285679379-test-bank-chapter-8-abc-for-decision-making.pdf

lOMoARcPSD|35265572 285679379 Test Bank Chapter 8 ABC for Decision Making Fundamentals of accounting (Ateneo de Zamboanga University) Scan to open on Studocu Studocu is not sponsored or end...

lOMoARcPSD|35265572 285679379 Test Bank Chapter 8 ABC for Decision Making Fundamentals of accounting (Ateneo de Zamboanga University) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 Chapt er8 Act ivi ty- BasedCost ing:AToolt oAi dDeci sion- Maki ng True/False 1. When combining activities in an activity-based costing system, T activities should be grouped together at the same level. For Easy example, batch-level activities should not be combined with unit-level activities. 2. Unit-level activities arise as a result of the total volume of T production and are performed each time a unit is produced. Easy 3. Unit-level production activities are performed each time a unit T is made. Easy 4. Organization-sustaining 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. Activity-based costing uses a number of activity cost pools, F each of which is allocated to products on the basis of direct Easy labor-hours. 6. The first-stage allocation in activity-based costing is the F process by which overhead costs are assigned to products before Medium they are assigned to customers. 7. Activity rates in activity-based costing are computed by T dividing costs from the first-stage allocations by the activity Easy measure for each activity cost pool. 8. In the second-stage allocation in activity-based 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 products--even manufacturing costs that are not Medium caused by the products. 10. When there are batch-level or product-level costs, in T comparison to a traditional cost system, an activity-based Hard costing system ordinarily will shift costs from high-volume to low-volume products. Managerial Accounting, 9/e 18 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 11. An activity-based costing system is generally easier to set up F and run than a traditional cost system. Medium 12. Activity-based 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 activity-based costing, as in traditional costing systems, F nonmanufacturing costs are not assigned to products. Medium 14. In activity-based costing, a plant-wide 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 decision-making purposes? Medium a. Unit-level activities. b. Batch-level activities. c. Product-level activities. d. Organization-sustaining activities 17. Testing a prototype of a new product is an example of a: C a. Unit-level activity. Easy b. Batch-level activity. c. Product-level activity. d. Organization-sustaining activity. 18. Setting up equipment is an example of a: B a. Unit-level activity. Medium b. Batch-level activity. c. Product-level activity. d. Organization-sustaining 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. Unit-level activity. b. Batch-level activity. c. Product-level activity. d. Organization-sustaining activity. Managerial Accounting, 9/e 19 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 20. Worker recreational facilities is an example of a cost that D would ordinarily be considered to be: Medium a. Unit-level. b. Batch-level. c. Product-level. d. Organization-sustaining. 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. Unit-level activity. b. Batch-level activity. c. Customer-level activity. d. Organization-sustaining activity. 22. Human resource management is an example of an activity at which D of the following levels? Medium a. Unit-level activity. b. Product-level activity. c. Batch-level activity. d. Organization-sustaining activity. 23. Which of the following would be classified as a product-level 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 labor-hours and the incurrence of overhead costs. c. over-reliance 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 activity-based costing model. Medium b. will systematically overcost high-volume products and undercost low-volume products. c. will systematically overcost low-volume products and undercost high-volume products. d. must be used for external financial reporting. Managerial Accounting, 9/e 20 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 26. Paul Company has two products: A and B. The company uses C activity-based 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 activity-based 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 activity-based 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 activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 28. Matt Company uses activity-based 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 activity-based costing is closest to: a. P2.40. b. P3.90. c. P10.59. d. P6.60. 29. Bridget Company uses activity-based 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 activity-based costing is closest to: a. P6.00. b. P9.60. c. P8.63. d. P13.80. Reference: 8-1 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 activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. 30. How much cost, in total, would be allocated in the first-stage D allocation to the Order Size activity cost pool? Easy a. P150,000 Refer To: b. P360,000 8-1 c. P255,000 d. P234,000 31. How much cost, in total, would be allocated in the first-stage B allocation to the Customer Support activity cost pool? Easy a. P255,000 Refer To: b. P282,000 8-1 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 activity-based costing system is used for internal decision- Refer To: making? 8-1 a. P60,000. b. P0. c. P84,000. d. P120,000. Reference: 8-2 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 activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. 33. How much cost, in total, would be allocated in the first-stage D allocation to the Order Size activity cost pool? Easy a. P348,000 Refer To: b. P188,500 8-2 c. P29,000 d. P84,000 34. How much cost, in total, would be allocated in the first-stage D allocation to the Customer Support activity cost pool? Easy a. P304,500 Refer To: b. P493,000 8-2 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 activity-based costing system is used for internal decision- Refer To: making? 8-2 a. P68,000. b. P0. c. P116,000. d. P58,000. Reference: 8-3 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 activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. 36. How much cost, in total, would be allocated in the first-stage A allocation to the Order Size activity cost pool? Easy a. P222,000 Refer To: b. P307,500 8-3 c. P123,000 d. P492,000 37. How much cost, in total, would be allocated in the first-stage D allocation to the Customer Support activity cost pool? Easy a. P389,500 Refer To: b. P615,000 8-3 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 activity-based costing system is used for internal decision- Refer To: making? 8-3 a. P82,000. b. P104,000. c. P0. d. P164,000. Reference: 8-4 Davis Company uses an activity-based costing system 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: Manufacturing overhead.......... P400,000 Selling and admin. Expenses..... P200,000 Total......................... P600,000 Managerial Accounting, 9/e 25 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 organization-sustaining costs. You have been asked to complete the first-stage allocation of the costs to the activity cost pools. 39. How much cost, in total, would be allocated in the first-stage B allocation to the Order Size activity cost pool? Easy a. P210,000. Refer To: b. P240,000. 8-4 c. P300,000. d. P255,000. 40. How much cost, in total, would be allocated in the first-stage D allocation to the Customer Support activity cost pool? Easy a. P255,000. Refer To: b. P180,000. 8-4 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 activity-based costing system is used for internal decision- Refer To: making? 8-4 a. P0. b. P60,000. c. P80,000. d. P120,000. Reference: 8-5 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 activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 organization-sustaining 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.) 8-5 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.) 8-5 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. 8-5 c. P7,392. d. P9,548. Reference: 8-6 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 activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 organization-sustaining 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.) 8-6 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.) 8-6 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. 8-6 c. P10,595. d. P14,248. Managerial Accounting, 9/e 28 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 Reference: 8-7 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 activity-based 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 organization-sustaining 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.) 