Chapter 1

Answer Key
TRUE OR FALSE
1. T
2. F
3. T
4. F
5. T
6. F
7. T
8. T
9. F
10. T
11. T
12. T
13. F
14. T
15. F
16. T
17. F
18. T
19. F
20. F
21. F
22. T
23. T
24. F
25. F
26. T
27. T
28. T
29. T
30. F
31. F
32. F
33. F
34. T
35. F
36. T
37. T
38. T
39. F
40. T
41. F
42. F
43. T
44. F
45. T
46. F
47. F
48. F
49. F
50. F
51. T
52. F
53. T
54. T
55. F
56. F
57. T
58. F
59. T
60. T
61. F
Multiple Choice
1. B
2. A
3. D
4. D
5. B
6. C
7. C
8. B
9. D
10. C
11. A
12. D
13. C
14. C
15. D
16. A
17. C
18. C
19. B
20. B
21. D
22. B
23. D
24. A
25. A
26. C
27. D
28. B
29. C
30. D
31. C
32. D
33. C
34. C
35. C
36. C
37. B
38. C
39. B
40. B
41. D
42. B
43. B
44. D
45. B
46. B
47. A
48. C
49. D
50. C
51. B
52. C/c/b/a/b/b
53. D
54. a/d/b/c
55. d/d/c/b
56. b
57. b/c
 58. c/b
59. B
60. B
61. D/A
62. C
63. A
64. B
65. A
66. B
67. A
68. B
69. A
70. D
71. A
72. B
73. B
74. A
75. C
76. A
77. A

Straight Problems
1.

Absorption
Sales (4,000 x 30) 120,000
COGS
(4,000 x (6 + 4 + 2 + FxFOH 2) 56,000
GP 64,000
OPEX
Variable (3 x 4,000) 12,000
Fixed 4,000
Net Income 48,000

FxFOH = 10,000 / 5,000 = 2

Variable (direct)
Sales (4,000 x 30) 120,000
COGS
(4,000 x (6 + 4 + 2) 48,000
GP 72,000
OPEX
Fixed FOH 10,000
Variable (3 x 4,000) 12,000
Fixed 4,000
Net Income 46,000
Throughput costing

Sales (4,000 x 30) 120,000

COGS
(4,000 x (6) 24,000
GP 96,000
OPEX
Direct labor (4 x 5,000 units) 20,000
Variable FOH (2 x 5,000 units) 10,000
Fixed FOH 10,000
Variable (3 x 4,000) 12,000
Fixed 4,000
Net Income 40,000

Problem 2
Answer
a.
Direct materials (20,000 x 18) 360,000
Direct labor 67,500
Variable FOH 97,500
Fixed FOH 330,000
Variable S&A 230,400
Fixed S&A 177,000
Total 1,262,400

b.
Absorption Variable Throughput
Cost of goods sold
(19,200 x 42.75) 820,800
(19,200 x 26.25) 504,000
(19,200 x 18.00) 345,600
Direct labor 67,500
Variable FOH 97,500
Fx FOH 330,000 330,000
Variable S&A 230,400 230,400 230,400
Fx S&A 177,000 177,000 177,000
Total 1,228,200 1,241,400 1,248,000

c.
Ending inventory 800 units
Absorption Variable Throughput
Direct Material (18 x 800) 14,400 14,400 14,400
Direct Labor 2,700 2,700 0
Variable FOH 3,900 3,900 0
Fixed FOH 13,200 0 0
Total 34,200 21,000 14,400
Problem 3
Answer
1.
Raw Materials Inventory 3,825,000
Accounts Payable 3,825,000

2.
Work in Process Inventory 3,037,500
Factory Overhead Control 1,012,500
Raw Materials Inventory 4,050,000
3.
Raw Materials Inventory 45,000
Work in Process Inventory 36,000
Factory Overhead Control 9,000
4.
a. To record the incurrence of salary and wages of factory employees.
Payroll 6,525,000
SSS Premium Payable 1125,000
Medicare Premium Payable 45,000
Pag-ibig Premium Payable 36,000
Withholding Taxes Payable 225,000
Accrued Payroll 5,094,000

b. To record labor charged to production.

