1st Final Departmental Examinations Reviewer
Subject Code: ACCO 20073
Course Subject: Cost Accounting and Control
Theories
1. When allocating joint process cost based on tons of output, all products will
a) be salable at split-off.
b) have the same joint cost per ton.
c) have a sales value greater than their costs.
d) have no disposal costs at the split-off point.
2. If two or more products share a common process before they are separated, the
joint costs should be assigned in a manner that
a) assigns a proportionate amount of the total cost to each product on a
quantitative basis.
b) maximizes total earnings.
c) minimizes variations in unit production costs.
d) does not introduce an element of estimation into the process of
accumulating costs for each product.
3. By-products are
a) allocated a portion of joint production cost.
b) not sufficient alone, in terms of sales value, for management to justify
undertaking the joint process.
c) also known as scrap.
d) the primary reason management undertook the production process.
4. Which of the following statements is true regarding by-products or scrap?
a) Process costing is the only method that should result in by-products or
scrap.
b) Job order costing systems will never have by-products or scrap.
c) Job order costing systems may have instances where by-products or scrap
result from the production process.
d) Process costing will never have by-products or scrap from the production
process.
5. Incremental revenues and costs need to be considered when using which
allocation method?
Physical measures
Sales value at split-off
a) yes
yes
b) yes
no
c) no
no
d) no
yes
6. The method of pricing by-products/scrap where no value is assigned to these
items until they are sold is known as the
a) net realizable value at split-off point method.
b) sales value at split-off method.
c) realized value approach.
d) approximated net realizable value at split-off method.
7. A company produces three products from a joint process. The products can be
sold at split-off or process further. In deciding whether to sell at split-off or
process, management should
a) Allocate the joint cost to the products based on a physical quantity measure
prior to making the decision
b) Allocate the joint costs to the products based on relative sales value prior to
making the decision
c) Subtract the joint costs from the total sales value of the product before
determining relative sales value and making the decision
d) Ignore the joint cost in making the decision
8. To compute equivalent units of production using the FIFO method of process
costing, work for the current period must be stated in units
a) completed during the period and units in ending inventory
b) completed from beginning inventory, units started and completed during the
period, and units partially completed in ending inventory
c) started during the period and units transferred out during the period
d) processed during the period and units completed during the period
9. The FIFO method of process costing differs from the average cost method of
process costing in that FIFO:
a) allocates costs based on whole units, but average cost method uses
equivalent units
b) considers the stage of completion of beginning work in process in computing
equivalent units of production, but the average cost method does not
c) does not consider the stage of completion of beginning work in process in
computing equivalent units of production, but the average cost method does
d) is applicable only to those companies using the FIFO inventory pricing
method, but the average cost method may be used with any inventory
pricing method
10. Process costing techniques should be use in assigning costs to products:
a) if the product is manufactured on the basis of each order received
b) in all manufacturing situations
c) when production is only partially completed during the accounting period
d) if the product is composed of mass-produced homogenous units
11. In a process cost system, the cost attributable to abnormal losses that occur
due to unexpected circumstances such as machine operator should be
assigned to:
a) ending work in process inventory
b) cost of goods manufactured and ending work in process inventory in the
ratio of units worked on during the period to units remaining in work in
process
c) a separate loss account in order to highlight production inefficiencies
d) cost of goods manufactured
12. Equivalent units of production are:
a) number of whole units of output that could have been produced during a
period from the actual resources expanded during that period
b) units completed by a production department in the period
c) number of whole that could have been completed if some work of the period
had been used to produce whole units
d) number of units worked on during the period by a production department
13. The cost of normal discrete losses is:
a) absorbed by all units in ending inventory
b) considered a period cost
c) absorbed by all units past inspection point on an EUP basis
d) written off as a loss on an EUP basis
14. When spoiled units are discovered at the start of the process in the subsequent
department, the cost of spoiled units is computed by multiplying spoiled units
by:
a) total unit costs from preceding and subsequent department
b) unit cost of materials from preceding department
c) unit cost in the subsequent department
d) unit cost from preceding department
15. What is the normal effect on the numbers of cost pools and allocation bases
when an activity-based cost (ABC) system replaces a traditional cost system?
Cost Pools
Allocation Bases
a)
Increase
No effect
b)
Increase
Increase
c)
No effect
No effect
d)
No effect
Increase
16. Which of the following statements about activity-based costing is not true?
a) In activity-based costing, cost drivers are what cause costs to be incurred.
b) Activity-based costing is useful for allocating marketing and distribution
costs.
c) Activity-based costing differs from traditional costing systems in that
products are not cross-subsidized.
d) Activity-based costing is more likely to result in major differences from
traditional costing systems if the firm manufactures only one product rather
than multiple products.
17. Namra Co.’s cost allocation and product costing procedures follow activitybased costing principles. Activities have been identified and classified as
being either value-adding or nonvalue-adding as to each product. Which of
the following activities, used in Namra’s production process, is nonvalueadding?
a) Heat treatment activity
b) Design engineering activity
c) Raw materials storage activity
d) Drill press activity
18. If overhead is underapplied, then:
a) the Manufacturing Overhead account will have a credit balance at the end
of the year.
b) the predetermined overhead rate is too high.
c) actual overhead cost is less than the estimated overhead cost.
d) the amount of overhead cost applied to Work in Process is less than the
actual overhead cost incurred.
