Page |1

SIMPLIFIED COST ACCOUNTING PART II

SOLUTIONS MANUAL

CHAPTER 1
Exercise 1-1 (TRUE OR FALSE)
1. X 6. √ 11. X 16. X
2. √ 7. X 12. √ 17. √
3. √ 8. √ 13.√ 18. √
4. X 9. X 14. X 19. X
5. X 10.X 15. √ 20. √

Exercise 1-2 ( Multiple Choice)

1. B 6. D 11. A
2. B 7. D 12. B
3. C 8. C 13. A
4. D 9. A 14. B
5. B 10. D 15. D

Exercise 1-3 (EP under FIFO versus EP under Weighted Average Method)

a) Quantity Schedule: EP Schedule:

SIP ………..208,000 MLO
F & T ………172,000 172,000
IPE (1/3)….. 36,000 12,000
184,000 * (EP will be the same for both FIFO & WA whenever
====== there is no WIP beginning)
In computing EP under WA, multiply all finished units (both F&T and FOH) by 100%; then add the EP in
IPE by multiplying the fraction or percentage of completion at the EOM by the IPE in units.
b) QS:
RPD …………. 120,000
F & T.............. 90,000 90,000
FOH................... 6,000 6,000
IPE (30%) ..... 24,000 7,200
103,200* (EP will be the same for both FIFO & WA whenever there is no
WIP beginning)
c) QS: MLO
IPB (1/4) 36,000
(5/6) 48,000
SIP 60,000
F&T 102,000 102,000
IPE (1/3) 30,000 10,000
(1/4) 12,000 3,000
115,000 EP-WA
(9,000) EP in IPB
106,000 EP under FIFO
======
d) QS: MLO
IPB (60%) 72,000
RPD 132,000
F&T 96,000 96,000
FOH 24,000 24,000
IPE (40%) 84,000 33,600
153,600 EP-WA
(43,200) EP in IPB
 Page |2

110,400 EP under FIFO

======
e) QS: MLO
IPB (1/6) 60,000
Transferred-in 96,000
F&T 48,000 48,000
FOH 12,000 12,000
IPE (2/3) 96,000 64,000
124,000 EP-WA
(10,000) EP in IPB
114,000 EP under FIFO
======
f) QS: MLO
IPB (40%) 120,000
SIP 80,000
F&T 96,000 96,000
IPE (70%) 104,000 72,800
168,800 EP –WA
(48,000) EP in IPB
120,800 EP under FIFO
======
g) QS: MLO Let X = units in IPB
IPB (60%) 40,000 X + 58,000 = 82,000 + 40% (X)
SIP 58,000 X = 40,000 u as IPB
F&T 82,000 82,000
IPE (30%) 16,000 4,800 40% x or 40% (40,000 u) = 16,000 u as IPE
86,800 EP-WA
(24,000) EP in IPB
62,800 EP under FIFO

Exercise 1-4 (Calculation of EP under FIFO)

MAY JUNE
A) QS: M CC M CC
IPB -0- (100% M; 4/5 CC) 30,000 (30,000) (24,000)
SIP 150,000 120,000
F&T 120,000 120,000 120,000 105,000 105,000 105,000
IPE (100% M; 4/5 CC) 30,000 30,000 24,000 (100%M; 2/5 CC) 45,000 45,000 18,000
EP-FIFO 150,000 144,000 EP-FIFO 120,000 99,000
======= ====== ====== ======
MAY JUNE
B) QS: M CC M CC
IPB -0- (40% CC) 15,000 ( 6,000)
RP-I 120,000 105,000
F&T 105,000 105,000 105,000 114,000 114,000 114,000
IPE (40% CC) 15,000 6,000 (3/5 CC) 6,000 3,600
EP-FIFO 105,000 111,000 EP-FIFO 114,000 111,600
======= ====== ====== ======
MAY JUNE
C) QS: M CC M CC
IPB -0- (100%M;2/3 CC) 30,000 (30,000) ( 20,000)
RP-I 105,000 114,000
F&T 75,000 75,000 75,000 90,000 90,000 90,000
IPE (100%M; 2/3 CC) 30,000 30,000 20,000 (1/4 CC) 54,000 13,500
EP-FIFO 105,000 95,000 EP-FIFO 60,000 83,500
======= ====== ====== ======
 Page |3

MAY JUNE
D) QS: M CC M CC
IPB -0- (30%M;80% CC) 15,000 ( 4,500) ( 12,000)
RP-I 75,000 90,000
F&T 60,000 60,000 60,000 75,000 75,000 75,000
IPE (30%M; 80% CC) 15,000 4,500 12,000 (30%M; 40% CC) 30,000 9,000 12,000
EP-FIFO 64,500 72,000 EP-FIFO 79,500 75,000
======= ====== ====== ======

Exercise 1-5 (Calculation of EP under FIFO)

Dept. 1 Dept. 1
QS: M CC
IPB (100%M; ¼ CC) 72,000 (72,000) (18,000)
SIP 36,000
F&T 80,000 80,000 80,000
FOH 28,000 28,000 28,000
IPE - - -___
EP-FIFO 36,000 90,000
====== ======
Dept. 2
QS: M CC
IPB (2/3 CC) 48,000 - (32,000)
RPD 80,000
F&T 80,000 80,000 80,000
FOH - - -
IPE (1/3 CC) 48,000 - 16,000
EP-FIFO 80,000 64,000
====== ======
Dept. 3
QS: M CC
IPB (40% CC) 20,000 - (8,000)
RPD 80,000
F&T 56,000 56,000 56,000
FOH 24,000 24,000 24,000
IPE (100%M;80%CC)20,000 20,000 16,000
EP-FIFO 100,000 88,000

Exercise 1-6 (True or False)

1. T -false
2. F -true
3. T- false
4. F -true
5. T –false

Exercise 1-7 (Calculation of Unit Cost for each cost element)

M L O
EP under WA 28,800 26,400 23,000
- EP in IPB (5,200) (7,400) (4,500)
EP under FIFO 23,600 19,000 18,500
====== ===== =====
Unit Cost: FIFO WA
M = 80,240 = P 3.40 M = 29,200 + 80,240 = P 3.80
23,600 28,800
 Page |4

L = 76,000 = P 4.00 L = 36,200 + 76,000 = P 4.25

19,000 26,400

O = 44,400 = P 2.40 O = 10,800 + 44,400 = P 2.40

18,500 23,000

Exercise 1-8 (Calculation of Weighted Average Unit Cost for each cost element)
E P________
QS: M L O UC:
RPD 25,000 M = P16,250 ÷ 25,000 = P 0.65
F&T 20,000 20,000 20,000 20,000 L = P10,350 ÷ 23,000 = P 0.45
IPE (100%M; 60%L; 40%O) 5,000 5,000 3,000 2,000 O = P 16,500 ÷ 22,000 = P 0.75
EP – WA 25,000 23,000 22,000

Exercise 1-9 (Determination of units in process, beginning and their percentage of completion)
Units in IPB = EP in IPB for Materials ÷ % applied for Materials
= 32,000 ÷ 100%
= 32,000
=====

% applied for L = EP in IPB for Labor ÷ Units in IPB

= 19,200 ÷ 32,000
= 60%
===

% applied for O = EP in IPB for Overhead ÷ Units in IPB

= 6,400 ÷ 32,000
= 20%
===
Exercise 1-10 (Determination of WIP beginning and WIP end)
Raw Materials Labor Overhead
% applied last month:
RM = EP in IPB for RM ÷ Units in IPB
= 30,000 ÷ 30,000 = 100%

L = EP in IPB for L ÷ Units in IPB

= 13,500 ÷ 30,000 = 45%

O = EP in IPB for O ÷ Units in IPB

= 24,000 ÷ 30,000 = 80%

a)WIP beginning or Costs Last Month P 1,259,250

+ Costs added this month:
Packaging Materials = 30,000 x 100% x P 2.65 = P 79,500
Labor = 30,000 x 55% x P 6.50 = P 107,250
Overhead = 30,000 x 20% x P 9.00 = P 54,000 240,750
Total Cost of the completed Work in Process Inventory, beginning P 1,500,000
=========
b) Unit Cost:
RM P 31.85
Packaging Materials 2.65
DL 6.50
OH 9.00
P 50.00
=======
200,000 u finished & transferred - 30,000 u started last month
 Page |5

= 170,000 u started & completed this month x P50

= P 8,500,000 as Cost of the units started & completed in Feb.
c) IPE:
RM = 50,000 x 100% x P 31.85 = P 1,592,500
L = 50,000 x 50% x P 6.50 = P 162,500
O = 50,000 x 90% x P 9.00 = P 405,000
P 2,160,000

Exercise 1-11 (Calculation of Material Costs and Conversion Costs for the Current Period)
M CC
F&T 40,000 40,000
+ IPE 3,000 1,800
EP under WA 43,000 41,800
- EP in IPB (6,000) (1,200)
EP under FIFO 37,000 40,600
x Unit Cost x P 0.10 x P0.20
Total Cost P 3,700 P 8,120
====== ======
Exercise 1-12 (Calculation of EP, Unit Cost, Cost of Goods Completed and WIP end Using
Weighted Average Method)

1. P134,400 ÷ 16,800 = P 8

2. Total conversion units 16,800

Conversion units for completed production 15,000
Conversion units for WIP 1,800 ÷ 6,000 = 30%
=====
3. No. Material A is added at the beginning of production and would be part of the ending WIP
inventory. Given that the WIP end is only 30% complete, these goods have yet to reach the
completion of manufacturing where packaging material is applied.

4. 15,000 x (P 5 + P 2 + P8) = P 225,000

5. Material A: 6,000 x P 5 = P 30,000

Packaging Material -
Conversion Cost: 1,800 x P 8 = 14,400
Total ……………………………….. P44,400

Exercise 1-13 (Journal Entries under Process Costing System)

Work in Process Inventory - Department E................................................. 50,000
Work in Process Inventory - Department Z.................................................. 40,000
Materials.............................................................................................. 90,000

Work in Process Inventory - Department E................................................. 80,000

Work in Process Inventory - Department Z.................................................. 70,000
Payroll.................................................................................................. 150,000

Work in Process Inventory - Department E................................................. 180,000

Work in Process Inventory - Department Z.................................................. 70,000
Applied Factory Overhead................................................................... 250,000

Work in Process Inventory - Department Z.................................................. 300,000

Work in Process Inventory - Department E.......................................... 300,000
30,000 units x P 10
 Page |6

Finished Goods Inventory............................................................................ 448,000

Work in Process Inventory - Department Z.......................................... 448,000
28,000 units x P 16

Exercise 1-14 (Journal Entries in Sequential Flow)

A. Oct. 31 Work-in-Process Inventory: Dept. A 2,075,000

Raw-Material Inventory 160,000
Wages Payable 555,000
Manufacturing Overhead 1,360,000

B. Oct. 31 Work-in-Process Inventory: Dept. B 1,925,000

Work-in-Process Inventory:Dept. A 1,925,000

C. Oct. 31 Finished-Goods Inventory 2,800,000

Work-in-Process Inventory:Dept. B 2,800,000

Exercise 1-15 (Multiple Choice)

1. D EP Schedule: Ave. UC of M = 11,000 + 46,120

IPB 22,000 F& T 97,000 112,000 EUP
SIP 90,000 + EP in IPE 15,000 = P 0.51
- F&T (97,000) EP under WA112,000 =====
IPE (100% M) 15,000 ======

