JOB ORDER COSTING (2010 Edition DAYAG reviewer)
1. Flor Company consumed P450, 000 worth of directed materials during May 2011. At
the end of the month, the direct materials inventory of Flor was P25, 000 lower than the
May 1 inventory level. How much was the direct material procured during May 2011?
Answer: P 425,000
2. Pink Company incurred the following costs during the month; direct labor, P120,000;
factory overhead, P108 000; and direct materials purchases, P160,000. Inventories
show the following cost:
Finished goods……………………………………
Work in process…………………………………..
Direct Materials…………………………………...
Beginning
Ending
P27,000
61,500
37,500
P30,000
57,500
43,500
How much is the cost of goods manufactured?
Answer: P386,000
3. Last Month, Pare Company placed P60,000 of materials into production. The Printing
Department used 8,000 labor hours at P5.60 per hour and the Binding Department used
4,600 hours at P6.00 per hour. Factory overhead is applied at a rate of P6.00 per labor
hour in the Printing Department and P8.00 per labor hour in the Binding Department.
Pare’s inventory accounts show the following balances:
Finished goods……………………………………
Work in process…………………………………..
Materials…………………………………............
Beginning
Ending
P22,000
15,000
20,000
P17,000
17,600
18,000
What is the total cost of goods sold?
Answer: P219,600
4. The factory ledger of Diamond Corporation contains the following cost data for the
year ended December 31, 2011:
Raw Materials………………………………………………
Work in process…………………………………………….
Finished goods……………………………………………..
Inventories
Opening
Closing
P150,000
P170,000
160,000
60,000
180,000
220,000
Raw Materials Used……………………………………….
Total Manufacturing costs charged to
production during the year
(including raw materials, direct labor
and factory overhead applied at
the rate of 50% of direct labor cost)………………
652,000
1,372,000
Compute the: (1) cost of raw materials purchased and (2) direct labor charged to
production during the year:
Answer: (1) P672,000; (2) P480,000
5. National Marketing Corp. uses a job-order costing system. It has three production
departments, X, Y, and Z.
The manufacturing cost budget for 2011 is as follows:
Direct Materials………………………………
Direct Labor………………………………….
Manufacturing overhead…………………….
Dept. X
Dept.Y
Dept. Z
P600,000
200,000
600,000
P400,000
500,000
100,000
P200,000
400,000
200,000
For Job No. 01-90 which was completed in 2011, direct materials cost was P75,000 and
direct labor cost was as follows:
Dept. X…………………………………………………………………………
Dept. Y………………………………………………………………………….
Dept. Z…………………………………………………………………………
P 40,000
100,000
20,000
The corporation applies manufacturing overhead to each job order on the basis of direct
labor cost, using departmental rates predetermined at the beginning of the year based
on the manufacturing cost budget.
The total manufacturing cost of Job No. 01-90 which was completed in 2011 is:
Answer: P385,000
6. The following data were taken from the records of Best Company.
08/31/2011 09/30/2011
Inventories:
Raw Materials…………………………………… P
?
Work-in-process………………………………… 80,000
Finished goods…………………………………
60,000
P 50,000
95,000
78,000
Raw Materials purchases, P 46,000
Factory overhead, 75% of direct labor cost, P63,000
Selling and administrative expenses, 12.5% of sales, P25,000.
Net income for September, 2011, P25,000.
What is the cost of raw materials inventory on August 31, 2011?
Answer: P40,000
7. Vat Corporation manufactures rattan furniture sets for export and uses the job order
cost system in accounting for its costs. You obtained from the corporation’s books and
records the following information for the year ended December 31, 2011;
 The work in process inventory on January 1 was 20% less than the work in
process inventory on December 31.
 The total manufacturing costs added during 2008 was P900,000 based on
actual direct materials and direct labor but with manufacturing overhead
applied on actual direct labor pesos.
 The manufacturing overhead applied to process was 72% of the direct labor
pesos, and it was equal to 25% of the total manufacturing costs.
 The cost of goods manufactured, also based on actual direct materials, actual
direct labor and applied manufacturing overhead, was P850,000.
The cost of direct materials used and the work-in-process inventory on December
31,2011:
Answer:
Direct Material Used
P362,000
Work-in-process Inventory
P250,000
8. Fusion Company has the following data on April 30, 2011:
April manufacturing overhead………………………………………….
Decrease in ending inventories:
Materials………………………………………………………….
Goods in Process……………………………………………….
Increase in ending inventory:
Finished Goods…………………………………………………
P30,101.80
2,430.00
590.00
1,320.00
The manufacturing overhead amounts to 50% of the direct labor, and the direct labor
and manufacturing overhead combined equal 50% of the total cost of manufacturing. All
materials are purchased F.O.B shipping point.
What is the cost of goods manufactured?
Answer: P181,200.80
9. The Fork Corporation manufactures one product and accounts for cost by a job-order
cost system. You have obtained the following information for the year ended December
31, 2011 from the corporation’s books and records;
Total manufacturing cost added during 2011
based on actual direct materials, actual
direct labor and applied factory overhead
on actual direct labor cost…………………………………………..
