MANAGEMENT ACCOUNTING (VOLUME I) - Solutions Manual

CHAPTER 15

FUNCTIONAL AND ACTIVITY-BASED

BUDGETING

I. Questions
1. No. Planning and control are different, although related, concepts.
Planning involves developing objectives and formulating steps to
achieve those objectives. Control, by contrast, involves the means by
which management ensures that the objectives set down at the planning
stage are attained.
2. Budgets have a dual purpose, for planning and for following up the
implementation of the plan. The great benefits from budgeting lie in the
quick investigation of deviations and in the subsequent corrective action.
Budgets should not be prepared in the first place if they are ignored,
buried in files, or improperly interpreted.
3. Two major features of a budgetary program are (1) the accounting
techniques which developed it and (2) the human factors which
administer it. The human factors are far more important. The success of
a budgetary system depends upon its acceptance by the company
members who are affected by the budget. Without a thoroughly
educated and cooperative management group at all levels of
responsibility, budgets are a drain on the funds of the business and are a
hindrance instead of help to efficient operations.
4. Manufacturing overhead costs are budgeted at normal operating capacity,
and the costs are applied to the products using a predetermined rate. The
predetermined rate is computed by dividing a factor that can be
identified with both the products and the overhead into the overhead
budgeted at the normal operating capacity. Budgets may also be used in
costing products in a standard cost accounting system.
5. The production division operates to produce the products that are sold.
Production and sales must be coordinated. Products must be
manufactured so that they will be available to meet sales delivery dates.
Activity of the production division will depend upon the sales that can
be made. Also, the sales division is limited by the capabilities of the
production department in manufacturing products. Successful operations
depend upon a coordination of sales and production.

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6. Labor hour required for production can be translated into labor pesos by
multiplying the number of hours budgeted by the appropriate labor rates.
The rates to be used will depend upon the rates established for job
classifications and the policy with respect to premium pay for overtime
or shift differences.
7. A long-range plan for the acquisition of plant assets is broken down and
entered in the current budget as the plan unfolds. The portion of the plan
which is to be executed in the next year is included in the budget for that
year.
8. A budget period is not limited to any particular unit of time. At a
minimum, a budget should cover at least one operating cycle. For
example, a budget should not cover a period when purchasing activity is
high and omit the period when sales volume and cash collection are
relatively high. The budget period should encompass the entire cycle
extending from the purchasing operation to the subsequent sale of the
products and the realization of the sales in cash. Ordinarily, a budget of
operations is prepared for a year which in turn is divided into quarters
and months. Long-term budgets, such as budgets for projects or capital
investments, may extend five to ten years or more into the future.
9. A rolling budget or a progressive budget or sometimes called continuous
budget, is a budget which is prepared throughout the year. As one month
elapses, a budget is prepared for one more month in the future. At any
one time for example, the company will have a budget for one year into
the future, when July of one year is over, a budget for the following July
will be added at the other end of the budget. This process of adding a
new month as a month expires is continuous.
10. Variances that are revealed by a comparison of actual results with a
budget are investigated if it appears that an investigation is warranted.
The investigation may show that stricter control measures are needed or
that some weaknesses in the operation should be corrected. It may also
reveal that the budget plan should be revised. The comparison is one
step in the control and direction of business operations.
11. A comparison of actual results with a budget can contribute information
that can be applied in the preparation of better budgets in the future.
Subsequent investigation of variances provides management with a
better knowledge of operations. This knowledge can be applied in the
preparation of more realistic budgets for subsequent fiscal periods.
12. A self-imposed budget is one in which persons with responsibility over
cost control prepare their own budgets, i.e., the budget is not imposed
from above. The major advantages are: (1) the views and judgments of

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persons from all levels of an organization are represented in the final

budget document; (2) budget estimates generally are more accurate and
reliable, since they are prepared by those who are closest to the
problems; (3) managers generally are more motivated to meet budgets
which they have participated in setting; (4) self-imposed budgets reduce
the amount of upward “blaming” resulting from inability to meet budget
goals. One caution must be exercised in the use of self-imposed
budgets. The budgets prepared by lower-level managers should be
carefully reviewed to prevent too much slack.
13. No, although this is clearly one of the purposes of the cash budget. The
principal purpose is to provide information on probable cash needs
during the budget period, so that bank loans and other sources of
financing can be anticipated and arranged well in advance of the actual
time of need.
14. Zero-based budgeting requires that managers start at zero levels every
year and justify all costs as if all programs were being proposed for the
first time. In traditional budgeting, by contrast, budget data are usually
generated on an incremental basis, with last year’s budget being the
starting point.

