Test Bank Chapter 3 Job Order Costing

Chapter 3
Systems Design: Job-Order Costing
True/False
1. Job-order costing would be more likely to be used than process costing

T in situations where many different products or services are produced
Easy each period to customer specifications.
2. Job-order costing is used in manufacturing companies and process

F costing is used in service firms.
Easy
3. In a job-order costing system, costs are traced to departments and

F then allocated to units of product using an average process.
Easy
4. Normally a job cost sheet is not prepared for a job until after the
F job has been completed.
Medium
5. Job cost sheets contain entries for actual direct material, actual
F direct labor, and actual manufacturing overhead cost incurred in
Easy completing a job.
6. In order to improve the accuracy of unit costs, most companies

F recompute the predetermined overhead rate each month.
Medium
7. The following journal entry would be made to apply overhead cost to

T jobs in a job-order costing system:
Medium
Work in Process ............... XXX
Manufacturing Overhead ... XXX
8. When the predetermined overhead rate is based on direct labor-hours,

T the amount of overhead applied to a job is proportional to the amount
Easy of actual direct labor-hours incurred on the job.
9. When completed goods are sold the transaction is recorded as a debit

F to Cost of Goods Sold and a credit to Work in Process.
Medium
10. The most common accounting treatment of underapplied manufacturing

F overhead is to transfer it to the Manufacturing Overhead control
Hard account.
11. In job-order costing, the Work in Process inventory account contains

F the actual costs of direct labor, direct materials, and manufacturing
Medium overhead incurred on partially completed jobs.
12. Nonmanufacturing costs are expensed as incurred, rather than going

T into the Work in Process account.
Easy
13. A credit balance in the Manufacturing Overhead account at the end of

F the year means that overhead was underapplied.
Medium
Managerial Accounting, 9/e 50

14. Indirect materials are not charged to a specific job but rather are
T included in manufacturing overhead.
Easy
15. The labor time ticket contains a detailed summary of the direct and
T the indirect labor hours of an employee.
Easy
Multiple Choice
16. Which of the following companies would be most likely to use a job-
B order costing system rather than a process costing system?
Easy a. fast food restaurant
b. shipbuilding
c. crude oil refining
d. candy making
17. The computation of unit product costs involves an averaging process

B in:
Easy
CMA Job-order costing Process costing
adapted a. Yes No
b. Yes Yes
c. No Yes
d. No No
18. Work in Process is a control account supported by detailed cost data

A contained in:
Easy a. job cost sheets.
b. the Manufacturing Overhead account.
c. the Finished Goods inventory account.
d. purchase requisitions.
19. In job-order costing, all of the following statements are correct with
D respect to labor time and cost except:
Medium a. time tickets are kept by employees showing the amount of work
on specific jobs.
b. the job cost sheet for a job will contain all direct labor
charges to that particular job.
c. labor cost that can be traced to a job only with a great deal
of effort is treated as part of manufacturing overhead.
d. a machine operator performing routine annual maintenance work
on a piece of equipment would charge the maintenance time to a
specific job.
20. In a job order cost system, the journal entry to record the
A application of overhead cost to jobs would include:
Medium a. a credit to the Manufacturing Overhead account.
b. a credit to the Work in Process inventory account.
c. a debit to Cost of Goods Sold.
d. a debit to the Manufacturing Overhead account.
21. In a job-order cost system, the use of indirect materials would

C usually be recorded as a debit to:
Medium a. Raw Materials.
b. Work in Process.
c. Manufacturing Overhead.
d. Finished Goods.
22. In a job order cost system, the use of direct materials previously

A purchased usually is recorded as a debit to:
Easy a. Work in Process inventory.
CPA b. Finished Goods inventory.
adapted c. Manufacturing Overhead.
d. Raw Materials inventory.
23. In a job-order cost system, direct labor costs usually are recorded
D initially with a debit to:
Easy a. Manufacturing Overhead.
b. Finished Goods inventory.
c. Direct Labor Expense.
d. Work in Process.
24. If a company applies overhead to jobs on the basis of a predetermined

A overhead rate, a credit balance in the Manufacturing Overhead account
Medium at the end of any period means that:
a. more overhead cost has been charged to jobs than has been
incurred during the period.
b. more overhead cost has been incurred during the period than has
been charged to jobs.
c. the amount of overhead cost charged to jobs is greater than the
estimated cost for the period.
d. the amount of overhead cost charged to jobs is less than the
estimated overhead cost for the period.

25. In a job order cost system, the amount of overhead cost that has been
D applied to a job that remains incomplete at the end of a period:
Medium a. is deducted on the Income Statement as overapplied overhead.
b. is closed to Cost of Goods Sold.
c. is transferred to Finished Goods at the end of the period.
d. is part of the ending balance of the Work in Process inventory
account.
26. The Work in Process inventory account of a manufacturing company shows

B a balance of P2,400 at the end of an accounting period. The job cost
Hard sheets of the two uncompleted jobs show charges of P400 and P200 for
direct materials, and charges of P300 and P500 for direct labor. From
this information, it appears that the company is using a predetermined
overhead rate, as a percentage of direct labor costs, of:
a. 80%.
b. 125%.
c. 300%.
d. 240%.
27. Freeman Company uses a predetermined overhead rate based on direct

C labor hours to apply manufacturing overhead to jobs. At the beginning
Medium of the year, the company estimated manufacturing overhead would be
P150,000 and direct labor hours would be 10,000. The actual figures
for the year were P186,000 for manufacturing overhead and 12,000
direct labor hours. The cost records for the year will show:
a. overapplied overhead of P30,000.
b. underapplied overhead of P30,000.
c. underapplied overhead of P6,000.
d. overapplied overhead of P6,000.
28. Harrell Company uses a predetermined overhead rate based on direct

B labor hours to apply manufacturing overhead to jobs. At the beginning
Medium of the year the company estimated its total manufacturing overhead
cost at P400,000 and its direct labor-hours at 100,000 hours. The
actual overhead cost incurred during the year was P350,000 and the
actual direct labor hours incurred on jobs during the year was 90,000
hours. The manufacturing overhead for the year would be:
a. P10,000 underapplied.
b. P10,000 overapplied.
c. P50,000 underapplied.
d. P50,000 overapplied.

