G.P. COSTA
Financial Accounting
1. Looks to the past
2. Objective
3. Reports mainly for external consumption
4. Covers the whole field
Direct Labor:
Labor costs that can be physically and conveniently traced to a product such as assembly
line workers in a plant. Direct labor is also called touch labor cost.
Conversion Cost
(Direct Labor +
Overhead Cost)
Manufacturing Overhead:
All costs of manufacturing a product other than direct materials and direct labor, such as
indirect materials, indirect labor, factory utilities, and depreciation of factory equipment.
Non-manufacturing Costs
Administrative Costs:
All costs associated with the general management of the company as a whole, such as
executive compensation, executive travel costs, secretarial salaries, and depreciation of
office building and equipment.
Prime Cost
(Direct Materials
+ Direct Labor)
COST ACCOUNTING
G.P. COSTA
1-Purchases
Materials
4- Materials used
Work in Process
4- Direct materials
7- Cost of goods
used
manufactured
5- Direct labor
6- Overhead applied
Payroll
2-Factory labor incurred
Finished Goods
7- Cost of goods
8- Cost of goods sold
manufactured
Key to Entries:
Accumulation
Assignment
5-Distribution of payroll
6- Overhead is applied
7-Completed goods are recognized
8-Cost of goods sold is recognized
Problem A
Selected transactions of the GPC Company for January are as follows:
a.
b.
c.
d.
e.
f.
COST ACCOUNTING
G.P. COSTA
Problem 1. Computation of Total Manufacturing Cost, Cost of Goods Manufactured, and Cost of Goods Sold.
During the past year, the ABC Company incurred these costs: direct labor, P2,500,000; factory overhead,
P4,000,000; and direct materials purchases, P1,500,000. Inventories were costed as follows:
Beginning
Ending
P250,000
P300,000
450,000
550,000
Materials.........................................................................................
75,000
125,000
Required:
(1)
(2)
(3)
(b)
Direct materials in the amount of P21,000 were issued from the storeroom.
(c)
(d)
The total payroll for January amounted to P31,000, including marketing salaries of P7,500 and
administrative salaries of P5,500. Labor time tickets show that P15,500 of the labor cost was direct labor.
(e)
(f)
(g)
Cost of production completed in January totaled P58,000, and finished goods in the shipping room on
January 31 totaled P18,000.
(h)
Customers to whom shipments were made during the month were billed for P88,000. (Also record entry
for cost of goods sold.)
Required: Prepare journal entries for the transactions, including the recording, payment, and distribution of the
payroll.
PROBLEM 3 Cost of Goods Manufactured Statement.
GHI Company manufactures file cabinets made to consumer specifications. The following information was
available at the beginning of March:
Materials inventory ........................................................................
P12,800
4,700
2,300
During March, materials costing P26,000 were purchased, direct labor cost totaled P19,300, and factory
overhead was P12,500 (including P2,500 of indirect materials). March 31 inventories were:
P13,300
6,800
2,800
COST ACCOUNTING
G.P. COSTA
P 400,000
2,600,000
Sales..................................................................................
3,500,000
35%
Company Beta:
Freight in ................................................................................
12,000
22,000
85,000
65,000
550,000
Company Chi:
Gross profit ............................................................................
P 264,000
612,000
34,000
26,000
18,000
12,000
Sales..................................................................................
Beginning
Ending
P42,500
P39,000
15,500
17,000
Materials......................................................................................
5,000
8,500
Required:
(1) Prepare a schedule of cost of goods manufactured.
(2) Compute the prime cost charged to Work in Process.
(3) Compute the conversion cost charged to Work in Process.
COST ACCOUNTING
G.P. COSTA
accrual of factory payroll, including indirect labor of P10,000 (use a payroll clearing account)
Job J-8
Job K-9
Direct materials:
Issued.................................................
P6,500
P8,000
Returned ............................................
500
500
400
P9,000
P15,000
P9 per hour
The company adds a 50% markup on cost in determining the amount to charge for each job.
Required: Prepare a schedule showing the cost and the amount to be charged for each job.
June
Requisitioned materials from inventory, P20,000 (75% of these were direct; 25% were indirect).
Direct materials of P3,000 and indirect materials of P1,000 were for Job 00-1. The remainders were
for Job 00-2.
For Job 00-2, returned P150 of direct materials and P200 of indirect materials.
Recorded liabilities for payroll: direct labor, P15,000 and indirect labor, P5,000. Of the direct labor
cost, 60% was for Job 00-1; the remainder was for Job 00-2.
10
Incurred other factory overhead costs, P20,000 (all applicable to Jobs 00-1 and 00-2).
