Requirement 1

Deluxe Executive
Direct Material Cost 40.00 65.00
Direct Labor Cost 25.00 25.00
Factory Overhead* 160.00 120.00
Total Unit Manufacturing Cost 225.00 210.00

* Total Machine Hours 32,000.00 45,000.00

Multiply: Overhead rate per machine hrs 80.00 80.00
Total Overhead rate 2,560,000.00 3,600,000.00
Divide: Total Units 16,000 30,000
Overhead rate per unit 160 120

Requirement 2

Deluxe Executive
Direct Material Cost 40.00 65.00
Direct Labor Cost 25.00 25.00
Factory Overhead* 188.50 104.80
Total Unit Manufacturing Cost 253.50 194.80

Rate per Cost Driver

Total No. of Cost (Total Cost/ Total no.
* Total Cost Driver of Cost Driver)
Setups 1,344,000.00 160.00 8,400.00
Machine Hours 3,696,000.00 77,000.00 48.00
Outgoing Shipments 1,120,000.00 350 3,200

Deluxe
Activity Rate per cost Driver Total Cost Driver Total Overhead Cost
Setups 8,400.00 100 840,000.00
Machine Hours 48.00 32000 1,536,000.00
Outgoing shipments 3,200.00 200 640,000.00
Total cost 3,016,000.00
Divide: Total Volume 16,000
Overhead Cost Per unit 188.50

Requirement 3

Understated/ Undercost by 456,000

Overhead Traditional 2,560,000.00

 Overhead ABC 3,016,000.00
(Under)/Over (456,000.00)

Requirement 4

Deluxe Executive
Overhead Traditional 2,560,000.00 Overhead Traditional
Overhead ABC 3,016,000.00 Overhead ABC
(Under)/Over (456,000.00) (Under)/Over

Requirement 5

No. Selling a product at a NET selling price of P240 per unit while the actual cost per unit is P253.5 will incur a loss of P1
 Executive
Activity Rate per cost Driver Total Cost Driver Total Overhead Cost
Setups 8,400.00 60 504,000.00
Machine Hours 48.00 45000 2,160,000.00
Outgoing shipments 3,200.00 150 480,000.00
Total cost 3,144,000.00
Divide: Total Volume 30,000
Overhead Cost Per unit 104.80
 Executive
3,600,000.00
3,144,000.00
456,000.00

it is P253.5 will incur a loss of P13.5 per unit

*

**
Requirement 1 Requirement 3
Product A Product B
Selling price per unit 30.00 120.00 Selling price per unit
Less: Cost per unit 26.37 84.65 Less: Cost per unit
GP per unit 3.63 35.35 GP per unit

Product A Product B
Direct Materials 15 24 Direct Materials
Direct Labor* 6 32 Direct Labor*
Factory Overhead** 5.37 28.65 Factory Overhead**
Total cost per unit 26.37 84.65 Total cost per unit

Direct Labor Product A Product B Direct Labor

Direct Labor Hours per unit 0.3 1.6 Direct Labor Hours per unit
Multiply: Direct Labor rate per hour 20 20 Multiply: Direct Labor rate p
Direct Labor cost per unit 6 32 Direct Labor cost per unit

Factory Overhead ** Factory Overhead

Product A Product B Total Activity

Direct Labor Hours per unit 0.3 1.6 Engineering Support
Multiply: Total units 10,000.00 2,000.00 Electricity
Total DLH used 3,000.00 3,200.00 6,200.00 Setup costs

Overheads Total Cost

Engineering Support 24,500.00 Product A

Electricity 34,000.00 Activity

Setup Costs 52,500.00 Engineering Support
Total Overhead Cost 111,000.00 Electricity
Divide: Total DLH used 6,200.00 Setup costs
Overhead Cost per DLH 17.90 Total Overhead Cost
Divide: Total units
Product A Product B Overhead Cost per unit
Total DLH used 3,000.00 3,200.00
Multiply: Overhead Cost per DLH 17.90 17.90 Product B
Total Overhead Cost 53,709.68 57,290.32

Divide: Total No. of Units 10,000 2,000 Activity

Overhead cost per unit 5.37 28.65 Engineering Support
Electricity
Setup costs
Requirement 2 Total Overhead Cost
 Product A Product B Divide: Total units
Total Number of Units 10,000.00 2,000.00 Overhead Cost per unit
Multiply: GP per unit 3.63 35.35
Gross Profit 36,290.32 70,709.68 Requirement 4
Divide: Total number of customers 500 400
GP per customer 72.58 176.77 Total Number of Units
Multiply: GP per unit
*Assume the GP is equally distributed per customer since the problem is silent Gross Profit
Divide: Total number of cus
Customer Service Cost GP per customer

Customer Service 81,000.00 *Assume the GP is equally distrib

Divide: Total no. of customers 900.00
Cost per customer 90.00
Requirement 3
Product A Product B
Selling price per unit 30.00 120.00
Less: Cost per unit 24.30 95.03
GP per unit 5.71 24.98

Product A Product B
Direct Materials 15 24
Direct Labor* 6 32
Factory Overhead** 3.30 39.03
Total cost per unit 24.30 95.03

Direct Labor Product A Product B

Direct Labor Hours per unit 0.3 1.6
Multiply: Direct Labor rate p 20 20
Direct Labor cost per unit 6 32

Factory Overhead
Cost per cost
Total Total cost Driver Driver
Engineering Support 24,500.00 70 350
34,000.00 3,400 10
Setup costs 52,500.00 350 150

Cost per cost

Driver Cost Driver Total Cost
Engineering Support 350.00 12.00 4,200.00
10.00 1,000.00 10,000.00
Setup costs 150.00 125 18,750
Total Overhead Cost 32,950.00
Divide: Total units 10,000
Overhead Cost per unit 3.30

Cost per cost

Driver Cost Driver Total Cost
Engineering Support 350.00 58.00 20,300.00
10.00 2,400.00 24,000.00
Setup costs 150.00 225 33,750
Total Overhead Cost 78,050.00
Divide: Total units 2,000
Overhead Cost per unit 39.03

Requirement 4
Product A Product B
Total Number of Units 10,000.00 2,000.00
Multiply: GP per unit 5.71 24.98
Gross Profit 57,050.00 49,950.00
Divide: Total number of cus 500 400
GP per customer 114.10 124.88

*Assume the GP is equally distributed per customer since the problem is silent