II. Matching Type

1. C 6. A
2. H 7. B
3. E 8. J
4. F 9. D
5. I 10. G

III. Exercises

Exercises 1 (Schedule of Expected Cash Collections)

Requirement 1

July August September Total

May sales:

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P430,000 × 10% P 43,000 P 43,000

June sales:
P540,000 × 70%, 10% 378,000 P54,000 432,000
July sales:
P600,000 × 20%,
70%, 10% 120,000 420,000 P 60,000 600,000
August sales:
P900,000 × 20%, 70% 180,000 630,000 810,000
September sales:
P500,000 × 20% 100,000 100,000
Total cash collections P541,000 P654,000 P790,000 P1,985,000

Notice that even though sales peak in August, cash collections peak in
September. This occurs because the bulk of the company’s customers pay in
the month following sale. The lag in collections that this creates is even
more pronounced in some companies. Indeed, it is not unusual for a
company to have the least cash available in the months when sales are
greatest.

Requirement 2

Accounts receivable at September 30:

From August sales: P900,000 × 10%......................................................................

P 90,000
From September sales: P500,000 × (70% + 10%)..................................................
400,000
Total accounts receivable........................................................................................
P490,000

Exercise 2 (Production Budget)

Septembe
July August r Quarter
Budgeted sales in units 30,000 45,000 60,000 135,000
Add desired ending inventory*
4,500 6,000 5,000 5,000
Total needs 34,500 51,000 65,000 140,000
Less beginning inventory 3,000 4,500 6,000 3,000
Required production 31,500 46,500 59,000 137,000
* 10% of the following month’s sales

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Exercise 3 (Materials Purchase Budget)

Quarter – Year 2 Year 3
First Second Third Fourth First
Required production of calculators 60,000 90,000 150,000 100,000 80,000
Number of chips per calculator × 3 × 3 × 3 × 3 × 3
Total production needs—chips 180,000 270,000 450,000 300,000 240,000

Year 2
First Second Third Fourth Year
Production needs—chips 180,000 270,000 450,000 300,000 1,200,000
Add desired ending inventory—
chips 54,000 90,000 60,000 48,000 48,000
Total needs—chips 234,000 360,000 510,000 348,000 1,248,000
Less beginning inventory—chips 36,000 54,000 90,000 60,000 36,000
Required purchases—chips 198,000 306,000 420,000 288,000 1,212,000
Cost of purchases at P2 per chip P396,000 P612,000 P840,000 P576,000 P2,424,000

Exercise 4 (Direct Labor Budget)

Requirement 1

Assumi
ng t
hatthe di
rectlaborworkf
orc
eisadj
ust
ed
eac
hquart
er,t
hedir
ectlaborbudgetwoul
dbe:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Year
Units to be produced 5,000 4,400 4,500 4,900 18,800
Direct labor time per unit (hours)
× 0.40 × 0.40 × 0.40 × 0.40 × 0.40
Total direct labor hours needed
2,000 1,760 1,800 1,960 7,520
Direct labor cost per hour × P11.00 × P11.00 × P11.00 × P11.00 × P11.00
Total direct labor cost P 22,000 P 19,360 P 19,800 P 21,560 P 82,720

Requirement 2

Assuming that the direct labor workforce is not adjusted each quarter and
that overtime wages are paid, the direct labor budget would be:

1st 2nd 3rd 4th

Quarter Quarter Quarter Quarter Year
Units to be produced 5,000 4,400 4,500 4,900 18,800
Direct labor time per unit
(hours) × 0.40 × 0.40 × 0.40 × 0.40 × 0.40
Total direct labor hours needed
2,000 1,760 1,800 1,960 7,520

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Regular hours paid 1,800 1,800 1,800 1,800 7,200

Overtime hours paid 200 - - 160 360
Wages for regular hours
(@ P11.00 per hour) P19,800 P19,800 P19,800 P19,800 P79,200
Overtime wages
(@ P11.00 per hour × 1.5) 3,300 - - 2,640 5,940
Total direct labor cost P23,100 P19,800 P19,800 P22,440 P85,140

