112 Cost Accounting QUESTIONS 1. When is job-order costing appropriate, and how are costs accumulated in a job order cost system? i) . When is process costing appropriate, and how are costs accumulated in a process cost system? 3. How is cost accounting related to fimancial accounting? 4. Distinguish between cost of goods sold and cost of goods manufactured. 5. What is a job cost sheet and why is it useful? 6. What are the primary cost-accumulation T accounts used in a job-order costing system? 7. What document is used to support the transfer of dircct materials from materials inventory to work in process? 8. In what way does the accounting treatment of direct materials and direct labor costs differ from that of factory overhead? 9. What documents constitute the supporting subsidiary ledger for work in process when using a job-order costing system? 10. What are the two entries typically required at the time finished units are sold?Chapter 4 Job Order Costing 113 TRUE OR FALSE 1 13. 14. 15. 16. 19 20. Product costs are historical figures and therefore are of little use to the manager. A company producing furniture would probably use a job-order cost system. Both job-order and process costing systems utilize averaging concepts in computing unit costs. Most factory overhead costs are direct costs and therefore can be aasily identified with specific jobs. The predetermined overhead rate is computed using estimates of cost and activity. The cost of indirect materials used in production is added to the MFG. Oh account rather than added directly to Work in Process. Actual manufacturing overhead costs are charged directly to the Work in Process account as the costs are incurred. Selling and administrative expenses should be added to the Manufacturing Overhead Account. If more overhead is applied to Work in Process than is actually incurred, then overhead will be overapplied. All of the raw materials purchased during a period are included in the cost of goods manufactured figure. Any balance in the Work in Process account at the end of a period should be closed to Cost of Goods Sold. Ifa job is not completed at year end, then no overhead cost should be applied to that job. Once production is completed, the job cost sheet can be discarded. In a job order cost system, depreciation of factory equipment should be charged directly to the Work in Process account. ‘The cost sheet is the support document for materials. Ajob order cost system identifies costs with a particular job rather than a set time period. Manufacturing costs are generally incurred in one period and recorded in a subsequent period. Ajob order cost system is most appropriate when a large volume of uniform products are produced. Job order cost sheets constitute the subsidiary ledger of the control account Work in Process inventory. When raw materials are purchased, the Wok in Process Inventory account is debited.114 Cost Accounting MULTIPLE CHOICE 1. Under the job-cost system, purchases of direct materials are debited to: a. Purchases b. Work in Process Control ©. Factory Overhead Control d. None of the above 2. Under the job-cost system, issues of direct materials are debited to @. Factory overhead Control b. Work in Process Control ¢. Materials Control d. None of the above 3. In job-order costing, what journal entry should be made for the retum to the stockroom of direct materials previously issued to production for use on a particular job? . debit Materials and credit Factory Overhead b, debit Materials and credit Work in Process ©. debit Purchase Retums and credit Work in Process d. debit Work in Process and credit Materials 4. Under a job-order costing system, the peso amount of the entry involved in the transfer of inventory from work in process to finished goods is the sum of the costs charged to all jobs: a. started in process during the period b. in process during the period €. completed and sold during the period d. completed during the period 5. Ina job-order costing system, indirect labor used should be debited to: a. Payroll liability b. Work in Process Control ¢. Finished Goods Control d. Factory Overhead ControiChapter 4 Job Order Costing 115 6. Which of the following is the basic document that is used to accumulate the cost of each order in job order costing: a. Invoice ‘D. Purchase order . Requisition sheet d._ Job Cost sheet 7. What is the best cost accumulation procedure to use when many batches, each differing as to product specification, are produced? a. Job order b. Process c. Actual d. Standard 8. The most common treatment of under-or overapplied overhead is to close it to: a. Work in process b. Retained Earnings C. Cost of Goods sold d. Finished goods 9. It’s two o'clock in the morning and you've been studying job-order costing for the past three hours. You drift off to sleep and in your first dream you visit JOB-ORDER COSTING LAND. You are a direct labor peso and are traveling through a giant ledger. By the time you finish your joumey, which accounts will you travel through and in what order? a. Work in process, Cost of goods manufactured, Finished goods, and Cost of goods sold b. Direct labor, Work in process, Finished