ACTIVITY BASED COSTING

Problem A: The accountant of Hondakars Manufacturing collected the following

information:

Activity Overhead Cost driver Product X1 Product X2

costs
Machining
Dept.
Setup P200,000 Number of setups 200 50
Machining 700,000 Machine hours 20,000 15,000
Packaging
Dept.
Assembly 300,000 Direct labor hours 40,000 60,000
Inspection 180,000 Number of 120 60
inspections

1. If Hondakars Manufacturing uses a plantwide rate based on direct labor

hours to allocate overhead costs, how much is product X1’s share of
overhead?
a. P324,000.
b. P416,000.
c. P638,000.
d. P552,000.

2. If the department allocation method is used, what is the overhead rate for
the Machining department with machine hours as the allocation base?
a. P39.43 per machine hour.
b. P13.71 per machine hour.
c. P20 per machine hour.
d. P25.71 per machine hour.

3. When activity-based costing is used, what is product X2’s share of the

Packaging department overhead costs?
a. P270,000.
b. P240,000.
c. P580,000.
d. P380,000.

4. When activity-based costing is used, how much of the overhead cost is

allocated to product X1?
a. P580,000.
b. P800,000.
c. P950,000.
d. P670,000.
PROBLEM B: VDO Savings and Loan had the following activities, traceable costs,
and physical flow of driver units:

Traceable Physical flow of

Activities Costs Driver Units

Open new accounts P50,000 1,000 accounts

Process deposits 36,000 400,000 deposits
Process withdrawals 15,000 200,000 withdrawals
Process loan applications 27,000 900 applications

The above activities are used by the Morayta branch and the Makati branch:
Morayta Makati

New accounts 200 400

Deposits 40,000 20,000
Withdrawals 15,000 18,000
Loan applications 100 160

5. What is the cost per driver unit for new account activity?
a. P0.09
b. P0.075
c. P 30.00
d. P 50.00

6. What is the cost per driver unit for the deposit activity?
a. P0.09
b. P0.075
c. P 30.00
d. P 50.00

7. What is the cost per driver unit for the withdrawal activity?
a. P0.09
b. P0.075
c. P 30.00
d. P 50.00

8. What is the cost per driver unit for the loan application activity?
a. P0.09
b. P0.075
c. P 30.00
d. P 50.00
9. How much of the loan application cost will be assigned to the Morayta
branch?
a. P3,000
b. P4,800
c. P 7,800
d. P 27,000

10. How much of the deposit cost will be assigned to the Makati branch?
a. P1,800
b. P3,600
c. P 5,400
d. P 36,000

11. How much of the new account cost will be assigned to the Makati branch?

a. P10,000
b. P20,000
c. P 30,000
d. P 50,000