Problem I

1 Unit Value of each product

PRODUCT L
Cost 700.00
Net Realizable Value
Estimated selling price 800.00
Less: Cost to sell 150.00 650.00

LCNRV 650.00

PRODUCT M
Cost 475.00
Net Realizable Value
Estimated selling price 950.00
Less: Cost to sell 205.00 745.00

LCNRV 475.00

PRODUCT N
Cost 255.00
Net Realizable Value
Estimated selling price 300.00
Less: Cost to sell 50.00 250.00

LCNRV 250.00

PRODUCT O
Cost 450.00
Net Realizable Value
Estimated selling price 1,000.00
Less: Cost to sell 260.00 740.00

LCNRV 450.00

LCNRV 1,825.00
LESS: COST 1,880.00
INVENTORY WRITE-OFF 55.00

2 Journal entries
 COST OF GOODS SOLD 55.00
INVENTORY 55.00

OR

INVENTORY WRITE-OFF 55.00

INVENTORY 55.00

Problem II
1

MATERIAL W LEDGER CARD ( FIFO method)

PURCHASES ISSUES
DATE QTY UNIT PRICE AMOUNT QTY
JANUARY 5,000 40.00 200,000.00
FEBRUARY 3,000
APRIL 12,000 45.00 540,000.00

MAY 2,000
7,000
NOVEMBER 17,000 50.00 850,000.00

5,000
5,000
DECEMBER 10,000 60.00 600,000.00

7,000.00

44,000 2,190,000.00 29,000

MATERIAL W LEDGER CARD ( Average method)

PURCHASES ISSUES
DATE QTY UNIT PRICE AMOUNT QTY
JANUARY 5,000 40.00 200,000.00
 FEBRUARY 3,000
APRIL 12,000 45.00 540,000.00
MAY 9,000
NOVEMBER 17,000 50.00 850,000.00
10,000
DECEMBER 10,000 60.00 600,000.00
7,000.00

44,000 2,190,000.00 29,000

Problem III

1. Total annual inventory cost for 3,650 at a time

95,000.00 x 16.50 + 3,650.00 x .60

3,650 2.00

26.03 x 16.50 + 1,825.00 x.60

429.50 + 1,095.00

1,524.50

EOQ = √ ((2 x Demand per year x Cost per order)/ carrying cost)

2 x 95,000 x 16.5

√ .60

√ 3,135,000
.60
 √ 5,225,000.00

2286 units

3. Times to place an order in one year

= Annual requirement / EOQ

= 95,000.00
2,286

41.6 times

Problem IV

1
Penoy Manufacturing Company
Cost of Goods Manufactured Statement
For the period ending December 31, 2012

Materials Inventory, beg. 60,000.00

Add: Purchases 160,000.00
Materials Available for use 220,000.00
Less: Materials Inventory, end 20,000.00
Materials used 200,000.00
Direct Labor 120,000.00
Manufacuring overhead 80,000.00
Manufacuring Cost 400,000.00
Add: Work in process, beg -
Cost of goods placed in process 400,000.00
Less: Work in process, end 25,000.00
Cost of goods manufactured 375,000.00

2
Penoy Manufacturing Company
Statement of Comprehensive Income
 For the period ending December 31, 2012

Sales 516,667.00
Less: Sales returns 10,000.00
Net Sales 506,667.00
Cost of goods sold
Materials Inventory, beg. 60,000.00
Add: Purchases 160,000.00
Materials Available for use 220,000.00
Less: Materials Inventory, end 20,000.00
Materials used 200,000.00
Direct Labor 120,000.00
Factory overhead 80,000.00
Total Manufacuring Cost 400,000.00
Add: WIP, beg (given) -
Cost of goods placed in process 400,000.00
Less: WIP, end 25,000.00
Cost of goods manufactured 375,000.00
Add: Finished goods, beg 25,000.00
Cost of goods available for sale 400,000.00
Less: Finished goods, end 100,000.00
Cost of goods sold 300,000.00
GROSS MARGIN 206,667.00
Less:
Selling Expenses 101,333.60
General Expeses 25,333.40
Net income before tax 80,000.00
Income Tax 28,000.00
Net income after tax 52,000.00

Problem V

Direct Materials 25,000.00

Direct Labor
Department 1 8,000.00
Department 2 12,000.00 20,000.00

Manufacturing overhead
Department 1 (8,000 x 600,000/200,000) 24,000.00
Department 2 (12,000x 400,000/800,000) 6,000.00 30,000.00
 Total Manufacturing costs 75,000.00

Problem VI
Journal entries
1
Spoiled goods inventory 320.00
Manufacturing overhead control 768.00
Work in process - Materials 800.00
Work in process Labor 96.00
Work in process - manufacturing overhead 192.00

2
Spoiled goods inventory 320.00
Work in process - Materials 236.00
Work in process Labor 28.00
Work in process - manufacturing overhead 56.00

Problem VII

a Job-costing

Job 16
Direct Materials 19,400.00
Direct Labor 1,500.00
Overhead ( 50 x 230) 11,500.00

Total Cost 32,400.00

Units produced 20
Unit cost 1,620

Job 57
Direct Materials 119,800.00
Direct Labor 22,500.00
Overhead ( 750 x 230) 172,500.00
 Total Cost 314,800.00
Units produced 400
Unit cost 787

b Activity-based costing

Job 16

Direct Materials 19,400.00

Direct Labor 1,500.00
Overhead
Material Handling (1,000 x .80) 800.00
Lathe work (40,000 x .40) 16,000.00
Milling (300 x 40.00) 12,000.00
Grinding (1,000 x 1.60) 1,600.00
Testing ( 20 x 30.00) 600.00 31,000.00
Total Cost 51,900.00
Units produced 20
Unit cost 2,595

