ADVANCED FINANCIAL ACCOUNTING AND REPORTING (AFAR)

JOB ORDER COSTING

PROBLEM A. At the beginning of the year, EL TERIFICO INC. has determined the budgeted overhead costs and
the related activity level for the production for the upcoming year as follows:
Budgeted variable overhead costs P 1,250,000
Budgeted fixed overhead costs 500,000
Budgeted direct labor hours 25,000
Budgeted machine hours 40,000
Budgeted production (units) 5,000

The company uses normal costing system and computes for the combined pre-determined overhead rate on the
basis of direct labor hours. During the year 2017, the company has worked on various jobs, one of them is Job#102
for 350 units of inventory and incurred the following actual costs:
Direct materials P5 per unit
Direct labor (0.2 hours per unit) P10 per unit
Indirect materials used P1,250
Indirect labor incurred 2,370
Other fixed manufacturing costs incurred 1,020

The company has completed Job#102 at the end of the year and billed the customer at P35 per unit.

1. Compute for the costs chargeable to Job#102.

a. 10,150
b. 9,890
c. 29,750
d. 11,250

2. Calculate the over / under-applied factory overhead costs.

a. 260 over-applied
b. 260 under-applied
c. 1,360 over-applied
d. 1,360 under-applied

3. Determine the adjusted cost of sales of Job#102 if over/under application of overhead is deemed
insignificant.
a. 10,410
b. 11,510
c. 8,790
d. 9,890

PROBLEM B. GEORGINA COMPANY which manufactures different types of tables uses job-order costing system
in accumulating its costs. During the year, the company worked on a particular job order for 5,250 units. The following
are the costs incurred for this job#124:
Plywood per board foot P 52.50
Assembler wages per hour 125.25
Painter wages per unit of Job#124 25.50
Screws and bolts (total costs) 123,375
Salary of supervisor 125,425
Factory rent 162,530

To produce a batch of 250 units, the following are needed:

 73.50 board feet of plywood
 63.00 assembler hours
 875 painter hours

4. Compute for the costs of this particular job if factory overhead is applied at 120% of assembler
wages and 85% of painter wages.
 a. 693,522
b. 639,522
c. 693,255
d. 639,255

PROBLEM C. AL CRUISE, the controller of CRUISER CORPORATION, is in the process of analyzing the overhead
costs for the month of November. He has gathered the following data for the month:

Labor
Direct labor hours:
Job 107 3,500
Job 108 3,000
Job 109 2,000
Labor costs:
Direct labor wages P 204,000
Indirect labor wages 15,000
Supervisory salaries 6,000

Material
Inventories, November 1:
Raw materials and supplies P 10,500
Work in process (Job 107) 54,000
Finished goods 112,500
Purchases of raw material and supplies:
Raw materials P 135,000
Supplies (indirect material) 15,000
Direct material requisitioned for production:
Job 107 P 45,000
Job 108 37,500
Job 109 25,500
Supplies (indirect material) 12,000
Total P 120,000

Other
Building occupancy costs (heat, light, etc.
Factory facilities P 6,400
Sales offices 1,600
Administrative offices 1,000
Total P 9,000
Production equipment costs
Power P 4,100
Repairs and maintenance 1,500
Depreciation 1,500
Other 1,000
Total P 8,100
Additional information
 The Company uses direct labor hours as the basis of allocating the overhead. The budgeted overhead costs
are P390,000 (variable) and P216,000 (fixed). Theoretical and normal capacity are 140,000 and 120,000
direct labor hours, respectively.
 During November, Job no. 107 and 108 were completed.
 Job no. 107 was sold at a 25% profit margin on cost.
Compute for the following:
5. Cost of goods manufactured.
a. 271,325
b. 325,325
c. 217,325
d. 124,650

6. WIP inventory at the end.

a. 83,600
b. 86,300
 c. 124,650
d. 208,250

7. Net income if any over or under-applied is closed to CGS.

a. 45,594
b. 52,144
c. 54,744
d. 42,994

PROBLEM D. You are asked to bring the following incomplete accounts of ALBAE Inc. up to date through January
31, 2016. Consider the data that appear in the T-accounts as well as additional information given in items (a) through
(i). Manufacturing overhead is allocated using direct labor costs.
Materials Inventory Control Wages Payable Control
12/31/2015 1/31/2016
Balance 15,000 Balance 3,000

Manufacturing Department
Work in Process Inventory Control Overhead Control
1/31/2016
Balance 7,000

Finished Goods Inventory Control

12/31/2015
Balance 20,000

Additional Information:
a. Manufacturing department overhead is allocated using a budgeted rate set every December.
Management forecasts next year’s overhead and next year’s labor costs. The budget for 2016 is
P400,000 of direct manufacturing labor and P600,000 of manufacturing overhead.
b. The only job unfinished on January 31, 2016 is No. 419, on which direct manufacturing labor costs
are P2,000 (125 direct manufacturing labor hours) and direct material costs are P8,000.
c. Total material placed into production during January is P90,000.
d. Cost of goods completed during January is P180,000.
e. Material inventory as of January 31, 2016 is P20,000.
f. Finished goods inventory as of January 31, 2016 is P15,000.
g. All plant workers earn the same wage rate. Direct manufacturing labor hours for January totals
2,500. Other labor and supervision totals P10,000.
h. The gross plant payroll on January paydays totals P52,000. All personnel are paid on a weekly
basis.
i. All “actual” manufacturing overhead incurred during January has already been posted.

(Adapted)
Required: Compute for the following as of January 31, 2016:
8. Work in process at the end
a. 13,000
b. 10,000
c. 12,000
d. 11,000

9. Material purchases
a. 90,000
b. 105,000
c. 95,000
d. 100,000

10. Cost of goods sold

a. 186,000
b. 187,000
c. 185,000
d. 188,000

11. Wages payable balance on January 1, 2016

 a. 3,000
b. 5,000
c. 7,000
d. 9,000

12. Actual overhead costs

a. 7,000
b. 60,000
c. 70,000
d. 67,000

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