Problem 8-1 Problem 8-5

1. Machine related: P 125,000 / 10,000 = P 12.50 1. Overhead rate: P280,000 / P100,000 = 280%
Others: P 295,000 / 25,000 = P 11.80 Job 1001: (P2,000 x 280%) = P5,600
2.Machine Setup: P 50,000 / 1,000 = P 50
Material Handling: P 45,000 / 1,000 = P 45 Job 2002:
Other material related: P 60,000 / 1,200 = P 50 Direct materials P12,000
Machine operation: P 75, 000 / 10,000 = P 7.50 Direct labor 2,000
Other overhead: P 190,000 / 25,000 = P 7.60 Overhead: (P2,000 x 280%) 5,600
Total cost P19,600
Problem 8-2 Unit cost (P19,600 / 50) P 392
1. Product KK Product GG
Direct materials P 100,000 P 310,000 Job 3003:
Direct Labor 50,000 350,000 Direct materials P 8,000
Overhead: Direct labor 4,000
KK: P 1,500,000 / 50,000 x 3,000 = 90,000 Overhead: (P4,000 x 280%) 11,000
GG: P 1,500,000/50,000x47, 000= 1,410,000 Total cost P23,200
Factory Cost P240, 000 P2,070,000 Sales price: (P23,200 x 150%) P34,800
Divided by units produced ÷ 500 ÷ 15,500
Unit Cost P 480 P 133.55 2. Job 1001:
Machine setup: (P20,000 / 200) =P100 x 8 = P 100
2. Product KK Product GG Inspection: (P130,000/6,500)=P20 x22 = 400
Direct materials P 100,000 P 310,000 Material handling: (P80,000 / 8,000)=P10 x30 = 300
Direct Labor 50,000 350,000 Engineering: (P50,000 / 1,000)=P50 x25 = 1,250
Overhead: Total overhead cost P2,050
Setup related:
KK: P 250,000 /200 x120 = 150,000 Job 2002:
GG: P 250,000 /200 x 80 = 100,000 Direct materials P12,000
Design related: Direct labor 2,000
KK: P350,000 /10,000 x6,000 = 210,000 Overhead:
GG: P350,000 /10,000 x4,000= 140,000 Machine setup: (P100 x 10) P1,000
Other: Inspection: (P20 x 15) 300
KK: P900,000 /50,000 x 3,000 = 54,000 Material handling: (P10 x40) 400
GG: P900,000 /50,000x47,000= 846,000 Engineering: (P50 x 50) 2,500 4,200
Factory Cost P 564,000 P1,746,000 Total Cost P18,200
Divided by units produced ÷ 500 ÷ 15,500 Unit cost: (P18,200 /50) P0.02
Unit cost P 1, 128 P 112.65
Job 3003:
Problem 8-3 Direct materials P 8,000
Multimedia Comfort Type Direct labor 4,000
Keyboards Keyboards Overhead:
1. Machine setup: (P100x14) P1,400
Materials Handling: Inspection: (P20 x 30) 600
MK: (5% x P12,000) P 600 Material handling: (P50 x 50) 2,500
CTK: (5% x 15,400) P 770 Engineering: (P50 x 15) 750 5,250
Machine setup: Total cost P17,250
MK: (P 160 x 45) 7,200 Sales price: (P17,250 x 150%) P25,875
CTK: (P 160 x 25) 4,000
Assembly: Problem 8-6
MK: (P 12 x 400) 4,800 a. Send/ received goods: P25,000 / 500,000 = P 0.05 per kilo
CTK: (P 12 x 700) 8,400 Store goods: P 8,000 / 80,000 = P .10 per cubic foot
Inspection: Move goods: P10,000 / 5,000 = P 2.00 per square foot
MK: (P 5 x 400) 2,000 Identify goods: P 4,000 / 500 = P 8.00 per package
CTK: (P 5 x 700) 3,500
Packaging and shipping: Anson:
MK: ( 10 x 9) 90 Send/ received goods: (40,000 x P0.05) P2,000
CTK: ( 10 x 16) 160 Store goods: ( 3,000 x P1.10) 300
Total overhead costs P 14,690 P 16,830 Move goods: ( 300 x P2.00) 600
2. Identify goods: ( 5 x P8.00) 40
Multimedia Keyboard: P 14,690 /400 = P 36.73 Total P2,940
Comfort Type Keyboard: P 16,830 /700 = P 24.04
Basco:
Problem 8-4 Send/ received goods: (40,000 x P0.05) P2,000
Store goods: ( 2,000 x P1.10) 200
(a.) Materials handling: (P30,000 /1,000) P30 per no. of requisition Move goods: ( 200 x P2.00) 400
Machine setups: (P27,000 /450) P60 per setup Identify goods: ( 20 x P8.00) 160
Quality inspection: (P24,000 /600) P40 per no. of inspection Total P2,760

