PROBLEM 6-1
UNDERAPPLICAT
Step 1 Budgeted OH 22,800,000.00
/ Budgeted Units of production 1,200,000.00 m
PRE-DETERMINED OH RATE P 19.00 per unit of production
JOURNAL ENTRIES:
Step 2 PRE-DETERMINED OH RATE P 19.00
x Actual units produced 1,160,000 Work In Process
Applied Manufacturing Overhead 22,040,000.00 MOC
Step 3 Actual MOH 22,384,000.00 MOC
Applied MOH 22,040,000.00 Various Credits
UnderApplied MOH 344,000.00
Underapplied MOH
MOC
COGS
Underapplied MOH
fgs
wip
cogs
fgs
CASH
SALES
SALES
COGS
GP
What about if there is overapplication?
UNDERAPPLICATION OVERAPPLICATION
JOURNAL ENTRIES: (assuming that actual is Php 22M)
22,040,000.00 Work In Process 22,040,000.00
22,040,000.00 MOC
22,384,000.00 MOC 22,000,000.00
22,384,000.00 Various Credits
344,000.00 MOC 40,000.00
344,000.00 Overapplied MOH
344,000.00 Overapplied MOH 40,000.00
rapplied MOH 344,000.00 COGS
22,040,000.00 fgs 22,040,000.00
22,040,000.00 wip
22,040,000.00 cogs 22,040,000.00
22,040,000.00 fgs
23,000,000.00 CASH 23,000,000.00
23,000,000.00 SALES
23,000,000.00 SALES 23,000,000.00
22,384,000.00 COGS 22,000,000.00
616,000.00 GP 1,000,000.00
VERAPPLICATION
mixers
(per mixer)
at actual is Php 22M)
22,040,000.00
22,000,000.00
40,000.00
40,000.00
22,040,000.00
22,040,000.00
23,000,000.00
PROBLEM 6-2
Underapplied MOH 8,000.00
MOC 8,000.00
Requirement #1
WIP Inventory 400.00
FGS Inventory 2,533.00
COGS 5,067.00
Underapplied MOH 8,000.00
WIP 12,000.00 5% X 8000 = 400.00
FGS 76,000.00 31.67% X 8000 = 2,533.00
COGS 152,000.00 63.33% X 8000 = 5,067.00
TOTAL 240,000.00
Requirement #2
MOC 8,000.00
Overapplied OH 8,000.00
Overapplied OH 8,000.00
WIP Inventory 400.00
FGS Inventory 2,533.00
COGS 5,067.00
Requirement #3
Underapplied MOH 10,000.00
MOC 10,000.00
COGS 10,000.00
Underapplied MOH 10,000.00
Requirement #4
WIP 4,000.00 4% X 1000 = 40.00
FGS 32,000.00 32.00% X 1000 = 320.00
COGS 64,000.00 64.00% X 1000 = 640.00
TOTAL 100,000.00
WIP Inventory 40.00
FGS Inventory 320.00
COGS 640.00
Underapplied MOH 1,000.00
A
PROBLEM 6-3
Step 1 Budgeted OH 60,000.00
/ Budgeted units of production 20,000
PRE-DETERMINED OH RATE 3.00 per unit
Step 2 PRE-DETERMINED OH RATE 3.00
x Actual units produced 18,000.00
Applied MOH 54,000.00
Step 3 Actual MOH 56,500.00
Applied MOH 54,000.00
UnderApplied MOH 2,500.00
JOURNAL ENTRIES:
Work In Process 270,000.00
Materials (18,000 x P 15) 270,000.00
Work In Process 306,000.00
Factory Payroll (18,000 x P 17) 306,000.00
Work In Process 54,000.00
MOC ( 18,000 x P 3) 54,000.00
MOC 56,500.00
Various Credits 56,500.00
Underapplied OH 2,500.00
MOC 2,500.00
Cost of Goods Sold 2,500.00
Underapplied OH 2,500.00
A
Problem 6-4
1 Actual MOH (P283,400 + P647,426.67) 930,826.67
Applied MOH (168,630 hours x P 5.49) 925,778.70
Underapplied overhead 5,047.97
