COST ACCOUNTING Lesson 1: Introduction to Cost Accounting (from the word file given) Comparison of Financial, Managerial and Cost Accounting Financial Accounting – use of accounting information for reporting to external parties, including investors and creditors. It is primarily concerned with financial statements for external use of stakeholders. Managerial Accounting – focuses on the needs of parties within the organization, rather than interested parties outside the organization. Cost Accounting – the intersection between the financial and managerial accounting. It provides product cost information to the stakeholders. Merchandising vs. Manufacturing Operations Merchandising company normally buys a product that is ready for resale when it is received. Cost of goods sold refers to the direct costs of producing the goods sold by a company. Also referred to as Cost of sales. Cost of goods sold for a merchandising company: Manufacturing company refers to a large-scale production of goods that converts raw materials, parts, and components into finished merchandise using manual labor and/or machines. The cost of goods sold for manufacturing company is more complex than in merchandising company. Two Basic Product-Costing Systems 1. Job order costing – a system for allocating costs to groups of unique product. 2. Process costing – system applicable to a continuous process of production of the same or similar goods. Major Difference Between Process and Job Order Costing Process Costing 1. Homogeneous units pass through a series of similar processes. 2. Costs are accumulated by processing department. 3. Unit costs are computed by dividing the individual departments’ costs by the equivalent production. 4. The cost of production report provides the detail for the WIP account for each department Job Order Costing 1. Unique jobs are worked on during a time period 2. Costs are accumulated by individual job. 3. Unit costs are determined by dividing the total costs on the job cost sheet by the number of units on the job. 4. The job cost sheet provides the detail for the WIP account. Lesson 2: Costs – Concepts and Classifications Cost is the cash or cash equivalent value sacrificed for goods and services that are expected to bring a current or future benefit to the organization. Classification of Costs A. Manufacturing costs/Product costs/Inventoriable costs (Part of COGS) 1. Direct materials (DM) – materials that become part of a finished product and can be conveniently and economically traced to specific product units. These materials are direct costs. 2. Direct labor (DL) – labor costs for specific work performed on products that can be conveniently and economically traced to end products. These are direct costs. 3. Factory overhead (FOH) – varied collection of production-related costs that cannot be practically or conveniently traced directly to end products. Indirect materials and labor are part of factory overhead costs. Prime costs = DM + DL Conversion costs = DL + FOH B. Non-manufacturing costs/Period costs (Part of operating expenses) 1. Marketing or selling expense – costs necessary to secure customer orders and get the finished product or service in to the hands of the customer. 2. Administrative or general expenses – include all-executive, organizational, and clerical expenses that cannot logically be included under either production or marketing. C. Costs Classified as to Variability 1. Fixed costs – costs which remain constant in total, irrespective of the volume of production. Two categories: a. Committed fixed costs – costs that represent relatively long term commitments on the part of management as a result of a past decision. Example is depreciation b. Managed fixed costs – costs that are incurred on a short-term basis and can be more easily modified in response to changes in management objectives. Example is advertising, research and development. 2. Variable costs – costs which vary directly, in total, in relation to volume of production. 3. Mixed costs – costs with fixed and variable components. Two types of mixed costs: a. Semi-variable costs – fixed portion of a semivariable cost usually represents a minimum fee for making a particular item or service available. Example is the cost of electricity. b. Step costs – the fixed part of step costs changes abruptly at various activity levels because these costs are acquired in indivisible portions. It is similar to a fixed cost within a very small relevant range. There are different methods of separating mixed costs into fixed and variable components: 1. Scatter graph 2. High-low point – identify the highest and lowest activity then deduct both to get the value of denominator. Get the value of the cost of the highest and lowest activity then deduct both to get the value of your numerator. Then divide to get the variable rate. 3. Method of least square – there are 3 formulas to be used in least-square method: Y = a + bx ∑Y = na + b ∑x ∑XY = ∑xa + b ∑x 2 Common cost – cost of facilities or services employed in two or more accounting periods, operations, commodities, or services. Joint costs – costs of materials, labor, and overhead incurred in the manufacture of two or