Module 4 - Activity-Based Costing: Activity 1 Problem on Activity based costing: Babes Manufacturing, Inc. Provided the following information for the month of October, 2020: Product Honey 450 units Product Hapi 850 units Number of units produced Activities/Cost Drivers: Materials handling Production set-up Quality inspections Machine depreciation Additional data: 900 kilos 9 runs 80 hours 280 hours 3,200 kilos 15 runs 120 hours 505 hours Direct material per unit Direct labor P600 50% of direct materials P400.00 Factory overhead is applied at the rate of 100% based on direct labor cost Estimated overhead costs for October, 2020 amounts to P160,000. The product is selling at 20% above cost. Factory overhead costs estimates for year 2020: Estimated number Estimated Acfivity Cost Drivers of cost drivers Overhead cost Materials handling Production set-up Quality inspections Machine depreciation Machine hours P 400,000 900,000 800,000 400,000 50,000 kilos 300 runs No. Of kilos No. Of rund Inspection hours 4,000 hours 20,000 hours Required: a. Using traditional approach, compute for the product cost per unit of Honey and Нapi b. Using activity based costing, compute for the factory overhead and cost per unit (round off to P1.00 of product honey and hapi. Show the computation of activity cost rate and its cost allocation to each product. c. Using activity based costing, compute for the product cost per unit of honey and hapi. d. Compute for the selling price of both honey and hapi using both traditional and activity based costing methods.
Module 4 - Activity-Based Costing: Activity 1 Problem on Activity based costing: Babes Manufacturing, Inc. Provided the following information for the month of October, 2020: Product Honey 450 units Product Hapi 850 units Number of units produced Activities/Cost Drivers: Materials handling Production set-up Quality inspections Machine depreciation Additional data: 900 kilos 9 runs 80 hours 280 hours 3,200 kilos 15 runs 120 hours 505 hours Direct material per unit Direct labor P600 50% of direct materials P400.00 Factory overhead is applied at the rate of 100% based on direct labor cost Estimated overhead costs for October, 2020 amounts to P160,000. The product is selling at 20% above cost. Factory overhead costs estimates for year 2020: Estimated number Estimated Acfivity Cost Drivers of cost drivers Overhead cost Materials handling Production set-up Quality inspections Machine depreciation Machine hours P 400,000 900,000 800,000 400,000 50,000 kilos 300 runs No. Of kilos No. Of rund Inspection hours 4,000 hours 20,000 hours Required: a. Using traditional approach, compute for the product cost per unit of Honey and Нapi b. Using activity based costing, compute for the factory overhead and cost per unit (round off to P1.00 of product honey and hapi. Show the computation of activity cost rate and its cost allocation to each product. c. Using activity based costing, compute for the product cost per unit of honey and hapi. d. Compute for the selling price of both honey and hapi using both traditional and activity based costing methods.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
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Transcribed Image Text:Module 4 - Activity-Based Costing: Activity 1
Problem on Activity based costing:
Babes Manufacturing, Inc. Provided the following information for the month of
October, 2020:
Product Honey
Product Hapi
850 units
Number of units produced
Activities/Cost Drivers:
450 units
Materials handling
Production set-up
Quality inspections
Machine depreciation
Additional data:
900 kilos
9 runs
80 hours
3,200 kilos
15 runs
120 hours
280 hours
505 hours
Direct material per unit
Direct labor
Factory overhead is applied at the rate of 100% based on direct labor cost
Estimated overhead costs for October, 2020 amounts to P160,000. The
product is selling at 20% above cost.
P400.00
P600
50% of direct materials
Factory overhead costs estimates for year 2020:
Estimated number
Estimated
Acfivity
Cost Drivers
of cost drivers
Overhead cost
Materials handling
Production set-up
Quality inspections
Machine depreciation Machine hours
No. Of kilos
No. Of rund
Inspection hours
50,000 kilos
300 runs
4,000 hours
20,000 hours
P 400,000
900,000
800,000
400,000
Required:
a. Using traditional approach, compute for the product cost per unit of Honey and
Нapi
b. Using activity based costing, compute for the factory overhead and cost per
unit (round off to P1.00 of product honey and hapi. Show the computation of
activity cost rate and its cost allocation to each product.
c. Using activity based costing, compute for the product cost per unit of honey
and hapi.
d. Compute for the selling price of both honey and hapi using both traditional and
activity based costing methods.
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