COST ACCOUNTING G.P.

COSTA

Definition of Cost Accounting

Cost Accounting involves the measuring, recording, and reporting of product costs.
From the data accumulated, the unit cost of each product is determined. In addition, cost
accounting provides data that can be used by management to measure performance and
control costs.

Comparison of Cost Accounting with Financial Accounting

Cost Accounting Financial Accounting
1. Looks to the future 1. Looks to the past
2. Subjective 2. Objective
3. Reports mainly for internal 3. Reports mainly for external
consumption consumption
4. Mainly to cut costs and expenses 4. Covers the whole field

Accounting for Manufacturing Operations

Accounting for manufacturing operations ranges from the simple to the complex. In
its simplest form, the accounting is basically an extension of the accounting for
merchandising operations when periodic inventory procedures are used. Under this type of
accounting, manufacturing costs are recorded as incurred. At the end of an accounting
period, physical inventories are taken for finished goods, work in process, and raw
materials. As in a merchandising company, closing entries are made to record the ending
inventories and the cost of goods manufactured.
In its more complex form, the accounting for manufacturing operations involves perpetual
inventory procedures and an extensive network of documents and accounting records.

Summary of manufacturing and non-manufacturing costs

Manufacturing Costs

Direct Materials:
Materials that can be physically and conveniently traced to a product, such as wood in a
table.
Prime Cost
(Direct Materials
+ Direct Labor)
Direct Labor:
Labor costs that can be physically and conveniently traced to a product such as assembly
line workers in a plant. Direct labor is also called touch labor cost.

Conversion Cost
(Direct Labor +
Overhead Cost)
Manufacturing Overhead:
All costs of manufacturing a product other than direct materials and direct labor, such as
indirect materials, indirect labor, factory utilities, and depreciation of factory equipment.

Non-manufacturing Costs

Marketing or selling costs:

All costs necessary to secure customer orders and get the finished product or service into
the hands of the customer, such as sales commission, advertising, and depreciation of
delivery equipment and finished goods warehouse.

Administrative Costs:
All costs associated with the general management of the company as a whole, such as
executive compensation, executive travel costs, secretarial salaries, and depreciation of
office building and equipment.
COST ACCOUNTING G.P. COSTA

Job Order Cost Flow

Direct materials, direct labor, and factory overhead in a job order system are
identical those in a simple manufacturing system. The flow of costs in job order
Job Order Cost Accounting

Materials Work in Process

1-Purchases 4- Materials used 4- Direct 7- Cost of goods
materials used manufactured
5- Direct labor
6- Overhead
applied

Payroll Finished Goods

2-Factory labor 7- Cost of goods 8- Cost of goods
incurred manufactured sold

Factory Overhead Control Cost of Goods Sold

Actual overhead 6-Applied 8- Cost of goods
incurred: overhead sold
3-Depreciation,
Insurance, Repairs
4-Indirect materials
5-Indirect labor

Key to Entries:

Accumulation Assignment
1-Purchase Raw Materials 4-Raw materials are used
2-Incur factory labor 5-Distribution of payroll
3- Incur factory overhead 6- Overhead is applied
7-Completed goods are recognized
8-Cost of goods sold is recognized
Problem A
Selected transactions of the GPC Company for January are as follows:
a. Material purchased on account, P40,000.
b. Materials requisitioned: P33,000 for production and P2,000 for indirect factory use.
c. Total gross payroll was P40,000, with withholdings of 12% income tax, 7.5% SSS,
and P280 Philhealth.
d. The wages due to the employees were paid.
e. Of the total payroll, P32,000 was direct labor and P8,000 was indirect factory labor.
f. An additional 10% is entered for employers payroll taxes, representing 7.5% SSS,
0.8% Philhealth, and 1.7% employees compensation.
g. Various factory overhead costs totaling P18,000 were incurred on account.
h. Other factory overhead consists of P2,100 depreciation, P780 expired insurance,
P1,250 accrued property taxes.
i. Factory overhead was transferred to the Work in Process account.
j. Cost of completed production to storage P92,000.
k. Sales on account were P80,000, 50% of which were collected. The cost of goods
sold was 75% of the sales price.
Required: Prepare journal entries for these transactions.
COST ACCOUNTING G.P. COSTA
Problem 1. Computation of Total Manufacturing Cost, Cost of Goods
Manufactured, and Cost of Goods Sold.
During the past year, the ABC Company incurred these costs: direct labor, P2,500,000;
factory overhead, P4,000,000; and direct materials purchases, P1,500,000. Inventories
were costed as follows:
Beginning Ending
Finished goods........................................................... P250,000 P300,000
Work in process......................................................... 450,000 550,000
Materials.................................................................... 75,000 125,000
Required:
(1) Calculate total manufacturing cost for the year.
(2) Calculate the cost of goods manufactured for the year.
(3) Calculate the cost of goods sold for the year.

