AE 212

LABOR COSTING EXERCISES

PROBLEM 1
The following information is based on the daily time records and the job time tickets for the payroll period
September 16 - 30,2019.

Employee Hours Timed In Jobs Worked On

Number Rate/Hr Regular OT 101 102 103
111 P300 96
221 120 96 7 42 25 30
222 145 80 50 30
223 150 96 5 30 44 25
224 140 90 10 40 40
225 100 92 45 16 25

Records show that overtime work on a Wednesday was done for Job 101. Abe is the production manager
and is not paid overtime.
Required:
1. Prepare the payroll worksheet.
2. Prepare a Factory Labor Cost Distribution Schedule
3. Prepare all necessary journal entries.
4. Prepare a Factory Labor Cost Distribution Schedule assuming Sept 25 which falls on a Friday is Eidl
Addha. All employees were requested to report for work on the holiday.

PROBLEM 2
For the payroll week ending October 31, GG supplied the following:
a. Total hours worked taken from time cards
Employee Gross Overti
Tax Regular
Position earnings Rate/hr hours me
No. Name status
Oct 1 - 24 hours
111 Rald Cutter S 26,480.00 148 40 6
112 Jan Cutter S 27,500.00 148 48 3
113 Son Stitcher ME3 28,975.00 156 48 7
114 Tin Stitcher ME4 28,455.00 156 45 5
115 Owel Sewer S1 26,950.00 148 48 12
116 Jo Sewer ME2 26,580.00 148 40 15
117 Rysa Supervisor S3 61,030.00 375 48 10
118 Arla Stores clerk ME 17,840.00 98 45
119 Che Timekeeper ME1 18,760.00 86 48 6
120 Sar Factory helper ME2 19,330.00 86 40 4
b. The time tickets for the same payroll week were accumulated and classified as follows;
Total
Employee Hours spent on Job Orders
Position hours
No. Name worked 608 609 610 611 612
111 Rald Cutter 46 5 8 15 8 10
112 Jan Cutter 51 6 10 15 10 9
113 Son Stitcher 55 7 10 12 15 9
114 Tin Stitcher 50 4 10 10 12 12
115 Owel Sewer 60 12 12 16 10 10
116 Jo Sewer 55 12 12 18 10 3
c. The overtime rate is 125% of regular rate
Required:
1. Schedule of labor hours and labor cost (use same format as in illustrative problem)
2. Journal entry to distribute factory payroll assuming management desires to record and control the
non-productive or idle time hours as follows:
Worker no. Hours spent Nature
112 1 Waiting for materials
113 1 Waiting for materials
1 Repair of machine
114 1 Waiting for materials
1 Assignment to new job

SOLUTION:
Schedule of distribution of factory hours
Job Nos. Direct Indirect Idle
Total
608 609 610 611 612 labor labor time
Jerald 5 8 15 8 10 46 46
Jan 6 10 15 10 9 50 1 51
Jason 7 10 12 15 9 53 2 55
Justin 4 10 10 12 12 48 2 50
Joel 12 12 16 10 10 60 60
Jojo 12 12 18 10 3 55 55
Crysa 58 58
Carla 45 45
Cherry 54 54
Cesar 44 44
TOT 46 62 86 65 53 312 201 5 518

Schedule of distribution of factory labor cost

Job Nos. Direct Indirect Idle Overtime
Total
608 609 610 611 612 labor labor time premium
Jerald 2,208
240 384 720 384 480 72 2,280.00
Jan 2,400
288 480 720 480 432 48 36 2,484.00
Jason 2,968
392 560 672 840 504 112 98 3,178.00
Justin 2,688
224 560 560 672 672 112 70 2,870.00
Joel 2,880
576 576 768 480 480 144 3,024.00
Jojo 2,640
576 576 864 480 144 180 2,820.00
Crysa 4,350 187.5 4,537.50
Carla 2,160 0 2,160.00
Cherry 3,024 84 3,108.00
Cesar 2,464 56 2,520.00
TOT 2,904 3,745 4,914 3,947 3,324 15,784 11,998 272 927.5 28,981.50

