CHAPTER 9

1

CHAPTER 9 Answers to Multiple Choice – Theoretical 1. 2. 3. 4. 5.

c b a a a

6. 7. 8. 9. 10.

b b c b d

11. 12, 13. 14. 15.

b d b b a

Solutions to Multiple Choice – Computational 1.

2.

(a) Total manufacturing cost: (2,200 units x P56) Less: cost of spoiled units (200 units x P56) Cost of good units

P123,200 11,200 P112,000

Unit cost: (P112,000 / 2,000 good units)

P

Manufacturing cost: (P56 – P1) x 2,200 = Less: Scrap value of spoiled units Cost of good units

P121,000 6,000 P115,000

Unit cost: (P115,000 / 2,000 good units)

P 57.50 (2)

56 (1)

(d) Charged to Specific Job: Direct materials Direct labor Manufacturing overhead (P800 x 150%) Manufacturing cost

P 660 800 1,200 P2,660

Unit cost: (P2,660 / 200 units)

P13.30

Due to internal failure: Manufacturing cost Add: Rework cost Direct materials Direct labor Overhead (P160 x 150%) Total cost after rework cost Unit cost: (P3,160 / 200 units)

P2,660 P100 160 240

500 P3,160 P15.80

2 3.

(d)

4.

(a)

5.

(c) Charged to specific job: Direct materials: (8,000 units x P5) Direct labor: (8,000 units x P4) Manufacturing overhead: (8,000 units x P3) Manufacturing costs Less: Scrap value (600 x P7) Manufacturing cost net of scrap value

P40,000 32,000 24,000 P96,000 4,200 P91,800

Unit cost: (P91,800 / 7,400 good units)

P 12.41

Charged to all production: Direct materials Direct labor Manufacturing overhead: (8,000 units x P3.50) Manufacturing cost Less: Cost of spoiled units (600 x P12.50) Manufacturing cost of good units

P 40,000 32,000 28,000 P100,000 1,500 P 98,500

Unit cost: (P98,500 / 7,400 good units) 6.

P 12.50

(b) Charged to LGU Machine Works: Direct materials: (1,000 x P3.50) Direct labor: (2,000 x P1.25) Overhead: (P2,500 x 140%) Manufacturing cost Rework cost: Direct materials: (100 x P0.15) Direct labor: (100 x P0.25) Overhead: (P25 x 140%) Total manufacturing cost

P 7,000 2,500 3,500 P13,000 P15 25 35

75 P13,075

Unit cost: (P13,075 / 2,000 units)

P6.5375

Charged to Factory Overhead Control: Direct materials Direct labor Overhead: (P2,500 x 150%) Manufacturing cost

P 7,000 2,500 3,750 P13,250

Unit cost: (P13,250 / 2,000 )

P6.6250

3 7.

(a)

8.

(b)

9.

(d)

10.

11.

12.

Direct materials (25 x P80) Direct labor (25 x P194) Overhead (P4,850 x 100%) Total Less: Scrap value (2 x P400) Manufacturing cost of 23 units

P 2,000 4,850 4,850 P11,700 800 P10,900

Unit cost: (P10,900 / 23)

P473.91

(b) Direct materials Direct labor Overhead Total Less: Cost of spoilage: (P49,565 / 2,200) x 200 units Manufacturing cost of 2,000 units

P26,951 15,076 7,538 P49,565 4,506 P45,059

Unit cost: (P45,059 / 2,000)

P 22.53

(b) Direct materials (P95 x 250) Direct labor (P6 x 5,260 DLH) Applied overhead (P2 x 5,260 DLH) Total Less: Cost of spoilage (P65,830 / 250) x 10 Manufacturing cost of 240 units

P23,750 31,560 10,520 P65,830 2,633 P63,197

Unit cost: (P63,197 / 240)

P263.32

(d) Direct materials Direct labor Overhead (P12,500/P2.50) x P1.50 Total Rework cost (P100 + P125 + P75) Sales value of spoiled units (1,000 x P4) Manufacturing cost of 9,000 units

P30,000 12,500 7,500 P50,000 300 (40,000) P46,300

Unit cost: (P46,300 / 9,000)

P5.1444

4 Solutions to Problems Problem 9-1 1. 2. 3. 4.

Cash/Accounts receivable Other income

2,500

Cash/Accounts receivable Cost of goods sold

2,500

Cash/Accounts receivable Factory overhead control

2,500

Cash/Accounts receivable Work in process inventory

2,500

2,500 2,500 2,500 2,500

Problem 9-2 1. 2. 3. 4.

