Cost Assignment Process (Basic):

Meow Corporation produces and sells two products namely Kaw and Koh.
In assigning direct materials and direct labor, the number of units of
materials used and number of hours worked are being used as the basis of
allocation, respectively. Other indirect costs such as indirect materials,
factory equipment depreciation, etc. are being applied on the basis of
direct labor hours.

The production data for the month are as follow:

Details Kaw Koh

DM @ P6.10 each 3,000 units 7,000 units
DLH @ P1.56/hr 5,000 hrs 15,000 hrs
Machine Hours 2,000 hrs 1,000 hrs
Units Produced 5,000 units 10,000 units
Total annual manufacturing overhead is P142,640 and annual expected
direct labor hours is 200,000 hours.

REQUIRED: Kaw
1 Compute the unit cost of Kaw and Koh. 5.93
2 Assuming that the total overhead incurred by two departments 7.72
namely Manual Department and Auto Department. The breakdown of the
cost and drivers are:
Details Manual Dept Auto Dept
Overhead cost 100,000.00 42,640.00
Drivers 200,000 DLH 21,320 MH
0.50 2.00
Compute the unit cost of Kaw and Koh.
 1 TC-PLANTWIDE
MOH Rate/u = 142,640.00
200,000 0.7132

Kaw Koh
DM 18,300.00
DL 7,800.00
MOH 3,566.00
Total 29,666.00
Units 5,000
Unit Cost 5.93

2 TC-DEPARTMENTAL

Koh Kaw Koh

- DM 18,300.00
- DL 7,800.00
MOH 12,500.00
Manual 2,500.00
Auto 10,000.00
Total 38,600.00
Units 5,000
Unit Cost 7.72
1
Liang
10.00
CM/u = SP - VC/u
6.00
4.00

CM 2,000 hrs
CM/u =
Su #REF!

#VALUE!

CMR = CM 2,000 hrs

S 3,000 units

FxC 5,000 units

BEPu =
CM/u 4.00

#VALUE!

FxC 5,000 units

BEPp =
CMR #REF!

#VALUE!
#VALUE!
 Liong Liang Liong
25.00 0
#VALUE!
#VALUE! BEPu #VALUE! #VALUE!
BEPR =
Su #REF! #REF!

1,000 hrs
#REF! #VALUE! #VALUE!

#VALUE!

1,000 hrs #VALUE! #VALUE!

7,000 units #REF! #REF!
0

3,000 units 7,000 units

MSp = Sp - BEPp
#VALUE! #VALUE!
10,000 units #VALUE! #VALUE!
#VALUE!
#REF! #REF!
MSp = Su x SP
#VALUE!

#REF!

10,000 units MSp #REF! #REF!

MSR =
#REF! Sp 3,000 units 7,000 units

#VALUE! #REF! #REF!

#VALUE!
MSR = 1 - BEPR
#VALUE! #VALUE!

Total CM 2,000 hrs 1,000 hrs

DOL or OLF =
Profit before tax #REF! #REF!

#VALUE! #VALUE!

1 1
#VALUE! #VALUE!

#VALUE! #VALUE!
 Traditional Costing, Costing System Refinement and Activity Based Costing:
Ballz Corporation has a traditional costing system in which it applies manufacturing overhead
to its products using a predetermined overhead rate based on direct labor-hours (DLHs)

The company has two products, SanGuko and SanTiago, about which it has provided the
following data:

Details SanGuko SanTiago

Direct Materials per unit P 29.20 P 47.40
Direct Labor per unit P 1.10 P 23.10
Direct labor-hours per unit 0.10 2.10
Annual Production 35,000 15,000
DLH 3,500 31,500
The company's estimated total manufacturing overhead for the year is P1,147,650 and the
company's estimated total direct labor-hours for the year is 35,000.

The company is considering using a variation of activity-based costing to determine its unit
product costs for external reports. Data for this proposed activity-based costing system
appear below:

Activities and Activity Measures Est. OH Costs

Assembling products (DLHs) P 140,000.00
Preparing batches (batches) 241,150.00
Milling (MHs) 766,500.00
Total P 1,147,650.00

SanGuko SanTiago
Assembling products 3,500 31,500
Preparing batches 560 1,295
Milling 1,540 1,015

REQUIRED: SanGuko
1 Determine the MOH/unit under traditional costing ₱3.28
2 Compute the MOH/unit of Kaw and Koh under ABC Costing ₱15.68
 1
ing:
cturing overhead
rs (DLHs) SanGuko
DLH 3,500
as provided the DL/u 32.79
MOH 114,765.00
Units 35,000
MOH/unit ₱3.28

2
a. Determine the activity rates
Assembling products (DLHs) 140,000.00 35,000.00
Preparing batches (batches) 241,150.00 1,855.00
35,000 Milling (MHs) 766,500.00 2,555.00
47,650 and the
SanGuko
Assembling products 14,000
termine its unit Preparing batches 72,800.00
costing system Milling 462,000.00
548,800
Units 35,000
MOH/unit ₱15.68

(434,035.00)
undercosted
PRODUCT CROSS SUBSIDIZATIO

Total
35,000
1,855
2,555

SanTiago
₱68.86
₱39.92
 SanTiago
31,500
32.79
1,032,885.00
15,000
₱68.86

Rate/Activity
4.00 per DLH
130.00 per batch
300.00 per MH

SanTiago
126,000
168,350.00
304,500.00
598,850
15,000
₱39.92

434,035.00
overcosted
CT CROSS SUBSIDIZATION
1

CM/u = SP - VC/u

CM
CM/u =
Su

CMR = CM
S

CM
CM/u =
Su

CM
CM/u =
Su

#REF!
Liang Liong
10.00 25.00 #REF!
6.00 #REF!
4.00 #REF! BEPu
BEPR =
Su

0.10 2.10
#REF! #REF!

#REF! #REF!

0.10 2.10
29.20 47.40
#REF!

766,500.00 -
#REF! #REF!

#REF! #REF!

1,540.00 1,015.00
#REF! #REF!

#REF! #REF!

MSp = Sp - BEPp

#REF! #REF!
#REF! #REF!
MSR = 1 - BEPR

#REF!

Total CM
DOL or OLF =
Profit before tax
Liang Liong

#REF! #REF!
#REF! #REF!

#REF! #REF!

#REF! #REF!
#REF! #REF!

#DIV/0! #DIV/0!

#DIV/0! #DIV/0!

29 47
#REF! #REF!

#REF! #REF!

#REF! #REF!

0.10 2.10
#REF! #REF!
 #REF! #REF!

1 1
#REF! #REF!

#REF! #REF!
Activity 1 COST
Cost Object

COST POOL

Activity 2 COST Cost Object

Activity 1 COST COST POOL 1

Cost Object
cost driver

Activity 2 COST COST POOL 2 Cost Object

cost driver