19. The net cost of normal spoilage in a job-order costing system in which
spoilage is common to all jobs should be
a) charged to manufacturing overhead during the period of the spoilage.
b) assigned directly to the jobs that caused the spoilage.
c) allocated only to jobs that are completed during the period.
d) charged to a loss account during the period of the spoilage.
20. The source document that records the amount of raw material that has been
requested by production is the
a) Interoffice memo
b) Material requisition
c) Bill of lading
d) Job-order cost sheet
21. A credit
a)
b)
c)
d)
to Work in Process inventory represents
work still in process
raw material put into production
the transfer of completed items of Finished Goods Inventory
the application of overhead to production
22. Which of the following types of firms typically would use process costing
rather than job order costing?
a) A manufacturer of commercial passenger aircraft
b) A small appliance repair shop
c) A specialty equipment manufacturer
d) A breakfast cereal manufacturer
23.
Which variance is least likely to be affected by hiring workers with less skill
than those already working?
a) Labor rate variance
b) Material use variance
c) Material price variance
d) Variable overhead efficiency variance
24.
A favorable material price variance coupled with an unfavorable material
usage variance would most likely result from
a) Machine efficiency
b) Product mix production changes
c) Labor efficiency problems
d) The purchase of lower than standard quality materials
25.
Which of the following is the most probable reason a company would
experience an unfavorable labor rate variance and a favorable labor efficiency
variance?
a) The mix of workers assigned to particular job was heavily weighted toward
the use of higher paid, experienced individuals.
b) The mix of workers assigned to the particular job was heavily weighted
toward to use of new, relatively low-paid unskilled workers.
c) Because of the production schedule, workers from other production areas
were to assist in this particular process.
d) Defective materials caused more labor to be used to produce a standard
unit.
26.
Under the three-variance method for analyzing FOH, budget or spending
variance is computed by subtracting from actual FOH costs incurred to the
a) Budgeted allowance based on actual input
b) Budgeted allowance based on actual output
c) Budgeted allowance based on standard input
d) Budgeted allowance based on standard output
27.
The production volume variance is due to
a) Inefficient or efficient use of direct labor hours
b) Efficient or inefficient use of variable overhead
c) Difference from planned level of the base used for overhead allocation and
the actual level achieved
d) Excessive application of direct labor hours over the standard amounts for the
output level actually achieved
28.
One way of analyzing the variable FOH variance is breaking it down into
a) Variable overhead spending and efficiency variances
b) Variable overhead spending and rate variances
c) Variable overhead efficiency and volume variances
d) Fixed overhead efficiency and capacity variance
29.
One-way of analyzing the fixed FOH variance is breaking it down into
a) Fixed overhead spending and volume variances
b) Fixed overhead spending and budget variances
c) Fixed overhead efficiency and volume variances
d) Fixed overhead efficiency and capacity variances
30.
An unfavorable volume variance signifies that
a) Cost control was poor
b) Sales were less than budgeted
c) Production was less than sales
d) Production was less than the level used to set the fixed overhead production
rate
Problems
1. Genesis Company produces chemical K-12 and L-13. The processing also yields
a by-product W-14, another chemical. The joint costs of processing are reduced
by the net realizable value of W-14. For the month of March, the joint costs
were registered at P3,840,000. Below are additional data:
Product
Units
Market value
K-12
2,000
P3,000,000
L-13
3,000
2,000,000
W-14
1,000
420,000
Costs of P180,000 were spent to complete the processing of W-14. Using the
average unit cost method, the allocated joint cost of K-12 would be:
a) 2,160,000
b) 1,920,000
c) 1,800,000
d) 1,440,000
2. Exodus Inc. manufactures three products, R, S, and T, in a joint process. For
every ten kilos of raw materials input, the output is five kilos of R, three kilos
of S, and two kilos of T. During August, 50,000 kilos of raw materials costing
P120,000 were processed and completed, with joint conversion costs of
P200,000. Conversion costs are to be allocated to the products on the basis of
market values.
To make the products saleable, further processing which does not require
additional raw materials was done at the following costs:
Product R
Product S
Product T
Further Processing Cost Selling Price
P30,000
P10.00
20,000
12.00
30,000
15.00
The joint conversion cost allocated to Product R is:
a) 88,000
b) 148,000
c) 140,800
d) 178,000
3. Nina Co. produces main products Blue and Red. The process also yields byproduct Magenta. The net realizable value of by-product Magenta is subtracted
from joint production cost of Blue and Red. The following information pertains
to production in July 2022 at a joint cost of P60,000.
