Solution manual management advisory services by agamata chapter3

This Accounting Materials are brought to you by www.everything.freelahat.com CHAPTER COSTS CONCEPTS and CLASSIFICATION [Problem 1] Direct labor Variable factory overhead Fixed factory overhead Unit conversion cost P10 15 P31 Direct materials Direct labor Unit prime cost P32 10 P42 Unit prime cost Variable factory overhead Unit variable cost P42 15 P57 Total production cost (12,000 units x P63) P756,000 [Problem 2] 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 Applied factory overhead (71,000DLH x P7.50) = P532,500 Actual factory overhead Less: Applied factory overhead Overapplied factory overhead P473,000 532,000 P( 59,500) Factory overhead shown on the statement of cost of goods manufactured P473,000 [Problem 3] Unit cost = = P4.35 P750,000 + P800,000 + P80,000 + P110,000 400,000 units Cost of goods sold = 360,000 units x P4.35 = P1,566,000 Inventory – Aug 31 = 40,000 units x P4.35 = P174,000 This Accounting Materials are brought to you by www.everything.freelahat.com [Problem 4] 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 Controllable direct fixed costs: Supervising salaries P 48,000 P 72,000 Uncontrollable direct fixed costs: Depreciation of machinery and equipment P 140,000 P 220,000 Controllable direct fixed costs Uncontrollable direct fixed costs Total direct fixed costs P 48,000 P 72,000 P 140,000 188,000 P 220,000 292,000 Direct variable costs Direct fixed costs Total direct costs P Allocated costs from corporate Headquarter Allocated repairs and maintenance (P250,000 x 120 / 400) Allocated factory rent - building (P200,000 x 20%) Allocated plant executives salaries (P380,000 x 40%) Total indirect costs Allocated costs from corporate headquarter Allocated factory rent - building Allocated plant executives’ salaries Depreciation for machinery and equipment Total unavoidable costs Supporting computations: P P 1,420,000 188,000 1,608,000 P 1,920,000 292,000 2,212,000 P 130,000 P 190,000 75,000 175,000 40,000 160,000 152,000 228,000 P 397,000 P 753,000 P 130,000 40,000 P 190,000 160,000 P 152,000 228,000 140,000 462,000 220,000 798,000 P This Accounting Materials are brought to you by www.everything.freelahat.com Department B Allocated repairs & maintenance (P250,000 x 280 / 400) Allocated factory rent – building (P200,000 x 80%) Allocated plant executive’s salaries (P380,000 x 60%) P 175,000 160,000 228,000 [Problem 5] Chemicals (P2,000 ÷ 100 lbs.) Direct labor (P200 ÷ 100 lbs) Electricity and water (P100 ÷ 100 lbs) Supervisor’s salaries (P500 ÷ 100 lbs) Unit variable costs Depreciation expense Other factory costs Total fixed costs P120,000 per month 200,000 P320,000 per month 300 tons Variable costs (No of tons x 100 x P28) Fixed costs Total costs Unit costs [(Total cost / No of tons)/100 lbs] P 840,000 P 320,000 P 1,160,000 P a b c d e f g h I [Problem 7] 400 tons 500 tons 1,120,000 P 320,000 1,440,000 P 1,400,000 320,000 1,720,000 P 38.67 / lb P 36 / lb [Problem 6] Cost Item P20 / lb P28 / lb 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 P 34.40 / lb This Accounting Materials are brought to you by www.everything.freelahat.com Direct (D) or Indirect(I) D D D D I D D D D D D D I I Cost Item a b c d e f g h I j k l m n [Problem 8] 1a VC Ratio Variable (V) 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% Total costs and expenses 2002 P 20,000,000 2003 P 26,400,000 (17,600,000 ) P 8,800,000 Variable costs (40% x sales) (11,200,000) Fixed costs P 8,800,000 P8,800,000 BEP (pesos) = = P14,666,667 60% Contribution margin (P50 million x 60%) Less: Fixed costs and expenses Operating income [Problem 9] a Cost Item Graph 11 10 P30,000,000 8,800,000 P21,200,000 This Accounting Materials are brought to you by www.everything.freelahat.com 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  ...This Accounting Materials are brought to you by www.everything.freelahat.com [Problem 4] Direct materials Direct labor Factory supplies Direct... 152,000 228,000 140,000 462,000 220,000 798,000 P This Accounting Materials are brought to you by www.everything.freelahat.com Department B Allocated repairs & maintenance (P250,000 x 280 / 400)... Variable (V) or Fixed (F) V F F V F V F F F P 34.40 / lb This Accounting Materials are brought to you by www.everything.freelahat.com Direct (D) or Indirect(I) D D D D I D D D D D D D I I Cost Item