ABC and STANDARD COSTING

ABC and STANDARD COSTING

Smithson Company

Smithson Company produces two products (A and B). Direct material and labor costs for Product A total P35 (which reflects 4 direct labor hours); direct material and labor costs for Product B total P22 (which reflects 1.5 direct labor hours). Three overhead functions are needed for each product. Product A uses 2 hours of Function 1 at P10 per hour, 1 hour of Function 2 at P7 per hour, and 6 hours of Function 3 at P18 per hour. Product B uses 1, 8, and 1 hours of Functions 1, 2, and 3, respectively. Smithson produces 800 units of A and 8,000 units of B each period.

____     1.   Refer to Smithson Company If total overhead is assigned to A and B on the basis of units produced, Product A will have an overhead cost per unit of

a.	P 88.64.
b.	P123.64.
c.	P135.00.
d.	None of the responses are correct.

____     2.   Refer to Smithson Company If total overhead is assigned to A and B on the basis of units produced, Product B will have an overhead cost per unit of

a.	P84.00.
b.	P88.64.
c.	P110.64.
d.	None of the responses are correct.

____     3.   Refer to Smithson Company If total overhead is assigned to A and B on the basis of direct labor hours, Product A will have an overhead cost per unit of

a.	P51.32.
b.	P205.28.
c.	P461.88.
d.	None of the responses are correct.

____     4.   Refer to Smithson Company If total overhead is assigned to A and B on the basis of direct labor hours, Product B will have an overhead cost per unit of

a.	P51.32.
b.	P76.98.
c.	P510.32.
d.	None of the responses are correct.

____     5.   Refer to Smithson Company If total overhead is assigned to A and B on the basis of overhead activity hours used, the total product cost per unit assigned to Product A will be

a.	P86.32.
b.	P95.00.
c.	P115.50.
d.	None of the responses are correct.

____     6.   Refer to Smithson Company If total overhead is assigned to A and B on the basis of overhead activity hours used, the total product cost per unit assigned to Product B will be

a.	P115.50.
b.	P73.32.
c.	P34.60.
d.	None of the responses are correct.

Phelps Company

Phelps Company produces 50,000 units of Product Q and 6,000 units of Product Z during a period. In that period, four set-ups were required for color changes. All units of Product Q are black, which is the color in the process at the beginning of the period. A set-up was made for 1,000 blue units of Product Z; a set-up was made for 4,500 red units of Product Z; a set-up was made for 500 green units of Product Z. A set-up was then made to return the process to its standard black coloration and the units of Product Q were run. Each set-up costs P500.

____     7.   Refer to Phelps Company. If set-up cost is assigned on a volume basis for the department, what is the approximate per-unit set-up cost for Product Z?

a.	P.010.
b.	P.036.
c.	P.040.
d.	None of the responses are correct.

____     8.   Refer to Phelps Company. If set-up cost is assigned on a volume basis for the department, what is the approximate per-unit set-up cost for the red units of Product Z?

a.	P.036.
b.	P.111.
c.	P.250.
d.	None of the responses are correct.

____     9.   Refer to Phelps Company. Assume that Phelps Company has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per-unit set-up cost for the blue units of Product Z?

a.	P.04.
b.	P.25.
c.	P.50.
d.	None of the responses are correct.

____    10.   Refer to Phelps Company. Assume that Phelps Company has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per-unit set-up cost for the green units of Product Z?

a.	P1.00.
b.	P0.25.
c.	P0.04.
d.	None of the responses are correct.

