UNIVERSITY OF SANTO TOMAS

ALFREDO M. VELAYO COLLEGE OF ACCOUNTANCY

SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS
A.Y. 2016-2017

COST ACCOUNTING (PROCESS COSTING)

PROBLEM 1

Compute the equivalent units of production of conversion cost for each of the following independent
cases

A. In process, end (5/8 incomplete) 42,400 units

In process, beg (1/3 to be completed) 29,250 units
(Units started in process is 175% of the work in process at the end)

1. EUP using FIFO

B. In process, beg (3/5 additional work to be done) 10, 125 units

Finished and Transferred units 15,570 units
(Of the units started in process, represent work in process
at the end which were 20% completed during the current period)

2. EUP using Average

PROBLEM 2

IDOL Inc. adds materials at the beginning of the process in department USB conversion costs were 70%
complete as to the 9,500 work-in-process units on September 1 and 40% incomplete as to the 7,000
work-in-process units on September 30. During September, 12,000 units were completed and
transferred to the next department. An analysis of the cost relating to work-in-process on September 1
and to production activity for September is as follows: (2 decimal places)

Costs

Materials Conversion

Work-In-process, September 1 P10,000 P7,500

Costs Incurred during September P42,750 P52,525

3. The total cost per equivalent unit for September under FIFO
4. The total cost per equivalent unit for September under average

PROBLEM 3

The following information is available for Updharmadown Corporation for the current month:
Started this month 120,000 units
Beginning WIP (3/5 incomplete) 11,250 units
Total spoilage 3,000 units
Abnormal spoilage 1,350 units
Ending WIP (30% to be done) ?
Transferred out 108,750 units

Beginning Work In Process Costs:

Material P15,600
Conversion P20,700

Current Costs:
Material P180,000
Conversion P525,915

All materials are added at the start of production and inspection point is at the end of the process. Using
the more accurate method representing the physical flow of units.

5. Total costs of units transferred out

6. The amount of work in process end
7. Cost of abnormal loss units

PROBLEM 4

Housemartins Corporation has the following information for the current month

Units started 175,000 units

Beginning Work In Process (65% to be done) 35,000 units
Total Spoilage 14,875 units
Spoilage within tolerance level 6,125 units
Ending Work In Process (20% incomplete) 23,375 units
Transferred out ? units

Beginning Work In Process Costs:

Material P46,250
Conversion P60,675

Current Costs:
Material P170,625
Conversion P265,335

All materials are added at the start of the production process. Housemartins Corporation inspects goods
at 100 percent completion as to conversion. Using the method that does not commingle the beginning
and the current period production activity.

8. What are the equivalent units of production for the conversion cost?
9. Total costs of transferred out units
10. The amount of work-in-process, end

PROBLEM 5

The Fantastic Decorations Corporation makes wreaths in two departments: Forming and Decorating.
Forming began the month with 500 wreaths in process that were 100 percent complete as to material
and 40 percent complete as to conversion. During the month, 6,500 wreaths were started and 4,900
units were completed. At month end, Forming had 1,200 wreaths that were still in process that were
100 percent complete as to material and 50% complete as to conversion. The company expects spoilage
of no more than 10% of the units started in process. Assume Forming uses the weighted average
method of process costing. Costs in the Forming Department are as follows:

Beginning Work In Process Costs:

Material P1,690
Conversion P2,300

Current Costs:
Material P14,820
Conversion P20,125

The Decorating Department had 600 wreaths in process at the beginning of the month that is 90%
incomplete as to conversion. The department had 800 units in ending Work In Process that were 85%
complete as to conversion. Inspection is done when the wreaths are 80% complete. After this, the
ribbons are added to the units. 4,100 units were completed during the month. Spoilage of no more than
3% of the units started and completed in considered to be normal. Decorating uses the FIFO method of
process costing and costs associated with Decorating are:

Beginning WIP inventory

Transferred In 1,170
Ribbon -
Conversion 6,210

Current Period:
Transferred In ?
Ribbon P26,980
Conversion P95,820

11. Total costs of units transferred out to Decorating Department

12. The amount of work in process, end in the Forming Department
13. Cost of abnormal loss units in Forming Department
14. What are the equivalent units of production for materials in Decorating Department?
15. What are the equivalent units of production for conversion cost in Decorating Department?

