CHAPTER 13

Introduction to Cost Accounting

E 12-1
1. A 6. A 11. A 16. A
2. A 7. A 12. A 17. A
3. A & C 8. A 13. A 18. C
4. A 9. A&C 14. A 19. A
5. A 10. A 15. A 20. A

E 12-2
Lakbay Manufacturing Company
Income Statement
For the Month Ended April 30, 2014
Sales P1,440,000
Cost of Goods Sold 966,000
Gross Profit P 474,000
Operating Expenses:
Marketing Expenses P72,000
Administrative Expenses 14,400 86,400
Profit before Income Tax P 387,600
Income Tax 135,660
Profit P251,940

Lakbay Manufacturing Company

Statement of Cost of Goods Sold
For the Month Ended April 30, 2014
Direct Materials:
Raw Materials Inventory, beginning P120,000
Raw Materials Purchases 720,000
Raw materials Available for Use P840,000
Less Raw Materials Inventory, end 170,000
Direct Materials Used P 670,000
Direct Labor 300,000
Factory Overhead 200,000
Total Manufacturing Cost P1,170,000
Add Work in Process Inventory, beginning 160,000
Total Cost of Work Put into Process P1,330,000
Less Work in Process Inventory, end 300,000
Cost of Goods Manufactured P1,030,000
Add Finished Goods Inventory, beginning 140,000
Cost of Goods Available for Sale P1,170,000
Less Finished Goods Inventory, end 204,000
Cost of Goods Sold P 966,000
APC - Chapter 12 (2014 edition) page 2

E 12-3
1. Raw Materials, June 30 P150,000
Add Raw Materials Put into Process 240,000
Raw materials Available for Use P390,000
Less Raw Materials, June 1 120,000
Raw Materials Purchased P270,000

2. Raw Materials Put into Process P240,000

Add Direct Labor
Department A P140,000
Department B 160,000 300,000
Prime Costs P540,000

3. Direct Labor P300,000

Add Factory Overhead
Department A (P140,000 x 120%) P168,000
Department B (P160,000 x 80%) 128,000 296,000
Conversion Costs P596,000

4. Raw Materials Put into Process P240,000

Direct Labor 300,000
Factory Overhead 296,000
Total Manufacturing Cost P836,000

5. Total Manufacturing Cost P836,000

Add Work in Process, June 1 160,000
Total Cost of Work Put into Process P996,000
Less Work in Process, June 30 128,000
Cost of Goods Manufactured P868,000

6. Cost of Goods Manufactured P868,000

Add Finished Goods, June 1 108,000
Cost of Goods Available for Sale P976,000
Less Finished Goods, June 30 120,000
Cost of Goods Sold P856,000

E 12-4
Company A
Finished Goods, beginning P1,200,000
Add Cost of Goods Manufactured 7,600,000
Cost of Goods Available for Sale P8,800,000
Less Cost of Goods Sold (P8,000,000 x 60%) 4,800,000
Finished Goods, end P4,000,000

Company B
Cost of goods sold P2,600,000
Add Finished goods, end 380,000
Cost of goods available for sale P2,980,000
APC - Chapter 12 (2014 edition) page 3

Company C
Cost of Goods Manufactured P680,000
Add Finished Goods, beginning 90,000
Cost of Goods Available for Sale P770,000
Less Finished Goods, end 104,000
Cost of Goods Sold P666,000
Add Gross Profit 192,000
Sales P858,000

E 12-5

a. Raw Materials Purchases 80,000

Vouchers Payable 80,000

b. no entry

c. Factory Payroll 80,000

Withholding Taxes Payable 9,600
SSS Contributions Payable 6,000
Medicare Contributions Payable 280
Vouchers Payable 64,120

d. Vouchers Payable 64,120

Cash 64,120

e. Direct Labor 64,000

Indirect Labor 16,000
Factory Payroll 80,000

f. Factory Payroll Taxes 8,000

SSS Contributions Payable 6,000
Medicare Contributions Payable 640
Employees’ Compensation Contributions Payable 1,360

g. Sundry Factory Overhead 36,000

Vouchers Payable 36,000

h. Depreciation Expense – Factory 4,200

Insurance – Factory 1,560
Property Taxes – Factory 2,500
Prepaid Insurance 1,560
Accumulated Depreciation – Factory 4,200
Accrued Property Taxes 2,500