Lafayette Savings and Loan

Lafayette Savings and Loan had the following activities, traceable costs, and physical flow of driver units:

		Traceable		Physical flow of
	Activities	Costs		Driver Units
	Open new accounts	P50,000		1,000 accounts
	Process deposits	36,000		400,000 deposits
	Process withdrawals	15,000		200,000 withdrawals
	Process loan applications	27,000		900 applications

The above activities are used by the Jennings branch and the Crowley branch:

		Jennings	Crowley
	New accounts	200	400
	Deposits	40,000	20,000
	Withdrawals	15,000	18,000
	Loan applications	100	160

____    11.   Refer to Lafayette Savings and Loan.  What is the cost per driver unit for new account activity?

a.	P0.09
b.	P0.075
c.	P30.00
d.	P50.00

____    12.   Refer to Lafayette Savings and Loan.  What is the cost per driver unit for the deposit activity?

a.	P0.09
b.	P0.075
c.	P30.00
d.	P50.00

____    13.   Refer to Lafayette Savings and Loan.  What is the cost per driver unit for the withdrawal activity?

a.	P0.09
b.	P0.075
c.	P30.00
d.	P50.00

____    14.   Refer to Lafayette Savings and Loan.  What is the cost per driver unit for the loan application activity?

a.	P0.09
b.	P0.075
c.	P30.00
d.	P50.00

____    15.   Refer to Lafayette Savings and Loan.  How much of the loan application cost will be assigned to the Jennings branch?

a.	P3,000
b.	P4,800
c.	P7,800
d.	P27,000

____    16.   Refer to Lafayette Savings and Loan.  How much of the deposit cost will be assigned to the Crowley branch?

a.	P1,800
b.	P3,600
c.	P5,400
d.	P36,000

____    17.   Refer to Lafayette Savings and Loan.  How much of the new account cost will be assigned to the Crowley branch?

a.	P10,000
b.	P20,000
c.	P30,000
d.	P50,000

Hazel Company uses activity-based costing.  The company produces two products:  coats and hats.  The annual production and sales volume of coats is 8,000 units and of hats is 6,000 units.  There are three activity cost pools with the following expected activities and estimated total costs:

Activity Cost Pool	Estimated Cost	Expected Activity Coats	Expected Activity Hats	Total
Activity 1	P20,000	100	400	500
Activity 2	P37,000	800	200	1,000
Activity 3	P91,200	800	3,000	3,800

____    18.   Refer to Hazel Company. Using ABC, the cost per unit of coats is approximately:

a.	P2.40
b.	P3.90
c.	P6.60
d.	P10.59

____    19.   Refer to Hazel Company. Using ABC, the cost per unit of hats is approximately:

a.	P2.40
b.	P3.90
c.	P12.00
d.	P15.90

Kan Co.

Kan Co. produces two products (A and B). Direct material and labor costs for Product A total P35 (which reflects 4 direct labor hours); direct material and labor costs for Product B total P22 (which reflects 1.5 direct labor hours). Three overhead functions are needed for each product. Product A uses 2 hours of Function 1 at P10 per hour, 1 hour of Function 2 at P7 per hour, and 6 hours of Function 3 at P18 per hour. Product B uses 1, 8, and 1 hours of Functions 1, 2, and 3, respectively. Kan produces 800 units of A and 8,000 units of B each period.

____    20.   Refer to Kan Co. If total overhead is assigned to A and B on the basis of units produced, Product A will have an overhead cost per unit of

a.	P 88.64.
b.	P123.64.
c.	P135.00.
d.	none of the above.

____    21.   Refer to Kan Co. If total overhead is assigned to A and B on the basis of units produced, Product B will have an overhead cost per unit of

a.	P84.00.
b.	P88.64.
c.	P110.64.
d.	none of the above.

____    22.   Refer to Kan Co. If total overhead is assigned to A and B on the basis of direct labor hours, Product A will have an overhead cost per unit of

a.	P51.32.
b.	P205.28.
c.	P461.88.
d.	none of the above.

____    23.   Refer to Kan Co. If total overhead is assigned to A and B on the basis of direct labor hours, Product B will have an overhead cost per unit of

a.	P51.32.
b.	P76.98.
c.	P510.32.
d.	none of the above.

____    24.   Refer to Kan Co. If total overhead is assigned to A and B on the basis of overhead activity hours used, the total product cost per unit assigned to Product A will be

a.	P86.32.
b.	P95.00.
c.	P115.50.
d.	none of the above.

