Exercises: Cost Accounting, Cost Concepts, Understanding and Classifying

Costs

E-1Uniliver, a manufacturing company, incurs the costs shown below:

Cost Product cost Period Direct Indirect
cost cost cost
Prime Conversion
Direct materials used Y Y
Taxes and licenses (plant) Y Y
Payroll for production Y Y
supervisor
Accident insurance on Y Y
factory workers
Wages-assembly workers Y Y Y
Small tools used Y Y
Advertising Y Y
Office supplies used Y Y
Depreciation-factory bldg. Y Y
Factory utilities Y Y
Administrative salaries Y Y
Bad debt expense Y Y
Prime cost = direct materials + direct labor; Conversion cost = direct labor + factory overhead
REQUIRED: a.) classify each cost as either a product cost or a period cost. If product cost,
identify it as prime and/or conversion cost. b.) classify each as either a direct or indirect cost
using the product as a cost object.
E-2 On January 1, the balances of Woodywood Company were as follows: Finished Goods, P
225,000; Work in Process, P 100,000; Materials, P 95,000. During January, the following
transactions were completed:
a. Materials were purchased, P 300,000.
RMI 300,000
Cash/AP 300,000
b. Direct materials amounting to P 210,000 were issued from the warehouse.
WIP – DM 210,000
RMI 210,000
 c. Indirect materials amounted to P 30,000.
FOH control 30,000
RMI 30,000
d. Total salaries and wages for January amounted to P 130,000, including salaries of
salesmen P 30,500 and administrative salaries of P 25,000. Labor time tickets show that P
65,500 of the labor cost was direct labor.
Salaries expense – SE 30,500
Salaries expense – Admin 25,000
WIP – DL 65,500
FOH – IL 9,000
Cash/accrual 130,000

e. Other factory overhead costs incurred on account were P 12,000.

Factory overhead control 12,000
Accounts payable/Accrual 12,000
f. Total factory overhead is closed to and transferred to Work in Process account.
Work in process 51,000
Factory overhead control 51,000
g. Finished products totaled P 158,500 and finished goods in the shipping room in January
31 totaled P 48,000.
Finished goods inventory 158,500
Work in process 158,500
h. Customers to whom shipments were made during the month were billed for P 350,000.
AR 350,000
Sales 350,000
Cost of sales 335,500
Finished goods inventory 335,500

DM used 210,000
Direct labor 65,500
FOH 51,000
Manufacturing Cost 326,500
WIP, beg 100,000
Cost of goods placed in process 426,500
WIP, end (268,000)
Cost of goods manufactured 158,500
FG, beg. 225,000
TGAS 383,500
FG, end (48,000)
Cost of sales 335,500
Entries: Periodic
 Purchases 300,000
Cash/AP 300,000

Payroll 130,000
Cash/accrual 130,000

Manufacturing Overhead 12,000

Accounts payable/Accrual 12,000

AR 350,000
Sales 350,000

REQUIRED: Prepare journal entries for the ff. transactions.

1. Periodic method
2. Perpetual method

E-3 The December 31, 2018 trial balance of KIM Company showed the following information:
Sales P 14,000,000 Sales return & allow. P 20,000
Purchases 2,400,000 Factory overhead 1,880,000
Freight-in 30,000 Advertising expense 150,000
Direct labor 3,200,000 Delivery expense 60,000
Sales salaries 200,000

Inventories:
12/31/18 1/01/18
Finished goods P 460,000 P 620,000
Work in process 130,000 120,000
Materials 190,000 170,000

REQUIRED: Compute for the following:

1.) Total manufacturing cost 5.) Gross profit
2.) Total goods placed in process 6.) Selling expenses
3.) Cost of goods manufactured 7.) General and admin expenses
4.) Cost of goods sold 8.) Net income/ net loss
Sales P 14,000,000
SRA (20,000)
Net sales P 13,980,000
 Cost of Sales:
RMI, beg. P 170,000
Add: Net cost of Purchases
Purchases P 2,400,000
Freight in 30,000 2,430,000
Available Materials P 2,600,000
RMI, end (190,000)
Direct materials used P 2,410,000
Direct labor 3,200,000
FOH 1,880,000
Manufacturing Cost P 7,490,000
WIP, beg. 120,000
Cost of goods placed in process P 7,610,000
WIP, end ( 130,000)
Cost of goods manufactured P 7,480,000
FG, beg. 620,000
TGAS P 8,100,000
FG, end (460,000)
Cost of sales P 7,640,000 7,640,000
Gross Profit P 6,340,000
Selling expenses (410,000)
Net income P 5,930,000

E-4 On September 2018, Zocco Company incurred the following costs: Direct materials, P
200,000; Factory overhead, P 250,000; and Direct labor, P 105,000. Inventories were as follows:
Beginning Ending
Finished goods P 350,000 P 200,000
Work in process 360,000 350,000
Materials 250,000 125,000