P1,000,000
Cost of goods manufactured based on actual
Direct materials and direct labor and
Applied factory overhead……………………………………………
970,000
Applied factory overhead to work in process
Based on direct labor cost…………………………………………..
75%
Applied factory overhead for the year, based
On total manufacturing cost…………………………………………
27%
Beginning work in process inventory was 80% of ending work in process inventory.
Compute the cost of direct materials used for year ended December 31, 2011.
Answer: P370,000
10. Tarzan Co. Employs a job order cost system. Its manufacturing activities in July,
2011, its first month of operation, are summarized as follows:
1201
Direct Materials…………………………. P 7,000
Direct labor cost………………………… P6,600
Direct labor hours………………………. 1,100
Units produced………………………….
200
JOB NUMBERS
1202
1203
1204
P5,800
P11,600 P5,000
P6,000
P8,400
P2,400
1,000
1,400
400
100
1,000
300
Manufacturing overhead is applied at a rate of P2 per direct labor hour for variable
overhead, P3 per hour for fixed overhead.
Jobs 1201, 1202 and 1203 were completion in July.
What is the cost of the completed jobs?
Answer: P62,900
11. Job No. 010 has, at the end of the second week in April, an accumulated total cost
of P4,200. In the third week. P1,010 of direct materials were used on the Job.
Twenty (20) hours of direct labor services were applied to the job at a cost of P5 per
hour.
Manufacturing overhead was applied at the basis of P2.50 per direct labor hour for fixed
overhead and P2 per hour for variable overhead.
Job No. 010 was the only job completed during the third week.
The total cost of Job Order No. 010 is:
Answer: P 5,400
12. The Work-in-Process account of the Malinta Company which uses a job order cost
system follows:
Work- in-Process
April 1 Balance……………..P 25,000
Finished Goods………..P 125,450
Direct Materials………….
50,000
Direct labor……………..
40,000
Overhead Applied…….
30,000
Overhead is applied to production at a predetermined rate, based on direct labor cost.
The work in process on April 30 represents the cost of Job No. 456, which has been
charged with direct labor cost of P3,000 and Job No. 789, which has been charged with
applied overhead of P2,400.
The cost of direct materials charged to Job No. 456 and Job No. 789 amounted to:
Answer: P 8,700.
13. The following information were taken from the accounting records of Yanni Music
Company for 2011:
Increase in raw materials inventory
Decrease in finished goods inventory
Raw Materials purchases
Direct labor payroll
Factory overhead
Freight out
P 45,000
150,000
1,290,000
600,000
900,000
135,000
The cost of raw materials used during the period amounted to:
Answer: P1,245,000.
14. Precise, Inc. manufactures specialized precision electronics kits. In late March, Job
order #0311 and #0322 were started. Estimated materials cost were P90,000 for both
orders (60% for #0311) while direct labor hours were estimated at 700 for #0311 and
400 for #0322. Labor rate is P18 per hour while variable overhead rate is P10 per hour.
By the end of April, 755 of the required material have been issued to production in the
amount of P90,000 and both job orders have been 50% converted with 360 hours
charged to #0311 and 180 hours charged to #0322 at the hourly rates given.
The total cost charged to Job Order #0311 was:
Answer: P64,080.
15. Handy Crafts manufactures to customers’ specifications. The company uses a job
order cost system and, for the month of May, 2011, summarized the following
information.
Beginning work in process inventory
(five partially completed jobs)
Orders completed (eighteen)
Orders shipped out (fourteen)
Materials requisitioned
Direct labor cost
Overhead= 150% of direct labor cost.
P 300,000
2,400,000
2,000,000
1,700,000
800,000
The month-end work in proves inventory was:
Answer: P 1,600,000.
16. Ambo, Inc. manufactured 50,000 kilos of compound Am in 2011 at the following
costs:
Opening work-in-process of P 88,125.
Materials of P182,500 of which 90% is direct materials
Labor of P242,500 of which 93% is direct labor
Closing work-in-process of P67,500.
Factory overhead is 125% of direct labor cost and includes indirect materials and
indirect labor. The cost of goods manufactured is:
Answer: P 692,306
17. Burger Co.’s materials purchase during 2011 are P25,590 and materials put into
production are directed materials, respectively, worth P18,500 and P7,090. The total
factory payroll is P74,000 of which P50,000 represents direct labor. Other factory
overhead cost to process. Sales, Cost of goods sold, and the cost of goods
manufactured, respectively, are P130,000, P120,000, and P128,000.
By what amount did the company’s closing goods in process inventory exceed its
opening goods in process inventory?
Answer: P 3,590
18. Steak Co. is a manufacturing concern using the perpetual inventory system. The
following materials inventory account data is provided:
Beginning balance
Other debits to the account
Excess of ending inventory over beginning inventory
P 275,000
825,000
55,000
How much is the cost of materials issued to production?
Answer: P 770,000
19. The following selected information pertains to Ajax processing Co.: direct materials,
P62,500; indirect materials, P12,500; factory payroll, P75,000 of direct labor and
P11,250 of indirect labor; and other factory overhead incurred, P37,500.
