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CHAPTER 3
COSTS CONCEPTS and CLASSIFICATION
[Problem 1]
1.
Direct labor
Variable factory overhead
Fixed factory overhead
Unit conversion cost
P10
15
6
P31
2.
Direct materials
Direct labor
Unit prime cost
P32
10
P42
3.
P42
15
P57
4.
[Problem 2]
1.
Indirect materials and factory supplies
Supervising salaries
Repairs and maintenance
Heat, light and power
Overtime premium plant worker
Fringe benefits for plant worker
Depreciation plant
Insurance plant
Actual factory overhead
P 68,000
90,000
40,000
28,000
20,000
15,000
190,000
22,000
P473,000
2.
3.
P473,000
532,000
P( 59,500)
4..
P473,000
[Problem 3]
1.
Unit cost
=
=
P4.35
2.
3.
= P174,000
[Problem 4]
1. Direct materials
Direct labor
Factory supplies
Direct variable costs
Department
A
P
800,000
600,000
20,000
P
1,420,000
Department
B
P
1,200,000
660,000
60,000
P
1,920,000
48,000
72,000
140,000
220,000
48,000
72,000
140,000
188,000
220,000
292,000
1,420,000
188,000
1,608,000
1,920,000
292,000
2,212,000
130,000
190,000
75,000
175,000
40,000
160,000
152,000
228,000
397,000
753,000
130,000
40,000
190,000
160,000
152,000
140,000
462,000
228,000
220,000
798,000
Department B
Allocated repairs & maintenance
(P250,000 x 280 / 400)
Allocated factory rent building
(P200,000 x 80%)
Allocated plant executives salaries
(P380,000 x 60%)
P 175,000
160,000
228,000
[Problem 5]
1.
Chemicals (P2,000 100 lbs.)
Direct labor (P200 100 lbs)
Electricity and water (P100 100 lbs)
Supervisors salaries (P500 100 lbs)
Unit variable costs
2.
Depreciation expense
Other factory costs
Total fixed costs
3.
300 tons
Variable costs
(No. of tons x 100 x P28)
Fixed costs
Total costs
4.
P20 / lb.
2
1
5
P28 / lb.
Unit costs
[(Total cost / No. of
tons)/100 lbs]
400 tons
500 tons
1,120,000 P
320,000
1,440,000 P
1,400,000
320,000
1,720,000
840,000 P
320,000
P 1,160,000 P
P 38.67 / lb P 36 / lb
[Problem 6]
Cost Item
a
b
c
d
e
f
g
h
I
Direct (D) or
Indirect(I)
D
I
I
D
I
I
I
D
I
Variable (V)
or Fixed (F)
V
F
F
V
F
V
F
F
F
[Problem 7]
Cost Item
Direct (D) or
Variable (V)
P 34.40 / lb
Indirect(I)
D
D
D
D
I
D
D
D
D
D
D
D
I
I
a
b
c
d
e
f
g
h
I
j
k
l
m
n
[Problem 8]
1a.
VC Ratio
or Fixed (F)
V
V
F
F
F
V
F
F
F
V
F
F
F
F
(P26,400,000 P20,000,000)
(P44,000,000 P28,000 000)
P6,400,000
P16,000,000
40%
2.
3.
4.
2002
P 20,000,000
(11,200,000)
P
8,800,000
[Problem 9]
a.
Cost
Item
1.
2.
3.
4.
5.
6.
7.
8.
Graph
6
11
1
4
5
10
3
7
2003
P 26,400,000
(17,600,000)
P
8,800,000
P14,666,667
P30,000,000
8,800,000
P21,200,000
9.
4.
9
Understanding the behavior of costs would guide managers on how to deal and
control costs in relation to volume of production. This could greatly help in
planning and controlling activities resulting to better business results.