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Test Bank Chapter 8 ABC For Decision Makingpdf PDF Free
Test Bank Chapter 8 ABC For Decision Makingpdf PDF Free
True/False
1. When combining activities in an activitybased costing system,
T activities should be grouped together at the same level. For
Easy example, batchlevel activities should not be combined with
unitlevel activities.
2. Unitlevel activities arise as a result of the total volume of
T production and are performed each time a unit is produced.
Easy
3. Unitlevel production activities are performed each time a unit
T is made.
Easy
4. Organizationsustaining activities are carried out regardless
T of how many units are made, how many batches are run, or how
Easy many different products are made.
5. Activitybased costing uses a number of activity cost pools,
F each of which is allocated to products on the basis of direct
Easy laborhours.
6. The firststage allocation in activitybased costing is the
F process by which overhead costs are assigned to products before
Medium they are assigned to customers.
7. Activity rates in activitybased costing are computed by
T dividing costs from the firststage allocations by the activity
Easy measure for each activity cost pool.
8. In the secondstage allocation in activitybased costing,
T activity rates are used to apply costs to products, customers,
Medium and other cost objects.
9. In traditional costing systems, all manufacturing costs are
T assigned to productseven manufacturing costs that are not
Medium caused by the products.
10. When there are batchlevel or productlevel costs, in
T comparison to a traditional cost system, an activitybased
Hard costing system ordinarily will shift costs from highvolume to
lowvolume products.
Managerial Accounting, 9/e 18
11. An activitybased costing system is generally easier to set up
F and run than a traditional cost system.
Medium
12. Activitybased costing is a costing method that is designed to
F provide managers with cost information for strategic and other
Medium decisions that potentially affect only variable costs.
13. In activitybased costing, as in traditional costing systems,
F nonmanufacturing costs are not assigned to products.
Medium
14. In activitybased costing, a plantwide overhead rate is used
F to apply overhead to products.
Medium
15 Changing a cost accounting system is likely to meet with little
F resistance in an organization since it is a technical matter of
Medium little interest to individuals outside of the accounting
department.
Multiple Choice
16. Which of the following levels of costs should not be allocated
D to products for decisionmaking purposes?
Medium a. Unitlevel activities.
b. Batchlevel activities.
c. Productlevel activities.
d. Organizationsustaining activities
17. Testing a prototype of a new product is an example of a:
C a. Unitlevel activity.
Easy b. Batchlevel activity.
c. Productlevel activity.
d. Organizationsustaining activity.
18. Setting up equipment is an example of a:
B a. Unitlevel activity.
Medium b. Batchlevel activity.
c. Productlevel activity.
d. Organizationsustaining activity.
19. The clerical activity associated with processing purchase
B orders to produce an order for a standard product is an example
Hard of a:
a. Unitlevel activity.
b. Batchlevel activity.
c. Productlevel activity.
d. Organizationsustaining activity.
Managerial Accounting, 9/e 19
20. Worker recreational facilities is an example of a cost that
D would ordinarily be considered to be:
Medium a. Unitlevel.
b. Batchlevel.
c. Productlevel.
d. Organizationsustaining.
21. Arranging for a shipment of a number of different products to a
B customer is an example of an activity at which of the following
Medium levels?
a. Unitlevel activity.
b. Batchlevel activity.
c. Customerlevel activity.
d. Organizationsustaining activity.
22. Human resource management is an example of an activity at which
D of the following levels?
Medium a. Unitlevel activity.
b. Productlevel activity.
c. Batchlevel activity.
d. Organizationsustaining activity.
23. Which of the following would be classified as a productlevel
D activity?
Medium a. Machine setup for a batch of a standard product.
b. Cafeteria facilities available to and used by all employees.
c. Human resource management.
d. Advertising a product.
24. Departmental overhead rates may not correctly assign overhead
C costs due to:
Hard a. the use of direct labor hours in allocating overhead costs
to products rather than machine time or quantity of
materials used.
b. the high correlation between direct laborhours and the
incurrence of overhead costs.
c. overreliance on volume as a basis for allocating overhead
costs where products differ regarding the number of units
produced, lot size, or complexity of production.
d. difficulties associated with identifying cost pools for the
first stage of the allocation process.
25. Overhead allocation based on volume alone:
B a. is a key aspect of the activitybased costing model.
Medium b. will systematically overcost highvolume products and
undercost lowvolume products.
c. will systematically overcost lowvolume products and
undercost highvolume products.
d. must be used for external financial reporting.
Managerial Accounting, 9/e 20
26. Paul Company has two products: A and B. The company uses
C activitybased costing. The estimated total cost and expected
Medium activity for each of the company's three activity cost pools
are as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P22,000 400 100 500
Activity 2 P16,240 380 200 580
Activity 3 P14,600 500 250 750
The activity rate under the activitybased costing system for
Activity 3 is closest to:
a. P70.45.
b. P28.87.
c. P19.47.
d. P58.40.
27. Selena Company has two products: A and B. The company uses
B activitybased costing. The estimated total cost and expected
Medium activity for each of the company's three activity cost pools
are as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P17,600 800 300 1,100
Activity 2 P12,000 500 200 700
Activity 3 P26,000 800 400 1,200
The activity rate under the activitybased costing system for
Activity 3 is closest to:
a. P46.33.
b. P21.67.
c. P65.00.
d. P18.53.
Managerial Accounting, 9/e 21
28. Matt Company uses activitybased costing. The company has two
D products: A and B. The annual production and sales of Product A
Hard is 8,000 units and of Product B is 6,000 units. There are three
activity cost pools, with estimated total cost and expected
activity as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P20,000 100 400 500
Activity 2 P37,000 800 200 1,000
Activity 3 P91,200 800 3,000 3,800
The cost per unit of Product A under activitybased costing is
closest to:
a. P2.40.
b. P3.90.
c. P10.59.
d. P6.60.
29. Bridget Company uses activitybased costing. The company has two
products: A and B. The annual production and sales of Product A
is 2,000 units and of Product B is 3,000 units. There are three
activity cost pools, with estimated total cost and expected
activity as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P9,000 400 350 750
Activity 2 P12,000 100 400 500
Activity 3 P48,000 400 1,200 1,600
The cost per unit of Product A under activitybased costing is
closest to:
a. P6.00.
b. P9.60.
c. P8.63.
d. P13.80.
Reference: 81
Note to the Instructor: Questions 30 to 32, 33 to 35, and 36 to 38 are
different versions of the same questions.
Dideda Company uses an activitybased costing system with three activity
cost pools. The company has provided the following data concerning its costs
and its activity based costing system:
Managerial Accounting, 9/e 22
Costs:
Manufacturing overhead ........... P360,000
Selling and admin. expenses ...... P240,000
Total .......................... P600,000
Distribution of resource consumption:
Activity Cost Pools
Order Customer
Size Support Other Total
Manufacturing overhead ......... 25% 65% 10% 100%
Selling and admin. expenses .... 60% 20% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
You have been asked to complete the firststage allocation of costs to
the activity cost pools.
30. How much cost, in total, would be allocated in the firststage
D allocation to the Order Size activity cost pool?
Easy a. P150,000
Refer To: b. P360,000
81 c. P255,000
d. P234,000
31. How much cost, in total, would be allocated in the firststage
B allocation to the Customer Support activity cost pool?
Easy a. P255,000
Refer To: b. P282,000
81 c. P120,000
d. P390,000
32. How much cost, in total, should NOT be allocated to orders and
C products in the second stage of the allocation process if the
Medium activitybased costing system is used for internal decision
Refer To: making?
