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COST ACCOUNTING G.P. COSTA Definition of Cost Accounting Cost Accounting involves the measuring, recording, and reporting of product costs. From the data accumulated, the unit cost of each product is determined. In addition, cost accounting provides data that can be used by management to measure performance and control costs. Comparison of Cost Accounting with Financial Accounting Cost Accounting Financial Accounting 1. Looks to the future 1. Looks to the past 2. Subjective 2. Objective 3. Reports mainly for internal consumption 3. Reports mainly for external consumption 4. Mainly to cut costs and expenses 4. Covers the whole field Accounting for Manufacturing Operations Accounting for manufacturing operations ranges from the simple to the complex. In its simplest form, the accounting is basically an extension of the accounting for merchandising operations when periodic inventory procedures are used. Under this type of accounting, manufacturing costs are recorded as incurred. At the end of an accounting period, physical inventories are taken for finished goods, work in process, and raw materials. As in a merchandising company, closing entries are made to record the ending inventories and the cost of goods manufactured. In its more complex form, the accounting for manufacturing operations involves perpetual inventory procedures and an extensive network of documents and accounting records. Summary of manufacturing and non-manufacturing costs Manufacturing Costs Direct Materials: Materials that can be physically and conveniently traced to a product, such as wood in a table. Prime Cost (Direct Materials + Direct Labor) Conversion Cost (Direct Labor + Overhead Cost) Direct Labor: Labor costs that can be physically and conveniently traced to a product such as assembly line workers in a plant. Direct labor is also called touch labor cost. Manufacturing Overhead: All costs of manufacturing a product other than direct materials and direct labor, such as indirect materials, indirect labor, factory utilities, and depreciation of factory equipment. Non-manufacturing Costs Marketing or selling costs: All costs necessary to secure customer orders and get the finished product or service into the hands of the customer, such as sales commission, advertising, and depreciation of delivery equipment and finished goods warehouse.

Cost Accounting Refresher

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COST ACCOUNTINGDefinition of Cost Accounting

G.P. COSTA

Cost Accounting involves the measuring, recording, and reporting of product costs. From the data accumulated, the unit cost of each product is determined. In addition, cost accounting provides data that can be used by management to measure performance and control costs.

Comparison of Cost Accounting with Financial Accounting Cost Accounting 1. Looks to the future 2. Subjective 3. Reports mainly for internal consumption 4. Mainly to cut costs and expenses Accounting for Manufacturing Operations Accounting for manufacturing operations ranges from the simple to the complex. In its simplest form, the accounting is basically an extension of the accounting for merchandising operations when periodic inventory procedures are used. Under this type of accounting, manufacturing costs are recorded as incurred. At the end of an accounting period, physical inventories are taken for finished goods, work in process, and raw materials. As in a merchandising company, closing entries are made to record the ending inventories and the cost of goods manufactured. In its more complex form, the accounting for manufacturing operations involves perpetual inventory procedures and an extensive network of documents and accounting records. Financial Accounting 1. Looks to the past 2. Objective 3. Reports mainly for external consumption 4. Covers the whole field

Summary of manufacturing and non-manufacturing costs Manufacturing CostsDirect Materials: Materials that can be physically and conveniently traced to a product, such as wood in a table. Prime Cost (Direct Materials + Direct Labor)

Direct Labor: Labor costs that can be physically and conveniently traced to a product such as assembly line workers in a plant. Direct labor is also called touch labor cost. Conversion Cost (Direct Labor + Overhead Cost) Manufacturing Overhead: All costs of manufacturing a product other than direct materials and direct labor, such as indirect materials, indirect labor, factory utilities, and depreciation of factory equipment.

Non-manufacturing Costs

Marketing or selling costs: All costs necessary to secure customer orders and get the finished product or service into the hands of the customer, such as sales commission, advertising, and depreciation of delivery equipment and finished goods warehouse.

Administrative Costs: All costs associated with the general management of the company as a whole, such as executive compensation, executive travel costs, secretarial salaries, and depreciation of office building and equipment.

