1.

Advanced Exploration is a newly formed firm that conducts marine research in the island of Batangas for
contract costumers. Organizationally, the firm is composed of two departments: Offshore Operations and Lab
Research. The Offshore Operations Department is responsible for gathering test samples and drilling
operations on the ocean floor. The Lab Research Department is responsible for analysis of samples and other
data gathered by Offshore Operations.

In its first month of operations (March 2009), Advanced Exploration obtained contracts for three research
projects:
▪ Job 1: Drill, collect, and analyze samples from 10 sites for a major oil company.
▪ Job 2: Collect and analyze samples for specific toxins off the coast of Davao for the government.
▪ Job 3: Evaluate 12 existing offshore wells for the presence of oil seepage for a major oil company.

Advanced Exploration contracts with its customers on a cost-plus basis; that is, the price charged is equal to
cost plus a profit equal to 10 percent of costs. The firm uses a job order costing system based on normal costs.
Overhead is applied in the Offshore Operations Department at the predetermined rate of P2,000 per hour of
research vessel use (RVH). In the Lab Research Department, overhead is applied at the predetermined rate
of P45 per professional labor hour (PLH).

For March 2009, significant transactions are summarized here:

a. Materials and test components were purchased on account: P110,000.
b. Materials were requisitioned for use in the three research projects by the Offshore Operations Department
(all of these materials are regarded as direct: Job #1 – P40,000; Job #2 – P28,000; Job #3 – P10,000.
Materials were issued to the Lab Research Department: Job #1 – P8,000; Job #2 – P6,000; Job #3 – P4,500.
c. The time sheets and payroll summaries indicated the following direct labor costs were incurred:
Offshore Operations Lab Research
Job #1 P60,000 P56,000
Job #2 50,000 20,000
Job #3 45,000 16,000
d. Indirect research costs were incurred in each department.
Offshore Operations Lab Research
Labor P120,000 P10,000
Utilities/Fuel 290,000 5,000
Depreciation 330,000 80,000
e. Overhead is applied based on the predetermined overhead rates in effect in each department. Offshore
Operations had 360 RVHs (170 RVHs on Job #1; 90 RVHs on Job #2; and 100 RVHs on Job #3), and Lab
Research worked 2,300 PLHs (1,400 PLHs on Job #1; 500 PLHs on Job #2; and 400 PLHs on Job #3) for
the year.
f. Job #1 was completed and cash was collected for the agreed price. At the end of the month, Job #2 and #3
were only partially complete.
g. Any underapplied or overapplied overhead is assigned to Cost of Goods Sold

Required:
i. Record the journal entries for transactions 1 to 7.
ii. As of the end of March 2009, determine the total cost assigned to: Job #2
_______________ and Job #3 _______________

2. Brocke Landscapes began operations on May 1, 2009. Its Work in Process inventory accounts on May 31
appeared as follows:
Work in Process Inventory
Direct Material P554,400 ? Cost of Completed Jobs
Direct Labor 384,000
Applied Overhead 345,600
 The company applies overhead on the basis of direct labor cost. Only one job was still in process on May 31.
That job had P132,600 in direct materials and P93,600 in direct labor cost assigned to it.

Required: How much cost was transferred out for jobs completed during May? _______________

3. For fiscal year 2009, Custom Metalworks estimated it would incur total overhead costs of P1,200,000 and work
40,000 machine hours. During January 2009, the company worked exclusively on one job, Job #1211. It
incurred January costs as follows:
Direct material usage P120,000
Direct labor (1,400 hours) 30,800 Manufacturing
overhead:
Rent P11,200
Utilities 15,200
Insurance 32,100
Labor 15,500
Depreciation 23,700
Maintenance 10,800
Total Overhead 108,500

Machine hours worked in January: 3,400

Required: Compute the January costs assigned to Job #1211 _______________

4. For 2009, Applebite Rafter Co. applied overhead to jobs using a predetermined overhead rate of P23.20 per
machine hour. This rate was derived by dividing the company’s total budgeted overhead of P556,800 by the
24,000 machine hours anticipated for the year.

At the end of 2009, the company’s manufacturing overhead control account had debits totaling P562,600.
Actual machine hours for the year totaled 24,900.

Required:
i. How much overhead should be debited to Work in Process Inventory for 2009? _______________
ii. Is overhead underapplied or overapplied and by how much? _______________

5. Betsy’s Interiors, an interior decorating firm, uses a job order costing system and applies overhead to jobs
using a predetermined rate of 60 percent of direct labor cost. At the beginning of June 2009, Job #918 was the
only job in process. Costs of Job #918 includes direct material of P16,500; direct labor of P2,400; and applied
overhead of P1,440. During June, the company began work on Jobs #919, #920, #921 and purchased and issued
P34,700 of direct material. Direct labor cost for the month totaled P12,600. Job #920 had not been completed
at the end of June, and its direct materials and direct labor charges were P6,700 and P1,300 respectively. All
the other jobs were completed in June.

