New Era University

College of Accountancy

COST ACCOUNTING
Job Order Costing

Part I – Theory

1. What determines the best design for costing systems?

a. Generally accepted accounting principles for financial accounting reporting
b. Latest technology for data collection regardless of the cost
c. Underlying operations of the company
d. Guidelines established by the Institute of Management Accountants for aiding management
decision making

2. Which of the following statements concerning cost accounting systems is true?

I. Cost accounting systems are used to supply cost data information on costs incurred by a
manufacturing process or department.
II. The primary reason managers want to understand the cost of individual products is to assess
product profitability.
III. A manufacturer may employ a job order cost system for some of its products and a process cost
system for others.
a. I, II and III c. I and III only
b. I and II only d. II and III only

3. Which of the following is not a characteristic of a job order costing system?

a. It accumulates cost for each department within the factory.
b. It provides a separate record for the cost of each quantity of product that passes through the
factory.
c. It is best suited for industries that manufacture custom goods.
d. It uses only one work in process account.

4. Which of the following statements concerning job order costing is true?

a. Job-order costing would be more likely to be used than process costing in situations where many
different products or services are produced each period to customer specifications.
b. In a job-order costing system, costs are traced to departments and then allocated to units of
product using an average process.
c. Job-order costing is used in those situations where units of a product are homogeneous.
d. Job-order costing is usually not used in service organizations such as hospitals and law firms.

5. In a production setting that makes goods to customer specifications, a job order costing system:
a. may be maintained using either actual or predetermined overhead rates.
b. emphasizes that large customers create the most costs even if they provide the most revenues.
c. can be used only if standard costs are used for materials and labor.
d. will provide reasonable product cost information only when all jobs utilize approximately the
same quantities of material and labor.

6. The following procedures are included in the seven-step approach to job order costing. Arrange them
in the correct order.
(1) Compute the indirect costs allocated to the job.
(2) Identify the indirect-cost pools associated with the job.
(3) Identify the direct costs of the job.
(4) Compute the total cost of the job by adding all direct and indirect costs assigned to the job.
(5) Identify the job that is the chosen cost object.
(6) Compute the rate per unit of each cost allocation base used to allocate indirect costs to the job.
(7) Select the cost-allocation base to use in assigning indirect costs to the job.
a. 5, 7, 3, 2, 6, 1, 4 c. 3, 2, 5, 7, 1, 6, 4
b. 7, 2, 5, 3, 1, 6, 4 d. 5, 3, 7, 2, 6, 1, 4

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7. Which of the following would be accounted for using a job order cost system?
a. Manufacturing of personal computers
b. Production of automobiles
c. Refining of petroleum
d. Construction of a new campus building

8. Which of the following entities would be most likely to use a job order costing system?
I. An advertising agency
II. An apparel manufacturing plant
III. A medical care facility
IV. A catering service
V. A cola-drink-concentrate producer
a. I, II, III, IV and V c. I, II and V only
b. I, III and IV only d. III and IV only

9. Which of the following costing methods of valuation are acceptable in a job order costing system?
Actual Standard Actual Predetermined
Material Cost Material Cost Labor Cost Overhead Cost
a. Yes Yes No Yes
b. Yes No Yes No
c. No Yes Yes Yes
d. Yes Yes Yes Yes

10. Using normal costing rather than actual costing requires that the allocation of indirect manufacturing
costs to work in process be:
a. done on a more timely basis, such as every two weeks rather than every month.
b. journalized only at year end when adjusting entries are normally made.
c. calculated by using the budgeted rate times actual quantity of allocation base.
d. calculated by using the budgeted rate times the budgeted quantity of allocation base.

11. When a manufacturing company has a highly automated plant producing many different products,
probably the most appropriate basis of applying factory overhead costs to work in process is:
a. units processed. c. direct labor hours.
b. machine hours. d. direct labor cost.

