Question
1. Sheldon Cooper operates Daddys Nursery which provides baby-sitting services for children between 2 to 5 years old. Working mothers leave their children at 8:00
1. Sheldon Cooper operates Daddys Nursery which provides baby-sitting services for children between 2 to 5 years old. Working mothers leave their children at 8:00 am and pick them up after office hours.
Sheldon converted his house into a nursery home where children are provided with sleeping areas, play pen and study areas, as well as meals, milk, and snacks. Nursery fee is computed by adding a mark up to the total cost of service provided to each child.
At present, Sheldon uses the traditional costing system in computing the cost of service per child, where the total cost is divided by the number of children served.
During the previous month, the nursery served100 children, for which the company incurred P50,000 total cost of service. Sheldon observed, however, that it is not right to just divide the total cost by the number of children because incurrence of some costs may vary depending on some factors. For example, children between 2 to 3 years old need more attention and are provided more services that those above 3 years old.
Considering this, Sheldon, plans to apply ABC system in determining the cost of service per child. He conducted a study of the previous months operations, and the following results came out:
Cost Category | Cost | Cost Driver | Cost Driver Quantity |
Meals, Snacks, Supplies | P20,000 | Number of children | 100 children |
Caregiving hours | P30,000 | Staff hours | 1,200 staff |
Children Category | Number of children | Staff hours |
Babies (2-3 years old) | 60 | 1,000 |
Kiddies (above 3 years old) | 40 | 200 |
- If the traditional costing system were used and nursery fee was computed at 300% of the cost of service per child, Daddys Nursery could have charged each child a fee of _________.
- If the ABC system were used, nursery fee per child should have been _________.
2. Summit Company provide the cost data for the month of January
Inventories: January 1 January 31
Direct materials P30, 000 P40, 000
WIP P15, 000 P20, 000
Finished Goods P65, 000 P50, 000
Factory overhead applied P150, 000
Cost of goods manufactured P515, 000
Direct materials used P190, 000
Actual FOH P144, 000
Required:
- Adjusted COGS if under or over-applied overhead were closed to COGS
- Adjusted COGS if under or -applied overhead were allocated to inventories and COGS.
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