Solution Manual - RANTE COST ACC

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Chapter 1 – Cost Concepts, Classifications and Accounting Cycle Summary of Answers

Exercise 1-1

1. Administrative Expense 11. Selling Expenses 2. Factory Overhead 12. Selling Expenses 3. Factory Overhead 13. Factory Overhead 4. Direct Labor 14. Selling Expenses 5. Factory Overhead 15. Factory Overhead 6. Selling Expenses 16. Selling Expenses 7. Factory Overhead 17. Selling Expenses 8. Factory Overhead 18. Factory Overhead 9. Factory Overhead 19. Selling Expenses 10. Selling Expenses 20. Administrative Expenses Exercise 1-2

1. Product/Service Costs 11. Product/Service Costs 21. Product/Service Costs 2. Product/Service Costs 12. Product/Service Costs 22. N/A

3. Period Costs 13. Product/Service Costs 23. N/A

4. Period Costs 14. Product/Service Costs 24. Product/Service Costs

5. Period Costs 15. Period Costs 25. N/A

6. Period Costs 16. Product/Service Costs 7. Product/Service Costs 17. Period Costs

8. Period Costs 18. Product/Service Costs 9. Product/Service Costs 19. Product/Service Costs 10. Period Costs 20. N/A

Exercise 1-3 1. hfajkak 2. P0.125 3. Highest: 3750 Lowest: 1500 4. 15000 Exercise 1-4 1. a, P 352820 d. P 314711 b. 1. P 140000 e. P 472067 2. P 113205 f. P 157356 3. P 84904 c. P 339615 2. Journal Entries

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a. Raw Materials 240000 Accounts Payable 240000 b. Work in Process 168000 Manufacturing Overhead 12000 Raw Materials 180000 c. Factory Payroll 150000 Accrued Payroll 150000 Work in Process 120000 Manufacturing Overhead 30000 Work in Process 150000 d. Manufacturing Overhead 12000 Accumulated Depreciation 12000 e. Manufacturing Overhead 1500 Taxes Payable 1500 f. Manufacturing Overhead 4320 Prepaid Insurance 4320 Manufacturing Overhead 5 000 Utilities Payable 5000 2. (Financial Statement)

Exercise 1-5 Exercise 1-6 Test Material 1.1 Multiple Choice Theories

a. P 86 500 a. P600 000 1. B 11. D 21. C b. P 12 500 b. P 252 000 2. B 12. D 22. D c. P7 500 c. P 682 000 3. C 13. C 23. C d. P80 500 d. P190 960 4. C 14. D 24. D e. P24 500 5 A 15. A 25. A f. P11 000 Exercise 1-7 6. B 16. D 26. C g. P55 000 (below, Table 1.3) 7. B 17. C 27. D h. P15 000 8. B 18. C 28. A i. P148 500 9. B 19 .D 29. C 10. C 20. D 30. D Exercise 1-7 (Table 1.3)

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Item Number Direct

Materials Direct Labor Manufacturing OH Period Cost

1. P 50 000 2. 20 000 3. P 10 000 4. P 2 500 5. P 15 000 6. 5 000 7. 1 200 8. 28 000 9. 2 800 10. 8 500 11. 3 500 12. 9 000 13. 800 14. 2 400 15. Other Category 16. Other Category 17. Other Category 18. 5 000 19. 1 500 20. 7 500 Total P 103 000 P 15 000 P 37 500 P 17 200

Test Material 1-2 Test Material 1-3 Test Material 1-4

1. True 11. False 1. Direct Material 11. Factory Overhead 1. P2

2. True 12. True 2. Direct Material 12. Factory Overhead 2. P19171.84 3. False 13. False 3. Factory Overhead 13. Factory Overhead 3. P3432000 4. False 14. True 4. Period Costs 14. Factory Overhead 4. P60000 5. False 15. True 5. Direct Labor 15. Period Costs 5. P9000

6. True 16. False 6. Period Costs 6. P12000

7. False 17. False 7. Period Costs 7. P215000

8. False 18. False 8. Direct Material 8. P475000

9. False 19. True 9. Factory Overhead 9. P3110000

10. False 20. False 10. Period Costs 10. P3450000

Test Material 1-5 Test Material 1-6 11. P 930000 12. P 127000 13. P 4500 14. P 88500 15 P 742500 16. P 1049000 17. P 1108500 1. C 2. D 3. D 4. C 5. A 6. A 7. B 11. A 12. D 13. C 14. C 15. B 16. D 17. B 1. C 2. A 3. B 4. B 5. C 6. B 7. D 11. B 12. C 13. A 14. B 15. A 16. C 17. B 21. B 22. C 23. D 24. C

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18. P 156200 19. P 41700 20. P 3432000 8. B 9. C 10. A 18. B 19. A 20. C 8. B 9. B 10.A 18. B 19 B 20.B ______________________________________________________________________________ COMPUTATIONS:

Exercise 1-1 Ex 1-1. Cost classification. Classify the following as direct materials (DM) , direct labor (DL) , factory overhead (FOH) , administrative (AD) ,and selling (SE) expenses by putting a check on the appropriate column.

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DM DL FOH AD SE 1 Wages of company officials other the plant supervisor. ∕

2 Wages of raw material inventory clerk. ∕

3 Wages of finished goods inventory clerk. ∕ 4 Wages of ironworker in a construction company. ∕

5 Transportation and representation allowance of plant managers and supervisors. ∕

6 Transportation and representation allowance of sales managers. ∕ 7 Wood glue and other related adhesives used by furniture factories. ∕

8 Buttons, threads and zippers used by ready to wear manufacturing company. ∕ 9 Lubricating oil used by factories in their operations. ∕

10 Gas and oil used by the company president. ∕

11 Gas and oil used by trucking company. ∕

12 Electric and power consumption of the administrative office. ∕ 13 Electric and power consumption of factory companies. ∕

14

Depreciation of delivery truck of a manufacturing company used un delivering finished goods to

customers. ∕

15 Cloth used by a ready to wear factory. ∕

16 Cloth used by advertising companies in making billboards. ∕ 17 Cost of daily advertisements in local newspaper regarding new product line. ∕ 18 Overtime pay of the employee who repairs the company’s copier. ∕

19

Cost of renting a private helicopter to fly along the grandstand pulling a banner advertising a

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Ex 1-2 Cost Classification. Classify each cost as product cost or period cost by putting a check mark on the appropriate column. If the item is not appropriate to be the product or period costs , write N/A to both columns.

Product Cost Period Cost

1 Depreciation of plant and machineries. ∕

2 Depreciation of sports equipment used by sports and fitness center. ∕ 3 Depreciation of delivery equipment of trading companies. ∕

4 Depreciation of service vehicle used by sales person. ∕

5 Depreciation of office equipments. ∕

6 Paper and toner used for office copier machine. ∕

7 Paper used by printing company. ∕

8 Paper and plastic bags used by supermarkets. ∕

9 Bonuses paid to factory workers of an efficient performance. ∕

10 Transportation costs of goods delivered to customers. ∕ 11 Transportation costs of goods purchased from suppliers. ∕

12 Cost of medical supplies of a hospital. ∕

13 Cost of continuing education of a resident physician in a hospital. ∕ 14 Transportation expenses of a resident doctor in attending seminar abroad. ∕ 15 Costs of goods served to the visitors of the company president. ∕ 16 Costs of food served by restaurant owners to their customers ∕

17 Gas and oil consumed by sales manager. ∕

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18 Gas and oil consumed by plant machineries ∕ 19 Gas and oil consumed by trucking companies. ∕

20 Gas and oil consumed by the company president. ∕ 21 Cost of insurance intended for the workers of a construction company. ∕

22 Cost of newspaper ads to the announcement of new office location. ∕ 23 Salaries and compensation and other benefits paid to Human Resource Manager. ∕ 24 Salaries and compensations and other benefits paid to workers of a factory. ∕

25 Maintenance costs for the family vehicle of the company executive officer. ∕

Ex 1-3 High-Low Method.

Dagupan Trans Inc. has incurred the following bus maintenance costs during the past six months. Miles Travelled Maintenance Costs January 12,750 17,100 February 15,900 17,400 March 19,050 17,550 April 22,500 18,000 May 30,000 18,750 June 12,000 16,500

Required: Using high-low method to separate mixed cost, estimate the total fixed costs component of the maintenance costs.

