Cost Accounting and Control 2019 Edition
Problem and Solutions
CHAPTER 3 – ACCOUNTING FOR FACTORY LABOR
Ex 3-1. Journalizing payroll
The net earnings of the factory workers for Dainty Company during the month of November 2019 are P90,000. The
employees’ withholding taxes are P9,000, SSS are P5,000 and other deductions are P2,000. Employer’s share of SSS
are P8,000. Of the total cost of factory labor, Of the total cost of factory labor, 90% is related to direct labor and 10% is
attributable to indirect labor.
Required: Give the entry to record the payroll.
Gross Pay
Others
SSS
Withholding Tax
Net Pay
106,000
(2,000)
(5,000)
(9,000)
90,000
Factory Payroll
Withholding Tax Payable
SSS Payable
Other Payables
Cash / Salaries Payable
Work in Process
Factory Overhead
Factory Payroll
106,000
2,000
5,000
9,000
9,000
95,400
10,600
106,000
Factory Overhead
SSS Payable
8,000
8,000
Ex 3-2. Payroll computation with overtime
PBB Company employs 5 workers in 6am to 2pm shift who earns P200 per hour. The 2 nd shift workers working from 2pm
to 10pm, earns the regular rate plus 5% shift premium plus 10% overtime premium for hours in excess of 8 hours. The 3 rd
shift workers working from 10pm to 6am earns the regular rate plus 5% shift premium and 10% night premium. All the
workers are direct laborers. WHT are deducted weekly.
6am – 2pm
Tibo
Jason
Hours worked
Mon
Tues
8
8
8
8
Wed
8
8
Thurs
8
8
Fri
4
8
2pm – 10pm
Rica
Princess
8
5
8
8
8
8
8
8
8
8
10pm – 6am
Bianca
Toni
8
8
8
8
8
8
8
8
8
8
Required: Prepare the payroll for the week and give all journal entries to record the payroll with supporting computations,
if necessary.
Cost Accounting and Control 2019 Edition
Problem and Solutions
Tibo
Gross Pay
Withholding Tax
Net Pay
7,200
(478.4)
6,721.60
Jason
Gross Pay
Withholding Tax
Net Pay
8,000
(653.92)
7,346.08
Gross Pay:
Regular Pay - 36 hours x 200
7,200
Withholding Tax:
(7,200 – 4,808) (.2)
478.4
Gross Pay:
Regular Pay – 40 hours x 200
8,000
Withholding Tax:
[(8,000 – 7,692) x .25] + 576.92
653.92
Rica
Gross Pay
Withholding Tax
Net Pay
Princess
Gross Pay
Withholding Tax
Net Pay
8,400
(753.92)
7,646.08
7,770
(596.42)
7,173.58
Gross Pay:
Regular Pay – 40 x 200 = 8,000
Shift Premium – 40 x 10 = 400
8,400
Withholding Tax:
[(8,400 – 7,692) x .25] + 576.92
753.92
Gross Pay:
Regular Pay – 37 x 200 = 7,400
Shift Premium – 37 x 10 = 370
7,770
Withholding Tax:
[(7,770 – 7,692) x .25] + 576.92
596.42
Bianca
Gross Pay
Withholding Tax
Net Pay
Toni
Gross Pay
Withholding Tax
Net Pay
9,200
(953.92)
8,246.08
Gross Pay:
Regular Pay – 40 x 200 = 8,000
Shift Premium – 40 x 10 = 400
Night Premium – 40 x 20 = 800
9,200
Withholding Tax:
[(9,200 – 7,692) x .25] + 576.92
953.92
Factory Payroll
Withholding Payable
Cash / Salaries Payable
9,200
(953.92)
8,246.08
Gross Pay:
Regular Pay – 40 x 200 = 8,000
Shift Premium – 40 x 10 = 400
Night Premium – 40 x 20 = 800
9,200
Withholding Tax:
[(9,200 – 7,692) x .25] + 576.92
953.92
49,770
4,390.5
45,379.5
Cost Accounting and Control 2019 Edition
Problem and Solutions
TEST MATERIAL 1.
At the beginning of the month, Roses Corporation had raw materials inventory of P100,000. It purchased
additional raw materials amounting to P600,000. At the end of the month, it was reported that raw materials
decreased by P80,000. Production reports showed that 100,000 units of Product X were manufactured at labor
costs of P550,000 of which 10% is indirect labor; Work in process beginning is P56,000 and decreased by P16,000
at the end of the month. Factory overhead is applied at 80% of direct labor costs. Of the raw materials issued,
only 80% is charged to the job.
