Buenaventura, Bien Carlo

Garcia, John Michael

Chapter 2 Cost - Concepts and Classification

Problem 4

Examples (a) V or F (b) I or P

1. Wood used in bookcases V I
2. Machine depreciation based on mach, Hrs V I
3. Fire insurance on factory equipment F P
4. Wiring used in radios V I
5. Indirect materials V I
6. Sales commissions V P
7. Bottles used to package liquid V I
8. Gasoline for a delivery truck V P
9. Straight-line depreciation of trucks used for
F P
delivery of sales to customers
10. Machine operator's hourly wages V I

Problem 5

1. Compute the prime costs

Materials ₱ 81,250.00
Less: Indirect Materials (23% of Materials) - 18,687.50
Direct Materials ₱ 62,562.50

Labor 87,500.00

- 23,625.00
Less: Indirect Labor (27% of Labor)
Direct Labor 63,875.00

Prime Cost ₱ 126,437.50

2. Compute the conversion costs

Labor ₱ 87,500.00
Less: Indirect Labor (27% of Labor) - 23,625.00
Direct Labor ₱ 63,875.00

Applied Factory Overhead 63,875.00

Conversion Cost ₱ 127,750.00

3. Compute the total product costs

Materials ₱ 81,250.00
Less: Indirect Materials (23% of Materials) - 18,687.50
Direct Materials ₱ 62,562.50
 Labor 87,500.00
Less: Indirect Labor (27% of Labor) - 23,625.00
Direct Labor 63,875.00

Applied Factory Overhead 63,875.00

Total Product Cost ₱ 190,312.50

Problem 6

1. Compute the prime costs

Direct Materials ₱ 285,000.00
Add: Direct Labor 245,000.00

Prime Cost ₱ 530,000.00

2. Compute the conversion costs

Direct Labor ₱ 245,000.00
Add: Fixed Factory Overhead 175,000.00
Variable Factory Overhead 155,000.00

Conversion Cost ₱ 575,000.00

Problem 7

1. Variable manufacturing cost per unit

Variable Costs:
Direct Materials (per unit) ₱ 60.00
Direct Labor ( per unit) 30.00
Manufacturing Overhead (per unit) 9.00

Total Variable Manufacturing Cost Per Unit ₱ 99.00

2. Variable cost per unit

Variable Costs:
Direct Materials (per unit) ₱ 60.00
Direct Labor ( per unit) 30.00
Manufacturing Overhead (per unit) 9.00
Marketing and Administrative (per unit) 6.00

Total Variable Cost Per Unit ₱ 105.00

3. Full manufacturing cost per unit

 Variable Costs:
Direct Materials (per unit) ₱ 60.00
Direct Labor ( per unit) 30.00
Manufacturing Overhead (per unit) 9.00

Total Variable Cost Per Unit ₱ 99.00

Fixed Costs:
Manufacturing Overhead (P30,000 / 1,200) 25.00

Total Fixed Cost Per Unit 25.00

Total Full Manufacturing Cost Per Unit ₱ 124.00

Problem 8

1. The variable cost per machine hour

Volume in Mach. Hrs. Cost
Highest Month (July) 7,500 ₱ 75,000.00
Lowest Month (December) 3,750 48,750.00
Difference 3,750 ₱ 26,250.00

Total Variable rate per volume in mach. hrs. (P26,250 / 3,750) ₱ 7.00

2. The total monthly fixed electricity costs

High Low
Total Cost Of Electricity ₱ 75,000.00 ₱ 48,750.00
Less: Variable Proportion
(7 x 7,500) 52500
(7 x 3,750) 26250

Total Monthly Fixed Electricity Costs ₱ 22,500.00 ₱ 22,500.00

3. The total elec. cost if 4,800 mach. hrs. are projected next month
Total Variable Cost Per Mach. Hrs. (4,800 x 7) ₱ 33,600.00
Add: Total Monthly Fixed Electricity Costs 22,500.00