81 a. P60,000.
b. P0.
c. P84,000.
d. P120,000.
Reference: 82
NOTE TO THE INSTRUCTOR: Questions 30 to 32, 33 to 35, and 36 to 38 are
different versions of the same questions.
Diehl Company uses an activitybased costing system with three activity cost
pools. The company has provided the following data concerning its costs and
its activity based costing system:
Managerial Accounting, 9/e 23
Costs:
Manufacturing overhead ........... P480,000
Selling and admin. expenses ...... P100,000
Total .......................... P580,000
Distribution of resource consumption:
Activity Cost Pools
Order Customer
Size Support Other Total
Manufacturing overhead ........ 5% 85% 10% 100%
Selling and admin. expenses ... 60% 20% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
You have been asked to complete the firststage allocation of costs to
the activity cost pools.
33. How much cost, in total, would be allocated in the firststage
D allocation to the Order Size activity cost pool?
Easy a. P348,000
Refer To: b. P188,500
82 c. P29,000
d. P84,000
34. How much cost, in total, would be allocated in the firststage
D allocation to the Customer Support activity cost pool?
Easy a. P304,500
Refer To: b. P493,000
82 c. P116,000
d. P428,000
35. How much cost, in total, should NOT be allocated to orders and
A products in the second stage of the allocation process if the
Medium activitybased costing system is used for internal decision
Refer To: making?
82 a. P68,000.
b. P0.
c. P116,000.
d. P58,000.
Reference: 83
NOTE TO THE INSTRUCTOR: Questions 30 to 32, 33 to 35, and 36 to 38 are
different versions of the same questions.
Dierich Company uses an activitybased costing system with three activity
cost pools. The company has provided the following data concerning its costs
and its activity based costing system:
Managerial Accounting, 9/e 24
Costs:
Manufacturing overhead ........... P600,000
Selling and admin. expenses ...... P220,000
Total .......................... P820,000
Distribution of resource consumption:
Activity Cost Pools
Order Customer
Size Support Other Total
Manufacturing overhead ........ 15% 75% 10% 100%
Selling and admin. expenses ... 60% 20% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
You have been asked to complete the firststage allocation of costs to
the activity cost pools.
36. How much cost, in total, would be allocated in the firststage
A allocation to the Order Size activity cost pool?
Easy a. P222,000
Refer To: b. P307,500
83 c. P123,000
d. P492,000
37. How much cost, in total, would be allocated in the firststage
D allocation to the Customer Support activity cost pool?
Easy a. P389,500
Refer To: b. P615,000
83 c. P164,000
d. P494,000
38. How much cost, in total, should NOT be allocated to orders and
B products in the second stage of the allocation process if the
Medium activitybased costing system is used for internal decision
Refer To: making?
83 a. P82,000.
b. P104,000.
c. P0.
d. P164,000.
Reference: 84
Davis Company uses an activitybased costing system in which there
are three activity cost pools. The company has provided the following data
concerning its costs and its activitybased costing system:
Costs:
Manufacturing overhead .......... P400,000
Selling and admin. Expenses ..... P200,000
Total ......................... P600,000
Managerial Accounting, 9/e 25
Distribution of resource consumption:
Activity Cost Pools
Order Customer
Size Support Other Total
Manufacturing overhead ........... 35% 55% 10% 100%
Selling and admin. Expense ....... 50% 30% 20% 100%
The "other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
You have been asked to complete the firststage allocation of the costs
to the activity cost pools.
39. How much cost, in total, would be allocated in the firststage
B allocation to the Order Size activity cost pool?
Easy a. P210,000.
Refer To: b. P240,000.
84 c. P300,000.
d. P255,000.
40. How much cost, in total, would be allocated in the firststage
D allocation to the Customer Support activity cost pool?
Easy a. P255,000.
Refer To: b. P180,000.
84 c. P330,000.
d. P280,000.
41. How much cost, in total should NOT be allocated to orders and
C products in the second stage of the allocation process if the
Medium activitybased costing system is used for internal decision
Refer To: making?
84 a. P0.
b. P60,000.
c. P80,000.
d. P120,000.
Reference: 85
NOTE TO THE INSTRUCTOR: Questions 42 to 44, 45 to 47, and 48 to 50 are
different versions of the same questions.
Escau Company is a wholesale distributor that uses activitybased costing
for all of its overhead costs. The company has provided the following data
concerning its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P380,000
Other expenses ...... P100,000
Total ............. P480,000
Managerial Accounting, 9/e 26
Distribution of resource consumption:
Activity Cost Pools
Filling Customer
Orders Support Other Total
Wages and salaries .. 30% 60% 10% 100%
Other expenses ...... 35% 45% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The activity measures for the activity cost pools for the year are as
follows:
Activity Cost Pool Activity
Filling orders ...... 3,000 orders
Customer support..... 20 customers
42. What would be the total overhead cost per order according to
C the activity based costing system? In other words, what would
Medium be the overall activity rate for the filling orders activity
Refer To: cost pool? (Round to the nearest whole cent.)
85 a. P56.00
b. P48.00
c. P49.67
d. P52.00
43. What would be the total overhead cost per customer according to
A the activity based costing system? In other words, what would
Medium be the overall activity rate for the customer support activity
Refer To: cost pool? (Round to the nearest whole peso.)
85 a. P13,650
b. P12,600
c. P14,400
d. P10,800
44. To the nearest whole peso, how much wages and salaries cost
B would be allocated to a customer who made 8 orders in a year?
Hard a. P14,784.
Refer To: b. P11,704.
85 c. P7,392.
d. P9,548.
Reference: 86
NOTE TO THE INSTRUCTOR: Questions 42 to 44, 45 to 47, and 48 to 50 are
different versions of the same questions.
Escalona Company is a wholesale distributor that uses activitybased costing
for all of its overhead costs. The company has provided the following data
concerning its annual overhead costs and its activity based costing system:
Managerial Accounting, 9/e 27
Overhead costs:
Wages and salaries .. P580,000
Other expenses ...... P200,000
Total ............. P780,000
Distribution of resource consumption:
Activity Cost Pools
Filling Customer
Orders Support Other Total
Wages and salaries .. 40% 50% 10% 100%
Other expenses ...... 35% 45% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Filling orders ...... 1,000 orders
Customer support .... 30 customers
45. What would be the total overhead cost per order according to
B the activity based costing system? In other words, what would
Medium be the overall activity rate for the filling orders activity
Refer To: cost pool? (Round to the nearest whole cent.)
86 a. P273.00
b. P302.00
c. P312.00
d. P292.50
46. What would be the total overhead cost per customer according to
D the activity based costing system? In other words, what would
Medium be the overall activity rate for the customer support activity
Refer To: cost pool? (Round to the nearest whole peso.)
86 a. P11,700
b. P13,000
c. P12,350
d. P12,667
47. To the nearest whole peso, how much wages and salaries cost
C would be allocated to a customer who made 4 orders in a year?
Hard a. P8,859.
Refer To: b. P7,124.
86 c. P10,595.
d. P14,248.
Managerial Accounting, 9/e 28
Reference: 87
NOTE TO THE INSTRUCTOR: Questions 42 to 44, 45 to 47, and 48 to 50 are
different versions of the same questions.
Escoto Company is a wholesale distributor that uses activitybased costing
for all of its overhead costs. The company has provided the following data
concerning its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P540,000
Other expenses ...... P200,000
Total ............. P740,000
Distribution of resource consumption:
Activity Cost Pools
Filling Customer
Orders Support Other Total
Wages and salaries .. 10% 80% 10% 100%
Other expenses ...... 20% 60% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Filling orders ...... 4,000 orders
Customer support .... 40 customers
48. What would be the total overhead cost per order according to
C the activity based costing system? In other words, what would
Medium be the overall activity rate for the filling orders activity
Refer To: cost pool? (Round to the nearest whole cent.)
