Answers on Board Work Exercises on Cost Accounting and Control – Manufacturing Overhead
Accounting – Actual and Applied
Problem 1: Journal Entries for Manufacturing Overhead
Requirements:
1. Prepare the journal entries to record the information.
Budgeted Manufacturing Overhead:
Indirect materials P8,800,000
Indirect labor 9,600,000
Light and Power 1,200,000
Depreciation expense 800,000
Insurance 200,000
Miscellaneous 2,200,000
Total Budgeted Manufacturing Overhead P22,800,000
Predetermined overhead rate = Budgeted manufacturing overhead/ budgeted units of
production
Predetermined overhead rate = P22,800,000/ 1,200,000 mixers
Predetermined overhead rate = P19 per mixer
Applied manufacturing overhead = P19 x 1,160,000 mixers
Applied manufacturing overhead = P22,040,000
Journal Entries:
a. Work in process 22,040,000
Manufacturing overhead control 22,040,000
To record applied manufacturing overhead
b. Manufacturing overhead control 22,384,000
Various credits 22,384,000
To record actual manufacturing overhead incurred.
2. Compute the amount of over applied or under applied overhead
Actual manufacturing overhead P22,384,000
Applied manufacturing overhead 22,040,000
Under applied manufacturing overhead P 344,000
Problem 2: Disposition of over applied or under applied manufacturing overhead
Totals of work in process, finished goods, and cost of goods sold:
Work in process P12,000
Finished goods 76,000
Cost of goods sold 152,000
Total P240,000
Requirements: Prepare the journal entry to close the Over or Under Applied Manufacturing Overhead
assuming:
1. Under applied manufacturing overhead of P8,000 is to be allocated to inventories and cost of
goods sold in proportion to balances in those accounts.
Work in process inventory ( P12,000/P240,000) x P8,000 400
Finished goods inventory (P76,000/P240,000) x P8,000 2,533
Cost of goods sold (P152,000/P240,000) x P8,000 5,067
Under applied manufacturing overhead 8,000
To close under applied manufacturing overhead to work in process, finished goods,
and cost of goods sold.
2. Over applied manufacturing overhead of P8,000 is to be allocated to inventories and cost of
goods sold in proportion to balances in those accounts.
Over applied manufacturing overhead 8,000
Work in process inventory 400
Finished goods inventory 2,533
Cost of goods sold 5,067
To close over applied manufacturing overhead to work in process, finished goods, and
cost of goods sold.
3. Under applied manufacturing overhead of P10,000 is allocated to Cost of Goods Sold
Cost of goods sold 10,000
Under applied manufacturing overhead 10,000
To close under applied manufacturing overhead to cost of goods sold.
4. Under applied manufacturing overhead of P10,000 is to be allocated to inventories and cost of
goods sold in proportion to the amounts of applied manufacturing overhead contained in
those accounts.
Work in process P4,000
Finished goods 32,000
Cost of goods sold 64,000
Total P100,000
Work in process inventory ( P4,000/P100,000) x P10,000 400
Finished goods inventory ( P32,000/P100,000) x P10,000 3,200
Cost of goods sold (P64,000/P100,000) x P10,000 6,400
Under applied manufacturing overhead 10,000
To close under applied manufacturing overhead to work in process, finished goods and
cost of goods sold.
Problem 3: Analysis of Under Applied or Over Applied Manufacturing Overhead
Requirements:
1. Compute the total under applied or over applied manufacturing overhead for the year.
Actual manufacturing overhead ( P283,400 + P647,426.67) P930,826.67
Applied manufacturing overhead ( P5.49 x 168,630 ) 925,778.70
Under applied manufacturing overhead (unfavorable) P 5,047.97
2. Analyze the over applied or under applied manufacturing overhead into a volume variance
and spending variance.
Fixed overhead rate per direct labor hour: P272,250/165,000 = P1.65
Variable overhead rate per direct labor hour: P633,600/165,000 = P3.84
Volume Variance:
Fixed overhead applied (P1.65 x 168,630 direct labor hours) P278,239.50
Fixed overhead budgeted 272,250.00
Volume Variance (favorable) P5,989.50
Spending Variance:
Actual manufacturing overhead P930,826.67
Budgeted overhead for hours worked:
Fixed P272,250.00
Variable (P3.84 x 168,639 hours) 647,539.20 919,789.20
Spending Variance (unfavorable) 11,037.47
Net Variance (unfavorable) P 5,047.97
