Managerial Accounting Exercises

Directions: Please complete the following exercises, for each exercise, use a separate long bond
paper and write your name clearly at the top of each page. It is crucial to answer all of the exercises.
Once you've completed your responses, compile them in a long folder. Make sure to label this folder or
envelope with your name, and the name of the course. Finally, submit your folder to the office on or
before the specified deadline, November 7, 2023.

EXERCISE NO. 1

Jones Electronics is a company that manufactures and sells electronic gadgets. They produce a popular
smartphone model, and various costs are associated with this product. Consider the following costs:

1. The smartphone's screen costs ₱250 per unit.

2. Assembly workers are paid ₱100 per hour, and it takes 1 hour to assemble one smartphone.
3. The production manager overseeing the assembly line earns an annual salary of ₱300,000.
4. The automated testing equipment used in quality control costs ₱25 per hour, and 0.5 hours are
required for testing each smartphone.
5. The company incurs an annual cost of ₱75,000 for software licenses used in the production
process.
6. The CEO's annual salary is ₱750,000.
7. Jones Electronics spends ₱1,000,000 per year on marketing and advertising for their
smartphone.
8. Salespeople receive a commission of ₱50 for each smartphone they sell.
9. If the company decides not to produce smartphones, they could rent out their production
facility for ₱375,000 per year.

Now, please classify each of these costs as either a variable cost, fixed cost, direct cost, or indirect cost,
and provide a brief explanation for your classification.

Required:
Classify these costs according to the various cost terms used in the chapter 2.
EXERCISE 2.

One company, The Vallente Company, is creating a cost formula to determine the constant and variable
parts of its monthly production overhead expenses. This is due to the nature of its business. The
following information was acquired by the Vallente corporation for the years 2021 and 2022 since it
needs to utilize machine-hours as its indicator of activity:

2021 2022

Month Machine-Hours Overhead Costs Machine-Hours Overhead Costs

January 21,000 Php84,000 21,000 Php86,000

February 25,000 Php99,000 24,000 Php93,000

March 22,000 Php89,500 23,000 Php93,000

April 23,000 Php90,000 22,000 Php87,000

May 20,500 Php81,500 20,000 Php80,000

June 19,000 Php75,500 18,000 Php76,500

July 14,000 Php70,500 12,000 Php67,500

August 10,000 Php64,500 13,000 Php71,000

September 12,000 Php69,000 15,000 Php73,500

October 17,000 Php75,000 17,000 Php72,500

November 16,000 Php71,500 15,000 Php71,000

December 19,000 Php78,000 18,000 Php75,000

All of the company's production machinery is leased. Up to 19,500 machine-hours will be covered by a
fixed monthly price under the leasing agreement. The cost becomes strictly variable with regard to the
total number of machine-hours spent throughout the month if the number of machine-hours used
reaches 19,500. An important component of overhead costs is the lease expense.

Required:

1. Estimate a manufacturing overhead cost formula using the high-low technique.

2. Utilizing all of the information for the two-year period, create a scattergraph. Using a ruler, draw
a straight line or lines to connect the plotted points. Describe the cost behavior trend your
scattergraph plot.
EXERCISE 3.

The following table shows the overall overhead costs for the Xian firm at various levels of activity:

Month Machine hour Total Overhead Cost

April 70,000 Php198,000
May 60,000 Php174,000
June 80,000 Php 222,000
July 90,000 Php 246,000

Assume that the full overhead costs indicated above includes the cost of utilities, the cost of supervisor
salary, and the cost of maintenance. Following 60,000 machine hours of use, these costs are allocated as
follows:

Item Particulars
Utilities (variable) Php 48,000
Supervisory salaries (fixed) Php 21,000
Maintenance (mixed) Php 105,000
Total Php 174,000

The management of Xian wants to divide the expense of maintenance into fixed and variable
components. Required:

1. Calculate what portion of the Php 246,000 in overhead expenses in July was related to maintenance.

2. Calculate a maintenance cost formula using the high-low method.

3. Write the linear equation Y=a+bX to represent the overall overhead costs for the firm.

4. At an operational activity level of 75,000 machine hours, what overall overhead costs could you
anticipate?
EXERCISE 4.

Recently, Cebu Technological University's Finance Department was given a new chair, Professor Malaki.
Professor Malaki discovered the following total cost connected with Finance 211 during the last few
terms after looking through the department's expense records:

Semester Number of Sections Offered Total Cost

1st Trimester, last year 4 Php 10,000
2nd Trimester, last year 6 Php 14,000
3rd Trimester, last year 2 Php 7,000
1st Trimester, this year 5 Php 13,000
2nd Trimester, this year 3 Php 9,500

Professor Malaki is aware that the course has some variable expenses, such as sums paid to graduate
assistants. For the sake of planning, he would prefer the variable and fixed expenses to be divided.

Required:

1. Create a scattergraph plot. (Put the number of portions offered on the horizontal axis and the total
cost on the vertical axis.)
2. Calculate the variable cost each section and the overall fixed cost per term for Finance 101 using the
least-squares regression technique. These estimations should be written as the linear equation Y = a +
bX.