JOB ORDER COSTING (2010 Edition DAYAG reviewer)

1. Flor Company consumed P450, 000 worth of directed materials during May 2011. At
the end of the month, the direct materials inventory of Flor was P25, 000 lower than the
May 1 inventory level. How much was the direct material procured during May 2011?
Answer: P 425,000
2. Pink Company incurred the following costs during the month; direct labor, P120,000;
factory overhead, P108 000; and direct materials purchases, P160,000. Inventories
show the following cost:
Beginning Ending
Finished goods…………………………………… P27,000 P30,000
Work in process………………………………….. 61,500 57,500
Direct Materials…………………………………... 37,500 43,500

How much is the cost of goods manufactured?

Answer: P386,000

3. Last Month, Pare Company placed P60,000 of materials into production. The Printing
Department used 8,000 labor hours at P5.60 per hour and the Binding Department used
4,600 hours at P6.00 per hour. Factory overhead is applied at a rate of P6.00 per labor
hour in the Printing Department and P8.00 per labor hour in the Binding Department.
Pare’s inventory accounts show the following balances:
Beginning Ending
Finished goods…………………………………… P22,000 P17,000
Work in process………………………………….. 15,000 17,600
Materials…………………………………............ 20,000 18,000

What is the total cost of goods sold?

Answer: P219,600
4. The factory ledger of Diamond Corporation contains the following cost data for the
year ended December 31, 2011:
Inventories
Opening Closing
Raw Materials……………………………………………… P150,000 P170,000
Work in process……………………………………………. 160,000 60,000
Finished goods…………………………………………….. 180,000 220,000
Raw Materials Used………………………………………. 652,000
Total Manufacturing costs charged to
production during the year
(including raw materials, direct labor
and factory overhead applied at
the rate of 50% of direct labor cost)……………… 1,372,000

Compute the: (1) cost of raw materials purchased and (2) direct labor charged to
production during the year:

Answer: (1) P672,000; (2) P480,000

5. National Marketing Corp. uses a job-order costing system. It has three production
departments, X, Y, and Z.
The manufacturing cost budget for 2011 is as follows:
Dept. X Dept.Y Dept. Z
Direct Materials……………………………… P600,000 P400,000 P200,000
Direct Labor…………………………………. 200,000 500,000 400,000
Manufacturing overhead……………………. 600,000 100,000 200,000

For Job No. 01-90 which was completed in 2011, direct materials cost was P75,000 and
direct labor cost was as follows:

Dept. X………………………………………………………………………… P 40,000

Dept. Y…………………………………………………………………………. 100,000
Dept. Z………………………………………………………………………… 20,000

The corporation applies manufacturing overhead to each job order on the basis of direct
labor cost, using departmental rates predetermined at the beginning of the year based
on the manufacturing cost budget.

The total manufacturing cost of Job No. 01-90 which was completed in 2011 is:

Answer: P385,000

6. The following data were taken from the records of Best Company.

08/31/2011 09/30/2011
Inventories:
Raw Materials…………………………………… P ? P 50,000
Work-in-process………………………………… 80,000 95,000
Finished goods………………………………… 60,000 78,000
Raw Materials purchases, P 46,000
Factory overhead, 75% of direct labor cost, P63,000
Selling and administrative expenses, 12.5% of sales, P25,000.
Net income for September, 2011, P25,000.

What is the cost of raw materials inventory on August 31, 2011?

Answer: P40,000

7. Vat Corporation manufactures rattan furniture sets for export and uses the job order
cost system in accounting for its costs. You obtained from the corporation’s books and
records the following information for the year ended December 31, 2011;

 The work in process inventory on January 1 was 20% less than the work in
process inventory on December 31.
 The total manufacturing costs added during 2008 was P900,000 based on
actual direct materials and direct labor but with manufacturing overhead
applied on actual direct labor pesos.
 The manufacturing overhead applied to process was 72% of the direct labor
pesos, and it was equal to 25% of the total manufacturing costs.
 The cost of goods manufactured, also based on actual direct materials, actual
direct labor and applied manufacturing overhead, was P850,000.
The cost of direct materials used and the work-in-process inventory on December
31,2011:
Answer: Direct Material Used Work-in-process Inventory
P362,000 P250,000

8. Fusion Company has the following data on April 30, 2011:

April manufacturing overhead…………………………………………. P30,101.80

Decrease in ending inventories:
Materials…………………………………………………………. 2,430.00
Goods in Process………………………………………………. 590.00

Increase in ending inventory:

Finished Goods………………………………………………… 1,320.00

The manufacturing overhead amounts to 50% of the direct labor, and the direct labor
and manufacturing overhead combined equal 50% of the total cost of manufacturing. All
materials are purchased F.O.B shipping point.

What is the cost of goods manufactured?