29. For the current year, Paxman Company incurred P150,000 in actual
A manufacturing overhead cost. The Manufacturing Overhead account showed
Hard that overhead was overapplied in the amount of P6,000 for the year. If
the predetermined overhead rate was P8.00 per direct labor hour, how
many hours were worked during the year?
a. 19,500 hours
b. 18,000 hours
c. 18,750 hours
d. 17,750 hours
30. Carlo Company uses a predetermined overhead rate based on direct labor
B hours to apply manufacturing overhead to jobs. The company estimated
Medium manufacturing overhead at P255,000 for the year and direct labor-hours
CPA at 100,000 hours. Actual manufacturing overhead costs incurred during
adapted the year totaled P270,000. Actual direct labor hours were 105,000.
What was the overapplied or underapplied overhead for the year?
a. P2,250 overapplied.
b. P2,250 underapplied.
c. P15,000 overapplied.
d. P15,000 underapplied.
31. Sawyer Manufacturing Company uses a predetermined overhead rate based

D on direct labor hours to apply manufacturing overhead to jobs. Last
Medium year, the company worked 57,000 actual direct labor hours and incurred
P345,000 of actual manufacturing overhead cost. The Company had
estimated that it would work 55,000 direct labor hours during the year
and incur P330,000 of manufacturing overhead cost. The company's
manufacturing overhead cost for the year was:
a. overapplied by P15,000.
b. underapplied by P15,000.
c. overapplied by P3,000.
d. underapplied by P3,000.
32. The Watts Company uses predetermined overhead rates to apply

D manufacturing overhead to jobs. The predetermined overhead rate is
Easy based on labor cost in Dept. A and on machine hours in Dept. B. At the
beginning of the year, the company made the following estimates:
Dept. A Dept. B
Direct labor cost ........ P30,000 P40,000
Manufacturing overhead ... 60,000 50,000
Direct labor hours ....... 6,000 8,000
Machine hours ............ 2,000 10,000
What predetermined overhead rates would be used in Dept A and Dept B,

respectively?
a. 50% and P8.00
b. 50% and P5.00
c. P15 and 110%
d. 200% and P5.00

33. Compton Company uses a predetermined overhead rate in applying overhead
C to production orders on a labor cost basis in Department A and on a
Easy machine hours basis in Department B. At the beginning of the most
recently completed year, the company made the following estimates:
Dept. A Dept. B
Direct labor cost ........ P56,000 P33,000
Factory overhead ......... 67,200 45,000
Direct labor hours ....... 8,000 9,000
Machine hours ............ 4,000 15,000
What predetermined overhead rate would be used in Department A and

Department B, respectively?
a. 83% and P5
b. 83% and P3
c. 120% and P3
d. 83% and P3
34. Kelsh Company uses a predetermined overhead rate based on machine

C hours to apply manufacturing overhead to jobs. The company has
Medium provided the following estimated costs for next year:
Direct materials .................. P10,000

Direct labor ...................... 30,000
Sales commissions ................. 40,000
Salary of production supervisor ... 20,000
Indirect materials ................ 4,000
Advertising expense ............... 8,000
Rent on factory equipment ......... 10,000
Kelsh estimates that 5,000 direct labor hours and 10,000 machine hours
will be worked during the year. The predetermined overhead rate per
hour will be:
a. P6.80.
b. P6.40.
c. P3.40.
d. P8.20.

35. Simplex Company has the following estimated costs for next year:
D
Medium Direct materials .................... P15,000
Direct labor ........................ 55,000
Sales commissions ................... 75,000
Salary of production supervisor ..... 35,000
Indirect materials .................. 5,000
Advertising expense ................. 11,000
Rent on factory equipment ........... 16,000
Simplex estimates that 10,000 direct labor and 16,000 machine hours will
be worked during the year. If overhead is applied on the basis of
machine hours, the overhead rate per hour will be:
a. P8.56.
b. P7.63.
c. P6.94.
d. P3.50.
36. CR Company has the following estimated costs for the next year:
A
Medium Direct materials ..................... P 4,000
Direct labor ......................... 20,000
Rent on factory building ............. 15,000
Sales salaries ....................... 25,000
Depreciation on factory equipment .... 8,000
Indirect labor ....................... 10,000
Production supervisor’s salary ....... 12,000
CR Company estimates that 20,000 labor hours will be worked during the
year. If overhead is applied on the basis of direct labor hours, the
overhead rate per hour will be:
a. P2.25.
b. P3.25.
c. P3.45.
d. P4.70.
37. Lucy Sportswear manufactures a specialty line of T-shirts. The company

D uses a job-order costing system. During March, the following costs
Medium were incurred on Job ICU2: direct materials P13,700 and direct labor
P4,800. In addition, selling and shipping costs of P7,000 were
incurred on the job. Manufacturing overhead was applied a the rate of
P25 per machine-hour and Job ICU2 required 800 machine-hours. If Job
ICU2 consisted of 7,000 shirts, the Cost of Goods Sold per shirt was:
a. P6.50
b. P6.00
c. P5.70
d. P5.50

38. Lucas Co. has a job order cost system. For the month of April, the
B following debits (credits) appeared in the Work in Process account:
Hard
CPA April
adapted 1 Balance .................. P 24,000
30 Direct materials ......... 80,000
30 Direct labor ............. 60,000
30 Manufacturing overhead ... 54,000
30 To finished goods ........ (200,000)
Lucas applies overhead at a predetermined rate of 90% of direct labor

cost. Job No. 100, the only job still in process at the end of April,
has been charged with manufacturing overhead of P4,500. The amount of
direct materials charged to Job No. 100 was:
a. P18,000.
b. P8,500.
c. P5,000.
d. P4,500.
39. Worrell Corporation has a job-order cost system. The following debits
C (credits) appeared in the Work in Process account for the month of
Hard March:
CPA
adapted March 1, balance ....................... P 12,000
March 31, direct materials ............. 40,000
March 31, direct labor ................. 30,000
March 31, manufacturing overhead applied 27,000
March 31, to finished goods ............ (100,000)
Worrell applies overhead at a predetermined rate of 90% of direct

labor cost. Job No. 232, the only job still in process at the end of
March, has been charged with manufacturing overhead of P2,250. What
was the amount of direct materials charged to Job No. 232?
a. P2,250
b. P2,500
c. P4,250
d. P9,000

40. The Samuelson Company uses a job-order cost system. The following data
D were recorded for June:
Medium
June 1 Added During June
Work in Process Direct Direct
Job Number Inventory Materials Labor
475 P1,000 P 400 P 200
476 P 900 P 600 P 800
477 P 800 P 900 P1,400
478 P 600 P 1,100 P1,900
Overhead is charged to production at 70% of the direct materials cost.

