Problem 6. The Accountant of Camera Film Company has established the following activity cost of pools and cost drivers: Activity Cost driver Budgete d OH P200,000 No. of set ups P100,000 Weight of Raw Mat Budgeted level Pool rate Machine set ups 100 P2,000/set up Materials hand 50,000 lbs. P2/lb. Hazardous waste control P50,000 P75,000 Other overhead P200,000 Weight of Hazardous chemical used Number of inspections Machine hours 10,000 lbs. P5/lb. 1,000 20,000 hrs. P10/m hr. Quality control P75/inspection costs An order for 2,000 boxes of film development chemicals has the following production requirements:

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Problem 6. The Accountant of Camera Film Company has established the following
activity cost of pools and cost drivers:
Budgete
d
Cost driver
Budgeted
level
Activity
Pool rate
OH
P200,000
P100,000
100
P2,000/set up
No. of set ups
Weight of Raw Mat
Weight of Hazardous
chemical used
Machine set ups
Materials hand
50,000 lbs. P2/lb.
Hazardous waste
control
P50,000
P75,000
10,000 Ibs. P5/lb.
1,000
20,000 hrs. P10/m hr.
P75/inspection
Quality control
Other overhead P200,000
costs
Number of inspections
Machine hours
An order for 2,000 boxes of film development chemicals has the following production
requirements:
Machine set ups
Raw materials
4
10,000 pounds
2,000 pounds
Hazardous materials
Inspections
Machine hours
20
500
Direct manufacturing cost actually incurred to produce 2,000 boxes are Direct
materials of P425,000 and direct labor of P400,000.
Before the company adopts the ABC approach of costing, the traditional approach of
allocating overhead, which is based on machine hours, is being used.
Required:
a. Determine the amount of overhead applied to each box of chemical under ABC
and traditional costing
b. Determine the manufacturing cost per box under ABC and traditional method.
Transcribed Image Text:Problem 6. The Accountant of Camera Film Company has established the following activity cost of pools and cost drivers: Budgete d Cost driver Budgeted level Activity Pool rate OH P200,000 P100,000 100 P2,000/set up No. of set ups Weight of Raw Mat Weight of Hazardous chemical used Machine set ups Materials hand 50,000 lbs. P2/lb. Hazardous waste control P50,000 P75,000 10,000 Ibs. P5/lb. 1,000 20,000 hrs. P10/m hr. P75/inspection Quality control Other overhead P200,000 costs Number of inspections Machine hours An order for 2,000 boxes of film development chemicals has the following production requirements: Machine set ups Raw materials 4 10,000 pounds 2,000 pounds Hazardous materials Inspections Machine hours 20 500 Direct manufacturing cost actually incurred to produce 2,000 boxes are Direct materials of P425,000 and direct labor of P400,000. Before the company adopts the ABC approach of costing, the traditional approach of allocating overhead, which is based on machine hours, is being used. Required: a. Determine the amount of overhead applied to each box of chemical under ABC and traditional costing b. Determine the manufacturing cost per box under ABC and traditional method.
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