An asset is constructed and the following costs are incurred:

Materials (normal, P 1,000,000)

Labor (normal, P 800,000)
Manufacturing overhead 900,000 = 2øb)Q

Constructe Finishe
d d
asset goods Tota
l
Materials 300,000
Labor 200,000 800,000
Manufacturing overhead 180,000 720,000
900,000

680,000
Note that the overhead is allocated to the constructed asset and
finished goods on the basis of direct labor cost.

Direct Fraction Overhead

labor
Constructed asset
200,000 2 / 10 180,000
Finished goods
800,000 8 / 720,000
10
900,000