i. Raw Materials, end 10,000

Work in Process, end 18,260
Manufacturing Summary 28,260
P80,000 - P66,000 – P4,000 = P10,000
P66,000 + P64,000 + P4,000 + P16,000 + P8,000 + P36,000 +
P4,200 + P1,560 + P2,500 – P184,000 = P18,260
APC - Chapter 12 (2014 edition) page 4

j. Accounts Receivable 160,000

Sales 160,000

k. Cash 80,000
Accounts Receivable 80,000

l. Manufacturing Summary 212,260

Raw Materials Purchases 80,000
Direct Labor 64,000
Indirect Labor 16,000
Factory Payroll Taxes 8,000
Sundry Factory Overhead 36,000
Depreciation Expense – Factory 4,200
Insurance – Factory 1,560
Property Taxes – Factory 2,500

m. Finished Goods, end 64,000

Income Summary 64,000
P184,000 – (P160,000 x 75%) = P64,000

E 12-6
1. Direct Materials, January 1 P12,800
Add Purchases of Direct Materials 18,000
Direct Materials Available for Use P30,800
Less Direct Materials, December 31 10,800
Direct Materials Used P20,000

2. Cost of Goods Sold (3) P105,400

Add Gross Profit 22,600
Sales P128,000

3. Cost of Goods Manufactured P100,000

Add Finished Goods, January 1 16,000
Cost of Goods Available for Sale P116,000
Less Finished Goods, December 31 10,600
Cost of Goods Sold P105,400

4. Direct Materials Used (1) P 20,000

Direct Labor 26,000
Factory Overhead 58.000
Total Manufacturing Cost P104,000

5. Cost of Goods Manufactured P100,000

Add Work in Process, December 31 4,000
Total Cost of Work Put into Process P104,000
Less Total Manufacturing Cost 104,000
Work in Process, January 1 P - 0--
APC - Chapter 12 (2014 edition) page 5

6. Direct Materials Used (7) P11,800

Add Direct Materials, December 31 9,200
Direct Materials Available for Use P21,000
Less Purchases of Direct Materials 14,000
Direct Materials, January 1 P 7,000

7. Total Manufacturing Cost P43,000

Less: Direct Labor P16,000
Factory Overhead 15,200 31,200
Direct Materials Used P11,800

8. Cost of Goods Sold P44,000

Add Finished Goods, December 31 10,600
Cost of Goods Available for Sale P54,600
Less Finished Goods, January 1 8,000
Cost of Goods Manufactured P46,600

9. Sales P67,600
Less Cost of Goods Sold 44,000
Gross Profit P23,600

10. Total Manufacturing Cost P43,000

Add Work in Process, January 1 9,600
Total Cost of Work Put into Process P52,600
Less Cost of Goods Manufactured (8) 46,600
Work in Process, December 31 P 6,000

11. Total Manufacturing Cost (15) P80,800

Less: Direct Materials Used P18,800
Factory Overhead 26,000 44,800
Direct Labor P36,000

12. Direct Materials Used P18,800

Add Direct Materials, December 31 11,000
Direct Materials Available for Use P29,800
Less Direct Materials, January 1 13,800
Purchases of Direct Materials P16,000

13. Sales P110,000

Less Gross Profit 24,000
Cost of Goods Sold P 86,000

14. Cost of Goods Sold (13) P86,000

Add Finished Goods, December 31 12,400
Cost of Goods Available for Sale P98,400
Less Finished Goods, January 1 15,600
Cost of Goods Manufactured P82,800
APC - Chapter 12 (2014 edition) page 6

15. Cost of Goods Manufactured (14) P82,800

Add Work in Process, December 31 600
Total Cost of Work Put into Process P83,400
Less Work in Process, January 1 2,600
Total Manufacturing Cost P80,800

16. Direct Materials, January 1 P 3,000

Add Direct Materials Purchased 16,000
Materials Available for Use P19,000
Less Direct Materials Used 11,200
Direct Materials, December 31 P 7,800

17. Total Manufacturing Cost P36,200

Less: Direct Materials Used P11,200
Direct Labor 12,000 23,200
Factory Overhead P13,000

