1

CHAPTER 6
Multiple Choice Questions Theoretical
1.
2.
3.
4.
5.

a
d
a
a
a

6.
7.
8.
9.
10.

b
a
a
c
d

11.
12.
13.
14.
15.

c
b
d
b
C

Multiple Choice Questions Computational

1.

(a)
P800,000 / 10,000 units = P80 per unit.

2.

(a)
P800,000 / P400,000 = 200% of material cost

3.

(a)
P800,000 / P600,000 = 133% of direct labor cost.

4.

(a)
P800,000 / 25,000* = P32 per direct labor hour.
* P600,000 / P24 = 25,000 estimated direct labor hour.

5.

(a)
P800,000 / 3.333* = P2.40 per machine hour

20 minutes / 60 minutes = 1/3 machine hour per unit

1/3 hour per unit x 10,000 units = 3.333 estimated machine hours.
6.

(a)
P800,000 / 12,500 units* = P64 overhead per unit.
*10,000 units / 80s% = 12,500 units.

7.

(a)
P800,000 / P500,000* = 160% of material cost.
* P40 x 12,500 units

16.
17.

a
b

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8.

(a)
P800,000 / (1/3 hour x 12,500 units) = P92 per machine hour.

9.

(a)
Estimated overhead / Estimated units of production = Overhead per unit.

10.

2009:

P180,000 / P15 = 12,000 estimated units of production.

2010:

P198,000 / P18 = 11,000 estimated units of production

(b)
Applied factory overhead (10,000 units x P15)
Actual factory overhead ( P50,000 + P95,000)
Overapplied overhead

11.

(b)
Actual factory overhead (P55,000 = P150,000)
Applied factory overhead (11,000 units x P18)
Underapplied overhead

12.

4,100 units
P0.36
2.10 P2.46
P10,086

(a)
Applied manufacturing overhead
Actual manufacturing overhead
Overapplied manufacturing overhead

14.

P205,000
198,000
P 7,000

(a)
Actual output
Overhead rate:
Fixed overhead rate: P1,440 / (48,000 / 12) =
Variable overhead rate
Applied manufacturing overhead

13.

P150,000
145,000
P 5,000

P10,086
9,000
P 1,086

(c)
Actual production
2,700 hours
Overhead rate:
Fixed overhead rate: (P16,920/12) (36,000/12) P0.47
Variable overhead rate
2.10
2.57
Applied manufacturing overhead
P6,939

15.

(c)
Actual manufacturing overhead
Applied manufacturing overhead
Underapplied manufacturing overhead

P7,800
6,939
P 861

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16.

(a)
Actual manufacturing overhead
Applied manufacturing overhead (248,300 DLH x 6.45*)
Underapplied overhead

P1,618,340
1,601,535
P 16,805

*P1,677,000 / 260,000 DLH = P6.45 per DLH

17.

(b)
Budgeted fixed overhead
Applied fixed overhead (248,300 DLH x 2.25*)
Volume variance (U)

P 585,000
558,675
P 26,325

*P585,000 / 260,000 DLH = P2.25 per DLH

18.

(c)
Budgeted overhead
Fixed overhead
P 585,000
Variable overhead (248,300 x P4.20*) 1,042,860
Actual manufacturing overhead
Spending variance (F)

19.

(a)
Volume variance (U)
Spending variance (F)
Net overhead variance (U)

20

P 26,325
9,520
P 16,805

(d)
Actual overhead:
Fixed
Variable
Applied overhead
Overapplied overhead

21.

P1,627,860
1,618,340
P 9,520

P348,000
637,880

P985,880
995,880
P 10,000

(b)
Budgeted fixed overhead
Applied fixed overhead (115,800 x P2.90*)
Volume variance (U)

P348,000
335,820
P 12,180

* P348,000 / 120,000 DLH = P2.90 per DLH

22.

(b)
Budgeted overhead:
Fixed overhead
Variable (115,800 x P5.70*)
Actual overhead
Spending variance (F)

P348,000
660,060

P684,000 / 120,000 DLH = P5.70 per DLH

P1,008,060
985,880
P 22,180

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23.

(b)
Volume variance (U)
Spending variance (F)
Total variance (F)

24.

(b)
Sales
Cost of goods sold:
Finished goods, July 1, 2009
Cost of goods manufactured
Total available
Finished goods, June 30, 2010
Cost of goods sold
Underapplied overhead
Gross profit
Operating expenses
Net income (loss)

25.

