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Week 1 Activity Cost Classification and Behavior

The document provides 7 practice problems related to cost accounting concepts. Problem 1 asks to compute manufacturing cost from various cost data. Problem 2 asks to calculate cost of goods sold from beginning and ending inventory balances and purchase/freight amounts. Problem 3 provides additional manufacturing costs and asks to compute prime cost, conversion cost, and cost of goods manufactured.

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189 views4 pages

Week 1 Activity Cost Classification and Behavior

The document provides 7 practice problems related to cost accounting concepts. Problem 1 asks to compute manufacturing cost from various cost data. Problem 2 asks to calculate cost of goods sold from beginning and ending inventory balances and purchase/freight amounts. Problem 3 provides additional manufacturing costs and asks to compute prime cost, conversion cost, and cost of goods manufactured.

Uploaded by

Josh Yuu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Ateneo de Zamboanga University

School of Management and Accountancy


Cost Management, Part I

Week 1

Instructors: R.J.M. Chua, CPA/K.J. Culajara, CPA, JD

Problem 1

The following cost data were taken from the records of a manufacturing company (all
amounts are in Philippine Peso)

Depreciation on factory equipment 1,000


Depreciation on sales office 500
Advertising 7,000
Freight-in (shipping) 3,000
Wages of production of workers 28,000
Raw materials used 47,000
Sales salaries and commissions 10,000
Factory rent 2,000
Factory insurance 500
Materials handling 1,500
Administrative salaries 2,000

Required: Compute the manufacturing cost incurred during the year.

Problem 2

Glenn Company has the following data pertaining to the year ended December 31 (all
amounts are in Philippine Peso):

Purchases 450,000
Beginning inventory 170,000
Ending inventory 210,000
Freight in 50,000
Freight out 75,000

Required: Compute the cost of goods sold for the year.

Problem 3
Lam Co.’s manufacturing operations reveals the following information:

Inventory accounts April 1 April 30


Direct materials 18,000 15,000
Work in process 9,000 6,000
Finished goods 27,000 36,000

Additional information for the month of April:


 Direct materials purchased – P42,000
 Direct labor payroll – P30,000
 Direct labor rate per hour – P7.50
 Factory overhead rate per direct labor hour – P10

Required: Compute for the following:


1. Prime cost for April – P65,000
2. Conversion cost
3. Cost of goods manufactured

Problem 4

Latourneau Company had the following account balances as of August 1, 2019 (all are in
Philippine Peso):

Raw material (direct and indirect) 20,300


inventory
Work in process inventory 7,000
Finished goods inventory 18,000

During August, the company incurred the following factory costs:


1. Purchased P164,000 of raw material on account.
2. Issued P180,000 of raw material to production. Of this amount, P134,000 was for
direct material and the remainder was for production supplies.
3. Accrued P88,000 in factory payroll costs; P62,000 was for direct labor and the rest
was for supervisors’ salaries.
4. Accrued P7,000 of utility costs; of this amount, P1,600 was a fixed cost and the
remainder was variable.
5. Accrued P2,000 of property taxes on the factory.
6. Recorded the expiration of P1,600 of prepaid insurance on factory equipment.
7. Recorded P40,000 of straight-line depreciation on factory equipment.
8. Applied actual overhead to Work in Process Inventory.
9. Transferred goods costing P320,000 to Finished Goods Inventory.
10. Recorded total sales of P700,000; of these, P550,000 were on account.
11. Recorded cost of goods sold of P330,000.
12. Recorded selling and administrative costs of P280,000 (credit “Various
accounts”).

Required:
a. Journalize the transactions for August.
b. Post transactions to T-accounts for Raw Material Inventory, Work in Process
Inventory, Finished Goods Inventory, and Cost of Goods Sold.
c. Prepare a schedule of cost of goods manufactured for August using actual costing.
d. Prepare an income statement, including a detailed schedule of cost of goods sold.

Problem 5

Kalogrides & McMillan CPAs incurred the following costs in performing audits during
September 2019. The firm uses a Work in Process Inventory account for audit
engagement costs and records overhead in fixed and variable overhead accounts.

Prepare journal entries for each of the following transactions:


 Used P5,000 of previously purchased supplies on audit engagements.
 Paid P8,000 of partner travel expenses to an accounting conference.
 Recorded P6,500 of depreciation on laptops used in audits.
 Recorded P1,800,000 of annual depreciation on the Kalogrides & McMillan
Building, located in downtown Zamboanga; 65% of the space is used to house
audit personnel.
 Accrued audit partner salaries, P200,000.
 Accrued remaining audit staff salaries, P257,900.
 Paid credit card charges for travel costs for client engagements, P19,400.
 One month’s prepaid insurance and property taxes expired on the downtown
building, P17,300.
 Accrued P3,400 of office assistant wages; the office assistant works only for the
audit partners and staff.
 Paid all accrued salaries and wages for the month.

Also, determine the cost of audit services rendered for September 2019.

Problem 6

Wasik Company had the following inventory balances at the beginning and end of
August 2019 (all are in Philippine Peso):
August 1 August 31
Raw materials inventory 58,000 84,000
Work in process inventory 372,000 436,000
Finished goods inventory 224,000 196,000

All raw material is direct to the production process. The following information is also
available about August manufacturing costs:
 Cost of raw material used – P612,000
 Direct labor cost – P748,000
 Manufacturing overhed – P564,000

Required:
a. Calculate the cost of goods manufactured for August
b. Determine the cost of goods sold for August

Problem 7

For each of the following cases, compute the missing amounts (all are in Philippine
Peso):
Case 1 Case 2 Case 3
Sales 9,300 ? 112,000
Direct material used 1,200 ? 18,200
Direct labor ? 4,900 ?
Prime cost 3,700 ? ?
Conversion cost 4,800 8,200 49,300
Manufacturing ? ? 17,200
overhead
Cost of goods 6,200 14,000 ?
manufactured
Beginning work in 500 900 5,600
process inventory
Ending work in ? 1,200 4,200
process inventory
Beginning finished ? 1,900 7,600
goods inventory
Ending finished 1,200 ? ?
goods inventory
Cost of goods sold ? 12,200 72,200
Gross profit 3,500 ? ?
Operating expenses ? 3,500 18,000
Net income 2,200 4,000 ?

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