PA2.
M-1401
Job Order Costing
Problem 1: Computation of Estimated Overhead
Nafoolish Company applies factory overhead on the basis of direct labor hours. Budget and
actual data for direct labor and overhead for the year are as follows:
Budget Actual
Direct labor hours P600,000 P550,000
Factory overhead costs 720,000 680,000
Required:
1. Compute for Predetermined Factory Overhead Rate
2. How much is the applied overhead?
3. How much is the over or under applied?
Problem 2: Computation of Estimated Overhead
Miriam, Inc. had the following information relating to 2011
Budgeted factory overhead P74,800
Actual factory overhead P78,300
Applied factory overhead P76,500
Estimated labor hours 44,000
If Miriam decides to use the actual results from 2011 to determine the 2012 overhead rate, what
will the 2012 overhead rate be?
Problem 3 — Job Order Costing
The Anda Company had the following inventories on August 1 of the current year.
Finished goods P25,000
Work in process 18,500
Materials 22,000
The work in process account controls two jobs
Job 401 Job 402
Materials P 3,000 P 5,600
Labor 2,500 3,000
Factory overhead 2,000 2,400
P 7,500 P11,000
The following information pertains to August operations:
1. Materials purchased on account, P28,000.
2. Materials issued for production, P25,000. Of this amount, P3,000 was for indirect materials;
the difference was distributed: P5,500 to Job 401; P7,000 to Job 402; and P9,500 to Job 403.
3. Materials returned to the warehouse from the factory, P800, of which P300 was for indirect
materials, the balance from Job 403.
4. Materials returned to vendors, P1,000.
5. Payroll after deducting P3,025 for withholding taxes, P1,600 for SSS Premiums, P375 for
Medicare, and P1,200 for Pag-ibig, was P32,800. The payroll due the employees was paid during
the month.
6. The payroll was distributed as follows: P10,400 to Job 401; P12,500 to Job 402, P10,500 to
Job 403 and the balance represents indirect labor.
7. The share of the employer for payroll was recorded - P2,000 for SSS Premiums, P375 for
Medicare Contributions, and P1,200 for Pag-ibig Funds.
8. Factory overhead, other than any previously mentioned, amounted to P15,000. Included in this
figure were P3,000 for depreciation of factory building and equipment, and P 950 for expired
insurance on the factory. The remaining overhead was unpaid at the end of August.
9. Factory overhead was applied to production at the rate of 80% of direct labor cost.
10. Jobs 401 and 402 were completed and transferred to the finished goods warehouse.
11. Job 401 was shipped and billed at a gross profit of 40% of the cost of goods sold.
12. Cash collections from accounts receivable during August were P35,000.
Required:
1. Journal entries to record the above transactions.
2. Job order cost sheets.
3. Cost of goods sold statement.
MULTIPLE CHOICE QUESTIONS
1. Benhur company consumed P450,000 worth of direct materials during May 2011. At the end
of the month the direct materials inventory of Benhur was P25,000 lower than the May 1
inventory level. How much were the direct materials procured during May 2011?
A. P475,000 C. P400,000
B. P375,000 D. P425,000
2. Pin company incurred the following costs during the month: direct labor, P122,000; factory
overhead, 108,000 and direct materials purchases, P160,000. Inventories show the following
costs:
Beginning Ending
Finished goods P27,000 P30,000
Work in process 61,500 57,500
Direct materials 37,500 43,500
How much is the cost of goods manufactured?
A. P443,500 C. P386,000
B. P382,000 D. P388,000
3. Last month, Pare company placed P55,000 of materials into production. The Printing
Department used 8,000 labor hours at 5.60 per hour and the Binding Department used 4,600
hours at P6.00 per hour. Factory overhead is applied at a rate of P6.00 per labor hour in the
Printing Department and P8.00 per labor hour in the Binding Department. Pares inventory
accounts show the following balances:
Beginning Ending
Finished goods P22,000 P17,000
Work in process 15,000 17,600
Materials 20,000 18,000
What is the total cost of goods sold?
A. P219,600 C. P108,000
B. P214,600 D. P217,200
4. The factory ledger of Diamond Corporation contains the following cost data for the year ended
December31, 2011:
Inventories
Opening Closing
Raw materials P150,000 170,000
Work in process 160,000 60,000
Finished goods 180,000 220,000
Raw materials used 652,000
Total manufacturing costs charged to production
during the year (including raw materials,
direct labor and factory overhead applied
at the rate of 50% of direct labor cost) 1,372,000
Compute the: (1) cost of raw materials purchased and (2) direct labor charged to production
during the year:
A. (1) P632,000; (2) P240,000 C. (1) P.72,000; (2) P720,000
B. (1) P672,000; (2) 480,000 D. (1) 360,000; (2) P480,000
5. National Marketing Corp. uses a job-order costing system. It has three production
departments, X, Y and Z.
