In celebration of Best Friends' Day 2022, Besties' Tea Shop, offers a promo to its valued customers which causes a reduction of its profit margin from 30% to 10% only. The business uses Activity-Based Costing system in allocating overhead cost. Pertinent data are as follow: Direct Materials Direct Labor ₱ 1.25 per ounce ₱ 5.25 per cup Activity Center Cost Driver Allocation Rate Handling Cost of materials 10% of material cost Mixing Number of ounces ₱ 0.20 per ounce Packaging Number of cups ₱ 3.00 per cup Find the following: a. How much is the overhead cost of a 48-oz cup? b. On Best Friends' Day, how much will you pay for one 24-oz cup? c. How much will you pay for one 36-oz cup without the promo?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
In celebration of Best Friends' Day 2022, Besties' Tea Shop, offers a promo
to its valued customers which causes a reduction of its profit margin from 30% to 10% only.
The business uses Activity-Based Costing system in allocating
| Direct Materials | Direct Labor |
| ₱ 1.25 per ounce | ₱ 5.25 per cup |
| Activity Center | Cost Driver | Allocation Rate |
| Handling | Cost of materials | 10% of material cost |
| Mixing | Number of ounces | ₱ 0.20 per ounce |
| Packaging | Number of cups | ₱ 3.00 per cup |
Find the following:
a. How much is the overhead cost of a 48-oz cup?
b. On Best Friends' Day, how much will you pay for one 24-oz cup?
c. How much will you pay for one 36-oz cup without the promo?
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