____    25.   Refer to Kan Co. If total overhead is assigned to A and B on the basis of overhead activity hours used, the total product cost per unit assigned to Product B will be

a.	P115.50.
b.	P73.32.
c.	P34.60.
d.	none of the above.

JJ Corp.

JJ Corp. produces 50,000 units of Product Q and 6,000 units of Product Z during a period. In that period, four set-ups were required for color changes. All units of Product Q are black, which is the color in the process at the beginning of the period. A set-up was made for 1,000 blue units of Product Z; a set-up was made for 4,500 red units of Product Z; a set-up was made for 500 green units of Product Z. A set-up was then made to return the process to its standard black coloration and the units of Product Q were run. Each set-up costs P500.

____    26.   Refer to JJ Corp. If set-up cost is assigned on a volume basis for the department, what is the approximate per-unit set-up cost for Product Z?

a.	P.010.
b.	P.036.
c.	P.040.
d.	none of the above.

____    27.   Refer to JJ Corp. If set-up cost is assigned on a volume for the department, what is the approximate per-unit set-up cost for the red units of Product Z?

a.	P.036.
b.	P.111.
c.	P.250.
d.	none of the above.

____    28.   Refer to JJ Corp. Assume that JJ Corp. has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per-unit set-up cost for the blue units of Product Z?

a.	P.04.
b.	P.25.
c.	P.50.
d.	none of the above.

____    29.   Refer to JJ Corp. Assume that JJ Corp. has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per-unit set-up cost for the green units of Product Z?

a.	P1.00.
b.	P0.25.
c.	P0.04.
d.	none of the above.

Kingston Company

The following July information is for Kingston Company:

Standards:
Material	3.0 feet per unit @ P4.20 per foot
Labor	2.5 hours per unit @ P7.50 per hour
Actual:
Production	2,750 units produced during the month
Material	8,700 feet used; 9,000 feet purchased @ P4.50 per foot
Labor	7,000 direct labor hours @ P7.90 per hour

____    30.   Refer to Kingston Company. What is the material price variance (calculated at point of purchase)?

a.	P2,700 U
b.	P2,700 F
c.	P2,610 F
d.	P2,610 U

____    31.   Refer to Kingston Company. What is the material quantity variance?

a.	P3,105 F
b.	P1,050 F
c.	P3,105 U
d.	P1,890 U

____    32.   Refer to Kingston Company. What is the labor rate variance?

a.	P3,480 U
b.	P3,480 F
c.	P2,800 U
d.	P2,800 F

____    33.   Refer to Kingston Company. What is the labor efficiency variance?

a.	P1,875 U
b.	P938 U
c.	P1,875 U
d.	P1,125 U

Timothy Company

Timothy Company has the following information available for October when 3,500 units were produced (round answers to the nearest peso).

Standards:
Material	3.5 pounds per unit @ P4.50 per pound
Labor	5.0 hours per unit @ P10.25 per hour
Actual:
Material purchased		12,300 pounds @ P4.25
Material used		11,750 pounds
17,300 direct labor hours @ P10.20 per hour

____    34.   Refer to Timothy Company. What is the labor rate variance?

a.	P875 F
b.	P865 F
c.	P865 U
d.	P875 U

____    35.   Refer to Timothy Company. What is the labor efficiency variance?

a.	P2,050 F
b.	P2,050 U
c.	P2,040 U
d.	P2,040 F

____    36.   Refer to Timothy Company. What is the material price variance (based on quantity purchased)?

a.	P3,075 U
b.	P2,938 U
c.	P2,938 F
d.	P3,075 F

____    37.   Refer to Timothy Company. What is the material quantity variance?

a.	P2,250 F
b.	P2,250 U
c.	P225 F
d.	P2,475 U

____    38.   Refer to Timothy Company. Assume that the company computes the material price variance on the basis of material issued to production. What is the total material variance?