COST ACCOUNTING

G.P. COSTA

Job Order Cost Flow Direct materials, direct labor, and factory overhead in a job order system are identical those in a simple manufacturing system. The flow of costs in job order Job Order Cost Accounting

1-Purchases

Materials 4- Materials used

Work in Process 4- Direct materials 7- Cost of goods used manufactured 5- Direct labor 6- Overhead applied Finished Goods 7- Cost of goods 8- Cost of goods sold manufactured Cost of Goods Sold 8- Cost of goods sold

Payroll 2-Factory labor incurred

Factory Overhead Control Actual overhead 6-Applied overhead incurred: 3-Depreciation, Insurance, Repairs 4-Indirect materials 5-Indirect labor

Key to Entries:

Accumulation 1-Purchase Raw Materials 2-Incur factory labor 3- Incur factory overhead

Assignment 4-Raw materials are used 5-Distribution of payroll 6- Overhead is applied 7-Completed goods are recognized 8-Cost of goods sold is recognized

Problem A Selected transactions of the GPC Company for January are as follows: a. b. c. d. e. f. Material purchased on account, P40,000. Materials requisitioned: P33,000 for production and P2,000 for indirect factory use. Total gross payroll was P40,000, with withholdings of 12% income tax, 7.5% SSS, and P280 Philhealth. The wages due to the employees were paid. Of the total payroll, P32,000 was direct labor and P8,000 was indirect factory labor. An additional 10% is entered for employers payroll taxes, representing 7.5% SSS, 0.8% Philhealth, and 1.7% employees compensation. g. Various factory overhead costs totaling P18,000 were incurred on account. h. Other factory overhead consists of P2,100 depreciation, P780 expired insurance, P1,250 accrued property taxes. i. Factory overhead was transferred to the Work in Process account. j. Cost of completed production to storage P92,000. k. Sales on account were P80,000, 50% of which were collected. The cost of goods sold was 75% of the sales price. Required: Prepare journal entries for these transactions.

COST ACCOUNTING

G.P. COSTA

Problem 1. Computation of Total Manufacturing Cost, Cost of Goods Manufactured, and Cost of Goods Sold. During the past year, the ABC Company incurred these costs: direct labor, P2,500,000; factory overhead, P4,000,000; and direct materials purchases, P1,500,000. Inventories were costed as follows: Beginning Finished goods ................................................................................ Work in process .............................................................................. Materials......................................................................................... Required: (1) (2) (3) Calculate total manufacturing cost for the year. Calculate the cost of goods manufactured for the year. Calculate the cost of goods sold for the year. P250,000 450,000 75,000 Ending P300,000 550,000 125,000

PROBLEM 2 Journal Entries for the Cost Accounting Cycle. On January 1, the ledger of the DEF Furniture Company contained, among other accounts, the following: Finished Goods, P25,000; Work in Process, P30,000; Materials, P15,000. During January, the following transactions were completed: (a) (b) (c) (d) (e) (f) (g) (h) Materials were purchased at a cost of P28,000. Direct materials in the amount of P21,000 were issued from the storeroom. Storeroom requisitions for indirect materials and supplies amounted to P3,200. The total payroll for January amounted to P31,000, including marketing salaries of P7,500 and administrative salaries of P5,500. Labor time tickets show that P15,500 of the labor cost was direct labor. Various factory overhead costs were incurred for P12,000 on account. Total factory overhead is charged to the work in process account. Cost of production completed in January totaled P58,000, and finished goods in the shipping room on January 31 totaled P18,000. Customers to whom shipments were made during the month were billed for P88,000. (Also record entry for cost of goods sold.)

Required: Prepare journal entries for the transactions, including the recording, payment, and distribution of the payroll. PROBLEM 3 Cost of Goods Manufactured Statement. GHI Company manufactures file cabinets made to consumer specifications. The following information was available at the beginning of March: Materials inventory ........................................................................ Work in process inventory.............................................................. Finished goods inventory ............................................................... P12,800 4,700 2,300

During March, materials costing P26,000 were purchased, direct labor cost totaled P19,300, and factory overhead was P12,500 (including P2,500 of indirect materials). March 31 inventories were:

Materials inventory ........................................................................ Work in process inventory.............................................................. Finished goods inventory ...............................................................

P13,300 6,800 2,800

Required: Prepare a cost of goods manufactured statement for March.

