ACCOUNTING FOR OVERHEAD manufacturing overhead to cost objects for a specific

INTRODUCTION TO OVERHEAD reporting period.

Cost Classification as to Function: - In layman’s term: We only estimate the total overhead
1. Manufacturing Costs - all costs incurred in the factory cost for the period using a specific allocation rate. We
to convert raw materials into finished goods. do not use the actual overhead costs incurred.
a) Direct Materials- raw materials cost that
becomes an integral part of the finished 2. WHY DO WE USE THE POH
product. 1. It allows an entity to get immediate cost information for
b) Direct Labor- all labor costs related to time decision-making and pricing decisions without the need
spent on products. to wait for the actual overhead costs which take time to
c) Overhead- all other costs incurred in the accumulate.
factory aside from direct materials and direct 2. When overhead rates are predetermined, it allows
labor. uniform costing whatever season or circumstance the
company is into.
2. Non-Manufacturing Costs - all costs which are not 3. Within the relevant range, there will be no problems on
incurred in transforming materials to finished goods. fluctuations of activity levels and the costs related
a) Selling Costs - all costs associated with thereunto.
marketing or selling a product.
b) General and Administrative Costs - all
executive, organizational and clerical costs
associated with the general management of
the organization rather than with
manufacturing, marketing or selling.
Cost Classification as to Timing of Recognition as Expense:
1. Product Costs- costs that “attach” or cling to the units Remember that:
that are produced and are reported as ASSETS until the 1. Overhead and activity levels are budgeted by an entity
goods are sold. for the whole accounting period.
a) Direct Materials 2. The numerator and denominator in determining the
b) Direct Labor POH rate is being studied well based on management
c) Overhead estimates, past actual production, or other bases and
2. Period Costs- costs that are recognized as expense in targets.
the income statement on the period in which the cost
was incurred. Specified volume of activity (Base to be used):
a) Selling Costs The base to be used should be related to functions represented by
b) General and Administrative Costs the overhead cost being applied:
THEREFORE OVERHEAD IS: ● FOH is labor oriented – base should be direct labor
● Part of Product/Inventoriable cost hours / direct labor cost.
● Part of Total Manufacturing Cost ● FOH is investment oriented related to operation of
machinery – base should be machine hours.
● FOH is material oriented – base should be materials
cost.
OVERHEAD
- includes all costs incurred in the production process 1. DIRECT LABOR HOURS
which are not direct materials or direct labor, not ● The most commonly used base or denominator.
directly traceable to the products completed but are still ● The number of direct labor hours spent is readily
necessary to be incurred to convert raw materials to available in a payroll sheet.
finished goods. The formula is:
Examples: FOHR = Estimated Factory Overhead
● Indirect materials (glue, tape, cleaning supplies, oils) Estimated Direct Labor Hours
● Indirect labor (factory supervisor, factory janitor) = Factory Overhead Rate per direct labor hour
● Factory insurance
● Factory depreciation of equipment and machineries 2. DIRECT LABOR COST
● Repairs and maintenance of factory assets ● More reliable than material cost as labor
● Factory rent rates do not change as often.
● Factory utilities (heat, light, power, etc) ● A direct relationship between labor cost and
factory overhead is needed.
PREDETERMINED OVERHEAD RATE ● Just like direct labor hours, the direct labor
1. WHAT IS PREDETERMINED OH RATE? cost is readily available on the payroll sheet.
- A predetermined overhead rate is an allocation rate ● The formula is:
that is used to apply the estimated cost of
 d) Direct Labor cost
e) Direct Labor Hour

3. MACHINE HOURS
● A direct relationship between machine hours and
factory overhead cost is needed.
● This may occur in companies or departments that are
largely automated so that majority of the factory
overhead cost consists of depreciation of factory
equipment.
● The formula is:

4. DIRECT MATERIAL COSTS

● A direct relationship between direct
materials and factory overhead cost is
needed.
● This may occur in companies where a very
large part of total cost is attributed to Direct
Materials.
● This is not an appropriate base to when more
than one product is manufactured by a
company. NOTE:
● The formula is: ● The FOHR computed is known as the plant-wide or
blanket rate.
● All departments in the Company will use the same
application rate for manufacturing overhead and the
same base.
● Applicable for entities who:
○ Manufacture only a single product
5. UNITS OF PRODUCTION ○ Manufacture different products that go
● This is the most simple method to use through the same series of productive
because units produced are readily available. departments (e.g. Ice cream)
● This method is appropriate when a company
or a department manufactures only one DEPARTMENTAL RATE
product. ● Shall be used when different products are being
● The formula is: manufactured by an entity.
● Also applicable when products do not pass through the
same series of productive departments.
● Compute for the estimated factory overhead per
department/segment/cost centers.
● Determine the applicable base.
● Apply the same formula
SAMPLE PROBLEM:
Gento Gento Company estimates factory overhead at P450,000
NORMAL COSTING
for the next fiscal year. It is estimated that 90,000 units will be
is a costing system that is used to determine the costs of producing
produced at a material cost of P600,000. Conversion will
products by using the actual costs of direct labor and direct
require an estimated 100,000 direct labor hours at a cost of
materials and an allocation method for overhead.
P3.00 per hour, with 45,000 machine hours.
Required: Compute the predetermined factory rate based on:

a) Material Cost
b) Units of production
c) Machine Hours
OVERHEAD VARIANCE
1. With the use of actual costing:
ACTUAL OVERHEAD = APPLIED OVERHEAD
since actual amount of overhead is being applied to production

2. With the use of normal costing:

ACTUAL OVERHEAD ≠ APPLIED OVERHEAD
since MOH account is debited for actual overhead and the
MOH account is credited for the amount of OH applied to
production.

1. ACTUAL OVERHEAD > APPLIED OVERHEAD

● MOH T-Account debit is greater than MOH
T-Account credit
● Overhead at the end of the period (before
adjustments) is UNDERAPPLIED.
2. ACTUAL OVERHEAD < APPLIED OVERHEAD
● MOH T-Account debit is lesser than MOH
T-account credit
● Overhead at the end of the period (before
adjustments) is OVERAPPLIED.

SAMPLE PROBLEM
Sharon Cuneta incurred the following costs of production during
the period:
● Direct Materials, 4,000 units @P56 per unit
● Indirect Materials, 1,000 units @P35 per unit
● Direct Labor, 9,600 labor hours @70 per DLH SAMPLE PROBLEM
● Indirect Labor, P96,400 At the start of the period, Halo Company still had inventories
● Factory Rent, P120,000 unfinished with a total cost of P89,000. During the period, direct
● Factory Depreciation, P42,000 materials used amounted to P288,000 and indirect materials
● Factory Utilities, P22,000 amounted to P34,000. Direct labor amounted to P537 per day of an
Sharon applies manufacturing overhead at 50% of direct labor cost. 8-hour work for all 26 days of production to 18 all direct laborers.
How much are the following: Meanwhile, indirect labor cost amounted to P86,700. At the end of
1. Total Manufacturing Cost the period, the direct materials component of the unfinished
2. Overhead Variance inventories amounted to P24,000 and the direct labor component
P18,000. Overhead is applied at 120% of direct labor cost.
Compute for the following using normal costing:
1. Total manufacturing cost during the period
2. Work-in-process inventory, ending
3. Cost of goods manufactured
The following account balances were made available by Yonce
Manufacturing:

Activities for the production period were:

● Raw Materials net purchases, P386,000
● Direct labor cost incurred, P420,000
● Actual Overhead incurred- utilities P89,000; rent
P60,000; depreciation P45,000; indirect labor
P100,000; indirect materials P78,000
● Overhead application rate: 80% of direct labor cost for
the period
● Cost of goods sold at normal costing before period-end
adjustments P1,072,000
Prepare the following:
1. Initial cost of goods sold calculation under normal
costing
2. Calculation of overhead variance
3. Entry to close the overhead variance to cost of goods
sold (assuming variance is immaterial)
4. Statement of cost of goods manufactured and sold
assuming actual costing was used.

OVERHEAD VARIANCE
1. Overhead Variance is immaterial:
● The amount of variance is closed against
COGS
● If variance is Underapplied = COGS
Increases
● If variance is Overapplied = COGS
Decreases
2. Overhead Variance is material:
 ● The amount of variance is closed and
prorated against the accounts in which
applied overhead resides: WIP Inventory,
FG inventory, and COGS.

Journal Entries:
1. To Record Various Indirect Costs Actually Incurred
(indirect labor, indirect materials, and the depreciation
cost of factory equipment):

Factory Overhead Control xx

Salaries & Wages payable xx

Supplies Inventory xx

Accu. Depreciation xx

THE FOHC ACCOUNT:

● FOHC is an accounting record used to track and control
the indirect manufacturing costs incurred in a
production process.
● It is a suspense account that represents the
accumulation of all manufacturing overhead costs
during a specific accounting period.

