I. Allocation of Service Department Costs Direct and Indirect Method Walk and Jog Co. Produces Backpacks, Tents and Sleeping Bags. produced in a separate production centers. The company also has a Purchasing department, which buys nylon, aluminum tubing and other items, and a small Engineering department, which also does R&D and quality control work. Major items of production overhead expenses for month of November and its cost drivers are shown below. The cost of purchasing and engineering departments are allocated to the three production departments on the basis of supplies usage and of direct hours, respectively. Cost P 60,000 30,000 50,000 105,000 90,000 Cost Driver Rent Expense Heating costs Electricity Indirect labor Supplies Square footage Cubic feet Metered usage Factory payroll Supplies usage Cost Backpacks Tents 1,100 9,900 200 P70,000 850 P7,500 Centers Sleeping bags Purchasing Engineering 650 5,200 125 P120,000 500 P37,500 Square feet Cubic feet Meter usage 800 7,300 250 1,000 9,000 150 45-0 3,600 75 Factory payroll P100,000 Direct labor hours Supplies usage P95,000 990 P10,000 P55,000 260 P22,500 600 P12,500 Required: 1. Distribute the production overhead expenses to the five (5) cost centers based on its cost drivers. (round off answers to nearest P1.00) 2. Allocate the costs of the two service departments to the three production departments using: (round off to P1.00) a. Direct method b. Step- down method. 3. Calculate the overhead rate per direct labor hours for each production departments when allocation of service departments is done using: a. Direct method b. Step=down method
I. Allocation of Service Department Costs Direct and Indirect Method Walk and Jog Co. Produces Backpacks, Tents and Sleeping Bags. produced in a separate production centers. The company also has a Purchasing department, which buys nylon, aluminum tubing and other items, and a small Engineering department, which also does R&D and quality control work. Major items of production overhead expenses for month of November and its cost drivers are shown below. The cost of purchasing and engineering departments are allocated to the three production departments on the basis of supplies usage and of direct hours, respectively. Cost P 60,000 30,000 50,000 105,000 90,000 Cost Driver Rent Expense Heating costs Electricity Indirect labor Supplies Square footage Cubic feet Metered usage Factory payroll Supplies usage Cost Backpacks Tents 1,100 9,900 200 P70,000 850 P7,500 Centers Sleeping bags Purchasing Engineering 650 5,200 125 P120,000 500 P37,500 Square feet Cubic feet Meter usage 800 7,300 250 1,000 9,000 150 45-0 3,600 75 Factory payroll P100,000 Direct labor hours Supplies usage P95,000 990 P10,000 P55,000 260 P22,500 600 P12,500 Required: 1. Distribute the production overhead expenses to the five (5) cost centers based on its cost drivers. (round off answers to nearest P1.00) 2. Allocate the costs of the two service departments to the three production departments using: (round off to P1.00) a. Direct method b. Step- down method. 3. Calculate the overhead rate per direct labor hours for each production departments when allocation of service departments is done using: a. Direct method b. Step=down method
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 3PA: Activity-based and department rate product costing and product cost distortions Black and Blue...
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:I. Allocation of Service Department Costs - Direct and Indirect Method
Walk and Jog Co. Produces Backpacks, Tents and Sleeping Bags.
produced in a separate production centers.
department, which buys nylon, aluminum tubing and other items, and a small
Engineering department, which also does R&D and quality control work.
Each is
The company also has a Purchasing
Major items of production overhead expenses for month of November and its
cost drivers are shown below. The cost of purchasing and engineering departments
are allocated to the three production departments on the basis of supplies usage and of
direct hours, respectively.
Rent Expense
Heating costs
Electricity
Indirect labor
Cost
P 60,000
30,000
50,000
105,000
90,000
Cost Driver
Square footage
Cubic feet
Metered usage
Factory payroll
Supplies usage
Supplies
Cost
Centers
Backpacks Tents
1,100
9,900
200
P70,000
850
P7,500
Engineering
650
Square feet
Cubic feet
Meter usage
Sleeping bags Purchasing
1,000
9,000
150
45-0
3,600
75
800
7,300
250
5,200
125
Factory payroll
Direct labor hours
P100,000
600
P12,500
P95,000
990
P10,000
P55,000
260
P22,500
P120,000
500
P37,500
Supplies usage
Required:
1. Distribute the production overhead expenses to the five (5) cost centers based on
its cost drivers. (round off answers to nearest P1.00)
2. Allocate the costs of the two service departments to the three production
departments using: (round off to P1.00)
a. Direct method
b. Step- down method.
3. Calculate the overhead rate per direct labor hours for each production
departments when allocation of service departments is done using:
a. Direct method
b. Step=down method
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