PROBLEM 2 Journal Entries for the Cost Accounting Cycle.

On January 1, the ledger of the DEF Furniture Company contained, among other accounts,
the following: Finished Goods, P25,000; Work in Process, P30,000; Materials, P15,000.
During January, the following transactions were completed:
(a) Materials were purchased at a cost of P28,000.
(b) Direct materials in the amount of P21,000 were issued from the storeroom.
(c) Storeroom requisitions for indirect materials and supplies amounted to P3,200.
(d) The total payroll for January amounted to P31,000, including marketing salaries of
P7,500 and administrative salaries of P5,500. Labor time tickets show that P15,500 of
the labor cost was direct labor.
(e) Various factory overhead costs were incurred for P12,000 on account.
(f) Total factory overhead is charged to the work in process account.
(g) Cost of production completed in January totaled P58,000, and finished goods in the
shipping room on January 31 totaled P18,000.
(h) Customers to whom shipments were made during the month were billed for P88,000.
(Also record entry for cost of goods sold.)
Required: Prepare journal entries for the transactions, including the recording, payment,
and distribution of the payroll.

PROBLEM 3 Cost of Goods Manufactured Statement.

GHI Company manufactures file cabinets made to consumer specifications. The following
information was available at the beginning of March:
Materials inventory.................................................... P12,800
Work in process inventory......................................... 4,700
Finished goods inventory........................................... 2,300
During March, materials costing P26,000 were purchased, direct labor cost totaled
P19,300, and factory overhead was P12,500 (including P2,500 of indirect materials). March
31 inventories were:

Materials inventory.................................................... P13,300

Work in process inventory......................................... 6,800
Finished goods inventory........................................... 2,800
Required: Prepare a cost of goods manufactured statement for March.
PROBLEM 4 Income Statement Relationships.
The following data are available for three companies at the end of their fiscal years:
Company Alpha:
Finished goods, April 1........................................ P400,000
Cost of goods manufactured.......................... 2,600,000
Sales.............................................................. 3,500,000
Gross profit on sales....................................... 35%
Finished goods inventory, March 31............... ?
Company Beta:
Freight in............................................................. P 12,000
Purchases returns and allowances................. 22,000
Marketing expense......................................... 85,000
Finished goods, December 31........................ 65,000
Cost of goods sold.......................................... 550,000
Cost of goods available for sale..................... ?

Company Chi:
Gross profit......................................................... P264,000
Cost of goods manufactured.......................... 612,000
Finished goods, January 1............................... 34,000
Finished goods, December 31........................ 26,000
Work in process, January 1............................. 18,000
Work in process, December 31....................... 12,000
Sales.............................................................. ?
Required: Determine the amounts indicated by the question marks.

PROBLEM 5 Cost of Goods Manufactured; Prime and Conversion Costs.

Rexaldo Company's purchases of materials during June totaled P25,000, and the cost of
goods sold for June was P130,000. Factory overhead was 200% of direct labor cost. Other
information pertaining to Rexaldo Company's inventories and production for June is as
follows:
Inventories Beginning Ending
Finished goods........................................................ P42,500 P39,000
Work in process....................................................... 15,500 17,000
Materials................................................................. 5,000 8,500
Required:
(1) Prepare a schedule of cost of goods manufactured.
(2) Compute the prime cost charged to Work in Process.
(3) Compute the conversion cost charged to Work in Process.

PROBLEM 6 Cost of Goods Manufactured and Sold.

For May, Narita Inc. had cost of goods manufactured equal to P90,000; direct materials
used P30,000; cost of goods sold, P100,000; direct labor, P38,000; purchases of materials,
P40,000; cost of goods available for sale, P125,000; and total factory labor, P48,000. Work
in process was P25,000 on May 1 and P15,000 on May 31. The company uses a single
materials account for direct and indirect materials.
Required: Prepare the following:
(1) A cost of goods sold statement. For brevity, show single-line items for factory
overhead and direct materials used.
(2) Summary general journal entries to record:
(a) purchase of materials on account
(b) use of materials, including direct materials of 1,000
(c) accrual of factory payroll, including indirect labor of P10,000 (use a payroll
clearing account)
(d) distribution of factory labor cost
(e) transfer of completed work to finished goods
(f) sales on account, at a markup equal to 100% of production cost

PROBLEM 7 Job Order Cost Schedule.

