ACTIVITY 2

COST ACCOUNTING AND CONTROL

Problem 1
Yorknew City Company manufactures unique, custom made furniture. The company uses a job order
cost system and applies overhead to production on the basis of direct labor cost. In computing a
predetermined overhead rate for the year 2020, the company estimated manufacturing overhead to be
P26 million and direct labor costs to be P20 million.

Actual costs incurred during 2020

Direct materials used P 30,000,000
Direct labor cost incurred 18,000,000
Insurance – factory equipment 500,000
Indirect labor 7,500,000
Factory maintenance 2,000,000
Rent – factory building 11,000,000
Depreciation – factory equipment 2,000,000

Required:
1. Compute the predetermined overhead for 2020.
2. Compute the amount of under- or over applied overhead for 2020.
3. Determine the cost of goods sold to be presented in income statement using the following data:

January 1, 2020 December 31, 2020

Work in process P 5,000,000 P 4,000,000
Finished goods 13,000,000 11,000,000

Problem 2
The following data are available for three companies at the end of their fiscal years:

Company Freecs:
Finished goods, April 1.......................................................... P 400,000
Cost of goods manufactured........................................... 2,600,000
Sales................................................................................. 3,500,000
Gross profit on sales........................................................ 35%
Finished goods inventory, March 31................................ ?

Company Zoldyck:
Freight in............................................................................... P 12,000
Purchases returns and allowances................................... 22,000
Marketing expense.......................................................... 85,000
Finished goods, December 31.......................................... 65,000
Cost of goods sold............................................................ 550,000
Cost of goods available for sale....................................... ?
Company Crueger:
Gross profit........................................................................... P 264,000
Cost of goods manufactured........................................... 612,000
Finished goods, January 1................................................ 34,000
Finished goods, December 31.......................................... 26,000
Work in process, January 1.............................................. 18,000
Work in process, December 31........................................ 12,000
Sales................................................................................. ?

Required: Determine the amounts indicated by the question marks.