18. Cost of Goods Manufactured P36,200

Add Finished Goods, January 1 12,000
Cost of Goods Available for Sale P48,200
Less Cost of Goods Sold 34,000
Finished Goods, December 31 P14,200

19. Sales P80,000

Less Cost of Goods Sold 34,000
Gross Profit P46,000

20. Cost of Goods Manufactured P36,200

Add Work in Process, December 31 5,000
Total Cost of Work Put into Process P41,200
Less Total Manufacturing Cost 36,200
Work in Process, January 1 P 5,000

P 12 – 1

1. Total Manufacturing Cost P3,600,000

Less Cost of Goods Manufactured 3,400,000
Difference in Work in Process beginning and ending P 200,000
÷ 20%
Work in Process, December 31 P1,000,000

2. Total Manufacturing Cost P3,600,000

Add Work in Process, January 1 (P1,000,000 x 80%) 800,000
Total Cost of Goods Put into Process P4,400,000

3. Total Manufacturing Cost P3,600,000

Less: Manufacturing Overhead (P3,600,000 x 25%) P 900,000
Direct Labor (P900,000 / 72%) 1,250,000 2,150,000
Direct Materials Used P1,450,000
APC - Chapter 12 (2014 edition) page 7

P 12 – 2
1. a. Raw Materials Purchases 400,000
Vouchers Payable 400,000
b. Other Factory Overhead 70,000
Vouchers Payable 70,000
c. Direct Labor 280,000
Indirect Labor 60,000
Sales Salaries 50,000
Administrative Salaries 30,000
Withholding Taxes Payable 37,040
SSS Contributions Payable 16,800
Medicare Contributions Payable 2,250
Pag-ibig Contributions Payable 12,600
Vouchers Payable 351,310
d. Vouchers Payable 351,310
Cash 351,310
e. Factory Payroll Taxes 28,400
Sales Payroll Taxes 4,750
Administrative Payroll Taxes 2,700
SSS Contributions Payable 21,000
Medicare Contributions Payable 2,250
Pag-ibig Contributions Payable 12,600
f. No entry
g. No entry
h. Accounts Receivable 1,078,000
Sales 1,078,000

i. Cash 810,000
Accounts Receivable 810,000
j. Vouchers Payable 440,000
Cash 440,000
k1 Work in Process, end 94,400
Raw Materials, end 60,000
Indirect Materials 70,000
Manufacturing Summary 224,400
P36,000 + P70,000 + P280,000 + 60,000 + P28,400 +
P370,000 + P70,000 – P820,000 = P94,400
P100,000 + P400,000 – P370,000 – P70,000 = P60,000

k2. Manufacturing Summary 908,400

Raw Material Purchases 400,000
Other Factory Overhead 70,000
Direct Labor 280,000
Indirect Labor 60,000
Factory Payroll Taxes 28,400
Indirect Materials 70,000
APC - Chapter 12 (2014 edition) page 8

k3. Manufacturing Summary 136,000

Work in Process, beginning 36,000
Raw Materials, beginning 100,000
k4. Finished Goods 120,000
Income Summary 120,000
P70,000 + P820,000 – P770,000 = P120,000

k5. Income Summary 70,000

Finished Goods, beginning 70,000

k6. Sales 1,078,000

Manufacturing Summary 820,000
Sales Salaries 50,000
Administrative Salaries 30,000
Sales Payroll Taxes 4,750
Administrative Payroll Taxes 2,700
Income Tax 66,165
Income Summary 104,385

k7. Income Summary 154,385

Retained Earnings 154,385

Linang Company
Cost of Goods Sold Statement
For the Month Ended July 31, 2014

Direct Materials:
Raw Materials, beginning P100,000
Add Raw Materials Purchases 400,000
Raw Materials Available for Use P500,000
Less: Indirect Materials P70,000
Raw Materials, end 60,000 130,000
Direct Materials Used P370,000
Direct Labor 280,000
Factory Overhead:
Indirect Materials P70,000
Indirect Labor 60,000
Factory Payroll Taxes 28,400
Other Factory Overhead 70,000 228,400
Total Manufacturing Cost P878,400
Add Work in Process, beginning 36,000
Total Cost of Work Put into Process P914,400
Less Work in Process, end 94,400
Cost of Goods Manufactured P820,000
Add Finished Goods, beginning 70,000
Cost of Goods Available for Sale P890,000
Less Finished Goods, end 120,000
Cost of Goods Sold P770,000
APC - Chapter 12 (2014 edition) page 9

