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1

CHAPTER 9
Answers to Multiple Choice Theoretical
1.
2.
3.
4.
5.

c
b
a
a
a

6.
7.
8.
9.
10.

b
b
c
b
d

11.
12,
13.
14.
15.

b
d
b
b
a

Solutions to Multiple Choice Computational


1.

2.

(a)
Total manufacturing cost: (2,200 units x P56)
Less: cost of spoiled units (200 units x P56)
Cost of good units

P123,200
11,200
P112,000

Unit cost: (P112,000 / 2,000 good units)

Manufacturing cost: (P56 P1) x 2,200 =


Less: Scrap value of spoiled units
Cost of good units

P121,000
6,000
P115,000

Unit cost: (P115,000 / 2,000 good units)

P 57.50 (2)

56 (1)

(d)
Charged to Specific Job:
Direct materials
Direct labor
Manufacturing overhead (P800 x 150%)
Manufacturing cost

P 660
800
1,200
P2,660

Unit cost: (P2,660 / 200 units)

P13.30

Due to internal failure:


Manufacturing cost
Add: Rework cost
Direct materials
Direct labor
Overhead (P160 x 150%)
Total cost after rework cost
Unit cost: (P3,160 / 200 units)

P2,660
P100
160
240

500
P3,160
P15.80

2
3.

(d)

4.

(a)

5.

(c)
Charged to specific job:
Direct materials: (8,000 units x P5)
Direct labor: (8,000 units x P4)
Manufacturing overhead: (8,000 units x P3)
Manufacturing costs
Less: Scrap value (600 x P7)
Manufacturing cost net of scrap value

P40,000
32,000
24,000
P96,000
4,200
P91,800

Unit cost: (P91,800 / 7,400 good units)

P 12.41

Charged to all production:


Direct materials
Direct labor
Manufacturing overhead: (8,000 units x P3.50)
Manufacturing cost
Less: Cost of spoiled units (600 x P12.50)
Manufacturing cost of good units

P 40,000
32,000
28,000
P100,000
1,500
P 98,500

Unit cost: (P98,500 / 7,400 good units)


6.

P 12.50

(b)
Charged to LGU Machine Works:
Direct materials: (1,000 x P3.50)
Direct labor: (2,000 x P1.25)
Overhead: (P2,500 x 140%)
Manufacturing cost
Rework cost:
Direct materials: (100 x P0.15)
Direct labor: (100 x P0.25)
Overhead: (P25 x 140%)
Total manufacturing cost

P 7,000
2,500
3,500
P13,000
P15
25
35

75
P13,075

Unit cost: (P13,075 / 2,000 units)

P6.5375

Charged to Factory Overhead Control:


Direct materials
Direct labor
Overhead: (P2,500 x 150%)
Manufacturing cost

P 7,000
2,500
3,750
P13,250

Unit cost: (P13,250 / 2,000 )

P6.6250

3
7.

(a)

8.

(b)

9.

(d)

10.

11.

12.

Direct materials (25 x P80)


Direct labor (25 x P194)
Overhead (P4,850 x 100%)
Total
Less: Scrap value (2 x P400)
Manufacturing cost of 23 units

P 2,000
4,850
4,850
P11,700
800
P10,900

Unit cost: (P10,900 / 23)

P473.91

(b)
Direct materials
Direct labor
Overhead
Total
Less: Cost of spoilage: (P49,565 / 2,200) x 200 units
Manufacturing cost of 2,000 units

P26,951
15,076
7,538
P49,565
4,506
P45,059

Unit cost: (P45,059 / 2,000)

P 22.53

(b)
Direct materials (P95 x 250)
Direct labor (P6 x 5,260 DLH)
Applied overhead (P2 x 5,260 DLH)
Total
Less: Cost of spoilage (P65,830 / 250) x 10
Manufacturing cost of 240 units

P23,750
31,560
10,520
P65,830
2,633
P63,197

Unit cost: (P63,197 / 240)

P263.32

(d)
Direct materials
Direct labor
Overhead (P12,500/P2.50) x P1.50
Total
Rework cost (P100 + P125 + P75)
Sales value of spoiled units (1,000 x P4)
Manufacturing cost of 9,000 units

P30,000
12,500
7,500
P50,000
300
(40,000)
P46,300

Unit cost: (P46,300 / 9,000)

P5.1444

4
Solutions to Problems
Problem 9-1
1.
2.
3.
4.

Cash/Accounts receivable
Other income

2,500

Cash/Accounts receivable
Cost of goods sold

2,500

Cash/Accounts receivable
Factory overhead control

2,500

Cash/Accounts receivable
Work in process inventory

2,500

2,500
2,500
2,500
2,500

Problem 9-2
1.
2.
3.
4.

