1.

a. Allocations to the Product Processing activity cost pool:

Indirect factory wages (47% × P16,000) ......................... P 7,520
Factory equipment depreciation (25% × P193,000)......... 48,250
Total .......................................................................... P55,770

b. As stated in the problem, the costs allocated to the “Other” cost pool are not assigned
to products.
Indirect factory wages (5% × P16,000) ........................... P 800
Factory equipment depreciation (14% × P193,000)......... 27,020
Total .......................................................................... P27,820

2.
a. Allocations to the Unit Processing activity cost pool:
Supervisory wages (64% × P94,000) .......... P 60,160
Factory utilities (35% × P128,000) ............. 44,800
Total ...................................................... P104,960

b. As stated in the problem, the costs allocated to the “Other” cost pool are not assigned
to products.
Supervisory wages (2% × P94,000) ............ P 1,880
Factory utilities (16% × P128,000) ............. 20,480
Total ...................................................... P22,360

3.
a. Allocations to the Machining activity cost pool:
Supervisory wages (33% × P46,000) .......... P 15,180
Factory utilities (69% × P199,000) ............. 137,310
Total ...................................................... P152,490

b. As stated in the problem, the costs allocated to the “Other” cost pool are not assigned
to products.
Supervisory wages (8% × P46,000) ............ P 3,680
Factory utilities (13% × P199,000) ............. 25,870
Total ...................................................... P29,550

4.
All three parts can be answered using a first-stage allocation of costs.

Working On Business
Engagements Development Other Total
Wages and salaries .... P372,000 P 62,000 P186,000 P620,000
Travel expenses ......... 70,000 56,000 14,000 140,000
Other expenses ......... 42,000 30,000 48,000 120,000
Total ......................... P484,000 P148,000 P248,000 P880,000

5.
a. The computation of the activity rates follow:
 Total Cost Total Activity Activity Rates
Cleaning .......... P263,784 34,800 hours P7.58 per hour
Job support ...... P145,180 7,000 jobs P20.74 per job
Client support .. P4,774 220 clients P21.70 per client

b. The customer margin for the family is computed as follows:

Client charges ............. P2,000.00
Costs:
Cleaning................... P682.20
Job support............... 933.30
Client support........... 21.70 1,637.20
Customer margin ......... P 362.80

Computations for costs:

Cleaning: 90 hours × P7.58 per hour = P682.20
Job support: 45 jobs × P20.74 per job = P933.30
Client support: 1 client × P21.70 per client = P21.70

c. The margin if all costs are allocated on the basis of cleaning hours:

Predetermined overhead rate = P583,738 ÷ 34,800 hours = P16.77 per hour

Client charges .................. P2,000.00

Allocated costs* ............... 1,509.30
Customer margin .............. P 490.70

* 90 hours × P16.77 per hour = P1,509.30

6.
a. The first step is to compute activity rates:
Total Cost Total Activity Activity Rates
Cleaning ............... P185,752 21,700 hours P8.56 per hour
Job support ........... P171,532 6,100 jobs P28.12 per job
Client support ....... P15,124 760 clients P19.90 per client

The customer margin for the family is computed as follows:

Client charges ............. P1,170.00
Costs:
Cleaning................... P513.60
Job support............... 421.80
Client support........... 19.90 955.30
Customer margin ......... P 214.70

Computations for costs:

Cleaning: 60 hours × P8.56 per hour = P513.60
Job support: 15 jobs × P28.12 per job = P421.80
Client support: 1 client × P19.90 per client = P19.90
 b. The margin if all costs are allocated on the basis of cleaning hours:

Predetermined overhead rate = P612,408 ÷ 21,700 hours = P28.22 per hour

Client charges ............. P1,170.00

Allocated costs* .......... 1,693.20
Customer margin ......... (P523.20)

* 60 hours × P28.22 per hour = P1,693.20

7.
a. The expected total direct labor hours during the period are computed as follows:

Product C: 400 units × 1.2 hours per unit ............ 480 hours
Product D: 3,000 units × 1.3 hours per unit ......... 3,900 hours
Total direct labor hours..................................... 4,380 hours

