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 activity-
based 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 nonvalue-
adding?
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 to Work in Process inventory represents
a) work still in process
b) raw material put into production
c) the transfer of completed items of Finished Goods Inventory
d) 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:

Further Processing Cost Selling Price

Product R P30,000 P10.00
Product S 20,000 12.00
Product T 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 by-
product 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.

L E N I
Bucket 750 1,000 1,500 2,000
Sales price/bucket at split off 12 9 15 10
Disposal cost/bucket at split off 8 5 11 4
Further processing costs 4 3 7 2
Final sales price 16 12 17 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 10,000 units

Selling price per unit 8.00
Selling cost per unit 3.00
Processing cost 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 200 units
Units started during February 1000 units
Work in process, ending inventory 240 units

Costs for Department A for February 2017 are:

Work in process, beginning inventory:
Direct materials P150,000
Conversion costs P208,000
Direct materials costs added during February P606,000
Conversion costs added during February 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 200 units
Units started during February 800 units
Work in process, ending inventory 240 units

Costs for Department A for February 2017 are:

Work in process, beginning inventory:
Direct materials P150,000
Conversion costs P210,000
Direct materials costs added during February P603,000
Conversion costs added during February 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 Beginning WIP Ending WIP

Transferred in ? ?
Direct materials 80% 70%
Direct Labor 40% 50%
Overhead 30% 40%
 Cost Data Beginning WIP Added During the Period
Transferred In P132,000 P540,000
Direct materials 47,000 161,600
Direct Labor 12,000 171,200
Overhead 7,000 129,600

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 43,500
Conversion 28,000 71,500
Current period
Material 75,000
Conversion 39,000 114,000
Total cost to be accounted for 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 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 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 four-
variance 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 Cost driver Budgeted Budgeted cost

activity
Materials handling No. of parts handled 5,000,000 P 850,000
Setup costs No. of setups 500 415,000
Machining costs Machine hours 45,500 660,000
Quality control No. of batches 500 125,000
Total manufacturing overhead cost 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 P5.20
Direct labor cost per unit (.05 DLH @ P15.00/DLH) .75
Total prime cost P5.95

Sales and production data:

Expected sales 20,000 units
Batch size 5,000 units
Setups 2 per batch
Total parts per finished unit 5 parts
Machine hours required 70 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 Cost driver Amount of activity Center cost

Materials handling Grams handled 200,000 grams P 150,000
Painting Units painted 75,000 units 300,000
Assembly Labor hours 4,800 hours 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) P18,500
b) P19,645
c) P21,455
d) 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 P35

Direct labor 28
Factory overhead (includes an allowance of P1 for spoiled work) 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 P5
Direct labor 4
Factory overhead (applied at 150% of direct labor cost) 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) P1,050 to work-in-process
b) P1,050 to factory overhead control
c) P918.75 to work-in-process
d) P918.75 to factory overhead control

40. 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 Problems
1. B 1. D
2. A 2. A
3. B 3. A
4. C 4. C
5. C 5. D
6. C 6. D
7. D 7. A
8. B 8. A
9. B 9. C
10. D 10. C
11. C 11. D
12. A 12. C
13. C 13. B
14. D 14. D
15. B 15. B
16. D 16. C
17. C 17. A
18. D 18. D
19. A 19. B
20. B 20. C
21. C 21. A
22. D 22. C
23. C 23. D
24. D 24. B
25. A 25. B
26. A 26. C
27. C 27. A
28. A 28. A
29. A 29. D
30. B
30. D
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 3,840,000.00

NRV of W-14 (420000-180000) - 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) 25000.00

Selling Price per Unit 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 44%

Joint Conversion Costs 200000.00

Joint Conversion Cost Allocated to R 88000.00

 3. (A) 29,333

Joint Cost: 60,000

Less: Net Realizable Value of by-product
Sales 10,000
Further cost (5,000) 5,000
Joint cost to be allocated to main product 55,000
Blue = 55,000 x 40,000/75,000
= 29,333

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 E N I
Bucket 750 1,000 1,500 2,000
Sales price/bucket at split off 12 9 15 10
Disposal cost/bucket at split off 8 5 11 4
Net realizable value at split off 4 4 4 6
Total (bucket x NRV) 3,000 4,000 6,000 12,000
I = (12,000/25,000) X 15,000
= 7,200

6. (D) 51,000
Product Sales value at split-off Allocated cost
Stay 50,000 50/85 30,000
Gone 35,000 35/85 21,000
85,000 51,000

7. (A)
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.

8. (A)
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) 6,000 6/24 1,420
Product J (1,200 x 15) 18,000 18/24 4,260
24,000 5,680

Allocated joint cost – Product J 4,260

Additional processing cost (1,200 x 3) 3,600
Total cost to produce Product J 7,860

11. (D) P4,217

Direct materials per unit (P150,000 / 200 units) P750

Conversion costs per unit (P208,000 / (200 × 0.3) units) 3,467
Total costs per unit P4,217

12. (C) 760 units

Number of units completed and transferred out = 200 units + 800 units - 240
units = 760 units

13. (B) P4

Current period cost P161,600

Divided by EUP 40,400
Cost per EUP 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: P198,000
Transferred in: 0 x 13.5 0
DM: 1,600 x 4 6,400
DL: 4,800 x 4 19,200
OH: 5,600 x 3 16,800
Total: P240,400