more products at the same time. Capital expenditure – expenditure intended to benefit more than one accounting periods and is recorded as an asset. Example is depreciation, amortization and depletion Revenue expenditure – expenditure that will benefit current period only and is recorded as an asset. Standard costs – predetermined costs for DM, DL and FOH. It is a budget for the production of one unit of product or service. Opportunity costs – the benefit given up when one alternative is chosen over another. Differential costs – costs that is present under one alternative but is absent in whole or in part under another alternative. Relevant costs – future cost that change across the alternatives. Example, COGS, advertising and others. Out-of-pocket cost - cost that requires the payment of money as a result of their incurrence. Sunk costs – a cost for which an outlay has already been made and it cannot be changed by present or future decision. Controllable cost – it is said to be a controllable cost at a particular level of management if that level has power to authorize the cost. Lesson 3: Cost Accounting Cycle Manufacturing Inventory Accounts 1. Materials Inventory – made up of the balances of materials and supplies on hand. 2. Work in Process inventory – all manufacturing costs incurred and assigned to products being produced. 3. Finished goods inventory - cost of products completed but unsold as of that date. COST ACCOUNTING (PPT) COST ACCOUNTING DEFINED -Is a system that records, summarizes, analyzes, and interprets the details of cost of materials, labor, and overhead necessary to produce and sell an article. -Refers to the gathering and providing of information for decision needs – ranging from the management recurring operations to the making of strategic decisions and the formulation of major policies Indirect materials Indirect labor Other manufacturing overhead MANUFACTURING OVERHEAD CLASSIFIED Indirect materials – this are materials used in the manufacturing process that cannot be easily traceable to the finished goods. -Glue used in manufacturing arm chairs; Thread used in sewing a suit; Screw, nail and paint used in construction -Refers to recording, classifying and reporting all costs aspects of company performance during period Indirect Labor – wages incurred for factory personnel who did directly work on finished product. PURPOSE OF COST ACCOUNTING Salary of factory supervisors and managers; Wages of janitors, crew and maintenance personnel -Helps the management in planning and controlling activities -Helps the management in answering questions like: *Which of our costs are out of line, and how can they be controlled? *Are our sales prices set realistically in relation to costs? *What is the unit cost of each type manufactured? -The ability to make specific and detailed identification and measurement of cost elements permits management to reach decisions and evaluate results with greater intelligence MANUFACTURING COSTS Direct Materials – are materials used in the manufacturing process that become significant part of the finished goods Direct Labor – the labor hours incurred of employees directly attributable in converting raw materials to finished goods. Factory overhead – are costs incurred in the factory other than directmaterials and direct labor. Other manufacturing overhead – cost incurred other than indirect materials and indirect labor. Rent, depreciation, taxes and insurance on factory building and machinery; Heat, light and power of factory machinery and equipment; Repairs and maintenance of factory machinery and equipment Prime Cost and Conversion Cost NONMANUFACTURING OVERHEAD AND COST CLASSIFIED AS TO VARIABILITY, DIFFERENT METHODS OF SEPARATING MIXED COSTS INTO FIXED AND VARIABLE COMPONENTS, OTHER COSTS, (SAME INFO DUN SA HANDOUT/WORDFILE) SAMPLE PROBLEMS SAMPLE PROBLEM NOTE: Variable cost per unit- Constant Total variable cost- Depends on the volume Fixed cost per unit- Depends on the volume Total fixed cost - Constant METHOD OF LEAST SQUARE HIGH-LOW POINT METHOD COST ACCOUNTING CYCLE (WORD FILE) It is the job of the cost accountant to design a system in which all cost elements are recorded and incurred, and then charged to production as the work flows through the operating cycle. The provision for special cost accounts sets the stage for charging costs in accordance with the flow of work. The process can best be understood if analyzed step by step as follows: 1. Procurement: Purchases of materials are debited to Materials, labor incurred to Payroll, and actual overhead costs incurred to Manufacturing Overhead Control. As these costs are used or applied in factory operations, they are credited to these accounts and transferred to production. Lesson 4: Job Order Costing The flow of the manufacturing costs, namely, direct materials, direct labor and factory overhead, parallels the flow of products through the manufacturing operations. Following are the steps in a typical cycle of operations of a firm using the Job Order Cost System: 1. Procurement – Materials and supplies needed for manufacturing are ordered, received and stored. Direct and indirect factory labor and services are obtained. 