NESTLE Inc., is employing a sophisticated just-in-time manufacturing system. The company uses backflush costing for recording its production. The following transactions occurred for the year ended December 31, 2016: a. Purchased P170,000 of raw materials on account. b. All materials purchased were requisitioned for production. c. Incurred direct labor costs of P80,000. d. Actual factory overhead costs amounted to P122,000. e. Applied conversion costs totaled P202,000 including direct labor cost of P80,000. f. All telephones were completed and sold. Req: What is the cost of goods sold for the year ended December 31, 2016?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Problem 1
NESTLE Inc., is employing a sophisticated just-in-time manufacturing system. The company uses backflush costing for recording its production. The following transactions occurred for the year ended December 31, 2016:
a. Purchased P170,000 of raw materials on account.
b. All materials purchased were requisitioned for production.
c. Incurred direct labor costs of P80,000.
d. Actual
e. Applied conversion costs totaled P202,000 including direct labor cost of P80,000.
f. All telephones were completed and sold.
Req: What is the cost of goods sold for the year ended December 31, 2016?
Problem 2
HONDA Inc, is using Just-in-Time Production System and Backflush Cost Accounting System for the year ended December 31, 2016. The following information was provided for the year 2016:
a. Raw materials purchased for year 2016 totaled P1,000,000.
b. Direct labor for the year 2016 totaled P500,000.
c. Actual overhead for the year 2016 totaled P300,000 and the standard overhead rate is 50% of direct labor cost.
d. The production report for year 2016 showed that the Finished Goods Inventory at December 31 was P200,000 consisting of:
Direct Materials 110,000 Direct Labor 60,000 Factory Overhead 30,000
Req: What is the Cost of Goods Sold for the year ended December 31, 2016?
Problem 3
SMC Inc. employs Just-in-Time and Backflush Costing Systems for the production of goods for the year ended December 31, 2016. The following transactions summarize the major steps in SMC's production during the year of 2016:
a. Raw materials received from suppliers amounted to P4,000.
b. Direct labor costs of P10,400 and overhead costs of P7,800 were incurred and applied, respectively, during the year of 2016.
c. The cost of work-in-process at December 31, 2016 was P3,600, This cost was determined through the production report and is composed of the following elements of cost
Direct materials 1,500 Direct labor 1,200 Overhead 900
d. In addition, the finished goods inventory at December 31, 2016 was P6,500 consisting of
Direct materials 1.500 Direct labor 2,850 Overhead 2,150
Requirements:
1. What is the amount of direct materials backflushed from raw and in process account to finished goods?
2. What is the amount of direct materials backflushed from finished goods to cost of goods sold?
3. What is the amount of cost of goods sold for the year ended December 31, 2016?
Problem 4
MIX Inc. is conducting a joint process which results to three products. The following production data were provided by MIX Inc. for the current period:
Product Name Units Produced Selling price per unit at split off point
Ace 10,000 P40
Bat 15,000 P20
Can 25,000 P12
Additional data for the period were provided:
All the ace items were sold for a gross profit of P100,000.
The joint costs were allocated using physical method.
Requirement:
1. What is the gross
2. Assuming the joint costs are fixed, what is the joint cost allocated to can items using the relative sales value method?
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