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CHAPTER 3
COSTS CONCEPTS and CLASSIFICATION

[Problem 1]
1. Direct labor P10 Variable factory overhead 15 Fixed factory overhead 6 Unit conversion cost P31

2. Direct materials P32 Direct labor 10 Unit prime cost P42

3. Unit prime cost P42 Variable factory overhead 15 Unit variable cost P57

4. Total production cost (12,000 units x P63) P756,000

[Problem 2]
1. Indirect materials and factory supplies P 68,000
Supervising salaries 90,000
Repairs and maintenance 40,000 Heat, light and power 28,000 Overtime premium – plant worker 20,000 Fringe benefits for plant worker 15,000 Depreciation – plant 190,000 Insurance – plant 22,000 Actual factory overhead P473,000

2. Applied factory overhead (71,000DLH x P7.50) = P532,500

3. Actual factory overhead P473,000 Less: Applied factory overhead 532,000 Overapplied factory overhead P( 59,500)

4.. Factory overhead shown on the statement of cost of goods manufactured P473,000

[Problem 3]
1. Unit cost = = P4.35

2. Cost of goods sold = 360,000 units x P4.35 = P1,566,000

3. Inventory – Aug. 31 = 40,000 units x P4.35 = P174,000

[Problem 4]

Department A

Department B
1.
Direct materials

P
800,000

P
1,200,000

Direct labor

600,000

660,000

Factory supplies

20,000

60,000

Direct variable costs

P
1,420,000

P
1,920,000

2.
Controllable direct fixed costs:

Supervising salaries

P
48,000

P
72,000

3.
Uncontrollable direct fixed costs:

Depreciation of machinery

and equipment

P
140,000

P
220,000

4.
Controllable direct fixed costs

P
48,000

P
72,000

Uncontrollable direct fixed costs

140,000

220,000

Total direct