15. (B) P78,000

Ending Inventory:
Transferred in: 4,000 x 13.5 P54,000
DM: 2,800 x 4 11,200
DL: 2,000 x 4 8,000
OH: 1,600 x 3 4,800
Total: P78,000

16. (C) 5,600

Units started during the month 80,000

X Normal loss percentage (given) 7%
Normal loss 5,600 units

17. (A) 4,400

Total bags to be accounted for (15,000 + 80,000) 95,000

Total bags accounted for (67,000 + 18,000) (85,000)
Bags spoiled during process 10,000
Normal spoilage (0.07 x 80,000) (5,600)
Abnormal spoilage 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 0 liter
Units started 180,000 liters
Equivalent units 180,000 liters

20. (C) 162,500

Conversion Costs:
Beginning inventory 0 liter
Units started 180,000
Units to account for 180,000
Units transferred out 155,000
Ending inventory 25,000 liters

Units transferred out 155,000

Ending inventory, 30% complete 7,500
Equivalent units 162,500

21. (A) P5,300 unfavorable

Overhead 135,000
Divided by: Direct labor hours (2 * 9,000) 18,000
Total OH rate 7.50
Variable % 80%
Variable OH rate* 6
22. (C) Debit to material usage variance at P1,500

23. (D) 123,000

Budgeted Allowance based on Standard Hrs.

Fixed 50,000
Variable (P4 * 18,000) 72,000
Total 122,000
Add: Controllable Variance - Unfavorable 1,000
Actual FOH 123,000

24. (B) P9.50

Non-Controllable Variance - Favorable 28,500

Divided by: Difference
Budgeted hours 40,000
Less: Standard hours (12hrs. * 3,500) (42,000) 2,000
Standard rate - Fixed 14.25
Divided by: Fixed % 60%
Total OH Rate 23.75
Multiply by: Variable % 40%
Standard rate - Variable 9.5

25. (B) P1,200 unfavorable

Actual hours 17,200

Less: Standard hours (2 * 8,500) (17,000
)
Difference 200
Multiply by: Standard rate – Variable* 6
Variable overhead efficiency variance 1,200
 Overhead 135,000
Divided by: Direct labor hours (2 * 9,000) 18,000
Total OH rate 7.50
Variable % 80%
Variable OH rate* 6

26. (C) P6,150 favorable

27. (A) P5.50

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 135,000
Divided by: Direct labor hours (2 * 9,000) 18,000
Total OH rate 7.50
Variable % 20%
Variable OH rate* 1.50
31. (B) P10.00

Overhead charge using labor hours: P85 x 450 P38,250

Overhead charge using machine hours: P38,250 - P8,250 P30,000
Ratio of overhead costs to machine steps: P30,000/3,000 P10.00

32. (C) P6.58

Total manufacturing overhead cost 2,050,000.00

divide by: Budgeted machine hours 45,500.00
Overhead rate 45.05
multiply by: Machine hours required per batch 70.00
Total 3,153.85
divide by: Batch size 5,000.00
Overhead cost per unit 0.63
Prime cost per unit 5.95
Cost per unit 6.58

33. (D) P7.39

Material handling cost per part 0.17

Cost per setup 830.00
Machining costs per hour 14.51
Quality control cost per batch 250.00
Material handling costs: P0.17 x 5 parts x 20,000 units 17,000.00
Setup costs: P830 x 2 x 4 batches 6,640.00
Machining costs: P14.51 x 70 MH x 4 batches 4,061.54
Quality control costs: P250 x 4 batches 1,000.00
Total applied overhead 28,701.54
divide by: Expected sales 20,000.00
Overhead cost per unit 1.44
Prime cost per unit 5.95
Cost per unit 7.39
34. (C) P43,045

Overhead rates:
Materials handling 0.75
Painting 4.00
Assembly 25.00

Cost assignment:
Materials handling: P0.75 x 15,900 grams 11,925.00
Painting: P4 x 5,280 units 21,120.00
Assembly: P25 x 400 hours 10,000.00
Total overhead costs 43,045.00

35. (B) P362,500

Total manufacturing cost 900,000.00

less: Applied factory overhead 225,000.00
Prime costs 675,000.00
less: Direct labor costs
Applied factory overhead 225,000.00
divide by: % of direct labor costs 72% (312,500.00)
Direct materials used 362,500.00

36. (B) P19,645

Work-in-process, beginning 15,820
Added:
Direct materials 3,015
Direct labor (20 hours x P25) 500
Applied factory overhead (20 hours x P15.5) 310 3,825
Total cost of Job 473 19,645
37. (A) P87,000
Work-in-process, beginning -
Added:
Direct materials (P120,000 X 60%) 72,000
Direct labor (375 hours x P25) 9,375
Applied factory overhead (375 hours x P15) 5,625 87,000
Total cost of Job #0915 87,000

38. (A) P91.00

Charge to work-in-process (P91 x 5,200) 473,200
less: Spoilage cost (P91 x 200) (18,200)
Net cost of production 455,000
divided by: Number of good units produced 5,000
Unit cost 91

39. (D) P918.75 to factory overhead control

Direct labor cost 3.50
Factory overhead 5.25
Rework cost per unit 8.75
multiply by: defective units 105.00
Total rework cost 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) 25,950,000

less: Spoilage cost (P3000 x 600) (1,800,000)
Net cost of production 24,150,000
divided by: Number of good units produced 8,050
Unit cost 3,000