Practice Set 1 (Cost Segregation)

OUR LADY OF THE PILLAR COLLEGE
San Manuel Campus

Cost Accounting and Control
COST ACCOUNTING PROBLEM SET 1

A. Hotel Sophia has accumulated records of the total electrical costs of the hotel and the
number of the occupancy-days over the last year. An occupancy day represents a room
rented out for one day. The hotel’s business is highly seasonal, with peaks occurring
during the ski season and in the summer..
OCCUPANCY- ELECTRICAL
MONTH
DAYS COSTS
₱
January 2,604.00 6,257.00
₱
February 2,856.00 6,550.00
₱
March 3,534.00 7,986.00
₱
April 1,440.00 4,022.00
₱
May 540.00 2,289.00
₱
June 1,116.00 3,591.00
₱
July 3,162.00 7,264.00
₱
1. August 3,608.00 8,111.00 Using the HLM,
₱ estimate the fixed cost of
September 1,260.00 3,707.00 electricity per month and
₱ the variable cost of
October 186.00 1,712.00 electricity per
₱ occupancy-day. Round-
November 1,080.00 3,321.00 off the
MONTH RENTAL RETURNS
₱ CAR WASH COSTS fixed cost
December 2,046.00 5,196.00 ₱ to the
January 2,310.00 10,113.00 nearest
whole peso ₱ and the
variable February 2,453.00 12,691.00 cost to the
nearest ₱ whole
centavo. March 2,641.00 10,905.00
2. Determine ₱ the cost
formula for April 2,874.00 12,949.00 electrical
costs. ₱
May 3,540.00 15,334.00
B. NR Rental ₱ Car offers
rental cars June 4,861.00 21,455.00 in an off-
airport ₱ location
near a July 5,432.00 21,270.00 major
tourist ₱ destination
in Baguio. August 5,268.00 19,930.00
₱
September 4,628.00 21,860.00
₱
October 3,720.00 18,383.00
₱
November 2,106.00 9,830.00
₱
December 2,495.00 11,081.00
Management would like to better understand the behavior of the company’s costs. One of those
costs is the cost of washing cars. Management believes that the costs of operating the car wash
should be related to the number of rental returns. Accordingly, the following data have been
compiled:
1. Using the LSM, estimate the fixed cost and variable cost elements of monthly car wash costs.
The fixed cost element should be estimated to the nearest peso and the variable cost element
to the nearest centavo.
2. Determine the cost formula for car wash costs.
C. Cardo, Inc. has accumulated the following data for the cost of maintenance on its machinery for
the last four months:
MAINTENANCE
MONTH MACHINE HOURS
COST
Septembe
r 21,000.00 ₱ 26,020.00
October 18,500.00 ₱ 24,600.00
November 15,000.00 ₱ 22,300.00
1. December 19,000.00 ₱ 25,100.00 Assuming
Cardo, INC.
uses the HLM of analysis, the fixed cost of maintenance would be estimated to be:
2. If machine hours are budgeted to be 20,000 hours, then the budgeted total maintenance
cost would be expected to be:
D. DUTERTE Company is accumulating data to be used in preparing its annual profit plan for the
coming year. The cost behavior pattern of the maintenance cost must be determined. The
accounting staff has suggested hours and cost. Data regarding the maintenance hours and costs
for the last year and the results of the regression analysis follow:
MAINTENANCE
MONTH HOURS OF ACTIVITY
COST
January 480.00 ₱ 4,200.00
February 320.00 ₱ 3,000.00
March 400.00 ₱ 3,600.00
April 300.00 ₱ 2,820.00
May 500.00 ₱ 4,350.00
June 310.00 ₱ 2,960.00
July 320.00 ₱ 3,030.00
1. August 520.00 ₱ 4,470.00 Using LSM,

the equation
September 490.00 ₱ 4,260.00
for the
relationship
October 470.00 ₱ 4,050.00
between hours
of activity and
November 350.00 ₱ 3,300.00
maintenance
costs would
December 340.00 ₱ 3,160.00
be:
E. Last year, ABNER COMPANY incurred the following costs:
Direct Materials ₱ 50,000.00

Direct Labor ₱ 20,000.00
Factory Overhead ₱ 130,000.00
Selling Expense ₱ 40,000.00
Administrative Expense ₱ 36,000.00
Unit produced and sold 10,000 units at a price of 31.00 each.

1. Prime cost per unit
2. Conversion cost per unit
3. COGS per unit
4. Gross profit per unit
5. Operating income
F. NORMAN COMPANY produced 1,000 units of a product which was sold at a price of 95.00
each. Total selling and administrative incurred was 30,000.
Direct Materials 25.00

Direct Labor 16.00
Factory Overhead 19.00
1. Conversion cost
2. Cost of Goods Sold
3. Gross Profit
4. Prime Cost

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OUR LADY OF THE PILLAR COLLEGE

San Manuel Campus

COST ACCOUNTING PROBLEM SET 1

January 480.00 ₱ 4,200.00

February 320.00 ₱ 3,000.00

March 400.00 ₱ 3,600.00

April 300.00 ₱ 2,820.00

May 500.00 ₱ 4,350.00

June 310.00 ₱ 2,960.00

July 320.00 ₱ 3,030.00

1. August 520.00 ₱ 4,470.00 Using LSM,

E. Last year, ABNER COMPANY incurred the following costs:

Direct Materials ₱ 50,000.00

Unit produced and sold 10,000 units at a price of 31.00 each.

Direct Materials 25.00

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