Problem 1.

Required; Journal entry

Debit Credit
1 Raw Materials 1,412,000
Account Payable 1,412,000
2 Work in Process 1,299,500
Manufacturing overhead 98,000
Raw Materials 1,397,500
3 Work in Process 316,000
Manufacturing overhead 163,200
Salaries & Wages Payable 479,200
4 Manufacturing overhead 1,081,200
Accumulated Depreciation 1,081,200
5 Manufacturing overhead 79,600
Accounts Payable 79,600
6 Finished Goods 2,494,200
Work in Process 2,494,200
7 Cost of Good Sold 1,740,000
Finished Goods 1,740,000
8 Accounts Receivable 3,570,000
Sales 3,570,000

Problem 2

Required 1. Prepare a schedule of cost of goods manufactured in good form.

Manufacturing Overhead

Indirect Labor 63,000

Indirect Material 34,000
Depreciation-Factory 114,000
Factory Utility 14,000
Total Manufacturing Overhead 225,000
Manufacturing Overhead Applied 225,000

Required 2. Was the overhead under-or overapplied? By how much?

Predetermined Overhead Rate= Estimated Total Overhead cost/ Estimated Total Base Units
Total Base Units= Total machine hours
POHR= 176,000/44,000= Php 4.00/machine hours
Applied OH= POHR x Actual machine hours
Applied OH= 4 x 47= 188,000
Applied OH – Actual OH
188,000 – 225,000 = 37,000
It is under-applied for the year for 37,000
 Required 3. Prepare an income statement for the year in good form. The company closes any under-or overapplied
overhead to Cost of Goods Sold.

Statement of Cost of Goods Manufactured

Direct Material

Beginning Raw Materials Inventory 26,000.00

Add: Raw Materials purchased 459,000.00

Total raw materials available 485,000.00

Less: Ending raw materials inventory 20,000.00

Total raw materials used 465,000.00

Less: Indirect Materials 34,000.00

Direct Materials Used 431,000.00

Direct Labor 296,000.00

Manufacturing Overhead

Indirect Labor 63,000.00

Indirect Material 34,000.00

Depreciation- Factory 114,000.00

Factory Utility 14,000.00

Total Manufacturing Overhead: 225,000.00

Total Manufacturing Costs 952,000.00

Add: Beginning Work-in-process Inventory 71,000.00

1,023,000.00

Less: Ending Work-in process Inventory 53,000.00

Cost of Goods Manufactured 970,000.00

Problem 3

Required:
           
            Fill in the lettered blanks above. SHOW YOUR CALCULATIONS.
 LA TRINIDAD
BAGUIO factory
factory

Estimated manufacturing overhead P1,000,000 P1,600,000

Estimated amount of allocation base (a) 100,000 MHs 200,000 MHs

Predetermined overhead rate P10 per DLP (d) P 8 / DLP

Actual amount of allocation base (b) 101,000 MHs 190,000 MHs

Actual manufacturing overhead P1,092,500 P1,472,500

Applied manufacturing overhead P1,010,000 (e) P 1,520,000

Under or overapplied overhead (c) P 82,500 (f) P 47,500

SOLUTIONS
BAGUIO FACTORY
 a) Estimated Allocation Base= Estimated Manufacturing Overhead/ POHR
Estimated Allocation Base= 1,000,000/10 per DLP = 100,000 MHs
 b) Actual Allocation Base= Applied Manufacturing Overhead/ POHR
Actual Allocation Base= 1,010,000/10 = 101,000 MHs
 c) Under or Overapplied Overhead= Applied Overhead-Actual Overhead
Under or Overapplied Overhead= 1,010,000-1,092,500 = Php 82,500.00 underapplied
LA TRINIDAD FACTORY
 d) Predetermined Overhead Rate= Estimated Manufacturing Overhead / Estimated Amount of Allocation Base
Predetermined Overhead Rate= P 1,600,000/ 200,000 MHs = P 8.00 per DLP
 e) Applied Manufacturing Overhead= POHR x Actual DLP
Applied Manufacturing Overhead= P 8 per DLP x 190,000 MHs = P 1,520,000.00

 f) Under or Overapplied Overhead= Applied Overhead-Actual Overhead Under or Overapplied Overhead= 1,520,000-
1,472,500 = Php 47,500.00 overapplied

PROBLEM 4.
Required 1

Compute the cost of direct materials purchased during the year.

Direct Materials
Direct Materials, Beginning 130

Add: Materials Purchased 1,200

Less: Direct Materials, Ending 80

Direct Materials Used in Production

2. Compute the predetermined overhead rate that was used during the past year.

Direct Materials ₱ 1,250.00

Direct Labor ₱ 2,000.00

Applied Factory Overhead ₱ 2,800.00

Total Manufacturing Costs ₱ 6,050.00

Predetermined Overhead Rate = Estimated Manufacturing Overhead / Estimated Amount of Allocation Base
Predetermined Overhead Rate = 2,800 / 2000 = P 1.40 per DLH
3. Compute the Cost of Goods Manufactured for the past year.
Direct Materials
Direct Materials, Beginning 130

Add: Purchases 1,200

Less: Direct Materials, Ending 80

Direct Materials used in production 1,250

Direct Labor 4,500

Manufacturing Overhead 2,800

TOTAL MANUFACTURING COSTS 6,050

Add: Beginning WIP Inventory 250

Less: Ending WIP Inventory 400

COGM for the year: 5,990

4. Compute the Cost of Goods Sold for the past year.

Cost of Goods Manufactured 5,900.00

Add: Beginning FG Inventory 300.00

Total goods available for sale: 6,200.00

Less: Ending FG Inventory 200.00

Cost of Goods Sold

Required:
 1. Compute the amount of under-or overapplied overhead cost for the year.
Applied Overhead = POHR x Actual Machine Hours
Applied Overhead = 5 x 5,000 = Php 25,000
Under or Overapplied Overhead = Applied Overhead -Actual Overhead
Under or Overapplied Overhead = Php 25,000-24,000 = 1,000 overapplied for the year
 2. Prepare a schedule of the Cost of Goods Manufactured for the year.

Direct Materials

Direct Materials, Beginning 4,000

Add: Materials Purchased 16,000

Total direct materials available: 20,000

Less: Direct Materials, Ending 3,500

Total Direct Material Used: 16,500

Direct Materials Used 16,500

Direct Labor 20,000

Manufacturing Overhead

Indirect Labor 5,000

Depreciation-Factory 12,000

Factory Utility 2,500

Property Taxes 1,500

Factory Insurance 3,000

Total Manufacturing Overhead: 24,000

Total Manufacturing Costs: 60,500

Add: Beginning Work-In process inventory 3,000

63,500

Less: Ending Work-In process inventory 3,750

Cost of Goods Manufactured 59,750

Problem 6
Required:
If overhead is overapplied, what adjustment does the company make to the Cost of Goods Sold? Is Cost of Goods Sold
increased or decreased? Why?
 -As the Overhead to COGS is overlapped, it will affect the COGS where it decreases while the net income rises. On
the other hand, COGS should be adjusted from the credit account and debit Manufacturing Overhead Cost.