goods, and Cost of goods sold. C. Work in process, Finished goods, and Cost of goods sold d. Manufacturing overhead. Work in process, Cost of goods manufactured, and Finished goods. @. Direct labor, Work in process, Finished goods, Cost of goods manufactured, and Cost of goods sold.116 Cost Accounting 10.Which of the following production operations would be most likely to employ a job order system of cost accounting? a. Toy manufacturing b. Shipbuilding . Crud oil refining d. Candy manufacturing 11. Someone told Marco de Santos, president of D’Santos Company. that under- or overapplicd manufacturing overhead can be allocated to three accounts. ‘What are those three accounts: a. Raw materials, Manufacturing overhead and Direct labor. b. Raw materials, Finished goods, and Cost of goods sold. ©. Cost of goods sold, Work in process, and Finished goods d. Cost of goods sold, Work in process, and Raw materials. 12. Which of the following statements are False? 1, A manufacturing company can use direct labor hours as an overhead base in one department and machine hours as an overhead base in another. 11. A debit balance in the work in process account indicates that not all goods completed during the period were sold. 111. The predetermined OH rate is computed by dividing estimated units in the overhead base by budgeted or estimated manufacturing overhead costs. a. Lonly Db. Lonly ©. Land 11 only d. I1and 111 only 13. What accounts would be debited and credited when the direct materials are Purchased on account? Credited a. Work in process Direct materials b. Direct materials Work in process C. Materials Accounts payable d. Work in process Accounts payableChapter 4 Job Order Costing 117 14, What accounts would be debited and credited when the wages for indirect laborers are recorded? Debited Credited a. Factory overhead Wages payable b. Factory overhead Payroll ©. Payroll Accrued payroll d. Work in process Payroll 15. Which of the following statements pertaining to job-order costing are TRUE? 1 The issuance of indirect materials from the storcroom is recorded on job- cost sheets. 11. Overapplied factory overhead can be properly disposed off with a debit to cost of goods sold and a credit to factory overhead. 111.Both an overstated forecast of overhead and an understated forecast of units of the overhead base can cause overhead to be overapplied. a. lonly b. Lonly c. Ilonly d. Land 111 only 16. A material requisition form normally does not contain which of the following? a. Vendor’s name b. Quantity requisitioned ¢. Unit cost d. Job number 17. A job order cost sheet normally does not contain which of the following? a. Direct materials b. Direct labor c. Actual factory overhead d. Applied factory overhead118 Cost Accounting 18. Ina job order costing system; payroll taxes deductions paid by the employer for factory employees are normally accounted for as a. direct labor b. factory overhead ¢. indirect labor d. administrative cost 19. Overhead applied was P120,000, which actual overhead was P 124.000. Which of the following is always true of the above? a. Direct labor activity was overestimated b. Overhead was under applied by P4,000 ©. Overhead was over applied by P4,000 d. The difference must be reported as a loss. 20. Which of the following is not a characteristic of job costing? a. Each job is distinguishable from other jobs b. Identical units are produced on an ongoing basis. ¢. It is not possible to compare actual costs with estimated costs d_ Job cost data are used for setting prices and bidding prices. 21. Under a job order costing system, the cost of direct materials. direct labor and factory overhead must first flow through the a. Finished goods account b. Cost of goods sold account c. Work in process account d. Cost of goods manufactured account 22. The unit cost of a product, under job order costing, can-be determined only a. At the end of the manufacturing process b. Upon completion of a job ¢. At the end of the month d. At the pont of timeChapter 4 Job Order Costing 119 23; 24. 25 When a job is completed and all costs have been accumulated pm a job cost sheet, the journal entry that should be made. a.Finished Goods Inventory Direct materials Direct labor Factory overhead b.Work in Process Inventory Direct materials Direct labor Factory overhead c.Raw Materials Inventory Work in Process Inventory d.Finished GoodsInventory Word in Process Inventory Cost of raw materials are debited to Raw Materials Inventory when a. the materials are ordered b. the materials are received c. materials are put into production d. the bill for the materials are paid Under an effective system of internal control, the authorization for issuing materials is made a. orally b. ona prenumbered materials requisition slip ¢. by the accountingdepartment d. by anyone on the120 Cost Accounting Problem J The Alexis Company had the following inventories on Aug, | of the current year. Finished goods P 25,000 Work in process 18,500 Materials 22.000 The work in process account controls two jobs Job 401 Job 402 Materials P 3,000 P 5,600 | Labor 2,500 3,000 Factory overhead 2,000 2.400 P7500 The following information pertains to August operations: 1) Materials purchased on account. P28,000. 