Hideo Woodcrafters produces special-order wood products. The company uses job order
costing for pricing and cost accumulation purposes. The following costs were incurred on
two recent jobs:
Cost Item.................................... Job J-8 Job K-9
Direct materials:
Issued..................................... P6,500 P8,000
Returned................................. 500 0
Indirect materials used............... 500 400
Direct labor................................. P9,000 P15,000
Direct labor rate......................... P9 per hour P10 per hour
Overhead application rate.......... P10 per direct labor hour P15 per direct labor hour

The company adds a 50% markup on cost in determining the amount to charge for each
job.
Required: Prepare a schedule showing the cost and the amount to be charged for each
job.

PROBLEM 8 Job Order Cost Sheet; Over- or Underapplied Overhead.

During June, the following transactions took place at the Inoue Corp.

June 3 Purchased materials, P30,000.

5 Requisitioned materials from inventory, P20,000 (75% of these were direct; 25%
were indirect). Direct materials of P3,000 and indirect materials of P1,000 were
for Job 00-1. The remainders were for Job 00-2.
7 For Job 00-2, returned P150 of direct materials and P200 of indirect materials.
8 Recorded liabilities for payroll: direct labor, P15,000 and indirect labor, P5,000.
Of the direct labor cost, 60% was for Job 00-1; the remainder was for Job 00-2.
10 Incurred other factory overhead costs, P20,000 (all applicable to Jobs 00-1 and
00-2).
14 Applied overhead at the rate of 200% of direct labor cost to Jobs 00-1 and 00-2,
which were completed and transferred to finished goods account today.
Required: Assuming that Jobs 00-1 and 00-2 were the only jobs during the period and that
all overhead (as recorded above) is the total applicable overhead for these projects:

(1) Prepare a job order cost sheet for each job.

(2) Determine the difference between applied and actual overhead for the month.
PROBLEM 9 Job Order Cycle Entries.
The following completed cost sheets were prepared for three jobs that were in production
during April in the Special Order Division of Takemasa Company:
Job 097 Job 781 Job 946
Direct materials.................................................... P 6,000 P2,700 P4,100
Direct labor........................................................... 9,200 7,300 8,200
Applied factory overhead...................................... 6,900 5,475 6,120
Allowance for commercial expenses and profit..... 11,050 7,738 9,210
On April 1, Job 097 was 75% complete as to materials, labor, and overhead. It was
finished during the month. The other jobs were started and finished during the month.
Jobs 097 and 946 were sold on account at the end of the month.
Required: Prepare general journal entries to be recorded in April to accumulate these job
costs for Work in Process as well as for Finished Goods and for the sale of the two jobs.
PROBLEM 10 Journal Entries
Iwamoto Inc. produces customized vans in a job order shop. On November 1, the following
balances appear in the inventory records:
Finished goods............................................................................................ P179,000
Work in process.......................................................................................... 308,000
Materials.................................................................................................... 83,000
The amount in Finished Goods represents P101,000 recorded for Van 175 and P78,000
recorded for Van 177. The work in process account represents the three vans in process,
as follows:
Van 179 Van 180 Van 181
Factory overhead.................................................. P75,000 P50,000 P25,000
Direct labor........................................................... 60,000 40,000 20,000
Direct materials.................................................... 26,000 7,000 5,000
The following transactions occurred during November:
(a) Purchased materials on account, P80,000.
(b) Requisitioned P60,000 of materials from inventory: P15,000 applied to Van 180,
P25,000 to Van 181, and P16,000 to Van 182, a new order; the balance was for
indirect materials.
(c) Recorded the liability for the payroll and the labor cost distribution in a single entry:
total payroll, P208,750. Of the payroll cost, 10% applied to Van 179, 20% to Van 180,
35% to Van 181, 30% to Van 182, and the remainder to indirect labor.
(d) Paid the payroll.
(e) Applied factory overhead at the rate of 150% of direct labor cost.
(f) Completed Vans 179 and 180.
(g) Sold Vans 175, 177, and 180 at 50% over manufacturing costs.
Required: Prepare general journal entries to record these transactions.

PROBLEM 11 Manufacturing Costs.