Answer: P181,200.80
9. The Fork Corporation manufactures one product and accounts for cost by a job-order
cost system. You have obtained the following information for the year ended December
31, 2011 from the corporation’s books and records;
Total manufacturing cost added during 2011
based on actual direct materials, actual
direct labor and applied factory overhead
on actual direct labor cost………………………………………….. P1,000,000

Cost of goods manufactured based on actual

Direct materials and direct labor and
Applied factory overhead…………………………………………… 970,000

Applied factory overhead to work in process

Based on direct labor cost………………………………………….. 75%

Applied factory overhead for the year, based

On total manufacturing cost………………………………………… 27%

Beginning work in process inventory was 80% of ending work in process inventory.

Compute the cost of direct materials used for year ended December 31, 2011.

Answer: P370,000

10. Tarzan Co. Employs a job order cost system. Its manufacturing activities in July,
2011, its first month of operation, are summarized as follows:
JOB NUMBERS
1201 1202 1203 1204
Direct Materials…………………………. P 7,000 P5,800 P11,600 P5,000
Direct labor cost………………………… P6,600 P6,000 P8,400 P2,400
Direct labor hours………………………. 1,100 1,000 1,400 400
Units produced…………………………. 200 100 1,000 300

Manufacturing overhead is applied at a rate of P2 per direct labor hour for variable
overhead, P3 per hour for fixed overhead.

Jobs 1201, 1202 and 1203 were completion in July.

What is the cost of the completed jobs?

Answer: P62,900

11. Job No. 010 has, at the end of the second week in April, an accumulated total cost
of P4,200. In the third week. P1,010 of direct materials were used on the Job.
Twenty (20) hours of direct labor services were applied to the job at a cost of P5 per
hour.
Manufacturing overhead was applied at the basis of P2.50 per direct labor hour for fixed
overhead and P2 per hour for variable overhead.
Job No. 010 was the only job completed during the third week.
The total cost of Job Order No. 010 is:
Answer: P 5,400
12. The Work-in-Process account of the Malinta Company which uses a job order cost
system follows:
Work- in-Process
April 1 Balance……………..P 25,000 Finished Goods………..P 125,450
Direct Materials…………. 50,000
Direct labor…………….. 40,000
Overhead Applied……. 30,000

Overhead is applied to production at a predetermined rate, based on direct labor cost.

The work in process on April 30 represents the cost of Job No. 456, which has been
charged with direct labor cost of P3,000 and Job No. 789, which has been charged with
applied overhead of P2,400.

The cost of direct materials charged to Job No. 456 and Job No. 789 amounted to:

Answer: P 8,700.

13. The following information were taken from the accounting records of Yanni Music
Company for 2011:

Increase in raw materials inventory P 45,000

Decrease in finished goods inventory 150,000
Raw Materials purchases 1,290,000
Direct labor payroll 600,000
Factory overhead 900,000
Freight out 135,000

The cost of raw materials used during the period amounted to:

Answer: P1,245,000.

14. Precise, Inc. manufactures specialized precision electronics kits. In late March, Job
order #0311 and #0322 were started. Estimated materials cost were P90,000 for both
orders (60% for #0311) while direct labor hours were estimated at 700 for #0311 and
400 for #0322. Labor rate is P18 per hour while variable overhead rate is P10 per hour.
By the end of April, 755 of the required material have been issued to production in the
amount of P90,000 and both job orders have been 50% converted with 360 hours
charged to #0311 and 180 hours charged to #0322 at the hourly rates given.
The total cost charged to Job Order #0311 was:
Answer: P64,080.
15. Handy Crafts manufactures to customers’ specifications. The company uses a job
order cost system and, for the month of May, 2011, summarized the following
information.
Beginning work in process inventory
(five partially completed jobs) P 300,000
Orders completed (eighteen) 2,400,000
Orders shipped out (fourteen) 2,000,000
Materials requisitioned 1,700,000
Direct labor cost 800,000
Overhead= 150% of direct labor cost.

The month-end work in proves inventory was:

Answer: P 1,600,000.

16. Ambo, Inc. manufactured 50,000 kilos of compound Am in 2011 at the following
costs:
Opening work-in-process of P 88,125.
Materials of P182,500 of which 90% is direct materials
Labor of P242,500 of which 93% is direct labor
Closing work-in-process of P67,500.

Factory overhead is 125% of direct labor cost and includes indirect materials and
indirect labor. The cost of goods manufactured is:

Answer: P 692,306

17. Burger Co.’s materials purchase during 2011 are P25,590 and materials put into
production are directed materials, respectively, worth P18,500 and P7,090. The total
factory payroll is P74,000 of which P50,000 represents direct labor. Other factory
overhead cost to process. Sales, Cost of goods sold, and the cost of goods
manufactured, respectively, are P130,000, P120,000, and P128,000.
By what amount did the company’s closing goods in process inventory exceed its
opening goods in process inventory?
Answer: P 3,590
18. Steak Co. is a manufacturing concern using the perpetual inventory system. The
following materials inventory account data is provided:
Beginning balance P 275,000
Other debits to the account 825,000
Excess of ending inventory over beginning inventory 55,000

How much is the cost of materials issued to production?