3. Linang Company
Income Statement
For the Month Ended July 31, 2014

Sales P1,078,000
Cost of Goods Sold 770,000
Gross Profit P 308,000
Operating Expenses:
Administrative Salaries P30,000
Administrative Payroll Taxes 2,700
Sales Salaries 50,000
Sales Payroll Taxes 4,750 87,450
Profit before Income Tax P 220,550
Income Tax 66,165
Profit P154,385

Linang Company
Statement of Financial Position
July 31, 2014

ASSETS
Cash (P200,000 - P351,310 + P810,000 – P440,000) P218,690
Accounts Receivable (P120,000 + P1,078,000 – P810,000) 388,000
Finished Goods 120,000
Work in Process 94,400
Raw Materials 60,000
TOTAL ASSETS P881,090

LIABILITIES
Vouchers Payable (P36,000 + P400,000 + P70,000 + P351,310 – P351,310 – P 66,000
P440,000)
Income Tax Payable 66,165
Withholding Taxes Payable 37,040
SSS Contributions Payable (P16,800 + P21,000) 37,800
Medicare Contributions Payable (P2,250 + P2,250) 4,500
Pag-ibig Contributions Payable (P12,600 + P12,600) 25,200
TOTAL LIABILITIES P236,705

SHAREHOLDERS’ EQUITY
Ordinary Share Capital P400,000
Retained Earnings (P90,000 + P154,385) 244,385
TOTAL STOCKHOLDERS’ EQUITY 644,385
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY P881,090
APC - Chapter 12 (2014 edition) page 10

P 12 – 3

1. Raw Materials, beginning P128,000

Add Raw Materials Purchases 168,000
Raw Materials Available for Use P296,000
Less: Direct Materials Used P156,000
Raw Materials, end 120,000 276,000
Indirect Materials Used P 20,000
2. Factory Payroll paid P 88,000
Accrued Payroll 12,000
Direct Labor (64,000)
Indirect labor P 36,000

3. Indirect Materials P 20,000

Indirect Labor 36,000
Factory Insurance 1,200
Depreciation of Factory Equipment 6,800
Factory Utility Service 12,000
Total Factory Overhead P 76,000

4. Direct Materials Used P156,000

Direct Labor 64,000
Factory Overhead 76,000
Total Manufacturing Cost P296,000
Add Work in Process, beginning 164,000
Total Cost of Work Put into Process P460,000
Less Work in Process, end 188,000
Cost of Goods Manufactured P272,000

5. Cost of Goods Manufactured P272,000

Add Finished Goods, beginning 592,000
Cost of Goods Available for Sale P864,000
Less Finished Goods, end 608,000
Cost of Goods Sold P256,000

P 12 – 4
1. P180,000 10. P 12,000 18. P260,000
2. P 30,000 11. P 34,000 19. P18,000
3. P 46,000 12. P 42,600 20. P78,000
4. P 12,000 13. P123,600 21. P53,400
5. P 34,000 14. P 42,000 22. P80,400
6. P 36,000 15. P 36,600 23. P32,600
7. P 94,000 16. P132,400 24. P36,600
8. P 30,000 17. P 95,000 25. P40,000
9. P 82,000
APC - Chapter 12 (2014 edition) page 11

MULTIPLE CHOICE
MC12- 1 B Cost of Goods Manufactured P680,000
Finished Goods, beginning 90,000
Finished Goods, end ( 104,000)
Cost of Goods Sold P666,000
Gross Profit 192,000
Sales P858,000

MC12- 2 A Raw Materials Purchased P 860,000

Less Increase in Raw Materials Inventory 30,000
Direct Materials Used P 830,000
Direct Labor 400,000
Factory Overhead 600,000
Total Manufacturing Cost = Cost of Goods Manufactured P1,830,000
Decrease in Finished Goods Inventory 70,000
Cost of Goods Sold P1,900,000