The work in process account of Takeshi Company showed:
Work in Process

Materials P22,000 | Finished goods P68,000

Direct labor 37,000 |
Factory overhead 55,500 |
Materials charged to the one job still in process amounted to P5,000. Factory overhead is
applied as a predetermined percentage of direct labor cost.
Required: Compute the following:
(1) The amount of direct labor cost in finished goods.
(2) The amount of factory overhead in finished goods.

PROBLEM 12 Manufacturing Costs.

Sadako Company is to submit a bid on the production of 5,500 vases. It is estimated that
the cost of materials will be P8,500, and the cost of direct labor will be P12,000. Factory
overhead is applied at 50% of direct labor cost in the Molding Department and at P7.50
per direct labor hour in the Finishing Department. Of the above direct labor, it is
estimated that 500 direct labor hours at a cost of P4,000 will be required in Finishing. The
company wishes a markup of 100% of its total production cost.
Required: Determine the following:
(1) Estimated cost to produce.
(2) Estimated prime cost.
(3) Estimated conversion cost.
(4) Bid price.
PROBLEM 13 Flow of Costs Through T Accounts.
The Kojie Company had the following inventories at the beginning and end of July:
July 1 July 31
Materials.............................................................................. P20,000 P 45,000
Work in process................................................................... ? 185,000
Finished goods..................................................................... 65,000 115,000

During July, the cost of materials purchased was P160,000 and factory overhead of
P125,000 was applied at a rate of 75% of direct labor cost. July cost of goods sold was
P240,000.
Required: Prepare completed T accounts showing the flow of the cost of goods
manufactured and sold.
Problem 1 SOLUTION
(1) Direct materials:
Materials inventory, beginning............................. P 75,000
Purchases............................................................. 1,500,000
Materials available for use.................................... P1,575,000
Less raw materials inventory, ending................... 125,000
Direct materials consumed................................... P1,450,000
Direct labor................................................................ 2,500,000
Factory overhead....................................................... 4,000,000
Total manufacturing costs......................................... P 7,950,000

(2) Total manufacturing costs [from (1)]......................... P7,950,000

Add work in process inventory, beginning............ 450,000
P8,400,000
Less work in process inventory, ending................ 550,000
Cost of goods manufactured..................................... P 7,850,000

(3) Cost of goods manufactured [from (2)]..................... P7,850,000

Add finished goods inventory, beginning.............. 250,000
Cost of goods available for sale................................. P8,100,000
Less finished goods inventory, ending.................. 300,000
Cost of goods sold..................................................... P7,800,000

Problem 2 SOLUTION
(a) Materials.................................................................... 28,000
Accounts Payable................................................. 28,000

(b) Work in Process......................................................... 21,000

Materials............................................................... 21,000

(c) Factory Overhead Control.......................................... 3,200

Materials............................................................... 3,200

(d) Payroll....................................................................... 31,000

Accrued Payroll..................................................... 31,000

Accrued Payroll.......................................................... 31,000

Cash..................................................................... 31,000

Work in Process......................................................... 15,500

Factory Overhead Control.......................................... 2,500
Marketing Expenses Control...................................... 7,500
Administrative Expenses Control............................... 5,500
Payroll................................................................... 31,000

(e) Factory Overhead Control.......................................... 12,000

Accounts Payable................................................. 12,000
(f) Work in Process......................................................... 17,700
Factory Overhead Control..................................... 17,700

(g) Finished Goods.......................................................... 58,000

Work in Process.................................................... 58,000

(h) Accounts Receivable.................................................. 88,000

Sales..................................................................... 88,000

Cost of Goods Sold (25,000 + 58,000 - 18,000)........ 65,000

Finished Goods..................................................... 65,000

Problem 3 SOLUTION
GHI Company
Cost of Goods Manufactured Statement
For the Month Ended March 31, 19--

Direct materials:
Materials inventory, March 1........................ P12,800
Purchases..................................................... 26,000
Materials available for use............................ P38,800
Less:.........................Indirect materials used P 2,500
Materials inventory, March 31.................. 13,300 15,800
Direct materials consumed........................... P23,000
Direct labor....................................................... 19,300
Factory overhead............................................... 12,500
Total manufacturing cost................................... P54,800
Add work in process inventory, March 1............ 4,700
P 59,500
Less work in process inventory, March 31......... 6,800
Cost of goods manufactured............................. P52,700

