Cost allocation process and activity-based costing
Problem-solving: 1. Cost Allocation Process: Apex Company's copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of 5,000,000 copies. | Salaries (xed) | P800,000 | | Employee benets (xed) | 100,000 | | Depreciation of copy machines (xed) | 100,000 | Utilities (xed) 50,000 Paper (variable, 10 cents per copy) 500,000 Toner variable 10 cents er co 500 000 The costs are assigned to two cost pools, one for xed and one for variable costs. The costs are then assigned to the sales department and the administrative department. Fixed costs are assigned on a lump-sum basis, 40% to sales and 60% to administration. The variable costs are assigned at a rate of 20 cents per copy. Required: Assuming 4,800,000 copies were made during the year, 2,500,000 for sales and 2,300,000 for administration, calculate the copy department costs allocated to sales and administration. Total Cost Allocated to Cost Allocated to Sales Administration Department Department | Fixed cost | | | | Variable cost Total Cost 2. Activity-Based Costing: The Cheesecake Factory is a national bakery that is known for its strawberry cheesecake. They also make 12 different kinds of cheesecake as well as several other types of bakery items. They have recently adopted an activity-based costing system to assign manufacturing overhead to products. The following data relate to their strawberry cheesecake and the ABC cost pools: Strawberry Cheesecake: Annual Production 40,000 units Direct materials per unit P250 Direct labor per unit P100I . Calculate the overhead cost per unit for the strawberry cheesecake. Overhead Cost per Unit of Strawberry Cheesecake Materials ordering Materials inspection Equipment setup Quality control Other Total . Calculate the total unit cost for the strawberry cheesecake. Total Unit Cost Direct materials Direct labor Manufacturing overhead Total Cost Pool Cost I Cost Driver Materials ordering P3,000.000 I Number of purchase orders Materials inspection 4,000,000 Number of receiving reports Equipment setup 3.750.000 Number of setups Quality control 2,250,000 Number of inspections Other 3.750.000 Direct labor cost Total manufacturing P16,750,000 overhead Annual activity information related to cost drivers: Cost Pool All Products Strawberry Cheesecake I Materials ordering I 7,500 orders I 2,000 I Materials inspection I 400 receiving reports 50 Equipment setup 2,000 setups 20 Quality control 2,000 inspections 100 Other P75 000 000 direct labor P1 250 000 Required: a. Calculate the overhead rate per unit of activity for each of the ve cost pools. ' ' Overhead Rate per Unit of Activity | Materials ordering | | I Materials inspection I I Equipment setup Quality control Other b. Calculate the total overhead assigned to the production of strawberry cheesecake. | | I Materials ordering I I Materials inspection I Equipment setup I Quality control Other Total Overhead Total
