Reviewer in Cost Accounting

(For Midterm Examination)

True or False
1. The journal entry to record normal spoilage specifically identified with a particular job includes a credit
to Work in Process. (True)
2. If a normal loss is anticipated on a specific job, the overhead application rate should include an amount
for the cost of defective units less disposal value. (True)
3. In an actual job-order costing system, factory overhead is assigned to a job continuously during the
production process. (False)
4. In a normal job order costing system, factory overhead is applied using predetermined rates times
standard input. (True)
5. In a job order costing system, costs are traced to departments and then allocated to units of product using
an average process. (False)
6. Job order costing is used in manufacturing companies and process costing is used in service firms.
(False)
7. A manufacturer of blank CDs would ordinarily use process costing rather than job order costing. (True)
8. When computing the cost per equivalent unit, it is not necessary to consider the percentage completion
of the units in the beginning inventory under the weighted average method. (True)
9. The cost per equivalent unit for conversion costs will always be the same under both the FIFO and the
weighted-average methods. (False)
10. In process costing, the same equivalent units in figure is used both for materials and conversion costs.
(False)
11. The cost per equivalent unit for conversion costs will always be the same under both the FIFO and the
weighted average methods if there is no beginning works in process inventory. (True)
12. The following journal entry would be made in a processing costing system when units that have been
completed with respect to the work done in the final processing department are transferred to the
finished goods warehouse: DR Finished Goods; CR Materials. (False)
Terminologies
1. The FIFO method of process costing will produce the same cost of goods transferred out amount as the
weighted average when
: There is no beginning Work in Process Inventory
2. If normal spoilage is detected at an inspection point within the process, (rather than at the end), the cost
of the spoilage should be
: Allocated to the good units that have passed the inspection point
3. Normal spoilage units resulting from a continuous process
: Result in a higher unit cost for the good units produced
4. All manufacturing costs other than direct materials are referred to as
: Conversion Cost
5. Cost of normal shrinkage and normal continuous losses in a process costing environment are handled by
the method of
: Neglect
6. When the cost of lost units must by assigned, and those same units must be included in an equivalent
unit schedule, these units are considered
: Abnormal and Continuous
7. An equivalent unit of material or conversion cost is equal to
: The amount of material or conversion cost necessary to complete one unit of production
8. Underapplied overhead resulting from unanticipated and immaterial price increases for overhead items
should be written off by
: Increasing Cost of Goods Sold
9. In a job order costing system, the use of indirect material would usually be reflected in the general
ledger as an increase in
 : Manufacturing Overhead Control
10. Applied Factory Overhead is debited and Factory Overhead is credited to
: Close the estimated overhead account to actual overhead
11. Under a job order cost system, the dollar/peso amount of the entry to transfer the inventory from Work
in Process to Finished Goods is the sum of the costs charged to all jobs
: Completed during the period
12. The cost of abnormal discrete units must be assigned to _____ units
: Lost
13. The number of completed units that could have been produced from the inputs applied is referred to as
: Equivalent units
14. The ________ report details all manufacturing quantities and costs, shows computation of EUP, and
indicates cost assignments to goods manufactured
: Cost of Production
15. At the end of the year Amcar Company had the following account balances after applied factory
overhead had been closed to Factory Overhead Control:
Factory Overhead Control.....................................................................P 1,000 CR
Cost of Goods Sold...............................................................................980,000 DR
Work in Process......................................................................................38,000 DR
Finished Goods...........................................................................................82,000 DR
The most common treatment of the balance in Factory Overhead Control would be to:
: Credit it to Cost of Goods Sold
16. Under the job order cost accumulation, the factory overhead control account controls
: Factory overhead analysis sheets
17. When a manufacturing company has a highly automated plant producing many different products,
probably the most appropriate basis of applying factory overhead costs to Work in Process is
: Machine hours
18. Factory Overhead Control is debited and payroll is credited for
: The distribution of indirect labor hours
19. Supplies needed for use in the factory are issued on the basis of
