(OH Is Overapplied) (Actual Activity) (ABC) : (Have A Difference)

Part I: Theory of Accounts
1. Which of the following statements is TRUE?

a. If actual overhead is less than applied overhead, upon closing, overhead is underapplied and Cost of Go
b. Actual overhead exceeds applied overhead and the amount is immaterial, upon closing, overhead
c. Applied overhead consists of estimated activity times predetermined overhead rate. (actual activity)
d. In order to obtain more accurate product costs, many companies now allocate overhead using just-in-tim
2. Which of the following statements is FALSE?
a. The actual costs of all individual overhead categories are recorded in the Manufacturing Overhead Cont
b. Direct costs are traced the same way for actual costing and normal costing.
c. Overhead costs allocated each month are expected to equal actual overhead costs incurred each m
d. Activity Based Costing is particularly useful when overhead costs are a significant portion of total costs.
3. The net cost of normal spoilage in a job order costing system in which spoilage is common to all jobs shoul
a. Assigned directly to the jobs that caused the spoilage
b. Charged to manufacturing overhead control during the period of spoilage
c. Charged to loss account during the period of spoilage
d. Allocated only to jobs that are completed during the period
4. The rework cost in a job order costing system in which the defective goods are charged to a specific job shou
a. Treated as expense immediately
b. Charged to manufacturing overhead control
c. Capitalized to the particular job as an additional cost in the work in process
d. Ignored
Part II: Problem Solving
Problem 1
WZM Company is a manufacturing company with a fiscal year that runs from July 1 to June 30. The company
uses a job order accounting system to its production costs. A predetermined overhead rate based upon direct labor
hours is used to apply overhead to individual jobs. A flexible budget of overhead costs was prepared for the fiscal
year as shown below:
Direct labor hours
Variable overhead costs
Fixed overhead costs

Although the annual maximum capacity is 100,000 direct labor hours, the company officials have determined that
75,000 direct labor hours to be the normal capacity for the year. Job 16-42 was not completed and job 16-40
remained unsold at the end of the month. Any over/under applied overhead is not material.
The information presented below is for the month of August: Inventories, August 1
Raw Materials and Supplies
Work in Process (Job 16-40)
Finished Goods
Purchases of raw materials and supplies during the month:

Raw materials
Supplies
Materials and supplies requisitioned for production:

Job 16-40
Job 16-41
Job 16-42
Supplies
Factory direct labor hours Job 16-40
Job 16-41
Job 16-42
Labor costs
Direct labor wages
Indirect labor wages (4,000 hours)
Supervisory salaries
Building occupancy costs (heat, light, depreciation, etc.)

Factory facilities
Sales office
Administrative office
Factory equipment costs

Power
Repairs and maintenance
Depreciation
Others
Compute for the following:
1. Amount to be debited to Finished Goods Inventory during the month

a. 435,010
b. 467,420
c. 526,020
d. 3240,60
Total Manufacturing Cost:
DM ₱116,760
DL ₱257,600
OH- Applied ₱241,500
₱615,860
Add: WinP Invty. Beg 32,410
Put into Process 648,270
Less: WinP Invty, end (180, 850) ( Job 16-42 ; DM ; 32.050 CC: 148, 800) 9,600 hrs. x ₱15.5)
CGM 467,420
2. Adjusted Cost of goods sold during the month of August

a. 201,960
b. 190,320
c. 213,600
d. 233,050
Cost of Goods Manufactured ₱467, 420

Add. FG Inventory, beg 58,600
Available for Sale ₱526,020
Less: FG Inventory, end (265,460 + 58,600 = 324,060)
(Job 16-40 l Beg ₱32,410 + DM 45,500 + CC 187,550 [12,100 X ₱15.5)
Costs of Goods Sold, normal ₱201,960

Add: Underapplied OH 11, 640
CGS, actual ₱213, 600
Actual OH ₱253,140
Applied OH 241,500 ( ₱7.5 x 32,000 hrs)
₱11,640
Costs of goods sold 11,640

FOH Applied 241,500
FOH - Control 253, 140
3. Which of the following statements is FALSE?

a. The Total Manufacturing Cost in August amount to P615,860
b. The Finished Goods Inventory at the end of the month amount to P265,460 (324,060)
c. The Work in Process Inventory at the end of the month amount to P180,850
d. The Raw Materials and Supplies Inventory account at the end of the month amount to P33,350

a. Upon requisition of materials for production there is a debit to Work in Process account in the amoun
b. The Building occupancy costs will be debited to Factory Overhead Control account in the amount of P
c. Factory Overhead Applied account will be debited in the amount of P241,500 (credited)
d. For the month of August, there is a credit to Finished Goods Inventory account in the amount o

a. Other than indirect materials and indirect labor, total actual manufacturing overhead will be credited t
b. Upon purchase of raw materials and supplies during the month, Factory Overhead Control account in
c. To record labor incurrence, Payroll account will be debited in the amount of P313,600
d. In closing the difference between the actual and applied overhead, Cost of Goods Sold account will be
Problem 2
You are asked to bring the following incomplete accounts up to date through February 28, 2023. You are also to
consider the additional information that follow:
Raw Materials Inventory

