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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 Accounting1. Looks to the future 1. Looks to the past2. Subjective 2. Objective3. Reports mainly for internal consumption 3. Reports mainly for external consumption4. 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.
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
Materials Work in Process1-Purchases 4- Materials used 4- Direct materials
used7- Cost of goods manufactured
5- Direct labor6- Overhead applied
Payroll Finished Goods2-Factory labor incurred 7- Cost of goods
manufactured8- Cost of goods sold
Factory Overhead Control Cost of Goods SoldActual overhead incurred:
6-Applied overhead 8- Cost of goods sold
3-Depreciation, Insurance, Repairs4-Indirect materials5-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. Material purchased on account, P40,000.b. Materials requisitioned: P33,000 for production and P2,000 for indirect factory use.c. Total gross payroll was P40,000, with withholdings of 12% income tax, 7.5% SSS, and P280 Philhealth.d. The wages due to the employees were paid.e. Of the total payroll, P32,000 was direct labor and P8,000 was indirect factory labor.f. An additional 10% is entered for employer’s 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 Ending
Finished goods............................................................................... P250,000 P300,000
Work in process............................................................................. 450,000 550,000
Materials........................................................................................ 75,000 125,000
Required:
(1) Calculate total manufacturing cost for the year.
(2) Calculate the cost of goods manufactured for the year.
(3) Calculate the cost of goods sold for the year.
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) Materials were purchased at a cost of P28,000.
(b) Direct materials in the amount of P21,000 were issued from the storeroom.
(c) Storeroom requisitions for indirect materials and supplies amounted to P3,200.
(d) 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.
(e) Various factory overhead costs were incurred for P12,000 on account.
(f) Total factory overhead is charged to the work in process account.
(g) Cost of production completed in January totaled P58,000, and finished goods in the shipping room on January 31 totaled P18,000.
(h) 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........................................................................ P12,800
Work in process inventory............................................................. 4,700
Finished goods inventory............................................................... 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........................................................................ P13,300
Work in process inventory............................................................. 6,800
Finished goods inventory............................................................... 2,800
Required: Prepare a cost of goods manufactured statement for March.
COST ACCOUNTING G.P. COSTA
PROBLEM 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.......................................................... P 400,000
Cost of goods manufactured........................................... 2,600,000
Sales................................................................................. 3,500,000
Gross profit on sales........................................................ 35%
Finished goods inventory, March 31................................ ?
Company Beta:
Freight in............................................................................... P 12,000
Purchases returns and allowances................................... 22,000
Marketing expense.......................................................... 85,000
Finished goods, December 31.......................................... 65,000
Cost of goods sold............................................................ 550,000
Cost of goods available for sale....................................... ?
Company Chi:
Gross profit........................................................................... P 264,000
Cost of goods manufactured........................................... 612,000
Finished goods, January 1................................................ 34,000
Finished goods, December 31.......................................... 26,000
Work in process, January 1.............................................. 18,000
Work in process, December 31........................................ 12,000
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 Beginning Ending
Finished goods............................................................................ P42,500 P39,000
Work in process.......................................................................... 15,500 17,000
Materials..................................................................................... 5,000 8,500
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.
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 ACCOUNTING G.P. COSTA
Required: Prepare the following:
(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................................................. Job J-8 Job K-9
Direct materials:
Issued................................................. P6,500 P8,000
Returned............................................ 500 0
Indirect materials used........................... 500 400
Direct labor............................................. P9,000 P15,000
Direct labor rate...................................... P9 per hour P10 per hour
Overhead application rate...................... P10 per direct labor hour P15 per direct labor hour
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 Purchased materials, P30,000.
5 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.
7 For Job 00-2, returned P150 of direct materials and P200 of indirect materials.
8 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.
10 Incurred other factory overhead costs, P20,000 (all applicable to Jobs 00-1 and 00-2).
14 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.
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) Prepare a job order cost sheet for each job.
(2) Determine the difference between applied and actual overhead for the month.
COST ACCOUNTING G.P. COSTA
PROBLEM 9 Job Order Cycle Entries.
