Cost Accounting Exercises

Cost Accounting Exercises – Materials cost I.

All costs incidental to materials procurement and handling until they are issued are charged to the materials account by Cruz Mfg. Co. at a rate predetermined for each of the departments involved. For 19C, the estimated departmental costs are given: Purchasing department P175,000 Receiving and Inspection Dept. 124,500 Materials department 83,000 Accounting department (20% is 295,000 estimated to be related to processing of payments for materials. Purchases for 19C were estimated to amount to P5, 000,000 for more or less 8,300,000 units to be ordered 50 times. Actual purchases for 19C amounted to P5, 600,000 for total of 8,000,000 units in 52 orders. Costs incurred by the four given departments were as follows: Purchasing department Receiving and inspection department Materials department Accounting department (20% is estimated to be related to processing of payments for materials.

P180,000 128,000 78,000 290,000

Required: a. Compute for the predetermined departmental overhead rates. b. How much is the applied material handling cost per department? c. How much is the material handling variance?

II.

Ivanovic Mfg. Co. maintains five column stock cards for materials that are considered critical. One of them is the piano hinge (item #023) located in bin # 51 with reorder quantity of 50 units and minimum and maximum balances of 20 ad 80 units, respectively. Freight charges on purchases are treated as additional cost of the item purchased. As of May 1 200C, the inventory of this item consists of: 20 units @ P 60 45 units@ P70 The following data are given for the month:

Jan.

2 8

PO # 631 is issued for 50 units at P75 Requisition # 356 is issued for 30 units to be chargeable to job #056 Required date of issuance is May 15th 9 Requisition #357 is issued for the immediate issuance of 15 units for job # 054 10 Return shipping order # 010 is issued for 5 units. Purchase cost was at P70. 12 Receiving and inspection report #256 is issued for 35 units ordered per PO # 631. Freight cost is P 21. 14 Return shipping order #021 is issued for 10 units previously received per RIR # 256. 15 Requisition # 356 is complied with 17 Requisition #360 is issued and immediately complied with. Accordingly, 12 units are charged to job #058 24 An order for 50 units @ P80.00 is made per PO # 636. 26 Five units previously issued is job #054 (per requisition no. 357) are returned to stockroom per returned materials report #08. 28 Requisition #365 is issued for 20 units that are to be charged to job #065 and needed on June 5 29 RIR # 270 is issued for 30 units ordered per PO 636. Freight in is P12. 30 Ten units are returned to supplier (PO #636 per return shipping order #025) Required: 1. Prepare a materials ledger card using: a. FIFO method b. Average costing method

III.

Scrap materials with estimated value of P6, 000 are gathered and separated from the work in process. They are subsequently sold for P6, 200. Make the entries under each of the following assumptions a. Revenue from sale of scrap is recognized only upon sale as (1) other income, (2) as adjustment to FOH or (3) as reduction in the cost of particular job b. Scrap is recognized upon separation thereof from work in process and revenue is treated as (1) as adjustment to FOH or (2) reduction in the cost of a particular job

IV.

ChaCha Corp. manufactures portable beds and chairs made of round steel bars and woven plastic strips. The steel bars are cut, heated and bent before they are connected by bolts and nuts to form the desired structures. The woven plastic strips are subsequently attached per specifications. For 19C, estimated factory overhead (without corresponding provision for any imperfection) is P60, 000 based on estimated direct labor cost of P120, 000. Per estimates, 5% spoilage may be expected with unrecovered cost of P3, 000.

For January 19C, the company processed an order for 10 portable rocking chairs (job no. 027). The prime costs are as follows: Direct materials P10, 000 Direct Labor 5,000 Upon final inspection, two rocking chairs are found below standard. Estimated cost recovery is P1,000 per chair. Required: A. Assuming that the job is a regular or standard one 1. Factory overhead to be used 2. Unit cost 3. Entries to take up the original production cost, spoilage and completion of remaining units? (use 3 WIP accounts) B. Assuming the job is a special one (answer the questions above)

V.

A job order for 1,000 pairs of carved wooden bookends is processed and prime costs are as follows: Direct Materials P 30,000 Direct Labor 20,000 Factory overhead rate of 50% of direct labor cost excludes a 2% provision for defective work. Prior to the transfer to stockroom, 50 pairs are found defective and are reprocessed. Prime costs in reprocessing amount to P800 (direct materials of P200 and direct labor of 600). Required: a. Assuming that the job is a regular and a standard one: 2. What FOH rate must be used? 3. What must be the unit cost for the 1,000 pairs of bookends upon completion? 4. What are the entries to take up the original production costs, spoilage and completion of the job? b. Assuming that the job is a special one, what would be your answers for the questions given above?