Chapter 5

Answer Key
TRUE OR FALSE
1. F
2. T
3. T
4. T
5. F
6. T
7. T
8. T
9. T
10. F
11. F
12. T
13. T
14. T
15. T
16. F
17. F
18. T
19. T
20. T
21. T
22. T
23. T
24. F
25. T
26. T
27. F
28. F
29. T
30. T
31. T
32. F
33. F
34. T
35. T
36. T
37. T
38. F
39. F
40. F
41. T
42. T
43. T
44. F
45. T
46. T
47. T
48. T
49. T
50. F
51. F
52. F
53. F
Multiple Choice
1. C
2. C
3. B
4. A
5. C
6. B
7. B
8. B
9. C
10. D
11. C
12. D
13. C
14. C
15. A
16. D
17. B
18. C
19. C
20. D
21. A
22. B
23. A
24. D
25. A
26. D
27. B
28. D
29. B
30. A
31. B
32. D
33. B
34. A
35. D
36. C
37. D
38. D
39. A
40. D
41. A
42. B
43. A
44. D
45. A/B/B/D
46. B
47. A/B/D/C
48. C/C/A/D/B/D/D
49. B
50. A
51. D
52. A/B/B
53. B
54. C/A
55. A/C
56. D
57. A
58. C/C/B
59. A
60. A
61. A/B/A
62. D
63. C/B
64. B/C/D/B/A
65. C/B/B/D/D/A
 66. A/B/C/C/B/A
67. A/C/B/B
68. B/
69. A
70. B/A/B
71. C/C
72. B
73. C
74. A
75.

Straight Problems
Problem 1
Answer:
1.
Cost of Goods Sold 20,000
Factory overhead 20,000

2.
Cost of Goods Sold 10,000
Finished Goods 6,000
Work in Process 4,000
Factory overhead 20,000

Cost of Goods Sold 125,000 50% 10000

Finished Goods 75,000 30% 6000
Work in Process 50,000 20% 4000
250,000 20,000

Problem 2
Answer
1.
Assembly Finishing Total
Budgeted FOH 1,000,000 400,000 P1,400,000
Divide by Budgeted DL hours 22,000 18,000 40,000
FOH rate = 35/Dlhr.

2.
Assembly Finishing Total
Budgeted FOH 1,000,000 400,000 P1,400,000
Divide by: Budgeted machine hours 35,000 15,000 50,000
FOH rate = P28.00/mhr.
3.
Assembly
Budgeted FOH P1,000,000
Divide by: Budgeted machine hours 35,000
FOH rate = P28.57/mhr

Finishing
Budgeted FOH P400,000
Divide by; Budgeted DL hours 18,000
FOH rate = P22.22/dlhr

Problem 3
Answer
1.
FOH rate P2,520,000 FOH
P1,800,000 Direct labor cost
FOH rate =140% of direct labor cost

2.
28,500 x 140% 39,900

3.
Fabricating Machining Assembly
Estimated FOH 1,050,000 1,200,000 270,000
Estimated Direct labor cost 600,000 300,000 900,000
FOH rate 175% of DLC 400% of DLC 30% of DLC

4.
Fabricating Machining Assembly Total
FOH rate 175% 400% 30%
Direct labor cost 8,400 1,500 18,600
FOH applied 14,700 6,000 5,580 26,280

C.
(1)
Actual FOH 2,592,000
Applied FOH (1,740,000 x 140%) 2,436,000
Under-applied FOH 156,000
(2)
Fabricating Machining Assembly Total
Actual FOH 1,080,000 1,260,000 252,000 2,592,000
Applied FOH
(630,000 x 175%) 1,102,500
(324,000 x 400%) 1,296,000
(786,000 x 30%) 235,800 2,634,300
Under (over) -applied FOH (22,500) (36,000) 16,200 (42,300)

Problem 4
Answer
1.
Budgeted FOH 325,000 175,000 500,000
Divide by budgeted direct labor hours 3,000 2,000 5,000
FOH rate 100
x direct labor hours (2+1) 3
FOH rate per unit P300

