AE 222 COST ACCOUNTING AND CONTROL
CHAPTER 3- COST BEHAVIOR
ACTIVITY 5
Direction: Answer the following problems. You can write your answers on a clean sheet of paper or
you can encode it and you can send it thru Gmail or Messenger, whichever is convenient. Don’t forget
to write a subject following this format BSA-2E CHAPTER 3- ACTIVITY 5 PERMEJO, JOHN
JOSEPH R. and please include a body of the letter in your email.
Princess Accounting Services pays P8,000 per month for a tax software license. In addition, variable
charges average P60 for every tax return the firm prepares.
Determine the total cost and the cost per unit if the firm expects to prepare the following number of
tax returns in March 2019:
1. 400
Total Cost= Variable Cost (400 x 60) P24,000 + Fixed Cost P8,000 = P32,000
Cost per Unit= P32,000/400 = P80
2. 600
Total Cost= Variable Cost (600 x 60) P36,000 + Fixed Cost P8,000 = P44,000
Cost per Unit= P44,000/600 = P73.33
3. 1,000
Total Cost= Variable Cost (1,000 x 60) P60,000 + Fixed Cost P8,000 = P68,000
Cost per Unit= P68,000/1,000= P68
*each item is worth two (2) points
Prince Company produces athletic caps. The company incurred the following costs to produce 6,000
caps last month:
Cardboard for brims P 24,000
Cloth 60,000
Plastic for headbands 30,000
Straight-line depreciation- factory 36,000
Factory supervisor’s salaries 96,000
Factory utilities 18,000
Total P264,000
Required:
4. What did each cap component cost on a per-unit basis? (1 point each)
a. Cardboard for brims 24,000/6,000= P4
b. Cloth 60,000/6,000= P10
c. Plastic for headbands 30,000/6,000= P5
d. Straight-line depreciation- factory 36,000/6,000= P6
e. Factory supervisor’s salaries 96,000/6,000= P16
f. Factory utilities 18,000/6,000= P3
AE 222 COST ACCOUNTING AND CONTROL
5. What is the probable type of behavior (variable or fixed) that each of the costs exhibits? (1
point each)
a. Cardboard for brims Variable
b. Cloth Variable
c. Plastic for headbands Variable
d. Straight-line depreciation- factory Fixed
e. Factory supervisor’s salaries Fixed
f. Factory utilities Variable
6. The company expects to produce 5,000 caps this month. Would you expect each type of cost
IN TOTAL to increase, decrease, or remain constant? (1 point each)
a. Cardboard for brims Decrease
b. Cloth Decrease
c. Plastic for headbands Decrease
d. Straight-line depreciation- factory Remain Constant
e. Factory supervisor’s salaries Remain Constant
f. Factory utilities Decrease
Empress Car Aircon is specialized in replacing air conditioner sets in automobiles. The following table
shows the costs incurred during a month when 1,200 air conditioning sets were replaced. Your task is
to fill in the missing data.
Number of Air Conditioning Sets
Replacements
Total Costs: 1,000 1,200 1,400
Fixed costs P84,000 P84,000 P84,000
Variable costs P50,000 P60,000 P70,000
Total costs P134,000 P144,000 P154,000
Cost per aircon set replacement:
Fixed costs P84 P70 P60
Variable costs P50 P50 P50
Total cost per aircon set replacement P134 P120 P110
*15 points all in all
Emperor Company provided you with a summary of its total budgeted production cost at three
production levels:
Volume in Units 2,000 4,000 6,000
Cost A P10,000 P10,000 P10,000
Cost B 2,800 3,600 4,400
Cost C 6,000 12,000 18,000
Cost D 4,000 4,200 5,000
Indicate the cost behavior (variable, fixed, or mixed) for:
7. Cost A Fixed
8. Cost B Mixed
9. Cost C Variable
AE 222 COST ACCOUNTING AND CONTROL
10. Cost D Mixed
The total budgeted cost for:
11. Cost A if the company produced 2,500 units
P10,000 still because it is a fixed cost
12. Cost C if the company produced 2,500 units
Variable cost per unit is P3 (6,000/2,000 or 12,000/4,000 or 18,000/6,000), so 2,500 x 3=
P7,500
*1 point each
All in all, this activity is worth 45 points. Happy answering!
“YOU SHOULD TURN YOUR CAN’TS INTO CANS AND YOUR DREAMS INTO PLANS.”
Prepared by:
JOHN JOSEPH R. PERMEJO
Part-time Lecturer
[email protected]