2. Production – Materials are transferred from the storeroom to the factory. Labor tools, machines, power and other costs are applied to complete the product. 3. Warehousing – Finished goods are moved from the factory to the warehouse where they are held until they are sold. 4. Selling – Firm looks for and finds customers. Merchandise is shipped from the warehouse when sales are made. The sales are recorded in the books. 2. Production: Costs of materials used as well as labor and factory overhead incurred transferred to production are debited to Work in Process. As goods are finished and moved from the factory, their total cost is removed from the Work in Process account by a credit entry and a debit to Finished Goods. 3. Warehousing: The cost of finished goods transferred from Work in Process is recorded as a debit to Finished Goods. The cost of merchandise shipped from the warehouse to the customers is credited to Finished Goods and debited to Cost of Goods Sold. 4. Selling: As finished goods are sold and shipped from the warehouse, their cost is debited to Cost of Goods Sold. At the end of the accounting period, this account is closed by a credit and a debit to Income Summary. (Guerrero 2018) INTRODUCTION TO THE JOB ORDER COST CYCLE – NORMAL COSTING Work Flow (same info sa word file) 1. Procurement 2. Production 3. Warehousing 4. Selling Recording of cost incurred (same info sa word file) 1. Procurement 2. Production 3. Warehousing 4. Selling EXCEL FILE STATEMENT OF COST OF GOODS SOLD FOR MANUFACTURING COMPANY Accounting for Materials Material Control Two basic aspects of materials control 1. Physical control or safeguarding of materials a. Limited access – only authorized personnel should have access to materials storage area. b. Segregation of duties – purchasing, receiving, storage, use, and recordings should be segregated to minimize opportunities for misappropriation of inventories. c. Accuracy in recording – inventory records should permit the determination of inventory quantities on hand upon request, and cost records should provide the data for the valuation of inventories for the preparation of financial statements. 2. Controlling the Investment in Materials Most important objective of materials control is maintaining the proper balance of materials on hand. The planning and control of the materials inventory investment requires careful study of the following factors: usage of funds, costs of materials handling, storage, insurance and others. These factors should be considered in determining (1) when orders should be placed, and (2) how many units should be ordered. a. Order point – point at which an item should be ordered a.1 Usage – the anticipated rate at which the materials will be used a.2 Lead time – the estimated time interval between the placement of an order and receipt of the material. a.3 Safety Stock – the estimated minimum level of inventory needed to protect against running out of stock. Formula: Daily usage * Lead time + Safety stock b. Economic Order Quantity (EOQ) – purchase order which results in the minimum total inventory cost. Methods of Computing EOQ 1. Tabular Method – several purchase order quantity alternatives are listed in separate columns. The column with the lowest total amount of inventory cost will be the economic order quantity. 2. Formula Method: EOQ – Economic Order Quantity C – cost of placing an order (ordering cost) N – number of units required annually (annual demand) K – carrying cost per unit of inventory Number of orders = N / EOQ Total order cost = Number of orders * C or (N/EOQ) * C Average inventory = EOQ / 2 Total carrying cost = Average inventory * K or (EOQ/2) * K Total costs = Total order cost + Total carrying cost (TOTAL ORDER COST SHALL BE EQUAL TO TOTAL CARRYING COST) Business Papers Used to Support Material Transactions 1. Purchase Requisition – is a written request, usually sent to inform the purchasing department if a need for materials or supplies. 2. Purchase Order – a written request to a supplier for specified goods on an agreed upon price. The request also stipulates terms of delivery and terms of payment. 3. Receiving Report – when the goods that were ordered are delivered, the receiving department will unpack and count them. 4. Material Requisition Slip – a written order to the storekeeper to deliver materials or supplies to the place designated or to issue the materials to the person presenting a properly executed requisition. Methods of Costing Materials 1. First-in, first-out (FIFO) method is based on the assumption that cost should be charged to manufacturing cost or cost of goods sold in the order in which incurred. Inventories are stated in terms of the most recent costs and expense in charged with the earliest costs incurred. 