NOTE:
● Under GAAP, we need to use actual cost. Hence, we
adjust the COGS.
● Adjustment is only done at the end because we only get
the data of our actual overhead at the end of the
reporting period.
● Normal costing is only used to fasten the accumulation 2. Applying the Overhead :
of cost information. Work in Process Inventory xx
● Remember: Inventory is measured at what?
Manufacturing Overhead Control* xx

*amount is the computed POHR multiplied by the activity volume

TYPES OF OVERHEAD
for the period
Types:

3. Completion of Work in Process Inventory:

Finished Goods Inventory xx

Work In Process Inventory xx

4. Sale of Goods:

Cost of Goods Sold xx

OVERHEAD JOURNAL ENTRIES
Recall the T-Account: Finished Goods Inventory xx
 ● To recap, the Factory Overhead account is not a typical ● With this, we can compare the revenue of each
account. It does not represent an asset, liability, department with their total cost. Then take decisions
expense, or any other element of financial statements. relating to a particular department.
Instead, it is a “suspense” or “clearing” account.
● Amounts go into the account and are then transferred Basis for Overhead Apportionment
out to other accounts. In this case, actual overhead
goes in, and applied overhead goes out.

ALLOCATION, APPORTIONMENT, and ABSORPTION of

OVERHEAD

ALLOCATION OF OVERHEAD

● When items of cost are identifiable directly with some

products or departments such costs are charged to cost
centers. This process is known as cost allocation.
● The complete distribution of an item of overhead to
the departments or products on a logical or equitable
basis is called allocation.
● Where a cost can be clearly identified with a cost
APPORTIONMENT PROBLEM
center or cost unit, then it can be allocated to that
● Total Rent = 5,000 pesos
particular cost center or unit
● Area of production department is:
Dep A – 100sq foot
COST ALLOCATION EXAMPLE Dep B – 200sq foot
Dep C- 700sq foot
● Electricity charges can be allocated to various ● Now total ratio of A:B:C is 1:2:7
departments if separate meters are installed ● Total Rent Expense will be
● Depreciation of machinery can be allocated to various Dep A = 5,000 x 1/10 = P500
departments as the machines can be identified Dep B = 5,000 x 2/10 = P1000
● Salary of stores clerk can be allocated to stores Dep C = 5,000 x 7/10 = P3,500
department ● Total overhead cost will be apportioned to different
● Cost of coal used in boilers can be directly allocated to departments on some basis. Basis of Rent
the boiler house division. apportionment is the area of department.
● Wages paid to workers of the service department can be
allocated to the particular department. APPORTIONMENT PROBLEM:
● Indirect materials used by a particular department can A factory has 3 production departments (P1, P2, P3) and 2
also be allocated to the department. service departments (S1 & S2). The following overheads &
other information are extracted from the books for the month of
January 2022:

ALLOCATION OF OVERHEAD

● Thus allocation is a direct process of identifying

overheads to cost units or cost centers. So the term
allocation means allotment of the whole item of cost
to a particular cost center or cost object without any
division.

APPORTIONMENT OF OVERHEAD
● Cost Apportionment is the allotment of proportions of
items to cost centers.
● When items of cost cannot be directly charged to or
accurately identifiable with any cost centers, they are
prorated or distributed amongst the cost centers on
some predetermined and suitable basis.
● Layman’s term: Apportionment of overhead costs
means to divide total cost of overhead among different
departments or branches or cost centers of a company
 ● This method of allocation makes it possible to assess
the department’s operational efficiency. If the internal
cost for a service is greater than the price charged by an
external supplier, the service department could be
considered for elimination.
● Examples:
○ Purchasing, personnel, warehousing,
maintenance departments.

