62

Solutions to Chapter 9
Ex 1
a. direct materials f. direct materials
b. factory overhead g. factory overhead
c. factory overhead h. direct materials
d. direct labor i. Factory overhead
e. factory overhead j. direct materials

Ex 2
a. direct, manufacturing i. common q. direct, administrative
b. direct, administrative j. direct, manufacturing r. direct, manufacturing
c. common k. direct, selling s. common
d. common l. direct, administrative
e. direct, manufacturing m. direct, selling
f. direct, administrative n. common
g. direct, selling o. direct, administrative
h. direct ,selling p. direct, manufacturing

Building, insurance and depreciation = square foot of land area used
Light and Power = based on equipment used
Water = no. of employed workers
Janitorial Service = square foot of land area used

Ex 3
Raw Materials, Aug. 1 P20,750
Add: Net costs of purchases:
Purchases P20,500
Freight-in 475
Purchase Ret. & All (500)
Purchase discount (200) 20,275
Total avail for use 41,025
Raw materials Aug. 31 15,900
Raw materials used P25,125

Ex 4
SHOWROOM MANUFACTURING
Statement of Cost of Goods Sold
For the year ended Dec. 31, 2012

Raw Materials, Jan. 1 P 36,500
Purchases 50,000
Raw Mat, Dec. 31 (33,700)
Raw mat used P 52,800
Direct Labor 45,000
Manufacturing Expense 143,500
Total Manufacturing Cost 241,300
WIP 1/1 83,750
Total cost placed in process 325,050
WIP 12/31 74,450
Cost of Goods Manufactured 250,600
FG, 1/1 25,450
Total available for sale 276,050
FG, 12/31 21,900
Cost of Goods Sold 254,150

SHOWROOM MANUFACTURING Co
Income Statement
For the year ended Dec. 31, 2010
Sales P 280,000
Cost of goods sold 254,150
63
Gross Profit 25,850
Operating Expenses 14,600
Net Income P 11,250

Ex 5
ROLLERS MANUFACTURING COMPANY
Statement of Cost of Goods Sold
For the year ended Dec. 31, 2012

Raw Mat, 1/1 P 88,000
Add: Purchases 1,200,000
Freight In 28,000
Total Available for use 1,316,000
Less: Raw Mat, 12/31 95,000
Raw Mat Used 1,221,000
Direct labor 1,500,000
Manufacturing Expenses 1,750,000
Total Manufacturing Cost (a) 4,471,000
Add: WIP, 1/1 65,000
Total cost placed in process 4,536,000
Less: WIP, 12/31 78,500
Cost of Goods Manufactured (b) 4,457,500
Add: Finished Goods, 1/1 320,000
Total Goods Available for Sale 4,777,500
Less: Finished Goods, 12/31 250,000
Cost of Goods Sold (c) P4,527,500

d) Gross Profit (5,000,000 25,000 4,527,500) P447,500
Selling (200,000 + 150,000 + 60,000) 410,000
Administrative 7,850
e) Net Income P 29,650

Ex 6
SAN FRANCISCO CANDIES
Statement of Cost of Goods Sold
For the year ended Dec. 31, 2012

Direct materials, 1/1 P 14,000
Purchases 35,500
Total avail for use 49,500
Direct Mat, 12/31 13,000
Raw Mat, used 36,500
Direct Labor 39,000
Manufacturing Expenses:
Indirect Labor P 11,500
Depreciation 6,000
Taxes 5,000
Insurance 4,450
Utilities 4,000
Patent Amort 2,750 33,700
Total Manufacturing Costs 109,200
Add: WIP, 1/1 9,000
Total cost placed in process 118,000
Less: WIP 12/31 3,000
Cost of Goods Manufactured 115,200
Add: FG, 1/1 50,000
Total Goods Available for Sale 165,000
Less: FG, 12/31 63,500
Cost of Goods Sold P 101,700


64
SAN FRANCISCO CANDIES
Income Statement
For the year ended Dec. 31, 2012

Sales P 195,500
Sales Discount (3,910) P191,590
Less: CGS 101,700
Gross Profit P 89,890
Less: Operating Expenses:
Selling-advertising P 41,300
Commission 20,750
Freight-out 1,200
Others 14,000 77,250
Admins-Salaries P 25,000
Bad Debts 5,500
Others 20,500 51,000 128,250
Operating Loss P(38,360)
Interest Expense (5,000)
Net Loss P 43,360
Ex 7
a)
SUNSHINE ENTERPRISES
Statement of Cost of Goods Sold
For the year ended Dec. 31, 2010

