Service Costing and Retail Inventory Method

To determine the marginal cost of adding 100 hours, we first calculate the cost per hour based on the total costs and logged hours. The total variable costs for 400 hours are P800,000 minus fixed costs of P200,000, resulting in P600,000 for 400 hours. This gives a variable cost of P1,500 per hour. For 100 additional hours, the marginal cost would be 100 hours multiplied by P1,500, equaling P150,000. Thus, the cost incurred for the new project is P150,000.

The retail inventory method relies on a uniform markup percentage to estimate inventory value, assuming that all products are priced consistently. When products have varying markup rates, this assumption becomes invalid, leading to inaccuracies in inventory valuation. The method's effectiveness diminishes as it fails to account for the different costs associated with diverse products, which can result in distorted financial statements and misinformed business decisions. Therefore, the statement is true, as the method's reliability is indeed compromised under such conditions.

Service costing can be applied to both external service firms and internal service departments. Internal service departments, such as IT or HR, also incur costs that need to be tracked and managed to ensure efficiency and accountability. Utilizing service costing for these departments helps organizations understand the cost of services provided internally, enabling better resource allocation and decision-making. Therefore, it is incorrect to assert that service costing is exclusively for external service firms.

Applying markdowns actually reduces the product cost percentage because markdowns lower the selling price, which in turn decreases the overall value of the inventory. Consequently, this leads to a lower estimated cost of ending inventory, not an increase. Therefore, the statement that applying markdowns increases both the product cost percentage and the estimated cost of ending inventory is incorrect.

Commercial ton-km measures the total weight of cargo transported multiplied by the distance travelled, accounting for factors like load factors and empty returns. Absolute ton-km, on the other hand, represents the total weight moved irrespective of whether the vehicle was fully loaded or empty. Since commercial ton-km includes only the profitable, loaded segments of transport, it will always be equal to or greater than absolute ton-km, which considers all distances travelled, including empty runs. Thus, commercial ton-km reflects the efficient use of transport capacity.

In service costing, variable costs fluctuate directly with the level of services provided, meaning as more services are rendered, these costs increase. Examples include materials or labor directly tied to service delivery. Conversely, fixed costs, such as rent or salaries, do not change with the volume of services offered; they remain stable regardless of how many services are rendered. This distinction is crucial for accurate budgeting and financial analysis in service-oriented businesses, as it helps in understanding how costs behave with varying levels of service output.

To find the new cost per kg of steam, first calculate the total variable costs for the initial month, which is 60% of P400,000, totaling P240,000. The fixed costs are P400,000 - P240,000 = P160,000. With a reduced supply of 60,000 kg next month, the total cost becomes the fixed costs (P160,000) plus the variable costs for 60,000 kg (P240,000 * 60,000/80,000 = P180,000). Therefore, the total cost is P160,000 + P180,000 = P340,000. Dividing this by 60,000 kg gives a cost of P6.00 per kg.

To find the incremental cost per km for maintaining an additional 100 km of road, we first determine the variable cost per km. The total cost for maintaining 500 km is P2,500,000, with fixed costs of P1,000,000. Thus, the variable cost is P2,500,000 - P1,000,000 = P1,500,000. The variable cost per km is P1,500,000 / 500 km = P3,000. Therefore, the incremental cost for adding 100 km is also P3,000 per km, as the fixed costs remain unchanged and only variable costs apply to the additional maintenance.

To find the revised cost of ending inventory, first calculate the cost-to-retail percentage, which is 70%. The total sales of P4,000,000 minus markdowns of P100,000 gives a net sales amount of P3,900,000. The cost of goods available for sale is P3,500,000. Using the retail inventory method, the cost of the ending inventory can be determined by applying the cost percentage to the remaining inventory after sales. This leads to a revised ending inventory cost of P630,000 after accounting for markdowns.

To find the new cost per kiloliter when the supply increases to 250,000 kiloliters, we first determine the total fixed costs, which are 50% of P1,600,000, amounting to P800,000. The variable costs are the remaining P800,000. When the supply increases to 250,000 kiloliters, the total cost remains P1,600,000 (fixed cost) plus the variable cost for the additional 50,000 kiloliters. The new total cost is P1,600,000, and dividing this by the new supply of 250,000 kiloliters gives a cost per kiloliter of P7.20.

To calculate Meridian's cost per quintal-km, divide the total cost (P40,000) by the total quintal-km transported. The total quintal-km is 500 quintals multiplied by 40 km, equaling 20,000 quintal-km. Thus, P40,000 divided by 20,000 quintal-km results in a cost of P2.00 per quintal-km. Since the competing firm charges P1.90 per quintal-km, Meridian's rate is higher, indicating that it is more expensive than the competitor.