Machine Cost Miles Traveled

Highest 18750 30000

Lowest -16500 12000

Difference 2250 18000

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3. Compute Variable Cost at Highest and Lowest Level of Activity

Highest Level 30000 * 0.125 = 3750

Lowest Level 12000 * 0.125 = 1500

4. Determining Fixed Cost at each level of activity

Highest Level 18750 - 3750 = 15000

Lowest Level 16500 - 1500 = 15000

Ex 1-4 Actual Costing Method

During the month of July, the following transactions were completed and reported by Bubbles Manufacturing Company.

a. Raw materials purchased on account, P240,000

b. Materials requisitioned for the month was P180,000 , P12,000 of which were factory supplies.

c. Factory payroll for the month was P150,000 of which P30,000 was for indirect laborers. d. Depreciation on factory plant and equipment for the month is P12,000

e. Factory taxes amounted to P1,500

f. Factory insurance expired amounted to P4,320 g. Factory utilities for the month amounted to P5,000 Additional Information:

a. Actual overhead is charged to production. b. 75% of the jobs put into process are completed.

c. All beginning inventory plus 75% of the goods completed during the period were delivered to customers at 50% mark-up cost. The company’s terms on sales are 30 days.

Inventories reported by the company at the beginning of the month are:

Raw Materials P80,000

Work in Process P100,000

Finished Goods P60,000

REQUIRED:

(1) Determine the following:

a. The total manufacturing cost for the period. P 352820

b. The balances of the inventory accounts at the end of the month. 1. Raw Materials P 140000

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3. Finished Goods P 84904

c. The costs of goods manufactured amounts to P 339615 d. The costs of goods sold amounts to P 314711

e. The sales price of the goods sold amounts to P 472067 f. Gross profit for the period amounts to P 157356

(2) Journal Entries to record the above (Use a yellow pad for your entries.) (3) Prepare a Statement of Costs of Goods Manufactured and Sold, in good form

a. RM inventory, July 1 P 80000

Add: Purchases 240000

Raw Materials Available P 320000

Less: RM inventory, July 31

(80000+240000-180000) -140000

Indirect Material -12000

Raw Materials P 168000

Direct Labor 120000

Manufacturing Overhead 64820

Total Manufacturing Cost P 352820 b. 1. RM inventory, July 1 P 80000 Add: Purchases 240000 Materials Used -180000 RM inventory, July 31 P 140000 2. WIP, July 1 P 100000 Direct Material 168000 Direct Labor 120000 Manufacturing Overhead 64820

Total Cost of Work put into Process P 452820

Multiply by 25%

WIP, July 31 P 113205

3. Cost of Goods Manufactured P 339615

Multiply by 25%

Finished Goods P 84904

c. Total Cost of Work put into Process P 452820

Multiply by 75%

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d. Finished Goods, July 1 P 60000

CGM (339615*75%) 254711 Cost of Goods Sold P 314711 e. (Journal Entries) f.

Bubbles Manufacturing Company Statement of Cost of Goods Sold

July 31, 2012

Raw Materials Used:

RM iventory, July 1 P 80000

Add: Purchases 240000

Raw Materials P 320000 Less: Inventory, July 31 P 140000

Indirect Materials Used 12000 152000 P 168000

Direct Labor 120000

Manufacturing Overhead

Indirect Materials Used P 12000

Indirect Labor 30000

Depreciation 12000

Insurance 4320

others 6500 64820

Total Manufacturing Costs P 352820

Add: Work in Process, July 1 100000

Total Cost of work put into Process P 452820

Less: Work in Process, July 31 -113205

Cost of Goods Manufactured P 339615

Add: Finished Goods, July 1 60000

Goods Available for sale P 399615

Less: Finished Goods, July 31 84904

Cost of Goods Sold P 314711

EXERCISE 1-5

a.) Direct Materials Used P 41 500

Direct Labor 15 000

Manufacturing Overhead 30 000

Total Manufacturing Cost P 86 500

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Add: Work in Process, Beginning 5 000 Total Cost of Goods placed into process P 91 500

Less: Cost of Goods Manufactured (79 000)

Work in Process, Ending Inventory P 12 500

c.) Cost of Goods Available for Sale P 86 500

Less: Cost of Goods Manufactured (79 000)

Finished Goods, Beginning P 7 500

d.) Cost of Goods Available for Sale P 86 500

Less: Finished Goods, Ending Inventory (6 000)

Cost of Goods Sold P 80 500

e.) Sales P 112 500

Less: Sales Discount (7 500)

Net Sales P 105 000

Less: Cost of Goods Sold 80 500

Gross Profit P 24 500

f.) Gross Profit P 24 500

Less: Operating Expenses (13 500)

Net Income P 11 000

g.) Total Manufacturing Cost P 100 000

Less: Direct Labor (20 000)

Manufacturing Overhead (25 000)

Direct Materials Used P 55 000

h.) Cost of Goods Manufactured P 105 000

Add: Work in Process, Ending Inventory 10 000 Total Cost of Goods placed Into process P 115 000

Less: Total Manufacturing Cost (100 000)

Work in Process, Beginning P 15 000

i.) Gross Profit P 30 000

Add: Cost of Goods Sold 112 000

Sales Discount 6 000

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j.) Cost of Goods Manufactured P 105 000

Finished Goods, Beginning 20 000

Cost of Goods Available for Sale P 125 000

k.) Cost of Goods Available for Sale P 125 000

Less: Finished Goods, Ending Inventory 12 500

Cost of Goods Sold P 112 500

l.) Gross Profit P 30 000

Less: Operating Expenses (16 000)

Net Income P 14 000

EXERCISE 1-6

a.) Direct Materials Issued to Production P 480 000

Direct Labor (150 000 x 80%) 120 000

Total Prime Cost for the Period P 600 000

b.) Indirect Materials Issued P 4 500

Indirect Labor (150 000 x 20%) 30 000

Depreciation of Sewing and Comp. equipment 8 000

Utilities Paid 22 000

Factory Insurance Expired 7 500

Factory Rent (Net of 10 000 deposit & 5000 adv. rental) 60 000

Total Manufacturing Overhead P 132 000

Add: Direct Labor (50 000 x 80%) 120 000

Total Conversion Cost for the Period P 252 000

c.) Direct Materials Issued to Production P 480 000

Direct Labor (150 000 x 80%) 120 000

Manufacturing Overhead 132 000

Total Manufacturing Cost P 732 000

Less: Work in Process, Ending Inventory (50 000)

Cost of Goods Manufactured for the year P 682 000

d.) Cost of Goods Manufactured for the year P 682 000 Multiply by: Percentage of units sold 80%

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Multiply by: Percentage of Gross profit 35%

Gross Profit for the Period P 190 960

EXERCISE 1-7

Item Number Direct Materials Direct Labor Manufacturing

OH Period Cost 21. P 50 000 22. 20 000 23. P 10 000 24. P 2 500 25. P 15 000 26. 5 000 27. 1 200 28. 28 000 29. 2 800 30. 8 500 31. 3 500 32. 9 000 33. 800 34. 2 400 35. Other Category 36. Other Category 37. Other Category 38. 5 000 39. 1 500 40. 7 500 Total P 103 000 P 15 000 P 37 500 P 17 200 Test Material 4

1. Machine hours Power costs

Highest 1200 14400

Lowest 400 12800 Difference 800 1600

VC/unit = 1600/800 = P 2

2. Hrs. worked Utility costs

Highest 3360 21440

Lowest 2600 18060 Difference 760 3380

VC/unit = 3380/760

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Fixed cost: (highest) = 3360 x 4.447368421 = P 14943.16 (lowest) = 2600 x 4.447368421 = P 11563.16 Highest = P21440 - 14943.16 = P6496.84 Lowest = P18060 - 11563.16 = P6496.84

Total Utility costs = (P 2850 x 4.447368421) + 6496.84 = P 19171. 84

3. Gross Profit P 768000

Cost of goods manufactured 2720000

Increase in finished goods (56000)

Total sales P3432000

4. Cost of fabric used in dresses P 60000

5. Wages of dressmakers P 5000

Wages of dress designers 4000

Direct labor P 9000

6. Wages of the maintenance employee P 2000

Cost of electricity in the shop 3500

Cost of space rental 6500

Overhead P12000

7. Office depreciation P28000

Freight costs for goods delivered to customers 12000

Janitor’s wages for cleaning the office 10000

Total selling, general & administrative expenses 165000

Period costs P215000

8. Materials P264000

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Factory depreciation 50000 Freight costs for materials purchased 8000 Janitor’s wages for cleaning the production area 10000

