TOMAS, Marielle Celine F.

MODULE 10 & 15
BSA – BCB 10/19/21
MODULE 10
I. Ethical Corp. estimates that its production for the coming year will be 10,000 units, which is
80% of normal capacity, with the following unit costs: materials, P40; direct labor, P60.
Direct labor is paid at the rate of P24 per hour. The most expensive piece of machinery, must
be run for 20 minutes to produce one unit. Total estimated overhead is expected to consist of
P400,000 for variable overhead and P400,000 for fixed overhead.
Required: Compute the overhead rate for each of the following bases, using the normal capacity
activity level:

1. PHYSICAL OUTPUT
Estimated Overhead 800,000
= = 80 overhead per unit
Estimated Units of Production 10,000

2. MATERIALS COST

Estimated Overhead 800,000

x 100 = x 100 = 200% materials cost
Estimated Materials Cost 40 x 10,000 units

3. DIRECT LABOR COST

Estimated Overhead 800,000
x 100 = x 100 = 133% of direct labor
Estimated Direct Cost 60 x 10,000 units

4. DIRECT LABOR HOURS

Estimated Overhead 800,000
= = 32 per direct labor hour
Estimated Direct Labor Hours 25,000 hours

5. MACHINE HOURS
Estimated Overhead 800,000
= = 240 per machine
Estimated Machine Hours 3,333 hours
hour
 (Round answer to the nearest peso or percentage.)

II. Values, Inc. manufactures audio equipment. The company estimates the following costs at
normal capacity and other items for the coming period:
Direct materials........................................................................................ P300,000
Direct labor .............................................................................................. 520,000
Factory overhead (fixed).......................................................................... 300,000
Factory overhead (variable)..................................................................... 240,000
Normal capacity ....................................................................................... 100,000 direct labor
hours
Expected production................................................................................ 80,000 direct labor
hours
Required: Compute the overhead application rate using both the normal capacity and the expected
actual capacity activity levels.

1. FIXED OVERHEAD PER DIRECT LABOR HOUR

Expected Actual Capacity Normal Capacity
300,000 300,000
= 3. 75 = 3.00
80,000 dlh 100,000 dlh

2. VARIABLE OVERHEAD PER DIRECT LABOR HOUR

Expected Actual Capacity Normal Capacity
192,000 240,000
= 2.40 = 2.40
80,000 dlh 100,000 dlh

3. TOTAL OVERHEAD PER DIRECT LABOR HOUR

Expected Actual Capacity Normal Capacity
3.75 + 2.40 = 6.15 3.00 + 2.40 = 5.40
 III. Data for the past two years for Behavior Corp. are:
20A 20B
Units produced....................................................................................... 10,000 11,000
Overhead applied per unit ..................................................................... P15 P18
Actual overhead:
Fixed .................................................................................................... 50,000 55,000
Variable................................................................................................ 95,000 150,000
Estimated overhead:
Fixed ................................................................................................... 50,000 56,000
Variable............................................................................................... 130,000 142,000

The company determines overhead rates based on estimated units to be produced.

Required:
1. Determine the estimated units of production used to obtain the overhead allocation rates in 20A and
20B.
20A
Estimated Overhead
= overhead per unit
Estimated Units of Production
50,000+ 130,000 15 x 180,000
= 15 =
x 15 15
x = 12,000 estimated units of production

20B
Estimated Overhead
= overhead per unit
Estimated Units of Production
50,000+ 130,000 18 x 198,000
= 18 =
x 18 18
x = 11,000 estimated units of production
 2. Determine the over- or underapplied factory overhead for each of the two years.
20A
Applied Factory Overhead (10,000 x 15) 150,000
Actual Factory Overhead (50,000 + 95,000) (145,000)
Overapplied Factory Overhead 5,000

20B
Applied Factory Overhead (11,000 x 18) 198,000
Actual Factory Overhead (55,000 + 150,000) (205,000)
Underapplied Factory Overhead 7,000

