CHAPTER 7 - ACCOUNTING FOR FACTORY OVERHEAD
Problem 1 – Denmark Company
FO rate = 216,000
216,000
216,000
216,000
90,000
72,000 units 1,600 MHrs.
240,000
249%of DMC P3.00/unit
Problem 2 - Colossal Corporation
207,000
FO rate = 207,000
500,000
52,100 units
41,40%of DMC
P3,97/unit
P135/MHr.
P3.00/MHr
= 16,000 Hrs. x P4.50
P 4.50/DLHr.
=
P 72,000
P 69,000
72,000
( P 3,000)
Problem 4 - Ellery Corporation
1.
Job 123
Direct labor cost
600
FO rate
180%
Applied FO
1,080
Job 123
DM
300
DL
600
FO
1,080
TOTAL 1,980
207,000
765,000
P2.44/DLHr. 27.06%ofDLC
=
3. Actual FO
Less: Applied
Overapplied FO
2.
90% of DLC P4.50/DLHr.
207,000
207,000
69,000 MHrs. 85,000 DLHrs.
Problem 3 – Manila Company
1. FO rate = P67,500/15,000 DLHrs.
2. Applied FO
216,000
48,000 DLHrs/
Job 124
1,080
940
1,692
3,712
Job 124
940
180%
1,692
Job 125
1,400
180%
2,520
Job 126
5,120
180%
9,216
Job 125
720
1,400
2,520
4,640
Job 126
4,200
5,120
9,216
18,536
TOTAL
6,300
8,060
14,508
28,868
Problem 5 – Thermal Corporation
1. Direct method
P1___
P2___
Direct cost
P 90,000
P 60,000
Allocated cost
S1
10,000
10,000
S2
20,000
12,000
Total
P120,000
P 82,000
Base
50,000 MHrs.
20,000 DLHrs
FO rate
P 2.40/MHr.
P 4.10/DLHr.
S1___
P 20,000
S2___
P 32,000
( 20,000)
( 32.000)
2. Step method
Direct cost
Allocated cost
S1
S2
Total
Base
FO rate
P1___
P 90,000
P2___
P 60,000
2,000
30,000
P122,000
50,000 MHrs.
P 2.44/MHr
2,000
18,000
P 80,000
20,000 DLHrs
P 4.00/DLHr.
S1____
P 20,000
S2___
P 32,000
( 20,000)
16,000
( 48,000)
3. Algebraic method
Direct cost
Allocated
S1
S2
Total
Base
FO rate
P1___
P 90,000
P2___
P 60,000
S1___
P 20,000
S2____
P 32,000
3.143
28,572
P121,715
50,000 MHrs.
P 2.43/MHr.
3,143
17,143
P80,286
20,000 DLHrs
P 4.0/DLHr.
( 31,429)
11,429
25,143
( 57,143)
S1 -= 20,000 + 20% S2
S2 = 32,000 + 80% S1
S1
S1 - .16S1
S1
S2
=
=
=
=
=
20000 + 20%( 32,000 + 80% S1)
20,000 + 6,400 + .16 S1
26.400
26,400/.84
31,429
= 32,000 + 80% 31,429
= 32,000 + 25,143
= 57,143
Problem 6 – ABC Company
1. Direct method
Machinery
Direct cost
P 52,500
Allocated cost
S1
5,600
S2
6,325
Total
P 64,625
Base
1,500DLHrs.
FO rate
P 42.95DLHr.
Assembly
P 48,000
Repair___
P 14,000
8,400
4,675
P 61,075
1,250 DLHrs
P48.86/DLHr.
( 14,000)
Cafeteria
P 11,000
( 11.000)
2. Step method
Machinery
P 52,500
Direct cost
Allocated cost
S1
S2
Total
Base
FO rate
4,119
8,455
P 65,074
1,500 DLHrs.
P 43.38/DLHr
Assembly
P 48,000
Repair
P 14,000
Cafeteria
P 11,000
6,176
6,250
P 60,426
1,250 DLHrs
P48.34/DLHr.
( 14,000)
3,705
( 14,705)
Problem 7 - Central Parkway Corp.
Direct cost
Allocated
S1
S2
Total
S1
S2
S1
S1 - .025 S1
S1
S2
P1___
120,000
P2____
80,000
13,333
8,333
141,666
6,667
6,667
93,334
S1___
25,000
( 26,667)
1,667
=
=
25,000 + 10% of S2
10,000 + 25% of S1
=
=
=
=
=
25,000 + 10% ( 10,000 + .25S1
25,000 + 1,000 + .025S1
26,000
26,000/.975
26,667
=
=
10,000 + .25(26,667)
16,667
Problem 8 – Megastar Company
Fixed
Variable
1.
Total
34,200
41,800
76,000
95,000 Mach. Hrs.
