ReSA -The Review School of Accountancy Advanced Financial Accounting
and Reporting

MAY 2022 Batch
AFAR Quiz 3
COVERAGE - Week 13 to Week 16 Lecture

AFAR-13: Joint Arrangements

AFAR-14: Jointly Controlled Entity, Joint Venture - SMEs

AFAR-15: Job Order Costing

AFAR-16: Process Costing

AFAR-17: Joint & By-Product Costing

AFAR-18: Backflush Costing, ABC & Service Cost Allocation
1. job-order costing and process costing have which of the following characteristics?
a.
b.
c.
d.
job-order Costing
homogeneous products
and large quantities
homogeneous products
and small quantities
heterogeneous products
and large quantities
heterogeneous products
and small quantities
Process Costing
heterogeneous products
and small quantities
heterogeneous products
and large quantities
homogeneous products
and small quantities
homogeneous products
and large quantities
2. If a company obtains two salable products from the refining of one ore, the refining process should be
accounted for as a(n)
a. mixed cost process.
b. joint process.
c. extractive process.
d. reduction process.
3. Which of the following is/are synonyms for joint products?
Main products
Co-products
a.
no
no
b.
yes
yes
c.
yes
no
d.
no
yes
4. 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.
5. Which of the following has sales value?
By-products Waste
a.
no
no
b.
yes
no
c.
yes
yes
d.
no
yes
6. Reducing setup time is a major aspect of
a. all push inventory systems.
b. the determination of safety stock quantities.
c. a JIT system.
d. an EOQ system.
Page 1 of 13 pages
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
AFAR Quiz 3
7. Just-in-time (JIT) inventory systems
a. result in a greater number of suppliers for each production process.
b. focus on a "push" type of production system.
c. can only be used with automated production processes.
d. result in inventories being either greatly reduced or eliminated.
8. In a standard cost system, Work in Process Inventory is ordinarily debited with
a. actual costs of material and labor and a predetermined overhead cost for overhead.
b. standard costs based on the level of input activity (such as direct labor hours worked).
c. standard costs based on production output.
d. actual costs of material, labor, and overhead.
9. A standard cost system may be used in
a. job order costing, but not process costing.
b. process costing, but not job order costing.
c. either job order costing or process costing.
d. neither job order costing nor process costing.
10. The overhead allocation method that allocates service department costs without consideration of services
rendered to other service departments is the
a. step method.
b. direct method.
c. reciprocal method.
d. none of the above.
11. Which service department cost allocation method utilizes a "benefits-provided" ranking?
a. algebraic method
b. indirect method
c. step method
d. direct method
12. Which service department cost allocation method assigns indirect costs to cost objects after considering
interrelationships of the cost objects?
Algebraic method
Step method
a.
no
no b.
no
yes c.
yes
yes d.
yes
no
13. Hartwell Company distributes its service department overhead costs directly to producing departments without
allocation to the other service departments. Information for January is presented here.
Maintenance
Utilities
Overhead costs incurred
P18,700
P9,000
Service provided to:
Maintenance Dept.
10%
Utilities Dept.
20%
Producing Dept. A
40%
30%
Producing Dept. B
40%
60%
The amount of Utilities Department costs distributed to Dept. B for January should be (rounded to the nearest
peso)
a. P3,600
b. P4,500.
c. P5,400.
d. P6,000.
14. Hartwell Company distributes distributes the service department's overhead costs based on the step method.
Maintenance provides more service than does Utilities. Which of the following is true?
Page 2 of 13 pages
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
Overhead costs incurred
Service provided to:
Maintenance Dept.
Utilities Dept.
Producing Dept. A
Producing Dept. B
a.
b.
c.
d.
Maintenance
P18,700
20%
40%
40%
Utilities
P9,000
10%
30%
60%
Allocate maintenance expense to Departments A and B.
Allocate maintenance expense to Departments A and B and the Utilities Department.
