CHAPTER 6

1

CHAPTER 6 Multiple Choice Questions – Theoretical 1. 2. 3. 4. 5.

a d a a a

6. 7. 8. 9. 10.

b a a c d

11. 12. 13. 14. 15.

c b d b C

Multiple Choice Questions – Computational 1.

(a) P800,000 / 10,000 units = P80 per unit.

2.

(a) P800,000 / P400,000 = 200% of material cost

3.

(a) P800,000 / P600,000 = 133% of direct labor cost.

4.

(a) P800,000 / 25,000* = P32 per direct labor hour. * P600,000 / P24 = 25,000 estimated direct labor hour.’

5.

(a) P800,000 / 3.333* = P2.40 per machine hour 

20 minutes / 60 minutes = 1/3 machine hour per unit

1/3 hour per unit x 10,000 units = 3.333 estimated machine hours. 6.

(a) P800,000 / 12,500 units* = P64 overhead per unit. *10,000 units / 80s% = 12,500 units.

7.

(a) P800,000 / P500,000* = 160% of material cost. * P40 x 12,500 units

16. 17.

a b

2 8.

(a) P800,000 / (1/3 hour x 12,500 units) = P92 per machine hour.

9.

(a) Estimated overhead / Estimated units of production = Overhead per unit.

10.

2009:

P180,000 / P15 = 12,000 estimated units of production.

2010:

P198,000 / P18 = 11,000 estimated units of production

(b) Applied factory overhead (10,000 units x P15) Actual factory overhead ( P50,000 + P95,000) Overapplied overhead

11.

(b) Actual factory overhead (P55,000 = P150,000) Applied factory overhead (11,000 units x P18) Underapplied overhead

12.

4,100 units P0.36 2.10 P2.46 P10,086

(a) Applied manufacturing overhead Actual manufacturing overhead Overapplied manufacturing overhead

14.

P205,000 198,000 P 7,000

(a) Actual output Overhead rate: Fixed overhead rate: P1,440 / (48,000 / 12) = Variable overhead rate Applied manufacturing overhead

13.

P150,000 145,000 P 5,000

P10,086 9,000 P 1,086

(c) Actual production 2,700 hours Overhead rate: Fixed overhead rate: (P16,920/12) ÷ (36,000/12) P0.47 Variable overhead rate 2.10 2.57 Applied manufacturing overhead P6,939

15.

(c) Actual manufacturing overhead Applied manufacturing overhead Underapplied manufacturing overhead

P7,800 6,939 P 861

3 16.

(a) Actual manufacturing overhead Applied manufacturing overhead (248,300 DLH x 6.45*) Underapplied overhead

P1,618,340 1,601,535 P 16,805

*P1,677,000 / 260,000 DLH = P6.45 per DLH 17.

(b) Budgeted fixed overhead Applied fixed overhead (248,300 DLH x 2.25*) Volume variance (U)

P 585,000 558,675 P 26,325

*P585,000 / 260,000 DLH = P2.25 per DLH 18.

(c) Budgeted overhead” Fixed overhead P 585,000 Variable overhead (248,300 x P4.20*) 1,042,860 Actual manufacturing overhead Spending variance (F)

19.

(a) Volume variance (U) Spending variance (F) Net overhead variance (U)

20

P 26,325 9,520 P 16,805

(d) Actual overhead: Fixed Variable Applied overhead Overapplied overhead

21.

P1,627,860 1,618,340 P 9,520

P348,000 637,880

P985,880 995,880 P 10,000

(b) Budgeted fixed overhead Applied fixed overhead (115,800 x P2.90*) Volume variance (U)

P348,000 335,820 P 12,180

* P348,000 / 120,000 DLH = P2.90 per DLH 22.

(b) Budgeted overhead: Fixed overhead Variable (115,800 x P5.70*) Actual overhead Spending variance (F) 

P348,000 660,060

P684,000 / 120,000 DLH = P5.70 per DLH

P1,008,060 985,880 P 22,180

4 23.

(b) Volume variance (U) Spending variance (F) Total variance (F)

24.

(b) Sales Cost of goods sold: Finished goods, July 1, 2009 Cost of goods manufactured Total available Finished goods, June 30, 2010 Cost of goods sold Underapplied overhead Gross profit Operating expenses Net income (loss)

25.

