Reference no: EM132865453

Problem - PBB Manufacturing Company uses back-flush costing to account for its manufacturing costs. The following activities for the 1st quarter of the current year follow:

a) Purchase direct materials, on account P800,000.

b) Direct labor costs incurred, P500,000.

c) Factory overhead costs incurred, P400,000.

d) Sold the completed production at 30% mark-up on cost.

Conversion cost is charged to cost of sales when incurred. At the beginning of the quarter, RIP account has a balance of P85,000 of which P35,000 is direct materials while the Finished goods account has a balance of P100,000 of which P40,000 is direct materials. There is no change in RIP and FG inventory accounts.

Required -

1. Determine the cost of sales for the period?

2. Determine the gross profit for the period?