PROBLEM 1
The following information was taken from the books of Maria Corporation:
Month
Utility Cost
Machine Hour
Labor Hours
Jan
950
999
502
Feb
1,175
1,022
733
Mar
1,425
1,220
1,090
Apr
1,506
1,283
1,135
May
1,618
1,313
1,186
Jun
1,525
1,261
1,154
Jul
1,675
1,440
1,264
Aug
1,724
1,290
1,323
Sep
1,626
1,335
1,230
Oct
1,575
1,164
1,165
Nov
1,653
1,373
1,237
Dec
1,418
1,124
1,035
(1) Using Hi-Lo method determined the unit cost variable cost and total fixed using:
(a) Machine hours
(b) Labor Hours
(2) Under method of least square and using the independent variable that best forecast the value of the dependent variable, determine
how much utility cost will be incurred for the production that requires 1,380 machine hours and 1,250 Labor hours. (Note: use the
independent variable that gives the higher coefficient of correlation (r))
ANSWER:
A. MACHINE HOURS
Machine Hours
Variable Cost (b) = (1,675 - 950) / (1,440 - 999)
Variable Cost =
1.6440
Fixed Costs (a) = 1,675 - (1.64 X 1,440)
Fixed Costs =
(692.347)
B. Labor Hours
Variable Cost (b) = (1,724 - 950) / (1,323 - 502)
Variable Cost =
0.9428
Fixed Costs (a) = 1,724 - (0.94 X 1,323)
Fixed Costs =
476.738
Fixed
Variable
Machine Hours (322.872)
1.467
Labor Hours
467.083
0.940
Utility cost budgeted for 1,250 LHrs
Correlation
0.88
0.99
1,641.53
PROBLEM 2
Following are the three months incomplete cost of goods sold statement of Kulang Kulang Company:
March
April
May
Direct Material Beg
95,000
L
50,000
Add Net Purchases
A
170,000
W
Total available for use
B
M
200,000
Less Direct Material End
C
N
X
Direct Materials Used
150,000
O
140,000
Direct Labor
D
175,000
Y
Factory Overhead
E
P
Z
Total Manufacturing Cost
300,000
462,500
AA
Add Work in Process Beg
F
Q
37,500
Total goods put into process
G
R
BB
Less Work in Process end
H
S
20,000
Cost of Goods Manufactured
I
440,000
CC
Add Finished Goods Beg
30,000
T
25,000
Total goods available for sale J
475,000
DD
Less Finished Goods end
K
U
30,000
Cost of Goods Sold
300,000
V
332,500
Overhead is approximately equal to 50% of Labor Cost
Answer:
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
m)
n)
o)
135,000.00
230,000.00
80,000.00
100,000.00
50,000.00
20,000.00
320,000.00
15,000.00
305,000.00
335,000.00
35,000.00
80,000.00
250,000.00
50,000.00
200,000.00
p) 87,500.00
q) 15,000.00
r) 477,500.00
s) 37,500.00
t) 35,000.00
u) 25,000.00
v) 450,000.00
w) 150,000.00
x) 60,000.00
y) 120,000.00
z) 60,000.00
aa) 320,000.00
bb) 357,500.00
cc) 337,500.00
dd) 362,500.00
PROBLEM 3
A certain company incurred a total manufacturing cost of P130,000, distributed as follows: Direct Materials – P60,000, Direct Labor –
P40,000, and factory overhead P30,000. At the end of the period it was determined that the work in process increased by P20,000,
while the finished goods decreased by P8,000. How much would be the cost of goods sold for the period?
ANSWER:
TMC
Inc WIP
COGM
Dec in FG
COGS
130,000.00
(20,000.00)
110,000.00
8,000.00
118,000.00
PROBLEM 4
The cost of goods manufactured of XXX Corporation for the month was P105,000, while the raw materials used was P50,000. At the
end of the month work in process decreased by P20,000, while finished goods increased by P15,000. Labor cost was determined to be
50% of raw materials used. How much would be the cost of goods sold and the factory overhead for the month?
ANSWER:
DL
25,000.00
FOH
10,000.00
TMC
85,000.00
Dec in WIP
20,000.00
COGM
105,000.00
Inc in FG
(15,000.00)
COGS
90,000.00
PROBLEM 5
The following information is provided by Maunlad Mfg. Corp.:
COGM
P
Labor Cost
FOH
FG Beginning
FG Ending
COGS
Raw Materials Used
WIP end
How much would be the costs of raw materials used?
