Baya - Exercise 4 Job Order Costing, Accounting For Material

 

  Activities in Job Order Costing (with integration of Accounting for Materials, Labor and Overhead)

Job Order Costing in General; Accounting for Factory Overhead

1. Company A is engaged engage d in the manufacture of furniture. The job cost sheets for the month of June 2015 show the following: Job 204

Job 205

P 184,000 70,000 42,000

P 115,000 50,000 30,000

38,000 20,000

44,000 30,000

Job 206

Job 207

110,000 34,000

135,000 26,000

In process, June 1 Direct materials Direct labor Applied overhead Costs in June Direct materials Direct labor

Factory overhead is applied to each job at the rate of 50% of direct labor costs. The actual factory overhead as of June 1 was P 85,000 while the actual factory overhead for the month of June was P 60,000. It completed jobs 204 and 205 in June 2015. Required. Prepare a statement cost of goods manufactured.

COST OF GOOD MANUFACTURED ACCOUNT TITLE

ACTUAL COSTING

NORMAL COSTING

Work in Process Beginning

504,000.00

491,000.00

Direct Material

327,000.00

327,000.00

Direct Labor

110,000.00

110,000.00

60,000.00

55,000.00

497,000.00

492,000.00

1,001,000.00

983,000.00

Less: Work in process End

305,000.00

335,000.00

Cost of Good Manufactured

696,000.00

648,000.00

Factory Overhead TOTAL MANUFACTURING COST Total goods available for process

 

  2. The Company received an order to make school uniforms and uses the job order cost system. The following transactions occurred during 2014 to Job U-101.

a.   b.  c.  d.  e.  f.  g.  h. 

Purchased raw materials at a cost of P 2,000,000. Direct materials used for P 1,400,000. Raw materials were used as indirect materials, P 200,000. Direct labor hours consumed for P 1,500,000 on the job, which was fully paid. Indirect labor hours used costing P 500,000. Other indirect costs accrued were P 1,250,000. Manufacturing overhead equal to 100% of direct labor was charged. The cost of U-101 of P 4,400,000 (direct materials of P 1,400,000 + direct labor costs of P 1,500,000 + applied overhead of P 1,500,000) was transferred to finished goods on completion. i.  Revenue is recorded at P 5,720,000 (P4,400,000 x 130%)  j.  Actual manufacturing overheads were P 1,950,000 1,95 0,000 (indirect materials costing P 200,000 + indirect labor costing P 500,000 and other overheads of P 1,250,000). Applied manufacturing overhead were P 1,500,000. The manufacturing overheads worth P 450,000 were under-applied and are taken to the cost of goods sold or income statement.

Required: Journal entries to record the above transactions. Account Title

a)

Raw Material Inventory

Debit

2,000,000.00

Cash b.)

Work in Process Inventory - DM

2,000,000.00 1,400,000.00

Raw Material Inventory c.)

Factory Overhead - DM

1,400,000.00 200,000.00

Raw Material Inventory d.)

Work in Process Inventory - DL

200,000.00 1,500,000.00

Cash/Payroll e.)

Factory Overhead - DL

1,500,000.00 500,000.00

Cash/Payroll f.)

Factory Overhead

500,000.00 1,250,000.00

Accrued expense

1,250,000.00

g.)

Work in Process - FOH Applied FOH

1,500,000.00

h.)

Finished Goods Inventory

4,400,000.00

Work in Process Inventory i.)

Accounts Receivable

Applied Factory Overhead Underapplied Factory Overhead

5,720,000.00 5,720,000.00 1,500,000.00 450,000.00

Factory Overhead Control Cost of Goods Sold Underapplied Factory Overhead

1,500,000.00

4,400,000.00

Sales  j.)

