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SOLUTIONS MANUAL

COST ACCOUNTING & CONTROL 2024 ed.

Chapter 1
Exercise 1-1 p. 25
1. C 6. C 11. N 16. N
2. C 7. C 12. C 17. C
3. N 8. C 13. C 18. N
4. C 9. C 14. N 19. C
5. C 10. C 15. C 20. C

Exercise 1-2 p. 26 (Crossword Puzzle)

Exercise 1-3 p. 26

1. DM + DL + OH = TMC P 96,000
- Increase in WIP = (11,500)
Cost of Goods Mfed. P 84,500
========

2. Material Purchases P 15,000 3. CGS ………….. P 156,000

+ Decrease in Materials inventory 4,000 - Decrease in FG (13,000)
DM Used ………………………….. P 19,000 CGM P 143,000
+ DL ………………………….. 40,000 + Increase in WIP 9,000
+ OH ………………………….. 50,000 TMC P 152,000
TMC …………………………… P 109,000 =========
+ WIP beginning ………………….. 28,000
Cost of Goods Placed Into ProcessP137,000
- Cost of Goods Manufactured 99,000
WIP end …………………………….P 38,000
=======
4. Factory burden P 75,255 / 50% = DL P 150,510
+ OH 75,255
CC P 225,765 / 50% = TMC P451,530
+ 1,475
CGM…………………… P 453,005
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Exercise 1-4 p. 27

1. Direct Materials 6. Direct Labor 11-15 Selling & Admin Expenses

2. Direct Materials 7. Overhead
3. Direct Materials 8. Selling & Admin Expenses
4. Direct Materials 9. Overhead
5. Overhead 10. Overhead

Exercise 1-5 p. 28 ( Calculation of UC, TC and BEP)

Cups of Coffee Served and Sold
30,000 40,000 50,000

Total Variable Costs P 180,000 P240,000 P300,000

Total Fixed Costs 300,000 300,000 300,000
Total Costs P 480,000 P540,000 P 600,000

Cost per cup of coffee:

Variable Cost P 6 P6 P6
Fixed Cost P 10 P 7.50 P6
P 16 P13.50 P12

Sales 45,000 u @ P16 = P 720,000

Less CGS:
Fixed CGS P 300,000
Variable CGS (P6 x 45,000 U) 270,000 570,000
Gross Profit P150,000
========

BEP = Total Fixed Costs / UCM = P300,000/USP 16 – UVC P6

= P300,000 / UCM P10 per cup

= 30,000 cups needed to breakeven

OR

Actual Sales Volume 45,000 cups – BEP 30,000 cups = 15,000 cups above BEP
x UCM P10
P 150,000 profit
Exercise 1-6 p. 29 (Inventory Balances; Journal Entries)

1. WIP, 4/30:
Job #70 …….P 5,200
Job #71 ……. 4,100
P 9,300
=======
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2. WIP, 5/31:
Job #71: Costs last month P 4,100
Costs this month 3,900 P 8,000
Job #73:
Costs this month 4,700
Job #74:
Costs this month 3,900
P16,600
=======
3. WIP, 6/30:
Job #74: Costs last month P 3,900
Costs this month 3,600
P 7,500
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4. FGI, 4/30:
Job #72: P 1,200
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5. FGI, 5/31:
Job #70: Costs last month P 5,200
Costs this month 4,400
P 9,600
=======
6. FGI, 6/30:
Job #71:
Costs incurred in April P 4,100
Costs incurred in May 3,900
Costs incurred in June 3,000 P 11,000
Job #73:
Costs last month P 4,700
Costs this month 4,500 9,200
P 20,200
========
7. Sales 1.5 x P 9,600 = P 14,400
- CGS: Job #70 (9,600)
GP P 4,800
========

8. Sales 1.5 x 20,200 …………………..P 30,300

- CGS:
Job #71 P 11,000
Job #73 9,200 20,200
GP ……………………………………..P 10,100
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9 & 10:
Finished Goods …………………P 11,000
WIP – Job #71 P 11,000

Finished Goods …………………P 9,200

WIP – Job #73 P 9,200

OR

Finished Goods …………………P 20,200

WIP P 20,200

Exercise 1-7 p. 30 (inventory costs; manufacturing costs)

1. Material Purchases in October 25,000 pcs. X P 1.20 = P 30,000

- Direct Materials Used in October 25,800
Materials Inventory, 10/31 P 4,200
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2. WIP, 10/31:
JO # 105:
Direct Materials Used P 8,000
Direct labor 3,600
Applied OH 1,800 DLH x P2.50 = 4,500
P 16,100
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3. FGI, 10/31:
JO # 104:
Direct Materials Used P 3,200
Direct labor 4,800
Applied OH 2,400 DLH x P2.50 = 6,000
P 14,000
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4. CGS in October:
DM DL Applied OH TC
JO #101 P 4,000 P 6,000 P 7,500 (3,000 x 2.50) = P 17,500
JO #102 3,600 5,400 6,750 (2,700 x 2.50) = 15,750
JO #103 7,000 9,000 11,250 (4,500 x 2.50) = 27,250
P14,600 P20,400 P25,500 P 60,500
======= ======= ====== ========