14
Applied overhead at the rate of 200% of direct labor cost to Jobs 00-1 and 00-2, which were
completed and transferred to finished goods account today.
Required: Assuming that Jobs 00-1 and 00-2 were the only jobs during the period and that all overhead (as
recorded above) is the total applicable overhead for these projects:
(1)
(2)
Determine the difference between applied and actual overhead for the month.
COST ACCOUNTING
G.P. COSTA
Job 781
Job 946
P 6,000
P2,700
P4,100
9,200
7,300
8,200
6,900
5,475
6,120
11,050
7,738
9,210
On April 1, Job 097 was 75% complete as to materials, labor, and overhead. It was finished during the month.
The other jobs were started and finished during the month. Jobs 097 and 946 were sold on account at the end
of the month.
Required: Prepare general journal entries to be recorded in April to accumulate these job costs for Work in
Process as well as for Finished Goods and for the sale of the two jobs.
PROBLEM 10 Journal Entries
Iwamoto Inc. produces customized vans in a job order shop. On November 1, the following balances appear in
the inventory records:
Finished goods .........................................................................................................................
P179,000
308,000
Materials..................................................................................................................................
83,000
The amount in Finished Goods represents P101,000 recorded for Van 175 and P78,000 recorded for Van 177.
The work in process account represents the three vans in process, as follows:
Van 179
Van 180
Van 181
Factory overhead......................................................................
P75,000
P50,000
P25,000
60,000
40,000
20,000
26,000
7,000
5,000
(b)
Requisitioned P60,000 of materials from inventory: P15,000 applied to Van 180, P25,000 to Van 181, and
P16,000 to Van 182, a new order; the balance was for indirect materials.
(c)
Recorded the liability for the payroll and the labor cost distribution in a single entry: total payroll,
P208,750. Of the payroll cost, 10% applied to Van 179, 20% to Van 180, 35% to Van 181, 30% to Van 182,
and the remainder to indirect labor.
(d)
(e)
(f)
(g)
Sold Vans 175, 177, and 180 at 50% over manufacturing costs.
P22,000
| Finished goods
Direct labor
37,000
Factory overhead
55,500
P68,000
COST ACCOUNTING
G.P. COSTA
Materials charged to the one job still in process amounted to P5,000. Factory overhead is applied as a
predetermined percentage of direct labor cost.
Required: Compute the following:
(1)
(2)
(2)
(3)
(4)
Bid price.
July 31
Materials......................................................................................................
P20,000
P 45,000
185,000
65,000
115,000
During July, the cost of materials purchased was P160,000 and factory overhead of P125,000 was applied at a
rate of 75% of direct labor cost. July cost of goods sold was P240,000.
Required: Prepare completed T accounts showing the flow of the cost of goods manufactured and sold.
COST ACCOUNTING
G.P. COSTA
Problem 1 SOLUTION
(1)
Direct materials:
Materials inventory, beginning ................................................
Purchases .................................................................................
1,500,000
1,450,000
2,500,000
4,000,000
7,950,000
7,950,000
450,000
P
(3)
1,575,000
125,000
(2)
75,000
8,400,000
550,000
7,850,000
7,850,000
250,000
8,100,000
300,000
7,800,000
Problem 2 SOLUTION
(a)
Materials ........................................................................................
28,000
(b)
28,000
21,000
Materials ..................................................................................
(c)
21,000
3,200
Materials ..................................................................................
(d)
Payroll.............................................................................................
3,200
31,000
31,000
31,000
Cash ..........................................................................................
31,000
15,500
2,500
7,500
5,500
Payroll ......................................................................................
31,000
COST ACCOUNTING
(e)
G.P. COSTA
12,000
(f)
12,000
17,700
(g)
17,700
58,000
(h)
58,000
Accounts Receivable.......................................................................
88,000
Sales .........................................................................................
88,000
65,000
65,000
Problem 3 SOLUTION
GHI Company
Cost of Goods Manufactured Statement
For the Month Ended March 31, 19--
Direct materials:
Materials inventory, March 1 ........................................
P 12,800
Purchases .......................................................................
26,000
P 38,800
P 2,500
13,300
15,800
P 23,000
19,300
12,500
P 54,800
4,700
P 59,500
6,800
P 52,700
Problem 4 SOLUTION
Company Alpha:
Sales ................................................................................................
P 3,500,000
400,000
2,600,000
P 3,000,000
725,000
2,275,000
P 1,225,000
COST ACCOUNTING
G.P. COSTA
Company Beta:
Cost of goods available for sale ......................................................
