A. Yellow-Arrow Company manufactures picture frames and uses job order costing system.

The following cost relate to the current run:

Estimated Overhead (exclusive of spoilage)
Spoilage (Estimated)
Sales Value of the Spoiled frames
Labor hours

P80,000
12,500
5,750
50,000

The actual cost of a spoiled frame is P 7. During the production, 150 frames are considered
spoiled. Each spoiled frames can be sold for P 4.
1.
2.

Assume that spoilage is part of all jobs, what is the predetermined overhead
rate using labor hour as the activity base?
Prepare the Journal Entry for the spoilage.
3. Assume that the spoilage relate to a specific job # 143, what is the
predetermined overhead rate using labor hours as activity base?
4. Prepare the Journal Entry for the spoilage.
B. Burblurry Cos Job 168 for the manufacture of 4,400 coats, which was completed in
September at unit costs presented below. Final Inspection of Job 168 disclosed 400 spoiled
coats which were sold to a jobber for P12,000
Direct Materials
P40
Direct Labor
36
Factory Overhead (includes an allowance for P 2 overhead)
P112

36

5. If the spoilage loss is charged to all production, what would be the unit cost of
good coats produced on Job 168?
6. If the spoilage loss is attributable to exacting specifications, what would be the
unit cost of good coats produced on Job 168?
C. Blackbike Cos incurred the following costs on Job 999 for the manufacture of 400 motors
during April:
Direct Materials
Direct Labor
Factory Overhead (150% of DL)

P1,320
1,600
2,400
P 5,320

Direct Costs of reworking 10 units:

Direct Materials
Direct Labor

P200
320
P520
7. If the rework costs were attributable to internal failure or charged to Factory
overhead, what would be the unit cost of Job 999?
8. If the rework costs were attributable to exacting specifications of Job 999, what
would be the unit cost of Job 999?
D. Camille Co. manufactures electric drills to the exacting specifications of various customers.
During May 2012, Job 143 for the production of 2,200 drills was completed at the following
costs per unit:
Direct Materials
Direct Labor
16
Applied Factory Overhead (P 3 allowance
P60

P20
24

Final inspection of Job 143 disclosed 100 defective units and 200 spoiled units. The
defective drills were reworked at total cost of P1,000, and the spoiled drills were sold to a
jobber for P 3,000.
9. What would be the unit cost of goods produced?
E. Carmella Mfg. Co. started 150 units in process on job order # 5. The prime costs placed in
process consisted of P30,000 for direct material in which this amount is 62.5 percent of the
said prime costs. The predetermined overhead rate was used to charged factory overhead
to production at 133.33% of the direct labor cost. Upon completion of the job order, units
equal to 20 percent of the units were rejected for failing to meet the strict quality control
requirements.
The company sells rejected units as scrap at only 1/3 of its production cost, and bills the
customers at 150% of the production cost.
10.
If the rejected units were due to machine breakdown, the billing price of job
order #5 would be?
11.
If the rejected units were due to customer specification, the billing price of
job order #5 would be?
F. Silver Metal Products accumulates metal shavings from the shop floor and sells them
periodically to a nearby scrap dealer. Scrap sales, on account, for the period just ended
total P2,300.
Required: Indicate the journal entries when:
(1)The scrap sales are viewed as additional revenue.
Accounts Receivable
2,300
Scrap Sales (or Other Income)

2,300

(2)The scrap sales are viewed as a reduction of the cost of goods sold during the
period.
Accounts Receivable
2,300
Cost of Goods Sold

2,300

(3)The scrap sales are viewed as a reduction of factory overhead.

Accounts Receivable
2,300
Factory Overhead Control

2,300

(4)The scrap sales are traceable to individual jobs and are viewed as a reduction
in the cost of materials used on the jobs.
Accounts Receivable
Work in Process

2,300
2,300

G. A current job consisted of 31,000 total units, of which 28,500 good units were produced
and 2,500 units were defective.
12.
What is the amount of abnormal spoilage on this job if the normal spoilage
rate is 5% of the total units produced?
13.
What is the amount of abnormal spoilage on this job if the normal spoilage
rate is 5% of the good units produced?
14.
What is the amount of abnormal spoilage on this job if the normal spoilage
rate is 5% of the normal input?

H. Baby Blue Company manufactures Clay Pots and uses job order costing system. The
following cost relate to the current run:
Direct Materials used
Direct Labor cost (8,000 hours worked)
Estimated Overhead (exclusive of spoilage)
Spoilage (estimated)
Sales Value of the Spoiled frames
Estimated units to be produced

P175,000
25,000
50,000
10,000
7,500
5,000

One pot can be made in two hours. The defective units amounted to 200 units of which 100
were not reworkable but can be sold to the jobber at a price which is 20% of its cost. The
actual rework cost for 50 defective units of Clay Pots amounted to the following:
Direct Material
Direct Labor
Overhead

1,500
?
?

15.
What is the allowance for spoilage to be included in the predetermined
overhead rate (POHR) if the spoilage is due to exacting specification?
16.
How many units were produced as good units?
17.
How much is the amount paid by the jobber for the spoiled units?
18.
How much is the new cost per unit of the spoilage and rework is due to
internal failure
19.
How much is the new cost per unit if the spoilage and rework is charged to
specific job?