P12,180
22,180
P10,000

P790,670
P 33,500
450,700
484,200
83,000
401,200
4,200

(b)
Fixed factory overhead:
Heat and light
Depreciation
Taxes and insurance
Total

26.

397,000
393,670
157,500
P236,170

54,900
793,000
300,500
P1,148,400

Variable factory overhead:

Indirect labor
Employee benefits
Supplies
Power
Total

P 240,000
90,000
60,000
48,000
P 438,000

Fixed overhead rate (P1,148,400 / 220,000 DLH)

Variable overhead rate (P438,000 / 60,000 DLH)
Total factory overhead rate per DLH
Actual DLH, 2011
Estimated total factory overhead for next year (2011)

P 5.22 per DLH

7.30 per DLH
P 12.52
220,000
P2,754,400

(c)
Fixed overhead rate (P1,200,000 / 240,000 machine hrs.)
Variable overhead rate (P2,400,000 / 240,000 machine hrs.)
Predetermined overhead rate

27.

(b)

28.

(b)

P 5
10
P15

21,000 machine hours x P15

Applied variable overhead (21,000 x P10)

Actual variable overhead
Underapplied variable manufacturing overhead

P210,000
214,000
P 4,000

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29.

(c)
Actual variable overhead
Budgeted variable overhead (21,000 hrs. x P10)
Variable spending variance (U)

30.

P214,000
210,000
P 4,000

(c)
Budgeted fixed overhead
Applied fixed overhead (21,000 hrs. x P5)
Volume variance (F)

P100,000
105,000
P 5,000

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PROBLEMS
Problem 6-1
(1)

(2)

Work in process
22,040,000
Applied factory overhead
To record applied factory overhead
(P22,800,000 / 1,200,000 mixers) x 1,160,000

22,040,000

Factory overhead control

Various credits
To record actual factory overhead incurred.

22,384,000

Actual factory overhead

Applied factory overhead
Underapplied factory overhead

P22,384,000
22,040,000
P 344,000

22,384,000

Problem 6-2
1.

Work in process inventory

400
Finished goods inventory
2,533
Cost of goods sold
5,067
Underapplied overhead
To allocate underapplied overhed to inventories
and cost of goods sold computed as follows:
Work in process (P12,000 / P240,000) x P8,000 =
Finished goods (P76,000 / P240,000) x P8,000 =
Cost of goods sold (P152,000 / P240,000) x P8,000 =

2.

3.

4.

Overapplied overhead
Work in process inventory
Finished goods inventory
Cost of goods sold
To close overapplied overhead to inventories
and cost of goods sold.

8,000

P 400
2,533
5,067

8,000
400
2,533
5,067

Cost of goods sold

10,000
Underapplied overhead
To close underapplied overhead to cost of goods sold.
Work in process inventory
Finished goods inventory
Cost of goods sold
Underapplied overhead
To close underapplied overhead to inventories
and cost of goods sold, computed as follows:

10,000

400
3,200
6,400

Work in process (P4,000 / P100,000) x P10,000 = P 400

Finished goods (P32,000 / P100,000) x P10,000 =
3,200
Cost of goods sold (P64,000 / P100,000) x P10,000 = 6,400

10,000

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Problem 6-3
(a)

Work in process
630,000
Materials (18,000 x P15)
Factory payroll (18,000 x P17)
Applied factory overhead (18,000 x P3*)
To record materials, labor and overhead charged
Production. Factory overhead control may also
be credited instead of Applied factory overhead.

270,000
306,000
54,000

* (P22,000 + P16,000 + P7,000 + P5,000 + P10,000) / 20,000 = P3

Factory overhead control
Various credits
To record actual factory overhead incurred.

56,500

Applied factory overhead

Underapplied overhead
Factory overhead control
To record underapplied overhead.

54,000
2,500

56,500

56,500

Alternative entry if applied factory overhead is not used.

Underapplied overhead
2,500
Factory overhead control
(b)

Cost of goods sold

Underapplied overhead
To close underapplied overhead to cost of goods
sold.

2,500

2,500
2,500

Problem 6-4
1.

Actual overhead (P283,400 + P647,426.67)

Applied overhead (168,630 hrs. x P5.49)
Underapplied overhead

P930,826.67
925,778.70
P 5,047.97

2.