WIP end = EP 15,000 u x P 0.51 = P 7,650

======

2. B M CC Ave. UC of M = P13,800 + P42,000 = P

3.10
F&T 12,000 12,000 18,000 u
+ EP in IPE 100%M; 50% CC= 6,000 3,000
EP – WA 18,000 15,000 Ave. UC of CC = P 3,740 + P 26,260= P 2.00
===== ===== 15,000 u P 5.10
=====
3. B M CC Ave. UC of M = P2,500 + P5,500 = P
0.40
F&T 12,000 12,000 20,000 u
+ EP in IPE 100%M; 75% CC= 8,000 6,000
EP – WA 20,000 18,000 Ave. UC of CC = P 1,000 + P5,000 = P0.33
===== ===== 18,000 u
Ave. UC from Previous Dept. (UCPD):
= P 12,000 + P 29,000 = P2.05
6,000 u + 14,000 u P 2.78
=====
4. C
Units transferred out.................................................................... 40,000 *
Ending work in process (10,000 units × 75% complete)..............  7,500
Equivalent units for conversion costs.......................................... 47,500
* Solve backwards: 47,500 − 7,500 = 40,000

Units in beginning inventory............................ 15,000

+ Units started................................................ 35,000 *
− Units in ending inventory............................. 10,000
 Page |7

= Units transferred out.................................... 40,000

* Solve backwards: Units started = 40,000 −15,000 + 10,000 = 35,000

5. B
Materials Conversion Total
Total cost........................................................ P73,950 P135,720
÷ Equivalent units..............................................    5,800      5,200
= Cost per equivalent unit.................................. P12.75 P26.10
× Ending inventory
Materials: 800 units × P12.75...................... P10,200
Conversion costs: *200 units × P26.10....... P5,220 P15,420

Units in work in process, March 31.......................................................................... 800

Less: Uncompleted as to conversion (5,800 total − 5,200 equivalent units)............ 600
Equivalent units in ending work in process: conversion.......................................... 200

6. C
Cost from beginning inventory.................................................................................
P 3,600
Cost to finish beginning inventory: (1 − 40%) = 60% × 2,000
= 1,200 EU × P8 cost per EU..............................................................................
   9,600
Total cost of units from beginning inventory............................................................
P13,200

7. B
To complete beginning work in process (15,000 units × 40% complete).......... 6,000
Units started and completed during the period (? units started − 10,000 units
in ending inventory)...................................................................................... ?
Ending work in process (10,000 units × 75% complete)...................................  7,500
Equivalent units of production.......................................................................... 37,500
To solve for Units started and completed during the period, solve algebraically:
6,000 + ? + 7,500 = 37,500
? = 24,000
Next:
Units started & completed = units started – 10,000 units from ending inventory 24,000 = units
started – 10,000
= 34,000

8. B EP under WA 22,000
- EP in IPB 5,000 x 1/5 = 1,000
EP under FIFO 21,000
======
9. A M CC
F&T 43,900 43,900
+ EP in IPE (60%CC) 2,400 WIP end = 2,400 EP in IPE x P 7.40
EP under WA 43,900 46,300 = P 17,760
- EP in IPB (1,580) =======
EP under FIFO 43,900 44,720
====== =====
F & T:
Costs last month or WIP beg. P 11,850
Costs added to IPB:
CC = 7,900 u x 80% x P 7.40 = 46,768
Started & Completed this month (43,900 – 7,900) x P 7.40 = 266,400
P325,018
=======
10. C
 Page |8

Quantity Schedule: M CC
IPB (100% M; 40% CC) 200 u (200 u) (80 u)
SIP 600 u
- IPE (100% M) 100 u 100 u
F&T 700 u 700 u 700 u
EP under FIFO 600 u 620 u
===== =====
UC:
M = P1,000,000 ÷ 600 u = P 1,666.67
CC = P 1,250,000 ÷ 620 u = 2,016.13
P 3,682.80
========
11. C refer to #11 for the quantity schedule

12. C M CC
EP under FIFO 600 u 620 u
+ EP in IPB 200 u 80 u
EP under WA 800 u 700 u
13. D F&T 80,000 chairs – 15,000 chairs in IPB = 65,000 chairs started and completed in Feb.

14. C IPB ……………. 3,000 u

+ SIP ……………77,000 u
- IPE ………….( 8,000 u)
F&T 72,000 u

15. C IPB 3,000 u + RPD 8,000 u = 11,000 units to be accounted for

16. A 11,000 u - 2,000 u = 9,000 u completed – 3,000 units started last month
= 6,000 u started & completed this month

17. B UC from PD = CPD this month ÷ RPD this month

= P 9,600 ÷ 8,000 units
= P 1.20

18. B Dept. 2
M CC CC
F&T 42,803 42,803 EP for CC under WA 49,562
IPE (100% M; 50% CC) 13,517 6,759 EP for CC under FIFO 46,362
EP under WA 56,320 49,562 Difference 3,200
EP in IPB (100% M;40% CC) 8,000 3,200 =====
EP under FIFO 48,320 46,362

19. B Dept. 1
M
F&T 42,120
IPE (100% M; 50% CC) 16,380
EP under WA 58,500
EP in IPB (100% M;60% CC) 3,500
EP under FIFO 55,000
======
20. D

COMPREHENSIVE PROBLEMS
 Page |9

Problem 1-A (Preparation of CPR using Weighted Average Method)

Robusta Coffee Co.
Cost of Production Report – Weighted Average
For the month ended July 31, 2013

Quantity Schedule: MLO

IPB (45%) 25,000 u
SIP 325,000 u
F&T 250,000 u 250,000
IPE (75%) 100,000 u 75,000
EP under WA 325,000
======
Costs Charged to the Department: TC UC
WIP beginning or Costs last month P 640,000 -
Costs added this month:
M …………………………………………………………….. 325,000 P 2.00 325,000+325,000/325,000
L …………………………………………………………….. 300,000 1.20 90,000+300,000/325,000
O ……………………………………………………………. 360,000 1.80 225,000+360,000/325,000
Total Costs to be accounted for ……………………………….P1,625,000 P 5.00
======== ======
Cost Assignment:
F & T 250,000 u x P 5 ……………………………………………………. P1,250,000
IPE 100,000 x 75% x P 5 ……………………………………………. 375,000
Total Costs as accounted for ………………………………….. P1,625,000
========
Debit Credit Debit Balance
Goods Finished, 250,000 u P 1,250,000 P 375,000 as ending balance of
WIP-Roasting Dept.

Problem 1-B (Preparation of CPR using Weighted Average Method)

Jarina Milling Company
Cost of Production Report – Weighted Average
For the month ended October 31, 20_

Quantity Schedule: M CC
IPB (100% M; 25% CC) 20,000 u
SIP 80,000 u
F&T 84,000 u 84,000 84,000
IPE (100% M; 80% CC) 16,000 u 16,000 12,800
EP under WA 100,000 96,800
====== =====
Costs Charged to the Department: TCUC
WIP beginning or Costs last month (250,000+489,000) = P739,000
-
Costs added this month:
M …………………………………………………………….. 725,000 P 9.75
(250,000+725,000)/100,000
CC ………………………………………………………….. 600,000 11.25 (489,000+600,000)/96,800
Total Costs to be accounted for ………………………………..P2,064,000 P 21.00
======== ======
Cost Assignment:
F & T 84,000 u x P 21 ……………………………………………………. P1,764,000
IPE:
M = 16,000 x 100% x P 9.75 ……………………………….P 156,000
CC = 16,000 x 80% x P 11.25 …………………………… 144,000 300,000
 P a g e | 10

Total Costs as accounted for ………………………………….. P2,064,000

========

Problem 1 – C (Preparation of CPR in one production department; FIFO vs. Weighted Average)
a)
Dico Phil Inc.
Cost of Production Report – Weighted Average
For the month ended June 30, 2013

Quantity Schedule: M L O
IPB (100% M; 30%L; 60% O) 42,000 u
SIP 60,000 u
F&T 72,000 u 72,000 72,000 72,000
IPE (100% M; 40%L; 80% O) 30,000 u 30,000 12,000 24,000
EP under WA 102,000 84,000 96,000
====== ===== =====
Costs Charged to the Department: TC UC
WIP beginning or Costs last month (32,400+14,070+35,580)= P82,050 -
Costs added this month:
M …………………………………………………………….. 90,000 P 1.20 (32,400+90,000)/102,000
L …………………………………………………………….. 32,130 0.55 (14,070+32,130)/84,000
O ……………………………………………………………. 46,020 0.85 (35,580+46,020)/96,000
Total Costs to be accounted for ………………………………..P 250,200 P 2.60
======== ======
Cost Assignment:
F & T 72,000 u x P 2.60 ……………………………………………………. P 187,200
IPE:
M = 30,000 x 100% x P 1.20 ……………………………….P 36,000
L = 30,000 x 40% x P 0.55 ………………………………. 6,600
O = 30,000 x 80% x P 0.85 ………………………………. 20,400 63,000
Total Costs as accounted for ………………………………….. P 250,200
========
b) Dico Phil Inc.
Cost of Production Report – FIFO
For the month ended June 30, 2013
Quantity Schedule: M L O
IPB (100% M; 30%L; 60% O) 42,000 u (42,000) (12,600) (25,200)
SIP 60,000 u
F&T 72,000 u 72,000 72,000 72,000
IPE (100% M; 40%L; 80% O) 30,000 u 30,000 12,000 24,000
EP under FIFO 60,000 71,400 70,800
====== ===== =====
Costs Charged to the Department: TC UC
WIP beginning or Costs last month (32,400+14,070+35,580)= P82,050 -
Costs added this month:
M …………………………………………………………….. 90,000 P 1.50 (90,000/60,000)
L …………………………………………………………….. 32,130 0.45 (32,130/71,400)
O ……………………………………………………………. 46,020 0.65 (46,020/70,800)
Total Costs to be accounted for ………………………………..P 250,200 P 2.60
======== ======

Cost Assignment:
F & T:
WIP beginning or Costs last month ………………………..P 82,050
Costs added to IPB:
L = 42,000 u x 70% x P .45 = 13,230
 P a g e | 11

O = 42,000 u x 40% x P 0.65 = 10,920

Started & Completed = 30,000 u x P 2.60 = 78,000 P184,200
IPE:
M = 30,000 x 100% x P 1.50 ……………………………….P 45,000
L = 30,000 x 40% x P 0.45 ………………………………. 5,400
O = 30,000 x 80% x P 0.65 ………………………………. 15,600 66,000
Total Costs as accounted for ………………………………….. P 250,200
========

Problem 1-D (FIFO and Weighted Average Method)

a. Weighted average inventory

assumption
Dept 1 MAT CC
Complete 20,000 20,000 20,000
Eq-End WIP 5,000     0 2,000
EP-WA 25,000 20,000 22,000

Unit P201,050 = P34,000 = P1.70 P109,450 = = P14.717

P8.042 P4.975
Cost 25,000 20,000 22,000

End WIP Dept 1 = 5,000 x P8.042 = P40,210

CC = 2,000 units x P4.975 =   9,950
P50,160

COGM = P344,500 - P50,160 = P294,340

b. FIFO inventory assumption

Dept 1 MAT CC
Complete 20,000  20,000 20,000 
Eq-End WIP 5,000  0 2,000 
- Eq-Begin (2,000)     0 (1,200)
EP-FIFO 23,000  20,000 20,800 

Unit P184,000 = P34,000 = P1.70 P104,000 = =

P8.00 P5.00 P14.70
Cost 23,000 20,000 20,800

End WIP Dept 1 = 5,000 units x = P40,000

P8.00
CC = 2,000 units x P5.00 = 10,000
P50,000

COGM = P344,500 - P50,000 = P294,500

Continuation of Problem 1 – E (Preparation of CPR using FIFO or Weighted Average Method

including Journal Entries)