Cash/Accounts receivable Other income

4,000

Cash/Accounts receivable Factory overhead control

4,000

Cash/Accounts receivable Work in process inventory

4,000

Materials inventory Factory overhead control

4,000

Work in process inventory Materials inventory

4,000

4,000 4,000 4,000 4,000 4,000

Problem 9-3 1.

Work in process inventory Materials inventory Payroll Applied factory overhead To record production cost. Spoiled goods inventory (100 x P10) Factory overhead control Work in process inventory (P54,000/2,000)100 To record spoilage cost. Finished goods inventory Work in process inventory To record finished goods (P54,000 – P2,700)

2.

Unit cost: (P51,300 / 1,900 units) = P27 Problem 9-4

54,000 24,000 10,000 20,000 1,000 1,700 2,700 51,300 51,300

5

1.

Work in process inventory Materials inventory To record production cost

208,000 208,000

Spoiled goods inventory (200 x P100) Work in process inventory To record scrap value of spoiled units. Finished goods inventory Work in process inventory To record cost of finished goods (P208,000 – P20,000) 2.

20,000 20,000 188,000 188,000

Unit cost: (P188,000 / 1,000 units) = P188

Problem 9-5 1.

2.

Spoiled goods inventory Factory overhead control Work in process inventory To record spoilage.

1,200 1,600

Spoiled goods inventory Factory overhead control Work in process inventory To record spoilage.

2,500 300

Accounts receivable Spoiled goods inventory To record the offer of scrap dealer.

2,500

2,800

2,800

2,500

Problem 9-6 Entry No. 1:

If spoiled units are due to customers exacting specifications.

Entry No. 2:

If spoiled units are due to internal failure/employee’s error.

Entry No. 3:

If cost of spoiled units is unrecoverable. This is an abnormal loss charged immediately to operations.

Entry No. 4:

If spoilage is traceable to a particular job and the loss is recoverable from the customer or from the insurance company.

Problem 9-7

6

1a.

Work in process inventory Materials inventory Payroll Applied factory overhead To record manufacturing cost

180,000 92,000 28,000 60,000

Spoiled goods inventory (400 x P15) Factory overhead control Work in process inventory To record cost of spoilage: (P180,000/10,000) x 400.

6,000 1,200

Finished goods inventory Work in process inventory To record cost of finished goods (P180,000 – P7,200)

172,800

1b.

Unit cost: (P172,800 / 9,600 units) =

2a.

Work in process inventory Materials inventory Payroll Applied factory overhead To record manufacturing cost.

172,800

P18. 180,000 92,000 28,000 60,000

Spoiled goods inventory Work in process inventory To record cost of spoiled goods (400 x P15)

2b.

7,200

6,000 6,000

Finished goods inventory Work in process inventory To record cost of finished goods.

174,000

Cash/Accounts receivable Sales To record sales (P174,000 x 140%)

243,600

Cost of goods sold Finished goods inventory To record cost of goods sold.

174,000

Unit cost: (P174,000 / 9,600 units) =

174,000

243,600

174,000 P18.125

Problem 9-8

7

1.

2.

Spoiled goods inventory Factory overhead control Work in process inventory To record cost of spoiled units (P400 x P4.50)

1,800 1,800

Accounts receivable Spoiled goods inventory To record sales of scrap.

1,100

3,600

1,100

Problem 9-9 1.

Factory overhead control Work in process inventory To record cost destroyed units.

1,200 1,200

Unit cost of the remaining 2,300 cases is P6. 2.

3a.

b.

4a.

b.

5.

Spoiled goods inventory Factory overhead control Work in process inventory To record salvage value of defective units.

200 1,000

Accounts receivable Work in process inventory To record cost of defective cases chargeable to customer.

1,200

Factory overhead control Work in process inventory To record cost of defective units charged to production.

1,200

1,200

1,200

1,200

Spoiled goods inventory Accounts receivable Work in process inventory To record salvage value of defective units.