MC12- 3 D Direct Materials, December 1 P 72,000

Direct Materials Purchases 168,000
Direct Materials, December 31 ( 60,000)
Direct Materials Used P 180,000
Direct Labor 120,000
Prime Cost P300,000

MC12- 4 B Direct Labor P120,000

Factory Overhead [(P120,000 /15) x 20] 160,000
Conversion Cost P280,000

MC12- 5 D Prime Cost P300,000

Factory Overhead 160,000
Total Manufacturing Cost P460,000
Work in Process, December 1 36,000
Work in Process, December 31 (24,000)
Cost of Goods Manufactured P472,000

MC12- 6 C Beginning inventories (P80,000 + P50,000 + P120,000) P250,000

Ending inventories (P100,000 + P70,000 + P140,000) (310,000)
Direct Labor 240,000
Factory Overhead 216,000
Cost of Goods Sold (756,000)
Direct Materials Purchases P360,000

MC12- 7 B Cost of Goods Sold P756,000

Finished Goods, September 30 140,000
Finished Goods, September 1 (120,000)
Cost of Goods Manufactured P776,000

MC12- 8 C P756,000 x 200% = P1,512,000

APC - Chapter 12 (2014 edition) page 12

MC12- 9 A Direct Materials, June 1 P246,000

Purchases 825,720
Direct Materials, June 30 (375,908)
Direct Materials Used in production P695,812

MC12-10 A Direct Materials Used P 695,812

Direct Labor 428,216
Prime Cost P1,124,028

MC12-11 A Direct Labor P428,216

Factory Overhead (P16,470 x 11) 181,170
Conversion Cost P609,386

MC12-12 C Prime Cost P1,124,028

Factory Overhead 181,170
Total Manufacturing Cost P1,305,198
Work in Process, June 1 648,040
Total Cost of Goods Placed in Process P1,953,238

MC12-13 C Total Cost of Goods Placed in Process P1,953,238

Less Work in Process, June 30 1,153,382
Cost of Goods Manufactured P 799,856

MC12-14 B Cost of Goods Manufactured P799,856

Finished Goods, beginning 1,196,642
Finished Goods, ending (1,587,278)
Cost of Goods Sold P409,220

MC12-15 C P428,216/16470 = P26.00

MC12-16 B P125,000/12.5% = P1,000,000

MC12-17 C P315,000/75% = P420,000

MC12-18 C Sales P1,000,000

Operating Expenses P125,000
Profit 125,000 250,000
Cost of Goods Sold P750,000

MC12-19 B Beginning Inventories P700,000

Ending inventories (1,115,000)
Purchases 230,000
Direct Labor 420,000
Factory Overhead 315,000
Cost of Goods Sold (750,000)
Raw Materials, beginning P200,000

MC12-20 A P200,000 + P230,000 – P250,000 = P180,000

APC - Chapter 12 (2014 edition) page 13

TM 44
1. T 6. F 11. F 16. F
2. F 7. T 12. T 17. T
3. T 8. F 13. T 18. F
4. F 9. T 14. F 19. T
5. F 10. F 15. F 20. F

TM 45 TM 46

1. A 6. E 1. B 6. D
2. B 7. G 2. B 7. A
3. H 8. K, L, M 3. C 8. C
4. D 9. I 4. C 9. B
5. K 10. N 5. C 10. C
11. A plus J
12. J
13. C
14. M
15. G

TM 47
1. B Sales P720,000
Gross Profit (440,000)
Cost of Goods Sold P280,000
Finished Goods, end 60,000
Cost of Goods Manufactured (240,000)
Finished Goods, beginning P100,000

2. B Sales P1,400,000
Gross Profit (650,000)
Cost of Goods Sold P 750,000
Finished Goods, end 70,000
Finished Goods, beginning (120,000)
Cost of Goods Manufactured P 700,000

3. A Total Manufacturing Cost P170,000

Prime Cost (P72,000/60%) (120,000)
Factory Overhead P 50,000

4. B Raw Materials Purchased P200,000

Direct Labor 300,000
Factory Overhead 400,000
Increase in Work in Process ( 30,000)
Decrease in Finished Goods 20,000
Cost of Goods Sold P890,000
APC - Chapter 12 (2014 edition) page 14

