Chapter 6

Answer Key
TRUE OR FALSE
1.F
2.T
3.T
4.F
5.F
6.T
7.T
8.T
9.T
10.T
11.T
12.F
13.F
14.F
15.T
16.T
17.F
18.T
19.T
20.F
21.F
22.T
23.F
24.T
25.F
26.F
27.T
28.F
29.T
30.F
31.F
32.T
33.T
34.T
35.F
36.T
37.F
38.F
39.T
40.T
41.T
42.T
43.F
44.F
45.F
46.T
47.F
48.T
49.T
50.F
51.T
52.F
53.F
54.T
55.F
56.T
57. F
58. F
59. T
60. F
Multiple Choice
1. A
2. A
3. B
4. D
5. B
6. B
7. A
8. C
9. D
10. D
11. B
12. B
13. B
14. B
15. B
16. A
17. C
18. D
19. C
20. B
21. C
22. C
23. A
24. B
25. C
26. D
27. B
28. A
29. B
30. C
31. A
32. A
33. B
34. C
35. D
36. D
37. D
38. A
39. D
40. C
41. A
42. C
43. A
44. D
45. A
 46. D
47.
B/A/D/D/C/C/B
48. B/A/D/A
49. A/D/C
50. A/C/B
51. B/D/B/C
52. B/A/B
53. B/C/A
54. B/B
55. D
56. B/B
57. D
58. C/A/B
59. B/A/A/C/D/D/A

Straight Problems
Problem 1
1. Lighting the factory – Facility level
2. Paying Rent – Facility level
3. Moving a batch – batch level
4. Inspecting a machine part – unit level
5. Marketing a product - product level
6. Paying Insurance – Facility level
7. Drilling a hole – Unit level
8. Engineering a product – product level
9. Setting up a machine – Batch level
10. Running the machine – unit level
11. Using janitorial services – Facility level
12. Truckload Shipping costs – batch level
13. Ordering a purchased part – batch level
14. Product design changes – product level
15. Paying a plant supervisor salary – Facility level
16. Cost of direct materials – Unit level
17. Materials receiving – batch level
18. Building Maintenance cost – Facility level
Problem 2
Answer:
1. Plant wide rate = P6,000,000 / 300,000 hours = P20 per hour
2.
A B (AxB) C (A x B) ÷ C
Product Direct Labor Rate Total FOH costs Units Unit Cost O 120,000 20 2,400,000
5,400 444.44 P 180,000 20 3,600,000 6,600 545.45
3.
Supervision: P4,200,000 / 300,000 hours = P14 per hour
Setups: P1,800,000 / 2,400 = P750 per set ups
4.
 Product O Activity Base Rate Total Setups 1,200 750 900,000 Supervision 120,000 14
1,680,000 2,580,000
÷ units 5,400
Per unit 477.78
Product P Activity Base Rate
Setups 1,200 750 900,000 Supervision 180,000 14 2,520,000
3,420,000
÷ units 6,600
Per unit 518.18
Problem 3
Answer
1. Plantwide rate: P2,750,000 / 200,000 hours = P13.75 per hour
Multiple production department rates
(a) Mixing: P1,550,000 / 100,000 hours = P15.50 per hour
(b) Finishing: P1,200,000 / 100,000 hours = P12.00 per hour
2. Plant wide
X: 13.75 x 100,000 hours = 1,375,000
Per unit: P1,375,000 / 50,000 units = P27.50 per unit
Y: 13.75 x 100,000 hours = 1,375,000
Per unit: P1,375,000 / 100,000 units = P13.75 per unit
Multiple production department rates
Product X
Mixing 15.50 x75,500 1,170,250
Finishing 12 x 45,000 540,000
Total 1,710,250
units 50,000
Per unit 34.21

Product Y
Mixing 15.50 x 24,500 379,750
Finishing 12 x 55,000 660,000
Total 1,039,750
units 100,000
Per unit 10.40

Problem 4
Answer
1.
Tablet
Setups 50 x 20.00 1,000.00
Inspections 80 x 1.00 80.00
Assembly (DLH) 200 x 10.00 2,000.00
FOH rate per unit 3,080.00
 2.
Phone
Setups 60 x 20.00 1,200.00
Inspections 100 x 1.00 100.00
Assembly (DLH) 120 x 10.00 1,200.00
FOH rate per unit 2,500.00
3. 3,080 x 500,000 units = 1,540,000,000 and 2,500 x 800,000 = 2,000,000,000
Problem 5
Answer
1. 8,880,000 / 480,000 = 18.50
2. 6,000,000/30,000 = 200
3. 12,000,000/ 148,800 = 80.65
4. 17,520,000/ 1,080 = 16,222.22
5. 36,000,000/ 480,000 = 75
6.
Pants Activities Activity Rate
No. of Purchase orders 96,000 18.50 1,776,000.00 No. of Production orders 7,200 200.00
1,440,000.00 No. of Moves 33,600 80.65 2,709,677.42 No. of Eng. changes 240 16,222.22
3,893,333.33 Machine Hours 48,000 75.00 3,600,000.00 Total 13,419,010.75
Divide by no of units produced 48,000 Pants per unit 279.56