The number of units produced and their corresponding market values are:
Blue – 1,000; 40,000
Red – 1,500; 35,000
Magenta – 500; 10,000
No further processing cost incurred except for Magenta amounting to 5,000. If
Nina Co. uses the net realizable value method for allocating joint cost, how
much of the joint cost should be allocated to Blue?
a) 29,333
b) 30,000
c) 32,000
d) 33,333
4. Tottenham Company produces four paint from the same process: L, E, N, and
I. Joint product costs are P15,000.
Bucket
Sales price/bucket at split off
Disposal cost/bucket at split off
Further processing costs
Final sales price
L
750
12
8
4
16
E
1,000
9
5
3
12
N
1,500
15
11
7
17
I
2,000
10
4
2
14
If Tottenham sells the product after further processing, the following disposal
costs will be incurred:
L = 3; E = 1; N = 4; I = 6. Using a physical measurement method, what amount
of joint processing cost is allocated to Product E?
a) 3,000
b) 4,285
c) 2,857
d) 2,143
5. Using net realizable value at split-off, what amount of joint processing cost is
allocated to Product I? (Refer to Tottenham Company).
a) 1,200
b) 3,600
c) 4,800
d) 7,200
6. LG Company manufactures two joint products (Stay and Gone). LG produces
15,000 units of Stay with an after split-off sales value of 50,000. However, if
Stay were to be processed further, additional cost of P8,000 will be incurred
but the sale value will increase to P65,000. LG produced 7,000 units of Gone
with an after split-off sales value of P35,000. However, if Gone were to be
further processed, additional cost of P5,000 will be incurred but the sales value
will go up to P40,000.
Under the relative sales value at split-off approach, the allocation to Stay from
total product cost is P30,000. What is the total product cost?
a) 105,000
b) 85,000
c) 72,000
d) 51,000
7. The following information pertains to a by-product called Levi:
Sales in 2022
Selling price per unit
Selling cost per unit
Processing cost
10,000 units
8.00
3.00
2
Inventory of Levi was recorded at net realizable value when produced in 2021.
No units of Moy were produced in 2022. What amount should be recognized as
profit on Levi’s 2021 sales?
a) 0
b) 30,000
c) 50,000
d) 80,000
8. Cheers Corp. manufactures a product that gives rise to a by-product called
Jack. The only costs associated with Jack are selling costs P1.00 for each unit
sold. Cheers accounts for Jack sales first by deducting its separable costs from
such sales and then by deducting this net amount from costs of sales of the
major product. During the year, 1,000 units of Jack were sold for P4.00 each.
If Cheers charges its method of accounting for Jack sales by recording the net
amount as additional sales revenue, what is the gross margin.
a) Unaffected
b) Increase by P3,000
c) Decrease by P3,000
d) Increase by P4,000
9. If Cheers records the net realizable value of Jack as inventory as it is produces,
what is the per unit value? (Refer to Cheers Corp.)
a) 1.00
b) 2.00
c) 3.00
d) 4.00
10. Eureka Corp. manufactures liquid chemicals D and J from a joint process.
Joint costs are allocated on the basis of relative market value at split-off. It
costs P5,680 to process 600 gallons of Product D and 1,200 gallons of Product
J to the split-off point. The market value at split-off is P10 per gallon for
Product D and P15 for Product J. Product J requires an additional process
beyond split-off at a cost of P3 per gallon before it can be sold. What is Eureka’s
cost to produce 1,200 gallons of Product J?
a) 5,040
b) 5,360
c) 7,860
d) 9,360
11. Lakers Co. manufactures plastic moldings for car seats. Its costing system
utilizes two cost categories, direct materials and conversion costs. Each
product must pass through Department A and Department B. Direct materials
are added at the beginning of production. Conversion costs are allocated
evenly throughout production.
Data for Department A for February 2017 are:
Work in process, beginning inventory, 30% converted
Units started during February
Work in process, ending inventory
200 units
1000 units
240 units
Costs for Department A for February 2017 are:
Work in process, beginning inventory:
Direct materials
Conversion costs
Direct materials costs added during February
Conversion costs added during February
P150,000
P208,000
P606,000
P431,000
What is the unit cost per equivalent unit of beginning inventory in Department
A? (Round the final answer to the nearest whole peso.)
a) P750
b) P2,717
c) P3,735
d) P4,217
12. Charlie Chairs Inc., manufactures plastic moldings for car seats. Its costing
system utilizes two cost categories, direct materials and conversion costs.
Each product must pass through Department A and Department B. Direct
materials are added at the beginning of production. Conversion costs are
allocated evenly throughout production.
Data for Department A for February 2017 are:
Work in process, beginning inventory, 30% converted
Units started during February
Work in process, ending inventory
200 units
800 units
240 units
Costs for Department A for February 2017 are:
Work in process, beginning inventory:
Direct materials
Conversion costs
Direct materials costs added during February
Conversion costs added during February
P150,000
P210,000
P603,000
P429,000
How many units were completed and transferred out of Department A during
February?
a) 440 units
b) 800 units
c) 760 units
d) 1,000 units
13. Fuchsia Co. makes product Pink in two separate departments: Department 1
and Department 2. Materials are introduced in Department 1 and an additional
material is added during the process. The following information are available
for the Department 2:
Production Data:
Beginning WIP Inventory - 8,000 units
Transferred In from Department 1 - 40,000 units
Ending WIP - 4,000 units
Stage of Completion
Transferred in
Direct materials
Direct Labor
Overhead
Beginning WIP
?
80%
40%
30%
Ending WIP
?