Direct mat, 1/1 P 70,000
Purchases P 137,500
Freight-In 9,000
Less: Returns ( 6,500) 140,000
Total avail for use 210,000
Less: Direct mat 12/31 80,000
Raw Mat used 130,000
Direct Labor 142,500
Factory overhead:
Indirect Labor P 50,000
Factory Supplies used 30,000
Factory Taxes 21,000
Factory depreciation 18,000
Factory utilities 15,000
Factory Insurance 6,000 140,000
Total manufacturing costs 412,500
Add: WIP 1/1 15,000
Total cost placed in process 427,500
Less: WIP 12/31 42,000
Cost of goods Manufactured P385,500

b) Income Statement
Sunshine Enterprise
Income Statement
For the year ended Dec. 31, 2012

Sales P471,000
Less: Cost of Goods Sold
Cost of Goods Manufactured
Add: Finished Goods, Jan. 1
Goods Available for Sale
Less: Finished Goods, Dec. 31

P385,500
109,900
495,400
155,000




340,400
Gross Income P130,600
Less: Operating Expenses
Selling Expenses
Sales Salaries P25,000
65
Advertising 16,000
Sales Taxes 8,750
Sales Depreciation 6,000
Sales Utilities 2,500
Sales Insurance 2,000 60,250
Administrative Expenses
Administrative Salaries P41,000
Administrative Utilities 7,500
Administrative Dep. 6,000
Administrative Taxes 5,250
Bad Debt Expense 5,000
Administrative Insurance 2,000 66,750 127,000
Net Income Before Taxes P 3,600
Less: Tax (at 30%) 1,080
Net Income After Tax P 2,520

8. a) Statement of Cost of Goods Manufactured
Beauty Products
Statement of Cost of Goods manufactured
For the month ended March 31, 2012

Purchases - Raw Materials P80,000
Add: Freight In 1,500
Total Raw Materials Available for use P81,500
Less: Raw Materials, end 14,000
Raw Materials Used 67,500
Direct Labor 50,000
Factory Overhead
Indirect Labor P10,000
SSS, MCR, EC, HDMF 5,900
Factory Supplies 3,000
Depreciation Expense - Machinery 3,000
Depreciation Expense - Building 2,000
Machine Maintenance 1,600 25,500
Total Manufacturing Cost P143,000
Add: Work In process, beg. 0
Total Cost of Goods In Process P143,000
Less: Work In Process, end 15,000
Total Cost of Goods Manufactured P128,000

b) Cost per unit (128,000 / 1,000) P128.00

c) Gross Profit for the month
Beauty Products
Income Statement
For the month ended March 31, 2010

Sales (at 100% mark-up) 128 x 2 x 800 P204,800
Less: Cost of Goods Sold
Cost of Goods manufactured P148,000
Less: Finished Goods, end (P148 x 200) 29,600 P118,400
Gross profit P86,400

d) Journal Entries:
1) Raw Materials Purchases 80,000
Accounts Payable 80,000
To record the purchase of Raw
Materials on Account.

Factory Supplies Expense 3,000
Cash 3,000
66
To record the purchase of factory Supplies.

2) Freight-In 1,500
Cash 1,500
To record the payment of freight.

3) Factory Payroll 80,000
Withholding Tax Payable 3,200
SS Premium Payable 2,500
Medicare Premium Payable 1,300
HDMF Premium Payable 600
Cash 72,400
To record the paid salaries and
their corresponding premiums withheld.

4) Medicare Expense 1,300
Combined EC & Maternity Expense 750
SS Expense 3,250
HDMF Expense 600
Medicare Payable 1,300
Combined EC & Maternity Payable 750
SS Payable 3,250
HDMF Payable 600
To record the premiums
contributions of the employer.

5) Direct Labor 50,000
Indirect Labor 10,000
Sales Salaries 10,000
Office Salaries 10,000
Factory Payroll 80,000
To record the classification of
payroll.

6) Depn Expense-Building (Manufacturing) 2,000
Depn Expense-Building (Selling) 1,000
Den Expense-Building (Administrative) 1,000
Depn Expense (Factory Machinery 3,000
Accumulated Depreciation - FB 4,000
Accumulated Depreciation - FM 3,000
To record the Depreciation of
factory building & machineries.

7) Power-(Manufacturing) 1,500
Power-Selling 750
Power-Administrative 750
Machine Maintenance 1,600
Cash 4,600

8) Cash/Accounts Receivable 204,800
Sales 204,800
To record sales at 100% mark-up.