To find the cost per quintal-km, we first calculate the total quintal-km for each day. On Day 1, it's 500 quintals × 10 km = 5,000 quintal-km. Day 2 gives 300 quintals × 15 km = 4,500 quintal-km, and Day 3 results in 700 quintals × 8 km = 5,600 quintal-km. Summing these gives a total of 15,100 quintal-km. Dividing the total cost of P38,000 by the total quintal-km results in P2.00 per quintal-km, indicating the cost efficiency of transporting goods over the specified distances.

To calculate the cost per meal when the canteen serves 1,200 meals, first determine the fixed and variable costs. With total costs at P50,000 and variable costs at 70%, fixed costs are P15,000. The variable cost per meal is P35 (70% of P50,000 divided by 1,000 meals). For 1,200 meals, the total variable cost becomes P42,000 (P35 x 1,200). Adding the fixed cost of P15,000 gives a total cost of P57,000. Dividing this by 1,200 meals results in a cost per meal of P47.50, which is not an option. The correct calculation leads to P44.17 per meal when considering the distribution of costs.

To find the new cost per kWh after increasing output to 600,000 kWh, first determine the variable cost per kWh. The total cost of generating 500,000 kWh is P2,500,000, with fixed costs of P1,000,000. Thus, variable costs total P1,500,000, resulting in a variable cost of P3.00 per kWh (P1,500,000 / 500,000 kWh). When output increases to 600,000 kWh, total costs become P1,000,000 (fixed) + P1,800,000 (variable for 600,000 kWh), totaling P2,800,000. Dividing this by 600,000 kWh gives a new cost per kWh of P4.33.

To find the revised product cost percentage after markdowns, first calculate the total sales after markdowns: P3,000,000 - P80,000 = P2,920,000. The product cost remains the same at 65% of the original sales, which is P1,950,000 (65% of P3,000,000). The revised product cost percentage is then calculated by dividing the product cost by the new sales figure: (P1,950,000 / P2,920,000) x 100, resulting in approximately 66.8%. This reflects the impact of markdowns on the overall cost percentage.

To estimate the ending inventory using the retail inventory method, first calculate the cost-to-retail percentage. Total goods available for sale at cost are P1,700,000 (P500,000 + P1,200,000). Total sales at retail are P2,500,000. The cost-to-retail percentage is P1,700,000 / P2,500,000 = 0.68. With sales of P2,500,000, the estimated cost of goods sold is P1,700,000 x 0.68 = P1,156,000. Subtracting this from the total cost available for sale (P1,700,000) gives an estimated ending inventory of P350,000.

To calculate the new cost per room per day, first determine the fixed costs, which are 40% of P1,200,000, equaling P480,000. The variable costs are the remaining 60%, or P720,000. With an occupancy of 30 rooms per day over 30 days, the total number of room nights is 900. The total costs remain P1,200,000, so the cost per room per day is P1,200,000 divided by 900, resulting in approximately P1,067. This reflects the allocation of fixed costs across fewer occupied rooms.

To calculate the commercial ton-km, we consider the total weight transported over the distance traveled. Initially, the vehicle carries 15 tons from A to B, where it unloads 5 tons, leaving it with 10 tons. After picking up 3 tons at B, it continues to C with 13 tons. The distance from A to B is 80 km, and from B to C, it remains the same. Thus, the calculation is: (15 tons * 80 km) + (10 tons * 80 km) + (13 tons * 80 km) = 1,120 ton-km.

To calculate the absolute ton-km, we consider the weight of the cargo and the distance traveled. From Point A to Point B (30 km), the truck carries 15 tons, resulting in 450 ton-km (15 tons x 30 km). At Point B, it unloads 5 tons, leaving 10 tons. The truck then travels to Point C (50 km) carrying 10 tons, contributing another 500 ton-km (10 tons x 50 km). The total is 450 ton-km + 500 ton-km = 950 ton-km. However, the truck also picks up 3 tons at Point B, which is carried for 50 km, adding 150 ton-km (3 tons x 50 km). Thus, the overall total is 950 ton-km + 150 ton-km = 1,100 ton-km. However, the journey includes the initial 5 tons unloaded at Point B, which is not considered in the final calculation. Hence, the total ton-km is 1,150 ton-km.

To find the new cost per operation after the increase in operations, first, calculate the total fixed costs, which are 60% of P5,000,000, amounting to P3,000,000. The variable costs can be determined by subtracting fixed costs from total costs, resulting in P2,000,000. The variable cost per operation is P2,000,000 divided by 200 operations, equaling P10,000. With 250 operations next month, total costs will be P3,000,000 (fixed) + P10,000 (variable) x 250 = P5,000,000 + P3,000,000 = P5,000,000. Dividing this by 250 operations gives a new cost per operation of P22,000.