: Material Requisitions
20. Finished goods is debited and work in process is credited for a
: Transfer of completed production to the finished goods storeroom
21. A product requires processing in two departments, the baking department and then the packaging
department, before it is completed. Costs transferred out of the baking department will be transferred to
: Work in Process-Packaging Department
22. In a process costing system, direct labor and manufacturing overhead are normally
: Incurred in full at the beginning of the process
23. True statement about Process Cost Systems
: A process cost system has one work in process account for each process.
24. Process costing techniques should be used in assigning costs to products
: If a product is composed of mass-produced homogeneous units
25. In a normal cost system, debits to Work in Process Inventory would not be made for
: Actual Overhead
26. Characteristics of Job Order Costing and Process Costing
: Heterogeneous Products and Homogeneous Products; Small and large quantities
27. A credit to Work in Process inventory represents
: The transfer of completed items to finished goods inventory
28. Total manufacturing costs for the year plus beginning work in process inventory cost equals
: Total Manufacturing Costs to account for
29. A journal entry includes a debit to work in process inventory and a credit to raw material inventory for
the reason that
: The direct material was placed into production
30. True statement about job order cost sheets
: Serves as subsidiary ledger information for both Work in Process Inventory and Finished Goods
Inventory
31. The journal entry to apply overhead to production includes a credit to manufacturing overhead control
and a debit to
: Work in Process Inventory
32. Production overhead does not include the costs of
: Factory employee’s cafeteria departments
33. The journal entry to record the incurrence and payment of overhead costs for factory insurance requires
a debit to
: Manufacturing overhead and a credit to cash
34. Overapplied overhead would result if
: Overhead costs incurred were less than costs charged to production
35. An equivalent unit of material or conversion cost is equal to
: The prime cost
36. Which method of inventory costing treats direct manufacturing costs and manufacturing overhead costs
both variable and fixed, as Inventoriable costs?
: Absorption Costing
37. The statement which is correct regarding absorption costing/variable costing
: If finished goods inventory increases, absorption costing results in higher income.
38. What would be the effect on the contribution margin per unit and the contribution margin ratio if the
selling price and variable expenses both decrease by 5%?
: Decrease; No change
39. What will happen to the total contribution margin and the breakeven point if the fixed expense increases
and the variable expense and selling price remain constant?
: Increase; Unchanged
40. The event that is most likely to increase the company’s overall breakeven point
: A change in the relative market demand for the products, with the increase favoring petrol relative
septine and tridol.
41. The difference between total sales in pesos and total variable expenses is called
: Contribution Margin
42. The ratio of fixed expenses to the unit contribution margin is the
: Breakeven point in unit sales
43. Breakeven analysis assumes that over the relevant range
: Unit variable costs are constant
44. An allocated portion of fixed manufacturing overhead is included in absorption costing and/or variable
costing
: Yes; No
45. Net income reported under variable costing will exceed net income reported under absorption costing for
a given period if
: Sales exceed production for that period
46. Under direct costing, fixed manufacturing overhead cost totaled 200,000 and variable selling costs
totaled 180,000 should be classified as
: Period Cost (200,000); Product Cost (180,000)
47. Variable costs
: Increase in total when the actual level of activity increases
48. Formula in determining the cost of goods sold in a merchandising entity
: Beginning Inventory + Purchases – Ending Inventory
49. A company that produces 10,000 units has fixed costs of $300,000, variable costs of $50 per unit, and a
sales price of $85 per unit.  After learning that its variable costs will increase by 20%, the company is
considering an increase in production to 12,000 units.  Which of the following statements is correct
regarding the company’s next steps?
 : If production remains at 10,000 units, profit will decrease by 100,000 (10,000 * 20% * 50)
Computations:
1. Department E had 4,000 units in Work in Process that was 40% completed at the beginning of the period
at a cost of $12,500. Of the $12,500, $8,000 was for materials and $4,500 was for conversion costs.
14,000 units of direct materials were added during the period at a cost of $28,700. 15,000 units were
completed during the period, and 3,000 units were 75% completed at the end of the period. All materials
are added at the beginning of the process. Direct labor was $32,450 and factory overhead was $18,710.
If the average cost method is used the conversion cost per unit (to the nearest cent) would be

