Problem Sets ABC Job Order Costing

PROBLEM 1
JAM Inc. employs normal costing for its job orders. The overhead is applied using a pre-
determined overhead rate. The following information relates to the JAM Inc. for the year
ended December 31, 2020:
Jamela Anthony Maris

Job in process, January 1, 2024
Direct materials 40,000 30,000 0
Labor 60,000 40,000 0
Factory overhead 30,000 20,000 0
Costs added during the year
Direct materials 20,000 10,000 100,000
Labor 100,000 200,000 400,000
Factory overhead ? ? ?
Additional information:
• Actual overhead for the year 2020 amounted to P350,000.

• Jobs No. 101 and 102 were completed and transferred to finished goods during year
2020.
• Job No. 101 was sold during year 2020.
• The gross profit rate is 20% based on cost.
Required:
1. What is the total manufacturing cost for 2020?

2. What is the cost of goods manufactured for 2020?
3. What are the cost of work in process on December 31, 2020 and the cost of finished
goods on December 31, 2020, respectively?
PROBLEM 2
Baby Kisses Company employs normal costing for its production. The following data are
provided during the current year:
Net purchases of raw materials during the year 500,000

Total labor costs during the year 800,000
Depreciation of factory assets during the year 100,000
Utilities on the factory during the year 300,000
Beginning Ending
Raw materials inventory 200,000 300,000
Work in process inventory 500,000 200,000
Finished goods inventory 600,000 300,000
• The entity uses a single account for its direct material and indirect materials. Indirect
material used is one-fourth of the total material used.
• The indirect labor cost is 1/8 of the total labor costs.
• The overhead application rate is 80% of direct labor costs.
• Any over or under application of overhead is considered material.
REQUIRED:
1. What is the total manufacturing cost during the current year?

2. What is the cost of goods manufactured during the current year?
3. What is the over or under application of overhead?
PROBLEM 3
Sweater Inc. has completed Job 101, containing 1,100 shoes, during 2020 at the following
unit costs:
Direct materials 2,000

Direct labor 1,000
Factory overhead (including an allowance of P300 for spoiled work) 1,300
Final inspection of Job 101 disclosed 100 spoiled shoes which were sold to a department for
P200,000.
REQUIRED:
1. What is the unit cost of the good shoes produced on Job 101 if spoilage loss is
charged to all production?
2. What is the unit cost of the good shoes produced on Job 101 if spoilage loss is
charged to specific Job 101?
PROBLEM 4
The following data are for the two products produced by Hot Company:
SMOKE FAX
Direct materials P15 per unit P24 per unit
Direct labor hours 0.3 DLH per unit 1.6 DLH per unit
Machine hours 0.1 MH per unit 1.2 MH per unit
Batches 125 batches 225 batches
Volume 10,000 units 2,000 units
Engineering modifications 12 modifications 58 modifications
Number of customers 500 customers 400 customers
Market price P30 per unit P120 per unit
The company's direct labor rate is P20 per direct labor hour (DLH). Additional information
follows.
Costs Driver
Indirect manufacturing: P24,500 Engineering modifications
Engineering support 34,000 Machine hours
Electricity Setup costs 52,500 Batches
Non-manufacturing:
Customer service 81,000 Number of customers
REQUIRED:
1. Compute the manufacturing cost per unit using the plant-wide overhead rate based
on direct labor hours. What is the gross profit per unit?
2. How much gross profit is generated by each customer of Smoke using the plant-wide
overhead rate? How much gross profit is generated by each customer of Fax using the
plant-wide overhead rate? What is the cost of providing customer service to each
customer? What information is provided by this comparison?
3. Determine the manufacturing cost per unit of each product line using ABC. What is
the gross profit per unit?
4. How much gross profit is generated by each customer of Smoke using ABC? How
much gross profit is generated by each customer of Fax using ABC? Is the gross profit
per customer adequate?
5. Which method of product costing gives better information to managers of this
company? Explain why.
PROBLEM 5
Breadwinner Company uses an activity-based costing system with three activity cost pools.
The company has provided the following data concerning its costs and its activity-based
costing system:
Costs:
Manufacturing overhead P 600,000

Selling and admin. Expenses 220,000
Distribution of resource consumption:
Order Size Customer Other Total

Support
Manufacturing overhead 15% 75% 10% 100%
Selling and admin. expenses 60% 20% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity and organization-
sustaining costs. You have been asked to complete the first-stage allocation of costs to the
activity cost pools.
REQUIRED:
1. How much cost, in total, would be allocated in the first-stage allocation to the Order
Size activity cost pool?
2. How much cost, in total, would be allocated in the first-stage allocation to the
Customer Support activity cost pool?

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PROBLEM 1

Jamela Anthony Maris

• Actual overhead for the year 2020 amounted to P350,000.

1. What is the total manufacturing cost for 2020?

Net purchases of raw materials during the year 500,000

1. What is the total manufacturing cost during the current year?

Direct materials 2,000

Manufacturing overhead P 600,000

Distribution of resource consumption:

Order Size Customer Other Total

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