Exercise 5 (Manufacturing Overhead Budget)

Requirement 1

Kiko Corporation
Manufacturing Overhead Budget

1st 2nd 3rd 4th

Quarter Quarter Quarter Quarter Year
Budgeted direct labor-hours 5,000 4,800 5,200 5,400 20,400
Variable overhead rate x P1.75 x P1.75 x P1.75 x P1.75 x P1.75
Variable manufacturing overhead P 8,750 P 8,400 P 9,100 P 9,450 P 35,700
Fixed manufacturing overhead 35,000 35,000 35,000 35,000 140,000
Total manufacturing overhead 43,750 43,400 44,100 44,450 175,700
Less depreciation 15,000 15,000 15,000 15,000 60,000
Cash disbursements for
manufacturing overhead P28,750 P28,400 P29,100 P29,450 P115,700

Requirement 2

Total budgeted manufacturing overhead for the year (a) P175,700

Total budgeted direct labor-hours for the year (b) 20,400
Predetermined overhead rate for the year (a) ÷ (b) P 8.61

Exercise 6 (Selling and Administrative Budget)

Helene Company
Selling and Administrative Expense Budget

1st 2nd 3rd 4th

Quarter Quarter Quarter Quarter Year
Budgeted unit sales 12,000 14,000 11,000 10,000 47,000
Variable selling and
administrative expense per
unit x P2.75 x P2.75 x P2.75 x P2.75 x P2.75
Variable expense P33,000 P 38,500 P 30,250 P 27,500 P129,250
Fixed selling and administrative
expenses:
Advertising 12,000 12,000 12,000 12,000 48,000

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Executive salaries 40,000 40,000 40,000 40,000 160,000

Insurance 6,000 6,000 12,000
Property taxes 6,000 6,000
Depreciation 16,000 16,000 16,000 16,000 64,000
Total fixed selling and
administrative expenses 68,000 74,000 74,000 74,000 290,000
Total selling and administrative
expenses 101,000 112,500 104,250 101,500 419,250
Less depreciation 16,000 16,000 16,000 16,000 64,000
Cash disbursements for selling
and administrative expenses
P 85,000 P 96,500 P 88,250 P 85,500 P355,250

Exercise 7 (Cash Budget Analysis)

Quarter (000 omitted)

1 2 3 4 Year
Cash balance, beginning P 9 * P 5 P 5 P 5 P 9
Add collections from customers
76 90 125 * 100 391 *
Total cash available 85 * 95 130 105 400
Less disbursements:
Purchase of inventory 40 * 58 * 36 32 * 166
Operating expenses 36 42 * 54 * 48 180 *
Equipment purchases 10 * 8 * 8 * 10 36 *
Dividends 2 * 2 * 2 * 2 * 8
Total disbursements 88 110 * 100 92 390
Excess (deficiency) of cash
available over disbursements
(3)* (15) 30 * 13 10

Financing:
Borrowings 8 20 * — — 28
Repayments (including
interest) 0 0 (25) (7)* (32)
Total financing 8 20 (25) (7) (4 )
Cash balance, ending P5 P 5 P 5 P 6 P 6

*Given.

IV. Problems

Problem 1 (Schedule of Expected Cash Collections and Disbursements)

Requirement 1

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September cash sales...............................................................................................

P 7,400
September collections on account:
July sales: P20,000 × 18%..................................................................................
3,600
August sales: P30,000 × 70%.............................................................................
21,000
September sales: P40,000 × 10%........................................................................
4,000
Total cash collections..............................................................................................
P36,000

Requirement 2

Payments to suppliers:
August purchases (accounts payable)..................................................................
P16,000
September purchases: P25,000 × 20%................................................................
5,000
Total cash payments................................................................................................
P21,000

Requirement 3

COOKIE PRODUCTS
Cash Budget
For the Month of September

Cash balance, September 1.....................................................................................

P 9,000
Add cash receipts:
Collections from customers.................................................................................
36,000
Total cash available before current financing.......................................................... 45,000
Less disbursements:
Payments to suppliers for inventory....................................................................
P21,000
Selling and administrative expenses....................................................................
9,000 *
Equipment purchases..........................................................................................
18,000
Dividends paid....................................................................................................
3,000
Total disbursements.................................................................................................
51,000
Excess (deficiency) of cash available over
disbursements......................................................................................................
(6,000)
Financing:
Borrowings..........................................................................................................
11,000
Repayments.........................................................................................................
0
Interest................................................................................................................
0
Total financing........................................................................................................
11,000
Cash balance, September 30...................................................................................
P5,000
* P13,000 – P4,000 = P9,000.

