6. Jose Company specializes in the production of two types of products, the A-1 and the B-3. The A-1 has been a bread-and-butter product for a number of years, while the B-3 is relatively new and struggling to gain public acceptance. Data on the two products follow: 291 Product A-1 Product B-3 Material cost Labor hours P20 P45 20 hours 500 Expected volume for coming year 10 hours 10,000 Labor cost is P20 per hour and overhead costs are budgeted at P660,000 for the coming year. For purposes of using the ABC system, the controller develops the following information: Product A-1 Product B-3 100 250 Number of machine setups, annually Testing time, annually 2,000 hours 2,750 hours Thus, the company performs one setup for every 10 units of A-1 (100/ 10,000) and one setup for every two units of B-3 (250/500). Similarly, the company spends 0.20 hours (2,000/10,000) testing an A-1 and 5.5 hours (2,750/500) testing a B-3. The controller also determined that of the total overhead of P660,000. about P140,000 is related to setups and P190,000 to testing. The remaining P330,000 is related to labor. What is the cost of each product, using the ABC system: Product B-3 P565 Product A-1 P280 P262 a. P925 P925 P565 b. C. P232 d. P262
6. Jose Company specializes in the production of two types of products, the A-1 and the B-3. The A-1 has been a bread-and-butter product for a number of years, while the B-3 is relatively new and struggling to gain public acceptance. Data on the two products follow: 291 Product A-1 Product B-3 Material cost Labor hours P20 P45 20 hours 500 Expected volume for coming year 10 hours 10,000 Labor cost is P20 per hour and overhead costs are budgeted at P660,000 for the coming year. For purposes of using the ABC system, the controller develops the following information: Product A-1 Product B-3 100 250 Number of machine setups, annually Testing time, annually 2,000 hours 2,750 hours Thus, the company performs one setup for every 10 units of A-1 (100/ 10,000) and one setup for every two units of B-3 (250/500). Similarly, the company spends 0.20 hours (2,000/10,000) testing an A-1 and 5.5 hours (2,750/500) testing a B-3. The controller also determined that of the total overhead of P660,000. about P140,000 is related to setups and P190,000 to testing. The remaining P330,000 is related to labor. What is the cost of each product, using the ABC system: Product B-3 P565 Product A-1 P280 P262 a. P925 P925 P565 b. C. P232 d. P262
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:7. Pablo Company produces two types of products: Product RR and
To assess the effect of the change, the following data have been
Product SS. The president of the company decided to change from
unit-based, traditional costing system to an activity-based cost system.
Chapier
292
7. Pablo Company produces two types of products: Product Rp
unit-based, traditional costing system to an activity-based cost sve
To assess the effect of the change, the following data have b
gathered (for simplicity, assume one process):
Machine
Hours
Material
Moves
Quantity
Prime Costs
Setups
P800,000
P150,000
P950,000
100,000
25,000.
P500,000*
200,000
100,000
P850,000
100
400,000
100,000
Product RR
50
Product SS
Peso value
P650,000
The cost of operating the production equipment.
*
Under the current system, the costs of operating equipment, materials
handling, and setups are assigned to products on the basis of machine
hours. Products are produced and moved in batches.
Under the current unit-based approach, what is the unit cost of each
product?
Product RR
a. Р6.00
b. P6.50
Product SS
P5.50
с. Р6.00
d. P6.50
P5.00
P6.50
P5.50
8. Using the data in No. 7, what is the unit cost of each product using an
activity-based costing approach?
Product RR
a. P5.50
b. P5.50
c. P6.00
d. P7.50
Product SS
P6.00
P7.50
P7.50
P5.50
Transcribed Image Text:Activity-Based Costing (ABC)
6. Jose Company specializes in the production of two types of products,
the A-1 and the B-3. The A-1 has been a bread-and-butter product for
a number of years, while the B-3 is relatively new and struggling to
gain public acceptance. Data on the two products follow:
291
Product A-1
Product B-3
Material cost
Labor hours
P20
P45
Expected volume for coming year
10 hours
10,000
20 hours
500
Labor cost is P20 per hour and overhead costs are budgeted at
P660,000 for the coming year.
For purposes of using the ABC system, the controller develops the
following information:
Product A-1
Product B-3
100
250
Number of machine setups, annually
Testing time, annually
2,000 hours
2,750 hours
Thus, the company performs one setup for every 10 units of A-1 (100/
10,000) and one setup for every two units of B-3 (250/500). Similarly,
the company spends 0.20 hours (2,000/10,000) testing an A-1 and 5.5
hours (2,750/500) testing a B-3.
The controller also determined that of the total overhead of P660,000.
about P140,000 is related to setups and P190,000 to testing. The
remaining P330,000 is related to labor.
What is the cost of each product, using the ABC system:
Product B-3
P565
P925
P925
P565
Product A-1
P280
a.
b.
P262
c.
d.
P232
P262
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