12. The materials requisition form is used to:

a. release finished goods to the shipping department.
b. record the acquisition of materials from a vendor.
c. release materials from the storeroom to the factory.
d. record and electronically transmit materials data in place of a receiving report.

13. A summary of the materials requisitions completed during a period serves as the basis for
transferring the cost of the materials from the controlling account in the general ledger to the
controlling accounts for:
a. work in process and factory overhead.
b. work in process and cost of goods sold.
c. finished goods and cost of goods sold.
d. work in process and finished goods.

14. In job-order costing, all of the following statements are correct with respect to labor time and cost
except:
a. Time tickets are kept by employees showing the amount of work on specific jobs.
b. The job cost sheet for a job will contain all direct labor charges to that particular job.
c. Labor cost that can be traced to a job only with a great deal of effort is treated as part of
manufacturing overhead.
d. A machine operator performing routine annual maintenance work on a piece of equipment would
charge the maintenance time to a specific job.

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15. Which of the following statements about job order cost sheets is true?
a. All job order cost sheets serve as the general ledger control account for work in process.
b. Job order cost sheets can serve as subsidiary ledger information for both work in process and
finished goods.
c. If material requisition forms are used, job order cost sheets do not need to be maintained.
d. Job order cost sheets show costs for direct material and direct labor, but not for manufacturing
overhead since it is an applied amount.

16. A credit to Work-in-Process Inventory represents:

a. the transfer of completed items to Finished Goods Inventory.
b. work still in process.
c. the application of overhead to production.
d. raw material put into production.

17. A journal entry includes a debit to Work-in-Process Inventory and a credit to Raw Material
Inventory. The explanation for this would be that:
a. indirect material was placed into production.
b. raw material was purchased on account.
c. direct material was placed into production.
d. direct labor was used for production.

18. Which of the following journal entries records the accrual of the cost of indirect labor used in
production?
a. debit Work-in-Process Inventory, credit Wages Payable
b. debit Work-in-Process Inventory, credit Manufacturing Overhead
c. debit Manufacturing Overhead, credit Work-in-Process Inventory
d. debit Manufacturing Overhead, credit Wages Payable

19. In job order costing, when materials that were previously issued to the factory for cleaning supplies
are returned to the storekeeper, the journal entry should be made to:
a. debit Raw Materials Inventory and credit Manufacturing Overhead.
b. debit Factory Overhead and credit Work-in-Process Inventory.
c. debit Work-in-Process Inventory and credit Raw Materials Inventory.
d. debit Purchase Returns and credit Factory Overhead.

20. The logical explanation for an entry that includes a debit to Manufacturing Overhead control and a
credit to Prepaid Insurance is:
a. the insurance company sent the company a refund of its policy premium.
b. overhead for insurance was applied to production.
c. insurance for production equipment expired.
d. insurance was paid on production equipment.

21. Which of the following statements concerning applied factory overhead is true?
a. Factory overhead is applied to each job at the time when the overhead cost is incurred.
b. Factory overhead is applied to each job at the end of the year when actual costs are known.
c. If factory overhead has been underapplied during the year, the adjusting entry at the end of the
year will decrease cost of goods sold.
d. If factory overhead has been overapplied during the year, the adjusting entry at the end of the
year will show a debit to factory overhead.

22. A job order cost system uses a predetermined overhead rate based on estimated activity and
estimated manufacturing overhead cost. At the end of the year, underapplied overhead might be
explained by which of the following situations?
Actual activity Actual manufacturing overhead costs
a. Greater than estimated Greater than estimated
b. Greater than estimated Less than estimated
c. Less than estimated Greater than estimated
d. Less than estimated Less than estimated

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23. Overapplied factory overhead would result if:
a. the plant were operated at less than normal capacity.
b. factory overhead costs incurred were less than costs charged to production.
c. factory overhead costs incurred were unreasonably large in relation to units produced.
d. factory overhead costs incurred were greater than costs charged to production.