COST ACCOUNTINGPROBLEM 4 Income Statement Relationships. The following data are available for three companies at the end of their fiscal years: Company Alpha: Finished goods, April 1 ........................................................... Cost of goods manufactured ............................................ Sales.................................................................................. Gross profit on sales ......................................................... Finished goods inventory, March 31 ................................ Company Beta: Freight in ................................................................................ Purchases returns and allowances ................................... Marketing expense ........................................................... Finished goods, December 31 .......................................... Cost of goods sold ............................................................ Cost of goods available for sale ........................................ P 12,000 22,000 85,000 65,000 550,000 ? P 400,000 2,600,000 3,500,000 35% ?

G.P. COSTA

Company Chi: Gross profit ............................................................................ Cost of goods manufactured ............................................ Finished goods, January 1 ................................................ Finished goods, December 31 .......................................... Work in process, January 1............................................... Work in process, December 31 ........................................ Sales.................................................................................. Required: Determine the amounts indicated by the question marks. PROBLEM 5 Cost of Goods Manufactured; Prime and Conversion Costs. Rexaldo Company's purchases of materials during June totaled P25,000, and the cost of goods sold for June was P130,000. Factory overhead was 200% of direct labor cost. Other information pertaining to Rexaldo Company's inventories and production for June is as follows: Inventories Finished goods ............................................................................. Work in process ........................................................................... Materials...................................................................................... Required: (1) Prepare a schedule of cost of goods manufactured. (2) Compute the prime cost charged to Work in Process. (3) Compute the conversion cost charged to Work in Process. Beginning P42,500 15,500 5,000 Ending P39,000 17,000 8,500 P 264,000 612,000 34,000 26,000 18,000 12,000 ?

PROBLEM 6 Cost of Goods Manufactured and Sold. For May, Narita Inc. had cost of goods manufactured equal to P90,000; direct materials used P30,000; cost of goods sold, P100,000; direct labor, P38,000; purchases of materials, P40,000; cost of goods available for sale, P125,000; and total factory labor, P48,000. Work in process was P25,000 on May 1 and P15,000 on May 31. The company uses a single materials account for direct and indirect materials.

COST ACCOUNTINGRequired: Prepare the following:

G.P. COSTA

(1) A cost of goods sold statement. For brevity, show single-line items for factory overhead and direct materials used. (2) Summary general journal entries to record: (a) purchase of materials on account

(b) use of materials, including direct materials of 1,000 (c) accrual of factory payroll, including indirect labor of P10,000 (use a payroll clearing account)

(d) distribution of factory labor cost (e) transfer of completed work to finished goods (f) sales on account, at a markup equal to 100% of production cost

PROBLEM 7 Job Order Cost Schedule. Hideo Woodcrafters produces special-order wood products. The company uses job order costing for pricing and cost accumulation purposes. The following costs were incurred on two recent jobs: Cost Item ................................................ Direct materials: Issued................................................. Returned ............................................ Indirect materials used ........................... Direct labor ............................................. Direct labor rate ..................................... Overhead application rate ...................... P6,500 500 500 P9,000 P9 per hour P10 per direct labor hour P8,000 0 400 P15,000 P10 per hour P15 per direct labor hour Job J-8 Job K-9

The company adds a 50% markup on cost in determining the amount to charge for each job. Required: Prepare a schedule showing the cost and the amount to be charged for each job.

PROBLEM 8 Job Order Cost Sheet; Over- or Underapplied Overhead. During June, the following transactions took place at the Inoue Corp.

June

3 5

Purchased materials, P30,000. Requisitioned materials from inventory, P20,000 (75% of these were direct; 25% were indirect). Direct materials of P3,000 and indirect materials of P1,000 were for Job 00-1. The remainders were for Job 00-2. For Job 00-2, returned P150 of direct materials and P200 of indirect materials. Recorded liabilities for payroll: direct labor, P15,000 and indirect labor, P5,000. Of the direct labor cost, 60% was for Job 00-1; the remainder was for Job 00-2. Incurred other factory overhead costs, P20,000 (all applicable to Jobs 00-1 and 00-2). Applied overhead at the rate of 200% of direct labor cost to Jobs 00-1 and 00-2, which were completed and transferred to finished goods account today.

7 8 10 14

Required: Assuming that Jobs 00-1 and 00-2 were the only jobs during the period and that all overhead (as recorded above) is the total applicable overhead for these projects:

(1) (2)

Prepare a job order cost sheet for each job. Determine the difference between applied and actual overhead for the month.