Total Electricity Cost ₱ 56,100.00

4. Compute the total period cost
Selling Expenses ₱ 3,250.00
General and Administrative Expenses 23,250.00

Total Period Cost ₱ 26,500.00

5. Calculate the overhead vairance and explaine why it is favorable or

unfavorable
Actual Factory Overhead (Control Account) ₱ 70,000.00
Applied Factory Overhead 63,875.00

Overhead Variance - Underapplied ₱ 6,125.00

Note: The underapplied factory overhead is considered UNFAVORABLE because
it increases the cost of goods sold - actual, that will lead to a decrease in gross
profit.
3. Compute the total inventoriable/product costs
Direct Materials ₱ 285,000.00
Add: Direct Labor 245,000.00
Fixed Factory Overhead 175,000.00
Variable Factory Overhead 155,000.00

Inventoriable/Product Cost ₱ 860,000.00

4. Compute the total period cost

Marketing Cost ₱ 160,000.00
Add: Administrative Cost 145,000.00

Total Period Cost ₱ 305,000.00

4. Full cost to make and sell per unit

Variable Costs:
Direct Materials (per unit) ₱ 60.00
Direct Labor ( per unit) 30.00
Manufacturing Overhead (per unit) 9.00
Marketing and Administrative (per unit) 6.00

Total Variable Cost Per Unit ₱ 105.00

Fixed Costs:
Manufacturing Overhead (P30,000 / 1,200) 25.00
Marketing and Administrative (24,000 - 1,200) 20.00

Total Fixed Cost Per Unit 45.00

Total Full Cost To Make And Sell Per Unit ₱ 150.00

Problem 5

1. Journal Entries

Accounts Debit Credit

Materials ₱ 250,000.00
Accounts Payable ₱ 250,000.00

Factory Overhead Control 43,750.00

Accounts Payable 43,750.00

Payroll 262,500.00
Withholding Taxes 23,150.00
SSS Premiums 10,500.00
Phil Health Contributions 1,406.25
Pag-ibig Funds 7,875.00
Accrued Payroll 219,568.75

Accrued Payroll 218,750.00

Cash 218,750.00

Work in Process 175,000.00

Factory Overhead Control 37,500.00
Selling Expense 31,250.00
Administrative Expense 18,750.00
Payroll 262,500.00

SSS Premiums 13,125.00

Work in Process 10,625.00
Selling Expenses 1,562.50
Administrative Expenses 937.50

Phil Health Contributions 1,406.25

Work in Process 750.00
Selling Expenses 468.75
Administrative Expenses 187.50

Pag-ibig Fund 7,875.00

Work in Process 6,375.00
Selling Expenses 937.50
Administrative Expenses 562.50

Work in Process 231,250.00

Factory Overhead Control 43,750.00
Materials 275,000.00

Work in Process 140,000.00

Factory Overhead Applied 140,000.00

Finished Goods 512,500.00

Work in Process 512,500.00
 Accounts Receivable 673,750.00
Sales 673,750.00

Cost of Goods Sold 481,250.00

Finished Goods 481,250.00

Cash 506,250.00
Accounts Receivable 506,250.00

Accounts Payable 275,000.00

Cash 275,000.00

Withholding Taxes 23,150.00

SSS Premiums 10,500.00
Phil Health Contributions 1,406.25
Pag-ibig Funds 7,875.00
Cash 42,931.25

2. Cost of Goods Sold Statement

Wesleyan Company
Cost Of Goods Sold Statement
For the Month Ended January 31, 2022
Direct Materials Used:
Materials Inventory, beg. ₱ 62,500.00
Add: Purchases 250,000.00
Total Available For Use 312,500.00
Less: Materials Inventory, end. - 37,500.00
Indirect Materials - 43,750.00 ₱ 231,250.00
Direct Labor
Direct Labor 175,000.00
Less: SSS Premiums - 10,625.00
Phil Health Contributions - 750.00
Pag-ibig Funds - 6,375.00 157,250.00
Factory Overhead 140,000.00
Total Manufacturing Costs 528,500.00
Add: Work in Process, beg. 22,500.00
Cost Of Goods Put Into Process 551,000.00
Less: Work in Process, end. - 38,500.00
Cost Of Goods Manufactured 512,500.00
Add: Finished Goods, beg. 43,750.00
Total Goods Available For Sale 556,250.00
Less: Finished Goods, end. - 75,000.00
Cost Of Goods Sold - Normal 481,250.00
Less: Overapplied factory overhead - 15,000.00
Cost Of Goods Sold - Actual 466,250.00

