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New Corporation manufactures two products, Product B and 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:
Using the data above and an activity-based costing approach, determine the unit product cost of each
product for the current year.
The Dillon Company makes and sells a single product and uses a flexible budget for overhead to plan and
control overhead costs. Overhead costs are applied on the basis of direct labor-hours. The standard cost card
shows that 5 direct labor-hours are required per unit. The Dillon Company had the following budgeted and
actual data for March:
Actual Budgeted
Units produced ............... 33,900 30,800
Direct labor-hours ........... 161,800 154,000
Variable overhead costs ...... $140,500 $123,200
Fixed overhead costs ......... $80,000 $77,000
53.
B
Medium
The variable overhead spending variance for March is:
a. $4,900 U.
b. $11,060 U.
c. $14,700 U.
d. $17,300 U.
54.
D
Medium
ABC AND FLEXIBLE BUDGET
55.
C
Medium
The fixed overhead budget variance for March is:
a. $900 F.
b. $3,900 F.
c. $3,000 U.
d. $7,750 F.
56.
A
Medium
The fixed overhead volume variance for March is:
a. $7,750 F.
b. $7,750 U.
c. $1,550 F
d. $3,900 U.
Fly Corporation manufactures two products, Product A and 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
ABC AND FLEXIBLE BUDGET
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:
Using the data above and an activity-based costing approach, determine the unit product cost of each
product for the current year.
Product S Product W
Direct material .... P10 P24
Direct labor ....... P 8 P12
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:
Using the data above and an activity-based costing approach, determine the unit product cost of each
product for the current year.
ABC AND FLEXIBLE BUDGET
A manufacturing company has a standard costing system based on machine-hours (MHs) as the measure of
activity. Data from the company's flexible budget for manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
Estimated Total
Overhead Expected
Activity Cost Pools Costs Activity Rate
Machine setups ..... P200,000 2,000 P100.00/setup
Purchase orders .... 43,500 600 72.50/order
Machine-hours ...... 104,000 13,000 8.00/hour
Maintenance requests 152,500 2,000 76.25/request
P500,000
Product S Product W
Activity Amount Activity Amount
Machine setups,
P100.00/setup...... 800 P 80,000 1,200 P120,000
Purchase orders,
P72.50/order....... 500 36,250 100 7,250
Machine-hours,
P8.00/hour......... 3,000 24,000 10,000 80,000
Maintenance request,
at P76.25/request.. 860 65,575 1,140 86,925
P205,825 P294,175
Using activity-based costing, the unit product cost of each product would be:
Product S Product W
Direct materials .............. P10.0000 P24.0000
Direct labor .................. 8.0000 12.0000
Manufacturing overhead ........ 3.4304 29.4175
Total unit product cost .... P21.4304 P65.4175
Dab Company manufactures two products, Product F and Product G. The company expects to
produce and sell 1,400 units of Product F and 1,800 units of Product G during the current year.
The company uses activity-based costing to compute unit product costs for external reports. Data
relating to the company’s three activity cost pools are given below for the current year:
Estimated
Activity Overhead Expected Activity
Cost Pool Costs Product F Product G Total
Machine setups P10,800 80 100 180
Purchase orders P77,520 510 1,010 1,520
General factory P75,920 2,240 3,600 5,840
Required:
Using the activity-based costing approach, determine the overhead cost per unit for each product.
ABC AND FLEXIBLE BUDGET
The Ferris Company applies manufacturing overhead costs to products on the basis of direct labor hours. The
standard cost card shows that 3 direct labor hours are required per unit of product. For August, the company
budgeted to work 90,000 direct labor hours and to incur the following total manufacturing overhead costs:
During August, the company completed 28,000 units of product, worked 86,000 direct labor hours, and
incurred the following total manufacturing overhead costs:
The denominator activity in the predetermined overhead rate is 90,000 direct labor hours.