Work in Process Inventory 4,500,000
Factory Overhead Control 2,025,000
Payroll 6,525,000
5.
a. To record the incurrence of selling and administrative salary.
Payroll 2,250,000
SSS Premium Payable 54,000
Medicare Premium Payable 36,000
Pag-ibig Premium Payable 22,500
Withholding Taxes Payable 99,000
Accrued Payroll 2,038,500

b. To record the selling and administrative salary.

Selling and Administrative Salaries 2,250,000
Payroll 2,250,000
6.
Accrued Payroll 8,145,000
Cash 8,145,000
7.
Factory Overhead Control 450,000
Utilities Payable 450,000
8.
Advertising Expense 2,250,000
Cash 2,250,000

9.
Factory Overhead Control 270,000
Insurance Expense 180,000
Prepaid Insurance 450,000
10.
Factory Overhead Control 810,000
Depreciation Expense 90,000
Accumulated Depreciation 900,000
11.
Work in Process 6,750,000
Applied Factory Overhead 6,750,000
(150% x 4,500,000)
12.
Finished Goods Inventory 9,000,000
Work in Process Inventory 9,000,000

13.
Accounts Receivable 15,750,000
Sales 15,750,000

Cost of Goods Sold 9,450,000

Finished Goods 9,450,000

14.
Cash 12,600,000
Accounts Receivable 12,600,000

15.
Over-applied Factory Overhead 2,191,500
Cost of Goods Sold 2,191,500

2. The Statement of Comprehensive Income and Cost of Goods Sold Statement of East Company are
shown below:
Toblerone Company
Statement of Comprehensive Income
For the month ended February 28, 2030

Sales 15,750,000
Less: Cost of Goods Sold (Schedule 1) 7258,500
Gross Profit 8,491,500
Less: Selling and Administrative Expenses (schedule 2) 4,770,000
Net Income before tax 3,721,500
Less: provision for tax (30%) 1,116,450
Net Income after tax 2,605,050
Other Comprehensive Income -
Total Comprehensive Income 2,605,050

Schedule 1
Toblerone Company
Cost of Goods Sold Statement
For the month ended February 28, 2030

Raw Materials Inventory, beginning 720,000

Add: Net Raw Materials Purchases 3,825,000
Total Raw Materials Available for Use 4,545,000
Less: Raw Materials End 540,000
Indirect Raw Materials used 1,003,500
Direct Materials used 3,001,500
Direct Labor 4,500,000
Factory Overhead - applied 6,750,000
Total Manufacturing Costs 14,251,500
Add: Work in Process, beginning 450,000
Total Costs of Goods Put into Process 14,701,500
Less: Work In Process, ending 5,701,500
Cost of Goods Manufactured 9,000,000
Add: Finished Goods , beginning 1,080,000
Total Goods Available For Sale 10,080,000
Less: Finished Goods, ending 630,000
Cost of Goods Sold 9,450,000
Less: Over-applied Factory Overhead 2,191,500
Actual Cost of Goods Sold 7,258,500

Schedule 2 Total Selling and Administrative Expenses

Selling and Administrative Salaries 2,250,000
Advertising Expenses 2,250,000
Insurance Expense 180,000
Depreciation Expense 90,000
Total 4,770,000
Problem 4
Answer
1 Materials 224,000
AP 224,000

2 WIP 129,500
FOH control 20,000
Materials 149,500

3 Payroll 400,000
WTAX payable 60,000
SSS Premium payable 20,000
Philhealth premium payable 4,000
Pag-ibig premium payable 4,000
Accrued Payroll 312,000

Accrued Payroll 312,000

Cash 312,000

4 WIP 240,000
FOH control 80,000
Administrative salaries 60,000
Sales salaries 20,000
Payroll 400,000

5 FOH control (80%) 22,560

Administrative expenses (15%) 4,230
Sales expenses (5%) 1,410
SSS Contribution payable (5% x 400,000) 20,000
Philhealth Contribution payable (1% x 400,000) 4,000
ECC Contribution payable (.05% x 400,000) 200
Pag-ibig Contribution payable (1% x 400,000) 4,000