Volume variance:
Fixed overhead applied (168,630 x P1.65*)
Fixed overhead budgeted
Volume variance (F)

P278,239.50
272,250.00
P 5,989.50

*P272,250 / 165,000 = P1.65

Spending variance:
Actual overhead per year
Budgeted overhead:
Fixed
Variable (168,630 x 3.84*)
Spending variance (U)

P930,826.67
P272,250.00
647,539.20

919,789.20
P 11,037.47

*P633,600 / 165,000 = P3.84

Total variance (U)

P 5,047.97

Problem 6-5
Elena Machinery Corporation
Income Statement
Year Ended December 31, 2010
Sales
Sales returns and allowances
Net Sales
Cost of goods sold:
Finished goods inventory, 1/1
Cost goods manufactured
Total available
Finished goods inventory, 12/31
Cost of goods sold
Add overapplied overhead
Gross profit
Operating expenses:
Selling expense
Administrative expenses
Net income before income tax
Provision for income tax
Net income after income tax

P960,500
43,700
916,800
P98,700
641,100
739,800
94,500
645,300
3,500
P 65,400
82,500

648,800
268,000
147,900
120,100
36,030
P 84,070

Problem 6-6
1.

Fixed manufacturing overhead

Variable manufacturing overhead [(P60,000/12) x P7.50]
Budgeted manufacturing overhead for the month

2.

Fixed overhead rate (P7,500 / 5,000 units/mo.)

Variable overhead rate
Total overhead rate
Actual output
Applied manufacturing overhead

3.

Actual manufacturing overhead

Budgeted factory overhead
Controllable overhead variance (U)

P 46,500
45,000
P 1,500

Applied manufacturing overhead

Budgeted manufacturing overhead
Volume variance ((U)

P 43,200
45,000
P 1,800

Controllable overhead variance (U)

Volume variance (U)
Net overhead variance (U)

P 1,500
1,800
P 3,300

4.

P 7,500
37,500
P 45,000
1.50
7.50
P 9.00
4,800
P 43,200

Or:
Actual overhead incurred
Applied overhead
Underapplied overhead

P 46,500
43,200
P 3,300

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Problem 6-7
1.

Fixed overhead
Variable overhead (36,000 DLH x P6.30)
Budgeted manufacturing overhead

P 16,920
226,800
P243,720

2.

Fixed overhead rate (P16,920 / 36,000 hrs.)

Variable overhead rate
Total overhead rate
Actual DLH
Applied manufacturing overhead

3.

Actual manufacturing overhead

Budgeted manufacturing overhead:
Fixed overhead (P16,920 / 12)
Variable (2,700 DLH x P6.30)
Controllable variance (U)

P 23,877

0.47
6.30
P 6.77
2,700
P 18,279

P 1,410
17,010

18,420
P 5,457

Fixed overhead applied (2,700 DLH x .47)

Fixed overhead budgeted (16,920 / 12)
Volume variance (U)

P 1,269
1,410
P 141

Controllable variance (U)

Volume variance (U)
Net variance (U)

P 5,457
141
P 5,598

Or:
Actual overhead
Applied overhead
Underapplied overhead

P 23,877
18,279
P 5,598

Problem 6-8
1.

Fixed overhead rate (P900,000 / 150,000 machine hours )

Variable overhead rate (P450,000 / 150,000 machine hours)
Total manufacturing overhead rate

2.

Actual manufacturing overhead

Applied manufacturing overhead (140,000 hrs. x P9.00)
Underapplied overhead

P1,305,000
1,260,000
P 45,000

3.

Actual manufacturing overhead

Budgeted manufacturing overhead (based on actual hrs.)
Fixed overhead
P900,000
Variable (140,000 hrs. x P3)
420,000
Controllable variance (F)

P1,305,000

Applied fixed overhead (140,000 hrs. x P6)

Budgeted fixed overhead
Volume variance (U)

P 840,000
900,000
P 60,000

4.

6.00
3.00
9.00

1,320,000
15,000

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Problem 6-9
1,

Fixed overhead rate (P42,000 / 60,000 DLH)

Variable overhead rate (P168,000 / 60,000 DLH)
Total overhead rate

P
2.80
P

0.70
3.50

2.

Actual direct labor hours

Overhead rate
Applied overhead

62,400
X P3.50
P218,400

3.

Actual manufacturing overhead

Applied manufacturing overhead
Overapplied overhead (F)

P213,100
218,400
P 5,300

Fixed overhead volume variance:

Applied fixed overhead (62,400 x .70)
Budgeted fixed overhead
Volume variance (F)

P 43,680
42,000
P 1,680

4.

Spending variance:
Actual overhead
Budgeted overhead based on Std. hours:
Fixed overhead
Variable (62,400 x P2.80)
Controllable variance (F)

P213,100
P 42,000
174,720

216,720
P 3,620

Problem 6-10
a.