Using these hours as a base, the predetermined overhead using direct labor hours would
be:

Estimated overhead cost ÷ Estimated direct labor-hours =

P119,100 ÷ 4,380 DLHs = P27.19 per DLH

Using this overhead rate, the unit product costs are:

Product C Product D
Direct materials ...................... P 4.00 P22.80
Direct labor ............................ 12.00 13.00
Manufacturing overhead .......... 32.63 35.35
Total unit product cost ............ P48.63 P71.15

b. The activity rates for each activity cost pool are as follows:

Estimated
Overhead Expected Activity
Costs Activity Rate
Machine setups ..... P10,440 180 P58.00
Purchase orders .... P78,000 2,000 P39.00
General factory ...... P30,660 4,380 P7.00

The overhead cost charged to each product is:

Product C Product D
Activity Amount Activity Amount
Machine setups ........ 60 P 3,480 120 P 6,960
Purchase orders ....... 820 31,980 1,180 46,020
General factory ......... 480 3,360 3,900 27,300
Total overhead cost ... P38,820 P80,280
 Overhead cost per unit:
Product C: P38,820 ÷ 400 units = P97.05 per unit
Product D: P80,280 ÷ 3,000 units = P26.76 per unit

Using activity based costing, the unit product cost of each product would be:

Product C Product D
Direct materials ........................... P 4.00 P22.80
Direct labor ................................. 12.00 13.00
Manufacturing overhead ............... 97.05 26.76
Total unit product cost ................. P113.05 P62.56

8.
The activity rates for each activity cost pool are as follows:

Overhead
Estimated Expected Activity
Activity Cost Pool Costs Activity Rate
Machine setups ........... P13,720 280 P49.00
Purchase orders .......... P74,730 1,590 P47.00
General factory ............ P15,000 3,000 P5.00

The overhead cost charged to each product is:

Product F Product G
Activity Amount Activity Amount
Machine setups ........... 140 P 6,860 140 P 6,860
Purchase orders .......... 630 29,610 960 45,120
General factory ............ 600 3,000 2,400 12,000
Total overhead cost ...... P39,470 P63,980

Overhead cost per unit:

Product F: P39,470 ÷ 600 units = P65.78 per unit
Product G: P63,980 ÷ 3,000 units = P21.33 per unit

9.

Activity Cost Pools Total Cost Total Activity Activity Rate

Designing products ............ P700,502 3,746 P187
Setting up batches ............. P12,400 620 P20
Assembling products ......... P125,440 8,960 P14

10.
Activity Cost Pools Total Cost Total Activity Activity Rate
Assembling products ......... P150,300 8,350 P18
Designing products ............ P1,177,535 7,597 P155
Setting up batches ............. P14,400 600 P24
11.

Product K52W Product X94T

Setting up batches ..................... P5,419.70 P7,193.42
Processing customer orders ....... 378.00 714.00
Assembling products ................. 2,460.41 1,419.06
Total overhead cost ................... P8,258.11 P9,326.48

12.

a. Product S96U
Setting up batches (78 batches × P32.22 per batch) ....... P2,513.16
Assembling products (412 assembly hours × P6.13 per
assembly hour) ....................................................... 2,525.56
Processing customer orders (53 customer orders ×
P72.75 per customer order) ...................................... 3,855.75
Total overhead cost..................................................... P8,894.47

b. Product Q06F
Setting up batches (24 batches × P32.22 per batch) ....... P 773.28
Assembling products (178 assembly hours × P6.13 per
assembly hour) ....................................................... 1,091.14
Processing customer orders (18 customer orders ×
P72.75 per customer order) ...................................... 1,309.50
Total overhead cost..................................................... P3,173.92

13.