2.
Budgeted FOH 325,000 Budgeted FOH 175,000
Divide by Budgeted machine hours 15,000 Budgeted direct labor hours 2000
FOH rate 22 FOH rate 87.50
Multiply by per unit 10 Multiply by per unit 1
FOH rate per unit 217 FOH rate per unit 87.50

Problem 5
Answer:
1.
Sewing Department 1,204,000 Cutting 1,470,000
140,000 840,000
FOH rate =P8.60/mhr. FOH rate =175% of direct labor cost

2.
Sewing Department (P8.60 x 220 hrs.) 1,892
Cutting (175% x 1,360) 2,380
Total factory overhead cost 4,272

3.
Sewing Cutting Total
Direct Materials 940 664 1,604
Direct Labor 580 1,360 1,940
FOH applied 1,892 2,380 4,272
3,412 4,404 7,816
 Unit cost = P7,816
100
Unit cost = P78.16/unit

4.
Sewing Cutting
FOH actual 1,140,000 FOH actual 1,500,000
FOH applied FOH applied
(130,000 mhr. x P8.60) 1,118,000 (872,000 x 175%) 1,526,000
Under-applied 22,000 Over-applied (26,000)

Problem 6
Answer
a.
Variable FOH P40,000 Fixed FOH 10,000
Direct labor hours 20,000 hrs Divide by (5 x 2,000) 10,000 hrs
Variable cost per hour 2 Fixed FOH rate per hour 1

Total FOH rate per labor hour P3/dlhr

b.
Variable FOH 40,000 Fixed FOH 10,000
Direct labor hours 20,000 Divide by 2,000
Variable cost per direct labor hours 2 FxOH per unit 5
x per unit 5
Variable FOH rate per unit 10

Total FOH rate per unit (10 + 5) P15/unit

Problem 7
Answer:
1.
FOH rate P1,800,000
150,000
FOH rate P12/mhr

2.
Actual FOH 1,700,000
Applied FOH (120,000 x P12) 1,440,000
Under-applied FOH 260,000

3.
Cost of Goods Sold 260,000
Factory Overhead 260,000
4.
Work in Process 72,000 5%
Finished Goods 360,000 25%
Cost of Goods Sold 1,008,000 70%
1,440,000 100%

Work in Process (5% x 260,000) 13,000

Finished Goods (25% x 260,000) 65,000
Cost of Goods Sold (70% x 260,000) 182,000
Factory Overhead 260,000

Problem 8
Answer
1.
Fixed FOH 40,000
Variable FOH (2 x 5,000 hrs) 10,000
Total estimated FOH 50,000
Divide by est. machine hours 5,000
FOH rate 10

2.
Fixed FOH 40,000
Variable FOH (2 x 5,200 hrs.) 10,400
Total estimated FOH 50,400

3.
Job 01 Job 02 Job 03
Fixed rate (50,000 ÷ 5,000) 10 10 10
Variable rate 2 2 2
FOH rate 10 10 10
Machine hours 1,500 2,000 1,700
FOH applied 15,000 20,000 17,000
4.
FOH rate 10
Actual hours 5,200
FOH applied 52,000
Actual FOH 56,000
Under-applied 4,000
5.
Actual FOH 56,000
Budgeted based on actual hours
Fixed 40,000
Variable (2 x 5,200) 10,400 50,400
Spending - unfavorable 5,600

6.
Budgeted Fixed FOH 40,000
Standard Fixed (8 x 5,200) 41,600
Idle capacity - favorable 1,600

Problem 9
Answer
1.
Fixed factory overhead 80,000
Variable FOH (2 x 100,000) 200,000
Total estimated FOH 280,000
divide by normal capacity units 100,000
FOH rate 2.80

Actual units 98,000

x FOH rate 2.80
Applied FOH 274,400

2.
Actual units 98,000
x FOH rate 2.80
Applied FOH 274,400
Actual FOH 265,000
Over - applied FOH 9,400

3 and 4
AFOH 265,000
Budgeted based on Actual hrs
Fixed 80,000
Variable (2 x 98,000) 196,000 276,000
Spending - favorable 11,000

