1
CHAPTER 8
Answers to Multiple Choice – Theoretical 1. 2. 3. 4. 5.
a d a c a
6. 7. 8. 9. 10.
b c c a a
Solutions to Multiple Choice – Computational 1.
(b)
Product AB: Product CD: 2.
1,600/100,000 1,600/100,000 x P860,000 = 200/100,000 x P860,000 =
P13,760 P 1,720
(c) Product AB
Direct labor hours: ho urs: AB: 1,600/100,000 1,600/100,000 x P520,000 = CD: 200/100,000 x P520,000 = No. of Batches: AB: 4/500 x P280,000 = CD: 12/500 x P280,000 = Engineering/design Engineering/d esign changes: AB: 2/120 x P60,000 = CD: 24/120 x P60,000 = Totals 3.
Product CD
P 8,320 P 1,040 2,240 6,720 1,000 P11,560
12,000 P19,760
(c) Traditional costing: Total hours per batch: 5,000DLH / 2,000 Volume x 100 batch size = 250 DLH Setup cost per hour: P1,000/250 DLH = P4 Setup cost per unit: P4 x 2.5 = P10 ABC: 1,000 Set up cost per batch / 100 batch = P10
4.
(c) Traditional Costing System: Direct materials Direct labor (820 x P18) Applied factory overhead (P14,760 x 300%) Total factory cost
P 55,500 14,760 44,280 P114,540
Unit cost (P114,540 / 150 units)
P 763.60
2 Number 4 (continued) Activity-Based Costing System: Direct materials Direct labor Applied factory overhead: Engineering design (P30 x 330) Machine setup (P200 x 22) Machining (P25 x 732) Assembly (P8 x 1,450) Packaging and shipping (P15 x 152) Building occupancy (P6 x 732) Total factory cost Unit cost (P121,132 / 150 units) 5.
P 55,500 14,760 P
(c) Traditional Costing: Direct materials Direct labor Applied overhead: Machine hours Predetermined overhead rate (P1,800,000/30,000) Applied overhead Divided by batch size Unit cost
9,900 4,400 18,300 11,600 2,280 4,392
50,872 P121,132 P 807.55
P4.40 0.75
x
80 P 60 P4,800 ÷5,000
0.96 P6.11
ABC Direct materials P4.40 Direct labor 0.75 Applied overhead: Materials handling: (P720,000 / 6,000,000) x 5 = P0.60 Setup cost: (P315,000 / 750) x 2 = P840 / 5,000 = 0.168 Machining cost: (P540,000/30,000)x80 =P1,440/5,000 = 0.288 Quality control: (P225,000/500) = P450/5,000 = 0.09 1.146 Unit cost P6.296 6.
(b) Product A-1 P 20 200
Materials Labor Applied overhead: Machine setup (P140,000/350 = P400) A-1: P400/100 units 4 B-3: P400/2 units Testing (P190,000/4,750) = P40 A-1: P40 x 0.20 hours = 8 B-3: P40 x 5.5 hours = Related to labor: A-1: 10x10,000 = 100,000 hrs. B-3: 20x 500 = 10,000 Total 110,000 hrs A-1: (100/110 xP330,000) ÷ 10,000 30 B-3: (10 /110 x P330,000) ÷ 5,000 Unit cost P262
Product B-3 P 45 400
200
220
60 P925
3 7.
(a)
Price costs Overhead: (P500,000+P850,000+P650,000)=P2,000,000 RR: 100,000/125,000 x P2,000,000 SS: 25,000/125,000 x P2,000,000 Total factory cost Divided by quantity Unit cost: 8.
10.
1,600,000 P2,400,000 ÷ 400,000 P 6.00
400,000 P500,000 ÷100,000 P 5.50
(b)
Prime cost Overhead: Cost of operating equipment: RR: 100/125 x P500,000 SS: 25/125 x P500,000 Material handling: RR: 100/125 x P850,000 SS: 25/125 x P850,000 Setups: RR: 100/125 x P650,000 SS: 15/125 x P650,000 Factory cost Quantity Unit cost 9.
Product RR Product SS P 800,000 P150,000
Product RR P 800,000
Product SS P 150,000
400,000 100,000 566,667 283,333 433,333 P2,200,000 ÷ 400,000 P 5.50
P ÷ P
(c)
Direct cost Overhead: Utilities: P600,000/P30,000 x 15,000 = Setups: P546,000 / 390 x 65 = Material handling: P1,280,000/800,000 x 250,000 = Factory cost
P 40,000 300,000 91,000 400,000 P 831,000
Unit cost: P831,000 / 20,000 units =
P
41.55
(a)
Direct Cost Overhead: P2,426,000 / 50,000 x 9,000 = Total factory cost Divided by units produced Unit cost
P 40,000 436,680 P476,680 ÷ 10,000 P 47.67
Selling price per unit (P47.67 x 120%)
P
57.20
216,667 750,000 100,000 7.50
4 11.