400 800

Spoiled goods inventory Factory overhead control Work in process inventory To record salvage value of defective units.

400 800

Factory overhead control Materials inventory To record rejected units charged to overhead.

200

1,200

1,200

200

Average unit cost is P6.00. 6.

Work in process inventory Materials inventory To record cost of rejected units charged to a particular job.

200

Average unit cost: (2,500 x P6) + P200 = P15,200 / 2,500 = P6.08 7.

Same.

200

8 Problem 9-10 1.

Work in process inventory Materials inventory Payroll Applied overhead To record manufacturing cost.

13,600 7,000 3,000 3,600

Manufacturing overhead control Materials inventory (200 x P1.50) Payroll (15/60 x P10 x 200) Applied overhead (15/60 x P12 x 200) To record rework cost. Finished goods inventory Work in process inventory To record cost of finished goods. 2.

Unit cost: (P13,600 / 200 units) =

1,400 300 500 600 13,600 13,600

P68

Problem 9-11 1.

Work in process inventory Materials inventory Payroll Applied overhead To record manufacturing cost.

130,000 40,000 30,000 60,000

Work in process inventory Materials inventory (1,000 x P1) Payroll (10/60 x P15) x 1000 Applied overhead (10/60 x P30) x 1,000 To record rework cost. Finished goods inventory Work in process inventory To record cost of finished goods. 2.

Unit cost: (P138,500 / 2,000 units) =

8,500 1,000 2,500 5,000 138,500 138,500

P69.20

9

Problem 9-12 1a.

Work in process inventory Materials inventory Payroll Applied overhead To record manufacturing cost.

400,000 184,000 72,000 144,000

Manufacturing overhead control Materials inventory (200 units x P4) Payroll : (30/60 x P12) x 200 Applied overhead: (30/36 x P24) x 200 To record rework cost. Finished goods inventory Work in process inventory To record cost of finished goods. b.

2a.

Unit cost: (P400,000 / 2,000 units) =

400,000 P200

Work in process inventory Materials inventory Payroll Applied overhead To record manufacturing cost.

400,000 184,000 72,000 144,000 4,400 800 1,200 2,400

Finished goods inventory Work in process inventory To record cost of finished goods. Unit cost: (P404,400 / 2,000 units) =

800 1,200 2,400 400,000

Work in process inventory Materials inventory Payroll Applied overhead To record rework cost.

b.

4,400

404,400 404,400 P202.20

10

Problem 9—13 1a.

Work in process inventory Materials inventory Payroll Applied overhead (P3,500 x 160%) To record manufacturing cost. Manufacturing overhead control Materials inventory Payroll Applied overhead To record rework cost.

2a.

Unit cost: (P17,100 / 2,000 units) =

30 45 72 17,100 17,100 P8.55

Work in process inventory Materials inventory Payroll Applied overhead (P3,500 x 150%) To record manufacturing cost. Work in process inventory Materials inventory Payroll Applied overhead (P45 x 150%) To record rework cost. Finished goods inventory Work in process inventory To record cost of finished goods.

b.

8,000 3,500 5,600 147

Finished goods inventory Work in process inventory To record cost of finished goods. b.

17,100

Unit cost: (P16,892.50 / 2,000 units) = P8.45

16,750 8,000 3,500 5,250 142.50 30 45 67.50 16,892.50 16,892.50

11

Problem 9-14 a.

Predetermined overhead rate: (P462,500 / 50,000 machine hrs. ) P9.25 per MH Direct materials Direct labor Applied overhead (1,540 x P9.25) Total cost of Job 2720

b.

The rework cost is debited to the manufacturing overhead control account since the company uses a predetermined rate to apply overhead. The entry is: Manufacturing overhead control Various accounts

c.

d.

P343,550 78,875 14,245 P436,670

Predetermined overhead rate:

37,750 37,750 (P425,000 / 50,000 = P8.50 per MH

Direct materials Direct labor Applied overhead (1,540 x P8.50) Total cost of Job 2720

P343,550 78,875 13,090 P435,515

Direct materials Direct labor Applied overhead (1,540 x P8.50) Rework cost (P37,750 x .20) Sale of reworked pipe (200 x P1.50) Total cost of Job 2720

P343,550 78,875 13,090 7,550 ( 300) P442,765