ACCOUNTING FOR OVERHEAD SAMPLE QUESTIONS (ADAPTED)

MODCOS1 1st Term AY 2018-2019

PROBLEM 1
YUSAKU Company has the following balances as of the year ended December 31, 2016

Raw Materials Inventory P30,000 Dr.

WIP Inventory 60,000 Dr.
Finished Goods Inventory 90,000 Dr.
Underapplied Factory Department Overhead* 8,000 Dr.
Cost of Goods Sold 150,000 Dr.

Additional information is as follows:

Cost of raw materials purchased during 2016 P82,000

Cost of raw materials used in 2016 74,000
Total manufacturing cost in 2016 250,000
Cost of goods completed during 2016 204,000
Factory overhead applied 120% of direct labor cost

*The company allocate underapplied factory overhead using the accounts ending balances.

Required:
1. Calculate the actual overhead incurred.
2. Compute the total adjusted balance of inventory after the adjustment of underapplied overhead.

PROBLEM 2
HIROSHI Company produces a line of non-motorized boats. HIROSHI uses a normal-costing system and
allocates manufacturing overhead using direct manufacturing labor cost. The following data are for 2016:

Budgeted manufacturing overhead cost P250,000

Budgeted direct manufacturing labor cost P500,000
Actual manufacturing overhead cost P234,000
Actual direct manufacturing labor cost P456,000

Inventory balances on December 31, 2016 were as follows:

December 31, 2016 2016 Direct December 31, 2016

Accounts Accounts Balance Manufacturing Labor Account Balance
(Before Proration) Cost in ending balance (After Proration)
Work-in-process ? P45,600 P170,200
Finished goods 253,500 79,800 ?
Cost of goods sold 422,500 102,600 ?

HIROSHI proration was on based on the overhead allocated in 2016.

Required:
1. What is the Work-in-Process account balance before proration?
2. How much is the under/overapplied overhead allocated to Finished Goods?
3. Calculate the adjusted balance of Cost of Goods Sold after proration.

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ACCOUNTING FOR OVERHEAD SAMPLE QUESTIONS (ADAPTED)
MODCOS1 1st Term AY 2018-2019

PROBLEM 3
Assume the following information relates to M Corporation for the month of July:

Job No. 101 Job No. 102 Job No. 103

Work In process, July 1
Materials P40,000 P30,000 -
Labor 60,000 40,000 -
Overhead 75,000 50,000 -

Cost added in July

Materials P55,000 P80,000 P92,000
Labor 80,000 95,000 115,000

Actual overhead incurred in July amounted to P375,000. Job No.101 and 102 were completed and
transferred to finished goods warehouse in July. Job No.101 was sold for P550,000. Overhead is applied
using the same predetermined overhead rate made in WIP beginning (OH related to expenditure of labor
cost).
Note: write off the d ifference between allocated and actua l overhead direc tly to Cos t o f Goods Sold .

Required:
1. Compute the Cost of goods manufactured.
2. Determine the cost of goods sold (adjusted of over/underapplied FOH).

PROBLEM 4
During June, the following transactions took place at the MC Corporation:

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 remainder 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.

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:

N o t e : r e t u r n e d d i r e ct a n d i n d i r e c t m a t e r i a l s a r e t o b e d e d u c t e d t o c o m p u t e t h e a d j u s t e d d i r e c t m a t e r i a l s
u s e d a n d i n d i r e c t m a t e r i a l s c o s t i n cu r r e d .

Required:
1. Calculate the total cost of Job 00-1.
2. Determine the total cost of Job 00-2.
3. Compute the difference between applied and actual overhead for the month.

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ACCOUNTING FOR OVERHEAD SAMPLE QUESTIONS (ADAPTED)
MODCOS1 1st Term AY 2018-2019

PROBLEM5
At year-end 2016, Dub’s Wind Generator Co. had a P40,000 debit balance in its Manufacturing Overhead
Control account. Overhead is applied to products based on direct labor cost. Relevant account balance
information at year-end follows:

Work in Process Finished Goods Cost of

Inventory Inventory Goods Sold
Direct material P70,000 P80,000 120,000
Direct labor 20,000 40,000 50,000
Factory overhead 40,000 80,000 100,000
Total P130,000 P200,000 P270,000

Required:
1. What predetermined OH rate was used during the year?
2. If the company prorate the overhead account balance based on the relative balances of the appropriate
accounts, how much is the allocated overhead cost for the Cost of Goods Sold?

PROBLEM6
Country Products uses a normal cost, job order costing system. In the Mixing Department, overhead is
applied using machine hours; in Paving, overhead is applied using direct labor hours. In December 2016,
the company estimated the following data for its two departments for 2017:

Mixing Department Paving Department

Direct labor hours 12,000 28,000
Machine hours 60,000 20,000
Budgeted overhead cost P480,000 P700,000

Job #220 was started and completed during March 2017. The job cost sheet shown the following
information:

Mixing Department Paving Department

Direct material P22,600 P3,400
Direct labor cost P1,250 P4,050
Direct labor hours 24 340
Machine hours 290 44

Required:
1. How much is the total overhead for Job #220 if it is applied for each department?
2. The president of company suggested that for simplicity, a single predetermined overhead rate be
computed using machine hours. How much total overhead would have been applied to Job #220 if the
single rate have been used?

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ACCOUNTING FOR OVERHEAD SAMPLE QUESTIONS (ADAPTED)
MODCOS1 1st Term AY 2018-2019

PROBLEM7
Mystic Inc. has just finished its first year of operations and must decide which method to use for adjusting
cost of goods sold. Because the company used a budgeted indirect-cost rate for its manufacturing
operations, the amount that was allocated to cost of goods sold was different from the actual amount
incurred.

The journal entry made that prorates the write-off of the difference between allocated and actual overhead
using ending account balances was:

Manufacturing Overhead Allocated 435,000

Work-in-Process 500
Finished Goods 1,000
Cost of Goods Sold 8,500
Manufacturing Overhead Control 425,000

Adjusted ending balances in the relevant accounts were:

Work-in-Process P 39,500
Finished Goods 79,000
Cost of Goods Sold 671,500

Required:
1. What is the allocation rate used for Cost of Goods Sold?
2. What is the total amount of Work-in-Process, Finished Goods and Cost of Goods sold if before
proration?

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