JOB ORDER COSTING

SUPPLEMENTARY HANDOUTS
PROBLEM 1. ADC Industries, Inc. which uses a job-order costing system, had two jobs in
process at the start of 2016: job no. 14 (P84,000) and job no. 15 (P53,500). The following
information is also available:
The job-order cost sheet as of the end of 2019 revealed the following information:
Job No.
Direct Material
Direct Labor
Overhead
Hours
Applied
14
P 48,000
360
P 18,000
15
23,500
220
19,000
The company applies manufacturing overhead on the basis of machine hours.
Budgeted overhead and machine activity for the year were anticipated to be
P856,000 and 16,000 hours, respectively. Direct labor rate in 2016 is the same as last
year.
The company worked on four jobs during the first quarter. Direct materials used,
direct labor incurred, and machine hours consumed were as follows:
Job No.
Direct Material
Direct Labor
Machine Hours
Hours
14
P 21,000
700
1,200
15
--440
700
16
44,000
1,300
2,000
17
15,000
176
500
Manufacturing overhead during the first quarter included charges for depreciation
(P34,000), indirect labor (P60,000), indirect materials used (P5,000), and other
factory costs (P139,500).
ADC Industries completed job no. 14 and job no. 15. Furthermore, job no. 15 was sold
on account, producing a profit of P34,700 for the firm.
Required: Supply the answer.
a. How much is the cost of goods in process at the end of first quarter of
2016?
b. How much did the finished goods inventory increase/decrease during the
first quarter?
(Adapted)

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PROBLEM 2. You are asked to bring the following incomplete accounts of ALBERT Inc. up to
date through January 31, 2016. Consider the data that appear in the T-accounts as well as
additional information given in items (a) through (i). Manufacturing overhead is allocated
using direct labor costs.
Materials Inventory Control
Wages Payable Control
12/31/2015
1/31/2016
Balance 15,000
Balance 3,000
Work in Process Inventory Control

57,000
Finished Goods Inventory Control
________________________
12/31/2015
Balance 20,000

Manufacturing Department
Overhead Control
1/31/2016
Balance

Cost of Goods Sold

Additional Information:
a.
Manufacturing department overhead is allocated using a budgeted rate set
every December. Management forecasts next years overhead and next
years labor costs. The budget for 2016 is P400,000 of direct manufacturing
labor and P600,000 of manufacturing overhead.
b.
The only job unfinished on January 31, 2016 is No. 419, on which direct
manufacturing labor costs are P2,000 (125 direct manufacturing labor hours)
and direct material costs are P8,000.
c.
Total material placed into production during January is P90,000.
d.
Cost of goods completed during January is P180,000.
e.
Material inventory as of January 31, 2016 is P20,000.
f.
Finished goods inventory as of January 31, 2016 is P15,000.
g.
All plant workers earn the same wage rate. Direct manufacturing labor hours
for January totals 2,500. Other labor and supervision totals P10,000.
h.
The gross plant payroll on January paydays totals P52,000. All personnel are
paid on a weekly basis.
i.
All actual manufacturing overhead incurred during January has already been
posted.
Required: Compute for the following as of January 31, 2016:
a. Ending balances of the inventory accounts.
b. Material purchases
c. Cost of goods sold
d. Wages payable balance on January 1, 2016
e. Actual overhead costs
(Adapted)

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PROBLEM 3. Al Cruise, the controller of CRUISER Corporation, is in the process of analyzing

the overhead costs for the month of November. He has gathered the following data for the
month:
Labor
Direct labor hours:
Job 107
3,500
Job 108
3,000
Job 109
2,000
Labor costs:
Direct labor wages
P 204,000
Indirect labor wages
15,000
Supervisory salaries
6,000
Material
Inventories, November 1:
Raw materials and supplies
Work in process (Job 107)
Finished goods
Purchases of raw material and supplies:
Raw materials
Supplies (indirect material)
Direct
material
requisitioned
for
production:
Job 107
Job 108
Job 109
Supplies (indirect material)
Total
Other
Building occupancy costs (heat, light,
etc.
Factory facilities
Sales offices
Administrative offices
Total