Problem 2 (Production and Purchases Budget)

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Requirement 1

Production budget:
Septembe
July August r October
Budgeted sales (units) 40,000 50,000 70,000 35,000
Add desired ending inventory 20,000 26,000 15,500 11,000
Total needs 60,000 76,000 85,500 46,000
Less beginning inventory 17,000 20,000 26,000 15,500
Required production 43,000 56,000 59,500 30,500

Requirement 2

During July and August the company is building inventories in anticipation

of peak sales in September. Therefore, production exceeds sales during these
months. In September and October inventories are being reduced in
anticipation of a decrease in sales during the last months of the year.
Therefore, production is less than sales during these months to cut back on
inventory levels.

Requirement 3

Raw materials purchases budget:

Septembe Third
July August r Quarter
Required production (units) 43,000 56,000 59,500 158,500
Material P214 needed per unit × 3 lbs. × 3 lbs. × 3 lbs. × 3 lbs.
Production needs (lbs.) 129,000 168,000 178,500 475,500
Add desired ending inventory (lbs.) 84,000 89,250 45,750 * 45,750
Total Material P214 needs 213,000 257,250 224,250 521,250
Less beginning inventory (lbs.) 64,500 84,000 89,250 64,500
Material P214 purchases (lbs.) 148,500 173,250 135,000 456,750

* 30,500 units (October production) × 3 lbs. per unit= 91,500 lbs.; 91,500 lbs. ×
0.5 = 45,750 lbs.

As shown in requirement (1), production is greatest in September. However,

as shown in the raw material purchases budget, the purchases of materials is
greatest a month earlier because materials must be on hand to support the
heavy production scheduled for September.

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Problem 3 (Cash Budget; Income Statement; Balance Sheet)

Requirement 1

Schedule of cash receipts:

Cash sales—June....................................................................................................
P 60,000
Collections on accounts receivable:
May 31 balance...................................................................................................
72,000
June (50% × 190,000).........................................................................................
95,000
Total cash receipts...................................................................................................
P227,000

Schedule of cash payments for purchases:

May 31 accounts payable balance...........................................................................

P 90,000
June purchases (40% × 200,000)............................................................................
80,000
Total cash payments................................................................................................
P170,000

PICTURE THIS, INC.

Cash Budget
For the Month of June

Cash balance, beginning.........................................................................................

P 8,000
Add receipts from customers (above)......................................................................
227,000
Total cash available.................................................................................................
235,000
Less disbursements:
Purchase of inventory (above).............................................................................
170,000
Operating expenses.............................................................................................
51,000
Purchases of equipment.......................................................................................
9,000
Total cash disbursements.........................................................................................
230,000
Excess of receipts over disbursements....................................................................
5,000
Financing:
Borrowings—note...............................................................................................
18,000
Repayments—note..............................................................................................
(15,000)
Interest................................................................................................................
(500)
Total financing........................................................................................................
2,500
Cash balance, ending..............................................................................................
P 7,500

Requirement 2

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PICTURE THIS, INC.

Budgeted Income Statement
For the Month of June

Sales........................................................................................................................
P250,000
Cost of goods sold:
Beginning inventory............................................................................................
P 30,000
Add purchases.....................................................................................................
200,000
Goods available for sale......................................................................................
230,000
Ending inventory.................................................................................................
40,000
Cost of goods sold...............................................................................................
190,000
Gross margin...........................................................................................................
60,000
Operating expenses (P51,000 + P2,000)................................................................. 53,000
Net operating income..............................................................................................
7,000
Interest expense.......................................................................................................
500
Net income..............................................................................................................
P 6,500
Requirement 3

PICTURE THIS, INC.