ANSWER:
DM
+
DL
+
FOH
+
WIPB +
WIPE COGM
300,000.00
100,000.00
50,000.00
80,000.00
60,000.00
470,000.00
375%
WIPB
100%
75%
WIPB
WIPB
470,000
100,000
50,000
30,000
20,000
480,000
500% of WIP end
75% of WIP beginning
PROBLEM 6
If the total manufacturing costs for the month is P142,000, while the finished goods beginning and ending were P20,000 and P12,000
respectively. How much would be the costs of Work in Process Beginning and Ending respectively, assuming cost of goods sold is
P158,000 and that the work in process ending is 80% of the work in process beginning?
ANSWER:
total manufacturing cost
work in process-b
work in process-e
cost of goods manufactured
finished good-b
finished good-e
cost of goods sold
142000
40000
32000
150000
20000
-12000
158000
140000+20%=150000
100%
80%
32000=40000*80%
158000-8000
8000=20000-12000
PROBLEM 7
Following were the other overhead cost incurred by UR Corporation for the year ended 2014:
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Volume of production
20,500.00 18,650.00 19,750.00 25,450.00
Supervisory salaries
102,499.00 99,076.50 101,111.50 111,656.50
Property tax and insurance
22,000.00 22,000.00 22,000.00 22,000.00
Maintenance
61,125.00 56,962.50 59,437.50 72,262.50
Supplies
76,982.50 70,757.25 74,458.75 93,639.25
Depreciation of buildings and equipment 50,000.00 50,000.00 50,000.00 50,000.00
Power
140,425.00 127,752.50 135,287.50 174,332.50
Light and heat
165,175.00 153,427.50 160,412.50 196,607.50
Total
618,206.50 579,976.25 602,707.75 720,498.25
Required:
1) Identify which of the cost items above are Fixed, Variable and Semi-Variable.
2) Using method of least square in separating Semi-Variable, determine how much of the total semi-variable cost is a) Fixed and b)
Variable Cost per unit?
3) Under the method of least square, determine how much of the other overhead cost is applicable to production of 22,000 units.
4) Using High and Low method, how much other overhead cost will be applied to production of 22,500 units.
ANSWER:
1. Supervisory salaries
Property tax and insurance
Maintenance
Supplies
Depreciation of buildings and equip.
Power
Lights and heat
Volume of production
Total Semivariable
For Semi-Variable Cost
b=
a=
For Total Overhead Cost
b=
a=
Semivariable
Fixed
Semivariable
Semivariable
Fixed
Variable
Semivariable
20,500.00
405,781.50
18,650.00 19,750.00 25,450.00
380,223.75 395,420.25 474,165.75
13.815
122,574.00
20.665
194,574.000
Overhead Cost for the production of 22,000 units
Y = 194,574 + 20.665X
649,204.000
Using Hi-Lo
b=
a=
Budgeted Overhead Cost at 22,500
20.665
194,574.00
659,536.50
PROBLEM 8
: Downstream Manufacturing Company realized too late that it had made a mistake locating its controller’s office and its electronic
data processing system in the basement. Because of the Typhoon, the Pasig River overflowed on May 2 and flooded the company’s
basement. Electronic data storage was beyond retrieval, and the company had not provided off-site storage of data. Some of the paper
printouts were located but were badly faded and only partially legible. On May 3, when the river subsided, company accountants were
able to assemble the following factory-related data from the debris and from discussions with various knowledgeable personnel. Data
about the following accounts were found:
• Raw Material (includes indirect material) Inventory: Balance April 1 was P4,800.
• Work in Process Inventory: Balance April 1 was P7,700.
• Finished Goods Inventory: Balance April 30 was P6,600.
• Total company payroll cost for April was P29,200.
• Accounts payable balance April 30 was P18,000.
• Indirect material used in April cost P5,800.
• Other nonmaterial and non-labor overhead items for April totalled P2,500.
Payroll records, kept at an across-town service center that processes the company’s payroll, showed that April’s direct labor amounted
to P18,200 and represented 4,400 labor hours. Indirect factory labor amounted to P5,400 in April. The president’s office had a file
copy of the production budget for the current year. It revealed that the predetermined manufacturing overhead application rate is based
on planned annual direct labor hours of 50,400 and expected factory overhead of P151,200.
Discussion with the factory superintendent indicated that only two jobs remained unfinished on April 30. Fortunately, the
superintendent also had copies of the job cost sheets that showed a combined total of P2,400 of direct material and P4,500 of direct
labor. The direct labor hours on these jobs totalled 1,072. Both of these jobs had been started during the current period. A badly faded
copy of April’s Cost of Goods Manufactured and Sold schedule showed cost of goods manufactured was P48,000, and the April 1
Finished Goods Inventory was P8,400.
