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    Chapter 7

    Uploaded by

    Roann Bargola
    This document contains 10 accounting problems related to factory overhead. It addresses calculating factory overhead rates, applying overhead to jobs and products, analyzing variances between applied and actual overhead, and allocating overhead under or over-applied. The problems demonstrate different overhead application and allocation methods including direct, step-down, and algebraic approaches.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd

    Chapter 7

    Uploaded by

    Roann Bargola
    8K views8 pages
    This document contains 10 accounting problems related to factory overhead. It addresses calculating factory overhead rates, applying overhead to jobs and products, analyzing variances between applied and actual overhead, and allocating overhead under or over-applied. The problems demonstrate different overhead application and allocation methods including direct, step-down, and algebraic approaches.

    Original Description:

    Solution Manual for Cost Accounting by De Leon (2015)

    Original Title

    Chapter-7

    Copyright

    © © All Rights Reserved

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    This document contains 10 accounting problems related to factory overhead. It addresses calculating factory overhead rates, applying overhead to jobs and products, analyzing variances between applied and actual overhead, and allocating overhead under or over-applied. The problems demonstrate different overhead application and allocation methods including direct, step-down, and algebraic approaches.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    8K views8 pages

    Chapter 7

    Uploaded by

    Roann Bargola
    This document contains 10 accounting problems related to factory overhead. It addresses calculating factory overhead rates, applying overhead to jobs and products, analyzing variances between applied and actual overhead, and allocating overhead under or over-applied. The problems demonstrate different overhead application and allocation methods including direct, step-down, and algebraic approaches.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 8

    CHAPTER 7 - ACCOUNTING FOR FACTORY OVERHEAD

    Problem 1 Denmark Company


    FO rate = 500,000
    500,000
    500,000
    500,000
    400,000
    10,000 units 80,000 MHrs.
    250,000
    125%of DMC P50/unit

    P6.25/MHr.

    500,000
    25,000DLHrs/

    200% of DLC P20.00/DLHr.

    Problem 2 - Marco Company


    1. FO rate = P255,000/100,000 = P 2.55/DLHr.
    2. FO Applied = 105,000 x P2.55 = P 267,750
    3. FO Control (actual)
    Less: Applied
    Underapplied

    P 270,000
    267,750
    P 2,250

    Problem 3 Marvin Company


    Requirement A
    1. Work in Process
    FO Applied ( 84,500 x 5.60)

    473,200
    473,200

    2. FO Control
    Misc. Accounts

    470,800
    470,800

    3. FO Applied
    Cost of Goods Sold
    FO Control

    473,200
    2,400
    470,800

    FO rate = P 456,120/81,450 = P 5.60/Mach. Hr.


    Since the problem is silent, the total variance (overapplied will be closed to
    Cost of goods sold.
    Requirement B
    Cost of goods sold 350,000/473,200 x 2,400 =1,775
    Finished goods

    100,000/473,200

    x 2,400 = 507

    Work in process

    23,200/473,200

    x 2,400 = 118

    Problem 4 - Ellery Corporation


    1.
    Job 123
    Direct labor cost
    600
    FO rate
    180%
    Applied FO
    1,080
    2.

    Job 123
    DM
    300
    DL
    600
    FO
    1,080
    TOTAL 1,980

    Job 124
    1,080
    940
    1,692
    3,712

    Job 124
    940
    180%
    1,692

    Job 125
    1,400
    180%
    2,520

    Job 126
    5,120
    180%
    9,216

    Job 125
    Job 126
    TOTAL
    720
    4,200
    6,300
    1,400
    5,120
    8,060
    2,520
    9,216
    14,508
    4,640 18,536
    28,868

    Problem 5 Thermal Corporation


    1. Direct method
    P1___
    P2___
    Direct cost
    P 90,000
    P 60,000
    Allocated cost
    S1
    10,000
    10,000
    S2
    20,000
    12,000
    Total
    P120,000
    P 82,000
    Base
    50,000 MHrs.
    20,000 DLHrs
    FO rate
    P 2.40/MHr.
    P 4.10/DLHr.

    S1___
    P 20,000

    S2___
    P 32,000

    ( 20,000)
    ( 32.000)

    2. Step method
    Direct cost
    Allocated cost
    S1
    S2
    Total
    Base
    FO rate

    P1___
    P 90,000

    P2___
    P 60,000

    2,000
    30,000
    P122,000
    50,000 MHrs.
    P 2.44/MHr

    2,000
    18,000
    P 80,000
    20,000 DLHrs
    P 4.00/DLHr.

    S1____
    P 20,000

    S2___
    P 32,000

    ( 20,000)

    16,000
    ( 48,000)

    3. Algebraic method
    Direct cost
    Allocated
    S1
    S2
    Total
    Base
    FO rate

    P1___
    P 90,000

    P2___
    P 60,000

    S1___
    P 20,000

    S2____
    P 32,000

    3.143
    28,572
    P121,715
    50,000 MHrs.
    P 2.43/MHr.

