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JOB ORDER COSTING (2010 Edition DAYAG reviewer)1. Flor Company consumed P450, 000 worth of directed materials during May 2011. At the end of the month, the direct materials inventory of Flor was P25, 000 lower than the May 1 inventory level. How much was the direct material procured during May 2011?...

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JOB ORDER COSTING (2010 Edition DAYAG reviewer)

1. Flor Company consumed P450, 000 worth of directed materials during May 2011. At the end of the month, the direct materials inventory of Flor was P25, 000 lower than the May 1 inventory level. How much was the direct material procured during May 2011? Answer: P 425,000 2. Pink Company incurred the following costs during the month; direct labor, P120,000; factory overhead, P108 000; and direct materials purchases, P160,000. Inventories show the following cost:

Finished goods…………………………………… Work in process………………………………….. Direct Materials…………………………………...

Beginning

Ending

P27,000 61,500 37,500

P30,000 57,500 43,500

How much is the cost of goods manufactured? Answer: P386,000 3. Last Month, Pare Company placed P60,000 of materials into production. The Printing Department used 8,000 labor hours at P5.60 per hour and the Binding Department used 4,600 hours at P6.00 per hour. Factory overhead is applied at a rate of P6.00 per labor hour in the Printing Department and P8.00 per labor hour in the Binding Department. Pare’s inventory accounts show the following balances:

Finished goods…………………………………… Work in process………………………………….. Materials…………………………………............

Beginning

Ending

P22,000 15,000 20,000

P17,000 17,600 18,000

What is the total cost of goods sold? Answer: P219,600 4. The factory ledger of Diamond Corporation contains the following cost data for the year ended December 31, 2011:

Raw Materials……………………………………………… Work in process……………………………………………. Finished goods……………………………………………..

Inventories Opening Closing P150,000 P170,000 160,000 60,000 180,000 220,000

Raw Materials Used………………………………………. Total Manufacturing costs charged to production during the year (including raw materials, direct labor and factory overhead applied at the rate of 50% of direct labor cost)………………

652,000

1,372,000

Compute the: (1) cost of raw materials purchased and (2) direct labor charged to production during the year: Answer: (1) P672,000; (2) P480,000 5. National Marketing Corp. uses a job-order costing system. It has three production departments, X, Y, and Z. The manufacturing cost budget for 2011 is as follows:

Direct Materials……………………………… Direct Labor…………………………………. Manufacturing overhead…………………….

Dept. X

Dept.Y

Dept. Z

P600,000 200,000 600,000

P400,000 500,000 100,000

P200,000 400,000 200,000

For Job No. 01-90 which was completed in 2011, direct materials cost was P75,000 and direct labor cost was as follows: Dept. X………………………………………………………………………… Dept. Y…………………………………………………………………………. Dept. Z…………………………………………………………………………

P 40,000 100,000 20,000

The corporation applies manufacturing overhead to each job order on the basis of direct labor cost, using departmental rates predetermined at the beginning of the year based on the manufacturing cost budget. The total manufacturing cost of Job No. 01-90 which was completed in 2011 is: Answer: P385,000 6. The following data were taken from the records of Best Company. 08/31/2011 09/30/2011 Inventories: Raw Materials…………………………………… P ? P 50,000 Work-in-process………………………………… 80,000 95,000 Finished goods………………………………… 60,000 78,000

Raw Materials purchases, P 46,000 Factory overhead, 75% of direct labor cost, P63,000 Selling and administrative expenses, 12.5% of sales, P25,000. Net income for September, 2011, P25,000. What is the cost of raw materials inventory on August 31, 2011? Answer: P40,000 7. Vat Corporation manufactures rattan furniture sets for export and uses the job order cost system in accounting for its costs. You obtained from the corporation’s books and records the following information for the year ended December 31, 2011;  The work in process inventory on January 1 was 20% less than the work in process inventory on December 31.  The total manufacturing costs added during 2008 was P900,000 based on actual direct materials and direct labor but with manufacturing overhead applied on actual direct labor pesos.  The manufacturing overhead applied to process was 72% of the direct labor pesos, and it was equal to 25% of the total manufacturing costs.  The cost of goods manufactured, also based on actual direct materials, actual direct labor and applied manufacturing overhead, was P850,000. The cost of direct materials used and the work-in-process inventory on December 31,2011: Answer:

Direct Material Used P362,000

Work-in-process Inventory P250,000

8. Fusion Company has the following data on April 30, 2011: April manufacturing overhead…………………………………………. Decrease in ending inventories: Materials…………………………………………………………. Goods in Process………………………………………………. Increase in ending inventory: Finished Goods…………………………………………………

P30,101.80 2,430.00 590.00

1,320.00

The manufacturing overhead amounts to 50% of the direct labor, and the direct labor and manufacturing overhead combined equal 50% of the total cost of manufacturing. All materials are purchased F.O.B shipping point. What is the cost of goods manufactured? Answer: P181,200.80

9. The Fork Corporation manufactures one product and accounts for cost by a job-order cost system. You have obtained the following information for the year ended December 31, 2011 from the corporation’s books and records; Total manufacturing cost added during 2011 based on actual direct materials, actual direct labor and applied factory overhead on actual direct labor cost…………………………………………..

P1,000,000

Cost of goods manufactured based on actual Direct materials and direct labor and Applied factory overhead……………………………………………

970,000

Applied factory overhead to work in process Based on direct labor cost…………………………………………..

75%

Applied factory overhead for the year, based On total manufacturing cost…………………………………………

27%

Beginning work in process inventory was 80% of ending work in process inventory. Compute the cost of direct materials used for year ended December 31, 2011. Answer: P370,000 10. Tarzan Co. Employs a job order cost system. Its manufacturing activities in July, 2011, its first month of operation, are summarized as follows: 1201 Direct Materials…………………………. P 7,000 Direct labor cost………………………… P6,600 Direct labor hours………………………. 1,100 Units produced…………………………. 200

JOB NUMBERS 1202 1203 1204 P5,800 P11,600 P5,000 P6,000 P8,400 P2,400 1,000 1,400 400 100 1,000 300

Manufacturing overhead is applied at a rate of P2 per direct labor hour for variable overhead, P3 per hour for fixed overhead. Jobs 1201, 1202 and 1203 were completion in July. What is the cost of the completed jobs? Answer: P62,900 11. Job No. 010 has, at the end of the second week in April, an accumulated total cost of P4,200. In the third week. P1,010 of direct materials were used on the Job.

Twenty (20) hours of direct labor services were applied to the job at a cost of P5 per hour. Manufacturing overhead was applied at the basis of P2.50 per direct labor hour for fixed overhead and P2 per hour for variable overhead. Job No. 010 was the only job completed during the third week. The total cost of Job Order No. 010 is: Answer: P 5,400 12. The Work-in-Process account of the Malinta Company which uses a job order cost system follows: Work- in-Process April 1 Balance……………..P 25,000 Finished Goods………..P 125,450 Direct Materials…………. 50,000 Direct labor…………….. 40,000 Overhead Applied……. 30,000 Overhead is applied to production at a predetermined rate, based on direct labor cost. The work in process on April 30 represents the cost of Job No. 456, which has been charged with direct labor cost of P3,000 and Job No. 789, which has been charged with applied overhead of P2,400. The cost of direct materials charged to Job No. 456 and Job No. 789 amounted to: Answer: P 8,700. 13. The following information were taken from the accounting records of Yanni Music Company for 2011: Increase in raw materials inventory Decrease in finished goods inventory Raw Materials purchases Direct labor payroll Factory overhead Freight out

P 45,000 150,000 1,290,000 600,000 900,000 135,000

The cost of raw materials used during the period amounted to: Answer: P1,245,000. 14. Precise, Inc. manufactures specialized precision electronics kits. In late March, Job order #0311 and #0322 were started. Estimated materials cost were P90,000 for both

orders (60% for #0311) while direct labor hours were estimated at 700 for #0311 and 400 for #0322. Labor rate is P18 per hour while variable overhead rate is P10 per hour. By the end of April, 755 of the required material have been issued to production in the amount of P90,000 and both job orders have been 50% converted with 360 hours charged to #0311 and 180 hours charged to #0322 at the hourly rates given. The total cost charged to Job Order #0311 was: Answer: P64,080. 15. Handy Crafts manufactures to customers’ specifications. The company uses a job order cost system and, for the month of May, 2011, summarized the following information. Beginning work in process inventory (five partially completed jobs) Orders completed (eighteen) Orders shipped out (fourteen) Materials requisitioned Direct labor cost Overhead= 150% of direct labor cost.