Answer: P 770,000

19. The following selected information pertains to Ajax processing Co.: direct materials,
P62,500; indirect materials, P12,500; factory payroll, P75,000 of direct labor and
P11,250 of indirect labor; and other factory overhead incurred, P37,500.
The total conversion cost was:
Answer: P 136,250
20. Pistahan Corporation is a manufacturing company engaged in the production of a
single special product known as “Marvel”, Production costs are accumulated with the
use of a job-order-cost system.
The following information is available as of June 1, 2011.
Work-in-process P 10,710
Direct materials inventory 48,600

In analyzing the job-order cost sheets, the records disclosed that the composition of the
work-in-process inventory on June 1, 2011 was as follows:

Direct material used P 3,960

Direct labor (900 hours) 4,500
Factory overhead applied 2,250
P 10,710

The following manufacturing activity occurred during the month of June 2011:

Purchased direct materials costing P60,000

Direct labor worked 9,900 hours of P5 per hour
Factory overhead of P2.50 per direct labor hour was applied to production. At the end of
June 2011, the following information was gathered in connection with the inventories:
Inventory of work-in-process:
Direct Materials used P 12,960
 Direct labor (1,500 hours) 7,500
Factory overhead applied 3,750
P 24,210
Inventory of direct materials P 51,000

Compute the cost of goods manufactured:

Answer: P118,350

21. Johnson uses a job order cost system and applies factory overhead to production
orders on the basis of direct-labor cost. The overhead rate for 2011 is 200% for
Department A and 50% for Department B. Job 123, started and completed during 2011,
was charged with the following costs:
Department
A B
Direct material P 25,000 P 5,000
Direct labor ? 30,000
Factory overhead applied 40,000 ?

The total manufacturing cost associated with Job 123 should be

Answer: P135,000

22. The Following data are obtained from Gianne Manufacturing Company:

 Cost of goods manufactured is P187,500

 Inventory variations are as follows: raw materials ending inventory is one-third
based on raw materials beginning; no initial inventory of work-in-process, but at
the end of period P12,500 was on hand; finished goods inventory was four times
as large at end of period as at the start.
 Net income after taxes amounted to P26,000, income tax rate is 35%.
 Purchase of raw materials amounted to net income before taxes.
 Breakdown of costs incurred in manufacturing cost was as follows:

Raw material consumed 50%

Direct labor 30%
Overhead 20%

Compute the amount raw material beginning inventory:

Answer: P90,000.

23. The following cost data were taken from the records of a manufacturing company:
Depreciation on factory equipment P 1,000
Depreciation on sales office 500
Advertising 7,000
Freight-out (shipping) 3,000
Wages of production workers 28,000
Raw materials used 47,000
Sales salaries and commissions 10,000
Factory rent 2,000
Factory insurance 500
Materials Handling 1,500
Administrative salaries 2,000

Based upon the above information, the manufacturing cost incurred during the year
was:
Answer: P80,000
24. Data pertaining to Lam Co.’s manufacturing operations:
Inventories 4/1 4/30
Direct Materials P 18,000 P 15,000
Work-In-Process 9,000 6,000
Finished goods 27,000 36,000

Additional information for the month of April:

Direct Materials purchased P 42,000

Direct labor payroll 30,000
Direct labor rate per hour 7.50
Factory overhead rate per direct labor hour 10.50

For the month of April, cost of goods manufactured was:

Answer: P 118,000

25. Carley Products has no work-in-process or finished goods inventories at the close of
business on December 31, 2011. The balances of Carley’s accounts as of December
31,2011 are as follow:

Cost of goods sold P 2,040,000

General selling and administrative expenses 900,000
Sales 3,600,000
Factory overhead control 700,000
Factory overhead applied 648,000

Carley Products’ income before income taxes 2011 is”

Answer: P 608,000
26. A Company had the following total usage of direct labor and direct materials
Hours Pounds
Direct Labor (P8 per hour) 400
Direct Materials (P10 per pound) 300

Incomplete job #101 has used 20 hours of direct labor and 8 pounds of direct materials.
Factory overhead is applied at the rate of 200% per direct labor peso. What is the
balance in work-in-process relating to job #101?

Answer: P 560 debit

27. The Childers Company manufactures widgets. During the fiscal year just ended, the
company incurred prime costs of P1,500,000 and conversion costs of P1,800,000.
Overhead is applied at the rate of 200& of direct labor cost. How much of the above
costs represent material cost?
Answer: P900,000.
28. Ajax Corporation transferred P72,000 of raw materials to its production department
in February and incurred P37,000 of conversion costs (P22,000 of direct labor and
P15,000 of overhead). At the beginning of the period, P14,000 of inventory (material
and conversion costs) was in process. At the end of the period, P18,000 of inventory
was in process. What was the cost of goods manufactured?
Answer: P105,000
29. Luna Co.’s year-end manufacturing costs were as follows:
Direct materials and direct labor P500,000
Depreciation of manufacturing equipment 70,000
Depreciation of factory building 40,000
Janitor’s wages for cleaning factory premises 15,000

How much of these costs should be inventoried for external reporting purposes?

Answer: P625,000

30. Blum Corp. which manufactured plastic coated metal clips. The information was
among Blum’s year-end manufacturing costs.