2. Average Method – used for periodic inventory system. The inventory at the end is computed by multiplying the weighted average cost per unit by the units on hand. Special Problems in Material Accounting 1. Discounts a. Trade Discount – are not recorded on the books because purchases are recorded on the books net of discount b. Quantity Discount – represents cost savings for volume purchases. c. Cash Discount – granted to customers to motivate them to pay promptly. Sample problem: The A Company purchased materials listed at P40,000; terms, 2/15, n/30 on August 1. Assume payments as follows: a. Full payment is made on August 14. b. Full payment is made on August 30. a. Spoiled Units– units that do not meet production standards and are either sold for their salvage or discarded. When spoiled units are discovered, they are taken out of production and no further work is performed on them. Two methods of Accounting for Spoiled Units 1. Charged to the specific job – the reason for the spoilage is the job itself. The effect of this method is that it will increase the unit cost of the remaining perfect finished articled in the job. Entry: Spoiled goods xx Work in process xx 2. Charged to all production – the spoilage is considered normal to the process and the number does not exceed the limit set by the company. All units manufactured during the period are charged with an additional cost which is added to the factory overhead rate. The unit cost originally charged will not increase anymore even if there are spoiled units discovered later on. Entry: Spoiled goods xx Factory overhead control xx Work in process xx b. Defective unit – units that do not meet production standards and must be processed further in order to be salable as good units or as irregulars. Two methods of Accounting for Defective Materials 2. Freight in a. Direct charging – the freight incurred on the purchase of raw materials is added to the invoice price. b. Indirect charging – charged to Factory Overhead Control account. Spoiled Units, Defective Units, Scrap Material, and Waste Material in a Job Order Cost System. 1. Charged to the specific job – if the reason for the defect is the job itself, additional costs incurred. Entry: Work in process xx Materials xx Payroll xx Factory overhead applied xx 2. Charged to all production – the reason is normal to the process and the number of defective units does not exceed the normal limit, then the additional costs incurred will be charged to all units being processed during the period. Entry: Factory overhead control Materials Payroll Factory overhead applied ACCOUNTING FOR MATERIALS (PPT) xx xx xx xx c. Scrap material – left over from the production process that cannot be put back into production for the same purpose, but may be usable for a different purpose or production process or which may be sold to outsiders for a nominal amount. Three methods of Accounting for Scrap Material 1. If the scrap recovered can be traced to a specific job, the entry is Scrap Materials Work in process xx Two basic aspects of material control (same sa word file) Economic order quantity (same sa w.f.) xx Sample Order Point Problem 2. If the scrap recovered are not traceable to a specific job, the entry is Scrap Materials Miscellaneous income xx xx 3. If the scrap recovered from factory supplies, the entry is Scrap Materials Factory overhead control xx xx d. Waste Material – are left over from the production process that has no further use or resale value and may require cost for their disposal. Two methods of Accounting for Waste Material 1. If the cost of disposing the waste materials is allocated to all jobs, the entry is Factory overhead control Accounts payable xx xx 2. If the cost of disposing the waste materials is allocated to a specific job, the entry is Work in process inventory Accounts payable xx xx *Expected daily usage of an item of material is 100 units, the anticipated lead time is 4 days, and it is estimated that a safety stock of 800 units is needed. Compute for the order point. Formula: Daily usage * Lead time + Safety stock Daily usage = 100 Lead time = 4 days Safety stock = 800 Order point = (100*4) + 800 = 1,200 units *Company sells pump housings to other companies. Would like to reduce inventory costs by finding optimal order quantity Annual demand = 1,000 units Ordering cost = $10 per order Average carrying cost per unit per year = $0.50 *Company sells pump housings to other companies Annual demand = 1,000 units Ordering cost = $10 per order Average carrying cost per unit per year = $0.50 Compute for the following: No. of orders Total order costs Average inventory Total carrying cost Total costs Economic Order Quantity Number of orders = N / EOQ = 1,000/200 = 5 Total order cost = Number of orders * C or (N/EOQ) * C = 5 * 10 = 50 Average inventory = EOQ / 2 = 200/2 = 100 Total carrying cost = Average inventory * K or (EOQ/2) * K = 100 * 0.50 = 50 Total costs = Total order cost + Total carrying cost = 50 + 50 = 100 Note that total order costs should be equal to total carrying cost Business Papers Used to Support Material Transactions (same sa word file) Methods of Costing Materials (same sa w.f.) Sample Problem in FIFO and Average Costing FIFO (WHEN VIEWED IN EXCEL) WEIGHTED AVERAGE (WHEN VIEWED IN EXCEL) MOVING AVERAGE Special Problems in Material Accounting (same on word file) Sample Problem in Discounts Sample problem: The A Company purchased materials listed at P40,000; terms, 2/15, n/30 on August 1. Assume payments as follows: Full payment is made on August 14. Full payment is made on August 30. DEFECTIVE UNITS METHOD