P12,180 22,180 P10,000

P790,670 P 33,500 450,700 484,200 83,000 401,200 4,200

(b) Fixed factory overhead: Heat and light Depreciation Taxes and insurance Total

26.

397,000 393,670 157,500 P236,170

P

54,900 793,000 300,500 P1,148,400

Variable factory overhead: Indirect labor Employee benefits Supplies Power Total

P 240,000 90,000 60,000 48,000 P 438,000

Fixed overhead rate (P1,148,400 / 220,000 DLH) Variable overhead rate (P438,000 / 60,000 DLH) Total factory overhead rate per DLH Actual DLH, 2011 Estimated total factory overhead for next year (2011)

P 5.22 per DLH 7.30 per DLH P 12.52 220,000 P2,754,400

(c) Fixed overhead rate (P1,200,000 / 240,000 machine hrs.) Variable overhead rate (P2,400,000 / 240,000 machine hrs.) Predetermined overhead rate

27.

(b)

28.

(b)

P 5 10 P15

21,000 machine hours x P15

Applied variable overhead (21,000 x P10) Actual variable overhead Underapplied variable manufacturing overhead

P210,000 214,000 P 4,000

5 29.

(c) Actual variable overhead Budgeted variable overhead (21,000 hrs. x P10) Variable spending variance (U)

30.

P214,000 210,000 P 4,000

(c) Budgeted fixed overhead Applied fixed overhead (21,000 hrs. x P5) Volume variance (F)

P100,000 105,000 P 5,000

6 PROBLEMS Problem 6-1 (1)

(2)

Work in process 22,040,000 Applied factory overhead To record applied factory overhead (P22,800,000 / 1,200,000 mixers) x 1,160,000

22,040,000

Factory overhead control Various credits To record actual factory overhead incurred.

22,384,000

Actual factory overhead Applied factory overhead Underapplied factory overhead

P22,384,000 22,040,000 P 344,000

22,384,000

Problem 6-2 1.

Work in process inventory 400 Finished goods inventory 2,533 Cost of goods sold 5,067 Underapplied overhead To allocate underapplied overhed to inventories and cost of goods sold computed as follows: Work in process (P12,000 / P240,000) x P8,000 = Finished goods (P76,000 / P240,000) x P8,000 = Cost of goods sold (P152,000 / P240,000) x P8,000 =

2.

3.

4.

Overapplied overhead Work in process inventory Finished goods inventory Cost of goods sold To close overapplied overhead to inventories and cost of goods sold.

8,000

P 400 2,533 5,067

8,000 400 2,533 5,067

Cost of goods sold 10,000 Underapplied overhead To close underapplied overhead to cost of goods sold. Work in process inventory Finished goods inventory Cost of goods sold Underapplied overhead To close underapplied overhead to inventories and cost of goods sold, computed as follows:

10,000

400 3,200 6,400

Work in process (P4,000 / P100,000) x P10,000 = P 400 Finished goods (P32,000 / P100,000) x P10,000 = 3,200 Cost of goods sold (P64,000 / P100,000) x P10,000 = 6,400

10,000

7 Problem 6-3 (a)

Work in process 630,000 Materials (18,000 x P15) Factory payroll (18,000 x P17) Applied factory overhead (18,000 x P3*) To record materials, labor and overhead charged Production. Factory overhead control may also be credited instead of Applied factory overhead.

270,000 306,000 54,000

* (P22,000 + P16,000 + P7,000 + P5,000 + P10,000) / 20,000 = P3 Factory overhead control Various credits To record actual factory overhead incurred.

56,500

Applied factory overhead Underapplied overhead Factory overhead control To record underapplied overhead.

54,000 2,500

56,500

56,500

Alternative entry if applied factory overhead is not used. Underapplied overhead 2,500 Factory overhead control (b)

Cost of goods sold Underapplied overhead To close underapplied overhead to cost of goods sold.

2,500

2,500 2,500

Problem 6-4 1.

Actual overhead (P283,400 + P647,426.67) Applied overhead (168,630 hrs. x P5.49) Underapplied overhead

P930,826.67 925,778.70 P 5,047.97

2.

