Baliwag Polytechnic College

Dalubhasaan Kong Mahal

Institute of Business and Accountancy
BSA02 – Integrated Accounting Course (AFAR) RAA Hipolito, CPA

COST ACCOUNTING

JOB ORDER COSTING

PROBLEM 1
BTECH Company uses a job-costing system at its Mindanao plant. The plant has Machining department
and an Assembly Department. Its job-costing system has two direct-cost categories (DM and DL) and two
manufacturing overhead cost pools (the Machining Department overhead, allocated using actual machine-
hours and the assembly department overhead, allocated using actual direct manufacturing labor cost). The
2020 budget for the plant is as follows:
Machining Assembly
Manufacturing overhead P 1,800,000 P 3,600,000
Direct manufacturing labor costs 1,400,000 2,000,000
Direct manufacturing labor hours 100,000 200,000
Machine hours 50,000 200,000

During June, the job cost record for Job 111 contained the following:
Direct materials used P 45,000 P 70,000
Direct manufacturing labor costs 14,000 15,000
Direct manufacturing labor hours 1,000 1,500
Machine hours 2,000 1,000

At the end of 2020, the actual manufacturing overhead costs were P2,100,000 in Machining and
P3,700,000 in Assembly. Assume that 55,000 actual machine hours were used in Machining and that actual
direct manufacturing labor cost in Assembly were P2,200,000. Compute the over or under-allocated
manufacturing overhead for each department.

a. What is the total manufacturing overhead cost of Job 111? 99,000

b. The (over) or under-allocated manufacturing overhead for the Machining Department is __________.
120,000
c. The (over) or under-allocated manufacturing overhead for the Assembly Department is __________.
(260,000)

PROBLEM 2
Rap & Associates, a consulting firm has the following condensed budget for 2020.

Revenues P 20,000,000
Total Costs;
Direct costs (Professional labor) P 5,000,000
Indirect costs (Consulting support) 13,000,000 18,000,000
Operating Income P 2,000,000

Rap has a single direct costs category (professional labor) and a single indirect-cost poll (client support).
Indirect costs are allocated to jobs on the basis of professional labor costs.

The mark-up rate for pricing jobs is intended to produce operating income equal to 10% of revenues.

Rap is bidding on a consulting job for McBee, a fast-food chain specializing in poultry meats. The budgeted
breakdown of professional labor on the job is as follows:

Professional Labor Category Budgeted Rate Budgeted Hours

Director P 200 3
Partner 100 16
Associate 50 40
Assistant 30 160

a. What is the mark-up rate as a percentage of professional labor costs? 400% 300%
b. How much is the budgeted cost of the McBee job? 32,400
c. How much will Rap bid for the job if it is to earn its target operating income of 10% of revenues? 36,000

AFAR 212202_11.1 Page 1 of 3

 Baliwag Polytechnic College
Dalubhasaan Kong Mahal
Institute of Business and Accountancy
BSA02 – Integrated Accounting Course (AFAR) RAA Hipolito, CPA
PROBLEM 3
Consider the following selected cost data for the Katharine Forging Company for 2020.
Budgeted Manufacturing overhead P 7,000,000
Budgeted machine hours 200,000
Actual manufacturing overhead P 6,800,000
Actual machine hours 195,000

Katharine’s job-costing system has a single manufacturing overhead cost pool. Cost are allocated to jobs
using a budgeted machine-hour rate and actual machine-hour. Any amount of under- or over-allocation is
written-off to costs of goods sold. Work In Progress 6,825,000
Manufacturing Overhead Allocated 6,825,000
a. The budgeted manufacturing overhead rate is_____________.
35 per machine hour
Manufacturing Overhead Allocated 6,825,000
b. The journal entry for the allocation of manufacturing overhead will be Manufacturing Department OH Control 6,800,000
Cost of Goods Sold 25,000
PROBLEM 4
The Baliwag Company uses a job-costing system at its Poblacion plant. The plant has Machining
Department and a Finishing Department. Baliwag uses a normal-costing system with two direct-cost
categories (direct materials and direct manufacturing labor) and two manufacturing overhead costs pools
(the Machining Department, with machine hours as the allocation base, and the Finishing Department, with
direct manufacturing labor costs as the allocation base). The year 2020 budget for the plant are as follows:

Machining Finishing
Manufacturing overhead P 10,000,000 P 8,000,000
Direct manufacturing labor costs 900,000 4,000,000
Direct manufacturing labor hours 30,000 160,000
Machine-hours 200,000 33,000

a. What is the budgeted overhead rate that should be used in the Machining Department? 50
b. What is the budgeted overhead rate that should be used in the Finishing Department? 200%

PROBLEM 5
During the month of January, the job cost record for the Job 143 shows the following:

Machining Finishing
Direct materials used P 14,000 P 3,000
Direct manufacturing labor costs 600 1,250
Direct manufacturing labor hours 30 50
Machine-hours 130 10

a. What is the total manufacturing overhead allocated to Job 143? 9,000

b. Assuming that the Job 143 consisted of 200 units of products, what is the unit product costs of Job
143? 139.25
c. Amount at the end of 2020 are as follows:
Machining Finishing
Manufacturing overhead incurred P 11,200,000 P 7,900,000
Direct manufacturing labor costs 950,000 4,100,000
Machine-hours 220,000 32,000
What is the under- or over-applied manufacturing overhead for the Poblacion plant as a whole? (100,000)

PROBLEM 6
Kipling & Associates is a law firm specializing in labor relations and employee-related work. It employs 25
professionals (5 partners and 20 associates) who work directly with its clients. The average budgeted total
compensation per professional for 2020 is P1,040,000. Each professional is budgeted to have 16,000
billable hours to clients in 2020. Kipling is a highly respected firm, and all professionals work for clients to
their maximum 1,600 billable hours available. All professional labor cost are included in a single direct cost
category and are traced to jobs on a per hour basis.

AFAR 212202_11.1 Page 2 of 3

 Baliwag Polytechnic College
Dalubhasaan Kong Mahal
Institute of Business and Accountancy
BSA02 – Integrated Accounting Course (AFAR) RAA Hipolito, CPA
All cost of Kipling & Associates other than professional labor costs are include in a single indirect cost pool
(legal support) and are allocated to jobs using professional labor hours as allocation base. The budgeted
level of indirect costs in 2020 is P22,000,000.

a. The budgeted direct costs rate per hour of professional labor for 2020 is _____________.
65 per professional labor hours
b. The budgeted indirect costs rate per hour of professional labor for 2020 is _____________.
55 per professional labor hour

PROCESS COSTING
Maylakandyan Manufacturing Corp. has two producing departments in the manufacturing of a single product
called “Gossip”, the Fabricating and Spreading department. The following data was taken from its records
for the month of February 2020:
Units Fabricating Spreading
Beginning Inventory 30,000 20,000
Transferred from previous department -- 90,000
Started in production 90,000 --
Transferred out 90,000 80,000
Ending Inventory 27,000 25,000
Spoiled (lost) units – normal all normal 3% of good output
Spoiled (lost) units – abnormal -- ?

Inventory Beg. End Beg. End

Percentage of completion:
Direct materials ? ? ? ?
Conversion Costs 30% 60% 60% 60%
Beginning Inventory Costs:
Direct Materials Php 111,000 Php 80,000
Conversion Costs 236,000 95,000
Prior departments costs FIFO- 205,000
W. Ave- 246,817
Current Costs:
Direct Materials Php 180,000 Php 200,000
Conversion Costs 387,600 391,500

a. In the Fabricating Department, materials are added at the beginning of the process. Normal spoilage
occur at this point.
b. In the Spreading Department, inspection takes place at the 80% stage of completion, after which,
materials are added to good units.

Helpful hint:
1. EUP for material costs of normal spoilage is absorbed by good units, therefore its EUP is zero.
2. For Spreading Department, since normal and abnormal spoilage are discovered at 80% completion, there
is also no EUP for material cost as it is only 60% complete, but will have EUP for conversion cost
equivalent to percentage where inspection takes place.

Required: Cost of Production Reports for the two departments under:

a. The FIFO Cost Flow
b. The Weighted Average Cost Flow

- End -

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