The treasurer’s office files copies of paid invoices chronologically. All invoices are for raw material purchased on account.
Examination of these files revealed that unpaid invoices on April 1 amounted to P6,100; P28,000 of purchases had been made during
April; and P18,000 of unpaid invoices existed on April 30.
1. Calculate the cost of direct material used in April.
2. Calculate the cost of raw material issued in April.
3. Calculate the April 30 balance of Raw Material Inventory.
4. Determine the amount of under applied or over applied overhead for April.
5. What is the Cost of Goods Sold for April?
ANSWER:
Downstream Manufacturing Company
Cost of Goods Sold Statement
For the month of April 2016
Raw Material 4/1
Add Net Purchases
Total Raw Materials Available
for use
Less Raw Materials 4/30
Raw Materials Used
Less Indirect Materials
Used
Direct Materials Used
Direct Labor
Factory Overhead Applied
Total Manufacturing Cost
Add Work in Process 4/1
Total Goods put into
process
Less Work in Process 4/30
Cost of Goods
Manufactured
Add Finished Goods 4/1
Total Goods Available for
Sale
Less Finished Goods 4/30
Cost of Goods Sold Normal
Add Under Applied FOH
COGS - Actual
4,800.00
28,000.00
32,800.00
7,984.00
24,816.00
5,800.00
19,016.00
18,200.00
13,200.00
50,416.00
7,700.00
58,116.00
10,116.00
48,000.00
8,400.00
56,400.00
6,600.00
49,800.00
500.00
50,300.00
FOH - Rate
IM
IL
OOH
FOH - C
3.00
5,800.00 5,400.00 2,500
13,700.00
Under Applied
500.00
DM
2,400.00
DL
4,500.00
FOH - A
3,216.00
PROBLEM 9
Micro Corp. uses 1,000 units of Chip annually in its production. Order costs consist of P10 for placing a long-distance call to make
the order and P40 for delivering the order by truck to the company warehouse. Each Chip costs P100, and the carrying costs are
estimated at 15.625%.
Required:
1. Compute the economic order quantity for Chip and the total order costs and carrying costs for the year.
2. Determine the best order quantity if Chip is purchased only in multiples of 25 units and that the storage space is limited to 100
units. (Round answers to the nearest whole Peso.)
ANSWER:
EOQ =
80
Ordering Costs = No. of orders X cost
per order
No. of orders = annual requirement /
order size
12.5
Ordering Costs =
625
Carrying Costs = Average Invty X Carrying Cost
per unit
Average Invty = Order Size/2 + Safety
Stocks
40
Carrying Costs =
625
Order
Size
No. of orders
Average Invty.
Total Carrying
Costs
Total Ordering
Costs
Total Ordering and Carrying
Costs
25
50
75
100
40.00
12.5
20.00
25
13.33
37.5
10.00
50
195.31
390.63
585.94
781.25
2,000.00
1,000.00
666.67
500.00
2,195.31
1,390.63
1,252.60
1,281.25
PROBLEM 10
Ofilyang Company uses Material NGEE to produce NGAA. Inventory at the beginning of June 2012 was 400 units of NGEE, valued
at P1.80 each. Further, receipts and issuances of NGEE during the month were as follows:
Units
Unit Cost
June 8, receipts
500
P2.10
June 14, receipts
600
?
June 25, Issuance
1,250
The company uses moving average method of stock valuation.
1. If the average unit cost at the issuance date was P1.932. What was the cost per unit of the June 14, receipts?
2. Assuming the company uses FIFO perpetual method of stock valuation, and that the total cost of Material NGEE issued was
P2,470. What will be the costs of the June 14, receipts?
Stock
Card
Qty
Received
Unit
Cost
Amount
Issued
Qty
Unit Cost
Amount
Qty
Balance
Unit
Cost
Amount
400 1.800
720
500 2.100
1050
900 1.967
1770
600 1.880
1,128.00
1500 1.932
2,898.00
1250 1.932
2,415.00
PROBLEM 11
Charleston Company has developed the following data to assist in controlling one of its inventory items:
Economic order quantity ........................................................................
Average daily use ...................................................................................
Maximum daily use................................................................................
Minimum daily use…………………………….. ..................................
Working days per year ...........................................................................
Cost of carrying inventory .....................................................................
Lead time ...............................................................................................