OF ACCOUNTING FOR DEFECTIVE UNITS (Same sa word file) FREIGHT IN SPOILED UNITS METHOD FOR ACCOUNTING FOR SPOILED UNITS (same sa word file) Accounting for Spoiled Units sample problem Job 3044 called for the making of 4,000 with these unit costs: Direct materials Direct labor Factory overhead (includes a P1.00 allowance for spoiled goods) Total P15 13 12 40 When the order was completed, 200 rejected units, a normal number, were sold for 18.00 each. Entries if the loss is charged to the specific job Entries if the loss is charged to all production Sample problem for defective units Job 3044 called for the making of 4,000 with these unit costs: Direct materials P15 Direct labor 13 Factory overhead (includes a P1.00 allowance for defective goods) 12 Total 40 During the process, 300 units were found to be defective and required the following total additional costs: Materials – 2,000, Labor – 4,000 and Overhead – 2,500. Entries if the loss is charged to the specific job Entries if the loss is charged to all production SCRAP MATERIALS AND METHODS ACCOUNTING FOR SCRAP MATERIALS WASTE MATERIALS (same sa word file) OF METHODS OF ACCOUNTING FOR WASTE MATERIAL 1. If the cost of disposing the waste materials is allocated to all jobs, the entry is Factory overhead control Accounts payable 1. Base to be used a. Direct labor hours – most commonly used base or denominator in the computation of the predetermined factory overhead. The formula is expressed as: xx xx 2. If the cost of disposing the waste materials is allocated to a specific job, the entry is Work in process inventory Accounts payable Factors to be Considered in the Computation of Overhead Rate xx xx b. Direct labor cost – this method is recommended if it can established that there is a direct relationship between labor cost and factory overhead. Formula is: Accounting for Factory Overhead Factory overhead refers to the cost pool used to accumulate all indirect manufacturing costs. Examples of the factory overhead include the following: Maintenance of factory building and equipment Three Categories of Factory Overhead: 1. Variable factory overhead – these are costs that vary in direct proportion to the level of production, within the relevant range. Variable costs per unit remains constant as production either increases or decreases. Total variable cost varies in direct proportion to production. 2. Fixed factory overhead – these are costs that remain constant within the relevant range regardless of the varying levels of production. The total remains constant but the fixed cost per unit varies inversely with the production. 3. Mixed factory overhead – have characteristics of both variable and fixed costs. the c. Machine hours – this may occur in companies departments that are largely automated so that majority of the factory overhead cost consist of depreciation on factory equipment. d. Direct materials costs – this method is appropriate if it can be inferred that factory overhead costs are directly related to direct material cost as in cases where direct materials are a very large part of total costs. e.Units of production – this is the most simple method to use because units produced are readily available. Steps in Computation of Departmentalized Overhead Rate 1. Divide the company into segments, called departments, cost centers, to which expenses are charged. 2. Estimate the factory overhead for each department 3. Select and estimate the base to be used by each department 4. Allocate the service department costs to the producing departments 5. Compute the factory overhead rate. Typical Allocation Bases for Common Costs 1. Labor-related common costs 2. Machine-related common costs 3. Space-related common costs 4. Service-related common costs Methods of Allocating Service Department Cost to Producing Departments 1. Direct method – the most widely used method. This method ignores any service rendered by one service department to another, it allocates each service department’s total costs directly to the producing department. 2. Step method – sometimes called sequential method of allocation. This method recognizes service rendered by service departments to other service departments and is more complicated because it requires a sequence of allocation. 3. Algebraic method – sometimes called reciprocal method. This method allocated costs by explicitly including the mutual services rendered among all departments. = Actual factory overhead – Budget allowed based on capacity used b. Idle capacity or volume variance – the variance due to different in volume and activity factors. Idle capacity = Budget allowed based on capacity used – Factory overhead applied Accounting for Factory Overhead (PPT) SAME LAHAT SA WORD FILE Sample problem A Company estimates factory overhead at P450,000 for the next fiscal year. It is estimated that 90,000 units will be produced at a material cost of 600,000. Conversion will require an estimate 100,000 direct labor hours at a cost of P3.00 per hour, with 45,000 machine hours. Compute the predetermined factory overhead rate based on: 1. Material cost 2. Units of production 3. Machine hours 4. Direct labor costs 5. Direct labor hours. Answers Factory