2. Perry Company uses a job order costing system and has the following information for the first week of
June: 1. Direct labor and direct materials used:
Job No. Direct Material Direct Labor Hours
498 $1,500 116
506 960 16
507 415 18
508 345 42
509 652 24
511 308 10
512 835 30
Total $5,015 256
The direct labor wage rate is $4 per hour. The overhead rate is $5 per direct labor hour. Actual overhead
costs for the week, $1,480. Jobs completed: Nos. 498, 506, and 509. The factory had no work in process
at the beginning of the week. Compute the amount of overhead over or Underapplied during this week.

3. Company manufactures tools to customer

specifications. The following data
pertain to
4. Job 1501 for April:
5. Direct materials
used...........................................................
.............................. P 4,200
6. Direct labor hours
worked......................................................
............................ 300
7. Direct labor rate per
hour...........................................................
........................ P 8.00
8. Machine hours
used...........................................................
............................... 200
9. Applied factory overhead rate per
machine
hour............................................... P
15.00
10. What is the total manufacturing cost
recorded on Job 1501 for April?
3. Amcar Company manufactures tools to customer specifications. The following data pertain to Job 1501
for April:
Direct materials used............................................................. P 4,200
Direct labor hours worked............................................................. 300
Direct labor rate per hour.......................................................... P 8.00
Machine hours used..................................................................... 200
Applied factory overhead rate per machine hour................... P 15.00
What is the total manufacturing cost recorded on Job 1501 for April?

4. Amcar Company adds material at the start to its production process and has the following information
available for March:
Beginning Work in Process Inventory
(40% complete as to conversion) 7,000 units
Started this period 32,000 units
Ending Work in Process Inventory
(25% complete as to conversion) 2,500 units
Transferred out ?
Compute the equivalent units of production for conversion using FIF0.
5. Raider Corporation uses the weighted-average method in its process costing system. The Molding
Department is the second department in its production process. The data below summarize the
department's operations in January.

Units (Percent Complete with Respect to Conversion)

Beginning work in process inventory 2,100 (50%)
Transferred in from the prior department during January 76,000
Completed and transferred to the next department during January 74,200
Ending work in process inventory 3,900 (70%)

The Molding Department's cost per equivalent unit for conversion cost for January was $3.91. How
much conversion cost was assigned to the ending work in process inventory in the Molding Department
for January?

6. Amcar Company uses the FIFO method in its process costing system. At the beginning of the month,
Department D's work in process inventory contained 2,000 units. These units were fully complete with
respect to materials and 40% complete with respect to conversion costs, with a total cost at that point of
$3,600. During the month, conversion costs amounted to $8 per equivalent unit. If all 2,000 units are
fully complete by the end of the month, their total cost by that time will be:

7. Department E had 4,000 units in Work in Process that was 40% completed at the beginning of the period
at a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of $28,700.
15,000 units were completed during the period, and 3,000 units were 75% completed at the end of the
period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory
overhead was $18,710. The number of equivalent units of production for the period for conversion if the
average cost method is used to cost inventories was:

8. The following information is available for Amcar Company for the current year:
Beginning Work in Process Costs of Beginning Work in Process:
(75% completed) 14,500 units Material $25,100
Started 75,000 units Conversion 50,000
Ending Work in Process Current Costs:
(60% complete) 16,000 units Material $120,000
Abnormal spoilage 2,500 units Conversion 300,000
Normal spoilage 5,000 units
(continuous)
Transferred out 66,000 units
Using FIFO, what are the equivalent units for conversion cost?

9. Same problem with No. 8. Using weighted average, what are the equivalent units for conversion cost?

10. Amcar Beach Products reports the following data for the first department in its production process:
Units in process at beginning of period
(All materials; 3/4 labor and factory overhead)............................ 5,000
Units started in process........................................................................ 35,000
Units transferred out.................................................................... 33,000
Units Still in process
(All materials; 1/2 labor and factory overhead)...............................5,000
Units Completed but not yet transferred to Finished Goods.................. 2,000
Related data were:
Work in Process at Beginning of Period Added
 Materials $100,000 $ 304,000
Labor 125,400 407,100
Factory overhead 173,500 407,750 Total
$398,900 $1,118,850
Using the weighted average costing method, how much is the total equivalent unit cost?

11. Same problem with No. 10. Determine the cost of the work in process ending inventory.

12. Quest Co. is a print shop that produces jobs to customer specifications. During January 20X6, Job
#3051was worked on and the following information is available:
Direct material used $2,500
Direct labor hours worked 15
Machine time used 6
Direct labor rate per hour $7
Overhead application rate per hour of machine time $18
What was the total cost of Job 3051 for January?