Tasty Chewing Gum Company

 P a g e | 12

Cost of Production Report – FIFO Method

For the month ended October 31, 2013

Quantity Schedule: M CC
IPB (100% M; 70% CC) 16,000 kg (16,000) (11,200)
SIP 405,000 kg
F&T 393,000 kg. 393,000 393,000
IPE (100% M; 25% CC) 28,000 kg. 28,000 7,000
EP under FIFO 405,000 388,800
====== =====
Costs Charged to the Department: TC UC
WIP beginning or Costs last month (244,100+56,800) = P300,900 -
Costs added this month:
M …………………………………………………………….. 850,500 P 2.10 (850,500/405,000)
CC (344,000 + 239,200)………………………………….. 583,200 1.50 (583,200/388,800)
Total Costs to be accounted for ………………………………..P1,734,600 P 3.60
======== ======
Cost Assignment:
F & T:
WIP beginning or Costs last month ………………………… P 300,900
Costs added to IPB:
CC = 16,000 kg. x 30% x P1.50 = 7,200
Started & Completed = 377,000 kg. x P3.60 = 1,357,200 1,665,300
IPE:
M = 28,000 kg. x P2.10 = 58,800
CC = 28,000 kg. x 25% x P1.50 = 10,500 69,300
Total Costs as accounted for …………………………….. P1,734,600
========

October 31, 2013 Work in process – Blending Department P 1,433,700

Materials ………………………………………………….P 850,500
Payroll …………………………………………………. 344,000
Applied Factory Overhead ……………………………… 239,200
Current production costs incurred in October

Work in process – Packaging Department P 1,665,300

Work in process – Blending Department P 1,665,300
Costs transferred out to Packaging Department

Tasty Chewing Gum Company

Cost of Production Report – Weighted Average Method
For the month ended October 31, 2013

Quantity Schedule: M CC
IPB (100% M; 70% CC) 16,000 kg
SIP 405,000 kg
F&T 393,000 kg. 393,000 393,000
IPE (100% M; 25% CC) 28,000 kg. 28,000 7,000
EP under WA 421,000 400,000
====== ======
Costs Charged to the Department: TC UC
WIP beginning or Costs last month (244,100+56,800) = P300,900 -
Costs added this month:
M …………………………………………………………….. 850,500 P 2.60
(244,100+850,500)/421,000
CC (344,000 + 239,200)………………………………….. 583,200 1.60 (56,800+583,200)/400,000
 P a g e | 13

Total Costs to be accounted for ………………………………..P1,734,600 P 4.20

======== ======
Cost Assignment:
F & T 393,000 kg. x P4.20 ………………………………………………. P1,650,600
IPE:
M = 28,000 x 100% x P 2.60 …………………………. P 72,800
CC = 28,000 x 25% x P 1.60 …………………………… 11,200 84,000
Total Costs as accounted for ………………………………….. P1,734,600
========

October 31, 2013 Work in process – Blending Department P 1,433,700

Materials ………………………………………………….P 850,500
Payroll …………………………………………………. 344,000
Applied Factory Overhead ……………………………… 239,200
Current production costs incurred in October

Work in process – Packaging Department P 1,650,600

Work in process – Blending Department P 1,650,600
Costs transferred out to Packaging Department

Problem 1 – F (Preparation of CPR with Journal Entries using FIFO Method)

Mitando Co.
Cost of Production Report – FIFO
For the month ended September 30, 2013

Cutting Department
Quantity Schedule: M L O
IPB (80% M; 50%L; 30% O) 10,000 u ( 8,000) (5,000) (3,000)
SIP 30,000 u
F&T 25,000 u 25,000 25,000 25,000
IPE (100% M; 80%L; 60% O) 15,000 u 15,000 12,000 9,000
EP under FIFO 32,000 32,000 31,000
====== ===== =====
Costs Charged to the Department: TC UC
WIP beginning or Costs last month (80,100+17,500+7,900)= P105,500 -
Costs added this month:
M …………………………………………………………….. 288,000 P 9.00 (288,000/32,000)
L …………………………………………………………….. 64,000 2.00 (64,000/32,000)
O ……………………………………………………………. 124,000 4.00 (124,000/31,000)
Total Costs to be accounted for ………………………………..P 581,500 P15.00
======== ======
Cost Assignment:
F & T:
WIP beginning or Costs last month ………………………..P105,500
Costs added to IPB:
M = 10,000 u x 20% x P 9 = P 18,000
L = 10,000 u x 50% x P 2 = 10,000
O = 10,000 u x 70% x P 4 = 28,000
Started & Completed = 15,000 u x P15 = 225,000 P386,500
IPE:
M = 15,000 x 100% x P 9 ………………………………. P 135,000
L = 15,000 x 80% x P 2 ………………………………. 24,000
O = 15,000 x 60% x P 4 ………………………………. 36,000 195,000
Total Costs as accounted for ………………………………….. P 581,500
 P a g e | 14

========
Assembly Department
Quantity Schedule: M L&O
IPB (60% M; 30% L&O) 5,000 u ( 3,000) (1,500)
RPD 25,000 u
F&T 18,000 u 18,000 18,000
IPE (80% M; 40% L&O) 12,000 u 9,600 4,800
EP under FIFO 24,600 21,300
====== =====
Costs Charged to the Department: TC UC
WIP beginning or Costs last month (10,000+1,000+2,000+4,000)= P17,000 -
Costs from Previous Dept. or Costs transferred-in 386,500 15.46 (386,500/25,000)
Costs added this month:
M …………………………………………………………….. 98,400 P4.00 (98,400/24,600)
L …………………………………………………………….. 42,600 2.00 (42,600/21,300)
O ……………………………………………………………. 75,402 3.54 (75,402/21,300)
Total Costs to be accounted for ……………………………….. P619,902 P25.00
======== =====
Cost Assignment:
F & T:
WIP beginning or Costs last month ……………………….. P17,000
Costs added to IPB:
M = 5,000 u x 40% x P 4 = P 8,000
L&O = 5,000 u x 70% x P 5.54 = 19,390
Started & Completed = 13,000 u x P25 = 325,000 P369,390
IPE:
CPD 12,000 u x P 15.46 P185,520
M = 12,000 u x 80% x P 4 ………………………………. 38,400
L&O = 12,000 u x 40% x P 5.54 …………………… 26,592 250,512
Total Costs as accounted for ………………………………….. P 619,902
========

September 30 WIP – Cutting Department P 476,000

Materials P 288,000
Payroll 64,000
Applied Factory Overhead 124,000
Production costs incurred this month

WIP- Assembly Department P 386,500

WIP – Cutting Department P 386,500
Cost of the units transferred out by Cutting
to Assembly Department

WIP – Assembly Department P 216,402

Materials P 98,400
Payroll 42,600
Applied Factory Overhead 75,402
Production costs incurred this month

Finished Goods Inventory P369,390

WIP – Assembly Department P 369,390
Cost of the units transferred out by Assembly
Department
 P a g e | 15

Problem 1-G (Preparation of CPR using FIFO method)

Crunchy Cookie Co.

Cost of Production Report – FIFO
For the month ended August 31, 2013

Baking Department Packaging Department

Quantity Schedule: M L&O M L&O

IPB (100% M; 25% L&O) 24,000 u (24,000) (6,000) (100%M;30% L&O) 30,000 u (30,000) (9,000)
SIP/RPD 1,200,000 u 1,224,000 u
F&T 1,224,000 u 1,224,000 1,224,000 1,214,000 u 1,214,000 1,214,000
IPE -0- ________ ________(100%M;80% L&O) 40,000 u 40,000 32,000
EP under FIFO 1,200,000 1,218,000 1,224,000 1,237,000
======= ======= ======= ========
Costs Charged to the Department: TC UC TC UC
WIP beginning or Costs last month P 2,700 - P 5,370 -
Costs from Previous Dept. or Costs Transferred-In 120,000 P 0.10 183,600 P 0.15
Costs added this month:
M …………………………………………………………… 24,480 .02
L&O…………………………………………………………… 60,900 0.05 37,110 .03
Total Costs to be accounted for ………………………………..P 183,600 P 0.15 P 250,560 P 0.20
======== ====== ========= =====
Cost Assignment:
F & T:
WIP beginning or Costs last month ……………………….. P 2,700 5,370
Costs added to IPB:
L&O = 24,000 u x 75% x P.05 = 900 (30,000x70%x.03) 630
Started & Completed = 1,200,000 u x P0.15 = 180,000 180,900 1,184,000 x .20 = 236,800 242,800
IPE:
Costs from Previous Dept.= 40,000 x .15 = 6,000
M 40,000 x .02 = 800
L&O _________ 32,000 x .03 = 960 7,760
Total Costs as accounted for …………………………….. P 183,600 P250,560
======== =======

CHAPTER 2
Exercise 2-1 (CPR with Production Shrinkage Using Weighted Average Method):
Mio Chemical Inc.
Cost of Production Report – Weighted Average
For the month ended May 31, 2013

Cooking Department
Quantity Schedule: M CC
IPB (100% M; 60% CC) 10,000 u
SIP 45,000 u
F&T 40,000 u 40,000 40,000
IPE (100% M; 40% CC) 9,000 u 9,000 3,600
Normal Shrinkage or Normal Lost Units 6,000 u ___-___ __-____
EP under WA 49,000 43,600
====== =====
Costs Charged to the Department: TC UC
 P a g e | 16

WIP beginning or Costs last month (4,375+2,975) = P 7,350 -

Costs added this month:
M …………………………………………………………….. 11,795 P 0.33 (4,375+11,795)/49,000
CC ……………………………..………………………………... 6,181 0.21 (2,975+6,181)/43,600
Total Costs to be accounted for …………………………………… P 25,326 P 0.54
======== ======
Cost Assignment:
F & T 40,000 u x P 0.54 ……………………………………. P21,600
IPE:
M = 9,000 x 100% x P 0.33 ………………………………. 2,970
CC = 9,000 x 40% x P 0.21 …………………………… , 756 3,726
Total Costs as accounted for ………………………………….. P 25,326
========

Exercise 2-2 (Spoilage With Salvage Value Using Weighted Average):

Sure-Na Company
Production Cost Report – Weighted Average
For the month ended July 31, 20_

Finishing Department
Quantity Schedule: M CC
IPB (100% M; 60% CC) 2,000 u
RPD 20,000 u
F&T 15,000 u 15,000 15,000
IPE (100% M; 20% CC) 4,000 u 4,000 800
Normal Discrete Spoilage (100% M; 80%CC) 3,000 u 3,000 2,400
EP under WA 22,000 18,200
====== =====
Costs Charged to the Department: TC UC
WIP beginning or Costs last month (6,050+3,410+1,638+2,184)=P 13,282 -
Costs transferred-in or CPD 54,450 P 2.75 (6,050 +
54,450)/22,000
Costs added this month:
M …………………………………………………………….. 30,690 P 1.55 (3,410+30,690)/22,000
CC ………………………14,742 + 19,656 =……..………….. 34,398 2.10
(3,822+34,398)/18,200
Total Costs to be accounted for …………………………………… P132,820 P 6.40
======== ======

Cost Assignment:
F & T 15,000 u x P 6.40 ……………………………………. P96,000
Cost of Normal Discrete Spoilage:
CPD or Costs transferred-in 3,000 x P 2.75 8,250
M = 3,000 x P 1.55 = 4,650
CC = 2,400 x P 2.10 = 5,040 P 113,940
IPE:
CPD = 4,000 x P 2.75 …………………………………….. P11,000
M = 4,000 x 100% x P 1.55 ………………………………. 6,200
CC = 4,000 x 20% x P 2.10 …………………………… 1,680 18,880

Total Costs as accounted for ………………………………….. P 132,820

========
 P a g e | 17

Exercise 2-3 (CPR with Normal and Abnormal Discrete Spoilage using FIFO method):
Endless Company
Cost of Production Report – FIFO
For the month ended May 31, 2013

Quantity Schedule: M L&O

IPB (100% M; 50% L&O) 5,600 u (5,600) (2,800)
SIP 74,400 u
F&T 70,000 u 70,000 70,000
IPE (100% M; 1/3 L&O) 7,500 u 7,500 2,500
Normal Discrete Spoilage 3% x 70,000 (100%) 2,100 u 2,100 2,100
Abnormal Discrete Spoilage (100%) 400 u 400 400
EP under FIFO 74,400 72,200
===== =====
Costs Charged to the Department: TC UC
WIP beginning or Costs last month = P 7,632 -
Costs added this month:
M …………………………………………………………….. 74,400 P 1.00 (74,400/74,400)
L&O ……………………………………………………….. 31,768 0.44 (31,768/72,200)
Total Costs to be accounted for ………………………………..P 113,800 P 1.44
======== ======

Cost Assignment:
F & T:
WIP beginning or Costs last month ………………………..P 7,632
Costs added to IPB:
L&O = 5,600 u x 50% x P .44 = 1,232
Started & Completed = 64,400 u x P 1.44 = 92,736 P101,600
Cost of Normal Discrete Spoilage 2,100 x P 1.44 = 3,024
Adjusted Cost of F & T ………………………………………….. P 104,624
IPE:
M = 7,500 x 100% x P 1.00 ………………………………. P 7,500
L&O = 7,500 x 1/3 x P 0.44 …………………………… 1,100 8,600
Cost of Abnormal Discrete Spoilage 400 x P 1.44 =………. 576
Total Costs as accounted for ………………………………….. P 113,800
========
Exercise 2-4 (CPR with accretion; using Weighted Average method)
AUPIP stands for Additional Units Put Into Process w/c resulted from accretion.