Jobs 475, 477, and 478 have been delivered to the customer.
Samuelson’s Work in Process inventory balance on June 30 was:

a. P6,450.
b. P2,860.
c. P2,300.
d. P2,720.
41. Beaver Company used a predetermined overhead rate last year of P2 per
B direct labor hour, based on an estimate of 25,000 direct labor hours
Easy to be worked during the year. Actual costs and activity during the
year were:
Actual manufacturing overhead cost incurred P47,000

Actual direct labor hours worked .......... 24,000
The under- or overapplied overhead last year was:

42. Dowan Company uses a predetermined overhead rate based on direct labor
B hours to apply manufacturing overhead to jobs. Last year Dowan Company
Hard incurred P156,600 in actual manufacturing overhead cost. The
Manufacturing Overhead account showed that overhead was underapplied
by P12,600 for the year. If the predetermined overhead rate is P6.00
per direct labor hour, how many hours did the company work during the
year?
a. 26,000 hours
b. 24,000 hours
c. 28,200 hours
d. 25,000 hours

43. Paul Company used a predetermined overhead rate during the year just
D completed of P3.50 per direct labor hour, based on an estimate of 22,000
Medium direct labor hours to be worked during the year. Actual overhead cost
and activity during the year were:
Actual manufacturing overhead cost incurred .. P90,000

Actual direct labor hours worked ............. 25,000
The under- or overapplied overhead for the year would be:

44. Sweet Company applies overhead to jobs on the basis of 125% of direct
A labor cost. If Job 107 shows P10,000 of manufacturing overhead
Medium applied, how much was the direct labor cost on the job?
a. P8,000
b. P12,500
c. P11,250
d. P10,000
45. Knowlton Company applies overhead to completed jobs on the basis of 70%
C of direct labor cost. If Job 501 shows P21,000 of manufacturing overhead
Medium applied, the direct labor cost on the job was:
a. P14,700.
b. P21,000.
c. P30,000.
d. P27,300.
46. The balance in White Company's Work in Process inventory account was
A P15,000 on August 1 and P18,000 on August 31. The company incurred
Hard P30,000 in direct labor cost during August and requisitioned P25,000
in raw materials (all direct material). If the sum of the debits to
the Manufacturing Overhead account total P28,000 for the month, and if
the sum of the credits totaled P30,000, then:
a. Finished Goods was debited for P82,000 during the month.
b. Finished Goods was credited for P83,000 during the month.
c. Manufacturing Overhead was underapplied by P2,000 at the end of
the month.
d. Finished Goods was debited for P85,000 during the month.

47. Under Lamprey Company's job-order costing system, manufacturing
B overhead is applied to Work in Process inventory using a predetermined
Medium overhead rate. During January, Lamprey's transactions included the
following:
Direct materials issued to production .... P 90,000

Indirect materials issued to production .. 8,000
Manufacturing overhead cost incurred ..... 125,000
Manufacturing overhead cost applied ...... 113,000
Direct labor cost incurred ............... 107,000
Lamprey Company had no beginning or ending inventories. What was the

cost of goods manufactured for January?
a. P302,000
b. P310,000
c. P322,000
d. P330,000
48. Compute the amount of direct materials used during November if P20,000
A in raw materials were purchased during the month and if the
Easy inventories were as follows:
Balance Balance
November 1 November 30
Raw materials .... P 4,000 P 3,000
Work in process .. 12,000 15,000
Finished goods ... 24,000 27,000
a. P21,000.
b. P19,000.
c. P18,000.
d. P15,000.
49. Sharp Company's records show that overhead was overapplied by P10,000
C last year. This overapplied overhead was closed out to the Cost of
Hard Goods Sold account at the end of the year. In trying to determine why
overhead was overapplied by such a large amount, the company has
discovered that P6,000 of depreciation on factory equipment was
charged to administrative expense in error. Given the above
information, which of the following statements is true?
a. Manufacturing overhead was actually overapplied by P16,000 for
the year.
b. The company's net income is understated by P6,000 for the
year.
c. Under the circumstances posed above, the error in recording
depreciation would have no effect on net income for the year.
d. The P6,000 in depreciation should have been charged to Work in
Process rather than to administrative expense.

Reference: 3-1
Wayne company uses a job costing system and applies overhead to jobs using a
predetermined overhead rate based on direct labor-hours. The company had the
following inventories at the beginning and end of March:
March 1 March 31
Direct Materials....... P36,000 P30,000
Work in Process........ 18,000 12,000
Finished Goods......... 54,000 72,000
The following additional data pertain to operations during March:
Direct materials purchased... P84,000

Direct labor cost............ P60,000
Direct labor rate............ P7.50 per direct labor-hour
Overhead rate................ P10.00 per direct labor-hour
50. During March total debits to Work in Process were:

D a. P84,000.
Medium b. P220,000.
CPA c. P144,000.
adapted d. P230,000.
Refer To:
3-1
51. The Cost of Goods Manufactured for March was:

D a. P212,000.
Medium b. P218,000.
CPA c. P230,000.
Refer To:
3-1
Reference: 3-2
Hamilton Company uses job-order costing. Manufacturing overhead is applied using a
predetermined rate of 150% of direct labor cost. Any over- or underapplied
manufacturing overhead is closed to the Cost of Goods Sold account at the end of each
month. Additional information is available as follows:
 Job 101 was the only job in process at January 31. The job cost sheet for
this job contained the following costs at the beginning of the month:
Direct materials .................. P4,000

Direct labor ...................... P2,000
Applied manufacturing overhead .... P3,000
 Jobs 102, 103, and 104 were started during February.

 Direct materials requisitions for February totaled P26,000.
 Direct labor cost of P20,000 was incurred for February.
 Actual manufacturing overhead was P32,000 for February.
 The only job still in process at February 28 was Job 104, with costs of
P2,800 for direct materials and P1,800 for direct labor.
52. The cost of goods manufactured for February was:

A a. P77,700.
Medium b. P78,000.
CPA c. P79,700.
adapted d. P85,000.
Refer To:
3-2
53. For the month of February, the manufacturing overhead was:

D a. P700 overapplied.
Medium b. P1,000 overapplied.
CPA c. P2,000 overapplied.
adapted d. P2,000 underapplied.
Refer To:
3-2
Reference: 3-3
Meyers Company had the following inventory balances at the beginning and end of
November:
November 1 November 30
Raw Materials ...... P17,000 P20,000
Finished Goods ..... P50,000 P44,000
Work in Process .... P 9,000 P11,000
During November, P39,000 in raw materials (all direct materials) were drawn from
inventory and used in production. The company's predetermined overhead rate was P8
per direct labor-hour, and it paid its direct labor workers P10 per hour. A total of
300 hours of direct labor time had been expended on the jobs in the beginning Work in
Process inventory account. The ending Work in Process inventory account contained
P4,700 of direct materials cost. The Company incurred P28,000 of actual manufacturing
overhead cost during the month and applied P26,400 in manufacturing overhead cost.
54. The raw materials purchased during November totaled:

A a. P42,000.
Medium b. P45,000.
Refer To: c. P36,000.
3-3 d. P39,000.
55. The direct materials cost in the November 1 Work in Process inventory
C account totaled:
Medium a. P6,600.
Refer To: b. P6,000.
3-3 c. P3,600.
d. P3,000.