87 a. P27.75
b. P37.00
c. P23.50
d. P18.50
49. What would be the total overhead cost per customer according to
D the activity based costing system? In other words, what would
Medium be the overall activity rate for the customer support activity
Refer To: cost pool? (Round to the nearest whole peso.)
87 a. P12,950
b. P11,100
c. P14,800
d. P13,800
50. To the nearest whole peso, how much wages and salaries cost
D would be allocated to a customer who made 8 orders in a year?
Hard a. P7,474.
Refer To: b. P14,948.
87 c. P9,191.
d. P10,908.
Managerial Accounting, 9/e 29
Reference: 88
NOTE TO THE INSTRUCTOR: Questions 51 to 54 and 55 to 58 are different
versions of the same questions.
Acton Company has two products: A and B. The annual production and sales of
Product A is 800 units and of Product B is 500 units. The company has
traditionally used direct laborhours as the basis for applying all
manufacturing overhead to products. Product A requires 0.3 direct labor
hours per unit and Product B requires 0.2 direct labor hours per unit. The
total estimated overhead for next period is P92,023.
The company is considering switching to an activitybased costing system
for the purpose of computing unit product costs for external reports. The
new activitybased costing system would have three overhead activity cost
poolsActivity 1, Activity 2, and General Factorywith estimated overhead
costs and expected activity as follows:
Estimated
Activity Overhead Expected Activity
Cost Pool Costs Product A Product B Total
Activity 1 P14,487 500 600 1,100
Activity 2 P64,800 2,500 500 3,000
General Factory P12,736 240 100 340
Total P92,023
(Note: The General Factory activity cost pool's costs are allocated on the
basis of direct labor hours.)
51. The predetermined overhead rate under the traditional costing
D system is closest to:
Medium a. P37.46.
Refer To: b. P21.60.
88 c. P13.17.
d. P270.66.
52. The overhead cost per unit of Product B under the traditional
A costing system is closest to:
Medium a. P54.13.
Refer To: b. P7.49.
88 c. P4.32.
d. P2.63.
53. The predetermined overhead rate (i.e., activity rate) for
B Activity 1 under the activitybased costing system is closest
Medium to:
Refer To: a. P28.97.
88 b. P13.17.
c. P83.66.
d. P24.15.
Managerial Accounting, 9/e 30
54. The overhead cost per unit of Product A under the activity
A based costing system is closest to:
Hard a. P86.97.
Refer To: b. P70.79.
88 c. P81.20.
d. P11.24.
Reference: 89
NOTE TO THE INSTRUCTOR: Questions 51 to 54 and 55 to 58 are different
versions of the same questions.
Addy Company has two products: A and B. The annual production and sales of
Product A is 1,700 units and of Product B is 1,100 units. The company has
traditionally used direct laborhours as the basis for applying all
manufacturing overhead to products. Product A requires 0.3 direct labor
hours per unit and Product B requires 0.6 direct labor hours per unit. The
total estimated overhead for next period is P98,785.
The company is considering switching to an activitybased costing system
for the purpose of computing unit product costs for external reports. The
new activitybased costing system would have three overhead activity cost
poolsActivity 1, Activity 2, and General Factorywith estimated overhead
costs and expected activity as follows:
Estimated
Activity Overhead Expected Activity
Cost Pool Costs Product A Product B Total
Activity 1 P30,528 1,000 600 1,600
Activity 2 P17,385 1,700 200 1,900
General Factory P50,872 510 660 1,170
Total P98,785
(Note: The General Factory activity cost pool's costs are allocated on the
basis of direct labor hours.)
55. The predetermined overhead rate under the traditional costing
C system is closest to:
Medium a. P9.15.
Refer To: b. P43.48.
89 c. P84.43.
d. P19.08.
56. The overhead cost per unit of Product B under the traditional
A costing system is closest to:
Medium a. P50.66.
Refer To: b. P5.49.
89 c. P26.09.
d. P11.45.
Managerial Accounting, 9/e 31
57. The predetermined overhead rate (i.e., activity rate) for
A Activity 2 under the activitybased costing system is closest
Medium to:
Refer To: a. P9.15.
89 b. P51.99.
c. P86.93.
d. P10.23.
58. The overhead cost per unit of Product B under the activity
D based costing system is closest to:
Hard a. P50.66.
Refer To: b. P26.09.
89 c. P35.28.
d. P38.16.
Reference: 810
NOTE TO THE INSTRUCTOR: Questions 59 to 60 and 61 to 62 are different
versions of the same questions.
Abel Company uses activitybased costing. The company has two products: A
and B. The annual production and sales of Product A is 200 units and of
Product B is 400 units. There are three activity cost pools, with estimated
costs and expected activity as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P16,660 600 100 700
Activity 2 P18,450 1,100 700 1,800
Activity 3 P 9,731 60 160 220
59. a. P24.91.
D b. P26.36.
Medium c. P16.77.
Refer To: d. P10.25.
810
60. The cost per unit of Product B is closest to:
A a. P41.58.
Medium b. P81.53.
Refer To: c. P74.73.
810 d. P17.69.
Reference: 811
NOTE TO THE INSTRUCTOR: Questions 59 to 60 and 61 to 62 are different
versions of the same questions.
Accola Company uses activitybased costing. The company has two products: A
and B. The annual production and sales of Product A is 1,100 units and of
Product B is 700 units. There are three activity cost pools, with estimated
costs and expected activity as follows:
Managerial Accounting, 9/e 32
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P18,271 600 500 1,100
Activity 2 P35,891 1,600 300 1,900
Activity 3 P48,796 440 420 860
61. The activity rate for Activity 3 is closest to:
D a. P119.72.
Medium b. P116.18.
Refer To: c. P26.67.
811 d. P56.74.
62. The cost per unit of Product A is closest to:
A a. P59.23.
Hard b. P57.20.
Refer To: c. P47.89.
811 d. P22.70.
Reference: 812
Arthur Company has two products: S and D. The company uses activitybased
costing and has prepared the following analysis showing the estimated total
cost and expected activity for each of its three activity cost pools:
Activity Estimated Expected Activity
Cost Pool Cost Product S Product D Total
Activity 1 P20,000 100 400 500
Activity 2 P14,600 500 250 750
Activity 3 P90,000 300 2,700 3,000
The annual production and sales of Product S is 4,547 units. The annual
production and sales of Product D is 7,913.
63. The activity rate under the activitybased costing system for
B Activity 3 is closest to:
Medium a. P33.33.
Refer To: b. P30.00.
812 c. P29.32.
d. P41.53.
64. The cost per unit of Product S under activitybased costing is
A closest to:
Hard a. P5.00.
Refer To: b. P1.98.
812 c. P10.00.
d. P1.83.
Reference: 813
Monson Company has two products: G and P. The company uses activitybased
costing and has prepared the following analysis showing the estimated total
cost and expected activity for each of its three activity cost pools:
Managerial Accounting, 9/e 33
Activity Estimated Expected Activity
Cost Pool Cost Product G Product P Total
Activity 1 P30,000 200 400 600
Activity 2 P24,000 600 900 1,500
Activity 3 P80,000 400 3,600 4,000
The annual production and sales of Product G is 10,640 units. The annual
production and sales of Product P is 26,600.
65. The activity rate under the activitybased costing system for
D Activity 2 is closest to:
Medium a. P89.33.
Refer To: b. P21.97.