Budgeted 276,000
Applied (2.80 x 98,000) 274,400
Idle capacity - unfavorable 1,600
Problem 10
Answer
1. P360,000/ 0.30 = 1,200,000 direct labor hours
2. P363,000 /0.30 = 1,210,000 direct labor hours

Problem 11
Answer:
a. 60,000 + (.80 x 120,000) = 156,000
b. 65,000 + (.80 x 200,000) = 225,000
c. 65,000 + (.80 x 220,000) = 241,000

Problem 12
Answer
Fixed 400,000 /25,000 = fixed foh rate P16 + variable foh P4 = P20 per unit

Problem 13
Answer
1.
Total Factory Overhead 1,200,000 - 1,000,000
Machine hours 100,000 - 80,000

Variable rate per hour 10

Fixed FOH 1,200,000 – (10 x 100,000) = 200,000

2.
Actual FOH 1,050,000
Applied (1,200,000 / 100,000 = 12 x 100,000) 1,200,000
Over-applied FOH 150,000

3.
Actual FOH 1,050,000
Budgeted based on Actual hours
Fixed 200,000
Variable (10 x 80,000) 800,000 1,000,000
Spending – unfavorable 50,000

Budgeted based on Actual hours 1,000,000

Applied 1,200,000
Idle Capacity variance – favorable 200,000

Problem 14

Answer:
1.
Actual Fixed FOH 250,000
Actual Variable FOH 82,000
Total Actual FOH 332,000
Divide by units produced 8,000
Actual FOH cost per unit 41.50
2.
Expected FOH cost per unit (12 + 32) 44.00

3.
AFOH
Fixed 250,000
Variable 82,000 332,000
Budgeted based on Actual hours
Fixed (32 x 10,000 units normal cap. X 1 hr.) 320,000
Variable (12 x 7,500 hrs.) 90,000 410,000
Spending Variance - favorable 78,000

Budgeted based on Actual hours

Fixed (32 x 10,000 units normal cap. X 1 hr) 320,000
Variable (12 x 7,500) 90,000 410,000
Standard/Applied
Fixed (8,000 units x 1 hr x 32) 256,000
Variable (12 x 8,000 units x 1 hr.) 96,000 352,000
Idle Capacity Variance - unfavorable 58,000

Problem 15
Answer
1. Budgeted fixed 3,132,000 + Budgeted variable 6,156,000)= 9,288,000 /1,080,000 = FOH rate P8.6
x actual hours 1,042,200 = 8,962,920 applied – actual 8,872,920 = 90,000 over applied

2. Actual FOH 8,872,920 – 9,072,540 Budgeted based on actual hours (fixed 3,132,000 + Var (5.7 x
1,042,200) = 199,620 Fav

3. Budgeted based on actual hours 9,072,540 – Applied 8,962,920 = 109,620 Unfav

Problem 16
Answer
1. 1,200,000 / 600,000 = P2 + P2 = 4
2. P4 x 640,000 hours = 2,560,000
3. Actual 2,498,000 – Applied 2,560,000 = over applied 62,000
4. Actual 2,498,000 – 2,480,000 Budget (1,200,000 + 2 x 640,000) = 18,000 U
5. Budget 2,480,000 – applied 2,560,000 = F 80,000

Problem 17
Answer
A: P10 = Budgeted 100,000 – Actual 105,000 =5,000 F. Capacity 50,000 F / 5,000 = P10 x budget units
100,000 = 1,000,000tal bugeted FC

B: 45,000 F / P3 = difference 15,000 F – 100,000 budget = actual prod. 85,000

3 x 100,000 normal cao = P300,000 budgeted FX cost
C: P200,000 /100,000 = P2 FC per unit; 100,000 – 90,000 = 10,000 xP2 =20K U