70%
50%
40%
Cost Data
Transferred In
Direct materials
Direct Labor
Overhead
Beginning WIP
P132,000
47,000
12,000
7,000
Added During the Period
P540,000
161,600
171,200
129,600
The company uses FIFO method of process costing. Based on the given data,
answer the following questions:
What is the cost per EUP of direct materials in Department 2?
a) 5
b) 4
c) 2.5
d) 3.5
14. What is the total cost of the completed units from the beginning WIP
inventory?
a) 210,800
b) 320,400
c) 220,400
d) 240,400
15. What is the total cost allocated to ending WIP?
a) 87,000
b) 78,000
c) 98,000
d) 89,000
16. The data for Mikrokosmos Company is given below:
Beginning WIP Inventory (60% complete)
15,000
Started during the month
80,000
Bags completed and transferred
67,000
Ending WIP inventory (80% complete)
18,000
Spoiled bag
?
Beginning WIP Inventory
Material
Conversion
Current period
Material
Conversion
Total cost to be accounted for
43,500
28,000
75,000
39,000
71,500
114,000
185,500
All materials are added at the start of the process, and conversion costs are
applied uniformly throughout the production process. The company expects a
maximum of 7 percent of the units started into production to be lost during
processing. The company uses the weighted average method of calculating
equivalent units.
How many units are considered as normal spoilage?
a) 6,600
b) 5,500
c) 5,600
d) 4,600
17. Using the same information as above, how many units are considered as
abnormal spoilage?
a) 4,400
b) 5,600
c) 4,600
d) 4,800
18. Calypso Company, which manufactures mats, begins its operations on January
1. The company's cost and production reports for the first month of operations
are:
Raw material cost
P90,000
Conversion Cost
P16,200
Finished mats are inspected, and the ones that are defective due to internal
production failure are pulled out. Defective mats cannot be economically
salvaged and are destroyed.
During the month, 1,800 mats were completed; 1,650 passed inspection.
There was no ending work in process.
The cost of the spoilage charged to Factory Overhead is:
a) 2,500
b) 3,000
c) 1,500
d) 1,350
19. Red Bull Drinks placed 180,000 liters of direct materials into the mixing
process. At the end of the month, 25,000 liters were still in process, 30%
converted as to labor and factory overhead. All direct materials are placed in
mixing at the beginning of the process and conversion costs occur evenly
during the process. Red Bull Drinks uses a weighted average method.
Assuming there was no beginning inventory, what are the equivalent units in
process for direct materials?
a) 205,000
b) 180,000
c) 25,000
d) 155,000
20. Using the same information above, assuming there is no beginning inventory,
what are the equivalent units in process for conversion costs?
a) 172,500
b) 152,500
c) 162,500
d) 160,500
21. Alamano Company, which applies overhead on the basis of direct labor hours.
Two direct labor hours are required for each product unit. Planned production
for the period was set at 9,000 units. Manufacturing overhead is budgeted at
P135,000 for the period, of which 20% of this cost is fixed. The 17,200 hours
worked during the period resulted in production of 8,560 units. Variable
manufacturing overhead cost incurred was P108,500 and fixed manufacturing
overhead cost was P28,000. Alamano Company uses a four-variance method
for analyzing manufacturing overhead.
The variable overhead spending variance for the period is:
a) P5,300 unfavorable
b) P1,200 unfavorable
c) P6,300 unfavorable
d) P6,500 unfavorable
22. Founding titan Corp. uses standard costing for the accounting of its product.
The budget officer provided the following standard data imposed by the toplevel management concerning the direct materials:
Standard direct material is 3 per unit of the product.
Standard price is P5 per unit of direct material
During the year, the company acquired on account 1,000 units material at a
total cost of P4,000. It also manufactured 150 products using 750 direct
materials.
The journal entry to record the material usage variance will include
a) Debit to work in process at P1,800
b) Credit to raw materials at P3,000
c) Debit to material usage variance at P1,500
d) Credit to material usage variance at P1,200
23. Daki's budgeted fixed FOH cost is P50,000 per month plus a variable FOH rate
of P4 per direct labor hour. The standard direct labor hours allowed for
October production was 18,000. An analysis of the FOH indicates that in
October, Daki had an unfavorable budget (controllable) variance of P1.000 and
an unfavorable volume variance of P500. Daki uses a two-way analysis of FOH
variance.
What is the actual FOH measured in October?
a) 121,000
b) 122,000
c) 122,300
d) 123,000
24. Gyutaro Inc.'s capacity for a month is 40,000 machine hours. Overhead is
40% variable and 60% fixed. During October 2031, Gyutaro Inc. produced
3,500 units of its product and incurred 38,000 machine hours. Each unit of
a product requires 12 machine hours. Favorable non-controllable variance for
the month of October is P28,500. What is the company's variable overhead
rate?
a) P19.75
b) P9.50
c) P14.25
d) P23.75
25. Makio Company, which applies overhead on the basis of direct labor hours.
Two direct labor hours are required for each product unit. Planned production
for the period was set at 9,000 units. Manufacturing overhead is budgeted at
P135,000 for the period, of which 20% of this cost is fixed. The 17,200 hours
worked during the period resulted in production of 8,500 units. Variable
manufacturing overhead cost incurred was P108,500 and fixed manufacturing
overhead cost was P28,000. Makio Company uses a four-variance method for
analyzing manufacturing overhead.
