Professional Documents
Culture Documents
1. Lorna Savings & Loans had the following activities, traceable costs, and physical flow of driver units:
Activities Total Overhead Costs
Open new accounts ₱50,000
Process deposits 36,000
Process withdrawals 15,000
Process loan applications 27,000
Physical total cost driver units are 1,000 new accounts, 100,000 deposits, 120,000 withdrawals and
400 loan applications. These activities are used by the Jennie branch and the Carla branch of Lorna
Company. Remaining cost driver units are used by other Lorna Saving Branches.
Jennie Carla
New accounts 200 400
Deposits 40,000 20,000
Withdrawals 12,000 18,000
Loan applications 100 150
REQUIRED:
a. Process deposit cost allocated to the Jennie Branch
b. Process withdrawal cost allocated to the Carla Branch
c. Total overhead cost assigned to the Jennie Branch
d. Total overhead cost assigned to the Carla Branch
SOLUTION:
Activities
Accounts = 50000/1000
Deposits = 36000/100000
Withdrawals = 15000/120000
50 x 200 = ₱ 10,000.00
₱ 32,650.00
50 x 400 = ₱ 20,000.00
₱ 39,575.00
2. The Maryan Co. uses estimated number of Machine hours in allocating factory overhead, however
they would want to know the effects of using ABC Costing. These data were available:
Activity Cost Driver Budget Activity Budget
Amount
Material Handling Number of parts handled 7,200,000 ₱1,080,000
Set-up Cost Number of set-ups 1,000 500,000
Machining Costs Machine hours 50,000
650,000
Quality Control Number of batches 800 480,000
Additional information:
SOLUTION:
3. The resource utilized by a given product divided by the total amount of the resource available is
called the Consumption Ratio
4. The segment for which you are estimating the cost is called the Cost Object ?
5. Any activity the causes the costs to be incurred? Cost Driver
3. Deborah Lane, general manager of the Northwest Division of Berea Enterprises, has significant
authority over pricing decisions as well as programs that involve cost reduction/control. The data
that follow relate to upcoming divisional operations:
REQUIRED:
a. Based on the information provided, calculate return on investment for the year.
b. Top management will promote Deborah if she can earn 20% return on investment for the year.
What unit selling price should she establish to get her promotion?
c. Independent of items 5 and 6, assume the unit selling price is ₱132 and that Berea has a 16%
imputed interest. Compute for residual income.
d. Based on the information provided in letter c above, top management will promote Deborah to
corporate headquarters if her division can generate ₱200,000 of residual income. If Deborah desires
to move to corporate, what must the division do to the amount of annual fixed costs incurred?
SOLUTION:
OI 2,600,000.00
IT (2,400,000.00)
RI 200,000.00
Responsibility Accounting - performance reporting system decentralization
4. The Sandara Company has two divisions, the Battery and the Auto Division. The Battery Division
manufactures standard 12-volt battery available for its regular customers. Given the following
independent cases, determine 1. Minimum transfer price; 2. What should be the optimal action of
Sandara Company.
CASE 1
The Battery Division makes a standard 12-volt battery
Production capacity 300,000 units
Selling price per battery ₱40 (to outsiders)
Variable costs per battery ₱18
Fixed costs per battery ₱7 (at 300,000 units)
The Battery Division is currently selling 300,000 batteries to outsiders at ₱40. The Auto
Division can use 100,000 of these batteries in its X-7 model. It can purchase them for ₱38
from an outside supplier.
CASE 2
The Battery Division makes a standard 12-volt battery
Production capacity 300,000 units
Selling price per battery ₱40 (to outsiders)
Variable costs per battery ₱18
Fixed costs per battery ₱7 (at 300,000 units)
The Battery Division is currently selling 150,000 batteries to outsiders at ₱40. The Auto
Division can use 100,000 of these batteries in its X-7 model. It can purchase them for ₱38
from an outside supplier.
CASE 3
The Battery Division makes a standard 12-volt battery
Production capacity 300,000 units
Selling price per battery ₱40 (to outsiders)
Variable costs per battery ₱18
Fixed costs per battery ₱7 (at 300,000 units)
The Battery Division is currently selling 250,000 batteries to outsiders at ₱40. The Auto
Division can use 110,000 of these batteries in its X-7 model. It can purchase them for ₱38
from an outside supplier.