Problem 4 SOLUTION
Company Alpha:
Sales.......................................................................... P3,500,000
Cost of goods sold:
Finished goods inventory, April 1.......................... P 400,000
Cost of goods manufactured................................. 2,600,000
Cost of goods available for sale............................ P3,000,000
Finished goods inventory, March 31...................... 725,000
Less cost of goods sold......................................... 2,275,000
Gross profit (20% of sales)......................................... P 1,225,000

Company Beta:
Cost of goods available for sale................................. P 615,000
Less finished goods ending inventory........................ 65,000
Cost of goods sold...................................................... P 550,000
Company Chi:
Sales.......................................................................... P 884,000
Cost of goods sold:
Cost of goods manufactured................................. P 612,000
Add beginning finished goods inventory............... 34,000
Cost of goods available for sale............................ P 646,000
Less ending finished goods inventory................... 26,000
Less cost of goods sold......................................... 620,000
Gross profit................................................................ P 264,000

Problem 5 SOLUTION

(1) Rexaldo Company

Schedule of Cost of Goods Manufactured
For Month Ended June 30, 19--

Work in process, June 1................................................... P 15,500

Production costs:
Direct materials......................................................... 21,500 **
Direct labor................................................................ 35,500
Factory overhead....................................................... 71,000 128,000
P143,500
Less work in process, June 30......................................... 17,000
Cost of goods manufactured........................................... P 126,500 *

Let x = direct labor

3x = P106,500
x = P35,500 direct labor
2x = P71,000 factory overhead

(2) Prime cost:

Direct materials [from (1)].................................. P 21,500
Direct labor [from (1)]......................................... 35,500
P 57,000
(3) Conversion cost:
Direct labor [from (1)]......................................... P 35,500
Factory overhead [from (1)]................................ 71,000
P106,500 ***

* Cost of goods sold (P130,000) + ending finished goods inventory (P39,000) - beginning finished
goods inventory (P42,500) = P126,500.

** Purchases of materials during June (P25,000) + beginning materials inventory (P5,000) -

ending materials inventory (P8,500) = P21,500.

*** Production costs for June (P128,000) - direct materials (P21,500) = direct labor and factory
overhead (P106,500).

Problem 6 SOLUTION
(1) Narita Inc.
Cost of Goods Sold Statement
For Month Ended May 31, 19--
(in thousands)

Direct materials consumed............................................. P 30

Direct labor..................................................................... 38
Factory overhead............................................................ 12
Total manufacturing cost [Note (a)]................................ P 80
Add work in process inventory, May 1............................ 25
P 105
Less work in process inventory, May 31.......................... 15
Cost of goods manufactured........................................... P 90
Add finished goods inventory, May 1 [Note (b)].............. 35
Cost of goods available for sale...................................... P 125
Less finished goods inventory, May 31 [Note (c)]........... 25
Cost of goods sold.......................................................... P 100

Note (a): Cost of goods manufactured............................ P 90

Add work in process, ending............................. 15
P 105
Less work in process, beginning....................... 25
Equals total manufacturing cost....................... P 80

Note (b): Cost of goods available for sale........................ P 125

Less cost of goods manufactured..................... 90
Equals finished goods, beginning..................... P 35

Note (c): Cost of goods available for sale........................ P 125

Less cost of goods sold..................................... 100
Equals finished goods, ending.......................... P 25

(2)

(a) Materials.................................................................. 40,000

Accounts Payable................................................ 40,000

(b) Work in Process....................................................... 30,000

Factory Overhead Control........................................ 1,000
Materials............................................................. 31,000

(c) Payroll (P38,000 + P10,000).................................... 48,000

Accrued Payroll................................................... 48,000

(d) Work in Process....................................................... 38,000

Factory Overhead Control........................................ 10,000
Payroll................................................................. 48,000
(e) Finished Goods........................................................ 90,000
Work in Process................................................... 90,000

(f) Accounts Receivable................................................ 200,000

Sales [P100,000 + (100% of P100,000)]............. 200,000

Cost of Goods Sold.................................................. 100,000

Finished Goods................................................... 100,000

Problem 7 SOLUTION

Job J-8 Job K-9

Direct materials............................................................... P 6,000 P 8,000
Direct labor...................................................................... 9,000 15,000
Factory overhead applied ................................................ 10,000 22,500
Total............................................................................. P 25,000 P 45,500
Allowance for profit and other costs................................. 12,500 22,750
Amount to be charged..................................................... P 37,500 P 68,250