2) Materials issued for production. P2500. Of this amount, P3,000 was for indirect materials: the difference was distributed: P3,500 to Job 401; P7,000 to Job 402: and P9,500 to Job 403 Materials returned to the warehouse from the factory, P800, of which P300 was for indirect materials, the balance from Job 403. 4) Materials returned to vendors, P1,000. 5) Payroll after deducting P3,025 for withholding taxes, P1,600 for SSS Premiums, P375 for Medicare, and P1,200 for Pag-ibig, was P22,800. The payroll due the employees was paid during the month 6) The payroll was distributed as follows: P10,400 to Job 401; P12,500 to Job 402, P10,500 to Job 403 and the balance represents indirect labor. 7) The share of the employer for payroll was recorded - P2,000 for SSS Premiums, P375 for Medicare Contributions, and P1,200 for Pag-ibig Funds. 8) Factory overhead, other than any previously mentioned, amounted to P15,000. Included in this figure were P3,000 for depreciation of factory building and equipment, and P 950 for expired insurance on the factory. The remaining overhead was unpaid at the end of August. 9) Factory overhead was applied to production at the rate of 80% of direct labor cost. 3 10) Jobs 401 and 402 were completed and transferred to the finished goods warehouseChapter 4 Job Order Costing 121 11) Job 401 was shipped and billed at a gross profit of 40% of the cost . 12) Cash collections from accounts receivable during August were P35,000. Requirements for Problem | 1. Joumal entries to record the above transactions. 2. job order cost sheets. 3. Cost of goods sold statement. Problem 2 On December 31, 2011. after closing, the ledgers of Golden Shower Company contained these accounts and balances: Cash Py 94,000 Accounts Receivable 100,000 Finished Goods 65,000 Work in Process 15,000 Materials 44,000 Machinery 70,600 Accounts Payable 118,750 Common Stock 200,000 Retained Earnings 69,850 Details of the three inventories are: Finished goods inventory: Item A - 2,000 units at P 12.50 P 25,000 Item B ~4,000 units at P 10.00 40,000 Total P__65,000 Work in process inventory: Job 101 Job 102 Direct materials: 1,000 units at P 5.00 P- 5,000 400 units at P 3.00 P 1,200 Direct labor: 1,000 hours at P4.00 4,000 400 hours at P 5.00 2,000 Factory overhead: % Applied at P 2.00/mour __2,000 800 ~~ Total P1000 24,000 Materials inventory: Material X - 0 units at P 5.00 P 20,000 Material Y - 8,000 units at P 3.00 24,000 Total P__44,000122 Cost Accounting During January, 2012, these transactions were completed @) Purchases on account: Material X - 20,000 units at P5.20: Material B - 24,000 units at P 3.75; indirect materials - P35,040 b) Payroll totaling P220,000 was paid. OF the total payroll, P40,000 was for marketing and administrative salaries, Payroll deductions consisted of P31,000 for withholding taxes, P7,000 for SSS premiums, P 440 for Medicare contributions, P 6,600 for Pag-ibig Funds. C) Payroll is to be distributed as follows: Job 101 - 10,000 direct labor hours at 4.00, Job 102 - 16,000 direct labor hours at P5.00; Job 103 - 12,000 direct labor hours at P3.00; indirect labor - P24,000; marketing and administrative salaries - P40,000. Employer's payroll taxes are: SSS Premiums - 5%: Medicare contributions - 0.2%: and Pag-ibig Funds - 3%. Materials were issued on a fifo basis as follows: Material X (charged to Job 101): Material Y - 24.000 units (charged to Job 102): Material X - 2,000 units and Materials Y - 5.000 units (charged to Job 103): (Note: Transactions are to be taken in consecutive order). Indircct materials amounted to P15,040. ©) Factory overhead was applied to Jobs 101. 102. and 103 based on a rate of P2.25 per direct labor hour. f) Jobs 101 and 102 were completed and sold on account for P240,000 and P270,000, respectively £) After allowing a 5% cash discount, a net amount of P494,000 was collected on accounts receivable. h) Marketing and administrative expenses (other than salaries) paid during the month amounted to P30.000. Miscellaneous factory overhead of P21,600 was paid. Depreciation on machinery was P4.000. i) Payments on account, other than payroll paid, amounted to P1 70,000. J) The over or underapplied factory overhead is to be closed, d Required: 1. Open T-accounts and record balances from the January | trial balance. Journalize the January transactions. ~ Post January transactions to the general ledger, and subsidiary ledgers for materials and work in process 4_ Prepare a statement of cost of. goods sold. wnChapter 4 Job Order Costing 123 Problem 3 J.AN,, Inc. manufactures tools to customer specification. The following data pertain to Job 309 for February, 2012: Direct materials used P 4,300 Direct labor hours worked 300 Direct labor rate per hour : P 8.00 Machine hours used 200 Applied factory overhead rate/mach. hr. P_15.00 Requirements: 1. Compute for the total manufacturing costs of job 309. 