13. Amcar Company uses a job order costing system and develops its predetermined overhead rate based on
machine hours. The company has two jobs in process at the end of the cycle, Jobs #17 and #19.
Budgeted overhead P 100,300
Budgeted machine hours 85,000
Raw material P 63,000
Labor cost P 50,000
Fifty-four percent of raw material belongs to Job #17 and 38 percent belongs to Job #19, and the balance
is considered indirect material. What amount of raw material used was allocated to overhead as indirect
material?

14. Selected cost data (in thousands) concerning the past fiscal year's operations of the CDF Manufacturing
Company are presented below.
Inventory Beginning Ending
Materials P75 P85
Work in process 80 30
Finished goods 90 110
Materials used, P326
Total manufacturing costs charged to production during the year (including direct materials, direct labor,
and factory overhead applied at the rate of 60% of direct labor cost), P686
Cost of goods available for sale, P826
Selling and general expenses, P25
Direct labor costs charged to production during the year amounted to:

15. Amcar Corporation has a job order cost system. The following debits (credits) appeared in Work in
Process for the month of July:
July 1, balance.................................................................... $ 12,000
July 31, direct materials ..........................................................40,000
July 31, direct labor.................................................................30,000
July 31, factory overhead ...................................................... 27,000
July 31, to finished goods................................................... (100,000)
Amcar applies overhead to production at a predetermined rate of 90% based on the direct labor cost. Job
1040, the only job still in process at the end of July, has been charged with factory overhead of $2,250.
What was the amount of direct materials charged to Job 1040?
16. The Amcar Company estimated Department A's overhead at $255,000 for the period based on an
estimated volume of 100,000 direct labor hours. At the end of the period, the factory overhead control
account for Department A had a balance of $265,500; actual direct labor hours were 105,000. What was
the over- or under-applied overhead for the period?

17. Cherokee Company applies factory overhead on the basis of direct labor hours. Budget and actual data
for direct labor and overhead for the year are as follows:
Budget Actual
Direct labor hours ............................................600,000 650,000
Factory overhead costs ...................................$720,000 $760,000
The factory overhead for Cherokee for the year is:

18. C Co. uses a job order costing system during April 2001, the following costs appeared in the Work in
Process Inventory account:
Beginning Balance $24,000
Direct Material Used 70,000
Direct Labor Incurred 60,000
Applied Overhead 48,000
Cost of Goods Manufactured 185,000
C Co. applies overhead on the basis of direct labor cost. There was only one job left in WIP Inventory at
the end of April which contained $5,600 of overhead. What amount of direct material was included in
this job?

19. During January, Ark employees worked on Job #479. At the end of the month, $714 of the overhead had
been applied to this job. Total Work in Process Inventory at the end of the month as $6,800, and all
other jobs had a total cost of $3,981. What amount of direct material is included in Job #479?

20. Black Corp. manufactures products on a job order basis. The job cost sheet for job #329 shows the
following for March:
Direct Material $5,000
Direct Labor (100 hours at $7.25) $725
Machine hours incurred 40
Predetermined overhead rate per machine hour $26
At the end of March, what total cost appears on the job cost sheet for Job #329?

21. Carolina Co. applies overhead to jobs at the rate of 40% of direct labor cost. Direct material of $1,250
and direct labor of $1,400 were expended on Job #44 during June. At May 31, the balance of Job #44
was $2,800. The June 30th balance is?

22. BTS Co. has a job order costing system and an overhead application rate of 120% of direct labor cost.
Job #33 is charged with direct material of 12,000 and overhead of 7,200. Job #34 has direct material of
2,000 and direct labor of 9,000. What amount of direct labor cost has been charged to Job #33?

23. BTS Co. has a job order costing system and an overhead application rate of 120% of direct labor cost.
Job #33 is charged with direct material of 12,000 and overhead of 7,200. Job #34 has direct material of
2,000 and direct labor of 9,000. What amount of direct labor cost has been charged to Job #34?
24. At the end of the last fiscal year, Nayeon Company had the following account balances:
Overapplied overhead 6,000
Cost of Goods Sold 980,000
Work in Process Inventory 38,000
Finished Goods Inventory 82,000
If the most common treatment of assigning Overapplied overhead was used, the final balance in Cost of
Goods Sold would have been?