(d)
Traditional costing (P27,500 x 14.5%) Activity-based Costing: Material inspection: P11.50 x 12 = P 138 In process inspection: P0.14 x 17,500 = 2,450 Product cert.: P77 x 25 1,925 Excess of ABC over traditional costing 12.
P3,987.50
4,513.00 P 525.50
(a)
Revenues Direct labor Overhead (Schedule 1) Income (loss)
Product LL P100,000 ( 60,000) ( 46,500) P (6,500)
Product MM P300,000 (100,000) (133,500) P 66,500
Product LL
Product MM
Schedule 1: Maintenance: LL: P75,000 / 25,000 x 5,000 = P15,000 MM: P75,000 / 25,000 x 20,000 = Product delivery: LL: P45,000 / 5,000 x 1,000 = 9,000 MM: P45,000 / 5,000 x 4,000 = Supervision: LL: P60,000 / P160,000 x P60,000 = 22,500 MM: P60,000 / P160,000 x P100,000 = Total overhead P46,500
13.
P 60,000
36,000
37,500 P133,500
(d) Vacuum Cleaners P6,500,000
Revenue Manufacturing cost: Direct materials 1,000,000 Direct labor 600,000 Overhead : P1,105,000/130,000 = P8.50 VC: 30,000 x P8.50 255,000 FP: 100,000 x P8.50 Total 1,855,000 Gross profit P4,645,000 Divided by units sold ÷ 10,000 Gross profit per unit P 465.50
Floor Polishers P5,950,000
900,000 2,000,000
850,000 3,750,000 P2,200,000 ÷ 1,000 P 2,200
5 14.
(b)
Revenue Manufacturing cost: Direct materials Direct labor Overhead: VC: P650,000 /130,000 x 30,000 = FP: P455,500 / 50,000 x 35,000 = Total Gross profit Divided by units sold Gross profit per unit
Vacuum Cleaners P6,500,000
Floor Polishers P5,950,000
1,000,000 600,000
900,000 2,000,000
150,000 1,750,000 P4,750,000 ÷ 10,000 P 475
318,850 3,218,850 P2,731,150 ÷ 1,000 P 2,731.15
6
Solution to Problems
Problem 8-1 1.
2.
Machine related: P125,000 / 10,000 =
P12.50
Others: P295,000 / 25,000 =
P11.80
Machine setup: P50,000 / 1,000 =
P50
Material handling: P45,000 / 1,000 =
P45
Other material related: P60,000 / 1,200 =
P50
Machine operation: P75,000 / 10,000 =
P7.50
Other overhead: P190,000 / 25,000 =
P7.60
Problem 8-2 1.
Direct materials Direct labor Overhead: KK: P1,500,000/50,000 x 3,000 = GG: P1,500,000/50,000 x 47,000 = Factory cost Divided by units produced Unit cost 2.
Direct materials Direct labor Overhead: Setup related : KK: P250,000/200 x 120 = GG: P250,000/200 x 80 = Design related: KK: P350,000/10,000 x 6,000 = GG: P350,000/10,000 x 4,000 = Other: KK: P900,000/50,000 x 3,000 = GG: P900,000/50,000 X 47,000 = Factory cost Divided by units produced Unit cost
Product KK P100,000 50,000
Product GG P 310,000 350,000
90,000 P240,000 ÷ 500 P 480 Product KK P100,000 50,000
1,410,000 P2,070,000 ÷ 15,500 P 133.55 Product GG P 310,000 350,000
150,000 100,000 210,000 140,000 54,000 P564,000 ÷ 500 P 1,128
846,000 P1,746,000 ÷ 15,500 P 112.65
7 Problem 8-3 1.
2.
Multimedia Keyboards
Materials handling: MK: (5% x P12,000) CTK: (5% x P15,400) Machine setup: MK: (P160 x 45) CTK: (P160 x 25) Assembly: MK: (P12 x 400) CTK: (P12 x 700) Inspection: MK: (P5 x 400) CTK: (P5 x 700) Packaging and shipping: MK: (10 x 9) CTK: (10 x 16) Total overhead costs
P14,690
Multimedia Keyboard: P14,690 /400 = Comfort Type Keyboard: P16,830 / 700 =
P36.73 P24.04
P
Comfort Type Keyboards
600 P
770
7,200 4,000 4,800 8,400 2,000 3,500 90 160 P16,830
Problem 8-4 (a)
Material handling: (P30,000 / 1,000) Machine setups: (P27,000 / 450) Quality inspection: (P24,000 / 600)
(b)
P30 per no. of requisition P60 per setup P40 per no. of inspection Product SS
Materials handling: SS: (P30 x 400) HH: (P30 x 600) Machine setups: SS: (P60 x 150) HH: (P60 x 300) Quality inspection: SS: (P40 x 200) HH: (P40 x 400) Total overhead costs
Product HH
P12,000 P18,000 9,000 18,000 8,000 P29,000
16,000 P52,000
8
Problem 8-5 1.
