Problem 2

Far Eastern Manufacturing Company has developed the following information the year ended December 31, 2022.

Raw Materials Inventory, January 1 218,750

Purchases 312,500
Raw Materials Inventory, December 31 156,250
Direct Labor 337,500
Factory Overhead (120% of direct labor cost) ?
Work in Process Inventory, January 1 112,500
Work in Process Inventory, December 31 150,000
Finished Goods Inventory, January 1 125,000
Finished Goods Inventory, December 31 100,000

Required: Cost of goods sold statement for the year ended December 31, 2022.

Problem 3

East Company submits the following data for May, 2022

Direct Labor Cost 200,000

Cost of Goods Sold 687,500
Factory Overhead- applied at 150% of direct
labor costs

Inventories May 1, 2022 May 31, 2022

Finished Goods 187,500 152,500
Work in Process 161,500 155,000
Materials 155,000 143,750

Required: Cost of Goods Sold statement for May 2022.

Problem 4

Letran Company completed the following transactions for October, 2022.

a) Purchased on account direct materials of 225,000.

b) The factory payroll was recorded. Direct labor 75,000; indirect labor 25,000. Employee payroll deductions were recorded as follows:
Withholding taxes 14,000
SSS Premiums 3,000
Phil Health Contribution 468.75
Pag Ibig Funds Contribution 2,025
c) Indirect materials purchased.
d) Employer payroll tax expense is recorded as follows:
SSS Premiums 4,500
Phil Health Contributions 468.75
Pag-Ibig Funds COntributions 2,025
e) Materials issued: direct materials- 150,000; indirect materials- 12,500
f) Defective materials 6,250 were returned to vendors.
g) Accounts payable totaling 185,375 and accrued payroll, were paid.
h) Slundry factory expenses of 31, 125 were recorded as liabilities
i) Factory overhead was charged to production at 120% of direct labor costs
j) Goods completed with a total cost of 225,000 were transferred to finished goods
k) Sales were 262,500 and cost 175,000 to produce

Requirements:

1. Entries to record the transactions given above.

2. Statement of cost of goods sold.

Problem 5

Wesleyan Company contained the following account balances:

Cash 125,000
Accounts Receivable 75,000
Finished Goods 43,750
Work in Process 22,500
Materials 62,500
Accounts Payable 12,500
Accrued Payroll 10,000
Common Stock 250,000
Retained Earnings 56,250
During January, 2022, the following transactions were completed.

a) Materials purchased on account, 250,000.

b) Factory overhead incurred on account. 43,750
c) Payroll for the period consists of: direct labor- 175,000; indirect labor- 37,500; sales salaries – 31,250; and administrative salaries- 18,750.
Deductions from payroll were as follows:
Withholding taxes 23,150
SSS Premiums 10,500
Phil Health Contributions 1,406.25
Pag-Ibig Funds 7,875
d) 218,750 was paid for payroll
e) Computation of employer’s payroll tax is as follows:
Factory Selling Administrative
SSS Premiums 10,625 1,562.50 937.50
Phil Health Contributions 750 468.75 187.50
Pag-Ibig Funds 6,375 937.50 562.50
f) Materials issued: direct materials – 231, 250; indirect – 43,750.
g) Factory Overhead was charged to production at 80% of direct labor cost.
h) Work finished and placed in stock- 512,500.
i) Cost of goods sold – 481,250. The markup was 40% of cost
j) Cash collected from customers, 506,250
k) Payments for liabilities amounted to 275,000, other than payroll
l) Remitted withheld tax to BIR and paid in full all accounts with GOCCs regarding employee welfare.

Requirement for Problem 5

1. Journal entries to record the above transactions

2. Cost of goods sold statement for January, 2022
3. Statement of Comprehensive Income for January, 2022
4. Statement of Financial Position as of January 31, 2022.

Problem 6

Asia Career Company, a manufacturing entity shows the following amounts in the cost of goods sold statement and the statement of comprehensive income for the year 2022.