Barley Company
Cost of Production Report – Weighted Average
For the month ended October 31, 20_

Mixing Dept.
Quantity Schedule: M CC
IPB 1,000 u
RPD 2,000 u
AUPIP 6,000 u
F&T 7,800 u 7,800 7,800
IPE (100% M;25% CC) 1,200 u 1,200 300
EP – WA 9,000 8,100
==== =====
Costs Charged to the Dept.: TC UC
WIP beg. or CLM (1,120+190+60+120) P 1,490 -
CPD or Costs transferred-in 9,680 P 1.20 (1,120 + 9,680) ÷ (1,000 u + 2,000 u +
6,000 u)
 P a g e | 18

Costs added this month:

M 1,610 0.20 (190+1,610) ÷ 9,000 u
CC or L&O (1,560 + 3,120) 4,680 0.60 (180+4,680) ÷ 8,100 u
TC to be accounted for P 17,460 P 2.00
====== ======
Cost Assignment:
F&T 7,800 x P 2 = P 15,600
IPE:
CPD 1,200 x P 1.20 = P 1,440
M = 1,200 x P 0.20 = 240
CC = 300 x P 0.60 = 180 1,860
TC as accounted for P 17,460
======

Exercise 2-5 (CPR with accretion; using FIFO method)

Herbal Products Company
Cost of Production Report – FIFO
For the month ended May 31, 20_

Blending Department
Quantity Schedule: M L O
IPB (100% M; 20% L; 40% O) 2,000 u (2,000) (400) (800)
RPD 5,000 u
AUPIP 5,000 u
F&T 10,500 u 10,500 10,500 10,500
IPE (100% M; 60% L; 80% O) 1,500 u 1,500 900 1,200
EP – FIFO 10,000 11,000 10,900
===== ===== =====
Costs Charged to the Department: TC UC
WIP beginning or Costs last month (2,460+500+150+ 600)= P 3,710 -
CPD or Costs transferred-in 12,500 P 1.25 (12,500 ÷ 5,000 urpd
+5,000 u)
Costs added this month:
M …………………………………………………………….. 2,500 P 0.25 (2,500/10,000)
L …………………………………………………………….. 3,300 0.30 (3,300/11,000)
O ……………………………………………………………. 7,630 0.70 (7,630/10,900)
Total Costs to be accounted for ……………………………….. P 29,640 P 2.50
======== ======
Cost Assignment:
F & T:
WIP beginning or Costs last month ………………………..P 3,710
Costs added to IPB:
L = 2,000 u x 80% x P0.30 = 480
O = 2,000 u x 60% x P0.70 = 840
Started & Completed = 8,500 u x P2.50 = 21,250 P26,280
IPE:
CPD = 1,500 x P 1.25 …………………………………… P 1,875
M = 1,500 x P0.25 ………………………..…………. 375
L = 900 x P0.30 …. ………………………………. 270
O = 1,200 x P0.70 ….………………………………. 840 3,360
Total Costs as accounted for ………………………………….. P 29,640
========
Exercise 2-6 (CPR involving spoiled units with salvage value; using FIFO method)
Petrophil Company
Cost of Production Report – FIFO
For the month ended September 30, 2013
 P a g e | 19

Blending Department
Quantity Schedule: M L&O
IPB (60% M; 30% L&O) 2,800 u (1,680) (840)
RPD 8,400 u
F&T 7,600 u 7,600 7,600
IPE (100% M; 50% L&O) 2,500 u 2,500 1,250
Normal Discrete Spoilage (100%) 1,100 u 1,100 1,100
EP – FIFO 9,520 9,110
===== =====
Costs Charged to the Department: TC UC
WIP beginning or Costs last month (17,889+2,733+7,278+12,350)= P 40,250 -
CPD or Costs transferred-in 68,040 P 8.10 (68,040 ÷ 8,400 urpd)
Costs added this month:
M …………………………………………………………….. 11,900 P 1.25 (11,900/9,520)
L&O 30,063 + 51,016 …………………………………… 81,079 8.90 (81,079/9,110)
Total Costs to be accounted for ……………………………….. P 201,269 P18.25
======== ======
Cost Assignment:
F & T:
WIP beginning or Costs last month ………………………..P 40,250
Costs added to IPB:
M = 2,800 u x 40% x P1.25 = 1, 400
L&O = 2,800 u x 70% x P8.90 = 17,444
Started & Completed = 4,800 u x P18.25 = 87,600
Costs of Normal Discrete Spoilage 1,100 x P 18.25 = 20,075
Adjusted Cost of F&T ………………………………………….. P 166,769
IPE:
CPD = 2,500 x P 8.10 …………………………………… P 20,250
M = 2,500 x P1.25 ………………………..…………. 3,125
L&O = 1,250 x P8.90 …. ………………………………. 11,125 34,500
Total Costs as accounted for ………………………………….. P 201,269
========

Exercise 2-7 (Hybrid Costing):

SIP ……………………….….1,500
F & T ……………………..….1,200
IPE (100%M; 25%L; 35%O) 300

a) Cost of the completed jackets:

DM:
Dacron 150 x P10 = P 1,500
Denim 500 x P5 = 2,500
Cotton 550 x P12 = 6,600 P 10,600
DL 1,200 x P 12 = 14,400
OH 1,200 x P 9 = 10,800
P 35,800
=======
b) WIP end:
DM:
Dacron 50 x P10 = P 500
Denim 100 x P5 = 500
Cotton 150 x P12 = 1,800 P 2,800
DL 300 x 25% x P12 = 900
OH 300 x 35% x P 9 = 945
 P a g e | 20

P 4,645
=======
Exercise 2-8 (Calculation of Unit Production Cost and Total Production Cost with journal entries):
1. SIZE
Medium Large
DM:
Job # 401 P 200,000 ÷ 5,000 P 40.00
Job # 402 P 500,000 ÷ 10,000 P 50.00
CC:
Cutting Dept. P 450,000 ÷ 15,000 30.00 30.00
Assembling Dept. P 225,000 ÷ 15,000 15.00 15.00
Finishing Dept. P 150,000 ÷ 15,000 10.00 10.00
Unit Production Cost P 95.00 P105.00
X Quantity produced ……………………….. x 5,000 x 10,000
Total Production Cost ………………………P 475,000 + P 1,050,000 = P 1,525,000
======== ========= =========
2.
WIP – Cutting Department ……………………………..P 1,150,000
Materials 200,000 + 500,000 ……………….. P 700,000
Applied Conversion Costs ……………………… 450,000

WIP – Assembling Department ……………………… P 1,375,000

WIP- Cutting Department ………………………. P 1,150,000
Applied Conversion Costs ……………………… 225,000

WIP – Finishing Department ………………………….. P 1,525,000

WIP – Assembling Department ……………….. P 1,375,000
Applied Conversion Costs ……………………… 150,000

Finished Goods Inventory ……………………………… P 1,525,000

WIP – Finishing Department …………………… P 1,525,000

Exercise 2-9(Using Hybrid Costing in Calculating Unit Production Cost and Total Production
Cost):
a. Extrusion Form Trim Finish
Material Costs P 192,000 P 44,000 P 15,000 P 12,000
÷ Quantity produced ÷ 16,000 u ÷ 11,000 u ÷ 5,000 u ÷ 2,000 u
Unit Cost of M P 12 P4 P3 P6

Conversion Costs P 392,000 P 132,000 P 69,000 P 42,000

÷ Quantity produced ÷ 16,000 u ÷ 11,000 u ÷ 5,000 u ÷ 2,000 u
Unit Cost of CC P 24.50 P 12 P 13.80 P 21

Plastic Standard Deluxe Executive

Sheets Model Model Model
Unit Costs:
Extrusion Material ……………………… P 12.00 P 12.00 P 12.00 P 12.00
Form Material …………………………... - 4.00 4.00 4.00
Trim Material ……………………………. - - 3.00 3.00
Finish Material …………………………... - - - 6.00
Extrusion CC ……………………………. 24.50 24.50 24.50 24.50
Form CC …………………………………. - 12.00 12.00 12.00
Trim CC ………………………………….. - - 13.80 13.80
 P a g e | 21

Finish CC …………………………………. - - - 21.00

UPC ………………………………………..P 36.50 P 52.50 P 69.30 P 96.30
X Qty. Produced …………………………x 5,000 x 6,000 x 3,000 x 2,000
Total Production Cost ………………….P182,500 P 315,000 P 207,900 P 192,600
======= ======== ======== ========
b. M EP CC EP
Entering Trim Operations:
2,000 Deluxe units 100% 2,000 100% 2,000
1,000 Deluxe units 100% 1,000 60% 600
2,000 Executive units 100% 2,000 100% 2,000
5,000 4,600
==== ====
WIP – Deluxe Model: UC TC
Extrusion Material ……………….. P 12 P 12,000
Form Material …………………….. 4 4,000
Trim Material ……………………… 3 3,000
Extrusion CC ……………………… 24.50 24,500
Form CC …………………………… 12.00 12,000
Trim CC (60%) ……………………. 9.00* 9,000*
P 64.50 P 64,500
====== =======

CC = 30,000 + 39,000 = P 15 per equivalent unit (CMA Adapted)

4,600

Exercise 2-10 (Hybrid Costing):

SIP ……………………….….130
F & T ……………………..….105
IPE (100% M; 60% CC) 25

a. Cost of the completed necklaces:

DM:
Natural 28 x P 7 = P 196
Glass 65 x P24 = 1,560
Metal 12 x P15 = 180 P 1,936
CC 105 x P 23 = 2,415
P 4,351
=======
b. WIP end:
DM:
Natural 7 x P 7 = P 49
Glass 5 x P 24 = 120
Metal 13 x P15 = 195 P 364
CC 25 x 60% x P23 = 345
P 709
======

Exercise 2-11 (True or False):

1. T 6. F 11. T

2. T 7. T 12. T

3. F 8. T 13. T
 P a g e | 22

4. T 9. T 14. T

5. T 10. T 15. T

Exercise 2- 12 (Multiple Choice):

1. D 6. B 11. B 16. B

2. B 7. D 12. B 17. A

3. B 8. D 13. B 18. A

4. D 9. B 14. C 19. C

5. A 10. C 15. B 20. C

Problem 2-A (Spoilage in Originating Department)

a. c.
Materials Conversion Costs Transferred In Mat CC
46,500  46,500  44,500  44,500 44,500 
9,000  3,000  12,000  0 2,400 
(8,000) (6,000) (10,000)     0 (3,000)
47,500  43,500  46,500  44,500 43,900 

b. Since the material in the second department goes in at the 50 percent point and
the ending WIP inventory is only at the 20 percent point, units complete is the
same as the equivalents of material 44,500, given that units started plus units in
beginning WIP are equal to units complete plus ending WIP 10,000 + 46,500 -
44,500 = 12,000 units in ending WIP.

