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S T R I C T L Y C O N F I D E N T I A L

Module 8:
ACTIVITY-BASED COSTING AND SERVICE COST ALLOCATIONS
ANSWER KEY

Test 1. TRUE OR FALSE QUESTIONS.

1. T 6. F 11. F 16. F 21. F 26. F


2. T 7. T 12. T 17. T 22. T 27. T
3. T 8. F 13. T 18. T 23. T 28. F
4. F 9. T 14. T 19. T 24. F 29. T
5. T 10. T 15. T 20. F 25. T 30. F

Test 2. MULTIPLE CHOICE QUESTIONS.

1. D 6. B 11. C 16. C 21. A 26. D


2. A 7. D 12. C 17. D 22. A 27. D
3. B 8. C 13. B 18. D 23. C 28. A
4. B 9. D 14. C 19. C 24. B 29. C
5. A 10. C 15. B 20. C 25. C 30. B

Test 3. PRACTICE EXERCISES.

Problem 1
1. ₱226,666.67
2. ₱136,000
3. ₱150,000
4. ₱111,111.11
5. ₱186,666.67
6. ₱175,000
7. ₱113,333.33
8. ₱68,000
9. ₱75,000
10. ₱ 88,888.89
11. ₱149,333.33
12. ₱140,000
13. ₱49.12
14. ₱48.50
15. ₱48.60

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Problem 2

a. ₱25,000 underapplied ₱187,500 - (₱5 32,500)

b. Work in Process, ₱4,687.50 ₱25,000 (₱37,500/₱200,000)


Finished Goods, ₱6,250.00 ₱25,000 (₱50,000/₱200,000)
Cost of Goods Sold, ₱14,062.50 ₱25,000 (₱112,500/₱200,000)

c. Work in Process, ₱42,187.50 = ₱37,500 + ₱4,687.50


Finished Goods, ₱56,250 = ₱50,000 + ₱6,250
Cost of Goods Sold, ₱126,562.50 = ₱112,500 + ₱14,062.50

d. ₱137,500 = ₱112,500 + ₱25,000

Problem 3

a. (1) Direct labor hours: (₱150,000/40,000 hours) = ₱3.75 per DLH


(2) Direct labor costs: (₱150,000/₱200,000) = 75% of DLC
(3) Machine hours: (₱150,000/60,000 hours) = ₱2.50 per MH

b. Overhead applied (42,000 ₱3.75) ₱157,500


Actual overhead 152,500
Over-applied overhead by ₱ 5,000

c. Factory Overhead 5,000


Cost of Goods Sold 5,000

Problem 4

a. Moldings ₱360,000
Machine hours 20,000
Overhead rate ₱18

Assembly 750,000
Labor hours 50,000
Overhead rate ₱15

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b.
A B
units produced 80,000 90,000
overhead applied to production
Molding:
₱18 x 5000 ₱90,000
₱18 x 15,000 ₱270,000
Assembly
₱15 x 20,000 ₱300,000
₱15 x 30,000 ₱450,000
Total ₱390,000 ₱720,000
Overhead per Unit ₱4.875 ₱8

Problem 5

a. Assembly ₱216,000
Labor hours 160,000
Overhead rate ₱1.35

Packaging ₱504,000
Machine hours 80,000
Overhead rate ₱6.30

b.
Deluxe Regular
Units 20,000 200,000
Prime costs ₱160,000 ₱1,500,000
Overhead applied to production
Assembly:
1.35 x 10,000 13,500
1.35 x 150,000 202,500
Packaging
6.30 x 8,000 50,400
6.30 x 72,000 453,600
Total ₱223,900 ₱2,156,100
Overhead per Unit ₱11.20 ₱10.78

c. ₱720,000/180,000 = ₱4 per labor hour

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d.

Deluxe Regular
Units 20,000 200,000
Prime costs ₱160,000 ₱1,500,000
Overhead costs
4 x 20,000 80,000
4 x 160,000 --- 640,000
Total costs ₱240,000 ₱2,140,000
Unit cost ₱12 ₱10.70

e.

Activity Cost Driver Activity Rate


Setting up equip ₱240,000 100 ₱2,400 per setup
Moving material ₱120,000 300 ₱400 per move
Machining ₱200,000 90,000 ₱2.22 machine hour
Inspecting ₱160,000 18,000 ₱8.89 per inspection hours

f.
Deluxe Regular
Units 20,000 200,000
Prime costs ₱160,000 ₱1,500,000
Overhead costs:
Setting up
₱2,400 x 60 144,000
₱2400 x 40 96,000
Moving materials
₱400 x 180 72,000
₱400 x 120 48,000
Machining
₱2.22 x 10,000 22,200
₱2.22 x 80,000 177,600
Inspecting
₱8.89 x 2000 17,780
₱8.89 x 16,000 142,240
Total costs ₱415,980 ₱1,963,840
Unit cost ₱20.80 ₱9.82

Problem 6

a. Number of Setups Number of Orders Machine Hours Packing Orders


Cost per pool ₱15,000 ₱8,400 ₱120,000 ₱40,000
Total ÷ 25 ÷ 105 ÷ 2,500 ÷ 200
Allocation rate ₱600 ₱80 ₱48 ₱200

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b. Product A Product B
Number of setups 20  ₱600 = ₱12,000 5  ₱600 = ₱3,000
Number of orders 35  ₱80 = 2,800 70  ₱80 = 5,600
Machine hours 1,000  ₱48 = 48,000 1,500  ₱48 = 72,000
Packing orders 75  ₱200 = 15,000 125  ₱200 = 25,000
₱77,800 ₱105,600

c. (₱15,000 + ₱8,400 + ₱120,000 + ₱40,000)/2,500 = ₱73.36 per MH

d. Product A: 1,000  ₱73.36 = ₱73,360


Product B: 1,500  ₱73.36 = ₱110,040

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