1000
100
120
50
250
P1.00
liters
liters
liters
liters
days
per liter per year
7 working days
Required: Compute the following:
(1) Order point (OP) = Lead Time Usage (LTU) + Safety Stocks (SS) = 840
(2) Average inventory = Order Size (OS)/2 + SS = 1000/2 + 140 = 640
(3) Maximum inventory assuming normal lead time and usage/Normal Maximum Inventory = OP – LTU + OS = 840 – 700 + 1,000
= 1,140
(4) Cost of placing one order; using EOQ; P20
(5) Absolute Maximum Inventory = OP – (LT X Min Daily Use) + OS ;
= 840 – (7 X 50) + 1,000 = 1,490
ANSWER:
Safety Stock =
140
Leadtime usage =
700
Order Point
840
Average Invty =
640
Normal Maximum Inventory = 1140
Cost of placing one order =
20
Absolute Maximum Inventory = 1490
PROBLEM 12
Warner Co. uses 6,000 units of material per year at a cost of P4 per unit. Carrying costs are estimated to be P1.125 per unit per year,
and order costs amount to P60 per order. As an incentive to its customers, Warner will extend quantity discounts according to the
following schedule:
Minimum
Order
500
1,000
2,000
List
Price
P4
4
4
Discount
2%
4
6
Net
Price
P3.92
3.84
3.76
Required:
(1)
(2)
(3)
Determine the economic order quantity (800) (ignoring quantity discounts) and the total annual order cost, carrying cost, and
materials costs at EOQ (considering quantity discounts).
Compute the annual order cost, carrying cost, materials cost, and total cost at each discount level. (Round to the nearest peso.)
Identify the order size, choosing from one of the three discount levels, that will minimize the total cost.
ANSWER:
EOQ =
Ordering Costs
Carrying Costs
Material Cost/Costs of
Purchases
Total
Cost
800
450
450
23520
24420
Order
Size
500
No. of orders
Average Invty.
Total Carrying
Costs
Total Ordering
Costs
Total Material
Costs
12.00
Total Costs
1000
6.00
250
2000
3.00
500
Cost per order
Carrying cost per
unit
60
1.125
1000
281.25
562.50
1,125.00
720.00
360.00
180.00
23,520.00
23,040.00 22,560.00
24,521.25
23,962.50 23,865.00
EOQ
PROBLEM 13
The following data refer to various annual costs relating to the inventory of a single-product company:
Unit transportation-in on purchases ...............................................................................
Storage per unit............................................................................................
Insurance per unit ........................................................................................
Annual interest foregone from alternate investment of funds .....................
Annual number of units required .................................................................
What is the annual carrying cost per unit?
ANSWER:
P0.30 = (0.12 + 0.10 + 800/10,000)
P
.20
.12
.10
P 800.00
10,000
PROBLEM 14
The following information relates to Hudson Company's Material A:
Annual usage in units ..................................................................................
7,200
Working days per year.................................................................................
240
Normal lead time in working days ..............................................................
20
Maximum lead time in working days ..........................................................
45
Assuming that the units of Material A will be required evenly throughout the year, the safety stock and order point would be: _750 :
1,350__.
SS = 7,200/240 X (45 – 20)
OP = LTU + SS = (7,200/240 X 20) + 750
ANSWER:
Computation of Maximum Safety Stock
Usage Variation
Safety Stock = (Maximum Usage - Normal Usage) X Leadtime
Normal = Average
Leadtime Variation
Safety Stock = (Maximum Leadtime - Normal Leadtime) X Daily(Normal) Usage
Usage and Leadtime Variation
Safety Stock = [(Max Usage - Normal Usage) X Leadtime] + [(Max Leadtime - Normal Leadtime) X Max Usage]
750
Order Point/Reorder Point = [daily usage X leadtime] + Safety Stocks
1350
PROBLEM 15
Penguin Company manufactures winter jackets. Setup costs are P2.00. Penguin manufactures 4,000 jackets evenly throughout the
year. Using the economic order quantity approach, the optimal production run would be 200 when the cost of carrying one jacket in
inventory for one year is: _____.
ANSWER:
200
=
\
2 X 4,000 X 2
X
PROBLEM 16
Leo Company manufactures specialized farming tools. Transactions and information related to inventory accounts for January 2017
were as follows:
Materials
Beginning Balance
Part X
1,000 units @ P102.50
Part Y
500 units @ P50.25
Part Z
750 units @ P20.35
Leo applies EOQ in controlling the investment in its inventory. For the year 2017, Leo estimated that 40,000, 25,000 and 30,000
units respectively will be used for the years estimated production. The ordering costs which are normally incorporated to the final
unit cost of the materials were estimated to be P250, P175, and P325 for Part X, Part Y and Part Z respectively, while carrying
costs which is accounted as an expense was estimated 3%, 5% and 4% of the purchase price for Part X, Part Y and Part Z
respectively.