Volume variance: Fixed overhead applied (168,630 x P1.65*) Fixed overhead budgeted Volume variance (F)

P278,239.50 272,250.00 P 5,989.50

*P272,250 / 165,000 = P1.65

Spending variance: Actual overhead per year Budgeted overhead: Fixed Variable (168,630 x 3.84*) Spending variance (U)

P930,826.67 P272,250.00 647,539.20

919,789.20 P 11,037.47

*P633,600 / 165,000 = P3.84

Total variance (U)

P 5,047.97

8

Problem 6-5 Elena Machinery Corporation Income Statement Year Ended December 31, 2010 Sales Sales returns and allowances Net Sales Cost of goods sold: Finished goods inventory, 1/1 Cost goods manufactured Total available Finished goods inventory, 12/31 Cost of goods sold Add overapplied overhead Gross profit Operating expenses: Selling expense Administrative expenses Net income before income tax Provision for income tax Net income after income tax

P960,500 43,700 916,800 P98,700 641,100 739,800 94,500 645,300 3,500 P 65,400 82,500

648,800 268,000 147,900 120,100 36,030 P 84,070

Problem 6-6 1.

Fixed manufacturing overhead Variable manufacturing overhead [(P60,000/12) x P7.50] Budgeted manufacturing overhead for the month

2.

Fixed overhead rate (P7,500 / 5,000 units/mo.) Variable overhead rate Total overhead rate Actual output Applied manufacturing overhead

P

3.

Actual manufacturing overhead Budgeted factory overhead Controllable overhead variance (U)

P 46,500 45,000 P 1,500

Applied manufacturing overhead Budgeted manufacturing overhead Volume variance ((U)

P 43,200 45,000 P 1,800

Controllable overhead variance (U) Volume variance (U) Net overhead variance (U)

P 1,500 1,800 P 3,300

4.

P 7,500 37,500 P 45,000 1.50 7.50 P 9.00 4,800 P 43,200

Or: Actual overhead incurred Applied overhead Underapplied overhead

P 46,500 43,200 P 3,300

9 Problem 6-7 1.

Fixed overhead Variable overhead (36,000 DLH x P6.30) Budgeted manufacturing overhead

P 16,920 226,800 P243,720

2.

Fixed overhead rate (P16,920 / 36,000 hrs.) Variable overhead rate Total overhead rate Actual DLH Applied manufacturing overhead

P

3.

Actual manufacturing overhead Budgeted manufacturing overhead: Fixed overhead (P16,920 / 12) Variable (2,700 DLH x P6.30) Controllable variance (U)

P 23,877

4

0.47 6.30 P 6.77 2,700 P 18,279

P 1,410 17,010

18,420 P 5,457

Fixed overhead applied (2,700 DLH x .47) Fixed overhead budgeted (16,920 / 12) Volume variance (U)

P 1,269 1,410 P 141

Controllable variance (U) Volume variance (U) Net variance (U)

P 5,457 141 P 5,598

Or: Actual overhead Applied overhead Underapplied overhead

P 23,877 18,279 P 5,598

Problem 6-8 1.

Fixed overhead rate (P900,000 / 150,000 machine hours ) Variable overhead rate (P450,000 / 150,000 machine hours) Total manufacturing overhead rate

P

2.

Actual manufacturing overhead Applied manufacturing overhead (140,000 hrs. x P9.00) Underapplied overhead

P1,305,000 1,260,000 P 45,000

3.

Actual manufacturing overhead Budgeted manufacturing overhead (based on actual hrs.) Fixed overhead P900,000 Variable (140,000 hrs. x P3) 420,000 Controllable variance (F)

P1,305,000

Applied fixed overhead (140,000 hrs. x P6) Budgeted fixed overhead Volume variance (U)

P 840,000 900,000 P 60,000

4.

P

P

6.00 3.00 9.00

1,320,000 15,000

10 Problem 6-9 1,

Fixed overhead rate (P42,000 / 60,000 DLH) Variable overhead rate (P168,000 / 60,000 DLH) Total overhead rate

P 2.80 P

0.70 3.50

2.

Actual direct labor hours Overhead rate Applied overhead

62,400 X P3.50 P218,400

3.

Actual manufacturing overhead Applied manufacturing overhead Overapplied overhead (F)

P213,100 218,400 P 5,300

Fixed overhead volume variance: Applied fixed overhead (62,400 x .70) Budgeted fixed overhead Volume variance (F)

P 43,680 42,000 P 1,680

4.

Spending variance: Actual overhead Budgeted overhead based on Std. hours: Fixed overhead Variable (62,400 x P2.80) Controllable variance (F)

P213,100 P 42,000 174,720

216,720 P 3,620

Problem 6-10 a.