Product costs P475000

9. Direct material [1640000-(1640000x10%)+540000-570000] P1446000

Direct labor 840000

MOH (164000+180000+360000+120000) 824000

Total factory costs P3110000

10. Total factory costs P3110000

Work in process-beg. 600000

Work in process-end. (440000)

Cost of goods manufactured P3270000

Finished goods-beg. 580000

Finished goods-end. (400000)

Cost of goods sold P34500000

11. Gross Profit [(3450000/75%) x 25%] P1150000

Office salaries (140000)

Sales salaries ( 80000)

Net Income P 930000

12. Total factory costs (P12500+45000+90000) (P 147500)

WIP, end. 37500

WIP, beg. P 127000

13. Cost of goods available for sale P 259500

Goods produced (237000)

FG, end ( 18000)

Increase in FG P 4500

14. Sales (337500-7500) P 330000

Cost of goods available for sale (259500)

FG, end 18000

Gross Profit P 88500

15. Gross Profit P150000

Sales Discount 30000

Cost of goods sold 562500

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16. Direct labor P 350000

Direct materials 460000

MOH (110000+50000+31000+8000+5000) 239000

Total factory costs P1049000

17. Total factory costs P1049000

WIP, beg. 220000

WIP, end. (160500)

Cost of goods manufactured P1108500

18. Total Factory costs (P62400 +32000+ 64000) P 158400

WIP, beg. 14700

WIP, end (16900)

Cost of goods manufactured P 156200

19. Sales P 200000

Cost of goods sold (156200 +12600 -10500) (158300)

Gross Profit P 41700

20. Same answer and solution in number 3.

Test Material 5 1. Direct Materials (174000-132000+1500000) P 1542000 Direct labor [(21000x45) + (1000x45)] 990000 Prime costs P 2532000 c. 2. Direct labor (21000x45) P 945000 MOH [(300000 +175000 + (1.5 x 45)] 542500 Conversion costs P 1487500 d. 3. d. Materials (3200000-180000) P 3020000 Labor [6900000+(2040000-320000)-2040000=6580000] [6580000+(800000 x 90%)-800000=6500000-3020000 / 160%] P 1275000 Overhead (2175000 x 60%) P1305000 4. Prime Costs P 6750000 Direct labor (4500000/150%) (3000000)

Decrease in raw materials ( 250000)

Raw material purchases P 3500000 c.

5. Direct material (4400000+9000000-2800000-850000) P 9750000 Conversion costs [6500000+1250000+560000+(1200000x60%)

+(600000x60%)+(1500000x60%)+850000] 11400000

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WIP, end. (2400000)

Cost of goods manufactured P21490000 a.

6. Cost of goods manufactured P 21490000

FG, beg. 2400000

FG, end. (2950000)

Cost of goods sold P 20940000

Divided by: 75 %

Total sales P 27920000 a.

7. c.

Work in process inventory:

{[7920000 / (38.50-30.80)] x 30.80} = 3520000

3520000 + 13680000 – 17400000 = decrease of 200000 Finished goods inventory:

(17400000+1500000-16800000) = 2100000

2100000-1500000 = increase of 600000

8. Sales (25000 / 12.5 %) P 200000

Gross profit (25000+25000) ( 50000)

Cost of goods sold P150000 b.

9. Beginning: Materials (50000+30000) P 80000 Labor (80000+60000) 140000 OH (120000+90000) 210000 Cost added: Materials (80000+50000+75000) P 205000 Labor (100000+80000+110000) 290000 OH (290000 x (120000/80000) 435000

Finished goods, end P1010000 c.

10. Overhead applied P 435000

Overhead actual (420000)

Over applied P 15000 a.

11. Total manufacturing cost:

P 975000-600000+55000-40000+15000-35000 = P 370000 a. 12. Total raw materials purchased:

P 370000-(520000-400000)-(120000/75%)+10000-5000 = P 95000 d.

13. FG, end:

P 85000+970000-110000 + (48000 x 20) + (48000 x 20 x 60%) + 90000 – 271000 +180000-(1050000/60%) = 730000 c.

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14. Sales revenue: P 1050000/60% = P 1750000 x 160% = P 2800000 b. 15. Direct labor (30101.80/ 50%) P 60203.6 MOH 30101.8 CC P 90305.40 / 50% = P180610.80 P 180610.80 + 590 = P 181200.80 b.

16. RM available for used P 47500

RM issued to production (30000) RM, beg. (47500-37500) (10000) Increase in RM P 7500 d. 17. b. Direct material (P 15000+ 33000 – 19000 – 1000) P 28000 MC (P 12000+30000-40000) P 110000 FG, June 30 (P 190000-140000) P 50000 18. Materials (P 380000-20000) P 360000 Direct labor (P 420000-40000) 380000 Prime costs P740000 b. 19. MOH (P 380000 / 20 =P 19000 x 28) P 532000 Prime costs 740000 WIP, beg. 20000

WIP, end P 352000 a. 20. Same solution and answer in number 7. CHAPTER 2 ACCOUNTING FOR MATERIALS Summary of Answers EXERCISE 2-1 1. Raw Materials Inventory 541000

Accounts payable 510000

2. Work in Process 344250

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3. Raw Materials Inventory 5900

Work in Process 5100

4. Accounts payable 4000

Raw Materials inventory 4000

5. Work in process 50000

6. Raw materials Inventory 107000

7. Work in Process 120824

Raw Materials Inventory 151030

Raw Materials Inventory 510000 5900 107000 382500 4000 150000 86400 Exercise 2-2 1. (36 000) units; (P 82 850) 2. 12 000 units; P 28 300 Exercise 2-3 1. 2 078.46 2. 69.28 3. 5.20 4. 10 392 5. 2 400 Exercise 2-4 1. 2 598.1 2. 11.1 3. 4 687.6 4. 3 897.6 Exercise 2-5 Journal Entries

1. Raw and in Process 200 000

Accounts Payable 200 000

Cost of goods sold 280 000

Payroll 130 000

Various Accounts 150 000

Finished goods 210 000

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2. Cost of goods sold 195 000

Raw and in Process 15 000

4. Raw materials 200 000

Work in process 200 000

Raw materials 200 000

Work in process Payroll 130 000

Manufacturing overhead 130 000

Test Material 2-1 Supply the

Answer Test Material 2-1 MC Problems Test material 2-3 1. 1,294,000 2. 1,292,000 3. 4,640,000 4. 301,429 5. 285,000 6. 708,750 7. 156,200 8. 41,700 9. 423,100 10. 1,625,000 11. P 600,000 12. P 200,100 13. P 131,400 14. P 1,160,000 15. P 1,637,000 16. P 1,629,000 17. P(1000) 1. B 2. D 3. C 4. D 5. D 6. D 7. A 8. B 9. A 10. A 1. B 2. 129700 3. A 4. C 5. C 6. B 7. A 8. D 9. C 10.36000 11.B 1. C 2. C 3. D 4. D 5. A 6. B 7. B 8. C 9. A 10. B 11. B 12. B 13. D 14. D 15. A 16. C 17. C 18. C

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Exercise 2-2 Units Unit cost Amount Inventory, August 5 000 P 2.00 10 000 Purchases: August 7 6 000 2.50 15 000 12 8 000 2.30 18 400 15 9 000 2.25 20 250 22 10 000 2.40 24 000 29 10 000 2.35 23 500 Raw materials available 48 000 111 150 Less issuance: August 7 (9 000) (20 000)

14 (9 000) (21 100) 21 (9 000) (20 300) 28 (9 000) (21 450) Raw materials issued (36 000) (82 850)

Raw materials inventory, end 12 000 28 300

Exercise 2-3

1. Economic Order Quantity or EOQ = 2 x annual demand x cost per order Annual carrying cost per unit

= 2 x 144 000 x 150 = 2 078.46 (200 x 5%)

2. Number of orders = annual requirement = 144 000 = 69.28 EOQ 2 078.46

3. Time to order = 360 days = 5.20 69.28

4. Total ordering cost = Number of orders per year x Cost per order = 69.28 x 150 = 10 392

5. (Daily usage x Lead time) + Safety stock = (400 x 5) + 400 = 2 400

Exercise 2-4

1. Economic Order Quantity or EOQ = 2 x annual demand x cost per order Annual carrying cost per unit

= 2 x 84 375 x 120 = 2 598.1 3

2. Time to order = 360 days = 11. 1 *Computation for 32.48 = 84 375

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3. Annual demand = 84 375 = 234.38 x 20 days = 4 687.6 360 days 360 days