COST ACCOUNTINGPROBLEM 9 Job Order Cycle Entries.

G.P. COSTA

The following completed cost sheets were prepared for three jobs that were in production during April in the Special Order Division of Takemasa Company: Job 097 Direct materials ........................................................................ Direct labor ............................................................................... Applied factory overhead ......................................................... Allowance for commercial expenses and profit ....................... P 6,000 9,200 6,900 11,050 Job 781 P2,700 7,300 5,475 7,738 Job 946 P4,100 8,200 6,120 9,210

On April 1, Job 097 was 75% complete as to materials, labor, and overhead. It was finished during the month. The other jobs were started and finished during the month. Jobs 097 and 946 were sold on account at the end of the month. Required: Prepare general journal entries to be recorded in April to accumulate these job costs for Work in Process as well as for Finished Goods and for the sale of the two jobs. PROBLEM 10 Journal Entries Iwamoto Inc. produces customized vans in a job order shop. On November 1, the following balances appear in the inventory records: Finished goods ......................................................................................................................... Work in process ....................................................................................................................... Materials.................................................................................................................................. P179,000 308,000 83,000

The amount in Finished Goods represents P101,000 recorded for Van 175 and P78,000 recorded for Van 177. The work in process account represents the three vans in process, as follows: Van 179 Factory overhead...................................................................... Direct labor ............................................................................... Direct materials ........................................................................ The following transactions occurred during November: (a) (b) (c) Purchased materials on account, P80,000. Requisitioned P60,000 of materials from inventory: P15,000 applied to Van 180, P25,000 to Van 181, and P16,000 to Van 182, a new order; the balance was for indirect materials. Recorded the liability for the payroll and the labor cost distribution in a single entry: total payroll, P208,750. Of the payroll cost, 10% applied to Van 179, 20% to Van 180, 35% to Van 181, 30% to Van 182, and the remainder to indirect labor. Paid the payroll. Applied factory overhead at the rate of 150% of direct labor cost. Completed Vans 179 and 180. Sold Vans 175, 177, and 180 at 50% over manufacturing costs. P75,000 60,000 26,000 Van 180 P50,000 40,000 7,000 Van 181 P25,000 20,000 5,000

(d) (e) (f) (g)

Required: Prepare general journal entries to record these transactions.

PROBLEM 11 Manufacturing Costs. The work in process account of Takeshi Company showed: Work in Process Materials Direct labor Factory overhead P22,000 37,000 55,500 | Finished goods | | P68,000

COST ACCOUNTING

G.P. COSTA

Materials charged to the one job still in process amounted to P5,000. Factory overhead is applied as a predetermined percentage of direct labor cost. Required: Compute the following: (1) (2) The amount of direct labor cost in finished goods. The amount of factory overhead in finished goods.

PROBLEM 12 Manufacturing Costs. Sadako Company is to submit a bid on the production of 5,500 vases. It is estimated that the cost of materials will be P8,500, and the cost of direct labor will be P12,000. Factory overhead is applied at 50% of direct labor cost in the Molding Department and at P7.50 per direct labor hour in the Finishing Department. Of the above direct labor, it is estimated that 500 direct labor hours at a cost of P4,000 will be required in Finishing. The company wishes a markup of 100% of its total production cost. Required: Determine the following: (1) (2) (3) (4) Estimated cost to produce. Estimated prime cost. Estimated conversion cost. Bid price.

PROBLEM 13 Flow of Costs Through T Accounts. The Kojie Company had the following inventories at the beginning and end of July: July 1 Materials...................................................................................................... Work in process ........................................................................................... Finished goods ............................................................................................. P20,000 ? 65,000 July 31 P 45,000 185,000 115,000

During July, the cost of materials purchased was P160,000 and factory overhead of P125,000 was applied at a rate of 75% of direct labor cost. July cost of goods sold was P240,000. Required: Prepare completed T accounts showing the flow of the cost of goods manufactured and sold.

