BARIACTO, DANIELA ROSE G.

05 QUIZ 1

BSA601 STRATEGIC COST MANAGEMENT

1. XYZ Corporation budgets factory overhead cost of P 500,000 for the coming year. Compute for the
overhead cost applied to the job. The following data are available:

Budgeted annual overhead for planned production P 500,000

Budgeted annual direct labor hours 35,000
Actual direct labor hours applied to the job 400 hours

Overhead Cost applied to the job:

= Budgeted annual overhead/ Budgeted annual direct labor hours

= P 500,000/ 35,000

= P 14.29 per direct labor hour

Actual Direct Labor Hours 400 hours

Multiply: Rate per DLH P 14.29

Overhead Cost applied to the job P 5,716

Work-In-Process Inventory 5,716

Factory Overhead 5,716

2. LLC Service Inc. provides professional consultancy services to third-party firms. Professional staff are
paid P 150 per hour, and their time is billed at P 500 per hour. The firm estimates the following total
costs for the coming year:

Estimated cost of professional staff P 3,000,000 (20,000 hours of staff time)

Estimated other costs (overhead) P 4,000,000
Total estimated costs P 7,000,000

ABC Corp. became a new client of the firm with job requirements of 100 hours of professional staff time.
Present in a tabular format the total billing for the job.
Determine the Overhead rate:

= Estimated overhead/ Estimated hours

= P 4,000,000/ 20,000
= P 200 per hour

Determine Applied Overhead for the job:

= 100 hours for the ABC Corp. x P 200 per hour

= P 20,000

Determine the Total Billing for the job:

Total billing for professional staff P 50,000

(P 500 per hour x 100)
Total overhead applied to the job P 20,000
(P 200 per hour x 100)
Total billing for the ABC Corp. P 70,000

3. Compute for the total cost of the job in the previous item and the total profit which will be generated
by LLC Service Inc. from performing the services requested by ABC Corp.

The job cost of the ABC Corp. can be determined similarly, by replacing the billing rate of P 500 per hour
with the cost of compensation for professional staff, P 200 per hour.

Total billing for professional staff P 15,000

(P 150 per hour x 100)
Total overhead applied to the job P 20,000
(P 200 per hour x 100)
Total billing for the ABC Corp. P 35,000

The profit on the ABC Corp. is P 70,000 – P 35,000 = P 35,000

4. Water Pipe Manufacturing completes job #727 on January 10. The job used 45 direct labor hours and
40 machine hours. The job consumed P 3,200 worth of materials. The average direct labor hour rate P
70 per hour, and the company uses the predetermined overhead rate of P 8.50 per direct labor hour.
Compute for the direct labor, applied overhead, and total cost of job #727.

Direct Labor:

= Rate x Activity
= P 70 per DLH x 45 DLH
= P 3,150
Applied Overhead:

= Predetermined Overhead Rate x Activity

= P 8.50 per DLH x 45 DLH
= P 382.50

Total Cost of Job #727:

Direct Materials P 3,200

Direct Labor P 3,150
Applied Overhead P 382.50

= Direct Materials + Direct Labor + Applied Overhead

= P 3,200 + P 3,150 + P 382.50
= P 6,732.50

5. The owner of Big Burger Restaurant wants to determine the unit cost associated with their 10,000
sales of burgers for January 201A.

The variable expenses per burger: The fixed expenses are as follows:

Burger patty P 5.50 Labor P 5,500

Bread P 2.00 Rent P 2,500
Ketchup P 0.50 Insurance P 500
Lettuce P 6.00 Advertising P 2,000
Mayonnaise P 0.50 Utilities P 4,800
Total variable cost P 14.50 Total fixed cost P 15,300

Unit Cost = Total Variable Cost + (Total fixed cost/ Total number of sales)

= P 14.50 + (P 15,300/ 10,000)

= P 14.50 + P 1.53
= P 16.03