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CHAPTER 9

Answers to Multiple Choice Theoretical

1. c 6. b 11. b
2. b 7. b 12, d
3. a 8. c 13. b
4. a 9. b 14. b
5. a 10. d 15. a

Solutions to Multiple Choice Computational

1. (a)

Total manufacturing cost: (2,200 units x P56) P123,200

Less: cost of spoiled units (200 units x P56) 11,200
Cost of good units P112,000

Unit cost: (P112,000 / 2,000 good units) P 56 (1)

Manufacturing cost: (P56 P1) x 2,200 = P121,000

Less: Scrap value of spoiled units 6,000
Cost of good units P115,000

Unit cost: (P115,000 / 2,000 good units) P 57.50 (2)

2. (d)

Charged to Specific Job:

Direct materials P 660
Direct labor 800
Manufacturing overhead (P800 x 150%) 1,200
Manufacturing cost P2,660

Unit cost: (P2,660 / 200 units) P13.30

Due to internal failure:

Manufacturing cost P2,660
Add: Rework cost
Direct materials P100
Direct labor 160
Overhead (P160 x 150%) 240 500
Total cost after rework cost P3,160

Unit cost: (P3,160 / 200 units) P15.80

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3. (d)

4. (a)

5. (c)

Charged to specific job:

Direct materials: (8,000 units x P5) P40,000
Direct labor: (8,000 units x P4) 32,000
Manufacturing overhead: (8,000 units x P3) 24,000
Manufacturing costs P96,000
Less: Scrap value (600 x P7) 4,200
Manufacturing cost net of scrap value P91,800

Unit cost: (P91,800 / 7,400 good units) P 12.41

Charged to all production:

Direct materials P 40,000
Direct labor 32,000
Manufacturing overhead: (8,000 units x P3.50) 28,000
Manufacturing cost P100,000
Less: Cost of spoiled units (600 x P12.50) 1,500
Manufacturing cost of good units P 98,500

Unit cost: (P98,500 / 7,400 good units) P 12.50

6. (b)

Charged to LGU Machine Works:

Direct materials: (1,000 x P3.50) P 7,000
Direct labor: (2,000 x P1.25) 2,500
Overhead: (P2,500 x 140%) 3,500
Manufacturing cost P13,000
Rework cost:
Direct materials: (100 x P0.15) P15
Direct labor: (100 x P0.25) 25
Overhead: (P25 x 140%) 35 75
Total manufacturing cost P13,075

Unit cost: (P13,075 / 2,000 units) P6.5375

Charged to Factory Overhead Control:

Direct materials P 7,000
Direct labor 2,500
Overhead: (P2,500 x 150%) 3,750
Manufacturing cost P13,250

Unit cost: (P13,250 / 2,000 ) P6.6250

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7. (a)

8. (b)

9. (d)

Direct materials (25 x P80) P 2,000

Direct labor (25 x P194) 4,850
Overhead (P4,850 x 100%) 4,850
Total P11,700
Less: Scrap value (2 x P400) 800
Manufacturing cost of 23 units P10,900

Unit cost: (P10,900 / 23) P473.91

10. (b)

Direct materials P26,951

Direct labor 15,076
Overhead 7,538
Total P49,565
Less: Cost of spoilage: (P49,565 / 2,200) x 200 units 4,506
Manufacturing cost of 2,000 units P45,059

Unit cost: (P45,059 / 2,000) P 22.53

11. (b)

Direct materials (P95 x 250) P23,750

Direct labor (P6 x 5,260 DLH) 31,560
Applied overhead (P2 x 5,260 DLH) 10,520
Total P65,830
Less: Cost of spoilage (P65,830 / 250) x 10 2,633
Manufacturing cost of 240 units P63,197

Unit cost: (P63,197 / 240) P263.32

12. (d)

Direct materials P30,000

Direct labor 12,500
Overhead (P12,500/P2.50) x P1.50 7,500
Total P50,000
Rework cost (P100 + P125 + P75) 300
Sales value of spoiled units (1,000 x P4) (40,000)
Manufacturing cost of 9,000 units P46,300

