CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING GERMAN/LIM/VALIX/K. DELA CRUZ/MARASIGAN

JOB ORDER COSTING

Part I: Theory of Accounts

1. Which of the following statements is TRUE?

A. If actual overhead is less than applied overhead, upon closing, overhead is underapplied and
Cost of Goods Sold is credited.
B. Actual overhead exceeds applied overhead and the amount is immaterial, upon closing,
overhead is underapplied and Cost of Goods Sold will increase.
C. Applied overhead consists of estimated activity times predetermined overhead rate.
D. In order to obtain more accurate product costs, many companies now allocate overhead using
just-in-time methods.

2. Which of the following statements is FALSE?

A. The actual costs of all individual overhead categories are recorded in the Manufacturing
Overhead Control account.
B. Direct costs are traced the same way for actual costing and normal costing.
C. Overhead costs allocated each month are expected to equal actual overhead costs incurred each
month.
D. Activity Based Costing is particularly useful when overhead costs are a significant portion of
total costs.

3. The net cost of normal spoilage in a job order costing system in which spoilage is common to all
jobs should be
A. assigned directly to the jobs that caused the spoilage
B. charged to manufacturing overhead control during the period of spoilage
C. charged to loss account during the period of spoilage
D. allocated only to jobs that are completed during the period

4. The rework cost in a job order costing system in which the defective goods are charged to a specific
job should be
A. treated as expense immediately
B. charged to manufacturing overhead control
C. capitalized to the particular job as an additional cost in the work in process
D. ignored

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Part II: Problem Solving

Problem 1
WZM Company is a manufacturing company with a fiscal year that runs from July 1 to June 30. The
company uses a job order accounting system to its production costs. A predetermined overhead rate
based upon direct labor hours is used to apply overhead to individual jobs. A flexible budget of
overhead costs was prepared for the fiscal year as shown below:

Direct labor hours 50,000 75,000 100,000

Variable overhead costs P250,000 P375,000 P500,000
Fixed overhead costs 187,500 187,500 187,500

Although the annual maximum capacity is 100,000 direct labor hours, the company officials have
determined that 75,000 direct labor hours to be the normal capacity for the year. Job 16-42 was not
completed and job 16-40 remained unsold at the end of the month. Any over/under applied overhead is
not material.

The information presented below is for the month of August:

Inventories, August 1
Raw Materials and Supplies P18,750
Work in Process (Job 16-40) 32,410
Finished Goods 58,600

Purchases of raw materials and supplies during the month:

Raw materials P150,000
Supplies 10,000

Materials and supplies requisitioned for production:

Job 16-40 P45,500
Job 16-41 39,210
Job 16-42 32,050
Supplies 28,640

Factory direct labor hours

Job 16-40 12,100
Job 16-41 10,500
Job 16-42 9,600

Labor costs
Direct labor wages P257,600
Indirect labor wages (4,000 hours) 20,000
Supervisory salaries 36,000

Building occupancy costs (heat, light, depreciation, etc.)

Factory facilities P26,500
Sales office 41,000
Administrative office 50,000

Factory equipment costs

Power P44,000
Repairs and maintenance 26,000
Depreciation 40,000
Others 32,000

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Compute for the following:

1. Amount to be debited to Finished Goods Inventory during the month

A. 435,010
B. 467,420
C. 526,020
D. 324,060

2. Adjusted Cost of goods sold during the month of August

A. 201,960
B. 190,320
C. 213,600
D. 233,050

3. Which of the following statements is FALSE?

A. The Total Manufacturing Cost in August amount to P615,860
B. The Finished Goods Inventory at the end of the month amount to P265,460
C. The Work in Process Inventory at the end of the month amount to P180,850
D. The Raw Materials and Supplies Inventory account at the end of the month amount to P33,350

