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ADVANCED FINANCIAL ACCOUNTING AND REPORTING (AFAR)

JOB ORDER COSTING II

SPOILAGE
Budgeted overhead costs (exc. Budget for spoiled goods) P1,275,000
Budgeted spoilage costs 112,500
Budgeted direct labor hours 62,500
Actual production for job#101 (1,500 spoiled units) 25,000 units

Actual costs incurred for Job#101:


Direct materials P30 per unit
Direct labor (6,250 DLHRs) P80 per direct labor
Factory overhead costs P130,000
Spoiled goods can be sold for P20 per unit.

Prepare journal entries assuming the following different cases:


a. Spoilage due to normal failure
b. Spoilage due to customer specification
c. Spoilage is unexpected and due to an isolated incident (abnormal loss)

DEFECTIVE GOODS
Actual production 25,000 units (1,500 defective)
Costs attributable to 25,000 units:
Direct materials P20 per unit
Direct labor P30 per unit
Factory overhead 150% of Direct labor costs

Costs to rework 1,500 defective units:


Direct materials P10 per unit
Direct labor P15 per unit
Prepare journal entries assuming the following different cases:
a. Defects due to normal failure
b. Defects due to customer specification
c. Defect is unexpected and due to an isolated incident (abnormal loss)

PROBLEM A. The following information was gathered from the accounting records of the company’s cost
department:
Work in process Factory overhead control
Beg P4,000 8,000 ? 3,000
DM 1,000
DL 2,000
FOH ?
End ? Bal

Additional information:

a. As of the end of the period, raw materials and finished goods inventory had balances of P1,000 and P3,000,
respectively.
b. Cost of goods sold amounted to P5,000.
c. Relevant actual costs incurred for the period are as follows: factory supplies P500, salary of factory
supervisor P1,000, salary of accounting manager P600, and Insurance (12% for factory) P5,000.

1. If any over/under applied overhead is deemed significant and is allocated based on the ending
balances of relevant inventories and cost of goods sold, what is the adjusted cost of goods sold?
a. 5,440
b. 4,550
c. 5,550
d. 4,450
PROBLEM B: Alexis Company’s Job 501 for the manufacture of 2,200 shoes was completed during August 2013 at
the following unit costs:
Direct materials P20
Direct labor 18
Factory overhead (includes an allowance 18
of P1 for spoiled units)

Final inspection of Job 501 disclosed 200 spoiled shoes which were sold to a department store for P6,000.

What would be the unit cost of the good shoes produced on Job 501 if spoilage loss is charged to:
2. All production
a. 57.50
b. 57
c. 56
d. 55

3. Specific to Job 501


a. 56.00
b. 56.50
c. 57.00
d. 57.50

PROBLEM C: During March, Noemi Company incurred the following costs on Job Order 111 for manufacturing of
200 units:

Original cost accumulation


Direct materials P660
Direct labor 800
Factory overhead (150% of direct 1,200
labor cost) P2,660

Direct costs of reworking 10 units:


Direct materials P100
Direct labor 160 a
P260

4. The rework costs were attributable to the exacting specifications of Job Order 111 and the full
rework costs were charged to this specific job. What is the cost per finished unit of Job Order III?
a. 15.00
b. 15.70
c. 15.80
d. 16.20

5. Assuming the rework costs were attributable to internal failure, what is the cost per finished unit of
Job 109?
a. 13.50
b. 13.40
c. 13.30
d. 13.20

PROBLEM D: Muscle Machine Shop manufacturers lifting equipment. One order from Simmer’s World for 200 lifting
equipment showed the following costs per unit:

Materials P400
Labor 175
Factory overhead, 160% of direct labor cost

Final inspection revealed that 15 of the units were not properly produced. Correction of each defective unit requires
P50 for materials, P80 for labor, and factory overhead at the appropriate rate.
6. Assuming cost of defective units is charged to all the jobs, what is the unit cost of finished goods?
a. 858
b. 958
c. 855
d. 955

7. Assuming cost of defective units is charged to the job order, what is the unit cost of each unit
manufactured?
a. 875
b. 875.35
c. 874
d. 874.35

PROBLEM E: During the year, the company worked on Job No. 143 and assigned the cost to 1,000 units produced
using the following information:
Direct materials P10 per unit
Direct labor 5 per unit (each unit requires 2 hours)
Factory overhead 5 per direct labor hour

The company has perfected the processes done in producing its products and therefore, on a normal operation it
expects to produce 99% perfectly crafted quality units from all its production. However, due to unnecessary and
unusual actions performed by its new production staff, Job No. 143 had produced 20 spoiled units. The manager
found out that no benefit can be further obtained from these spoiled units.
8. How much would be the cost per good unit of Job no 143?
a. 25
b. 30
c. 35
d. 40

PROBLEM F: During the year, the company worked on Job No. 888 and assigned the cost to 1,000 units produced
using the following information:
Direct materials P10 per unit
Direct labor 5 per hour (each unit requires 2 hours)
Factory overhead 5 per direct labor hour

The company has perfected the processes done in producing its products and therefore, on a normal operation it
expects to produce 99% perfectly manufactured quality units from all its production. Job No. 888 produced 5 spoiled
units which can be sold at P10 each.
9. How much would be the cost per good unit of Job no 888?
a. 25
b. 30
c. 35
d. 40

PROBLEM G: During the year, the company worked on Job No. 8 and assigned the cost to 2,000 units produced
using the following information:
Direct materials P10 per unit
Direct labor 10 per hour (each unit requires 2 hours)
Factory overhead 5 per direct labor hour

The company has perfected the processes done in producing its products and therefore, on a normal operation it
expects to produce 99% perfectly manufactured quality units from all its production. Job No. 8 produced 10 defective
goods which can be reworked at a total cost of P150. The reworked units are included to good units and delivered to
the customer.
10. How much would be the total cost charged to Job No. 8?
a. 40,000
b. 75,000
c. 55,000
d. 80,000

PROBLEM H: During the year, the company worked on Job No. 88 and assigned the cost to 1,000 units produced
using the following information:
Direct materials P10 per unit
Direct labor 10 per unit (each unit requires 2 hours)
Factory overhead 5 per direct labor hour

The company has perfected the processes done in producing its products. However, due to customer exacting
specifications. Job No. 88 produced 10 defective goods which can be reworked at a total cost of P150. The reworked
units are included to good units and delivered to the customer subsequently.
11. How much would be the cost per good unit of Job No. 88?
a. 30
b. 31.15
c. 31
d. 30.15

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