The manufacturing cost budget for 2011 is as follows:
Dept. X Dept. Y Dept. Z
Direct Materials P600,000 P400,000 P200,000
Direct Labor 200,000 500,000 400,000
Manufacturing overhead 600,000 100,000 200,000
For Job no. 01-90 which was completed in 2011, direct materials cost was P75,000 and direct
labor was as follows:
Dept. X P 40,000
Dept. Y 100,000
Dept. Z 20,000
The corporation applies manufacturing overhead to each job order on the basis of direct labor
cost, using departmental rates predetermined at the beginning of the year based on the
manufacturing cost budget.
The total manufacturing cost of Job No. 01-90 which was completed is 2011 is:
A. P235,000 C. P385,000 .
B. P310,000 D. P150,000
6. Avery Co. uses a predetermined factory overhead rate based on direct labor hours. For the
month of October, Avery’s budgeted overhead was P300,000 based on a budgeted volume of
100,000 direct labor hours. Actual overhead amounted to P325,000 with actual direct labor hours
totaling 110,000. How much was the overapplied or underapplied overhead?
A. P30,000 overapplied C. P5,000 overapplied
B. P30,000 underapplied D. P5,000 underapplied
7. Yolanda Company provided the iñventory balances and manufacturing cost data for the month
of January.
Under Yolanda’s cost system, any over-or underapplied overhead is closed to the cost of goods
sold account at the end of the calendar year.
Inventories January 1 January31
Direct materials P30,000 P40,000
Work in process 15,000 20,000
Finished goods 65,000 50,000
Month of January
Factory overhead applied P150,000
Cost of goods manufactured 515,000
Direct materials used 190,000
Actual factory overhead 144,000
What would cost of goods sold be if under-or overapplied overhead were closed to cost of goods
sold?
A. P509,000 C. P530,000
B. P524,000 D. P536,000
8. Using the same information in No. 7, what would cost of goods sold be if under-or
overapplied were allocated to inventories and cost of goods sold?
A. P509,700 C. P526,300
B. P524,700 D. P530,300
9. The following date were taken the records of Best Company:
9/30/2011 8/31/2011
Inventories:
Raw materials P ? P50,000
Work in process 80,000 95,000
Finished goods 60,000 78,000
Raw materials purchases, P46,000
Factory overhead, 75% of direct labor cost, P63,000.
Selling and administrative expenSe5 12.5% of sales, P25,000
Net income for September, 2011, P25,000
What is the cost of raw materials inventory on August 31, 2011?
A. P30,000 C. P46,000
B. P40,000 D. P50,000
10. Wat Corporation manufactures rattan furniture sets for export and uses the lob order cost
system in accounting for its costs. You obtained from the corporation’s books and records the
following information for the year ended December 31, 2011:
The work in process inventory on January 1 was 20% less than the work in process
inventory on December 31.
The total manufacturing costs added during 2011 was P900,000 based on actual direct
materials and direct labor but with 3nufacturing overhead applied on actual direct labor
pesos.
The manufacturing overhead applied to process was 72% of the direct labor pesos, and it
was equal to 25% of the total manufacturing costs.
The costs of goods manufactured, also based on actual direct materials, actual direct labor
and applied manufacturing overhead was P850,000
The cost of direct materials used and the work-in process inventory on December 31, 2011:
Direct materials used Work in process inventory
A. P1,075,000 P200,000
B. 362,500 250,000
C. 312,500 250,000
D. 312,500 275,000
11. Chiz Crafts manufactures to customers’ specifications. The company uses a job order cost
system and, for the month of May 2O09,ummarized the following information:
Beginning work in process inventory (five partially completed jobs) P300,000
Orders completed (eighteen) 2,400,000
Orders shipped out (fourteen) 2,000,000
Materials requisitioned 1,700,000
Direct labor cost 800,000
Overhead = 150% of direct labor cost
The month-end work in process inventory was
A. P700,000 C. P1,400,000
B. P800,000 D. P1,600,000
12. The BAM Manufacturing Co. uses a job-order costing system, and it applies factory
overhead to production at a pre-determined rate based on direct labor cost. The following
account appears in the general ledger:
WORK IN PROCESS
Beg. Bal P50,000 Finished goods P250,900
Direct Materials 100,000
Direct Labor 80,000
Applied overhead 60,000
The ending work in process represents the cost of Job# 26 which has been charged with P6,000
of direct labor and the cost of Job # 27 which has been charged with applied factory overhead of
P4,800. Total cost of direct materials in the ending work in process was
A. P8,400 C. P15,200
B. P9,000 D. P17,400
13. ANGGARA Co. manufactures leather products and uses a job order costing system. Its work
in process show the following:
Direct materials used P341,000
Direct labor incurred 324,500
Factory overhead 259,600
Transferred to finished goods 825,000
Two jobs are still in process on which materials of P70,400 are expended Factory overhead is
applied at a predetermined percentage based on direct labor cost. What are the direct labor and
overhead components of the jobs transferred to finished goods?