6 WIP 180,000
Factory overhead applied 180,000

7 FOH control 68,500

Accumulated Depreciation 60,000
Prepaid insurance 3,500
Accounts Payable 5,000

8 FG 367,500
WIP 367,500
 9 AR 591,500
Sales 591,500

COGS 455,000
FG 455,000

10 Cash 550,000
AR 550,000

Problem 5
Answer
1 RM 152,320
AP 152,320

2 WIP 107,520
RM 107,520

3 WIP 206,080
Payroll 206,080

4 FOH control 241,920

Various accounts 241,920

WIP 241,920
FOH 241,920

5 FG 486,080
WIP 486,080

6 COGS 448,000
FG 448,000

7 AR 720,000
Sales 720,000

8 SE 104,640
AP 104,640

9 AE 87,360
AP 87,360
Sales 720,000
Raw Materials, Feb. 1 -
Add: Purchases 152,320
Total raw materials available for use 152,320
Less: raw materials end 44,800
Cost of direct materials used in production 107,520
Direct labor cost 206,080
Factory overhead 241,920
Total Manufacturing cost 555,520
Add: Work in process inventory, Feb. 1 -
Total cost of goods put into process 555,520
Less: work in process inventory, Feb. 28 69,440
Cost of goods manufactured 486,080
Add: Finished goods inventory, Feb. 1 -
TGAS 486,080
Less: Finished goods, Feb. 28 38,080
COGS 448,000 448,000
GP 272,000
Less: OPEX
SE 104,640
AE 87,360
Net income 80,000

Problem 6
Answer
a RM 924,000
AP 924,000

b WIP 705,600
FOH control 102,900
RM 808,500

c Payroll 954,100
Accrued Payroll 954,100

WIP 820,400
FOH control 133,700
Payroll 954,100

d Factory overhead control 215,950

Various Payable 215,950
 Selling Expenses 342,125
Admin expenses 213,150
Various payable 555,275

e Factory overhead control 42,630

Selling expense 36,050
Admin expense 26,075
Prepaid insurance 104,755

f Depreciation expense - office bldg 123,375

Depreciation expense - office equipment 63,210
Factory overhead control 42,630
Accumulated Depreciation - office bldg 123,375
Accumulated Depreciation - office equipment 63,210
Accumulated Depreciation - factory equipment 42,630

g WIP 540,720
Applied FOH 540,720

h FG 1,470,000
WIP 1,470,000

i COGS 1,295,000
FG 1,295,000
Req 2
Raw Materials, August 1 -
Add: Purchases 924,000
Total raw materials available for use 924,000
Less: raw materials end 115,500
indirect materials used 102,900
Cost of direct materials used in production 705,600
Direct labor cost 820,400
Factory overhead applied 540,720
Total Manufacturing cost 2,066,720
Add: Work in process inventory, Dec. 1 -
Total cost of goods put into process 2,066,720
Less: work in process inventory, Dec. 31 596,720
Cost of goods manufactured 1,470,000
Add: Finished goods inventory, Dec. 1 -
TGAS 1,470,000
Less: Finished goods, Dec. 31 175,000
COGS 1,295,000
 FOH
Actual Applied
102,900 540,720
133,700
215,950
42,630
42,630
537,810 540,720
2,910 over applied

Problem 7

A B C D
Direct materials 29,250 36,000 22,500 22,500
Direct labor 58,500 18,000 31,500 30,000
Factory overhead 32,500 24,000 36,000 67,500
Total manufacturing costs 120,250 78,000 90,000 120,000
Work in process, beginning 16,250 12,000 13,500 33,750
Work in process, ending 19,500 6,000 18,000 22,500
Cost of goods manufactured 117,000 84,000 85,500 131,250
Finished goods, beginning 6,500 15,000 18,000 26,250
Total goods available for sale 123,500 99,000 103,500 157,500
Finished goods, ending 13,000 9,000 18,000 26,250
Cost of goods sold 110,500 90,000 85,500 131,250
Sales 195,000 126,000 162,000 300,000
Gross Profit 84,500 36,000 76,500 168,750
Operating expenses 58,500 21,000 54,000 101,250
Net operating income 26,000 15,000 22,500 67,500

