CHAPTER 9
Answers to Multiple Choice – Theoretical
1. c 6. b 11. b
2. b 7. b 12, d
3. a 8. c 13. b
4. a 9. b 14. b
5. a 10. d 15. a
Solutions to Multiple Choice – Computational
1. (a)
Total manufacturing cost: (2,200 units x P56) P123,200 Less: cost of spoiled units (200 units x P56) 11,200
Cost of good units P112,000
Unit cost: (P112,000 / 2,000 good units) P 56 (1) Manufacturing cost: (P56 – P1) x 2,200 = P121,000 Less: Scrap value of spoiled units 6,000
Cost of good units P115,000
Unit cost: (P115,000 / 2,000 good units) P 57.50 (2)
2. (d)
Charged to Specific Job:
Direct materials P 660
Direct labor 800
Manufacturing overhead (P800 x 150%) 1,200
Manufacturing cost P2,660
Unit cost: (P2,660 / 200 units) P13.30
Due to internal failure:
Manufacturing cost P2,660
Add: Rework cost
Direct materials P100
Direct labor 160
Overhead (P160 x 150%) 240 500
Total cost after rework cost P3,160
3. (d)
4. (a)
5. (c)
Charged to specific job:
Direct materials: (8,000 units x P5) P40,000 Direct labor: (8,000 units x P4) 32,000 Manufacturing overhead: (8,000 units x P3) 24,000
Manufacturing costs P96,000
Less: Scrap value (600 x P7) 4,200 Manufacturing cost net of scrap value P91,800 Unit cost: (P91,800 / 7,400 good units) P 12.41 Charged to all production:
Direct materials P 40,000
Direct labor 32,000
Manufacturing overhead: (8,000 units x P3.50) 28,000
Manufacturing cost P100,000
Less: Cost of spoiled units (600 x P12.50) 1,500 Manufacturing cost of good units P 98,500
Unit cost: (P98,500 / 7,400 good units) P 12.50
6. (b)
Charged to LGU Machine Works:
Direct materials: (1,000 x P3.50) P 7,000 Direct labor: (2,000 x P1.25) 2,500 Overhead: (P2,500 x 140%) 3,500 Manufacturing cost P13,000 Rework cost: Direct materials: (100 x P0.15) P15 Direct labor: (100 x P0.25) 25 Overhead: (P25 x 140%) 35 75
Total manufacturing cost P13,075
Unit cost: (P13,075 / 2,000 units) P6.5375 Charged to Factory Overhead Control:
Direct materials P 7,000
Direct labor 2,500
Overhead: (P2,500 x 150%) 3,750
Manufacturing cost P13,250
7. (a) 8. (b) 9. (d) Direct materials (25 x P80) P 2,000 Direct labor (25 x P194) 4,850 Overhead (P4,850 x 100%) 4,850 Total P11,700
Less: Scrap value (2 x P400) 800
Manufacturing cost of 23 units P10,900
Unit cost: (P10,900 / 23) P473.91 10. (b) Direct materials P26,951 Direct labor 15,076 Overhead 7,538 Total P49,565
Less: Cost of spoilage: (P49,565 / 2,200) x 200 units 4,506 Manufacturing cost of 2,000 units P45,059
Unit cost: (P45,059 / 2,000) P 22.53 11. (b) Direct materials (P95 x 250) P23,750 Direct labor (P6 x 5,260 DLH) 31,560 Applied overhead (P2 x 5,260 DLH) 10,520 Total P65,830
Less: Cost of spoilage (P65,830 / 250) x 10 2,633
Manufacturing cost of 240 units P63,197
Unit cost: (P63,197 / 240) P263.32 12. (d) Direct materials P30,000 Direct labor 12,500 Overhead (P12,500/P2.50) x P1.50 7,500 Total P50,000 Rework cost (P100 + P125 + P75) 300 Sales value of spoiled units (1,000 x P4) (40,000) Manufacturing cost of 9,000 units P46,300
Solutions to Problems
Problem 9-1
1. Cash/Accounts receivable 2,500
Other income 2,500
2. Cash/Accounts receivable 2,500
Cost of goods sold 2,500
3. Cash/Accounts receivable 2,500
Factory overhead control 2,500
4. Cash/Accounts receivable 2,500
Work in process inventory 2,500
Problem 9-2
1. Cash/Accounts receivable 4,000
Other income 4,000
2. Cash/Accounts receivable 4,000
Factory overhead control 4,000
3. Cash/Accounts receivable 4,000
Work in process inventory 4,000
4. Materials inventory 4,000
Factory overhead control 4,000
Work in process inventory 4,000
Materials inventory 4,000
Problem 9-3
1. Work in process inventory 54,000
Materials inventory 24,000
Payroll 10,000
Applied factory overhead 20,000
To record production cost.
