The cost accountant of L. Rosales, Inc. is considering to use the ABC system in determining the cost of its products. At present, the company uses the traditional costing systems wherein factory overhead costs are allocated based on direct labor hours. This cost accountant believes that the present system may be providing misleading cost information, hence, the plan to change to ABC system. For the coming period, the company is planning to use 5,000 direct labor hours, and its total budgeted factory overhead amounts to P 90,000, broken down as follows: Activity Cost Driver Budgeted Activity Budgeted Cost Sets up cost Number of set ups 40 P 20,000 Production monitoring Number of batches 20 40,000 Quality control Number of inspections 1,000 30,000 Total overhead costs P 90,000 Projected data for one of the company’s products, Product X for the coming period as follows: Production and sales 1,000 units Direct labor hours 2,000 hours Units per batch 500 Number of set ups 4 Number of inspections 200 Direct materials cost P 10 per unit Direct labor rate P 20 per hour If the company will use the traditional full cost (manufacturing costs) system, the cost per unit of product X for the coming period will be A. P 36 c. P 86 b. P 50 d. P 68
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The cost accountant of L. Rosales, Inc. is considering to use the ABC system in determining the cost of its products. At present, the company uses the traditional costing systems wherein
For the coming period, the company is planning to use 5,000 direct labor hours, and its total budgeted factory overhead amounts to P 90,000, broken down as follows:
Activity Cost Driver Budgeted Activity Budgeted Cost
Sets up cost Number of set ups 40 P 20,000
Production monitoring Number of batches 20 40,000
Quality control Number of inspections 1,000 30,000
Total overhead costs P 90,000
Projected data for one of the company’s products, Product X for the coming period as follows:
Production and sales 1,000 units
Direct labor hours 2,000 hours
Units per batch 500
Number of set ups 4
Number of inspections 200
Direct materials cost P 10 per unit
Direct labor rate P 20 per hour
If the company will use the traditional full cost (manufacturing costs) system, the cost per unit of product X for the coming period will be
A. P 36 c. P 86
b. P 50 d. P 68
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