Credit

1,950,000.00 450,000.00 450,000.00

 

3. Star Corporation uses job order costing. At the beginning of September, the jobs were in  process:  No. 223 P 36,000 10,000 15,000

Materials Labor Applied Overhead

No. 225 P 13,000 2,000 3,000

Star had no finished goods inventory on September 1. During the month, Jobs No. 226, 227, 228, and 220 were started. Materials requisitions for September totaled P 40,000, direct labor cost, P 30,000 and actual factory overhead P 48,000. Factory overhead applied at a rate of 150% of direct labor cost. The only job still in process at the end of September was No. 229 with P 12,000 of materials and P 3,000 labor. Job No. 226, the only finished goods on hand at the end of September, had a total cost of P 15,000. Requirements: 1.  Journal entry to record the applied overhead. Date

Account Title

Debit

Work in Process - DM

Credit

40,000.00

Raw Material Inventory

40,000.00

Work in Process - DL

30,000.00

Payroll

30,000.00

Work in Process Inventory - FOH

40,000.00

Applied FOH

40,000.00

FOH Control

48,000.00

Accrued Expenses

48,000.00

2.  Calculate the ending work in process inventory. Work in Process End.

Amount

Direct Material

12,000.00

Direct Labor

3,000.00

Factory Overhead

4,500.00

Total Work in Process End

19,500.00

3.  Journal entry to record the goods completed. Date

Account Title

Debit

Finished Good

Credit

174,500.00

Work in Process

174,500.00

Particular

Amount

Work in Process Begining

79,000.00 79,000.0 0

Direct Material

40,000.00

Direct Labor

30,000.00

Factory Overhead

45,000.00

Manufacturing Cost: Work in Process End COGM

115,000.00 -

19,500.00 174,500.00

 

4.  Journal entry to transfer finished goods to cost of goods sold. Date

Acccount Title

Cost of Goods Sold

Debit

Credit

159,500.00

Finished Goods Inventory

159,500.00

Particular

Amount

Work in Process Beginning

79,000.00

Direct Material

40,000.00

Direct Labor

30,000.00

Factory Overhead Manufacturing Cost:

45,000.00 115,000.00

Work in Process End

-

19,500.00

COGM

174,500.00

Finished Goods Inventory Beg

-

-

Finished Goods Inventory End.

15,000.00

COSG

159,500.00

5.  Journal entry to close the under or overapplied factory overhead to cost of goods sold. Date

Account Title

Debit

Applied Factory Overhead Underapplied FOH

Credit

45,000.00 3,000.00

Factory Overhead Control Cost of Goods Sold

48,000.00 3,000.00

Underapplied FOH

3,000.00

4.  Aoyama Corporation is a local manufacturer that uses a job order costing. Manufacturing overhead is applied using a predetermined rate based on direct labor cost. The cost ledger shows the following information for the month of August: Work in Process Inventory  ___ Balance, 8/1 250,000 Goods manufactured 296,000 Materials used 120,000 Direct labor 100,000 Applied OH

80,000

Aoyama had three outstanding jobs in ending work in process that are expected to be delivered in the following month:   Job # 108 with direct materials of P 35,000 and direct labor of P 20,000   Job # 109 with direct materials of P 45,000 and direct labor of P 25,000   Job # 110 with applied overhead of P 28,000. •

•

•

The total overhead applied to Job 108 was: a.  P 16,000  b.  P 20,000 c.  P 25,000 d.  P 31,250 Total Overhead Applied

Applied Factory Overhead / Estimated Direct Labor Overhead Rate

Overhead Rate x Direct Labor TOTAL OVERHEAD APPLIED

Amount

80,000 / 100,000 80.00%

20,000 x .80 16,000

 

  Accounting for Materials

1.  On August 1 of the current year, Beejay Company recorded purchases of raw materials of P 800,000 and P 1,000,000 under credit terms 2/15, n/30. The payment due on the P 800,000 purchase was remitted on August 16. The payment due on the P 1,000,000  purchase was remitted on August 31.

Under the net method and the gross method, these purchases should be included at what respective amounts? Gross Price Method Date

Account Title

Purchases

Debit

Credit

1,800,000.00

Cash

1,800,000.00

GROSS PRICE AMOUNT = 1,800,000

Net Price Method Date

Account Title

Purchases

Debit

Credit

1,764,000.00

Cash

1,764,000.00

NET PRICE AMOUNT = 1,764,000

Under allowance method how much is the purchase discount lost?