Problem 2-B (Normal and Abnormal Spoilage)

a.
TI Mat CC
Complete 33,600 33,600 33,600
+ Equiv Ending 10,500 10,500 4,200
WIP
+ Normal Sp 1,680 1,680 1,680
+ Abnor Sp   420   420   420
46,200 46,200 39,900

b. 33,600 x P9 P302,400 TC = 46,200 x P5 P231,000

1,680 x P9 15,120 46,200 x P1 46,200
P317,520 39,900 x P3 119,700
P396,900

c. 10,500 x P5 P52,500
10,500 x P1 10,500
 P a g e | 23

4,200 x P3 12,600
P75,600

COGM = P396,900 - 75,600 - 3,780 = P317,520

d. P5 = P18,900 + X
46,200

X = P231,000 - 18,900 = P212,100

e. ABN = 420 x P9 = P3,780

Problem 2-C (Operaion Costing)

A. Department no. 1: P380,000 ÷ 40,000 units = P9.50
Department no. 2: P196,000 ÷ 28,000 units (40,000 x 70%) = P7.00
Department no. 3: P150,000 ÷ 12,000 units (40,000 x 30%) = P12.50

B. Direct materials (P23,500 + P11,900) P35,400

Department no. 1 conversion (500 x P9.50) 4,750
Department no. 3 conversion (500 x P12.50) 6,250
Total cost P46,400

C. Operation costing is a hybrid system because it contains features that are present in both a
job-costing system and a process-costing system. Direct materials are assigned directly to
the batches of goods produced; in contrast, conversion costs are accumulated by
department and are then assigned to manufactured goods by using an averaging technique.

Chapter 3
Exercise 3-1 (True/False)

3-1
1 F 6 T 11 T
2 T 7 F 12 T
3 F 8 F 13 F
4 T 9 T
5 T 10 T

Exercise 3-2 (Multiple Choice)

3-2
1 B 11 C 21 D
2 D 12 D 22 B
Approximated NRV/
3 B 13 B 23 Hypothetical NRV
4 D 14 A 24 C
 P a g e | 24

5 D 15 B 25 C
6 A 16 B 26 C
7 D 17 D 27 C
8 C 18 A 28 D
9 C 19 B 29 A
10 A 20 B 30 D

Exercise 3-3 (by-product/replacement method)

Refined
3-3 Sugar Wine Total
Production Cost P600, 000 P700, 000 P1, 300, 000
Replacement (60,0
Cost 00) 60,000
540,0 760,0 1,300,0
Production Cost 00 00 00
after Cost Transer

Exercise 3-4 By-Product (Reversal Method)

3-4 a. P62, 500

b. P95, 000

Exercise 3-5. Joint Products (Physical Measure Allocation)

3-5
a. (1,000/5,150) * P9,000 = P1,748
r b. (1,400/5,150) * P9,000 = P2,447
c. (750/5,150) * P9,000 = P1,311
d. (2,000/5,150) * P9,000 = P3,495

Exercise 3-6. Joint Products (Physical Measure Allocation)

Exercise 3-7. By-Products and Joint Products (Physical Measure Allocation)

3-7
50,0
Joint Cost 00
1,7
Less: NRV of BP 00
48,3
Allocable Cost 00
 P a g e | 25

48,3
2x4 lumber 00 x 200,000/300,000 32,200

Exercise 3-8. (Joint Cost Allocation)

3-8
a. Product Pounds
250,0
A 2000/3500 X 00 142,857
250,0
B 900/3500 X 00 64,286
250,0
C 600/3500 X 00 42,857

250,000
P250,000/ 1, 000 units=
b. P250/unit

Product
125,0
A 00
75,0
B 00
50,0
C 00
250,0
00
c.
Product Total Points
5,0
A 00 x 250000 148,810
2,4
B 00 x 250000 71,429
1,0
C 00 x 250000 29,762
8,4
00 250,000

Exercise 3-9. (Joint Cost Allocation)

3-9
 P a g e | 26

Yards Sales Price at

Split-off Total
A 800 P6.50 5,200
B 1,100 P8.25 9,075
C 1,500 P8.00 P12,000
P26,275
a. P(9,075/26,275) x P2, 200= P725

b. P(12,000/26,275) * P2,100 = P959

Disposal NRV
Sales Price Costs at
Split-
Yards Split-off Split-Off Off Total
A 800 P6.50 P3.00 P3.50 2,800
B 1,100 P8.25 P4.20 P4.05 4,455
C 1,500 P8.00 P4.00 P4.00 6,000
P13,255
c. P(2,800/13,255) * P2,100 = P444
d. P(6,000/13,255) x P2,100 = P951

Exercise 3-10. (Joint Cost Allocation)

3-10
a. P26,000 =(4,000xP9)-P10,000
b.
Product
4,628.
A 57
13,371.
B 43
18,000.
00

Exercise 3-11. (Joint Cost Allocation)

Comprehensive Problems

Problem 3-A. Methods in accounting for Joint Products

 P a g e | 27

Comparison of alternative joint-cost allocation methods, further-processing decision,

chocolate products.

Joint Costs Separable Costs

$30,000

Chocolate- Processing Chocolate

Powder Liquor $12,750 Powder
Base

Cocoa
Beans
Processing

Milk
Processing
Milk-Chocolate Chocolate
$26,250
Liquor Base

SPLITOFF
POINT

1a. Sales value at splitoff method:

Chocolate- Milk-
Powder/ Chocolate/ Total
Liquor Base Liquor Base
Sales value of total production at splitoff,
600 ´ $21; 900 ´ $26 $12,600 $23,400 $36,000
Weighting, $12,600; $23,400  $36,000 0.35 0.65
Joint costs allocated,
0.35; 0.65 ´ $30,000 $10,500 $19,500 $30,000

1b.
Physical-measure method:
Physical measure of total production
(15,000  1,500) ´ 60; 90 600 gallons 900 gallons 1,500 gallons
Weighting, 600; 900  1,500 0.40 0.60
Joint costs allocated,
0.40; 0.60 ´ $30,000 $12,000 $18,000 $30,000
 P a g e | 28

1c. Net realizable value method:

Chocolate- Milk-
Powder Chocolate Total
Final sales value of total production,
6,000 ´ $4; 10,200 ´ $5 $24,000 $51,000 $75,000
Deduct separable costs 12,750 26,250 39,000
Net realizable value at splitoff point $11,250 $24,750 $36,000
Weighting, $11,250; $24,750  $36,000 0.3125 0.6875
Joint costs allocated,
0.3125; 0.6875 ´ $30,000 $ 9,375 $20,625 $30,000

d. Constant gross-margin percentage NRV method:

Step 1:

Final sales value of total production, (6,000 ´ $4) + (10,200 ´ $5) $75,000
Deduct joint and separable costs, ($30,000 + $12,750 + $26,250) 69,000
Gross margin $ 6,000
Gross-margin percentage ($6,000 ÷ $75,000) 8%

Step 2:
Chocolate- Milk-
Powder Chocolate Total
Final sales value of total production,
6,000 ´ $4; 10,200 ´ $5 $24,000 $51,000 $75,000
Deduct gross margin, using overall
gross-margin percentage of sales (8%) 1,920 4,080 6,000
Total production costs 22,080 46,920 69,000

Step 3:

Deduct separable costs 12,750 26,250 39,000

Joint costs allocated $ 9,330 $20,670 $30,000
 P a g e | 29

2. Chocolate- Milk-
Powder Chocolate Total
a. Revenues $24,000 $51,000 $75,000
Joint costs 10,500 19,500 30,000
Separable costs 12,750 26,250 39,000
Total cost of goods sold 23,250 45,750 69,000
Gross margin $ 750 $ 5,250 $ 6,000

Gross-margin percentage 3.125% 10.294% 8%

b. Revenues $24,000 $51,000 $75,000

Joint costs 12,000 18,000 30,000
Separable costs 12,750 26,250 39,000
Total cost of goods sold 24,750 44,250 69,000
Gross margin $ (750) $ 6,750 $ 6,000

Gross-margin percentage (3.125)% 13.235% 8%

c. Revenues $24,000 $51,000 $75,000

Joint costs 9,375 20,625 30,000
Separable costs 12,750 26,250 39,000
Total cost of goods sold 22,125 46,875 69,000
Gross margin $ 1,875 $ 4,125 $ 6,000

Gross-margin percentage 7.812% 8.088% 8%

d. Revenues $24,000 $51,000 $75,000

Joint costs 9,330 20,670 30,000
Separable costs 12,750 26,250 39,000
Total cost of goods sold 22,080 46,920 69,000
Gross margin $ 1,920 $ 4,080 $ 6,000

Gross-margin percentage 8% 8% 8%

3. Further processing of chocolate-powder liquor base into chocolate powder:

Incremental revenue, $24,000 – $12,600 $11,400
Incremental costs 12,750
Incremental operating income from further processing $ (1,350)

Further processing of milk-chocolate liquor base into milk chocolate:

 P a g e | 30

Incremental revenue, $51,000 – $23,400 $27,600

Incremental costs 26,250
Incremental operating income from further processing $ 1,350

Chocolate Factory could increase operating income by $1,350 (to $7,350) if chocolate-powder
liquor base is sold at the splitoff point and if milk-chocolate liquor base is further processed into
milk chocolate.

Problem 3-B (Joint Products; Gross Profit Determination)

NRV C REVENUE 20,000 x .30 = P6,000

COST (4,000)

NRV P2,000

NRV:

A (800,000 x P.4375) = P350,000 - P50,000 = P300,000

B (200,000 x P.65) = P130,000 - (P32,000 - P2,000) =  100,000

P400,000

ALLOCATION:
A (P300,000/P400,000 x P200,000 = P150,000
B (P100,000/P400,000 x P200,000 =   50,000

UNIT COST:
A (P150,000 + P50,000)/800,000 = P .25
B (P50,000 + P30,000)/200,000 = P .40

GROSS PROFIT:
A (P .4375 - P.25) x 640,000 = P120,000
B (P .65 - P.40) x 180,000 =   45,000
P165,000

Problem 3-C (Joint Cost Allocation; Multi-department)

a. JOINT COST P90,000 

- SALES VALUE (20,000) (10,000 x P2)
P70,000 

SALES VALUE
A 10,000  P10 = P100,000/P200,000 x P70,000 = P35,000
B 20,000  P 5 =  100,000/P200,000 x P70,000 = P35,000
P200,000

UNIT COST
 P a g e | 31

A (P35,000 + P10,000)/10,000 = P4.50

B (P35,000 + P8,000)/20,000 = P2.15

b. ENDING INVENTORY
B 5,000 x P2.15 = P10,750
C 1,000 x P2.00 =   2,000
P12,750

c. NRV
A P100,000 - P10,000 = P 90,000/P182,000 x P70,000 = P34,615
B P100,000 - P8,000 =   92,000/P182,000 x P70,000 =  35,385
P182,000     P70,000

UNIT COST
A (P34,615 + P10,000)/10,000 = P4.46
B (P35,385 + P8,000)/20,000 = P2.17

ENDING INVENTORY
B 5,000 x P2.17 = P10,850
C 1,000 x P2.00 =   2,000
P12,850

Problem 3-D (Accounting for by-products)

Answer:
Cost reduction Revenue
when produced when sold
Sales: Lumber P480,000 P480,000
Shavings 4,080
Total Sales: P480,000 484,080
Cost of Good Sold:
Total manufacturing costs P332,000 P332,000
Byproduct 4,080 0
Total COGS 327,920 332,000
Gross Margin P152,080 P152,080

Problem 3-E (Joint Cost Analysis for Managerial Decisions)

Ultimate Ultimate Processing Hypothetical Apportionment

Market Value Units Market cost after market of joint

Product per Unit Produced Value split-off value production cost
L1 P5.50 22,000 P121,000 P33,000 P88,000 P17,600*
L2 7.25 17,500 126,875 24,875 102,000 20,400
B 8.50 11,750 99,875 31,375 68,500 13,700
P347,750 P89,250 P 258,500 P51,700
 P a g e | 32