615,000
65,000
550,000
884,000
Company Chi:
Sales ................................................................................................
Cost of goods sold:
Cost of goods manufactured ....................................................
612,000
34,000
P
646,000
26,000
620,000
264,000
15,500
Problem 5 SOLUTION
(1)
Rexaldo Company
Schedule of Cost of Goods Manufactured
For Month Ended June 30, 19--
21,500 **
35,500
71,000
128,000
P 143,500
17,000
P 126,500 *
(2)
Prime cost:
Direct materials [from (1)] .....................................................
(3)
21,500
35,500
57,000
35,500
Conversion cost:
Direct labor [from (1)] ...........................................................
Factory overhead [from (1)] ..................................................
71,000
P 106,500 ***
COST ACCOUNTING
G.P. COSTA
Cost of goods sold (P130,000) + ending finished goods inventory (P39,000) - beginning finished goods inventory
(P42,500) = P126,500.
**
Purchases of materials during June (P25,000) + beginning materials inventory (P5,000) - ending materials inventory
(P8,500) = P21,500.
*** Production costs for June (P128,000) - direct materials (P21,500) = direct labor and factory overhead (P106,500).
Problem 6 SOLUTION
(1)
Narita Inc.
Cost of Goods Sold Statement
For Month Ended May 31, 19-(in thousands)
30
38
12
80
25
P 105
Less work in process inventory, May 31 ...............................................
15
90
35
P 125
25
P 100
Note (a):
90
15
P 105
Less work in process, beginning .........................................
Equals total manufacturing cost .........................................
25
P
80
P 125
90
Note (c):
P 125
100
35
25
(2)
(a)
Materials ......................................................................................
Accounts Payable...................................................................
40,000
40,000
COST ACCOUNTING
(b)
G.P. COSTA
30,000
1,000
Materials ................................................................................
(c)
31,000
48,000
(d)
48,000
38,000
10,000
Payroll ....................................................................................
(e)
48,000
90,000
(f)
90,000
200,000
200,000
100,000
100,000
Problem 7 SOLUTION
Job J-8
Direct materials ......................................................................................
Job K-9
6,000
8,000
9,000
15,000
10,000
22,500
Total ..................................................................................................
P 25,000
P 45,500
12,500
22,750
P 37,500
P 68,250
Problem 8 SOLUTION
(1)
Job 00-1
Materials .......................................................................................................................
3,000
Job 00-2
P
11,850
Labor .............................................................................................................................
9,000
6,000
18,000
12,000
(2)
30,000
4,800
29,850
29,800
Incurred:
Indirect materials ...................................................................................................
Indirect labor ..........................................................................................................
5,000
20,000
COST ACCOUNTING
G.P. COSTA
Applied:
Job 00-1 ..................................................................................................................
Job 00-2 ..................................................................................................................
18,000
12,000
30,000
P
(200 )
Problem 9 SOLUTION
Debit
Work in Process .......................................................................................................
8,300 *
Materials............................................................................................................
8,300
17,800 **
17,800
13,320 ***
13,320
55,995
55,995
40,520
40,520
60,780
Sales ...................................................................................................................
Credit
60,780
Problem 10 SOLUTION
Debit
(a)
Materials.........................................................................................................
80,000
(b)
80,000
4,000
56,000
Materials .................................................................................................
(c)
60,000
10,437
198,313
(d)
Credit
208,750
208,750
208,750
COST ACCOUNTING
(e)
G.P. COSTA
297,470
(f)
297,470
429,563
(g)
429,563
593,063
Sales ........................................................................................................
593,063
395,375
Finished Goods........................................................................................
395,375
Problem 11 SOLUTION
(1)
P68,000
17,000
P51,000
(2)
x = P20,400
1.5x = 1.5(P20,400)
1.5x = P30,600 factory overhead in finished goods
Problem 12 SOLUTION
(1)
Materials ...............................................................................................................................
8,500
12,000
Factory overhead:
(2)
4,000
3,750
28,250
Materials ...............................................................................................................................
8,500
12,000
P
20,500
COST ACCOUNTING
(3)
G.P. COSTA
(4)
12,000
7,750
19,750
28,250
28,250
P
56,500
Problem 13 SOLUTION
Materials
Inv.
20,000
Purch.
Work in Process
| WIP
135,000
Inv.
160,000
Materials
180,000
Factory
45,000
overhd.
Labor
|
|
65,000 | CGS
WIP
|
|
125,000
166,667
475,000
|
|
FG
240,000
290,000* |
355,000
115,000
135,000
185,000
Finished Goods
Inv.
48,333 ** | FG
290,000