Problem 1

The Mayhem Company uses a job-order costing system. The following data relate to October, the first month of the company's fiscal year:

1. Raw materials purchased on account, P210,000.
2. Raw materials issued to production, P190,000 (P178,000 direct materials and P12,000 indirect materials).
3. Direct labor cost incurred, P90,000; and indirect labor cost incurred, P110,000.
4. Depreciation recorded on factory equipment, P40,000.
5. Other manufacturing overhead costs incurred during October, P70,000 (credit Accounts Payable).
6. The company applies manufacturing overhead cost to production on the basis of P8 per machine-hour. There were 30,000 machine-hours recorded for October
7. Production orders costing P520,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
8. Production orders that had cost P480,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold at 25% above cost. The goods were sold on account.

Required:

1. Prepare journal entries to record the information given above.
2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant information above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of P42,000.