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ABS Problems (1-2)

The document provides cost and activity data for three activity centers - Utilities, Scheduling and Setup, and Material Handling - that are used to assign overhead costs at Dragon Furniture Company. It also provides product-level data on prime costs, activity drivers, and units produced for Products A, B, and C. Using the ABC method, total production costs and unit costs are determined for each product by assigning overhead costs based on cost pools and activity drivers. The traditional method is also used to determine unit costs by applying overhead at a rate of $12.13 per direct labor hour.

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231 views3 pages

ABS Problems (1-2)

The document provides cost and activity data for three activity centers - Utilities, Scheduling and Setup, and Material Handling - that are used to assign overhead costs at Dragon Furniture Company. It also provides product-level data on prime costs, activity drivers, and units produced for Products A, B, and C. Using the ABC method, total production costs and unit costs are determined for each product by assigning overhead costs based on cost pools and activity drivers. The traditional method is also used to determine unit costs by applying overhead at a rate of $12.13 per direct labor hour.

Uploaded by

dewlate abina
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PROBLEM 1.

Dragon Furniture Company has identified activity centers to which overhead costs are
assigned. The following data are available:

ACTIVITY CENTERS COSTS ACTIVITY DRIVERS

Utilities P300,000 60,000 machine hours

Scheduling and Setup 273,000 780 setups

Material Handling 640,000 1,600,000 pounds of materials

The Company’s products and other operating statistics follow:

PRODUCT

A B C
Prime costs P 80,000 P80,000 P90,000
Machine hours 30,000 10,000 20,000
Number of setups 130 380 270
Pounds of materials 500,000 300,000 800,000
Number of units 40,000 20,000 60,000
produced
Direct labor hours 32,000 18,000 50,000

Required:

(1) Using ABC Method, determine the total production costs for each product. Determine also
the unit cost of each product.

POOL RATES:

Utilities P 300,000 / 60,000 P 5/mhr

Scheduling and set up P 273,000 / 780 P 350 /set up

Materials Handling P 640,000 / 1,600,000 P 40 lbs


ACTIVITY PRODUCT (A) PRODUCT (B) PRODUCT (C) TOTAL
Utilities:

A 30,000 x 5 P 150,000
B 10,000 x 5 P 50,000
C 20,000 x 5 P 100,000

Total: P 300,000
Scheduling &
Set-ups:

A 130 x 350 45,000


B 380 x 350 133,000
C 270 x 350 94,000

Total: 273,000
Material
Handling:

A 500,000 x .40 200,000


B 300,000 x .40 120,000
C 800,000 x .40 320,000

Total: 640,000
TOTAL 395,500 303,000 514,500 1,213,000

TOTAL COST OF THE JOB

COST ITEM A B C
Prime Costs P 60,000 P 80,000 P 90,000
Overhead 395,500 303,000 514,500
Total P 475,500 P 383,000 P 604,500

(2) Using Traditional Method of costing using direct labor hours as basis of applying overhead,
what is the unit cost of Product A, B and C.

Predetermined Overhead Rate = P 1,213,000 / 100,000 = P 12.13/DLH

Product A:
Prime cost P 80,000
Overhead cost (32,000 x 12.13) 388,160
Total 468,160
Units Produced 40,000
Manufacturing Cost per unit P 11.70
Product B:
Prime cost P 80,000
Overhead cost (18,000 x 12.13) 218,340
Total 298,340
Units Produced 20,000
Manufacturing Cost per unit P 14,92

Product C:
Prime cost P 90,000
Overhead cost (50,000 x 12.13) 606,500
Total 696,500
Units Produced 30,000
Manufacturing Cost per unit P 13.93

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