Other information related to materials were:
Order
Usage per Day Lead-Time (days)
Size Min Normal
Max Min Normal
Max
Part X 2,550
100 160
200 2
4
6
Part Y 1,850
75
100
125 1
3
5
Part Z 4,900
100 120
150 2
3
4
Work in Process
Beginning Balance
Job 309
Job 312
Job 313
Materials
Part X
45 units
150 units 85 units
Part Y
35 units
60 units
48 units
Part Z
40 units
80 units
54 units
Labor @ P45/hr P1,980
P2,340
P1,035
Overhead is applied at P50 per hour which is inclusive of P5 allowance for defects.
Cost charged for the current month
-----------------------Job Number---------------------------309 312 313 314 315 316
Materials in units
Part X
555
550 615 700
430
350
Part Y
395
370 382 420
350
130
Part Z
80
40
66
120
100
70
Labor Hrs. 54
48
77
112
65
45
Prior to the completion of Job 314, due to a customer request a minor adjustment which requires an additional material for Part X and
Part Z of 10 units and 15 units respectively and 3 hours of labors were made. While for Job 309, 312, and 313, 2% of the jobs were
found defective and were considered spoiled from which recoverable amount is estimated at 80% of the total cost incurred. The
defects on these jobs were due from power interruptions.
At the end of the month Job 315 and Job 316 were still in process, while the remaining goods units from the completed jobs were
delivered and billed to the customer at 50% above costs.
Compute for the following:
1) Carrying Cost per unit and Total Purchase Price of Part X, Part Y and Part Z. (rounded to 3 decimal places)
2) Final Unit Costs of Part X, Part Y and Part Z. (rounded to 3 decimal places)
3) Cost of Direct Materials, Direct Labor, and Factory Overhead charged to work in process for the month.
4) Sales Value per completed Jobs.
5) Safety Stock and Reorder Point
6) Materials Inventory End
Prepare the Journal entry for
7) Issuance of Materials
8) Costs of reworks
9) Spoiled Goods
1) Billing and Delivery
ANSWER:
Part X
Part Y
Part Z
Part X
Purchase Price
Add Purchase Order Costs
102.525
51.132
20.304
0.098
0.095
0.066
Unit Costs
102.623
51.227
20.370
(2)
Unit Carrying Cost
3.076
2.557
0.812
(1)
Safety Stock
560.00
325.00
240.00
Reorder Point
1,200.00
625.00
600.00
102.631
Part X
555
550
615
700
430
350 3,200.00
Part Y
395
370
382
420
350
130 2,047.00
Part Z
80
40
66
120
100
70 476.00
Order Size
Qty on Hand
Materials
end
1000 2,200.00
2550
350.00
2,890.00
102.623
296,580.47
500 1,547.00
1850
303.00
2,153.00
51.227
110,291.73
750 274.00
259.00
20.35 5,270.65
412,142.85
Purchase Price
Part X
102.525
Part Y
51.132
Part Z
20.304
Part Z
102.533 51.140
20.300
0.098
0.095
0.066
Total
Invty 1/1
Part Y
51.235
20.366
Qty Received
5,100.00
3,700.00
-
Total Purchase Price
522,877.50
189,188.40
-
(1)
Total
Issued
From Beg
Fro Purch.
