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Module 4.2 Activity-Based Costing Problems

1. Under the existing costing system, the total cost per unit for Product KK is P480 and for Product GG is P133.55. 2. Under the ABC system, the total cost per unit for Product KK is P1,128 and for Product GG is P112.65.

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Danica Ramos
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1K views

Module 4.2 Activity-Based Costing Problems

1. Under the existing costing system, the total cost per unit for Product KK is P480 and for Product GG is P133.55. 2. Under the ABC system, the total cost per unit for Product KK is P1,128 and for Product GG is P112.65.

Uploaded by

Danica Ramos
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Activity-Based Costing

Problems
Sherwin B. Santos, CPA
LAKERS Company uses activity-based costing. The company produces two
products: MIAMI and HEAT. The annual production and sales volume of MIAMI
is 8,000 units and of HEAT is 6,000 units. There are three activity cost pools with
the following expected activities and estimated total costs:

Activity Estimated Expected Activity Expected Activity


Cost Pool Cost MIAMI HEAT Total

Activity 1 P 20,000 100 400 500


Activity 2 37,000 800 200 1,000
Activity 3 91,200 800 3,000 3,800

Compute for the cost per unit of MIAMI and HEAT.

M -6.6 AND H-15.90


San Juan Company produces 2 products, PRODUCT KK and GG, and uses a
costing system in which all overhead is accumulated in a single cost pool and
allocated based on machine hours. The company’s management has
decided to implement ABC because a cost study has revealed significant
amounts of overhead cost related to setup activity and design activity. The
number of setups and design hours will be the activity drivers for the two new
cost pools, and machine hours will continue as the base for allocating the
remaining overhead. Selected information follows:

KK GG Total
Units produced 500 15,500 16,000
Direct material cost:
Per unit P200 P20
Total P100,000 P310,000 P410,000
Machine Hours 3,000 47,000 50,000
Direct Labor cost P50,000 P350,000 P400,000
Setups 120 80 200
Design Hours 6,000 4,000 10,000
Overhead:
Setup-related P250,000
Design-related 350,000
Others 900,000
REQUIRED:
1. Compute for the total and per-unit costs reported for the two products by
the existing costing system.
2. Compute for the total and per-unit costs reported for the two products by
the ABC system.

KK 240,000 & 480, GG 2,070,000 & 133.55


KK 564,000 & 1128, GG 1,746,000 & 112.65
1. Product KK Product GG
Direct materials P100,000 P 310,000
Direct labor 50,000 350,000
Overhead:
KK: P1,500,000/50,000 x 3,000 = 90,000
KK GG Total
GG: P1,500,000/50,000 x 47,000 = 1,410,000
Units 500 15,500 16,000 Factory cost P240,000 P2,070,000
produced Divided by units produced ÷ 500 ÷ 15,500
Unit cost P 480 P 133.55
DM cost:
Per unit P200 P20 2. Product KK Product GG
Total P100,000 P310,000 P410,000 Direct materials P100,000 P 310,000
Direct labor 50,000 350,000
Machine 3,000 47,000 50,000 Overhead:
Hours Setup related :
Direct Labor P50,000 P350,000 P400,000 KK: P250,000/200 x 120 = 150,000
GG: P250,000/200 x 80 = 100,000
cost Design related:
Setups 120 80 200 KK: P350,000/10,000 x 6,000 = 210,000
GG: P350,000/10,000 x 4,000 = 140,000
Design Hours 6,000 4,000 10,000 Other:
KK: P900,000/50,000 x 3,000 = 54,000
GG: P900,000/50,000 X 47,000 = 846,000
Factory cost P564,000 P1,746,000
Divided by units produced ÷ 500 ÷ 15,500
Unit cost P 1,128 P 112.65

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