PROBLEM

Voyager Inc. produces customized vans in a job order shop. On November 6, the following balances appear
in the inventory records:

Finished goods........................................................................................................................................ P179,000

Work in process..................................................................................................................................... 308,000
Materials................................................................................................................................................. 83,000

The amount in Finished Goods represents P101,000 recorded for Van 175 and P78,000 recorded for Van 177.
The work in process account represents the three vans in process, as follows:

Van 179 Van 180 Van 181

Factory overhead............................................................................... P75,000 P50,000 P25,000
Direct labor........................................................................................ 60,000 40,000 20,000
Direct materials................................................................................. 26,000 7,000 5,000

The following transactions occurred during November:

(a) Purchased materials on account, P80,000.
(b) Requisitioned P60,000 of materials from inventory: P15,000 applied to Van 180, P25,000 to Van 181,
and P16,000 to Van 182, a new order; the balance was for indirect materials.
(c) Record the additional labor cost distribution in a single entry: total payroll, P208,750. Of the payroll
cost, 10% applied to Van 179, 20% to Van 180, 36% to Van 181, 30% to Van 182, and the remainder
to indirect labor.
(d) Paid the payroll.
(e) Applied factory overhead at the rate of 150% of direct labor cost.
(f) Completed Vans 179 and 180.
(g) Sold on Account Vans 175, 177, and 180 at 150% of cost.
(h) Reclassify the following expenses as part of production costs

Factory Bldg. Depreciation 250,000

Factory Machine Repairs & Maintenance 30,000
Factory Insurance 150,000

(i) Close over/under application of factory overhead to Cost of Goods Sold

Required: Prepare general journal entries for (a) to (i) to record these transactions.
Prepare the Cost of Goods Sold
Present the cost sheets and account the work in process for 181, 182

Note: Continuation, do requirements in blue prints

SOLUTION
Debit Credit
(a) Materials......................................................................................................... 80,000
Accounts Payable................................................................................... 80,000

(b) Factory Overhead Control............................................................................ 4,000

Work in Process – Van180 ........................................................................... 15,000
Work in Process – Van181 ........................................................................... 25,000
Work in Process – Van182 ........................................................................... 16,000
Materials................................................................................................. 60,000

(c) Factory Overhead Control............................................................................ 8,350

Work in Process-Van179............................................................................... 20,875
Work in Process-Van180............................................................................... 41,750
Work in Process-Van181............................................................................... 75,150
Work in Process-Van182 …………………………………………………. 62,625
Accrued Payroll...................................................................................... 208,750
 FOH-C (208,750 x 5% = 10,437.50)

(d) Accrued Payroll............................................................................................. 208,750

Cash......................................................................................................... 208,750

(e) Work in Process-Van179............................................................................... 31,312.50

Work in Process-Van180.............................................................................. 62,625.00
Work in Process-Van181.............................................................................. 112,725.00
Work in Process-Van182.............................................................................. 93,937.50
Factory Overhead Applied.................................................................... 300,600.00

Van 179 Van 180 Van 181

Factory overhead............................................................................... P75,000 P50,000 P25,000
Direct labor........................................................................................ 60,000 40,000 20,000
Direct materials................................................................................. 26,000 7,000 5,000

(b) Factory Overhead Control............................................................................ 4,000

Work in Process – Van180 ........................................................................... 15,000
Work in Process – Van181 ........................................................................... 25,000
Work in Process – Van182 ........................................................................... 16,000

(c) Factory Overhead Control............................................................................ 8,350

Work in Process-Van179............................................................................... 20,875
Work in Process-Van180............................................................................... 41,750
Work in Process-Van181............................................................................... 75,150
Work in Process-Van182 …………………………………………………. 62,625

(e) Work in Process-Van179............................................................................... 31,312.50

Work in Process-Van180.............................................................................. 62,625.00
Work in Process-Van181.............................................................................. 112,725.00
Work in Process-Van182.............................................................................. 93,937.50
Factory Overhead Applied.................................................................... 300,600.00

Van179 Van 180 Van181 Van 182

Direct labor.................................................................... 20,875.00 41,750.00 75,150 62,625.00
X 150% (200,400 x 150% = 300,600)
Factory overhead...............................................................31,312.50 62,625.00 112,725 93,937.50

(f) Finished Goods-Van179................................................................................ 213,187.50

Finished Goods-Van180................................................................................. 216,375.00
Work in Process- Van 179................................................................. 213,187.50
Work in Process –Van 180…………………………................. 216,375.00

Van 179 Van 180 Van 181

Factory overhead............................................................................... P75,000 P50,000 P25,000
Direct labor........................................................................................ 60,000 40,000 20,000
Direct materials................................................................................. 26,000 7,000 5,000

WIP - Van 179

_______________________
FOH 75,000 213,187.50
DL 60,000
DM 26,000
DL 20,875
FOH 31,312.50
________________________
213,187.50

WIP - Van 180

_______________________
FOH 50,000 216,375
DL 40,000
DM 7,000
DM 15,000
DL 41,750
FOH 62,625
________________________
216,375

(g) Sold on Account Vans 175, 177, and 180 at 150% of cost.

Sold Vans 175, 177, and 180 at 50% over manufacturing costs.

Cost Sales Price (150% based on cost)

Van 175 P101,000 P151,500.00
Van 177 78,000 117,000.00
Van 180 216,375 324,562.50
Total 395,375 593,062.50

Cost of Goods Sold......................................................................................... 395,375

Finished Goods – Van175...................................................................... 101,000
Finished Goods – Van177 …………………………………………….. 78,000
Finished Goods – Van180 ……………………………………………. 216,375

(g) Accounts Receivable...................................................................................... 593,063

Sales......................................................................................................... 593,063

(h) Factory Overhead Control ………………………………………………….. 430,000

Depreciation Expense – Bldg. 250,000
Repairs & Maintenance - 30,000
Insurance Expense 150,000

(i) Factory Overhead – Applied P 450, 600

Over applied FOH 20,600
Factory Overhead Control 430,000

(j) Over applied FOH 20,600

Cost of Goods Sold 20,600
PROBLEM

Manufacturing Costs. The work in process account of Meyers Company showed:

The total value of Work in Process for Job 1 and Job 2

Materials P22,000
Direct labor 37,000
Factory overhead 55,500

Finished goods –Job 1 P68,000

Materials charged to Job 2 which is still in process amounted to P5,000. Factory overhead is applied as a
predetermined percentage of direct labor cost.

Required: Compute the following:

(1) The amount of direct labor cost in finished goods.

(2) The amount of factory overhead in finished goods.

SOLUTION

(1) The amount of direct labor in finished goods:

Finished goods............................................................................................................................. P68,000
Materials included in finished goods........................................................................................ 17,000
Direct labor and factory overhead in finished goods.............................................................. P51,000

Factory overhead charged to work in process P55,500

Let x = direct labor in finished goods = = 1.5
2.5x Direct labor
= 51,000 charged
direct to work
labor and in process
factory P37,000
overhead in finished goods
x = 20,400 direct labor in finished goods

(2) The amount of factory overhead in finished goods:

x = 20,400
1.5x = 1.5(20,400)
1.5x = 30,600 factory overhead in finished goods