Cash/Accounts receivable
Other income

4,000

Cash/Accounts receivable
Factory overhead control

4,000

Cash/Accounts receivable
Work in process inventory

4,000

Materials inventory
Factory overhead control

4,000

Work in process inventory


Materials inventory

4,000

4,000
4,000
4,000
4,000
4,000

Problem 9-3
1.

Work in process inventory


Materials inventory
Payroll
Applied factory overhead
To record production cost.
Spoiled goods inventory (100 x P10)
Factory overhead control
Work in process inventory (P54,000/2,000)100
To record spoilage cost.
Finished goods inventory
Work in process inventory
To record finished goods (P54,000 P2,700)

2.

Unit cost: (P51,300 / 1,900 units) = P27


Problem 9-4

54,000
24,000
10,000
20,000
1,000
1,700
2,700
51,300
51,300

1.

Work in process inventory


Materials inventory
To record production cost

208,000
208,000

Spoiled goods inventory (200 x P100)


Work in process inventory
To record scrap value of spoiled units.
Finished goods inventory
Work in process inventory
To record cost of finished goods (P208,000 P20,000)
2.

20,000
20,000
188,000
188,000

Unit cost: (P188,000 / 1,000 units) = P188

Problem 9-5
1.

2.

Spoiled goods inventory


Factory overhead control
Work in process inventory
To record spoilage.

1,200
1,600

Spoiled goods inventory


Factory overhead control
Work in process inventory
To record spoilage.

2,500
300

Accounts receivable
Spoiled goods inventory
To record the offer of scrap dealer.

2,500

2,800

2,800

2,500

Problem 9-6
Entry No. 1:

If spoiled units are due to customers exacting specifications.

Entry No. 2:

If spoiled units are due to internal failure/employees error.

Entry No. 3:

If cost of spoiled units is unrecoverable. This is an abnormal loss charged


immediately to operations.

Entry No. 4:

If spoilage is traceable to a particular job and the loss is recoverable from the
customer or from the insurance company.

Problem 9-7

1a.

Work in process inventory


Materials inventory
Payroll
Applied factory overhead
To record manufacturing cost

180,000
92,000
28,000
60,000

Spoiled goods inventory (400 x P15)


Factory overhead control
Work in process inventory
To record cost of spoilage: (P180,000/10,000) x 400.

6,000
1,200

Finished goods inventory


Work in process inventory
To record cost of finished goods (P180,000 P7,200)

172,800

1b.

Unit cost: (P172,800 / 9,600 units) =

2a.

Work in process inventory


Materials inventory
Payroll
Applied factory overhead
To record manufacturing cost.

172,800

P18.
180,000
92,000
28,000
60,000

Spoiled goods inventory


Work in process inventory
To record cost of spoiled goods (400 x P15)

2b.

7,200

6,000
6,000

Finished goods inventory


Work in process inventory
To record cost of finished goods.

174,000

Cash/Accounts receivable
Sales
To record sales (P174,000 x 140%)

243,600

Cost of goods sold


Finished goods inventory
To record cost of goods sold.

174,000

Unit cost: (P174,000 / 9,600 units) =

174,000

243,600

174,000
P18.125

Problem 9-8

1.

2.

Spoiled goods inventory


Factory overhead control
Work in process inventory
To record cost of spoiled units (P400 x P4.50)

1,800
1,800

Accounts receivable
Spoiled goods inventory
To record sales of scrap.

1,100

3,600

1,100

Problem 9-9
1.

Factory overhead control


Work in process inventory
To record cost destroyed units.

1,200
1,200

Unit cost of the remaining 2,300 cases is P6.


2.

3a.

b.

4a.

b.

5.

Spoiled goods inventory


Factory overhead control
Work in process inventory
To record salvage value of defective units.

200
1,000

Accounts receivable
Work in process inventory
To record cost of defective cases chargeable to customer.

1,200

Factory overhead control


Work in process inventory
To record cost of defective units charged to production.

1,200

1,200

1,200

1,200

Spoiled goods inventory


Accounts receivable
Work in process inventory
To record salvage value of defective units.