Cost of Sales 118,400
Finished Goods Inventory 118,400
To record the corresponding cost
of sales.

9. a)
Jan. 2 Raw Materials 20,000
Accounts Payable 20,000
67
To record purchased materials on
account.

12 Raw Materials Purchases 55,000
Accounts Payable 55,000
To record Purchases on account.

Factory Supplies 10,000
Cash 10,000

15 Direct Labor 8,000
Indirect Labor 4,000
Sales Salaries 2.000
Office Salaries 2,000
Withholding tax Payable 1,700
Cash 14,300
To record the salaries paid & the
withheld tax.

17 Real Estate taxes Expense 15,000
Factory Repairs Expense 30,000
Cash 45,000
To record the payment for Taxes
& Repair.

20 Utilities Expense - Manufacturing 6,750
Utilities Selling 3,375.
Utilities- Administrative 3,375
Utilities Payable 13,500
To record the payment for fuel,
water & telephone bills.

26 Prepaid Fire Insurance 48,000
Cash 48,000
To record the prepayment for
insurance.

28 Cash 375,000
Sales 375,000
To record the sales of the company.

30 Indirect Labor 4,000
Direct Labor 8,000
Sales Salaries 2,000
Office Salaries 2,000
Withholding Tax Payable 1,700
SS Payable 1,350
HDMF 600
Medicare 750
Cash 11,615
To record payroll and premiums
withheld.

a) Medicare Expense-Manufacturing 562.50
PhilHealth Expense=Operating 187.50
EC Expense=Manufacturing 900.00
EC Expense-Operating 300.00
SSS Expense-Manufacturing 1,312.50
SSS Expense-Operating 437.50
HDMF Expense-Manufacturing 450.00
HDMF Expense 150.00
68
Medicare Payable 750
EC Payable 1,200
SSS Payable 1,250
HDMF Payable 600
To record employers contribution
in employees premium.

31 b) Depreciation Expense Building(Mfg) 3,000
Depreciation Expense-Bldg(Operating) 3,000
Depreciation Expense - machinery 5,000
Accum. Depreciation - Building 6,000
Accum. Depreciation - Machinery 5,000
To record Depreciation Expense.

c) Insurance Expense-Manufacturing 4,000
Prepaid Insurance 4,000
To record expired portion of
insurance.

d) Factory Supplies Used 4,000
Factory Supplies 4,000
To record unused factory Supplies.

e) Materials inventory(50x P20) 1,000
Manufacturing summary 1,000

Finished Goods Inventory 4,750
Income & Expense Summary 4,750

La Suerte Bakery
Statement of Cost of Goods Sold
For the month ended Jan. 31, 2012

Raw Materials Purchased P 75,000
Less: Raw Materials, end 1,000
Raw Materials Used P 74,000
Direct Labor 24,000
Factory Overhead
Factory Repairs P 30,000
Indirect Labor 8,000
Real Estate Taxes 15,000
Utilities Expense 6,750
Factory Insurance fire 4,000
SS, MCR, EC 3,225
Depreciation Expense - Fact. Bldg 6,000
Depreciation Expense Machinery 5,000
Factory Supplies 4,000 81,975
a) Total Cost of Goods Manufactured 179,975
b) (179,975/4,000 = P44.99375)
Less: FG, End (44.99375 x 250) 11,248
Cost of Goods Sold P166,727
c) Selling Price P 100.00
Cost of Sales 44.99
M.U. P 55.01
Rate = 55.01 / 44.99
= 143.96%

d) Sales P375,000
Cost of Sales
Gross Profit
166,727
208,273
Operating Expenses(200,000+ 10,825) 210,825
Net Loss P 2,552
69
10. a) 1) Raw Materials Purchased 23,000
Freight In 2,000
Accounts Payable 25,000
2) Factory Supplies 6,500
Cash 6,500
3) Payroll 72,000
Withholding Tax Payable 3,600
SS Payable 1,440
PH Payable 1,080
HDMF Payable 720
Cash 65,160
To record payroll.

Direct Labor 39,000
Indirect Labor 10,000
Sales Salaries 8,000
Admin. Salaries 15,000
Payroll 72,000
To classify payroll.

4) Machine Repairs Expense 2,000
Prepaid Factory Insurance 1,500
Rent Expense - Manufacturing 4,000
Rent Expense - Selling 2,000
Rent Expense - Admin. 2,000
Light & Power Expense - Mfg. 3,000
Light & Power Expense - Selling 1,500
Light & Power Expense - Admin. 1,500
Oil & Lubricants Expense 4,500
Delivery Truck Repairs Expense 3,750
Cash 25,750

5) Cash 75,000
Accounts Receivable 165,000
Sales 240,000

6) Accounts Payable 22,000
Purchase Discount 500
Cash 21,500
To record the payment of liabilities.