8-7 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.) 8-7 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. 8-7 c. P9,191. d. P10,908. Managerial Accounting, 9/e 29 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 Reference: 8-8 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 labor-hours 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 activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and General Factory--with 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. 8-8 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. 8-8 c. P4.32. d. P2.63. 53. The predetermined overhead rate (i.e., activity rate) for B Activity 1 under the activity-based costing system is closest Medium to: Refer To: a. P28.97. 8-8 b. P13.17. c. P83.66. d. P24.15. Managerial Accounting, 9/e 30 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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. 8-8 c. P81.20. d. P11.24. Reference: 8-9 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 labor-hours 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 activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and General Factory--with 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. 8-9 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. 8-9 c. P26.09. d. P11.45. Managerial Accounting, 9/e 31 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 57. The predetermined overhead rate (i.e., activity rate) for A Activity 2 under the activity-based costing system is closest Medium to: Refer To: a. P9.15. 8-9 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. 8-9 c. P35.28. d. P38.16. Reference: 8-10 NOTE TO THE INSTRUCTOR: Questions 59 to 60 and 61 to 62 are different versions of the same questions. Abel Company uses activity-based 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. 8-10 60. The cost per unit of Product B is closest to: A a. P41.58. Medium b. P81.53. Refer To: c. P74.73. 8-10 d. P17.69. Reference: 8-11 NOTE TO THE INSTRUCTOR: Questions 59 to 60 and 61 to 62 are different versions of the same questions. Accola Company uses activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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. 8-11 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. 8-11 d. P22.70. Reference: 8-12 Arthur Company has two products: S and D. The company uses activity-based 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 activity-based costing system for B Activity 3 is closest to: Medium a. P33.33. Refer To: b. P30.00. 8-12 c. P29.32. d. P41.53. 64. The cost per unit of Product S under activity-based costing is A closest to: Hard a. P5.00. Refer To: b. P1.98. 8-12 c. P10.00. d. P1.83. Reference: 8-13 Monson Company has two products: G and P. The company uses activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 activity-based costing system for D Activity 2 is closest to: Medium a. P89.33. Refer To: b. P21.97. 8-13 c. P26.67. d. P16.00. 66. The cost per unit of Product P under activity-based costing is A closest to: Hard a. P4.00. Refer To: b. P30.16. 8-13 c. P10.00. d. P6.88. Reference: 8-14 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 organization-sustaining 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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.) 8-14 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.) 8-14 a. P6.00 b. P6.60 c. P7.20 d. P6.80 Reference: 8-15 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 organization-sustaining 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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.) 8-15 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.) 8-15 a. P27.00 b. P26.50 c. P30.00 d. P24.00 Reference: 8-16 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 organization-sustaining 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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.) 8-16 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.) 8-16 a. P3.93 b. P5.50 c. P4.71 d. P4.93 Reference: 8-17 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 activity-based costing for its overhead costs. The company has provided the following data concerning the activity rates in its activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 73. According to the activity-based 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 8-17 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 8-17 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 8-17 b. P815 c. P710 d. P760 Reference: 8-18 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 activity-based costing for its overhead costs. The company has provided the following data concerning the activity rates in its activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 8-18 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 8-18 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 8-18 b. P365 c. P315 d. P420 Reference: 8-19 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 activity-based costing for its overhead costs. The company has provided the following data concerning the activity rates in its activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 79. According to the activity-based 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 8-19 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 8-19 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 8-19 b. P198 c. P303 d. P123 Managerial Accounting, 9/e 40 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 Essay 82. Ingersol Draperies makes custom draperies for homes and Hard businesses. The company uses an activity-based 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 organization-sustaining 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 first-stage 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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. First-stage 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 83. Hasty Hardwood Floors installs oak and other hardwood floors in Medium homes and businesses. The company uses an activity-based 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 organization-sustaining 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 first-stage 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 Answer: a. First-stage 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 activity-based 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 organization-sustaining 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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: First-stage 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 activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 first-stage 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 activity-based 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 organization-sustaining 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 Required: a. Prepare the first-stage 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. First-stage 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 activity-based 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 organization-sustaining 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 Required: a. Prepare the first-stage 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. First-stage 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 activity-based costing system for its overhead costs. The company has provided the following data concerning its activity-based 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 organization-sustaining 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor hours. The activity-based 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 activity-based 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 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 direct-labor 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 Machine-hours 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 activity-based costing approach, determine the unit product cost of each product for the current year. Answer: 1. The company expects to work 45,000 direct labor-hours 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 labor-hours............. 45,000 hours Managerial Accounting, 9/e 54 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 Using these hours as a base, the predetermined overhead using direct labor-hours 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 B-one hour 10 Product H-two 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 Machine-hours........ 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 Machine-hours, 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. Managerial Accounting, 9/e 55 Downloaded by bla blabla ([email protected])  lOMoARcPSD|35265572 Using activity-based 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 one-half 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 direct-labor 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