Accounting for Manufacturing Overhead
1.-3. JYD Corporation has two departments, Assembly and Finishing. The following are data available for two
departments in 2021:
Machine hours per unit
Direct labor hours
Budgeted (Estimated) Factory
Overhead
Budgeted machine hours
Budgeted direct labor hours

Assembly
10 hours
2 hours
Finishing
5 hours
1 hour
₱325,000
₱175,000
15,000 hours
3,000 hours
2,500 hours
2,000 hours
Using plant-wide Factory Overhead rate based on direct labor hours, how much is the Factory
Overhead rate per unit?
Total factory overhead = 325,000 + 175,000 = ₱500,000
Total direct labor hours = 3,000 + 2,000 = 5,000 hours
Factory overhead rate per direct labor hours = 500,000/5,000 = ₱100 per hour
Total direct labor hours required per unit = 2 + 1 = 3 labor hours
Factory overhead rate per unit = ₱100 * 3
Factory overhead rate per unit = ₱300 per unit

Assume in the Assembly Department, machine hours are the basis in calculation the Factory
overhead rate, what is the departmental Factory overhead rate per unit?
Total assembly department factory overhead = 325,000
Total assembly department machine hours = 15,000
Assembly department factory overhead rate per machine hour = 325,000/15,000 = 21.6667
Factory overhead rate per unit = 21.6667*10
Factory overhead rate per unit = ₱216.67

Assume in the Finishing Department, direct labor hours are the basis in calculation the Factory
overhead rate, what is the departmental Factory overhead rate per unit?
Total finishing department factory overhead = ₱175,000
Total finishing department direct labor hours = 2,000
Finishing department factory overhead rate per direct labor hour = 175,000/2,000 = 87.50
Factory overhead rate per unit = 87.50*1
Factory overhead rate per unit = ₱87.50
4.-10. Peter Corporation makes shirts that it sells to retailers. The company uses a job-order costing system in
which predetermined overhead rates are used to apply factory overhead costs to jobs. The predetermined
rate in the Sewing Department is based on machine hours, and in the Cutting department is based on direct
labor cost. The following estimates are made at the beginning of the year.
Sewing Department
Cutting Department
Direct labor hours
24,000
120,000
Machine hours
140,000
10,000
Direct material cost
1,020,000
1,300,000
Direct labor cost
260,000
840,000
Factory overhead cost
1,204,000
1,470,000
Job 101 was started on February 1 and completed on February 25. The company's cost records show the
following information concerning the job.
Sewing Department
Cutting Department
Direct labor hours
60
170
Machine hours
220
40
Direct material cost
940
664
Direct labor cost
580
1,360
At the end of the year, the records of the company show the actual cost and data for all jobs worked during
this year.
Sewing
Cutting
Direct labor hours
20,000
124,000
Machine hours
130,000
18,000
Direct material cost
860,000
1,360,000
Direct labor cost
216,000
872,000
Factory overhead cost
1,140,000
1,500,000
 Compute the factory overhead rate used in the Sewing Department during the year.
Estimated Factory Overhead Cost 1,204,000
÷ Estimated Machine Hours
÷ 140,000
Factory Overhead Rate
₱8.60/machine hour
 Compute the factory overhead rate used in the Cutting Department during the year.
estimated Factory Overhead Cost 1,470,000
÷ Estimated Direct Labor Cost
÷ 840,000
Factory Overhead Rate
₱1.75 of Direct Labor Cost
 Compute the total factory overhead cost applied to Job 101.
Sewing department: 220 machine hours * 8.60/machine hour = 1,892
Cutting department: 1,360 Direct Labor Cost * 175% of Direct Labor = 2,380