Allocate utilities expense to the Maintenance Department and Departments A and B.
None of the above.
Bobcat Company. uses a job-order costing system. During April, the following costs appeared in the Work in
Process Inventory account:
Beginning balance
P 24,000
Direct material used
70,000
Direct labor incurred
60,000
Applied overhead
48,000
Cost of goods manufactured
185,000
15. Bobcat Company applies overhead on the basis of direct labor cost. There was only one job left in Work in Process
at the end of April which contained P5,600 of overhead. What amount of direct material was included in this job?
a. P4,400
b. P4,480
c. P6,920
d. P8,000
16. West Company is a print shop that produces jobs to customer specifications. During January, Job #3051 was
worked on and the following information is available:
Direct material used
P2,500
Direct labor hours worked
15
Machine time used
6
Direct labor rate per hour
P 7
Overhead application rate per hour of machine time
P18
What was the total cost of Job #3051 for January?
a. P2,713
b. P2,770
c. P2,812
d. P3,052
Items 17 and 18 are based on the following information:
Gamma Co. uses a job-order costing system. At the beginning of January, the company had two jobs in process
with the following costs:
Job #456
Job #461
Direct Material
P 3,400
1,100
Direct Labor
P 510
289
Overhead
P 255
?
Gamma pays its workers P8.50 per hour and applies overhead on a direct labor hour basis.
17. Refer to Gamma Company. How much overhead was included in the cost of Job #461 at the beginning of January?
a. P 144.50
b. P 153.00
c. P2,200.00
d. P2,456.50
Page 3 of 13 pages
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
18. Refer to Gamma Company. During January, Gamma’s employees worked on Job #649. At the end of the month,
P714 of overhead had been applied to this job. Total Work in Process at the end of the month was P6,800 and
all other jobs had a total cost of P3,981. What amount of direct material is included in Job #649?
a. P 677.00
b. P1,391.00
c. P2,142.00
d. P4,658.00
Items 19 to 21 are based on the following information:
Williams Company uses a job-order costing system and the following information is available from its records. The
company has three jobs in process: #6, #9, and #13.
Raw material used
Direct labor per hour
Overhead applied based on direct labor cost
P120,000
P
8.50
120%
Direct material was requisitioned as follows for each job respectively: 30 percent, 25 percent, and 25 percent; the
balance of the requisitions was considered indirect. Direct labor hours per job are 2,500; 3,100; and 4,200;
respectively. Indirect labor is P33,000. Other actual overhead costs totaled P36,000.
19. Refer to Williams Company. What is the prime cost of Job #6?
a. P42,250
b. P57,250
c. P73,250
d. P82,750
20 Refer to Williams Company. If Job #13 is completed and transferred, what is the balance in Work in Process
Inventory at the end of the period if overhead is applied at the end of the period?
a. P 96,700
b. P 99,020
c. P139,540
d. P170,720
21. Refer to Williams Company. Assume the balance in Work in Process Inventory was P18,500 on June 1 and
P25,297 on June 30. The balance on June 30 represents one job that contains direct material of P11,250. How
many direct labor hours have been worked on this job (rounded to the nearest hour)?
a. 751
b. 1,324
c. 1,653
d. 2,976
22 . The following information pertains to Sigma Company for September:
Job #323
Job #325
Job #401
Direct Material
P 3,200
?
5,670
Direct Labor
P 4,500
5,000
?
Overhead
?
?
P5,550
Sigma Company applies overhead for Job #323 at 140 percent of direct labor cost and at 150 percent of direct
labor cost for Jobs #325 and #401. The total cost of Jobs #323 and #325 is identical.
