Problem 1 (adapted)

Kai Corp. manufactures two models of beds, the standard and the deluxe model. The following activity and cost information has been compiled: Standard Deluxe OH Costs No. of setups 9 21 P 90,000 No. of components 90 150 210,000 No. of DLH 650 150

Required: Compute the total amount of overhead costs assigned to each model using:

1.Traditional costing system

2. Activity-based costing system

3. Discuss the effects of the difference in the computed amounts of overhead costs.

Problem 2 (adapted)

Aguila Company has two major segments with the following information: Skyscraper Ground Zero Total Annual Revenue P200,000 P600,000 P800,000 Annual Salesperson Salaries P30,000 P45,000 P75,000 Number of Customers 50 75 125 Miles Driven 80,000 40,000 120,000 The business also has overhead costs as follows: Cost pool Cost in pool Cost driver Travel P36,000 miles driven Entertainment P144,000 number of customers Administrative P150,000 salaries TOTAL P330,000

Required:

1.Allocate the overhead costs to the segments based on sales revenue.

2.Determine the income of each segment.

3.Allocate the overhead costs to the segments using ABC.

4. Determine the income of each segment under ABC.