A. B. C. D.
Direct labor P308,000 P310,500 P324,500 P341,000
Overhead P246,400 P248,400 P259,600 P272,000
Questions 14 through 16 are based on the following information
The following information is taken fr the records of JOHN REY Manufacturing Company for the
first calendar quarter of 2011:
Jan. 1 March31
Inventory, Raw materials P32,300 P34,100
Inventory, Goods in Process 38,500 35,050
Inventory, Finished Goods 44,600 48,800
Direct labor 254,000
Factory overhead cost 236,900
Cost of goods sold 676,300
14. How much is the total “cost of goods manufactured» during the first quarter of 2011?
A. P676,100 C. P680,500
B. P243,000 D. P713,350
15. How much is the total cost of goods placed in process during the first quarter of 2011?
A. P680,500 C. P715,550
B. P677,050 D. P719,050
16. How much is the total cost of raw materials used during the first quarter of 2011?
A. P263,150 C. P224,650
B. P186, 150 D. P286, 150
17. NANCY Products has no work-in-process or finished goods inventories at the close of
business on December 31, 2011. The balances of NANCY accounts as of December 31, 2011 are
as follows:
Cost of goods sold P2,040,000
General selling and administrative expenses 900,000
Sales 3,600,000
Factory overhead control 700,000
Factory overhead applied 648,000
NANCY income before income taxes 2011 is
A. P660,000 . C. P712,000
B. P608,000 D. P1,508,000
18. A company had the following total usage of direct labor and direct materials
Hours Pounds
Direct Labor (P8 per hour) 400
Direct Materials (Pl0 per pound) 300
Incomplete job # 101 has used 20 hours of direct labor and 8 pounds of direct materials. Factory
overhead is applied at the rate of 200% per direct labor peso. What is the balance in work in
process relating to job # 101
A. P560 debit C. P12,600 debit
B. P560 credit D. P12,600 credit
19. The Childers Company manufactures widgets. During the fiscal year just ended, the company
incurred prime costs of P1,500,000 and conversion costs of P1,800,000. Overhead is applied at
the rate of 200% of direct labor cost. How much of the above costs represent material cost?
A. P1,500,000 C. P900,000
B. P300,000 D. P600,000
20. Ajax Corporation transferred P72,000 of raw materials to its production depament in
February and incurred P37,000 of conversion costs (P22,000 of direct labor and P15,000 of
overhead). At the beginning of the period, P14,000 of inventory (material and conversion costs)
was in process.
At the end of the period, P18,000 of inventory was in process. What was the cost of goods
manufactured?
A. P105,000 C. P123,000
B. P109,000 D. P141,000
21. Luna Co.’s year-end manufacturing costs were as follows:
Direct materials and direct labor P500,000
Depreciation of manufacturing equipment 70,000
Depreciation of factory building 40,000
Janitor’s wages for cleaning factory premises 15,000
How much of these costs should be inventoried for external purposes?
A. P625,000 C. P585,000
B. P610,000 D. P500,000
22. Blum Corp. which manufactures plastic coated metal clips. The information was among
Blum’s year-end manufacturing costs.