Spoiled goods inventory (100 x P10) 1,000
Factory overhead control 1,700
Work in process inventory (P54,000/2,000)100 2,700 To record spoilage cost.
Finished goods inventory 51,300
Work in process inventory 51,300
To record finished goods (P54,000 – P2,700)
2.
Unit cost: (P51,300 / 1,900 units) = P27
1. Work in process inventory 208,000
Materials inventory 208,000
To record production cost
Spoiled goods inventory (200 x P100) 20,000
Work in process inventory 20,000
To record scrap value of spoiled units.
Finished goods inventory 188,000
Work in process inventory 188,000
To record cost of finished goods (P208,000 – P20,000) 2. Unit cost: (P188,000 / 1,000 units) = P188
Problem 9-5
1. Spoiled goods inventory 1,200
Factory overhead control 1,600
Work in process inventory 2,800
To record spoilage.
2. Spoiled goods inventory 2,500
Factory overhead control 300
Work in process inventory 2,800
To record spoilage.
Accounts receivable 2,500
Spoiled goods inventory 2,500
To record the offer of scrap dealer.
Problem 9-6
Entry No. 1: If spoiled units are due to customers exacting specifications. Entry No. 2: If spoiled units are due to internal failure/employee’s error.
Entry No. 3: If cost of spoiled units is unrecoverable. This is an abnormal loss charged immediately to operations.
Entry No. 4: If spoilage is traceable to a particular job and the loss is recoverable from the customer or from the insurance company.
1a. Work in process inventory 180,000
Materials inventory 92,000
Payroll 28,000
Applied factory overhead 60,000
To record manufacturing cost
Spoiled goods inventory (400 x P15) 6,000
Factory overhead control 1,200
Work in process inventory 7,200
To record cost of spoilage: (P180,000/10,000) x 400.
Finished goods inventory 172,800
Work in process inventory 172,800
To record cost of finished goods (P180,000 – P7,200) 1b. Unit cost: (P172,800 / 9,600 units) = P18.
2a. Work in process inventory 180,000
Materials inventory 92,000
Payroll 28,000
Applied factory overhead 60,000
To record manufacturing cost.
Spoiled goods inventory 6,000
Work in process inventory 6,000
To record cost of spoiled goods (400 x P15)
Finished goods inventory 174,000
Work in process inventory 174,000
To record cost of finished goods.
Cash/Accounts receivable 243,600
Sales 243,600
To record sales (P174,000 x 140%)
Cost of goods sold 174,000
Finished goods inventory 174,000
To record cost of goods sold.
2b. Unit cost: (P174,000 / 9,600 units) = P18.125
1. Spoiled goods inventory 1,800
Factory overhead control 1,800
Work in process inventory 3,600
To record cost of spoiled units (P400 x P4.50)
2. Accounts receivable 1,100
Spoiled goods inventory 1,100
To record sales of scrap.
Problem 9-9
1. Factory overhead control 1,200
Work in process inventory 1,200
To record cost destroyed units.
Unit cost of the remaining 2,300 cases is P6.
2. Spoiled goods inventory 200
Factory overhead control 1,000
Work in process inventory 1,200
To record salvage value of defective units.
3a. Accounts receivable 1,200
Work in process inventory 1,200
To record cost of defective cases chargeable to customer.
b. Factory overhead control 1,200
Work in process inventory 1,200 To record cost of defective units charged to production.