Refer to Sigma Co. Assume that Jobs #323 and #401 are incomplete at the end of September. What is the
balance in Work in Process Inventory at that time?
a. P18,920
b. P22,620
c. P28,920
d. P30,120
Page 4 of 13 pages
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
Items 23 and 24 are based on the following information:
Trenton Company has two departments (Processing and Packaging) and uses a job-order costing system. Baker
applies overhead in Processing based on machine hours and on direct labor cost in Packaging. The following
information is available for July:
Machine hours
Direct labor cost
Applied overhead
Processing
2,500
P44,500
P55,000
Packaging
1,000
P23,000
P51,750
23. Refer to Trenton Company. What is the overhead application rate per machine hour for Processing?
a. P 0.81
b. P 1.24
c. P17.80
d. P22.00
24. Refer to Trenton Co. What is the overhead application rate for Packaging?
a. P 0.44
b. P 2.25
c. P23.00
d. P51.75
Items 25 and 26 are based on the following information:
Treacy Company uses a job-order costing system. Assume that Job #504 is the only one in process. The following
information is available:
Budgeted direct labor hours
65,000 Budgeted machine hours
9,000
Budgeted overhead
P350,000 Direct material
P110,500
Direct labor cost
P 70,000
25. Refer to Treacy Company. What is the overhead application rate if Treacy uses a predetermined overhead
application rate based on direct labor hours (rounded to the nearest whole peso)?
a. P 0.20
b. P 5.00
c. P 5.38
d. P38.89
26. Refer to Treacy Company. What is the total cost of Job #504 assuming that overhead is applied at the rate of
135% of direct labor cost (rounded to the nearest whole peso)?
a. P192,650
b. P268,250
c. P275,000
d. P329,675
27. At the end of the last fiscal year, Hilton Company had the following account balances:
Overapplied overhead
P 6,000
Cost of Goods Sold
P980,000
Work in Process Inventory
P 38,000
Finished Goods Inventory
P 82,000
If the most common treatment of assigning overapplied overhead were used, the final balance in Cost of Goods
Sold is:
a. P974,000.
b. P974,660.
c. P985,340.
d. P986,000.
Page 5 of 13 pages
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
28. Rigby Products has no Work in Process or Finished Goods inventories at the close of business on December 31,
20x9. The balances of Strong Products’ accounts as of December 31, 20X9, are as follows:
Cost of goods sold--unadjusted
P2,040,000
Selling & administrative expenses
900,000
Sales
3,600,000
Manufacturing overhead control
700,000
Manufacturing overhead applied
648,000
Pretax income for 20X9
is:
a. P608,000. b.
P660,000. c. P712,000.
d. undeterminable from the information given.
Items 29 and 30 are based on the following information:
For Job Order No. 369, Escalera Company incurred the following costs for the manufacture of 200 units of a
novelty gadget:
Original cost accumulation:
Direct materials………………………………………………………………………… P 13,200
Direct labor……………………………………………………………………………… 16,000
Factory overhead (150% of direct labor)………………………………………………… 24,000
Total……………………………………………………………………………………… P 53,200
Direct costs of ten reworked units:
Direct materials………………………………………………………………………… P 2,000
Direct labor……………………………………………………………………………… 3,200
Total………………………………………………………………………………………P 5,200
29. The rework cost was attributable to exacting specifications required by the job and was charged to the specific
order. The units cost of Job Order No. 369 is:
a. P266
c. P292
b. P280
d. P316
30. The rework costs were attributable to internal failure (to all production) or charged to factory overhead, what is
the cost per finished unit of Job 1992?
a. P266
c. P292
b. P280
d. P316
Items 31 and 32 are based on the following information:
Kuchen Manufacturing uses backflush costing to account for an electronic meter it makes. During August 20X8, the
firm produced 16,000 meters of which it sold 15,800. The standard cost for each meter is:
Direct material
P 20
Conversion costs
44
Total
P 64
Assume that the company had no inventory on August 1. The following event took place in August:
1. Purchased P320,000 of direct materials.
2. Incurred P708,000 of conversion costs.
3. Applied P704,000 of conversion costs to Raw and In Process Inventory.
4. Finished 16,000 meters.
5. Sold 15,800 meters for P100 each.
31. Compute the Finished Goods, ending
a. P0
b. P12,800
c. P1,011,200
d. P1,015,200
32. Amount of Cost of Goods Sold after the adjustment of over-under applied conversion cost:
a. P1,011,200
c. P1,024,000
b. P1,015,200
d. P1,028,000
Page 6 of 13 pages
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
33. Duke Company transferred 5,500 units to Finished Goods Inventory during September. On September 1, the
company had 300 units on hand (40 percent complete as to both material and conversion costs). On September
30, the company had 800 units (10 percent complete as to material and 20 percent complete as to conversion
costs). The number of units started and completed during September was:
a. 5,200.
b. 5,380.
c. 5,500.
d. 6,300.
34. Carter Company uses a weighted average process costing system. Material is added at the start of production.
Dixie Company started 13,000 units into production and had 4,500 units in process at the start of the period that
were 60 percent complete as to conversion costs. If Dixie transferred out 11,750 units, how many units were in
ending Work in Process Inventory?
a. 1,250
b. 3,000
c. 3,500
d. 5,750
Items 35 and 36:
Perry Company
Perry Company. has the following information for November:
Beginning Work in Process Inventory
(70% complete as to conversion)
Started
Ending Work in Process Inventory
(10% complete as to conversion)
Beginning WIP Inventory Costs:
Material
Conversion
Current Period Costs:
Material
Conversion
6,000 units
24,000 units
8,500 units
P23,400
50,607
P31,500
76,956
All material is added at the start of the process and all finished products are transferred out.
35. Refer to Perry Company. Assume that weighted average process costing is used. What is the cost per
equivalent unit for material?
a. P0.55
b. P1.05
c. P1.31
d. P1.83
36. Refer to Perry Company. Assume that FIFO process costing is used. What is the cost per equivalent unit for
conversion?
a. P3.44
b. P4.24
c. P5.71
d. P7.03
Items 37 and 38:
Harris Company has the following information for July:
Units started
Beginning Work in Process: (35% complete)
Normal spoilage (discrete)
Abnormal spoilage
Ending Work in Process: (70% complete)
Transferred out
Beginning Work in Process Costs:
Material
Conversion
Page 7 of 13 pages
100,000
20,000
3,500
5,000
14,500
97,000
P15,000
10,000
units
units
units
units
units
units
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
AFAR Quiz 3
All materials are added at the start of the production process. Harris Company inspects goods at 75 percent completion
as to conversion.
37. Refer to Harris Company. What are equivalent units of production for material, assuming FIFO?
a. 100,000
b. 96,500
c. 95,000
d. 120,000
38. Refer to Harris Company. Assume that the costs per EUP for material and conversion are P1.00 and P1.50,
respectively. Using FIFO, what is the total cost assigned to the transferred-out units (rounded to the nearest peso)?
a. P245,750
b. P244,438
c. P237,000
d. P224,938
39. Previtz Company produces two products from a joint process: X and Z. Joint processing costs for this
production cycle are P8,000.
Disposal
Sales price
cost per
Further
Final sale
per yard at
yard at
processing
price per
Yards
split-off
split-off
per yard
yard
X
1,500
P6.00
P3.50
P1.00
P 7.50
Z
2,200
9.00
5.00
3.00
11.25
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to X (round
to the nearest peso)?
a.
b.
c.
d.
P3,090
P5,204
P4,000
P2,390
Furhmann Company manufactures products X and Y from a joint process that also yields a by-product, Z. Revenue
from sales of Z is treated as a reduction of joint costs. Additional information is as follows:
Products
X
Y
Z
Total
Units produced
20,000
20,000
10,000
50,000
Joint costs
?
?
?
P262,000
Sales value at
split-off
P300,000
P150,000
P10,000
P460,000
Joint costs were allocated using the sales value at split-off approach.
40. The joint costs allocated to product X were
a. P 84,000
b. P100,800.
c. P150,000.
d. P168,000.