Shorts Activities Activity Rate

No. of Purchase orders 96,000 18.50 1,776,000.00 No. of Production orders 3,600 200.00
720,000.00 No. of Moves 19,200 80.65 1,548,387.10 No. of Eng changes 240 16,222.22
3,893,333.33 Machine Hours 192,000 75.00 14,400,000.00 Total 22,337,720.43
Divide by no of units produced 72,000 Shorts per unit 310.25

Slacks Activities Activity Rate

No. of Purchase orders 288,000 18.50 5,328,000.00 No. of Production orders 19,200 200.00
3,840,000.00 No. of Moves 96,000 80.65 7,741,935.48 No. of Eng changes 600 16,222.22
9,733,333.33 Machine Hours 240,000 75.00 18,000,000.00
Total 44,643,268.82 Divide by no of units produced 16,000 Shorts per unit 2,790.20
Problem 6 Job 102 (P26.4 x 50DLH) 1,320
Solution Total Cost 14,820 17,820
1. Total Overhead cost P1,320,000 / 50,000 Divide by Units Completed 1,200 1,200
Direct labor hours = P26.40 per DLH Job 101 Unit Cost 12.35 14.85
Job 102
Direct Materials 9,000 12,000 2.
Direct Labor (P90 per hour) 4,500 4,500
Overhead
Job 101 (P26.4 x 50 DLH) 1,320
 Job 102

Job 101
Direct Materials 9,000 12,000 Direct Labor (P90 per hour) 4,500 4,500 Overhead
Moves (18 x P100) 1,800 (36 x P100) 3600 Machine (750 x P4) 3,000 (450 x P4) 1800 Orders
(18 x P20) 360 (72 x P20) 1440 Parts (1200 x P0.60) 720 (4800 x P0.60) 2880 Setups (6 x P200)
1,200 (24 x P200) 4800 Total Cost 20,580 31,020
Units Completed 1,200 1200 Unit Cost 17.15 25.85
Problem 7
Solution
1.
ABA÷B
Activity Cost Pool Cost Driver Volume per year Overhead rate Molding 900,000 12,000 75 Inspection
450,000 900 500 Production Management 750,000 120 6,250
Cost Driver Project 1 Project 2 Batches 6,000 units/600 units = 10 12,000 units/ 300 = 40
Molding hours 10 batches x 30 = 300 40 batches x 45 = 1,800 Contracts 1 1
Project 1 Project 2
Contract Price 162,000 600,000 Less: Cost
Materials (15 x 6,000) 90,000 (12,000 x P20) 240,000 Molding (300 hours x P75) 22,500 (1,800
x P75) 135,000 Inspection (10 batches x P500) 5,000 (40 x P500) 20,000
Management 6,250 123,750 6,250 401,250 Profit (loss) 38,250 198,750
2. Total Overhead

Problem 8
Answer
1.
Total Cost Allocated cost
 Wages and Salaries 20% 1,600,000 320,000
Depreciation 15% 1,100,000 165,000
Occupancy 5% 600,000 30,000
Total 515,000
÷ machine hours 50,000
Activity rate 10.3/mhr.
2.
Total Cost Allocated cost
Wages and Salaries 65% 1,600,000 P1,040,000 Depreciation 35% 1,100,000 P
385,000 Occupancy 70% 600,000 P 420,000 Total P1,845,000
÷ orders 4,000
Total P461.25/order
3. Mixing P515,000 and Order Processing P1,845,000
Problem 9
Answer
1. FOH rate = P5,312,000 / 128,000 direct labor hours (56K + 72K) = P41.50 per
DLhr. Product A Product B
Direct Materials 34.50 63.70
Direct labor 20.80 62.40 FOH (0.80 x41.50 per DLhr) and
(2.40 x41.50 per DLhr) 33.20 99.60 88.50 225.70
2. ABC
Total Expected
Activities Estiamted FOH cost Activity Activity Rate
Assembling products 2,432,000 128,000 19.00 Preparing batches 960,000 9,600 100.00
Milling 1,920,000 6,400 300.00 5,312,000

Activities Product A Activity Rate Total Cost Assembling products 56,000 19.00 1,064,000
Preparing batches 4,608 100.00 460,800 Milling 2,176 300.00 652,800 2,177,600
÷ units 70,000
FOH per unit 31.11

Activities Product B Activity Rate Total Cost Assembling products 72,000 19.00 1,368,000
Preparing batches 4,992 100.00 499,200 Milling 4,224 300.00 1,267,200 3,134,400
÷ units 30,000
FOH per unit 104.48

Product A Product B
Direct Materials 34.50 63.70
 Direct labor 20.80 62.40
FOH 31.11 104.48
86.41 230.58
Problem 10
Req. 1
P50,000/(200 DLH + 200 DLH) = P125 per DLH x 200 DLH = P25, 000/25 units of Wall Mirror = P1,000
per unit
Req. 2
P50,000/(5 +15 materials move) = P2,500 per unit materials move x 5 materials move of wall mirrors =
P12,500 / 25 units produced = P500 per unit