D: P700,000 / 100,000 = P7 FC per unit; P70,000 F / P7 = 10,000 + 100,000 =110K

 Standard Total
Fixed cost Budgeted Actual Idle Capacity
Company per unit Fixed Cost Production Variance
A P10 P1,000,000 105,000 P50,000 F
B P3 P300,000 115,000 P45,000 F
C P2 P200,000 90,000 P20,000 U
D P7 P700,000 110,000 P70,000 F

Problem 18

Answer
Direct Method
Maintenance Utilities Mixing Assembly
93,500.00 45,000.00
(93,500.00) 46,750.00 46,750.00
(45,000.00) 15,000.00 30,000.00
61,750.00 76,750.00

Step Method
Maintenance Utilities Mixing Assembly
93,500.00 45,000.00
(93,500.00) 18,700.00 37,400.00 37,400.00
(63,700.00) 21,233.33 42,466.67
- - 58,633.33 79,866.67

Reciprocal
M = 93,500 + 10%U
U = 45,000 + 20%M

M = 93,500 + 10% (45,000 + 20%M)

M = 93,500 + 4,500 + 2%M
98%M = 98,000
M = 100,000

U = 45,000 + 20%(100,000)
U = 65,000

Maintenance Utilities Mixing Assembly

93,500.00 45,000.00
(100,000.00) 20,000.00 40,000.00 40,000.00
6,500.00 (65,000.00) 19,500.00 39,000.00
- - 59,500.00 79,000.00
Problem 19
Answer:
a. Direct Method
Personnel Security Maintenance Cutting Sewing Finishing
1,000,000 400,000 100,000 800,000 1,200,000 600,000
(1,000,000) 375,000 500,000 125,000
(400,000) 150,000 100,000 150,000
(100,000) 50,000 25,000 25,000
- - - 1,375,000 1,825,000 900,000
Divide by 40,000 60,000 20,000
FOH rate 34.38 30.42 45.00

b. Step Method
Personnel Security Maintenance Cutting Sewing Finishing
1,000,000 400,000 100,000 800,000 1,200,000 600,000
(1,000,000) 100,000 100,000 300,000 400,000 100,000
(500,000) 55,556 166,667 111,111 166,667
(255,556) 127,778 63,889 63,889
- - (0) 1,394,445 1,775,000 930,556
Divide by 40,000 60,000 20,000
FOH rate 34.86 29.58 46.53
c. Reciprocal Method
Personnel Security Maintenance Cutting Sewing Finishing
1,000,000.00 400,000.00 100,000.00 800,000 1,200,000 600,000
(1,079,545.45) 107,954.55 107,954.55 323,864 431,818 107,955
53,409.01 (534,090.09) 53,409.01 160,227 106,818 160,227
26,136.36 26,136.36 (261,363.63) 104,545 52,273 52,273
- - - 1,388,636 1,790,909 920,454
Divide by 40,000 60,000 20,000
FOH rate 34.72 29.85 46.02

P =1,000,000 +10%S + 10%M

S = 400,000 + 10%P + 10%M
M = 100,000 + 10%P + 10%S

S = 400,000 + 10%(1,000,000 + 10%S + 10%M) + 10%M

S = 400,000 + 100,000 + 1%S + 1%M + 10%M
S = 500,000 + 1%S + 11%M
99%S = 500,000 + 11%M

M = 100,000 + 10%(1,000,000 + 10%S + 10%M) + 10%S

M = 100,000 + 100,000 + 1%S + 1%M + 10%S
M = 200,000 + 11%S + 1%M
 99%M = 200,000 + 11%S
99%
M = 202,020.20 + 11.11111%S

Value of S
99%S = 500,000 + 11% (202,020.20+11.11111%S)
99%S = 500,000 + 22,222.22 + 1.22222%S
97.77777%S = 522,222.22
97.7778%
S = 534,090.09

Value of M
M = 202,020.20 + 11.11111% (534,090.09)
M = 261,363.63

Value of P
P = 1,000,000 + 10% (534,090.09) + 10% (261,363.63)
P = 1,000,000 + 53,409.09 + 26,136.36.76
P = 1,079,545.45