COST ACCOUNTINGProblem 1 SOLUTION (1) Direct materials: Materials inventory, beginning ................................................ Purchases ................................................................................. Materials available for use ....................................................... Less raw materials inventory, ending ...................................... Direct materials consumed ...................................................... Direct labor ..................................................................................... Factory overhead ........................................................................... Total manufacturing costs .............................................................. P P P P 75,000 1,500,000 1,575,000 125,000 1,450,000 2,500,000 4,000,000 7,950,000

G.P. COSTA

(2)

Total manufacturing costs [from (1)] ............................................. Add work in process inventory, beginning ...............................

P

7,950,000 450,000

P Less work in process inventory, ending ................................... Cost of goods manufactured .......................................................... P

8,400,000 550,000 7,850,000

(3)

Cost of goods manufactured [from (2)] ......................................... Add finished goods inventory, beginning ................................ Cost of goods available for sale ...................................................... Less finished goods inventory, ending ..................................... Cost of goods sold ..........................................................................

P

7,850,000 250,000

P

8,100,000 300,000

P

7,800,000

Problem 2 SOLUTION (a) Materials ........................................................................................ Accounts Payable ..................................................................... 28,000 28,000

(b)

Work in Process .............................................................................. Materials ..................................................................................

21,000 21,000

(c)

Factory Overhead Control .............................................................. Materials ..................................................................................

3,200 3,200

(d)

Payroll............................................................................................. Accrued Payroll ........................................................................

31,000 31,000

Accrued Payroll .............................................................................. Cash ..........................................................................................

31,000 31,000

Work in Process .............................................................................. Factory Overhead Control .............................................................. Marketing Expenses Control .......................................................... Administrative Expenses Control ................................................... Payroll ......................................................................................

15,500 2,500 7,500 5,500 31,000

COST ACCOUNTING(e) Factory Overhead Control .............................................................. Accounts Payable ..................................................................... 12,000 12,000

G.P. COSTA

(f)

Work in Process .............................................................................. Factory Overhead Control ........................................................

17,700 17,700

(g)

Finished Goods ............................................................................... Work in Process .......................................................................

58,000 58,000

(h)

Accounts Receivable....................................................................... Sales .........................................................................................

88,000 88,000

Cost of Goods Sold (25,000 + 58,000 - 18,000) .............................. Finished Goods .........................................................................

65,000 65,000

Problem 3 SOLUTION GHI Company Cost of Goods Manufactured Statement For the Month Ended March 31, 19--

Direct materials: Materials inventory, March 1 ........................................ Purchases ....................................................................... Materials available for use ............................................ Less: .......................................... Indirect materials used Materials inventory, March 31 ................................ Direct materials consumed ............................................ Direct labor .......................................................................... Factory overhead ................................................................. Total manufacturing cost ..................................................... Add work in process inventory, March 1 ............................. P 2,500 13,300 15,800 P 23,000 19,300 12,500 P 54,800 4,700 P 59,500 Less work in process inventory, March 31 ........................... Cost of goods manufactured ............................................... 6,800 P 52,700 P 12,800 26,000 P 38,800

Problem 4 SOLUTION Company Alpha: Sales ................................................................................................ Cost of goods sold: Finished goods inventory, April 1 ............................................. Cost of goods manufactured .................................................... Cost of goods available for sale ................................................ Finished goods inventory, March 31 ........................................ Less cost of goods sold ............................................................. Gross profit (20% of sales) .............................................................. P 400,000 2,600,000 P 3,000,000 725,000 2,275,000 P 1,225,000 P 3,500,000

COST ACCOUNTINGCompany Beta: Cost of goods available for sale ...................................................... Less finished goods ending inventory ............................................. Cost of goods sold ........................................................................... P P 615,000 65,000 550,000

G.P. COSTA

Company Chi: Sales ................................................................................................ Cost of goods sold: Cost of goods manufactured .................................................... Add beginning finished goods inventory .................................. Cost of goods available for sale ................................................ Less ending finished goods inventory ....................................... Less cost of goods sold ............................................................. Gross profit ..................................................................................... P P P 612,000 34,000 646,000 26,000 620,000 264,000 P 884,000

Problem 5 SOLUTION

(1)

Rexaldo Company Schedule of Cost of Goods Manufactured For Month Ended June 30, 19--

Work in process, June 1 ........................................................................ Production costs: Direct materials .............................................................................. Direct labor ..................................................................................... Factory overhead ............................................................................ 21,500 ** 35,500 71,000

P

15,500

128,000 P 143,500

Less work in process, June 30 ............................................................... Cost of goods manufactured ................................................................