Methods of Allocating Service Department Costs

1. Direct Method
● Is the most widely used method.
● This method ignores any service rendered by
one service department to another.
ALLOCATION vs. APPORTIONMENT ● It allocates each service department’s total
● Allocation deals with the whole items of cost and cost directly to the producing departments.
apportionment deals with proportion of items of cost.
● Allocation is direct process of departmentalization of
overheads, where as apportionment needs a suitable
basis for sub-division of the cost
● Whether a particular item of expense can be allocated
or apportioned does not depends on the nature of
expense, but depends on the relation with the cost
centre or cost unit to which it is to be charged

CONCLUSION
Allocation and apportionment of overheads and then absorption 2. Sequential/Step Method
of overheads helps for finding total cost of production for better ● This method recognizes services rendered
decision making for cost control and cost reduction. by service departments to other departments.
● The sequence typically starts with the
SERVICE AND PRODUCING DEPARTMENTS department that renders service to the
Introduction greatest number of other service
● In a departmentalized company, factory overhead departments and ends with the department
should be budgeted for each department. that renders service to the least number of
● Prior to the computation of the departmentalized factory other departments.
overhead rate, management must make sure that the ● Once a service department’s costs are
service department costs have been allocated to the allocated, no subsequent service department
producing departments. costs are allocated to it.

Producing Department
● These departments perform the primary purpose of the
company—to produce goods and services for
consumers.
● They are cost accumulation centers in which work is
performed directly on the goods being produced.
● Examples of operating departments are the assembly
departments of manufacturing firms and the
departments in hotels that take and confirm
reservations. 3. Algebraic/Reciprocal Method

Service Department ● This method allocates costs by explicitly

● Service or support department is a unit in an including the mutual services rendered
organization that contributes in a very indirect way to among all departments.
the conversion of raw materials to finished goods. They
are, however and still, involved in producing goods.
● The costs of service departments are allocated to the
producing departments because they exist to support the
producing departments.
SAMPLE PROBLEM
Vanesa Manufacturing has 4 departments. Assembly
department and finishing department make up the production
departments while the cafeteria and maintenance department
make up the service departments.

The overhead cost of the cafeteria is allocated based on the 3. ALGEBRAIC METHOD
number of employees while the overhead cost of the
maintenance department is based on the estimated overhead for
the period.

In determining the predetermined overhead rates, the assembly

department uses direct labor hours and the finishing department
uses machine hours. The following information is made
available:

1. DIRECT METHOD

2. STEP METHOD
 COST ACCOUNTING - Job Order Costing
Absorption of Overhead
● The ultimate aim of Overhead Accounting is to absorb
them in the product units produced by the firm.
● Thus, the indirect costs or overhead will have to be
distributed over the final products so that the charge is
complete.
● This process is known as cost absorption or
‘Absorption’ of overheads.
● FOH rate is used here!
C = 343,116.96
OH Variance is material
M = 152,710.62
When OH variance is material:
The amount of OH is closed and prorated against accounts in
which applied overhead resides: work-in process inventory,
finished goods inventory, and cost of goods sold.

ABC Company has the following account balances at the end

of the period, with their materials, labor and overhead
components:

COMPARISON OF THE 3 METHODS:

 ● Each job is prepared by batch or order in
accordance with the customer’s specifications.
● The cost of Materials, labor, and overhead applied
is accumulated for each job in a job cost sheet.

Cost Accounting When to use Job Order Costing:

● refers to recording, classifying, and reporting all ● Products that are manufactured within a
costs aspects of company performance during a department or cost center are heterogenous or
particular period of time. dissimilar.
● It is a system that records, summarizes, analyzes, ● They are manufactured individually or in distinct
and interprets the details of the cost of materials, lots or batches (each job requires different
labor, and overhead necessary to produce and sell amounts of materials, labor, and overhead).
an article or a product. Documents:
● Material Requisition Form:

Cost Accumulation Systems

● When silent, use normal costing.

Cost Accumulation Procedures

● Job Order Costing
● Process Costing
● Hybrid Costing
● Backflush Costing

Cost Flow/Inv Acc. Components

● Time Ticket:

Job Order Costing

● Is a costing system that takes place when
customers order small, unique batches of
products.
● This system determines the price of each
individual product and ensures that the cost for
each product is reasonable enough for a customer
to purchase it while still making profit for the
company.
 ● Job Cost Sheet