IV. To determine an overhead application rate for its Machining and Assembly Departments, the
management of EQ Co. requested the following overhead cost data for June:
Machining Assembly
Item Department Department Total
Number of employees ....................................................... 60 40 100
Square footage .................................................................. 15,000 10,000 25,000
Monthly average wage per employee
(direct and indirect) .................................................... P 2,000 P 2,500 --
Overhead directly chargeable to
department (excluding indirect labor)......................... P90,000 P75,000
P165,000
Materials used ................................................................... 60,000 90,000 150,000
Factory rent........................................................................ ? ? 33,000
Other building costs........................................................... ? ? 60,000
Payroll Department cost .................................................... ? ? 18,000
Freight-in and other Receiving
Department costs ....................................................... ? ? 75,000
In each department, 80% of the employees are direct laborers. Overhead is charged to production on the
basis of direct labor cost. The allocation basis for other data is as follows: all building costs, square
footage; Payroll Department cost, number of employees; freight-in and other Receiving Department
costs, materials used.
1.
Machine Assembly
Department Department
Overhead directly chargeable 90,000 75,000
Indirect labor:
20% x 60 x 2,000 24,000
20% x 40 x 2,500 20,000
Factory Rent:
15,000/25,000 x 33,000 19,800
10,000/25,000 x 33,000 13,200
Other building costs:
15,000/25,000 x 60,000 36,000
10,000/25,000 x 60,000 24,000
Payroll Department Costs:
60/100 x 18,000 10,800
40/100 x 18,000 7,200
Freight in and other receiving department costs:
60,000/150,000 x 75,000 30,000
90,000/150,000 x 75,000 45,000
Total Overhead 210,600 184,400

2.
Direct Labor Costs Machine Assembly
Department Department
80% x 60 x 2,000 96,000
80% x 40 x 2,500 80,000

Overhead as a percentage of direct labor cost Machine Assembly

Department Department
210,600/96,000 219%
184,400/80,000 231%
 MODULE 15
1. Ulysses Company estimates overhead of P225,000 for next year. An estimated 25,000 units will be
produced, with materials cost of P500,000. Conversion will require an estimated 56,250 direct labor hours
at a cost of P8 per hour and an estimated 75,000 machine hours.
Required: Compute the predetermined overhead rate to be used in applying factory overhead to
production on each of the following bases:

A. Units of production
Estimated Factory Overhead 225,000
Divided by: Estimated units of production /25,000
Units of Production 9

B. Materials cost
Estimated Factory Overhead 225,000
Divided by: Estimated Material Cost /500,000
Materials Cost 0.45

C. Direct labor hours

Estimated Factory Overhead 225,000
Divided by: Estimated Direct Labor hours /56,250
Direct labor Hours 4

D. Direct labor cost

Estimated Factory Overhead 225,000
Divided by: (56,250 x 8) /450,000
Direct Labor Cost 0.5

E. Machine hours
Estimated Factory Overhead 225,000
Divided by: Estimated Machine hours /75,000
Machine Hours 3

2. Theoretical capacity for Rolly Company is 80,000 direct labor hours, and normal capacity is 50,000
direct labor hours. The actual capacity attained for the fiscal year ended June 30, 2020 was 43,000 hours.
It is estimated that 40,000 hours will be worked in 2021. Fixed Factory Overhead is P400,000 and
variable factory overhead is P6.69 per direct labor hour.
Required:
(a) Using the normal capacity, compute (a) the factory overhead rate, and (b) the fixed part of the factory
overhead rate.
 A. Factory overhead rate
Fixed factory overhead 400,000
divided by: normal capacity directory labor hours /50,000
8
Add: Variable factory overhead + 6.69
Factory Overhead Rate 14.69

B. Fixed factory overhead rate

Fixed factory overhead 400,000
divided by: normal capacity direct labor hours /50,000
Fixed Factory Overhead Rate 8

b) Using expected actual capacity for 2021, compute (a) the factory overhead rate, and (b) the fixed part
of the factory overhead rate.

A. Factory overhead rate

Fixed factory overhead 400,000
divided by: estimated direct labor hours /40,000
10
Add: Variable factory overhead + 6.69
Factory Overhead Rate 16.69

B. Fixed factory overhead rate

Fixed factory overhead 400,000
divided by: estimated direct labor hours /50,000
Fixed Factory Overhead Rate 10

3. Siony Company budgeted factory overhead at P255,000 for the period for Dept. A based on a budgeted
volume of 50,000 machine hours. At the end of the period, the actual factory overhead was P281,000 and
actual machine hours were 52,500
Required: Calculate the applied factory overhead and the over- or underapplied amount for the period.
A. Applied Factory Overhead
FOH rate = 225,000/50,000 = 5.10
 Actual Machine Hours 52,500
Multiply by: FOH rate x 5.10
Applied Factory Overhead 267,750