Allowance Discount Method Date

Account Title

Purchases Allowance for Sales Discount Cash

ALLOWANCE DISCOUNT LOSS = (36,000)

Debit

Credit

1,800,000.00 36,000.00 1,764,000.00

 

2.  On December 3, Francis Company purchased materials listed at P 8,600 from Lyn Corp. Terms of the purchase were 3/10, n/20. Francis Company also purchased materials from Duck Company on December 10 for a list price of P 7,500. Terms of the purchase were 3/10, n/30. On December 16, Francis paid both suppliers for these purchases. If Francis uses the net method of recording purchases, the journal entry to record the payment on December 16 will included: a. A debit to Accounts payable of P 15,875.  b. A debit to Purchase Discounts Lost of P 258. c. A credit to Purchase Discounts of P 258. d. A credit to Cash of P 15,617. Net Price Method Date

Dec-03

Account Title

Purchases

Debit

Credit

8,342.00

Accounts Payable Dec-10

Purchases

8,428.00 7,275.00

Accounts Payable Dec-16

Accounts Payable

7,275.00 7,275.00

Cash

7,275.00

Account Payable

8,342.00

Purchase Forfeited

258.00

Cash

8,600.00

3.  Skyfall Co. records purchases at net amounts. On May 5, Skyfall purchased materials on account, P 32,000, terms 2/10, n/30. Skyfall returned P 2,000 of the May 5 purchase and received credit on account. At May 31 the balance had not been paid. By how much should the account payable be adjusted on May 31? a. P 600  c. P 680  b. P 640 d. P 0

Date

May-05

Account Title

Debit

Purchases

Credit

31,360.00

Accounts Payable

May-05

Accounts Payable Purchase Return and Allowance

May-31

Purchases Purchases Forfeited

31,360.00

2,000.00

2,000.00

30,000.00 600.00

Accounts Payable

30,600.00

Use the following information for the next two questions. Miller Inc is a manufacturer of Model III Calculators. Transactions needed for production during August are shown below: Date Balance/ Transactions Units Aug. 1 Inventory 2,000 7 Purchase 3,000 12 Issuance 3,600 21 Purchase 4,800 22 Issuance 3,800 29 Purchase 1,600

pertaining to materials Cost P 36.00 P 37.20 P 38 P 38.50

 

  4.  If Miller Inc. uses a FIFO perpetual inventory system, the ending inventory of Model III calculator materials on August 31 is reported as 152,800. Date

Received

Issued

Aug-01 Aug-07

3,000 at P 37.20

Aug-12 4,800 at P 38

Aug-22

72,000.00

2,000 at P 36

72,000.00

3,000 at P 37.20

111,600.00

1,400 at P 37.20

52,080.00

1,400 at P 37.20

52,080.00

4,800 at P 38

182,400.00

2,400 at P 38

91,200.00

2,400 at P 38

91,200.00

1,600 at P 38.50

61,600.00

1,400 at P 37.20 2,400 at P 38

Aug-29

2,000 at P 36

2,000 at P 36 1,600 at P 37.20

Aug-21

Balance

1,600 at P 38.50

Issued Section

Amount

Ending Inventory

Amount

2,000 at P 36

72,000.00

2,400 at P 38

91,200.00

1,600 at P 37.20

59,520.00

1,600 at P 38.50

61,600.00

1,400 at P 37.20

52,080.00

2,400 at P 38

91,200.00

7,400 units

274,800.00

TOTAL ENDING INVENTORY

152,800.00

5.  If Miller Inc. uses a weighted average cost periodic inventory system, the ending inventory of Materials for Model III calculators at August 31 is reported as 150,040 Weighted Average Method 

2,000 at P 36

Amount

72,000.00

3,000 at P 37.20

111,600.00

4,800 at P 38

182,400.00

1,600 at P 38.50

61,600.00

11,400 units

427,600.00

Unit cost = 427,600/11,400 Inventory, August 31 TOTAL ENDING INVENTORY

37.51 4,000 x 37.51 150,040

6.  The following information was available from the raw materials inventory records of Breakaway Company for January: Units Unit cost Balance at January 1 3,000 P 9.77 Purchases: January 6 2,000 P 10.30 January 26 2,700 P 10.71 Issuances: January 7 2,500 January 31 3,200 Assuming that Breakaway maintains perpetual inventory records, what should be the inventory at January 31, using the moving-average inventory method, rounded to the nearest peso? c. P 20,720  a. P 20,474  b. P 20.520 d P 21,010