The total conversion cost was:
Answer: P 136,250
20. Pistahan Corporation is a manufacturing company engaged in the production of a
single special product known as “Marvel”, Production costs are accumulated with the
use of a job-order-cost system.
The following information is available as of June 1, 2011.
Work-in-process
Direct materials inventory
P 10,710
48,600
In analyzing the job-order cost sheets, the records disclosed that the composition of the
work-in-process inventory on June 1, 2011 was as follows:
Direct material used
Direct labor (900 hours)
Factory overhead applied
P 3,960
4,500
2,250
P 10,710
The following manufacturing activity occurred during the month of June 2011:
Purchased direct materials costing P60,000
Direct labor worked 9,900 hours of P5 per hour
Factory overhead of P2.50 per direct labor hour was applied to production. At the end of
June 2011, the following information was gathered in connection with the inventories:
Inventory of work-in-process:
Direct Materials used
P 12,960
Direct labor (1,500 hours)
Factory overhead applied
7,500
3,750
P 24,210
P 51,000
Inventory of direct materials
Compute the cost of goods manufactured:
Answer: P118,350
21. Johnson uses a job order cost system and applies factory overhead to production
orders on the basis of direct-labor cost. The overhead rate for 2011 is 200% for
Department A and 50% for Department B. Job 123, started and completed during 2011,
was charged with the following costs:
Direct material
Direct labor
Factory overhead applied
Department
A
B
P 25,000
P 5,000
?
30,000
40,000
?
The total manufacturing cost associated with Job 123 should be
Answer: P135,000
22. The Following data are obtained from Gianne Manufacturing Company:
 Cost of goods manufactured is P187,500
 Inventory variations are as follows: raw materials ending inventory is one-third
based on raw materials beginning; no initial inventory of work-in-process, but at
the end of period P12,500 was on hand; finished goods inventory was four times
as large at end of period as at the start.
 Net income after taxes amounted to P26,000, income tax rate is 35%.
 Purchase of raw materials amounted to net income before taxes.
 Breakdown of costs incurred in manufacturing cost was as follows:
Raw material consumed
Direct labor
Overhead
50%
30%
20%
Compute the amount raw material beginning inventory:
Answer: P90,000.
23. The following cost data were taken from the records of a manufacturing company:
Depreciation on factory equipment
Depreciation on sales office
P 1,000
500
Advertising
Freight-out (shipping)
Wages of production workers
Raw materials used
Sales salaries and commissions
Factory rent
Factory insurance
Materials Handling
Administrative salaries
7,000
3,000
28,000
47,000
10,000
2,000
500
1,500
2,000
Based upon the above information, the manufacturing cost incurred during the year
was:
Answer: P80,000
24. Data pertaining to Lam Co.’s manufacturing operations:
Inventories
Direct Materials
Work-In-Process
Finished goods
4/1
P 18,000
9,000
27,000
4/30
P 15,000
6,000
36,000
Additional information for the month of April:
Direct Materials purchased
Direct labor payroll
Direct labor rate per hour
Factory overhead rate per direct labor hour
P 42,000
30,000
7.50
10.50
For the month of April, cost of goods manufactured was:
Answer: P 118,000
25. Carley Products has no work-in-process or finished goods inventories at the close of
business on December 31, 2011. The balances of Carley’s accounts as of December
31,2011 are as follow:
Cost of goods sold
General selling and administrative expenses
Sales
Factory overhead control
Factory overhead applied
Carley Products’ income before income taxes 2011 is”
Answer: P 608,000
P 2,040,000
900,000
3,600,000
700,000
648,000
26. A Company had the following total usage of direct labor and direct materials
Direct Labor (P8 per hour)
Direct Materials (P10 per pound)
Hours
400
Pounds
300
Incomplete job #101 has used 20 hours of direct labor and 8 pounds of direct materials.
Factory overhead is applied at the rate of 200% per direct labor peso. What is the
balance in work-in-process relating to job #101?
Answer: P 560 debit
27. The Childers Company manufactures widgets. During the fiscal year just ended, the
company incurred prime costs of P1,500,000 and conversion costs of P1,800,000.
Overhead is applied at the rate of 200& of direct labor cost. How much of the above
costs represent material cost?
Answer: P900,000.
28. Ajax Corporation transferred P72,000 of raw materials to its production department
in February and incurred P37,000 of conversion costs (P22,000 of direct labor and
P15,000 of overhead). At the beginning of the period, P14,000 of inventory (material
and conversion costs) was in process. At the end of the period, P18,000 of inventory
was in process. What was the cost of goods manufactured?
Answer: P105,000
29. Luna Co.’s year-end manufacturing costs were as follows:
Direct materials and direct labor
Depreciation of manufacturing equipment
Depreciation of factory building
Janitor’s wages for cleaning factory premises
P500,000
70,000
40,000
15,000
How much of these costs should be inventoried for external reporting purposes?
Answer: P625,000
30. Blum Corp. which manufactured plastic coated metal clips. The information was
among Blum’s year-end manufacturing costs.
