1.

Graham Manufacturing is a small manufacturer that uses machine-hours as its activity base
for assigned overhead costs to jobs. The company estimated the following amounts for 2013
for the company and for Job 62:
Company Job 62
Direct materials Php60,000 Php4,500
Direct labor Php25,000 Php2,500
Manufacturing overhead costs Php72,000
Machine hours 80,000 1,350

During 2013, the actual machine-hours totaled 84,000, and actual overhead costs were
Php71,000.
Instructions
(a) Compute the predetermined overhead rate.
(b) Compute the total manufacturing costs for Job 62.
(c) How much overhead is over or underapplied for the year for the company? State amount and
whether it is over- or underapplied.
(d) If Graham Manufacturing sells Job 62 for Php14,000, compute the gross profit.
Solution (7–9 min.)
(a) Php72,000  80,000 = Php0.90 per machine hour
(b) Php4,500 + Php2,500 + (Php0.90 × 1,350) = Php8,215
(c) Actual – Applied = Over/Underapplied
Php71,000 – (Php0.90 × 84,000) = Php4,600 overapplied
(d) Php14,000 – Php8,215 (from (b) above) = Php5,785

2. Jardin Company begins the month of March with Php17,000 of work in process costs from
Job 324. Information from job cost sheets shows the following additional costs assigned
during March, April, and May of 2013:
Manufacturing Costs Assigned
Job No. March April May
324 Php26,000
325 20,000 Php28,000 Php15,000
326 41,000 11,000
327 16,000 34,000
 328 29,000 51,000

Job 324 was completed in March. Jobs 325 and 327 were completed in May, and Job 326 was
completed in April. Jobs are sold during the month after completion. Total revenue for jobs sold
during the 3-month period is Php145,000.
Instructions
Calculate the balances of the work in process and finished goods inventory accounts at the end of
May.
Solution (5–6 min.)
Work in process
Job 328 Php29,000 + Php51,000 = Php80,000
Finished goods
Job 325 Php20,000 + Php28,000 + Php15,000 =Php 63,000
Job 327 Php16,000 + Php34,000 = 50,000
Php113,000

3. The gross earnings of factory workers for Amcar Company during the month of January are
Php400,000. The employer's payroll taxes for the factory payroll are Php48,000. Of the total
accumulated cost of factory labor, 75% is related to direct labor and 25% is attributable to
indirect labor.
Instructions
(a) Prepare the entry to record the factory labor costs for the month of January.
(b) Prepare the entry to assign factory labor to production.
(c) Prepare the entry to assign manufacturing overhead to production, assuming the
predetermined overhead rate is 125% of direct labor cost.
Solution (8–12 min.)
(a) Factory Labor.................................................................................. 448,000
Factory Wages Payable.......................................................... 400,000
Employer Payroll Taxes Payable........................................... 48,000
(b) Work in Process Inventory..............................................................336,000 .75
 Manufacturing Overhead................................................................112,000 .25
Factory Labor......................................................................... 448,000
(Php448,000 × 75% = Php336,000)
(c) Work in Process Inventory.............................................................. 420,000
Manufacturing Overhead....................................................... 420,000
(Php336,000 × 125% = Php420,000)
4. Finn Manufacturing Company uses a job order cost accounting system and keeps perpetual
inventory records. Prepare journal entries to record the following transactions during the
month of June.
June 1 Purchased raw materials for Php20,000 on account.
8 Raw materials requisitioned by production:
Direct materials Php8,000
Indirect materials 1,000
15 Paid factory utilities, Php2,100 and repairs for factory equipment, Php8,000.
25 Incurred Php96,000 of factory labor.
25 Time tickets indicated the following:
Direct Labor (6,000 hrs × Php12 per hr) = Php72,000
Indirect Labor (3,000 hrs × Php8 per hr) = 24,000
Php96,000
25 Applied manufacturing overhead to production based on a predetermined overhead
rate of Php7 per direct labor hour worked.
28 Goods costing Php18,000 were completed in the factory and were transferred to
finished goods.
30 Goods costing Php15,000 were sold for Php20,000 on account.
Solution (16–23 min.)
June 1 Raw Materials Inventory ....................................................... 20,000
Accounts Payable ......................................................... 20,000
(Purchase of raw materials on account)
8 Work In Process Inventory ................................................... 8,000
Manufacturing Overhead ...................................................... 1,000
 Raw Materials Inventory .............................................. 9,000
(To assign materials to jobs and overhead)
15 Manufacturing Overhead 10,100
Cash .............................................................................. 10,100
(To record payment of factory utilities and repairs)