 

Date

Received

Issued

Balance

Jan-01 Jan-06

2,000 at P 10.30

Jan-07 Jan-26

2,500 at P 9.98 2,700 at P 10.71

Jan-31

3,200 at P 10.36

3,000 at P 9.77

29,310.00

5,000 at P 9.98

49,900.00

2,500 at P 9.98

24,950.00

5200 at P 10.36

53,872.00

2,000 at P 10.36

20,720.00

7.  Yontabal Company started operations in 2014. The following data are abstracted from the company’s production and sales records:  records:  

 Number of units produced  Number of units sold Unit production cost Sales revenue

2014 240,000 150,000 4.50 1,200,000

2015 232,500 217,500 5.20 1,800,000

2016 202,500 195,000 5.80 1,950,000

Using the FIFO cost flow assumption, the gross profit for the year ended December 31, 2016 is a. P 819,200 c. P 1,068,000 b. P 882,000 d. P 1,072,500 1,950,000

Sales Cost of Sales

BI (105,000 units x 5.20)

546,000.00

Produced (202,500 x 5.80)

1,174,500.00

EI (112,500 x 5.80)

662,500.00

1,058,000.00 882,000.00

Gross Profit

The following data have been accumulated for Grace Mfg., Inc.

Raw materials –  materials –  beginning inventory (Jan. 1, 2017) Purchases

10,000 units @ P 6.00. 8,500 units @ P 7.00. 11,000 units @ P 7.50 Transferred 21,500 units of raw materials to work in process: Work in process –  process –  beginning inventory (Jan. 1, 2017) 5,600 units @ P 13.50 Direct labor P 250,000 Manufacturing overhead 325,000 Work in process –  process –  ending inventory (Mar. 31, 2017) 4,200 units @ P 13.75

Date

Received

Issued

Jan-01

10,000 at P 6

60,000.00

8,500 at P 7

8,500 at P 7

59,500.00

11,000 at 7.50

11,000 at 7.50

82,500.00

10,000 at P 6

10,000 at P 6

60,000.00

8,500 at P 7

8,500 at P 7

59,500.00

3,000 at P 7.50

3,000 at P 7.50

22,500.00

5,600 at P 13.50

75,600.00

10,000 at P 6

10,000 at P 6

60,000.00

8,500 at P 7

8,500 at P 7

59,500.00

3,000 at P 7.50

3,000 at P 7.50

22,500.00

Jan-01

Mar-31 Mar-31

Balance

325,000

325,000.00

250,000

250,000.00

4,200 at P 13,75

4,200 at P 13,75

-

57,750.00 734,850.00

 

If Grace uses the FIFO method for valuing raw materials inventories, compute for the cost of goods manufactured for the quarter ended March 31, 2017. a. P 699,150 c. P 734,850   b. P 717,000 d. P 746,850 8.  Greece Company provided the following data for the current year: Raw materials Inventory –  Inventory  –  Jan.  Jan. 1 Cost 3,000,000  NRV 2,800,000  Net purchases of materials 8,000,000 Raw materials Inventory –  Inventory  –  Jan.  Jan. 31 Cost 4,000,000  NRV

3,700,000 COST

Raw Material Beginning

3,000,000.00

NRV

Inventory

2,800,000.00

2,800,000.00

Add: Purchases

8,000,000.00

Less Raw Material Ending

4,000,000.00

3,700,000.00

3,700,000.00

TOTAL DIRECT MATERIAL

7,100,000.00

What amount should be reported as direct materials used? a.  P 7,000,000 b.  P 7,100,000 c.  P 7,300,000 d.  P 7,200,000 9.  In 2016, North Company experienced a decline in the value of raw materials inventory resulting in a writedown from cost of P 3,600,000 to net realizable value of P 3,000,000. The entity uses the allowance method to record the necessary adjustment. 2016

COST NRV

3,600,000.00 3,000,000.00

Loss on Inventory Write-down

600,000.00

Account Title

Loss on inventory write-down

Debit

Credit

600,000.00

Allowance for inventory write-down

600,000.00

In 2017, market conditions have improved dramatically. On December 31, 2017, the inventory had a cost of P 5,000,000 and net realizable value of P 4,600,000? 2017

COST

5,000,000.00

NRV

4,600,000.00

Loss on inventory write-down

400,000.00

Allowance for Inventory write-down beg.