2.
Overhead rate: P280,000 / P100,000 = 280% Job 1001: (P2,000 x 280%)
P5,600
Job 2002: Direct materials Direct labor Overhead: (P2,000 x 280%) Total cost Unit cost (P19,600 / 50)
P12,000 2,000 5,600 P19,600 P392
Job 3003: Direct materials Direct labor Overhead: (P4,000 x 280%) Total cost Sales price: (P23,200 x 150%)
P 8,000 4,000 11,200 P23,200 P34,800
Job 1001: Machine setup: (P20,000 / 200) = P100 x 8 Inspection: (P130,000 / 6,500) = P20 x 22 Material handling: (P80,000 / 8,000) = P10 x 30 Engineering: (P50,000 x 1,000) = P50 x 25 Total overhead cost Job 2002: Direct materials Direct labor Overhead: Machine setup: (P100 x 10) Inspection: (P20 x 15) Material handling: (P10 x 40) Engineering: (P50 x 50) Total cost Unit cost: (P18,200 / 50) Job 3003: Direct materials Direct labor Overhead: Machine setup: (P100 x 14) Inspection: (P20 x 30) Material handling: (P50 x 50) Engineering: (P50 x 15) Total cost Sales price: (P17,250 x 150%)
= = = =
P 100 400 300 1,250 P2,050
P12,000 2,000 P 1,000 300 400 2,500
4,200 P18,200 P0.02
P 8,000 4,000 P1,400 600 2,500 750
5,250 P17,250 P25,875
9 Problem 8-6 a.
Send/receive goods: P25,000 / 500,000 = P0.05 per kilo Store goods: P8,000 / 80,000 = P.10 per cubic foot Move goods: P10,000 / 5,000 = P2.00 per square foot Identify goods: P4,000 / 500 = P8.00 per package Anson: Send/receive goods: Store goods: Move goods: Identify goods: Total cost
(40,000 x P0.05) (3,000 x P0.10) (300 x P2) (5 x P8)
P2,000 300 600 40 P2,940
Basco: Send/receive goods: Store goods: Move goods: Identify goods: Total
(40,000 x P0.05) ( 2,000 x P0.10) ( 200 x P2) ( 20 x P8)
P2,000 200 400 160 P2,760
Casio: Send/receive goods: Store goods: Move goods: Identify goods: Total
(40,000 x P0.05) ( 1,000 x P0.10) ( 1,000 x P2) ( 80 x P8)
P2,000 100 2,000 640 P4,740
b.
Anson: 40,000 x P0.08 = Basco: 40,000 x P0.08 = Casio: 40,000 x P0.08 =
P3,200 P3,200 P3,200
c.
Anson: P2,940 x 130% = Basco: P2,760 x 130% = Casio: P4,740 x 130% =
P3,822 P3,588 P6,162
d.
The current pricing plan captures only one dimension of cost causality, send/receive goods. Accordingly, the prices charged for warehousing services are almost independent of the causes of the costs. As indicated in a comparison of the answers to parts (b) and (c), the existing pricing plan generates the same price for the three customers whereas an ABC-based price results in very different prices to be charged to the three customers.
10 Problem 8-7 1.
Job 456 P19,400 1,500
Direct materials Direct labor Manufacturing overhead: Job 456: P230 x P50 Job 789: P230 x P750 Total manufacturing costs Divided number of units Manufacturing cost per unit
11,500
2.
Direct materials Direct labor Manufacturing overhead: Materials handling: P0.80 x 1,000; P0.80 x 4,000 Lathe work: P0.40 x 40,000; P0.40 x 120,000 Milling: P40 x 300; P40 x 2,100 Grinding: P1.60 x 1,000; P1.60 x 4,000 Testing: P30 x 20; P30 x 400 Total manufacturing cost Number of units Unit manufacturing cost 3.
Job 789 P119,800 22,500
P32,400 ÷ 20 P 1,620
172,500 P314,800 ÷ 400 P 787
Job 456 P19,400 1,500
Job 789 P119,800 22,500
800
3,200
16,000
48,000
12,000
84,000
1,600
6,400
600 P51,900 ÷ 20 P 2,595
12,000 P295,900 ÷ 400 P 739.75
The product cost figures computed in requirement 1 and 2 differ because: a. b.
the job orders differ in the way the use each of five activity areas, and the activity areas differ in their indirect cost allocation bases 9specifically, each area does not use the direct manufacturing labor-hours indirect cost allocation base).