2. Compute for the total prime cost. 3. Compute for the total conversion cost. Problem 4 Marvin Inc, produces special machines made to customer's specifications. The following data pertain to Job 109 composed of 20 drilling units with a total contract price of P 25,000. ‘Week ending Week ending ——__April 8 April 5 Materials Department 1 P 2,400 P 1300 Direct labor rate - Dept. 1 P 8.20/hour 8.20/hour Labor hours used - Dept. 1 300 200 Direct labor rate - Dept. 2 P 8.00/hour P8.00/hour Labor hours used - Dept. 2 150 70 Machine hours used - Dept. 2 200 120 Applied factory overhead Department | P 4.00 per labor hour Department 2 P 1.00 per machine hour Marketing and administrative costs are charged to each order at a rate of 25% of the cost to manufacture. Requirements: - Compute the total direct materials cost of Job 109. . Compute the total direct labor cost of the Job 109. . Compute the total factory overhead applied to Job 109. . Compute the total gross profit of the order. . Compute the net income of the order. UbwWN =124 Cost Accounting Problem 5 Star Wars Cotporation obtains the following information from its records for the month of August Jobs complet Job 110 330 Direct materials cost P 15.000 P 25,000 Direct labor cost $0,000 50,000 Factory overhead 30.000 30,000 Units manufactured 3,000 4,000 10.000 Gross profit or selling price 25% P80,000 20% Required I. Prepare in summary form, the journal entries that would have been made during the month to record the above 2. Prepare the schedules showing the gross profit or loss for August. a. For the business as a whole. b. For each job completed and sold. Problem 6 The following account balances were taken from the general ledger accounts of the Ellery Corporation. January 1 December 31 Materials P 60,000 P 80,000 Work in Process 85,000 110,000 Finished Goods 120,000 90,000 Factory Overhead Control - 330,000 Applied Factory Overhead (applied at a rate of 80% of DL - 320,000 Cost of Goods Sold - 850,000 Requirements: 1. Journal entries to record the transactions that were entered in the above accounts for the year 2012. 2. Cost of Goods Sold Statement for the year 2012 3. Entry to close the Factory Overhead Control account and Applied Factory Overhead to Cost of Goods Sold.Chapter 4 Job Order Costing 125 Problem 7 Ellen Joyce Company is engaged in the manufacture of engines which are made only on customers’ orders and to their specifications. During January, the company worked on Jobs 201, 202, 203, and 204. The following figures summarize the cost records for the month. Job201 Job 202 Job 203. Sob 204 Direct materials put into process; Jan. 2 P15,000 5,000 = i 18 20,000 16,000 P- 5,000 e 22 15,000 1,000 10,000 P.- 6,000 28 - - 3,500 2,000 Direct labor costs week ending Jan. 2 1,000 1,000 = ft 9 27,000 9,000 4 a 16 32,000 27,000 - s 23 20,000 3,000 5,000 1,500 30 7 : 18,000 11,500 Factory overhead 60,000 32,000 ~—17,500 9,000 Engines completed 100 60 25 Jobs 201 and 202 have been completed and delivered to the customer at a total selling price of P350,000. Job 203 is finished but has not yet been delivered. Job 204 is still in process. There was no work in process at the beginning of the month. Required: 1. Prepare the summary journal entries for the month to record the preceding information. (Assume a work in process accounts is maintained for each Job). 2. Prepare a cost sheet for each job 3. Prepare a statement of cost of goods! manufactured and sold.126 Cost Accounting Problem 8 The following inventory data relate to Abner Corporation. Inventories Beginning Ending Finished goods P 90,000 P 110,000 Work in process 80,000 70,000 Direct materials 95,000 90,000 Revenues and costs for the period Sales P 900,000 Cost of goods available for sale 775,000 Total manufacturing costs 675,000 Factory overhead 175,000 Direct materials used 205,000 Required: Compute the following for the year: 1. Direct materials purchased 2. Direct labor costs incurred 3. Cost of goods sold 4. Gross profit Problem 9 ‘The Pacific Production Company presents the following selected general ledger accounts showing balances at April | of the current year. Cash P 20,000 Finished Goods 296.000 Work in Process 82,000 Materials 64.000 Prepaid Insurance 2,000 Accrued Payroll s Accumulated Depreciation 140.000 Accounts Payable $4,000 Factory Overhead Control 124,000 Cost of Goods Sold 400.000 Factory Overhead Applied 126.000 Sales 620,000Chapter 4 Job Order Costing 127 Balances at April 30 of current year include: Accrued Payroll P 6,000 Finished Goods 304,000 Work in Process 94,000 Materials 60,000 ‘The April transactions of the company are summarized as follows: a) Cash sales P 210,000 b) Materials purchased on account 84,000 C) Direct materials used 78,000 d) Direct labor 32,000 ) Factory insurance expired 600 f) Factory depreciation 3,400 g) Factory utility service purchased on account 6,000 hh) Accounts payable paid 98,000 i) Factory payroll paid 44,000 Required: Compute for the following . Indirect materials used Indirect labor Factory overhead applied (125% of DLC) . Cost of goods manufactured Cost of goods sold UPwNe Problem 10 The Table and Chair Manufacturing Company received orders from customers on January 1, 2009. as follows: Job No. 101 Blims Company placed an order for 50 table. The price agreed upon for the job is P 25,000. January 18 is the expected date of completion Job No. 102 Nice Furniture Store placed an order for 24 chairs. The price agreed upon for the job is P 4,000. January 25 is the expected date of completion. Both jobs will be formed in the Assembly Department ad cleaned and checked in the Finishing Department. The Table and Chair Manufacturing Company uses a job order cost system. The following information relates to jobs 101 ad 102.128 Cost Accounting 1) The Purchasing Department purchased the following on January 2. 