CHAPTER 4
E 4-1 E4-2

1 T 11 F 21 T 1 C 11 D
2 T 12 F 22 T 2 C 12 B
3 T 13 F 23 T 3 C 13 B
4 F 14 F 24 T 4 D 14 D
5 T 15 T 25 F 5 A 15 B
6 T 16 F 26 T 6 A 16 B
7 F 17 F 27 T 7 A 17 A
8 T 18 T 28 F 8 A 18 D
9 T 19 T 29 T 9 B 19 D
10 T 20 F 30 T 10 D
E4-3
1. C
2. D
3. A
4. D
5. D
6. B
7. B
8. B
9. D
 10. C

Total Variance = Actual Overhead - Applied Overhead

= P(26,250 + 38,000) - (P(1.75 + 3.10) * 2.50 hrs/unit * 4,500 units)

= P64,250.00 - P54,462.50

= P9,687.50U

11. A

Controllable Variance = Actual Overhead - Budgeted Overhead Based on Standard Quantity

= P64,250.00 - P((4,500 units * 2.5 DLH/unit * P1.75) + 38,750)

= P(64,250 - P58,437.50)

= P5,812.50 U

12. B

Uncontrollable Variance = Budgeted Overhead Based on SQ - Applied Overhead

= P(58,437.50 - 54,562.50)

= P3,875.00 U

13. C

OH Spending Variance = Actual OH - Budgeted OH based upon Inputs Used

= P64,250 - ((10,000 hrs * P1.75) + P38,750)

= P(64,250 - 56,250)

= P8,000.00 U

14. B

OH Efficiency Variance = Budgeted OH based on Actual - Budgeted OH based on Standard

= ((10,000 * P1.75)+ P38,750) - ((4,500 * 2.50 * P1.75) + P38,750)

= P(56,250.00 - 58,437.50)

= P2,187.50 F

15. C
Volume Variance = Budget Based on Standard Quantity - Overhead Applied

= P(58,437.50 - 54,562.00)

= P3,875.00 U

16. C

Variable Overhead Spending Variance = Actual VOH - Budgeted VOH/Actual Quantity

= P26,250.00 - (10,000 * P1.75/VOH hr)

= P(26,250.00 - 17,500.00)

= P8,750.00 U

17. C

VOH Efficiency Variance = Budgeted VOH based on Actual - Budgeted VOH/Standard Qty

= ((10,000 * P1.75/hr) - ((4,500 * 2.50hrs/unit * P1.75/hr))

= P(17,500.00 - 19,687.50)

= P2,187.50 F

18. D

Fixed OH Spending Variance = Actual Fixed OH - Applied Fixed OH

= P(38,000 - 38,750)

= P750 F

19. D

Volume Variance = Budget Based on Standard Quantity - Overhead Applied

= P(58,437.50 - 54,562.00)

= P3,875.00 U

E4-4 (Various Variances)

a. 7,110 units (P72,310 + 5,770 - 6,980) / (2 x P5)
b. 14,220 SH P71,100 / P5
c. 15,616 AH P78,080 / P5
d. 21,330 lbs (P130,760 - 3,500 + 720) / P6
e. 21,210 lbs P127,260 / P6

E4-5 (Various Variances)

a. 8,734 units (P105,560 - 14,560 - 3,660) / (2 x P5)

b. 17,468 SH 8,734 x 2
c. 18,200 AH (P105,560 - 14,560) / P5
d. P4,392 U (18,200 - 17,468) x 6
e. P96,880 (18,200 x P6) - P12,320

E4-6 (Various Variances)

Budgeted fixed overhead rate = Fixed overhead/Denominator quantity

= P84,800/53,000 direct labor-hours
= P1.60/direct labor-hour

Actual fixed overhead = Budgeted fixed overhead + Budget variance

= P84,800 + P7,200
= P92,000

Actual variable overhead = Total actual overhead – Actual fixed overhead

= P262,500 - P92,000
= P170,500

Actual variable overhead rate = Actual variable overhead/Actual hours

= P170,500/55,000
= P3.10

Spending variance = AH (AR - SR)

= 55,000 (P3.10 - P3.00)
= P5,500 U

SH X SR = AH X SR - overhead efficiency variance

= 55,000 X P3.00 - P15,000
= P15,000

Standard hours allowed = (SH X SR)/SR

= P150,000/P3.00
= 50,000 hours

Actual units produced = Standard hours allowed/hours per unit

= 50,000 hours/2 hours per unit
= 25,000 units
Volume variance = Budgeted fixed - (SH X SR)
= P84,800 - (50,000 X P1.60)
= P84,800 - P80,000
= P4,800 U

Summary:
Actual hours 5,000 hours
Standard hours allowed 50,000 hours
Denominator hours 53,000 hours
Spending variance P 5,500 U
Efficiency variance P15,000 U
Budget variance P 7,200 U
Volume variance P 4,800 U

E4-7 (Various Variances)

a. Standard cost per roll = P9,000/450 = P20.00

Standard number of pounds per roll = P20/P4 = 5 pounds per roll

b. Actual pounds = (P9,000 + P80)/P4 = 2,270 pounds

c. Materials price variance = P9,600 - (P9,000 + P80)

= P520 unfavorable

d. Total standard labor cost of actual hours = (450 x 3 x P8) + P400 = P11,200
Actual hours = P11,200/P8 = 1,400

Total actual cost = 1,400 x P8.25 = P11,550

e. Labor price variance = P11,550 - P11,200 = P350 unfavorable

E4-8
a. Direct materials' unfavorable price variance may have been caused by: (1) paying a higher price
than the standard for the period, (2) changing to a new vendor, or (3) buying higher-quality
materials.

Direct manufacturing labor's favorable price variance may have been caused by: (1) changing
the work force by hiring lower-paid employees, (2) changing the mix of skilled and unskilled
workers, or (3) not giving pay raises as high as anticipated when the standards were set for the
year.

b. Direct materials' favorable efficiency variance may have been caused by: (1)
employees/machinery working more efficiency and having less scrap and waste materials, (2)
buying better-quality materials, or (3) changing the production process.
 Direct manufacturing labor's unfavorable efficiency variance may have been caused by: (1) poor
working conditions, (2) changes in the production process (learning something new initially
takes longer), (3) different types of direct materials to work with, or (4) poor attitudes on behalf
of the workers.

E4-9 (Static Budget & Flexible Budget Variances)

a. Olabacim’s Hardware -- Static Budget with Variances -- 2014

Static
Actual Budget Variances
Product handling P10,900 P11,200 P300 F
Storage 465 600 135 F
Utilities 2,020 2,440 420 F
Shipping clerks 1,400 1,664 264 F
Supplies 340 332 8 U
Total P15,125 P16,236 P1,111 F

b. Olabacim’s Hardware -- Flexible Budget with Variances -- 2014

Flexible
Actual Budget Variances
Product handling P10,900 P11,125 P225 F
Storage 465 675 210 F
Utilities 2,020 2,350 330 F
Shipping clerks 1,400 1,600 200 F
Supplies 340 300 40 U
Total P15,125 P16,050 P925 F

E4-10 (Various Variances)

1. App rate = P6/DLH
TOHC = P50,000 + P1/DLH
Std O (A) 5,000  2 = 10,000
          (B) 5,000  4 = 20,000
Std Hrs. 5,000  2 = 10,000

2. a. 1. (P7.20 - P7.00)  12,000 = P2,400 U

2. (P3.90 - P4.00)  20,000 =  2,000 F
P 400 U

b. 1. (10,500 - 10,000)  P7.00 = P3,500 U

2. (19,800 - 20,000)  P4.00 =    800 F
P2,700 U

c. P79,380 - (9,800  P8) = P980 U

d. (9,800 - 10,000)  P8 = P1600 F

 e. (10,000 - 10,000)  P5 = 0

f. (9,800 - 10,000)  P1 = P200 F

g. Fix Spd P48,100 - P50,000 = P1,900 F

Var Spd P21,000 - (9,800  P1) = P11,200 U

PROBLEMS

P4-1. Material Standards

P4-2. Labor Standards

P4-3 Material Variances

(a.)
8,200*P16.40= 8,200*P15.60= (1,640*5.2)*P15.60=
P134,480 P127,920 P133,036.80

P6,560 U (MPu) P5,116.80 F (MQV)

P1,443.20 U (Total Material Variance)

(b.)
8,500*P15.60= 8,200*P15.60=
P139,400 P132,600 P127,920

P6,800 U (MPP) P4,680 U (MI)

P4-4. Material variances

(Actual unit price - Standard unit price) x Actual usage = Materials price usage variance

Halibut: (P.70 per oz. - P.60 per oz.) x 5,500 oz.......................................................................... P 550 unfav.

Asparagus: (P.20 per oz. - P.25 per oz.) x 3,800 oz..................................................................... (190) fav.

Rice: (P.12 per oz. - P.10 per oz.) x 4,900 oz............................................................................... 98 unfav.

Yogurt: (P.22 per oz. - P.20 per oz.) x 3,150 oz........................................................................... 63 unfav.

Materials price usage variance................................................................................................... P 521 unfav.

(Actual quantity - Standard quantity allowed) x Standard price = Materials quantity variance

Halibut: (5,500 oz. - 6,000 oz.) x P.60......................................................................................... P(300) fav.

Asparagus: (3,800 oz. - 4,000 oz.) x P.25.................................................................................... (50) fav.

Rice: (4,900 oz. - 5,000 oz.) x P.10.............................................................................................. (10) fav.

Yogurt: (3,150 oz. - 3,000 oz.) x P.20.......................................................................................... 30 unfav.

Materials quantity variance........................................................................................................ P(330) fav.

P4-5. Labor Variances

a. Labor rate variance = (AH x AR) - (AH x SR) = P59,470 - (3,800 x P15.50) = P570 U

b. SH = Standard hours per unit x Actual output = 0.3 x 12,800 = 3,840

Labor efficiency variance = SR(AH - SH) = P15.50(3,800 - 3,840) = P620 F

P-4-6. Labor Variances

Wilson Xavier Yelding Ziachin Total

Actual rate................................................... P 11.00 P 9.25 P 10.50 P 9.75 P 40.50

Standard rate............................................... 10.00 10.00 10.00 10.00 40.00

Rate difference............................................ P 1.00 P (.75) P .50 P (.25) P .50

Multiplied by hours worked........................ x 8 x 8 x 8 x 8 x 8

Labor rate variance..................................... P 8.00 P (6.00) P 4.00 P (2.00) P 4.00

unfav. fav. unfav. fav. unfav.

Actual hours worked................................... 8.0 8.0 8.00 8.00 32

Standard hours allowed.............................. 7.8 7.2 8.75 8.25 32

Difference in hours...................................... .2 .8 (.75) (.25) 0

Multiplied by standard rate........................ x P10 x P10 x P10 x P10 x P10

Labor efficiency variance............................. P 2.00 P 8.00 P (7.50) P (2.50) 0

unfav. unfav. fav. fav.