Problem 20
a.
Direct Method
Personnel Medical Inspection Extracting Finishing
250,000 100,000 20,000 800,000 600,000
(250,000.00) 173,076.92 76,923.08
(100,000.00) 50,000.00 50,000.00
(20,000.00) 11,428.57 8,571.43
- - - 1,034,505.49 735,494.51
Divide by 50,000.00 25,000.00
FOH rate 20.69 29.42

Allocation of Personnel
Extracting 45/65 x 250,000
Finishing 20/65 x 250,000
Allocation of Medical
Extracting 20/40 x 100,000
Finishing 20/40 x 100,000

Allocation of Inspection
Extracting 40/70 x 20,000
Finishing 30/70 x 20,000
b.
Step Method
Personnel Medical Inspection Extracting Finishing
250,000 100,000 20,000 800,000 600,000
(250,000.00) 37,500.00 50,000.00 112,500.00 50,000.00
(137,500.00) 45,833.33 45,833.33 45,833.33
(115,833.33) 66,190.47 49,642.86
- - 0.00 1,024,523.81 745,476.19
Divide by 50,000.00 25,000.00
FOH rate 20.49 29.82

Allocation of Personnel
Medical 15% x 250,000
Inspection 20% x 250,000
Extracting 45% x 250,000
Finishing 20% x 250,000

Allocation of Medical
Inspection 20/60 x 137,500
Extracting 20/60 x 137,500
Finishing 20/60 x 137,500

Allocation of Inspection
Extracting 40/70 x 115,833.33
Finishing 30/70 x 115,833.33

c.
Reciprocal
Personnel Medical Inspection Extracting Finishing
250,000 100,000 20,000 800,000 600,000
(331,707.32) 49,756.10 66,341.46 149,268.29 66,341.46
69,593.50 (173,983.74) 34,796.75 34,796.75 34,796.75
12,113.82 24,227.64 (121,138.21) 48,455.28 36,341.46
(0.00) - 0.00 1,032,520.33 737,479.68
Divide by 50,000.00 25,000.00
FOH rate 20.65 29.50

P = 250,000 + 40%M + 10%I

M = 100,000 + 15%P + 20%I
I = 20,000 + 20%P + 20%M

Substituting the value of P to M

M = 100,000 + 15% (250,000 + 40%M + 10%I) + 20%I
M = 100,000 + 37,500 + 6%M + 1.5%I + 20%I
M = 137,500 + 6%M + 21.5%I
94%M = 137,500 + 21.5%I
 Substituting the value of P to I
I = 20,000 + 20% (250,000 + 40% M + 10% I) + 20%M
I = 20,000 + 50,000 + 8%M + 2%I + 20%M
I = 70,000 + 28%M + 2%I
98%I = 70,000 + 28%M
98%
I = 71,428.57 + 28.57143%M

Computing the value of M

94%M = 137,500 + 21.5% (71,428.57 + 28.57143%M)
94%M = 137,500 + 15,357.14 + 6.14286%M
87.85714%M = 152,857.14
87.85714%
M = 173,983.74

Computing the value of I

I = 71,428.57 + 28.57143% (173,983.74)
I = 121,138.21

Computing the value of P

P = 250,000 + 40%(173,983.74) + 10%(121,138.21)
P = 250,000 + 69,593.50 + 12,113.82
P = 331,707.32

Problem 21
Answer
Direct Method
Personnel Maintenance Security Assembly Finishing
70,000 30,000 10,000 500,000 200,000
(70,000.00) 46,666.67 23,333.33
(30,000.00) 15,000.00 15,000.00
(10,000.00) 7,142.86 2,857.14
- - - 568,809.52 241,190.48
Divide by 20,000.00 30,000.00
FOH rate 28.44 8.04
Allocation of Personnel
Assembly 40/60 x 70,000
Finishing 20/60 x 70,000

