Part 1: True or False

1. Factory overhead includes all manufacturing costs which may be variable or fixed, except direct material and
direct labor. TRUE
2. Wages earned by machine operators in producing the firm’s product should be categorized as direct labor.
TRUE
3. In cost accounting, the term “relevant range” refers to the range over which the cost relationships are invalid.
FALSE
4. A fixed cost is constant per unit of change in production. FALSE
5. Job Order Costing is the best cost accumulation procedure to use when many batches, each differing as to
product specification, are produced. TRUE
6. The fixed portion of the semi-variable cost of electricity for a manufacturing plant is both factory overhead
cost and period cost. FALSE
7. In a job order cost system, the application of factory overhead would usually be reflected in the general
ledger as an increase in work in process. TRUE
8. In a job order cost system, direct labor costs usually are recorded initially as an increase in factory overhead
control. FALSE
9. Underapplied factory overhead results when factory overhead costs incurred are less than the costs charged
to production. FALSE
10. In a job order cost system, the use of direct materials previously purchased usually is recorded as a decrease
in work in process. FALSE

Part 2: Problem
Provide the journal entry for the following:

The following events took place at the Rounin Company over the past year.
11. Incurred direct labor costs of P47, 000
Work in process 47000
Accrued Payroll 47000
12. Purchased manufacturing equipment for P75, 000
Manufacturing equipment75000
Accounts Payable75000
13. Purchased direct materials for P176, 000
Materials 176000
Accounts Payable 176000
14. Incurred manufacturing overhead of P81, 000
Factory Overhead Control 81000
Accounts Payable/other applicable accounts 81000
15. Transferred 73% of the direct materials to work in process
Work in process 128480
Materials128480
16. Completed work on 85% of the goods in work in process
Finished Goods218008
Work in process218008
17. Sold 90% of the completed goods
COGS196,207.20
Finished Goods 196207.20
18. Marketing and administrative costs were P85, 000
Marketing and Administrative Cost 85,000
 Accounts Payable 85,000
19. Sales amounted to P400, 000
Accounts Receivable 400,000
Sales 400,000

There were no beginning balances in any of the inventory accounts. Costs are assigned equally across all work in process
Based on the above data:
20. What is the cost of goods sold? 196,207.20
21. What is the company’s net income or net loss? 188,792.80
22. How much is the value of the ending finished goods inventory? 21,800.80

The following events took place at the Dream Company for the current year.
1. Purchased P120, 000 in direct materials
2. Incurred labor costs as follows
a. Direct labor, P72, 000
b. Supervisor labor, P26, 000
3. Purchased manufacturing equipment for P94, 000
4. Other manufacturing overhead (excluding supervisor labor) was P88, 000
5. Transferred 80% of the materials to the manufacturing assembly line
6. Completed work on 70% of the goods in process. Costs are assigned equally across all work in process
7. Sold 60% of the completed goods

There were no beginning balances in the inventory accounts. All costs incurred were debited to the appropriate account
and credited to accounts payable. Provide the following:

23. Ending balance in direct materials inventory P24,000

24. The cost of goods sold P118,440

The financial records of Ram Company have been destroyed in a fire. The following information has been obtained from
a separate set of books maintained by the accountant. The accountant now requires your assistance in computing the
missing items.

25. What is the amount of direct materials transferred out?P18000

26. What is the amount of direct materials purchased? P16,400
 27. What is the cost of goods transferred out of work in process? 39,500
28. What is the ending work in process inventory?7,500
29. What is the cost of goods transferred out of finished goods inventory?57,000

30. For the year 2009, the gross margin of Jumbo Co. was P96, 000; the cost of goods manufactured was P340,
000; the beginning inventories of work in process and finished goods were P28, 000 and P45, 000 respectively;
and the ending inventories of work in process and finished goods were P38, 000 and P52, 000 respectively.
The sales of Jumbo Co. for 2009, must have been 429,000

Last month, Babe 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 in the binding department. Babe’s
inventory accounts show the following balances:
Beginning Ending