5. Actual OH in October 18,500 + 15,000 = P 33,500

Applied OH in October (14, 400DLH x 2.5) 36,000
Over-applied OH or Net Favorable OH Variance P (2, 500)
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Exercise 1-8 pp. 31-32 (Multiple Choice involving computations & application of
high- low point method)
1. C 130,000 – 20,000 IL = DL P110,000
2. A 110,000 x 150% = 165,000 Applied OH
3. B DM Used 98,000
DL 110,000
Applied OH 165,000
WIP beg. 91,000
- WIP end (82,000)
CGM 382,000
4. A + FGI beg. 48,000
- CGS (389,000)
FGI end 41,000
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5. D Actual OH 166,000 – Applied OH 165,000 = Under-applied OH 1,000

6. D Job # 501:
Costs last month
P 3,000
Costs this month10,000 P 13,000
Job # 502 8,000
CGM in Feb. P 21,000
=======
7. A Job # 501: Sales P 18,000
- CGS 13,000
Gross Margin P 5,000
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8. B H L = Difference
TC P 30,000 - P 28,000 = P 2,000
Units produced 160,000 u - 140,000 u = 20,000 units = P 0.10 / u
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9. C TC P 38,000 - P 34,000 = P 4,000
Units produced 160,000 u - 140,000 u = 20,000 u = P 0.20 / u

@ the Highest pt. Or @ the Lowest Point

TC P38,000 TC P34,000
- TVC P0.20 x160,000 u = 32,000 - TVC P0.20 x 140,000 u = 28,000
TFC P6,000 TFC P 6,000

10. C Materials 150,000 x P 0.60 = P 90,000

Labor 150,000 x P 1 = 150,000
Factory Supplies (150,000 x P0.10) + 14,000 = 29,000
Heat, Light & Power (150,000 x P0.20) + 6,000 = 36,000
Other FO 25,000
Total Manufacturing Cost P 330,000
=========
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Exercise 1-9 p. 33 (Manufacturing costs computation)

1. P384,000 + P3,136,000 - P275,200 = P3,244,800

2. P3,244,800 + P2,176,000 + P32,000 + P320,000 + P22,400 + P275,200 + P384,000 +

P224,000 + P32,000 + P16,000 = P6,726,400

3. Prime Costs = P3,244,800 DMU + DL P 2,176,000

= P 5,420,800

4. Conversion Costs = DL P 2,176,000 + OH P 1,305,600 = P 3,481,600

5. CGM = P6,726,400 + P96,000 - P64,000 = P6,758,400 CGM

6. P6,758,400 + P672,000 - P1,280,000 = P6,150,400 CGS

Exercise 1-10 (Cost of goods manufactured and sold)

Correction: Please change the amount in letter a to P205,200 and in letter b to

P168,200 and Cost of Goods Manufactured to P403,000.

Suchi Manufacturing Co.

Statement of Financial Operations
For the month ended January 31, 2024

Sales 360,000/75% = P 480,000

Less Cost of Goods Sold:
Material Purchases …………………….. P 205,200
Less Materials Inventory, January 31 37,000 P168,200
Direct Labor ……………………………………………………. 130,800
Factory Overhead ……………………………………………. 150,200
Total Manufacturing Costs P449,200
Less WIP end …………………………………………………… 46,200
Cost of Goods Manufactured ……………………………. P403,000
Less: Finished Goods Inventory End ………………… 43,000 360,000
Gross Profit P 120,000
Less Operating Expenses or Commercial Expenses:
General and Administrative Expenses P 53,600
Selling Expenses 66,400 120,000
Profit (Loss) ………………………………………………………………. P -0–

Therefore, the business is operating at break-even point during the first month of
operations in 2024.
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Exercise 1-11 p. 35 (Manufacturing Costs Computation)

1. Finished Goods Inventory Beginning: P40,000 + P122,000 - P124,000 = P38,000

2. Current manufacturing costs: P42,000 + P44,000 - P16,000 = P70,000

3. Direct materials used: P14,000 + P96,000 - P28,000 = P82,000

4. Merchandise Inventory End : P82,000 + P420,000 - P446,000 = P56,000

Exercise 1-12 p. 36 (CMA Adapted - Ethics Challenge)

a. Ritchie Tejana suggested reclassifying some period costs as product costs since the
company is building up large finished goods inventories in anticipation of the Christmas
selling season. Product costs are inventoried and flow through to the income statement
only when products are sold. Period expenses, in contrast, flow directly to the income
statement. Since most of the finished goods inventories will be held over to the next
quarter, reclassifying period costs as product costs will effectively defer recognition of
expenses until next quarter and therefore will improve the current quarter's net operating
income.

b. Jelo Sy is probably alarmed by both the economic situation the company finds itself in and
by the apparent willingness of top management to bend the rules. Improperly reclassifying
costs is an indication that top management does not feel like it has to play by the rules or
be honest in its dealings with the bank. With such loose ethical standards, Marga may
wonder what other things they are doing that are unethical and/or illegal.