JOB ORDER COSTING CONTINUATION

Predertermined Overhead Rate- used to apply overhead to jobs is

determined before the period begins

An allocation base, such as direct labor hours, direct labor dollars,

or machine hours, is used to assign manufacturing overhead to
individual jobs.

Additional data(Continuation for PearCo):

PearCo estimates that it will require 160,000 direct labor-hours to
meet the coming period’s estimated production level. In addition, the
company estimates total fixed manufacturing overhead at $200,000, and
variable manufacturing overhead costs of $2.75 per direct labor hour.

Illustration 1:
Job WR53 at AP Industry, Inc. required P200 of direct materials and 10
direct labor hours at P15 per hour. Estimated total overhead for the
year was P760,000 and estimated direct labor hours were 20,000. What
would be recorded as the cost of job WR53?
a. P200
b. P350
c. P380
d. P730

JOURNALIZING TRANSACTIONS, POSTING AND PREPARATION OF FS IN JOB ORDER

COSTING
Illustration 2:
a. On October 1, Tiger Corporation had P5,000 in raw materials on
hand. During the month, the company purchased P45,000 in raw
materials.
b. Tiger uses a predetermined overhead rate of P3.50 per machine-hour.
During the month, 5,000 machine-hours were worked on jobs.
c. During the month, Tiger incurred but has not paid sales salaries of
P2,000, and advertising expense of P750.
d. During the period, Tiger completed jobs with a total cost of
P27,000
e. Tiger sold the P25,000 in Finished Goods Inventory to customers for
P43,500 on account.

At the end of the month, the company incurred the following actual
overhead costs:
1. Utilities (heat, water, and power) P5,700
2. Depreciation of factory equipment P4,900
3. Property taxes payable on factory P6,000

Required: Prepare Journal Entries, T- Account, Statement of Cost of

Goods Sold and Statement of Financial Performance.