Unit cost: (P46,300 / 9,000) P5.1444

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Solutions to Problems

Problem 9-1

1. Cash/Accounts receivable 2,500

Other income 2,500

2. Cash/Accounts receivable 2,500

Cost of goods sold 2,500

3. Cash/Accounts receivable 2,500

Factory overhead control 2,500

4. Cash/Accounts receivable 2,500

Work in process inventory 2,500

Problem 9-2

1. Cash/Accounts receivable 4,000

Other income 4,000

2. Cash/Accounts receivable 4,000

Factory overhead control 4,000

3. Cash/Accounts receivable 4,000

Work in process inventory 4,000

4. Materials inventory 4,000

Factory overhead control 4,000

Work in process inventory 4,000

Materials inventory 4,000

Problem 9-3

1. Work in process inventory 54,000

Materials inventory 24,000
Payroll 10,000
Applied factory overhead 20,000
To record production cost.

Spoiled goods inventory (100 x P10) 1,000

Factory overhead control 1,700
Work in process inventory (P54,000/2,000)100 2,700
To record spoilage cost.

Finished goods inventory 51,300

Work in process inventory 51,300
To record finished goods (P54,000 P2,700)

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

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Problem 9-4

1. Work in process inventory 208,000

Materials inventory 208,000
To record production cost

Spoiled goods inventory (200 x P100) 20,000

Work in process inventory 20,000
To record scrap value of spoiled units.

Finished goods inventory 188,000

Work in process inventory 188,000
To record cost of finished goods (P208,000 P20,000)

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

Problem 9-5

1. Spoiled goods inventory 1,200

Factory overhead control 1,600
Work in process inventory 2,800
To record spoilage.

2. Spoiled goods inventory 2,500

Factory overhead control 300
Work in process inventory 2,800
To record spoilage.

Accounts receivable 2,500

Spoiled goods inventory 2,500
To record the offer of scrap dealer.

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.
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Problem 9-7

1a. Work in process inventory 180,000

Materials inventory 92,000
Payroll 28,000
Applied factory overhead 60,000
To record manufacturing cost

Spoiled goods inventory (400 x P15) 6,000

Factory overhead control 1,200
Work in process inventory 7,200
To record cost of spoilage: (P180,000/10,000) x 400.

Finished goods inventory 172,800

Work in process inventory 172,800
To record cost of finished goods (P180,000 P7,200)

1b. Unit cost: (P172,800 / 9,600 units) = P18.

2a. Work in process inventory 180,000

Materials inventory 92,000
Payroll 28,000
Applied factory overhead 60,000
To record manufacturing cost.

Spoiled goods inventory 6,000

Work in process inventory 6,000
To record cost of spoiled goods (400 x P15)

Finished goods inventory 174,000

Work in process inventory 174,000
To record cost of finished goods.

Cash/Accounts receivable 243,600

Sales 243,600
To record sales (P174,000 x 140%)

Cost of goods sold 174,000

Finished goods inventory 174,000
To record cost of goods sold.

2b. Unit cost: (P174,000 / 9,600 units) = P18.125

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Problem 9-8

1. Spoiled goods inventory 1,800

Factory overhead control 1,800
Work in process inventory 3,600
To record cost of spoiled units (P400 x P4.50)

2. Accounts receivable 1,100

Spoiled goods inventory 1,100
To record sales of scrap.

Problem 9-9
1. Factory overhead control 1,200
Work in process inventory 1,200
To record cost destroyed units.

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

2. Spoiled goods inventory 200

Factory overhead control 1,000
Work in process inventory 1,200
To record salvage value of defective units.

3a. Accounts receivable 1,200

Work in process inventory 1,200
To record cost of defective cases chargeable to customer.

b. Factory overhead control 1,200

Work in process inventory 1,200
To record cost of defective units charged to production.