Wages
Machine operators P200,000
Maintenance workers 30,000
Factory foremen 90,000

Materials Used
Metal wire P500,000
 Lubricant for oiling machinery 10,000
Plastic coating 380,000

Blum’s year-end:

Answer: Direct Labor Direct Materials

P200,000 P880,000

31. Hamilton Company uses job order costing. Factory overhead is applied to
production at a determined rate of 150% of direct-labor cost. Any over-or under applied
factory 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, 2011, with accumulated costs
as follows:

Direct materials P4,000

Direct labor 2,000
Applied factory overhead 3,000
P 9,000

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

 Direct materials requisitions foe February totaled P26,000.
 Direct-labor cost of P20,000 was incurred for February.
 Actual factory overhead was P32,000 for February.
 The only job still in process at February 28, 2011 was Job 104, with costs of
P2,800 for direct materials and P1,800 for direct labor.

The cost of goods manufactured for February 2011 was:

Answer: P77,700

32. Using the same information in No. 31, any over- or under applied factory overhead
should be closed to the cost of goods sold account at February 28,2011, in the amount
of

Answer: P2,000 under applied.

33. Under Pick Company’s job order costing system, manufacturing overhead is applied
to work-in-process using a predetermined annual overhead rate. During Jnuary2011,
Picks transactions included the following:

Direct materials issued to production P90,000

Indirect materials issued to production 8,000
Manufacturing overhead incurred 125,000
Manufacturing overhead applied 113,000
Direct labor costs 107,000

Pick has neither beginning nor enough ending work-in-process inventory. What was the
cost of jobs completed in January 2011?

Answer: P310,000

34. A company manufactures pipes and uses a job order costing system. During May,
the following jobs were started (no other jobs were in process) and the following costs
were incurred:

Job X Job Y Job Z Total

Materials requisitioned P10,000 P20,000 P15,000 P45,000
Direct Labor 5,000 4,000 2,500 11,500
P15,000 P24,000 P17,500 P56,500

In addition, estimated overhead of P300,000 and direct labor costs of P150,000 were
estimated to be incurred during the year. Actual overhead of P24,000 was incurred in
May; overhead is applied on the basis of direct labor pesos. If only Job X and Job Z
were completed during the month, the appropriate entry to record the initiation of all jobs
would be

Answer: Work-in-process P79,500

Direct Materials P45,000
Direct Labor 11,500
Applied factory overhead 23,000

35. Tastee-Treat Company prepares, packages, and distributes six frozen vegetables in
two different sized containers. The different vegetables and different sizes are prepared
in large batches. The company employs a normal cost job order costing system.
Manufacturing overhead is assigned to batches by a predetermined rate on the basis of
direct labor hours. The manufacturing overhead costs incurred by the company during
two recent years (adjusted for changes using current prices and wage rate) are
presented below.

2011 2012
Direct labor hours worked............................ 2,760,000 2,160,000
Manufacturing overhead costs incurred
(adjusted for changes in current
Prices and wage rate):
Indirect labor…………………… P11,040,000 P8,640,000
Employee benefits…………….. 4,140,000 3,240,000
Supplies…………………………. 2,760,000 2,160,000
Power…………………………… 2,208,000 1,728,000
Head and light ………………………. 552,000 552,000
Supervision ………………………….. 2,865,000 2,625,000
 Depreciation ………………….. 7,930,000 7,930,000
Property taxes and insurance……….. 3,005,000 3,005,000
Total overhead costs P34,500,000 P29,880,000

What is the variable overhead rate?

Answer: P7.70

36. Using the same information in No. 35, what will be the total overhead rate for a
2,300,000 direct labor hour level of activity in 2012?

Answer: P13.46

37. Regan Company operates its factory on a two-shift basis and pays a late-shift
differential of 15%. Regan also pays a premium of 50% for overtime work. Since Regan
manufactures only for stock, the cost system provides for uniform direct\labor hourly
charges for production done without regard to shift worked or work done on an overtime
basis. Overtime and late-shift differentials are included in Regan’s factory overhead
application rate. The May payroll for production workers is as follows:

Wages at basis direct-labor rates …………………………… P325,000

Shift differentials ………………………………………………. 25,000
Overtime premiums ……………………………………….. 10,000

For the month of May, what amount of direct labor should Regan charge to work-in-
process?

Answer: P325,000

38. Woodman Company applies factory overhead on the basis of direct labor hours.
Budget and actual data for direct labor and overhead for the year are as follows:

Budget Actual
Direct labor hours P600,000 P550,000
Factory overhead costs 720,000 680,000

The factory overhead for Woodman for the year is

Answer: Underapplied by P20,000

39. At the beginning of the year, Smith Inc. budgeted the following:

Units 10,000
Sales P100,000
Less:
Total variable expenses 60,000
 Total fixed expenses 20,000
Net Income 20,000

Factory overhead:
Variable P30, 000
Fixed 10,000

There were no beginning inventories. At the end of the year, there was no work-in-
process; total factory overhead incurred in the year was P39, 500; and underapplied
factory overhead was P1,500. Factory overhead was applied on the basis of budgeted
unit production. How many units were produced this year?

