Cost Accounting

Chapter 2 - Costs – Concepts and classification

Problem 1 Problem 2
1. Direct 9. Direct 1. Manufacturing 6. Manufacturing
2. Indirect 10.Direct 2. Selling 7. Administrative
3. Direct 11.Indirect 3. Manufacturing 8. Selling
4. Direct 12.Direct 4. Selling 9. Administrative
5. Direct 13.Direct 5. Administrative 10.Selling
6. Direct 14.Direct
7. Direct 15.Indirect
8. Indirect

Problem 3
1. Variable Product Direct
2. Variable Product Direct
3. Fixed Product Indirect
4. Variable Product Direct
5. Fixed Product Indirect
6. Fixed Period Indirect
7. Fixed Period Indirect
8. Variable Period Direct
9. Fixed Product Indirect
10.Fixed Period Indirect

Problem 4 – Bug Company

1. Fixed Period 6. Variable Period
2. Fixed Inventoriable 7. Variable Inventoriable
3. Fixed Inventoriable 8. Fixed Inventoriable
4. Variable Inventoriable 9. Fixed Period
5. Fixed Inventoriable 10. Fixed Inventoriable

Problem 5 – Mighty Muffler, Inc.

a. P 60,000
b. P 60,000
c. P 37,500 = P50/muffler x 500 = P 25,000
750
d. P 50 x 1,000 = P 50,000
e. P 60,000 + P 25,000 = P 85,000
f. P 60,000 + P 50,000 = P 110,000
g. P 60,000/ 500 = P 120
h. P 60,000/750 = P 80
I, P 60,000/1,000 = P 60
j. P 50
k. P 50
l. P 50
m. P 120 + P 50 = P 170
n. P 80 + P 50 = P 130
o. P 60 + P 50 = P 110
Problem 6 – JP Morgan
1. b, c. i
2. a, c, i
3. a, c, i
4. a, c. h
5. b. d, i
6. g
7. e, f (correction – should be when one additional loan application is processed)
8. b, d, i
9. a, c, i
10. b, c,

Problem 7 – Mother Goose Company

1. Prime costs - 530,000
2. Conversion cost - 575,000
3 Inventoriable cost - 860,000
4. Total period costs - 305,000

Problem 8 –
a. c - fixed (total amount is constant)
b. a – variable (4,480/3,200 = 1.40; 6,300/4,500 = 1.40 per unit is constant)
c. d - mixed ( 3,950/3,200 = 12.34; 5,250/4,500 = 1.16) total amount and amount per unit
varies in relation to units sold)

Problem 9 - Blanche Corporation

` 1. Direct materials used P 32.00
Direct labor 20.00
Variable manufacturing overhead 15.00
Variable marketing 3.00
Total variable cost per unit 70.00
X No. of units produced and sold 12,000
Total variable costs per month P 840,000

2. Fixed manufacturing overhead P 6.00

Fixed marketing costs 4.00
Total fixed cost per unit 10.00
X No. of units produced and sold 12,000
Total fixed costs per month P 120,000
Problem 10
1. Direct materials P 60.00
Direct labor 30.00
Variable manufacturing overhead 9.00
Total variable manufacturing cost per unit P 99.00

` 2. Total variable manufacturing cost per unit P 99.00

Variable marketing and administrative 6.00
Total variable costs per unit 105.00

3. Total variable manufacturing cost per unit P 99,00

Fixed manufacturing overhead (30,000/1,200) 25.00
Full manufacturing cost per unit 124.00

4. Full manufacturing cost per unit 124.00

Variable marketing and administrative 6.00
Fixed marketing and administrative 20.00
Full cost to make and sell per unit 150.00

Problem 11 – Johnson Corporation

1. Variable cost per machine hour = 35,600 – 20,000

4,000 - 2,000
= 7.80 per machine hour

2. 4,000 hours 2000 hours

Total electricity expense 35,600 20,000
Less: Variable costs
( 4,000 x 7.80) 31,200
( 2000 x 7.80) ______ 15,600
Fixed cost 4,400 4,400

3. Fixed cost 5,000

Variable cost ( 6,000 x 7.50) 45,000
Totl manufacturing costs 50,000

Problem 12 – Valdez Motors Co.

1. Variable cost per machine hour = 5,475 – 3,975
210 - 145
= 23.08 per machine hour

2. 210 hours 145 hours

Total overhead costs 5,475 3,975
Less: Variable costs
( 210 x 23.08) 4,847
( 145 x 23.08) _____ 3,347
Fixed cost 628 628
Problem 13
Department A Department B
1. Direct materials P 800,000 P 1,200,000
Direct labor 600,000 660,000
Factory supplies 20,000 60,000
Direct variable costs P 1,420,000 P 1,920,000

2. Controllable direct fixed costs

Supervisory salaries P 48,000 P 72,000

3. Uncontrollable direct fixed costs:

Depreciation – machinery and
Equipment P 140,000 P 220,000

4. Controllable direct fixed cost P 48,000 P 72,000

Uncontrollable direct fixed cost 140,000 220,000
Total direct fixed cost P 188,000 P 292,000

5. Allocated costs from headquarters P 130,000 P 190,000

Allocated repairs & maintenance 75,000 175,000
Allocated factory rent – bldg. 40,000 160,000
Allocated plant executive’s salaries 152,000 228,000
Total indirect costs P 397,000 P 753,000

6. Allocated costs from headquarters P 130,000 P 190,000

Allocated factory rent – bldg. 40,000 160,000
Allocated plant executive’s salaries 152,000 228,000
Depreciation- mach. & equipment 140,000 220,000
Total unavoidable costs P 462,000 P 798,000

True/False Questions
1. False 6. True 11. False 16. True
2. False 7. False 12. False 17. False
3. True 8. True 13. True 18. True
4. False 9. False 14. False 19. False
5. False 10. True 15. False 20. True

Multiple choice
1. B 11. C 21. A
2. C 12. A 22. C
3. B 13. C 23. A
4. C 14. B 24. C
5. D 15. A 25. B
6. A 16. B 26. B
7. D 17. B 27. A
8. D 18. A 28. B
9. B 19. D 29. C
10. C 20. B 30. B