24. At the end of the fiscal year, the balance in Manufacturing Overhead Control is small. This balance
would normally be:
a. transferred to Work-in-Process Inventory.
b. transferred to Cost of Goods Sold.
c. transferred to Finished Goods Inventory.
d. allocated among Work-in-Process, Finished Goods and Cost of Goods Sold.

25. If each professional in a service company is paid on an annual salary basis, why might the firm want
to use a predetermined or budgeted rate for direct or professional labor?
a. Year-end bonuses paid to the professional staff are difficult to trace to individual jobs.
b. A predetermined or budgeted rate is easier to justify to a client who might question a billing rate.
c. Professional staff persons do not keep accurate records of the jobs on which they work.
d. Professional staff incurs more client costs, such as travel and lodging, while working on a job.

26. Departmental overhead rates are usually preferred to plant-wide overhead rates when:
a. the activities of each of the various departments in the plant are not homogeneous.
b. the costs of many service departments are being allocated to each of the various departments.
c. all products passing through the various departments require the same manufacturing effort in
each department.
d. most of the overhead costs are fixed.

27. Generally accepted accounting principles require the use of normal capacity to allocate
manufacturing overhead. Normal capacity is the:
a. measure of activity that allows for routine variations in manufacturing activity.
b. measure of activity that represents a firm’s anticipated activity level for an upcoming period
based upon projected product demand.
c. estimated maximum potential activity for a specified time.
d. measure of production that considers historical and estimated future production levels and
cyclical fluctuations.

28. In a job order costing system, the net cost of normal spoilage is equal to:
a. estimated disposal value plus the cost of spoiled work.
b. the cost of spoiled work minus estimated spoilage cost.
c. the units of spoiled work times the predetermined overhead rate.
d. the cost of spoiled work minus the estimated disposal value.

29. Select the incorrect statement regarding the accounting for product losses.
a. Normal losses that are anticipated on all jobs are estimated and included in the development of
the predetermined overhead rate.
b. Normal losses that are associated with a specific job are charged to a loss account in the period
they are incurred.
c. Abnormal losses are charged to a loss account in the period they are incurred.
d. The difference between normal and abnormal loss is one of degree and therefore must be
determined by management.

30. If abnormal spoilage occurs in a job order costing system, has a material peso value, and is related to
a specific job, the recovery value of the spoiled goods should be:
a. debited to a scrap inventory account and credited to work in process.
b. debited to work in process and credited to manufacturing overhead.
c. debited to a loss account and credited to work in process.
d. debited to manufacturing overhead and credited to sales.

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Part II – Problems

1. Perry Company’s raw materials inventory transactions for the most recent month are summarized
below:
Beginning raw materials P 10,000
Purchases of raw materials 100,000
Raw materials issued:
Materials requisition 1445 50,000 For Job 101
Materials requisition 1446 40,000 For Job 102
Materials requisition 1447 15,000 Used in multiple jobs
How much of the raw materials cost would be added to the Work in Process Inventory account
during the period?
a. P105,000 c. P100,000
b. P110,000 d. P90,000

2. Cyrus Company’s payroll costs for the most recent month are summarized below:
Item Description Total cost
Hourly labor wages 750 hours @ P25 per hour
200 hours for Job 101 = P5,000
300 hours for Job 102 = 7,500
250 hours for Job 103 = 6,250 P18,750
Factory supervision 4,250
Production engineer 6,000
Factory janitorial work 2,000
Selling and administrative salaries 8,000
Total payroll costs P39,000
How much of the labor costs would be added to manufacturing overhead?
a. P18,750 c. P31,000
b. P12,250 d. P39,000

3. Machine hours used to set the predetermined overhead rate were 25,000; actual hours were 24,000;
and, overhead applied was P60,000. Budgeted overhead for the year was:
a. P62,500. c. P59,000.
b. P60,000. d. P57,600.