The variable overhead efficiency variance (quantity) variance for the period
is
a) P5,300 unfavorable
b) P1,200 unfavorable
c) P1,500 unfavorable
d) P6,500 unfavorable
26.
Suma Company's direct labor costs for the month of January were as follows:
Actual direct labor hours - 20,000
Standard direct labor hours - 21,000
Direct labor rate variance - Unfav. - P 3,000
Total payroll - P126,000
What was Suma's direct labor efficiency variance?
a) P6,000 favorable
b) P6,300 favorable
c) P6,150 favorable
d) P6,450 favorable
27.
Hinatsuru's operations for April disclosed the following data relating to
direct labor:
Actual cost - P10,000
Rate variance (Favorable) - 1,000
Efficiency variance (unfavorable) - 1,500
Standard cost - P9,500
Actual direct labor hours for April amounted to 2,000. What was the standard
direct labor hourly rate?
a) P5.50
b) P5.00
c) P4.75
d) P4.50
28.
Uzui Inc. is employing standard costing for its product. For the year ended
December 31, 2020, it provided the following data:
During the year, the company acquired 1,500 units of direct materials at a
total cost of P15,000. The journal entry to record the material variance
during the year includes credit to material usage variance in the amount of
P700. The standard direct material is 5 per product. The company
manufactured 200 units of product using 900 direct materials.
The journal entry to record the material price variance will include a
a) Debit to material price variance of P4,500
b) Debit to material price variance of P2,700
c) Credit to material price variance of P10,500
d) Credit to material price variance of P6,300
29.
Rumbling Corp. uses standard costing for the accounting of its product. The
budget officer provided the following standard data imposed by the top-level
management concerning the direct materials:
Standard direct material is 3 per unit of the product.
Standard price is P5 per unit of direct material
During the year, the company acquired on account 1,000 units material at a
total cost of P4,000. It also manufactured 150 products using 750 direct
materials.
The journal entry to record the material purchase variance will include
a) Debit to raw materials at P4,000
b) Credit to accounts payable at P3,750
c) Debit to material price variance at P750
d) Credit to material price variance at P1,000
30.
Blengbong Company, which applies overhead on the basis of direct labor
hours. Two direct labor hours are required for each product unit. Planned
production for the period was set at 9,000 units. Manufacturing overhead is
budgeted at P135,000 for the period, of which 20% of this cost is fixed. The
17,200 hours worked during the period resulted in production of 8,500 units.
Variable manufacturing overhead cost incurred was P108,500 and fixed
manufacturing overhead cost was P28,000. Blengbong Company uses a fourvariance method for analyzing manufacturing overhead.
The fixed overhead volume variance for the period is:
a) P750 unfavorable
b) P1,500 unfavorable
c) P2,500 unfavorable
d) P1,000 unfavorable
31.
Product A uses 450 hours of direct labor and has 3,000 machine steps. Park
Solomon, the cost accountant, has been considering either direct labor hours
or machine steps as the cost driver. The ratio of overhead cost to direct labor
hours is P85. The assignment of overhead cost to Product A using direct
labor hours would result in a higher charge by P8,250 than if machine steps
were used as the cost driver.
Determine the ratio of overhead cost to machine steps.
a) P8.57
b) P10.00
c) P12.40
d) P14.00
32.
Believing that its traditional cost system may be providing misleading
information, Suhyeok Corporation is considering an activity-based costing
(ABC) approach. It now employs a full-cost system and has been applying its
manufacturing overhead on the basis of machine hours.
Suhyeok Corp plans on using 50,000 direct labor hours and 30,000 machine
hours in the coming year. The following data show the manufacturing
overhead that is budgeted.
Activity
Materials handling
Setup costs
Machining costs
Quality control
Cost driver
No. of parts handled
No. of setups
Machine hours
No. of batches
Budgeted
activity
5,000,000
500
45,500
500
Total manufacturing overhead cost
Budgeted cost
P
850,000
415,000
660,000
125,000
P2,050,000
Cost, sales, and production data for one of Suhyeok Corp’s products for the
coming year as follows:
Prime costs:
Direct material cost per unit
Direct labor cost per unit (.05 DLH @ P15.00/DLH)
Total prime cost
Sales and production data:
Expected sales
Batch size
Setups
Total parts per finished unit
Machine hours required
P5.20
.75
P5.95
20,000
5,000
2
5
70
units
units
per batch
parts
MH per batch
If the organization uses the traditional full-cost system, the cost per unit for
this product for the coming year would be
a) P5.00
b) P5.25
c) P6.58
d) P6.85
33.
Using the same information from the preceding number, and assuming that
the organization employs an Activity-based costing system, the cost per unit
of the product described for the coming year would be:
a) P5.91
b) P6.33
c) P6.48
d) P7.39
34.
Cheongsan, Inc. is a Korean exporter of souvenir items manufactured in
Amsterdam. The following overhead cost data have been accumulated:
Activity center
Materials handling
Painting
Assembly
Cost driver
Grams handled
Units painted
Labor hours
Amount of activity
200,000 grams
75,000 units
4,800 hours
Center cost
P 150,000
300,000
120,000
Job 98 contains 5,280 units. It weighs 15,900 grams and uses 400 hours of
labor.