4. Number of orders x Cost of placing an order = 32. 48 x 120 = 3 897.6 Exercise 2-5

1. Raw and in Process 200 000

Payroll 130 000

*Materials in RiP (75 000 - 45 000) 30 000

Add: Purchases 200 000

Less: Materials in RiP (50 000 - 30 000) 20 000

Amount backflush RiP to FG 210 000

*Materials in Finished goods, beg. (80 000 - 35 000) 45 000 Add: Backflush 210 000 Less: Materials in FG, end. (90 000 - 30 000) 60 000 Amount backflush FG to CGS 195 000 3. Conversion cost in Raw and in Process, beg. 45 000 Conversion cost in Raw and in Process, end. 30 000 (15 000)

Conversion cost in finished goods, beg. 35 000

Conversion cost in finished goods, end. 30 000

(5 000)

4. Raw materials 200 000

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Work in process Payroll 130 000

Test Material 2-6

CHAPTER 1 – TEST MATERIAL 6 MULTIPLE CHOICE PROBLEMS

1. Direct Materials 977,400

Direct Labor 1,691,500

Manufacturing Overhead 1,353,200

Total Factory Costs 4,022,100

2. Total Factory Costs 4,022,100

Add : Work in Process, beginning 354,000 Less : Work in Process, ending (434,000)

Costs of Goods Manufactured 3,942,100

3. Work in Process 4. Direct Materials 42,200 Utilities 6,960 Office Depreciation 10,000 Rent paid 9,600 Period Costs 68,760 5. Direct Materials 42,400 Direct Labor 100,000 Overhead 61,840

Total Factory Costs 204,240

6. Gross Profit 203,840

7. Cost of Goods Sold 345,000

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Costs of Goods Manufactured 348,000 (4,000)

Total Factory Costs 344,000

8. Total Manufacturing Costs 2,081,000

9. Overhead for the year Overhead applied by 117,000

10. Costs of Goods Manufactured 1,841,000

Chapter 3: Accounting for Factory Labor

Summary of Answers Exercise 1 Test Material 1 Test Material 2 (Journal Entries) 1. P1, 039, 000 1. A 2. P13, 340 2. C Exercise 3-2 3.P11,280 3. A 1P13,936.26 4..P2,150 4. B 2P13,208 5.P3530.34 5. B 1. 3P1,107.82 6.P170.4 2. 6.A 4 (entries) 7.P3,600,000 7.B 8.P1,000,000 8. C Exercise 3-3 9.P5,500,000 9. A 1. .P5,295.97 10.18,900 10. D 2..P2,549.7 11. 2,250 11. B 3..P900 12. 225,000 4.. P75,953.73 13. 270,000 5.. P6,396.30 6..(entries) Exercise 1 Factory payroll 106000

Withholding tax payable 9000

SSS payable 5000

Pag-ibig payable 2000

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Work in process 95400

Manufacturing overhead 10600

Factory Payroll 106000

Exercise 3-2

No.of_hrs Reg _Rate Basic _Pay OT Prem. _(10%) Shift Prem (5%)

Night Prem

(10%) Total WHT Net Pay

6am-2pm Tibo, (S) 40 52 2080 2080 129.38 1950.6 Jason, (ME) 47 52 2444 36.4 2480.4 197.94 2282.5 2pm-10pm Rica, (Z) 40 52 2080 104 2184 310.26 1873.7 Princess, (S1) 43 52 2236 16.38 111.8 2364.2 99.86 2264.3 10pm-6am Bianca, (S) 40 52 2080 208 2288 160.58 2127.4 Toni, (M) 44 52 2288 22.88 228.8 2539.7 209.8 2329.9 Total 13208 75.66 215.8 436.8 P13,936.26 1107.82 12828.44 1. Total Payroll, P13,936.26 2. Direct Labor, P13,208 3. Total WHT, P1,107.82 Tibo (S) Princess (S1)

Gross Pay – P2,080 Gross Pay – P2364.18

Tax Due on P1,538 P48.08 Tax Due on P2019 P48.08

Add: 15% of 542 81.3 Add: 15% of 345.18 51.78

Total P129.38 Total P99.86

Jason (ME) Bianca (S)

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Tax Due on P2308 P163.46 Tax Due on 1538 P48.08

Add: 20% of 172.4 34.48 Add: 15% of 750 112.5

Rica (Z) Toni (M)

Gross Pay – P2080 Gross Pay – P2539.68

Tax Due on P1346 P163.46 Tax Due on 2308 P163.46

Add: 20% of 734 146.8 Add: 20% of 231.68 46.34 Total P310.26 Total P209.80 4. Journal Entries: Factory Payroll 13,936.26 WHT Payable 1107.82 Cash 12,828.44 Work in Process 13,208 Manufacturing Overhead 728.26 Factory Payroll 13,936.26 Exercise 3-3

1st week 2nd Week 3rd Week *4th week Total

6am-2pm Tibo, (M1) 2280 2280 2300 2080 8940 Jason, (S) 2250 2150 2150 2480.4 9030.4 Willie, (ME) 2300 2250 2190 2308.8 9048.8 2pm-10pm Rica, (S1) 2500 2400 2380 2184 9464 Princess, (M1) 2480 2450 2280 2364.18 9574.18 Kathy, (S) 2300 2300 2300 2544.36 9444.36 10pm-6am Bianca, (S) 2600 2570 2580 2288 10038 Toni, (S1) 2750 2400 2450 2539.68 10139.7 Yeng, (Zero) 2600 2300 2480 2539.68 9919.68 Total 22060 21100 21110 21329.1 85599.1 *4th_week 1st_Shift

(27)

Tibo, (M1) (52php*40hrs) 2,080 Jason (S) Basic Pay (52*47) 2,444 OT Prem (5.2*7) 36.4 Total 2,480.8 Willie, (ME) Basic Pay (52*44) 2,288 OT Prem (5.2*4) 20.8 Total 2,308.8

2nd_{Shift with 5% Shift Premium} Rica (S1) (52*1.05*40) 2,184 Princess (M1) Basic Pay (54.6*43) 2,347.8 OT Prem (5.46*3) 16.38 Total 2,364.18 Kathy (S) Basic Pay (54.6*46) 2,511.6 OT Prem (5.46*6) 32.73 Total 2,544.36

3rd_{Shift with 10% Night Premium} Bianca (S) (52*1.1*40) 2,288 Toni (S1) Basic Pay (57.2*44) 2516.8 OT Prem (5.72*4) 22.88 Total 2539.68 Yeng, (Zero) Basic Pay (57.2*44) 2516.8 OT Prem (5.72*4) 22.88 Total 2539.68

(28)

Payroll for Gross

the month WHT SSS PhilHealth Pag-ibig

Total

Deductions Net Payroll

Tibo, (M1) 8940 236.83 283.3 100 100 720.13 8219.87 Jason, (S) 9030.4 562.78 283.3 100 100 1046.08 7984.32 Willie, (ME) 9048.8 565.63 283.3 100 100 1048.93 8000.07 Rica, (S1) 9464 315.43 283.3 100 100 798.73 8665.27 Princess, (M1) 9574.18 331.93 283.3 100 100 815.23 8758.77 Kathy, (S) 9444.36 624.88 283.3 100 100 1108.18 8335.82 Bianca, (S) 10038 715.93 283.3 100 100 1199.23 8838.77 Toni, (S1) 10139.7 416.83 283.3 100 100 900.13 9239.87 Yeng, (Zero) 9919.68 1525.73 283.3 100 100 2009.03 7910.97 Total 85599.12 5295.97 2549.7 900 900 9645.67 75953.73

With Holding Taxes:

Tibo (M1) Princess (M1)

Gross Pay – P8,940 Gross Pay – P9574

Tax Due on P8,750 P208.33 Tax Due on P8750 P208.33

Add: 15% of 190 28.5 Add: 15% of 824 123.6

Jason (S) Kathy (S)

Gross Pay – P9,030 Gross Pay – P9444

Tax Due on P6,667 P208.33 Tax Due on 6667 P208.33

Add: 15% of 2,363 354.45 Add: 15% of 2777 416.55

Willie (ME) Bianca (S)

Gross Pay – P9,049 Gross Pay – P10,038

Tax Due on P6,667 P208.33 Tax Due on 10,000 P708.33

Add: 15% of 2382 357.3 Add: 20% of 38 7.6

Rica (S1) Toni (S1)

Gross Pay – P9,464 Gross Pay – P10,140

(29)

Add: 15% of 714 107.1 Add: 15% of 1390 208.5 Total P315.43 Total P416.83 Yeng, (zero) Gross Pay – P9920 Tax Due on 5833 P708.33 Add:20% of 4087 817.4 Total P1,525.73