B. Over or underapplied Factory Overhead

Actual Factory Overhead 281,000

Multiply by: Applied Factory Overhead (267,750)
Underapplied Factory Overhead 13,250

4. Verbo Company assembles and sells hand drills All parts are purchased and the cost of the parts per
drill total P50. Labor is paid on the basis of P32 per drill assembled. Because the company handles only
one product, the unit cost base is used for applying factory overhead at a predetermined rate. Estimated
factory overhead for the coming period based on a production of 30,000 drills, is as follows:
Indirect Materials P220,000
Indirect Labor 240,000
Light and Power 30,000
Depreciation 25,000
Miscellaneous 55,000
During the period, actual factory overhead was P561,600 and 29,000 drills were assembled. These units
were completed but not yet transferred to the finished goods storeroom.
Required:
1. Prepare the entries to record the preceding information.
PARTICULARS F DEBIT CREDIT
Work in Process 1,450,000
Materials 1,450,000

Work in Process 928,000

Payroll (29,000 x 32) 928,000

Factory Overhead Control 561,600

Materials, Payroll, Accruals and Various Accounts 561,600

Work in Process (29,000 drills x 19 FOH rate) 551,000

Applied Factory Overhead 551,000
 Applied Factory Overhead 551,000
Factory Overhead Control 551,000

2. Determine the amount of over-or underapplied overhead.

Actual Factory Overhead 561,600

Applied Factory Overhead 551,000
Underapplied Factory Overhead 10,600

5. Normal annual capacity for Wicky Co. is 48,000 units, with production rates being level throughout the
year. The October budget shows fixed factory overhead of P1,440 and an estimated variable factory
overhead rate of P2.10 per unit. During October, actual output was 4,100 units, with a total actual factory
overhead of P9,000.
Required: Calculate the over-or underapplied factory overhead for October.

1,440/4,000 + 2.10 = 2.46

Applied Factory Overhead – 4,100 x 2.46 = 10,086

Over or Underapplied Factory Overhead - 9,000

10,086
(1,086) overapplied
6. The following information is available concerning the inventory and cost of goods sold accounts of XO
Manufacturing Co. at the end of the year.
Work in Process Finished Goods Cost of Sales
Direct Material P2,000 P6,000 P12,000
Direct Labor 2,000 16,000 32,000
Applied Factory Overhead 2,000 16,000 32,000
Year-end balance P6,000 P38,000 P76.000

Applied factory overhead has already been closed to Factory Overhead Control.
Required:
Give the journal entry to close Factory Overhead Control, assuming:
(a) Underapplied factory overhead of P6,000 is to be allocated to inventories and cost of goods sold
in proportion to the balances in the accounts.
 PARTICULARS F DEBIT CREDIT
Work in Process (6,000 x 5%) 300
Finished Goods (19/60 x 6,000) 1,900
Cost of Goods Sold (19/30 x 6,000) 3,800
Factory Overhead Control 6,000

(b) Overapplied factory overhead of P6,000 is to be allocated to inventories and cost of goods sold
in proportion to the balances of the accounts.

PARTICULARS F DEBIT CREDIT

Factory Overhead Control 6,000
Work in Process (6,000 x 5%) 300
Finished Goods (19/60 x 6,000) 1,900
Cost of Goods Sold (19/30 x 6,000) 3,800

(c) Underapplied factory overhead of P6,000 is to be allocated to inventories and cost of goods sold
in proportion to the amounts of applied factory overhead contained in those accounts
PARTICULARS F DEBIT CREDIT
Work in Process (6,000 x 4%) 240
Finished Goods (32% x 6,000) 1,920
Cost of Goods Sold (64% x 6,000) 3,840
Factory Overhead Control 6,000

7. Yoke Manufacturing Co. was totally destroyed by fire during June. However, the following cost data
were recovered: actual direct labor cost, P8,117; actual direct material cost, P16,550; and actual factory
overhead cost, P14,134; predetermined factory overhead rate, 200% of direct labor cost.
Required: Calculate the amount of over- or underapplied factory overhead.
Actual Factory Overhead 14,134
Applied Factory Overhead (200% of 8,117) 16,234
Overapplied Overhead (2,100)