Cost Accounting - Chapter_7

CHAPTER 7 - ACCOUNTING FOR FACTORY OVERHEAD Problem 1 – Denmark Company FO rate = 216,000 216,000 90,000 72,000 units 240%of DMC P3.00/unit Problem 2 - Colossal Corporation FO rate = 207,000 207,000 500,000 52,100 units 41,40%of DMC

P3,97/unit

216,000 1,600 MHrs. P135/MHr.

P3.00/MHr

= 16,000 Hrs. x P4.50

P2.44/DLHr. 27.06%ofDLC

P 4.50/DLHr.

=

P 72,000

Job 124 1,080 940 1,692 3,712

Job 124 940 180% 1,692

Job 125 1,400 180% 2,520

Job 126 5,120 180% 9,216

Job 125 720 1,400 2,520 4,640

Job 126 4,200 5,120 9,216 18,536

TOTAL 6,300 8,060 14,508 28,868

Problem 5 – Rubi Company 1. FO rate

207,000 765,000

P 69,000 72,000 ( P 3,000)

Problem 4 - Ellery Corporation 1. Job 123 Direct labor cost 600 FO rate 180% Applied FO 1,080 Job 123 DM 300 DL 600 FO 1,080 TOTAL 1,980

90% of DLC P4.50/DLHr.

=

3. Actual FO Less: Applied Overapplied FO

2.

216,000 48,000 DLHrs/

207,000 207,000 69,000 MHrs. 85,000 DLHrs.

Problem 3 – Manila Company 1. FO rate = P67,500/15,000 DLHrs. 2. Applied FO

216,000 240,000

P 60,000 P 60,000

P 60,000 40,000 DLHrs.

P60,000 25,000 MHrs.

100%of DLC

P 1.50/DLHr.

P2.40/MHr.

``

Page 2 2. a) Factory overhead was based on direct labor cost JOB 101 JOB 102 JOB 103 JOB 104 DM 5,000 7,000 8,000 9,000 DL 7,200 10,000 11,000 9,000 FO APP/. 7,200 10,000 11,000 9,000 TOTAL 19,400 27,000 30,000 27,000

JOB 105 10,000 15,000 15,000 40,000

JOB 106 11,000 4,200 4,200 19,400

b). Factory overhead was based on direct labor hours JOB 101 JOB 102 JOB 103 JOB 104 DM 5,000 7,000 8,000 9,000 DL 7,200 10,000 11,000 9,000 FO APP. 7,500 9,000 9,750 8,400 TOTAL 19,700 26,000 28,750 26,400

JOB 105 10,000 15,000 15,750 40,750

JOB 106 11,000 4,200 4,500 19,700

c( Factory overhead was based o machine hours JOB 101 JOB 102 JOB 103 JOB 104 DM 5.000 7,000 8,000 9,000 DL 7,200 10,000 11,000 9,000 FO APP. 7,200 7,680 9,600 8,160 TOTAL 19,400 24,680 28,600 26,160

JOB 105 10,000 15,000 15,000 40,000

JOB 106 11,000 4,200 3.600 18,800

Problem 6 – Thermal Corporation 1. Direct method Direct cost Allocated cost S1 S2 Total Base FO rate

P1___ P 90,000

P2___ P 60,000

S1___ P 20,000

10,000 20,000 P120,000 50,000 MHrs. P 2.40/MHr.

10,000 12,000 P 82,000 20,000 DLHrs P 4.10/DLHr.

( 20,000)

P1___ P 90,000

P2___ P 60,000

2,000 30,000 P122,000 50,000 MHrs. P 2.44/MHr

2,000 18,000 P 80,000 20,000 DLHrs P 4.00/DLHr.

S2___ P 32,000

( 32.000)

2. Step method Direct cost Allocated cost S1 S2 Total Base FO rate

S1____ P 20,000

S2___ P 32,000

( 20,000)

16,000 ( 48,000)

3. Algebraic method Direct cost Allocated S1 S2 Total Base FO rate

P1___ P 90,000

P2___ P 60,000

S1___ P 20,000

S2____ P 32,000

3.143 28,572 P121,715 50,000 MHrs. P 2.43/MHr.

3,143 17,143 P80,286 20,000 DLHrs P 4.0/DLHr.

( 31,429) 11,429

25,143 ( 57,143)

S1 -= 20,000 + 20% S2 S2 = 32,000 + 80% S1 S1 S1 - .16S1 S1

S2

= = = = =

20000 + 20%( 32,000 + 80% S1) 20,000 + 6,400 + .16 S1 26.400 26,400/.84 31,429

= 32,000 + 80% 31,429 = 32,000 + 25,143 = 57,143

Problem 7 – High Density Corporation 1. Direct method Insertion Assembly Direct cost 685,000 795,000 Allocated Bldg. occupancy 63,158 116,842 Accounting 100,227 144.773 Maintenance 132,955 192.045 Total 981,340 1,248,660

Occupancy Accounting Maintenance 180,000 245,000 325,000 (180,000) ( 245,000) ( 325,000)

2. Step method Direct cost Allocated cost Occupancy Accounting Maintenance Total

Insertion Assembly 685,000 795,000

Occupancy Accounting 180,000 245,000

55.728 94,480 147,365 982,573

( 180,000)

103,096 136,471 212,860 1,247,427

11,146 (256.146)

Maintenance 325,000 10,030 25,145 (360,175)

Problem 8 - Central Parkway Corp.

