Allyson Charissa T.

Ansay
BSA – 2
Cost Accounting

Exercises:
Exercise 2-1. Journalizing raw materials transactions using perpetual
inventory system. FIFO method.
Required: Use FIFO method in accounting for the raw materials.
1. Journal entries to record the above transactions
2. Determine the raw materials inventory balance

Date Account Title and Description DR CR

1 Raw Materials Inventory P 510,000
Accounts Payable P 500,000
Cash 10,000
Purchased raw materials on account and
the company also paid freight for the
shipment

2 Work in Process 344,250

Manufacturing overhead 38,250
Raw materials Inventory 382,500
Recorded requisition for the month, 75% of
the total raw materials available for use,
10% is indirect materials

3 Raw Materials Inventory 5,900

Work in Process 5,100
Manufacturing overhead 800
Excess materials return to the storeroom

4 Accounts Payable P 4,000

Raw Materials Inventory P 4,000
Materials Returned to the vendor

5 Work in Process 50,000

 Accounts Payable 50,000
Purchased raw materials intended
specifically for a particular job on account

6 Raw Materials Inventory 107,000

Accounts Payable 105,000
Cash 2000
Purchased Raw materials on account and
paid freight
Terms: n/30

7 Work in Process 120,000

Manufacturing Overhead 30,000
Raw Materials Inventory 150,000
Issued to production department 1,500
units of which 80% is direct materials

Units UC Amount
Inventory 0 0 P0
Purchases:
1 5,000 100 500,000
6 1,000 105 105,000
Add: Excess materials return 5,900
Freight 12,000
Raw Materials available 6,000 P 622,900
Less: Issuance
2 (382,500)
4 40 (4,000)
7 1,500 (150,000)
Raw Materials Issued (1,540) (P 536,500)
Raw Materials Inventory 4,460 P 86,400

RM available RM issued RM inventory

FIFO - perpetual P 622,900 P 536,500 P 86,400

Exercise 2-2. Inventory Valuation using FIFO-periodic

Required: Compute for the raw materials usage and inventory using FIFO periodic

Units UC Amount
Inventory, 8/1 5,000 P 2.00 P 10,000
Purchases:
8/7 6,000 2.50 15,000
12 8,000 2.30 18,400
15 9,000 2.25 20,250
22 10,000 2.40 24,000
29 10,000 2.35 23,500
Raw Materials Available 48,000 P 111,150
Less: Issuance
8/7 (9,000) (20,000)
14 (9,000)
21 (9,000)
28 (9,000)
Raw Materials issued (36,000)
Raw Materials Inventory 12,000 P

Computations for Issuance Amount

8/7. 9,000 units – 5,000 units = 4,000 units
4,000 units x P2.50 = P10,000
P10,000 + P10,000 = P20,000

14. 9,000 units – 5,000 units = 4,000 units

5,000 units x P2.50 = P12,500
4,000 units x P2.30 = P9,200

Exercise 2-3. EOQ computation

Determine the Following:
a. Economic Order Quantity (EOQ)
2 x annual demand x cost per order
EOQ=
√ Annual carrying cost per unit ∨annual holding cost

Annual units Required = P144,000

Ordering costs = P150/order
Carrying costs per unit = P200 x 5% = P10
 2 x 144,000 x 150
EOQ=
√ 10
E OQ=2,078.46

b. Frequency of order
Annual Requirement
No .of orders=
EOQ
144,000
No .of orders= =69.28
2,078.46

Time to order = 360 days/69.28 = 5.20 days

c. Total ordering costs for the year

Total ordering costs = No. of orders per year x cost per order
= 69.28 x 150
= P10,392

d. Reorder point assuming a safety stock equal to days requirement

Daily usage = 144,000 units/360 days = 400 units
Daily usage = 400 units
Lead time = 5 days

Reorder point = Daily usage x Lead time + safety stock

= 400 x 5 + 400
= 2,400

Exercise 2-4. Backflush accounting & traditional costing

Required: Journalize the above information using backflush accounting. (Show
supporting computations of necessary)
Raw and in Process Beginning Ending
Direct materials P75,000 P50,000
Conversion costs 45,000 30,000
Finished Goods
Direct materials 80,000 90,000
Conversion costs 35,000 30,000

a. Raw and in Process P200,000

Accounts Payable P200,000

b. Cost of sales 280,000

Work in process 130,000
Factory Overhead 150,000

c. Finished Goods
Raw and in Process
Solution:
Materials in RIP, beginning P
DM received during the period
Total
Less:

Exercise 2-5. Budgeted overhead

Required: Determine the total budgeted overhead

Exercise 2-6. Backflush accounting

Required: Give the final entry to adjust the inventory accounts at the end of the period