Madelyn Company manufactures unique, custom-made furniture. The company usesa job order system and applies overhead to production on the basis of direct laborcost. In computing a predetermined overhead rate for the year 2019, the companyestimated manufacturing overhead to be P26 million and direct labor costs to be P20million.Actual costs incurred during 2019Direct materinls usedDirect labor cost incurredInsurance- factory equipmentIndirect laborP 30,000.00018,000,000500,0007,500,0002,000,00011,000,0002,000,000Factory maintenanceRent- factory buildingDepreciation- factory equipment Instructions - Answer each of the following1. Why is Madelyn Company using a job order cost system?2. On what basis does the company allocate its manufacturing overhead?Compute the predetermined overhead rate for 2019.3. Compute the amount of the under- or over applied overhead for 2019.4. Determine the cost of goods sold given the following dataJanuary 1, 2019P 5,000,00013,000,000December 31, 2019Work in processFinished goodsP 4,000,00011,000,000

Name: Madelyn Company manufactures unique, custom-made furniture. The compa
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Description: Madelyn Company manufactures unique, custom-made furniture. The company usesa job order system and applies overhead to production on the basis of direct laborcost. In computing a predetermined overhead rate for the year 2019, the companyestimated ma

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Instructions - Answer each of the following 1. Why is Madelyn Company using a job order cost system? 2. On what basis does the company allocate its manufacturing overhead? Compute the predetermined overhead rate for 2019. 3. Compute the amount of the under- or over applied overhead for 2019.

Instructions - Answer each of the following 1. Why is Madelyn Company using a job order cost system? 2. On what basis does the company allocate its manufacturing overhead? Compute the predetermined overhead rate for 2019. 3. Compute the amount of the under- or over applied overhead for 2019.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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Question

Madelyn Company manufactures unique, custom-made furniture. The company uses
a job order system and applies overhead to production on the basis of direct labor
cost. In computing a predetermined overhead rate for the year 2019, the company
estimated manufacturing overhead to be P26 million and direct labor costs to be P20
million.
Actual costs incurred during 2019
Direct materinls used
Direct labor cost incurred
Insurance- factory equipment
Indirect labor
P 30,000.000
18,000,000
500,000
7,500,000
2,000,000
11,000,000
2,000,000
Factory maintenance
Rent- factory building
Depreciation- factory equipment

Instructions - Answer each of the following
1. Why is Madelyn Company using a job order cost system?
2. On what basis does the company allocate its manufacturing overhead?
Compute the predetermined overhead rate for 2019.
3. Compute the amount of the under- or over applied overhead for 2019.
4. Determine the cost of goods sold given the following data
January 1, 2019
P 5,000,000
13,000,000
December 31, 2019
Work in process
Finished goods
P 4,000,000
11,000,000

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