Problem 1 Avery Co. uses a predetermined factory overhead rate based on direct labor hours. For the month of October, Avery's budgeted overhead was P300, 000 based on a budgeted volume of 100, 000 direct labor hours. Actual overhead amounted to P325,000 with actual direct labor hours totalling P110, 000. How much was the over-applied or under-applied overhead? Problem 2 Summit Company provide the cost data for the month of January Inventories: Direct materials January 1 P30,000 January 31 P40,000 WIP P15, 000 P20,000 Finished Goods P65, 000 P50, 000 Factory overhead applied P150,000 Cost of goods manufactured P515,000 Direct materials used P190,000 Actual FOH P144,000 Required: 1. Adjusted COGS if under or over-applied overhead were closed to COGS 2. Adjusted COGS if under or -applied overhead were allocated to inventories and COGS. Problem 3 Schneider, Inc. had the following information relating to 2011. Budgeted FOH Actual FOH Applied FOH Estimated labor hours P74, 800 P78, 300 P76, 500 P44,000 Required: if Schneider decides to use the actual results from 2011 to determine the 2012 overhead rate, what will the 2012 overhead rate be? PROBLEM 4 Thermal Corporation has two producing department and two service departments labelled P1, P2, S1, S2 respectively. Direct costs for each department and the proportion of service costs used by various departments are as follows: Cost Center Direct Costs Proportion of services used by: S1 $2 P1 P2 P1 P2 S1 S2 P100,000 P50, 000 P15,000 P25,000 - 10% 60% 30% 50% 10% 40% In calculating predetermined overhead rates, machine hours are used as the base in P1 and direct labor hours as the base in P2. P1 P2 Machine hours Direct labor hours 50,000 40,000 40,000 20,000 Requirements: Allocate the service department costs to operating departments and compute the factory overhead rate for P1 and P2 using the following methods: a. Direct method b. Step method start with S1 c. Algebraic method PROBLEM 5 Candice Corporation produces reusable Christmas cards in two departments: Printing and Laminating. These departments are supported by two service departments: Personnel and Maintenance. Personnel use the number of employees as an allocation base and Maintenance uses machine hours. The expected level of activity for next quarter is shown below: No. Of Employees Machine hours Personnel Maintenance Printing Laminating 40 60 120 180 60,000 40,000 Allocations are made in the order shown below. Budgeted costs for next quarter are P93, 000 for Personnel and P68, 000 for Maintenance. Required: Total amount of service cost that should be allocated to the printing and laminating department under 1. Direct method 2. Step method PROBLEM 6 The cost accountant of Above the Ankle is considering to use the ABC system in determining the cost of its products. At present, the company uses the traditional costing system wherein factory overhead costs are allocated based on direct labor hours. The cost accountant believes that the present system maybe providing misleading cost information, hence, the plan to change to the ABC system. For the coming period, the company is planning to use 5,000 direct labor hours, and its total budgeted factory overhead amounts to P90,000, broken down as follows: Activity Cost Driver Budgeted Activity Budgeted Cost Setup costs Production monitoring Quality control Number of set ups Number of batches Number of inspections 40 P20,000 20 P40,000 1,000 P30,000 Projected data for one of the Company's product, Product B, for the coming period are as follows: Production and sales Direct labor hours Units per batch 1,000 units 2,000 hours Number of inspections Direct material cost Direct labor rate 200 P10 per unit P20 per hour Number of setups 1. 500 4 If the Company will use the traditional full cost system, the cost per unit of product B for the coming period will be 2. If the Company will use the ABC system, the cost per unit of product B for the coming year will be