JOB COSTING
Job Costing is the process of accumulating costs of materials, labor, and overheads for a specific
job or project
Problem 1. The Showa manufacturing company recorded the following transactions during
2020:
a. Raw materials purchased on account, P820,000.
b. Raw materials were requisitioned for use in production, P760,000 (P720,000 direct materials
and P40,000 indirect materials).
c. Direct labor, P150,000; indirect labor, P220,000; sales commission, P180,000; and
administrative salaries, P400,000.
d. Sales travel costs were P34,000.
e. Utility costs incurred in the factory, P86,000.
f. Advertising expenses were P360,000.
g. Depreciation for the year was P700,000 (P560,000 relates to factory and P140,000 relates to
selling and administrative activities).
h. Insurance expired during the year, P20,000 (P14,000 relates to factory operations and P6,000
relates to selling and administrative activities).
i. Fine manufacturing company worked 160,000 machine hours. Manufacturing overhead was
applied to production.
j. Goods costing P1,800,000 were completed during the year.
k. The goods costing P1,740,000 were sold to customers for P3,000,000.
The Showa manufacturing company uses job order costing system. The company uses machine
hours to apply overhead cost to jobs. At the beginning of 2020, the company estimated that
150,000 machine hours would be worked and P900,000 overhead cost would be incurred during
2020.
The balances of raw materials, work in process (WIP), and finished goods at the beginning of
2020 were as follows:
• Raw materials: P40,000
• Work in process: P30,000
• Finished goods: P60,000
Required:
1. Prepare journal entries from the above information.
2. Prepare a journal entry to close the balance in manufacturing overhead account (over or
under applied manufacturing overhead) to cost of goods sold.
Problem 2
Digos Company was organized on January 1, 2010. On the same date, 25,000, P100 par value, ordinary
shares were issued in exchange for property, plant and equipment valued at P3,000,000 and cash of
P1,000,000. The following data summarize activities for 2010:
a) Profit for the year ended December 31, 2010 was P1,000,000.
b) Raw materials on hand on December 31 were equal to 25% of raw materials purchased.
c) Manufacturing costs were distributed as follows:
Materials used 50%
Direct labor 30%
Factory overhead 20% (includes depreciation of building, P100,000)
d) Goods in process remaining in the factory on December 31 were equal to 1/3 of the goods finished
and transferred to stock.
e) Finished goods remaining in stock on December 31 were equal to 25% of the cost of goods sold.
f) Operating expenses were 30% of sales.
g) Cost of goods sold was 150% of the operating expenses total.
h) Ninety percent of sales were collected during 2010. The balance was considered collectible.
i) Seventy five percent of the raw materials purchased were paid for. There were no expense accruals
or prepayments at the end of the year.
REQUIREMENTS:
Based on the above information, prepare a balance sheet and income statement
for the year ended December 31, 2010
PROBLEM 3 are based on the following data
Avilla Company provided the following inventory balances and manufacturing cost data for the
month of January 2021
Inventories
Increase in Direct Materials P10,000
Increase in Work-in-process 5,000
Decrease in Finished goods 15,000
Month of
January 2021
Cost of goods manufactured P515,000
Factory overhead applied 150,000
Direct materials used 190,000
Actual factory overhead 144,000
Under Avilla’s cost system, any over or under applied overhead is closed to the cost of goods
sold account at the end of the calendar year.
1. What was the total amount of direct material purchase during January 2021?
a. P180,000
b. P190,000
c. P195,000
d. P200,000
2. How much direct labor cost was incurred during January 2021?
a. P170,000
b. P175,000
c. P180,000
d. P186,000
3. What would cost of goods sold be if under or over applied overhead were closed to cost
of goods sold?
a. P509,000
b. P524,000
c. P530,000
d. P536,000
4. Assuming that ending inventories of the Work in Process and Finished Goods are
P40,000 and P30,000 respectively, what would cost of goods sold be if under or over
applied overhead were allocated to inventories and cost of goods sold?
a. P509,700
b. P524,700
c. P526,300
d. P530,300
