Download docx - Cost Accounting Refresher

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.


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.


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.


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.


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.


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 |


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.


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


(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


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 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


(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


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


(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


(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