    3,143
    17,143
    P80,286
    20,000 DLHrs
    P 4.0/DLHr.

    ( 31,429)
    11,429

    25,143
    ( 57,143)

    S1 -= 20,000 + 20% S2
    S2 = 32,000 + 80% S1
    S1

    =
    =
    =
    =
    =

    S1 - .16S1
    S1
    S2

    20000 + 20%( 32,000 + 80% S1)


    20,000 + 6,400 + .16 S1
    26.400
    26,400/.84
    31,429

    = 32,000 + 80% 31,429


    = 32,000 + 25,143
    = 57,143

    Problem 6 ABC Company


    1. Direct method
    Machinery
    Direct cost
    P 52,500
    Allocated cost
    S1
    5,600
    S2
    6,325
    Total
    P 64,625
    Base
    1,500DLHrs.
    FO rate
    P 42.95DLHr.

    Assembly
    P 48,000

    Repair___
    P 14,000

    8,400
    4,675
    P 61,075
    1,250 DLHrs
    P48.86/DLHr.

    ( 14,000)

    Cafeteria
    P 11,000
    ( 11.000)

    2. Step method
    Direct cost
    Allocated cost
    S1
    S2
    Total
    Base
    FO rate

    Machinery
    P 52,500
    4,119
    8,455
    P 65,074
    1,500 DLHrs.
    P 43.38/DLHr

    Assembly
    P 48,000

    Repair
    P 14,000

    Cafeteria
    P 11,000

    6,176
    6,250
    P 60,426
    1,250 DLHrs
    P48.34/DLHr.

    ( 14,000)

    3,705
    ( 14,705)

    3.Algebraic method
    Repair
    Cafeteria
    Machinery
    Assembly
    Repair = 14,000 + (46.67%Cafeteria)
    Cafeteria = 11,000 + 26.47% Repair

    Services rendered by
    Repair Dept.
    Cafeteria Dept.
    3,500 - 46.67%
    1,800 - 26.47%
    2,000 - 29.41%
    2,300 - 30.67%
    3,000 - 44.12%
    1,700 - 22.66%
    6.800 100.00%
    7,500
    100.00%

    Repair

    = 14,000 + 46.67% (11,000 + 26.47% R)


    = 14,000 + 5,134 + ,1235R
    1 - .1235 R = 19,134
    R = 19,134/.8765
    = 21,830
    Cafeteria = 11,000 + 26.47%R
    = 11.000 + 5,778
    = 16,778
    Direct cost
    Allocated cost
    S1
    S2
    Total
    Base
    FO rate

    Machinery
    P 52,500
    6,420
    5,146
    P 64,066
    1,500 DLHrs.
    P 42.71/DLHr

    Assembly
    P 48,000

    Repair
    P 14,000

    Cafeteria
    P 11,000

    9,632
    3,902
    P 61,534
    1,250 DLHrs
    P49.23/DLHr.

    ( 21,830)
    7,830

    5,778
    ( 16,778)

    Problem 7 - Central Parkway Corp.


    Direct cost
    Allocated
    S1
    S2
    Total
    S1
    S2
    S1
    S1 - .025 S1
    S1
    S2

    P1___
    120,000

    P2____
    80,000

    13,333
    6,667
    8,333
    6,667
    141,666
    93,334
    =
    25,000 + 10% of S2
    =
    10,000 + 25% of S1

    5 S1___
    25,000
    ( 26,667)
    1,667

    =
    =
    =
    =
    =

    25,000 + 10% ( 10,000 + .25S1


    25,000 + 1,000 + .025S1
    26,000
    26,000/.975
    26,667

    =
    =

    10,000 + .25(26,667)
    16,667

    Problem 8 Megastar Company


    95,000 Mach. Hrs.
    Total
    Per Mach.Hr.
    Fixed
    34,200
    0.36
    ( 34,200/95,000)
    Variable
    41,800
    0.44
    ( 41,800/95,000)
    76,000
    0.80

    S2___
    10,000
    6,667
    (16,667)

    1.

    Actual factory overhead


    Less: Applied (100,000 x .80)
    Overapplied factory overhead

    P 78,600
    80,000
    ( 1,400)

    2.

    Actual factory overhead


    Less: Budget allowed on actual hours
    Fixed
    34,200
    Variable (100,000 x .44)
    44,000
    Spending variance unfavorable

    P 78,600

    Budged allowed on actual hours


    Less: Applied factory overhead
    Idge capacity variance favorable

    P 78,200
    80,000
    ( 1,800)

    3.