4a. Spoiled goods inventory 400

Accounts receivable 800
Work in process inventory 1,200
To record salvage value of defective units.

b. Spoiled goods inventory 400

Factory overhead control 800
Work in process inventory 1,200
To record salvage value of defective units.

5. Factory overhead control 200

Materials inventory 200
To record rejected units charged to overhead.

Average unit cost is P6.00.

6. Work in process inventory 200

Materials inventory 200
To record cost of rejected units charged to a particular job.

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

7. Same.
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Problem 9-10

1. Work in process inventory 13,600

Materials inventory 7,000
Payroll 3,000
Applied overhead 3,600
To record manufacturing cost.

Manufacturing overhead control 1,400

Materials inventory (200 x P1.50) 300
Payroll (15/60 x P10 x 200) 500
Applied overhead (15/60 x P12 x 200) 600
To record rework cost.

Finished goods inventory 13,600

Work in process inventory 13,600
To record cost of finished goods.

2. Unit cost: (P13,600 / 200 units) = P68

Problem 9-11

1. Work in process inventory 130,000

Materials inventory 40,000
Payroll 30,000
Applied overhead 60,000
To record manufacturing cost.

Work in process inventory 8,500

Materials inventory (1,000 x P1) 1,000
Payroll (10/60 x P15) x 1000 2,500
Applied overhead (10/60 x P30) x 1,000 5,000
To record rework cost.

Finished goods inventory 138,500

Work in process inventory 138,500
To record cost of finished goods.

2. Unit cost: (P138,500 / 2,000 units) = P69.20

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Problem 9-12

1a. Work in process inventory 400,000

Materials inventory 184,000
Payroll 72,000
Applied overhead 144,000
To record manufacturing cost.

Manufacturing overhead control 4,400

Materials inventory (200 units x P4) 800
Payroll : (30/60 x P12) x 200 1,200
Applied overhead: (30/36 x P24) x 200 2,400
To record rework cost.

Finished goods inventory 400,000

Work in process inventory 400,000
To record cost of finished goods.

b. Unit cost: (P400,000 / 2,000 units) = P200

2a. Work in process inventory 400,000

Materials inventory 184,000
Payroll 72,000
Applied overhead 144,000
To record manufacturing cost.

Work in process inventory 4,400

Materials inventory 800
Payroll 1,200
Applied overhead 2,400
To record rework cost.

Finished goods inventory 404,400

Work in process inventory 404,400
To record cost of finished goods.

b. Unit cost: (P404,400 / 2,000 units) = P202.20

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Problem 913

1a. Work in process inventory 17,100

Materials inventory 8,000
Payroll 3,500
Applied overhead (P3,500 x 160%) 5,600
To record manufacturing cost.

Manufacturing overhead control 147

Materials inventory 30
Payroll 45
Applied overhead 72
To record rework cost.

Finished goods inventory 17,100

Work in process inventory 17,100
To record cost of finished goods.

b. Unit cost: (P17,100 / 2,000 units) = P8.55

2a. Work in process inventory 16,750

Materials inventory 8,000
Payroll 3,500
Applied overhead (P3,500 x 150%) 5,250
To record manufacturing cost.

Work in process inventory 142.50

Materials inventory 30
Payroll 45
Applied overhead (P45 x 150%) 67.50
To record rework cost.

Finished goods inventory 16,892.50

Work in process inventory 16,892.50
To record cost of finished goods.

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

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Problem 9-14

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

Direct materials P343,550

Direct labor 78,875
Applied overhead (1,540 x P9.25) 14,245
Total cost of Job 2720 P436,670

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 37,750

Various accounts 37,750

c. Predetermined overhead rate: (P425,000 / 50,000 = P8.50 per MH

Direct materials P343,550

Direct labor 78,875
Applied overhead (1,540 x P8.50) 13,090
Total cost of Job 2720 P435,515

d. Direct materials P343,550

Direct labor 78,875
Applied overhead (1,540 x P8.50) 13,090
Rework cost (P37,750 x .20) 7,550
Sale of reworked pipe (200 x P1.50) ( 300)
Total cost of Job 2720 P442,765