1. Determine the prime costs for the period.
DM
DL
OH
TMC
WIP, beg
WIP, end
COGM
544,000
495,000
396,000
1,435,000
56,000
(40,000)
1,451,000
Raw Materials, beginning
Raw Materials purchases
Raw Materials, end
Raw Materials, issued
100,000
600,000
(20,000)
680,000
x.80
544,000
DM
DL
Prime Costs
544,000
495,000
1,039,000
375,000
117,000
400,000
120,000
492,000
520,000
Direct Materials
Factory Overhead
A rush order was accepted by Sonny Company for 4 home video ordered by SM Corporation. The labor time
records for the week show the following:
Employees
Andrea
Mayet
Mel
Malou
Glenn
Ryan
Boy
Hours
42
45
48
48
45
42
40
HV 1
Labor time distribution
HV 2
HV 3
10
24
15
24
20
10
24
4
15
8
10
HV 4
10
15
22
15
10
10
22
All workers are paid P100 per hour, except Andrea, the Supervisor, who receives P156 per hour. Overtime premium is
10% of regular rate. The regular work time is 8 hours a day or 40 hours a week.
2. Compute for the gross payroll for the week.
3. Distribute the payroll (Work in process & Factory overhead)
Cost Accounting and Control 2019 Edition
Problem and Solutions
Andrea (Supervisor)
Regular Pay (42 x 156)
Overtime Premium (2 x 15.6)
6,552.00
31.20
6,583.20
Mayet
Regular Pay (45 x 100)
Overtime Premium (5 x 10)
Mel
Malou
Regular Pay (48 x 100)
Overtime Premium (8 x 10)
4,800
80
4,880
Glenn
Regular Pay (45 x 100)
Overtime Premium (5 x 10)
Regular Pay (48 x 100)
Overtime Premium (8 x 10)
4,800
80
4,880
Ryan
4,500
50
4,550
Boy
Regular Pay (40 x 100)
Gross Payroll:
Regular pay
Overtime Premium
Gross Pay
4,500
50
4,550
4,000
Regular Pay (42 x 100)
Overtime Premium (2 x 10)
4,200
20
4,220
Note:
Because it is a rush order the regular pay and the overtime
premium is considered as direct labor. However, Andrea’s regular
pay and overtime premium is considered as factory overhead.
33,352
311.2
33,663.2
Factory Payroll
Cash / Salaries Payable
33,663.2
Work in Process
Factory Overhead
Factory Payroll
27,080
6,583.20
33,663.2
33,663.2
Intel Company pay its workers a basic rate of P68 per hour plus 10% premium for ordinary overtime plus 10%
night premium. The regular working days is from Monday to Friday, 8am to 5pm. In the 1 st week of August, Intel
Company required 5 of its workers to work beyond ordinary working time one Friday. The 5 workers worked up to
11pm that Friday.
4. Compute for the total earnings of the 5 workers for the day, Friday, and determine the amount charged to factory
overhead.
Factory Payroll
Cash / Salaries Payable
4,998
Work in Process
Factory Overhead
Factory Payroll
4,760
238
4,998
4,998
Cost Accounting and Control 2019 Edition
Problem and Solutions
HP Company generated the following data for the year just ended:
Total manufacturing costs
Cost of goods manufactured
Overhead applied based on direct labor costs
Overhead applied based on total manufacturing costs
P10,000,000
P10,250,000
75%
27%
5. Determine the amount of labor charged to work in process account.
DM
DL
OH
TMC
3,700,000
3,600,000
2,700,000
10,000,000
OH = 10,000,000 x .27 = 2,700,000
DL = 2,700,000 / .75 = 3,600,000
Betty La Fea Company reported the following for the yar just ended:
Beginning inventories:
Raw Materials
Work in Process
Finished Goods
P 450,000
560,000
900000
Ending Inventories:
Raw Materials
Work in Process
Finished Goods
P 600,000
760,000
1,040,000
Goods Manufactured
Raw material purchases
Overhead applied
P6,800,000
2,650,000
50% of DLC
6. Compute for the prime costs for the year just ended.
DM
DL
OH
TMC
WIP, beg
WIP, end
COGM
FG, beg
FG, end
COGS
DM
DL
Prime costs
2,500,000
3,000,000
1,500,000
7,000,000
560,000
(760,000)
6,800,000
900,000
(1,040,000)
6,660,000
2,500,000
3,000,000
5,500,000
Raw Materials, beginning
Raw Materials purchases
Raw Materials, end
Raw Materials used
CC = DL + OH
4,500,000 = x + .50x
4,500,000 = 1.50x
4,500,000 / 1.50 = 1.50x / 1.50
DL = 3,000,000
OH = 3,000,000 x .50 = 1,500,000
450,000
2,650,000
(600,000)
2,500,000
Cost Accounting and Control 2019 Edition
Problem and Solutions
Sharp Enterprises operates its factory on a two-shift basis and pays a late shift differential of 15 percent above
the regular wage rate of P65 per hour. The company also pays a premium of 10 percent for overtime work. During
the year, work occurred in the following categories:
Number of hours worked during the regular shift
Number of overtime hours for regular shift workers
Number of hours worked during the late shift
10,000
300
6,000
7. Determine the amount of total payroll and distribute the total payroll to Work in Process and Factory overhead.
Regular Pay
Overtime Premium
Night Premium
(16,300 x 65)
(300 x 6.5)
(6,000 x 9.75)
1,059,500
1,950
58,500
1,119,950
Factory Payroll
Cash / Salaries Payable
1,119,950
Work in Process
Factory Overhead
Factory Payroll
1,059,500
60,450
1,119,950
1,119,950
A factory employee is paid P45 per hour for a regular workweek of 40 hours. During the week ended June 21, the
employee worked 50 hours and earned time and a half for overtime hours.
8. Compute for the amount debited to work in process.
Regular Pay
Overtime Premium
(50 x 45)
(10 x 22.5)
2,250
225
2,475
Factory Payroll
Cash / Salaries Payable
2,475
Work in Process
Factory Overhead
Factory Payroll
2,250
225
2,475
2,475
Cost Accounting and Control 2019 Edition
Problem and Solutions
Sunshine Manufacturing Company just started its operation this year. After its first three months of operations,
Sunshine Manufacturing Company had the following data on its operation:




Cost of goods sold amounted to P540,000
Manufacturing costs were distributed as follows: 40% direct materials used; 30% direct labor; 30% factory
overhead
Work in process, March 31 was 10% of the total manufacturing costs
Finished goods remaining in stock were 20% of the total cost of goods manufactured
9. Compute for the amount of direct labor costs incurred for the period.
DM
DL
OH
TMC
WIP, beg
WIP, end
COGM
FG, beg
FG, end
COGS
300,000
225,000
225,000
750,000
0
(75,000)
675,000
0
(135,000)
540,000
COGM = 540,000 / .80 = 675,000
TMC = 675,000 x .90 = 750,000
The cost of goods manufactured for the period is P450,000; Factory overhead is P150,000; Decrease in work in
process inventory, P30,000.
10. Determine the amount of prime costs for the period.
Prime Costs
OH
TMC
270,000
150,000
420,000
TMC
ΔWIP
COGM
420,000
30,000
450,000
Cost Accounting and Control 2019 Edition
Problem and Solutions
TEST MATERIAL 2. (UNCHECKED)
Below are balances and information taken from the records of Bulls Company for the last quarter of the current
year:
Inventories: October 1
Raw Materials
Work in process
Finished goods
Cost of goods sold
Manufacturing overhead
P134,000
354,000
594,600
10,800,000
4,200,000 debit
4,600,000 credit
Supplementary data:
1) During the period, purchases of raw materials totaled P1,093,400 while physical count of raw materials revealed
that P250,000 were unused.
2) 39,800 direct labor hours were utilized distributed as follows:
a. 25,000 hours worked on regular time at P42.50 per hr.
b. 14,000 hours worked at P42.50 plus 10% special night premium
c. 800 hours worked on overtime at regular rate plus 30% OT premium
3) Overhead is charged to production at 80% of direct labor costs.
4) Actual overhead incurred were P1,420,000. Overhead variance is closed to all accounts with overhead elements
only at the end of the year
5) At the end of the year, records show that work in process increased by P80,000 while Finished Goods decreased
by P150,000.
1. The total factory costs for the quarter amounted to:
a. P4,147,560
c. P4,376,100
b. P4,022,100
d. P3,880,900
2. The costs of goods manufactured for the quarter amounted to:
a. P3,942,100
c. P4,067,560
b. P4,692,100
d. P3,880,900
3. The balances of the following accounts after closing the overhead variance are:
Work in process
Finished Goods
Cost of Sales
a. P434,000
P444,600
P4,092,100
b. P404,908
P414,797
P3,817,795
c. P463,092
P474,403
P4,366,405
d. P424,831
P435,207
P14,577,643
DM:
DM
DL
OH
TMC
WIP, beg
WIP, end
COGM
FG, beg
COGSAS
FG, end
COGS
P
977,400
1,761,200
1,408,960
4,147,560
594,600
(674,600)
4,067,560
594,600
(444,600)
(444,600)
P 4,217560
RM, beg
RM purchase
RM, end
RM used
P134,000
1,0931,400
(250,000)
P977,400
39,800 x 42.50
14,000 x 4.25
800 x 12.75
P1,694,500
59,500
10,200
P1,761,000
1,761,200 x .80
P1,408,960
DL:
OH:
Factory Overhead
4,200,000
1,420,000
4,600,000
1,408,960
Cost Accounting and Control 2019 Edition
Problem and Solutions
5,620,000
6,008,960
388,960
overapplied
Victory Manufacturing Company produces a variety of products. The firm operates 24 hours per day with three
daily work shifts. The first shift workers receive regular pay. The 2 nd shift receive 10% pay premium, and the 3 rd
shifts receive 20% pay premium. In addition, the firm pays overtime premium of 50% based on the pay rate for the
1st shifts. All labor premiums are included in overhead.