Answer Key

1. 57 450
2. 16 875
3. 10
4. 6.49
5. 645 690
6. 88 627.50
7. 7 897.50
8. 192 675
9. 469 606
10. 52 696
11. 31 850
12. 5 460
13. 1 625
14. 4 900
15. 5 200
 UNIVERSITY OF SANTO TOMAS
ALFREDO M. VELAYO COLLEGE OF ACCOUNTANCY
SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS
A.Y. 2016-2017

COST ACCOUNTING (JOINT AND BY PRODUCT)

Problem Solving

A. The Fantastic Decorations Corporation makes wreaths in two departments: Forming and Decorating.
Forming began the month with 500 wreaths in process that were 100 percent complete as to
material and 40 percent complete as to conversion. During the month, 6,500 wreaths were started
and 4,900 units were completed. At month end, Forming had 1,200 wreaths that were still in
process that were 100 percent complete as to material and 50 percent complete as to conversion.
The company expects spoilage of no more than 10 percent of the units started in process. Assume
Forming uses the weighted average method of process costing. Costs in the Forming Department
are as follows:

Beginning Work in Process Costs:

Material P3,175
Conversion 6,350
Current Costs:
Material P5,233
Conversion 15,697

The Decorating Department had 600 wreaths in process at the beginning of the month that is 90
percent incomplete as to conversion. The department had 300 units in ending Work in Process
that were 75 percent complete as to conversion. Inspection is done when the wreaths are 60
percent complete. Ribbons are added at 65 percent completion. Other materials are assumed
to be added evenly throughout the decoration process. 4,100 units were completed during the
month. Spoilage of no more than 15 percent of the units started and completed is considered
to be normal. Decorating uses the FIFO method of process costing, and the costs associated
with
Decorating are:

Beginning WIP Inventory:

Transferred In P3,144
Other Materials 768
Ribbon -
Conversion 823
Current Period:
Transferred In ?
Other Materials P64,025
Ribbon 27,192
Conversion 45,057

1. How much is Forming departments work in process inventory?

2. What is the amount of the transferred out cost of the Forming department?
3. How much is the total normal loss shouldered by the units started and completed?
4. How much is the cost of goods manufactured for the month?
5. What is the total cost to be charged to profit or loss for the month?
B. Stockton Company makes a chemical spray that goes through two processes. Data for February are
as follows:

Mixing Department Boiling Department

Gallons transferred to Boiling Department 75,000

Gallons transferred to finished goods 68,000
Gallons on hand at the end of the month 9,000 15,000
Percent complete as to conversion 40% 65%
Gallons on hand at the beginning of the month 8,000 8,000
Percent incomplete as to conversion 50% 85%

Costs incurred during February

Other materials P69,825 N/A
Chemical X 100,547 N/A
Chemical Y N/A P672,214
Conversion cost 210,910 287,499

Cost in beginning inventory

Other materials P9,975 N/A
Chemical X 23,203 N/A
Chemical Y N/A P118,626
Prior department costs N/A 65,000
Conversion cost 60,260 29,741

Other materials Chemical X and Chemical Y are added at the beginning, 45 percent and 90 percent
completion respectively.

Stockton uses the weighted average cost accumulation system.

Compute for the following:

6. The sum of the cost per EUP in the Mixing department.

7. Other materials cost contained in the ending work in process inventory of Mixing
department.
8. Total cost of the ending inventory units for February in the Boiling department.
9. Assuming the company has no balance in its finished goods inventory beginning account
and it has sold 61,900 units, what is the balance of cost of goods sold?

C. Sheldon Inc. purchases logs from independent timber contractors and processes them into three
types of lumber products as follows:
a. Studs for residential construction (walls and ceilings)
b. Decorative pieces (fireplace mantels and beams for cathedral ceilings)
c. Posts used as support braces (mine support braces for exterior fences around ranch
properties)

These products are the result of a joint process that involves removing bark from the logs,
cutting the logs into a workable size and then cutting the individual products from the logs,
depending upon the type of wood (pine, oak, walnut, or maple) and the size (diameter) of the
log.

Total joint costs amounted to P5,000,000. Product yield and sales value on a per-unit basis are
as follows:
 Product Monthly output Fully processed sales price Cost to sell

Studs P243,750 P8 P2
Decorative pieces 68,900 100 10
Posts 48,750 20 3

The studs and posts require no further processing whereas the decorative pieces must be
planed and further sized after emerging from the sawmill. This additional processing costs
P1,378,000 per month. Without this planning and sizing process, there is still an active market
for the unfinished decorative pieces where the sales and prices averages P50 per unit. The cost
that the company will incur to be able to sell the product will be the same regardless of their
decision ti sell as is or process further. The company uses the relative sales value method of
allocating joint cost and plans to maximize their profit for the period.

10. How much is the cost per unit of studs?

11. What is the total joint costs allocated to posts?
12. Assume that 35,000 studs, 5,000 decorative pieces and 12,000 posts are unsold at year
end and the balance in finished goods inventory beginning is zero, how much is the cost of
goods sold?

D. A pharmaceutical company processes a material which is to yield three outputs, Product D, E, and F.
The company has purchased P850,000 worth of raw materials and incurred conversion costs of
P350,000.

Product Gallons Selling price at Further processing Final selling

produced split off point processing cost price

D 22,000 P40 P180,000 P58

E 23,000 30 150,000 35

F 25,000 55 120,000 59

13. Which product/s must be sold at split off point?

14. By how much will the profit decrease if the company chooses to process all the products

further?