Setting up batches (18 batches × P16.68 per batch) ....... P 300.24

Processing customer orders (4 customer orders × P98.60
per customer order)................................................. 394.40
Assembling products (103 assembly hours × P7.89 per
assembly hour) ....................................................... 812.67
Total overhead cost .................................................... P1,507.31

14.

a. First-stage allocation
Making Drapes Job Support Other Total
Production overhead .... P84,000 P28,000 P28,000 P140,000
Office expense............. 21,000 77,000 42,000 140,000
Total ........................... P105,000 P105,000 P70,000 P280,000
Activity ........................ 3,000 yards 140 jobs

b. Activity rates (costs divided by activity)

Making Job
Drapes Support
 Activity ........................ 3,000 yards 140 jobs

Production overhead .... P28.00 P200.00

Office expense............. 7.00 550.00
Total ........................... P35.00 P750.00

c. Overhead cost of the job.

Making Drapes Job Support Total

Activity ............................. 85 1
Production overhead ......... P2,380 P200 P2,580
Office expense.................. 595 550 1,145
Total ................................ P2,975 P750 P3,725

Sales .......................................... P6,000

Green costs:
Direct materials and labor .......... 2,990
Green margin............................... 3,010
Yellow costs:
Office expense .......................... 1,145
Yellow margin .............................. 1,865
Red costs:
Production overhead ................. 2,580
Red margin .................................. (P 715)

15.

a. First-stage allocation
Installing Job
Floors Support Other Total
Production overhead .... P66,000 P 30,000 P24,000 P120,000
Office expense ............ 28,000 70,000 42,000 140,000
Total ........................... P94,000 P100,000 P66,000 P260,000

b. Activity rates (costs divided by activity)

Installing Job
Floors Support
Activity............................. 800 squares 100 jobs

Production overhead ......... P 82.50 P 300.00

Office expense ................. 35.00 700.00
Total ................................ P117.50 P1,000.00

c. Overhead cost of the job.

Installing Job
Floors Support Total
Activity........................ 3.2 1
 Production overhead .... P264.00 P 300.00 P 564.00
Office expense ............ 112.00 700.00 812.00
Total ........................... P376.00 P1,000.00 P1,376.00

16.

First-stage allocation
Filling Product
Orders Support Other Total
Wages and salaries ...... P102,000 P510,000 P68,000 P680,000
Nonwage expenses ...... 30,000 66,000 24,000 120,000
Total ........................... P132,000 P576,000 P92,000 P800,000

Filling Product
Orders Support
Activity ...................................... 4,000 orders 40 products

Wages and salaries .................... P25.50 P12,750

Nonwage expenses .................... 7.50 1,650
Total ......................................... P33.00 P14,400

17.

a. Activity rates (costs divided by activity)

Job
Painting Support
Painting overhead ..... P 9.90 P225.00
Office expense ......... 0.60 390.00
Total ........................ P10.50 P615.00

b. Overhead cost of the job.

Job
Painting Support Total
Activity........................ 71 1

Painting overhead ........ P702.90 P225.00 P 927.90

Office expense ............ 42.60 390.00 432.60
Total ........................... P745.50 P615.00 P1,360.50

Sales ........................................... P3,800.00

Green costs:
Direct materials and labor .......... 2,410.00
Green margin ............................... 1,390.00
Yellow costs:
Office expense........................... 432.60
Yellow margin ............................... 957.40
Red costs:
 Painting overhead ...................... 927.90
Red margin................................... P 29.50

18.

a. Traditional Unit Product Costs

Predetermined overhead rate = P1,521,960 ÷ 22,000 DLHs = P69.18 per DLH

W82R L48S
Direct materials ......................................................... P11.50 P 62.90
Direct labor ................................................................ 2.00 13.00
Manufacturing overhead (0.2 DLHs × P69.18 per DLH; 1.3
DLHs × P69.18 per DLH)........................................... 13.84 89.93
Unit product cost ....................................................... P27.34 P165.83

b. ABC Unit Product Costs

Estimated
Overhead Total Expected
Cost Activity Activity Rate
Supporting direct labor ... P352,000 22,000 DLHs P16 per DLH
Setting up machines ....... P201,960 1,188 setups P170 per setup
Parts administration ....... P968,000 1,936 part types P500 per part type