4. Zedd Company manufactures custom racing bicycles. The company uses a job order cost system to
determine the cost of each bike. Estimated costs and expenses for the coming year follow:
Bike parts P347,800
Factory machinery depreciation 52,500
Factory supervisor salaries 134,000
Factory direct labor 218,400
Factory supplies 36,900
Factory property tax 24,750
Advertising cost 18,000
Administrative salaries 46,000
Administrative-related depreciation 17,700
Total expected costs P896,050
Overhead will be applied on the basis of direct labor hour. The direct labor rate is P12 per hour.
What would be the amount of applied overhead if 18,500 hours are worked in the upcoming year?
a. P252,240.38 c. P248,150.00
b. P222,000.00 d. P474,240.38

5. The following information is available for completed Job No. 143: Direct materials, P20,000; direct
labor, P30,000; manufacturing overhead applied, P15,000; units produced, 5,000 units; units sold,
4,000 units. What is the cost of the finished goods on hand from this job?
a. P10,000 c. P13,000
b. P65,000 d. P52,000

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Refer to the following information to answer the next three questions:
Imagine Dragons Corp. (IDC) builds custom swimming pools for homeowners in Metro Manila.
IDC uses material requisition forms and direct labor time tickets to trace direct materials and direct
labor costs to specific jobs. Manufacturing overhead is applied to jobs at a rate of P100 per direct
labor hour. During the first month of operations, the company recorded the following transactions:
 Purchased P200,000 in raw materials.
 Issued the following materials to production:
o P130,000 was directly traceable to specific jobs.
o P20,000 was not directly traceable to specific jobs.
 Recorded the following labor costs (paid in cash):
o Direct labor P50,000
o Construction supervision 30,000
 Recorded the following actual manufacturing overhead costs:
o Construction insurance P 5,000
o Construction equipment depreciation 25,000
o Pool permits and inspections 5,000
 Recorded the following nonmanufacturing costs:
o Office equipment depreciation P 3,000
o Rent and insurance on owner’s company car 2,000
o Advertising costs 10,000
 Applied manufacturing overhead to jobs in process based on 900 actual direct labor hours.
 Completed 15 pools at a total cost of P195,000.
 Finalized the sale of 13 pools that cost P176,000. The other 2 pools are completed and awaiting
inspection by the customer before the sale is finalized.
 Recorded sales revenue of P325,000 on the 13 pools that were sold.
 Closed the Manufacturing Overhead account balance to Cost of Goods Sold.

6. What was the ending balance of the work in process inventory?

a. P80,000 c. P75,000
b. P85,000 d. P70,000

7. What was the cost of goods sold after the overhead adjustment?
a. P171,000 c. P181,000
b. P176,000 d. P190,000

8. IDC’s net operating income during the first month of operations was:
a. P134,000. c. P139,000.
b. P154,000. d. P149,000.

9. One Republic Corporation manufactures custom jewelry and uses the job order cost system in
accounting for its costs. You obtained from the corporation’s books and records the following
information for the year ended December 31, 2013:
 The work-in-process inventory on January 1 was 15% less than the work-in-process inventory on
December 31.
 The total manufacturing costs added during 2012 was P1,200,000 based on actual direct
materials and direct labor but with manufacturing overhead applied on actual direct labor pesos.
 The manufacturing overhead applied to process was 80% of the direct labor pesos, and it was
equal to 20% of the total manufacturing costs.
 The cost of goods manufactured, also based on actual direct materials, actual direct labor, and
applied manufacturing overhead, was P1,125,000.
The cost of direct materials used and the work-in-process inventory on January 1, 2013 were:
Direct materials used WIP Inventory, Jan. 1
a. P960,000 P500,000
b. P768,000 P500,000
c. P720,000 P450,000
d. P660,000 P425,000

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10. Gotye Co. has no Work in Process or Finished Goods inventories at the close of business on
December 31, 2013. The balances of Gotye’s accounts as of December 31, 2013, are as follows:
Cost of goods sold--unadjusted P2,040,000
Selling & administrative expenses 900,000
Sales 3,600,000
Manufacturing overhead control 700,000
Manufacturing overhead applied 648,000
What is the pretax income for 2013?
a. P608,000 c. P712,000
b. P660,000 d. Cannot be determined