1. Total Tax Withheld P5,295.97 2. Total SSS Deductions P2,549.7 3. Total Philhealth Deductions P900 4. Total Net Payable P75,953.73

5. Employer’s Share in SSS, Philhealth Medicare Payable P6,396.30 Basic Pay of Employee, Monthly (52*8hrs*20) P8,320

SSS Range of Compensation (8,250-8,749.99) Amount Due to SSS: if SSS ER P610.70 if SSS EE P283.30 Philhealth Range of Compensation (8,000-8,499.99)

Amount Due to Philhealth: if Employer’s Share P100.00

If Personal Share P100.00

SSS ER (610.70*9) P5,496.3

Philhealth ER (100*9) 900.00

Total Employer’s Share P6,396.30

6. Factory Payroll 85,599.12 WHT Payable 5,295.97 SSS Payable 2,549.70 Pag-ibig Payable 900.00 Philhealth Payable 900.00 Cash 75,593.73

(30)

Manufactuing Overhead 7,296.30 SSS Payable 5,496.30 Pag-ibig Payable 900.00 Philhealth Payable 900.00 Work in Process 20,176 Manufacturing Overhead 1,153 Factory Payroll 21329.10

Test Material 1 Supply the answer.

1. Purchases of Raw Materials P600, 000

Add: Decrease in Raw Materials 80, 000

Raw Materials used 680, 000

Multiply by: Percentage of material charged to job 80%

Direct Material charged to the job 544, 000

Add: Direct Labor

Labor Cost 550, 000

Less: Indirect Labor (550, 000*10%) (55, 000) 495, 000

Prime Cost P1, 039, 000

2. Direct Laborers

Basic Pay – No. of worked hours 268

Multiply by: Rate/hr. 40 P10,720 OT Premium – OT hours (268-240) 28

Multiply by: Rate/hr. (P40*50%) 20 560 Supervisor

Basic Pay – No. of worked hours 42

Multiply by: Rate/hr. 50 P2, 100 OT Premium – OT hours (42-40) 2

Multiply by: Rate/hr. (P50*50%) 25 50

(31)

3. Basic Pay – No. of worked hours 268

Multiply by: Rate/hr. (P40*50%) 20 560 Amount charged to Work in Process P11, 280

4. Basic Pay – No. of worked hours 42

Multiply by: Rate/hr. (P50*50%) 25 50 Amount charged to Factory Overhead P2, 150

5. Regular Shift 8am- 5pm P48

Ordinary Overtime Hours 5pm - 10pm

OT premium (P48*10%) = P4.80 + P48 P52.80 OT Hour with Night Premium 10pm - 11pm

Night Premium (P48*10%) = P4.80 OT Premium (P52.80*20%) = P5.28

Regular Rate P48 P58.08

Rate/hr. * No. of hours worked Total

Regular Shift 48 * 8 P384

Ordinary OT 52.80 * 5 264

OT with Night Premium 58.08 * 1 58.08

Total Earnings of 1 worker that day P706.08

Multiply by: No. of workers

* 5

Total Earnings of 5 workers that day P3, 530.34

6. Net Pay P706.08

(32)

Labor Premiums of 1worker 34.08

Multiply by: No.of workers *5

Total amount of Manufacturing Overhead P170.4 7. Overhead Applied (P10,000,000*27%) P2,700,000

Divide by: Overhead Rate 75%

Direct Labor P3,600,000

8. Cost of Goods Manufactured P10,250,000

Less: Manufacturing Cost (10,000,000

Net Effect in Work in Process P250,000

Let X = WIP, Beginning .80X = WIP, Ending

WIP, Beg. - WIP, Ending = CGM X - .80X = 250,000 .20X = 250,000 .20 .20 X = P1,250,000 WIP, Beginning P1,250,000 Multiply by: 80% WIP, Ending P1,000,000

9. Direct Materials, Beginning P450,000

Add: Purchases 2,650,000

Direct Materials Available P3,100,000

Less: Direct Materials, Ending (600,000)

Direct Materials Used P2,500,000

Cost of Goods Manufactured P6,800,000

Add: WIP, Ending 760,000

Less: WIP, Beginning (560,000)

Total Manufacturing Cost P7,000,000

Less: Direct Materials Used (2,500,000)

(33)

Let X = Direct Labor

.50X = Factory Overhead

Direct Labor + Factory Overhead = Conversion Cost X + .50X = 4,500,000

1.50X = 4,500,000 1.50 1.50 X = 3,000,000

Direct Materials P2,500,000

Add: Direct Labor 3,000,000

Prime Cost P5,500,000

10. OT Premium

No. of hours worked 300

Multiply by: OT premium rate (P18*50%) 9 P2,700 Night Shift Premium

No. of hours worked 6000

Multiply by: OT premium rate (P18*15%) 2.7 16,200 Labor charged to FOH P18,900

11. No. of hours worked (including OT hours) 50 Multiply by: Rate per hour *45

Amount debited too WIP P2, 250

12. Let X = CGM Let X = TMC

.20X = FG, end .10X = WIP, End CGM – FG, end = CGS TMC – WIP, End = CGM

X - .20X = 540,000 X - .10X = 675,000

.80X = 540,000 .90X = 675,000

.80 .80 .90 .90

X (CGM) = 675,000 X (TMC) = 750,000

(34)

Multiply by: Percentage allocable to DL *30%

Direct Labor P225,000

13. Cost of Goods Manufactured P450,000

Less: Decrease in WIP (30,000)

Manufacturing Cost 420,000

Less: Factory Overhead (150,000)

Prime Cost P270,000

Test Material 2 Multiple Choice

1. Purchases of Raw Materials P42,000 Add: Decrease in Raw Materials 3,000

Direct Materials Used 45,000

Add: Direct Labor 30,000

Prime Cost P75,000 A

2. Direct Labor P30,000

Add: Factory Overhead

No. of DLH (P30,000/P7.50) 4000

Multiply by: OH rate/DLH 10 40,000

Conversion Cost P70,000 C

3. Raw Materials Available P410,000

Less: RM, end (60,000)

Indirect Materials (10,000)

Direct Materials Used P340,000

Direct Labor 300,000

Factory Overhead 337,500

Manufacturing Cost P977,500

Add: WIP, Beginning 150,000

Cost of Goods placed into process 1,127,500 Less: Cost of Goods Manufactured (975,000)

Wip, Ending P152,500 A

4. OT Premium (1000hrs.*50%*P35) P17,500

10% Pay Premium - 2nd_{Shift (5000hrs*10%*P35)} _17,500 20% Pay Premium - 3rd_{Shift (5000hrs*20%*P35)} _35,000

Labor Premiums P70,000

B 5. Basic Pay

(35)

Shift 2 (5000hrs*P35*1.10%) 192,500 Shift 3 (5000hrs*P35*1.20%) 210,000 Add: OT Basic OT hours 1000 Rate/hr. 35 35,000 Add: OT Premium OT hours 1000 Rate/hr. (P35*50%) 17.5 17,500 Total Payroll P630,000 B 6. Basic Pay (800hrs*P30) 24,000 Add: OT Premium (800hrs*P30*50%) 12,000 Direct Labor P36,000 A 7. Sales (2500u*20) P50,000

Less: Cost of Sales

Direct Material (2500u*P3) 7,500

Direct Labor 36,500 Factory Overhead (800hrs*P18) 14,400 (57,900) Gross Margin (P7,900) B 8. Basic Pay (44hrs*P48) P2,112 Add: OT Premium (4hrs*24) 96 Weekly Earnings P2,208 C

CHAPTER 4 ACCOUNTING FOR MANUFACTURING OVERHEAD Summary of Answers

Exercise 4-1 Exercise 4-3 Exercise 4-6 Exercise 4-9

a. P10/DLH 1. SD- 60.8 TD- 35 Budg OH AA2 P1800000 A. P130 000 B. P390 000 1. P237 500 2.P465000 3.P309 266 b. P5450 2. SD –P4864 TD- P13300 Actual OH P1717200 C. P310 000 D. P288 000 4.P50742 c. P44875 3. P18 164 Test Material 1 d. P58337.5 4. SD- 28.04 TD-13 459.2 App OH AA3 P1550000 Exercise 4-7 1.P596 000 2.P1015000 1.P8 571 2.P62 200 3.P64 000 Budg LOA P600000 3.P6100 4. P1029500 4.P5/MH 5.P1 375 000

(36)