3. Statement of Comprehensive Income

 Wesleyan Company
Statement of Comprehensive Income
For the Month Ended January 31, 2022
Sales 673,750.00
Less: Cost of Goods Sold - 466,250.00
Gross Profit 207,500.00
Less: Operating Expenses
Selling Expenses 28,281.25
Administrative Expenses 17,062.50
SSS Premium 13,125.00
Phil Health Contributions 1,406.25
Pag-ibig Funds 7,875.00 67,750.00
Net Income 139,750.00

3. Statement of Financial Position

Wesleyan Company
Statement of Financial Position
As of January 31, 2022
ASSETS
Current Assets
Cash ₱ 94,568.75
Accounts Receivable 242,500.00
Finished Goods 75,000.00
Work in Process 38,500.00
Materials 37,500.00
Non-Current Asset

Total Assets 488,068.75

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable 31,250.00
Accrued Payroll 10,818.75
Non-Current Liabilities

Shareholders' Equity
Common Stock 250,000.00
Retained Earnings 196,000.00 446,000.00
Total Liabilities and Shareholders' Equity 488,068.75

*Statement of Retained Earnings

Wesleyan Company
Statement of Retained Earnings
For the Month Ended January 31, 2022
Balance, January 1 56,250.00
Add: Net Income 139,750.00
Retained Earnings, January 31 196,000.00
 Cash Accounts Receivable Finished Goods
125,000.00 218,750.00 75,000.00 506,250.00 43,750.00
506,250.00 275,000.00 673,750.00 512,500.00
42,931.25

631,250.00 536,681.25 - 748,750.00 506,250.00 - 556,250.00

94,568.75 242,500.00 75,000.00

Factory overhead Ctrl Payroll Withholding taxes

43,750.00 262,500.00 262,500.00 23,150.00
37,500.00
43,750.00

125,000.00 - - 262,500.00 262,500.00 - 23,150.00

- -

Selling exp Admin exp Factory overhead appl

31,250.00 1,562.50 18,750.00 937.50
468.75 187.50
937.50 562.50

31,250.00 2,968.75 - 18,750.00 1,687.50 - -

28,281.25 17,062.50
 Finished Goods Work in Process Materials
481,250.00 22,500.00 10,625.00 62,500.00 275,000.00
175,000.00 750.00 250,000.00
231,250.00 6,375.00
140,000.00 512,500.00

481,250.00 - 568,750.00 530,250.00 - 312,500.00 275,000.00 -

38,500.00 37,500.00

Withholding taxes SSS Philhealth

23,150.00 13,125.00 10,500.00 1,406.25 1,406.25
10,500.00 1,406.25

23,150.00 - 23,625.00 10,500.00 - 2,812.50 1,406.25 -

- 13,125.00 - 1,406.25

Factory overhead appl Sales COGS

140,000.00 673,750.00 481,250.00

140,000.00 - - 673,750.00 - 481,250.00 -

 Accounts Payable Accrued Payroll Common stock
275,000.00 12,500.00 218,750.00 10,000.00 250,000.00
250,000.00 219,568.75
43,750.00

275,000.00 306,250.00 - 218,750.00 229,568.75 - - 250,000.00

31,250.00 10,818.75

Pag-ibig
7,875.00 7,875.00
7,875.00

15,750.00 7,875.00
- 7,875.00
 Retained earnings
56,250.00
139,750.00

- - 196,000.00