Total Factory Overhead Applied to Job 101 = 4,272
What would be the total cost of Job 101?
Sewing department: 940 direct materials + 580 direct labor + 1,892 factory overhead applied =
3,412 total cost
Cutting department: 664 direct materials + 1,360 direct labor + 2,380 factory overhead applied =
4,404 total cost
Total cost of Job 101 = 7,816
If Job 101 contained 100 units, what would be the unit cost?
Job 101
Sewing
Formula and
Cutting
Formula and
Total
Department
Computation
Department
Computation
Direct
940
664
1,604
Material Cost
Direct Labor
580
1,364
1,940
Cost
Predetermined
Predetermined
Factory
Overhead Rate
Overhead Rate
Overhead
1,892
* Machine
2,380
* Direct Labor
4,272
Cost
Hours = 8.6 *
Cost = 1.75 *
220
1,360
Total Cost
3,412
4,404
7,816
Divided by
Number of
100
Units
Unit Cost
78.16
What would be the under or over-applied Factory overhead in the Sewing Department at the end of
the year?
Sewing Department
Formula and Computation
Predetermined Overhead Rate
Applied Factory Overhead
1,118,000
* Machine Hours = 8.6 *
Cost
130,000
Actual Factory Overhead Cost
(1,140,000)
Under-applied Factory
22,000
Overhead Cost
What would be the under or over-applied Factory overhead in the Cutting Department at the end of
the year?
Cutting Department
Formula and Computation
Applied Factory Overhead
Cost
1,526,000
Actual Factory Overhead
Cost
Over-applied Factory
Overhead Cost
(1,500,000)
Predetermined Overhead
Rate * Direct Labor Cost =
1.75 * 872,000
26,000
Note: Underapplied Overhead Cost = Applied Overhead Cost < Actual Overhead Cost
Overapplied Overhead Cost = Applied Overhead Cost > Actual Overhead Cost
11-12. The following are the flexible budget of Coco Corporation in different levels of direct labor hours.
Variable Factory Overhead
Direct labor hours
20,000 | 30,000 | 40,000
40,000 | 60,000 | 80,000
Fixed Factory Overhead
10,000 | 10,000 | 10,000
Each product needs 5 direct labor hours and the company expects to produce 2,000 units in 2021.


Calculate the total factory overhead rate per unit using direct labor hours as an allocation base.
Variable overhead = 5 * 2000 * 2 = 20,000
Fixed overhead = 10,000
Total overhead = 30,000
Budgeted Direct Labor hours = 5 * 2000 = 10,000
Total overhead rate = total overhead /budgeted direct labor hours
= 30,000 / 10,000 = ₱3 per DLH
Calculate the total factory overhead rate per unit using units of production as an allocation base.
Total overhead = 30,000
Budgeted number of units = 2,000
Overhead rate = total overhead / budgeted number of units
= 30,000 / 2,000 = ₱15 per DLH
13.-17. Jose Corporation makes bottles using the latest automated technology. The company applies Factory
Overhead cost to products on the basis of machine hours. The following are estimates used to determine the
factory overhead rates at the start of the year.
Machine Hours
150,000
Factory Overhead Cost
1,800,000
The company cost records show the following actual cost incurred for the year.
Machine Hours
120,000
Factory Overhead Cost
1,700,000
Raw Materials
60,000
Work in Process (includes Factory Overhead
200,000
applied of ₱72,000)
Finished Goods (includes Factory Overhead applied
1,000,000
of ₱360,000)
Cost of Goods Sold (includes Factory Overhead
2,800,000
applied of ₱1,008,000)
 Compute the Factory Overhead rate.
Factory overhead rate = Factory overhead cost/ Machine hours
= 1,800,000/150,000 = ₱12 per machine hour
 Computer the under or over-applied Factory Overhead.
Applied factory overhead = Actual machine hours * Factory overhead rate
= 120,000 * 12 = 1,440,000
Under applied factory overhead = Actual factory overhead cost - Applied factory overhead cost
= 1,700,000 – 1,440,000 = ₱260,000

Assume the variance is material, what is the adjustment of the Cost of Goods Sold?
General Journal
Debit
Credit
Cost of Goods Sold
₱260,000
Manufacturing overhead
₱260,000

Assume the variance is material, what is the variance share of the Finished Goods Inventory account?
Variance share of the Finished Goods Inventory account = Under applied Factory Overhead x Factory
Overhead applied to Finished Goods / Total Applied overhead

= 260,000 x 360,000/1,440,000
= ₱65,000
Assume the variance is material, what is the variance share of the Work in Process account?
Variance share of the Work in Process account = Under applied Factory Overhead x Factory
Overhead applied to Work in Process / Total Applied overhead
= 260000 x 72000/1440000
= ₱13,000
18.-21. Ethel Corporation has the following data for the year 2021:
Estimated Factory Overhead
₱40,000 + (₱2 * Machine hour rate)
Estimated machine hours
5,000
Assume that Ethel Corporation has worked on three jobs: 01; 02; and 03 last year. 1,500 machine hours were
spent for Job 01; 2,000 machine hours for Job 02; and 1,700 machine hours for Job 03. The actual factory
overhead is ₱56,000 using 5,200 machine hours.