a.	P2,850 U
b.	P5,188 U
c.	P5,188 F
d.	P2,850 F

Batt Manufacturing

The following March information is available for Batt Manufacturing Company when it produced 2,100 units:

Standard:
Material	2 pounds per unit @ P5.80 per pound
Labor	3 direct labor hours per unit @ P10.00 per hour
Actual:
Material	4,250 pounds purchased and used @ P5.65 per pound
Labor	6,300 direct labor hours at P9.75 per hour

____    39.   Refer to Batt Manufacturing. What is the material price variance?

a.	P637.50 U
b.	P637.50 F
c.	P630.00 U
d.	P630.00 F

____    40.   Refer to Batt Manufacturing. What is the material quantity variance?

a.	P275 F
b.	P290 F
c.	P290 U
d.	P275 U

____    41.   Refer to Batt Manufacturing. What is the labor rate variance?

a.	P1,575 U
b.	P1,575 F
c.	P1,594 U
d.	P0

____    42.   Refer to Batt Manufacturing. What is the labor efficiency variance?

a.	P731.25 F
b.	P731.25 U
c.	P750.00 F
d.	none of the above

Redd Co.

Redd Co. uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for August when Redd made 4,500 units:

Standard:
DLH per unit	2.50
Variable overhead per DLH	P1.75
Fixed overhead per DLH	P3.10
Budgeted variable overhead	P21,875
Budgeted fixed overhead	P38,750
Actual:
Direct labor hours	10,000
Variable overhead	P26,250
Fixed overhead	P38,000

____    43.   Refer to Redd Co. Using the one-variance approach, what is the total overhead variance?

a.	P6,062.50 U
b.	P3,625.00 U
c.	P9,687.50 U
d.	P6,562.50 U

____    44.   Refer to Redd Co. Using the two-variance approach, what is the controllable variance?

a.	P5,812.50 U
b.	P5,812.50 F
c.	P4,375.00 U
d.	P4,375.00 F

____    45.   Refer to Redd Co. Using the two-variance approach, what is the noncontrollable variance?

a.	P3,125.00 F
b.	P3,875.00 U
c.	P3,875.00 F
d.	P6,062.50 U

____    46.   Refer to Redd Co. Using the three-variance approach, what is the spending variance?

a.	P4,375 U
b.	P3,625 F
c.	P8,000 U
d.	P15,750 U

____    47.   Refer to Redd Co. Using the three-variance approach, what is the efficiency variance?

a.	P9,937.50 F
b.	P2,187.50 F
c.	P2,187.50 U
d.	P2,937.50 F

____    48.   Refer to Redd Co. Using the three-variance approach, what is the volume variance?

a.	P3,125.00 F
b.	P3,875.00 F
c.	P3,875.00 U
d.	P6,062.50 U

____    49.   Refer to Redd Co. Using the four-variance approach, what is the variable overhead spending variance?

a.	P4,375.00 U
b.	P4,375.00 F
c.	P8,750.00 U
d.	P6,562.50 U

____    50.   Refer to Redd Co. Using the four-variance approach, what is the variable overhead efficiency variance?

a.	P2,187.50 U
b.	P9,937.50 F
c.	P2,187.50 F
d.	P2,937.50 F

____    51.   Refer to Redd Co. Using the four-variance approach, what is the fixed overhead spending variance?

a.	P7,000 U
b.	P3,125 F
c.	P750 U
d.	P750 F

____    52.   Refer to Redd Co. Using the four-variance approach, what is the volume variance?

a.	P3,125 F
b.	P3,875 F
c.	P6,063 U
d.	P3,875 U

ABC AND STANDARD COSTING

Answer Section

MULTIPLE CHOICE

            1.   A

Total Overhead
Product A	Function	Hourly  Rate	Hours	Total
	1	P                10	2	P       20
	2	P                  7	1	P         7
	3	P                18	6	P     108
		Totals	9	P     135
Product B	Function	Hourly  Rate	Hours	Total
	1	P                10	1	P       10
	2	P                  7	8	P       56
	3	P                18	1	P       18
		Totals	10	P       84
OH/Unit	Units Produced	Total
P       135	800	P        108,000
P         84	8000	P        672,000
		P        780,000
Total OH	Proportion	Allocated   OH	Units Produced	OH per Unit
P 780,000	0.090909091	P      70,909.09	800	P   88.64
	(800/8800)

