Problem A. Wyoming Company manufactures radios in two different styles: Radio Model Annual Sales in Units Starry 10,000 Polka 16,000 Wyoming uses a traditional volume-based costing system in applying factory overhead using direct labor pesos. The unit prime costs of each product were as follows: Starry Polka Direct Materials P38.00 P25.40 Direct labor: 1.2 x P14.60 17.52 0.9 x P14.60 13.14 The predetermined overhead rate was P350% (P1,349,040 ÷ 385,440) Direct labor budget per annual sales: Starry radio 10,000 x P17.52 P175,200 Polka radio 16,000 x P13.14 210,240 Total P385,440 Factory overhead: Engineering and Design P404,712 Quality control 269,808 Machinery 539,616 Miscellaneous Overhead 134,904 Total P1,349,040 Wyoming’s controller had been researching activity-based costing and decided to switch to it. A special study determined Wyoming’s two radio models were responsible for the following proportions of each cost driver: Starry Polka Engineering and Design 40% 60% Quality control 45% 55% Machinery 60% 40% Miscellaneous Overhead 35% 65% Required. Compute the following: Applied factory overhead per unit for the Starry Model under traditional costing. Applied factory overhead per unit for the Polka Model under traditional costing. Applied factory overhead per unit for the Starry Model based on Engineering and design, under ABC system.

Problem A. Wyoming Company manufactures radios in two different styles: Radio Model Annual Sales in Units Starry 10,000 Polka 16,000 Wyoming uses a traditional volume-based costing system in applying factory overhead using direct labor pesos. The unit prime costs of each product were as follows: Starry Polka Direct Materials P38.00 P25.40 Direct labor: 1.2 x P14.60 17.52 0.9 x P14.60 13.14 The predetermined overhead rate was P350% (P1,349,040 ÷ 385,440) Direct labor budget per annual sales: Starry radio 10,000 x P17.52 P175,200 Polka radio 16,000 x P13.14 210,240 Total P385,440 Factory overhead: Engineering and Design P404,712 Quality control 269,808 Machinery 539,616 Miscellaneous Overhead 134,904 Total P1,349,040 Wyoming’s controller had been researching activity-based costing and decided to switch to it. A special study determined Wyoming’s two radio models were responsible for the following proportions of each cost driver: Starry Polka Engineering and Design 40% 60% Quality control 45% 55% Machinery 60% 40% Miscellaneous Overhead 35% 65% Required. Compute the following: Applied factory overhead per unit for the Starry Model under traditional costing. Applied factory overhead per unit for the Polka Model under traditional costing. Applied factory overhead per unit for the Starry Model based on Engineering and design, under ABC system.

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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Radio Model Annual Sales in Units

Starry 10,000

Polka 16,000

Wyoming uses a traditional volume-based costing system in applying factory overhead using direct labor pesos. The unit prime costs of each product were as follows:

Starry Polka

Direct Materials	P38.00	P25.40
Direct labor:
1.2 x P14.60	17.52
0.9 x P14.60		13.14

The predetermined overhead rate was P350% (P1,349,040 ÷ 385,440) Direct labor budget per annual sales:

Starry radio	10,000 x P17.52	P175,200
Polka radio	16,000 x P13.14	210,240
Total		P385,440

Factory overhead:

Engineering and Design	P404,712
Quality control	269,808
Machinery	539,616
Miscellaneous Overhead	134,904
Total	P1,349,040

Wyoming’s controller had been researching activity-based costing and decided to switch to it. A special study determined Wyoming’s two radio models were responsible for the following proportions of each cost driver:

	Starry	Polka
Engineering and Design	40%	60%
Quality control	45%	55%
Machinery	60%	40%
Miscellaneous Overhead	35%	65%

Required. Compute the following:

Applied factory overhead per unit for the Starry Model under traditional costing.
Applied factory overhead per unit for the Polka Model under traditional costing.
Applied factory overhead per unit for the Starry Model based on Engineering and design, under ABC system.
Applied factory overhead per unit for the Starry Model based on Quality Control, under ABC system.
Applied factory overhead per unit for the Starry Model based on Machinery, under ABC system
Applied factory overhead per unit for the Starry Model based on Miscellaneous Overhead, under ABC system
Applied factory overhead per unit for the Polka Model based on Engineering and Design, under ABC system
Applied factory overhead per unit for the Polka Model based on Quality Control under ABC system
Applied factory overhead per unit for the Polka Model based on Machinery, under ABC system
Applied factory overhead per unit for the Polka Model based on Miscellaneous Overhead, under ABC system

PROBLEM B.

Crown Modules Inc. manufactures dining chairs and tables. The following information is available:

	Dining Chairs	Tables		Total Cost
Machine Setups	200		600	P32,000
Inspections	250		500	P54,000
Labor hours	2,600		2,400

Crown Modules is considering switching from one overhead rate based on labor hours to activity-based costing.

Required.

Compute total machine setups and inspection costs assigned to each product, using a single overhead rate.
Compute total machine setups and inspection costs assigned to each product, using activity-based costing.

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