What is the predetermined Factory Overhead?
Predetermined factory overhead = Estimated overhead cost/ estimated machine hours
= [₱40,000 + (5,000 * ₱2 per machine hours)] / 5,000 machine
hours
= [₱40,000 + ₱10,000] / 5,000 machine hours
= ₱50,000 / 5,000 hours
= ₱10
What is the expected Factory Overhead for an actual level of activity of 5,200 machine hours?
Estimated factory overhead = ₱40,000 + (₱2 x machine hours)
= ₱40,000 + (₱2 x 5,200 hours)
= ₱40,000 + ₱10,400
= ₱50,400
What is the Factory Overhead applied to Job 03?
Applied Factory overhead = Predetermined factory overhead x actual machine hours used in Job 03
= ₱10 * 1,700 machine hours
= ₱17,000
What is the total under or over-applied Factory Overhead?
Total under or overapplied factory overhead = Actual factory overhead - Expected factory overhead
= ₱56,000 - ₱50,400
= ₱5,600 underapplied
22.-24. Senen Corporation has two service departments (Maintenance Department and Security Department)
and two producing departments (Assembly Department and Finishing Department). The following are the
percentage usage of each department.
Departments
Use of Maintenance Department
Use of Security Department
Maintenance
5%
Security
10%
Assembly
60%
40%
Finishing
30%
55%
The Maintenance Department cost is ₱900,000 and the Security Department cost is ₱500,000.

Compute the service cost allocated to Security Department using the direct method.
Service Departments
Maintenance Security
₱900,000
₱500,000
Producing
Departments
Assembly Finishing
Total
Departmental cost before allocation
₱1,400,000
Allocation:
Maintenance department cost (60/90: 30/90) (₱900,000)
₱600,000 ₱300,000
Security department cost (40/95: 55/95)
(₱500,000) ₱210,526 ₱289,474
Total Costs
₱810,526 ₱589,474 ₱1,400,000
0

Compute the service cost allocated to Maintenance Department using the step-down/sequential
method.
Departmental cost before allocation
Allocation:
Maintenance department cost (10%: 60%:
30%)
Security department cost (40/95: 55/95)
Total Costs

Service Departments Producing Departments
Total
Maintenance Security
Assembly Finishing
₱900,000 ₱500,000
₱1,400,000
(₱900,000)
-
90,000
540,000
270,000
-
(₱590,000) ₱248,421 ₱341,579
₱788,421 ₱611,579 ₱1,400,000
0
Compute the service cost allocated to Security Department using the reciprocal method
Let M = maintenance
Let S = security
M=900,000+0.05S
S=500,000+0.10M
M=900,000+0.05S
M=900,000+0.05(500,000+0.10M) (the equation of S is substituted)
M=900,000+25,000+0.005M (the 0.05 is distributed) {500,000 * 0.05 = 25,000; 0.05 * 0.10M =
0.005M}
1M−0.005M=925,000 (the 0.005M is transposed to the left side to isolate the variable M.)
0.995M=925,000
M=929,648 (rounded)
S=500,000+0.10M
S=500,000+0.10(929,648)
S=500,000+92,965
S=592,965 (rounded)
The question is, how much is the cost allocated to the security department?
Therefore, it is 10% of the total maintenance department costs.
929,648∗10%=92,965 (rounded)
25.-26. JYD Manufacturing Company has two production departments (Fabrication and Assembly) and three
services departments (General Factory Administration, Factory Maintenance, and Factory Cafeteria).
A summary of the year's overhead cost and other data for each department prior to allocation of service
department costs appear below:
Fabrication
Overhead Costs
Assembly
₱6,730,000 ₱4,850,000
General Factory
Administration
Factory
Maintenance
Factory
Cafeteria
₱160,000
₱203,200
₱240,000
Direct Labor Costs
562,500
437,500
31,000
27,000
42,000
Number of
Employees
280
200
12
8
20
Square Footage
Occupied
88,000
72,000
1,750
2,000
4,800
The costs of the General Factory Administration, Factory Maintenance, and Factory Cafeteria are allocated on
the basis of direct labor hours, square footage occupied, and the number of employees respectively. It is the
company's policy that the order of distribution is based on the highest dollar amount of costs originating in
the service departments and the direct method is used.