Journal entry to distribute factory payroll assuming management desires to record and control the non-
productive or idle time hours
Work in process – Labor 15,784.00
 Factory overhead control 13,197.50
(Superintendence P 4,350.00)
(Indirect labor 7,648.00)
(Waiting for materials 160.00)
(Repair of machine 56.00)
(Assignment to new job 56.00)
(Overtime premium 927.50)
Payroll 28,981.50

Worker no. Idle hrs Regular rate Waiting for Repair of Assignment to
materials machine new job

112 1
48 48.00
113 2
56 56.00 56.00
114 2 56.00
56 56.00
Total 56.00
160.00 56.00

PROBLEM 3
A worker earns P20,000 per month on the average and produces 50 units per day. Accordingly, the
employer’s monthly contributions for SSS, Medicare, Pag-IBIG and EC premiums are P456, P37.50, P10 and
P100 respectively. Fringe benefits such as meal and uniform subsidies amount to P9,900 per annum.
Required:
Assuming that there are 330 working days in one year, what is the effective labor cost per unit?

SOLUTION:

Gross pay per working day [(P20,000 x 12 mos)/330 days] P 727,27

Employer’s contributions [((456 + 37.50 + 10 + 100=603.50 x 12 mos)/330 days] 21.95
Meal and uniform subsidies, etc [9,900 / 330 days] 30.00
Effective rate per day P 779.22
Divide by output per day 50
Effective labor cost per unit P 15.58

PROBLEM 4
Eight factory workers and supervisor comprise a team in the Machining Department. The supervisor earns
P200 per hour and the combined hourly direct wages of the eight workers is P1,280. Each employee is
entitled to a two-week paid vacation and a bonus equal to four weeks’ wages per year. Vacation pay and
bonuses are treated as an indirect cost and are accrued over the 50-week work year. A provision in the
union contract does not allow these employees to work in excess of 40 hours per week.
Required:
The journal entry to record the bonus and vacation liability applicable to one week’s production.

SOLUTION:

Account Titles Debit Credit

1. To record estimated liability for bonus
 Factory overhead control 4,736
Estimated liability for bonus 4,736
* [(P200 + 1,280) x 40 hrs x 4 wks] / 50 wks

2. To record estimated liability for vacation

Factory overhead control 2,368
Estimated liability for vacation 2,368
* [(P200 + 1,280) x 40 hrs x 2 wks] / 50 wks

PROBLEM 5
The factory workers in MG Company are paid on piece-work basis, at P10.00 per piece completed. The
workers are however guaranteed a wage of P36 per hour worked. Actual hours worked and production
during the week are as follows:
Employee Hours Worked Pieces completed
Q 36 134
U 48 157
I 48 167
C 40 123
K 39 126
Allowance for waiting and machine delays are paid at guaranteed rate. During the week allowance will be
given to Q, 1 hour and K, 2 hours.
Required:
Prepare the journal entry for the week’s payroll, assuming no payroll deductions.
SOLUTION:
Account Titles Debit Credit
Work in process – labor 7,070.00
Factory overhead control 678.00
(Make-up pay P 570.00)
(Delay allowance 108.00)
Vouchers payable 7,748.00

Computations:
Q U I C K
Hours worked 36 48 48 40 39
Guaranteed wage 1,296.00 1,728.00 1,728.00 1,440.00 1,404.00
Piece-work earnings 1,340.00 1,570.00 1,670.00 1,230.00 1,260.00
Make-up pay -0- 158.00 58.00 210.00 144.00

Piece-work Make-up Delay Total

earnings pay allowance earnings
P - P
Q P 1,340.00 0- P 36.00 1,376.00
U 1,570.00 158.00 -0- 1,728.00
I 1,670.00 58.00 -0- 1,728.00
C 1,230.00 210.00 -0- 1,440.00
wK 1,260.00 144.00 72.00 1,476.00
P
Totals P 7,070.00 P 570.00 P 108.00 7,748.00