17,000 P 126,500 *

Let x = direct labor 3x = P106,500 x = P35,500 direct labor 2x = P71,000 factory overhead

(2)

Prime cost: Direct materials [from (1)] ..................................................... Direct labor [from (1)] ........................................................... P P 21,500 35,500 57,000

(3)

Conversion cost: Direct labor [from (1)] ........................................................... Factory overhead [from (1)] .................................................. P 35,500 71,000 P 106,500 ***

COST ACCOUNTING*

G.P. COSTA

Cost of goods sold (P130,000) + ending finished goods inventory (P39,000) - beginning finished goods inventory (P42,500) = P126,500.

**

Purchases of materials during June (P25,000) + beginning materials inventory (P5,000) - ending materials inventory (P8,500) = P21,500.

*** Production costs for June (P128,000) - direct materials (P21,500) = direct labor and factory overhead (P106,500).

Problem 6 SOLUTION

(1)

Narita Inc. Cost of Goods Sold Statement For Month Ended May 31, 19-(in thousands)

Direct materials consumed ................................................................... Direct labor ........................................................................................... Factory overhead .................................................................................. Total manufacturing cost [Note (a)] ..................................................... Add work in process inventory, May 1 .................................................

P

30 38 12

P

80 25

P 105 Less work in process inventory, May 31 ............................................... Cost of goods manufactured ................................................................ Add finished goods inventory, May 1 [Note (b)] .................................. Cost of goods available for sale ............................................................ Less finished goods inventory, May 31 [Note (c)]................................. Cost of goods sold ................................................................................. P 15 90 35 P 125 25 P 100

Note (a):

Cost of goods manufactured .............................................. Add work in process, ending ..............................................

P

90 15

P 105 Less work in process, beginning ......................................... Equals total manufacturing cost ......................................... P 25 80

Note (b): Cost of goods available for sale .......................................... Less cost of goods manufactured ....................................... Equals finished goods, beginning .......................................

P 125 90 P 35

Note (c):

Cost of goods available for sale .......................................... Less cost of goods sold ....................................................... Equals finished goods, ending ............................................

P 125 100 P 25

(2)

(a)

Materials ...................................................................................... Accounts Payable...................................................................

40,000 40,000

COST ACCOUNTING(b) Work in Process ........................................................................... Factory Overhead Control ........................................................... Materials ................................................................................ 30,000 1,000 31,000

G.P. COSTA

(c)

Payroll (P38,000 + P10,000) ......................................................... Accrued Payroll ......................................................................

48,000 48,000

(d)

Work in Process ........................................................................... Factory Overhead Control ........................................................... Payroll ....................................................................................

38,000 10,000 48,000

(e)

Finished Goods ............................................................................ Work in Process .....................................................................

90,000 90,000

(f)

Accounts Receivable .................................................................... Sales [P100,000 + (100% of P100,000)] .................................

200,000 200,000

Cost of Goods Sold ....................................................................... Finished Goods ......................................................................

100,000 100,000

Problem 7 SOLUTION

Job J-8 Direct materials ...................................................................................... Direct labor ............................................................................................. Factory overhead applied ...................................................................... Total .................................................................................................. Allowance for profit and other costs ...................................................... Amount to be charged ............................................................................ P 6,000 9,000 10,000 P 25,000 12,500 P 37,500 P

Job K-9 8,000 15,000 22,500 P 45,500 22,750 P 68,250

Problem 8 SOLUTION

(1) Job 00-1 Materials ....................................................................................................................... Labor ............................................................................................................................. Overhead applied ......................................................................................................... Total cost ...................................................................................................................... P P 3,000 9,000 18,000 30,000 P P Job 00-2 11,850 6,000 12,000 29,850

(2) Incurred:

Analysis of Factory Overhead

Indirect materials ................................................................................................... Indirect labor .......................................................................................................... Other overhead incurred ........................................................................................

