Advance Financial Accounting and Reporting

JOB ORDER COSTING/ JOINT AND BY PRODUCTS AND BACKFLUSH COSTINGS

Problem 1: Jamil 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.

Req. 1: The cost of goods manufactured for February was:

Req. 2: For the month of February, the manufacturing overhead was:

Problem 2: JM Inc. is employing normal costing for its job orders. The overhead is applied using a
predetermined overhead rate. The following information relates to the JM Inc. for the year ended December 31,
2016:

Job No. 101 Job No. 102 Job No. 103

Job in Process, January 1, 2016:

Direct Materials 40,000 30,000 0
Labor 60,000 40,000 0
Factory Overhead 30,000 20,000 0
Costs added during 2016:
Materials 20,000 10,000 100,000
Labor 100,000 200,000 400,000
Factory Overhead ? ? ?

Additional information:

1. Actual overhead for the year 2016 amounted to P350,000.

2. Jobs No. 101 and 102 were completed and transferred to finished goods during year 2016.
3. Job No. 101 was sold during year 2016.
4. The gross profit rate is 20% based on cost.

1. What is the total manufacturing cost for 2016?

2. What is the cost of goods manufactured for 2016?
3. What is the cost of goods sold for 2016?
4. What is the gross profit for 2016?
5. What are the cost of work in process on December 31, 2016 and the cost of finished goods on
December 31, 2016, respectively?

Problem 3: Jack Company uses a job order costing system. During August 2013, the following costs appeared
in the Work in Process Inventory account:

Beginning balance P 192,000

Direct material used 560,000
Direct labor incurred 480,000
Applied overhead 384,000
Cost of goods manufactured 1,480,000

Jack Company applies overhead on the basis of direct labor cost. There was only one job left in Work in
Process at the end of August which contained P44,800 of overhead.

What amount of direct material was included in this job?

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Problem 4: Jayson Corp. manufactures automated testing equipment. The 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 P4,000 P8,400 P150
ST-211 ..................
P121,450 P2,500 P12,160 P300
XD-108 ..................
P21,800 P86,400 P36,650 P3,100
SL-205 ..................
P34,350 P71,800 P32,175 P2,700
RX-115 ..................P0 P18,990 P21,845 P1,400

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?

Problem 5: NOP Company’s Job 921 manufactured 13,750 units that was completed in August at unit costs
presented as follows:

Direct materials P50

Direct labor 45
Factory overhead (includes an allowance of P2.50
Spoiled work) 45

Final inspection of Job 921 disclosed 1,250 spoiled units, which were sold for P37,500.

What would be the unit cost of good units if the spoilage loss is attributable to exacting specifications of Job
747?
A. P137.50
B. P143.75
C. P140
D. P148.25

Problem 6: During August 2012, Faithfully Inc. incurred the following costs for Job 522 (450 drum sets):

Direct materials P42,500

Direct labor P65,250
Factory overhead P78,300

45 units of drum sets were found to be defective and Faithfully Inc. had to incur the following to remedy the
said defects:

Direct materials P13,550

Direct Labor P15,250

If the rework cost is normal but specific to Job 522, the cost per finished unit is:
A. P518.11
B. P497.75
C. P575.68
D. P484.22

JUST IN TIME/BACKFLUSH COSTING

Problem 1: The Tristan Company seeks to streamline the costing system of its Manila plant. It will use a
backflush costing system with three trigger points:

 Purchase of raw materials

 Completion of finished goods
 Sale of finished goods
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Advance Financial Accounting and Reporting
There are no beginning inventories. The following data pertain to August 2011:

Raw materials purchase P880,000

Raw materials used 850,000
Conversion costs incurred 422,000
Conversion allocated to finished goods 400,000
Cost transferred to finished goods 1,250,000
Costs of goods sold 1,190,000

Assume no materials variances. The balance of Materials and In-Process Inventory (MIP) account at the end
of August 2011 is:
a. P 30,000 c. P850,000
b. P880,000 d. 0

Problem 2: The RAIN Manufacturing Company uses a Materials and In-Process (MIP) inventory account. At
the end of each month, all inventories are counted, their conversion costs components are estimated, and
inventory account balances are adjusted accordingly. Raw materials is backflushed from MIP account to
Finished Goods account. The following data is for the month of August:

Beginning balance of MIP account P38,700

Conversion cost incurred 4,800
Raw materials purchased 680,000
Conversion cost allocated 5,300
Ending balance of MIP account 41,900

The amount of direct materials and conversion costs to be backflushed to finished goods are:
a. P676,800 and P4,800 respectively.
b. P680,000 and P4,800 respectively.
c. P676,800 and P5,300 respectively.
d. P680,000 and P5,300 respectively.