January 1, 2022 December 31, 2022

Materials 125,000 187,500
Work in Process 108,750
Finished Goods 100,000
Materials Used 737,500
Cost of Goods sold 937,500
Cost of goods manufactured 1,000,000
Total Manufacturing costs 987,500
Required:

1. Work in process, January 1, 2022

2. Finished goods, December 31, 2022
3. Amount of materials purchased in 2022

Instructions (Problem 6)- Answer each of the following

1. Why is Santo Tomas Company using a job order cost system?

2. On what basis does the company allocate its manufacturing overhead?
Compute the predetermined overhead rate for 2022.
3. Compute the amount of the under-or-over applied overhead for 2022.
4. Determine the cost of goods sold given the following additional data.
January 1, 2022 December 31, 2022
Work in process 6,250,000 5,000,000
Finished goods 16,250,000 13,750,000

Problem 7

Santo Tomas Company manufactured unique, custom-made furniture. The company uses a job order system and applied overhead to production on the basis of direct labor cost. In
computing a predetermined overhead rate for thee year 2022, the company estimated manufacturing overhead to be 32,500,000 and direct labor costs to be 25,000,000.

Accrual costs incurred during 2022

Direct materials used 37,500,000

Direct labor cost incurred 22,500,000
Insurance- factory equipment 625,000
Indirect labor 9,375,000
Factory maintenance 2,500,000
Rent- factory building 13,750,000
Depreciation- factory equipment 2,500,000

Problem 8

Polytechnic Company’s records were destroyed by fire. The controller was able to ascertain that sales for the nine-month period ending September 30 were 1,250,000. The company’s suppliers
indicated that merchandise costing 500,000 was delivered for the period. The company’s statement indicated the ending inventory for the previous accounting period was 260,00. The company
was reimbursed by its insurance company for 200,000 worth of inventory destroyed by the fire. Insurance companies pay 80% of the cost for casualty of this nature. There were no other
inventories on hand.

Required:

1. Estimate the cost of goods for this period

2. Amount of loss to the company
MULTIPLE-CHOICE-PROBLEMS (CHAPTER 3)

For Luzon Company, the predetermined overhead rate is 80% of direct labor cost. During the month, Luzon incurs 312,500 of factory labor cost, of which 20% is indirect labor. Actual
overhead incurred was 207,000 that includes the indirect labor.

1. The amount of overhead debited to Work in Process Inventory should be:

a. 200,000
b. 144,000
c. 168,000
d. 160,000

The following information was taken from Visayas Company’s accounting records for the year ended December 31, 2022.

Increase in raw materials inventory 31,250

Decrease in finished goods inventory 56,250
Raw materials purchased 562,500
Direct labor payroll 250,000
Factory overhead 375,000
2. There was no work-in-process inventory at the beginning or end of the year. Visayas Company’s 2022 cost of goods sold is
a. 1,212,500
b. 925,000
c. 970,000
d. 1,221,500

Items 3 through 5 are based on the following information pertaining to Mindanao Company’s manufacturing operations.

Inventories 3/1/22 3/31/22

Direct Materials 45,000 37,500
Work-in-process 22,500 15,000
Finished goods 67,500 90,000

Additional information for the month of March 2022

Direct materials purchased 105,000

Direct labor payroll 75,000
Direct labor per hour 7.50
Factory overhead rate/direct labor hour 10.00
3. For the month of March 2022, prime cost was
a. 90,000
b. 120,000
c. 187,500
d. 150,000
4. For the month of March 2022, conversion cost was
a. 90,000
b. 140,000
c. 144,000
d. 175,000
5. For the month of March 2022, cost of goods manufactured was
a. 295,000
b. 224,000
c. 230,000
d. 236,000

Items 6 and 7 are based on the following data of Matatag Company for the month of March 2022:

March 1 March 31
Materials 50,000 62,500
Work in process 31,250 43,750
Finished Goods 75,000 87,500

March 1 to 31, 2022

Direct Labor Cost 150,000

Factory overhead applied 135,000
Cost of goods sold 472,500
6. The total amount of direct materials purchased during March was:
a. 50,000
b. 170,000
c. 180,000
d. 225,000
7. The cost of goods manufactured during March 2022 was:
a. 378,000
b. 388,000
c. 398,000
d. 485,000

Some selected sales and costs data for Alcid Manufacturing Company are given below:

Direct materials used 125,000

Direct labor 187,500
Factory overhead (40% variable) 93,750
Selling and administrative expenses (50% direct, 60% 150,000
variable)
8. Prime cost was:
a. 175,000
b. 250,000
c. 130,000
d. 312,500
9. Conversion cost was:
a. 150,000
b. 225,000
c. 250,000
d. 281,250
 10. Direct cost was:
a. 225,000
b. 250,000
c. 310,000
d. 387,500
11. Indirect cost was:
a. 168,750
b. 135,000
c. 195,000
d. 325,000

12. Product cost was:

a. 135,000
b. 250,000
c. 325,000
d. 406,250
13. Variable cost was:
a. 440,000
b. 280,000
c. 352,000
d. 370,000

During 2022, there was no change in either materials or the WP inventories. However, FG which had a beginning balance of 31,250, increased by 18,750.

14. If the manufacturing costs incurred totaled 600,000 during 2022, the goods available for sale must have been:
a. 781,250
b. 600,000
c. 610,000
d. 625,000

During the month of May 2022, Candace Mfg. Co. incurred 37,500. 50,000, and 25,000 of materials, labor and factory overhead costs respectively.

15. If the CoGM was 118,750 in total and the ending inventory was 18,750, the beginning inventory of work in process must have been
a. 10,000
b. 20,000
c. 110,000
d. 25,000

The Lion Company’s cost of goods manufactured was 150,000 when its sales were 450,000 and its gross margin was 275,000

16. If the ending inventory of FG was 37,500, the beginning inventory of finished goods must have been:
a. 10,000
b. 50,000
c. 130,000
d. 62,500

The gross margin for Cruise Company for 2022 was 406,250 when sales were 875,000. The FG inventory, beginning was 75,000 and the FG inventory, end was 43,750
 17. The cost of goods manufactured was
a. 300,000
b. 350,000
c. 437,500
d. 375,000

During the month of January, F Co.’s direct labor cost totaled 36,000, and direct labor cost was 60% of prime cost.

18. If total mfg. cost during January were 85,000, the factory overhead was:
a. 24,000
b. 25,000
c. 31,250
d. 60,000

During 2022, there was no change in the beginning or ending balance in the Materials inventory account for the DL Co. However, the WP inventory account increased by 18,750, and the FG
inventory account decreased by 12,500.

19. If purchases of raw materials were 125,000 for the year, direct labor costs was 187,500, and manufacturing overhead cost was 250,000, the cost of goods sold for the year would be:
a. 556,250
b. 445,000
c. 465,000
d. 475,000

During the month of March 2022, Nape Co. used 375,000 of direct materials. At March 31,2022, Nape’s direct materials inventory was 62,500 more than it was at March 1, 2022.

20. Direct materials purchases during the month of March 2022 amounted to:
a. 437,500
b. 250,000
c. 300,000
d. 350,000
21. Calculate the manufacturing overhead incurred for F&B Co.
Direct labor cost incurred 312.50
Direct materials used 137.50
Beginning work in process 62.50
Ending work in process 212.50
Finished goods completed 375
a. 60
b. 75
c. 560
d. 580
22. Determine the sales for the year
Gross profit 360,000
Ending inventory 150,000
Goods available for sale 225,000
 a. 425,000
b. 340,000
c. 400,000
d. 460,000

Given the following information:

Finished goods beginning 26,000

Finished goods ending 37,000
Cost of goods manufactured 127,000
23. What is the cost of goods sold?
a. 115,500
b. 116,000
c. 153,000
d. 190,500

Uniflo Manufacturing Company developed the following data for the current year.

Work in process inventory, January 1 40,000

Direct materials used 24,000
Actual factory overhead 48,000
Applied factory overhead 36,000
Cost of goods manufactured 44,000
Total manufacturing costs 120,000
24. Uniflo Company’s direct labor cost for the year is
a. 12,000
b. 60,000
c. 36,000
d. 48,000

The following data relate to Maxine Manufacturing Company for the period:

Direct labor 2,400

Factory overhead 1,700
Work in process inventory, beginning 11,000
Work in process inventory, ending 5,000
Cost of goods manufactured 16,000
Sales 50,000
Finished goods inventory, beginning 9,000
Finished goods inventory, end 8,000
Total selling, general, and administrative costs 14,000
25. The amount of direct materials put into production during the period
a. 6,700
b. 5,600
c. 4,800
d. 5,900