813 c. P26.67.
d. P16.00.
66. The cost per unit of Product P under activitybased costing is
A closest to:
Hard a. P4.00.
Refer To: b. P30.16.
813 c. P10.00.
d. P6.88.
Reference: 814
NOTE TO THE INSTRUCTOR: Questions 67 to 68, 69 to 70, and 71 to 72 are
different versions of the same questions.
Forse Florist specializes in large floral bouquets for hotels and other
commercial spaces. The company has provided the following data concerning
its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P80,000
Other expenses ...... P40,000
Total ............. P120,000
Distribution of resource consumption:
Activity Cost Pools
Making
Bouquets Delivery Other Total
Wages and salaries .. 60% 30% 10% 100%
Other expenses ...... 45% 25% 30% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Making bouquets ...... 60,000 bouquets
Delivery ............. 5,000 deliveries
Managerial Accounting, 9/e 34
67. What would be the total overhead cost per bouquet according to
D the activity based costing system? In other words, what would
Medium be the overall activity rate for the making bouquets activity
Refer To: cost pool? (Round to the nearest whole cent.)
814 a. P0.90
b. P1.05
c. P1.20
d. P1.10
68. What would be the total overhead cost per delivery according to
D the activity based costing system? In other words, what would
Medium be the overall activity rate for the deliveries activity cost
Refer To: pool? (Round to the nearest whole cent.)
814 a. P6.00
b. P6.60
c. P7.20
d. P6.80
Reference: 815
NOTE TO THE INSTRUCTOR: Questions 67 to 68, 69 to 70, and 71 to 72 are
different versions of the same questions.
Foster Florist specializes in large floral bouquets for hotels and other
commercial spaces. The company has provided the following data concerning
its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P70,000
Other expenses ...... P50,000
Total ............. P120,000
Distribution of resource consumption:
Activity Cost Pools
Making
Bouquets Delivery Other Total
Wages and salaries .. 70% 20% 10% 100%
Other expenses ...... 45% 25% 30% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Making bouquets ...... 40,000 bouquets
Delivery ............. 1,000 deliveries
Managerial Accounting, 9/e 35
69. What would be the total overhead cost per bouquet according to
A the activity based costing system? In other words, what would
Medium be the overall activity rate for the making bouquets activity
Refer To: cost pool? (Round to the nearest whole cent.)
815 a. P1.79
b. P1.73
c. P2.10
d. P1.35
70. What would be the total overhead cost per delivery according to
B the activity based costing system? In other words, what would
Medium be the overall activity rate for the deliveries activity cost
Refer To: pool? (Round to the nearest whole cent.)
815 a. P27.00
b. P26.50
c. P30.00
d. P24.00
Reference: 816
NOTE TO THE INSTRUCTOR: Questions 67 to 68, 69 to 70, and 71 to 72 are
different versions of the same questions.
Foss Florist specializes in large floral bouquets for hotels and other
commercial spaces. The company has provided the following data concerning
its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P70,000
Other expenses ...... P40,000
Total ............. P110,000
Distribution of resource consumption:
Activity Cost Pools
Making
Bouquets Delivery Other Total
Wages and salaries .. 55% 35% 10% 100%
Other expenses ...... 45% 25% 30% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Making bouquets ...... 20,000 bouquets
Delivery ............. 7,000 deliveries
Managerial Accounting, 9/e 36
71. What would be the total overhead cost per bouquet according to
A the activity based costing system? In other words, what would
Medium be the overall activity rate for the making bouquets activity
Refer To: cost pool? (Round to the nearest whole cent.)
816 a. P2.83
b. P2.75
c. P3.03
d. P2.48
72. What would be the total overhead cost per delivery according to
D the activity based costing system? In other words, what would
Medium be the overall activity rate for the deliveries activity cost
Refer To: pool? (Round to the nearest whole cent.)
816 a. P3.93
b. P5.50
c. P4.71
d. P4.93
Reference: 817
NOTE TO THE INSTRUCTOR: Questions 73 to 75, 76 to 78, and 79 to 81 are
different versions of the same questions.
Grogam Catering uses activitybased costing for its overhead costs. The
company has provided the following data concerning the activity rates in its
activitybased costing system:
Activity Cost Pools
Preparing Arranging
Meals Functions
Wages ............ P1.15 P110.00
Supplies ......... P0.35 P380.00
Other expenses ... P0.25 P70.00
The number of meals served is the measure of activity for the Preparing
Meals activity cost pool. The number of functions catered is used as the
activity measure for the Arranging Functions activity cost pool.
Management would like to know whether the company made any money on a
recent function at which 100 meals were served. The company catered the
function for a fixed price of P21.00 per meal. The cost of the raw
ingredients for the meals was P8.25 per meal. This cost is in addition to
the costs of wages, supplies, and other expenses detailed above.
For the purposes of preparing action analyses, management has assigned
ease of adjustment codes to the costs as follows: wages are classified as a
Yellow cost; supplies and raw ingredients as a Green cost; and other
expenses as a Red cost.
Managerial Accounting, 9/e 37
73. According to the activitybased costing system, what was the
A total cost (including the costs of raw ingredients) of the
Medium function mentioned above? (Round to the nearest whole peso.)
Refer To: a. P1,560
817 b. P1,760
c. P1,060
d. P910
74. Suppose an action analysis report is prepared for the function
D mentioned above. What would be the "red margin" in the action
Hard analysis report? (Round to the nearest whole peso.)
Refer To: a. P690
817 b. P440
c. P390
d. P540
75. Suppose an action analysis report is prepared for the function
A mentioned above. What would be the "yellow margin" in the
Hard action analysis report? (Round to the nearest whole peso.)
Refer To: a. P635
817 b. P815
c. P710
d. P760
Reference: 818
NOTE TO THE INSTRUCTOR: Questions 73 to 75, 76 to 78, and 79 to 81 are
different versions of the same questions.
Groce Catering uses activitybased costing for its overhead costs. The
company has provided the following data concerning the activity rates in its
activitybased costing system:
Activity Cost Pools
Preparing Arranging
Meals Functions
Wages ............ P0.70 P145.00
Supplies ......... P0.45 P230.00
Other expenses ... P0.40 P100.00
The number of meals served is the measure of activity for the Preparing
Meals activity cost pool. The number of functions catered is used as the
activity measure for the Arranging Functions activity cost pool.
Management would like to know whether the company made any money on a
recent function at which 150 meals were served. The company catered the
function for a fixed price of P14.00 per meal. The cost of the raw
ingredients for the meals was P8.75 per meal. This cost is in addition to
the costs of wages, supplies, and other expenses detailed above.
For the purposes of preparing action analyses, management has assigned
ease of adjustment codes to the costs as follows: wages are classified as a
Yellow cost; supplies and raw ingredients as a Green cost; and other
expenses as a Red cost.
Managerial Accounting, 9/e 38
76. (including the costs of raw ingredients) of the function
B mentioned above? (Round to the nearest whole peso.)
Medium a. P1,520
Refer To: b. P2,020
818 c. P1,370
d. P2,220
77. Suppose an action analysis report is prepared for the function
A mentioned above. What would be the "red margin" in the action
Hard analysis report? (Round to the nearest whole peso.)
Refer To: a. P80
818 b. (P20)
c. (P70)
d. P230
78. Suppose an action analysis report is prepared for the function
A mentioned above. What would be the "yellow margin" in the
Hard action analysis report? (Round to the nearest whole peso.)
Refer To: a. P240
818 b. P365
c. P315
d. P420
Reference: 819
NOTE TO THE INSTRUCTOR: Questions 73 to 75, 76 to 78, and 79 to 81 are
different versions of the same questions.
