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CASE 1. PCMR Electronics produces two models of calculators: Basic and Scientific. PCMR plans to implement activity-based costing (ABC). After detailed review of the
CASE 1. PCMR Electronics produces two models of calculators: Basic and Scientific. PCMR plans to implement activity-based costing (ABC). After detailed review of the company's processes and process improvement initiatives, I came up with the following cost pools and cost drivers, as well as the activities and their budgeted costs. Cost pool Budgeted activity Cost driver Product design (a) 100 parts-square feet Set-up (b) 2,000 set-up hours Machine operation (c) 12,750 machine hours Materials handling (d) 200 no. of material movements Distribution (e) 67,500 cubic feet delivered General administration (f) 30,000 labor hours Overhead budget Fuel, lubricants, electricity and utilities consumed in relation with Costs manufacturing activity Depreciation of production line equipment Salary of product engineers Labor incurred in ensuring templates are properly held in place and aligned before manufacturing starts Salary and fringe benefits of plant supervisors and other factory support personnel Depreciation of delivery trucks Materials consumed in making prototypes Fuel and lubricants for trucks Corporate costs allocated to the manufacturing division Salary of truck drivers Maintenance of delivery equipment Salary of warehouse personnel in charge of handling raw materials (e) (a) (f) (e) ? Cost associated with trial runs and fine tuning of machines Clean-up costs of machineries after manufacturing activity Marketing costs Indirect costs allocated to product design Placing and receiving orders of materials Opportunity costs associated with keeping of inventories Production budget for Basic and Scientific calculators follow: 006 @@ d r d d d P 700,000 (c) 575,000 (a) 560,000 440,000 (f) 360,000 304,000 275,000 210,000 150,000 104,000 98,000 (d) 90,000 80,000 (b) 80,000 67,000 65,000 52,000 20,000 P 4,230,000 Direct Materials Direct Labor Prime costs No. of units parts-square feet set-up hours machine hours no. of material movements cubic feet delivered labor hours ACCO 20073 - QUIZ # 2 Questionnaire Basic P 2,250,000 1,200,000 P 3,450,000 60,000 30 Scientific P 1,350,000 390,000 P 1,740,000 15,000 70 500 1,500 9,000 3,750 100 100 45,000 20,250 22,500 9,750 Currently, PCMR uses the traditional method of overhead cost allocation based on direct labor hours. PCMR sells its products at 60% gross profit based on full cost. 1. How much is the selling price of basic calculator under (a) ABC and (b) traditional costing? A. (a) P95.29; (b) P105.09 B. (a) P152.46; (b) P168.14. C. (a) P617.13; (b) P519.13 D. (a) P238.22; (b) P262.72 2. Under ABC, how much is the total overhead cost associated with distribution? A. P618,000 B. P783,000 C. P685,000 D. P1,125,000 3. How much is the pool rate per set-up hour for set-up? A. P40 B. P300 C. P260 D. P309 4. How much is the cost of scientific calculator under traditional costing? A. P207.65 B. P519.13 C. P332.24 D. P907.13 5. How much is the cost of scientific calculator under ABC? A. P246.85 B. P394.96 C. P617.13 D. P207.65
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