THEORIES

RADAKOVICH CORPORATION
ACTIVITY COST POOL TOTAL COST TOTAL ACTIVITY ASSEMBLY
ASSEMBLY ₱ 436,240.00 28,000 MACHINE HOURS
PROCESSING ORDER ₱ 60,896.00 1,600 ORDERS
INSPECTION ₱ 82,767.00 1,410 INSPECTION HOURS

PRODUCTION F60/YEAR TOTAL MACHINE HOURS

230 UNITS 480
ORDERS INSPECTION-HOURS/YEAR
50 30
DIRECT MATERIAL COST DIRECT LABOR COST
12.7 45.93
PRODUCT SELSS
126.6

SALES 230*126.60
COST OF GOODS SOLD
DIRECT MATERIAL COST 230*12.70 ₱ 2,921.00
DIRECT LABOR COST 230*45.93 ₱ 10,563.90
MANUFACTURING OVERHEAD
ASSEMBLY 480*15.58 ₱ 7,478.40
PROCESSING ORDER 50*38.06 ₱ 1,903.00
INSPECTION 30*58.7 ₱ 1,761.00
PRODUCT MARGIN

ABC CO.
QUALITY CONTROL ACTIVITIES ACTIVITIES COST TOTAL INTERNAL FAILURE COST
PROCESS AUDITS ₱ 50,000.00
TRAINING OF MACHINE OPERATORS ₱ 27,000.00
PROCESSING RETURNED PRODUCTS ₱ 18,000.00
SCRAP PROCESSING ₱ 24,000.00 ₱ 24,000.00
REWORK ₱ 8,000.00 ₱ 8,000.00
PREVENTATIVE MAINTENANCE ₱ 30,000.00
PRODUCT DESIGN ₱ 46,000.00
WARRANTY WORK ₱ 12,000.00
FINISHED GOODS INSPECTION ₱ 22,000.00
TOTAL ₱ 32,000.00

Each unit of a product requires four components. The average number of components is 4.25 due to component failure.
Purchasing higher quality components can reduce the average number of components to four per unit. The cost per compone
Calculate the reduction in failure costs per unit due to purchasing higher quality components.
AVE. NUMBER OF COMPONENTS ₱ 4.25
HIGHER QUALITY AVE. # COMPONENTS 4
REDUCTION 0.25
MULTIPLY BY: COST PER COMPONENTS ₱ 350.00
reduction in failure costs per unit ₱ 87.50

ABC CO. 2019

PURCHASING COMPONENTS ₱ 50,000.00
PURCHASE ORDERS 500

PURCHASE ORDERS ₱ 250.00

ENTAIL COST ₱ 27,500.00

INSPECTION TIME ₱ 10,000.00

2 INSPECTORS ₱ 120,000.00
SUPPLIES COSTING 2
COST RELATED TO REWORKING ₱ 30,000.00
PERFORMING WARRANTY WORK ₱ 60,000.00
WARRANTY COST FOR COMPETITORS ₱ 30,000.00

JRD CO. FILLING ORDERS

WAGES AND SALARIES 580000 15%
OTHER EXPENSES 120000 55%

FILLING ORDERS 2000

CUSTOMER SUPPORT 20

WAGES AND SALARIES COST RATE COST

ALLOCATED TO FILLING ORDERS 15% 580000
ALLOCATED TO CUSTOMER SUPPORT 75% 580000
TOTAL

TULIP CO. MAKING BOUQUETS

WAGES AND SALARIES ₱ 70,000.00 70%
OTHER EXPENSES ₱ 60,000.00 45%

WAGES AND SALARIES ₱ 70,000.00 70%

OTHER EXPENSES ₱ 60,000.00 45%
TOTAL

TOTAL OH COST PER BOUQUET

XYZ CO.
ACTIVITY COST POOLS EST. OVERHEAD COST TOTAL EXPECTED ACTIVITY
MACHINE RELATED ₱ 242,100.00 9,000.00
BATCH SET UP ₱ 713,900.00 11,000.00
GENERAL FACTORY ₱ 256,500.00 9,000.00
TOTAL ₱ 1,212,500.00 29,000.00

XYC CO.
PARTICULARS PRODUCT A PRODUCT B
PRODUCTION VOLUME 2500 10000
DIRECT LABOR HOURS 5000 20000
SETUP COST/BATCH ₱ 1,000 ₱ 2,000
BATCH SIZE 100 50
TOTAL SETUP COSTS ₱ 20,000 ₱ 40,000
 ₱ 29,118.00

₱ 24,627.30
₱ 4,490.70

TOTAL PREVENTION COST

₱ 27,000.00

₱ 30,000.00
₱ 46,000.00

₱ 103,000.00

5 due to component failure.

ur per unit. The cost per component is P350.
CUSTOMER SUPPORT OTHER
75% 10%
25% 20%

TOTAL COST TOTAL ACTIVITY ACTIVITY RATE TOTAL ACTIVITY ABC COST
87000 2000 43.5 7 304.5
435000 20 21750 1 21750
522000 $ 22,055

DELIVERY OTHER TOTAL

20% 10% 100%
25% 30% 100%

₱ 49,000.00
₱ 27,000.00
₱ 76,000.00
40000
₱ 1.90
COST DRIVER RATE PRODUCT X TOTAL
₱ 26.90 6,000.00 ₱ 161,400.00
₱ 64.90 6,000.00 ₱ 389,400.00
₱ 28.50 1,000.00 ₱ 28,500.00
₱ 120.30 13,000.00 ₱ 579,300.00