Required:
i. Total cost of Job #920 as of the end of June 2009 _______________
ii. Total cost of goods manufactured for June 2009 _______________
iii. If actual overhead for June was P8,700, was the overhead underapplied or overapplied for the month?
By how much? _______________

6. Tom Mahr is an advertising consultant. Recently, he has been working with his accountant to develop a formal
accounting system. His accountant has suggested the use of a job order costing system to simplify costing
procedures. During September, Tom and his staff worked on Jobs for the following companies:
 Brangston Westside Randall Company
Manufacturing Inc.
Direct Material Cost P4,500 P8,100 P9,600
Direct Labor Cost 1,800 9,450 20,250
Number of Ads Designed 5 10 15

Tom is able to trace direct material to each job because most of the cost associated with material is related to
photography and duplicating. The accountant has told Tom that a reasonable charge for overhead, based on
previous information, is P55 per direct labor hour. The normal labor cost per hour is P45.

Required:
i. Determine the cost per ad developed for each client.
Brangston ____________ Westside ____________ Randall ____________
ii. Tom has been charging P4,600 per ad developed. What was his net income for the month, if actual
overhead for the month was P40,000. _______________

7. Reliable Production Co.’s materials purchases for May, 2009 totaled P110,000 and its cost of goods sold during
the month was P345,000. Factory overhead was applied at 50% of direct labor cost. Inventories were as follows:

Opening Closing
Finished Goods P102,000 P105,000
Work in Process 40,000 36,000
Materials 20,000 26,000

Required: The prime cost charged to work in process during May 2009 was _______________

8. Dairy Products, Inc. manufactures liquefied oxygen and packs them in metal tanks. For 2009, the following
data are summarized:
a. Number of oxygen tanks produced 18,000
b. Materials placed in production, P164,000, including P8,000 of indirect materials.
c. Total factory payroll P143,000, of which the indirect labor portion amounts to P24,000.
d. Other factory overhead costs, P100,000.
e. Operating expenses, P135,400.

Required: The Prime Cost to process amounted to _______________

9. Breezy Production Co. has provided the following statistics for the year 2009:
Raw Materials Purchases P135,000
Opening Raw Materials Inventory 100,000
Closing Raw Materials Inventory 75,000
Total Manufacturing Cost 560,000
Factory Overhead** 175,000
** Including P20,000 of direct materials and 50,000 of indirect labor.

Required: Direct labor amounted to _______________

10. Malaya Co., a manufacturer of heating units, summarized the following information for the year 2009:
a. Materials cost of P270,000 includes indirect materials and supplies of P75,000;
b. Labor cost of P360,000 includes direct labor of P240,000;
c. Factory overhead of P120,000 represents power and light;
d. Selling and administrative overhead total P180,000

Required: Conversion costs for 2009 amounted to _______________

 11. The following information was available from the inventory records of the Marcus Company for January, 2009.
Units Unit Cost Total Cost

Balance at January 1 2,000 P9.775 P19,550

Purchases:
January 6 1,500 10.300 15,450
January 26 3,400 10.750 36,550
Sales:
January 7 1,800

January 31 3,200

Balance, January 31 1,900

Required: Assuming that Marcus maintains perpetual inventory records, what should be the inventory at
January 31, 2009 _______________

12. West Co.’s 2009 manufacturing costs were as follows:

Direct materials and direct labor P700,000
Other variable manufacturing costs 100,000
Depreciation of factory building and manufacturing equipment 80,000
Other fixed manufacturing overhead 18,000

Required: What amount should be considered product cost for external reporting purposes? _______________

13. The following information is available from the records of a manufacturing company that applies factory
overhead based on direct labor hours:
Estimated overhead cost P500,000
Estimated labor hours 200,000
Actual overhead cost P515,000
Actual labor hours 210,000

Required: Based on the information, factory overhead is overapplied/underapplied (specify) by

_______________

14. The following are selected cost data concerning the past fiscal year’s operation of the Televans Manufacturing
Company.
Inventories

Beginning Ending

Raw Materials P75,000 P85,000

Work in Process 80,000 30,000
Finished Goods 90,000 110,000

Raw materials used P326,000

Total manufacturing costs charged to
production during the year (including raw
materials, direct labor and factory overhead
applied at a rate of 60% of
direct labor cost) 686,000

Cost of goods available for sale 826,000

Selling and general expenses 25,000

Required:
1. The cost of raw materials purchased during the year _______________
2. Direct labor costs charged to production during the year amounted to _______________
3. The cost of goods manufactured during the year was _______________