The actual payroll for the month is as follows:
Total wages for 16,000 hours
Wage rate for the 1st shift
Total regular hours worked
?
P35 per hour
15,000
4. The total amount of total payroll for the period is:
a. P560,000
c. P630,000
b. P525,000
d. P606,600
1st shift
2nd shift
3rd shift
OT Premium
5,000 x 35
5,000 x (35 + 3.5)
5,000 x (35 + 7)
1,000 x (35 + 17.5)
Total Payroll
P175,000
192,500
210,000
52,500
P630,000
One Friday morning, a customer brings a rush order of 2,500 units of Product X at a unit sales price of P20. Glory
Company agrees to produce these units for the customer over the weekend for shipment on Monday. Fifty of the
direct labor employees who earn P30 an hour work eight hours each day on Saturday and Sunday to complete
the order. Glory Company regular working day is Monday to Friday. The company’s policy on overtime during
weekend is time and a half Materials costing P3 per unit was used on the order. The factory overhead application
rate is P18 per direct labor hour.
5.
The amount of direct labor charged to the job is
a. P36,000
c. P12,000
b. P18,000
d. P24,000
Basic Pay
Add: OT Premium
800 x 30
800 x 15
Total Direct Labor
P94,000
12,000
P36,000
X Company pays time and a half for hours in excess of 40 hours per week.
6. If an individual is paid P48 per hour and works 44 hours a week, the weekly earnings will amount to:
a. P1,920
c. P2,064
b. P2,208
d. P2,112
Regular Pay
Add: OT Premium
44 hours x P48
4 hours x P24
P94,000
12,000
Total Weekly Earnings
P36,000
UCC Company has three producing departments A, B and C with 50, 30 and 20 employees, respectively in each
department. Factory payroll costs other than direct labor are accumulated in a Payroll Department account and
Cost Accounting and Control 2019 Edition
Problem and Solutions
are assigned to producing departments on the basis of number of employees. The total payroll in each
department was: Dept A, P300,000; Dept B, P275,000; Dept C, P325,000; and Payroll, P50,000, Other costs
accumulated in the Payroll Department amounted to P200,000.
7. The amount of Payroll Department Costs chargeable to Department C is:
a. P125,000
c. P100,000
b. P40,000
d. P50,000
250,000 x .20 = 50,000
8. Which of the following is classified as a period costs?
a. The wages of workers on the shipping docks who load completed products into outgoing trucks
b. The wages of workers paid for the idle time resulting from a machine breakdown in the molding department
c. The payments for employee benefits paid to workers in the manufacturing plant
d. The wages of workers for reworking defective products that failed the quality inspection upon completion
9. The entry when direct factory labor is assigned to jobs is a debit to:
a. Work in process and a credit to factory labor
b. Manufacturing overhead and a credit to factory labor
c. Factory labor and a credit to manufacturing overhead
d. Factory labor and a credit wo work in process inventory
10. Which of the following journal entries records the accrual of the cost of indirect labor used in production?
a. Debit Work in Process Inventory, credit Wages payable
b. Debit Work in Process Inventory, credit Manufacturing Overhead
c. Debit Manufacturing Overhead, credit Work in Process Inventory
d. Debit Manufacturing Overhead, credit Wages Payable
Flores Company applies overhead at 120% of direct labor costs. Job 300 is charges with direct materials of
P12,000 and manufacturing overhead of P7,200. Job 400 has direct materials of P2,000 and direct labor of P9,000.
11. The amount of direct labor charged to Job 300 is:
a. P6,000
c. P8,640
b. P7,200
d. P14,400
7,200 / 1.20 = 6,000
Selected cost data concerning the prior year’s operations of Simply Company at presented below:
Inventories
Beginning
Ending
Raw Materials Inventory
P75,000
P85,000
Work in Process Inventory
80,000
30,000
Finished Goods Inventory
90,000
110,000
Raw materials used, P326,000
Total factory costs for the year, P686,000
Factory overhead is applied at 60% of direct labor costs
Cost of goods available for sale, P826,000
Selling and general expenses, P25,000
12. Direct labor charged to the job during the year amounted to:
a. P216,000
c. P135,000
b. P225,0000
d. P360,000
DM
DL
OH
P326,000
225,000
135,000
686,000
Conversion costs = DM + DL
360,000 = x + .60x
360,000 = 1.60x
360,000 / 1.60 = 1.60x / 1.60
x = 225,000
DL = 225,000
OH = 135,000