Answer: P9,500

40. A company manufactures plastic products for the home and restaurant market. The
company also does contract work for other customers and utilizes a job order costing
system. The flexible budget covering next year’s expected range of activity is

Direct labor hours 50,000 80,000 110,000

Machine hours 40,000 64,000 88,000
Variable O/H costs P100,000 P160,000 P220,000
Fixed O/H costs 150,000 150,000 150,000
Total O/H costs P250,000 P310,000 P370,000

A predetermined overhead rate based on direct labor hours is used to apply total
overhead. Management has estimated that 100,000 direct labor hours will be used next
year. The predetermined overhead rate per direct labor hour to be used to apply total
overhead to the individual jobs next year is

Answer: P3.50

41. Schneider, Inc. had the following information relating to 2011.

Budgeted factory overhead P74, 800

Actual factory overhead P78, 300
Applied factory overhead P76, 500
Estimated labor hours 44,000

If Schneider decides to use the actual results from 2011 to determine the 2012
overhead rate, what will the 2012 overhead rate be?

Answer: P1.740

42. The XYZ Company uses a predetermined overhead rate. XYZ prepared the
following budget at the beginning of the year:
 Direct labor cost P12, 000
Factory overhead P25, 000
Direct labor hours 9,000
Machine hours 1,500

During the month of January, the cost sheet for order number 100 indicates P20 of raw
materials, P50 of direct labor, 10 hours of direct labor, and 5 machine hours. Order
number 100 consists of 49 units of product. CXYZ applies overhead based on direct
labor cost. What amount of overhead should be applied to order number 100?

Answer: P104.17

43. At the end of the last fiscal year, Baehr Company had the following account
balance.
Overapplied Overhead P1, 000
Cost of goods sold 980,000
Work-in-process inventory 38,000
Finished goods inventory 82,000

The most common treat of the overapplied overhead would be to

Answer: Credit it to cost of goods sold.

44. The appropriate method for the disposition of underapplied or overapplied factory
overhead.

Answer: depends on the significance of the amount.

45. During the current accounting period, manufacturing company purchased P70,000
of raw materials, of which P50,000 of direct materials and P5,000 of indirect materials
were used in production. The company also incurred P45,000 of total labor costs and
P20,000 of other factory overhead costs. An analysis of the work-in-process control
account revealed P40,000 of direct labor costs. Based upon the above information,
what is the total amount accumulated in the factory overhead control account?

Answer: P30,000

A company allocate overhead to jobs in process using direct labor costs, raw material
costs, and machine hours. The overhead application rates for the current year are:

100% of direct materials

20% of raw materials
P117 per machine hour

A particular production run incurred the following costs:

Direct labor, P8,000
 Raw materials, P2,000.
A total of 140 machine hours were required for the production run.

What is the total cost that would be charged to the production run?

Answer: P34,780

47. Pane Company uses a job costing system and applies overhead to products on the
basis of direct labor cost. Job No. 75, the only job in process on January 1, had the
following costs assigned as of that date: direct materials, P40,000; direct labor,
P80,000; and factory overhead, P120,000. The following selected costs were incurred
during the year.

Traceable to jobs:
Direct materials. P178,000
Direct labor. 345,000 P523,000

Not traceable to jobs:

Factory materials and supplies. P46,000
Indirect labor. 235,000
Plant maintenance. 73,000
Depreciation on factory equipment 29,000
Other factory costs. 76,000 456,000

Pane's profit plan for the year included budgeted direct labor of P320,000 and factory
overhead of P448,000. Assuming no work-in-process on December 31, Pane's
overhead for the year was

Answer: P24,000 overapplied

48. Avery Co. Uses a predetermined factory overhead rate based on direct labor hours.
For the month of October, Avery's budgeted overhead was P300,000 based on a
budgeted volume of 100,000 direct labor hours. Actual overhead amounted to P325,000
with actual direct labor hours totaling 110,000. How much was the overapplied or
underapplied overhead?

Answer: P5, 000 overapplied

49. The following is a standard cost variance analysis report on direct labor cost for a
division of a manufacturing company:
 Actual Actual Standard
Hours at Hours at Hours at
Actual Standard Standard
Job. Wages Wages Wages
213 P3,243 P3,700 P3,100
215 15, 345 15,675 15,000
217 6,754 7,000 6,600
219 19,788 18,755 19,250
221 3,370 3,470 2,650

What is the total flexible budget direct labor variance for the division?

Answer: P1,900 unfavorable

50. Cannon Cannery, Inc. Estimated its factory overhead at P510,000 for the year,
based on a normal capacity of 100,000 direct labor hours. Standard direct labor hours
for the year totaled 105,000, while the factory overhead control account at the end of
the year showed a balance of P540,000. How much was the underapplied factory
overhead for the year?

Answer: P4,500

51. Summit Company provided the inventory balances and manufacturing cost data for
the month of January.

Under Summit's cost system any over-or underapplied overhead is closed to the cost of
goods account at the end of the calendar year.
Inventories:
January 1. January 31
Direct Materials P30,000 P40,000
Work-in-process P15,000 20,000
Finished Goods 65,000 50,000

Month of January
Factory overhead applied P150,000
Cost of goods manufactured 515,000
Direct materials used 190,000
Actual factory overhead 144,000
What would cost of goods sold be if under- or overapplied overhead were closed to cost
of goods sold?