Problem 8
AnswerCOGS 11,718,000; COGM 11,513,400; FOH 3,428,600, DM 5,459,968; Purchases 5,333,138

Problem 9
Answer
1. 648,000 (given)
2. End 729,000 + used 648,000 – purchases 1,134,000 = beg. 243,000
3. End 16,200 + payments 1,312,200 – beg 194,400 = 1,134,000
4. Beg. 129,600 + DM 648,000 + DL 1,296,000 + FOH 972,000 (81 x 12,000) – COGM 2,430,000 =
615,600 end
Budgeted DL hrs = 15,552,000 / P108 = 144,000
Budgeted FOH 11,664,000 / Budgeted DLhr 144,000 = FOH rate P81
5. Wages pay end 24,300 + payment 1,287,900 – beg 16,200 = DL 1,296,000
DL 1,296,000 / P108 = DL hours 12,000

6. 81 x 12,000 dlhr = 972,000

7. FG end 81,000 + COGS 2,916,000 – FG beg 567,000 = COGM 2,430,000
8. 2,916,000 x 150% = P4,374,000
9. Beg. AR 129,600 + Sales 4,374,000 – Collection P3,321,000 = P1,182,600
10. Actual 970,000 – Applied 972,000 = 2,000 over
Problem 10
Raw Materials, Jan. 1 731,250
Add: Purchases 1,374,750
Total raw materials available for use 2,106,000
Less: raw materials end, Dec. 31 910,000
Cost of direct materials used in production 1,196,000
Direct labor cost 1,397,500
Factory overhead 482,290
Total Manufacturing cost 3,075,790
Add: Work in process inventory, Jan. 1 1,316,250
Total cost of goods put into process 4,392,040
Less: work in process inventory, Dec. 31 1,235,000
Cost of goods manufactured 3,157,040
Add: Finished goods inventory, Jan. 1 1,267,500
TGAS 4,424,540
Less: Finished goods, Dec. 31 1,200,000
COGS 3,224,540

Sales 6,435,000
COGS (3,224,540)
GP 3,210,460
OPEX
Selling (1,407,250)
Admin (646,100)
NI 1,157,110

Problem 11
Answer
Raw Materials, August 1 35,700
Add: Purchases 68,544
Total raw materials available for use 104,244
Less: raw materials end 31,416
Cost of direct materials used in production 72,828
Direct labor cost 64,260
Factory overhead 16,360
Total Manufacturing cost 153,448
Add: Work in process inventory, August 1 24,276
Total cost of goods put into process 177,724
Less: work in process inventory, August 31 27,132
Cost of goods manufactured 150,592
Add: Finished goods inventory, August 1 18,564
TGAS 169,156
Less: Finished goods, August 31 21,420
COGS 147,736
Problem 12
Cost of direct materials used in production 30,240
Direct labor cost 43,400
Factory overhead 28,000
Total Manufacturing cost 101,640
Add: Work in process inventory, January 1 70,000
Total cost of goods put into process 171,640
Less: work in process inventory, January 31 74,200
Cost of goods manufactured 97,440
Add: Finished goods inventory, January 1 29,400
TGAS 126,840
Less: Finished goods, January 31 33,600
COGS 93,240

Problem 13
Answer
Total Manufacturing cost 241,920 375,840 90,720
Add: Work in process inventory, January 1 34,560 77,760 15,120
Total cost of goods put into process 276,480 453,600 105,840
Less: work in process inventory, January 31 51,840 103,680 12,960
Cost of goods manufactured 224,640 349,920 92,880

Problem 14
Answer
A. SP = 1,125,000/40% = P2,812,500 / 56,250 units = P50 selling price
B.
Cost of goods manufactured 1,084,500
Add: Finished goods inventory, Jan1 391,500
TGAS 1,476,000
Less: Finished goods, Dec 31 351,000
COGS 1,125,000
The FG end totals P1,125,000, which means that the inventory was reduced by P40,500 (391,500 -
351,000) and management was successful n achieving its goal.