SOLUTION:
TP Bargaining Range
CASE 1 Capacity Min TP = 40
Max TP = 38
Therefore, no
transfer
CASE 2 Idle Capacity Min TP = 18
Max TP = 38
Therefore,
transfer
CASE 3 No Capacity
Production 300000
Selling 250000
Idle 50000 MIN TP = 30
Needed 110000 MAX TP = 38
Deficit 60000 Therefore,
transfer
CM/unit x 22
CM lost 1320000
/ units 110000
Per unit 12 + 18 = 30
*Balanced Scorecard
SOLUTION:
c. 2 = 1000000/x = 500000
1. Advocates of variable costing for internal reporting purposes do not rely on which of the following
points?
a. The matching concept
b. Price-volume relationships
c. Absorption costing does not include selling and administrative expenses as part if inventoriable
cost
2. Net profit under absorption costing may differ from net profit determined under direct costing. How
is the difference calculated?
a. Change in the quantity of all units in inventory times the relevant fixed costs per
unit.
b. Change in the quantity of all units produced times the relevant fixed costs per unit.
c. Change in the quantity of all units in inventory times the relevant variable costs per unit.
d. Change in the quantity of all units produced times the relevant variable costs per unit.
3. The following data relate to Man Company, a new corporation, during a period when the firm
produced and sold 120,000 units and 115,000 units, respectively:
Direct materials used ₱430,000
The company met its original planned production target of 120,000 units. There were no variances
during the period, and the firm’s selling price is ₱15 per unit.
REQUIRED: a. Cost of end-of-period finished-goods inventory under VC & AC b. Net income under
VC & AC
SOLUTION:
5.50 10 AC VC
DM
DL 5000 5000
FOH 3 x 10 x7
VOH 1.5 a. 50000 35000
FOPEX
VOPEX 0.5
S ₱ 1,725,000.00 c. S ₱ 1,725,000.00
VC 862,000.00 CGS: B
-
CM 862,000.00 P
1,200,000.00
FOPEX&FOH (660,000.00) E 1,150,000.00
(500,000.00)
OI ₱ 202,500.00 GP
575,000.00
VOPEX
(57,500.00)
FOPEX (300,000.00)
OI ₱
217,500.00
4. Mentor Co. uses the standard costing based on the following data for at 12,500 units normal
capacity:
Factory overhead
REQUIRED: a. Product unit cost under normal capacity b. Volume variances in Feb. and March
c.NI - VC & AC
SOLUTION:
a. 23.8 (8+5+6+4.8)
b. 500 x 4.8 = 2400 U
(12500 x 9000) x 4.8 = 16800 U
c. FEBRUARY
VC AC
S S 418,500.00
418,500.00
VC (310,500.0 CGS:
0) B 321,300.00
CM P 2,400.00
108,000.00
FC E (323,700.00)
(84,000.00) -
OI GP 94,800.00
24,000.00
OPEX (78,000.00)
OI 16,800.00
MARCH VC AC
S 254,200.00 S 254,200.00
VC 188,600.00 CGS:
B 195,160.00
CM 65,600.00 P 16,800.00
FC E (211,960.00)
(84,000.00) -
OI (18,400.0 GP 42,240.00
0)
OPEX (56,800.00)
OI (14,560.00)
To reconcile: NI - AC 16,800.00
+ BI FOH 9,600.00
- EI FOH (2,400.00)
NI - VC 24,000.00
To NI – AC (14,560.00)
reconcile:
+ BI FOH 2,400.00
- EI FOH (6,240.00)
NI - VC (18,400.00)
1. The December 31, 2016, balance sheet of Tinay, Inc. is presented below. These are the only
accounts in the balance sheet. Amounts indicated by question mark (?) can be calculated from
additional information given.
Assets:
Cash ₱25,000
Accounts receivable (net) ?
Inventory ?
Property, plant and equipment (net) 294,000
Total ₱432,000
Liabilities and Stockholders’ Equity:
Accounts payable (trade) ₱ ?
Income taxes payable (current) 25,000
Long-term debt ?
Common stock 300,000
Retained earnings ?
Total ₱ ?