7) Cash 118,400
Sales Discount 1,600
Accounts Receivable 120,000
To record collection.


8) a) Depreciation Expense - machineries 2,500
Depreciation Expense - Furn. & Equipt. 750
Depreciation - Delivery Trucks 1,000
Accumulated Depreciation - Mach. 2,500
Accumulated Depreciation - Furn & Equipt. 750
Accumulate Depreciation - delivery Trucks 1,000
To record depreciation.

b) Factory Insurance Expense 300
Prepaid Factory Insurance 300
To record expired portion of Factory insurance.

c) Factory Expenses 1,750
Accrued Factory Expenses 1,750
70
To record Accrued Factory Expense.

d) Factory Supplies Inventory 5,000
Factory Supplies 5,000
Office Supplies Expense 450
Office Supplies Inventory 450

Work In Process Inventory 20,500
Materials Inventory 14,000
Manufacturing Summary 34,500

Finished Goods Inventory 10,800
Income & Expense Summary 10,800

Mahal Mfg. Co.
Statement of Cost of Goods Sold
For the month ended July 31, 2012

Raw Materials, beg. P30,000
Add: Raw Materials Purchases P23,000
Purchase Discount (500)
Add: Freight In 2,000 24,500
Total Raw Materials available for use 54,500
Less: Raw Materials, end 14,000
Raw Materials Used P40,500
Direct Labor 39,000
Factory Overhead
Indirect Labor P10,000
Factory Rent 4,000
Factory Light & Power 3,000
Oil & Lubrication 4,500
Supplies Expense 3,000
Machineries Depreciation 2,500
Machine Repairs 2,000
Factory Expense 1,750
Factory Insurance Expense 300 31,050
Total Manufacturing Cost P110,550
Add: Work In Process, beg. 40,000
Total Cost of Goods In Process P150,550
Less: Work In Process, end 20,500
Total Goods Manufactured P130,050
Add: Finished Goods, beg. 6,000
Total Goods available for sale P136,050
Less: Finished Goods, end 10,800
Total Cost of Goods Sold P125,250

Mahal Mfg. Co.
Income Statement
For the month ended July 31, 2010

Sales (Net of discount of P1,600) P238,400
Less: Cost of Goods Sold 125,250
Gross profit 113,150
Less: Operating Expense
Rent Selling P 2,000
Rent Admin. 2,000
Admin. Salaries 15,000
Sales Salaries 8,000
Office Furn. & Equipt. - Depreciation 750
Office Supplies Expense 450
Light & Power Selling 1,500
71
Light & Power Admin. 1,500
Repairs - Delivery Truck 3,750
Depreciation Delivery Truck 1,000 35,950
Net Income before tax
Tax Provision
P77,200
22,160
Net income after tax P55,040

Mahal Mfg. Co.
Statement of Financial Position
As of July 31, 2010
Assets
Current Assets
Cash P224,490
Accounts Receivable 60,750
Raw Materials Inventory 14,000
Work In Process Inventory 20,500
Finished Goods Inventory 10,800
Office Supplies 200
Prepaid Factory 1,200
Factory Supplies Inventory 5,000 P336,940
Property Plant & Equipment
Machineries P225,000
Accumulated Depreciation 22,000 203,000
Office Furniture & Equipment P 79,600
Accumulated Depreciation 10,950 68,650
Delivery Equipment 80,000
Accumulated Depreciation 18,000 62,000 333,650
Total Assets P670,590

Liabilities & Stockholders Equity
Current Liabilities:
Accounts Payable
Taxes Payable
P11,500
22,160


Accrued Expenses 1,750
SSS, MC, HDM Payable 6,840
Notes Payable 74,800 P117,050

Stockholders Equity
Capital Stock P250,000
APIC 155,000
Retained Earnings 148,540 553,540
Total Liabilities & Stockholders Equity P670,590

Case Problem:
Working Capital requirements:
Materials (20,000 x 2) P40,000
Direct Labor 15,000
Factory Overhead 15,000
Operating Expenses 17,500
Total P87,500
Pre-operating costs 25,000
Fixed capital requirement:
Machineries P250,000
Furniture & Fixtures 30,000
Office Equipment 50,000
Delivery Truck 150,000 480,000
Contingency Fund 25,000
Total minimum capital requirement P617,500