● This sheet is the main source for tracking an item

to keep pricing and inventory accurate.
● It tracks the following information:
○ The date the job was started
○ The date employees completed the job The Cinnamon Girl Company uses a job order costing
○ The date the order was shipped to the system which is based on normal costs, and overhead is
customer applied on machine hours. The inventories on October 1:
○ Customer information direct materials, P2,000, finished goods, P5,000 (Job Order
○ Job records information: overhead, No. 1000), work-in-process, Job Order No. 1001, the job had
materials, and labor been assigned P130 for direct materials, P165 for direct
○ The summary of the final cost of the job. labor cost with 100 machine hours. Purchases of direct
materials, 30,000 pieces @ P1.40 per piece. Following are
Businesses that use Job Order: the additional costs incurred during the month.
White Collar Businesses- accounting firms, private
investment companies, and law firms. Per Client.
Medical Service Businesses- hospitals, small doctor’s
offices, medical billing companies. Per Patient.
Film Studios and Production Companies- Per
Production.
Manufacturing overhead costs are charged to jobs on the
Problem Solving basis of P1.50 per machine hour used. The actual
Florida Kilos produces special-order wood products. The manufacturing overhead cost for the month totaled P30,350.
Company uses job order costing for pricing and cost During October, Job Order Nos. 1001, 1002, 1004, and 1005
accumulation purposes. The following costs were were completed. Jobs 1001 and 1002 were shipped out and
incurred on two recent jobs: the customers were billed for P9,000 for Job No. 1001 and
P20,000 for 1002.

The company adds a 50% markup on cost in determining

the amount to charge for each job.
Prepare a schedule showing the cost and the amount to
be charged for each job.
 1. The cost of goods manufactured amounted to: Accounting for Scrap
A. P55,495 B. P55,500 C. P56,495 D. P57,500 Scrap Materials defined:
● Refers to those that are unavoidable during production.
2. The work-in-process on October 31 amounted to: ● Scrap includes:
A. P25,675 B. P29,820 C. P43,770 D. P69,445 ○ fillings or excessive trimmings of materials
○ defective materials that cannot be returned
3. The cost of goods available for sale amounted to: to vendor or not suitable for manufacturing
A. P55,495 B. P60,495 C. P60,500 D. P61,495 operations
○ broken parts as a result of an employee error
4. The finished goods on October 31 amounted to: or machine breakdowns that cause the
A. P 8,275 B. P17,400 C. P 30,675 D. P43,770 product in a poor quality condition.
How should scrap be treated?
5. The cost of goods of goods sold amounted to: ● Additional Revenue (if immaterial)
A. P29,820 B. P29,375 C. P21,950 D. P7,870 ● Reduction of Cost of Goods Sold – you can choose
this in lieu of additional revenue. The effect on income
6. The gross margins on Jobs 1001 and 1002 would be the same.
respectively amounted to: ● Reduction of Factory Overhead Control (if silent) –
A. P1,200 P 1,850 B. 1,130 ( 1,950) C. P1,150 P1,850 it is not traceable to a particular job.
D. 1,130 (1,850) ● Reduction in Cost of Materials / WIP traceable to a
particular job.
7. The direct materials on October 31 amounted to: ● If the scrap has a salvage value, it should be collected
A. P 5,000 B. P 7,000 C. P 30,675 D. P43,770 and placed in the storage and available for sale to scrap
dealers or anybody who is willing to buy.
● If the scrap is the result of filings, excessive trimmings
or materials residue, and the costs of scrap cannot be
determinable then, the scrap, notwithstanding that they
cannot be eliminated in the production, a record of
quality of scrap should be maintained. The purpose is to
keep track and periodically analyze to determine if
some of the waste is due to inefficient use of materials
and if not eliminated, at least minimize.

Waste Vs. Scrap

● Waste as distinguished to scrap materials refers to any

amount of raw materials left-over from a production
process or production cycle for which there is no
further use. Waste is not usually salable at any price
and must be discarded.
● Note that the Journal Entries will vary depending on
whether the scrap is recognized at the time of sale or
production.

Scrap Journal Entries

1. Recognizing Scrap at the time of sale

a. If the value of scrap is low or immaterial:

Cash/AR xx

Scrap Revenue xx

b. If the scrap is attributable to a specific job:

Cash/AR xx

WIP xx

c. If the scrap is attributable to all jobs:

Cash/AR xx

Manufacturing OH xx
 2. Recognizing Scrap at the time of production ● If the spoilage is due to internal failure, per unit cost
will not change.
a. If the scrap is attributable to a specific job:
● If spoilage loss is charged to all production, the cost of
Scrap Inventory xx goods would be the full unit cost which includes any
normal spoilage allowance. It is through this allowance
WIP xx that the cost of spoiled goods is “spread” over the entire
b. If the scrap is attributable to all jobs: production.
● If spoilage loss is charged to a specific job, spoilage is a
Scrap Inventory xx function of specific job requirements rather than general
factory condition. Then, the overhead rate should
Manufacturing OH xx
exclude any normal spoilage allowance.
c. b. If the scrap is sold (for both a and b):
Summary:
Cash/AR xx