Wages
Machine operators
Maintenance workers
Factory foremen
P200,000
30,000
90,000
Materials Used
Metal wire
P500,000
Lubricant for oiling machinery
Plastic coating
10,000
380,000
Blum’s year-end:
Answer:
Direct Labor
P200,000
Direct Materials
P880,000
31. Hamilton Company uses job order costing. Factory overhead is applied to
production at a determined rate of 150% of direct-labor cost. Any over-or under applied
factory overhead is closed to the cost of goods sold account at the end of each month.
Additional information is available as follows:

Job 101 was the only job in process at January 31, 2011, with accumulated costs
as follows:
Direct materials
Direct labor
Applied factory overhead





P4,000
2,000
3,000
P 9,000
Jobs 102,103 and 104 were started during February.
Direct materials requisitions foe February totaled P26,000.
Direct-labor cost of P20,000 was incurred for February.
Actual factory overhead was P32,000 for February.
The only job still in process at February 28, 2011 was Job 104, with costs of
P2,800 for direct materials and P1,800 for direct labor.
The cost of goods manufactured for February 2011 was:
Answer: P77,700
32. Using the same information in No. 31, any over- or under applied factory overhead
should be closed to the cost of goods sold account at February 28,2011, in the amount
of
Answer: P2,000 under applied.
33. Under Pick Company’s job order costing system, manufacturing overhead is applied
to work-in-process using a predetermined annual overhead rate. During Jnuary2011,
Picks transactions included the following:
Direct materials issued to production
Indirect materials issued to production
Manufacturing overhead incurred
Manufacturing overhead applied
P90,000
8,000
125,000
113,000
Direct labor costs
107,000
Pick has neither beginning nor enough ending work-in-process inventory. What was the
cost of jobs completed in January 2011?
Answer: P310,000
34. A company manufactures pipes and uses a job order costing system. During May,
the following jobs were started (no other jobs were in process) and the following costs
were incurred:
Materials requisitioned
Direct Labor
Job X
P10,000
5,000
P15,000
Job Y
P20,000
4,000
P24,000
Job Z
P15,000
2,500
P17,500
Total
P45,000
11,500
P56,500
In addition, estimated overhead of P300,000 and direct labor costs of P150,000 were
estimated to be incurred during the year. Actual overhead of P24,000 was incurred in
May; overhead is applied on the basis of direct labor pesos. If only Job X and Job Z
were completed during the month, the appropriate entry to record the initiation of all jobs
would be
Answer: Work-in-process
Direct Materials
Direct Labor
Applied factory overhead
P79,500
P45,000
11,500
23,000
35. Tastee-Treat Company prepares, packages, and distributes six frozen vegetables in
two different sized containers. The different vegetables and different sizes are prepared
in large batches. The company employs a normal cost job order costing system.
Manufacturing overhead is assigned to batches by a predetermined rate on the basis of
direct labor hours. The manufacturing overhead costs incurred by the company during
two recent years (adjusted for changes using current prices and wage rate) are
presented below.
Direct labor hours worked............................
Manufacturing overhead costs incurred
(adjusted for changes in current
Prices and wage rate):
Indirect labor……………………
Employee benefits……………..
Supplies………………………….
Power……………………………
Head and light ……………………….
Supervision …………………………..
2011
2,760,000
2012
2,160,000
P11,040,000
4,140,000
2,760,000
2,208,000
552,000
2,865,000
P8,640,000
3,240,000
2,160,000
1,728,000
552,000
2,625,000
Depreciation …………………..
Property taxes and insurance………..
Total overhead costs
7,930,000
3,005,000
P34,500,000
7,930,000
3,005,000
P29,880,000
What is the variable overhead rate?
Answer: P7.70
36. Using the same information in No. 35, what will be the total overhead rate for a
2,300,000 direct labor hour level of activity in 2012?
Answer: P13.46
37. Regan Company operates its factory on a two-shift basis and pays a late-shift
differential of 15%. Regan also pays a premium of 50% for overtime work. Since Regan
manufactures only for stock, the cost system provides for uniform direct\labor hourly
charges for production done without regard to shift worked or work done on an overtime
basis. Overtime and late-shift differentials are included in Regan’s factory overhead
application rate. The May payroll for production workers is as follows:
Wages at basis direct-labor rates …………………………… P325,000
Shift differentials ……………………………………………….
25,000
Overtime premiums ………………………………………..
10,000
For the month of May, what amount of direct labor should Regan charge to work-inprocess?
Answer: P325,000
38. Woodman Company applies factory overhead on the basis of direct labor hours.
Budget and actual data for direct labor and overhead for the year are as follows:
Direct labor hours
Factory overhead costs
Budget
P600,000
720,000
Actual
P550,000
680,000
The factory overhead for Woodman for the year is
Answer: Underapplied by P20,000
39. At the beginning of the year, Smith Inc. budgeted the following:
Units
Sales
Less:
10,000
P100,000
Total variable expenses
60,000
Total fixed expenses
Net Income
20,000
20,000
Factory overhead:
Variable
Fixed
P30, 000
10,000
There were no beginning inventories. At the end of the year, there was no work-inprocess; total factory overhead incurred in the year was P39, 500; and underapplied
factory overhead was P1,500. Factory overhead was applied on the basis of budgeted
unit production. How many units were produced this year?