P4-7. Indirect Cost Variances

a. Variable overhead rate variance = (AH x AR) - (AH x SR) = P13,580 - (1,400 x P9.40) = P420 U

b. Variable overhead efficiency variance = SR(AH - SH*) = P9.40(1,400 - 1,560) = P1,504 F

*SH = Standard hours per unit x Actual output = 3.0 x 520 = 1,560

P4-8. Indirect Cost Variances

(a) Four Way Approach

Variable OH Variances:

3,700*P3.00= (7,600*0.50hrs)*P3.00=
P10,730 P11,100 P11,400

P370 F P300 F
VOH VOH
Spending Variance Efficiency Variance

Fixed OH Variances:
4,000*P8= (7,600*0.50hrs)*P8.00=
P29,950 P32,000 P30,400

P2,050 F P1,600 U
FOH FOH
Spending Variance Volume Variance

(b-d)
P10,730+29,950= P11,100+32,000= P11,400+32,000= P11,400+30,400=
P40,680 P43,100 P43,400 P41,800

P2,420 F P300 F P1,600 U

Overhead Spending Overhead Efficiency Overhead Volume THREE WAY
Variance Variance Variance

P2,720 F P1,600 U TWO WAY

Controllable Variance Uncontrollable Volume

P1,120 F
Total Overhead Variance ONE WAY

P4-9. Indirect Cost Variances

 May June

Actual factory overhead........................................................................... P 140,100 P 149,300

Budget allowance based on standard:

Budgeted fixed expense (40% x P10 x

15,000 units).............................................................................. (60,000) (60,000)

Variable expenses:

12,000 hrs. allowed x P10 x .60.................................................. (72,000)

15,000 hrs. allowed x P10 x .60.................................................. (90,000)

Controllable variance............................................................................... P 8,100 unfav. P (700) fav.

Budgeted allowance based on standard

hours allowed.................................................................................... P 132,000 P 150,000

Standard hours allowed x Standard factory

overhead rate:

12,000 hrs. x P10........................................................................ (120,000)

15,000 hrs. x P10........................................................................ (150,000)

Volume variance...................................................................................... P 12,000 unfav. 0

P4-10. Indirect Cost Variances

Actual factory overhead........................................................................... P 25,600

Standard overhead chargeable to production (5,200

standard hours allowed x P5 overhead rate).................................... 26,000

Overall factory overhead variance........................................................... P (400) favorable

Actual factory overhead........................................................................... P 25,600

Budget allowance based on actual hours:

Variable overhead (4,800 actual hours x P3).................................... P14,400

Fixed overhead.................................................................................. 10,000 24,400

Spending variance.................................................................................... P 1,200 unfavorable

Budget allowance based on actual hours (from above).......................... P 24,400

Budget allowance based on standard hours:

Variable overhead (5,200 standard hours x P3)............................... P15,600

Fixed overhead.................................................................................. 10,000 25,600

Variable efficiency variance..................................................................... P (1,200) favorable

Budget allowance based on standard hours (from above)..................... P 25,600

Standard factory overhead chargeable to production

(from above)..................................................................................... 26,000

Volume variance...................................................................................... P (400) favorable

Spending variance.................................................................................... P 1,200

Variable efficiency variance..................................................................... (1,200)

Volume variance...................................................................................... (400)

Overall factory overhead variance........................................................... P (400) favorable

P4-11. Indirect Cost Variances

Actual factory overhead..................................................................................... P 47,500

Budget allowance based on actual hours worked:

Fixed factory overhead................................................................................ P12,000

Variable factory overhead:

P30,000

10,300 actual hrs. x ----------------.......................................................... 30,900 42,900

10,000 DLH

Spending variance.............................................................................................. P 4,600 unfav.

Budget allowance based on actual hours worked............................................. P 42,900

Actual hours x standard overhead rate:

P30,000 + P12,000

10,300 hrs. x --------------------------......................................................... 43,260

 10,000 DLH

Idle capacity variance......................................................................................... P (360) fav.

Budget allowance based on actual hours worked............................................. P 42,900

Budget allowance based on standard hours allowed:

Fixed expense.............................................................................................. P12,000

Variable expense (10,200 standard hours

allowed x P3 variable overhead rate)................................................... 30,600 42,600

Variable efficiency variance................................................................................ P 300 unfav.

Actual hours (10,300) x fixed overhead rate (P1.20)......................................... P 12,360

Standard hours allowed (10,200) x fixed overhead

rate (P1.20).................................................................................................. 12,240

Fixed efficiency variance.................................................................................... P 120 unfav.

P4-12. Material Mix and Yield Variances

Actual quantities at individual standard materials cost........................................................... P 11,6201

Actual input quantity at weighted average of standard

materials cost (20,160 x P.3812)........................................................................................ P 7,681

Materials mix variance.............................................................................................................. P 3,939 unfav.

Actual input quantity at weighted average of standard

materials cost (20,160 x P.3812)........................................................................................ P 7,681

Actual output quantity at standard materials cost per

pound of output (18,500 lbs. x P.403)................................................................................ 7,400

Materials yield variance............................................................................................................ P 281 unfav.

1
Beeswax............................................................ 4,100 lbs. @ P1 per lb............................................. P 4,100

Synthetic wax................................................... 13,800 lbs. @ P.20 per lb.......................................... 2,760

 Colors................................................................ 2,200 lbs. @ P2 per lb............................................. 4,400

Scents............................................................... 60 lbs. @ P6 per lb............................................. 360

20,160 lbs. ............................................................... P 11,620

2
Weighted average standard materials costs:

Beeswax............................................................ 200 lbs. @ P1....................................................... P 200

Synthetic wax................................................... 840 lbs. @ P.20.................................................... 168

Colors................................................................ 7 lbs. @ P2....................................................... 14

Scents............................................................... 3 lbs. @ P6....................................................... 18

1,050 lbs. ............................................................... P 400

$400
Standard materials cost = = $.381 per lb .
1,050 lbs .

3
Standard materials costs $400
= = $.40 per lb . cost per unit of output
Standard output 1,000 lbs .
P 4-13 (Journal Entry Preparation)

SOLUTION

Materials....................................................................................................................... 90,000

Materials Purchase Price Variance........................................................................ 2,400

Accounts Payable................................................................................................... 87,600

Work in Process............................................................................................................ 78,000

Materials................................................................................................................ 77,000

Materials Quantity Variance................................................................................. 1,000

Work in Process............................................................................................................ 143,750

Labor Rate Variance...................................................................................................... 750

Payroll.................................................................................................................... 144,000

Labor Efficiency Variance...................................................................................... 500

Factory Overhead Control............................................................................................ 256,000

Various Credits...................................................................................................... 256,000

Work in Process............................................................................................................ 254,750

Factory Overhead Controllable Variance...................................................................... 2,950

Factory Overhead Control..................................................................................... 256,000

Factory Overhead Volume Variance..................................................................... 1,700

or

Work in Process............................................................................................................ 254,750

Factory Overhead Control..................................................................................... 254,750

Factory Overhead Controllable Variance...................................................................... 2,950

Factory Overhead Volume Variance..................................................................... 1,700

Factory Overhead Control..................................................................................... 1,250

P 4-14 (Journal Entry Preparation)

SOLUTION

Work in Process............................................................................................................ 24,000

Materials Quantity Variance................................................................................. 400

Materials................................................................................................................ 23,600

Work in Process............................................................................................................ 48,000

Labor Efficiency Variance [P12 x (4,200 DLH - 4,000 DLH)].......................................... 2,400

Labor Rate Variance [(P12.50 - P12) x 4,200 DLH]....................................................... 2,100

Payroll (P12.50 x 4,200 DLH)................................................................................. 52,500

Factory Overhead Control............................................................................................ 252,500

Various Credits...................................................................................................... 252,500

 Overhead at 100% Overhead at 80% $280,000 $250,000
=
Hours at 100% Hours at 80% 5,000 4,000

= $30 per hour variable overhead

Work in Process.............................................................................................. 224,000

Factory Overhead Variable Efficiency Variance............................................. 6,0002

Factory Overhead Volume Variance............................................................... 26,0003

Factory Overhead Control....................................................................... 252,500

Factory Overhead Spending Variance..................................................... 3,5001

Actual factory overhead................................................................................. P 252,500

Budget allowance based on actual hours:

Fixed expense.......................................................................................... P 130,0001

Variable expense (4,200 hours x P30)..................................................... 126,000 256,000

Factory overhead spending variance............................................................. P (3,500) fav.

1
P250,000 - P30 (4,000) = P130,000 fixed overhead

2
Budget allowance based on actual hours..................................................... P 256,000

Budget allowance based on standard hours allowed:

Variable overhead (4,000 x P30)........................................................... P 120,000

Fixed overhead (P250,000 - P120,000)................................................. 130,000 250,000

Variable efficiency variance........................................................................... P 6,000 unfav.

3
Budget allowance based on standard hours allowed................................... P 250,000

Standard factory overhead charged to production

(P56 x 4,000)......................................................................................... 224,000

Volume variance............................................................................................ P 26,000 unfav.

P 4-15 (Journal Entry Preparation)

SOLUTION

Factory Overhead Control.............................................................................................. 199,000

Various Credits........................................................................................................ 199,000

Page | 49
Work in Process (P40 F.O. rate x 4,600 SH).................................................................... 184,000

Applied Factory Overhead...................................................................................... 184,000

Applied Factory Overhead.............................................................................................. 184,000

Variable Efficiency Variance [P9 var. x (5,200 AH - 4,600 SH)]....................................... 5,400

Fixed Efficiency Variance [P31 fix. x (5,200 AH - 4,600 SH)]........................................... 18,600

Spending Variance.................................................................................................. 2,800

Idle Capacity Variance [P31 fix. x (5,000 BH - 5,200 AH)]....................................... 6,200

Factory Overhead Control...................................................................................... 199,000

P 4-16 (Disposition of Variances)

SOLUTION

(1)

Materials price usage variance to:

P150,000

Work in process.......................................................... ---------------- x P (10,000) = (1,500) fav.

P1,000,000

P50,000

Finished goods ........................................................... ---------------- x P (10,000) = (500) fav.

P1,000,000

P800,000

Cost of goods sold...................................................... ---------------- x P (10,000) = (8,000) fav.

P1,000,000

Total................................................................... P (10,000) fav.

Materials quantity variance to:

P150,000

Work in process.......................................................... ---------------- x P 22,280 = P 3,342 unfav.

P1,000,000

Page | 50
 P50,000

Finished goods............................................................ ---------------- x P 22,280 = 1,114 unfav.

P1,000,000

P800,000

Cost of goods sold...................................................... ---------------- x P 22,280 = 17,824 unfav.

P1,000,000

Total................................................................... P 22,280 unfav.

Labor variances to:

P250,000

Work in process.......................................................... ---------------- x P (4,000) = P (400) fav.

P2,500,000

Finished goods (same as to work in process)............. = (400) fav.

P2,000,000

Cost of goods sold...................................................... ---------------- x P (4,000) = (3,200) fav.

P2,500,000

Total................................................................... P (4,000)1 fav.

1
Labor rate variance - Labor efficiency variance = Net labor variance

(P27,000) fav. - P23,000 unfav. = (P4,000) fav.

Overhead variances to:

P150,000

Work in process.......................................................... ---------------- x P 31,500 = P 3,150 unfav.

P1,500,000

P150,000

Finished goods............................................................ ---------------- x P 31,500 = 3,150 unfav.

Page | 51
 P1,500,000

P1,200,000

Cost of goods sold...................................................... ---------------- x P 31,500 = 25,200 unfav.

P1,500,000

Total................................................................... P 31,500 unfav.

(2)

Standard cost of goods sold:

Materials.................................................................................................................................... P 800,000

Labor.......................................................................................................................................... 2,000,000

Overhead................................................................................................................................... 1,200,000

P 4,000,000

Add unfavorable variances:

Materials quantity...................................................................................................................... 17,824

Overhead................................................................................................................................... 25,200

Less favorable variances:

Materials price usage................................................................................................................. (8,000)

Labor.......................................................................................................................................... (3,200)

Cost of goods sold after allocation.................................................................................................... P 4,031,824

P4-17 (Materials Mix and Materials Yield Variance)

1. The materials mix variance equals the actual total quantity used times the difference between the budgeted
weighted-average standard unit cost for the budgeted mix and the budgeted weighted average standard unit
cost for the actual mix. This variance is favorable if the standard weighted average cost for the actual mix is less
than the standard weighted-average cost for the budgeted mix. The standard mix weighted-average standard
unit cost id P225 per liter (P135 standard total cost / 600 liters).

