1. Furman Tailors has gathered information on utility costs for the past year.
The
controller has decided that utilities are a function of the hours worked during the
month. The following information is available and representative of the company’s
utility costs:
Hours worked Utility cost incurred
Low point 1,300 P 903
High point 1,680 1,074
If 1,425 hours are worked in a month, total utility cost (rounded to the nearest dollar)
using the high-low method should be
a. P947.
b. P954.
c. P959.
d. P976.
2. Reno Corporation uses a predetermined overhead application rate of P0.30 per
direct labor hour. During the year it incurred P345, 000 of actual overhead, but it
planned to incur P360, 000 of overhead. The company applied P363, 000 of overhead
during the year. How many direct labor hours did the company plan to incur?
a. 1,150,000
b. 1,190,000
c. 1,200,000
d. 1,210,000
3. Birmingham Machine Works had the following data regarding monthly power costs:
Month Machine hours Power cost
Jun 300 P680
Jul 600 720
Aug 400 695
1
Sept. 200 640
Assume that management expects 500 machine hours in October. Using the high-low
method, calculate October’s power cost using machine hours as the basis for
prediction.
a. P700
b. P705
c. P710
d. P1,320
4. Walton Corporation wishes to develop a single predetermined overhead rate. The
company's expected annual fixed overhead is P340, 000 and its variable overhead
cost per machine hour is P2. The company's relevant range is from 200,000 to
600,000 machine hours. Walton expects to operate at 425,000 machine hours for the
coming year. The plant's theoretical capacity is 850,000. The predetermined overhead
rate per machine hour should be
a. P2.40.
e. P2.57.
f. P2.80.
g. P2.85.
5. Nickel Corp. is preparing a flexible budget for 20-2 and the following maximum
capacity estimates for Carbon Department are available: At maximum
Capacity
Direct labor hours 80,000
Variable factory overhead P200,000
Fixed factory overhead P250,000
Assume that Nickel’s normal capacity is 75% of maximum capacity. What
would be the total factory overhead rate, based on direct labor hours, in a
2
flexible budget at normal capacity?
a. P5.62 b. P 6.67 c. P 7.50 d. P 5.00
6. Carla Trading has the following preliminary forecast for 20-9:
No. of units 150,000 units
Selling price per unit P15
Variable costs P1, 200,000
Fixed costs P850, 000
Advertising expense was not included in the above costs.
Based on a market study in December, 20-8, the Company estimated that it
could increase the unit selling price by 10% and increase the unit sales volume
by 20%, if P200,000 would be spent on advertising. If Carla will incorporate
these changes in its 209 forecast. What would be the operating income?
a. P480, 000 b. P 720,000 c. P680, 000 d. P420, 000
MACHINE HOURS 200
MULTIPLY 0.2
40
TOTAL 640
FIXED CONTENT 600
MACHINE HOURS 500
0.2
VARIABLE CONTENT 100
FIXED CONTETNT 600
TOTAL POWER COST 700
VARIABLE OVERHEAD RATE 2
FIXED OVERHEAD 340000
DIVIDE 425000
3
0.8
PREDETERMINED OVERHEAD RATE 2.8
VARIABLE FACTORY OVERHEAD 200000
DIVIDE 80000
VARIABLE RATE (CONSTANT) 2.5
MAXIMUM CAPACITY 80000
75%
NORMAL CAPACITY 60000
FIXED FACTORY OVERHEAD 250000
DIVIDE 60000
FIXED RATE 4.166667
TOTAL FACTORY OVERHEAD RATE 6.666667
TOTAL VARIABLE COST 1200000
DIVIDE 150000
VARIABLE RATE 8
SELLING PRICE PER UNIT 15
MULTIPLY 110%
NEW SELLING PRICE PER UNIT 16.5
NUMBER OF UNITS 150000
MULTIPLY 120%
NEW NUMBER OF UNITS 180000
FIXED COSTS 850000
ADD 200000
NEW FIXED COSTS 1050000
NEW SELLING PRICE PER UNIT 16.5
VARIABLE RATE -8
4
8.5
MULTIPLY 180000
TOTAL CONTRIBUTION MARGIN 1530000
NEW FIXED COSTS -1050000
480000