Answer: P9,500
40. A company manufactures plastic products for the home and restaurant market. The
company also does contract work for other customers and utilizes a job order costing
system. The flexible budget covering next year’s expected range of activity is
Direct labor hours
Machine hours
Variable O/H costs
Fixed O/H costs
Total O/H costs
50,000
40,000
P100,000
150,000
P250,000
80,000
64,000
P160,000
150,000
P310,000
110,000
88,000
P220,000
150,000
P370,000
A predetermined overhead rate based on direct labor hours is used to apply total
overhead. Management has estimated that 100,000 direct labor hours will be used next
year. The predetermined overhead rate per direct labor hour to be used to apply total
overhead to the individual jobs next year is
Answer: P3.50
41. Schneider, Inc. had the following information relating to 2011.
Budgeted factory overhead
Actual factory overhead
Applied factory overhead
Estimated labor hours
P74, 800
P78, 300
P76, 500
44,000
If Schneider decides to use the actual results from 2011 to determine the 2012
overhead rate, what will the 2012 overhead rate be?
Answer: P1.740
42. The XYZ Company uses a predetermined overhead rate. XYZ prepared the
following budget at the beginning of the year:
Direct labor cost
Factory overhead
Direct labor hours
Machine hours
P12, 000
P25, 000
9,000
1,500
During the month of January, the cost sheet for order number 100 indicates P20 of raw
materials, P50 of direct labor, 10 hours of direct labor, and 5 machine hours. Order
number 100 consists of 49 units of product. CXYZ applies overhead based on direct
labor cost. What amount of overhead should be applied to order number 100?
Answer: P104.17
43. At the end of the last fiscal year, Baehr Company had the following account
balance.
Overapplied Overhead
P1, 000
Cost of goods sold
980,000
Work-in-process inventory
38,000
Finished goods inventory
82,000
The most common treat of the overapplied overhead would be to
Answer: Credit it to cost of goods sold.
44. The appropriate method for the disposition of underapplied or overapplied factory
overhead.
Answer: depends on the significance of the amount.
45. During the current accounting period, manufacturing company purchased P70,000
of raw materials, of which P50,000 of direct materials and P5,000 of indirect materials
were used in production. The company also incurred P45,000 of total labor costs and
P20,000 of other factory overhead costs. An analysis of the work-in-process control
account revealed P40,000 of direct labor costs. Based upon the above information,
what is the total amount accumulated in the factory overhead control account?
Answer: P30,000
A company allocate overhead to jobs in process using direct labor costs, raw material
costs, and machine hours. The overhead application rates for the current year are:
100% of direct materials
20% of raw materials
P117 per machine hour
A particular production run incurred the following costs:
Direct labor, P8,000
Raw materials, P2,000.
A total of 140 machine hours were required for the production run.
What is the total cost that would be charged to the production run?
Answer: P34,780
47. Pane Company uses a job costing system and applies overhead to products on the
basis of direct labor cost. Job No. 75, the only job in process on January 1, had the
following costs assigned as of that date: direct materials, P40,000; direct labor,
P80,000; and factory overhead, P120,000. The following selected costs were incurred
during the year.
Traceable to jobs:
Direct materials.
Direct labor.
Not traceable to jobs:
Factory materials and supplies.
Indirect labor.
Plant maintenance.
Depreciation on factory equipment
Other factory costs.
P178,000
345,000
P46,000
235,000
73,000
29,000
76,000
P523,000
456,000
Pane's profit plan for the year included budgeted direct labor of P320,000 and factory
overhead of P448,000. Assuming no work-in-process on December 31, Pane's
overhead for the year was
Answer: P24,000 overapplied
48. Avery Co. Uses a predetermined factory overhead rate based on direct labor hours.
For the month of October, Avery's budgeted overhead was P300,000 based on a
budgeted volume of 100,000 direct labor hours. Actual overhead amounted to P325,000
with actual direct labor hours totaling 110,000. How much was the overapplied or
underapplied overhead?
Answer: P5, 000 overapplied
49. The following is a standard cost variance analysis report on direct labor cost for a
division of a manufacturing company:
Job.
213
215
217
219
221
Actual
Hours at
Actual
Wages
P3,243
15, 345
6,754
19,788
3,370
Actual
Hours at
Standard
Wages
P3,700
15,675
7,000
18,755
3,470
Standard
Hours at
Standard
Wages
P3,100
15,000
6,600
19,250
2,650
What is the total flexible budget direct labor variance for the division?
Answer: P1,900 unfavorable
50. Cannon Cannery, Inc. Estimated its factory overhead at P510,000 for the year,
based on a normal capacity of 100,000 direct labor hours. Standard direct labor hours
for the year totaled 105,000, while the factory overhead control account at the end of
the year showed a balance of P540,000. How much was the underapplied factory
overhead for the year?
Answer: P4,500
51. Summit Company provided the inventory balances and manufacturing cost data for
the month of January.
Under Summit's cost system any over-or underapplied overhead is closed to the cost of
goods account at the end of the calendar year.
