CHAPTER 7 - ACCOUNTING FOR FACTORY OVERHEAD Problem 1 – Denmark Company FO rate = 216,000 216,000 216,000 216,000 90,000 72,000 units 1,600 MHrs. 240,000 249%of DMC P3.00/unit Problem 2 - Colossal Corporation FO rate = 207,000 207,000 500,000 52,100 units 41,40%of DMC
P3,97/unit
P135/MHr.
P3.00/MHr
= 16,000 Hrs. x P4.50
P 4.50/DLHr.
=
P 72,000 P 69,000 72,000 ( P 3,000)
Problem 4 - Ellery Corporation 1. Job 123 Direct labor cost 600 FO rate 180% Applied FO 1,080 Job 123 DM 300 DL 600 FO 1,080 TOTAL 1,980
207,000 765,000
P2.44/DLHr. 27.06%ofDLC
=
3. Actual FO Less: Applied Overapplied FO
2.
90% of DLC P4.50/DLHr.
207,000 207,000 69,000 MHrs. 85,000 DLHrs.
Problem 3 – Manila Company 1. FO rate = P67,500/15,000 DLHrs. 2. Applied FO
216,000 48,000 DLHrs/
Job 124 1,080 940 1,692 3,712
Job 124 940 180% 1,692
Job 125 1,400 180% 2,520
Job 126 5,120 180% 9,216
Job 125 720 1,400 2,520 4,640
Job 126 4,200 5,120 9,216 18,536
TOTAL 6,300 8,060 14,508 28,868
Problem 5 – Thermal Corporation 1. Direct method P1___ P2___ Direct cost P 90,000 P 60,000 Allocated cost S1 10,000 10,000 S2 20,000 12,000 Total P120,000 P 82,000 Base 50,000 MHrs. 20,000 DLHrs FO rate P 2.40/MHr. P 4.10/DLHr.
S1___ P 20,000
S2___ P 32,000
( 20,000) ( 32.000)
2. Step method Direct cost Allocated cost S1 S2 Total Base FO rate
P1___ P 90,000
P2___ P 60,000
2,000 30,000 P122,000 50,000 MHrs. P 2.44/MHr
2,000 18,000 P 80,000 20,000 DLHrs P 4.00/DLHr.
S1____ P 20,000
S2___ P 32,000
( 20,000)
16,000 ( 48,000)
3. Algebraic method Direct cost Allocated S1 S2 Total Base FO rate
P1___ P 90,000
P2___ P 60,000
S1___ P 20,000
S2____ P 32,000
3.143 28,572 P121,715 50,000 MHrs. P 2.43/MHr.
3,143 17,143 P80,286 20,000 DLHrs P 4.0/DLHr.
( 31,429) 11,429
25,143 ( 57,143)
S1 -= 20,000 + 20% S2 S2 = 32,000 + 80% S1 S1 S1 - .16S1 S1
S2
= = = = =
20000 + 20%( 32,000 + 80% S1) 20,000 + 6,400 + .16 S1 26.400 26,400/.84 31,429
= 32,000 + 80% 31,429 = 32,000 + 25,143 = 57,143
Problem 6 – ABC Company 1. Direct method Machinery Direct cost P 52,500 Allocated cost S1 5,600 S2 6,325 Total P 64,625 Base 1,500DLHrs. FO rate P 42.95DLHr.
Assembly P 48,000
Repair___ P 14,000
8,400 4,675 P 61,075 1,250 DLHrs P48.86/DLHr.
( 14,000)
Cafeteria P 11,000
( 11.000)
2. Step method Machinery P 52,500
Direct cost Allocated cost S1 S2 Total Base FO rate
4,119 8,455 P 65,074 1,500 DLHrs. P 43.38/DLHr
Assembly P 48,000
Repair P 14,000
Cafeteria P 11,000
6,176 6,250 P 60,426 1,250 DLHrs P48.34/DLHr.
( 14,000)
3,705 ( 14,705)
Problem 7 - Central Parkway Corp.
Direct cost Allocated S1 S2 Total S1 S2 S1 S1 - .025 S1 S1
S2
P1___ 120,000
P2____ 80,000
13,333 8,333 141,666
6,667 6,667 93,334
S1___ 25,000 ( 26,667) 1,667
= =
25,000 + 10% of S2 10,000 + 25% of S1
= = = = =
25,000 + 10% ( 10,000 + .25S1 25,000 + 1,000 + .025S1 26,000 26,000/.975 26,667
= =
10,000 + .25(26,667) 16,667
Problem 8 – Megastar Company
Fixed Variable
1.