(b.) Product SS Product HH Casio:

Materials handling: Send/ received goods: (40,000 x P0.05) P2,000
SS: (P30 x 400) P 12,000 Store goods: ( 1,000 x P1.10) 100
HH: (P30 x 600) P 18,000 Move goods: ( 1,000 x P2.00) 2,000
Machine setups: Identify goods: ( 80 x P8.00) 640
SS: (P60 x 150) 9,000 Total P4,740
HH: (P60 x 300) 18,000
Quality inspection: b. Anson: 40,000 x P 0.08 = P3,200
SS: (P 40 x 200) 8,000 Basco: 40,000 x P 0.08 = P3,200
HH: (P40 x 400) 16,000 Casio: 40,000 x P0.08 = P3,200
Total overhead Costs P 29,000 P52,000
c. Anson: P2,940 x 130% = P3,822
Basco: P2,760 x 130% = P3,588
Casio: P4,740 x 130% = P6,162
d. The current pricing plan captures only one dimension of cost casualty,
send/receive goods. Accordingly, the prices charged for warehousing
services are almost independent of the causes of the costs. As indicated
in a comparison of the answers to parts (b) and (c), the existing plan
generates the same price for the three customers whereas an ABC-based
price results in very different prices to be charged to the three
customers.
 Problem 8-7 Problem 8-9