4. Which of the following statements is TRUE?

A. Upon requisition of materials for production there is a debit to Work in Process account in the
amount of P145,400
B. The Building occupancy costs will be debited to Factory Overhead Control account in the
amount of P117,500
C. Factory Overhead Applied account will be debited in the amount of P241,500
D. For the month of August, there is a credit to Finished Goods Inventory account in the amount
of P201,960

5. Which of the following statements is TRUE?

A. Other than indirect materials and indirect labor, total actual manufacturing overhead will be
credited to various accounts in the amount of P142,000
B. Upon purchase of raw materials and supplies during the month, Factory Overhead Control
account in the amount of P10,000 will be debited
C. To record labor incurrence, Payroll account will be debited in the amount of P313,600
D. In closing the difference between the actual and applied overhead, Cost of Goods Sold account
will be credited

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Problem 2
You are asked to bring the following incomplete accounts up to date through February 28, 2021. You
are also to consider the additional information that follow:
January 31, 2021 February 28, 2021
Raw Materials Inventory ? P297,500
Work in process Inventory P 90,000 ?
Finished Goods Inventory 210,000 ?
Accounts Payable 175,000

Additional Information:
a. Overhead is applied by using a predetermined rate that is set at the beginning of each year by
forecasting the year’s overhead and relating it to forecasted direct labor hours. The budget for
2021 called for a total of 1,200,000 direct labor hours and P10,800,000 of factory overhead.
b. The accounts payable are for direct materials only. The balance on March 1 was P325,000.
Payments of P800,000 were made during February.
c. The finished Goods Inventory at the end of February was P300,000
d. The Cost of Goods Sold during the month was P1,408,000. This amount is after closing the
under/over applied overhead which is immaterial
e. On February 28, there was only one unfinished job in the factory; cost records showed that
P90,000 (8,000 hours) of direct labor and P75,000 of the direct materials had been charged to
the job.
f. A total of 38,000 direct labor hours were worked during the month of February. All the
factory workers earn the same rate of pay.
g. Manufacturing Overhead Control amount to P375,000 had already been posted

Based on all foregoing transactions, compute for the following:

6. Amount to be debited to Raw Materials Inventory
A. 297,500
B. 950,000
C. 842,500
D. 800,000

7. Amount to be credited to Work in Process Inventory

A. 1,465,000
B. 1,498,000
C. 237,000
D. 1,612,000

8. Amount to be debited to Work in Process – Overhead

A. 427,500
B. 90,000
C. 72,000
D. 342,000

9. Amount to be credited to Raw Material Inventory

A. 297,500
B. 842,500
C. 800,000
D. 325,000

10. Amount to be credited to Finished Goods Inventory

A. 1,612,000
B. 1,408,000
C. 1,375,000
D. 1,465,000
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Problem 3
ABC Company’s Job 501 for the manufacture of 2,200 sling bags was completed during January 2022
at the following unit costs:

Direct materials P50

Direct labor 45
Factory overhead (includes an allowance 45
of P2.50 for spoiled units)

Final inspection of Job 501 disclosed 200 spoiled sling bags which were sold to a department store for
P15,000.

Compute the unit cost of the good shoes produced on Job 501 if spoilage loss is charged to:

1. All production
A. 143.75
B. 142.50
C. 140.00
D. 137.50

2. Specific to Job 501

A. 140.00
B. 141.25
C. 142.50
D. 143.75

Problem 4
During January, XYZ Company incurred the following costs on Job Order 111 for manufacturing of
200 units:
Original cost accumulation
Direct materials P 660
Direct labor 800
Factory overhead (150% of direct 1,200
labor cost) P2,660

Direct costs of reworking 10 units:

Direct materials P100
Direct labor 160 a
P260

1. The rework costs were attributable to the exacting specifications of Job Order 111 and the
full rework costs were charged to this specific job. Compute the cost per finished unit of Job
Order 111
A. 15.00
B. 15.70
C. 15.80
D. 16.20

2. Assuming the rework costs were attributable to internal failure, compute the cost per
finished unit of Job 111
A. 13.50
B. 13.40
C. 13.30
D. 13.20
END

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