The standard cost of the actual quantity used was P18,606 (see below). Thus the actual mix weighted-average
standard unit cost was P0.220398 (P18,606/84,420 liters used), and the mix variance was P388.50 favorable.
[(0.220398 – P.225) x 84,420 liters].

P.200 x 26,600 = P5,320.00

.425 x 12,880 = 5,474.00
.150 x 37,800 = 5,670.00
.300 x 7,140 = 2,142.00
P18,606.00

Page | 52
 2. The materials yield variance equals the difference between the actual input and the standard input allowed for
the actual output, times the budgeted weighted average standard cost per input unit at the standard mix. The
standard input for the actual output was 84,000 liters (140 batches x 600 liters per batch). The standard mix
budgeted weighted – average standard unit cost is P225 per liter (135 total cost / 600 liters). Thus, the yield
variance is P94.50 unfavorable [(84,420 liters used – 84,000 liters allowed) x P.225].

P4-18 (Overhead Variances)

1. The fixed overhead spending (budget) variance is the difference between actual and budgeted fixed factory
overhead. Actual fixed overhead was P540,000. Budgeted fixed overhead was P5 per hour based on a capacity of
100,000 direct labor hour per month, or P500,000. Because these costs are fixed, the budgeted fixed overhead is
the same at any level of production. Hence, the variance is P40,000 unfavorable (P540,000 – P500,000).

2. The variable overhead spending variance is the difference between the actual variable overhead and the
variable overhead based on the standard rate and the activity level. Thus, the variable overhead spending
variance were P12,000 favorable [P740,000 actual cost – (P8 standard rate x 94,000 actual hours)]. Because
actual is less than standard, the variance was favorable.

3. The variable overhead efficiency variance equals the standard price (P8 an hour) times the difference between
the actual hours and the standard hours allowed for the actual output. Thus the variance is P48,000 [8 x (94,000
actual hours – (4 standard hours per unit x 22,000 units produced)]. The variance is unfavourable because actual
hours exceeded standard hours.

4. The direct labor price variance equals actual labor hours times the difference between standard and actual labor
rates. The actual labor cost was P940,000 for 94,000 or P10 per hour. The standard rate was P9 per hour. Thus
the variance is P94,000 (94,000 hours x (10-9)). Since actual is greater than the standard, unfavourable.

5. The direct labor rate efficiency variance equals the standard rate times the difference between actual and
standard hours. Hence, the variance is P54,000[9 x (94,000 hours – (4 std hrs per unit x 22,000 units)). The
variance is unfavourable because the actual exceeded the standard.

P4-19 (Journal Entry Preparations)

a. Raw Materials (10,000 ounces @ P3.50 per ounce) 35,000

Materials Price Variance
(10,000 ounces @ P0.35 per ounce U) 3,500
Accounts Payable 38,500

b. Work in Process (7,200 ounces @ P3.50 per ounce) 25,200

Materials Quantity Variance
(800 ounces U @ P3.50 per ounce) 2,800
Raw Materials (8,000 ounces @ P3.50 per ounce) 28,000

c. Work in Process (2,100 hours @ P10 per hour) 21,000

Labor Rate Variance (2,000 hours @ P1.50 per hour U) 3,000
Labor Efficiency Variance
(100 hours F @ P10 per hour) 1,000
Wages Payable (2,000 hours @ P11.50 per hour) 23,000

P4-20 (Various Variances)

a. & b.
Raw Materials:
Price variance = AQ(AP − SP) (based on quantity purchased)
= 21,000 (P17 − P16) = P21,000 U

Quantity variance = SP(AQ − SQ) (based on quantity used)

= P16(33,400 − *33,600) = P3,200 F

Page | 53
* SQ = 22,400 units at 1.5 grams per unit = 33,600

c. & d.
Direct labor:
Rate variance = AH(AR − SR) = 16,750(P8 − P8) = 0

Efficiency variance = SR(AH − SH) = P8(16,750 − *16,800) = P400 F

* SH = 22,400 units at 0.75 hours per unit = 16,800

e. & f.
Variable overhead:
Spending variance = AH(AR − SR) = 16,750(*P2.90 − P3) = P1,675 F

* AR = P48,575 / 16,750 hours = P2.90

Efficiency variance = SR(AH − SH) = P3(16,750 − *16,800) = P150 F

* SH = 22,400 units at 0.75 hours per unit = 16,800

Chapter 5
Exercise 5-1 (True or False)
1. F 6. T
2. F 7. F
3. T 8. T
4. F 9. F
5. T 10. T

Exercise 5-2 (Identification)

1. Toyota 6. Raw-in-Process (RIP)
2. Kanban 7. Throughput time
3. Just-in-time (JIT) 8. Six Sigma
4. Backflush Costing 9. Throughput time
5. Withdrawal Kanban 10. Partial productivity

Exercise 5-3 (Computations - Backflush Costing)

1. RIP account, beginning balance P30,000
Raw materials purchased 350,000
RIP account, ending balance (39,200)
Direct materials to be backflushed P340,800

Conversion cost to be backflushed P4,300

2. Backflushed: All raw materials purchased were requisitioned for production P 900,000
There are no RIP beginning and ending

Amount backflushed from RIP to FG P900,000

Applied conversion cost 8,000,000
Finished Goods P8,900,000
3. Correction:
a. Purchased P540,000 instead of P350,000 of direct materials
c. Applied P990,000 instead of P700,000 of conversion costs

RIP, beginning P0
RM purchased 540,000
Applied Conversion Cost 990,000
RIP, ending ___-___
Backflushed from RIP to FG P1530,000

Applied conversion costs transaction was entered into RIP account as mentioned in the problem

Page | 54
 Amount backflushed P1,050,000
Divide: Units completed 18,000
Unit Cost P58.33
Multiply: Ending inventory
(18,000 – 17,800) 200
Finished Goods ending balance P11,666

2. Raw materials purchased (Debit to RIP) P850,000

Raw materials used (Credit to RIP) 820,000
Balance of RIP accounts, July 2012 P30,000

3. Correction:
Standard price of DM should be P30 and conversion cost at P10.

Raw materials purchased – Dr to RIP P10,500,000

DM to be backflushed (234,000 x 30) – CR to RIP 7,020,000
Balance of RIP P 3,480,000

Trigger points are the purchase of materials and when the products are sold.

Cost of goods sold (234,000 x P40) P9,360,000

Exercise 5-4 (Journal Entries)

Raw and in Process 356,000

Accounts Payable 356,000

Finished Goods 373,700

Raw and in Process 373,700

RIP, beginning (P42,600 – 6,900) P35,700

Materials purchased 356,000
RIP, ending (P22,500 – 4,500) (18,000)
Amount to be backflushed P373,700

Cost of Goods Sold 390,700

Finished Goods 390,700

Materials in FG beginning (P45,000 – 17,000) P28,000

Materials transferred from RIP 373,700
Materials in FG ending (P16,000 – 5,000) (11,000)
Amount to be backflushed P390,700

Cost of Goods Sold 14,400

RIP (6,900 – 4,500) 2,400
Finished Goods (17,000 – 5,000) 12,000

Exercise 5-5 (Short Computations - Performance Measurements)

1. Inspection Time 0.4

Process Time 2.0
Move Time 0.6
Queue Time 5.0
Throughput Time 8.0

Throughput Time 8.0

Wait Time 17
Delivery cycle time 25

MCE = 2 (Process Time) = 25%

8 (throughput time)
2. Move time per unit = 18,000 / 2,000 units = 9

Manufacturing cycle time per unit = 80,000 / 2,000 units = 40

Delivery cycle time per unit = (23,000 + 80,000) / 2,000 units = 51.5

3. Value-added time = process time of 25

Page | 55
 Move time 12
Inspection time 17
Wait time 10
Queue time 14
Non-value added time 53

Process time 25
Move time 12
Inspection time 17
Queue time 14
Throughput time 68

MCE = 25 / 68 = 37%

4. Cycle time = 23 days / 150 units = .1533 day / unit

Velocity = 150 units / 23 days = 6.52 units per day

Total units to be purchased in 3 days = 6.52 x 3 = 19.56 units

Given the capacity of the company, it could not provide the additional order of 30 chairs to be delivered in 3 days

5. Current Productivity ratio = 2500 square yards = 357.14 square yards per hour
7 hours
New productivity ratio = 2700 square yards = 385.71 square yards per hour
7 hours
Percentage change = 385.71 – 357.14 = 8%
357.14

Exercise 5-6 (Short Computations - Operational Measurements)

Exercise 5-7 (Short Computations - Performance Measurements)

Exercise 5-8 (Short Computations - Performance Measurements)

Exercise 5-9 (Short Computations - Efficiency Measurements)

Problem 5-A (Over- and under-allocation of conversion cost)

Problem 5-B (Effect of a JIT Inventory System on Financial statements)

Multiple Choice 5-A

Multiple Choice 5-B

Chapter 6
Exercise 6-1 (Quality)
1. NVA 6. NVA 11. NVA 16. NVA
2. NVA 7. VA 12. VA 17. VA
3. NVA 8. VA 13. NVA 18. VA
4. VA 9. NVA 14. VA 19. VA
5. VA 10. VA 15. NVA 20. NVA

Exercise 6-2 (Quality, TQM, Benchmarking)

1. False 6. True 11. True
2. True 7. False 12. True
3. True 8. True 13. False
4. True 9. True 14. True
5. False 10. False 15. True

Exercise 6-3 (Quality, TQM, Benchmarking) -LACKING

1. A 16. C
2. B 17.C
3. D 18. B

Page | 56
 4. C 19. D
5. C 20. C
6. B
7. A
8. B
9. D
10. C
11. D
12. D
13. A
14. A
15. C
Exercise 6-4 (Cost of Quality)
1. IF 6. EF
2. IF 7. PC
3. IF 8. IF
4. AC 9. IF
5. EF 10. AC

Exercise 6-5 (Cost of Quality)

1. (2,500-1,875)X(P40-P25)=P9,375
2. 1,875 x 10 =P18,750
3. 375x15 =P5,625
4. 9,375+18,750+5,625 =P33,750
5. 33,750+10,000+5,000 =P48,750

Exercise 6-6 (Cost of Quality / ISO)

1. B (4,616+3,144) 6. D
2. C 7. B
3. D 8. B
4. A 9. A
5. B 10.B

Exercise 6-7 (Target Costing)

95,000x19= P1,805,000
120,000X18= 2,160,000
225,000x16= 3,600,000
100,000x12= 1,200,000
Sales P8,765,000
Less: Profit (540,000xP4.50) (2,430,000)
Target Cost P6,335,000
Divide by Total Expected Volume 540,000
Unit Cost P11.73

Exercise 6-8 (Target Costing)

(a.)
250,000x2.50 625,000
625,000x2.40 1,500,000
875,000x2.30 2,012,500
1,250,000x2.10 2,625,000
1,500,000x2.00 3,000,000
1,125,000x2.00 2,250,000
500,000x1.90 950,000
325,000x1.90 617,500
Sales P13,580,000
Less: Profit (20%) (2,716,000)
Target Cost P10,864,000
Divide by Total Quantity 6,450,000
Unit Cost P1.68

Page | 57
 (b.) Target Costing = P10,864,000
Estimated Production:
Variable Cost (0.85+0.20+0.25) x 6,450,000= P8,385,000
Total Fixed Cost (100,000x8products) = 800,000 P9,185,000

Yes, Fast foods should begin the production of the new product, estimated production is lower than
the target cost.

Exercise 6-19 (PLC, Kaizen, Target Costing, TOC, BPR)

1. C 6. D 11. B 16. C
2. A 7.B 12. B 17.B
3. B 8.C 13.B 18.D
4. B 9. B 14.D 19.B
5. D 10.C 15.B 20. C

Exercise 6-10 (Product Life Cycle)

Problem 6-A (Preparation of Quality Cost Report)

Problem 6-B (Quality Cost Computations)

Problem 6-C (Quality Cost Computations)

Page | 58