Direct
Materials
Reworks TMC
3,200.00
102,500.00
225,770.60
328,270.60
1,026.23
2,047.00
25,125.00
79,248.17
104,373.17
476.00
9,686.60
-
9,686.60
Part
X
Part
Y
Part
Z
Total
329,296.83
104,373.17
305.55
9,992.15
442,330.37
443,662.15
Direct Labor
18,045.00
135 18,180.00
Factory Overhead
19,490.00
135 19,625.00
Direct Materials
Job 315
Job 316
Total Qty
Total Costs
Part X
430
350
780 80,045.94
Part Y
350
130
480 24,588.96
Part Z
100
70
170 3,459.50
Direct labor
4,950.00
FOH - A
5,500.00
Work in Process End
118,544.40
Sales Value
Job 309
Job 312
Job 313
Job 314
Part X
61,500.00
71,762.92
71,825.65
72,862.33
Part Y
21,607.50
21,866.41
21,980.71
21,515.34
Part Z
2,442.00
2,442.00
2,442.00
2,747.25
Total Materials
Labor Cost
Factory Overhead
Total manfacturing
Costs
85,549.50 96,071.32 96,248.36 97,124.92
4410
4500
4500
5175
4900
5000
5000
5175
94,859.50
105,571.32 105,748.36 107,474.92
Less Spoiled
1,897.19
2,111.43
Final cost of completed
92,962.31
103,459.89 103,633.39
Add Markup
46,481.16
51,729.95
Total Sales Value
139,443.47 155,189.84 155,450.09 161,212.38
SGI
FOH-C
1,517.75
379.44
WIP
Accounts Receivable
Sales
Cost of Goods Sold
Work in process
2,114.97
51,816.70
1,689.14
422.29
53,737.46
1,691.97
422.99
6,123.58
611,295.77
611,295.77
407,530.52
407,530.52
4,898.87
1,224.72
PROBLEM 17
On December 31, 2015 KTV Co., with outstanding share capital of P60,000 had the following assets and liabilities:
Cash P 10,000
Accounts Receivable 20,000
Finished Goods 12,000
Work in Process 4,000
Materials P 8,000
Prepaid Expense 1,000
Property, Plant and Equipment 60,000
Current Liabilities 35,000
During 2016, the retained earnings account increased 50% as a result of the year’s business. No dividends were paid during the year.
Balances of accounts receivable, prepaid expenses, current liabilities, and share capital were the same on December 31, 2016, as they
had been on December 31, 2015.Inventories were reduced by exactly 50% except for finished goods inventory, which was reduced by
33 1/3%. Plant assets(net) were reduced by depreciation of P8,000, charged ¾ to factory overhead and ¼ to administrative expense.
Sales of P120,000 were made on account, costing P76,000. Direct labor cost was P18,000, Factory overhead was applied at a rate of
100% of direct labor costs, leaving P4,000 underapplied that was closed to cost of goods sold account. Total marketing and
administrative expenses amounted to 10% and 15% of gross sales respectively.
Required: Prepare the statement of financial position and income statement with note showing details of cost of goods sold.
ANSWER:
1. KTV Co.
Statement of Financial Position
As of the year ended December 31, 2016
Cash
Accounts Receivable
Inventories
Prepaid Expenses
Total Current Assets
(3.00)
Note - 1
Note - 2
38,000.00
20,000.00
14,000.00
1,000.00
73,000.00
Property, Plant and Equipment
Total Assets
52,000.00
125,000.00
Current Liabilities
Share Capital
Retained Earnings
35,000.00
60,000.00
30,000.00
125,000.00
Note - 3
2.
KTV Co.
Income Statement
For the year ended December 31, 2016
Net Sales
Less Cost of Sales - actual
Gross Profit
Less Expenses
Selling
Administrative
Net Income
120,000.00
80,000.00
40,000.00
12,000.00
18,000.00
30,000.00
10,000.00
Cost of Sales
Materials 1/1
Add Purchases
Total Materials available for use
Less Materials 12/31
Direct materials used
Direct Labor
Factory Overhead
Total Manufacturing Cost
Add Work in process 1/1
Total Goods put into process
Less Work in process 12/31
Cost of goods manufactured
Add Finished Goods 1/1
Total Goods available for sales
Less Finished Goods 12/31
Cost of Goods Sold Normal
Add underapplied overhead
Cost of goods sold actual
Note 1 - Cash
Collection
Payments
Purchases
Direct Labor
Factory Overhead - Control
Selling
Administrative
Net increase in cash
Cash Beginning
Cash ending
8,000.00
30,000.00
38,000.00
4,000.00
34,000.00
18,000.00
18,000.00
70,000.00
4,000.00
74,000.00
2,000.00
72,000.00
12,000.00
84,000.00
8,000.00
76,000.00
4,000.00
80,000.00
120,000.00
30,000.00
18,000.00
16,000.00
12,000.00
16,000.00
92,000.00
28,000.00
10,000.00
38,000.00
PROBLEM 18
Argonne Rigging manufactures its product to customer specifications and uses a job order system.
The processing of a unit of product requires the use of one pound Material AAA and ½ pound of
Material BBB, and at completion about 2% of the materials used becomes a scrap and are normally
sold to at P5 per pound. Recent order from Michaels Company was for 10,000 pulleys, and the job
was assigned number 1001. Following are the transactions and other informations related to the
job:
 Inventory of materials before the production process starts is consist of 500 pounds of
Material AAA at P15 per pound and 125 pounds of Material BBB at P10 per pound.