11. Swift Manufacturing uses a job order cost accounting system. On November 1, the company has two
jobs in process: Job No. 451, P36,000, and Job No. 452, P40,000. During November, a summary of
source documents reveals the following:
Materials Requisition Slips Labor Time Tickets
Job No. 451 P12,000 P26,000
Job No. 452 17,000 12,000
Job No. 453 24,000 29,000
Job No. 454 21,000 28,000
General use 6,000 4,000
Total P80,000 P99,000
Swift applies manufacturing overhead to jobs at an overhead rate of 60% of direct labor cost. Job
No. 451 was completed during the month. What is the balance of the Work in Process Inventory
account as of November 30?
a. P270,400 c. P224,800
b. P302,000 d. P212,400

Refer to the following information to answer the next two questions:

The following partially completed T-accounts summarize transactions for Adele Company during
the year:
Raw Materials Work in Process
Beg Bal 4,000 (2) 20,000 Beg Bal 8,000 (7) 50,000
( 1) 18,000 (2) 12,000
(4) 15,000
(6) 28,000

Manufacturing Overhead Accounts Payable

(2) 8,000 (6) 28,000 (1) 18,000
(3) 12,000 (5) 4,000
(4) 5,000
(5) 4,000

Finished Goods Wages and Salaries Payable

Beg Bal 17,000 Beg Bal 6,000
(7) 50,000 (4) 30,000
End Bal 12,000

Sales Salaries Expense Accumulated Depreciation (Factory)

(4) 10,000 Beg Bal 90,000
(3) 12,000

Cost of Goods Sold

At the end of the year, the company closes out the balance in the Manufacturing Overhead account
to Cost of Goods Sold.

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12. Adele Company’s prime costs during the year amounted to:
a. P55,000. c. P43,000.
b. P50,000. d. P27,000.

13. The cost of goods sold (after adjustment for underapplied or overapplied overhead) is:
a. P55,000. c. P54,000.
b. P51,000. d. P56,000.

14. Rihanna Company has underapplied overhead of P135,000 for the year. Before disposition of the
underapplied overhead, selected year-end balances from Rihanna’s accounting records were:
Sales P3,600,000
Cost of goods sold 2,160,000
Direct materials inventory 108,000
Work in process inventory 162,000
Finished goods inventory 270,000
Under Rihanna’s cost accounting system, over- or underapplied overhead is allocated to appropriate
inventories and cost of goods sold based on year-end balances. In its income statement, the adjusted
cost of goods sold should be:
a. P2,052,000. c. P2,268,000.
b. P2,272,500. d. P2,047,500.

Refer to the following information to answer the next three questions:

Levine Company employs a job order costing system. Only three jobs, #105, #106, and #107 were
worked during November and December 2013. Job#105 was completed December 10; the other two
jobs were still in production on December 31, the end of the company’s operating year. Job cost
sheets on the three job follows:
November costs: #105 #106 #107
Direct materials P16,500 P9,300 -
Direct labor P13,000 P7,000 -
Factory overhead P20,800 P11,200 -
December costs: #105 #106 #107
Direct materials - P8,200 P21,300
Direct labor P4,000 P6,000 P10,000
Factory overhead ? ? ?
The following additional information is available:
 Manufacturing overhead is assigned to jobs on the basis of direct labor cost.
 Indirect materials used during December totaled P4,000, while indirect labor cost totaled P8,000.
 Various manufacturing overhead incurred during December was P19,000.
 Balances in the inventory accounts at November 30 were as follows:
Raw Materials P40,000
Work-in-Process ?
Finished Goods 85,000

15. The entry to record overhead charged to production is:

a. Work in process 31,000
Manufacturing overhead control 31,000
b. Work in process 31,000
Materials 4,000
Wages payable 8,000
Various accounts 19,000
c. Work in process 32,000
Manufacturing overhead control 32,000
d. Work in process 32,000
Materials 4,000
Wages payable 8,000
Various accounts 20,000

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16. The cost of goods manufactured for the period is:
a. P60,700 c. P58,300
b. P54,300 d. P55,000

17. The overhead resulted to a variance of:

a. P1,000 overapplied.
b. P1,000 underapplied.
c. P19,000 overapplied.
d. P19,000 underapplied.