P 10,500
54,000
112,500
P 135,000
15,000
P 45,000
37,500
25,500
12,000
P 120,000

P 6,400
1,600
1,000
P 9,000

Production equipment costs

Power
P 4,100
Repairs and maintenance
1,500
Depreciation
1,500
Other
1,000
Total
P 8,100
Additional Information:
The Company uses direct labor hours as the basis of allocating the overhead. The
budgeted overhead costs are P390,000 (variable) and P216,000 (fixed). Theoretical
and practical capacity are 140,000 and 120,000 direct labor hours, respectively.
During November, Job no. 107 and 108 were completed.
Required: Compute for the following:
a. Cost of Job 107
b. Assuming Job 108 was sold at a 25% profit margin on cost, compute for the
sales revenue
c. Over/under applied overhead during the period
(CMA, adapted)

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PROBLEM 4. AL Manufacturing, Inc. which uses a job-order costing system, had two jobs in
process at the start of 2016: job no. 14 (P84,000) and job no. 15 (P53,500). The following
information is also available:
The company applies manufacturing overhead on the basis of machine hours.
Budgeted overhead and machine activity for the year were anticipated to be
P856,000 and 16,000 hours, respectively. Normally, the company expects to incur
spoilage and rework costs due to complication and complexity of the processes of
production. Spoiled goods of up to 5% of the total units produced per job are
considered normal and defective goods of up to 3% of the total units per job are
likewise regarded as normal.
The company worked on four jobs during the first quarter. Direct materials used,
direct labor incurred, and machine hours consumed were as follows:
Job No.
Prime Costs
Machine Hours
No. of units
14
P 81,000
1,800
2,000
15
23,000
900
500
16
56,200
800
4,500
17
73,000
500
1,200
Manufacturing overhead during the first quarter included charges for depreciation
(P34,000), indirect labor (P60,000), indirect materials used (P5,000), and other
factory costs (P139,500).
Only Job no. 17 was not yet completed as of the end of the first quarter.
Out of the total units produced, 80 units from Job no. 14 and 360 units from Job no.
16 are spoiled based on the quality inspection done by the engineers. Spoiled goods
from Job no. 14 can be resold at P50 each while no further benefit can be obtained
from the spoiled goods from Job no. 16.
On the other hand, 10 units from Job no. 15 were found to be defective upon
inspection. Costs to rework these units require P30.25 direct materials per unit, a
total of P12,000 direct labor cost and a total of 5 machine hours.
Job no. 15 was sold to a customer at a markup of 20% on costs.
Required: Compute for the following:
a. Total costs to be charged to Job nos. 14, 15 and 16
b. Cost per good unit of Job nos. 14, 15 and 16
c. Work in process at the end
d. Effect on Net income

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PROBLEM 5. AL Manufacturing, Inc. which uses a job-order costing system, had two jobs in
process at the start of 2016: job no. 14 (P84,000) and job no. 15 (P53,500). The following
information is also available:
The Company applies manufacturing overhead on the basis of machine hours.
Budgeted overhead and machine activity for the year were anticipated to be
P856,000 and 16,000 hours, respectively.
The Company worked on four jobs during the first quarter. Direct materials used,
direct labor incurred, and machine hours consumed were as follows:
Job No.
Prime Costs
Machine Hours
No. of units
14
P 81,000
1,800
2,000
15
23,000
900
500
16
56,200
800
4,500
17
73,000
500
1,200
Manufacturing overhead during the first quarter included charges for depreciation
(P34,000), indirect labor (P60,000), indirect materials used (P5,000), and other
factory costs (P139,500).
Only Job no. 17 was not yet completed as of the end of the first quarter.
Out of the total units produced, 80 units from Job no. 14 and 360 units from Job no.
16 are spoiled based on the quality inspection done by the engineers. Spoiled goods
from Job no. 14 can be resold at P50 each while no further benefit can be obtained
from the spoiled goods from Job no. 16.
On the other hand, 10 units from Job no. 15 were found to be defective upon
inspection. Costs to rework these units require P30.25 direct materials per unit, a
total of P12,000 direct labor cost and a total of 5 machine hours.
Job no. 16 was sold to a customer at a markup of 25% on sales.
Required: Compute for the following assuming all spoilage and defects are due to
customer specifications:
a. Total costs to be charged to Job nos. 14, 15 and 16
b. Cost per good unit of Job nos. 14, 15 and 16
c. Work in process at the end
d. Effect on Net income

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