What is the total overhead cost allocated to the Fabrication Department?
Total Overhead Cost Allocation (Fabrication) = Cost Allocated from General Factory + Cost Allocated
from Factory Maintenance + Cost Allocated from Factory Cafeteria
= ₱90,000 + ₱111,760 + ₱140,000
= ₱341,760
Assuming Assembly Department uses direct labor hours, what is the Factory Overhead rate of the
Assembly Department?
Total Overhead Cost (Assembly) = Overhead Cost of Assembly + Cost Allocated from General
Factory + Cost Allocated from Factory Maintenance + Cost Allocated from Factory Cafeteria
= ₱4,850,000 + ₱70,000 + ₱91,440 + ₱100,000
= ₱5,111,440
Factory Overhead Rate (Assembly) = Total Overhead Cost (Assembly) / Direct Labor Hours
= ₱5,111,440 / 437,500 hours
= ₱11,68 per hour
27.-31. Bambina Corporation, a manufacturer of beauty products has the following partially completed
manufacturing cost data for its production. The relevant range of production is 800,000 to 1,200,000 per year.





Units produced
800,000
960,000
1,200,000
Total production costs
?
?
?
Total variable costs
320,000
?
?
Total fixed costs
480,000
?
?
Total costs
800,000
?
?
Variable cost per unit
?
?
?
Fixed cost per unit
?
?
?
Total cost per unit
?
?
?
What are the total production costs for the 960,000 units produced? 864,000
What are the total production costs for the 1,200,000 units produced? 960,000
What is the total cost per unit for the 800,000 units produced? 1
What is the total cost per unit for the 960,000 units produced? 0.90
What is the total cost per unit for the 1,200,000 units produced? 0.80
Units produced
800,000
960,000
1,200,000
Total production costs (Total variable cost +
total fixed cost)
= 320,000 +
480,000 =
800,000
= 384,000 +
480,000 =
864,000
= 480,000 +
480,000 = 960,000
Total variable costs (Variable cost per unit *
units produced)
320,000
= 0.40 * 960,000
= 384,000
= 0.40 * 1,200,000
= 480,000
Total fixed costs (remain fixed in every activity
level)
480,000
480,000
480,000
Total costs (Total variable cost + total fixed
cost)
800,000
= 384,000 +
480,000 =
864,000
= 480,000 +
480,000 = 960,000
Variable cost per unit (Total variable cost /
Units produced) (remain fixed in every activity
level)
= 320,000 /
800,000 = 0.40
0.40
0.40
Fixed cost per unit (Total fixed cost / Units
produced)
= 480,000 /
800,000 = 0.60
= 480,000 /
960,000 = 0.50
= 480,000 /
1,200,000 = 0.40
Total cost per unit (Total costs/units
produced)
= 800,000 /
800,000 = 1
= 864,000 /
960,000 = 0.90
= 960,000 /
1,200,000 = 0.80
Units produced
800,000 960,000 1,200,000
Total production costs (here we assume that all the fixed and variable costs
are related to production)
800,000 864,000
960,000
Total variable costs
320,000 384,000
480,000
Total fixed costs
480,000 480,000
480,000
Total costs
800,000
864,000
960,000
Variable cost per unit
0.40
0.40
0.40
Fixed cost per unit
0.60
0.50
0.40
Total cost per unit
1
0.90
0.80
32.-35. Nas Corporation's managers in the stamping department have been studying the overhead cost and the
relationship with machine hours. The following are data from the most recent 12 months.
Month
Overhead
Machine hours
January
5,030
2,730
February
1,600
600
March
7,210
3,403
April
4,560
2,200
May
6,880
3,411
June
6,520
2,586
July
6,230
3,364
August
5,570
2,411
September
7,728
3,960
October
5,810
2,897
November
4,580
2,207
December
6,010
2,864
The manager of the department has requested a regression analysis of these two variables. The staff person
performing the analysis decided to exclude February. She observed the volume of activity was very low for that
month because of two factors: a severe flue outbreak and an electrical fire that disrupted operations for about
10 working days.
 Using the high-low point method, compute the fixed cost.
 Using the high-low point method, how much are the estimated overhead costs for 3,000 machine
hours?
 Using the least square (regression) analysis, compute the fixed cost.
 Using the least square (regression) analysis, how much are the estimated overheads for 3,000 machine
hours?