (20 points)
The financial statements of BBM Company included these items:
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
Problem 4 (40 points)
Dutertz Ltd recorded the following costs for the past six months:
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
B. Using Least Square Method.
a. Estimate the fixed cost per month - 3,628.01
b. Estimate the total costs for the following activity levels in a month
75 units - 9,132.8
90 units - 10,233.7
SOLUTION:
FORMULA: FORMULA:
𝑛 ∑ 𝑥𝑦 − (∑ 𝑥)(∑ 𝑦) ∑𝑦 − 𝑚∑𝑥
𝑛 ∑ 𝑥 2 − (∑ 𝑥)2 𝑛
SOLUTION: SOLUTION:
43,818 21,768.060301512
597 6
b - Variable production cost per month a - fixed production cost per month
= 73.3969849246 or 73.40 = 3,628.010050252 or 3,628.01
FORMULA:
Y = a + bx
SOLUTION:
Y = 3,628.010050252 + 73.3969849246 (90)
Y = 3,628.010050252 + 6,605.728643214
Y = 10,233.738693466 or 10,233.7
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
The maintenance costs and machine hours (the selected cost driver) for the
past six months are as follows:
(1,230) was the least number of machine hours but it does not correspond to
the least maintenance cost which is 10,600. In this situation the cost driver or
activity level prevails.
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
SOLUTIONS:
Units Production
Months XY X2
Produced Costs
FORMULA: FORMULA:
𝑛 ∑ 𝑥𝑦 − (∑ 𝑥)(∑ 𝑦) ∑𝑦 − 𝑚∑𝑥
𝑛 ∑ 𝑥 2 − (∑ 𝑥)2 𝑛
SOLUTION: SOLUTION:
2,662,500 26,103
712,500 6
a - fixed production cost per month
b - Variable production cost per month
= 4,350.5
= 3.73684210526 or 3.74
FORMULA:
COST FUNCTION
Y = a + bx
Y = 4,350.5 + 3.74(x)
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
b - Variable production cost per month a - fixed production cost per month
= 22.49 = 708.01
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
SOLUTION:
Highest Activity Cost 5,475
Lowest Activity Cost 3,975
Difference in Activity Cost 1,500
where:
Y - total monthly production costs
X - number of units produced per month
a - fixed production cost per moth
b - variable production cost per month
n - number of months
∑ -summation
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
8 150 4,200 630,000 22,500
9 210 5,475 1,149,750 44,100
10 180 4,760 856,800 32,400
11 170 4,325 735,250 28,900
12 145 3,975 576,375 21,025
n = 12 ∑ 𝑥 = 2,085 ∑ 𝑦 = 55,381 ∑ 𝑥𝑦 = 9,714,785 ∑ 𝑥 2 = 366,375
FORMULA: FORMULA:
𝑛 ∑ 𝑥𝑦 − (∑ 𝑥)(∑ 𝑦) ∑𝑦 − 𝑚∑𝑥
𝑛 ∑ 𝑥 2 − (∑ 𝑥)2 𝑛
SOLUTION: SOLUTION:
1,108,035 8,496.1095889735
49,275 12
a - fixed production cost per month
b - Variable production cost per month
= 708.01
= 22.49
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KERVIN REY G. JACKSON October 1, 2021
COACCON / Sec. 217 UNITS 2 and 3
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