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 Job 781 Job 946
Direct materials........................................................................ P 6,000 P2,700 P4,100
Direct labor.............................................................................. 9,200 7,300 8,200
Applied factory overhead......................................................... 6,900 5,475 6,120
Allowance for commercial expenses and profit....................... 11,050 7,738 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........................................................................................................................ P179,000
Work in process...................................................................................................................... 308,000
Materials................................................................................................................................. 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 Van 180 Van 181
Factory overhead..................................................................... P75,000 P50,000 P25,000
Direct labor.............................................................................. 60,000 40,000 20,000
Direct materials........................................................................ 26,000 7,000 5,000
The following transactions occurred during November:
(a) Purchased materials on account, P80,000.
(b) 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.
(c) 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.
(d) Paid the payroll.
(e) Applied factory overhead at the rate of 150% of direct labor cost.
(f) Completed Vans 179 and 180.
(g) Sold Vans 175, 177, and 180 at 50% over manufacturing costs.
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 P22,000 | Finished goods P68,000
Direct labor 37,000 |
Factory overhead 55,500 |
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) The amount of direct labor cost in finished goods.
(2) 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) Estimated cost to produce.
(2) Estimated prime cost.
(3) Estimated conversion cost.
(4) 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 July 31
Materials.................................................................................................... P20,000 P 45,000
Work in process.......................................................................................... ? 185,000
Finished goods............................................................................................ 65,000 115,000
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 ACCOUNTING G.P. COSTA
Problem 1 SOLUTION
(1) Direct materials:
Materials inventory, beginning................................................ P 75,000
Purchases................................................................................. 1,500,000
Materials available for use....................................................... P 1,575,000
Less raw materials inventory, ending...................................... 125,000
Direct materials consumed...................................................... P 1,450,000
Direct labor.................................................................................... 2,500,000
Factory overhead........................................................................... 4,000,000
Total manufacturing costs............................................................. P 7,950,000
(2) Total manufacturing costs [from (1)]............................................. P 7,950,000
Add work in process inventory, beginning............................... 450,000
P 8,400,000
Less work in process inventory, ending................................... 550,000
Cost of goods manufactured.......................................................... P 7,850,000
(3) Cost of goods manufactured [from (2)]......................................... P 7,850,000
Add finished goods inventory, beginning................................. 250,000
Cost of goods available for sale...................................................... P 8,100,000
Less finished goods inventory, ending..................................... 300,000
Cost of goods sold.......................................................................... P 7,800,000
Problem 2 SOLUTION
(a) Materials........................................................................................ 28,000
Accounts Payable..................................................................... 28,000
(b) Work in Process............................................................................. 21,000
Materials.................................................................................. 21,000
(c) Factory Overhead Control.............................................................. 3,200
Materials.................................................................................. 3,200
(d) Payroll............................................................................................ 31,000
Accrued Payroll........................................................................ 31,000
Accrued Payroll.............................................................................. 31,000
Cash......................................................................................... 31,000
Work in Process............................................................................. 15,500
Factory Overhead Control.............................................................. 2,500
Marketing Expenses Control.......................................................... 7,500
Administrative Expenses Control................................................... 5,500
Payroll...................................................................................... 31,000
COST ACCOUNTING G.P. COSTA
(e) Factory Overhead Control.............................................................. 12,000
Accounts Payable..................................................................... 12,000
(f) Work in Process............................................................................. 17,700
Factory Overhead Control....................................................... 17,700
(g) Finished Goods.............................................................................. 58,000
Work in Process....................................................................... 58,000
(h) Accounts Receivable...................................................................... 88,000
Sales......................................................................................... 88,000
Cost of Goods Sold (25,000 + 58,000 - 18,000).............................. 65,000
Finished Goods........................................................................ 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........................................ P 12,800
Purchases....................................................................... 26,000
Materials available for use............................................. P 38,800
Less:..........................................Indirect materials used P 2,500
Materials inventory, March 31................................ 13,300 15,800
Direct materials consumed............................................ P 23,000
Direct labor.......................................................................... 19,300
Factory overhead................................................................. 12,500
Total manufacturing cost..................................................... P 54,800
Add work in process inventory, March 1............................. 4,700
P 59,500
Less work in process inventory, March 31........................... 6,800