Exercise 4-2 Exercise 4-4 6.P185.97/unit a. P550,000 AA1 Co. Exercise 4-5 Exercise 4-8 7.P137.90/unit b. P2.20 ALOA P536000 1. P2 664 900 1.P2860000 8.P2 490 788 c. P30,000 Over P29000 P 2, 199,120 2.P140000 9.P5.90/unit d.P50,000 2. P4 763 700 10.10.70/DLH 11.9.75/DLH 4.P3 631 380 44.43/DLH 8.D Test Material 4 12.9.90/DLH 5.P39.38/DLH 14.P5 869 900 9.A 1.D 13.P537 250 6.P2 835 360 10.B 2.A 14.P1 030 000 7.P2 860 000 Test Material 3 11.D 3.C 15.P204 398 8.P140 000 1.B 12.B 4.C 16.P534 060 9.P192 600 2.A 13.C 5.A 10.P622 000 3.C 14.D 6.D

Test Material 2 11.86.67/DLH 4.A 15.P258 000 7.A

1.P1 775 700 44.44/MH 5.C 16.B 8.C

2.P5 677 380 12.P5 986 600 6.C 9.D

3.P3 775 680 13.86.70/PLH 7.C 10.A

11.D Problem 4-1 C. MI P35 806 B1 Dep1 P135 000

12.A Dep1 P858 743.92 FA 49 501 Dep2 P64 257

13.A Dep2 P1 001 256.32 FI P36 692

14.A B2 Dep1 P610 000

15.E Problem 4-2 Problem 4-3 Dep2 P239 275

16.B A. MI P268 738 A1. Dep1 P262 500 17.A FA P315 544 Dep 2 P87 500 18.D FI P356 718 19.D B. MI P268 257 A2. Dep1 P737 500 20.B FA P315 839 Dep2 262 500 FI P356 904 ______________________________________________________________________________ COMPUTATIONS: Exercise. 4-1

(a) Total estimated overhead (110000+84000+6000) P 200000 Divided by: Total estimated DLH (4000+14000+2000) 20000

Overhead application rate P 10DLH

(b)Direct Labor hours

Design 25

Sewing 320

Beading 200

545

Multiplied by: overhead rate P 10

Total overhead applied to the job P 5450

(37)

Direct Labor hours

Design (25hrs x P25) 625

Sewing (320hrs x P15) 4800

Beading (200hrs x P20) 4000

9425

Overhead applied to the job 5450

Total cost of the job P 44875

(d)

Total cost of the job P 44875

Multiply by: 130%

Billing price P 58337.50

Exercise. 4-2

(a) Manufacturing overhead for the year P 550000

(b) Overhead cost P 550000

Estimated hours 250000

Overhead rate P 2.20

Actual overhead, January 1 P 52000

Applied overhead, January 1 (10000hrs x P2.20) 22000 Under applied overhead, January 1 P 30000 (c) Actual overhead, December 31 P 548000 Applied overhead, December 31 (240000hrs x P2.20) (528000)

Under applied overhead, P 20000

Under applied overhead, January 1 30000 Under applied overhead, December 31 P50000

Exercise 4-3

(1) Sewing department

Total budgeted overhead P 76000

Divided by: estimated total machine hours 1250

Treating department

Total budgeted overhead P 182000

Divided by: direct labor hours 5200

Overhead rate P 35

(2) Machine hours on job no.4 (sewing) 80

(38)

Direct labor hours on Job no.4 (treating) 380 Overhead rate P 35 OH applied P13300 OH applied (sewing) P 4864 OH applied (treating) 13300 Total OH applied P18164

(3) Total budgeted overhead P 258000

Divided by: Total DLH 9200

Plant wide rate P 28.04

(4) Direct labor hours 480

Plant wide rate P 28.04

OH applied to Job No.4 P 13459.20 Exercise 4-4

AA1 Co.

Budgeted manufacturing OH P1600000

Budgeted level of activity 500000

OH rate P 3.20

Applied OH P 1715200

Divided by: OH rate 3.20

Actual level of activity P 536000DLH

Actual OH P1744000

Applied OH 1715200

Under applied P 28800

AA2 Co.

Applied OH P 1764000

Divided by: actual level of activity 392000DLH Multiplied by: budgeted level of activity 400000DLH

Budgeted OH P 1800000 Applied OH P 1764000 Over applied OH 46800 Actual OH P 1717200 AA3 Co. Actual OH P 1486000 Over applied OH 64000 Applied OH P 1550000

(39)

Applied OH P 1550000 Divided by: actual level of activity 620000DLH

OH rate P 2.50

Budgeted OH P 1500000

Divided by: OH rate 2.50

Budgeted level of activity 600000DLH

Exercise 4-5

(1) Using departmental rates Department 1

Overhead cost (budgeted data) 2 700 000

Direct labor hours (budgeted data) / 80 000

Total 33.75

Units produced * 9 400

Total 317 250

Direct labor hours per unit (79 000/9 400) * 8.40

Overhead applied 2 664 900

Department 2

Overhead cost (budgeted data) 2 040 000

Machine labor hours (budgeted data) / 40 000

Total 51

Units produced * 56 000

Total 2 856 000

Machine hours per unit (43 000/56 000) * .77

Overhead applied 2 199 120

(2) Using plant wide rate

Overhead rate = 2 700 000 + 2 040 000 80 000 + 120 000 =23.7 / DLH

Total overhead applied = Overhead rate * Units produced * Direct labor per unit = 23.70 * 65 500 * 3.07

= 4 763 700 Ex. 4-6.

(A)Direct materials beginning 85 000

Purchases 150 000

Total 235 000

Direct materials ending - 105 000

(40)

(B)Direct materials 130 000

Direct labor 90 000

Factory overhead 72 000

Total manufacturing cost 292 000

Work in process beginning 98 000

Cost of goods put into process 390 000

(C) Cost of goods put into process 390 000

Work in process ending - 80 000

Cost of goods manufactured 310 000

(D)Actual overhead 75 000

Applied overhead -72 000

Under applied overhead 3 000

Cost of goods manufactured 310 000

Finished goods beginning 50 000

Cost of goods available for sale 360 000

Finished goods ending - 75 000

Adjusted cost of goods sold 288 000

Exercise 4-7 (1) Direct labor 350 000 Indirect labor 35 000 Indirect materials 200 000 Depreciation 11 000 Maintenance 50 000 Miscellaneous 31 000 Conversion cost 596 000 (2) Conversion cost 596 000 Direct materials 360 000

Cost of goods put into process 1 176 000

Cost of goods manufactured 1 015 500

(3) Factory overhead (10.40*25 000) 260 000

Direct labor cost 350 000

Conversion cost 610 000

(41)

Direct materials 360 000

Cost of goods put into process 1 290 000

Cost of goods manufactured 1 029 500

Exercise 4-8

(1) Overhead 2 750 000

Machine hours (budgeted) / 125 000

Overhead rate 22

Machine hours worked (10 000 + 120 0000 * 130 000

Overhead applied to production 2 860 000

(2) Actual overhead (260 000 + 2 740 000) 3 000 000

Applied overhead - 2 860 000

Exercise 4-9

1. Total Service Cost allocated to ASSEMBLY: (direct method)

Personnel Cost (200 000 x 100/400) 50 000

Assembly (500 000 x 1800/4800) 187 500

Total _{237 500}

2. Total Service Cost allocated to FINISHING: (step method)

Service Departments Producing Department Administration Personnel Assembly Finishing Estimated Overhead Costs 500 000 200 000 1 800 000 3 000 000 Service Provided by:

Administration (500 000) Personnel (500 000 x 2/50) 20 000 Assembly (500 000 x 18/50) 180 000 Finishing (500 000 x 30/50) 300 000 Personnel (220 000) Assembly (220 000 x 10/40) 55 000 Finishing (220 000 x 30/40) 165 000

Total Service Cost 235 000 465 000

Service Departments Producing Department Administration Personnel Assembly Finishing Estimated Overhead Costs 200 000 500 000 1 800 000 3 000 000

(42)

Service provided by:

Personnel * 3/43=7% 10/43=23% 30/43=70%

Administration 2/50=4% * 18/50=36% 30/50=60%

Cost Formula

Personnel Cost= 200 000 + 4%A Administration Cost= 500 000 + 7%P New Value of each Service Department

Personnel Cost = 200 000 + 4% (500 000 + 7%P) = 200 000 + 20 000 + 0.0028P = 220 000/0.9972 = 220 618 Administration Cost = 500 000 + 7%P = 500 000 + 7% (220 618) = 515 443