 During the month the company acquired 10,100 pounds of Material AAA P15.50 per pound
and 6,000 pounds of Material BBB at P9.75 per pound, freight cost incurred for the delivery
was P3,248.
 Issued for production the required materials using FIFO and incurred labor cost of
P160,000 of which P15,000 are indirect labor.
 Applied overhead at 150% of direct labor cost.
 Prior to the completion 2% of the units processed were found defective, of which 80% can
be reworked by incurring additional labor cost of P5 per unit, and the remaining defective
goods are sold as seconds at P35 per unit.
 Remaining good units after the reworks made were accepted by Michaels and these were
billed at 75% profit on cost.
 Scrap materials were recovered and 70% of which were sold.
Required: Prepare all necessary journal entries (round unit cost to 3 decimal places).
ANSWER:
Materials
Accounts Payable
218,298.00
218,298.00
Work in Process
Materials
206,470.88
Payroll
Accrued Payroll
160,000.00
Work in Process
Factory Overhead Control
Payroll
145,000.00
Work In Process
Factory Overhead Applied
Charged to specific job/All production
Work In Process/Factory Ovehead Control
Payroll
Factory Overhead Applied
Charged to Specific job
Spoiled Goods Inventory
Work In Process
Charged to All jobs
Spoiled Goods Inventory
Factory Overhead Control
Work In Process
217,500.00
206,470.88
160,000.00
15,000.00
160,000.00
217,500.00
2,000.00
800.00
1,200.00
1,400.00
1,400.00
1,400.00
875.88
2,275.88
Scrap Materials
(10,000 X 1.5 X 2% X P5)
Work In Process/FOHC
Cash
Scrap Materials
1,500.00
1,500.00
1,050.00
1,050.00
Accounts Receivable
Sales
994,124.03
Cost of Goods Sold
Work in Process
568,070.88
Material AAA
Material BBB
Material AAA
Material BBB
568,070.88
Purc. Cost Ratio
156,550.00
0.0151
58,500.00
0.0151
215,050.00
Freight
Total
2,364.45 158,914.45
883.55
59,383.55
3,248.00 218,298.00
Beginning
7,500.00
1,250.00
Current Purch.
149,473.00
48,247.88
Material AAA
Material BBB
DM
DL
FOH
Rework
994,124.03
Beginning Current Purch.
Total
7,500.00
149,473.00
1,250.00
48,247.88
206,470.88
WIP - Specific Job
206,470.88
145,000.00
217,500.00
2,000.00 568,070.88
DM
DL
FOH
Rework
Total
156,973.00
49,497.88
206,470.88
156,973.00
49,497.88
1,400.00 Spoiled
1,500.00 Scrap
Selling Price 994,124.03
Cost 568,070.88
Gross Margin
426,053.16
160,000.00
WIP - All Production
206,470.88
2,275.88
145,000.00
217,500.00
566,694.99
56.897
Unit Cost
15.734
9.897
991,716.24
TEST I - MULTIPLE CHOICE – PROBLEMS - Show all supporting computations, present it in good format. Boxed your final
answer on your computation and indicate your letter choice in capital letter. (NO COMPUTATIONS, NO POINTS) (3 pts. Each)
1.
The following costs relate to Antonietta Industries for the last quarter:
Conversion cost
₱ 435,000
Direct materials
215,000
Manufacturing overhead
190,000
Selling and administrative expense
185,000
What is Antonietta’s prime cost for last quarter?
A. ₱ 460,000
B. ₱ 410,000
C. ₱405,000
Conversion cost
Manufacturing Overhead
Direct Materials
435,000.00
(190,000.00)
215,000.00
Prime cost
2.
3.
Antonietta’s total manufacturing cost is
A. ₱ 460,000
B. ₱ 645,000
460,000.00
C. ₱650,000
435,000.00
215,000.00
Total manufacturing cost
650,000.00
Selling and administrative expenses
A
D. ₱840,000
Conversion cost
Direct Materials
Antonietta’s total period cost is
A. ₱ 185,000
B. ₱ 275,000
D. ₱375,000
C. ₱400,000
C
D. ₱620,000
185,000.00
A
4.
Jasmine Co. produced 5,500 outdoor chairs for Job Order No. 610. Total material cost was ₱51,700. Each chair required 2.2 hours of direct labor at
₱8.90/hour. A total of ₱53,845 of factory overhead was traced to Order 610. What is the prime cost per unit of this order?