Answer: P524,000

52. Using the same information in No. 51, what would cost of goods sold be if under- or
overapplied overhead were allocated to inventories and cost of goods sold?

Answer: P524,700

53. Worley Company has underapplied overhead of P45,000 for the year. Before
disposition of the underapplied overhead, selected year-end balances from Worley's
accounting records were:

Sales P1,200,000
Cost of goods sold 720,000
Direct materials inventory 36,000
Work-in-process inventory 54,000
Finished goods inventory 90,000

Under Worley’s cost accounting system, over- or underapplied overhead is allocated to

appropriate inventories and CGS based on year-end balances in its year-end income
statement, Worley should report CGS of

Answer: P757,500

Costs of Quality: Spoilage and detective units

54. Harper Co's Job 501 for the manufacture of 2,200 coats, which was completed
during August at the unit cost presented below. Final inspection of Job 501 disclosed
200 spoiled coats which were sold to a jobber for P6,000.

Direct materials P20

Direct labor 18
Factory overhead(includes an allowance of
P1 for spoiled work) 18
P56

Assume that spoilage loss is charged to all production during August. What
would be the unit cost of the good coats produced on Job 501?
Answer:P56.00

55. Using the same information in No. 54, assume instead that the spoilage loss is
attributable to the exacting specifications of Job 501 and is charged to this specific job.
What would be the unit cost of good coats produced on Job 501?
Answer: P57.50

56. Under Heller Company's job order cost system, estimated costs of defective
work(considered normal in the manufacturing process) are included in the
predetermined factory overhead rate. During March, Job No. 210 for 2,000 hand saws
was completed at the following costs per unit.
Direct materials P5
Direct labor 4
Factory Overhead (applied at 150% of direct labor costs) 6
P15

Final inspection disclosed 100 defective saws, which were reworked at a cost of P2 per
unit for direct labor, plus overhead at the predetermined rate. The defective units fall
within the normal range. What is the total rework cost and to what account should it be
charged?

Answer: P500 to factory overhead control

57. During March, Hart Company incurred the following costs on Job 109 for the
manufacture of 200 motors:
Original cost accumulation:
Direct materials P660
Direct labor 800
Factory overhead (150% of DL ) 1,200
P2, 660

Direct costs of reworking 10 units:

Direct materials P100
Direct labor 160
P260

Answer: P15.80
58. Using the same information in No. 57, assuming the rework cost were attributable to
internal failure or charged to factory overhead, what is the cost per finished unit of Job
109?

Answer: P13.30

59. Condotti Company's Job 205 for the manufacture of 6,600 coats was completed
during August 2011 at the following unit costs:

Direct materials P1500

Direct labor 1,000
Factory overhead (include an allowance of
P50 spoiled work) 500
P3,000

Final inspection of Job 205 disclosed 600 spoiled coats which were sold to a jobber for
P600,000. Assume that spoilage loss is charged to all production duroing August 2011.
What would be the unit cost of the good coats produced on Job 205?

Answer: P3000

60. Using the same information in No. 59, assuming the spoilage loss attributable to
exacting specifications or chargeable to particular job, what would be the unit cost of the
good coats produced on Job 205?

Answer: P3,145

61.Simpson Company manufactures electric drills to the exacting specifications of

various customers. During April 2011, Job 403 for the production of 1,100 drills was
completed at the following costs per unit:

Direct materials…………………………………………………… P10

Direct labor………………………………………………………… 8
Applied factory overhead………………………………………… 12
Total………………………………………………………………… P30

Answer: P32

62. Some units of output failed to pass final inspection at the end of the manufacturing
process. The production and inspection supervisors determined that the incremental
revenue from reworking the units exceeded the cost of rework. The rework of the
defective units was authorized, and the following costs were incurred in reworking the
units:

Materials requisitioned from stores:

Direct materials:………………………………………… P5,000
Miscellaneous supplies……………………………….. P300
Direct labor……………………………………………………… P14,000

Answer: Work-in-process inventory control for P5,000 and factory overhead

control for P35,300

63. In a job order accounting situation, assume that there are P45,000 of charges to a
given job consisting of 25,000 material, P10,000 direct labor, and P10,000 applied
overhead. The job yields 500 units of a product of which 100 are rejected as spoiled
with no salvage value. The cost of the spoilage is determined to be P9,000. If the firm
wishes to use this job as the basis for setting a spoilage standard for comparison to
future work, the conceptually superior way to express the spoilage rate would be

Answer: 25 % of good outputs.

64. Gumamela Mfg. Co.started 150 units in process on job order #13. The prime costs
placed in a process consisted of P30,000 and P18,000 for materials and direct labor,
respectively, and a pre-determined rate was used to charge factory overhead to
production at 133-1/3% of the direct labor cost. Upon completion of the job order, units
equal to 20% of the good output were rejected for failing to meet strict quality control
requirements.