Wages
Machine operators P200,000
Maintenance workers 30,000
Factory foremen 90,000
Materials Used
Metal wire 500,000
Lubricant for oiling machinery 10,000
Plastic coating 380,000
Blum’s year-end:
Direct labor Direct Materials
A. 230,000 890,000
B. 200,000 880,000
C. 290,000 510,000
D. 320,000 500,000
23. Hamilton Company uses job order costing’ Factory overhead is applied to production at a
determined rate of 150% of direct-labOr cost. Any over or underapplied factory overhead is
closed to the cost of goods sold account at the end of each month. Additional information is
available as follows:
Job 101 was the only job inproceSs at January 31, 2011,With accumulated costs as
follows:
Direct materials P4,000
Direct labor 2,000
Applied factory overhead 3,000
9,000
Jobs 102, 103 and 104 were started during February
Direct materials requisitions for February totaled P26,000
Direct-labor cost of P20,000 was incurred for February
Actual factory overhead was P32,000 for February
The only job still in process at February 28, 2011 was Job 104, with costs of P2,800 for
direct materials and P1,800 for direct labor
The cost of goods manufactured for February 2011 was
A. P77,700 C. P79,700
B. P78,000 D. P85,000
24. Using the same information in No. 23, any over or under-applied factory overhead should be
closed to the cost of goods sold account at February 28, 2011, in the amount of
A. P700 overapplied C. P1,700 underapplied
B. P1,000 overapplied D. P2,000 underapplied
25. Under Pick Company’s job order costing system, manufactUring overhead is applied to work
in process using a predetermined annual overhead rate. During January 2011, Pick’s transactions
included the following:
Direct materials issued to production P90,000
Indirect materials issued to production 8,000
Manufacturing overhead incurred 125,000
Manufacturing overhead applied 113,000
Direct labor costs 107,000
Pick had neither beginning nor ending work in process inventory. What was the cost of jobs
completed in January 2011?
A. P302,000 C. P322,000
B. P310,000 D. P330,000
26. A company manufactures pipes and uses a job order costing system. During May, the
following jobs were started (no other jobs were in process) and the following costs were
incurred:
Job X Job Y Job Z Total
Materials requisitioned 10,000 20,000 15,000 45,000
Direct labor 5,000 4,000 2,500 11,500
15,000 24,000 17,500 56,500
In addition, estimated overhead of P300,000 and direct labor costs of P150,000 were estimated to
be incurred during the year. Actual overhead of P24,000 was inçurred in May; overhead is
applied on the basis of direct labor pesos. If only Job X and Job Z were completed during the
month, the appropriate entry to record the initiation of all jobs would be
A.
A. Work in process P79,500
Direct materials P45,000
Direct labor 11,500
Applied factory 23,000
overhead
B. Work in process P80,500
Direct materials P45,000
Direct labor 11,500
Factory overhead 24,000
C. Work in process P80,500
Direct materials P45,000
Direct labor 11,500
Applied factory 24,000
overhead
D. Direct labor P11,500
Direct material 45,000
Work in process P56,500
27. The Papaya Company uses a job order cost system. The following data were obtained from
the company’s cost records as of June 30. No jobs were in process at the beginning of June, all
costs listed being incurred during the month.
Job Order No. Direct Materials Direct Labor Hours Direct Labor Cost
1001 P4,320 1,300 P1,600
1002 9,150 3,700 7,250
1003 11,275 8,200 14,325
1004 3,225 1,500 2,800
1005 6,500 3,200 6,100
1006 2,750 980 1,650
Manufacturing overhead costs are charged to jobs on the basis of p1.50 per direct labor hour. The
actual rnanufacturing overhead cost for the month totaled P30,350. During June, Job Order Nos.
1001, 1002, 1004 and 105 were completed. Jobs 1001l and 1002 were shipped out and the
customers were billed P9,000 for Job 1001 and P20,000 for Job 1002.
The cost of goods manufactured would be:
A. P55,500 C. P56,495
B. P55,495 D. P57,500
28. Job No. 210 has, at the end of the second week in February, an accumulated total cost of
P4,200. In the third week, p1,000 of direct materials were used on the Job, together with P10 of
indirect materials.
Twenty (20) hours of direct labor services were applied to the job at a cost of P5 per hour.
Manufacturing overhead was applied at the basis of P2.50 per direct labor hour for fixed
overhead and P2 per hour for variable overhead.
Job No. 210 was the only job completed during the third week.
The total cost of Job Order No. 210 is:
A. P5,390 C. P5,350
B. P5,360 D. P5,400
29. The workinPr0ss account of the MatamiS Company which uses a job order cost system
follows:
Work in Process
April 1 Balance P25,000 Finished goods P125,450
Direct Materials 50,000
Direct labor 40,000
Factory Overhead Applied 30,000
Overhead is applied to production at a predetermined rate, based on direct labor cost. The work
in process at April 30 represents the cost of Job No. 456, which has been charged with direct
labor cost of p3,000 and Job No 789, which has been charged with applied overhead of P2,400.
The cost of direct materials charged to Job No. 456 and Job No. 789 amounted to:
A. P8,700 C. P4,500
B. P7,600 D. P4,200
30. The Narra Company uses a job order cost accounting system. Overhead is applied to
production at a predetermined rate based on direct labor cost.
The following postings appear in the ledger accounts of the company for the month of
September, 2011:
Debit
Work in process, Sept. 1 P30,000
Direct materials 60,000
Factory overhead 40,000
Direct labor 50,000
On September 30, 2011, finished goods completed, from work in process cost P160,000.