Finished Goods P22,000 P17,000

Work in Process P15,000 P17,600
Materials P20,000 P18,000

31. What is the cost of goods sold? P219,600

The following data were taken from the record of Best Company
08/31/2019 09/30/2019
Inventories
Raw Materials ? P50,000
Work in process P80,000 P95,000
Finished Goods P60,000 P78,000
Raw materials purchases P46,000
Factory overhead, P63,000 which is 75% of direct labor cost
Selling and Administrative Expenses, 12.5%, P25,000
Net Income for September,2011, P25,000

32. What is the cost of raw materials inventory on August 31, 2019? P40,000

Laly Soriano Company had 350 units of product on hand at August 1 costing P31.00 each. Purchasing of product X during
the month of August were as follows: (Round off to four decimal places)
Unit Unit Cost
August 13 500 32
August 17 450 33
August 28 300 34

On August 31, 450 units are on hand.

33. The cost of inventory at August 31, under the FIFO method is_____. 15,150
34. The total cost of purchases under the FIFO method is ________. 41,050

Worley Company has under applied overhead of P45, 000 for the year. Before disposition of the underapplied overhead,
selected year-end balances from Worley’s accounting records were
 Sales P1,200,000
Cost of Goods Sold P720,000
Direct Materials Inventory P36,000
Work in Process Inventory P54,000
Finished Goods Inventory P90,000

35. Under Worley’s cost accounting system, over or under applied overhead is allocated to appropriate
inventories and cost of goods sold based on year-end balances in it’s year end income statement. Worley
should report cost of goods sold of _______. P757,500

The XYZ Company uses a predetermined overhead rate. XYZ prepared the following budget at the beginning of the year:

Direct Labor Cost P12,000

Factory Overhead P25,000
Direct labor hours 9,000
Machine hours 1,500
During the month of January, the cost sheet of order number 100 indicates P20 of raw materials, P50 of direct labor, 10
hours of direct labor, and 5 machine hours. Order number 100 consists of 49 units of product. XYZ applies overhead
based on direct labor cost.

36. What amount of overhead should be applied to order number 100? P104.70

As part of a cost study, the cost accountant of Shinly Corporation has recorded the cost of operations at seven different
levels of materials usage. The records show the following:
Kilos of materials Costs of operation
80 P800
60 P480
20 P320
120 P1, 200
140 P1, 280
40 P480
100 P1, 040

37. Using the high-low points method, the variable cost of operations per kilo of materials used is P8.00
38. Using the same high-low points method, the fixed cost of operations is P160
39. What is the cost function of the costs of operation? y=8(x) +160
40. Assuming 150 kilos of material usage is expected to occur next month, how much will be the estimated
operations cost based on the cost function generated from high-low method?P1,360
41. Using the least squares method, the average rate of variability per kilo of materials used is P8.71
42. Using the least square method, the fixed portion of the cost is P103
43. Assuming 98 kilos of material usage is expected to occur next month, how much will be the estimated
operations cost based on the cost function generated from least square method? P956.58

Data about Maritz Company’s production and inventories for the month of June are as follows:
Purchases – Direct materials P143, 440
Freight-in P5, 000
Purchase returns and allowances P2, 440
Direct labor P175, 000
Actual factory overhead P120, 000
 Inventories:
Finished goods P68, 000 P56, 000
Work in Process P110, 000 P135, 000
Direct materials P52, 000 P44, 000
Maritz Company applies factory overhead to production at 80% of direct labor cost. Over or under applied overhead is
closed to cost of goods sold at year-end. The company’s accounting period is on the calendar year basis.

44. Maritz Company’s prime cost for June was _________. P329,000
45. Maritz Company’s conversion cost for June was ________. P315,000
46. For the month of June, Maritz Company’s total manufacturing cost was _______. P469,000
47. For June, Maritz Company’s cost of goods transferred to the finished goods inventory account was _________.
P444,000
48. Maritz Company’s cost of goods sold for June was _________. P456,000
49. The amount of over/under applied overhead factory for the month of June was ________. P20,000
overapplied
50. The cost of goods sold for the month of June should be increased (decreased) by the amount of over/under
applied factory overhead of _________. Zero