Question 55 of 55 A number of activities have been identified for the Production, Planning and Development Department of Company A. An investigation has indicated that the budgeted costs for the three months ended 31 March 2021 are quantified as follows: Activities Product Design Purchasing Production Packing Distribution Cost Driver Unit Basis Units of Cost Driver Design hours 8,000 Purchase orders 4,000 Machine hours 12,000 Volume (cu. m.) Weight (kg.) 20,000 120,000 Cost (P) 2,000,000 (Note 1) 200,000 1,500,000 (Note 2) 400,000 600,000 Note 1: This includes all design costs for new products released this period. Note 2: This includes a depreciation provision of P300,000 of which P8,000 applies to 3 months' depreciation on a straight line basis for a new product (NPD), the remainder to other products. New product NPD is included in the above budget. The following additional information applies to NPD: (1) Estimated total output over the product life cycle: 5,000 units (4 years life cycle) (ii) Product design requirement: 400 design hours (iii) Output in quarter ended 31 March 2021: 250 units (iv) Equivalent batch size per purchase order: 50 units (v) Other product unit data: production time - 0.75 machine hrs.; volume - 0.4 cu. m; weight - 3 kgs. Prepare a unit-overhead cost for product NPD using an activity-based approach which includes an appropriate share of life-cycle costs using the information provided above.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Question 55 of 55
A number of activities have been identified for the Production, Planning and Development Department of Company A. An
investigation has indicated that the budgeted costs for the three months ended 31 March 2021 are quantified as follows:
Activities
Product Design
Purchasing
Production
Packing
Distribution
Cost Driver Unit Basis Units of Cost Driver
Design hours
8,000
Purchase orders
4,000
Machine hours
12,000
Volume (cu. m.)
20,000
Weight (kg.)
120,000
Cost (P)
2,000,000 (Note 1)
200,000
1,500,000 (Note 2)
400,000
600,000
Note 1: This includes all design costs for new products released this period.
Note 2: This includes a depreciation provision of P300,000 of which P8,000 applies to 3 months depreciation on a straight line basis for a new
product (NPD), the remainder to other products.
New product NPD is included in the above budget. The following additional information applies to NPD:
(1) Estimated total output over the product life cycle: 5,000 units (4 years life cycle)
(ii) Product design requirement: 400 design hours
(ii) Output in quarter ended 31 March 2021:250 units
(iv) Equivalent batch size per purchase order: 50 units
(v) Other product unit data: production time - 0.75 machine hrs.; volume - 0.4 cu. m; weight - 3 kgs.
Prepare a unit-overhead cost for product NPD using an activity-based approach which includes an appropriate share of
life-cycle costs using the information provided above.
Transcribed Image Text:Question 55 of 55 A number of activities have been identified for the Production, Planning and Development Department of Company A. An investigation has indicated that the budgeted costs for the three months ended 31 March 2021 are quantified as follows: Activities Product Design Purchasing Production Packing Distribution Cost Driver Unit Basis Units of Cost Driver Design hours 8,000 Purchase orders 4,000 Machine hours 12,000 Volume (cu. m.) 20,000 Weight (kg.) 120,000 Cost (P) 2,000,000 (Note 1) 200,000 1,500,000 (Note 2) 400,000 600,000 Note 1: This includes all design costs for new products released this period. Note 2: This includes a depreciation provision of P300,000 of which P8,000 applies to 3 months depreciation on a straight line basis for a new product (NPD), the remainder to other products. New product NPD is included in the above budget. The following additional information applies to NPD: (1) Estimated total output over the product life cycle: 5,000 units (4 years life cycle) (ii) Product design requirement: 400 design hours (ii) Output in quarter ended 31 March 2021:250 units (iv) Equivalent batch size per purchase order: 50 units (v) Other product unit data: production time - 0.75 machine hrs.; volume - 0.4 cu. m; weight - 3 kgs. Prepare a unit-overhead cost for product NPD using an activity-based approach which includes an appropriate share of life-cycle costs using the information provided above.
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