2.
Cost of direct materials used in production 180,000
Direct labor cost 333,000
Factory overhead applied 549,000
Total Manufacturing cost 1,062,000
Add: Work in process inventory, Dec. 1 270,000
Total cost of goods put into process 1,332,000
Less: work in process inventory, Dec.31 247,500
Cost of goods manufactured 1,084,500

Yes, management achieved its goal because the WIP fell by P22,500 (270,000 – 247,500)
C.
Sales 2,812,500
COGS 1,125,000
GP 1,687,500
OPEX 1,395,000
NI before tax 292,500
Tax 87,750
NI after tax 204,750

Problem 15
Answer:
Raw Materials, beg 18,000
Add: Purchases 100,000
Total raw materials available for use 118,000
Less: raw materials end 18,000
Indirect materials used 10,000
Cost of direct materials used in production 90,000
Direct labor cost 80,000
Factory overhead applied 115,000
Total Manufacturing cost 285,000
Add: Work in process inventory, beg 8,000
Total cost of goods put into process 293,000
Less: work in process inventory, end 20,000
Cost of goods manufactured 273,000
Add: Finished goods inventory, beg 157,000
TGAS 430,000
Less: Finished goods, end 30,000
COGS 400,000

Sales 560,000
Divide by 140%
COGS 400,000

Problem 16 A.
Raw Materials, beg 325,000
Add: Purchases 650,000
Total raw materials available for use 975,000
Less: raw materials end 227,500
indirect materials used -
Cost of direct materials used in production 747,500
Direct labor cost 2,210,000
Factory overhead applied 2,925,000
Total Manufacturing cost 5,882,500
Add: Work in process inventory, Jan. 1 845,000
Total cost of goods put into process 6,727,500
Less: work in process inventory, Dec. 31 1,105,000
Cost of goods manufactured 5,622,500
Add: Finished goods inventory, Jan. 1 1,820,000
TGAS 7,442,500
Less: Finished goods, Dec. 31 1,657,500
COGS 5,785,000

B.
Sales 10,140,000
COGS 5,785,000
GP 4,355,000
S&A Exp 585,000
Net Income before tax 3,770,000
Income tax 1,131,000
Net income after t ax 2,639,000

Problem 17
a. 1,700,000
b. 2,000,000
c. 3,200,000
d. 3,100,000
e. 500,000

Problem 18
a. 2,000,000
b. 2,075,000
c. 2,125,000

Problem 19
1. 3,190,000
2. 1,464,000

Problem 20
1,000,000 COGM

Problem 20
RM beg 15,000
Net RM Purchased 33,000
Total RM available for use 48,000
RM End (19,000)
Indirect materials used (1,000)
Direct materials used 28,000
DL cost (6/7 x 49,000) 42,000
Factory Overhead 40,000
Total Manufacturing Cost 110,000
WIP beg 40,000
WIP end (30,000)
COGM 120,000
FG beg 70,000
 TGAS 190,000
FG end 50,000
COGS 140,000

Factory Overhead = Depreciation 17,000 + Insurance 2,000 + Indirect labor 7,000 + Indirect materials
1,000 + other FOH 13,000 = 40,000

Problem 21
RM beg. 15,000 DM used 28,000
NP 33,000 DL (6/7 x 49,000) 42,000
Total RM available for use 48,000 FOH:
RRM end (19,000) Depreciation 17,000
Indirect materials used (1,000) Insurance 2,000
DM used 28,000 Indirect materials 1,000
Indirect labor 7,000
Other FOH 13,000 40,000
Total Manufacturing costs 110,000

3. TGAS 190,000 – COGS 140,000 = 50,000 FG end.

Problem 22
A. Prime cost = DM 340K + DL 400K = 740K
B. Conversion cost = DL 400K + FOH applied 280K = 680K
C. Total Manufacturing costs = 340K + DL 400 + FOH applied 280 = 1,020,000
D. COGM = WIP beg 290,000 + TMC 1,020,000 – WIP end 342K = 968,000
E. GOGS = FG beg 170K + COGM 968K – FG end 156K = 982,000
F. Over applied 16,000 = Applied 280K – Actual 264K

Problem 23
FG beg 65,000
COGM 515,000
FG end (50,000)
COGS - normal 530,000
Over-applied FOH (6,000)
COGS- actual 524,000