Compute the total overhead costs that should be assigned to Job 98.
a) P35,545
b) P38,250
c) P43,045
d) P45,345
35.
Saebom, Inc. manufactures solihiya furniture sets for export and uses the
job order cost system in accounting for its costs. You obtained from the
company’s books and records the following information for the year ended
December 31, 2022:
• The work in process inventory on January 1 was 20% less than the work
in process inventory on December 31.
• The total manufacturing costs added during 2022 was P900,000 based
on actual direct materials and direct labor but with manufacturing
overhead applied on actual direct labor pesos.
• The manufacturing overhead applied to process was 72% of the direct
labor pesos, and it was equal to 25% of the total manufacturing costs.
• The cost of goods manufactured, also based on actual direct materials,
actual direct labor and applied manufacturing overhead, P850,000.
How much is the cost of direct materials used on December 31, 2022?
a) P1,515,000
b) P362,500
c) P312,500
d) P275,000
36.
Job No. 473 has, at the end of the second week in September, an
accumulated total cost of P15,820. In the third week, P3,015 of direct
materials were used on the job. Twenty (20) hours of direct labor services
applied to the job at a cost of P25 per hour. Manufacturing overhead was
applied at the basis of P12.50 per direct labor for fixed overhead and P3 per
hour for variable overhead. Job No. 473 was the only job completed during
the third week.
The total cost of Job Order No. 473 is:
a)
b)
c)
d)
P18,500
P19,645
P21,455
P25,000
37.
Gali, Inc. manufactures specialized precision electronic kits. In late April,
Job Orders #0915 and #0916 were started. Estimated materials cost were
P90,000 for both orders (60% for #0915) while direct labor hours were
estimated at 700 for #0915 and 400 for #0916. Labor rate is P25 per hour
while variable overhead rate is P15 per hour. By the end of May, 755 of the
required materials have been issued to production in the amount of
P120,000 and both job orders have been 50% converted with 375 hours
charged to #0915 and 180 hours charged to #0916 at the hourly rates given.
The total cost charged to Job Order #0915 was:
a) P87,000
b) P90,500
c) P95,000
d) P112,500
38.
Nayeon Co.’s Job 801 for the manufacture of 5,200 coats, which was
completed during February at the unit costs presented below. Final
inspection of Job 801 disclosed 200 spoiled coats which were sold to a
jobber for P8,000.
Direct materials
Direct labor
Factory overhead (includes an allowance of P1 for spoiled work)
P35
28
28
P91
Assume that spoilage loss is charged to all production during February. What
would be the unit cost of the good coats produced on Job 801?
a) P91.00
b) P94.25
c) P105.00
d) P108.60
39.
Under Choi Ung Company’s job order cost system, estimated costs of
defective work (considered normal in the manufacturing process) are
included in the predetermined factory overhead rate. During October, Job
No. 550 for 2,000 hand saws was completed at the following costs per unit:
Direct materials
Direct labor
Factory overhead (applied at 150% of direct labor cost)
P5
4
6
P15
Final inspection disclosed 105 defective saws, which were reworked at a cost
of P3.50 per unit for direct labor, plus overhead at the predetermined rate.
The defective units fall within the normal range. What is the total rework
cost and to what account should it be charged?
a)
b)
c)
d)
40.
P1,050 to work-in-process
P1,050 to factory overhead control
P918.75 to work-in-process
P918.75 to factory overhead control
Yeonsu Company’s Job 902 for the manufacture of 8,650 coats was
completed during July 2022 at the following unit costs:
Direct materials
P1,500
Direct labor
1,000
Factory overhead (include an allowance of P50 for spoiled work)
500
P3,000
Final inspection of Job 902 disclosed 600 spoiled coats which were sold to a
jobber for P600,000. Assume that spoilage loss is charged to all production
during July 2022. What would be the unit cost of the good coats produced
on Job 902?
a) P2,900
b) P2,950
c) P3,000
d) P3,145
Summary of Answers
Theories
1. B
2. A
3. B
4. C
5. C
6. C
7. D
8. B
9. B
10. D
11. C
12. A
13. C
14. D
15. B
16. D
17. C
18. D
19. A
20. B
21. C
22. D
23. C
24. D
25. A
26. A
27. C
28. A
29. A
30. D
Problems
1. D
2. A
3. A
4. C
5. D
6. D
7. A
8. A
9. C
10. C
11. D
12. C
13. B
14. D
15. B
16. C
17. A
18. D
19. B
20. C
21. A
22. C
23. D
24. B
25. B
26. C
27. A
28. A
29. D
30. B
31. B
32. C
33. D
34. C
35. B
36. B
37. A
38. A
39. D
40. C
Summary of Answers – Explained
Theories
15. (B) In an ABC system, cost allocation is more precise than in traditional systems
because activities rather than functions or departments are defined as cost objects.
This structure permits allocation to more cost pools and the identification of a cost
driver specifically related to each.
16. (D) ABC determines the activities associated with the incurrence of costs and then
accumulates a cost pool for each activity using the appropriate activity base (cost
driver). However, given one product, all costs are assigned to one product; the
particular method used to allocate the costs does not matter.
23. (C) Material price variance
Material price variance arises from the difference between the actual price and standard
price of the raw materials. This is less likely to produce a variance related to workers.