The company sells rejected units as scrap at only 1/3 of production cost, and bills
customers at 150percent of production cost.

If the rejected units were ascribed to company failure, the billing price of job order #13
would be:

Answer: P90,000

65. Using the same information in No. 64, and if the rejected units were ascribed to
customer action, the billing price of job order #13 would be:

Answer: P102,000
Service Cost Allocation

66. Boa Corp. distributes service department overhead costs directly to producing
departments without allocation to the other service department. Information for the
month of June is as follows:

Service Departments
Maintenance Utilities
Overhead costs incurred...... P20,000 P10,000
Service provided to departments:
Maintenance........................ --- 10%
Utilities............................... 20% --
Producing-A 40% 30%
Producing-B 40% 60%
Totals 100% 100%

The amount of maintenance department costs distributed to Producing-A department for

June was

Answer: P10,000

67. UST allocates support department costs to its individual schools using the step
method. Information for May 2011 is as follows:

Support Department
Maintenance Power
Costs incurred P99,000 P54,000
Service percentages provided to:
Maintenance --- 10%
Power 20% ---
School of Education 30% 20%
School of Technology 50% 70%
100% 100%

What is the amount of May 2008 support department costs allocated to School of
Education?

Answer: P46,100

68. Hartwell Company distributes the sevice department overhead costs directly to
producing departments without allocation to the other service departments. Information
for the month of January is presented as follows:
 Maintenance Utilities
Overhead costs incurred P18, 700 P9, 000
Service provided to:
Maintenance department --- 10%
Utilities department 20% ---
Producing department A 40% 30%
Producing department B 40% 60%

The amount of utilities department costs distributed to producing department B for

January should be

Answer: P6,000

69. Using the same information in No. 68, and assume instead that Hartwell Company
distributes the service departments’ overhead costs based on the step-down method.
Which of the following methods is true?

Answer: Allocate maintenance expense to departments A and B and the utilities

department.

70. Using the same information in No.68, and under the step-down method, how much
of Hartwell’s utilities department cost is allocated between department A and B?

Answer: P 12,740

71. Using the same information in No.68, and that Hartwell Company distributes service
department overhead costs based on the reciprocal method, what would be the formula
to determine the total maintenance costs?

Answer: M= P18,700+.10U

72. Using the same information in No.68, and that Hartwell Company distributes utilities
department overhead costs based on the reciprocal method, what would be the formula
to determine the total utilities costs?

Answer: U=P9,000+.20M

73. AJD Company has two service departments (A and B) and two producing
departments (X and Y). data provided are as follows:
 Service Operating
Departments Departments
A B X Y
Direct costs………………… P150 P350 P5,000 P6,000
Services performed
by Dept. A………….. 40% 40% 20%
Services performed
By Dept. B………….. 20% 70% 10%

AJD Company uses the direct method to allocate service department costs. The service
department cost allocated to Department Y is:

Answer: P87.50

74. Using the same information in No. 73, what is the total cost for Department X:

Answer: P5,295.83

75. Using the same information in No. 73, except that step-down is used to allocate
service department costs. Department A costs are allocated first. The service
department cost allocated to Department Y is:

Answer: P75.00

76. Using the same information in Nos. 73 and 75, what is the total cost for Department
X:

Answer: P5,375.00

77. Using the same information in No. 73, except that the reciprocal method is used to
allocate service department costs. The service department cost allocated to department
Y is:

Answer: P85.00

78. Using the same information in Nos. 74 and 77, what is the total cost for Department
X:

Answer: P5,085.00

79. A company has two service departments (S1 and S2) and two production
departments (P1 and P2). Departmental data for January were as follows:

S1 S2
 Costs incurred:……………………. P27,000 P18,000
Service provided to:
S1…………………………………… -- 20%
S2…………………………………… 10% --
P1…………………………………… 50% 30%
P2…………………………………… 40% 50%

What are the total allocated service department costs to P2 if the company uses the
reciprocal method of allocating its service department costs? (Round calculations to the
nearest whole number.)

Answer: P23,051

80. Computer Complex, which offers two main services:

(1) Time on a time- shared computer system and
(2) Proprietary computer programs. Computer time is provided by the operation
department (Op) and programs of each service used by each department for a typical
period is presented below.

User Op P
Op…………………………………………………… -- 40%
P…………………………………………………….. 30% --
Sold to customers………………………………… 70% 60%
Total………………………………………………… 100% 100%

In a typical period, the operation department spends P4, 500 and the programming
department spends P2, 500.

Under the step-down method, what is the cost of the computer time and the computer
programs or sale?

Answer: TIME PROGRAMS:

P3,150 P3,850

81. Using the same information in No. 68, using the reciprocal method what is the
solution to the service cost allocation problem?

Answer: Op = 4,500+.40P; P = 2,500+.30Op

82. A hospital has a P100, 000 expected utility bill this year. The janitorial, accounting,
and orderlies departments are service functions to the operating, hospital rooms, and
laboratories departments. Floor space assigned to each department is
Department Square Footage
Janitorial………………………………………………… 1,000
Accounting……………………………………………… 2,000
Orderlies………………………………………………… 7,000
Operating……………………………………………….. 4,000
Hospital Rooms………………………………………... 30,000
Laboratories……………………………………………. 6,000
50,000

How much of the P100, 000 will eventually become the hospital department total costs,
assuming a direct allocation based on square footage is used?