Overhead cost for W82R

Activity Rate Activity ABC Cost
Supporting direct labor ... P16 per DLH 9,000 DLHs P144,000
Setting up machines ....... P170 per setup 814 setups 138,380
Parts administration ....... P500 per part type 924 part types 462,000
Total .............................. P744,380

Overhead cost for L48S

Activity Rate Activity ABC Cost
Supporting direct labor ... P16 per DLH 13,000 DLHs P208,000
Setting up machines ....... P170 per setup 374 setups 63,580
Parts administration ....... P500 per part type 1,012 part types 506,000
Total .............................. P777,580

W82R L48S
Direct materials ......................................................... P11.50 P62.90
Direct labor ................................................................ 2.00 13.00
Manufacturing overhead (P744,400 ÷ 45,000 units;
P777,600 ÷ 10,000 units).......................................... 16.54 77.76
Unit product cost ....................................................... P30.04 P153.66

19.

a. Traditional Unit Product Costs

Predetermined overhead rate = P2,656,000 ÷ 64,000 DLHs = P41.50 per DLH
 B40W C63J
Direct materials ......................................................... P34.90 P 63.70
Direct labor ................................................................ 20.80 62.40
Manufacturing overhead (0.8 DLHs × P41.50 per DLH; 2.4
DLHs × P41.50 per DLH)........................................... 33.20 99.60
Unit product cost ....................................................... P88.90 P225.70

b. ABC Unit Product Costs

Estimated
Overhead Total Expected
Cost Activity Activity Rate
Assembling products ... P1,216,000 64,000 DLHs P19 per DLH
batche
Preparing batches ....... P480,000 4,800 s P100 per setup
Milling ........................ P960,000 3,200 MHs P300 per MH

Overhead cost for B40W

Activity Rate Activity ABC Cost
Assembling products ... P19 per DLH 28,000 DLHs P 532,000
per batche
Preparing batches ....... P100 setup 2,304 s 230,400
Milling ........................ P300 per MH 1,088 MHs 326,400
Total ........................... P1,088,800

Overhead cost for C63J

Activity Rate Activity ABC Cost
Assembling products ... P19 per DLH 36,000 DLHs P 684,000
per batche
Preparing batches ....... P100 setup 2,496 s 249,600
Milling ........................ P300 per MH 2,112 MHs 633,600
Total ........................... P1,567,200

B40W C63J
Direct materials ......................................................... P34.90 P 63.70
Direct labor ................................................................ 20.80 62.40
Manufacturing overhead (P1,088,800 ÷ 35,000 units;
P1,567,200 ÷ 15,000 units) ....................................... 31.11 104.48
Unit product cost ....................................................... P86.81 P230.58

20.

a. Traditional Manufacturing Overhead Costs

Predetermined overhead rate = P1,464,480 ÷ 24,000 DLHs = P61.02 per DLH

H16Z P25P
Direct labor-hours ................................... 0.40 1.20
Predetermined overhead rate per DLH ....... P61.02 P61.02
 Manufacturing overhead cost per unit ....... P24.41 P73.22

b. ABC Manufacturing Overhead Costs

Estimated
Overhead Total Expected
Cost Activity Activity Rate
Supporting direct labor ... P552,000 24,000 DLHs P23 per DLH
Setting up machines ....... P132,480 1,104 setups P120 per setup
Parts administration ....... P780,000 1,560 part types P500 per part type

Overhead cost for H16Z

Activity Rate Activity ABC Cost
Supporting direct labor .... P23 per DLH 12,000 DLHs P276,000
Setting up machines ........ P120 per setup 864 setups 103,680
Parts administration ........ P500 per part type 600 part types 300,000
Total .............................. P679,680
Annual production .......... 30,000
Manufacturing overhead
cost per unit ................ P22.66

Overhead cost for P25P

Activity Rate Activity ABC Cost
Supporting direct labor ... P23 per DLH 12,000 DLHs P276,000
Setting up machines ....... P120 per setup 240 setups 28,800
Parts administration ....... P500 per part type 960 part types 480,000
Total .............................. P784,800
Annual production .......... 10,000
Manufacturing overhead
cost per unit ............... P78.48