            2.   B

See #70 for Total Overhead Computations
Total OH	Proportion	Allocated OH	Units Produced	OH per Unit
P 780,000	0.909090909	P    709,090.91	8000	P   88.64
	(8000/8800)

PTS:    1                     DIF:     Moderate         OBJ:    5-3

            3.   B

Product	DL Hrs/Unit	Units Produced	Total DL  Hours
A	4	800	3200
B	1.5	8000	12000
			15200
Total OH	Proportion	Allocated OH	Units Produced	OH per Unit
P     780,000	0.210526316	P          164,210.53	800	P    205.28
	(3,200/15,200)

              

            4.   B

See #72 for Direct Labor Computations
Total OH	Proportion	Allocated OH	Units Produced	OH per Unit
P     780,000	0.789473684	P          615,789.47	8000	P     76.98
	(12,000/15,200)

PTS:    1                     DIF:     Moderate         OBJ:    5-3

            5.   C

Total OH	Proportion	Allocated OH	Units Produced	OH per Unit	DM and DL/Unit	Total
P   780,000	0.082568807	P      64,403.67	800	P   80.50	P        35.00	P  115.50
	(7,200/87,200)

            6.   D

Total OH	Proportion	Allocated OH	Units Produced	OH per Unit	DM and DL/Unit	Total
P   780,000	0.917431193	P 715,596.33	8000	P    89.44	P        22.00	P 111.44
	(80,000/87,200)

            7.   B

Total setup cost:  P500 ´ 4 = P2,000

P2,000/56,000 = P0.0357

            8.   A

Total setup cost:  P500 ´ 4 = P2,000

P2,000/56,000 = P0.0357

            9.   C

Setup cost for blue units = P500.00

Number of blue units produced = 1,000

P500/1,000 = P.50

           10.   A

Setup cost = P500.00

Units produced = 500

P500.00/500 = P1.00/unit

           11.   D

P50,000/1,000 = P50.00 per account

           12.   A

P36,000/400,000 = P0.09

           13.   B

P15,000/200,000 = P0.075

           14.   C

P27,000/900 = P30.00

              

           15.   A

P30.00 ´ 100 = P3,000

           16.   A

P0.09 * 20,000 = P1,800

           17.   B

400 * P50 = P20,000

           18.   C

Activity	Cost Allocation	Cost per Unit
1	P20,000 * 100/500 =   P 4,000 / 8,000	P0.50
2	P37,000 * 800/1,000 = P29,600 / 8,000	3.70
3	P91,200 * 800/3,800 = P19,200 / 8,000	2.40
	Total Cost per Unit	6.60

           19.   D

Activity	Cost Allocation	Cost per Unit
1	P20,000 * 400/500 =   P 16,000 / 6,000	P2.67
2	P37,000 * 200/1,000 = P 7,400/ 6,000	1.23
3	P91,200 * 3,000/3,800 = P72,000 / 6,000	12.00
	Total Cost per Unit	15.90

           20.   A

           21.   B

           22.   B

           23.   B

           24.   C

           25.   A

           26.   B

           27.   B

           28.   C

           29.   A

           30.   A

           31.   D

           32.   C

           33.   B

           34.   B

           35.   A

           36.   D

           37.   A

           38.   C

           39.   B

           40.   C

           41.   B

           42.   D

           43.   C

           44.   A

           45.   B

           46.   C

           47.   B

           48.   C

           49.   C

           50.   C

           51.   D

           52.   D