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Classify each of the following firms and determine which cost accounting system they likely use. Answer
JC for Job Order Costing and PC for Process Costing.
1. Production of beverages
2. Production of sugar
3. Company that manufactures custom bridal gowns
4. Provides public accounting services
5. Pharmaceutical and semiconductor industries
6. Automobile repair shop
7. Designs custom software
8. Health care clinic
9. Engage in road and bridge construction
10. Produce bricks for sale to the public
11. Produce sailboats made to customer specification
12. Produces stained glass windows
13. Company that manufactures blank CD
14. Manufactures hair spray and hand lotion
15. Provides landscaping services for corporations
1. When a job order cost accounting system is used, the cost accumulation is centered on which cost
object:
a. Department
b. Job
c. Item
d. Supervisor
2. Job order cost accounting system is applicable for those companies producing products that are:
a. Homogeneous and in large quantities
b. Homogeneous and in limited quantities
c. Heterogeneous and in limited quantities
d. Heterogeneous and in large quantities
3. The source document that records the amount of raw materials requested and issued for production
is:
a. Job order cost sheet memo
b. Bill of lading
c. Material requisition
d. Interoffice memo
6. Which of the following items is not included in (charged to) factory overhead?
a. Cost of service departments
b. Cost of marketing departments
c. Cost of maintenance departments
d. Factory depreciation and supplies
7. In a normal costing system, debits to Work in Process Inventory would not be made fore
a. Actual overhead
b. Applied overhead
c. Actual DM
d. Actual DL
8. In job order costing system, the use of indirect material would usually be reflected in the general
ledger as an increase in
a. Material Inventory
b. Work in Process
c. Applied Factory Overhead
d. FOC
9. Two basic costing system for assigning costs to products or services are job costing and process
costing/ The fundamental criterion employed to determine whether job order costing or process
costing should be employed is:
a. Number of cost pools employed to allocate the direct costs to the product or service.
b. Type of base used in allocating the indirect cost pools to the product or service.
c. Proportion of direct costs expended to produce the product or service.
d. The nature and amount of the product or service brought to the marketplace for customer
consumption
10. The cost of materials that have been started into production but are not completely processed
would be found in which inventory account?
a. Supplies Inventory
b. Work in Process Inventory
c. Raw Materials Inventory
d. Finished Goods Inventory
Exercise 2-4 (Cost flows)
Orly Corp. applies overhead to job at a rate of 120% of direct labor cost. On December 31, 2019, a fire
burned many of the firm’s cost records, leaving only the following information:
105,000
Required:
1. Supply the missing data in the T-accounts
2. Prepare the Statement of Cost of Goods Manufactured and Cost of Goods Sold Statement
Work in Process
Jan 1 Balance P250,000 Finished Goods 1,254,500
Direct Material Used 500,000
Direct Labor 400,000
Applied FOH 300,000
Factory overhead is applied to production at a predetermined rate based on direct labor cost. The work
in process on January 31 represents the cost of Job# 888 which has a direct labor cost of P30,000 and
Job#899 with applied factory overhead of P24,000.
Determine the:
1. Predetermined factory overhead rate for the year
2. Cost of direct materials charged to Job #888 and Job #899.
Exercise 2-6 (Manufacturing Cost)
Work in Process
Materials 38,750 Finished Goods 93,750
Direct Labor 36,875
Factory Overhead 29,500
Materials charged to the only job still in process amounted to P8,000. Factory overhead is applied at a
predetermined percentage of direct labor cost.
Determine the:
1. Predetermined factory overhead rate.
2. Direct labor cost contained in Finished Goods inventory account.
3. Factory overhead included in Finished Goods inventory account.
The following data are available about Mamita Company who uses job order cost system:
On December 1, Neil Company had the following inventories: materials, P60,000; work in process –
P30,000; and finished goods – P90,000. During the month, materials purchases totaled P140,000. Direct
Labor for December was P100,000, at a uniform wage of P6.40 per hour. Marketing and Administrative
expenses for the month amounted to 10% of net sales. Inventories on December 31, were as follows:
Materials, P50,000; Work in Process, P20,000; and Finished Goods, P100,000. Net sales for December
totals P500,000. Factory overhead is applied @ P8.00 per direct labor hour.