Additional Information:
Current ratio (at year end) 1.5 to 1
Total liabilities divided by total stockholders’ equity 0
Inventory turnover based on sales and ending inventory 15 times
Inventory turnover based on cost of goods sold and inventory 10.5 times
Gross margin for 2016 ₱315,000
SOLUTION:
2. AM Company has current ratio of 2.5 to 1; the acid-test ratio is 0.9 to 1; cash and receivables are
₱270,000. The only current assets are cash, receivables, and inventory. (a) What are the current
liabilities? (b) How much is inventory?
SOLUTION:
a. CR = CA/CL ATR/QR = CA - In / CL = 270000
0.9
= 300000
b. 300000 x 7.5 = 750,000.00
(270,000.00)
480,000.00
3. The ABA Co. management asked you to submit an analysis of the increase in their gross income in
20-5 based on these comparative data:
20-5 20-4
Net sales ₱1,237,500 ₱1,000,000
Cost of sales 950,000 800,000
Gross profit ₱ 287,500 ₱ 200,000
REQUIRED: If unit sales prices increase by 12.5% in 20-5, analyze changes in gross profit.
SOLUTION:
a. CY Sale 1,237,500.00
PY Sale @ CY USP
(1000000 x 112.5% 1,125,000.00
= 10%
Change in Volume 112,500.00
b. 3 Factors
1. Quantity
200000 x 10 % = 20000 F
2. Price
CY Sale 1,237,500.00
PY Sale @ CY Volume
(1000000 x 110%) 1,100,000.00
Change in Price 137,500.00 F = 12.5%
3. Cost
CY Cost 950,000.00
PY Cost @ CY Volume
(800000 x 110%) 880,000.00
Change in Cost 70,000.00 U = 7.95%
TOTAL 87,500.00 F
5. Formula of DPS, EPS, Diluted EPS, Dividend Yield and Dividend Payout.
ANSWER:
Accounts payable 45 39
Common stock 90 70
Retained earnings 150 138
Total liabilities and equity ₱285 ₱247
COST-VOLUME-PROFIT ANALYSIS
1. The Moen Corp sold 150,000 units of its product for ₱20.00. Variable cost per unit is ₱14 and total
fixed costs amount to ₱792,000.
REQUIRED:
a. Breakeven point in units and in pesos
b. The number of units in order to earn pre-tax income of ₱60,000
c. The number of units in order to earn net-of-tax income of ₱90,000, 40% tax
d. Margin of safety
e. Operating income
f. Degree of operating leverage
SOLUTION:
a BEPunits = 792000/6
.
BEPsales = 792000/30%
2. Below is an examination of Marlow Co. financial data. Labor hours and production costs for its sole
product O for the last four months of the year were given below:
Months Labor Hours Total Production Costs
September 25 ₱200
October 35 250
November 45 300
December 35 250
REQUIRED:
i. Using least square method, the fixed monthly production costs of Product O is
a. ₱100 b. ₱250 c. ₱75 d. ₱200
ii. If there are approximately 38 labor hours for January of next year, how much will be
budgeted total production costs for Product O for January?
a. ₱265 b. ₱250 c. ₱300 d. ₱190
SOLUTION:
b. y = a x bx
= 75 + (5 x 38)
A = 265
.
STANDARD COSTING AND VARIANCE ANALYSIS
1. The Shama Co. standard costs on a per unit basis for its major product SH were as follows:
Materials 2 kilos @ ₱3.33 per kilo ₱6.66
Labor 1.5 hrs @ ₱6.00 per hour 9.00
Factory overhead
(based on normal capacity of 5,000 units, and 7,500 labor hours)
Variable portion at ₱0.20 per hour 0.30
Fixed portion at ₱0.40 per hour 0.60
Total standard per unit ₱16.56
SOLUTION:
a
. DM variances
(3.30 - 3.33)
1. Price = 14000 = 420 F
(12500 - 12000)
2. Quantity = 3.33 = 1665 U
= 1254 U
SQ = 2 x 6000 = 12000
b
. DL variances
1. Rate = (6 .00 - 6.00 )
8950 = 0
(8950 - 9000)
2. Efficiency = 6.00 = 300 F
= 300 F
c
. OH variances
4 - Way:
3050 - (5000 x
1. FOH Spending = 0.60) =
3050 - (7500 x = 50 U
or = 0.40) =
2. VOH Spending
= (5120 - 3050) - (8950 x 0.2)
= 2070 - 1790 = 280 U = 280 F
3. VOH Efficiency
= [8950 - (6000 x 1.5)] 0.20
= (8950 - 9000) 0.20 = 10 F
4. Volume = (6000 - 5000) 0.6
3000 - (6000 x = 600 F
or = 0.6)
3 - Way:
1. Spending = 5120 - [3000 + (8950 x .20)]
= 5120 - (3000 +
1790)
= 5120 - 4790 = 330 U
2 - Way:
5120 - [3000 + (6000 x 1.5 x
1. Controllable = 0.20)]
or = 5120 - [3000 + (6000 x 0.30)]
5120 - (3000 +
= 1800)
= 5120 - 4800 = 320 U
PROCESS COSTING
1. Alberto Company has the following information for July: Units started, 100,000; Beginning work in
process, 20,000 units (35% complete); Normal spoilage, 5,000 units; Abnormal spoilage, 3,500
units; Ending work in process, 14,500 (70% complete); Transferred out, 97,000 units; Beginning
work in process cost: Materials, ₱15,000; Conversion, ₱10,000. All materials are added at the start
of the production process. Alberto inspects goods at the end of processing.
