Manufacturing - Actual Costing - JBJ

Direct materials (DM)

Direct labor (DL)

Factory indirect cost

Example:

• Factory Rent expense

• Indirect Materials (IM)

• Indirect Labor (IL)

• Factory Supervisor Salaries
• Factory Security Guard
• Factory Janitor

• Factory Utilities expense

• Factory Insurance expense

• Factory Equipment, Machine, Building, Furniture and Fixtures

Depreciation

• Factory Supplies expense

Selling expenses

Example:

• Freight Out

• Store Rent expense

• Commission expense

• Sales Person Salaries expense

• Store Utilities expense

• Store Insurance expense

• Store Equipment, Machine, Building, Furniture and Fixtures Depreciation

• Store Supplies expense

General and Administrative expenses

• Bad Debts expense

• Office Rent expense

• Office Salaries expense

• Office Utilities expense

• Office Insurance expense

• Office Equipment, Machine, Building, Furniture and Fixtures Depreciation

• Office Supplies expense

Prime Cost

Direct Materials X
Direct Labor X
Total X

Conversion Cost

Direct Labor X
Factory Overhead X
Total X

Total Manufacturing Cost

Direct Materials X
Direct Labor X
Factory Overhead X
Total X
T - ACCOUNTS

Raw Materials Inventory Work in Process Inventory Finished Goods

(RM) (WIP) Inventory (FG)

Beg. X Issued Beg. X COGM Beg. X COGS

X X X
Purchases X DM COGM
X X
DL
X
FOH X

Total X X TGIP X X TGAS X X

End X END X End X

Factory Overhead (FOH)

Indirect materials X Tranferred

X
Indirect Labor to WIP
X
Other Indirect
Cost X
X

Total
X

0
Computation of Net income

Net sales X
Cost of Goods sold (X)
Gross profit X
less: Operating expenses
Selling expenses X
General and administrative expenses X (X)
Operating Income or Earnings Before Interest and Tax(EBIT) X
Less: Other expenses (example: Interest expense) (X)
Add: Other income ( example: Interest income) X
Earning before tax (EBT) X
Less: Income tax expense (X)
Net income X

Problem 1

Love Company had the following accounts balance as of January 1, 2018:

Raw materials (DM and IM) inventory 20,300

Work in process 7,000
Finished goods inventory 18,000

During January, the company incurred the following factory cost:

1. Purchased P164,000 of raw materials on account.

2. Issued P180,000 of raw materials to production. Of this amount, P134,000

was for direct materials and the remainder was for production supplies.

3. Accrued P88,000 in factory payroll cost, P62,000 was for direct labor and the
rest was for supervisors salaries.

4. Accrued P7,000 of factory utility cost

5. Accrued P2,000 of property taxes on the factory.

6. Recorded the expiration of P1,600 of prepaid insurance on factory

equipment.

7. Recorded P40,000 of straight-line depreciation on factory equipment.

8. Transferred actual overhead to work in process.

9. Transferred goods costing P320,000 to finished goods inventory.

10. Recorded total sales of P700,000; of these, P550,000 on account.

11. Recorded cost goods sold of P330,000

12. Recorded selling cost of P100,000 and administrative cost of P180,000.

13. Paid interest expense P2,000.

14. Accrued income tax (assuming 40% tax rate).

Required:

A. Journalize the transaction for January.

B. Post transaction to T- account for raw materials inventory, Work in process

inventory, Finished goods inventory, Manufacturing overhead.

C. Compute cost of goods manufactured for January.

D. Compute cost of goods sold.

E. Compute Net income.

Problem 2

Honest Company manufactures mailboxes. The following data represent

transaction and
balances for January 2018, the company’s first month of operation.

Purchased direct materials on accounts P 248,000

Issued direct materials to production 186,000
Accrued direct labor payroll 134,000
Paid factory rent 3,600
Accrued factory utilities 16,200
Recorded factory equipment depreciation 15,800
Paid factory supervisor salary 6,400
Ending work in process inventory (6,000 units) 35,000
Ending finished goods inventory (3,000) ?
Sales on account (P24 per unit) 648,000

Required:
A. Prepare the journal entries to record the flow of cost for January.

B. How many units were sold in January? How many units were completed in
January?

C. What was the total cost of goods manufactured in January?

D. What is the per unit cost of goods manufactured in January?

Problem 3

January 2018 inventory and cost data for Respect Company are as follows:

January 1 January 31
Raw materials P 12,300 P ?
Work in process 25,900 33,300
Finished goods 62,700 55,500
 Direct labor P 182,400
Direct materials purchased 196,300
Direct materials used 195,800
Selling and administrative expenses 171,200
Factory overhead 205,700

Required:

A. Compute the total inventory January 31, 2018.

B. Compute the cost of goods manufactures for January 2018.

C. Compute the cost of goods sold for January 2018.

D. Compute the net income. Assume that C company income tax rate is 40%.
Sales for January 2018 were P985,000

Problem 4

Faith Enterprises has the following data

 Inventories: March 1 March 31

Raw material P18,000 P15,000

Work in process 9,000 6,000
Finished goods 27,000 36,000

Additional information for March:

Raw material purchased P42,000
Direct labor payroll P30,000
Direct labor rate per hour 7.50
Actual Factory overhead P15,000

Required: Compute the following

1. Prime cost
2. Conversion cost
3. Total Manufacturing Cost
4. Cost of goods manufactured

Problem 5
Hope Company makes evening dresses. The following information was
gathered from the company records for 2018, the first year of company
operations. Work in process inventory at the end of 2018 was P15,750.

Direct materials Purchased P 555,000

Direct materials issued to production 447,000
Direct labor payroll accrued 322,500
Indirect labor payroll accrued 93,000
Prepaid factory insurance expired 3,000
Factory utilities paid 21,450
Depreciation on factory equipment 32,550
Factory rent paid 126,000
Sales (All account) 1,431,000

The company’s gross profit rate for the year was 35%.

Required:

A. Compute the cost of goods sold for 2018.

B. What was the total cost of goods manufactured for 2018?

C. What is finished goods inventory at December 31, 2018?

D. If net income was P125,000, What were total selling and administrative
expenses for the year?