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Answer Keys Activity No
Financial Accounting 1 (Ateneo de Manila University)
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Pamantasan ng Cabuyao
Brgy. Banay- Banay, City of Cabuyao, Laguna
Managerial Accounting
Costs, Concepts and Classification
ACTIVITY 1
Name: Score:
Course and Section: Date:
Problem I
Presented below is a list of costs and expenses usually incurred by J. Hendrix Corporation, a
manufacturer of furniture, in its factory:
1. Metal used in manufacturing tables – Direct Materials
2. Insurance on factory machines - Manufacturing Overhead
3. Leather used in manufacturing furniture - Direct Materials
4. Wages paid to machine operators - Direct Labor
5. Depreciation of factory machinery - Manufacturing Overhead
6. Salaries of factory supervisors - Manufacturing Overhead
7. Wood used in manufacturing furniture - Direct Materials
8. Sandpaper, bolts and nails - Manufacturing Overhead
9. Property taxes on factory building - Manufacturing Overhead
Instructions:
Classify the above items into the following categories (a) Direct Materials, (b) Direct Labor and (c)
Manufacturing Overhead.
Problem II
Classify the following as either manufacturing (M), selling (S), or administrative (A)
1. Metal for the furniture of golf clubs -M
2. Wages of drivers delivering goods to customers -S
3. Rent on factory building -M
4. Freight- in of materials purchased -M
5. President’s salary -A
6. Cost of machine breakdown -M
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7. Power to operate factory equipment -M
8. Advertising -S
9. Commission paid to sales personnel -S
10. Travel expenses of salesmen -S
Problem III
RATM Delivery Services reports the following costs and expenses in June of the current year:
Direct materials P 220,000
Factory rent 50,000
Direct labor 180,000
Factory utilities 8,500
Supervisor’s salary in the factory 60,000
Depreciation—factory equipment 20,000
Sales commission 57,000
Advertising 47,000
Depreciation—office equipment 10,000
Salary of the president 250,000
Required:
Compute the following:
a. (1) Direct Materials = 220,000
(2) Direct Labor, = 180,000
(3) Manufacturing Overhead = Factory Rent P 50,000
Factory Utilities 8,500
Supervisor’s salary in the factory 60,000
Depreciation—factory equipment 20,000
Total P 138,500
(4) Selling Expenses = Sales Commissions P 57,000
Advertising 47,000
Total P 104,000
(5) Administrative Expenses = Depreciation—Office Equipment P 10,000
Salary of the President 250,000
Total P 260,000
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b. Total Product Cost = Direct Materials P 220,000
Direct Labor 180,000
Manufacturing Overhead 138,500
Total P 538,500
c. Total Period Cost = Selling Expenses P 104,000
Administrative Expenses 260,000
Total P 364,000
d. Cost per unit if the company was able to manufacture 40,000 units
= (Total Product Cost + Total Period Cost) / No. of Units produced
= (P538,500 + P364,000) / 40,000 Units
= P22.5625 / Units
Problem IV
Classify each of the following costs of Queen Company in two ways: (a) as Variable (V) or Fixed costs
(F): (b) as Inventoriable Costs (I) or Period Costs (P)
(a) V or F (b) I or P
Example: Direct Labor V I
1. Wood used in bookcases F P
2. Machine depreciation based on machine hours V I
3. Fire Insurance on factory equipment V I
4. Wiring used in radios V I
5. Sales Commissions V P
Problem V
L. Zepp, Inc. operates an automobile service facility, which specializes in replacing mufflers on cars. The
following table shows the costs incurred during a month when 750 mufflers were replaced.
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Number of Muffler Replacements
400 500 800
Total Costs
Fixed Costs a P 50,000 b
Variable Costs c 60,000 d
Total Costs e P110,000 f
Cost per muffler replacement
Fixed Costs g h i
Variable Costs j k l
Total Costs per replacement m n o
Required: Fill the missing amounts.
a. P50,000
b. P50,000
c. Variable Cost per Unit x No. of Muffler Replacements
= *P120/ Unit x 400 units
= P48,000
* 60,000 / 500 units
d. Variable Cost per Unit x No. of Muffler Replacements
= P120/ Unit x 800 units
= P96,000
e. P50,000 + P48,000 = P98,000
f. P50,000 + P96,000 = P146,000
g. P50,000 / 400 units = P125/ unit
h. P50,000 / 500 units = P100/ unit
i. P50,000 / 800 units = P62.5/ unit
j. P120 / unit
k. P120 / unit
l. P120 / unit
m. P125 / unit + P120 / unit = P245 / unit
n. P100 / unit + P120 / unit = P220 / unit
o. P62.5 / unit +P120 / unit = P182.5 / unit
Problem VI
The financial statements of Talica Company included these items:
Marketing Costs P 160,000
Direct Labor Cost 245,000
Administrative Costs 145,000
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Direct Materials Used 285,000
Fixed Factory Overhead Costs 175,000
Variable Factory Overhead Costs 155,000
Compute:
1. Prime Cost = Direct Materials Used + Direct Labor Cost
= P285,000 + P245,000
= P530,000
2. Conversion Cost = Direct Labor + Manufacturing Overhead (Variable and
Fixed)
= P245,000 + (P155,000 + 175,000)
= P245,000 + P330,000
= P575,000
3. Total Inventoriable Cost/ Product Cost = Direct Materials Used + Direct Labor + Manufacturing
Overhead
= P285,000 + P245,000 + P330,000
= P860,000
4. Total Period Cost = Marketing Costs + Administrative Costs
= P160,000 + P145,000
= P305,000
Problem VII
M24 Corporation estimated its unit costs of producing and selling 12,000 units per month as follows:
Direct Materials used P 32.00
Direct Labor 20.00
Variable Manufacturing Overhead 15.00
Fixed Manufacturing Overhead 6.00
Variable Marketing Costs 3.00
Fixed Marketing Costs 4.00
Estimated Unit Cost P 80.00
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Compute:
1. Total Variable Costs per month
= Variable Cost per unit x No. of units produced
= **P70/ unit x 12,000 units
= P840,000
**Variable Cost per Unit = Direct Materials used / unit + Direct Labor / unit + Variable
Manufacturing Overhead / unit + Variable Marketing Costs / unit
= P 32 + P20 + P15 + P3
= P70 / unit
2. Variable Cost per Unit produced.
= P70/ unit
3. Total Manufacturing Cost.
= Total Manufacturing Cost / Unit x No. of units produced
= **P73 / unit x 12,000 units
= P876,000
*** = Direct Materials used / unit + Direct Labor / unit + Variable Manufacturing Overhead / unit
+ Fixed Manufacturing Overhead / unit
= P 32 + P20 + P15 + P6
= P73 / unit
4. Manufacturing Cost per Unit.
= P73/ unit
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