JOB ORDER COSTING

Part 1: Theory of Accounts

1. Which of the following statements concerning the comparison among actual cosring,
normal costing and standard costing is correct?

a. Actual costing system values manufactured products with the actual material costs,
actual direct labor costs, and actual manufacturing overhead costs.

b. Normal costing system values manufactured products with the actual material costs,
actual direct labor costs and manufacturing overhead based on a predetermined
manufacturing overhead rate with the possible over/under application of factory
overhead to be closed to costs of goods sold only if insignificant or to be closed
prorated to cost of goods sold, work in process and finished goods inventory if
significant.

c. Standard costing system values manufactured goods with predetermined material

cost, predetermined direct labor cost, and a predetermined manufacturing overhead
costs with the possible over/under application of factory overhead to be closed to
costs of goods sold only if insignificant or to be closed prorated to cost of goods sold,
work in process and finished goods inventory if significant.

d. All of the above.

2. When shall the job order costing be used instead of process costing?
a. When the production process performs standardized or uniform procedures.
b. When the company performs a very long production runs.
c. When the company intends to use it for billing customers.
d. When the company produces low-value and homogeneous products

3. Which of the following statements concerning spoilage in a job-order costing is correct?

a. The cost of abnormal spoilage is recorded as period cost or expense.
b. When normal spoilage occurs because of the specification of a particular job, cost of
normal.
loss shall be capitalized to that specific job reduced by the current disposal value/ net
realizable value of the spoiled units.
c. When normal spoilage is a characteristic of a given production cycle, the cost of
normal loss is
 not charged to a specific job but will be closed to manufacturing overhead control
account.
d. All of the above.
4. Which of the following statements concerning rework costs in a job-order costing is correct?
a. If the normal rework cost is attributable to a specific job, it shall be capitalized to that
particular job.
b. It the normal rework cost is common to all jobs, it shall be debited to manufacturing
overhead
control account.
c. If the rework cost is abnormal, it shall be recorded as period cost or expense.
d. All of the above.
5. Which of the following statements concerning scrap in a job-order costing is correct?
a. If the scrap is insignificant, the realizable value of scrap is recognized as revenue at
the time it is sold.
b. If the scrap is insignificant but traceable to the job that yielded the scrap, the net
realizable
value of scrap shall be recorded as a deduction from cost of that specific product.
c. If the scrap is insignificant but common to all jobs, the net realizable value of scrap
shall be credited to manufacturing overhead control.
d. If the scrap is significant, the net realizable value shall be capitalized as inventory of
scrap with the credit going to specific job if traceable to a particular job or manufacturing
overhead control if common to all jobs.
e. All of the above.
Part 2: Problem Solving

Problem 1. MLB Inc. is employing normal costing for its job orders. The overhead is applied
using a predetermined overhead rate. The following information relates to MLB Inc. for the
year ended December 31, 2020:

Job No. 101 Job No. 101 Job No. 103

Job in Process, January 1, 2020:
Direct Materials 40,000 30,000 0
Direct Labor 60,000 40,000 0
Factory Overhead 30,000 20,000 0

Cost added during 2020:

Direct Materials 20,000 10,000 100,000
Direct Labor 100,000 200,000 400,000
Factory Overhead ? ? ?

Additional information:

1. Actual overhead for the year 2020 amounted to P 350,000.

2. Jobs No. 101 and 102 were completed and transferred to finished goods during the
year 2020.
3. Job No. 101 was sold during year 2020.
4. The gross profit rate is 20% based cost.

Required:
1. Total Manufacturing Cost for 2020
2. Cost of Goods Manufactured for 2020
3. Cost of Goods Sold for 2020
4. Gross Profit for 2020
5. Work in Process and Finished Goods on December 31, 2020.

Problem 2. UFC Inc. applies factory overhead as follows:

Department Per Machine Hour

Fabricating P 10
Spreading P 20
Packaging P 30

Actual machine hours are:

 Fabricating – 2,000 hours
Spreading – 1,500 hours
Packaging – 3,000 hours

The following additional data are provided:

a. The actual factory overhead expense for the period is P 100,000.

b. The ending balances of the inventories and cost of goods sold after the application of
overhead are as follows:
Raw Materials 200,000
Work in Process 100,000
Finished Goods 400,000
Cost of Goods Sold 500,000
c. The over/ (under) applied overhead during the period is considered material if at
least 30% of actual factory overhead.

Required:
1. Under/ Over applied overhead
2. Cost of Goods Sold at the end of the year.
3. Cost of Goods Sold reported in the FS.

Problem 3. Nike Inc. has completed the Job 101, containing 1, 100 shoes, during 2020 at the
following unit costs:

Direct Materials 2,000

Direct Labor 1,000
Factory Overhead (including an allowance of P 300 for spoiled work 1,300
Final inspection of Job 101 disclosed 100 spoiled shoes which were sold to department for P
200,000
Required:
1. Unit cost of the good shoes produced on Job 101 if spoilage loss is charged to all
production
2. Unit cost of the good shoes produced on Job 101 if spoilage loss is charged to specific
Job 101

Problem 4. For the year ended December 31, 2020, UA Inc. incurred the following costs on Job
Order 201 for manufacturing of 500 units:
Original cost accumulation:
Direct Materials 500,000
Direct Labor 400,000
Factory Overhead 100,000

Direct costs of reworking 100 units:

Direct Materials 100,000
Direct Labor 200,000

Required:
1. Cost per unit of Job Order 201 if the rework cost were attributable to the exacting
specification of Job Order 201
2. Cost per unit of Job Order 201 if the rework cost were attributable to internal failure