Scrap Inventory xx

3. If the scrap is sold at the amount more than or less than

its recorded value:

Cash/AR xx
Pro-forma Entries for Spoilage
WIP/Manufacturing OH (balancing figure) xx

Scrap Inventory xx

WIP/Manufacturing OH (balancing figure) xx

4. If the scrap is reused as direct materials rather than sold

as a scrap:

a. To record return of scrap to the storeroom:

Materials Inventory xx Sample Problem 1:

WIP/MOH xx Get Free Company’s Job 501 for the manufacture of 2,200
b. To record reuse of scrap: units, which was completed during August at the unit costs
presented below:
WIP xx

Materials Inventory xx

Accounting for Spoiled Goods

Spoilage Defined:
Final inspection of Job 501 disclosed 200 spoiled units which
● Either partially or fully completed units, for reasons of were sold to a local jobber for P6,000.
being spoiled, cannot be corrected because it is not
technically possible to correct them, or it is not 1. Assume that spoilage loss is charged to all production or due
economical to correct them. to internal failure during August. What would be the unit cost
● Spoilage may either be: of the product produced on Job 501?
○ Charged to a Particular Job – due to
CHARGED TO ALL PRODUCTION
exacting specifications or customer-imposed
WIP 123,200
standards.
Materials 44,000
○ Charged to All Production / FOH – due to
Payroll 39,600
internal failure brought about by an MOH 39,600
employee error or worn-out delivery PER UNIT COST 56.00
Accounting for Spoilage: SALE OF SPOILED GOODS
CASH (AT SV) 6,000
● Journal entries will depend on whether the spoilage is FOHC 5,200
due to customer specifications or due to internal failure. WIP 11,200
● If the spoilage is due to customer specification, the TRANSFER TO FG
per unit cost will tend to be different as compared to its FG 112,000
per unit cost had there been no spoiled goods WIP 112,000
recognized PER UNIT COST 56.00
 (112K/2,000) Sample Problem 2:

Suburban House manufactures picture frames of all sizes and

shapes and uses a job-order costing system. There is always
2. Assume that the spoilage loss is attributable to the exacting
some spoilage in each production run. The following costs
specifications of Job 501 (or production run) and is charged to
relate to the current run:
specific jobs. What would be the unit cost of the product
produced on Job 501?

CHARGED TO SPECIFIC JOB

WIP 121,000
Materials 44,000
Payroll 39,600 The actual cost of a spoiled picture frame is P7.00. During the
MOH 37,400 year 170 frames are considered spoiled. Each spoiled frame can
PER UNIT COST 55.00 be sold for P4. The spoilage is considered a part of all jobs
SALE OF SPOILED GOODS (factory overhead).
CASH (AT SV) 6,000
a. Labor hours are used to determine the predetermined
WIP 6,000
overhead rate. What is the predetermined overhead rate
per direct labor hour
TRANSFER TO FG b. Prepare the journal entry needed to record the spoilage
FG 112,000 (factory overhead or to all production.
WIP 112,000 c. Prepare the journal entry if the spoilage relates only to
PER UNIT COST 57.50 Job #12 (particular job or exacting specifications) rather
(115K/2,000) than being a part of all production runs

a.
CHARGED TO ALL PRODUCTION Budgeted Overhead P160,000
WIP 123,200 Budgeted Spoilage 25,000
Materials 44,000 Sales Value of spoiled frames (11,500)
Payroll 39,600 Budgeted Costs 173,500
MOH 39,600 Divided by: Budgeted Labor Hours 100,000
PER UNIT COST 56.00 Predetermined Overhead Rate P1.735/DLH
SALE OF SPOILED GOODS b.
CASH (AT SV) 6,000 Spoiled goods inventory (P4 x 170) 680
FOHC 5,200 FOHC (balancing figure) 510
WIP 11,200 WIP Inv (P7x170) 1,190
TRANSFER TO FG c.
FG 112,000 Spoiled goods inventory (P4 x 170) 680
WIP 112,000 WIP Inv 680
PER UNIT COST 56.00
(112K/2,000)

CHARGED TO SPECIFIC JOB

WIP 121,000
Materials 44,000
Payroll 39,600
MOH 37,400
PER UNIT COST 55.00
SALE OF SPOILED GOODS
CASH (AT SV) 6,000
WIP 6,000
TRANSFER TO FG
FG 112,000
WIP 112,000
PER UNIT COST 57.50
(115K/2,000)