2012. Direct materials = 100 sheets of narra for P14,000 Indirect materials 20 cases of glue for P50 10 cases of nails for P300 50 gallons of varnish for P 200 2) The following materials were requisitioned Quantity Description | Amount Assembly Department Job 101 75 sheets Narra P 10.500 Job 102 7 sheets Narra 980 Finishing Department 10 gallons Varnish 40 3) Labor costs according to labor time cards and payroll summary were as follows Assembly Finishing Total Direct labor ~ Job 101 P 2,750 P 425. P 3,175 = Job 102 1,200 270 1,470 Indirect tabor 700 100 800 4) Additional factory overhead incurred Rent Expense P 1,500 Depreciation ~ machines 360 Depreciation ~ factory building 490 Utilities expense 225 300 Payroll taxes 5) _ Factory overhead is applied to each job upon completion as follows: Setting Department - 120% of direct labor costs Finished Department — 75% of direct labor costs 6) Job 101 was completed on February 25, 2012 and Job 102 was completed on February 28, 2012. Both jobs were transferred to the finished goods storeroom upon completion 7) Job 101 was picked-up on February 26, 2012 and Job 102 was picked up on March I, 2012. The customer for Job 101 paid cash, and the customer for Job 102 charged his account Required: 1. Prepare the journal entries for the above transactions, 2. Prepare job order cost sheet for Job 102.Chapter 4 Job Order Costing 129 Problem 11 Assume the following relates to the Candy Corporation for the month of July JobNo.101 Job No.102 Job No. 103 In process, July | Materials P 40,000 P-30,000 = Labor 60,000 40,000 : Overhead 75,000, 50,000 Cost added in July Materials $5,000 80,000 92,000 Labor 80,000 95,000 115,000 Actual overhead incurred in July amounted to P 375,000. Job No. 101 and 102 were completed and transferred to finished goods warehouse in July. Overhead is applied using a predetermined overhead rate. Job 101 was sold for P 550,000. Requirements: Compute for the following — 1. Work in process, July 1 2. Overhead assigned to production in July assuming same factory OH rate 3. Cost of goods manufactured 4. Cost of goods sold (actual) 5. Finished goods inventory, July 31 6. Work in process inventory, July 31 Problem 12 For June, MLT Company had cost of goods manufactured equal to P120,000; materials purchases, P33,000: depreciation of factory assets, P17,000; cost of goods sold, P140,000; expired insurance on factory assets, P2,000; cost of goods available for sale, P190,000; and total factory labor, P49,000. Inventories were as follows: June I June 30 Materials P15,000 P19,000 Work in process 40,000 30,000 ? 2 Finished goods ? General factory overhead of P13,000 was incurred in June; this figure includes all factory overhead except indirect labor, indirect materials, depreciation and insurance. Direct labor cost for the month was six times larger than indirect labor cost. The cost of indirect materials used was P1,000. The company uses a single materials account for direct and indirect materials. Requirements. - Determine the amount for the following, 1. The direct materials used 2. The total manufacturing costs 3. Finished goods inventory, June 1130 Cost Accounting Problem 13 Miracle Company provides you with the following information January 1, 2011 Jamuary 31, 2011 Inventories: Materials |e, P 50,000 Work in process 80,000 95,000 Finished goods 60,000, 78,000 January transactions: Purchases of materials, P 46,000 Factory overhead (75% of direct labor cost) P 63.000 Selling and adm. Expenses (12.5% of sales, P 25,000 Factory overhead control, P 62,800. ‘Net income for January, P-25.200 Indirect materials used, P 1,000 Requirements: 1. Materials inventory, January 1 1. Cost of goods manufactured 2. Cost of goods sold (normal) for the month of January, 2009. Problem 14 The following were taken from the books of Nona Company 7 January 1 March 31 Raw materials P 268,000 P 167,000 Work in process 0 0 Finished goods 43,000 ” (100 units) . (300 units) Direct materials used P1.847,700 Direct labor 2.125.800 Factory overhead 1,026,500 Sales (12,300 units at P 535 The company uses the FIFO method of costing inventories Requirements: 1. The number of units manufactured 2. The cost of goods manufactured per unit 3. The cost of goods soldChapter 4 Job Order Costing 131 Problem 15 Summarized data for jobs worked on during January, February and March 2010 appear below: COSTS INCURRED JOBS ——JANUARY_ —-___FEBRUARY _ MARCH : 1 i P 5,400 Bie 3,600 ae 4,800 res 4,200 P 4,000 5 . 3,550 6 5,850 ...... P6500 ae 9,600 ... 3,800 Ro . 4,500 ..... 