    78,200
    P 400

    Problem 9 - Abner Company

    Fixed
    Variable
    Total

    TotalP 33,840
    302400
    P336,200

    72,000 units
    Per unit
    P 0.47
    (33,840/72,000)
    4.20
    (72,000 x 4.20)
    P 4.67

    1.

    Applied FO ( 5,400 units x P4.67

    P25,218

    2.

    Actual FO
    Less: Applied FO 5,400 units x P 4.67
    Underapplied FO

    P 15,910
    25,218
    (P 9.308)

    3.

    Actual FO
    Less: Budget allowed on actual hours
    Fixed (33,840/12 months)
    2,820
    Variable ( 5,400 x 4.20)
    22,680
    Spending variance favorable

    P 15,910

    4.

    Budged allowed on actual hours


    Less: Applied
    Idle capacity variance unfavorable

    Problem 10 - Norman Corporation


    1.
    Variable rate/hour = 270,000 252,000
    60,000 - 48,000
    = P1.50/DLHr.

    25,500
    ( P 9,590)
    P25,500
    25,218
    P 282

    2.
    Total
    Less: Variable
    (60,000 x 1.50)
    (48,000 x 1.50)
    Fixed

    High
    270,000

    Low
    252,000

    90,000
    _______
    180,000

    72,000
    180,000

    Actual factory overhead


    Less: Applied ( 60,000 x 90%) x 5.25
    Overapplied FO
    FO rate =

    3.

    252,000
    48,000

    = 5.25/ DLHrs.

    Actual factory overhead


    Less: Budget allowed on actual hours
    Fixed
    Variable (54,000 x 1.50)
    Spending variance

    4.

    273,000
    283,500
    ( 10,500)

    Budget allowed on actual hours


    Less: Applied
    Idle capacity variance

    Problem 11 Strawberry Corporation


    Actual factory overhead
    Less: Applied factory overhead
    /
    Overapplied factory overhead favorable

    273,000
    180,000
    81,000

    261,000
    12,000
    261,000
    283,500
    ( 22,500)
    30,500
    39,700
    ( 9,200)

    a.

    Allocation of overapplied factory overhead


    Cost of goods sold
    32,000/39,700 x 9,200 = 7,416
    Finished goods inventory
    4,200/39,700 x 9,200 =
    973
    Work in process inventory
    3,500/39,700 x 9,200 =
    811
    39,700
    9,200

    b.

    Applied factory overhead


    Cost of goods sold
    Finished goods inventory
    Work in process inventory
    Factory overhead control

    39,700
    7,416
    973
    811
    30,500

    Problem 12 TINOR COMPANY


    a)
    Direct materials ( 50 x P120)
    Direct labor
    Factory overhead (100 x P 25)
    Total manufacturing cost
    No. of units
    Cost per unit

    Product A
    P 6,000
    (100 x P120)
    6,000
    2,500
    (300 x P 25)
    P 14,500
    50
    P
    290/unit

    Product B
    P 12,000
    18,000
    7,500
    P 37,500
    100
    P
    375/unit

    Factory overhead rate = P200,750/8,030 direct labor ours = P 25/DLHr.


    b)
    Product A
    Product B
    Direct materials (50 x P120)
    P 6,000
    (100 x P120)
    P 12,000
    Direct labor
    6,000
    18,000
    Factory overhead
    Material handling (20 x P50)
    1,000
    (40 x P50)
    2,000
    Scheduling & setup (5 x 200)
    1,000
    ( 7 x 200)
    1.400
    Design section (3 x P 107.50)
    322,50 (5 x 107.50)
    537.50
    No. of parts (6 x 100)
    600
    (10 x 100)
    1,000
    Total costs
    P 14,922.50
    P 34,937.50
    No. of units
    50
    100
    Cost per unit
    P 298.45/unit
    P 349.38/unit

    TRUE/FALSE
    1. True
    2. False
    3. True
    4. True
    5. True

    6.
    7.
    8.
    9.
    10.

    True
    True
    True
    False
    True

    MULTIPLE CHOICE THEORY


    1.
    c
    6.
    d
    2.
    c
    7.
    c
    3.
    d
    8.
    a
    4.
    b
    9.
    d
    5.
    d
    10.
    A

    11.
    12.
    13.
    14.
    15.

    False
    False
    True
    True
    True

    MULTIPLE CHOICE - PROBLEMS


    1.
    a
    11.
    d
    2.
    b
    12.
    a
    3.
    c
    13.
    b
    4.
    c
    14.
    c
    5.
    c
    15.
    c
    6.
    c
    16.
    c
    7.
    c
    17.
    b
    8.
    a
    18.
    a
    9.
    d
    19.
    a
    10.
    d
    20.
    a

    21.
    22.
    23.
    24.
    25.
    26.
    27.
    28.
    29.
    30.

    b
    d
    a
    b
    c
    c
    d
    c
    d
    d

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