3. Administration Cost allocated to FINISHING Department

515 443 x 60% 309 266

4. Personnel Cost allocated to ASSEMBLY Department

220 618 x 23% 50 742

Problem 4-1: 1st_step:

a) Repairs and Maintenance costs = P 870,000 + 20%HR b) Human Resource costs = P 990,000 + 16%RM

2nd_step:

a) Repairs and Maintenance costs = P 870,000 + 20% (990,000 + 16%RM) = P 870,000 + 198,000 + 0.032RM = P 1,103,306

b) Human Resource costs = P 990,000 + 16% (1103,306) = P 1,166,529

3rd_step:

Department 1 Department 2 Repairs & Maintenance costs:

Dept. 1: 44% x 1,103,306 P 485,454.64

Dept. 2: 40% x 1,103,306 P 441,322.40

Human Resource costs:

Dept. 1: 32% x 1,166,529 373,289. 28

(43)

Total allocated service costs P 858,743.92 P 1,001,256.32 Problem 4-2:

a. Direct method

Service Departments Producing Departments Gen. Factory

Office Employee Relations Mixing Fabricating Finishing Est. Dept. OH costs P 43,000 P 79,000 P 233,000 P 266,000 P 320,000 Gen. Factory Office costs: (43,000)

Mixing: (23,200 / 68,000) x 43,000 14,671 Fabricating: (25,600 / 68,000) x 43,000 16,188 Finishing: (19,200 / 68,000) x 43,000 12,141

Employee Relations costs: (79,000)

Mixing: (144 / 540) x 79,000 21,067

Fabricating: (228 / 540) x

79,000 33,356

Finishing: (168 / 540) x

79,000 24,577

Total est. factory overhead P 268,738 P 315,544 P 356,718

b. Step method

Service Departments Producing Departments Gen. Factory

Office Employee Relations Mixing Fabricating Finishing Est. Dept. OH costs P 43,000 P 79,000 P 233,000 P 266,000 P 320,000 Gen. Factory Office costs: (43,000)

Employee Relations: (12,000 / 80,000) x 43,000 6,450 Mixing: (23,200 / 80,000) x 43,000 12,470 Fabricating: (25,600 / 80,000) x 43,000 13,760 Finishing: (19,200 / 80,000) x 43,000 10,320

Employee Relations costs: 85,450 Mixing: (144 / 540) x 85,450 22,787 Fabricating: (228 / 540) x 85,450 36,079 Finishing: (168 / 540) x 85,450 (85,450) 26,584

(44)

Total est. factory overhead P 268,257 P 315,839 P 356,904

c. Algebraic method 1st_step:

a) Gen. Factory Office costs = P 43,000 + 10%ER b) Employee Relations costs = P 79,000 + 15%GFO 2nd_step:

a) Gen. Factory Office costs = P 43,000 + 10% (79,000 + 15%GFO) = P 43,000 + 7,900 + 0.15GFO = P 51,675

b) Employee Relations costs = P 79,000 + 15% (51,675) = P 86,751

3rd_step:

Mixing Fabricating Finishing Gen. Factory Office costs:

Mixing: 29% x 51,675 P 14,986

Fabricating: 32% x 51,675 P 16,536

Finishing: 24% x 51,675 P 12,402

Employee Relations costs:

Mixing: 24% x 86,751 20,820

Fabricating: 38% x 86,751 32,965

Finishing: 28% x 86,751 24,290

Total allocated service costs P 35,806 P 49,501 P 36,692 Problem 4-3:

A. If Plant wide-rate is used

1) P 486,000 + 564,000 ═ P 35.00 / DLhrs. 30,000

FOH; Dept. 1: FOH; Dept. 2:

= 5,000 x 1.5 x 35.00 = 5,000 x 0.5 x 35.00

= P 262,500 = P 87,500

2)

(45)

Direct Materials P 175,000 P 50,000 P 225,000 Direct Labor costs 300,000 125,000 425,000 Factory Overhead costs 262,500 87,500 350,000 P 737, 500 P 262,500 P 1,000,000

B. If Departmental rate is used

1) Dept. 1: P 486,000 / 27,000 DLH = P 18.00 / DLhrs. Dept. 2: P 564,000 / 65,800 MH

= P 8.57 / MH

FOH; Dept. 1: FOH; Dept.2:

= 5,000 x 1.5 x 18.00 = 5,000 x 1.5 x 8.57

= P 135,000 = P64, 257

2)

Dept. 1 Dept. 2 Total

Direct Materials P 175,000 P 50,000 P 225,000 Direct Labor costs 300,000 125,000 425,000 Factory Overhead costs 135,000 64,275 199,275 P 610,000 P 239,275 P 849, 275 Test Material 1

Service Departments Producing Department Maintenace Utilities Department ₁ Department ₂

Estimated Overhead Costs 20 000 10 000

Maitenance * 20% 40% 40%

Utilities 10% * 30% 60%

Cost Formula

Maitenance Cost= 20 000 + 10%U Utilities Cost= 10 000 + 20%M New Value of each Service Department

Maintenance Cost = 20 000 + 10% (10 000 + 20%M) = 20 000 + 1 000 + 0.02M = 21 000/0.98

(46)

Maintenance Cost allocated to Department 1

21 428.57 x 40% 8 571

2. Direct Materials 28 000

Direct Labor (950 hrs x 20) 19 000

Factory Overhead (950 hrs x 16) 15 200

Balance opf Work in Process 62 200

3. Maintenance Cost allocated to Depatment B: (direct method)

160 000 x 320/800 64 000

4. Total Budgeted Overhead

[600 000 + (3 x 300 000MH)] 1 500 000

Divide by: Machine hours 300 000 MH

Predetermined OH rate 5/MH

5. Overhead Component of COS

275 000 MH x 5MH 1 375 000

6. Direct Materials

(20 500lbs x 20) + (11 000lbs x 24) 674 000

Direct Labor

(28 000hrs x 48) +_ (2 800hrs 50) 1 484 000

Actual Factory Overhead

(265 000 + 140 000) + (20 600 +20 000) 445 600

Total Manufacturing Cost 2 603 600

Divide by: Units produced 14 000

Manufacturing cost per unit 185.97

7. Budgeted Overhead

(1 149 500 + 590 500) 1 740 000

Divide by: Estimated DLH

(110 000 + 10 000) 120 000

Overhead rate 14.50/DLH

Applied FOH

(28 000hrs + 2 800hrs) x 14.50 446 600

(47)

(28 000hrs x 48) + (2 800hrs x 50) 1 484 000

Conversion Cost 1 930 600

Divide by: Units produced 14 000

Conversion Cost per unit 137.9

8. Department 1

Budgeted Overhead 1 149 500

Divide by: Estimated DLH 110 000

Multiply by: Actual DLH 28 000

Applied Overhead 292 600

Department 2

Budgeted Overhead 590 500

Divide by: Estimated MH 100 000

Overhead rate 5.91/MH

Multiply by: Actual MH 6 800

Applied Overhead 40 188 Direct Materials (20 500 x 20)+(11 000 x 24) 674 000 Direct Labor (28 000 x 48)+(2 800 x 50) 1 484 000 Applied Overhead (292 600 + 40 188) 332 788

Total Manufacturing Cost 2 490 788

9. Estimated Production(in units) 200 000

Multiply by: Predetermined OH rate 10.4

Total Factory OH 2 080 000

Fixed Factory OH 900 000

Variable Factory OH 1 180 000

Divide by: Estimated units of prod. 200 000

Variable Factory OH rate 5.90

10. ASSEMBLY Department OH rate:

(48)

Power (250 000 x 840/960 218 750

Total Budgeted OH 428 083

Divide by: DLH (20 emp x 2 000hrs) 40 000

Assembly Department OH rate 10.70/DLH

11. ASSEMBLY Department OH rate:

Power (250 000 x 840/1200) 175 000

Repair (98 000 x 1/9) 10 889

Total Budgeted OH 389 889

12 Repair Power Assembly Finishing

Budgeted Overhead 48 000 250 000 204 000 320 000

Labor Hours 1 000 1 000 8 000

KWH 240 000 840 000 120 000

Repair * 10% 10% 80%

Power 20% * 70% 10%

Cost Formula

Repair Cost = 48 000 + 20%P Power Cost = 250 000 + 10%R New Value of each Service Department

Repair Cost = 48 000 + 20% (250 000 + 10%R) = 48 000 + 50 000 + 0.02R = 98 000/0.98 = 100 000 Power Cost = 250 000 + 10% (100 000) = 250 000 + 10 000 = 260 000

