ACCOUNTING LESSONS WITH BCV

Job Order Costing

Problem 1:
VAN DYNE Co. uses a job order costing system, and the following information is available from its records:
Raw materials used P120,000
Direct labor per hour P8.50
Overhead applied based on direct labor cost 120%

The company has three jobs in process: Job #101, #102, and #103. Direct materials were requisitioned for each job
as follows: 30%, 25%, and 25%, respectively, the balance of the requisitions 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.

1. What is the prime cost of Job #101?

2. How much overhead is applied to Work-in-Process?
3. What is the total amount of actual overhead?
4. How much is the over- or under- applied overhead?
5. If Job #103 is completed and transferred, what is the balance in Work-in-Process inventory at
the end of the period?

Problem 2:
Lang Inc. produces product “X”. For 2024, Lang Inc. estimated the following:

Overhead costs (exclusive of spoilage) P1,200,000

Estimated spoilage cost 100,000
Estimated sales value of spoiled materials 40,000
Estimated direct labor hours 40,000

The cost of a unit of product “X” is P80. During the current production period, 150 units of product “X” are considered
spoiled. Each spoiled unit of product “X” can be sold for P64.

1. What is the predetermined overhead rate per direct labor hour if the spoilage is inherent in
production?
2. What is the predetermined overhead rate per direct labor hour if the spoilage relates only to a
specific job?

Problem 3:
Princeton Company’s Job #143 for the manufacturing of 4,400 coats, which was completed in September at unit costs
presented as follows:

Direct materials P40

Direct labor 36
Overhead (including an allowance for spoilage of P2.00) 36
Manufacturing cost per unit P112

Final inspection of Job #143 disclosed 400 spoiled coats which were sold to a jobber for P12,000.

Case 1: The spoilage is attributable to internal failure or charged to production.

1. How many units are deemed as good units?
2. How much is credited to the WIP inventory account due to spoilage?
3. What would be the unit cost of good coats produced on Job #143?

Case 2: The spoilage is attributable to customer specifications or charged to specific job.

1. How many units are deemed as good units?
2. How much is credited to WIP inventory account due to spoilage?
3. What would be the unit cost of good coats produced on Job #143?
Problem 4:
Whitney Co.’s incurred the following costs on Job #001 for the manufacturing of 400 motors during December:
Direct materials P1,320
Direct labor 1,600
Factory overhead 2,400
P5,320

Inspection of Job #001 disclosed that 10 units are defective. All the 10 defective units were reworked and incurred the
following direct costs:
Direct materials P200
Direct labor 320
P520

Case 1: The rework costs were attributable to internal failure.

1. How many units are deemed as good units?
2. What amount of rework cost is to be debited to WIP inventory account?
3. What would be the new unit cost of Job #001?

Case 2: The rework costs were attributable to exacting specifications of Job #001.
1. How many units are deemed as good units?
2. What amount of rework cost is to be debited to WIP inventory account?
3. What would be the new unit cost of Job #001?

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