PROBLEMS:

1. Nite Corporation has developed the following flexible budget formula for annual indirect labor costs:
Total Cost = P480,000 + P5.00 per machine hour
Operating budgets for the current month are based upon 20,000 machine hours of planned machine
time. Indirect labor costs included in this planning budget are:
A. P 48,333 C. P580,000
B. P100,000 D. P140,000

2. Harem Company uses an annual cost formula for overhead of P72,000 + P1.60 for each direct labor hour worked. For the upcoming
month Karla plans to manufacture 96,000 units. Each unit requires five minutes of direct labor. Harem Company’s budgeted overhead
for the month is
A. P 12,800 C. P 84,800
B. P 18,800 D. P774,000

3. Total production costs for Jordan, Inc. are budgeted at P2,300,000 and P2,800,000 for 50,000 and 60,000 units of budgeted output,
respectively. Because of the need for additional facilities, budgeted fixed costs for 60,000 units are 25 percent more than budgeted
fixed costs for 50,000 units. How much is Jordan’s budgeted variable cost per unit of output?
A. P 7.50 C. P30.00
B. P16.00 D. P62.50

4. Irma Company manufactures office furniture. During the most productive month of the year, 3,500 desks
were manufactured at a total cost of P84,400. In its slowest month, the company made 1,100 desks at a cost of P46,000. Using
the high-low method of cost estimation, total fixed costs in August are:
A. P56,000 C. P17,600
B. P28,400 D. P38,400

5. Palm, Inc. has a total of 2,000 rooms in its nationwide chain of hotels. On the average, 70 percent of the rooms are
occupied each day. The company’s operating cost is P21 per occupied room per day at this occupancy level,
assuming a 30-day month. This P21 figure contains both variable and fixed cost elements. During October, the
occupancy dropped to only 45 percent. A total of P792,000 in operating costs were incurred during the month.

What would be the expected operating costs, assuming that the occupancy rate increases to 60 percent during November?
A. P1,056,000 C. P 756,000
B. P 846,000 D. P 829,500

6. The Shepherd Company’s president would like to know the estimated fixed and variable
components of a particular cost. Actual data for this cost for four recent periods appear below.
8
 Activity Cost
Period 1 24 P174
Period 2 25 179
Period 3 20 165
Period 4 22 169

A. Y = P 0.00 + P7.55X C. Y = P103.38 + P3.00X

B. Y = P110.44 + P2.70X D. Y = P113.35 + P0.89X

B. P2.57. D. P2.85.

7. The Overland Company wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data:
Month Electricity Cost Direct Labor Hours
January P6,750 1,500
April 7,500 1,700
July 8,500 2,000
October 7,250 1,600
Using the high-low method, what is the best equation?
A. Y = P 750 + P5.00X C. Y = P 750 + P3.50X
B. Y = P1,500 + P3.50X D. Y = P1,500 + P5.00X

8. The following information is available for maintenance costs:

Month Production Volume Maintenance Costs
June 150,000 P500,000
July 230,000 620,000
August 380,000 800,000
September 120,000 480,000
October 270,000 710,000
Using the least squares, the estimate of the fixed portion of maintenance costs (rounded to thousand pesos) is
A. P131,000 C. P332,000
B. P321,000 D. P115,000

9. Tomas Ocampo has just been appointed chairperson of the Accountancy Department of ADEB College. In reviewing the department’s
cost records, Tomas has found the following total cost associated with MAS Part 2 subject over the last several terms:

Semester/Term Number of Subjects Offered Total Cost

AY2004, First Semester 4 P10,000
AY2004, Second Semester 6 14,000
AY2004, Summer 2 7,000
AY2005, First Semester 5 13,000
AY2005, Second Semester 3 9,500
Tomas knows that there are some variable costs, such as amounts paid to student assistants,
associated with the course. He would like to have variable and fixed cost components separated for
planning purposes. Using the least-squares method, what is the variable cost per section of MAS?
A. P1,750 C. P1,200
B. P1,500 D. P 900

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