P 300,000 2,400,000 2,000,000 1,700,000 800,000

The month-end work in proves inventory was: Answer: P 1,600,000. 16. Ambo, Inc. manufactured 50,000 kilos of compound Am in 2011 at the following costs: Opening work-in-process of P 88,125. Materials of P182,500 of which 90% is direct materials Labor of P242,500 of which 93% is direct labor Closing work-in-process of P67,500. Factory overhead is 125% of direct labor cost and includes indirect materials and indirect labor. The cost of goods manufactured is: Answer: P 692,306 17. Burger Co.’s materials purchase during 2011 are P25,590 and materials put into production are directed materials, respectively, worth P18,500 and P7,090. The total factory payroll is P74,000 of which P50,000 represents direct labor. Other factory overhead cost to process. Sales, Cost of goods sold, and the cost of goods manufactured, respectively, are P130,000, P120,000, and P128,000.

By what amount did the company’s closing goods in process inventory exceed its opening goods in process inventory? Answer: P 3,590 18. Steak Co. is a manufacturing concern using the perpetual inventory system. The following materials inventory account data is provided: Beginning balance Other debits to the account Excess of ending inventory over beginning inventory

P 275,000 825,000 55,000

How much is the cost of materials issued to production? Answer: P 770,000 19. The following selected information pertains to Ajax processing Co.: direct materials, P62,500; indirect materials, P12,500; factory payroll, P75,000 of direct labor and P11,250 of indirect labor; and other factory overhead incurred, P37,500. The total conversion cost was: Answer: P 136,250 20. Pistahan Corporation is a manufacturing company engaged in the production of a single special product known as “Marvel”, Production costs are accumulated with the use of a job-order-cost system. The following information is available as of June 1, 2011. Work-in-process Direct materials inventory

P 10,710 48,600

In analyzing the job-order cost sheets, the records disclosed that the composition of the work-in-process inventory on June 1, 2011 was as follows: Direct material used Direct labor (900 hours) Factory overhead applied

P 3,960 4,500 2,250 P 10,710

The following manufacturing activity occurred during the month of June 2011: Purchased direct materials costing P60,000 Direct labor worked 9,900 hours of P5 per hour Factory overhead of P2.50 per direct labor hour was applied to production. At the end of June 2011, the following information was gathered in connection with the inventories: Inventory of work-in-process: Direct Materials used P 12,960

Direct labor (1,500 hours) Factory overhead applied

7,500 3,750 P 24,210 P 51,000

Inventory of direct materials Compute the cost of goods manufactured: Answer: P118,350

21. Johnson uses a job order cost system and applies factory overhead to production orders on the basis of direct-labor cost. The overhead rate for 2011 is 200% for Department A and 50% for Department B. Job 123, started and completed during 2011, was charged with the following costs:

Direct material Direct labor Factory overhead applied

Department A B P 25,000 P 5,000 ? 30,000 40,000 ?

The total manufacturing cost associated with Job 123 should be Answer: P135,000 22. The Following data are obtained from Gianne Manufacturing Company:  Cost of goods manufactured is P187,500  Inventory variations are as follows: raw materials ending inventory is one-third based on raw materials beginning; no initial inventory of work-in-process, but at the end of period P12,500 was on hand; finished goods inventory was four times as large at end of period as at the start.  Net income after taxes amounted to P26,000, income tax rate is 35%.  Purchase of raw materials amounted to net income before taxes.  Breakdown of costs incurred in manufacturing cost was as follows: Raw material consumed Direct labor Overhead

50% 30% 20%

Compute the amount raw material beginning inventory: Answer: P90,000. 23. The following cost data were taken from the records of a manufacturing company: Depreciation on factory equipment Depreciation on sales office

P 1,000 500

Advertising Freight-out (shipping) Wages of production workers Raw materials used Sales salaries and commissions Factory rent Factory insurance Materials Handling Administrative salaries

7,000 3,000 28,000 47,000 10,000 2,000 500 1,500 2,000

Based upon the above information, the manufacturing cost incurred during the year was: Answer: P80,000 24. Data pertaining to Lam Co.’s manufacturing operations: Inventories Direct Materials Work-In-Process Finished goods

4/1 P 18,000 9,000 27,000

4/30 P 15,000 6,000 36,000

Additional information for the month of April: Direct Materials purchased Direct labor payroll Direct labor rate per hour Factory overhead rate per direct labor hour