Cost of goods manufactured................................................ P 52,700
Problem 4 SOLUTION
Company Alpha:
Sales............................................................................................... P 3,500,000
Cost of goods sold:
Finished goods inventory, April 1............................................. P 400,000
Cost of goods manufactured.................................................... 2,600,000
Cost of goods available for sale................................................ P 3,000,000
Finished goods inventory, March 31......................................... 725,000
Less cost of goods sold............................................................. 2,275,000
Gross profit (20% of sales).............................................................. P 1,225,000
COST ACCOUNTING G.P. COSTA
Company Beta:
Cost of goods available for sale...................................................... P 615,000
Less finished goods ending inventory............................................. 65,000
Cost of goods sold.......................................................................... P 550,000
Company Chi:
Sales............................................................................................... P 884,000
Cost of goods sold:
Cost of goods manufactured.................................................... P 612,000
Add beginning finished goods inventory.................................. 34,000
Cost of goods available for sale................................................ P 646,000
Less ending finished goods inventory....................................... 26,000
Less cost of goods sold............................................................. 620,000
Gross profit..................................................................................... P 264,000
Problem 5 SOLUTION
(1) Rexaldo Company
Schedule of Cost of Goods Manufactured
For Month Ended June 30, 19--
Work in process, June 1........................................................................ P 15,500
Production costs:
Direct materials.............................................................................. 21,500 **
Direct labor..................................................................................... 35,500
Factory overhead............................................................................ 71,000 128,000
P 143,500
Less work in process, June 30............................................................... 17,000
Cost of goods manufactured................................................................ 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)]..................................................... P 21,500
Direct labor [from (1)]........................................................... 35,500
P 57,000
(3) Conversion cost:
Direct labor [from (1)]........................................................... P 35,500
Factory overhead [from (1)].................................................. 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................................................................... P 30
Direct labor........................................................................................... 38
Factory overhead.................................................................................. 12
Total manufacturing cost [Note (a)]..................................................... P 80
Add work in process inventory, May 1................................................. 25
P 105
Less work in process inventory, May 31............................................... 15
Cost of goods manufactured................................................................ P 90
Add finished goods inventory, May 1 [Note (b)]................................... 35
Cost of goods available for sale............................................................ P 125
Less finished goods inventory, May 31 [Note (c)]................................. 25
Cost of goods sold................................................................................ P 100
Note (a): Cost of goods manufactured.............................................. P 90
Add work in process, ending.............................................. 15
P 105
Less work in process, beginning......................................... 25
Equals total manufacturing cost......................................... P 80
Note (b): Cost of goods available for sale.......................................... P 125
Less cost of goods manufactured....................................... 90
Equals finished goods, beginning........................................ P 35
Note (c): Cost of goods available for sale.......................................... P 125
Less cost of goods sold....................................................... 100
Equals finished goods, ending............................................ P 25
(2)
(a) Materials..................................................................................... 40,000
Accounts Payable.................................................................. 40,000
COST ACCOUNTING G.P. COSTA
(b) Work in Process........................................................................... 30,000
Factory Overhead Control........................................................... 1,000
Materials............................................................................... 31,000
(c) Payroll (P38,000 + P10,000)......................................................... 48,000
Accrued Payroll...................................................................... 48,000
(d) Work in Process........................................................................... 38,000
Factory Overhead Control........................................................... 10,000
Payroll................................................................................... 48,000
(e) Finished Goods............................................................................ 90,000
Work in Process..................................................................... 90,000
(f) Accounts Receivable.................................................................... 200,000
Sales [P100,000 + (100% of P100,000)]................................. 200,000
Cost of Goods Sold...................................................................... 100,000
Finished Goods...................................................................... 100,000
Problem 7 SOLUTION
Job J-8 Job K-9
Direct materials...................................................................................... P 6,000 P 8,000
Direct labor............................................................................................ 9,000 15,000
Factory overhead applied ...................................................................... 10,000 22,500
Total................................................................................................. P 25,000 P 45,500
Allowance for profit and other costs...................................................... 12,500 22,750
Amount to be charged........................................................................... P 37,500 P 68,250
Problem 8 SOLUTION
(1)
Job 00 - 1 Job 00 - 2
Materials...................................................................................................................... P 3,000 P 11,850
Labor............................................................................................................................ 9,000 6,000
Overhead applied......................................................................................................... 18,000 12,000
