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PROBLEM 1 The ABC Manufacturing Company produced P100, 000 units during the year ended December 31,...

PROBLEM 1

The ABC Manufacturing Company produced P100, 000 units during the year ended December 31, 2009. It incurred the following costs for the year

Materials                               P75, 000 (10% is indirect materials)

Labor                                     P97, 000 (7% is indirect labor)

Factory Overhead                125% of direct labor cost

WIP – January 1                  P25, 500

WIP – December 31           P27, 000

Required: How much is the Company’s cost of goods manufactured?

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Answer #1

Ans:

Cost of goods manufactured : Direct costs + Opening WIP - Closing WIP

Direct costs :

Material : P75,000 * 90% = P67,500

Labor : P97,000 * 93% = P90,210

Factory overhead : P90,210 * 125% = P112,762.50

Total Direct costs : P67,500 + P90,210 + P112,762.50 = P270,472.50

Opening WIP : P25,500

Ending WIP : P27,000

Cost of goods manufactured : P270,472.50 + P25,500 - P27,000 = P268,972.50

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