24. (D) The purchase of lower than standard quality materials.
Substandard materials can be acquired at a lower price which will produce a favorable
material price variance, but more quantity of materials would be required due to its
lesser quality the standard which will produce an unfavorable material quantity
variance.
25. (A) The mix of workers assigned to particular job was heavily weighted toward the
use of higher-paid, experienced individuals.
Hiring experienced individuals which require a higher rate will produce unfavorable
labor rate variance due to a higher actual rate than the standard rate but will produce
a favorable labor efficiency variance because they will require lesser hours than
standard due to their experience.
Problems
1. (D) 1,440,000.00
Unadjusted Joint Costs
NRV of W-14 (420000-180000)
3,840,000.00
-
240,000.00
Joint Costs to be Allocated
3,600,000.00
Ratio of K-12 (2000/5000)
40%
Allocated Joint Costs to K-12
1,440,000.00
2. (A) 88000.00
Raw Materials Allocated to R (50000 x 5/10)
Selling Price per Unit
25000.00
10.00
Final Sales Value
250000.00
Further Processing Cost
-30000.00
Market Value of R
220000.00
MV of All Products (220000+160000+120000)
500000.00
Ratio of Market Value of R
Joint Conversion Costs
Joint Conversion Cost Allocated to R
44%
200000.00
88000.00
3. (A) 29,333
Joint Cost:
Less: Net Realizable Value of by-product
Sales
Further cost
Joint cost to be allocated to main product
Blue = 55,000 x 40,000/75,000
= 29,333
60,000
10,000
(5,000)
5,000
55,000
4. (C) 2,857
Bucket of Product E = 1,000
Total Bucket = 5,250
Joint cost allocated to product E = (1,000/5,250) x 15,000
= 2,857
5. (D) 7,200
L
Bucket
750
Sales price/bucket at split off
12
Disposal cost/bucket at split off
8
Net realizable value at split off
4
Total (bucket x NRV)
3,000
I = (12,000/25,000) X 15,000
= 7,200
6. (D) 51,000
Product
Stay
Gone
7. (A)
8. (A)
Sales value at split-off
50,000
35,000
85,000
E
1,000
9
5
4
4,000
50/85
35/85
N
1,500
15
11
4
6,000
I
2,000
10
4
6
12,000
Allocated cost
30,000
21,000
51,000
Since the inventory of the by-product was recorded at net realizable value when
produced in 2021, and likewise, when the units of the by-product were sold in
2022, the proceeds equalled the inventory cost plus disposal costs, thus, no profit
will be recognized in 2022.
Before the change, the net amount increases the gross margin because it is
deducted from cost of goods sold. After the change, the net amount increases the
gross margin because it is added to sales. Therefore, the effect is the same.
9. (C)
Net realizable value = estimated selling price – estimated cost to sell. Thus, given
no additional processing cost, the net realizable value is equal to the amount
P3.00 (4.00 – 1.00).
10. (C) 7,860
Product D (600 x 10)
Product J (1,200 x 15)
6,000
18,000
24,000
6/24
18/24
Allocated joint cost – Product J
Additional processing cost (1,200 x 3)
Total cost to produce Product J
11.
1,420
4,260
5,680
4,260
3,600
7,860
(D) P4,217
Direct materials per unit (P150,000 / 200 units)
Conversion costs per unit (P208,000 / (200 × 0.3) units)
Total costs per unit
12.
P750
3,467
P4,217
(C) 760 units
Number of units completed and transferred out = 200 units + 800 units - 240
units = 760 units
13.
(B) P4
Current period cost
Divided by EUP
Cost per EUP
P161,600
40,400
P4
EUP:
Transferred-In
DM
DL
OH
Beginning Inventory
8,000
-
1,600
4,800
5,600
Started and completed
36,000
36,000
36,000
36,000
36,000
Ending Inventory
4,000
4,000
2,800
2,000
1,600
Total
48,000
40,000
40,400
42,800
43,200
Transferred-In
DM
DL
OH
Current cost
P540,000
P161,600
P171,200
P129,600
Divided by EUP
40,000
40,400
42,800
43,200
Cost per EUP
P13.5
P4
P4
P3
14.
(D) P240,400
Beginning Inventory:
Cost last month:
Transferred in: 0 x 13.5
DM: 1,600 x 4
DL: 4,800 x 4
OH: 5,600 x 3
Total:
15.
P198,000
0
6,400
19,200
16,800
P240,400
(B) P78,000
Ending Inventory:
Transferred in: 4,000 x 13.5
DM: 2,800 x 4
DL: 2,000 x 4
OH: 1,600 x 3
Total:
16.
(C) 5,600
Units started during the month
X Normal loss percentage (given)
Normal loss
17.
P54,000
11,200
8,000
4,800
P78,000
80,000
7%
5,600 units
(A) 4,400
Total bags to be accounted for (15,000 + 80,000)
Total bags accounted for
(67,000 + 18,000)
Bags spoiled during process
Normal spoilage (0.07 x 80,000)
Abnormal spoilage
95,000
(85,000)
10,000
(5,600)
4,400
18.
(D) 1,350
Materials: 90,000 / (1650 + 150) = P50
Conversion: 16,200 / (1650 + 150) = P9
Spoilage: 150 x 9 = P1,350
19.
