EXERCISES

LEGANES- BSA2-BDFH ; IVISAN – BSA2-A

1. Nelson Company incurred P100,000 in overhead costs during the most recent fiscal
year. At year-end, before the application of overhead costs to ending inventories, direct
costs had been identified as follows:

DIRECT LABOR DIRECT MATERIALS

FINISHED GOODS 20,000 80,000
WORK IN PROCESS 30,000 120,000

Overhead is applied at the rate of 50% of direct labor cost.

At what amount should the inventories be valued at year-end?

Finished goods & Work in process

a. 100,000 and 250,000
B. 140,000 and 210,000
C. 110,000 & 165,000
D. 115,000 & 172,500

2. Marielyn Company has overapplied overhead of 45,000 for the year ended December
31, 2015. Before the disposition of the overhead applied, selected December 31, 2015
balances from Marielyn’s accounting records are as follows:

Sales 1,200,000
Cost of goods sold 800,000
Inventories:
Direct materials 50,000
Work in process 50,000
Finished goods 150,000

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

appropriate inventories and cost of goods sold based on year-end balances. In its 2015
income statement, Marilyn should report the cost of goods sold of:

a. 682,500
B. 684,000
C. 764,000
D. 757,500