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    ABC and Standard Costing Problem

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    MARC OLIVER CASTANEDA
    The document discusses activity-based costing (ABC) and provides overhead cost and activity driver data for Zomboss Company. It also provides additional data on the estimated costs of producing 5,000 doors. If traditional machine hour rates are used, the overhead rate would be P5,750 per machine hour. Using traditional costing, the cost per door would be P692.50. Under the ABC method, the accurate cost per door is P730.

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    ABC and Standard Costing Problem

    Uploaded by

    MARC OLIVER CASTANEDA
    106 views2 pages
    The document discusses activity-based costing (ABC) and provides overhead cost and activity driver data for Zomboss Company. It also provides additional data on the estimated costs of producing 5,000 doors. If traditional machine hour rates are used, the overhead rate would be P5,750 per machine hour. Using traditional costing, the cost per door would be P692.50. Under the ABC method, the accurate cost per door is P730.

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    Problems on ABC and Standard Costing

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    ABC and Standard Costing problem

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    The document discusses activity-based costing (ABC) and provides overhead cost and activity driver data for Zomboss Company. It also provides additional data on the estimated costs of producing 5,000 doors. If traditional machine hour rates are used, the overhead rate would be P5,750 per machine hour. Using traditional costing, the cost per door would be P692.50. Under the ABC method, the accurate cost per door is P730.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    106 views2 pages

    ABC and Standard Costing Problem

    Uploaded by

    MARC OLIVER CASTANEDA
    The document discusses activity-based costing (ABC) and provides overhead cost and activity driver data for Zomboss Company. It also provides additional data on the estimated costs of producing 5,000 doors. If traditional machine hour rates are used, the overhead rate would be P5,750 per machine hour. Using traditional costing, the cost per door would be P692.50. Under the ABC method, the accurate cost per door is P730.

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    © All Rights Reserved
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    PRACTICAL ACCOUNTING PROBLEMS II

    Activity-Based Costing
    The budgeted manufacturing overhead costs of Zomboss Company for 2010 are as follows:
    Type of Cost Cost Amount
    Electric Power P 1,000,000
    Work Cells 6,000,000
    Materials Handling 2,000,000
    Quality Control Inspections 2,000,000
    Product Runs (machine setups) 500,000
    Total Budgeted Overhead Costs P 11,500,000

    For the last five years, the cost accounting department has been charging overhead
    production costs based on machine hours. The estimated budgeted capacity for 2006 is
    2,000,000 machine hours.

    The president of Zomboss Company recently attended a seminar on activity-based costing.


    He now believes that ABC results in more reliable cost data cost data that, in turn, will give
    the company an edge in pricing over its competitors. At the president’s request, the
    production manager provided the following data regarding expected 2006 activity for the cost
    drivers of the preceding budgeted overhead costs.

    Type of Cost Activity Drivers


    Electric Power 200,000 kilowatt hours
    Work Cells 1,200,000 square feet
    Materials Handling 500,000 material moves
    Quality Control Inspections 400,000 inspections
    Product Runs (machine setups) 50,000 product runs

    The Vice President of Marketing received an offer to sell 5,000 doors to a local construction
    company. The VP asked the head of the cost accounting to prepare cost estimates for
    producing the 5,000 doors. The head of cost accounting accumulated the following data
    concerning production of 5,000 doors:

    Direct material cost P 200,000


    Direct labor cost P 400,000
    Machine hours 10,000
    Direct labor hours 20,000
    Electric power-kilowatt hours 2,000
    Work cells-square feet 12,000
    Number of material handling moves 120
    Number of quality control inspections 60
    Number of product runs (setups) 30

    Requirements:
    1. What is the predetermined overhead rate if the traditional measure of machine hours
    is used?
    2. What is the manufacturing cost per door as presently accounted for?
    3. What is the manufacturing cost per door under the proposed ABC method?

    Prepared by: Marc Oliver B. Castañeda, CPA, MSBA Page 1


    PRACTICAL ACCOUNTING PROBLEMS II

    Standard Costing

    Zombross Co. manufactures screen doors with the following standard quantity and cost
    information per door:

    Aluminum 4 sheets at P2 P 8
    Copper 3 sheets at P5 15
    Direct labor 7 hours at P7 49
    Variable overhead 6 machine hours at P3 18
    Fixed overhead 5 machine hours at P2 10

    Overhead rates were based on normal monthly capacity 5,000 machine hours.

    During November, the company produced only 800 doors and the following costs were
    incurred in October:

    Materials
    Aluminum 3,400 sheets purchased and used at P2.20
    Copper 2,500 sheets purchased and used at P4.20

    Labor
    Direct labor 5,250 hours at P8.00

    Overhead
    Variable overhead P11,800 (based on 4,250 machine hours)
    Fixed overhead P9,500 (based on 4,250 machine hours)

    Requirements:
    1. Material Price Variance for each material
    2. Material Quantity Variance for each material
    3. Total Material Variance for each material
    4. Labor Rate variance
    5. Labor Efficiency variance
    6. Total Labor Variance
    7. Overhead Spending Variance
    8. Overhead Efficiency Variance
    9. Total Overhead Variance
    10. Fixed Overhead Spending Variance
    11. Prepare Journal entries

    Prepared by: Marc Oliver B. Castañeda, CPA, MSBA Page 2

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