4,200 9 4 4 2,500 10. Prk Honniuecs ee tance eta 6.000 Jobs Completed Jobs Sold January : SS EAIP ES hese peat, La Eobenetyen nia Sinkoar Se. Ja 2.5 March AS ascot: 7,8 Required: Compute for the following Work in process inventory, January 31 Work in process inventory, February 28 Work in process inventory, March 31 . Finished goods inventory, January 31 Finished goods inventory, February 28 . Finished goods inventory, March 31 Cost of goods sold for January Cost of goods sold for February 9. Cost of goods sold for March eIAwR YW Problem 16 The following T-accounts have incomplete postings; however, the amounts shown therein are correct: Direct materials Work in process Beg. bal. 10,000 2,000 Beg. bal. 1,000 25,,000 30,000 15,000132 Cost Accounting Finished goods Cost of goods sold Beg. bal. 2,500 18,000 Factory overhead control Accounts payable. 4,200 2.000° Beg. bal 25,000 Factory overhead applied | Additional information a. The debit of P15,000 to work in process represents direct materials issued for the month. b. Factory overhead is applied at a rate of P0.50 per direct labor hour. ¢. Work ticket for the month totaled 10,000 direct labor hours. Factory workers receive P1.00 per hour Required: Compute for the following . Direct materials inventory, end Direct labor charged to production Defective materials returned to suppliers Work in process inventory, end . Finished goods inventory, end . Cost of goods sold awwChapter 4 Job Order Costing 133 Problem 17 ‘Watson Manufacturing Company employs a job order cost accounting system and keeps perpetual inventory accounts. The following transactions occurred in the first month of operations. 1. Direct materials requisitioned during the month: Job 101 P= 20,000 Job 102 16,000 Job 103 24,000 2. Direct labor incurred and charged to jobs during the month was: Job 101 P 30,000 Job 102 29,000. Job 103 20,000 3. Factory overhead was applied to jobs worked on using a predetermined overhead rate based on 80% of direct labor cost. 4. Actual manufacturing overhead costs incurred during the month amounted to P 60,000. 5. Job 101 consisting of 1,000 units and Job 103 consisting of 200 units were completed during the month. Requirements: 1. Journal entries to record the above transactions 2. Answer the following questions: a. How much factory overhead was applied to Job 103 during the month? b. Compute the unit cost of Jobs 101 and 103. ©. What is the balance in Work in Process Inventory at the end of the month? d. Detefnine if factory overhead was under or over applied during the month. How much? ~134 Cost Accounting MULTIPLE CHOICE Dexter Company’s 2011 manufacturing costs were as follows: Direct materials and direct labor P 500,000 Depreciation of manufacturing equipment 70,000 Depreciation of factory building 40,000 Janitor’s wages for cleaning factory premises 15,000 1. How much of these costs should be inventoried for extemal reporting purposes? 3 a. P 625,000 bP -610,000 ec. P 585,000 dP 500,000 Peter Paul Company uses a job order cost system and applies factory overhead to production orders on the basis of direct labor cost. The overhead rates for 2010 are 200% for Dept. A and 50% for Dept. B. Job 123, started and completed during 2011, was charged with the following costs: Direct materials Direct labor 2 Factory overhead 40,000 2. The total manufacturing costs associated with Job 123 should be a. P 135,000 b. P-180,000 c. P195,000 d. P 240,000 Jorelle Corporation has a job order cost system. The following debits (credits) appeared in the work-in-process account for the month of March 2011 March Description Amount 1 Balance P 2,000 31 Direct materials 12,000 31 Direct labor 8.000 31 Factory overhead 6,400 31 To finished goods (24.000)Chapter 4 Job Order Costing 135 Jorell applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job No. 30, the only job still in process at the end of March 2011, has been charged with direct labor of P1,000. 3. The amount of direct materials charged to Job was a, P 12,000 b. P 4,400 cP 2,600 dP 1,500 Blue Beach Industries has two production departments. ABC and XYZ, and uses a Job order cost system. To determine manufacturing costs, the company applies manufacturing, overhead to production orders based on direct labor cost using the departmental rates predetermined at the beginning of the year based on the annual budget. The 2009 budget for the two departments was as follows: ABC XYZ Direct materials P 630,000 P 90,000 Direct labor 180,000 720,000 Factory overhead 540,000 360,000 Actual materials and labor costs of Job No. 676 during 2011 were as follows: Direct materials P 22,500 Direct labor - ABC 7,200 Direct labor - XYZ 10,800 4. What was the total manufacturing cost associated with Job No. 678 for 2011? a. P 45,000 b. P-49,500 c, P58,500 dd. P67,500 ‘The Work-In-Process account of the Malinta Company follows: Work-In Process April | bal 25,000 | FinishedGoods P 125,450 Direct materials 50,000 Direct labor 40,000 Factory overhead-applied 30,000136 Cost Accounting Overhead is applied to production at a predetermined rate, based on direct labor cost. The work in process at April 30 represents the cost of Job No. 436, which has been charged with direct labor cost of P3,000, and Job No. 789, which has been charged with applied overhead of P2,400 5. The cost of direct materials charged to Job No. 456 and Job No. 789 amounted a P8,700 b. P 7,600 c. P4500 dP 4,200 6. The prime cost during the month amounted to: a. P 70,000 b. P 90,000 ¢, P120,000 d.