Problem 8 SOLUTION

(1)
Job 00-1 Job 00-2
Materials............................................................................................ P 3,000 P 11,850
Labor................................................................................................. 9,000 6,000
Overhead applied.............................................................................. 18,000 12,000
Total cost........................................................................................... P 30,000 P 29,850

(2) Analysis of Factory Overhead

Incurred:
Indirect materials......................................................................... P 4,800
Indirect labor................................................................................ 5,000
Other overhead incurred............................................................... 20,000 P 29,800
Applied:
Job 00-1........................................................................................ P 18,000
Job 00-2........................................................................................ 12,000 30,000
Amount overapplied ......................................................................... P (200)

Problem 9 SOLUTION
Debit Credit
Work in Process.............................................................................. 8,300 *
Materials................................................................................... 8,300

Work in Process.............................................................................. 17,800 **

Accrued Payroll......................................................................... 17,800

Work in Process.............................................................................. 13,320 ***

 Factory Overhead Control......................................................... 13,320

Finished Goods............................................................................... 55,995

Work in Process......................................................................... 55,995

Cost of Goods Sold......................................................................... 40,520

Finished Goods.......................................................................... 40,520

Accounts Receivable...................................................................... 60,780

Sales......................................................................................... 60,780

* (.25 x P6,000) + P2,700 + P4,100

** (.25 x P9,200) + P7,300 + P8,200
*** (.25 x P6,900) + P5,475 + P6,120

Problem 10 SOLUTION
Debit Credit
(a) Materials................................................................................ 80,000
Accounts Payable............................................................. 80,000

(b) Factory Overhead Control....................................................... 4,000

Work in Process...................................................................... 56,000
Materials.......................................................................... 60,000

(c) Factory Overhead Control....................................................... 10,437

Work in Process...................................................................... 198,313
Accrued Payroll................................................................. 208,750

(d) Accrued Payroll....................................................................... 208,750

Cash................................................................................. 208,750

(e) Work in Process...................................................................... 297,470

Applied Factory Overhead................................................ 297,470

(f) Finished Goods....................................................................... 429,563

Work in Process................................................................ 429,563

(g) Accounts Receivable.............................................................. 593,063

Sales................................................................................ 593,063

Cost of Goods Sold................................................................. 395,375

Finished Goods................................................................. 395,375

Problem 11 SOLUTION

(1) The amount of direct labor in finished goods:

Finished goods.............................................................................................. P68,000
Materials included in finished goods............................................................. 17,000
 Direct labor and factory overhead in finished goods..................................... P51,000

Factory overhead charged to work in process $55,500

= = 1.5
Direct labor charged to work in process $37,000
Let x = direct labor in finished goods
2.5x = P51,000 direct labor and factory overhead in finished goods
x = P20,400 direct labor in finished goods

(2) The amount of factory overhead in finished goods:

x = P20,400
1.5x = 1.5(P20,400)
1.5x = P30,600 factory overhead in finished goods

Problem 12 SOLUTION

(1) Materials.................................................................................................. P 8,500

Direct labor.............................................................................................. 12,000
Factory overhead:
Molding (50% x P8,000)...................................................................... 4,000
Finishing (500 DLH x P7.50)................................................................ 3,750
Estimated cost to produce....................................................................... P 28,250

(2) Materials.................................................................................................. P 8,500

Direct labor.............................................................................................. 12,000
Estimated prime cost............................................................................... P 20,500

(3) Direct labor.............................................................................................. P 12,000

Factory overhead..................................................................................... 7,750
Estimated conversion cost....................................................................... P 19,750

(4) Estimated cost to produce....................................................................... P 28,250

Markup (P28,250 x 100%)........................................................................ 28,250
Bid price.................................................................................................. P 56,500

Problem 13 SOLUTION

Materials Work in Process

Inv. 20,000 | WIP 135,000Inv.48,333 **|
FG 290,000
Purch. 160,000 | Materials 135,000 |
180,000 | Factory |
45,000 | overhd. 125,000 |
| Labor 166,667 |
| 475,000 |
| 185,000 |
 Finished Goods Cost of Goods Sold

Inv. 65,000 | CGS 240,000 FG 240,000 |

WIP 290,000* | |
355,000 | |
115,000 | |

CGA-Canada (adapted). Reprinted with permission.

*Beginning inventory + WIP = Ending inventory + CGS

P65,000 + WIP = P115,000 + P240,000
WIP = P290,000

**Beginning WIP + Mfg. costs = Ending WIP + FG

Beginning WIP + P426,667 = P185,000 + P290,000
Beginning WIP = P48,333