JOINT AND BY PRODUCT

Problem 1: Jomari Company produces four solvents from the same process: C, D, E, and G. Joint product
costs are P9,000. (Round all answers to the nearest peso.)

Disposal Final
Sales price cost Further sales
per barrel per barrel processing price
Barrels at split-off at split-off costs per barrel
C 750 P10.00 P6.50 P2.00 P13.50
D 1,000 8.00 4.00 2.50 10.00
E 1,400 11.00 7.00 4.00 15.50
G 2,000 15.00 9.50 4.50 19.50

If Jomari sells the products after further processing, the following disposal costs will be incurred: C, P2.50; D,
P1.00; E, P3.50; G, P6.00.

1. Using a physical measurement method, what amount of joint processing cost is allocated to Product D?
A. P1,748 C. P1,311
B. P2,447 D. P3,495

2. Refer to Jomari Company. Using sales value at split-off, what amount of joint processing cost is
allocated to Product C?
A. P4,433 C. P1,108
B. P2,276 D. P1,182

3. Refer to Jomari Company. Using net realizable value at split-off, what amount of joint processing cost is
allocated to Product E?
A. P1,017 C. P2,170
B. P1,550 D. P4,263

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Problem 2: The Raymund Company processes apples into pies, spread and dressing. During the second
quarter of 2011, the joint cost of processing the apples were P750,000. There was no beginning inventories
for the quarter. Production and sales value information for the quarter were as follows: Assume the use of the
estimated net realizable value method.

Product Items/ Sales Value at Separable Final Selling Ending

unit Split-off point Costs Price Inventories

Pies 20,000 P12 per unit P 20 per unit P35 per unit 7,000
Spread 50,000 15 per unit 10 per unit 28 per unit 24,000
Dressing 25,000 9 per unit 8 per unit 20 per unit 10,000

Determine the total value of ending inventory

A. P750,000 C. P721,500
B. P1,140,000 D. P788,500

Problem 3: The LMN Company manufactures joint products D and F as well as by-product X. Cumulative cost
data for the period amounts to P204,000 representing 20,000 completed units. Costs are assigned to
products D and F by the net realizable value method, which considers further processing costs in subsequent
operations. Cost is allocated to by-product X using the reversal cost method.

Additional data:
Product X Product D Product F
Quantity produced 2,000 units 8,000 units 10,000 units
Sales price per unit P10 P20 P25
Further processing cost per unit P1 P5 P7
Marketing and administrative expenses P2
Operating profit per unit P3

What is the cost allocated to product D and F?

Product D Product E
a. P78,400 P117,600
b. P81,600 P122,400
c. P76,488 P119,512
d. P74,800 P121,200

Problem 4: The Archie Chemical Company produces a product known as “CHIPPY” from which by product
results. This by-product can be sold at P2.50 a pound. The manufacturing costs of the main product and by-
product up to the point of separation for the three months ended March 31, 2011 follows: Materials, P35,000;
Labor, P20,000; Overhead, P20,000. The units processed were 20,000 pounds of the main product and 2,000
pounds of the by-product.

During the period 18,000 pounds of the “CHIPPY” were sold at P12., while the company was able to sell 1,500
pounds of the by-product. Selling and administrative expenses related to the main product amounted to
P42,000. Disposal cost per each unit of the by-product is P0.20.

1. Assume that the by-product is inventoried and recorded at net realizable value. The net realizable value
of the by-product reduces the manufacturing costs of “CHIPPY”. What is the unit cost of “CHIPPY”?
Assume that the by-product is recorded as realized. What is the cost of inventory of CHIPPY?
A. P3.52; P7,500 C. P3.91; P7,500
B. P3.91; P7,155 D. P3.52; P7,155

2. Assume that the by product is inventoried and the net realizable value of the by-product is deducted from
the CGS of CHIPPY. What is the net income? Assume that the by-product is not inventoried. The net
amount realized from the sale of the by-product is reported as other revenue. What is the net income?
A. P151,950; P109,950 C. P111,100; P109,950
B. P109,950; P111,100 D. P109,950; P151,950

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