—P145,000 The Diamond Company uses a job order cost accounting system. Overhead is applied to production at a predetermined rate of 80% based on direct labor cost. The following postings appear in the ledger accounts of the company for the month of September, 2011. Debit Work in process, Sept. 1 P 30,000 Direct materials 60,000 Direct labor 50,000 Factory overhead 40,000 Cost of goods completed (155,000) Job No. 327 was the only job not completed in September, and it has been charged 4,600 for factory overhead. 7. Direct materials charged to Job No, 327 was: a, P 10,350 b. P 14,650 c. P 20,000 dP 25,000Chapter 4 Job Order Costing 137 8. Direct labor charged to Job. 327 was: a. P 5,750 b. P6784 c. P8280 d. P 8,480 Hamilton Company uses job-order costing. Factory overhead is applied to production at a budgeted cost of 150% of direct labor costs. Any overapplied or underapplied factory overhead is closed to the cost of goods sold account at the end of each month. Job 101 was the only job in process at January 31, 201, with accumulated costs as follows: Direct materials P 4,000 Direclabor 2,000 Factory overhead applied 3,000 Total P__9,000 Jobs 102, 103, and 104 were started during February. Direct materials requisitions for February totaled P26,000. Direct labor costs of P20,000 were incurred for February. Actual factory overhead was P32,000 for February. The only job still in process at February 28, 2011, was Job 104, with costs of P2,800 for direct materials and P1,800 for direct labor. 9. The cost of goods manufactured for February 2011 was: P-77,700 P 78,000 79,700 P 85,000 Bese The following information relates to Job No. 2468, which is being manufactured by Daisy Co. to meet customer’s order. Department A Department B Direct materials used P 5,000 P 3,000 Direct labor hours used 400 200 Direct labor rate per hour P 4.00 P 5.00 Overhead rate per DL hour P 4.00 P 4.00 Administrative and other overhead 20% of full production cost Profit markup 25% of selling price138 Cost Accounting 10. The selling price to the customer for Job 2468 is: a P 16,250 b. P20,800 © P17333 4 P 10,800 Abner Corporation has manufactured 100,000 units of ‘compound X in 2009 at the following costs. Labor of P242,500 of which 93% represents direct labor. Materials of P 182,500 of which 90% represents direct materials. Opening work in Process is P88,125. Closing work in process inventory is P67,500. Overhead is applied at 125% of direct labor cost. 11.. The cost of goods manufactured is a. P 671.150 b. P 692,306 ©. P 651,036 dP 629,900 Jolly Co. employs the job order cost system. Relevant data for the month just ended are summarized below. @. Work in process beginning P 100,000 b. Direct materials used for the month 200,000 ©. Direct labor costs for the month 160,000 d. Overhead applied based on direct labor 120,000 ©. Cost of goods completed 501,800 f. Ending work in process referred to Job 106 which was charged with direct labor of P12,000 and Job 107 charged with overhead of P9,600, 12. The cost of direct materials charged to Jobs 106 and 107 was a P 34.800 b. P 16,800 c. P 30,000 dP 36,000Chapter 4 Job Order Costing 139 MV Crafts manufactures to customer order using the job order cost system. For the month just ended, it registered the following data: Beginning work in process (5 partially completed jobs) P 300,000 Orders completed (18) 2,400,000 Orders shipped (14) 2,000,000 Materials requisitioned for the month 1,700,000 Direct labor cost 800,000 Factory overhead rate 150% of direct labor cost 13, The ending work in process inventory was a. P 1,400,000 b. P- 500,000 ©. — P 1,600,000 dP 700,000 The Modern Company does not maintain backup documents for its computer files. In June, some of the: current data were lost, and you have been asked to help reconstruct the data. The following beginning balances are known: Asof June 1 Direct materials inventory P 12,000 Work in process inventory 4,500 Finished goods inventory 11,000 * Manufacturing overhead - actual 16,500 Accounts payable 6,000 Reviewing old documents and interviewing selected employees have tumed up the following additional information a. The production superintendent's cost sheets showed that materials of P2,600 Were contained in the June 30 work in process inventory. b. Also, 300 direct labor hours had been expended at P6 per hour on the goods in ending work in process inventory. ¢. The Accounts Payable account is for direct materials purchases only. ‘The clerk remembers clearly that the balance in the Accounts Payable account on June 30 was P8,000. An analysis of canceled checks shows payments of 40,000 were made to suppliers during the month. d. Payroll records show that 5,200 dircct labor hours were recorded for the month. It was verified that there were no variations in Pay rates among employees during that period ©. Records at the warehouse indicate that finished goods inventory totaled P16,000 on June 30140 Cost Accounting f Another record kept manually indicates that cost of goods sold in June totaled P84.000. g. The predetermined overhead rate was based on an estimated 60,000 direct labor hours to be worked during the year, and an estimated P180. 