Actual manufacturing overhead Budgeted manufacturing overhead Controllable variance (F)

P 60,000 64,000 P 4,000

Applied manufacturing overhead Budgeted manufacturing overhead Volume variance (U)

P 58,000 64,000 P 6,000

b.

Applied manufacturing overhead Volume variance (F) Budgeted manufacturing overhead Controllable variance (F) Actual manufacturing overhead

P 30,000 14,000 16,000 2,000 P 18,000

c.

Actual manufacturing overhead Controllable variance (U) Budgeted manufacturing overhead Applied manufacturing overhead Volume variance (F)

P 48,000 12,000 36,000 48,000 P 12,000

11 d.

Budgeted manufacturing overhead Controllable variance (F) Actual manufacturing overhead

P 36,000 2,000 P 34,000

Budgeted manufacturing overhead Volume variance (F) Applied manufacturing overhead

P 36,000 4,000 P 40,000

e.

Actual manufacturing overhead Controllable variance (F) Budgeted manufacturing overhead Applied manufacturing overhead Volume variance

P 36,000 6,000 42,000 40,000 P 2,000

f.

Actual manufacturing overhead Controllable variance (U) Budgeted manufacturing overhead Volume variance (U) Applied manufacturing overhead

P 54,000 12,000 42,000 4,000 P 38,000

g.

Actual manufacturing overhead Controllable variance Budgeted manufacturing overhead Applied manufacturing overhead Volume variance

P 32,000 -032,000 32,000 P -0-

Problem 6-11 1.

Work in process, Oct. 1 Current cost: Direct materials Direct labor (P204,000 x 7/17) Applied overhead (7,000 P9) Total cost of Job 20

P109,000

2.

4,000 DLH x P9 =

P 36,000

3.

17,000 total direct labor hours x P9 =

P153,000

4.

Supplies Indirect labor Supervisory salaries Building occupancy costs Factory equipment costs Other factory costs Total actual manufacturing overhead

P 4,000 30,000 83,000 7,000 12,000 10,000 P150,000

5.

Close to cost of goods sold account.

6,

No. The amount should be apportioned to the Work in Process Inventory account, Finished Goods Inventory account and Cost of Goods Sold.

90,000 84,000 63,000 P346,000

12

Problem 6-12 1.

Indirect materials and supplies Indirect labor Employee benefits Depreciation Supervision Total actual manufacturing overhead

P 30,000 106,000 46,000 24,000 40,000 P246,000

2.

P140,000 actual direct labor cost x 160% =

P224,000

3.

Actual manufacturing overhead Applied manufacturing overhead Underapplied overhead

P246,000 224,000 P 22,000

Problem 6-13 1. Direct materials Direct labor Applied overhead: WIP (4,000 hours x P7.20) FG (10,000 hours x P7.20) Total inventory cost

Work in ProcessFinished Goods P 18,000 P 20,000 36,000 40,000 28,800 P 82,800

72,000 P132,000

2.

Supervision Indirect labor Utilities Depreciation – factory building Property tax Freight-in Depreciation – factory equipment Insurance Repairs and maintenance Miscellaneous Total actual manufacturing overhead

P 37,000 58,100 45,600 15,000 8,000 13,000 15,000 6,000 16,500 19,800 P234,000

3.

Actual manufacturing overhead Budgeted manufacturing overhead (P141,750 + P85,050) Controllable variance (U)

P234,000 226,800 P 7,200

Budgeted manufacturing overhead Applied manufacturing overhead Volume variance (F)

P226,800 230,400 P 3,600

Net overhead variance (U)

P 3,600

13

Problem 6-13 (continued) Manuel Company Statement of Cost of Goods Manufactured and Sold Month Ended January 31, 2010 Direct materials used: Materials inventory, Jan. 1 Purchases (P216,000 – P10,100) Total available Materials inventory, Jan. 31 Direct labor Applied manufacturing overhead Manufacturing cost Work in process inventory, Jan. 1 Total cost of goods placed in process Work in process inventory, Jan. 31 Cost of goods manufactured Finished goods inventory, Jan. 1 Goods available for sale Finished goods inventory, Jan. 31 Cost of goods sold at normal Underapplied overhead Cost of goods sold at actual

P 42,000 205,900 247,900 18,000

P 229,900 512,000 230,400 972,300 65,000 1,037,300 82,800 954,500 36,000 990,500 132,000 858,500 3,600 P 862,100