MODCOS1

ACCOUNTING FOR LABOR

AY 2nd Term 2017-2018

Problem 1 – Overtime
Assuming an employee regularly earns P65.00 per hour for an 8-hour a day. If called upon to work more than 8 hours
in a working day, the company will have to pay overtime premium for hours worked in excess of 8 hours.

Required:
1. Assuming the employee works 12 hours on Monday, and is paid 50% overtime premium (time and a half), the
earnings to be charged for direct labor and overhead, respectively, would be?
2. Assuming the employee is paid a premium of 100% (double time), the earning to be charged to direct labor and
overhead would be?

Problem 2 – Idle time

Jolly is employed by Bee Company. Last week he worked 34 hours assembling one of the company’s products and
was idle 6 hours due to material shortages. Bee’s employees are engaged at their workstations for a normal 40-hour
week. Jolly is paid P64 per hour.

Required:
Allocate Jolly’s earnings for the week between direct labor and manufacturing overhead.

Problem 3 – Gross Earnings

From the following data, compute the regular earnings, overtime premium and the total gross earnings of each
employee at LSU Company, for the week ended May 7, 2017. All employees are paid at the regular hourly rate for the
first 40 hours worked during the week. The rate for hours worked in excess of 40 is 50% (time and half) of the regular
rate.

Employees
Working Days JL MA
Monday 8 8
Tuesday 8 8
Wednesday 7 8
Thursday 9 8
Friday 8 9
Saturday - 4
Hourly rate P64 P75

Problem 4 – Gross Earnings

Samson Company recently adopted an incentive plan. Factory workers are paid P8.50 per unit with a guaranteed
minimum wages of P 2,000 per week. Following is a report on employees’ productivity for the week ending April 19,
2017. All employees worked the full 40-hour week.

Weekly Summary
Employee’s name Unit produced
1. N. Chua 240
2. M. Ben 286
3. A. Tan 275
4. A. Par 240
5. A. Cruz 225

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Required:
1. Compute each employee’s gross pay.
2. What amount should be charged to work-in process?
3. What amount should be charged to Factory overhead?

Problem 5 – Gross Earnings and Journal Entries

A weekly factory payroll summary made from time tickers shows the following data:

Number of Hours Worked

Employee Classification Rate/Hour
Basic Overtime
Reyes Direct P66 40 2
Cruz Direct 66 40 3
Tomas Direct 75 40 4
Salazar Indirect 64 40
Diaz Indirect 64 40

Overtime is payable at 50% (time and half) of the regular rate pay for an employee.

Required:
1. Determine the gross pay for each employee
2. Prepare the journal entries for
a. Recording the payroll
b. Allocation of the payroll
c. Payment of the payroll

Problem 6 - Journal Entries

The GT Manufacturing Company pays employees every two weeks. Monday, May 1, is the beginning of a new payroll
period. The following payroll summary for the period May 1-14 is prepared by the payroll department and forwarded
to accounting for recording:

Factory Sales and Admin.

Particulars Total
Employees Employees
Gross earnings P 125,000 P 25,000 P 150,000
Deductions:
SSS Contribution 3,330 950 4,280
Philhealth Contribution 375 150 525
HDMF Contribution 2,000 600 2,600
Withholding taxes P 11,000 P 2,400 P 13,400
Net Earnings P 108,295 P 20,900 P 129,195

The factory payroll is 70% direct laborer while 30% are indirect. The following schedule provides the information
necessary to record the employer’s mandatory contribution for the period.

SSS Philhealth HDMF

Factory Payroll 4,067 375 2,000
Selling and Administrative Payroll 4,540 150 600

Required:
Provide the journal entries for the following:
1. Record the payroll
2. Payment of the net earnings to employees
3. Allocation of the payroll
4. Employer’s mandatory contribution

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Problem 7-Payroll Computation
JOE Co. had the following employees and the payroll data made from time ticket for the month ended August 31
pertaining to Job 100.

Number
Employee’s
Position of hours
Name
worked
IA Plant supervisor 168
GM Factory worker 180
CE Factory worker 192

All employees are paid P140 per hour, except IA, who receives P150 per hour. All overtime premium pay is
chargeable to the factory overhead control. All employees including IA received time and a half (50%) for overtime
hours.

Note: The Company based the computation of SSS, Philhealth and HDMF from the 40 hours per week or actual hours work whichever is lower.

Required:
1. Calculate the total payroll and total net earnings for the month.
2. Compute the employer’s SSS, Philhealth and HDMF contribution

Problem 8 – Vacation and Bonus Pay

Alex Reyes, a production worker earns P27,600 per month and the company pay the worker a year-end bonus
equivalent to one month’s wages. Reyes is also entitled to a half-month paid vacation per year. Company policy
provides that bonus and vacation payments be treated as indirect costs and accrued during the 11.5 months the
employee is at work.

Required:
Journal entry to record and distribute the labor cost of the production for the month.

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