BACKFLUSH COSTING

1. The Action Corporation manufactures electrical meters. For May, there were no beginning
inventories of raw materials and no beginning and ending Work in Process. Action uses a JIT
manufacturing system and backflush costing with three trigger points for making entries in the
accounting system:
a. Purchases of raw materials – debited to Raw and In-process account
b. Completion of Finished Goods – debited to Finished Goods account.
c. Sale of finished goods

Action’s May standard cost per meter are direct materials, P25; and conversion costs, P20. The
following data apply to May manufacturing:

Raw Materials and components purchased P550,000

Conversion Cost incurred P440,000

Number of Finished units manufactured 21,000

Number of Finished units sold 20,000

The balances of Raw and In Process and Finished Goods Inventory accounts at the end of May are:

2. The Malakas Corporation manufactures telephones. For June, there were no beginning
inventories of raw materials and no beginning and ending Work in Process. Action uses a JIT
manufacturing system and backflush costing with two trigger points for making entries in the
accounting system:
a. Purchases of raw materials – debited to Raw and In-process account
b. Sale of finished goods

Action’s May standard cost per meter are direct materials, P25; and conversion costs, P20. The
following data apply to May manufacturing:

Raw Materials and components purchased P5,300,000

Conversion Cost incurred P3,080,000

Number of Finished units manufactured 200,000

Number of Finished units sold 192,000

The balances of Raw and In Process and Cost of Goods Sold accounts at the end of June are:
 STANDARD COSTING

1. The actual cost of the materials is P5 per pound. The actual usage of materials os 1,000 pounds.
The company’s standard for production is 2 pounds of materials for every unit of product X
produced at a cost of P4.50 per pound. How much is the favorable (unfavorable) quantity
variance if 450 units of product X was produced?

2. The payroll for the month is P24,000, of which P2,000 pertains to indirect labor. The actual labor
hours is 2,000. The company’s standard hours allowed for such level of production is 2,100
hours. How much is favorable (unfavorable) efficiency variance if the unfavorable rate variance
is P2,000?

3. Throop company had budgeted 50,000 units of output using 50,000 units of raw materials at a
total material cost of P100,000. Actual output was 50,000 units of products, requiring 45,000
units of raw materials at a cost of P2.10 per unit. The direct material price variance and usage
variance were:

4. Total material variance is P925F. Price variance is P50F. How much is the quantity or usage
variance?

5. Total materials variance is P925F. Price variance is P50U. Actual price is P34.50 per unit of
material. Total standard cost os P4,375. How much is the standard unit price?

6. Total materials variance is P925F. Price variance is P50F. Actual price is 34.50 per unit of
material. Total standard cost is P4,375. How much is the standard unit price?

7. Tub Co. uses a standard cost system. The following information pertains to direct labor for
product B for the month of October:
Standard hours allowed for actual production 2,000
Actual rate paid per hour P8.40
Standard rate per hour P8.00
Labor Efficiency Variance P1,600 U
What were the actual hours worked?

8. Thor Co.’s records for April disclosed the following data relating to direct labor:
Actual Cost P10,000
Rate Variance 1,000 Favorable
Effeciency Variance 1,500 Unfavorable
Standard Cost P9,500
Actual direct labor hours for April amounted to 2,000. Thorp’s standard direct labor rate per
hour in April was?
ANSWER:
BACKFLUSH COSTING:
1. P25,000 AND P45,000
2. P308,000 AND P7,872,000

STANDARD COSTING:
1. 450 U
2. 1,000 F
3. 4,500 U AND 10,000 F
4. 875 F
5. 34.00
6. 35.00
7. 2,200
8. 5.50