56. The actual direct labor hours worked during November totaled:
B a. 2,800 hours.
Hard b. 3,300 hours.
Refer To: c. 3,500 hours.
3-3 d. 3,600 hours.
57. The amount of direct labor cost in the November 30 Work in Process
C inventory was:
Hard a. P2,800.
3-3 c. P3,500.
d. P6,300.
Reference: 3-4
The following T accounts are for Stanford Company:
Raw Materials Cost of Goods Sold

Beg. Bal. 7,000 | 24,000(2) |
(1)19,000 | |
| |
| |
| |
Sales Salaries Expense Work in Process

(4) 11,000 | Beg. Bal. 11,000 | ? (7)
| (2) 15,000 |
| (4) 18,000 |
| (6) 31,000 |
| |
Accounts Payable Manufacturing Overhead

| 19,000 (1) (2) 9,000 | 31,000 (6)
| 5,000 (5) (3) 16,000 |
| (4) 8,000 |
| (5) 5,000 |
| |
Wages & Salaries Payable Finished Goods

| 7,000 Beg. Bal. Beg. Bal. 18,000 |
| 37,000 (4) (7) 62,000 |
| End. Bal. 15,000 |
| |
Accumulated Depreciation—
Factory
| 82,000 Beg. Bal.
| 16,000 (3)

58. The indirect labor cost is:
A a. P8,000.
Hard b. P15,000.
3-4 d. P37,000.
59. The cost of goods manufactured is:

D a. P82,000.
Hard b. P64,000.
3-4 d. P62,000.
60. The cost of goods sold (after adjustment for under- or overapplied
C overhead) is:
Hard a. P58,000.
3-4 c. P72,000.
d. P65,000.
61. The manufacturing overhead applied is:

B a. P24,000.
Medium b. P31,000.
3-4 d. P42,000.
62. The cost of direct materials used is:

B a. P14,000.
Hard b. P15,000.
3-4 d. P24,000.
63. The ending Work in Process account balance would be:

A a. P13,000.
Hard b. P75,000.
3-4 d. P64,000.
Reference: 3-5
Mallet Company has only Job 844 in process on March 1 of the current year. The job has
been charged with P2,000 of direct material cost, P2,500 of direct labor cost, and
P1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a
predetermined rate of 70% of direct labor cost. Any under- or overapplied overhead
cost is closed to Cost of Goods Sold at the end of the month.

During March, the following activity and amounts were recorded by the company:
Raw materials (all direct materials):

Purchased during the month ..................... P29,500
Used in production ............................. P30,500
Labor:
Direct labor hours worked during the month ..... 2,500
Direct labor cost incurred ..................... P26,500
Indirect labor costs incurred .................. P5,500
Manufacturing overhead costs incurred (total) .. P18,500
Inventories:
Raw materials (all direct) March 31 ............ P7,500
Work in process, March 31 ...................... P14,500
Work in process inventory contains P5,500 of direct labor cost.
64. The amount of direct materials cost in the March 31 work in process
A inventory account was:
Medium a. P5,150.
3-5 c. P9,000.
d. P3,850.
65. The cost of goods manufactured for March was:

A a. P67,300
Hard b. P67,250
Refer To: c. P81,800
3-5 d. P75,550
66. The entry to dispose of the under- or overapplied overhead cost for the
B month would include:
Hard a. a debit of P50 to Cost of Goods Sold.
Refer To: b. a debit of P50 to Manufacturing Overhead.
3-5 c. a debit of P5,500 to Manufacturing Overhead.
d. a credit of P5,500 to Cost of Goods Sold.
67. The balance in the March 1 in the Raw Materials inventory was:
D a. P10,500.
Hard b. P9,500.
3-5 d. P8,500.

Reference: 3-6
The Milo Company's records for May contained the following information:
Actual direct labor-hours ....... 9,000 hours

Actual direct labor cost ........ P 47,000
Direct material purchased ....... 16,000
Direct material used ............ 14,000
Cost of goods sold .............. 100,000
Overapplied overhead ............ 5,000
Ending inventories:
Raw materials ................. 30,000
Work in process ............... 50,000
Finished goods ................ 70,000
The company uses a predetermined overhead rate of P5.00 per direct labor hour to
apply manufacturing overhead to jobs.
68. The actual overhead cost incurred during the month was:
C a. P50,000.
Medium b. P55,000.
3-6 d. P45,000.
69. The total cost added to Work in Process during May was:
B a. P101,000.
Medium b. P106,000.
3-6 d. P111,000.
Reference: 3-7
The information below has been taken from the cost records of Tercel Company for the
past year:
Raw materials used in production ......................... P326,000

Total manufacturing costs charged to jobs during
the year (includes raw materials, direct labor, and
manufacturing overhead applied at the rate of 60 per
cent of direct labor cost) ............................. 686,000
Cost of goods available for sale ......................... 826,000
Selling and administrative expenses ...................... 25,000
Inventories
Beginning Ending
Raw Materials ............. P75,000 P 85,000
Work in Process ........... 80,000 30,000
Finished Goods ............ 90,000 110,000

70. The cost of raw materials purchased during the year amounted to:
D a. P411,000.
Medium b. P360,000.
CMA c. P316,000.
Refer To:
3-7
71. Direct labor costs charged to production during the year amounted to:
B a. P135,000.
Medium b. P225,000.
CMA c. P360,000.
Refer To:
3-7
72. The Cost of Goods Manufactured during the year was:

C a. P636,000.
Medium b. P766,000.
CMA c. P736,000.
Refer To:
3-7
73. The Cost of Goods Sold for the year (before disposition of any
B overhead under- or overapplied) was:
Medium a. P736,000.
CMA b. P716,000.
adapted c. P691,000.
Refer To: d. P801,000.
3-7
Reference: 3-8
The following data are for Potras Company:
Beginning Ending
Finished goods inventory ............ P30,000 P40,000
Work in process inventory ........... P20,000 P13,000
Raw materials inventory ............. P21,000 P26,000
Purchases of raw materials .......... P71,000
Factory depreciation ................ P 5,000
Other factory costs ................. P10,000
Direct labor ........................ P27,000
Indirect labor ...................... P 6,000
Selling expense ..................... P12,000
Over- or underapplied overhead ...... -0-
74. The cost of raw materials used in production was:

D a. P26,000.
Medium b. P71,000.
3-8 d. P66,000.
75. The cost of goods manufactured was:

C a. P114,000.
Medium b. P133,000.
3-8 d. P138,000.
76. The cost of goods sold was:

D a. P131,000.
Medium b. P91,000.
3-8 d. P111,000.
Reference: 3-9
The Bus Company uses a job-order cost system. The following information was recorded
for September:
Added During September

September 1 Direct Direct
Job Number Inventory Materials Labor
1 P1,000 P 300 P200
2 1,400 250 300
3 500 1,500 150
4 750 4,000 400
The direct labor wage rate is P10 per hour. Overhead is applied at the rate of P5 per
direct labor-hour. Jobs 1, 2, and 3 have been completed and transferred to finished
goods. Job 2 has been delivered to the customer.
77. The ending Work in Process inventory is:

B a. P7,575.
Medium b. P5,350.
3-9 d. P5,150.
78. The Cost of Goods Manufactured for September is:

C a. P10,750.
Medium b. P11,275.
3-9 d. P7,625.
79. The Cost of Goods Sold for September (before disposition of any under-
A or overapplied overhead) is:
Medium a. P2,100.
3-9 c. P3,700.
d. P1,950.