25. Carley Products has no Work in Process or Finished Goods inventories at the close of business on
December 31, 2020. The balances of Carley’s accounts as of December 31, 2021 are as follows:
Cost of Goods Sold $2,040,000
Selling and Administrative Expenses 900,000
Sales 3,600,000
Manufacturing Overhead Control 700,000
Manufacturing Overhead Applied 648,000
Carley Products’ pretax income for 2021 is?

26. The following data were taken from the accounting records of the Hazel Corporation which uses the
weighted-average method in its process costing system:
Beginning work in process inventory
(Materials 100% complete; Conversion 70% complete) 30,000 units
Started in process during the period 90,000 units
Ending Work in Process Inventory
(Materials 100%) complete; Conversion 60% complete) 20,000 units
The equivalent unit for material costs was?

27. Gyro Products transferred 10,000 units to one department. An additional 3,000 units of materials were
added in the department. At the end of the month, 7,000 units were transferred to the next department.
There was no beginning inventory. The costs for units transferred in would be effectively allocated
over?

28. Romel Laki Abs Processing Co. uses the average costing method and reported a beginning inventory of
5,000 units that were 20% complete with respect to materials in one department. During the month,
11,000 units were started; 8,000 units were finished; ending inventory amounted to 8,000 units that were
60% complete with respect to materials. Total materials cost during the period for work in process
should be spread over:

29. Romel Model Corporation's production cycle starts in the Mixing Department. The following
information is available for April:
Units
Work in process, April 1 (50% complete) 40,000
Started in April 240,000
Work in process, April 30 (60% complete) 25,000
Materials are added at the beginning of the process in the Mixing Department. Using the average cost
method, what are the equivalent units of production in materials and conversion for the month of April?
30. Daddy Mel Corporation has provided the following production and total cost data for two levels of
monthly production volume. The company produces a single product. Production volume
6,000 units 7,000 units
Direct materials $582,600 $679,700
Direct labor $136,200 $158,900
Manufacturing overhead $691,800 $714,700
The best estimate of the total monthly fixed manufacturing cost is?

31. During the month of May, direct labor cost totaled $15,000 and direct labor cost was 30% of prime cost.
If total manufacturing costs during May were $79,000, the manufacturing overhead was:

32. The budget data for the Bidwell Company appear below.
Sales (100,000 units) $1,000,000
Costs: Fixed Variable
Direct materials $0 $300,000
Direct labor 0 200,000
Manufacturing overhead 100,000 150,000
Selling and administrative costs 110,000 50,000
Total costs $210,000 $700,000 10,000
Budgeted operating income $ 90,000
Based on the above data, the breakeven sales in units would be?

33. Same problem with No. 32. If fixed costs increased $31,500 with no other cost or revenue factors
changing, the breakeven sale in units is?

34. Lindsay Company reported the following results from sales of 5,000 units of Product A for June:
Sales $200,000
Variable Expenses 120,000
Fixed Expenses 60,000
Assume that Lindsay increases the selling price of Product A by 10% in July 1. How many units of
Product A would have to be sold in July to generate an operating income of $20,000?

35. Pinaglaruan Lang Pala Company manufactures and sells dolls. The following information relates to the
operating results for the last quarter:
Stuff toys sold 19,375
Breakeven point in number of toys 15,500
Breakeven point in peso sales P 65,875
Total fixed costs P 47,275
What was the margin of safety percentage for the last quarter of Pinaglaruan Lang Pala? (Rounded to
the nearest percent)

36. Sinayang Ko Lang Company, which has only one product, has provided the following data concerning
its most recent month of operations:
Selling Price P 106
Units in Beginning Inventory 0
Units Produced 1,600
 Units Sold 1,400
Units in Ending Inventory 200
Variable Costs per Unit:
Direct Materials P 15
Direct Labor P 14
Variable Manufacturing Overhead P6
Variable Selling & Manufacturing P4
Fixed Costs:
Fixed Manufacturing Overhead P 51,200
Fixed Selling and Administrative P 23,800
The total contribution margin for the month under the variable costing approach is?

37. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of
$600,000 in the monthly advertising budget, will double unit sales. What will the new contribution
format income statement look like if these changes are adopted?