(B) 180,000
Direct materials:
Beginning inventory
Units started
Equivalent units
20.
0 liter
180,000 liters
180,000 liters
(C) 162,500
Conversion Costs:
Beginning inventory
Units started
Units to account for
Units transferred out
Ending inventory
0 liter
180,000
180,000
155,000
25,000 liters
Units transferred out
Ending inventory, 30% complete
Equivalent units
155,000
7,500
162,500
21. (A) P5,300 unfavorable
Overhead
Divided by: Direct labor hours (2 * 9,000)
Total OH rate
Variable %
Variable OH rate*
135,000
18,000
7.50
80%
6
22. (C) Debit to material usage variance at P1,500
23. (D) 123,000
Budgeted Allowance based on Standard Hrs.
Fixed
Variable (P4 * 18,000)
Total
Add: Controllable Variance - Unfavorable
Actual FOH
50,000
72,000
122,000
1,000
123,000
24. (B) P9.50
Non-Controllable Variance - Favorable
Divided by: Difference
Budgeted hours
Less: Standard hours (12hrs. * 3,500)
Standard rate - Fixed
Divided by: Fixed %
Total OH Rate
Multiply by: Variable %
Standard rate - Variable
28,500
40,000
(42,000)
25. (B) P1,200 unfavorable
Actual hours
Less: Standard hours (2 * 8,500)
Difference
Multiply by: Standard rate – Variable*
Variable overhead efficiency variance
17,200
(17,000
)
200
6
1,200
2,000
14.25
60%
23.75
40%
9.5
Overhead
Divided by: Direct labor hours (2 * 9,000)
Total OH rate
Variable %
Variable OH rate*
26. (C) P6,150 favorable
27. (A) P5.50
135,000
18,000
7.50
80%
6
28. (A) Debit to material price variance of P4,500
29. (D) Credit to material price variance at P1,000
30. (B) P1,500 unfavorable
Overhead
Divided by: Direct labor hours (2 * 9,000)
Total OH rate
Variable %
Variable OH rate*
135,000
18,000
7.50
20%
1.50
31. (B) P10.00
Overhead charge using labor hours: P85 x 450
Overhead charge using machine hours: P38,250 - P8,250
Ratio of overhead costs to machine steps: P30,000/3,000
P38,250
P30,000
P10.00
32. (C) P6.58
Total manufacturing overhead cost
divide by: Budgeted machine hours
Overhead rate
multiply by: Machine hours required per batch
Total
divide by: Batch size
Overhead cost per unit
Prime cost per unit
Cost per unit
2,050,000.00
45,500.00
45.05
70.00
3,153.85
5,000.00
0.63
5.95
6.58
33. (D) P7.39
Material handling cost per part
Cost per setup
Machining costs per hour
Quality control cost per batch
Material handling costs: P0.17 x 5 parts x 20,000 units
Setup costs: P830 x 2 x 4 batches
Machining costs: P14.51 x 70 MH x 4 batches
Quality control costs: P250 x 4 batches
Total applied overhead
divide by: Expected sales
Overhead cost per unit
Prime cost per unit
Cost per unit
0.17
830.00
14.51
250.00
17,000.00
6,640.00
4,061.54
1,000.00
28,701.54
20,000.00
1.44
5.95
7.39
34. (C) P43,045
Overhead rates:
Materials handling
Painting
Assembly
0.75
4.00
25.00
Cost assignment:
Materials handling: P0.75 x 15,900 grams
Painting: P4 x 5,280 units
Assembly: P25 x 400 hours
Total overhead costs
11,925.00
21,120.00
10,000.00
43,045.00
35. (B) P362,500
Total manufacturing cost
less: Applied factory overhead
Prime costs
less: Direct labor costs
Applied factory overhead
divide by: % of direct labor costs
900,000.00
225,000.00
675,000.00
225,000.00
72%
Direct materials used
(312,500.00)
362,500.00
36. (B) P19,645
Work-in-process, beginning
Added:
Direct materials
Direct labor (20 hours x P25)
Applied factory overhead (20 hours x P15.5)
Total cost of Job 473
15,820
3,015
500
310
3,825
19,645
37. (A) P87,000
Work-in-process, beginning
Added:
Direct materials (P120,000 X 60%)
Direct labor (375 hours x P25)
Applied factory overhead (375 hours x P15)
Total cost of Job #0915
72,000
9,375
5,625
87,000
87,000
38. (A) P91.00
Charge to work-in-process (P91 x 5,200)
less: Spoilage cost (P91 x 200)
Net cost of production
divided by: Number of good units produced
Unit cost
473,200
(18,200)
455,000
5,000
91
39. (D) P918.75 to factory overhead control
Direct labor cost
Factory overhead
Rework cost per unit
multiply by: defective units
Total rework cost
3.50
5.25
8.75
105.00
918.75
The rework cost should be allocated among all units by charging it to the factory
overhead control.
40. (C) P3,000
Charge to work-in-process (P3,000 x 8,650)
less: Spoilage cost (P3000 x 600)
Net cost of production
divided by: Number of good units produced
Unit cost
25,950,000
(1,800,000)
24,150,000
8,050
3,000