Candice Corporation produces reusable Christmas cards in two departments: Printing and Laminating. These departments are supported by two service departments: Personnel and Maintenance. Personnel use the number of employees as an allocation base and Maintenance uses machine hours. The expected level of activity for next quarter is shown below: Overhead costs Printing Department P60,000 P40,000 Laminating Department Personnel P93,000 Maintenance P68,000 No. Of Employees Machine hours Personnel 40 60 Maintenance Printing 120 60,000 180 40,000 Laminating Allocations are made in the order shown below. Budgeted costs for next quarter are P93, 000 for Personnel and P68,000 for Maintenance. No. Of Employees Machine hours Personnel 40 Maintenance 60 Printing 120 60,000 Laminating 180 40,000 Allocations are made in the order shown below. Budgeted costs for next quarter are P93, 000 for Personnel and P68, 000 for Maintenance. Required: Total amount of service cost that should be allocated to the printing department under Step method The cost accountant of Above the Ankle is considering to use the ABC system in determining the cost of its products. At present, the company uses the traditional costing system wherein factory overhead costs are allocated based on direct labor hours. The cost accountant believes that the present system maybe providing misleading cost information, hence, the plan to change to the 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 P90,000, broken down as follows: Activity Cost Driver Budgeted Activity Budgeted Cost Setup costs Number of set ups 40 P20,000 Production monitoring Number of batches 20 P40,000 Number of inspections Quality control 1,000 P30,000 Projected data for one of the Company's product, Product B, for the coming period are as follows: Production monitoring Number of batches 20 P40,000 Quality control Number of inspections 1,000 P30,000 Projected data for one of the Company's product, Product B, for the coming period are as follows: Production and sales 1,000 units Direct labor hours 2,000 hours 500 Units per batch Number of setups Number of inspections 4 200 Direct material cost P10 per unit Direct labor rate P20 per hour If the Company will use the ABC system, the cost per unit of product B for the coming year will be The cost accountant of Above the Ankle is considering to use the ABC system in determining the cost of its products. At present, the company uses the traditional costing system wherein factory overhead costs are allocated based on direct labor hours. The cost accountant believes that the present system maybe providing misleading cost information, hence, the plan to change to the 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 P90,000, broken down as follows: Activity Cost Driver Budgeted Activity Budgeted Cost Setup costs Number of set ups 40 P20,000 Production monitoring Number of batches 20 P40,000 Number of inspections Quality control 1,000 P30,000 Projected data for one of the Company's product, Product B, for the coming period are as follows: Quality control Number of inspections 1,000 P30,000 Projected data for one of the Company's product, Product B, for the coming period are as follows: Production and sales 1,000 units Direct labor hours 2,000 hours Units per batch 500 Number of setups 4 Number of inspections 200 Direct material cost P10 per unit Direct labor rate P20 per hour If the Company will use the traditional full cost system, the cost per unit of product B for the coming period will be Sheldon Cooper operates Daddy's 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 served 100 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 month's 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 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, Daddy's Nursery could have charged each child a fee of Sheldon Cooper operates Daddy's 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 served 100 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 month's 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 ABC system were used, nursery fee per child should have been (Kiddies Category) PROBLEM 7 Sheldon Cooper operates Daddy's 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 served 100 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 month's 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 ABC system were used, nursery fee per child should have been (Babies Category)