Inventories:
January 1. January 31
Direct Materials
P30,000
P40,000
Work-in-process
P15,000
20,000
Finished Goods
65,000
50,000
Factory overhead applied
Cost of goods manufactured
Direct materials used
Actual factory overhead
Month of January
P150,000
515,000
190,000
144,000
What would cost of goods sold be if under- or overapplied overhead were closed to cost
of goods sold?
Answer: P524,000
52. Using the same information in No. 51, what would cost of goods sold be if under- or
overapplied overhead were allocated to inventories and cost of goods sold?
Answer: P524,700
53. Worley Company has underapplied overhead of P45,000 for the year. Before
disposition of the underapplied overhead, selected year-end balances from Worley's
accounting records were:
Sales
Cost of goods sold
Direct materials inventory
Work-in-process inventory
Finished goods inventory
P1,200,000
720,000
36,000
54,000
90,000
Under Worley’s cost accounting system, over- or underapplied overhead is allocated to
appropriate inventories and CGS based on year-end balances in its year-end income
statement, Worley should report CGS of
Answer: P757,500
Costs of Quality: Spoilage and detective units
54. Harper Co's Job 501 for the manufacture of 2,200 coats, which was completed
during August at the unit cost presented below. Final inspection of Job 501 disclosed
200 spoiled coats which were sold to a jobber for P6,000.
Direct materials
Direct labor
Factory overhead(includes an allowance of
P1 for spoiled work)
P20
18
18
P56
Assume that spoilage loss is charged to all production during August. What
would be the unit cost of the good coats produced on Job 501?
Answer:P56.00
55. Using the same information in No. 54, assume instead that the spoilage loss is
attributable to the exacting specifications of Job 501 and is charged to this specific job.
What would be the unit cost of good coats produced on Job 501?
Answer: P57.50
56. Under Heller Company's job order cost system, estimated costs of defective
work(considered normal in the manufacturing process) are included in the
predetermined factory overhead rate. During March, Job No. 210 for 2,000 hand saws
was completed at the following costs per unit.
Direct materials
P5
Direct labor
4
Factory Overhead (applied at 150% of direct labor costs)
6
P15
Final inspection disclosed 100 defective saws, which were reworked at a cost of P2 per
unit for direct labor, plus overhead at the predetermined rate. The defective units fall
within the normal range. What is the total rework cost and to what account should it be
charged?
Answer: P500 to factory overhead control
57. During March, Hart Company incurred the following costs on Job 109 for the
manufacture of 200 motors:
Original cost accumulation:
Direct materials
P660
Direct labor
800
Factory overhead (150% of DL )
1,200
P2, 660
Direct costs of reworking 10 units:
Direct materials
Direct labor
Answer: P15.80
P100
160
P260
58. Using the same information in No. 57, assuming the rework cost were attributable to
internal failure or charged to factory overhead, what is the cost per finished unit of Job
109?
Answer: P13.30
59. Condotti Company's Job 205 for the manufacture of 6,600 coats was completed
during August 2011 at the following unit costs:
Direct materials
Direct labor
Factory overhead (include an allowance of
P50 spoiled work)
P1500
1,000
500
P3,000
Final inspection of Job 205 disclosed 600 spoiled coats which were sold to a jobber for
P600,000. Assume that spoilage loss is charged to all production duroing August 2011.
What would be the unit cost of the good coats produced on Job 205?
Answer: P3000
60. Using the same information in No. 59, assuming the spoilage loss attributable to
exacting specifications or chargeable to particular job, what would be the unit cost of the
good coats produced on Job 205?
Answer: P3,145
61.Simpson Company manufactures electric drills to the exacting specifications of
various customers. During April 2011, Job 403 for the production of 1,100 drills was
completed at the following costs per unit:
Direct materials……………………………………………………
Direct labor…………………………………………………………
Applied factory overhead…………………………………………
Total…………………………………………………………………
P10
8
12
P30
Answer: P32
62. Some units of output failed to pass final inspection at the end of the manufacturing
process. The production and inspection supervisors determined that the incremental
revenue from reworking the units exceeded the cost of rework. The rework of the
defective units was authorized, and the following costs were incurred in reworking the
units:
Materials requisitioned from stores:
Direct materials:…………………………………………
Miscellaneous supplies………………………………..
Direct labor………………………………………………………
P5,000
P300
P14,000
Answer: Work-in-process inventory control for P5,000 and factory overhead
control for P35,300
63. In a job order accounting situation, assume that there are P45,000 of charges to a
given job consisting of 25,000 material, P10,000 direct labor, and P10,000 applied
overhead. The job yields 500 units of a product of which 100 are rejected as spoiled
with no salvage value. The cost of the spoilage is determined to be P9,000. If the firm
wishes to use this job as the basis for setting a spoilage standard for comparison to
future work, the conceptually superior way to express the spoilage rate would be
Answer: 25 % of good outputs.
64. Gumamela Mfg. Co.started 150 units in process on job order #13. The prime costs
placed in a process consisted of P30,000 and P18,000 for materials and direct labor,
respectively, and a pre-determined rate was used to charge factory overhead to
production at 133-1/3% of the direct labor cost. Upon completion of the job order, units
equal to 20% of the good output were rejected for failing to meet strict quality control
requirements.