Total cost...................................................................................................................... P 30,000 P 29,850
(2) Analysis of Factory Overhead
Incurred:
Indirect materials................................................................................................... P 4,800
Indirect labor......................................................................................................... 5,000
Other overhead incurred....................................................................................... 20,000 P 29,800
COST ACCOUNTING G.P. COSTA
Applied:
Job 00-1................................................................................................................. P 18,000
Job 00-2................................................................................................................. 12,000 30,000
Amount overapplied ................................................................................................... P (200 )
Problem 9 SOLUTION
Debit Credit
Work in Process....................................................................................................... 8,300 *
Materials........................................................................................................... 8,300
Work in Process....................................................................................................... 17,800 **
Accrued Payroll................................................................................................. 17,800
Work in Process....................................................................................................... 13,320 ***
Factory Overhead Control................................................................................. 13,320
Finished Goods........................................................................................................ 55,995
Work in Process................................................................................................. 55,995
Cost of Goods Sold.................................................................................................. 40,520
Finished Goods.................................................................................................. 40,520
Accounts Receivable................................................................................................ 60,780
Sales.................................................................................................................. 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 Credit
(a) Materials........................................................................................................ 80,000
Accounts Payable................................................................................... 80,000
(b) Factory Overhead Control.............................................................................. 4,000
Work in Process............................................................................................. 56,000
Materials................................................................................................ 60,000
(c) Factory Overhead Control.............................................................................. 10,437
Work in Process............................................................................................. 198,313
Accrued Payroll...................................................................................... 208,750
(d) Accrued Payroll.............................................................................................. 208,750
Cash........................................................................................................ 208,750
COST ACCOUNTING G.P. COSTA
(e) Work in Process............................................................................................. 297,470
Applied Factory Overhead...................................................................... 297,470
(f) Finished Goods.............................................................................................. 429,563
Work in Process...................................................................................... 429,563
(g) Accounts Receivable...................................................................................... 593,063
Sales....................................................................................................... 593,063
Cost of Goods Sold......................................................................................... 395,375
Finished Goods....................................................................................... 395,375
Problem 11 SOLUTION
(1) The amount of direct labor in finished goods:
Finished goods........................................................................................................................... P68,000
Materials included in finished goods.......................................................................................... 17,000
Direct labor and factory overhead in finished goods................................................................. P51,000
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.............................................................................................................................. P 8,500
Direct labor.......................................................................................................................... 12,000
Factory overhead:
Molding (50% x P8,000)................................................................................................. 4,000
Finishing (500 DLH x P7.50)........................................................................................... 3,750
Estimated cost to produce................................................................................................... P 28,250
(2) Materials.............................................................................................................................. P 8,500
Direct labor.......................................................................................................................... 12,000
Estimated prime cost........................................................................................................... P 20,500
Factory overhead charged to work in processDirect labor charged to work in process
= $55,500$37,000
= 1 .5
COST ACCOUNTING G.P. COSTA
(3) Direct labor.......................................................................................................................... P 12,000
Factory overhead................................................................................................................. 7,750
Estimated conversion cost................................................................................................... P 19,750
(4) Estimated cost to produce................................................................................................... P 28,250
Markup (P28,250 x 100%).................................................................................................... 28,250
Bid price............................................................................................................................... P 56,500
Problem 13 SOLUTION
Materials Work in Process
Inv. 20,000 | WIP 135,000 Inv. 48,333 ** | FG 290,000
Purch. 160,000 | Materials 135,000 |
180,000 | Factory |
45,000 | overhd. 125,000 |
| Labor 166,667 |
| 475,000 |
| 185,000 |
Finished Goods Cost of Goods Sold
Inv. 65,000 | CGS 240,000 FG 240,000 |
WIP 290,000* | |
355,000 | |
115,000 | |
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