25 Factory Labor ........................................................................ 96,000

Factory Wages Payable ................................................ 96,000
(To record factory labor costs)

25 Work In Process Inventory ................................................... 72,000

Manufacturing Overhead ...................................................... 24,000
Factory Labor ............................................................... 96,000
(To assign factory labor to jobs and overhead)

25 Work In Process Inventory ................................................... 42,000

Manufacturing Overhead ............................................. 42,000
(To apply overhead to jobs)

28 Finished Goods Inventory ..................................................... 18,000

Work In Process Inventory .......................................... 18,000
(To record completion of production)

30 Accounts Receivable ............................................................. 20,000

Cost of Goods Sold ............................................................... 15,000
Sales ............................................................................. 20,000
Finished Goods Inventory ............................................ 15,000
(To record sales of finished goods and its cost)
5. Perry Company employs a job-order costing system. Only three jobs-Job #205, Job #206, and
Job #207-were worked on during January and February. Job #205 was completed February
10; the other two jobs were still in production on February 28, the end of the company's
operating year. Job cost sheets on the three jobs follow:

Job Cost Sheet

Job #205 Job #206 Job #207
January costs incurred:
Direct material Php16,500 Php 9,300 Php —
Direct labor  13,000   7,000      —
Manufacturing overhead  20,800  11,200      —

February costs incurred:

Direct materials —   8,200 21,300
Direct labor   4,000   6,000 10,000
Manufacturing overhead ? ? ?

The following additional information is available:

a. Manufacturing overhead is assigned to jobs on the basis of direct labor cost.

b. Balances in the inventory accounts at January 31 were as follows:

Raw Material Php40,000

Work in Process ?
Finished Goods 85,000

Required:
a. Prepare T-accounts for Raw Material, Work in Process Inventory, Finished
Goods Inventory, and Manufacturing Overhead Control. Enter the January 31
inventory balances given previously; in the case of Work in Process
Inventory, compute the January 31 balance and enter it into the Work in
Process Inventory T-account.

b. Prepare journal entries for February as follows:

1. Prepare an entry to record the issue of materials into production and post the entry
to appropriate T-accounts. (In the case of direct material, it is not necessary to
make a separate entry for each job.) Indirect materials used during February
totaled Php4,000.

2. Prepare an entry to record the incurrence of labor cost and post the entry to
appropriate T-accounts. (In the case of direct labor, it is not necessary to make a
separate entry for each job.) Indirect labor cost totaled Php8,000 for February.

3. Prepare an entry to record the incurrence of Php19,000 in various actual

 manufacturing overhead costs for February (credit Accounts Payable).

c. What apparent predetermined overhead rate does the company use to assign
overhead cost to jobs? Using this rate, prepare a journal entry to record the
application of overhead cost to jobs for February (it is not necessary to make
a separate entry for each job). Post this entry to appropriate T-accounts.

d. As stated earlier, Job #205 was completed during February. Prepare a journal
entry to show the transfer of this job off of the production line and into the
finished good warehouse. Post the entry to appropriate T-accounts.

e. Determine the balance at February 28 in the Work in Process inventory

account. How much of this balance consists of the cost of Job #206? Job
#207?

ANS:
a.

Raw Materials Work in Process

Inventory Inventory
BB 40,000 BB 77,800
29,500 60,700
33,500 20,000
32,000
98,600

Finished Goods Manufacturing

Inventory Overhead Control
BB 85,000 4,000
60,700 8,000 32,000
19,000

b. 1. Work in Process 29,500

Inventory
Manufacturing Overhead 4,000
Control
Raw Materials
33,500
Inventory

2. Work in Process 20,000

Inventory
 Manufacturing Overhead
8,000
Control
Payroll 28,000

3. Manufacturing Overhead
19,000
Control
Accounts Payable 19,000

c. 160%/DL COST  Php20,000 = Php32,000

Work in Process Inventory 32,000

Manufacturing Overhead
32,000
Control

d. Finished Goods Inventory 60,700

Work in Process Inventory 60,700

e. WIP INV 98,600

Job 206 = Php51,300 Job 207 =
Php47,300

JOB #205 JOB #206 JOB #207

Beg WIP Php50,300 Php27,500       -
Direct Mat       0   8,200 Php21,300
Direct Labor   4,000   6,000  10,000
Factory Overhead   6,400   9,600  16,000
Php60,700 Php51,300 Php47,300