Reference: 3-10
The following journal entries without Peso data were taken from the accounting
records of Case Company. Case company has a job-order costing system and applies
overhead to jobs using a predetermined overhead rate.
1. Work in Process ................ XXX

Manufacturing Overhead ......... XXX
Wages Payable .............. XXX
2. Salary Expense ................. XXX

Wages Payable .............. XXX
3. Manufacturing Overhead ......... XXX

Accumulated Depreciation ... XXX

Raw Materials .............. XXX

Manufacturing Overhead ..... XXX
6. Manufacturing Overhead ......... XXX

Raw Materials .............. XXX
7. Finished Goods ................. XXX

Work in Process ............ XXX
8. Raw Materials .................. XXX

Accounts Payable ........... XXX
80. The entry to record the purchase of raw materials is:

A a. 8.
Medium b. 4.
Refer To: c. 6.
3-10 d. 1.
81. The entry to transfer the cost of goods manufactured for the period
C is:
Medium a. 1.
Refer To: b. 4.
3-10 c. 7.
d. 5.
82. The entry to record the application of overhead is:

B a. 1.
Medium b. 5.
Refer To: c. 6.
3-10 d. 3.

83. The entry to record depreciation on manufacturing equipment is:
B a. 1.
Medium b. 3.
Refer To: c. 4.
3-10 d. 5.
Reference: 3-11
Summit Company has provided the following inventory balances and manufacturing cost
data for the month of January:
Inventories: January 1 January 31

Direct materials ....... P30,000 P40,000
Work in process ........ P15,000 P20,000
Finished goods ......... P65,000 P50,000
Month of January
Cost of goods manufactured ........ P515,000
Manufacturing overhead applied .... P150,000
Direct materials used ............. P190,000
Actual manufacturing overhead ..... P144,000
Under Summit's job-order costing system, any over or underapplied overhead is closed
to the Cost of Goods Sold account at the end of the calendar year (i.e., December
31).
84. What was the total amount of direct material purchases during January?
D a. P180,000
Medium b. P190,000
CPA c. P195,000
adapted d. P200,000
Refer To:
3-11
85. How much direct labor cost was incurred during January?
C a. P170,000
Medium b. P175,000
CPA c. P180,000
adapted d. P186,000
Refer To:
3-11
Reference: 3-12
The Tse Manufacturing Company uses a job-order costing system and applies overhead to
jobs using a predetermined overhead rate. The company closes any balance in the
Manufacturing Overhead account to Cost of Goods Sold. During the year the company's
Finished Goods inventory account was debited for P125,000 and credited for P110,000.
The ending balance in the Finished Goods inventory account was P28,000. At the end of
the year, manufacturing overhead was overapplied by P4,500.
86. The balance in the Finished Goods inventory account at the beginning
B of the year was:
Hard a. P28,000.
3-12 c. P17,500.
d. P8,500.
87. If the estimated manufacturing overhead for the year was P24,000, and
B the applied overhead was P26,500, the actual manufacturing overhead
Medium cost for the year was:

Refer To: a. P19,500.
3-12 b. P22,000.
c. P28,500.
d. P31,000.
Essay
88. Parker Company uses a job order cost system and applies manufacturing
Medium overhead to jobs using a predetermined overhead rate based on direct
labor-hours. Last year manufacturing overhead and direct labor-hours
were estimated at P50,000 and 20,000 hours, respectively, for the
year. In June, Job #461 was completed. Materials costs on the job
totaled P4,000 and labor costs totaled P1,500 at P5 per hour. At the
end of the year, it was determined that the company worked 24,000
direct labor hours for the year and incurred P54,000 in actual
manufacturing overhead costs.
Required:
a. Job #461 contained 100 units. Determine the unit cost that
would appear on the job cost sheet.
b. Determine the under- or overapplied overhead for the year.
Answer:
a. Direct materials ............ P4,000
Direct labor ............... 1,500
Overhead (300* x P2.50**) .. 750
Total ..................... P6,250
Unit cost .................. P62.50
* P1,500 ÷ P5.00/DLH = 300 DLH

** P50,000 ÷ 20,000 DLH = P2.50/DLH
b. Actual overhead Cost ........ P54,000

Overhead applied:
24,000 DLH x P2.50 ....... 60,000
Overapplied overhead ....... (P 6,000)

89. Gilford, Inc., uses a job order costing system. Costs going through
Hard the company's work in process account during June are given below.
Manufacturing overhead is applied to production using a predetermined
overhead rate based on direct labor cost.
Work in Process
______________________________________________________________________
_____________________________
Balance -0- | 95,000 Transferred out
Direct materials 20,000 |
Direct labor 30,000 |
Manufacturing Overhead 60,000 |
______________________________________________________________________
______________________________
Balance 15,000 |
Only Job 105 was still in process at the end of the month. This job
had been charged with P3,000 in direct materials cost.
Required:
a. Complete the following job order cost card for Job 105:
Direct materials .......... P 3,000

Direct labor .............. _______
Manufacturing overhead .... _______
Total cost at June 30 .. _______
b. Determine the total amount of materials cost charged to completed

jobs during the month.
Answer:
a. Since only Job 105 was in process at the end of the month, all
of the P15,000 balance in the Work in Process account must apply
to it.
Total cost in Work in Process (all Job 105) ... P15,000

Less materials cost in Job 105 ................ 3,000
Direct labor and manufacturing overhead cost .. P12,000
From the Work in Process T-account, it appears that

manufacturing overhead is being applied at 200% of
direct labor cost.
Let X = Direct labor cost

X + 2.00X = P12,000
3X = P12,000
X = P 4,000
Thus, direct labor cost in Job 105 is P4,000, and

manufacturing overhead cost is 200% x P4,000 = P8,000.
Therefore,
Direct materials ........... P 3,000

Direct labor ............... 4,000
Manufacturing overhead ..... 8,000
Total cost at June 30 ... P15,000

b. Since P20,000 in materials cost was charged to Work in Process,
and since only P3,000 in materials cost applies to Job 105, the
difference of P17,000 represents the cost charged to completed
jobs during the month.
90. Stan Wilson, a newly hired worker at Superior Molding, was puzzled by
Easy the job cost sheets attached to the jobs he worked on. He understood
the materials and labor cost entries--these represent the actual costs
of materials he requisitioned for the job and the cost of the labor
hours he recorded for the job. However, he did not understand the
entry for Manufacturing Overhead. This entry was made at the end of
the day by the accountants and he had no idea where this number came
from. He asked the company's controller, Mary Donner, but the only
part of the explanation he understood was that the overhead entries do
not represent actual overhead costs.
Required:
Explain to Stan what the Manufacturing Overhead entries on the job

cost sheet mean.
Answer:
The Manufacturing Overhead entries on the job cost sheet are arrived
at by applying a predetermined overhead rate to the base, which is
most likely direct labor-hours. This number does not represent actual
overhead costs. There are several reasons for this. First, by
definition, it is difficult or impossible to trace overhead costs to
particular jobs. Therefore, actual overhead costs cannot really be
traced to the jobs Stan works on. Even so, an "actual" rate could be
used instead of a predetermined rate for spreading overhead costs
among jobs. However, most companies choose to use a predetermined rate
since actual rates tend to fluctuate and cannot be determined until
the close of the accounting period.
91. Bakerston Company is a manufacturing firm that uses job-order costing.