P 42,000 30,000 7.50 10.50

For the month of April, cost of goods manufactured was: Answer: P 118,000 25. Carley Products has no work-in-process or finished goods inventories at the close of business on December 31, 2011. The balances of Carley’s accounts as of December 31,2011 are as follow: Cost of goods sold General selling and administrative expenses Sales Factory overhead control Factory overhead applied Carley Products’ income before income taxes 2011 is” Answer: P 608,000

P 2,040,000 900,000 3,600,000 700,000 648,000

26. A Company had the following total usage of direct labor and direct materials Direct Labor (P8 per hour) Direct Materials (P10 per pound)

Hours 400

Pounds 300

Incomplete job #101 has used 20 hours of direct labor and 8 pounds of direct materials. Factory overhead is applied at the rate of 200% per direct labor peso. What is the balance in work-in-process relating to job #101? Answer: P 560 debit 27. The Childers Company manufactures widgets. During the fiscal year just ended, the company incurred prime costs of P1,500,000 and conversion costs of P1,800,000. Overhead is applied at the rate of 200& of direct labor cost. How much of the above costs represent material cost? Answer: P900,000. 28. Ajax Corporation transferred P72,000 of raw materials to its production department in February and incurred P37,000 of conversion costs (P22,000 of direct labor and P15,000 of overhead). At the beginning of the period, P14,000 of inventory (material and conversion costs) was in process. At the end of the period, P18,000 of inventory was in process. What was the cost of goods manufactured? Answer: P105,000 29. Luna Co.’s year-end manufacturing costs were as follows: Direct materials and direct labor Depreciation of manufacturing equipment Depreciation of factory building Janitor’s wages for cleaning factory premises

P500,000 70,000 40,000 15,000

How much of these costs should be inventoried for external reporting purposes? Answer: P625,000 30. Blum Corp. which manufactured plastic coated metal clips. The information was among Blum’s year-end manufacturing costs. Wages Machine operators Maintenance workers Factory foremen

P200,000 30,000 90,000

Materials Used Metal wire

P500,000

Lubricant for oiling machinery Plastic coating

10,000 380,000

Blum’s year-end: Answer:

Direct Labor P200,000

Direct Materials P880,000

31. Hamilton Company uses job order costing. Factory overhead is applied to production at a determined rate of 150% of direct-labor cost. Any over-or under applied factory overhead is closed to the cost of goods sold account at the end of each month. Additional information is available as follows: 

Job 101 was the only job in process at January 31, 2011, with accumulated costs as follows: Direct materials Direct labor Applied factory overhead

    

P4,000 2,000 3,000 P 9,000

Jobs 102,103 and 104 were started during February. Direct materials requisitions foe February totaled P26,000. Direct-labor cost of P20,000 was incurred for February. Actual factory overhead was P32,000 for February. The only job still in process at February 28, 2011 was Job 104, with costs of P2,800 for direct materials and P1,800 for direct labor.

The cost of goods manufactured for February 2011 was: Answer: P77,700 32. Using the same information in No. 31, any over- or under applied factory overhead should be closed to the cost of goods sold account at February 28,2011, in the amount of Answer: P2,000 under applied. 33. Under Pick Company’s job order costing system, manufacturing overhead is applied to work-in-process using a predetermined annual overhead rate. During Jnuary2011, Picks transactions included the following: Direct materials issued to production Indirect materials issued to production Manufacturing overhead incurred Manufacturing overhead applied

P90,000 8,000 125,000 113,000

Direct labor costs

107,000

Pick has neither beginning nor enough ending work-in-process inventory. What was the cost of jobs completed in January 2011? Answer: P310,000 34. A company manufactures pipes and uses a job order costing system. During May, the following jobs were started (no other jobs were in process) and the following costs were incurred:

Materials requisitioned Direct Labor

Job X P10,000 5,000 P15,000

Job Y P20,000 4,000 P24,000

Job Z P15,000 2,500 P17,500

Total P45,000 11,500 P56,500

In addition, estimated overhead of P300,000 and direct labor costs of P150,000 were estimated to be incurred during the year. Actual overhead of P24,000 was incurred in May; overhead is applied on the basis of direct labor pesos. If only Job X and Job Z were completed during the month, the appropriate entry to record the initiation of all jobs would be Answer: Work-in-process Direct Materials Direct Labor Applied factory overhead

P79,500 P45,000 11,500 23,000

35. Tastee-Treat Company prepares, packages, and distributes six frozen vegetables in two different sized containers. The different vegetables and different sizes are prepared in large batches. The company employs a normal cost job order costing system. Manufacturing overhead is assigned...