Compute the:
1. WIP inventory at June 30
2. Finished Goods inventory at June 30
3. Cost of Goods Sold in June
Inventories
November 1, 2019 November 30, 2019
Finished Goods P30,000
Direct Materials P12,500
Direct Labor P7,500
Machine Time 150 hours
Work in Process 7,500 units 5,000 units
Direct Materials, P2.40 per unit
Direct Labor, P0.80 per unit
Machine Time 120 hours 80 hours
Materials P20,000 P16,250
Total factory costs in November was P450,000, of which P75,000 was direct labor cost. A total of 600
machine hours were used for the month. The company uses a predetermined overhead rate of P100 per
machine hour in assigning factory overhead to Work in Process and Finished Goods inventories.
Materials purchased in November were P217,500 and Freight-In on these purchases totaled P3,750.
Compute the:
1. Cost of Materials used for the month
2. Work in Process at November 30
3. November Cost of Goods Manufactured
4. Finished Goods Inventory at November 30
5. November Cost of Goods Sold
Exercise 2-11 (Manufacturing cost)
Jehu Company uses job order costing. At the beginning of May, two jobs were in process:
There was no inventory of finished goods on May 1. During the month, Jobs #969, 970, 971, 972 and 973
were started. Materials requisitioned in May totaled P65,000, direct labor cost P50,000 and actual
factory overhead, P80,000. Factory overhead is applied at a rate of 150% of direct labor cost.
The only job still in process at the end of May is Job# 973, with cost of P7,000 for materials and P4,500
for direct labor. Job# 971, the only finished job on hand at the end of May, has a total cost of P10,000.
Compute the:
1. Prime cost for the month of May
2. Conversion cost for the month of May
3. Cost of goods manufactured for the month of May
4. Cost of jobs available for sale in May
The following information pertains to the three jobs that were in process at the factory of Dereal
Company:
Required:
Prepare the appropriate journal entry to record each of the following February transactions:
1. Direct materials were issued from the storeroom to work in process.
2. The distribution of payroll to work in process
3. Factory overhead was applied to February production.
4. Job #101 and Job #102 were completed and transferred to the storeroom.
Exercise 2-13 (Work in Process)
On January 1, two jobs were in process at Clare Printing Press. Details of the jobs are:
Materials inventory at January 1 totaled P115,000 and P14,500 in materials were purchased during the
month. A requisition for P1,750 in supplies was filled. On January 1, finished goods inventory consisted
of two jobs: Job No. R-207 costing of P49,000 and Job No. R-221 with a cost of P19,750. Both of these
jobs were sold during the month.
On January, Job No. R-215 and R-238 were completed. Completing Job No. R-215 required additional
direct labor cost of P8,500 and direct materials costing P3,750. The completion costs for Job No. R-238
included P13,500 in direct materials and P25,000 in direct labor.
Job No. R-240 was started during the month but was not finished. A total of P39,250 of direct materials
were brought from the storeroom during the period and total direct labor costs during the month
amounted to P51,000. Factory overhead was applied at 150% of direct labor costs of all jobs.
Determine the:
1. Cost of the completed jobs in January.
2. Cost of job/s still in process at the end of January.
The following data pertains to the production and sale of a commodity that were taken from the
company’s stock card:
REQUIRED:
Determine the cost of the inventory balance at May 31, using (a) first-in, first-out method and (b)
weighted average costing. Identify the quantity, unit price, and total cost of each lot in the inventory.
Exercise 2-15 (inventory Costing)
The units of an item available for sale during the year were as follows:
There are 30 units of the item in the physical inventory at December 31. The periodic inventory system
is used.
REQUIRED: Determine the inventory cost using First-In, First-Out (FIFO) costing method.
The beginning inventory and purchases of an item for the period were as follows:
The company uses the physical inventory system, and there were 15 units in the inventory at the end of
the period. Determine the cost of the 15 units in the inventory by each of the following methods,
presenting details of your computations:
(1) FIFO;
(2) Average cost.
The material ledger card shows the balance of Material Q on May 1 and its receipts and issuance in May
as follows:
REQUIRED: Determine the breakdown of the total cost of materials issued in May assuming the use of
Perpetual Inventory System, First-In, First-Out (FIFO) method.
Exercise 2-18 (Comprehensive)
Zelsa Company had the following inventories on November 1, 2019: Finished Goods – P37,500; Work in
Process – P47,675; Materials – P35,000. The breakdown of Work in process account is as follows:
Required:
1. Journalize the November transactions.
2. Prepare the T-accounts for Raw Materials, Payroll, Factory Overhead, WIP and Finished Goods.
3. Determine the cost of goods manufactured, cost of goods sold and net profit for the month.
Problem 2-A (T-Account Analysis)
D Wonder Landscape Co. began operations on November 1, 2019. Its Work in Process inventory account
on November 30 appeared as follows:
The company applies overhead on the basis of direct labor cost. Only one job was still in process on
November 30. That job had P83,375 in direct material and P234,000 in direct labor cost assigned to it.