2 VOLUME VARIANCE (or CAPACITY VARIANCE)
Fixed OH Applied (168,630 x P 1.65) 278,239.50
Fixed OH Budgeted (based on 165,000) 272,250.00
Volume Variance (FAVORABLE) 5,989.50 favorable
SPENDING VARIANCE (or CONTROLLABLE VARIANCE)
Actual MOH 930,826.67
Budgeted MOH
Fixed Overhead Budgeted 272,250.00
Variable Overhead Applied (168,630 x P 3.84) 647,539.20 919,789.20
Spending Variance (UNFAVORABLE) 11,037.47
Summary:
Volume Variance 5,989.50 favorable
Spending Variance 11,037.47 unfavorable
NET VARIANCE 5,047.97 unfavorable
BUDGETED APPLIED
Fixed OH 272,250.00 278,239.50
Variable OH 633,600.00 647,539.20
TOTAL 905,850.00 925,778.70
5,047.97 unfavorable
unfavorable
ACTUAL
283,400.00
647,426.67
930,826.67
Problem 6-5
Sales 960,500.00
less: Sales Returns (43,700.00)
Net Sales 916,800.00
less: COGS
Cost of goods manufactured 641,100.00
add: FGS, beginning 98,700.00
Total Goods Available for Sale 739,800.00
less: FGS, end (94,500.00)
COGS, unadjusted 645,300.00
less: overapplied (3,500.00) 641,800.00
Gross Profit 275,000.00
less: Selling Expense 65,400.00
less: Admin Expense 82,500.00 (147,900.00)
Income before tax 127,100.00
less: Income Tax (38,130.00)
Net Profit 88,970.00
Spending Variance (Unfavorable) -
Summary:
Volume Variance 300.00 unfavorable
Spending Variance 3,000.00 unfavorable
NET OVERHEAD VARIANCE 3,300.00 unfavorable
4 Actual Overhead 46,500.00
Applied Overhead 43,200.00
Underapplied Overhead 3,300.00
7i
Problem 6-6
1 Fixed MOH 7,500.00
Variable MOH (5,000 units X P7.50) 37,500.00
Budgeted MOH for the month P 45,000
2 Pre-determined Fixed Overhead rate ( P7,500 / 5,000 units) P 1.50
Pre-determined Variable overhead rate P 7.50
Total Overhead rate P 9.00
x actual output 4,800 units
Applied MOH P 43,200
3 VOLUME VARIANCE (or CAPACITY VARIANCE)
Fixed OH Applied (4,800 x P 1.5) 7,200.00
Fixed OH Budgeted 7,500.00
Volume Variance (Unfavorable) 300.00
SPENDING VARIANCE (or CONTROLLABLE VARIANCE)
Actual Overhead 46,500.00
Budgeted Overhead:
Fixed Overhead Budgeted 7,500.00
Variable Overhead Applied (4,800 units x P 7.50) 36,000.00 43,500.00
Spending Variance (Unfavorable) 3,000.00
Summary:
Volume Variance 300.00 unfavorable
Spending Variance 3,000.00 unfavorable
NET OVERHEAD VARIANCE 3,300.00 unfavorable
4 Actual Overhead 46,500.00
Applied Overhead 43,200.00
Underapplied Overhead 3,300.00
BUDGETED OHR APPLIED ACTUAL
Fixed OH
Variable OH
TOTAL
Problem 6-7
1 Fixed MOH 16,920.00
Variable MOH (36,000 labor hours x P 6.30) 226,800.00
Budgeted MOH for the year 243,720.00
2 Fixed Overhead rate ( P16,920 / 36,000 labor hours) 0.47
Variable overhead rate 6.30
Total Overhead rate 6.77
x actual labor hours 2,700 hours
OR:
Budgeted MOH for the year 243,720.00
/ budgeted labor hours 36,000
Total Overhead rate 6.77
Overhead rate 6.77
x actual labor hours 2,700