400
800

Spoiled goods inventory


Factory overhead control
Work in process inventory
To record salvage value of defective units.

400
800

Factory overhead control


Materials inventory
To record rejected units charged to overhead.

200

1,200

1,200

200

Average unit cost is P6.00.


6.

Work in process inventory


Materials inventory
To record cost of rejected units charged to a particular job.

200

Average unit cost: (2,500 x P6) + P200 = P15,200 / 2,500 = P6.08


7.

Same.

200

8
Problem 9-10
1.

Work in process inventory


Materials inventory
Payroll
Applied overhead
To record manufacturing cost.

13,600
7,000
3,000
3,600

Manufacturing overhead control


Materials inventory (200 x P1.50)
Payroll (15/60 x P10 x 200)
Applied overhead (15/60 x P12 x 200)
To record rework cost.
Finished goods inventory
Work in process inventory
To record cost of finished goods.
2.

Unit cost: (P13,600 / 200 units) =

1,400
300
500
600
13,600
13,600

P68

Problem 9-11
1.

Work in process inventory


Materials inventory
Payroll
Applied overhead
To record manufacturing cost.

130,000
40,000
30,000
60,000

Work in process inventory


Materials inventory (1,000 x P1)
Payroll (10/60 x P15) x 1000
Applied overhead (10/60 x P30) x 1,000
To record rework cost.
Finished goods inventory
Work in process inventory
To record cost of finished goods.
2.

Unit cost: (P138,500 / 2,000 units) =

8,500
1,000
2,500
5,000
138,500
138,500

P69.20

Problem 9-12
1a.

Work in process inventory


Materials inventory
Payroll
Applied overhead
To record manufacturing cost.

400,000
184,000
72,000
144,000

Manufacturing overhead control


Materials inventory (200 units x P4)
Payroll : (30/60 x P12) x 200
Applied overhead: (30/36 x P24) x 200
To record rework cost.
Finished goods inventory
Work in process inventory
To record cost of finished goods.
b.

2a.

Unit cost: (P400,000 / 2,000 units) =

400,000
P200

Work in process inventory


Materials inventory
Payroll
Applied overhead
To record manufacturing cost.

400,000
184,000
72,000
144,000
4,400
800
1,200
2,400

Finished goods inventory


Work in process inventory
To record cost of finished goods.
Unit cost: (P404,400 / 2,000 units) =

800
1,200
2,400
400,000

Work in process inventory


Materials inventory
Payroll
Applied overhead
To record rework cost.

b.

4,400

404,400
404,400
P202.20

10

Problem 913
1a.

Work in process inventory


Materials inventory
Payroll
Applied overhead (P3,500 x 160%)
To record manufacturing cost.
Manufacturing overhead control
Materials inventory
Payroll
Applied overhead
To record rework cost.

2a.

Unit cost: (P17,100 / 2,000 units) =

30
45
72
17,100
17,100
P8.55

Work in process inventory


Materials inventory
Payroll
Applied overhead (P3,500 x 150%)
To record manufacturing cost.
Work in process inventory
Materials inventory
Payroll
Applied overhead (P45 x 150%)
To record rework cost.
Finished goods inventory
Work in process inventory
To record cost of finished goods.

b.

8,000
3,500
5,600
147

Finished goods inventory


Work in process inventory
To record cost of finished goods.
b.

17,100

Unit cost: (P16,892.50 / 2,000 units) = P8.45

16,750
8,000
3,500
5,250
142.50
30
45
67.50
16,892.50
16,892.50

11

Problem 9-14
a.

Predetermined overhead rate: (P462,500 / 50,000 machine hrs. ) P9.25 per MH


Direct materials
Direct labor
Applied overhead (1,540 x P9.25)
Total cost of Job 2720

b.

The rework cost is debited to the manufacturing overhead control account since the
company uses a predetermined rate to apply overhead. The entry is:
Manufacturing overhead control
Various accounts

c.

d.

P343,550
78,875
14,245
P436,670

Predetermined overhead rate:

37,750
37,750
(P425,000 / 50,000 = P8.50 per MH

Direct materials
Direct labor
Applied overhead (1,540 x P8.50)
Total cost of Job 2720

P343,550
78,875
13,090
P435,515

Direct materials
Direct labor
Applied overhead (1,540 x P8.50)
Rework cost (P37,750 x .20)
Sale of reworked pipe (200 x P1.50)
Total cost of Job 2720

P343,550
78,875
13,090
7,550
( 300)
P442,765