Good luck and GOD BLESS!!!
There are only two things in the world to worry over; the things you can control, and the things you can’t
control. Fix the first, forget the second.
The invariable mark of wisdom is to see the miraculous in the common.
No one knows what he can do until he tries
There’s no traffic jam on the extra mile.
Worry is like a rocking chair – it will give you something to do, but it won’t get you anywhere.
If you haven’t all things you want, be grateful for the things you don’t have that you didn’t want.
Page 8 of 13 pages
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
Suggested Answers and Solutions
1. D
2. B
3. B
4. B
5. B
6. C
7. D
8. C
9. C
10. B
11. C
12. C
DIF: 1
13. D (P9,000 x 6/9)
14. B
15. A
Total Costs Incurred
Less: Cost of Goods Manufactured
Costs remaining in WIP
Overhead
Direct Labor (5,600/.80)
Direct Materials
5,600
7,000
16. A
Direct Materials
Direct Labor (15 hours * P7/hour)
Factory Overhead (6 hrs machine time * P18 / machine hr
202,000
(185,000)
17,000
(12,600)
4,400
P
P
17. A
Direct Labor Hours: P289/P8.50
Overhead Application Rate:
BFOH Rate: P255 / 60 hrs
34 hrs * P4.25/hr
2,500
105
108
2,713
34 hrs
P
P
Page 9 of 13 pages
4.25
144.50
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
18. A
Direct Materials--Job 649
Total Work in Process
Other Work in Process
Costs remaining in WIP
Overhead
Direct Labor (OH x 2) $714 * 2
Direct Materials
P
P 714
1,428
19. B
Direct Materials (P120,000 * 30%)
Direct Labor (2,500 hrs * P8.50)
Total Prime Costs
P
6,800
(3,981)
2,819
P
(2,142)
677
P
36,000
21,250
57,250
P
20. D
Step 1: Compute Total Cost of Job #6
DM: P120,000 * .30
DL: 2,500 * P8.50
FOH: P21,250 * 120%
Step 2: Compute Total Cost of Job #9
DM: P120,000 * .25
DL: 3,100 * P8.50
FOH: 26,350 * 120%
P 36,000
21,250
25,500
P 82,750
P 30,000
26,350
31,620
87,970
P 170,720
Total Costs of Jobs 6 and 9
21. A
Step 1: Determine DL and FOH
WIP at June 30:
Less DM in WIP
Step 2: Separate DL and FOH
Let x = DL; 1.2x = FOH
x + 1.2x = 14,047
2.2x = 14,047
x = P6,385
Step 3: Compute DL Hours
P6,385 ÷ 8.50
P 25,297
11,250 14,047
751 hours
22. C
Step 1: Determine DL for Job 401
P5,550 ÷ 150%
Step 2: Compute Total Cost of Job 401
DM
DL
FOH
DM
DL
FOH
Step 2: Compute Total Cost of Job 323
Total Costs of Jobs 323 and 401
23. D
Total Applied Overhead
P55,000
Machine Hours
2,500
Rate per Hour
P22.00
Page 10 of 13 pages
P
P
5,670
3,700
5,550
3,200
4,500
6,300
P 3,700
14,920
14,000
P 28,920
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
24. B
Total Applied Overhead
P51,750
Total Direct Labor
P23,000
Rate per Peso of DL
P2.25
25. C
Budgeted Overhead
P350,000
Budgeted Direct Labor Hours
65,000
Overhead Application Rate
P5.38
26. C
Direct Materials
Direct Labor
Factory Overhead (P70,000 * 135%)
Total Cost of Job #504
110,500
70,000
94,500
275,000
27. A
Unadjusted COGS
P980,000
less: Overapplied OH
P6,000
Adjusted COGS
P974,000
28. A
Sales
Less: Cost of Goods Sold
Add: Factory Overhead Underapplied (700,000-648,000)
Selling, General and Administrative Expenses
Pretax Income
P2,040,000
___52,000
P 3,600,000
(2,092,000)
(900,000)
P 608,000
29. D
Original costs charged to Work-in-Process
Add: Rework Costs
Direct Materials
Direct Labor
Applied Overhead (150% of P3,200)
Total Costs of Job No. 369
Divided by: Good Units
P 53,200
P 2,000
3,200
4,800
10,000
P 63,200
_____200
P 316
30. A - P53,200 / 200 units = P266
PAS 21 par. 23 (a) requires the foreign currency monetary items, such as trade payables, of an entity to be
retranslated at the closing rate at the end of a reporting period.
