Cost Accounting and Control, Part 1 Rommel Regor D.

Ong, CPA
Practice Problems for Job Order Costing September 11, 2017

PROBLEM 1: Voyager Inc. produces customized vans in a job order shop. On November 1, the following balances appear in
the inventory records:

Finished goods................................................................................................................................................................. P179,000

Work in process (Summary)...................................................................................................................................... 308,000
Materials............................................................................................................................................................................. 83,000

The amount in Finished Goods represents P101,000 recorded for Van 175 and P78,000 recorded for Van 177. The work in
process account represents the three vans in process, as follows:

Van 179 Van 180 Van 181

Factory overhead.............................................................................................. P75,000 P50,000 P25,000
Direct labor......................................................................................................... 60,000 40,000 20,000
Direct materials................................................................................................. 26,000 7,000 5,000

The following transactions occurred during November:

a. Purchased materials on account, P80,000.
b. Requisitioned P60,000 of materials from inventory: P15,000 applied to Van 180, P25,000 to Van 181, and P16,000 to Van
182, a new order; the balance was for indirect materials.
c. Recorded the liability for the payroll and the labor cost distribution in a single entry: total payroll, P208,750. Of the
payroll cost, 10% applied to Van 179, 20% to Van 180, 35% to Van 181, 30% to Van 182, and the remainder to indirect
labor.
d. Applied factory overhead at the rate of 150% of direct labor cost.
e. Other overhead costs amounted to 258,031.25 (various accounts were credited).
f. Completed Vans 179 and 180.
g. Sold Vans 175, 177, and 180 at 50% over manufacturing costs.

REQUIRED:
1. Make an income statement for the month of November with supporting Schedule of Cost of Goods Manufactured.

PROBLEM 2: Barrett Kitchens produces a variety of items in accordance with special job orders from hospitals, plant
cafeterias, and university dormitories. An order for 2,100 cases of mixed vegetables costs P9 per case: direct materials, P4;
direct manufacturing labor, P3; and manufacturing overhead allocated, P2. The manufacturing overhead rate includes a
provision for normal spoilage. Consider each requirement independently.

REQUIRED:
1. Assume that a laborer dropped 420 cases. Suppose part of the 420 cases could be sold to a nearby prison for P420 cash.
Prepare a journal entry to record this event. Calculate and explain briefly the unit cost of the remaining 1,680 cases.

2. Refer to the original data. Tasters at the company reject 420 of the 2,100 cases. The 420 cases are disposed of for P840.
Assume that this rejection rate is considered normal. Prepare a journal entry to record this event, and do the following:
a. Calculate the unit cost if the rejection is attributable to exacting specifications of this particular job.
b. Calculate the unit cost if the rejection is characteristic of the production process and is not attributable to this specific
job.
c. Are unit costs the same in requirements 2a and 2b? Explain your reasoning briefly.

3. Refer to the original data. Tasters rejected 420 cases that had insufficient salt. The product can be placed in a vat, salt can
be added, and the product can be reprocessed into jars. This operation, which is considered normal, will cost P420.
Prepare a journal entry to record this event and do the following:
a. Calculate the unit cost of all the cases if this additional cost was incurred because of the exacting specifications of this
particular job.
b. Calculate the unit cost of all the cases if this additional cost occurs regularly because of difficulty in seasoning.
c. Are unit costs the same in requirements 3a and 3b? Explain your reasoning briefly.