Lagumbay, Arcelley C.

BSBA_FM-3A
Managerial Accounting_Module-3

Lesson 1

I. Identification. Identify the terms as described in each item.

1. Activity - Based Costing

2. Cost Driver
3. Value-Added Activities
4. Activity Cost Pool
5. Activity

II. Problem Solving.

Weber Industries has three activity cost pools and two products. It estimates production of
3,000 units of Product A and 1,400 of Product B. Having identified its activity cost pools and
The cost drivers for each pool, Weber accumulated the following data relative to those
Activity cost pools and cost drivers.
Annual Overhead Data Estimated Use of
Cost Drivers per
Product

Activity Cost Estimated Estimated Product Product

Cost Drivers Overhead Use of A B
Pool Cost
Drivers
per
Activity

Machine Set-ups P16,000 40 25 15

Set-ups

Machining Machine 110,000 5,000 1,000 4,000

hours

Packaging Orders 30,000 500 150 350

A. . Prepare a schedule showing the calculations of the activity-

based overhead rates.
B. . Prepare a schedule that assigns each activity's overhead cost
pool to each product
 C. . Calculate the overhead cost per unit for each product.

CALCULATION OF ACTIVITY RATES BASED ON CODT DRIVER

ACTIVITY COST ESTIMATED ESTIMATED USE OF COST RATE

POOL OVERHEAD DRIVERS
PER ACTIVITY
Machine Set-ups P16,000 40 P400 Per set-up

Machining P110,000 5,000 P22 Per machine

hour

Packaging P30,000 500 P60 Per order

SOLUTION:
16,000÷40= 400 per set-up
110,000÷5,000= 22 per machine hour
30,000÷500= 60 per order.

PRODUCT A
ACTIVITY COST ESTIMATED USE × RATE
POOLS OF COST
DRIVERS
PER ACTIVITY

Managing Set-up 25 400 P10,000

Machining 1,000 22 P22,000

Packaging 150 60 P9,000

Overhead assigned P41,000

 PRODUCT B
ACTIVITY COST ESTIMATED × RATE
POOLS USE OF COST
DRIVERS
PER
ACTIVITY

Managing Set-up 15 400 P6,000

Machining 4,000 22 P88,000

Packaging 350 60 P21,000

Overhead assigned P115,000

PRODUCT A PRODUCT B
Total Overhead Assigned P41,000 P115,000
Number of units 3,000 1,400
Overhead Cost per unit P13.67 P82.14
 Lesson 2
I. Identification. Identify the terms as described in each item.

1. Cost-Volume Profit Analysis

2. Margin Of Safety
3. CVP Income Statement
4. Contribution Margin
5. Break Even Point

II.Problem Solving

HBW Company makes ball pens that sell for P20 each. For the coming year,
management expects fixed costs to total P220, 000 and variable costs to be P9 per unit.

a. Calculate the break-even point in dollars

b. Calculate the margin of safety percentage, assuming actual sales are P500, 000.
c. Calculate the sales required in dollars to earn an operating income of P165, 000.

SOLUTION:

CONTRIBUTION MARGIN PER UNIT= UNIT SELLING - UNIT VARIABLE COST

= P20-P9= P11
BREAK EVEN POINTS IN UNITS = FIXED COST ÷ CONTRIBUTION MARGIN PER UNIT
= P220, 000 ÷ P11
=20,000 UNITS
CONTRIBUTRION MARGIN RATIO =P11 ÷ P20
=55%

Therefore, HBW Company’s break-event point in sales dollars is P36, 364 calculated as follows:
Break-even point in dollars = Fixed cost ÷ Contribution Margin Ratio
= P20, 000 ÷ 55%
=P36, 364

MARGIN OF SAFETY = ACTUAL SALES – BREAK EVEN SALES

= P500, 000 – 36,364
=P463, 636
Required sales in units = (Fixed cost + Target Operating income) ÷ Contribution margin per unit
= (P20, 000 + P165, 000) ÷ P11
=P16, 818 Units
 Lesson 3

I. Identification. Identify the terms as described in each item.

1. Budget
2. Budget Income Statement
3. Master Budget
4. Participatory Budgeting
5. Financial Budgets

II. Problem Solving

1. Maltz Company estimates that unit sales will be 10,000 in quarter 1; 12,000 in quarter
2; 14,000 in quarter 3; and 18,000 in quarter 4. Using a sales price of P80 per unit, prepare the
sales budget by quarters for the year ending December 31, 2021.

MALTZ COMPANY
Production Budget
For the Six Months Ending December 31,2021
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year

Budgets Unit Sales

10,000 12,000 14,000 18,000 54,000

Unit Selling Price *P80 *P80 *P80 *P80 *P80

Budgeted Sales P800,000 P960,000 P1,120,000 P1,440,000 4,320,000

2. Rajiv Company has completed all of its operating budgets. The sales budget for the
year shows 50,000 units and total sales of P2, 250,000. The total cost of making one unit
of sales is P25. It estimates selling and administrative expenses to be P300, 000 and
income taxes to be P210, 000. Prepare a budgeted income statement for the year ending
December 31, 2021.
 RAJIV COMPANY
Budgeted Income Statement
For the year Ending December 31,2021
Sales P2,250,000

Cost of Goods Sold 1,250,000

Gross Profit 1,000,000

Selling and Administrative Expenses 300,000

Income from Operation 700,000

Income Tax Expense 210,000

Net Income P490,000

3. Bruno Industries expects credit sales for January, February, and March to be P200, 000, P260,
000, and P300, 000, respectively. It is expected that 75% of the sales will be collected in the
month of sale, and 25% will be collected in the following month. Calculate cash collections
from customers for each month.

COLLECTION FROM CUSTOMER

CREDIT SALES JANUARY FEBRUARY MARCH

January P200,000 P150,000 P50,000

February P260,000 P195,000 P65,000

March P300,000 P225,000

P150,000 P245,000 P290,000

4. Moore Wholesalers is preparing its merchandise purchases budget. Budgeted sales are P400,
000 for April and P480, 000 for May. Cost of goods sold is expected to be 65% of sales. The
company's desired ending inventory is 20% of the following month's cost of goods sold.
Calculate the required purchases for April.

MOORE WHOLESALERS
Purchase Budget
For the Month of April

Budgeted Cost of Goods Sold 260,000

Add: Desired Ending Inventory 62,000

Total Inventory required 322,000

Less: Beginning Inventory -52,000

Required Merchandise Purchases 270,400

SOLUTION:

For April: P400, 000 * 65% =P260, 000

April Beginning Inventory: P260, 000 *20% =P52, 000
For May: P480, 000 * 65% =P312, 000
May Beginning Inventory: P312, 000 * 30% =P62, 000

5. For Tracey Company, units to be produced are 5,000 in quarter 1 and 6,000 in quarter 2. It
takes 1.6 hours to make a finished unit, and the expected hourly wage rate is P15. Prepare a
direct labor budget by quarters for the six months ending June 30, 2021.

TRACEY COMPANY
Direct Labor Budget
For the Month Ended June 30, 2021
 QARTER

1 2 Six Months

Units to be produced 5,000 6,000

Hour per each unit 1.6 1.6

Total hours required 8,000 9,600

Hourly wage rate P15 P15

Total cost of Direct Labor P120,000 P144,000 P264,000

SOLUTION:

Total hours required = 5,000 * 1.6 =8,000

6,000 * 1.6 =9,600
Total cost of direct labor =8,000 * 15 =120,000
=9,600 * 15 =144,000