TOPIC :

Costs Concepts, Classification and segregation

Numb
er of
MH

Maintena
nce Costs

Numb
er of
MH

Maintena
nce Costs

3,000

9,800

9,000

24,800

4,500

12,900

3,500

10,400

8,000

18,100

5,500

13,000

6,000

13,500

7,000

16,000

1. The Lamesa Corporation builds

tabletop replicas of some of the
most famous resorts in the
Philippines. The company is
highly automated, and thus
maintenance cost is a
significant organizational
expense. The companys owner
has decided to use machine
hours as a basis of predicting
maintenance costs and has
gathered the following data
from the prior 8 weeks of

operations:

Required:
a. Variable cost rate
b. Total fixed costs
c. If the company expects to use 8,200 machines hours next month, how much us the estimated
maintenance costs.
2. One of the products of La Union Corporation goes through a glazing process. For the last six
quarters, the cost of the glazing process was observed in relation with the number of units
produced as tabulated below:

Required:
a. Using the least-squares method, calculate the variable cost rate and the total fixed costs
elements of the glazing process
b. Express the cost data in a above in the form Y=a + bx
c. Assume the company processes 1,120 units in the next quarter, how much is the expected
glazing cost?
3. Following are costs incurred by Abtina Manufacturing Corporation during the previous month:

Direct Materials
Indirect Materials
Direct Labor
Indirect Labor
Factory utilities
Advertising costs
Units
Quart
Total
Sales
Commissions
Produce
Quarters
ers
Cost building
Depreciation ondadministration
Salaries of administrative personnel
2
01
04
Depreciation
-800
delivery equipment
7,000
Overtime pay - factory workers
2
Rework
cost
on
defective
products
discovered 05
02
500
0,000
quality inspection
3
03
1,000
1,000
06

Units
Produc
ed
400
600
900

5,000
2,000
6,000
1,000
4,000
8,000
Total
12,000
Cost
3,000
20,000
1
2,000
9,000
1,500
2
2,500
4,000
2
9,000

Required:
a. Total product costs
b. Total period costs
4. Data about Maritz Companys production and inventories for the month of June are as follows:
Purchases direct materials
Freight-in
Purchase return and allowances
Direct labor
Actual factory overhead
Inventories:
Finished goods
Work-in-process
Direct Materials

June 1
68,000
110,000
52,000

143,440
5,000
2,440
175,000
120,000
June 30
56,000
135,000
444,000

Maritz Company applies factory overhead to production at 80% of direct labor cost. Over or
underapplied overhead is closed to cost of goods sold at year end. The companys accounting
period is on the calendar year basis.
Required:
a. Prime cost
b. Conversion cost
c. Total Manufacturing cost
d. Cost of goods sold
e. Overhead factory over/under applies