Job No. 327 was the only job not completed in September, and it has been charged P4,600 for
factory overhead.
Direct materials charged to Job No. 327 was:
A. P10,350 C. P9,650
B. P 14,650 D. P25,000
Questions 31 and 32 are based on the following:
Newport Company, a manufacturer of fiber optic communications equipment, uses a job-order
costing system. Since the production process is heavily automated, manufacturing overhead is
applied on the basis of machine hours using a predetermined overhead rate. The current annual
rate of P15 per machine hour is based on budgeted manufacturing overhead costs of P1,200,000
and a budgeted activity level of 80,000 machine hours. Operations for year 2013 have been
completed, and all of the accounting entries have been made for the year except the application
of manufacturing overhead to the jobs worked on during December, the transfer of costs from
Work in Process to Finished Goods for the jobs completed in December, and the transfer of costs
from Finished Goods to Cost of Goods Sold for the jobs that have been sold during December.
Summarized data as of November 30, 2013 and for December 2013 are presented in the
following table. Jobs Tu-007, Nu-013, and Nu-015 were completed during December. All
completed jobs except Job Nu-013 have been turned over to customers by the close of business
on December 31, 2013.
Work in Process December 2013 Activity
Balance Direct Direct Machine
Job No. 11/30/2013 Material Labor Hours
Tu-007 P 87,000 P 1,500 P 4,500 300
Nil 013 55,000 4,000 12,000 1,000
N 11-015 -0- 25,600 26,700 1,400
D12-002 -0- 37,900 20,000 2,500
D12-003 -0- 26,000 16,800 800
Total P142,000 P95,000 P80,000 P6,000
Activity through December 2013
Operating Activity 11/30/2013 Activity
Actual manufacturing overhead:
Indirect material P125,000 P9,000
Indirect labor 345,000 30,000
Utilities 245,000 22,000
Depreciation 385,000 35,000
Total Overhead P1,100,000 P96,000
Other Items:
Raw material purchases * P965,000 P98,000
Direct-labor costs P845,000 P80,000
Machine hours 73,000 6,000
Account Balances at Beginning of Year: 1/1/2013
Raw material inventory* P105,000
Work in process inventory 60,000
Finished goods inventory 125,000
* Raw material purchases and raw material inventory consist of both direct and indirect
materials. The balance of the Raw Materials Inventory account as of December 31, 2013 is
P85,000.
31. Determine the amount by which the overhead is overapplied or underapplied as of Dec. 31,
2013.
A. P11,000 underapplied C. P6,000 underapplied
B. P11,000 overapplied D. P6,000 overapplied
32. Determine the balance in Newport Company’s Finished Goods Inventory account on Dec. 31,
2013.
A. P86,000 C. P39,000
B. P31,000 D. P211,000
33. You find that the cost records at Sabath Tool and Die Company have been poorly maintained.
Some information has been entered, but other information is missing. Fortunately, the
information given is correct.
The costs for Jobs 686, 687, and 688 are to be determined. The direct materials cost is P5,280 for
Job 686 and P7,150 for Job 687. The cost of direct materials requisitioned during the month for
all other jobs, except Job 688, is P48,200. No jobs were in process at the beginning of the month.
The total cost of direct materials requisitioned during the month was P69,130.
Labor is paid at a uniform rate of P100 an hour. Job 686 required 82 direct labor hours, and Job
688 required 43 direct labor hours. A total of 760 direct labor hours were worked during the
month. The direct labor cost of all other jobs, with the exception of the three jobs being
considered, was P58,500.
Two machine hours are used for each direct labor hour. Overhead is applied at a rate of P40 per
machine hour. The actual overhead cost for the month was P63,200. Jobs 686, 687, and 688 were
completed during the month. How much is the cost of goods manufactured?
A. P44,820 C. P63, 190
B. P48,710 D. P64,860
34. Kyoto Corporation, a Japanese manufacturer of television sets, provides the following data
for 2013:
Budgeted overhead cost Y20,000,000
Budgeted activity 20,000 machine hours
Actual overhead cost Y21,500,000
Overapplied overhead Y500,000
Determine the amount of machine hours worked at Kyoto Corporation during 2013.
A. 22,000 D. 20,500
B. 20,000 E. none of these
C. 21,000
35. The Childers Company manufactures widgets. During the fiscal year just ended, the company
incurred prime costs of P1,500,000 and conversion costs of P1,800,000. Overhead is applied at
the rate of 200% of direct labor cost. How much of the above costs represent material cost?
A. P1,500,000 C. P900,000
B. P300,000 D. P600,000
