JOB ORDER AND PROCESS COSTING, and ACTIVITY BASED COSTING ASSIGNMENT

Problem 1

Aladili Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the company's inventory balances were as follows:Raw materials ................................ P36,000Work in process ............................. P41,000Finished goods ............................... P104,000The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 21,000 machine-hours and incur P210,000 in manufacturing overhead cost. The following transactions were recorded for the year:a. Raw materials were purchased, P346,000.b. Raw materials were requisitioned for use in production, P338,000 (P302,000 direct and P36,000 indirect).c. The following employee costs were incurred: direct labor, P360,000; indirect labor, P68,000; and administrative salaries, P111,000.d. Selling costs, P153,000.e. Factory utility costs, P29,000.f. Depreciation for the year was P102,000 of which P93,000 is related to factory operations and P9,000 is related to selling and administrative activities.g. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 19,000 machine-hours.h. The cost of goods manufactured for the year was P870,000.i. Sales for the year totaled P1,221,000 and the costs on the job cost sheets of the goods that were sold totaled P855,000.j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.

Required:Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume that all transactions with employees, customers, and suppliers were conducted in cash.

Problem 2

Hacken Company has a job-order costing system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor cost. The information below has been taken from the cost records of Hacken Company for the past year:Direct materials used in production ..................................................... P1,250Total manufacturing costs charged to production during the year(includes direct materials, direct labor, and applied factory overhead) ...............6,050Manufacturing overhead applied ......................................................... P2,800Selling and administrative expenses.................................................... P1,000Inventories:Direct materials, January 1 ............................................................... P130Direct materials, December 31 ......................................................... P80Work in process, January 1 .............................................................. P250Work in process, December 31 ........................................................ P400Finished goods, January 1 ................................................................ P300Finished goods, December 31 .......................................................... P200Required:a. Compute the cost of direct materials purchased during the year.b. Compute the predetermined overhead rate that was used during the past year.c. Compute the Cost of Goods Manufactured for the past year.d. Compute the Cost of Goods Sold for the past year.

Problem 3

Testor Products uses a job-order costing system with a predetermined overhead rate based on machine-hours. The company closes out any under- or overapplied overhead to Cost of Goods Sold.Required:If overhead is overapplied, what adjustment does the company make to Cost of Goods Sold? Is Cost of Goods Sold increased or decreased? Why?

Problem 4

Anchor Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.Work in process, beginning:Units in process ........................................................... 800Stage of completion with respect to materials ............ 60%Stage of completion with respect to conversion.......... 10%Costs in the beginning inventory:Materials cost ........................................................... p1,296Conversion cost ........................................................ p2,416Units started into production during the month .............. 16,000Units completed and transferred out .............................. 16,500Costs added to production during the month:Materials cost .............................................................. p47,076Conversion cost ........................................................... p497,213Work in process, ending:Units in process ........................................................... 300Stage of completion with respect to materials ............ 60%Stage of completion with respect to conversion.......... 70%Required:Prepare a production report for the department using the weighted-average method.

Problem 5

Bae Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.Work in process, beginning:Units in process ........................................................... 100Stage of completion with respect to materials ............ 70%Stage of completion with respect to conversion.......... 90%Costs in the beginning inventory:Materials cost ........................................................... P182Conversion cost ........................................................ p3,429Units started into production during the month .............. 10,000Units completed and transferred out .............................. 9,700Costs added to production during the month:Materials cost .............................................................. P27,986Conversion cost ........................................................... P373,815Work in process, ending:Units in process ........................................................... 400Stage of completion with respect to materials ............ 90%Stage of completion with respect to conversion.......... 70%

Required:Using the weighted-average method:a. Determine the equivalent units of production for materials and conversion costs.b. Determine the cost per equivalent unit for materials and conversion costs.c. Determine the cost of units transferred out of the department during the month.d. Determine the cost of ending work in process inventory in the department.

Problem 6

Dachuna Inc. uses the FIFO method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.Work in process, beginning:Units in process ................................................................ 500Stage of completion with respect to materials ................. 60%Stage of completion with respect to conversion............... 70%Costs in the beginning inventory:Materials cost ................................................................ P1,020Conversion cost ............................................................. P8,925Units started into production during the month ................... 10,000Units completed and transferred out ................................... 9,600Costs added to production during the month:Materials cost ................................................................... P31,488Conversion cost ................................................................ P259,548Work in process, ending:Units in process ................................................................ 900Stage of completion with respect to materials ................. 60%Stage of completion with respect to conversion............... 90%Required:Prepare a production report for the department using the FIFO method.

Problem 7

Ebert Inc. uses the FIFO method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.Work in process, beginning:Units in process ................................................................ 600Stage of completion with respect to materials ................. 60%Stage of completion with respect to conversion............... 70%Costs in the beginning inventory:Materials cost ................................................................ P1,188Conversion cost ............................................................. P16,548Units started into production during the month ................... 18,000Units completed and transferred out ................................... 18,400Costs added to production during the month:Materials cost ................................................................... P56,234Conversion cost ................................................................ P715,394Work in process, ending:Units in process ................................................................ 200Stage of completion with respect to materials ................. 50%Stage of completion with respect to conversion............... 20%Required:Using the FIFO method:a. Determine the equivalent units of production for materials and conversion costs.b. Determine the cost per equivalent unit for materials and conversion costs.c. Determine the cost of units transferred out of the department during the month.d. Determine the cost of ending work in process inventory in the department.

Problem 8

Swagg Jewelry Corporation manufactures custom jewelry. In the past, Swagg has been using a traditional overhead allocation system based solely on direct labor hours. Sensing that this system was distorting costs and selling prices, Swagg has decided to switch to an activity-based costing system using three activity cost pools. Information on these activity cost pools are as follows:Activity Cost Pool Estimated Activity Estimated Overhead CostLabor related ............ 8,000 direct labor hours P40,000Machine related ....... 12,500 machine hours P50,000Quality control ......... 800 number of inspections P12,000Job #309 incurred P900 of direct material, 30 hours of direct labor at P40 per hour, 80 machine hours, and 5 inspections.Required:a. What is the cost of the job under the activity-based costing system?b. Relative to the activity-based costing system, would Job #309 have been overcosted or undercosted under the traditional system and by how much?

Problem 9

Duckhorn Housecleaning provides housecleaning services to its clients. The company uses an activity-based costing system for its overhead costs. The company has provided the following data from its activity-based costing system.Activity Cost PoolTotalCost Total ActivityCleaning ................. P645,576 72,700 hoursJob support ............ P129,546 5,400 jobsClient support ........ P 20,900 760 clientsOther ...................... P110,000 Not applicableTotal ....................... P906,022The "Other" activity cost pool consists of the costs of idle capacity and organization sustaining costs. One particular client, the Lumbard family, requested 31 jobs during the year that required a total of 62 hours of housecleaning. For this service, the client was charged P1,620

Required:a. Compute the activity rates (i.e., cost per unit of activity) for the activity cost pools. Round off all calculations to the nearest whole cent.b. Using the activity-based costing system, compute the customer margin for the Lumbard family. Round off all calculations to the nearest whole cent.c. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Lumbard family. Round off all calculations to the nearest whole cent.