REQUIRED: Determine the EUP for materials and conversion, using FIFO and weighted average
method.
SOLUTION:
FIFO AVE
Conversio Conversio
Materials n Materials n
BI
- 13,000.00 97,000
Completed and .00 97,000.00
transferred SC 77,000.00 77,000.00
REQUIRED:
a. Work in Process Inventory, beg.
b. Work in Process Inventory, end
c. Cost of Goods Manufactured
d. Total Cost to Account For
SOLUTION:
a
. Transferred in 10000 x 13.85 = 138500
Materials 10000 x 5.00 = 50000
Conversion 7000 x 10.50 = 73500
WIP, beg. = 262000
b
. Transferred in 37000 x 14.00 = 518000
Materials 37000 x 4.75 = 175750
Conversion 22200 x 11.50 = 255300
WIP, end. = 949050
c
. BI Cost 262,000.00
Cost to complete
BI
CGM 7,738,000.00
JOB-ORDER COSTING
1. Below are the balances and information taken from the records of Federal Company for the last
quarter of the current year, 2018:
Inventories:
Raw Materials, October 1 - ₱134,000
Work in Process, October 1 – 354,000
Finished Goods, October 1 – 594,600
Factory Overhead Control – Debits, ₱4,200,000; Credits, ₱4,600,000 (January to September)
Cost of Goods Sold – January to September – 10,200,000
Supplementary information:
a. During the last quarter, purchases of raw materials totaled ₱1,093,400, while physical count of
raw materials revealed that ₱250,000 were unused.
b. Direct labor hours of 39,800 were utilized as follows:
25,000 hours worked on regular time at regular rate of ₱42.50 per hour;
14,000 hours worked at regular rate plus 10% special night premium
800 hours worked on overtime at regular rate plus 30% overtime premium
c. Overhead is charged to production at 80% of direct labor cost.
d. Actual overhead incurred was ₱1,420,000 including indirect materials of ₱12,000 but excluding
special night and overtime premium. Overhead variance is closed to all accounts with overhead
elements at the end of the year.
e. At the end of the year, records show that Work in Process Inventory increased by ₱80,000 while
Finished Goods Inventory decreased by ₱150,000.
REQUIRED:
a. Determine the factory cost for the last quarter.
b. Determine the cost of goods manufactured for the last quarter.
c. Determine the under(over)applied factory overhead for the year ended December 31, 2018.
SOLUTION:
a Sales 319,000.00
.
CGS: B 73,800.00
P 43,200.00
E 8,100.00 (125,100.00)
GP 193,900.00
OE (47,850.00)
OI 146,050.00
OI-BP 20,250.00
166,300.00
b Sales 319,000.00
.
CGS (117,000.00)
GP 202,000.00
OE (47,850.00)
OI 12,150.00
OI-BP 166,300.00
c Sales 319,000.00
.
CGS (106,065.00) [117000 - (12150 x
90%)]
GP 212,935.00
OE (47,850.00)
OI 165,085.00
SOLUTION:
CASE 1:
a
. = 1800000 - 80000/200000
= 8.6
b
. = 1800000/200000 + 20000
= 8.18
CASE 2:
a
. = 1800000/200000
=9
b = 1800000 + 170000/200000 +
. 50000
= 7.88
CASE 3:
a
. = 1800000/200000
=9
b
. = 1800000 + 680000/250000
= 9.92
=9