ASSEMBLY DEPARTMENT OH rate

(49)

Power (260 000 x 70%) 182 000

Total Budgeted Overhead 396 000

13. Budgeted Annual Variable Overhead 1 800 000

Budgeted Fixed OH

Factory Rent 50 000

Factory Plant and Equipment 380 000 430 000

Total Factory Overhead 2 230 000

Divide by: Estimated MH 80 000

FOH rate 27.875/MH Applied Overhead 2 062 750 74 000MH x 27.875 2 600 000 Actual Overhead 537 250 Underapplied OH 14. Cost Formula S1Cost = 200 000 + 20%S2 S2 Cost = 176 000 + 10%S1 New Value of each Service Department

S1 Cost = 200 000 + 20% (176 000 + 10%S1) = 200 000 + 35 200 + 0.02S1 = 235 200/0.98 = 240 000 S2 Cost = 176 000 + 10% (240 000) = 176 000 + 24 000 = 200 000 Budgeted OH of P2 850 000

Allocated Service Cost provided by:

S1 240 000 x 50% 120 000

S2 200 000 x 30% 60 000 180 000

Total Budgeted FOH 1 030 000

15. STEP method

(50)

Direct Overhead Cost 950 000 630 000 1 800 500 5 260 470

Sevices provided by: (950 000)

Administration Maintenance 950 000 x 8/89 85 393 Freight 950 000 x 30/89 320 225 Passenger 950 000x 51/89 544 382 Maintenance (715 393) Freight 715 393 x 80/280 204 398 Passenger 715 393 x 200/280 510 995 16. SIMULTANEOUS method

Maintenance Administration Freight Passenger

Direct Overhead Cost 630 000 950 000 1 800 500 5 260 470

Direct Labor Hours 8 000 9 000 30 000 51 000

No.of employees 40 50 80 200

Maintenance * 15% 24% 61%

Administration 9% * 34% 57%

Cost Formula

Maintenance Cost = 630 000 + +9%A Administration Cost = 950 000 + 15%M New Value of each Service Department

Maintenance Cost = 630 000 + 9% (950 000 + 15%M) = 630 000 + 85 500 + 0.0135M = 715 500/0.9865 = 725 291 Administration Cost = 950 000 + 15% (725 291) = 950 000 + 108 794 = 1 058 794

Budgeted OH of Freight Department Allocated Service Cost provided by:

Maintenance 725 291 x 24% 174 070

Admnistration 1 058 794 x 34% 359 990

(51)

Test Material 2 1. Applied Overhead Direct Labor

(14 000 x 76.50) + (800 x 76.50) 1 132 200

Multiply by: OH rate 80% 905 760

Actual Overhead

Incurred 2 556 000

Special night premium

(14 000 x 76.50 x 10%) 107 100

OT premium

(800 x 76.50 x 30%) 18 360 (2 681 460)

Underapplied OH 1 775 700

3.Raw Material, beg 241 200

Purchases 1 968 120

Raw Matertials, end (450 000)

Indirect Materials 21 600 Direct Materials 1 737 720 Direct Labor 14 000hrs x 76.50 1 071 000 800hrs x 76.50 61 200 1 132 200 Applied Overhead 1 132 200 x 80% 905 760

Total Manufacturing Costs 3 775 680

4. Total Manufacturing Costs 3 775 680

Work in process, beg 637 200

Work in process, end

(637 200 + 144 000) (781 200)

Cost of Goods Manufactured 3 631 680

2. Total Manufacturing Costs 3 775 680

Work in process, beg 637 200

Work in process, end

(637 200 + 144 000) (781 200)

Cost of Goods Manufactured 3 631 680

(52)

Finished Goods, end

(1 070 280 - 270 000) (800 280)

Cost of Goods Sold 3 901 680

Underapplied OH 1 775 700

Adjusted Cost of Goods Sold 5 677 380

5. Budgeted Overhead 2 953 125

Divided by: Budgeted DLH 75 000

Predetermined FOH rate 39.38/DLH

6. Actual DLH used 72 000

Multiply by: Predetermined FOH rate 39.38

Total Overhead applied 2 835 360

7. Estimated OH cost 2 750 000

Divide by Estimated MH usage 125 000

OH rate 22/MH

Applied Overhead, July

(10 000MH x 22/MH) 220 000

Remainder

(120 000MH x 22/MH) 2 640 000

Total Applied OH costs 2 860 000

8. Applied OH 2 860 000

Actual OH

July 260 000

Remainder 2 740 000 (3 000 000)

Underapplied OH costs (variance) 140 000

9. Budgeted Overhead Costs 2 568 000

Divide by: Estimated MH usage 48 000

Overhead rate 53.50/MH

Applied Overhead

3 600MH x 53.50/MH 192 600

Less: Actual Overhead 202 000

(53)

10. Materials 63 000

Direct Labor 105 000

Applied FOH 192 600

Total Manufacturing Costs 360 600

Work in process, beg (252 000)

Cost of Goods Manufactured/CGS 612 600

Underapplied OH (variance) 9 400

Adjusted Cost of Goods Sold 622 000

11. STEP method

Administration Maintenance Cutting Sewing

Overhead Costs 1 800 000 800 000 5 000 000 6 000 000

Services provided by:

Administration (1 800 000) Maintenance 1 800 000 x 20/120 300 000 Cutting 1 800 000 x 80/120 1 200 000 Sewing 1 800 000 x 20/120 300 000 Maintenance (1 100 000) Cutting 1 100 000 x 50/75 733 333 Sewing 1 100 000 x 25/75 366 667

Total Factory Overhead 6 933 333 6 666 667

Divide by 80 000DLH 150 000MH

Factory Overhead rate 86.67/DLH 44.44/MH

12. Direct Materials

(950 000 + 210 000 ) 1 160 000

Direct Labor Costs

(560 000 + 1 200 000) 1 760 000

Factory OH Applied

Cutting (20 000DLH x 86.67/DLH) 1 733 400

Sewing (30 000MH x 44.44/MH) 1 333 200 3 066 600

*in producing 10 000 units 13. ALGEBRAIC method

Administration Maintenance Cutting Sewing

Overhead Costs 1 800 000 800 000 5 000 000 6 000 000

(54)

Space occupied 4 500 sqm 7 000 sqm 50 000 sqm 25 000 sqm Services provided by:

Administration * 17% 66% 17%

Maintenance 6% * 63% 31%

Cost Formula

Administration Costs = 1 800 000 + 6%M Maintenance Costs = 800 000 + 17%A New value of each service department

Administration Costs = 1 800 000 + 6%(800 000 + 17%) = 1 800 000 + 48 000 + 0.0102A = 1 848 000/0.9898 = 1 867 044 Maintenance Costs = 800 000 + 6%M = 800 000 + 17% (1 867 044) = 800 000 + 317 397 = 1 117 397

Allocation Cutting Sewing

Administration Cutting 1 867 044 x 66% 1 232 249 Sewing 1 867 044 x 17% 317 397 Maintenance Cutting 1 117 397 x 63% 703 960 Sewing 1 117 397 x 31% 346 393

Total allocated service costs 1 936 209 663 790

Add: Overhead Costs 5 000 000 6 000 000

Total Overhead Costs 6 936 209 6 663 790

Divide by 80 000DLH 150 000MH

FOH rate 86.70/DLH 44.43/MH

14. Direct Materials

(950 000 + 210 000) 1 160 000

Direct Labor Costs

(560 000 + 1 200 000) 1 760 000

Factory Overhead Applied

(55)

Sewing (30 000MH x 44.43/MH) 1 332 900 3 066 900

*in producing 10 000 units

Test Material 3 1. B

Applied OH component of:

Cost of Goods Sold 1 440 000

Finished Goods 500 000

Total Budgeted Overhead 2 400 000

Divide by: Budgeted MH 50 000

Predetermined OH rate 48/MH

2. A

Sales for August

(500 000 x 1.2) 600 000

Gross Margin 190 000

Cost of Goods Sold 410 000

Finished Goods, end 60 000

Finished Goods, beg (81 000)

Cost of Goods Manufactured 389 000

Work in process, end 85 000

Work in process, beg (78 000)

Cost of Goods put into process 396 000

Prime cost

(48 000 + 294 000) (342 000)

Applied Overhead 54 000

Divide by: Actual DLH usage 45 000

3. C

Budgeted cost after allocation

Producing 1 510 439

Finishing 1 315 561

Total 2 826 000

Divide by: Budgeted DLH

Producing 35 000