SOLUTION: Exercise 3 Multiple Choice (p 127)

Area occupied by factory building

and sales and admin office 3000 sq m
Divided by total lot area 5000 sq m
Percentage occupied by factory and sales 60%
Multiply by total rent ₱ 50,000.00
Rent allocated to factory and sales ₱ 30,000.00

1) Open space 2,000.00

Factory building and sales
Factory building 2,000.00
Sales and admin 1,000.00 3,000.00
5,000.00

Production share in rent (2,000/3,000 x P30,000) ₱ 20,000.00

Share of QC dept (50/2,000 x P20,000) ₱ 500.00 A

Raw materias warehouse share in rent

2) ( 300 sqm / 2,000 sqm x P2,000) ₱ 3,000.00 A

3) Production share in rent (2,000/3,000 x P30,000) ₱ 20,000.00 B

Engineering ₱ 200,000.00
Quality Control 100,000.00
4) Warehouse 120,000.00
Total overhead to be allocated ₱ 420,000.00 B

Dept A Dept B Dept C

Engineering ₱ 200,000.00 ₱ 120,000.00 ₱ 60,000.00 ₱ 20,000.00
Quality Control 100,000.00 50,000.00 31,250.00 18,750.00
Warehouse 120,000.00 60,000.00 30,000.00 30,000.00
Allocated Costs ₱ 230,000.00 ₱ 121,250.00 ₱ 68,750.00
Add: Own costs 150,000.00 50,000.00 50,000.00
Total Costs C ₱ 380,000.00 ₱ 171,250.00 ₱ 118,750.00

5) Basis of Engineering QC Warehouse

Allocation Maintenance Number of Number of
Hours Tests Requests
Dept A 300 200 200
Dept B 150 125 100
Dept C 50 75 100
 500 400 400

QC Warehouse Dept A
Engineering ₱ 200,000.00 ₱ 50,000.00 ₱ 25,000.00 ₱ 75,000.00
Quality Control 100,000.00 100,000.00
₱ 150,000.00 ₱ 30,000.00 ₱ 60,000.00
₱ 55,000.00
Warehouse 120,000.00 120,000.00
₱ 175,000.00 ₱ 87,500.00
Allocated costs ₱ 222,500.00
Add: Own costs 150,000.00
6) ₱ 372,500.00

Basis of Allocation: Engineeing QC Warehouse

Quality Control 200
Warehouse 100 100
Dept A 300 200 200
Dept B 150 125 100
Dept C 50 75 100
800 500 400

RECEPIENT OF SERVICES
Engineering QC Warehouse
A Engineering ₱ 200,000.00 25.00% 12.5%
B Quality Control 100,000.00 3.85% 19.23%
C Warehouse 120,000.00 9.09%

SERVICES PROVIDED
Maint Hours No of Tests No of Request
Services received by: Engineeing QC Warehouse
Engineering 20
Quality Control 200 40
Warehouse 100 100
Dept A 300 200 200
Dept B 150 125 100
Dept C 50 75 100
800 520 440

7)
 Engineering

QC

Warehouse

Engineering Qty Control Warehouse Dept A Dept B

Cost before allocation ₱ 200,000 ₱ 100,000 ₱ 120,000 ₱ 150,000 ₱ 50,000
Allocation of Engineering (206,734.04) 51,683.51 25,841.76 77,525.27 38,762.63
Allocation of Qty Control 6,456.54 (167,870.00) 32,282.69 64,565.38 40,353.37
Allocation of Warehouse 16,193.01 (178,123.16) 80,965.07 40,482.54
Allocated costs -₱ 278 ₱ 7 ₱ 1 ₱ 373,056 ₱ 169,599

NOTE : Engineering, Qty Control and Warehouse should have zero balances. But due to rounding off of decimal places,
it cannot exactly results to zero balance

8) After the allocation, the total overhead to charged to production would still be ₱ 670,000
 Dept B Dept C
₱ 37,500.00 ₱ 12,500.00

₱ 37,500.00 ₱ 22,500.00

₱ 43,750.00 ₱ 43,750.00
₱ 118,750.00 ₱ 78,750.00
50,000.00 50,000.00
₱ 168,750.00 ₱ 128,750.00
D

CEPIENT OF SERVICES
Dept A Dept B Dept C
37.50% 18.75% 6.25% 100%
38.46% 24.04% 14.42% 100%
45.45% 22.73% 22.73% 100%

A = P200,000 + 4% B
B = P100,000 + 25% A + 9.09% C
C = P120,000 + 12.5% A + 19.23% B

B = P100,000 + 25% (P200,000 + 4% B) + 9.09% (P120,000 + 12.5%A + 19.23% B)

B = P100,000 + (50,000 + 1%B) + (P10,908 + 1.13625%A + 1.748007%B)
B = P160,908 + 2.748007%B + 1.13625%A
B - 2.748007%B = P160,908 + 1.13625%A
97.251993%B = P160,908 + 1.13625%A

B = P160,908 + 1.13625%A
97.251993%

A = P200,000 + 4% ( P160,908 + 1.13625%A)

97.251993%

97.251993%A = P194,503.986 + P6,436.32 + .0545%A

97.197493%A = P 200,940.36
 A = ₱ 206,734.04

B = (P160,908 + P2,349.016) / 97.251993%

B = (P160,908 + P2,349.016) / 97.251993%
B = ₱ 167,870.00

C = P120,000 + 12.5% (P206,734.04) + 19.23% (P167,870)

C = ₱ 178,123.16

Dept C
₱ 50,000
12,920.88
24,212.02
40,482.54
₱ 127,615 ₱ 670,000

off of decimal places,