HOMEWORK 002 (HW002)

COST ACCOUNTING AND CONTROL

Compute in good form and answer each required question
Double rule and encircle final figure answer.

QUESTION:
Problem 1
The Mayhem Company uses a job-order costing system. The following data relate to October,
the first month of the company’s fiscal year.
a. Raw materials purchased on account ₱210,000.
b. Raw materials issued to production, ₱190,000 (₱178,000 direct materials and ₱12,000
indirect materials).
c. Direct labor cost incurred, ₱90,000; and indirect labor cost incurred, ₱110,000.
d. Depreciation recorded on factory equipment, ₱40,000.
e. Other manufacturing overhead costs incurred during October, ₱70,000 (credit Accounts
Payable).
f. The company applies manufacturing overhead cost to production based on ₱8 per machine-
hour. There were 30,000 machine-hours recorded for October.
g. Production orders costing ₱520,000 according to their job cost sheets were completed
during October and transferred to Finished Goods.
h. Production orders that had cost ₱480,000 to complete according to their job cost sheets
were shipped to customers during the month. Theses goods were sold at 25% above cost.
The goods were sold on account.
Required:
1. Prepare journal entries to record the information given above.
2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant
information above to each account. Compute the ending balance in each account, assuming
that Work in Process has a beginning balance of ₱42,000.
Problem 2
Java Company manufactures a product that is subject to wide seasonal variations in demand.
Unit costs are computed on a quarterly basis by dividing each quarter’s manufacturing costs
(materials, labor and overhead) by the quarter’s production in units. The company’s estimated
costs, by quarter, for the coming year are given below:

Quarter
First Second Third Fourth
Direct Materials ₱ 240,000.00 ₱ 120,000.00 ₱ 60,000.00 ₱ 180,000.00
Direct Labor 96,000.00 48,000.00 24,000.00 72,000.00
Manufacturing Overhead 228,000.00 204,000.00 192,000.00 216,000.00
Total manufacturing costs ₱ 564,000.00 ₱ 372,000.00 ₱ 276,000.00 ₱ 468,000.00

Number of units to be produced 80,000 40,000 20,000 60,000

estimated cost per unit ₱ 7.05 ₱ 9.30 ₱ 13.80 ₱ 7.80

Management finds the variation in unit costs to be confusing and difficult to work with. It has
been suggested that the problem lies with manufacturing overhead, since it is the largest
element of cost. Accordingly, you have been asked to find a more suitable way of assigning
manufacturing overhead cost to units of product. After some analysis, you have determined
changes in the level of production.
Required:
1. The company uses a job-order costing system. How would you recommend that
manufacturing overhead cost be assigned to production? Be specific and show
computations.
2. Recompute the company’s unit costs in accordance with your recommendations in (1)
above.
Problem 3
Aries Corporation manufactures eighteenth-century, classical-style furniture. It uses a job
costing system that applies factory overhead on the basis of direct labor-hours. Budgeted
factory overhead for the year 2014 was ₱1,235,475, and management budgeted 86,700 direct
labor-hours. These transactions were recorded during August:
a. Purchased 5,000 square feet of oak on account at ₱25 per square foot.
b. Purchased 50 gallons of glue on account at ₱36 per gallon (indirect material)
c. Requisitioned 3,500 square feet of oak and 30.5 gallons of glue for production.
d. Incurred and paid payroll costs of ₱187,900. Of this amount, ₱46,000 were indirect labor
costs; direct labor personnel earned ₱22 per hour on average.
e. Paid factory utility bill, ₱15,230 in cash.
f. August’s insurance cost for the manufacturing property and equipment was ₱3,500. The
premium had been paid in March.
g. Incurred ₱8,200 depreciation on manufacturing equipment for August.
h. Recorded ₱2,400 depreciation on an administrative asset.
i. Paid advertising expenses in cash, ₱5,500.
j. Incurred and paid other factory overhead costs, ₱13,500.
k. Incurred miscellaneous selling and administrative expenses, ₱13,250.
l. Applied factory overhead to production on the basis of direct labor-hours.
m. Competed goods costing goods costing ₱146,000 manufactured during the month.
n. Made sales on account in August, ₱132,000. The cost of goods sold was ₱112,000.
Required:
1. Compute the firm’s predetermined factory overhead rate for the year.
2. Prepare journal entries to record the August events.
3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of
Goods Sold account on August 31, 2019.
4. Prepare a schedule of cost of goods manufactured and sold.
5. Prepare the income statement for August.
Problem 4
Golpo Fisheries Inc. processes tuna for various distributors. Two departments are involved –
department 1 and department 2. Data relating to pounds of tuna processed in department 1
during may are given below:

Pounds of Percent
Tuna Completed
Work in process, May 1 30,000.00 55
Started into processing during May 480,000.00 --
Work in Process, May 31 20,000.00 90

Labor and overhead only.

All materials are added at the beginning of processing in department 1. Labor and overhead
costs are incurred uniformly throughout processing.

Required:
Prepare a quantity schedule and a computation of equivalent units for May, assuming that the
company uses the weighted-average method of accounting for units.
Problem 5
Great Mix Company makes a unique syrup using cane sugar and local herbs. The syrup is sold
in small bottles and is prized as a flavoring for the drinks and for use in desserts. The bottles are
sold for ₱12 each. The first stage in the production process is carried out in the Mixing
Department, which removes foreign matter from the raw materials and mixes them in the proper
proportions in large vats. The company uses the weighted-average method in its process
costing system.
A hastily prepared report for the Mixing Department for April appears below:

Quantity Schedule
Units to be Accounted for:
Work in Process, April 1 (90% materials,
80% conversion cost added last month) 30,000.00
Started into production 200,000.00
Total units 230,000.00

Units Accounted for as follows:

Transferred to the next department 190,000.00
Work in process, April 30 (75% materials,
60% conversion cost added this month) 40,000.00
Total units 230,000.00

Total Cost
Cost to be accounted for:
Work in process, April 1 ₱ 98,000.00
Cost added during the month 827,000.00
Total cost ₱ 925,000.00

Cost Reconciliation
Cost accounted for as follows:
Transferred to the next department ₱ 805,600.00
Work in process, April 30 119,400.00
Total Cost ₱ 925,000.00
Great Mix Company has just been acquired by another company, and the management of the
acquiring company wants some additional information about Great Mix’s operations.
Required:
1. What were the equivalent units for the month?
2. What were the costs per equivalent unit for the month? The beginning inventory
consisted of the following costs: materials, ₱67,800; and conversion cost, ₱30,200. The
costs added during the month consisted of: materials, ₱579,000; and conversion cost,
₱248,000.
3. How many of the units transferred to the next department were started and completed
during the month?
4. The manager of Mixing Department, anxious to make a good impression on the new
owners, stated, “Materials prices jumped from about ₱2.50 per unit in March to ₱3.00
per unit in April, but due to good cost control, I was able to hold our materials cost to less
than ₱3.00 per unit for the month.” Should this manager be rewarded for good cost
control? Explain.

DEFINE THE FOLLOWING:

1. Product Costing
2. Job-order Costing System
3. Actual Costing System
4. Normal Costing System
5. Standard Costing System
6. Weighted-average method
7. FIFO method

Period of Submission: on or before JULY 03, 2021, 2359H

FILE NAME: Surname, First Name, MI—ATAE22-07032021-HW002
FORMAT: Handwritten at any size white bond or yellow pad
Save as PDF

**Note: Provide signature over your name on each page of your work at the
lower right side of your paper