Grodt Catering uses activitybased costing for its overhead costs. The
company has provided the following data concerning the activity rates in its
activitybased costing system:
Activity Cost Pools
Preparing Arranging
Meals Functions
Wages ............ P0.85 P110.00
Supplies ......... P0.50 P310.00
Other expenses ... P0.30 P120.00
The number of meals served is the measure of activity for the Preparing
Meals activity cost pool. The number of functions catered is used as the
activity measure for the Arranging Functions activity cost pool.
Management would like to know whether the company made any money on a
recent function at which 60 meals were served. The company catered the
function for a fixed price of P19.00 per meal. The cost of the raw
ingredients for the meals was P8.60 per meal. This cost is in addition to
the costs of wages, supplies, and other expenses detailed above.
For the purposes of preparing action analyses, management has assigned
ease of adjustment codes to the costs as follows: wages are classified as a
Yellow cost; supplies and raw ingredients as a Green cost; and other
expenses as a Red cost.
Managerial Accounting, 9/e 39
79. According to the activitybased costing system, what was the
B total cost (including the costs of raw ingredients) of the
Medium function mentioned above? (Round to the nearest whole peso.)
Refer To: a. P655
819 b. P1,155
c. P505
d. P1,355
80. Suppose an action analysis report is prepared for the function
D mentioned above. What would be the "red margin" in the action
Hard analysis report? (Round to the nearest whole peso.)
Refer To: a. P135
819 b. (P165)
c. (P115)
d. (P15)
81. Suppose an action analysis report is prepared for the function
D mentioned above. What would be the "yellow margin" in the
Hard action analysis report? (Round to the nearest whole peso.)
Refer To: a. P248
819 b. P198
c. P303
d. P123
Managerial Accounting, 9/e 40
Essay
82. Ingersol Draperies makes custom draperies for homes and
Hard businesses. The company uses an activitybased costing system
for its overhead costs. The company has provided the following
data concerning its annual overhead costs and its activity cost
pools.
Overhead costs:
Production overhead .. P120,000
Office expense ....... P120,000
Total .............. P240,000
Distribution of resource consumption:
Activity Cost Pools
Making Job
Drapes Support Other Total
Production overhead .. 35% 45% 20% 100%
Office expense ....... 5% 65% 30% 100%
The "Other" activity cost pool consists of the costs of
idle capacity and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Annual Activity
Making drapes ....... 2,000 yards
Job support ......... 160 jobs
Other ............... Not applicable
Required:
a. Prepare the firststage allocation of overhead costs to the
activity cost pools by filling in the table below:
Making Job
Drapes Support Other Total
Production overhead ..
Office expense .......
Total ..............
b. Compute the activity rates (i.e., cost per unit of activity)
for the Making Drapes and Job Support activity cost pools by
filling in the table below:
Making Job
Drapes Support
Production overhead ..
Office expense .......
Total ..............
Managerial Accounting, 9/e 41
c. Prepare an action analysis report in good form of a job that
involves making 71 yards of drapes and has direct materials
and direct labor cost of P2,510. The sales revenue from this
job is P4,400.
For purposes of this action analysis report, direct
materials and direct labor should be classified as a Green
cost; production overhead as a Red cost; and office expense
as a Yellow cost.
Answer:
a. Firststage allocation
Making Job
Drapes Support Other Total
Production overhead .. P42,000 P54,000 P24,000 P120,000
Office expense ....... P6,000 P78,000 P36,000 P120,000
Total .............. P48,000 P132,000 P60,000 P240,000
Activity ............. 2,000 160
yards jobs
b. Activity rates (costs divided by activity)
Production overhead .. P21.00 P337.50
Office expense ....... P3.00 P487.50
Total .............. P24.00 P825.00
c.
Overhead cost of the job.
Making Job
Drapes Support Total
Activity ............ 71 1
Production overhead . P1,491.00 P337.50 P1,828.50
Office expense ...... P213.00 P487.50 P700.50
Total ............. P1,704.00 P825.00 P2,529.00
Revenue ......................... P4,400.00
Green costs:
Direct materials and labor ... P2,510.00
Green margin .................... P1,890.00
Yellow costs:
Office expense ............... P700.50
Yellow margin ................... P1,190.50
Red costs:
Production overhead .......... P1,828.50
Red margin ...................... (P638.00)
Managerial Accounting, 9/e 42
83. Hasty Hardwood Floors installs oak and other hardwood floors in
Medium homes and businesses. The company uses an activitybased
costing system for its overhead costs. The company has provided
the following data concerning its annual overhead costs and its
activity based costing system:
Overhead costs:
Production overhead .. P190,000
Office expense ....... P140,000
Total .............. P330,000
Distribution of resource consumption:
Activity Cost Pools
Installing Job
Floors Support Other Total
Production overhead .. 40% 40% 20% 100%
Office expense ....... 10% 60% 30% 100%
The "Other" activity cost pool consists of the costs of
idle capacity and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Annual Activity
Installing floors ... 200 squares
Job support ......... 160 jobs
Other ............... Not applicable
A "square" is a measure of area that is roughly equivalent to
1,000 square feet.
Required:
a. Prepare the firststage allocation of overhead costs to the
activity cost pools by filling in the table below:
Installing Job
Floors Support Other Total
Production overhead ..
Office expense .......
Total ..............
b. Compute the activity rates (i.e., cost per unit of activity)
for the Installing Floors and Job Support activity cost
pools by filling in the table below:
Installing Job
Floors Support
Production overhead ..
Office expense .......
Total ..............
Managerial Accounting, 9/e 43
Answer:
a. Firststage allocation
Installing Job
Floors Support Other Total
Production overhead P76,000 P76,000 P38,000 P190,000
Office expense ..... P14,000 P84,000 P42,000 P140,000
Total ............ P90,000 P160,000 P80,000 P330,000
Activity ........... 200 160
squares jobs
b. Activity rates (costs divided by activity)
Production overhead .. P380 P475
Office expense ....... P70 P525
Total .............. P450 P1,000
c. Overhead cost of the job.
Installing Job
Floors Support Total
Activity ........... 3.4 1
Production overhead .. P1,292 P475 P1,767
Office expense ....... P238 P525 P763
Total .............. P1,530 P1,000 P2,530
84. Goel Company, a wholesale distributor, uses activitybased
Medium costing for its overhead costs. The company has provided the
following data concerning its annual overhead costs and its
activity based costing system:
Overhead costs:
Wages and salaries .. P460,000
Nonwage expenses .... P120,000
Total ............. P580,000
Distribution of resource consumption:
Activity Cost Pools
Filling Product
Orders Support Other Total
Wages and salaries .. 15% 75% 10% 100%
Nonwage expenses .... 10% 70% 20% 100%
The "Other" activity cost pool consists of the costs of
idle capacity and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Annual Activity
Filling orders ...... 4,000 orders
Product support ..... 30 products
Other ............... Not applicable
Managerial Accounting, 9/e 44
Required:
Compute the activity rates (i.e., cost per unit of activity)
for the Filling Orders and Product Support activity cost pools
by filling in the table below:
Filling Product
Orders Support
Wages and salaries ..
Nonwage expenses ....
Total .............