Medium The company's inventory balances were as follows at the beginning and
end of the year:
Beginning Ending
Balance Balance
Raw materials ........ P14,000 P22,000
Work in process ...... 27,000 9,000
Finished goods ....... 62,000 77,000
The company applies overhead to jobs using a predetermined overhead

rate based on machine-hours. At the beginning of the year, the company
estimated that it would work 33,000 machine-hours and incur P231,000
in manufacturing overhead cost. The following transactions were
recorded for the year:
• Raw materials were purchased, P315,000.

• Raw materials were requisitioned for used in production,
P307,000 (P281,000 direct and P26,000 indirect).
• The following employee costs were incurred: direct labor,
P377,000; indirect labor, P96,000; and administrative
salaries, P172,000.
• Selling costs, P147,000.
• Factory utility costs, P10,000.
• Depreciation for the year was P127,000 of which P120,000

is related to factory operations and P7,000 is related to
selling and administrative activities.
• Manufacturing overhead was applied to jobs. The actual level
of activity for the year was 34,000 machine-hours.
• Sales for the year totaled P1,253,000 .
Required:
a. Prepare a schedule of cost of goods manufactured in good

form.
b. Was the overhead under- or overapplied? By how much?
c. Prepare an income statement for the year in good form.
The company closes any under- or overapplied overhead to
Cost of Goods Sold.
Answer:
a. Schedule of cost of goods manufactured
Estimated total manufacturing overhead(a) P231,000

Estimated total machine-hours (b) ....... 33,000
Predetermined overhead rate (a) ÷ (b) ... P7.00
Actual total machine-hours (a) .......... 34,000

Predetermined overhead rate (b) ......... P7.00
Overhead applied (a) X (b) .............. P238,000
Direct materials:
Raw materials inventory, beginning ....P 14,000
Add: purchases of raw materials ....... 315,000
Total raw materials available ......... 329,000
Deduct: raw materials inventory, ending 22,000
Raw materials used in production ...... 307,000
Less: indirect materials .............. 26,000
Direct materials ........................ 281,000
Direct labor ............................ 377,000
Manufacturing overhead applied .......... 238,000
Total manufacturing costs ............... 896,000
Add: Beginning work in process inventory 27,000
923,000
Deduct: Ending work in process inventory 9,000
Cost of goods manufactured ..............P 914,000
b. Overhead under- or overapplied
Actual manufacturing overhead cost incurred:

Indirect materials ...................P 26,000
Indirect labor ....................... 96,000
Factory utilities .................... 10,000
Factory depreciation ................. 120,000
Manufacturing overhead cost incurred 252,000
Manufacturing overhead applied ......... 238,000
Underapplied overhead ..................P 14,000
c. Income Statement
Beginning finished goods inventory .....P 62,000

Cost of goods manufactured ............. 914,000

Goods available for sale ............... 976,000
Ending finished goods inventory ........ 77,000
Unadjusted cost of goods sold .......... 899,000
Add: underapplied overhead ............. 14,000
Adjusted cost of goods sold ............P 913,000
Sales .................................. P1,253,000

Cost of goods sold (adjusted) .......... 913,000
Gross margin ........................... 340,000
Less selling and administrative expenses:
Administrative salaries ..............P 172,000
Selling costs ........................ 147,000
Depreciation ......................... 7,000
326,000
Net income ............................. P 14,000
92. Allenton Company is a manufacturing firm that uses job-order costing.

Medium At the beginning of the year, the company's inventory balances were as
follows:
Raw materials ........ P 26,000

Work in process ...... 47,000
Finished goods ....... 133,000
The company applies overhead to jobs using a predetermined overhead

rate based on machine-hours. At the beginning of the year, the company
estimated that it would work 31,000 machine-hours and incur P248,000
in manufacturing overhead cost. The following transactions were
recorded for the year:
a. Raw materials were purchased, P411,000.
b. Raw materials were requisitioned for used in production,
P409,000 (P388,000 direct and P21,000 indirect).
c. The following employee costs were incurred: direct labor,
P145,000; indirect labor, P61,000; and administrative
salaries, P190,000.
d. Selling costs, P148,000.
e. Factory utility costs, P12,000.
f. Depreciation for the year was P121,000 of which P114,000 is
related to factory operations and P7,000 is related to selling
and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of

activity for the year was 29,000 machine-hours.
h. The cost of goods manufactured for the year was P783,000.
i. Sales for the year totaled P1,107,000 and the costs on the job
cost sheets of the goods that were sold totaled P768,000.
j. The balance in the Manufacturing Overhead account was closed
out to Cost of Goods Sold.
Required:
Prepare the appropriate journal entry for each of the items above (a.
through j.). You can assume that all transactions with employees,
customers, and suppliers were conducted in cash.
Answer:
a. Raw Materials Inventory ........ 411,000
Cash ...................... 411,000
b. Work in Process Inventory ...... 388,000

Manufacturing Overhead ......... 21,000

Raw Materials Inventory ... 409,000
c. Work in Process Inventory ...... 145,000

Manufacturing Overhead ......... 61,000
Administrative Salary Expense .. 190,000
Cash ...................... 396,000
d. Selling Expenses ............... 148,000

Cash ...................... 148,000
e. Manufacturing Overhead ......... 12,000

Cash ...................... 12,000
f. Manufacturing Overhead ......... 114,000

Depreciation Expense ........... 7,000
Accumulated Depreciation .. 121,000
g. Work in Process ................ 232,000

Manufacturing Overhead .... 232,000
h. Finished Goods ................. 783,000

Work in Process ........... 783,000
i. Cash ........................... 1,107,000

Sales ..................... 1,107,000
Cost of Goods Sold ............. 768,000
Finished Goods ............ 768,000
j. Manufacturing Overhead ......... 24,000

Cost of Goods Sold ........ 24,000

93. The Collins Company uses a job-order cost system and applies
Medium manufacturing overhead cost to jobs on the basis of the cost of
materials used in production. At the beginning of the most recent year,
the following estimates were made as a basis for computing the
predetermined overhead rate for the year: manufacturing overhead cost,
P200,000; direct materials cost, P160,000. The following transactions
took place during the year (all purchases and services were acquired on
account):
a. Raw materials purchased, P86,000.