Work in process Inventory
Finished Goods Inventory
Accounts Payable
Additional Information:
a. Overhead is applied by using a predetermined rate that is set at the beginning of each year by forecasting the
year’s overhead and relating it to forecasted direct labor hours. The budget for 2023 called for a total of 1,200,000
direct labor hours and P10,800,000 of factory overhead.
b. The accounts payable are for direct materials only. The balance on March 1 was P325,000. Payments of
P800,000 were made during February.
c. The finished Goods Inventory at the end of February was P300,000
d. The Cost of Goods Sold during the month was P1,408,000. This amount is after closing the under/over
applied overhead which is immaterial
e. On February 28, there was only one unfinished job in the factory; cost records showed that P90,000 (8,000
hours) of direct labor and P75,000 of the direct materials had been charged to the job.
f. A total of 38,000 direct labor hours were worked during the month of February. All the factory workers earn
the same rate of pay.
g. Manufacturing Overhead Control amount to P375,000 had already been posted
Based on all foregoing transactions, compute for the following:

1. Amount to be debited to Raw Materials Inventory
A. 297,500
B. 950,000
C. 842,500
D. 800,000
Raw materials Invantory 950,000

Cash/ Accounts Payable 950,000
AP. End ₱325,000

Add: Payments 800,000
Less: AP, beg (175,000) ₱950,000 Materials purchased during the month.
2. Amount to be credited to Work in Process Inventory

A. 1,465,000
B. 1,498,000
C. 237,000
D. 1,612,000
Finished Goods Invenotry 1,465,000
WinP Inventory 1,465,000
Actual OH ₱375,000
Applied OH 342,000 (38,00 hours x P9)
33,000 underapplied
CGS, actual/adjusted ₱1,408,000

Less: underapplied OH (33,000)
CGS, normal costing ₱1,375,000
Add: FG Inventory, end 300,000
Available for Sale 1,675,000
Less: FG Inventory, beg (210,000)
CGM ₱1,465,000
3. Amount to be debited to Work in Process – Overhead

A. 427,500
B. 90,000
C. 72,000
D. 342,000
WinP Inventory (Oh) 342,000

FOH/ MOH Applied 342,000
4. Amount to be credited to Raw Material Inventory

A. 297,500
B. 842,500
C. 800,000
D. 325,000
CGM ₱1,465,000
Add: WinP Inventory, end 237,000 (DM: 75,000 + DL; 90,000 +OH 72,000 [8,000 x P9])
Put into Process ₱1,702,000
Less: Winp Inventory, beg (90,000
TMC ₱1,612,000
CC (38,000 x ₱20.25(₱11.25 +P9) (769,500)
842,500
WinP Inventory (DM) 842,500

RM Inventory 842,500
5. Amount to be credited to Finished Goods Inventory

A. 1,612,000
B. 1,408,000
C. 1,375,000
D. 1,465,000
Costs of Goods Sold 1,375,000

Finished Goods Inventory 1,375,000
Problem 3
ABC Company’s Job 501 for the manufacture of 2,200 sling bags was completed during January 2023 at the follow
Direct materials
Direct labor
Factory overhead (includes an allowance
of P2.50 for spoiled units)
Final inspection of Job 501 disclosed 200 spoiled sling bags which were sold to a department store for P15,000.
Compute the unit cost of the good shoes produced on Job 501 if spoilage loss is charged to:
1. All production

a. 143.75
b. 142.50
c. 140.00
d. 137.50
a. Upon entry to production:
Work-in-Process Invty 308,000

RM Invty (2,200 x ₱ 50) 110,000
Payroll (2,200 x ₱45) 99,000
FOH Applied (2,200) x ₱45) 99,000
b. Upon Completion
FG Invty 280,000 (good units)
Spoiled Goods Invty 15,000 (recoverable)
FOH Control 13,000 (unrecoverable)
WIP Invty 308,000
Cost of Spoilage: 200 units x ₱140= - ₱28,000 (of which ₱15,000 is recoverable)
*₱280,000/2,000 units = ₱140
2. Specific to Job 501

a. 140.00
b. 141.25
c. 142.50
d. 143.75

Work-in- Process Invty 302,500
RM Invty (2,200 x ₱50) 110,000
Payroll (2,200 x ₱45) 99,000
FOH Applied (2,200 x ₱42.5) 93,500*
*exculding allowance for spoialge since a particular job was identified.
b. Upon completion:
Fg Invty 287,500
(including the ₱12,500 unrecoverable)
Spoiled Goods Invty 15,000 (recoverable)
WIP Invty 302,500
Cost of Spoilage: 200 units x ₱137.50 = ₱27,500 (of which ₱15,000 is recoverable while ₱12,500 is unrecoverable)
*₱287,500/2,000 units = ₱143.75
Problem 4
During January, XYZ Company incurred the following costs on Job Order 111 for manufacturing of 200 units:
Original cost accumulation ₱660
Direct materials 800
Direct labor 1,200
Factory overhead (150% of direct 2,600
labor cost)
Direct costs of reworking 10 units:

Direct materials ₱100
Direct labor 100
P260
1. The rework costs were attributable to the exacting specifications of Job Order 111 and the full rework
costs were charged to this specific job. Compute the cost per finished unit of Job Order 111
a. 15.00
b. 15.70
c. 15.80
d. 16.20

Work-in_Process Invty 2,660
Rm Invty 660
Payroll 800
FOH Applied 1,200
b. Upon reworking 10 units:

Work-in-Process Invty 500
RM Invty 100
Payroll 160
FOH 240 ( 160 x 150%)
c. Upon completion:
FG Invty 3,160 (3,160/200 = ₱15.80)
WIP Invty 3,160
2. Assuming the rework costs were attributable to internal failure, compute the cost per finished unit of

a. 13.50
b. 13.40
c. 13.30
d. 13.20

Work-in-Process Invty 2,660
RM Invty 660
Payroll 800
FOH Applied 1,200
b. Upon reworking 10 units:

FOH Control 500
RM Invty 100
Payroll 160
FOH 240(160 x 150%)
Assuming the rework cost is abnormal (beyond expectation) the debit is Loss on Rework (period cost) instead of FOH
c. Upon completion:
FG Invty 2,660 (2,660/200 = ₱13.30)
WIP Invty 2,660
d Cost of Goods Sold is credited. ( OH is overapplied)
g, overhead is underapplied and Cost of Goods Sold will increase.
ng just-in-time methods. (ABC)
verhead Control account.
rred each month. (have a difference)

of total costs.
all jobs should be
cific job should be

50,000 75,000 100,000
P250,000 P375,000 P500,000
187,500 187,500 187,500

P18,750
32,410
58,600
P150,000
10,000
P45,500
39,210
32,050
28,640
12,100
10,500
9,600
P257,600
20,000
36,000
P26,500
41,000
50,000
P44,000
26,000
40,000
32,000
n the amount of P145,400 (116,760)
e amount of P117,500 (26,500)
he amount of P201,960
be credited to various accounts in the amount of P142,000 (168,500)

ol account in the amount of P10,000 will be debited (Debit Supplies)
count will be credited (debited)

February 28,
January 31, 2023
2023
? P297,500
P 90,000 ?
210,000 ?
175,000
at the following unit costs:
P50
###
###
ecoverable)
ished unit of Job 111
stead of FOH Control (product cost)

(OH Is Overapplied) (Actual Activity) (ABC) : (Have A Difference)

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Part I: Theory of Accounts

1. Which of the following statements is TRUE?

Part II: Problem Solving

Direct labor hours

Variable overhead costs

Fixed overhead costs

Purchases of raw materials and supplies during the month:

Materials and supplies requisitioned for production:

Factory direct labor hours Job 16-40

Building occupancy costs (heat, light, depreciation, etc.)

Factory equipment costs

Repairs and maintenance

Compute for the following:

1. Amount to be debited to Finished Goods Inventory during the month

2. Adjusted Cost of goods sold during the month of August

Cost of Goods Manufactured ₱467, 420

Costs of Goods Sold, normal ₱201,960

Costs of goods sold 11,640

3. Which of the following statements is FALSE?

4. Which of the following statements is TRUE?

5. Which of the following statements is TRUE?

Raw Materials Inventory

Based on all foregoing transactions, compute for the following:

Raw materials Invantory 950,000

AP. End ₱325,000

2. Amount to be credited to Work in Process Inventory

CGS, actual/adjusted ₱1,408,000

3. Amount to be debited to Work in Process – Overhead

WinP Inventory (Oh) 342,000

4. Amount to be credited to Raw Material Inventory

WinP Inventory (DM) 842,500

5. Amount to be credited to Finished Goods Inventory

Costs of Goods Sold 1,375,000

1. All production

a. Upon entry to production:

Work-in-Process Invty 308,000

2. Specific to Job 501

a. Upon entry to production:

Direct costs of reworking 10 units:

a. Upon entry to production:

b. Upon reworking 10 units:

a. Upon entry to production:

b. Upon reworking 10 units:

ng just-in-time methods. (ABC)

verhead Control account.

rred each month. (have a difference)

all jobs should be

cific job should be

P250,000 P375,000 P500,000

187,500 187,500 187,500

be credited to various accounts in the amount of P142,000 (168,500)

count will be credited (debited)

stead of FOH Control (product cost)

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