HIGH-LOW METHOD

Dagupan Trans Inc, has incurred the following bus maintenance costs during the past six
months
Miles Traveled Maintenance Costs
January 12750 17100
February 15900 17400
March 19050 17550
April 22500 18000
May 30000 18750
June 12000 16500
Required: Using a high-low method to separate mixed cost, estimate the total fixed costs
component of the maintenance costs.

18 750−16 500 2250

= =0.125 vc /unit
30 000−12 000 18 000

H=30 000 x 0.125=3750 TVC

L=12 000 x 0.125=1500 TVC

H=18 750−3750=15 000 TFC

L=16 500−1500=15 000TFC

ANSWER: 15 000

Bayo Dress Shop makes evening dresses. The following information has been gathered from
the company records of 2016, the first year of company operations. Work in Process Inventory
at the end of the year was 100 000.

Raw materials purchased on account, of which only 75% were paid during
2350000
the year

Raw materials issued to production, of which 25% is indirect materials 1940000

Accrued payroll (80% is direct labor) 1350000

Depreciation of sewing and computer equipment 80000

Utilities paid 320000

Factory insurance expired 17500
Factory rent including 50000 deposit 960000

Bayo Dress Shop applies actual overhead to production.

1 The total factory costs for the period.
2 Cost of goods manufactured for the year
3 Gross profit assuming 75% of the production is sold at a gross profit rate of 35%

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 RAW MATERIALS
Purchases 2 350 000
Raw Materials, End (410 000)
Raw Materials Used 1 940 000
Indirect Raw Materials
(485 000)
Used
Direct Materials Used 1 455 000
Direct Labor 1 080 000
Factory Overhead 2 082 500
TOTAL FACTORY 4 617
COSTS 500
WIP, Beg 0
Total Costs of Work Put
4 617 500
into Process
WIP, End (100 000)
TOTAL COST OF
4 517
GOODS
500
MANUFACTURED

FACTORY OVERHEAD
Indirect Raw Materials 485 000
Indirect Labor 270 000
Depreciation of Sewing and Computer
80 000
Equipment
Factory Insurance Expired 17 500
Factory Rent 910 000
Utilities Paid 320 000
TOTAL FACTORY OVERHEAD 2 082 500

SALE 5 212 500 100%

COST 3 388 125 65%
GROSS
1 824 375 35%
PROFIT

The following informations are available for Fortified Company during the 6-
months period ending June 30:
Accounts Beginning Ending
Direct materials 174000 132000
Work in process 311500 289750
Finished Goods 192000 255000

Supplementary data:
a. Purchases during the period: 1500000
Direct materials 60000
Factory supplies 175000
b. Supervision fee
Direct labor hours worked, 21,000 @ P45, excluding 1,000 hours
overtime. The company's policy on overtime is time and a half.
c.

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 Other factory overhead including factory supplies used of P25,000
but excluding overtime premium
d. 300000
e. Actual overhead is applied to the job.

1 The prime costs during the period amounted to 2 532 000

2 The conversion costs during the period amounted to 1 487 500

RAW MATERIALS
Purchases 1 500 000
Raw Materials, Beg 174 000
Raw Materials Used 1 674 000
Raw Material, End (132 000)
Direct Materials Used 1 542 000
Direct Labor 990 000
Factory Overhead 497 500
Total Factory Cost 3 029 500

Dove Manufacturing Company's Cost of Goods Sold for the year amounted to
P6900000. The work in process at the end was 90% of the beginning Work in
Process Inventory. Factory overhead was applied at 60% of direct labor costs. On
January 1, inventories showed the following balances:

Finished Goods 2040000

Work in Process 800000
Direct Materials 400000
Factory Supplies 180000

During the period, the following purchases were recorded:

Direct Materials 3200000
Factory Supplies 900000
It was noted that Finished Goods decreased by P320000 while direct materials and
factory supplies increased by P180000 and P50000, respectively.

Determine the costs of materials, labor and overhead added during the period.

ANSWERS:
Raw Materials- 3 020 000
Direct Labor- 2 175 000
Overhead- 1 305 000

The following costs were actually incurred in the production of 10,000 units of
Product A:
Raw materials, of which 10% is indirect 1200500
Factory labor, of which 20% is indirect labor 1045000

Factory overhead, other than indirect materials and indirect labor 900000
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 Factory overhead charged to production is equivalent to 110% of direct labor
costs. At the end of the period, inspection revealed that the total costs of goods
manufactured is equal to 2837500 while costs od unfinished job is 20% of total
factory costs.

Compute for the work in process at the beginning of the period

ANSWER:
568 660

West Virginia Company reported a net income of P55,500 for the period just ended.
The goods available for sale was P259,500 of which P237,000 come from goods
produced during the current period.

Change in finished goods inventory assuming the finished goods at the end of
a. the period is P22,000

Gross profit assuming sales for the period is P337,500 and sales discounts were
b. reported to be P7,500

ANSWER:
a. DECREASED BY 500
b. 92 500

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