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1. What advice will you be giving to the management? Accept or reject the made-to-order deal? Use the underlined word in capital letters as your choice. 2. What total overhead costs will be charged to the supposed silk products? 3. What is the gross profit ratio computed as support to your answer in number 1?

1. What advice will you be giving to the management? Accept or reject the made-to-order deal? Use the underlined word in capital letters as your choice. 2. What total overhead costs will be charged to the supposed silk products? 3. What is the gross profit ratio computed as support to your answer in number 1?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Shalom Company has budgeted overhead costs of P1,200,000. It has allocated overhead on a plant-wide basis to its two products (wool and cotton) using direct labor hours, which are estimated to be 400,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (the cost driver is machine hours) and design (the cost driver is the number of set-ups). Overhead allocated to the cutting cost pool is P800,000 and P400,000 is allocated to the design cost pool. Additional information related to these pools is as follows: Wool Cotton Machine hours Number of set-ups 100,000 800 100,000 200 Amounts must be in whole numbers. Example: 88,000 or (88,000) Unit costs be in whole numbers. Example: 88 Format of percentages: 88% Words must be in capital letters. A customer offered P1,000,000 deal for a made-to-order production of silk products. Shalom Company estimates that this product line will incur total prime costs of P430,000 and requires 45,000 machine hours and 415 set-ups. Assume that Shalom Company implements ABC, and its policy is to accept special orders only if the gross profit is at least 25% of the selling price. The management sought your advice as you are one of the proponents of activity-based costing. Item 1 REJECT 1. What advice will you be giving to the management? Accept or reject the made-to-order deal? Use the underlined word in capital letters as your choice. 2. What total overhead costs will be charged to the supposed silk products? 3. What is the gross profit ratio computed as support to your answer in number 1? Item 2 346,000 Item 3 Round of ratio to whole percentages [22%
Transcribed Image Text:Shalom Company has budgeted overhead costs of P1,200,000. It has allocated overhead on a plant-wide basis to its two products (wool and cotton) using direct labor hours, which are estimated to be 400,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (the cost driver is machine hours) and design (the cost driver is the number of set-ups). Overhead allocated to the cutting cost pool is P800,000 and P400,000 is allocated to the design cost pool. Additional information related to these pools is as follows: Wool Cotton Machine hours Number of set-ups 100,000 800 100,000 200 Amounts must be in whole numbers. Example: 88,000 or (88,000) Unit costs be in whole numbers. Example: 88 Format of percentages: 88% Words must be in capital letters. A customer offered P1,000,000 deal for a made-to-order production of silk products. Shalom Company estimates that this product line will incur total prime costs of P430,000 and requires 45,000 machine hours and 415 set-ups. Assume that Shalom Company implements ABC, and its policy is to accept special orders only if the gross profit is at least 25% of the selling price. The management sought your advice as you are one of the proponents of activity-based costing. Item 1 REJECT 1. What advice will you be giving to the management? Accept or reject the made-to-order deal? Use the underlined word in capital letters as your choice. 2. What total overhead costs will be charged to the supposed silk products? 3. What is the gross profit ratio computed as support to your answer in number 1? Item 2 346,000 Item 3 Round of ratio to whole percentages [22%
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