Per Mach.Hr.
0.36
( 34,200/95,000)
0.44
( 41,800/95,000)
0.80
Actual factory overhead
Less: Applied (100,000 x .80)
Overapplied factory overhead
P 78,600
80,000
( 1,400)
S2___
10,000
6,667
(16,667)
2.
3.
Actual factory overhead
Less: Budget allowed on actual hours
Fixed
34,200
Variable (100,000 x .44)
44,000
Spending variance – unfavorable
P 78,600
Budged allowed on actual hours
Less: Applied factory overhead
Idge capacity variance favorable
P 78,200
80,000
( 1,800)
P
78,200
400
Problem 9 - Abner Company
Fixed
Variable
Total
72,000 units
Per unit
P 0.47
(33,840/72,000)
4.20
(72,000 x 4.20)
P 4.67
TotalP 33,840
302400
P336,200
1.
Actual FO
Less: Applied FO 5,400 units x P 4.67
Underapplied FO
P 15,910
25,218
(P 9.308)
2.
Actual FO
P 15,910
Less: Budget allowed on actual hours
Fixed (33,840/12 months)
2,820
25,500
Variable ( 5,400 x 4.20)
22,680
Spending variance – favorable
( P 9,590)
3.
Budged allowed on actual hours
Less: Applied
Idle capacity variance – unfavorable
P25,500
25,218
P 282
Problem 10 - Norman Corporation
1.
Variable rate/hour = 270,000 – 252,000
60,000 - 48,000
= P1.50/DLHr.
2.
Total
Less: Variable
(60,000 x 1.50)
(48,000 x 1.50)
Fixed
High
270,000
Low
252,000
90,000
_______
180,000
72,000
180,000
2.
Actual factory overhead
Less: Applied ( 60,000 x 90%) x 5.25
Overapplied FO
FO rate =
3.
252,000
48,000
= 5.25/ DLHrs.
Actual factory overhead
Less: Budget allowed on actual hours
Fixed
Variable (54,000 x 1.50)
Spending variance
4.
273,000
283,500
( 10,500)
273,000
180,000
81,000
Budget allowed on actual hours
Less: Applied
Idle capacity variance
261,000
283,500
( 22,500)
Problem 11 – Strawberry Corporation
Actual factory overhead
Less: Applied factory overhead
Overapplied factory overhead – favorable
a.
30,500
39,700
( 9,200)
Allocation of overapplied factory overhead
Cost of goods sold
Finished goods inventory
Work in process inventory
b.
261,000
12,000
32,000/39,700 x 9,200 = 7,416
4,200/39,700 x 9,200 =
973
811
3,500/39,700 x 9,200 =
39,700
9,200
Applied factory overhead
Cost of goods sold
Finished goods inventory
Work in process inventory
Factory overhead control
Problem 12
a)
Direct materials ( 50 x P120)
Direct labor
Factory overhead (100 x P 25)
Total manufacturing cost
No. of units
Cost per unit
Product A
P 6,000
(100 x P120)
1,000
2,500
(300 x P 25)
P 9,500
50
P
190/unit
39,700
7,416
973
811
30,500
Product B
P 12,000
3,000
7,500
P 22,500
100
P
225/unit
Factory overhead rate = P200,750/8,030 direct labor ours = P 25/DLHr.
b)
Direct materials (50 x P120)
Direct labor
Factory overhead
Material handling (40 x P50)
Scheduling & setup (7 x 200)
Design section (5 x P 107.50)
No. of parts (10 x 100)
Total costs
No. of units
Cost per unit
TRUE/FALSE
1. True
2. False
3. True
4. True
5. True
6.
7.
8.
9.
10.
Product A
P 6,000
1,000
2,000
1,400
537,50
1,000
P 11,937.50
50
P 238.75/unit
(100 x P120)
(20 x P50)
( 5 x 200)
( 3 x 107.50)
(6 x 100)
True
True
True
False
True
11.
12.
13.
14.
15.
Product B
P 12,000
3,000
1,000
1.000
322.50
600
P 17,922.50
100
P 179.23/unit
False
False
True
True
True
MULTIPLE CHOICE – THEORY
1.
c
6.
d
2.
c
7.
c
3.
d
8.
a
4.
b
9.
d
5.
d
10.
a
MULTIPLE CHOICE - PROBLEMS
1.
c
11.
d
2.
d
12.
d
3.
c
13.
d
4.
d
14.
a
5.
c
15.
b
6.
c
16.
c
7.
c
17.
c
8.
c
18.
c
9.
c
19.
b
10.
a
20.
a
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
A
A
b
c
d
a
b
c
C
163,706
31. d
32. c
for No. 25 –allocation under step method must be in the following order
1. Building occupancy
2. Supervision
3. Equipment maintenance