MODULE 2

EXERCISES
SUGGESTED SOLUTIONS
PROBLEM 1
1. Materials
Accounts payable

15,000.00
P

2. Work in process
FOC
Materials

15,000.00

11,480.00
40.00
11,520.00

3. Payroll

5,445.00
Accrued payroll

5,445.00

Work in process
FOC
Payroll

4,645.00
800.00
5,445.00

4. FOC

2,675.00
Rent Expense Payable
Accum. Depreciation Machines
Accum. Depreciation Factory Building
Utilities Expense Payable
Payroll Taxes Payable

1,500.00
160.00
490.00
225.00
300.00
2,675.00

5. Work in process
FO Applied

5,261.25

6. Finished goods
Work in process

21,386.25

Direct Materials
Direct Labor
Factory overhead
Total

5,261.25

21,386.25
Job 101
10,500.00
3,175.00
3,618.75
17,293.75

Job 102
980.00
1,470.00
1,642.50
4,092.50

Total
11,480.00
4,645.00
5,261.25
21,386.25

7. Cash

25000.00
Sales

25000.00

Cost of Goods Sold

Finished goods

17293.75
17293.75

Accounts receivable
Sales

4000.00

Cost of goods sold

Finished goods

4092.50

4000.00

4092.50

(NOTE: Answers for Requirement number 2 are not given)

Problem 2
1. Allocation based on cost
Product

Invoice

Percentage

Share of Freight

Total cost

11,250

49%

450

11,700

2.60

13,500

49%

540

14,040

2.34

15,750

49%

630

16,380

2.184

2.

Cost per pound

Allocation based on shipping weight

Product

Weight

Percentage

Share of Freight

Total cost

4,500

9%

405

11,655

2.59

6000

9%

540

14,040

2.34

7000

9%

675

16,425

2.19

PROBLEM 3
1.

FIFO
Issued = 600 x 4.00 = 2,400
Cost of inventory - 200 x 5.00
500 x 4.50
400 x 4.00

=- 1,000
= 2,250
= 1,000

Cost per pound

2.

WEIGHTED AVERAGE
Received

Issued

Balance

1
3

250 x 4.00

5 500 x 4.50

1,000

2250

1,000 x 4.00

4,000

750 x 4.00

3,000

1,250 x 4.20

5,250

150 x 4.20

630

1,100 x 4.20

4,620

10

110 x 4.20

462

990 x 4.20

4,158

11

( 10 ) x 4.20

( 42)

1,000 x 4.20

4,200

2500

1,500 x 4.47

6,700

( 1,500 )

1,200 x 4.33

5,200

1,100 x 4.33

4,767

15 500 x 5.00
20 ( 300 ) x 5.00
26

100 x 4.33

433

PROBLEM 4
a. Loss due to spoiled work is spread over all jobs
1 Work in Process

1,320,000

Materials

360,000

Payroll

480,000

FO Applied

480,000

2 Spoiled Goods

8,000

FO Control

8,500

Work in Process ( 100 x 165)

16,500

3 Finished goods

1,303,500

Work in Process

1,303,500

Unit cost = 1303500/7900 = 165

b. Loss due to spoiled work is charged to the specific job
1 Work in Process
Materials
Payroll
FO Applied
2 Spoiled Goods
FO Control
Work in Process ( 100 x 165)
3 Finished goods
Work in Process

1,320,000
P

360,000
480,000
480,000

8,000
8,500
16,500
1,312,000
1,312,000

PROBLEM 5
FO rate =

207000
500000

207000
52100 units

41,40%of DMC

P3,97/unit

207000
69,000 MHrs.
P3.00/MHr

207000
85000 DLHrs.
P2.44/DLHr.

207000
765000
27.06%ofDLC

PROBLEM 6
1. FO rate

P 60,000
P 60,000

P 60,000
40,000 DLHrs.

100%of DLC

P 1.50/DLHr.

P60,000
25,000 MHrs.
P2.40/MHr.

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 7
1. Direct method
Direct cost
Allocated cost
S1
S2
Total
Base
FO rate

P2___
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

S1____
P 20,000

P1___
P 90,000

S2___
P 32,000

( 32.000)

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

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.

20,000)
(

S2___
32,000
16,000
48,000)

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

P1___
P 90,000
3.143
28,572
P121,715
50,000 MHrs.
P 2.43/MHr.

P2___
P 60,000

S1___
P 20,000

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

( 31,429)
11,429

S1 = 20,000 + 20% S2
S2 = 32,000 + 80% S1

S1

= 20000 + 20% ( 32,000 + 80% S1 )

= 20,000 + 6,400 + .16 S1

S1 - .16S1

= 26,400

S1

= 26,400 / .84
31,429

S2

= 32,000 + 80% 31,429

= 32,000 + 25,143
= 57,143

S2____
P 32,000

25,143
57,143)

PROBLEM 8

Employee
Austria
Bautista
DeSantos
Motus
Reyes
TOTAL

No.
Hrs
42
43
44
40
40

Rate
36.00
36.00
45.00
30.00
30.00

Regular
Pay
1,512
1,548
1,980
1,200
1,200
7,440

OT
Hours
2
3
4
-

Rate
18.00
18.00
22.50
-

Overtime
Premium
36.00
54.00
90.00
-__
180.00

Total
Pay
1,548
1,602
2,070
-___
7,620

b)
1.

2.

3.

Payroll
Accrued payroll

7,620

Accrued payroll
Cash

7,620

Work in Process ( 1,512 + 1,548 + 1,980 )

FOC ( 1,200 + 1,200 + 180 )
Payroll

5,040
2,580

7,620

7,620

7,620

PROBLEM 9
Employee

Guranteed

Total pay - piece rate

Deficiency

Wage

Total
Payroll

Cruz

2,000

( 240 x 7.50 )

1,800

Briones

2,000

( 286 x 7.50 )

2,145

200.00
-

2,000.00
2,145.00

David

2,000

( 275 x 7.50 )

2,062.50

2,062.50

Mendoza

2,000

( 240 x 7.50 )

1,800

200.00

2,000.00

Rivera

2,000

( 225 x 7.50 )

1,687.50

312.50

2,000.00

Tolentino

2,000

( 285 x 7.50 )

2,137.50

TOTAL

12,000

11,632.50

712.50

2.

Charged to Work in process

11,632.50

3.

Charrged to factory overhead account

712.50

2,137.50
12,345.00

PROBLEM 10
Deductions were computed on the assumption that previous payment of wages were
made without deductions and all deductions are made on the last payment for the
month.
Assume the following amount as previous wages (for the past 3 weeks)
Castro

5,600

Ardina

7,500

Briones

6,500

David

6,200

Fajardo

5,900

Tomas

5,800

Villas

5,200

Employee
Castro
Ardina
Briones
David
Fajardo
Tomas
Villas
TOTAL

REGU
HRS.
42
45
48
48
45
42
40

LAR
RATE
40.00
50.00
40.00
40.00
40.00
40.00
40.00

PAY
1,680.00
2,250.00
1,920.00
1,920.00
1,800.00
1,680.00
1,600.00
12,850.00

OVER
HRS.
2
5
8
8
5
2
-

TIME
RATE
20.00
25.00
20.00
20.00
20.00
20.00
-

(NOTE : Answers for requirement number 2 are not given)

- done -

PAY
40.00
125.00
160.00
160.00
100.00
40.00
-__
625.00

TOTAL
PAY
1,720.00
2,375.00
2,080.00
2,080.00
1,900.00
1,720.00
1,600.00
13,475.00