A. ₱ 19.58
B. ₱ 28.98
C. ₱29.37
D. ₱38.77
Direct Labor
5,500 x 2.2 hrs x P8.90/hr
Direct Materials
107,690.00
51,700.00
Prime cost
Divided no. of chairs produced
159,390.00
5,500
Prime cost per unit
5.
28.98
B
Using the information in No. 26, what is the conversion cost per unit of this order?
A. ₱ 19.58
B. ₱ 28.98
C. ₱29.37
D. ₱38.77
Direct Labor
5,500 x 2.2 hrs x P8.90/hr
Factory Overhead
107,690.00
53,845.00
Conversion cost
Divided no. of chairs produced
161,535.00
5,500
Conversion cost per unit
29.37
C
6.
Using No. 12 information, what is the unit cost of this order?
A. ₱ 37.88
B. ₱ 38.77
C. ₱28.09
D. ₱36.99
Direct Labor
5,500 x 2.2 hrs x P8.90/hr
Direct Materials
Factory Overhead
107,690.00
51,700.00
53,845.00
Conversion cost
Divided no. of chairs produced
213,235.00
5,500
Unit cost per order
38.77
B
7. The following cost data were taken from the records of JGG manufacturing company:
Depreciation on factory equipment
₱ 1,000
Depreciation on sales office
500
Advertising
7,000
Freight out (shipping)
3,000
Wages of production workers
28,000
Raw materials used
47,000
Sales salaries and commissions
10,000
Factory rent
2,000
Factory insurance
500
Materials handling
1,500
Administrative salaries
2,000
Based upon this information, the manufacturing cost incurred during the year was:
A. ₱ 18,500
B. ₱ 80,000
C. ₱ 80,500
D. ₱ 83,000
Depreciation on factory equipment
₱ 1,000
Wages of production workers
28,000
Raw materials used
47,000
Factory rent
2,000
Factory insurance
500
Materials handling
1,500
Manufacturing cost
₱ 80,000
B
8. Joy Corp. manufactures plastic coated metal clips. The following were among Joy’s 2014 manufacturing costs:
Wages:
Machine operators
₱200,000
Maintenance workers
30,000
Factory foreman
90,000
Materials used:
Metal wire
₱500,000
Lubricant for oiling machinery
10,000
Plastic coating
380,000
In 2014, Joy’s direct labor and direct materials amounted to:
Direct Labor Direct Materials
Direct Labor Direct Materials
A.
₱ 230,000
₱ 510,000
C.
₱320,000
₱880,000
B.
220,000
500,000
D.
200,000
880,000
Direct labor
₱200,000
Direct materials (₱500,000 + 380,000)
880,000
D
TEST II – PROBLEM SOLVING
Celsius Company manufactures a product that requires the use of a considerable amount of natural gas to heat it to a desired
temperature. The process requires a constant level of heat, so the furnaces are maintained at a set temperature for 24 hours a day.
Although units are not continuously processed, management desires that the variable cost be charged directly to the product and the
fixed cost to the factory overhead. The following data have been collected for the year:
Units Cost
Units Cost
January
………............
2,400 ₱4,400
July……………………….. 2,200 ₱4,250
February………………..
2,300 4,300
August…………………..
2,100 4,100
March…………………… 2,200 4,200
September…………….
2,000 3,950
April……………………… 2,000 4,000
October…………………
1,400 3,400
May……………………… 1,800 3,800
November……………..
1,900 3,700
June……………………… 1,900 3,900
December……………..
1,800 4,050
1. Separate the variable and fixed elements, using the high-low method. Compute for the variable cost per unit.
2. Determine the variable cost to be charged to the product for the year. (Hint: First determine the number of annual units
produced)
3. Determine the fixed cost to be charged to factory overhead for the year.
1. High-low method
High volume...................................................................................
Low volume ...................................................................................
Change .......................................................................................
Units
2,400
1,400
1,000units
Variable cost per unit: ₱1,000  1,000 = ₱1.00 per unit 5 pts.
Fixed cost
1,400 Units
Total cost.................................................................................
₱ 3,400
Variable cost, $1.00 per unit ...................................................
1,400
Fixed cost ................................................................................
₱ 2,000
Cost
₱ 4,400
3,400
₱ 1,000
2,400 Units
₱ 4,400
2,400
₱ 2,000
2. Variable cost charged to product: 24,000 units  ₱1.00 per unit = ₱24,000. 5 pts.
3. Fixed cost charged to factory overhead: ₱2,000 per month  12 months = ₱24,000. 5 pts.
5 pts.