P

4,800 5,000 20,000 P 29,800

COST ACCOUNTINGApplied: Job 00-1 .................................................................................................................. Job 00-2 .................................................................................................................. Amount overapplied .................................................................................................... P 18,000 12,000 P

G.P. COSTA

30,000 (200 )

Problem 9 SOLUTION Debit Work in Process ....................................................................................................... Materials............................................................................................................ 8,300 * 8,300 Credit

Work in Process ....................................................................................................... Accrued Payroll ..................................................................................................

17,800 ** 17,800

Work in Process ....................................................................................................... Factory Overhead Control .................................................................................

13,320 *** 13,320

Finished Goods ........................................................................................................ Work in Process .................................................................................................

55,995 55,995

Cost of Goods Sold ................................................................................................... Finished Goods ..................................................................................................

40,520 40,520

Accounts Receivable ................................................................................................ Sales ...................................................................................................................

60,780 60,780

*

(.25 x P6,000) + P2,700 + P4,100

** (.25 x P9,200) + P7,300 + P8,200 *** (.25 x P6,900) + P5,475 + P6,120

Problem 10 SOLUTION Debit (a) Materials......................................................................................................... Accounts Payable .................................................................................... 80,000 80,000 Credit

(b)

Factory Overhead Control .............................................................................. Work in Process .............................................................................................. Materials .................................................................................................

4,000 56,000 60,000

(c)

Factory Overhead Control .............................................................................. Work in Process .............................................................................................. Accrued Payroll .......................................................................................

10,437 198,313 208,750

(d)

Accrued Payroll ............................................................................................... Cash.........................................................................................................

208,750 208,750

COST ACCOUNTING(e) Work in Process .............................................................................................. Applied Factory Overhead ...................................................................... 297,470

G.P. COSTA297,470

(f)

Finished Goods ............................................................................................... Work in Process ......................................................................................

429,563 429,563

(g)

Accounts Receivable ....................................................................................... Sales ........................................................................................................

593,063 593,063

Cost of Goods Sold ......................................................................................... Finished Goods........................................................................................

395,375 395,375

Problem 11 SOLUTION

(1)

The amount of direct labor in finished goods: Finished goods ............................................................................................................................ Materials included in finished goods .......................................................................................... Direct labor and factory overhead in finished goods ................................................................. P68,000 17,000 P51,000

Factory overhead charged to work in process $55,500 = = 1.5 Direct labor charged to work in process $37,000

Let x = direct labor in finished goods 2.5x = P51,000 direct labor and factory overhead in finished goods x = P20,400 direct labor in finished goods

(2)

The amount of factory overhead in finished goods:

x = P20,400 1.5x = 1.5(P20,400) 1.5x = P30,600 factory overhead in finished goods

Problem 12 SOLUTION

(1)

Materials ............................................................................................................................... Direct labor ........................................................................................................................... Factory overhead: Molding (50% x P8,000) .................................................................................................. Finishing (500 DLH x P7.50) ............................................................................................ Estimated cost to produce ....................................................................................................

P

8,500 12,000

4,000 3,750 P 28,250

(2)

Materials ............................................................................................................................... Direct labor ........................................................................................................................... Estimated prime cost ............................................................................................................

P

8,500 12,000

P

20,500

COST ACCOUNTING(3) Direct labor ........................................................................................................................... Factory overhead .................................................................................................................. Estimated conversion cost .................................................................................................... P P

G.P. COSTA12,000 7,750 19,750

(4)

Estimated cost to produce .................................................................................................... Markup (P28,250 x 100%) ..................................................................................................... Bid price ................................................................................................................................

P

28,250 28,250

P

56,500

Problem 13 SOLUTION

Materials Inv. Purch. 20,000 160,000180,000 45,000

Work in Process 135,000 Inv. Materials Factory overhd. Labor 125,000 166,667475,000 185,000

| WIP | | | | | |

48,333 ** | FG 135,000 | | | | | |

290,000

Finished Goods Inv. WIP 65,000 | CGS 290,000* |355,000 115,000

Cost of Goods Sold 240,000 FG 240,000 | | | |

| |

CGA-Canada (adapted). Reprinted with permission.

*Beginning inventory + WIP = Ending inventory + CGS P65,000 + WIP = P115,000 + P240,000 WIP = P290,000

**Beginning WIP + Mfg. costs = Ending WIP + FG Beginning WIP + P426,667 = P185,000 + P290,000 Beginning WIP = P48,333