The company sells rejected units as scrap at only 1/3 of production cost, and bills
customers at 150percent of production cost.
If the rejected units were ascribed to company failure, the billing price of job order #13
would be:
Answer: P90,000
65. Using the same information in No. 64, and if the rejected units were ascribed to
customer action, the billing price of job order #13 would be:
Answer: P102,000
Service Cost Allocation
66. Boa Corp. distributes service department overhead costs directly to producing
departments without allocation to the other service department. Information for the
month of June is as follows:
Overhead costs incurred......
Service provided to departments:
Maintenance........................
Utilities...............................
Producing-A
Producing-B
Totals
Service Departments
Maintenance
Utilities
P20,000
P10,000
--20%
40%
40%
100%
10%
-30%
60%
100%
The amount of maintenance department costs distributed to Producing-A department for
June was
Answer: P10,000
67. UST allocates support department costs to its individual schools using the step
method. Information for May 2011 is as follows:
Costs incurred
Service percentages provided to:
Maintenance
Power
School of Education
School of Technology
Support Department
Maintenance
Power
P99,000
P54,000
--20%
30%
50%
100%
10%
--20%
70%
100%
What is the amount of May 2008 support department costs allocated to School of
Education?
Answer: P46,100
68. Hartwell Company distributes the sevice department overhead costs directly to
producing departments without allocation to the other service departments. Information
for the month of January is presented as follows:
Overhead costs incurred
Service provided to:
Maintenance department
Utilities department
Producing department A
Producing department B
Maintenance
P18, 700
--20%
40%
40%
Utilities
P9, 000
10%
--30%
60%
The amount of utilities department costs distributed to producing department B for
January should be
Answer: P6,000
69. Using the same information in No. 68, and assume instead that Hartwell Company
distributes the service departments’ overhead costs based on the step-down method.
Which of the following methods is true?
Answer: Allocate maintenance expense to departments A and B and the utilities
department.
70. Using the same information in No.68, and under the step-down method, how much
of Hartwell’s utilities department cost is allocated between department A and B?
Answer: P 12,740
71. Using the same information in No.68, and that Hartwell Company distributes service
department overhead costs based on the reciprocal method, what would be the formula
to determine the total maintenance costs?
Answer: M= P18,700+.10U
72. Using the same information in No.68, and that Hartwell Company distributes utilities
department overhead costs based on the reciprocal method, what would be the formula
to determine the total utilities costs?
Answer: U=P9,000+.20M
73. AJD Company has two service departments (A and B) and two producing
departments (X and Y). data provided are as follows:
Direct costs…………………
Services performed
by Dept. A…………..
Services performed
By Dept. B…………..
Service
Departments
A
B
P150
P350
40%
20%
Operating
Departments
X
Y
P5,000 P6,000
40%
20%
70%
10%
AJD Company uses the direct method to allocate service department costs. The service
department cost allocated to Department Y is:
Answer: P87.50
74. Using the same information in No. 73, what is the total cost for Department X:
Answer: P5,295.83
75. Using the same information in No. 73, except that step-down is used to allocate
service department costs. Department A costs are allocated first. The service
department cost allocated to Department Y is:
Answer: P75.00
76. Using the same information in Nos. 73 and 75, what is the total cost for Department
X:
Answer: P5,375.00
77. Using the same information in No. 73, except that the reciprocal method is used to
allocate service department costs. The service department cost allocated to department
Y is:
Answer: P85.00
78. Using the same information in Nos. 74 and 77, what is the total cost for Department
X:
Answer: P5,085.00
79. A company has two service departments (S1 and S2) and two production
departments (P1 and P2). Departmental data for January were as follows:
S1
S2
Costs incurred:…………………….
Service provided to:
S1……………………………………
S2……………………………………
P1……………………………………
P2……………………………………
P27,000
-10%
50%
40%
P18,000
20%
-30%
50%
What are the total allocated service department costs to P2 if the company uses the
reciprocal method of allocating its service department costs? (Round calculations to the
nearest whole number.)
Answer: P23,051
80. Computer Complex, which offers two main services:
(1) Time on a time- shared computer system and
(2) Proprietary computer programs. Computer time is provided by the operation
department (Op) and programs of each service used by each department for a typical
period is presented below.
User
Op……………………………………………………
P……………………………………………………..
Sold to customers…………………………………
Total…………………………………………………
Op
-30%
70%
100%
P
40%
-60%
100%
In a typical period, the operation department spends P4, 500 and the programming
department spends P2, 500.
Under the step-down method, what is the cost of the computer time and the computer
programs or sale?
Answer:
TIME
P3,150
PROGRAMS:
P3,850
81. Using the same information in No. 68, using the reciprocal method what is the
solution to the service cost allocation problem?
Answer: Op = 4,500+.40P; P = 2,500+.30Op
82. A hospital has a P100, 000 expected utility bill this year. The janitorial, accounting,
and orderlies departments are service functions to the operating, hospital rooms, and
laboratories departments. Floor space assigned to each department is
Department
Janitorial…………………………………………………
Accounting………………………………………………
Orderlies…………………………………………………
Operating………………………………………………..