Budgeted Balance Sheet
June 30

Assets
Cash........................................................................................................................
P 7,500
Accounts receivable (50% × 190,000).................................................................... 95,000
Inventory.................................................................................................................
40,000
Buildings and equipment, net of depreciation
(P500,000 + P9,000 – P2,000)............................................................................
507,000
Total assets..............................................................................................................
P649,500

Liabilities and Equity

Accounts payable (60% × 200,000)........................................................................
P120,000
Note payable...........................................................................................................
18,000
Share capital............................................................................................................
420,000
Retained earnings (P85,000 + P6,500)....................................................................
91,500
Total liabilities and equity.......................................................................................
P649,500

Problem 4 (Sales, Production and Materials Purchases Budget)

Requirement 1

Nikko Manufacturing Company

Sales Budget

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For the year ending December 31, 2005

Units Amount
First quarter 16,000 P 480,000
Second quarter 20,000 600,000
Third quarter 22,000 660,000
Fourth quarter 22,000 660,000
Total 80,000 P2,400,000

Requirement 2

Nikko Manufacturing Company

Statement of Production Required
For 2005

Quarter
1st 2nd 3rd 4th Total
Units to be sold 16,000 20,000 22,000 22,000 80,000
Add: Desired ending inventory (20%) 4,000 4,400 4,400 5,000 5,000
Total units required 20,000 24,400 26,400 27,000 85,000
Less: Beginning inventory 3,000 4,000 4,400 4,400 3,000
Units to be produced 17,000 20,400 22,000 22,600 82,000

Requirement 3

Nikko Manufacturing Company

Statement of Raw Materials Purchase Requirements
For 2005

Quarter
1st 2nd 3rd 4th Total
Units required for production 51,000 61,200 66,000 67,800 246,000
Add: Desired ending inventory 12,240 13,200 13,560 15,000 15,000
Total units 63,240 74,400 79,560 82,800 261,000
Less: Beginning inventory 12,500 12,240 13,200 13,560 12,500
Raw Materials to be Purchased 50,740 62,160 66,360 69,240 248,500

Problem 5 (Schedule of Expected Cash Collections; Cash Budget)

Requirement 1

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Schedule of expected cash collections:

Month
April May June Quarter
From accounts receivable P141,000 P 7,200 P148,200
From April sales:
20% × 200,000 40,000 40,000
75% × 200,000 150,000 150,000
4% × 200,000 P 8,000 8,000
From May sales:
20% × 300,000 60,000 60,000
75% × 300,000 225,000 225,000
From June sales:
20% × 250,000 50,000 50,000
Total cash collections P181,000 P217,200 P283,000 P681,200

Requirement 2

Cash budget:

Month
April May June Quarter
Cash balance, beginning P 26,000 P 27,000 P 20,200 P 26,000
Add receipts:
Collections from
customers 181,000 217,200 283,000 681,200
Total available 207,000 244,200 303,200 707,200
Less disbursements:
Merchandise purchases
108,000 120,000 180,000 408,000
Payroll 9,000 9,000 8,000 26,000
Lease payments 15,000 15,000 15,000 45,000
Advertising 70,000 80,000 60,000 210,000
Equipment purchases 8,000 — — 8,000
Total disbursements 210,000 224,000 263,000 697,000
Excess (deficiency) of
receipts over
disbursements (3,000) 20,200 40,200 10,200
Financing:
Borrowings 30,000 — — 30,000
Repayments — — (30,000) (30,000)
Interest — — (1,200) (1,200)

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Total financing 30,000 — (31,200 ) (1,200)

Cash balance, ending P 27,000 P 20,200 P 9,000 P 9,000

Requirement 3

If the company needs a minimum cash balance of P20,000 to start each

month, the loan cannot be repaid in full by June 30. If the loan is repaid in
full, the cash balance will drop to only P9,000 on June 30, as shown above.
Some portion of the loan balance will have to be carried over to July, at
which time the cash inflow should be sufficient to complete repayment.

Problem 6 (Flexible Budget)

Summer Machine Company

Flexible Overhead Budget
Department 1

Capacity
100% 90% 80% 70% 60%
Machine Hours 200,000 180,000 160,000 140,000 120,000
Variable Overhead P1,300,000 P1,170,000 P1,040,000 P 910,000 P 780,000
Fixed Overhead 300,000 300,000 300,000 300,000 300,000
Total P1,600,000 P1,470,000 P1,340,000 P1,210,000 P1,080,000