overhead variance – the difference between the actual factory overhead as shown by factory overhead control account and the overhead charged to productions as shown by the factory overhead applied account. Classification of manufacturing variance a. Underapplied overhead = FOC (actual) > FOApplied b. Overapplied overhead = FOC (actual) < FOApplied 1. Estimated factory overhead / Estimated material cost = 450,000 / 600,000 X 100 = 75% 2. Estimated factory overhead / Units of production = 450,000 / 90,000 = P5.00/unit overhead Causes of manufacturing overhead variance: a. Spending variance – variance due to the expense factors Spending variance 3. Estimated factory overhead / Estimated machine hours = 450,000 / 45,000 = P10/machine hr 4. Estimated factory overhead / Estimated labor cost = 450,000 / 300,000 X 100 = 150% 5. Estimated factory overhead / Estimated labor hours = 450,000 / 100,000 = 4.5/dlh Methods of Allocating Service Department Cost to Producing Departments Sample Problem using Direct Method B Company’s factory is divided into four departments – producing departments; Molding and Decorating, serviced by the Buildings and Grounds, and the Factory Admin departments. Building and Grounds cost will be allocated using square feet and Factory Administration cost will be allocated using direct labor hours. In computing predetermined overhead rates, machine hours are used as the base in Molding and direct labor hours as the base in Decorating. Step Method Sample Problem in Factory Overhead Variance Pro forma entry: Payroll xx Withholding Tax Payable SSS Premium Payable PhilHealth Payable Pag-Ibig Payable Accounts Payable Work in Process (Direct) xx Factory overhead control (Indirect) xx Payroll Accounting for Labor Labor cost is the price paid for using human resources. The compensation paid to employees who engage in production related activities. The accounting system of a manufacturer must include the following procedures for recording payroll costs. 1. Recording the numbers of hours used in total and by job. 2. Recording the quantity produced by the workers 3. Analyzing the hours used by employees to determine how time is to be changed xx xx xx xx xx xx Classification for Labor 1. Direct labor – labor identified with particular products which is considered feasible to be measured and charged to specific production order cost sheet. 2.Indirect labor – labor identified with particular products but which is not considered feasible to be measure and charge to a specific production order. 3. Labor overhead a. Waiting time or idle time – cost of nonproductive hours of direct labor caused by lack of work, waiting for materials delay from scheduling,machine breakdown and machine set-up. If the idleness is normal – charged to factory overhead control. Sample: Kath spent 36 hours on Job 101 and was idle for 4 hours during the week. Kath’s rate is P50 per hour for a 40-hour week, as per union contract. How much will be charged to work in process and factory overhead control? 4. Allocation of payroll costs of jobs and factory overhead accounts 5. Preparation of payroll, including computation and recording of the employees gross earnings, deductions, and net earnings. Deduction to payroll 1. 2. 3. 4. Withholding taxes SSS Contribution Philheakth Contributions Pagibig Funds Contribution b. Make-up pay – when payments to an employee are based solely on the number of units produced, the employee is said to be paid at a “piecework” rate. If the output multiplied by the piece rate > guaranteed wage, charged to work in process. If the output multiplied by the piece rate < guaranteed wage, the difference will be charged to factory overhead control. Sample: Beth is paid P15 per piece and produced during the week 80 pieces. If the guaranteed weekly pay id P1,500. How much should be charged to work in process? Factory overhead? If the guaranteed weekly pay is P1,000. How much should be charged to work in process? Factory overhead? c. Overtime premium – represents amount paid, in excess of regular rate, to employees working in excess of 8 hours in a day, or working during holidays or their rest day. The overtime is normally charged to factory overhead control. If overtime results from the requirements of a specific job – charged to work in process. Sample: Diane worked for 45 hours during the week for P50/hr and the company paid half of the rate for overtime charges. How much should be charged to work in process? Factory overhead control? If the overtime worked by Diane was caused by a rush order and the customer agreed to pay the special service. How much should be charged to work in process? Factory overhead control? d. Shift premium – extra pay to work during less desirable evening shift of night shift and will be charged to factory overhead control. Sample: Anne is assigned to night shift from 10pm to 6am and is paid a shift premium of P20 per hour aside from her regular rate of P50. How much should be charge to work in process? Factory overhead? e. Employers’ payroll taxes - amount remitted to different government agencies for SSS premium, PhilHealth contributions, and Pag-Ibig contributions. Charged to factory overhead control.