Hospital Rooms………………………………………...
Laboratories…………………………………………….
Square Footage
1,000
2,000
7,000
4,000
30,000
6,000
50,000
How much of the P100, 000 will eventually become the hospital department total costs,
assuming a direct allocation based on square footage is used?
Answer: P75,000
Items 83 and 84 are based on the following information:
Fabricating and Fishing are the two production departments of a manufacturing
company. Building Operations and Information Services are service departments that
provide support to the two production departments to allocate the service department
costs to the production departments. Square footage is used to allocate building
operations, and computer time is used to allocate information services. The costs of the
service departments and relevant operating data for the departments are as follows:
Costs:
Labor and benefit…………….
costs
Other traceable costs………...
Total……………………………
Operating Data:
Square feet occupied
Computer time……………….
(in hours)
Building
Operations
Information
Services
P200,000
P300,000
350,000
P550,000
900,000
1,200,000
5,000
200
10,000
Fabricating
Finishing
16,000
1,200
24,000
600
83. If the company employs the direct method to allocate the costs of the service
departments, then the amount of building operations costs allocated to fabricating would
be
Answer: P220,000
84. If the company employs the step method to allocate the costs of the service
departments and information services costs are allocated first, then the total amount of
service department costs (Information Services and Building Operations) allocated to
Finishing would be
Answer: P762,000
Items 85 through 89 are based on the following information:
The managers of Rochester Manufacturing are discussing ways to allocate the cost of
service departments such as Quality Control and Maintenance to the production
departments. To aid them in this discussion the controller has provided the following
information:
Quality
Control Maintenance Machining
Budgeted overhead costs
before allocation……. P350,000
Budgeted machine hours…
-Budgeted directed labor hours
-Budgeted hours of service:
Quality control…………
-Maintenance…………. 10,000
P200,000
---
P400,000
50,000
--
7,000
--
21,000
18,000
Assembly
Total
P300,000 P1,250,000
-50,000
25,000
25,000
7,000
12,000
35,000
40,000
85. If Rochester Manufacturing uses the direct method of allocating service department
costs, the total service costs allocated to the assembly department would be
Answer: P167,500
86. Using the direct method, the total amount of overhead allocated to each machine
hour at Rochester Manufacturing would be
Answer: P15.65
87. If Rochester Manufacturing uses the step- down method of allocating service costs
beginning with quality control, the maintenance costs allocated to the Assembly
Department would be
Answer: P108,000
88. If Rochester Manufacturing uses the reciprocal method of allocating service costs,
the total amount of quality control costs(rounded to the nearest peso) to be allocated to
the other departments would be
Answer: P421,053
89. If Rochester Manufacturing decides not to allocate service costs to the production
departments, the overhead allocated to each direct labor hour in the Assembly
Department would be
Answer: P12.00
Items 90 and 91 are based on the following information.
M&P Tool has three service departments that support the production area. Outlined
below is the estimated overheard by department for the upcoming year.
Service Departments
Receiving…………………….
Repair………………………...
Total…………………………..
Production Departments
Assembly…………………….
Bolting………………………..
Estimated
Overhead
P25,000
35,000
10,000
Number of
Employees
2
2
1
25
12
The Repair Department supports the greatest number of departments, followed by the
Tool Department. Overhead cost is allocated to departments based upon the number of
employees.
90. Using the direct method of allocation, how much of the Repair Department’s
overhead will be allocated to the Tool Department?
Answer: Zero
91. Using the step-down method of allocation, the allocation from the Repair
Department to the Tool Department would be
Items 92 and 93 are based on the following information:
The Photocopying Department provides photocopy services for both Departments A
and B and has prepared its total budget using the following information for next year:
Fixed costs…………………………..
Available capacity…………………..
Budgeted usage
Department A……………….
Department B……………….
Variable cost………………………..
P100,000
4,000,000 pages
1,200,000 pages
2,400,000 pages
0.03 per page
92. Assume that the single- rate method of cost allocation is used and the allocation
base is budgeted usage. How much photocopying cost will be allocated to Department
B in the budget year?
Answer: P875
93. Assume that the dual rate cost allocation method is used and the allocation basis is
budgeted usage for fixed costs and actual usage for variable costs. How much cost
would be allocated to Department A is 1,400,000 pages and actual usage for
Department B is 2,100,000 pages?
Answer: P75,333
94. Dext stores has three stores and one service center. The percentage of service
used in the current year are store A, 25%; store B, 40%; and store C, 45%. The
expected long-term budgeted usages are store A, 30%; store B, 30%; and store C,
40%. The service center costs were budgeted at P450,000 fixed and P550,000 variable.
Actual fixed costs were P430,000 and actual variable costs were P570,000. Dexter
allocates the budgeted variable costs of the central unit based on actual use of the unit
service, and allocates budgeted fixed costs based on expected long- term use of the
unit’s services. Service center costs allocated to store B are:
Answer: P355,000
95. In allocating factory service department costs to producing departments, which one
of the following items would most likely be used as an activity base?
Answer: Units of electric power consumed
MUSOR, Sittie Saimah B.
V- BS Accountancy