Allocation of Maintenance
Assembly 30/60 x 30,000
Finishing 30/60 x 30,000

Allocation of Security
Assembly 50/70 x 10,000
Finishing 20/70 x 10,000
 Step Method
Personnel Maintenance Security Assembly Finishing
70,000 30,000 10,000 500,000 200,000
(70,000.00) 7,000.00 21,000.00 28,000.00 14,000.00
(37,000.00) 5,285.71 15,857.14 15,857.14
(36,285.71) 25,918.36 10,367.35
- - 0.00 569,775.51 240,224.49
Divide by 20,000.00 30,000.00
FOH rate 28.49 8.01
Allocation of Personnel
Maintenance 10%
Security 30%
Assembly 40%
Finishing 20%

Allocation of Maintenance
Security 10/70
Assembly 30/70
Finishing 30/70

Allocation of Security
Assembly 50/70
Finishing 20/70

Problem 22

Answer:
1.
P1 P2
Fixed Cost
400,000 x 33.33% 133,333.33
400,000 x 66.67% 266,666.67
Variable
4,800,000 x .03 144,000
9,600,000 x .03 288,000
Total 277,333.33 554,666.67

2.
P1 P2
Fixed Cost
400,000 x 33.33% 133,333.33
400,000 x 66.67% 266,666.67
Variable
5,600,000 x .03 168,000
8,400,000 x .03 252,000
Total 301,333.33 518,666.67
Problem 23

Answer
1.
Direct Method
Maintenance Human Resources Machining Assembly
500,000 200,000
(500,000) 227,272.73 272,727.27
(200,000) 90,909.09 109,090.91
318,181.82 381,818.18

2.
Step Method
Maintenance Human Resources Machining Assembly
500,000.00 200,000.00
(500,000.00) 56,451.61 201,612.90 241,935.48
(256,451.61) 116,568.92 139,882.69
- 318,181.82 381,818.17

Problem 24
Answer
a.
Human Resource Security Assembly Finishing
1,800,000.00 500,000.00
(1,800,000.00) 720,000.00 1,080,000.00
(500,000.00) 200,000.00 300,000.00
- - 920,000.00 1,380,000.00

b.
Human Resource Security Assembly Finishing
1,800,000.00 500,000.00
(1,800,000.00) 192,857.14 642,857.14 964,285.71
(692,857.14) 277,142.86 415,714.28
- - 920,000.00 1,380,000.00

Problem 25
Answer:
1. Direct Method
Maintenance Security Assembly Finishing
900,000 500,000
(900,000) 600,000 300,000
(500,000) 210,526.32 289,473.68
(900,000) (500,000) 810,526 589,474
2. Step Method
Maintenance Security Assembly Finishing
900,000 500,000
(900,000) 90,000 540,000 270,000
(590,000) 248,421.05 341,578.95
- - 788,421.05 611,578.95

3. Reciprocal Method
M = 900,000 + 5%S
S = 500,000 + 10%M

M = 900,000 + 5% (500,000 + 10%M)

M = 900,000 + 25,000 + 0.5%M
99.5%M = 925,000
M = 929,648.24

S = 500,000 + 10%(929,648.24)
S = 592,964.82
Maintenance Security Assembly Finishing
900,000 500,000
(929,648) 92,965 557,788.94 278,894.47
29,648 (592,965) 237,185.93 326,130.65
0 0 794,974.87 605,025.12

Problem 26
Req. 1
Fabrication Assembly
Gen Factory Admin
Fabrication (P160,000 x 562,500/1,000,000 hrs) 90,000
Assembly (P160,000 x 437,500/1,000,000 hrs) 70,000
Factory Maintenance
Fabrication (P203,200 x 88,000/160,000 sq.ft.) 111,760
Assembly (P203,200 x 72,000/160,000 sq.ft.) 91,440
Factory cafeteria
Fabrication (P240,000 x 280/ 480 employees) 140,000
Assembly (P240,000 x 200 / 480 employees) 100,000
Total Allocated Cost 341,760 261,440

Req. 2
Budgeted FOH 4,850,000
Add: Allocated FOH 261,440
Total FOH 5,111,440
Divide by Direct labor hours 437,500
FOH rate 11.68