Problem 8-8 P16 / P20 = 80% of an hour; .80 x 60 minutes = 48 minutes P120 / P20 = 6 DLHs P40 / P10 = 2 DLHs
a.
Umbrellas: Gazebos: Tents:
b.
Umbrellas: Gazebos: Tents: Total overhead
c.
Allocation rates: Quality control: P400,000 / 280,000 = P1.43 per unit (rounded) Setups: P400,000 / 2,000 = P200 per setup Material handling: P1,200,000 / 4,000,000 = P0.30 per kilo Equipment operation: P6,000,000 / 2,000,000 = P3.00 per MH
(P16 x 200,000) (P120 x 20,000) (P40 x 60,000) cost
P3,200,000 2,400,000 2,400,000 P8,000,000
11 Problem 8-8 (continued) Overhead Cost Allocation: Umbrellas
Quality control: P1.43 x 200,000 P1.43 x 20,000 P1.43 x 60,000 Setups: P200 x 400 P200 x 800 P200 x 800 Material handling: P0.30 x 800,000 P0.30 x 2,000,000 P0.30 x 1,200,000 Equipment operation: P3.00 x 400,000 P3.00 x 800,000 P3.00 x 800,000 Total overhead Number of units Overhead cost per unit
Tents
P 286,000 P
28,600 P
85,800
80,000 160,000 160,000 240,000 600,000 360,000 1,200,000 2,400,000 P1,806,000 ÷ 200,000 P 9.03
P3,188,600 ÷ 20,000 P 159.43
2,400,000 P3,005,800 ÷ 60,000 P 50.10
P 8.00 12.00 9.03 P29.03
P 80.00 90.00 159.43 P329.43
P 8.00 30.00 50.10 P88.10
Total cost per unit: Direct materials Direct labor Overhead Total d.
Gazebos
If prices are set based on product costs, activity-based costing would generate lower prices for umbrellas and higher prices for the other two products.
Problem 8-9 1a.
Budgeted manufacturing overhead rate =
Budgeted manufacturing overhead Budgeted direct labor cost
=
P3,000,000 P600,000 P5 per direct labor cost
= 1b.
Direct materials Direct labor Manufacturing overhead (0.60 x P5.00) Total costs Budgeted selling prices per kilo: Mauna Loa (P12.00 x 130%) = African (P10 x 130%) =
Mauna Loa P 8.40 0.60 3.00 P12.00
P15.60 P13.00
African P 6.40 0.60 3.00 P10.00
12 Problem 8-9 (continued) 2.
Total budgeted unit costs per kilo are:
Direct materials Direct labor Manufacturing overhead: Purchase orders: MLC: ( 4 x P1,000 ÷ 100,000) AC: ( 4 x P1,000 ÷ 2,000) Material handling: MLC: (30 x P800 ÷ 100,000) AC: (12 x P800 ÷ 2,000) Quality control: MLC: (10 x P480 ÷ 100,000) AC: (4 x P480 ÷ 2,000) Roasting: MLC: (1,000 x P20 ÷ 100,000) AC: (20 x P20 ÷ 2.000) Blending: MLC: (500 x P20 ÷ 100,000) AC: (10 x P20 ÷ 2,000) Packaging: MLC: (100 x P20 ÷ 100,000) AC: (2 x P20 ÷ 2,000) Total cost per unit
Mauna Loa P 8.40 0.60
African Coffee P 6.40 0.60
0.04 2.00 0.24 4.80 0.04 0.96 0.20 0.20 0.10 0.10 0.02 P 9.64
0.02 P15.08
Problem 8-10 (a)
Purchasing: Processing: Packaging: Testing: Storage: Washing:
(P240,000 / 1,500) (P1,400,000 / 1,000,000) (P580,000 / 400,000) (P240,000 / 4,000) (P180,000 /18,000) (P560,000 / 800)
(b)
Purchasing: (P160 x 800) ; (P160 x 700) Processing: (P1.40 x 400,000; (P1.40 x 600,000) Packaging: (P1.45 x 180,000); (P1.45 x 220,000) Testing: (P60 x 2,100); (P60 x 1,900) Storage: (P10 x 10,400); (P10 x 7,600) Washing: (P700 x 350); (P700 x 450) Total overhead cost (c)
P160 per order P1.40 per liter P1.45 per container P60 per test P10 per liter P700 per batch Paint XX
Paint YY
P 128,000
P 112,000
560,000
840,000
261,000
319,000
126,000
114,000
104,000
76,000
245,000 P1,424,000
315,000 P1,776,000
Unit overhead cost: Paint XX (P1,424,000 / 180,000 container = Paint YY (P1,776,000 / 220,000 container =
P7.91 P8.07