Direct cost Allocated S1 S2 Total S1 S2 S1 S1 - .025 S1 S1

S2

P1___ 120,000

P2____ 80,000

13,333 8,333 141,666

6,667 6,667 93,334

S1___ 25,000

S2___ 10,000

( 26,667) 1,667

= =

25,000 + 10% of S2 10,000 + 25% of S1

= = = = =

25,000 + 10% ( 10,000 + .25S1 25,000 + 1,000 + .025S1 26,000 26,000/.975 26,667

= =

10,000 + .25(26,667) 16,667

6,667 (16,667)

Problem 9 – Megastar Company

Fixed Variable

Total 34,200 41,800 76,000

95,000 Mach. Hrs. Per Mach.Hr. 0.36 ( 34,200/95,000) 0.44 ( 41,800/95,000) 0.80

1.

Actual factory overhead Less: Applied (100,000 x .80) Overapplied factory overhead

P 78,600 80,000 ( 1,400)

2.

Actual factory overhead Less: Budget allowed on actual hours Fixed 34,200 Variable (100,000 x .44) 44,000 Spending variance – unfavorable

P 78,600

Budged allowed on actual hours Less: Applied factory overhead Idge capacity variance favorable

P 78,200 80,000 ( 1,800)

3.

P

78,200 400

Page 5 Problem 10 - Abner Company

Fixed Variable Total

72,000 units Per unit P 0.47 (33,840/72,000) 4.20 (72,000 x 4.20) P 4.67

TotalP 33,840 302400 P336,200

1.

Actual FO Less: Applied FO 5,400 units x P 4.67 Underapplied FO

P 15,910 25,218 (P 9.308)

2.

Actual FO Less: Budget allowed on actual hours Fixed (33,840/12 months) Variable ( 5,400 x 4.20) Spending variance – favorable

P 15,910

3.

2,820 22,680

Budged allowed on actual hours Less: Applied Idle capacity variance – unfavorable

25,500 ( P 9,590) P25,500 25,218 P 282

Problem 11 - Norman Corporation 1. Variable rate/hour = 270,000 – 252,000 60,000 - 48,000 = P1.50/DLHr. 2. Total Less: Variable (60,000 x 1.50) (48,000 x 1.50) Fixed 2.

High 270,000

Low 252,000

90,000 _______ 180,000

72,000 180,000

Actual factor overhead Less: Applied ( 60,000 x 90%) x 5.25 Overapplied FO FO rate =

252,000 48,000

= 5.25/ DLHrs.

273,000 283,500 ( 10,500)

Page 6 3. Actual factory overhead Less: Budget allowed on actual hours Fixed Variable (54,000 x 1.50) Spending variance 4.

273,000 180,000 81,000

Budget allowed on actual hours Less: Applied Idle capacity variance

261,000 12,000 261,000 283,500 ( 22,500)

Problem 12 - Blanche Corporation 1.

Variable rate/ = 356 ,250 - 348,750 47,500 - 45.000

2. Total Less: Variable 45,000 x 3 47,500 x 3 Fixed 3.

=

P3.00/DLHr.

90% capacity 348,750

95% capacity 356,250

135,000 _______ 213,750

142,500 213,750

Actual factory overhead Less: Applied ( 42,500 DLHrs x 7.50) Underapplied factory overhead

Problem 13 - Bulilit Company 1) Direct materials (50 x P120) (100 x P120) Direct labor Factory overhead applied ( 100 x P25) (400 x P25) Total costs Divide by number of units Cost per unit

445,000 318,750 126,250

Product A P 6,000 2,000 2,500 ________ P 10,500 50__ P 210.00

Product B P 12,000 8,000 10,000 P 30,000 100_ P 300.00

Factory overhead rate = Est. Factory overhead Est. direct labor hours = P200,750/ 8,030 = P 25.00/ per direct labor hour

Page 7 2) Direct materials Direct labor Factory overhead applied Mat. Handling ( 20 x ( 50 x Setup ( 5x ( 8x Design changes ( 2 x ( 5x No. of parts ( 10 x ( 15 x Total costs Divide by number of units Cost per unit

Product A P 6,000 2,000 P 50 ) P 50) P 200) P 200) P 107.50) P 107.50) P 100) P 100)

Factory overhead rate Mat. Handling P60,000/1,200 Setup P 80,000/ 400 Design changes P 10,750/ 100 No. of parts P 50,000/ 500

= = = =

Product B P 12,000 8,000

1,000 2,500 1,000 1,600 215 537.50 1,000 ________ P 11,215 50__ P 224.30

1,500 P 26,137.50 100___ P 261.38

P 50/ times handled P 200/setup P 107.50/change P 100/part

Problem 14 Setup ( 1 x P 100) Inspections ( 20 x P 20) Mat. Moves ( 30 x P 10) Eng. Hours ( 10 x P 50) Total factory OH

Job 101 P 100 400 300 500 P 1,300

Job 102 ( 2 x P100) P 200 ( 10 x P 20) 200 ( 10 x P 10) 100 ( 50 x P50) 2,500 P 3,000

Factory overhead rate Setup P 20,000/200 Inspections P 130,000/6,500 Mat. Moves P 80,000/8,000 Eng. Hrs. P 50,000/1,000

= = = =

(4 x P100) (30 x P20) ( 50 x P10) ( 10 x P50)

P 100/setup P 20/inspection P 10/move P 50/hour

Job 103 P 400 600 500 500 P 2,000

Page 8 TRUE/FALSE 1. True 2. False 3. True 4. True 5. True MULTIPLE CHOICE 1. c 6. 2. c 7. 3. d 8. 4. c 9. 5. 7,000 fav. 10. `

6. 7. 8. 9. 10.

c c c c c

True True True False True

11. 12. 13. 14. 15.

11. a 12. 13. d 14. 137,500 hrs. 15. d

False False True True True

16. b 17. c 18 39,000 UA 19. a 20. c 21. b 22. a 23. a