18. Products at Avicii Corp. are sent through two production departments: Fabricating and Finishing.
Overhead is applied to products in the Fabricating Department based on 150 percent of direct labor
cost and P18 per machine hour in Finishing. The following information is available about Job #297:
Fabricating Finishing
Direct material P1,590 P580
Direct labor cost ? 48
Direct labor hours 22 6
Machine hours 5 15
Overhead applied 429 ?
The customer is to be charged costs plus 30 percent. What amount will be billed to the customer?
a. P3,441.10 c. P4,020.90
b. P3,906.50 d. P4,163.90

Refer to the following information to answer the next two questions:

Gaga Corp., a job-order manufacturing company, uses a predetermined overhead rate based on direct
labor hours. For 2013, estimated direct labor hours are 95,000, and estimated factory overhead is
P579,500. The following information is for September 2013. Job A was completed during
September, and job B was started but not finished.
September 1, 2011 inventories:
Materials control P 7,500
Work-in-process control (all job A) 31,200
Finished goods control 67,000
Material purchases P 104,000
Direct materials requisitioned:
Job A P 45,000
Job B 33,500
Direct labor hours:
Job A 4,200
Job B 3,500
Labor costs incurred:
Direct labor (P5.50/hour) P 42,350
Indirect labor 13,500
Supervisory salaries 6,000
Rental costs:
Factory P 7,000
Administrative offices 1,800
Total equipment depreciation costs:
Factory P 7,500
Administrative offices 1,600
Indirect materials used P 12,000

19. What is the overapplied or underapplied overhead for September?

a. P970 overapplied c. P660 overapplied
b. P970 underapplied d. P660 underapplied

20. What is the total cost of Job A?

a. P124,920 c. P112,620
b. P119,880 d. P104,220

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21. Lovato Company uses a job order cost system. The following debits (credit) appeared in Lovato’s
work-in-process account for the month of June 2013:
June Description Amount
1 Balance P 4,000
30 Direct materials 24,000
30 Direct labor 16,000
30 Factory overhead 12,800
30 To finished goods (48,000)
Lovato applies overhead to production at a predetermined rate of 80% of direct labor costs. Job No.
3, the only job still in process on June 30, 2013, has been charged with direct labor of P2,000. What
was the amount of direct materials charged to Job No. 3?
a. P8,800 c. P5,200
b. P24,000 d. P3,000

Refer to the following information to answer the next four questions:

You are asked to bring the following incomplete accounts of Guetta, Inc. up to date through January
31, 2013. Consider the data that appear in the T-accounts as well as additional information given in
items (a) through (i). Guetta’s job order costing system has two direct cost categories (direct material
and direct manufacturing labor) and one indirect cost pool (manufacturing overhead, which is
allocated using direct manufacturing labor costs).
Materials Inventory Control Wages Payable Control
12/31/2012 1/31/2013
Balance 15,000 Balance 3,000

Work in Process Inventory Control Manufacturing Overhead Control

January 2013
Charges 57,000

Finished Goods Inventory Control Cost of Goods Sold

12/31/2012
Balance 20,000

Additional Information:
 Manufacturing department overhead is allocated using a budgeted rate set every December.
Management forecasts next year's overhead and next year's direct manufacturing labor costs. The
budget for 2013 is P400,000 of direct manufacturing labor and P600,000 of manufacturing
overhead.
 The only job unfinished on January 31, 2013 is No. 419, on which direct manufacturing labor
costs are P2,000 (125 direct manufacturing labor hours) and direct material costs are P8,000.
 Total material placed into production during January is P90,000.
 Cost of goods completed during January is P180,000.
 Material inventory as of January 31, 2013 is P20,000.
 Finished goods inventory as of January 31, 2013 is P15,000.
 All plant workers earn the same wage rate. Direct manufacturing labor hours for January totals
2,500. Other labor and supervision totals P10,000.
 The gross plant payroll on January paydays totals P52,000. Ignore withholdings. All personnel
are paid on a weekly basis.
 All actual manufacturing department overhead incurred during January has already been posted.