Applied MOH 18,279.00
3 VOLUME VARIANCE (or CAPACITY VARIANCE)
Fixed OH Applied (2,700 labor hours x P 0.47) 1,269.00
Fixed OH Budgeted ( P 16,920 / 12 months) 1,410.00
Volume Variance (Unfavorable) 141.00
SPENDING VARIANCE (or CONTROLLABLE VARIANCE)
Actual Overhead
Budgeted Overhead:
Fixed Overhead Budgeted( P 16,920 / 12 months) 1,410.00
Variable Overhead Applied ( 2,700 labor hours x P 6.30) 17,010.00
Spending Variance (Unfavorable)
Summary:
Volume Variance 141.00
Spending Variance 5,457.00
NET OVERHEAD VARIANCE 5,598.00
4 Actual Overhead 23,877.00
Applied Overhead (see computation #2) 18,279.00
Underapplied Overhead 5,598.00
/ 36000 =6.77 predetermined OH
during October
23,877.00
18,420.00
5,457.00
unfavorable
unfavorable
unfavorable
Problem 6-8
1 Budgeted OH ( P 900,000 + P 450,000) 1,350,000.00
/ machine hours 150,000
PRE-DETERMINED OH RATE P 9 per machine hour
OR:
Fixed OH ( P 900,000 / 150,0000 machine hours) 6.00
Variable OH ( P 450,000 / 150,000 machine hours) 3.00
PRE-DETERMINED OH RATE (per machine hour) 9.00
2 Actual Manufacturing OH 1,305,000.00
Applied Manufacturing OH (140,000 x P 9.00) 1,260,000.00
Underapplied Overhead 45,000.00
3 SPENDING VARIANCE (or CONTROLLABLE VARIANCE)
Actual Overhead
Budgeted Overhead:
Fixed Overhead Budgeted 900,000.00
Variable Overhead Applied ( 140,000 machine hours x P 3) 420,000.00
Spending Variance (FAVORABLE)
4 VOLUME VARIANCE (or CAPACITY VARIANCE)
Fixed OH Applied (140,000 machine hours x P6) 840,000.00
Fixed OH Budgeted 900,000.00
Volume Variance (UNFAVORABLE) 60,000.00
Summary:
Volume Variance 60,000.00
Spending Variance 15,000.00
NET OVERHEAD VARIANCE 45,000.00
BUDGETED OHR APPLIED
Fixed OH 900,000.00 6.00 840,000.00
Variable OH 450,000.00 3.00 420,000.00
TOTAL 1,350,000.00 9.00 1,260,000.00
1,305,000.00
1,320,000.00
15,000.00 favorable
unfavorable
unfavorable
favorable
unfavorable
ACTUAL
1,305,000.00
Problem 6-9
1 Fixed OH ( P 42,000 / 60,000 labor hours) 0.70
Variable OH ( P 168,000 / 60,000 labor hours) 2.80
PRE-DETERMINED OH RATE (per labor hour) 3.50
2 Actual hours 62,400
x overhead rate P 3.5
Applied Overhead 218,400.00
3 Actual manufacturing overhead 213,100.00
Applied manufacturing overhead (see #2 computation) 218,400.00
Overapplied overhead 5,300.00
4 VOLUME VARIANCE (or CAPACITY VARIANCE)
Fixed OH Applied (62,400 labor hours x P .7) 43,680.00
Fixed OH Budgeted 42,000.00
Volume Variance (FAVORABLE) 1,680.00
SPENDING VARIANCE (or CONTROLLABLE VARIANCE)
Actual Overhead
Budgeted Overhead:
Fixed Overhead 42,000.00
Variable Overhead ( 62,400 labor hours x P 2.8) 174,720.00
Spending Variance (FAVORABLE)
Summary:
Volume Variance 1,680.00
Spending Variance 3,620.00
NET OVERHEAD VARIANCE 5,300.00
213,100.00
216,720.00
3,620.00
favorable
favorable
favorable