5. D Direct Materials Used P600,000

Increase in Direct Materials Inventory 100,000
Direct Materials Purchases P700,000

6. A Finished Goods transferred out P340,000

Work in Process, end 600,000
Work in Process, beginning (100,000)
Total Manufacturing Cost P840,000
Direct Materials Used (220,000)
Direct labor (500,000)
Factory Overhead P120,000
7. B Cost of Goods Available for Sale P360,000
Finished Goods, end (240,000
Cost of Goods Sold P120,000
Gross Profit 560,000
Sales P680,000

8. D Direct Materials P3,400,000

Direct Labor 1,600,000
Factory Overhead 2,400,000
Total Manufacturing Cost P7,400,000
Work in Process, beginning 600,000
Total Cost of Work Put into Process P8,000,000
Cost of Goods Manufactured (4,800,000)
Work in Process, end P3,200,000

9. A Total Manufacturing Cost = to Cost of Goods Manufactured P120,000

Finished Goods, beginning 50,000
Cost of Goods Available for Sale P170,000

10. B Cost of Goods Manufactured P190,000

Work in Process end 30,000
Total Cost of Work Put into Process P220,000
Total Manufacturing Cost:
Direct Materials P60,000
Direct Labor 80,000
Factory Overhead 40,000 180,000
Work in Process, beginning P 40,000

TM 48
Liwasan Corporation
APC - Chapter 12 (2014 edition) page 15

Cost of Goods Sold Statement

For the Year Ended December 31, 2014

Direct Materials:
Raw Materials Inventory, beginning P 176,000
Raw Materials Purchases P732,000
Add Freight-in on raw materials purchased 13,200
Delivered Cost of Raw Materials Purchases 745,200
Raw Materials Available for Use P 921,200
Less Raw Materials Inventory, end 128,000
Direct Materials Used P 793,200
Direct Labor 1,047,200
Factory Overhead* 1,145,600
Total Manufacturing Cost P2,986,000
Add Work in Process, beg 59,600
Total Cost of Work Put into Process P3,045,600
Less Work in Process, end 77,600
Cost of Goods Manufactured P2,968,000
Add Finished Goods, beginning 108,400
Cost of Goods Available for Sale P3,076,400
Less Finished Goods, end 132,000
Cost of Goods Sold P2,944,400
* Factory Overhead excluding depreciation P 936,800
Depreciation – manufacturing 208,800
Total P1,145,600

TM 49
a. Raw Materials Purchases 692,000
Factory Supplies 196,000
Vouchers Payable 888,000

b. no entry

c. no entry

d. Direct Labor 98,000

Cash 98,000

e. Depreciation Expense – Factory Building and Equipment 44,000

Accumulated Depreciation – Factory Building and 44,000
Equipment

f. Indirect Labor 372,000

Cash 372,000

g. Utilities – Factory 52,000

Cash 52,000

h. Other Factory Overhead 166,000

Cash 166,000
APC - Chapter 12 (2014 edition) page 16

i1. Factory Supplies Inventory 10,000

Factory Supplies 10,000
P196,000 – P186,000 = P10,000

i2. Direct Materials Inventory, end 178,000

Work in Process, end 162,000
Manufacturing Summary 340,000
P692,000 + P256,000 – P770,000 = P178,000
P770,000 + P186,000 + P98,000 + P44,000 + P372,000 +
P52,000 + P166,000 + P164,000 – P1,690,000 = P162,000

i3. Manufacturing Summary 420,000

Direct Materials Inventory, beginning 256,000
Work in Process Inventory, beginning 164,000

i4. Manufacturing Summary 1,610,000

Raw Materials Purchases 692,000
Factory Supplies 186,000
Direct Labor 98,000
Depreciation Expense – Factory Building and Equipment 44,000
Indirect Labor 372,000
Utilities – Factory 52,000
Other Factory Overhead 166,000
j. Accounts Receivable 2,524,000
Sales 2,524,000

k. Cash 2,390,000
Accounts Receivable 2,390,000

l1. Finished Goods, end 294,000

Income Summary 294,000
P344,000 + P1,690,000 – P1,740,000 = P294,000

l2. Income Summary 344,000

Finished Goods, beginning 344,000

m. Vouchers Payable 936,000

Cash 936,000