Answer: P75,000

Items 83 and 84 are based on the following information:

Fabricating and Fishing are the two production departments of a manufacturing

company. Building Operations and Information Services are service departments that
provide support to the two production departments to allocate the service department
costs to the production departments. Square footage is used to allocate building
operations, and computer time is used to allocate information services. The costs of the
service departments and relevant operating data for the departments are as follows:

Building Information
Operations Services Fabricating Finishing
Costs:
Labor and benefit……………. P200,000 P300,000
costs
Other traceable costs………... 350,000 900,000
Total…………………………… P550,000 1,200,000
Operating Data:
Square feet occupied 5,000 10,000 16,000 24,000
Computer time………………. 200 1,200 600
(in hours)

83. If the company employs the direct method to allocate the costs of the service
departments, then the amount of building operations costs allocated to fabricating would
be

Answer: P220,000

84. If the company employs the step method to allocate the costs of the service
departments and information services costs are allocated first, then the total amount of
service department costs (Information Services and Building Operations) allocated to
Finishing would be
Answer: P762,000

Items 85 through 89 are based on the following information:

The managers of Rochester Manufacturing are discussing ways to allocate the cost of
service departments such as Quality Control and Maintenance to the production
departments. To aid them in this discussion the controller has provided the following
information:

Quality
Control Maintenance Machining Assembly Total
Budgeted overhead costs
before allocation……. P350,000 P200,000 P400,000 P300,000 P1,250,000
Budgeted machine hours… -- -- 50,000 -- 50,000
Budgeted directed labor hours -- -- -- 25,000 25,000
Budgeted hours of service:
Quality control………… -- 7,000 21,000 7,000 35,000
Maintenance…………. 10,000 -- 18,000 12,000 40,000

85. If Rochester Manufacturing uses the direct method of allocating service department
costs, the total service costs allocated to the assembly department would be

Answer: P167,500

86. Using the direct method, the total amount of overhead allocated to each machine
hour at Rochester Manufacturing would be

Answer: P15.65

87. If Rochester Manufacturing uses the step- down method of allocating service costs
beginning with quality control, the maintenance costs allocated to the Assembly
Department would be

Answer: P108,000

88. If Rochester Manufacturing uses the reciprocal method of allocating service costs,
the total amount of quality control costs(rounded to the nearest peso) to be allocated to
the other departments would be

Answer: P421,053

89. If Rochester Manufacturing decides not to allocate service costs to the production
departments, the overhead allocated to each direct labor hour in the Assembly
Department would be
Answer: P12.00
Items 90 and 91 are based on the following information.
M&P Tool has three service departments that support the production area. Outlined
below is the estimated overheard by department for the upcoming year.

Estimated Number of
Service Departments Overhead Employees
Receiving……………………. P25,000 2
Repair………………………... 35,000 2
Total………………………….. 10,000 1

Production Departments
Assembly……………………. 25
Bolting……………………….. 12

The Repair Department supports the greatest number of departments, followed by the
Tool Department. Overhead cost is allocated to departments based upon the number of
employees.

90. Using the direct method of allocation, how much of the Repair Department’s
overhead will be allocated to the Tool Department?

Answer: Zero

91. Using the step-down method of allocation, the allocation from the Repair
Department to the Tool Department would be

Items 92 and 93 are based on the following information:

The Photocopying Department provides photocopy services for both Departments A
and B and has prepared its total budget using the following information for next year:

Fixed costs………………………….. P100,000

Available capacity………………….. 4,000,000 pages
Budgeted usage
Department A………………. 1,200,000 pages
Department B………………. 2,400,000 pages
Variable cost……………………….. 0.03 per page

92. Assume that the single- rate method of cost allocation is used and the allocation
base is budgeted usage. How much photocopying cost will be allocated to Department
B in the budget year?

Answer: P875
93. Assume that the dual rate cost allocation method is used and the allocation basis is
budgeted usage for fixed costs and actual usage for variable costs. How much cost
would be allocated to Department A is 1,400,000 pages and actual usage for
Department B is 2,100,000 pages?

Answer: P75,333

94. Dext stores has three stores and one service center. The percentage of service
used in the current year are store A, 25%; store B, 40%; and store C, 45%. The
expected long-term budgeted usages are store A, 30%; store B, 30%; and store C,
40%. The service center costs were budgeted at P450,000 fixed and P550,000 variable.
Actual fixed costs were P430,000 and actual variable costs were P570,000. Dexter
allocates the budgeted variable costs of the central unit based on actual use of the unit
service, and allocates budgeted fixed costs based on expected long- term use of the
unit’s services. Service center costs allocated to store B are:

Answer: P355,000

95. In allocating factory service department costs to producing departments, which one
of the following items would most likely be used as an activity base?

Answer: Units of electric power consumed

MUSOR, Sittie Saimah B.

V- BS Accountancy