Manufacturing Overhead rate per machine hour P8.00

Summer Machine Company

Flexible Overhead Budget
Department 2

Capacity
100% 90% 80% 70% 60%
Direct Labor Hours 200,000 180,000 160,000 140,000 120,000
Machine Hours 400,000 360,000 320,000 280,000 240,000
Variable Overhead P1,400,000 P1,260,000 P1,120,000 P 980,000 P 840,000
Fixed Overhead 500,000 500,000 500,000 500,000 500,000
Total P1,900,000 P1,760,000 P1,620,000 P1,480,000 P1,340,000

Manufacturing Overhead rate per machine hour P4.75

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V. Multiple Choice Questions

1. B 11. C 21. C
2. B 12. B 22. C
3. C 13. C 23. D
4. E 14. B 24. C
5. C 15. D 25. C
6. C 16. C 26. C
7. D 17. A 27. D
8. C 18. B 28. A
9. A 19. E 29. C
10. D 20. B 30. D

Supporting computations:

Questions 16 to 20:

January February
Cost of sales P1,400,000 P1,640,000
Add: Desired Minimum Inventory 492,000 456,000
Total 1,892,000 2,096,000
Less: Beginning Inventory (1,400,000 x 0.3) (17) 420,000 492,000
Gross Purchases (16) 1,472,000 1,604,000
Less: Cash discount 14,720 16,040
Net cost of purchases P1,457,280 P1,587,960

Payments of Purchases
60% - month of purchase P874,368 P 952,776
40% - following month 582,912
Total (18) P1,535,688

(19)
February
Cash

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Gross Discount Net

Current month’s sales (with
discount) 35% P595,000 P11,900 P583,100
Current month’s sales (without
discount) 15% 255,000 0 255,000
Previous month’s sales (with
discount) 4.5% 67,500 1,350 66,150
Previous month’s sales (without
discount) 40.5% 607,500 607,500
P1,525,000 P13,250 P1,511,750

(20)Total Collections in February P1,511,750

Add: Cash sales 350,000
Total P1,861,750

(21)Estimated cash receipts

Collections from customers P1,350,000
Proceeds from issuance of common stock 500,000
Proceeds from short-term borrowing 100,000
Total P1,950,000
Less: Estimated cash disbursements
For cost and expenses P1,200,000
For income taxes 90,000
Purchase of fixed asset 400,000
Payment on short-term borrowings 50,000
Total 1,740,000
Cash balance, Dec. 31 P 210,000

(22)Net income P120,000

Add: Depreciation 65,000
Working capital provided from operations P185,000
Add: Increase in income taxes payable P 80,000
Increase in provision for doubtful
accounts receivable 45,000 125,000
Total P310,000
Less: Increase in accounts receivable P 35,000
Decrease in accounts payable 25,000 60,000
Increase in cash P250,000

(23)Cash Receipts for February 2005

From February sales (60% x 110,000) P 66,000
From January sales 38,000

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Total P104,000

(24)Pro-forma Income Statement, February 2005

Sales P110,000
Cost of sales (75%) 82,500
Gross profit P 27,500

Less: Operating expenses 16,500

Depreciation 5,000
Bad debts 2,200 23,700
Net operating income P 3,800

(25)Accounts Payable on February 28, 2005 will be the unpaid purchases in

February - (75% x P120,000) = P90,000.

Questions 26 to 29:

Net sales P2,000,000

Less: Cost of sales
Finished goods inventory, Jan. 1 P 350,000
Add: Cost of goods manufactured (Sch. I) 1,350,000 *
Total available for sale P1,700,000
Less: Finished goods inventory, Dec. 31 400,000 1,300,000 (26)
Gross Profit P 700,000
Less: Operating and financial expenses
Selling P 300,000
Administrative 180,000
Finance 20,000 500,000
Net income before taxes P 200,000

* Determined by working back from net income to sales.

Schedule I

Raw materials used

Raw materials inventory, Jan. 1 P 250,000
Add: Purchases 491,000 (29)
Total available 741,000
Less: Raw materials inventory, Dec. 31 300,000
Raw materials used P 441,000
Direct labor 588,000
Manufacturing overhead 441,000 (28)
Total Manufacturing Cost P1,470,000 (27)
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Add: Work-in-process inventory, Jan. 1 200,000

Total P1,670,000
Less: Work-in-process inventory, Dec. 31 320,000
Cost of goods manufactured P1,350,000

(30)Variable factory overhead

P150,000
P3.125
48,000
Fixed factory overhead
P240,000
5.000
48,000
Total factory overhead P8.125

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