4a. Spoiled goods inventory 400
Accounts receivable 800
Work in process inventory 1,200
To record salvage value of defective units.
b. Spoiled goods inventory 400
Factory overhead control 800
Work in process inventory 1,200
To record salvage value of defective units.
5. Factory overhead control 200
Materials inventory 200
To record rejected units charged to overhead. Average unit cost is P6.00.
6. Work in process inventory 200
Materials inventory 200
To record cost of rejected units charged to a particular job.
Average unit cost: (2,500 x P6) + P200 = P15,200 / 2,500 = P6.08 7. Same.
Problem 9-10
1. Work in process inventory 13,600
Materials inventory 7,000
Payroll 3,000
Applied overhead 3,600
To record manufacturing cost.
Manufacturing overhead control 1,400
Materials inventory (200 x P1.50) 300
Payroll (15/60 x P10 x 200) 500
Applied overhead (15/60 x P12 x 200) 600 To record rework cost.
Finished goods inventory 13,600
Work in process inventory 13,600
To record cost of finished goods.
2. Unit cost: (P13,600 / 200 units) = P68
Problem 9-11
1. Work in process inventory 130,000
Materials inventory 40,000
Payroll 30,000
Applied overhead 60,000
To record manufacturing cost.
Work in process inventory 8,500
Materials inventory (1,000 x P1) 1,000
Payroll (10/60 x P15) x 1000 2,500
Applied overhead (10/60 x P30) x 1,000 5,000 To record rework cost.
Finished goods inventory 138,500
Work in process inventory 138,500
To record cost of finished goods.
Problem 9-12
1a. Work in process inventory 400,000
Materials inventory 184,000
Payroll 72,000
Applied overhead 144,000
To record manufacturing cost.
Manufacturing overhead control 4,400
Materials inventory (200 units x P4) 800
Payroll : (30/60 x P12) x 200 1,200
Applied overhead: (30/36 x P24) x 200 2,400 To record rework cost.
Finished goods inventory 400,000
Work in process inventory 400,000
To record cost of finished goods.
b. Unit cost: (P400,000 / 2,000 units) = P200
2a. Work in process inventory 400,000
Materials inventory 184,000
Payroll 72,000
Applied overhead 144,000
To record manufacturing cost.
Work in process inventory 4,400
Materials inventory 800
Payroll 1,200
Applied overhead 2,400
To record rework cost.
Finished goods inventory 404,400
Work in process inventory 404,400
To record cost of finished goods.
Problem 9—13
1a. Work in process inventory 17,100
Materials inventory 8,000
Payroll 3,500
Applied overhead (P3,500 x 160%) 5,600 To record manufacturing cost.
Manufacturing overhead control 147
Materials inventory 30
Payroll 45
Applied overhead 72
To record rework cost.
Finished goods inventory 17,100
Work in process inventory 17,100
To record cost of finished goods.
b. Unit cost: (P17,100 / 2,000 units) = P8.55
2a. Work in process inventory 16,750
Materials inventory 8,000
Payroll 3,500
Applied overhead (P3,500 x 150%) 5,250 To record manufacturing cost.
Work in process inventory 142.50
Materials inventory 30
Payroll 45
Applied overhead (P45 x 150%) 67.50 To record rework cost.
Finished goods inventory 16,892.50
Work in process inventory 16,892.50
To record cost of finished goods.
Problem 9-14
a. Predetermined overhead rate: (P462,500 / 50,000 machine hrs. ) P9.25 per MH
Direct materials P343,550
Direct labor 78,875
Applied overhead (1,540 x P9.25) 14,245
Total cost of Job 2720 P436,670
b. The rework cost is debited to the manufacturing overhead control account since the company uses a predetermined rate to apply overhead. The entry is:
Manufacturing overhead control 37,750
Various accounts 37,750
c. Predetermined overhead rate: (P425,000 / 50,000 = P8.50 per MH
Direct materials P343,550
Direct labor 78,875
Applied overhead (1,540 x P8.50) 13,090
Total cost of Job 2720 P435,515
d. Direct materials P343,550
Direct labor 78,875
Applied overhead (1,540 x P8.50) 13,090 Rework cost (P37,750 x .20) 7,550 Sale of reworked pipe (200 x P1.50) ( 300)