b. Raw materials requisitioned for use in production (all direct
materials), P98,000.
c. Utility costs incurred in the factory, P15,000.
d. Salaries and wages incurred as follows:
Direct labor ......................... P175,000
Indirect labor ....................... P70,000
Selling and administrative salaries .. P125,000
e. Maintenance costs incurred in the factory, P15,000.
f. Advertising costs incurred, P89,000.
g. Depreciation recorded for the year, P80,000 (80% relates to
factory assets and the remainder relates to selling and
administrative assets).
h. Rental cost incurred on buildings, P70,000, (75% of the space is
occupied by the factory, and 25% is occupied by sales and
administration).
i. Miscellaneous selling and administrative costs incurred,
P11,000.
j. Manufacturing overhead cost was applied to jobs as per company
policy.
k. Cost of goods manufactured for the year, P500,000.
l. Sales for the year (all on account) totaled P1,000,000. These goods
cost P600,000 to manufacture.
Required:
Prepare journal entries to record the information above. Key your

entries by the letters a through l.
Answer:
a. Raw Materials ................... 86,000

Accounts Payable ............. 86,000
b. Work in Process ................. 98,000

Raw Materials ................ 98,000
c. Manufacturing Overhead .......... 15,000

d. Work in Process ................. 175,000

Manufacturing Overhead .......... 70,000
Salaries Expense ................ 125,000
Salaries and Wages Payable ... 370,000

e. Manufacturing Overhead .......... 15,000
f. Advertising Expense ............. 89,000

g. Manufacturing Overhead .......... 64,000

Depreciation Expense ............ 16,000
Accumulated Depreciation ..... 80,000
h. Manufacturing Overhead .......... 52,500

Rent Expense .................... 17,500
i. Miscellaneous Expense ........... 11,000

j. Work in Process ................. 122,500

Manufacturing Overhead ....... 122,500
((P200,000/P160,000) x P98,000))
k. Finished Goods .................. 500,000

Work in Process .............. 500,000
l. Accounts Receivable ............. 1,000,000

Sales ........................ 1,000,000
Cost of Goods Sold .............. 600,000

Finished Goods ............... 600,000
94. Carver Test Systems manufactures automated testing equipment. The

Hard company uses a job-order costing system and applies overhead on the
basis of machine-hours. At the beginning of the year, estimated
manufacturing overhead was P1,960,000 and the estimated machine-hours
was 98,000. Data regarding several jobs at Carver are presented below.
Beginning Direct Direct Machine

Job Number Balance Materials Labor Hours
XJ-107 P118,600 P 4,000 P 8,400 150
ST-211 121,450 2,500 12,160 300
XD-108 21,800 86,400 36,650 3,100
SL-205 34,350 71,800 32,175 2,700
RX-115 - 18,990 21,845 1,400
By the end of the first month (January), all jobs but RX-115 were
completed, and all completed jobs had been delivered to customers
except for SL-205.
Required:
What was the balance in Finished Goods inventory at the end of

January?
Answer:
The Finished Goods inventory consists only of job SL-205. The balance

in the account is computed as follows:
Beginning balance, job SL-205 ......... P 34,350

November charges to job SL-205
Direct materials ................... 71,800
Direct labor ....................... 32,175
Manufacturing overhead applied* .... 54,000
Ending balance, job SL-205 ............ P192,325
* Predetermined overhead rate = P1,960,000 ÷ 98,000 MH = P20

per MH
Overhead applied = 2,700 machine-hours X P20 per MH = P54,000
95. Dotsero Technology, Inc., has a job-order costing system. The company
Medium uses predetermined overhead rates in applying manufacturing overhead
cost to individual jobs. The predetermined overhead rate in Department A
is based on machine-hours, and the rate in Department B is based on
direct materials cost. At the beginning of the most recent year, the
company’s management made the following estimates for the year:
Department
A B
Machine-hours ................. 70,000 19,000
Direct labor-hours ............ 30,000 60,000
Direct materials cost ......... P195,000 P282,000
Direct labor cost ............. P260,000 P520,000
Manufacturing overhead cost ... P420,000 P705,000
Job 243 entered into production an April 1 and was completed on May 12.
The company’s cost records show the following information about the job:
Department
A B
Machine-hours ................. 250 60
Direct labor-hours ............ 70 120
Direct materials cost ......... P840 P1,100
Direct labor cost ............. P610 P880
At the end of the year, the records of Dotsero showed the following
actual cost and operating data for all jobs worked on during the year:
Department
A B
Machine-hours ................. 61,000 20,000
Direct labor-hours ............ 28,000 66,000
Direct materials cost ......... P156,000 P284,000
Manufacturing overhead cost ... P385,000 P705,000
Required:
a. Compute the predetermined overhead rates for Department A and

Department B.
b. Compute the total overhead cost applied to Job 243.
c. Compute the amount of underapplied or overapplied overhead in each

department at the end of the current year.
Answer:
a. Department A predetermined overhead rate:
Estimated overhead cost/Estimated machine-hours

= P420,000/70,000 = P6.00
Department B predetermined overhead rate:
Estimated overhead cost/Estimated direct materials cost

= P705,000/P282,000 = 250% of direct materials cost
b. Overhead applied to Job 243:
Department A: 250 x P6.00 = P1,500

Department B: P1,100 x 2.5 = P2,750
P4,250
c. Department A Department B
Manufacturing overhead incurred... P385,000 P705,000
Manufacturing overhead applied:
61,000 X P6.00 = ............. 366,000
P284,000 X 250% = ............. 710,000
Underapplied (overapplied) overhead P 19,000 P (5,000)
96. Scanlon Company has a job-order costing system and applies manufacturing
Medium overhead cost to products on the basis of machine hours. The following
estimates were used in preparing the predetermined overhead rate for the
most recent year:
Machine hours ........................ 95,000

Manufacturing overhead cost .......... P1,710,000
During the most recent year, a severe recession in the company’s

industry cause the curtailment of production and a buildup of inventory
in the company’s warehouses. The company’s cost records revealed the
following actual cost and operating data for the year:
Machine hours .......................... 75,000

Manufacturing overhead cost ............ P1,687,500
Amount of applied overhead in inventories at year-end:

Work in process ...................... P 337,500
Finished goods ....................... 253,125
Amount of applied overhead in
cost of goods sold for the year .. 759,375
Required:
a. Compute the company’s predetermined overhead rate for the year

and the amount of under- or overapplied overhead for the year.
b. Determine the difference between net income for the year if the
under- or overapplied overhead is allocated to the appropriate
accounts rather than closed directly to Cost of Goods Sold.