Required:
1. What was the predetermined overhead rate?
2. What was the balance in Work in Process Inventory at the end of May?
3. What was the total cost of jobs completed in May?
Delex Company had the following inventories at the beginning and end of January:
January 1 January 31
Materials P50,000 P112,500
Work in Process ? 462,500
Finished Goods 162,500 287,500
During January, the cost of materials purchased was P400,000 and factory overhead of P312,500 was
applied at a rate of 125% of direct labor cost. July Cost of Goods Sold was P600,000.
Required: Prepare the T-accounts showing the flow of cost f goods manufactured and sold.
Problem 2-C (Job Cost Computation)
A manufacturer employs a job order cost system. All jobs ordinarily pass through all three production
departments, and Job 102 and Job 103 were completed during the current month.
Required:
1. Compute the total cost of jobs completed
2. Compute the total cost of jobs still in process
Problem 2-D (Manufacturing Cost)
Last month, Gumela Company put P150,000 of materials into production. The Grinding Department
used 20,000 direct labor hours at a cost of P5.60 per hour, and the Machining Department used 11,500
direct labor hours at a cost of P6 per hour. Factory overhead is applied at a rate of P6 per labor hour in
the Grinding Department and P8 per labor hour in the Machining department. Inventory accounts had
the following beginning and ending balances:
Beginning Ending
Materials P55,000 P42,500
Work in Process P37,500 P44,000
Finished Goods P47,500 P45,000
Mark Kevin Motor of Panguil Bay, Philippines makes marine motors for vessels. The company uses a job-
order costing system. Only three jobs –Job MK508, Job MK509 and Job MK510 – were worked on during
May and June. Job MK508 was completed on June 20; the other two jobs were uncompleted on June 30.
Job cost sheets on the three jobs are given below:
Required:
1. Compute for Cost of Goods Manufactured
2. Determine the June 30 Work in Process inventory account.
Problem 2-F (Cost of Goods Sold)
On September 18, 2019, a fire destroyed Wawangz World’s Work in Process Inventory, which consisted
of two in process custom jobs (WA25 and NG28). The following information had, however, been
contained in some offsite records:
Wako Refrigeration uses an actual cost, job order cost system. The following transactions are for August
2019. At the beginning of the month, Materials Inventory was P17,750, Work in Process Inventory was
P56,750, and Finished Goods Inventory was P27,500.
Required:
Vanda Inc. produces customized vans in a job order shop. On November 1, the following balances
appear in the inventory records.
Materials P207,500
Work in Process 770,000
Finished Goods 447,500
The amount in Finished Goods represents P252,500 recorded for Van 1075 and P195,000 recorded for
Van 1077. The work in process account represents the three vans in process, as follows:
Hawan Manufacturing Corp. uses a job order cost system. The company’s trial balances as of May 1,
2012 included the following accounts:
Job Order cost sheet for the month of May, 2012 were as follows:
f. Overhead is applied at jobs in process at predetermined rate of P10 per direct labor hour.
g. Jobs 3909, 3911 and 3912 were completed during the month.
h. Jobs 3909, 3910 and 3911 were sold to customers during the month. The prices of these jobs
were P562,500, P93,750 and P375,000 respectively.
i. Total operating expenses (selling, distribution, general and administrative) were P186,250 for
the month.
Required:
1. Prepare the general journal entries to record these transactions.
2. Prepare job order cost sheets for jobs worked on during the month.
3. Prepare the Cost of Goods Manufactured Statement for the month of May.
4. Prepare an income statement for the month of May.
Problem 2-J (Comprehensive)
The following transactions pertain to the manufacturing operations of Dale Dan Company:
A client has asked advice as to a satisfactory system of factory costs for a factory that is divided into two
main divisions:
1. Machine Shop: This division makes steel molds used in the manufacture to plastic articles. These
molds require careful precision work; and frequently, one person is employed at machining one
mold for several weeks. The finished molds are used by the Plastic Division of the company/ In
addition, some other machine work is done for customers, although this forms the smaller
portion of the shop’s output.
2. Plastic Division: This division manufactures plastic article including ash trays, buttons, knobs, etc.
The process of manufacturing consists of placing chemical powders in a mold, which is then
placed under a stream press where pressure is applied for a few minutes. The chemical powders
are the only materials used and are not processed before being placed in the mold. After being
processed, a certain amount of finishing and inspection labor is necessary to complete the
articles.
It is ascertained that:
Required: A method or methods for obtaining factory costs, explaining why there are considered the
most satisfactory under the circumstances.