REQUIRED:
a. Total manufacturing cost for the month of September.
b. The cost of goods manufactured for the month of September.
c. The cost of goods sold for the month of September.
Direct materials used P 200,000
Direct labor 105,000 PC: P 305,000
FOH 250,000 CC: P 355,000
Manufacturing cost P 555,000
WIP, beg 360,000
Cost of goods placed in process P 915,000
WIP, end (350,000)
Cost of goods manufactured P 565,000
 FG, beg. 350,000
TGAS P 915,000
FG, end (200,000)
Cost of goods sold P 715,000

E-5 Coco company manufactures tables. The following information was available at the
beginning and ending of August:
Beginning Ending
Materials inventory P 42,500 P 22,000
Work in process inventory 45,500 16,000
Finished goods inventory 25,500 12,000

During august, materials costing P 126,000 were purchased, direct labor cost totaled P 109,600,
and factory overhead was P 112,500 which includes P 22,500 of indirect materials. How much is
the cost of good manufactured for August?
RMI, beg. 42,500
Purchases 126,000
RMI, end (22,000)
Materials used 146,500
Indirect materials (22,500)
Direct materials used 124,000
Direct labor 109,600
FOH 112,500
Manufacturing cost 346,100
WIP, beg 45,500
WIP, end (16,000)
COGM 375,600
FG, beg 25,500
FG, end (12,000)
COS 389,100

E-6 On June 2018, Flaming Company’s purchases materials amounting to P 125,000, and the
cost of goods sold for June was P 330,000. Factory overhead was 300% of direct labor cost.
Other information pertaining to Flaming Company’s inventories and production for June is as
follows:
Inventories Beginning Ending
Finished goods P 142,500 P 40,000
Work in process 25,500 17,000
Materials 14,000 9,500

REQUIRED:
 a.) Prepare schedule of cost of goods manufactured.
b.) Compute the prime cost charged to work in process.
c.) Compute the conversion cost charged to work in process.

RMI, beg 14,000

Purchases 125,000
RMI, end (9,500)
Direct materials used 130,000
DL 22,375
FOH 67,125
Total manufacturing cost 219,500
WIP, beg 25,000
WIP, end (17,000)
COGM 227,500
FG, beg. 142,500
FG, end (40,000)
COS 330,000

MC = DM + DL + FOH
219,500 = 130,000 + DL + FOH
DL + FOH = 89,500 (Conversion Cost)
DL + 300%(DL) = 89,500
1DL + 3DL = 89,500
4DL = 89,500
DL = 22,375
PC = 130,000 + 22,375 = 152,375
E-7 Jing Inc. had a cost of goods manufactured for the month of July equal to P 100,000; raw
materials used P 29,000; cost of goods sold, P 120,000; direct labor, P 28,000; purchases of
materials, P 45,000; cost of goods available for sale, P 125,000; total salaries and wages, P
58,000. Work in process was P 35,000 on July 1 and P 15,000 on July 31. The company uses a
sole account for direct and indirect materials.
Required:
a.) Cost of goods sold statement
b.) Journal entries to record (use periodic and perpetual)
1.) The purchase of materials on account
RMI 45,000
AP 45,000
2.) The use of materials which includes indirect materials of P 2,000.
FOH Control – IM 2,000
WIP – DM 27,000
 RMI 29,000

3.) The accrual payroll in the production department which includes indirect labor of P
11,500.
Payroll 58,000
Accrued salaries 58,000

4.) The distribution of factory labor cost

WIP – DL 28,000
FOH control 11,500
Salaries – Operating 18,500
Payroll 58,000

Accrued salaries 58,000

Cash 58,000

5.) The transfer of completed work to finished goods

FG 100,000
WIP 100,000
6.) The sales on account, at a mark-up equal to 150% of production cost.

AR (120,000 x 150%) 180,000

Sales 180,000

COS 120,000
FG 120,000

Raw Materials used 29,000

Indirect materials (2,000)
Direct mat. Used 27,000
DL 28,000
FOH 25,000
Manufacturing cost 80,000
WIP, beg. 35,000
WIP, end (15,000)
COGM 100,000
FG, beg. 25,000
TGAS 125,000
FG, end (5,000)
COS 120,000
 DIY: Inventory Systems and Cost of Goods Sold

Dartmouth Company reported the following inventory balances as of October 31, 2015:
Raw materials P 80,000
Work in process 110,000
Finished goods 190,000

The following transactions occurred during the month of November:

1. Purchased P 25,000 of raw materials on account.
2. Issued P 18,000 of raw materials to production, of which P 15,000 were direct to the
product.
3. Factory payroll of P 34,000 was accrued and distributed as follows: P 30,000 for direct
labor and P 4,000 for supervisors (ignore payroll taxes and deductions).
4. Factory utility costs of P 8,000 were accrued.
5. Prepaid insurance of P1,000 on factory equipment expired in November.
6. Straight-line depreciation on factory equipment for the month was P 10,000.
7. Selling and administrative expenses were P 40,000 (P30,000 was paid in cash and P
10,000 was accrued.)
8. Factory overhead was transferred to work in process inventory.
9. Goods manufactured were transferred to finished goods inventory. Ending inventories
were: work in process, P 60,000 and finished goods, P 175,000.
10. Sales of P 217,600 was made on account.
Required:
a. Journal entries to record the above transactions (perpetual and periodic)
b. Statement of the cost of goods manufactured
c. Income statement