Actual manufacturing overhead

Budgeted manufacturing overhead
Controllable variance (F)

P 60,000
64,000
P 4,000

Applied manufacturing overhead

Budgeted manufacturing overhead
Volume variance (U)

P 58,000
64,000
P 6,000

b.

Applied manufacturing overhead

Volume variance (F)
Budgeted manufacturing overhead
Controllable variance (F)
Actual manufacturing overhead

P 30,000
14,000
16,000
2,000
P 18,000

c.

Actual manufacturing overhead

Controllable variance (U)
Budgeted manufacturing overhead
Applied manufacturing overhead
Volume variance (F)

P 48,000
12,000
36,000
48,000
P 12,000

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d.

Budgeted manufacturing overhead

Controllable variance (F)
Actual manufacturing overhead

P 36,000
2,000
P 34,000

Budgeted manufacturing overhead

Volume variance (F)
Applied manufacturing overhead

P 36,000
4,000
P 40,000

e.

Actual manufacturing overhead

Controllable variance (F)
Budgeted manufacturing overhead
Applied manufacturing overhead
Volume variance

P 36,000
6,000
42,000
40,000
P 2,000

f.

Actual manufacturing overhead

Controllable variance (U)
Budgeted manufacturing overhead
Volume variance (U)
Applied manufacturing overhead

P 54,000
12,000
42,000
4,000
P 38,000

g.

Actual manufacturing overhead

Controllable variance
Budgeted manufacturing overhead
Applied manufacturing overhead
Volume variance

P 32,000
-032,000
32,000
P
-0-

Problem 6-11
1.

Work in process, Oct. 1

Current cost:
Direct materials
Direct labor (P204,000 x 7/17)
Applied overhead (7,000 P9)
Total cost of Job 20

P109,000

2.

4,000 DLH x P9 =

P 36,000

3.

17,000 total direct labor hours x P9 =

P153,000

4.

Supplies
Indirect labor
Supervisory salaries
Building occupancy costs
Factory equipment costs
Other factory costs
Total actual manufacturing overhead

P 4,000
30,000
83,000
7,000
12,000
10,000
P150,000

5.

Close to cost of goods sold account.

6,

No. The amount should be apportioned to the Work in Process Inventory

account, Finished Goods Inventory account and Cost of Goods Sold.

90,000
84,000
63,000
P346,000

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Problem 6-12
1.

Indirect materials and supplies

Indirect labor
Employee benefits
Depreciation
Supervision
Total actual manufacturing overhead

P 30,000
106,000
46,000
24,000
40,000
P246,000

2.

P140,000 actual direct labor cost x 160% =

P224,000

3.

Actual manufacturing overhead

Applied manufacturing overhead
Underapplied overhead

P246,000
224,000
P 22,000

Problem 6-13
1.
Direct materials
Direct labor
Applied overhead:
WIP (4,000 hours x P7.20)
FG (10,000 hours x P7.20)
Total inventory cost

Work in ProcessFinished Goods

P 18,000
P 20,000
36,000
40,000
28,800
P 82,800

72,000
P132,000

2.

Supervision
Indirect labor
Utilities
Depreciation factory building
Property tax
Freight-in
Depreciation factory equipment
Insurance
Repairs and maintenance
Miscellaneous
Total actual manufacturing overhead

P 37,000
58,100
45,600
15,000
8,000
13,000
15,000
6,000
16,500
19,800
P234,000

3.

Actual manufacturing overhead

Budgeted manufacturing overhead (P141,750 + P85,050)
Controllable variance (U)

P234,000
226,800
P 7,200

Budgeted manufacturing overhead

Applied manufacturing overhead
Volume variance (F)

P226,800
230,400
P 3,600

Net overhead variance (U)

P 3,600

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Problem 6-13 (continued)

Manuel Company
Statement of Cost of Goods Manufactured and Sold
Month Ended January 31, 2010
Direct materials used:
Materials inventory, Jan. 1
Purchases (P216,000 P10,100)
Total available
Materials inventory, Jan. 31
Direct labor
Applied manufacturing overhead
Manufacturing cost
Work in process inventory, Jan. 1
Total cost of goods placed in process
Work in process inventory, Jan. 31
Cost of goods manufactured
Finished goods inventory, Jan. 1
Goods available for sale
Finished goods inventory, Jan. 31
Cost of goods sold at normal
Underapplied overhead
Cost of goods sold at actual

P 42,000
205,900
247,900
18,000

P 229,900
512,000
230,400
972,300
65,000
1,037,300
82,800
954,500
36,000
990,500
132,000
858,500
3,600
P 862,100