Christine I.

Cabuenas
Christen Hope C. Ressureccion

1.) CIC Company manufactures a device that is used by cell phone users to obtain solar energy for
the battery of their phones without needing electricity. The following data relates to the first month of
operation:

Beginning Inventory: 0 units

Units produced: 60 000 units
Units sold: 45 000 units
Selling Price: $130 per unit

Manufacturing Costs:
 Direct material cost per unit: $40
 Direct labor cost per unit: $18
 Variable manufacturing overhead cost per unit: $8
 Fixed manufacturing overhead cost per month: $1 320 000

Using the given information above, what is the unit product cost using absorption costing and variable
costing respectively.

A. $78 and $68

B. $98 and $66
C. $88 and $66
D. $76 and $58

Answer: C

Solution

Absorption Costing Variable Costing

Direct Material $40 $40
Direct Labor $18 $18
Variable MOH $8 $8
Fixed MOH *$22 -
Unit Product Cost $88 $66

*1320000/60000 = $22

CPA Diary. (2013). Predetermined Overhead Rates, Flexible Budget, Absorption and Variable
Costing. [PDF file]
Retrieved from https://cpadiary.wordpress.com/author/milliegayle/page/2/
2.) Rey Frances Company produces three products: x, y, z from the same process joint cost for this
production run are 4, 100.

Sales price per Disposal cost per Further processing Final sales price
Pounds
pound at split off pound at split off per pound per pound
x 700 7.5 3.5 2 8.5
y 1200 8.5 4 3.25 11
z 1600 9 4.5 3.5 12

If the products are processed further, Gordon Comp. will incur the ff. disposal costs upon sale.

X, 2.5, y, 3, and z, 2.0

Using the information given above, what amount of joint processing cost is allocated to product Y
using the net realizable value at split off? (Round off to the nearest dollar)

a. $1358
b. $1241
c. $1065
d. $1438

Answer: D

Solution

Sales price at Disposal cost at

Pounds NRV at split off Total
split off split off
x 700 7.5 3.5 4 2800
y 1200 8.5 4 4.5 5400
z 1600 9 4.5 4.5 7200
15400

Joint cost of product y = $ (5400/15400) x 4100 = 1438

CPA Diary. (2013). Allocation of Joint Cost and Accounting for By-products [PDF file]
Retrieved from https://cpadiary.files.wordpress.com/2013/05/chapter-111.doc
Electro company has two service departments, Power and Maintenance, and two production
departments, Machining and Assembly. All costs are regarded as strictly variable. For September the
following information is available:

Service Departments Production Departments

Power Maintenance Machining Assembly

Direct costs ₱95,500 ₱50,200 ₱35,000 ₱20,100

Actual activity:
Kilowatt hrs. 60,000 130,000 70,000
Maintenance hours 450 2000 3000

If the company uses the direct method for allocating service departments costs to production
departments, what amount of Power Department cost will be allocated to the Machining Department
for September?

A. ₱76,075

B. ₱62,075

C. ₱62,062.50

D. ₱65,625

Answer: B. ₱62,075

Solution:

Direct Method
Power Maintenace Machining Assembly
Direct Cost ₱95,500 ₱50,200 ₱35,000 ₱20,100
Add: Allocated Cost
Power
Machining 65% 13/20 ₱62,075 62,075
Assembly 35% 7/20 33,425 33,425
Total ₱95,500 (95,500)
Maintenance
Machining 40% 2/5 ₱20,080 20,080
Assembly 60% 3/5 30,120 30,120
Total ₱50,200 (50,200)
Allocated cost (₱95,500) (₱50,200) ₱82,155 ₱63,545
Total Cost - - ₱117,155 ₱83,645

Mustafaaltawashy. (2013). Service Cost Allocation [PDF file].

Retrieved from https://mustafaaltawashy.files.wordpress.com/2013/06/23-service-cost-allocation.pdf

Data concerning Melecto Company's activity for the first 5 months of the year appear below:

Machine Hours Electrical Cost

January 8,000 ₱5,500
February 5,000 3,650
March 6,800 4,300
April 3,000 2,500
May 5,600 3,900

Using the high-low method of analysis, What is the estimated variable electrical cost per machine
hour?

A. ₱0.60
B. ₱0.50
C. ₱0.40
D. ₱0.80

Answer: A. ₱0.60

Solution:

High Point - Low Point = Change

Cost ₱5,500 ₱2500 ₱3000
Activity 8,000 3000 5000

Change in Cost $ = ₱3000 = ₱0.60 variable cost/unit

Change in Activity 5000

Harper College.(2015). High-low method [PDF file].

https://www.harpercollege.edu/academics/academic_support/tutoring/subjects/pdf/High-
Low%20Method%20CR.pdf

Theory : Other topics

1. A mixed cost

a) is fixed over a wider range of activity than a step cost.

b) is a fixed cost over the relevant range and a variable cost everywhere else.

c) always increases on a per unit basis.

d) contains both fixed and variable components.

Answer: D

Harper College.(2015). High-low method [PDF file].

https://www.harpercollege.edu/academics/academic_support/tutoring/subjects/pdf/High-
Low%20Method%20CR.pdf