Registered cost accountant - Additional lecture notes

PROBLEM 1

B Company Inc. records incoming materials at invoice price less discounts plus applied
receiving and handling cost. For product G, the following data are available:

Budgeted for Actual Cost

the Month for the Month
Freight-in and cartage-in P 25,000 P 25,800
Purchasing department cost 48,000 45,000
Receiving department cost 39,000 42,000
Storage and handling 42,000 38,000
testing, spoilage and rejects 26,000 31,200
P 180,000 P 182,000

The purchasing budget shows estimated net purchases of P1,440,000 for the month.
Actual invoices net of discounts total P1,485,000 for the month.

Required:
1. Determine the applied acquisition costing rate for the month.
2. Determine the amount of applied cost added to materials purchased during the
month.
3. Indicate the possible disposition of the variance.

PROBLEM 2

Kaleidoscope Cutlery manufactures kitchen knives. One of the employees whose job is to
cut out the wooden knife handles, worked 48 hours during a week in January. The
employee earns P12 per hour for a 40-hour week. For additional hours the employee is
paid an overtime rate of P16 per hour. The employees time was spent as follows:

Regular duties involving cutting out knife handles 38 hours

General shop cleanup duties 9 hours
Idle time due to power outage 1 hour

Required:
1. Calculate the total cost of the employees wages during the week described
above.
2. Determine the portion of this cost to be classified in each of the following
categories:
a. Direct labor
b. Manufacturing overhead (idle time)
c. Manufacturing overhead (overtime premium)
d. Manufacturing overhead (indirect labor)

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Registered cost accountant - Additional lecture notes

PROBLEM 3

C Corporation estimated factory overhead of P207,000 for the next fiscal year. It is
estimated that 52,100 units will be produced at a materials cost of P500,000. Conversion
will required an estimated 85,000 labor hours at a cost of P9 per hour, with 69,000
machine hours.

Required:
Calculate the predetermined factory overhead rate based on:
1. Materials costs
2. Units of production
3. Machine hours
4. Direct labor cost
5. Direct labor hours

PROBLEM 4

Madison Corporation is developing departmental overhead rates based on direct labor

hours for its two production departments, Molding and Assembly. The Molding
Department employs 20 people, and the Assembly Department employs 80 people. Each
person in these two departments work 2,000 hours per year. The production-related
overhead costs for the Molding Department are budgeted at P204,000, and the Assembly
Department costs are P320,000. Two service departments, Repair and Power, support the
two production departments and have budgeted costs of P48,000 and P250,000,
respectively. The production departments overhead rates cannot be determined until
service departments costs are distributed. The following schedule reflects the use of the
Repair Department and Power Departments output by the various departments.

Services Provided
Department Repair Hours KWH
Molding 1,000 840,000
Assembly 8,000 120,000
Repair 240,000
Power 1,000
10,000 1,200,000

Required:
1. Calculate the overhead rate per direct labor hour for Molding and Assembly
Department, distributing service department costs using
a. Direct method
b. Step method
c. Algebraic method

PROBLEM 5

Golden Company produces an inexpensive product branded as My Bi. Selected data for
the companys last years operations follow:

Units:
Beginning inventory 4,000
Normal capacity 50,000
Unit sales price P250
Variable costs per unit:

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Registered cost accountant - Additional lecture notes

Direct materials 30
Direct labor 20
Manufacturing overhead 25
Selling and administrative 12
Fixed costs:
Manufacturing overhead per unit P14
Selling and administrative, total 300,000

Required:
For each of the independent cases:

a. Determine the profit under the absorption and variable costing methods:

Production Sales
1 50,000 52,000
2 50,000 49,500
3 50,000 50,000
4 52,000 51,000
5 47,500 52,500

b. Account for the difference in operating income under the absorption costing
method and variable costing method.
c. Determine the adjusted cost of good sold and ending inventories.

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