Answer:
Firststage allocation
Filling Product
Orders Support Other Total
Wages and salaries . P69,000 P345,000 P46,000 P460,000
Nonwage expenses ... P12,000 P84,000 P24,000 P120,000
Total ............ P81,000 P429,000 P70,000 P580,000
Activity ........... 4,000 30
orders products
Activity rates (costs divided by activity)
Wages and salaries.. P17.25 P11,500
Nonwage expenses.... P3.00 P2,800
Total............. P20.25 P14,300
85. Fife & Jones PLC, a consulting firm, uses an activitybased
Medium costing in which there are three activity cost pools. The
company has provided the following data concerning its costs
and its activity based costing system:
Costs:
Wages and salaries ... P540,000
Travel expenses ...... P100,000
Other expenses ....... P140,000
Total .............. P780,000
Distribution of resource consumption:
Activity Cost Pools
Working On Business
Engagements Development Other Total
Wages and salaries 50% 20% 30% 100%
Travel expenses ... 60% 30% 10% 100%
Other expenses .... 35% 25% 40% 100%
Managerial Accounting, 9/e 45
Required:
a. How much cost, in total, would be allocated to the Working
On Engagements activity cost pool?
b. How much cost, in total, would be allocated to the Business
Development activity cost pool?
c. How much cost, in total, would be allocated to the Other
activity cost pool?
Answer:
All three parts can be answered using a firststage allocation of
costs.
Working On Business
Engagements Development Other Total
Wages and salaries P270,000 P108,000 P162,000 540,000
Travel expenses .. P60,000 P30,000 P10,000 P100,000
Other expenses ... P49,000 P35,000 P56,000 P140,000
Total .......... P379,000 P173,000 P228,000 P780,000
a. P379,000
b. P173,000
c. P228,000
86. Huish Awnings makes custom awnings for homes and businesses.
Hard The company uses an activitybased costing system for its
overhead costs. The company has provided the following data
concerning its annual overhead costs and its activity cost
pools:
Overhead costs:
Production overhead .. P150,000
Office expense ....... P100,000
Total .............. P250,000
Distribution of resource consumption:
Activity Cost Pools
Making Job
Awnings Support Other Total
Production overhead .. 45% 40% 15% 100%
Office expense ....... 8% 65% 27% 100%
The "Other" activity cost pool consists of the costs of
idle capacity and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Annual Activity
Making awnings ...... 5,000 yards
Job support ......... 200 jobs
Other ............... Not applicable
Managerial Accounting, 9/e 46
Required:
a. Prepare the firststage allocation of overhead costs to the
activity cost pools by filling in the table below:
Making Job
Awnings Support Other Total
Production overhead ..
Office expense .......
Total ..............
b. Compute the activity rates (i.e., cost per unit of activity)
for the Making Awnings and Job Support activity cost pools
by filling in the table below:
Making Job
Awnings Support
Production overhead ..
Office expense .......
Total ..............
c. Prepare an action analysis report in good form of a job that
involves making 80 yards of awnings and has direct materials
and direct labor cost of P3,000. The sales revenue from this
job is P4,000.
For purposes of this action analysis report, direct
materials and direct labor should be classified as a Green
cost; production overhead as a Red cost; and office expense
as a Yellow cost.
Answer:
a. Firststage allocation
Making Job
Awnings Support Other Total
Production overhead.. P67,500 P60,000 P22,500 P150,000
Office expense....... P 8,000 P65,000 P27,000 P100,000
Total.............. P75,500 P125,000 P49,500 P250,000
Activity ............ 5,000 200
yards jobs
b. Activity rates (costs divided by activity)
Production overhead . P13.50 P300.00
Office expense ...... P 1.60 P325.00
Total ............. P15.10 P625.00
Managerial Accounting, 9/e 47
c.
Overhead cost of the job.
Making Job
Awnings Support Total
Activity ............. 80 1
Production overhead .. P1,080.00 P300.00 P1,380.00
Office expense ....... P 128.00 P325.00 P 453.00
Total .............. P1,208.00 P625.00 P1,833.00
Revenue ......................... P4,000.00
Green costs:
Direct materials and labor ... P3,000.00
Green margin .................... P1,000.00
Yellow costs:
Office expense ............... P 453.00
Yellow margin ................... P 547.00
Red costs:
Production overhead .......... P1,380.00
Red margin ...................... P( 833.00)
87. Phoenix Company makes custom covers for air conditioning units
Hard for homes and businesses. The company uses an activitybased
costing system for its overhead costs. The company has provided
the following data concerning its annual overhead costs and its
activity cost pools:
Overhead costs:
Production overhead .. P100,000
Office expense ....... P 50,000
Total .............. P150,000
Distribution of resource consumption:
Activity Cost Pools
Making Job
Covers Support Other Total
Production overhead .. 40% 42% 18% 100%
Office expense ....... 12% 60% 28% 100%
The "Other" activity cost pool consists of the costs of
idle capacity and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Annual Activity
Making covers ....... 2,500 yards
Job support ......... 200 jobs
Other ............... Not applicable
Managerial Accounting, 9/e 48
Required:
a. Prepare the firststage allocation of overhead costs to the
activity cost pools by filling in the table below:
Making Job
Covers Support Other Total
Production overhead ..
Office expense .......
Total ..............
b. Compute the activity rates (i.e., cost per unit of activity)
for the Making Covers and Job Support activity cost pools by
filling in the table below:
Making Job
Covers Support
Production overhead ..
Office expense .......
Total ..............
c. Prepare an action analysis report in good form of a job that
involves making 50 yards of covers and has direct materials
and direct labor cost of P1,500. The sales revenue from this
job is P2,500.
For purposes of this action analysis report, direct
materials and direct labor should be classified as a Green
cost; production overhead as a Red cost; and office expense
as a Yellow cost.
Answer:
a. Firststage allocation
Making Job
Covers Support Other Total
Production overhead .. P40,000 P42,000 P18,000 P100,000
Office expense ....... P 6,000 P30,000 P14,000 P 50,000
Total .............. P46,000 P72,000 P32,000 P150,000
Activity ............. 2,500 200
yards jobs
b. Activity rates (costs divided by activity)
Production overhead .. P16.00 P210.00
Office expense ....... P 2.40 P150.00
Total .............. P18.40 P360.00
Managerial Accounting, 9/e 49
c.
Overhead cost of the job.
Making Job
Covers Support Total
Activity ............. 50 1
Production overhead .. P 800.00 P210.00 P1,010.00
Office expense ....... P 120.00 P150.00 P 270.00
Total .............. P 920.00 P360.00 P1,280.00
Revenue ......................... P2,500.00
Green costs:
Direct materials and labor ... P1,500.00
Green margin .................... P1,000.00
Yellow costs:
Office expense ............... P 270.00
Yellow margin ................... P 730.00
Red costs:
Production overhead .......... P1,010.00
Red margin ...................... (P 280.00)
88. Jackson Painting paints the interiors and exteriors of homes
Medium and commercial buildings. The company uses an activitybased
costing system for its overhead costs. The company has provided
the following data concerning its activitybased costing
system.
Activity Cost Pool Activity Measure Annual Activity
Painting overhead ... Square meters 10,000 square meters
Job support ......... Jobs 320 jobs
Other ............... None Not applicable
The "Other" activity cost pool consists of the costs of idle
capacity and organizationsustaining costs.
The company has already finished the first stage of the
allocation process in which costs were allocated to the
activity cost centers. The results are listed below:
Job
Painting Support Other Total
Painting overhead .. P54,000 P42,000 P24,000 P120,000
Office expense ..... P16,000 P96,000 P48,000 P160,000
Total ............ P70,000 P138,000 P72,000 P280,000
Managerial Accounting, 9/e 50
Required:
a. Compute the activity rates (i.e., cost per unit of activity)
for the Painting and Job Support activity cost pools by
filling in the table below. Round off all calculations to
the nearest whole cent.
Job
Painting Support
Painting overhead ....
Office expense .......
