ABC company manufactures high quality musical instruments.

The company estimated that it

would incur Php120,000 in factory overhead costs and 8,000 direct labor hours for the year. The
April 1 balances in the inventory accounts follow:

Materials inventory Php 27,000

Work in Process inventory (S10) 10,500

Finished Goods inventory (J21) 54,000

Job S10 is the only job in process on April 1. The following transactions were recorded for the
month of April.

a. Purchased materials on account, Php 90,000.

b. Issued Php91,000 of materials to production, Php4,000 of which was for indirect materials.
Cost of direct materials issued:

Job S10 Php 23,000

Job C20 42,000

Job M54 22,000

c. Incurred and paid payroll cost of Php20,460:

Direct Labor cost (Php13/hour; total 920 hours)

Job S10 (470 hrs.) Php 6,110

Job C20 (310 hrs.) 4,030

Job M54 (140 hrs.) 1,820

Indirect Labor 2,500

Selling and Administrative salaries 6,000

d. Recognized depreciation for the month:

Manufacturing assets Php 2,200

Selling and Administrative assets 1,700

e. Paid Advertising expenses, Php 6,000.

f. Incurred factory utilities costs Php 1,300.
g. Incurred other factory overhead costs Php1,600.
h. Applied factory overhead to production on the basis of direct labor hours.
i. Completed Job S10 during the month and transferred it to the finished goods warehouse.
j. Sold Job J21 on account for Php59,000.
k. Received Php25,000 of collections on account from customers during the month.

Required:

1. Calculate the company’s predetermined overhead rate.

 Estimated Factory Overhead Costs Php120,000

Estimated Direct Labor Hours 8,000 hours

Since the basis is the DL hours, Php120,000 / 8,000 hours = Php15/DL hr

2. Prepare journal entries for the April transaction. (A-K)

a.)
Raw Materials 90,000
Accounts Payable 90,000

b.)
WIP - Job S10 23,000

WIP - Job C20 42,000

WIP - Job M54 22,000

FOH – Indirect Materials 4,000

Raw Materials 91,000

c.)

WIP - Job S10 6,110

WIP - Job C20 4,030

WIP - Job M54 1,820

FOH - Indirect Labor 2,500

Salaries Expense (Selling & Administrative) 6,000

Accrued Payroll 20,460

d.)

FOH - Manufacturing Depreciation Expense 2,200

S&A Depreciation Expense 1,700

Accumulated Depreciation 3,900

e.)

Advertising Expense - S&A 6,000

Cash 6,000
f.)

FOH - Utilities Expense 1,300

Accounts Payable 1,300

g.)

FOH - Other Overhead Costs 1,600

Accounts Payable 1,600

h.)

WIP 13,800

FOH 13,800
Predetermined overhead rate x Total Actual DL hours
Php15/DL hr. x 920 hrs. = 13,800

i.)

FG - Job S10 46,660

WIP - Job S10 46,660

Job S10:
Beg. WIP (S10) 10,500
Direct Materials (S10) 23,000
Direct Labor (S10) 6,110
Applied FOH 7,050
(P15/DL hr. x 470 hrs.) 46,660

j.)

Accounts Receivable 59,000

Sales 59,000
COGS 54,000

FG - (Job J21) 54,000

k.)

Cash 25,000

Accounts Receivable 25,000

3. What was the balance of Materials Inventory Account on April 30?

Raw Materials
April 1 bal. 27,000 91,000 RM used
purchases 90,000
April 30 bal. 26,000

Bal. of material inventory account on April 30 = 26,000

4. What was the balance of the Work in Process Inventory account on April 30?
Since Jobs C20 and M54 are left in the
WIP inventory, Job C20 Job M54
WIP, Beginning 0 0
Direct Materials 42,000 22,000
Direct Labor 4,030 1,820
Applied FOH 4,650 (Php15/hr. x 310 hrs.) 2,100 (Php15/hr. x 140 hrs.)
Total Costs / TMC 50,680 25,920

Total Bal. of WIP Inv. on April

76,600 (50,680 + 25,920)
30

OR

WIP
April 1 bal. 10,500 46,660 COGMA of S10

Direct Materials 87,000

Direct Labor 11,960
Applied FOH 13,800
April 30 bal. 76,600

Bal. of WIP Inv. on April 30 = 76,600

5. What was the amount of underapplied or overapplied overhead?

Applied FOH 13,800

Predetermined OH rate x Actual DL hours
Php15/DL hr. x 920 hours

Actual FOH 11,600

Indirect Materials 4,000
Indirect Labor 2,500
Depreciation 2,200
Utilities 1,300
Other FOH 1,600
Total FOH 11,600

Applied FOH 13,800

Actual FOH 11,600
OVERAPPLIED FOH 2,200