600,000.00

Allowance for Inventory write down end.

400,000.00

 

Account Title

Debit

Allowance for inventory write down

Credit

200,000.00

Gain on reversal inventory write down

200,000.00

What Is included in the adjusting entry on December 31, 2017? a.  Debit gain on reversal of inventory write down P 200,000.  b.  Credit gain on reversal of inventory write-down P 400,000. c.  Debit allowance for inventory write down P 200,000. d.  Credit allowance for inventory write down P 400,000. Materials Control

10. Assume that an entity’s annual inventory requirement is 3,600 units. The ordering costs are P 50 per order while the annual carrying costs are expected to be P 1 per unit. The entity can procure inventories in several lots as follows: 3,600 units, 1,800 units, 900 units, 600 units and 300 units. Determine which of these order o rder quantities is the EOQ .    ,   EOQ =    EOQ = 600 units

11. Aeon Laketown predicts that 10,000 units of materials will be used during the year. The expected daily usage is 40 units. The expected lead time is 6 days, and there is a safety stock of 300 units. Aeon expects that the cost of materials will be P 480 per unit. It anticipates that it will cost P 200 to place each order. The annual carrying cost is P 1.00  per unit. Required: a.  Calculate the order point.

40 units (daily usage) x 6 days (lead time) Safety Stock Order Point b.  Calculate the EOQ:

EOQ =

   ,   √     

EOQ = 2,000 units

c.  Calculate the total ordering and carrying costs.

Ordering cost = 10,000 / 2,000 units x 200 =  1,000  Carrying Cost = 2,000 units x P 1/ unit = 2,000  TOTAL COST = 1,000 + 2,000 = 3,000 

240 units 300 units 540,000 units

 

  Accounting for Labors

12. Hansel Corporation provided the following data:  No. of employees at the beginning of the month  No. of employees at the end of the year  No. of employees resigned  No. of employees discharged  No. of employee replaced

600 640 40 10 20

Required: Calculate the labor turnover by applying three methods: a.  Separation method b.  Replacement method c.  Flux method

METHOD a.  Separation Method b.  Replacement Method c.  Flux Method

CALCULATION

LABOR TURNOVER RATE

40 + 10 / 620 x 100

8.06

20 / 620 x 100

3.23

40 + 20 + 10 / 620 x 100

11.29

13. Hakone Company determined P 284,200 payroll for the week consisting of P 240,000 earned by 80 direct laborers and P 44,200 earned by 20 indirect laborers. The total factory bonuses to be paid at year-end is estimated at P 980,00 980,000. 0. All factory workers receive a three-week paid vacation and 10 paid holidays. Required: Prepare the journal entries to: (a) distribute the weekly payroll and to (b) accrue the bonus, vacation and holiday pay.

Date

Account Title

Debit

Work in process - DL

240,000.00

FOH control -IL

44,200.00

Payroll Work in process - DL FOH - Control - IL Accrued Expenses

Credit

284,200.00 784,000.00 196,000.00 980,000.00

14. A manufacturing company’s payroll register shows the following information for December: Salary paid to marketing department, P 40,000 (10 employees) Wages paid to labor, P 100,000 Insurance is fully paid by company, P 10,000 per month Company has a policy to award a fully paid one-week vacation to best employee of the year from marketing department with a bonus of P 1,500. Required: Assuming that current period has completed, comp leted, prepare all necessary  journal entries to record the payroll on December 31 st.

 

 

Payroll: Marketing (40,000 x 10)

400,000.00

Labor

100,000.00

Insurance

10,000.00

Bonus

1,500.00

Award

10,000.00

TOTAL

521,500.00

Date

Account Title

Payroll

Debit

521,500.00

Accrued Expenses

521,500.00

Work in Process - DL

102,000.00

Selling Expense

419,500.00

Payroll

Credit

521,500.00