Answer:
The company’s predetermined overhead rate for the year is:
P1,710,000/95,000 = P18 per machine hour
The amount of under-/overapplied overhead is:
Actual overhead ............... P1,687,500

Applied overhead (P18 X 75,000) 1,350,000
Underapplied overhead ......... P 337,500
Allocation of underapplied overhead:
Overhead applied in work in process P 337,500 25.00% P 84,375

Overhead applied in finished goods 253,125 18.75% 63,281
Overhead applied in cost of goods sold 759,375 56.25% 189,844
Total overhead applied P1,350,000 100.00% P337,500
The entire amount of underapplied overhead P337,500 is added to Cost of

Goods Sold where no allocation occurs. Allocation results in only
P189,844 being added to Cost of Goods Sold. Net income would be higher
under allocation by P337,500 - P189,844 = P147,650.

97. The following cost data relate to the manufacturing activities of the
Medium Kamas Company during the most recent year:
Manufacturing overhead costs incurred during the year:
Property taxes ............. P 1,600

Utilities, factory ......... 2,600
Indirect labor ............. 5,100
Depreciation, factory ...... 13,000
Insurance, factory ......... 2,500
Total actual costs ......... P24,800
Other costs incurred during the year:
Purchases of raw materials . P15,000

Direct labor cost .......... 22,000
Inventories:
Raw materials, beginning ... P 5,000
Raw materials, ending ...... 4,400
Work in process, beginning . 3,500
Work in process, ending .... 4,500
The company uses a predetermined overhead rate to charge overhead cost

to production. The rate for the year just completed was P4.00 per
machine-hour; a total of 6,000 machine-hours were recorded for the year.
Required:
a. Compute the amount of under- or overapplied overhead cost for the

year just ended.
b. Prepare a schedule of cost of goods manufactured for the year.
Answer:
a. Actual total manufacturing overhead cost ....... P24,800

Manufacturing overhead applied: 6,000 x P4.00 = 24,000
Underapplied manufacturing overhead ............ P 800
b. Kamas Company
Schedule of Cost of Goods Manufactured
For the Year Just Ended
Direct materials:
Raw materials, beginning ............... P 5,000
Add purchases of raw materials ......... 15,000
Raw materials available for use ........ 20,000
Deduct raw materials inventory, ending . 4,400

Raw materials used in production ....... 15,600
Direct labor ............................... 22,000
Manufacturing overhead applied to
work in process .................... 24,000
Total manufacturing costs .................. 61,600
Add beginning work in process .............. 3,500
65,100
Deduct ending work in process .............. 4,500
Cost of goods manufactured ................. P60,600

98. Arthur Manufacturing Company produces a single product. The controller
Hard has asked your help in preparing a schedule of cost of goods
manufactured for the month just ended. The following information is
available:
1. Eleven thousand units were sold at P22 per unit.
2. Thirteen thousand units requiring one unit each of raw materials

were produced.
3. Raw materials inventory at the beginning of the month was 1,100

units at P4 each.
4. During the month, two purchases of raw materials were made:
Purchase #1: 7,000 units at P5 each

Purchase #2: 6,000 units at P5.50 each
5. The company uses the first-in, first-out method of determining

raw materials inventories.
6. The work in process inventories were:
Beginning of the month: 1,500 units valued at P17,000

End of the month: 1,500 units valued at P19,000
7. Direct labor cost was P110,000.
8. Overhead is applied to production on the basis of 65% of

direct labor cost.
Required:
Prepare a schedule of cost of goods manufactured for the month.

Answer:
Arthur Manufacturing Company

Schedule of Cost of Goods Manufactured
For the Year Just Ended
Raw materials used:

Beginning raw materials inventory ...... P 4,400
Purchases .............................. 68,000
Raw materials available ................ 72,400
Ending raw materials inventory ......... 6,050
Raw materials used ..................... 66,350
Direct labor ........................... 110,000
Manufacturing overhead applied
to work in process ................ 71,500
Total manufacturing costs .............. 247,850
Add: Work in process, beginning ....... 17,000
264,850
Deduct: Work in process, ending ....... 19,000
Cost of goods manufactured ............. P245,850
Computations:
Raw materials:
Beginning: 1,100 @ P4 ................. P 4,400
Purchases: 7,000 @ P5 ....... P35,000
6,000 @ P5.50..... 33,000 68,000
Ending: 1,100 @ P5.50 .............. (6,050)
Raw materials used ..................... P69,350
Units:
1,100 + 7,000 + 6,000 – 13,000 = 1,100 units in ending inventory.
Factory overhead applied to work in process:
P110,000 x 0.65 = P71,500.

Test Bank Chapter 3 Job Order Costing

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Chapter 3

Systems Design: Job-Order Costing

1. Job-order costing would be more likely to be used than process costing

2. Job-order costing is used in manufacturing companies and process

3. In a job-order costing system, costs are traced to departments and

6. In order to improve the accuracy of unit costs, most companies

7. The following journal entry would be made to apply overhead cost to

8. When the predetermined overhead rate is based on direct labor-hours,

9. When completed goods are sold the transaction is recorded as a debit

10. The most common accounting treatment of underapplied manufacturing

11. In job-order costing, the Work in Process inventory account contains

12. Nonmanufacturing costs are expensed as incurred, rather than going

13. A credit balance in the Manufacturing Overhead account at the end of

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17. The computation of unit product costs involves an averaging process

18. Work in Process is a control account supported by detailed cost data

21. In a job-order cost system, the use of indirect materials would

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24. If a company applies overhead to jobs on the basis of a predetermined

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26. The Work in Process inventory account of a manufacturing company shows

27. Freeman Company uses a predetermined overhead rate based on direct

28. Harrell Company uses a predetermined overhead rate based on direct

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31. Sawyer Manufacturing Company uses a predetermined overhead rate based

32. The Watts Company uses predetermined overhead rates to apply

What predetermined overhead rates would be used in Dept A and Dept B,

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What predetermined overhead rate would be used in Department A and

34. Kelsh Company uses a predetermined overhead rate based on machine

Direct materials .................. P10,000

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37. Lucy Sportswear manufactures a specialty line of T-shirts. The company

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Lucas applies overhead at a predetermined rate of 90% of direct labor

Worrell applies overhead at a predetermined rate of 90% of direct

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Overhead is charged to production at 70% of the direct materials cost.

Samuelson’s Work in Process inventory balance on June 30 was:

Actual manufacturing overhead cost incurred P47,000

The under- or overapplied overhead last year was:

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Actual manufacturing overhead cost incurred .. P90,000

The under- or overapplied overhead for the year would be:

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Direct materials issued to production .... P 90,000

Lamprey Company had no beginning or ending inventories. What was the

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The following additional data pertain to operations during March:

Direct materials purchased... P84,000

50. During March total debits to Work in Process were:

51. The Cost of Goods Manufactured for March was:

Direct materials .................. P4,000

 Jobs 102, 103, and 104 were started during February.

52. The cost of goods manufactured for February was:

53. For the month of February, the manufacturing overhead was:

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54. The raw materials purchased during November totaled:

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Raw Materials Cost of Goods Sold

Sales Salaries Expense Work in Process

Accounts Payable Manufacturing Overhead

Wages & Salaries Payable Finished Goods

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