Total ..............
b. Prepare an action analysis report in good form of a job that
involves painting 63 square meters and has direct materials
and direct labor cost of P2,070. The sales revenue from this
job is P2,500.
For purposes of this action analysis report, direct
materials and direct labor should be classified as a Green
cost; painting overhead as a Red cost; and office expense as
a Yellow cost.
Answer:
a. Activity rates (costs divided by activity)
Job
Painting Support
Painting overhead .... P5.40 P131.25
Office expense ....... P1.60 P300.00
Total .............. P7.00 P431.25
b.
Overhead cost of the job.
Job
Painting Support Total
Activity ............. 63 1
Painting overhead .... P340.20 P131.25 P471.45
Office expense ....... P100.80 P300.00 P400.80
Total .............. P441.00 P431.25 P872.25
Sales ............................. P2,500.00
Green costs:
Direct materials and labor ... P2,070.00
Green margin .................... P430.00
Yellow costs:
Office expense ............... P400.80
Yellow margin ................... P29.20
Red costs:
Painting overhead ............ P471.45
Red margin ...................... (P442.25)
Managerial Accounting, 9/e 51
89. Cabanos Company manufactures two products, Product C and
Hard Product D. The company estimated it would incur P160,790 in
manufacturing overhead costs during the current period.
Overhead currently is applied to the products on the basis of
direct labor hours. Data concerning the current period’s
operations appear below:
Product C Product D
Estimated volume 3,400 units 4,800 units
Direct labor hours per unit 1.40 hour 1.90 hours
Direct materials cost per unit P 7.40 P12.70
Direct labor cost per unit P14.00 P19.00
Required:
a. Compute the predetermined overhead rate under the current
method, and determine the unit product cost of each product
for the current year.
b. The company is considering using an activitybased costing
system to compute unit product costs for external financial
reports instead of its traditional system based on direct
labor hours. The activitybased costing system would use
three activity cost pools. Data relating to these activities
for the current period are given below:
Estimated
Activity Overhead Expected Activity
Cost Pool Costs Product C Product D Total
Machine setups P12,190 80 150 230
Purchase orders 79,200 730 920 1,650
General factory 69,400 4,760 9,120 13,880
P160,790
Determine the unit product cost of each product for the
current period using the activitybased costing approach.
Answer:
a. The expected total direct labor hours during the period are
computed as follows:
Product C: 3,400 units x 1.4 hr. 4,760 hours
Product D: 4,800 units x 1.9 hrs. 9,120 hours
Total direct labor hours 13,880 hours
Using these hours as a base, the predetermined overhead
using direct labor hours would be:
Estimated overhead cost, P160,790
÷ Estimated direct labor hours, 13,880 = P11.58/DLH
Managerial Accounting, 9/e 52
Using this overhead rate, the unit product costs are:
Product C Product D
Direct materials P 7.40 P12.70
Direct labor 14.00 19.00
Manufacturing overhead 16.22 22.01
Total unit product cost P37.62 P53.71
b. The overhead rates for each activity center are as follows:
Estimated
Overhead Expected Overhead
Costs Activity Rate
Machine setups P12,190 230 P53.00
Purchase orders P79,200 1,650 P48.00
General factory P69,400 13,880 P 5.00
The overhead cost charged to each product is:
Product C Product D
Activity Amount Activity Amount
Machine setups 80 P 4,240 150 P 7,950
Purchase orders 730 35,040 920 44,160
General factory 4,760 23,800 9,120 45,600
Total overhead cost P63,080 P97,710
Overhead cost per unit:
Product C: P63,080 ÷ 3,400 units = P18.55 per unit.
Product D: P97,710 ÷ 4,800 units = P20.36 per unit.
Using activity based costing, the unit product cost of each
product would be:
Product C Product D
Direct materials P 7.40 P12.70
Direct labor 14.00 19.00
Manufacturing overhead 18.55 20.36
Total unit product cost P39.95 P52.06
Managerial Accounting, 9/e 53
90. Lionel Corporation manufactures two products, Product B and
Hard Product H. Product H is of fairly recent origin, having been
developed as an attempt to enter a market closely related to
that of Product B. Product H is the more complex of the two
products, requiring two hours of direct labor time per unit to
manufacture compared to one hour of direct labor time for
Product B. Product H is produced on an automated production
line.
Overhead is currently assigned to the products on the basis of
directlabor hours. The company estimated it would incur
P450,000 in manufacturing overhead costs and produce 7,500
units of Product H and 30,000 units of Product B during the
current year. Unit costs for materials and direct labor are:
Product B Product H
Direct material ..... P12 P25
Direct labor ........ P10 P20
Required:
1. Compute the predetermined overhead rate under the current
method of allocation and determine the unit product cost of
each product for the current year.
2. The company's overhead costs can be attributed to four major
activities. These activities and the amount of overhead cost
attributable to each for the current year are given below:
Estimated Expected Activity
Overhead Product Product
Activity Cost Pools Costs B H Total
Machine setups required ... P180,000 600 1,200 1,800
Purchase orders issued .... 38,382 500 100 600
Machinehours required .... 92,650 6,800 10,200 17,000
Maintenance requests issued 138,968 693 907 1,600
P450,000
Using the data above and an activitybased costing approach,
determine the unit product cost of each product for the current
year.
Answer:
1. The company expects to work 45,000 direct laborhours during
the current year, computed as follows:
Product B: 30,000 units x 1 hr. ..... 30,000 hours
Product H: 7,500 units x 2 hrs. .... 15,000 hours
Total direct laborhours ............. 45,000 hours
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Using these hours as a base, the predetermined overhead using
direct laborhours would be:
Pred. ovhd. rate = P450,000 ÷ 45,000 DLHs = P10.00/DLH
Using this overhead rate, the unit product cost of each product
would be:
Product Product
B___ H
Direct materials .............. P12 P25
Direct labor .................. 10 20
Manufacturing overhead:
Product Bone hour 10
Product Htwo hours ...... _____ 20
Total ......................... P32 P 65
2. The overhead rates are computed as follows:
Estimated Total
Overhead Expected
Activity Cost Pools Costs Activity Rate
Machine setups ....... P180,000 1,800 P100.000/setup
Purchase orders ...... 38,382 600 63.970/order
Machinehours ........ 92,650 17,000 5.450/hour
Maintenance requests . 138,968 1,600 86.855/request
P450,000
The overhead cost attributable to each product is:
Product B Product H
Activity Amount Activity Amount
Machine setups,
P100.00/setup ........ 600 P 60,000 1,200 P120,000
Purchase orders,
P63.97/order ......... 500 31,985 100 6,397
Machinehours, P5.45/hour 6,800 37,060 10,200 55,590
Maintenance request,
at P86.855/request ... 693 60,191 907 78,777
P189,236 P260,764
Overhead cost per unit:
Product B: P189,236 30,000 units = P6.3079/unit.
Product H: P260,764 7,500 units = P34.7685/unit.
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Using activitybased costing, the unit product cost of each
product would be:
Product B Product H
Direct materials ............... P12.0000 P25.0000
Direct labor ................... 10.0000 20.0000
Manufacturing overhead ......... 6.3079 34.7685
Total unit product cost ..... P28.3079 P79.7685
91. Flyer Corporation manufactures two products, Product A and
Hard Product B. Product B is of fairly recent origin, having been
developed as an attempt to enter a market closely related to
that of Product A. Product B is the more complex of the two
products, requiring three hours of direct labor time per unit
to manufacture compared to one and onehalf hours of direct
labor time for Product A. Product B is produced on an automated
production line.
