Polytechnic University of the Philippines

College of Accountancy and Finance

Sta. Mesa, Manila

Advanced Financial Accounting and Reporting Cost Accounting

Problem 1. The records of XYZ Co. revealed the following data for 2018:
Work in Process P 73,150
Finished Goods 115,000
Cost of Goods Sold 133,650
Direct Labor 111,600
Direct Material 84,200

1. Refer to XYZ Co., assume for this question only, actual overhead of P98,750 and applied overhead is
P93,250. Manufacturing overhead is under/over applied by?

2. Refer to XYZ Co., assume that XYZ has underapplied overhead of P37,200 for 2018 and that this amount
is material. What will the journal entry needed to close the Overhead account be? (Round decimal to
nearest whole percent)

3. Refer to XYZ, assume that XYZ has overapplied of P11,200 for 2018 and that this amount is
immaterial. What is the balance of Cost of Goods Sold after the overapplied overhead is closed?

Problem 2. CRACKLINGS Company uses a job order costing system. During August 2018, the
following costs appeared in the Work in Process Inventory Account:
Beginning balance P 192,000
Direct material used 560,000
Direct labor incurred 480,000
Applied overhead 384,000
Cost of goods manufactured 1,480,000

4. CRACKLING Company applies overhead on the basis of direct labor cost. There is only one job left at
the end of August which contained P45,000 of overhead. What amount of direct material was included in
this job?

Problem 3. STRUGGLE Products has no work in process or Finished Goods Inventories at the close of
business on December 31, 2018. The balances of STRUGGLE’s accounts as of December 31, 2018, were
as follows:
Cost of goods sold - unadjusted P 6,120,000
Selling and administrative expenses 2,700,000
Sales 11,000,000
Manufacturing overhead control 2,100,000
Manufacturing overhead applied 1,874,000

5. Pretax income for 2018:

Problem 4. The VERA Company uses job order costing. At the beginning of August, two jobs were in
process.

Job 769 Job 772

Materials P80,000 P28,000
Direct Labor 40,000 12,000
Applied factory overhead 60,000 18,000

a. There was no inventory of finished goods on August 1.

b. During the month of August, Jobs 773, 774, 776, 778 and 779 were started.
c. Materials requisition for August totaled P520,000 direct labor cost, P400,000 and actual factory
overhead, P640,000.
d. The only job still in process at the end of August is Job 779, with costs of P56,000 materials and
P36,000 for direct labor.
e. Job 776, the only finished job on hand at the end of August has a total cost of P80,000.

6. Cost of goods sold after under/over applied is:

Problem 5. POM Company’s Job 921 manufactured 13,750 units that were completed in August at unit
costs presented as follows:
Direct Materials P50
Direct Labor 45
Factory overhead (includes allowance of P2.00 spoiled work) 45

7. Final inspection of Job 921 disclosed 1,250 spoiled units, which were sold for P37,500. What would be
the unit cost of good units if the spoilage loss is attributable to exacting specifications of Job 921?

8. Using the preceding information, what would be the unit cost of the good units if spoilage loss is
charged to all production?

Problem 6. During August 2018, Faithfull incurred the following costs for Job 500 (450 drum sets):
Direct materials P42,500
Direct labor 65,250
Factory overhead 78,300

45 units of drum sets were found to be defective and the company had to incur the following remedy to
said defects:
Direct materials P13,550
Direct labor 15,250

9. If the rework cost is normal but specific to Job 500, the cost of the finished unit is

a. P497.75 b. P518.11 c. P575.68 d. P484.22

10. The Work in Process inventory account of a manufacturing company shows a balance of P2,400 at the
end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of P400 and
P200 for direct materials, and charges of P300 and P500 for direct labor. From this information, it appears
that the com- pany is using a predetermined overhead rate, as a percentage of direct labor costs, of:

a. 80%. b. 125%. c. 300%. d. 240%.

11. For the current year, Paxman Company incurred P150,000 in actual manufacturing overhead cost. The
Manu- facturing Overhead account showed that overhead was overapplied in the amount of P6,000 for the
year. If the predetermined overhead rate was P8.00 per direct labor hour, how many hours were worked
during the year?

a. 19,500 hours b. 18,000 hours c. 18,750 hours d. 17,750 hours

12. Worrell Corporation has a job-order cost system. The following debits (credits) appeared in the Work
in Process account for the month of March:
March 1, balance P 12,000
March 31, direct materials 40,000
March 31, direct labor 30,000
March 31, manufacturing overhead applied 27,000
March 31, to finished goods (100,000)

Worrell applies overhead at a predetermined rate of 90% of direct labor cost. Job No. 232, the only job
still in process at the end of March, has been charged with manufacturing overhead of P2,250. What was
the amount of direct materials charged to Job No. 232?

a. P2,250 b. P2,500 c. P4,250 d. P9,000

13. VCX manufactures products B, C and D from a joint process. The total cost in February is P500,000.
Other information for the month were as follows:

B C D
Ultimate selling price P300,000 P550,000 P450,000
Processing costs after SO P100,000 P150,000 P250,000
Quantity sold 1,000 2,000 2,000
Ending inventory in units 5,000 6,000 4,000

What is the total production cost of Product C?

a. P350,000 b. P275,000 c. P400,000 d. P300,000
14. A manufacturing company produces Product A from a process that yields a by-product X. the by-
product requires additional processing cost of P30,000. The by-product will require selling and
administrative expenses totaling P20,000. Their accounting policy is to charge the joint costs to main
product only. Information concerning a batch produced during the year ended December 31, 2018 follows:

Product Units Produced Market Value at Split-Off Units Sold

A 100,000 P50 60,000
B 8,000 P10 8,000

The joint costs incurred up to split-off point is P3,000,000. The selling and administrative expense
incurred is P1,000,000 exclusive of that for the by-product.

a. What is the gross profit for the year if the net revenue from the by-product is presented as other?
Income?
b. What is the gross profit for the year if the net revenue from the by-product is presented as
additional sales revenue?
c. What is the gross profit for the year if the net revenue from the by-product is presented as
deduction from the cost of goods sold?
d. What is the gross profit for the year if the net revenue from the by-product is presented as
deduction from the total manufacturing cost of the main product?

Problem 7. Haru Inc. is using Just-in-Time Production System and Backflush Cost Accounting System
for the fiscal year ended August 31, 2018. The following information was provided:
a. Purchased P1,000,000 raw materials for the fiscal year.
b. Direct labor costs of P500,000 were incurred.
c. Actual overhead for the year totaled P300,000.
d. The standard overhead rate is 50% of direct labor costs.
e. The production report for the year showed that the Finished Goods Inventory at August 31, 2018 was
P200,000 consisting of:
Direct Materials 110,000
Direct Labor 60,000
Factory Overhead 30,000

15. What is the Cost of Goods Sold for the fiscal year ended August 31, 2018?

Problem 8. Aero Products Co. employs Just-in-Time and Backflush Costing System for the production of
gods for the year ended December 31, 2018. The following transactions summarize the major steps in
Aero’s production during the year of 2018:
a. Raw materials totaling P250,000 were purchased.
b. Direct labor costs of P650,000 and overhead costs of P487,500 were incurred and applied,
respectively, during the year 2018.
c. The cost of work-in-process at December 31, 2018 was P182,000. This cost was determined through
the production report and is composed of:
Direct Materials 77,000
Direct Labor 60,000
Factory Overhead 45,000
d. In addition, the finished goods inventory at December 31, 2018 was P327,000 consisting of:
Direct Materials 92,300
Direct Labor 132,700
Factory Overhead 102,000

16. What is the amount of direct materials backflushed from raw and in process account to finished
goods?
17. What is the amount of direct materials backflushed from finished goods to cost of goods sold?
18. What is the amount of cost of goods sold for the year ended December 31, 2018?

Problem 9. Vector Company employs process cost system. A unit of product passes through two
departments: Assembly and Finishing before it is complete. Information regarding Assembly Department
follow:
Work in process, August 1 4,000 units
Spoiled units 3,000
Started in production 26,000
Transferred out 24,000

Raw materials are added at the beginning of processing in the Assembly department without changing the
number of units being processed. Work in Process on August 1 was 90% complete as to conversion while
80% converted on August 31. In the Assembly Department, inspection takes place when the units are 75%
converted. The company usually experienced a 5% loss based on the completed units. Cost data for the
month of August follow:
Materials Labor Overhead
Work in process, beg P32,400 P26,400 P28,500
Current costs 111,600 88,200 114,750

19. Total costs of units transferred-out and total cost of work in process, end
a. P331,200; P37,376 b. P343,684; P37,376 c. P331,200; P36,000 d. P343,684; P36,000

Problem 10. The following information is available for DETAIN Company for the current year:

Beginning Work in Process (75% complete) 14,500 units

Started 75,000
Ending Work in Process (60% complete) 16,000
Abnormal spoilage 2,500
Normal spoilage (continuous) 5,000
Transferred out 66,000
Cost of beginning work in process
Materials P25,100
Conversion costs 50,000
Current costs
Materials P120,000
Conversion costs

All materials are added at the start of the production.

20. Using FIFO, what is the cost per equivalent unit for conversion costs?
a. P4.46 b. P4.15 c. P4.30 d. P3.84
Problem 11. The Production data for Department 1 for August 2019 are as follows:

WIP, August 1 (1/4 done as to conversions costs) 40,000 units

Started in August 296,000
Transferred out during August 244,000
Spoiled units 32,000
WIP, August (80% complete) 60,000
Cost of beginning work-in process:
Materials P500,000
Conversion costs 60,000
Current costs:
Materials P2,960,000
Conversion 1,884,000

Additional Information:

a. Materials are added at the start of the production.

b. Conversion cost are added evenly during the process.
c. The company uses the FIFO method of costing
d. Inspection of errors, when production is 100% complete.
e. Normal spoilage is 11% of good units transferred out during August.

21. What are the cost allocated to:

a. Next department
b. In-process, end in Dept. 1
c. Period cost