1. JOB 456 JOB 789 1a. Budgeted manufacturing overhead rate = Budgeted manufacturing OH
Direct materials P19,400 P119,800 Budgeted direct labor cost
Direct labor 1,500 22,500 = P 3,000,000
Manufacturing overhead: P 600,000
Job 456: P230 x P50 11,500 = P 5 per direct labor cost
Job 789: P230 x P750 172,500
Total manufacturing costs P32,400 P314,800 1b. Mauna Loa African
Divided number of units ÷ 20 ÷ 400 Direct materials P 8.40 P 6.40
Manufacturing cost per unit P 1,620 P 787 Direct labor 0.60 0.60
Manufacturing overhead (0.60x P5.00) 3.00 3.00
2. JOB 456 JOB 789 Total costs P12.00 P10.00
Direct materials P19,400 P119,800
Direct labor 1,500 22,500 Budgeted selling prices per kilo:
Manufacturing overhead: Mauna Loa (P12.00 x 130%) = P15.60
Materials handling: African (P10.00 x 130%) = P13.00
P 0.80 x 1,000; P0.80 x 4,000 800 3,200
Lathe work: 2, total budgeted unit costs per kilo are:
P 0.40 x40,000; P0.40x120,000 16,000 48,000 Mauna Loa African Coffee
Milling: Direct materials P 8.40 P 6.40
P 40 x 300; P 40 x 2,100 12,000 84,000 Direct labor 0.60 0.60
Grinding: Manufacturing overhead:
P1.60 x 1000; P1.60 x 4,000 1,600 6,400 Purchase orders:
Testing: MLC: (4 x P1,000 ÷ 100,000) 0.04
P 30 x 20; P30 x 400 600 12,000 AC: (4 x P1,000 ÷ 2,000) 2.00
Total manufacturing cost P51,900 P295,900 Material handling:
Number of units ÷ 20 ÷ 400 MLC: (30 x P800 ÷ 100,000) 0.24
Unit manufacturing cost P 2,595 P739.75 AC: (12 x P800 ÷ 2,000) 4.80
Quality control:
3. The product cost figures computed in requirement 1 and 2 differ MLC: (10 x P480 ÷ 100,000) 0.04
because: AC: (4 x P480 ÷ 2,000) 0.96
a. The job orders differ in the way the use each of five activity Roasting:
areas, and MLC: (1,000 x P20 ÷ 100,000) 0.20
b. The activity areas differ in their indirect cost allocation bases AC: (20 x P20 ÷ 2,000) 0.20
9 specifically, each are does not use the direct manufacturing Blending:
labor-hours indirect cost allocation base. MLC: (500 x P20 ÷ 100,000) 0.10
AC: (10 x P20 ÷ 2,000) 0.10
Problem 8-8 Packaging:
MLC: (100 x P20 ÷ 100,000) 0.02
a. Umbrellas: P16/ P20 = 80% of an hour; 80x 60minutes= 48 minutes AC: (2 x P20 ÷ 2,000) 0.02
Gazebos: P120/P20 = 6 DLHs Total cost per unit P 9.64 P15.08
Tents: P40 / P10 = 2 DLHs
b. Umbrellas: (P16 x 200,000) P 3,200,000 Problem 8-10
Gazebos: (120x 20,000) 2,400,000
Tents: (P40 x 60,000) 2,400,000 (a) Purchasing: (P240,000 / 1,500) P160 per order
Total overhead cost P8,000,000 Processing: (P1,400,000/1,000,000) P1.40 per liter
Packaging: (P580,000 / 400,000) P1.45 per container
c. Allocation rates: Testing: (P240,000 / 4,000) P60 per test
Quality control: P400,000 / 280,000 = P 1.43 per unit (rounded) Storage: (P180,000 / 18,000) P10 per liter
Setups: P400,000 / 2,000 = P200 per setup Washing: (P560,000 / 800) P700 per batch
Material handling: P 1,200,000/4,000,000= P0.30 per kilo
Equipment orientation: P 6,000,000/2,000,000= P3.00 per kilo MH (b) Paint XX Paint YY
OVERHEAD COST ALLOCATION: Purchasing:
Umbrellas Gazebos Tents (P160 x 800) ; (P160 x 700) P 128,000 P 112,000
Quality control: Processing:
P1.43 x 200,000 P 286,000 (P1.40x 400,000;(P1.40x600,000) 560,000 840,000
P1.43 x 20,000 P 28,600 Packaging:
P1.43 x 60,000 P 85,800 (P1.45x 180,000;(1.45x220,000) 261,000 319,000
Setups: Testing:
P200 x 400 80,000 (P60x2,100); (P60 x1,900) 126,000 114,000
P200 x 800 160,000 Storage:
P200 x 800 160,000 (P10 x10,400); (P10x 7,600) 104,000 76,000
Material handling: Washing:
P0.30x 800,000 240,000 (700x 350); (P700 x450) 245,000 315,000
P0.30x2,000,000 600,000 Total overhead cost: P1,424,000 P1,776,000
P0.30x1,200,000 360,000
Equipment operation: (c) Unit overhead cost: Paint XX (P1,424,000 / 180,000container) = P7.91
P3.00x 400,000 1,200,000 Paint YY (P1,776,000 / 220,000container) = P8.07
P3.00x 800,000 2,400,000
P3.00x 800,000 ________ 2,400,000
Total overhead P1,806,000 P3,188,600 P3,005,800
Number of units ÷ 200,000 ÷ 20,000 ÷ 60,000
Overhead cost per unit P 9.03 P 159.43 P 50.10

Total cost per unit

Direct materials P 8.00 P 80.00 P 8.00
Direct labor 12.00 90.00 30.00
Overhead 9.03 159.43 50.10
Total P 29.03 P 329.43 P 88.10

d. If prices are set based on product costs, activity-based costing would

generate lower process for umbrellas and higher prices for the other
two products.