Cost Accounting - 2019

Chapter 2 - Costs – Concepts and classification

Problem 1- Ram Corporation Problem 2

1. Direct materials 1. Fixed
2. Manufacturing overhead 2. Variable
3. Direct materials 3. Mixed
4. Direct labor 4. Fixed
5. Manufacturing overhead 5. Variable
6. Manufacturing overhead 6. Fixed
7. Direct materials 7. Fixed
8. Manufacturing overhead 8. Variable
9. Manufacturing overhead 9. Variable
10. Manufacturing overhead 10. Variable

Problem 3
1. Manufacturing 6. Manufacturing - Cost of machine breakdown
2. Selling 7. Manufacturing - Power to operate factory equipment
3. Manufacturing 8. Seling - Advertising
4. Manufacturing 9. Selling - Commission paid to sales personnel
5. Administrative 10.Administrative - Travel expenses of Chief Executive Officer

QUIZ Rocco Manufacturing Company reports the following costs and expenses in March of 2019:
Direct materials P220,000
Factory rent 50,000
Direct labor 180,000
Factory utilities 8,500
Factory supervisor’s salary 60,000
Depreciation – Factory equipment 20,000
Sales commission 57,000
Advertising 47,000
Depreciation – office equipment 10,000
Salary of the president 250,000

SOLUTION TO QUIZ Product Cost Period Cost

Direct mat. Direct laborMfg. OH Selling Adm
1. DM 220,000
2. Factory rent 50,000
3. Direct labor 180,000
4. Factory utilities 8,500
5. Supervision 60,000
6. Depreciation-FE 20,000
7. Sales Commission 57,000
8. Advertising 47,000
9. Depreciation-OE 10,000
10. Salary - pres. 250,000
1. TOTAL PRODUCT CST = 220,000 + 180,000 + 138,500 = p 538,500
2. TOTAL PERIOD COST = 57,000 + 307,000 = 364,000
3. COST PER UNIT = 538,500/ 40,000 = P 13.4625
 Problem 4 – Bug Company
1. Variable Inventoriable (DM) 6. Variable Period (OE)
2. Variable Inventoriable (FO) 7. Variable Inventoriable (DM)
3. Fixed Inventoriable (FO) 8. Variable Period (OE)
4. Variable Inventoriable (DM) 9. Fixed Period (OE)
5. Variable Inventoriable (FO) 10. Variab;e Inventoriable (DL)

QUIZ Mighty Muffler, Inc. operates an automobile service facility, which specializes in replacing
mufflers on cars. The following table shows the costs incurred during a month when 500 mufflers
were replaced:
Number of muffler replacements
Total costs: 400 500 800
Fixed costs (a) P 50,000 (b)
Variable costs (c) 60,000 (d)
Total costs (e) P110,000 (f)
Cost per muffler replacement
Fixed cost (g) (h) (i)
Variable cost (j) (k) (l)
Total cost per unit replacement (m) (n) (o)
Required: Fill in the missing amounts.
ANSWERS FO QUIZ
a. P 50,000
b. P 50,000
c. P 60,000 = P120/muffler x 400 = P 48,000
500
d. P 120 x 800 = P 96,000
e. P 50,000 + P 48,000 = P 98,000
f. P 50,000 + P 96,000 = P 146,000
g. P 50,000/ 400 = P 125
h. P 50,000/500 = P 100
I, P 50,000/800 = P 62.50
j. P 48,000/400 = P 120
k. P 60,000/500 = P 120
l. P 96,000/800 = P 120
m. P 125 + P 120 = P 245
n. P 100 + P 120 = P 220
o. P 62.50 + P 120 = P 182.50

Problem 5
1. Prime cost (P65,000 - P15,000) + (P70,000 - P18,000) = P102,000
2. Conversion cost (P70,000 - P18,000) + (P95,000 - P33,000) = P114,000
3. Total product cost (P50,000 + P52,000 + P62,000*) = P164,000
4. Total period cost (P2,600 + P18,600) = P 21,200
 Applied Overhead (P95,000 – P15,000 - P18,000)= P62,000.

Problem 6 – Mother Goose Company

1. Prime costs - 530,000
2. Conversion cost - 575,000
3 Inventoriable cost - 860,000
4. Total period costs - 305,000
Problem 7
1. Direct materials P 60.00
Direct labor 30.00
Variable manufacturing overhead 9.00
Total variable manufacturing cost per unit P 99.00

` 2. Total variable manufacturing cost per unit P 99.00

Variable marketing and administrative 6.00
Total variable costs per unit 105.00

3. Total variable manufacturing cost per unit P 99,00

Fixed manufacturing overhead (30,000/1,200) 25.00
Full manufacturing cost per unit 124.00

4. Full manufacturing cost per unit 124.00

Variable marketing and administrative 6.00
Fixed marketing and administrative 20.00
Full cost to make and sell per unit 150.00

Problem 8
1. P7 per machine hour
2. P18,000
3. P51,600

Problem 9 – Johnson Corporation

1. Variable cost per machine hour = 35,600 – 20,000
4,000 - 2,000
= 7.80 per machine hour
2. 4,000 hours 2000 hours
Total electricity expense 35,600 20,000
Less: Variable costs
( 4,000 x 7.80) 31,200
( 2000 x 7.80) ______ 15,600
Fixed cost 4,400 4,400

3. Fixed cost 4,400

Variable cost ( 4,500 x 7.50) 35,100
Totl manufacturing costs 39,500

Problem 10 – Valdez Motors Co.

1. Variable cost per machine hour = 5,475 – 3,975
210 - 145
= 23.08 per machine hour

2. 210 hours 145 hours

Total overhead costs 5,475 3,975
Less: Variable costs
( 210 x 23.08) 4,847
( 145 x 23.08) _____ 3,347
Fixed cost 628 628
 Variable cost (200 mh x P23.08) P4,616
Fixed cost 628 P5,244

True/False Questions
1. False 6. True 11. False 16. True 21. True
2. False 7. False 12. False 17. False 22. True
3. True 8. True 13. True 18. True 23. False
4. False 9. False 14. False 19. False 24. False
5. False 10. True 15. False 20. True 25. True

Multiple Choice – Theoretical

1. D 6. A 11. C 16. B
2. C 7. D 12. D 17. B
3. B 8. D 13. C 18. A
4. C 9. B 14. B 19. D
5. D 10. C 15. A 20. B
Multiple choice - Computational
1. A 11. B
2. C 12. A
3. A 13. A
4. B 14. B
5. A 15. C
6. B 16. A
7. C 17. P34,000
8. B 18. C
9. B 19. D
10. A 20. D