Overhead is currently assigned to the products on the basis of
directlabor hours. The company estimated it would incur
P396,000 in manufacturing overhead costs and produce 5,500
units of Product B and 22,000 units of Product A during the
current year. Unit costs for materials and direct labor are:
Product A Product B
Direct material ...... P9 P20
Direct labor ......... P7 P15
Required:
1. Compute the predetermined overhead rate under the current
method of allocation and determine the unit product cost of
each product for the current year.
2. The company's overhead costs can be attributed to four major
activities. These activities and the amount of overhead cost
attributable to each for the current year are given below:
Estimated Expected Activity
Overhead Product Product
Activity Cost Pools Costs A B Total
Machine setups required ... P170,000 700 1,000 1,700
Purchase orders issued .... 37,000 300 200 500
Machinehours required .... 91,000 4,000 9,000 13,000
Maintenance requests issued 98,000 400 600 1,000
P396,000
Using the data above and an activitybased costing approach,
determine the unit product cost of each product for the current
year.
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Answer:
1. The company expects to work 45,000 direct laborhours during
the current year, computed as follows:
Product A: 22,000 units x 1.5 hr. ..... 33,000 hours
Product B: 5,500 units x 3.0 hrs. .... 16,500 hours
Total direct laborhours ............... 49,500 hours
Using these hours as a base, the predetermined overhead using
direct laborhours would be:
Pred. ovhd. rate = P396,000 ÷ 49,500 DLHs = P8.00/DLH
Using this overhead rate, the unit product cost of each product
would be:
Product Product
A___ B
Direct materials ............. P 9 P20
Direct labor ................. 7 15
Manufacturing overhead:
Product B1.5 hour ......... 12
Product Hthree hours ...... 24
Total ........................ P28 P59
2. The overhead rates are computed as follows:
Estimated Total
Overhead Expected
Activity Cost Pools Costs Activity Rate
Machine setups ....... P170,000 1,700 P100/setup
Purchase orders ...... 37,000 500 74/order
Machinehours ........ 91,000 13,000 7/hour
Maintenance requests . 98,000 1,000 98/request
P396,000
The overhead cost attributable to each product is:
Product B Product H
Activity Amount Activity Amount
Machine setups,
P100.00/setup ....... 700 P 70,000 1,000 P100,000
Purchase orders,
P74.00/order ........ 300 22,200 200 14,800
Machinehours,
P7.00/hour 4,000 .... 28,000 9,000 63,000
Maintenance request,
at P98.00/request ... 400 39,200 600 58,800
P159,400 P236,600
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Overhead cost per unit:
Product A: P159,400 22,000 units = P7.2455/unit.
Product B: P236,600 5,500 units = P43.0182/unit.
Using activitybased costing, the unit product cost of each
product would be:
Product A Product B
Direct materials .............. P 9.0000 P20.0000
Direct labor .................. 7.0000 15.0000
Manufacturing overhead ........ 7.2455 43.0182
Total unit product cost .... P23.2455 P78.0182
92. EMD Corporation manufactures two products, Product S and
Hard Product W. Product W is of fairly recent origin, having been
developed as an attempt to enter a market closely related to
that of Product W. Product W is the more complex of the two
products, requiring one hour of direct labor time per unit to
manufacture compared to onehalf hour of direct labor time for
Product S. Product W is produced on an automated production
line.
Overhead is currently assigned to the products on the basis of
directlabor hours. The company estimated it would incur
P500,000 in manufacturing overhead costs and produce 10,000
units of Product W and 60,000 units of Product S during the
current year. Unit cost for materials and direct labor are:
Product S Product W
Direct material .... P10 P24
Direct labor ....... P 8 P12
Required:
1. Compute the predetermined overhead rate under the current
method of allocation and determine the unit product cost of
each product for the current year.
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2. The company's overhead costs can be attributed to four major
activities. These activities and the amount of overhead cost
attributable to each for the current year are given below:
Estimated Expected Activity
Overhead Product Product
Activity Cost Pools Costs S W Total
Machine setups required .. P200,000 800 1,200 2,000
Purchase orders issued ... 43,500 500 100 600
Machinehours required ... 104,000 3,000 10,000 13,000
Maintenance requests
issued ................ 152,500 860 1,140 2,000
P500,000
Using the data above and an activitybased costing approach,
determine the unit product cost of each product for the current
year.
Answer:
1. The company expects to work 40,000 direct laborhours during
the current year, computed as follows:
Product S: 60,000 units x 0.5 hr. .... 30,000 hours
Product W: 10,000 units x 1.0 hrs. ... 10,000 hours
Total direct laborhours .............. 40,000 hours
Using these hours as a base, the predetermined overhead using
direct laborhours would be:
Pred. ovhd. rate = P500,000 ÷ 40,000 DLHs = P12.50/DLH
Using this overhead rate, the unit product cost of each product
would be:
Product Product
S W
Direct materials ............ P10.00 P24.00
Direct labor ................ 8.00 12.00
Manufacturing overhead:
Product Bhalf hour .... 6.25
Product Hone hour ..... 12.50
Total ....................... P24.25 P48.50
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2. The overhead rates are computed as follows:
Estimated Total
Overhead Expected
Activity Cost Pools Costs Activity Rate
Machine setups ..... P200,000 2,000 P100.00/setup
Purchase orders .... 43,500 600 72.50/order
Machinehours ...... 104,000 13,000 8.00/hour
Maintenance requests 152,500 2,000 76.25/request
P500,000
The overhead cost attributable to each product is:
Product S Product W
Activity Amount Activity Amount
Machine setups,
P100.00/setup...... 800 P 80,000 1,200 P120,000
Purchase orders,
P72.50/order....... 500 36,250 100 7,250
Machinehours,
P8.00/hour......... 3,000 24,000 10,000 80,000
Maintenance request,
at P76.25/request.. 860 65,575 1,140 86,925
P205,825 P294,175
Overhead cost per unit:
Product S: P205,825 60,000 units = P3.4304/unit.
Product W: P294,175 10,000 units = P29.4175/unit.
Using activitybased costing, the unit product cost of each
product would be:
Product S Product W
Direct materials .............. P10.0000 P24.0000
Direct labor .................. 8.0000 12.0000
Manufacturing overhead ........ 3.4304 29.4175
Total unit product cost .... P21.4304 P65.4175
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93. Daba Company manufactures two products, Product F and Product
Medium G. The company expects to produce and sell 1,400 units of
Product F and 1,800 units of Product G during the current year.
The company uses activitybased costing to compute unit product
costs for external reports. Data relating to the company’s
three activity cost pools are given below for the current year:
Estimated
Activity Overhead Expected Activity
Cost Pool Costs Product F Product G Total
Machine setups P10,800 80 100 180
Purchase orders P77,520 510 1,010 1,520
General factory P75,920 2,240 3,600 5,840
Required:
Using the activitybased costing approach, determine the
overhead cost per unit for each product.
Answer:
The overhead rates for each activity center are as follows:
Estimated
Activity Overhead Expected Overhead
Cost Pool Costs Activity Rate
Machine setups P10,800 180 P60.00
Purchase orders P77,520 1,520 P51.00
General factory P75,920 5,840 P13.00
The overhead cost charged to each product is:
Product F Product G
Activity Amount Activity Amount
Machine setups 80 P 4,800 100 P 6,000
Purchase orders 510 26,010 1,010 51,510
General factory 2,240 29,120 3,600 46,800
Total overhead cost P59,930 P104,310
Overhead cost per unit:
Product F: P59,930 ÷ 1,400 units = P42.81 per unit.
Product G: P104,310 ÷ 1,800 units = P57.95 per unit.
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