Job 57

Direct Materials 119,800.00

Direct Labor 22,500.00
Overhead
Material Handling (4,000 x .80) 3,200.00
Lathe work (120,000 x .40) 48,000.00
Milling (2,100 x 40.00) 84,000.00
Grinding (4,000 x 1.60) 6,400.00
Testing ( 400 x 30.00) 12,000.00 153,600.00
Total Cost 295,900.00
Units produced 400
Unit cost 740

c
Job-costing and Activiry-based costing differ in the manufacturing cost per unit because the former
always use volume-related measures, such as direct labor hours and machine hours to allocate
overheads to products. While Activity-based costing allocates overhead cost to products on the basis of the
resources consumed by each activity involved in producing particular product.
Problem VIII

Manufacturing Cost
Materials 25 x 80 2,000.00
Direct Labor 25 x 194 4,850.00
Mfg. overhead 25 x 194 4,850.00
11,700.00
Additional Cost for defective goods
Materials 97.00
Direct Labor 125.00
Mfg. overhead 125.00
347.00
Total Manufacturing costs 12,047.00
Cost of the good units 12,047.00

Unit cost of completed units ( 12,047 / 23) 523.78

Problem IX

Direct Materials 40,000.00

Direct Labor 32,000.00
Manufacturing overhead 24,000.00
Total Manufacturing cost 96,000.00
Scrap value of 600 spoiled jeans 4,200.00
Net cost 91,800.00

Unit cost of Jeans if spoilage is charged to specific job 12.41

Direct Materials 40,000.00

Direct Labor 32,000.00
Manufacturing overhead (including spoilage allowance) 28,000.00
Total Manufacturing cost 100,000.00
8000
Unit cost of Jeans if spoilage is charged to all production 12.5

Problem X
 Traditional Costing System

Total set-up cost incurred 60,000.00

Divided by Total direct labour hours 25,000
Set up cost per direct labor hout 2.40
x direct labor hour per unit 2
Set up cost per unit 4.80

ABC System

Set up cost per batch 1,000.00

Divided by batch size 100
Set up cost per unit 10.00

Problem XI

Journal entries
1
Spoiled goods inventory 1,974.00
Work in process - Materials 1,582.46
Work in process Labor 195.77
Work in process - manufacturing overhead 195.77

2 Cash 1,974.00
Manufacturing overhead 1,974.00

Problem XII

1 Safety Stock

Problem XIII
 Sep-15 Payroll Summary 658,150.00
Social Security Premium Payable 40,805.00
Philhealth Premium Payable 9,872.00
PagIBIG Premium payable 9,800.00
Employees Income Tax payable 98,723.00
Salaries and Wages Payable 498,950.00

Sept 15 Salaries and Wages Payable 498,950.00

Cash 498,950.00

Problem XIV

EOQ = √ ((2 x Demand per year x Cost per order)/ carrying cost)

√ 2 x 1,000 x 50
15.65

√ 100,000
15.65

√ 6,389.77

80 units

2 Total Order Cost

 Number of orders per year
1,000 / 80 12.50
x cost per order 50.00
625.00

3 Carrying cost for the year

Average unit x carrying cost per unit

(80/2) x 15.65 626.00

Problem XV

1
Applied Overhead rate 5.49
x Actual Direct labor hours 168,630.00
Applied Factory Overhead 925,778.70
Less:
Actual Fixed Overhead 283,400.00
Actual Variable Overhead 647,426.67
Total Actual Factory Overhead 930,826.67

Under-applied overhead - 5,047.97

2 Volume variance

Budgeted Overhead based on actual hours 919,789.20

Less: Standard overhead based on actual hours 925,778.70
-5,989.50 UNFAVORABLE

Spending variance

Actual Factory overhead 930,826.67

Less:
Budgeted Overhead based on actual hours
Fixed Overhead 272,250.00
Variable overhead 647,539.20 919,789.20
11,037.47 FAVORABLE

Total overhead variance 5,047.97 FAVORABLE

 W LEDGER CARD ( FIFO method)
ISSUES BALANCE
UNIT PRICE AMOUNT QTY UNIT PRICE AMOUNT
5,000 40.00 200,000.00
40.00 120,000.00 2,000 40.00 80,000.00
12,000 45.00 540,000.00
14,000 620,000.00
40.00 80,000.00
45.00 315,000.00 5,000 45.00 225,000.00
17,000 50.00 850,000.00
22,000 1,075,000.00
45.00 225,000.00
50.00 250,000.00 12,000 50.00 600,000.00
10,000 60.00 600,000.00
22,000 1,200,000.00

50.00 350,000.00 5,000 50.00 250,000.00

10,000 60.00 600,000.00
15,000 850,000.00
1,340,000.00

W LEDGER CARD ( Average method)

ISSUES BALANCE
UNIT PRICE AMOUNT QTY UNIT PRICE AMOUNT
5,000 40.00 200,000.00
40.00 120,000.00 2,000 40.00 80,000.00
14,000 42.50 595,000.00
42.50 382,500.00 5,000 42.50 212,500.00
22,000 46.25 1,017,500.00
46.25 462,500.00 12,000 46.25 555,000.00
22,000 53.13 1,168,750.00
53.13 371,875.00 15,000 53.13 796,875.00

1,336,875.00
ment
2012
 because the former
ours to allocate
products on the basis of the
T