Total 34,200 41,800 76,000
95,000 Mach. Hrs. Per Mach.Hr. 0.36 ( 34,200/95,000) 0.44 ( 41,800/95,000) 0.80
Actual factory overhead Less: Applied (100,000 x .80) Overapplied factory overhead
P 78,600 80,000 ( 1,400)
S2___ 10,000 6,667 (16,667)
2.
3.
Actual factory overhead Less: Budget allowed on actual hours Fixed 34,200 Variable (100,000 x .44) 44,000 Spending variance – unfavorable
P 78,600
Budged allowed on actual hours Less: Applied factory overhead Idge capacity variance favorable
P 78,200 80,000 ( 1,800)
P
78,200 400
Problem 9 - Abner Company
Fixed Variable Total
72,000 units Per unit P 0.47 (33,840/72,000) 4.20 (72,000 x 4.20) P 4.67
TotalP 33,840 302400 P336,200
1.
Actual FO Less: Applied FO 5,400 units x P 4.67 Underapplied FO
P 15,910 25,218 (P 9.308)
2.
Actual FO P 15,910 Less: Budget allowed on actual hours Fixed (33,840/12 months) 2,820 Variable ( 5,400 x 4.20) 22,680 25,500 Spending variance – favorable ( P 9,590)
3.
Budged allowed on actual hours Less: Applied Idle capacity variance – unfavorable
P25,500 25,218 P 282
Problem 10 - Norman Corporation 1. Variable rate/hour = 270,000 – 252,000 60,000 - 48,000 = P1.50/DLHr. 2. Total Less: Variable (60,000 x 1.50) (48,000 x 1.50) Fixed
High 270,000
Low 252,000
90,000 _______ 180,000
72,000 180,000
2.
Actual factory overhead Less: Applied ( 60,000 x 90%) x 5.25 Overapplied FO FO rate =
3.
252,000 48,000
= 5.25/ DLHrs.
Actual factory overhead Less: Budget allowed on actual hours Fixed Variable (54,000 x 1.50) Spending variance
4.
273,000 283,500 ( 10,500)
273,000 180,000 81,000
Budget allowed on actual hours Less: Applied Idle capacity variance
261,000 283,500 ( 22,500)
Problem 11 – Strawberry Corporation Actual factory overhead Less: Applied factory overhead Overapplied factory overhead – favorable a.
30,500 39,700 ( 9,200)
Allocation of overapplied factory overhead Cost of goods sold Finished goods inventory Work in process inventory
b.
261,000 12,000
32,000/39,700 x 9,200 = 7,416 4,200/39,700 x 9,200 = 973 3,500/39,700 x 9,200 = 811 39,700 9,200
Applied factory overhead Cost of goods sold Finished goods inventory Work in process inventory Factory overhead control
Problem 12 a) Direct materials ( 50 x P120) Direct labor Factory overhead (100 x P 25) Total manufacturing cost No. of units Cost per unit
Product A P 6,000 (100 x P120) 1,000 2,500 (300 x P 25) P 9,500 50 P 190/unit
39,700 7,416 973 811 30,500
Product B P 12,000 3,000 7,500 P 22,500 100 P 225/unit
Factory overhead rate = P200,750/8,030 direct labor ours = P 25/DLHr.
b) Direct materials (50 x P120) Direct labor Factory overhead Material handling (40 x P50) Scheduling & setup (7 x 200) Design section (5 x P 107.50) No. of parts (10 x 100) Total costs No. of units Cost per unit
TRUE/FALSE 1. True 2. False 3. True 4. True 5. True
6. 7. 8. 9. 10.
Product A P 6,000 1,000 2,000 1,400 537,50 1,000 P 11,937.50 50 P 238.75/unit
(100 x P120)
(20 x P50) ( 5 x 200) ( 3 x 107.50) (6 x 100)
True True True False True
11. 12. 13. 14. 15.
Product B P 12,000 3,000 1,000 1.000 322.50 600 P 17,922.50 100 P 179.23/unit
False False True True True
MULTIPLE CHOICE – THEORY 1. c 6. d 2. c 7. c 3. d 8. a 4. b 9. d 5. d 10. a MULTIPLE CHOICE - PROBLEMS 1. c 11. d 2. d 12. d 3. c 13. d 4. d 14. a 5. c 15. b 6. c 16. c 7. c 17. c 8. c 18. c 9. c 19. b 10. a 20. a
21. 22. 23. 24. 25. 26. 27. 28. 29. 30.
A A b c d a b c C 163,706
31. d 32. c
for No. 25 –allocation under step method must be in the following order 1. Building occupancy 2. Supervision 3. Equipment maintenance