22. What is the cost of materials purchased during January?

a. P90,000 c. P85,000
b. P95,000 d. P75,000

23. What is the amount of direct manufacturing labor costs incurred during January?
a. P40,000 c. P30,000
b. P50,000 d. P52,000

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24. What is the cost of goods sold during January?
a. P200,000 c. P175,000
b. P185,000 d. P165,000

25. Manufacturing overhead underapplied or overapplied for January

a. P18,000 over c. P3,000 over
b. P18,000 under d. P3,000 under

Refer to the following information to answer the next two questions:

Mars Company uses a job order costing system and the following information is available from its
records. The company has three jobs in process: #6, #9, and #13. Raw materials used amounted to
P120,000 and the direct labor rate was P8.50 per hour. Overhead was applied at 120% of direct labor
cost. Direct material was requisitioned as follows for each job respectively: 30 percent, 25 percent,
and 25 percent; the remainder was considered indirect. Direct labor hours per job are 2,500; 3,100;
and 4,200; respectively. Indirect labor is P33,000. Other actual overhead costs totaled P36,000.

26. If Job #13 is completed and transferred, what is the balance in Work in Process Inventory at the end
of the period if overhead is applied at the end of the period?
a. P170,720 c. P99,020
b. P139,540 d. P96,700

27. Assume the balance in Work in Process Inventory was P18,500 on June 1 and P25,297 on June 30.
The balance on June 30 represents one job that contains direct material of P11,250. How many direct
labor hours have been worked on this job (rounded to the nearest hour)?
a. 2,976 c. 1,324
b. 1,653 d. 751

28. One Direction Co. uses a job order costing system that combines actual direct material and actual
direct labor costs with a predetermined overhead charge based on machine hours. Expected overhead
and machine hours of P1,421,000 and 145,000, respectively, were used in developing the
predetermined rate for 2013. During 2013, the company worked on Job #639 and incurred the
following costs and machine hours: direct materials, P95,000; direct labor, P43,600; machine hours,
650. Upon completion of Job #639, the quality control inspector determined that 30 units were
spoiled and would be unacceptable to the customer. Thirty (30) additional good units were made at a
total cost of P2,780. The spoiled units were sold for P480. What is the total cost of Job #639?
a. P147,270 c. P144,970
b. P148,230 d. P147,750

29. Owl City Company manufactures custom-made wigs. During May 2013, Job 527 for the production
of 520 wigs was completed at the following costs per unit: direct materials, P60; direct labor, P45;
applied factory overhead, P54 (based on direct labor cost). Final inspection of Job 527 disclosed 12
defective units and 20 spoiled units. The defective wigs were reworked at a total prime cost of
P1,000, 40% of which was direct labor. The spoiled wigs were sold to jobber for P1,800. What
would be the unit cost of the good units produced on Job 527?
a. P170.96 c. P164.72
b. P168.32 d. P171.92

30. Paramore Company’s Job 380 for the manufacture of 65 pillows was completed during October at
the following unit costs: direct materials, P150; direct labor, P100; factory overhead (includes an
allowance of P5 for spoiled work), P100. Final inspection disclosed 5 spoiled pillows which were
sold to a jobber for P1,500. The spoilage loss is charged to all production during October. What
would be the unit cost of the good pillows produced?
a. P326.92 c. P295.00
b. P348.75 d. P350.00

< END OF QUIZ >

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