31. D
Raw and In Process (RIP)
Finished Goods
Cost of Goods Sold
320,000
320,000
Actual Conversion Cost
708,000
704,000
4,000
4,000
Applied Conversion Cost
704,000
704,000
320,000
704,000
1,024,000
1,011,200
4,000
1,011,200
*12,800
Unit Cost : P1,024,000 / 16,000 = P64
* P64 x (16,000 – 15,800) = P12,800
32. B – refer to No. 31
Page 11 of 13 pages
1,015,200
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
33. A
34. D
35. D
Units Transferred Out
Less: Units in Beginning Inventory
Units Started and Completed
5,500
(300)
5,200
Beginning Work in Process
Add: Units Started
Deduct: Units Transferred Out
Ending Work in Process
4,500
13,000
( 11,750)
5,750
Material Costs:
Beginning
Current Period
P
23,400
31,500
54,900
36. B
Conversion Costs:
Beginning (Ignored for FIFO)
Current Period
P
P
Equivalent Units
Beginning Inventory (6,000 * 30%)
Started and Completed (15,500)
Ending Inventory (8,500 * 10%)
÷ 30,000 =
units
P 1.83
76,956
76,956
1,800
15,500
850
18,150 equivalent units
P 4.24
Cost per equivalent unit
37. A
Materials: FIFO
Beginning Work in Process
+ Units Started and Completed
+ Normal Spoilage—Discrete
+ Abnormal Spoilage
+ Ending Work in Process
Equivalent Units of Production
38. B
Transferred Out Units: FIFO
Beginning Work in Process
+ Completion of Beginning Inventory
+ Units Started and Completed
+Normal Spoilage--Discrete-Materials
+Normal Spoilage--Discrete-Conversion
Equivalent Units of Production
77,000
3,500
5,000
14,500
0%
100%
100%
100%
100%
(20,000 * 65%)
Page 12 of 13 pages
77,000
3,500
5,000
14,500
100,000
13,000
77,000
3,500
2,625
1.50
2.50
1.00
1.50
25,000
19,500
192,500
3,500
3,938
244,438
AFAR Quiz 3
ReSA - The Review School of Accountancy
Coverage: AFAR – 13 to 18 (ReSA Batch 43 – May 2022 Batch)
39. A
X
Y
Yards
1,500
2,200
Final
Sales Price
P 7.50
P11.25
Separate
Cost per Yard
P4.50
P8.00
Net Sales
Price
P3.00
P3.25
P(4,500/P11,650) * P8,000 = P3,090
Approximated
NRV
P 4,500
7,150
P11,650
40. D
P262,000 * P(300,000/450,000) = P174,667 preliminary allocation to Product X
P10,000 * P(300,000/450,000) = P6,667 reduction in joint cost from sales of Product Z
P(174,667 - P6,667) = P168,000
Good luck and GOD BLESS!!!
There are only two things in the world to worry over; the things you can control, and the things you can’t
control. Fix the first, forget the second.
The invariable mark of wisdom is to see the miraculous in the common.
No one knows what he can do until he tries
There’s no traffic jam on the extra mile.
Worry is like a rocking chair – it will give you something to do, but it won’t get you anywhere.
If you haven’t all things you want, be grateful for the things you don’t have that you didn’t want.
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