000 in manufacturing overhead costs. 14.. Cost of goods manufactured in June: a, P 11.000 b. P49,000 ©. P 84.000 d. P89,000 15, Ending balance in work in process inventory on June 30. a. P 5,300 b. P 13,400 c. P 15,000 d. P 20,300 16.. Direct materials used during June: a. P 2,600 b. P 18,900 ©. P 42,500 d. P 43,000 Adams Company uses a job order costing system and the following information is available from the records. The company has 3 jobs in process: 501, 502 and 503, Raw materials used P 120,000 Direct labor per hour P 850 Overhead applied based on direct labor cost 120% Direct material was requisitioned as follows for each job, respectively: 30%, 25%, and 25%, the balance of the requisitions were considered indirect, Direct labor hours per job are 2,500, 3,100, and 4,200, respectively. Indirect labor is P33,000. Other actual overhead costs totaled P 36,000. 17. What is the total amount of actual factory overhead? a. P 36,000 b. P.69,000 ¢. P93,000 d. P99,960Chapter 4 Job Order Costing 141 18. If Job 503 is completed and transferred, how much is the total cost transferred to Finished Goods Inventory? a. P 96,700 b. P 99,020 c. P 108,540 d. P 139,540 Work in process of Alonzo Corporation on July 1, 2011 (per general ledger) is P22,800. Per cost sheets: Job 101 Job 102 Direct materials P 6,000 8,000 Direct labor 3,000 2,500 Amount charged to Work in process for July. 2009 Job 101 Job 102 _Job 103 Job 104 Direct materials 3,000 2,000 6,000 4,500 Direct labor 1,000 1,500 2,600 2,000 Factory overhead is applied to production based on direct labor cost. Jobs 101 and 103 are completed during the month 19.. Cost of goods put into process must be: a. P 42,100 b. P 26,860 c. P 45,400 d. P49,660 20, . The cost of goods manufactured for the month of July is a. P21.600 b. P 15,400 ©. P25,560 d. P31,800 Marco Corporation has a job order cost system. The following debits (credits) appeared in the general ledger account work-in-process for the month of September, : September 1 Balance P 12,000 September 30, direct materials 40,000 September 30, direct labor 30,000 September 30, factory overhead 27,000 September 30, to finished goods (100,000)142 Cost Accounting Marco applies overhead to production at a predetermined rate of 90% based on the direct labor cost. Job no, 232. the only job still in process at the end of September, 2009. has been charged with factory overhead of P2,250. 21.. What was the amount of direct materials charged to Job 232 as at end of September, 2011? a. P2,250 b. P2,500 c. P4250 d= P9,000 * Sunshine Mfg. Co. charges factory overhead to production at a predetermined rate based on direct labor cost. The rate has remained the same for the last two years. The following data are given on its production: JobNo.1 JobNo.2 JobNo.3 JobNo.4 Total Work in process ~ Jan. 1 Direct materials P 8,000 P 15,000 P23,000 Direct labor 3,200 6.500 9,700 Applied FO 1,920 3,900 5,820 Cost added - January Direct materials 3,000 8.500 P18,000 9.500 39,000 Direct labor 1,200 3.150 7,500 2.700 14.550 Job Nos. 1, 2, and 3 were completed during the month. Job Nos. | and 3 were sold at 180% of cost. The balance of the factory overhead control account is P 11,640, 22.. The variance is allocated between cost of goods sold, finished goods, and work in process as follows Cost of Goods Sold Finished Goods a. P 870 P 1,500 b 2,380 1.930 cs 1,740 630 d. None of the givenChapter 4 Job Order Costing 143 Incomplete accounts of the Janice Company appear as follows on January 31. Inv. Bal. 15,000 Purch. 35,000 Finished Goods Bal. 10,000 | CofGS 20,000 CofGM 40,000 Additional information a. There were 5,500 direct labor hours at the rate of P8.00 per direct labor hour b. Overhead is applied at the rate of P4.00 per direct labor hour 23. The January 31 of materials inventory should be a. P.20,000 b. — P.25,000 ©. P 30,000 d.— P-50,000 24. The total overhead that have been charged to work in process during January a. P-17.000 b. — P.22,000 c. P33000 d. P-40000 25. The January 31 balance of the Work in Process account a P-46,000 b. P-75,000 c. P76,000 d.— P82,000 26, The January 31 balance of the Finished Goods Inventory account a P 6,000 b. P10,000 c. P 20,000 d— P30,000144 Cost Accounting 27. Total manufacturing overhead costs incurred during the month of January were 24.000. The amount debited to Factor Overhead Control account for January a P-17,000 b. P-24.000 c. P33000 d. P41000. 28, Cost of Goods Sold during January was a P 10.000 b. P 20.000 o. P 30,000 d. P 40.000 29. The amount of under applied or over applied overhead cost for January is a P-1,000 over applied b. P.2,000 over applied ¢. P-1,000-under applied d. 2,000 under applied Materials costing P 56,000 were transferred from materials inventory to Job No.301 which is still in incomplete at this point 30... Which of the following is the proper journal entry for the transfer? a. Materials Inventor 56,000 Work in process 36,000 b. Work in process 56,000 Materials Inventor 36,000 ©. Finished goods 56,000 Work in Process 36,000 d. Factory Overhead Control 56,000 Materials Inventory 56,000