E. Quartz Company manufactures three different products from using a single raw material. Pertinent
information is presented below:

Amethyst Sapphire Turquoise

Kilos of output 165,000 231,000 264,000

Selling price per kilo P17.25 9.40 12.45
Cost to sell per kilo 2.75 3.05 2.40
 Separate Processing Cost Total Cost

Amethyst Sapphire Turquoise

Materials P1,500,000
Direct Labor P250,000 P340,000 P690,000 1,280,000
Variable factory overhead 123,750 173,250 198,000 495,000
Fixed factory overhead 297,000 202,000 101,000 600,000

All the units produced were also sold during the year except 46,200 units of sapphire. There was no
finished goods inventory beginning.

Assume the use of physical measure of allocating joint cost:

15. What is the gross profit for Quartz Company?

16. What is the net income of Quartz for the year?
17. What is the balance of finished goods inventory end?

Assume the use of relative sales value method of allocating joint cost (no rounding off for the
percentage to be used for allocation):

18. How much of the total joint cost was allocated to Sapphire?
19. How much is the cost per unit of Turquoise?
20. What is the amount to be reported as operating expense for the year?
21. How much is the net income of Quartz for the year?

F. The following information relating to the cost of quality if Hansen Company is presented below:

Recruiting P350,000
Continuing supplier verification 250,000
Packaging inspection 50,000
Litigation 50,000
Quality training 275,000
Marketing research 125,000
Quality audits 134,000
Warranty costs 35,600
Discounts due to defects 45,000
Rework costs 37,800
Lost profit from selling defective units 69,800

Compute the following:

22. Total prevention cost.

23. Total appraisal cost.
24. Total internal failure cost.
25. Total external failure cost.

G. Maxwell Company has presented you with the following information:

Defective units 1,500

Units reworked 700
Customer claims processed 845
Discounts due to defects P12,250
 Warranty expense 56,800
Profit per unit of regular sales 36
Profit per unit of defective units 22
Cost per customer claim processed 45
Rework cost per unit 5

26. How much is the lost from profit from selling defective units?
27. How much is the total cost of noncompliance?

Answer Key

1. 3 882
2. 25 235
3. 8 240
4. 144 075
5. 11 922
6. 6.05
7. 8 550
8. 133 530
9. 1 359 324
10. 6.28
11. 765 306
12. 5 673 605
13. Product E and F
14. 55 000
15. 4 243 220
16. 2 592 230
17. 248 050
18. 392 211
19. 6
20. 1 650 990
21. 2 565 671
22. 884 000
23. 300 000
24. 107 600
25. 130 600
26. 11 200
27. 121 775
 UNIVERSITY OF SANTO TOMAS
ALFREDO M. VELAYO COLLEGE OF ACCOUNTANCY
SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS
A.Y. 2016-2017

COST ACCOUNTING (STANDARD COSTING)

Problem 1

Compute for the missing items: nos. 1-12 are based on the foregoing:

CASE I (2-Way)

Standard Factory Overhead P 7,500

Controllable Variance P 500 - F
Total Factory Overhead Variance P 500 - UF

1. Actual Factory Overhead

2. Budgeted Overhead based on standard hours
3. Volume Variance

CASE II (3-Way)
Standard Factory Overhead P 9,800
Spending Variance P 1000 - F
Volume Variance P 500 - UF
Variable Efficiency Variance P 200 - UF

4. Budgeted OH based on Standard Hours

5. Budgeted OH based on Actual Hours
6. Actual Factory Overhead
7. Total Factory OH Variance

CASE III (4-Way)

Standard Factory Overhead P 10.00 (40% is fixed)
Efficiency Variance P 200 - F
Variable Spending Variance P 1,400 - UF
Actual Fixed Overhead P 6,500
Standard Hours Allowed 1,800 hours
Normal Capacity 2,000 hours

8. Actual Factory Overhead

9. Volume Variance
10. Fixed Spending Variance
11. Actual hours worked
12. Total Factory Overhead cost variance
Problem 2

The standard cost of one unit of a manufactured product of JUGGERNAUT Company follows:

Materials - 5 pounds @ P0.20 Labor - 4 hours @ P7.00 per hour

Actual date for the month of October:

Materials purchased 100,000 lbs. @ P0.21 per lb
Materials used to manufacture 10,000 units 60,000 lbs.
Actual direct labor hours 39,000 @ P6.80/hr

13. Material purchase price variance

14. Labor efficiency variance
15. Labor rate variance
16. Material quantity variance

Problem 3

The PSYLOCKE Company manufactures one product and provides you with the follwingin formation for
the year 2012:

Normal direct labor hours - 155,000 Actual direct labor hours - 148,000
Actual Variable OH - P475,000 Actual fixed OH - P632,500
Standard fixed OH - P4.00/hr Units manufactured - actual 60,000
Total Budgeted factory OH - P1,085,000

Based on the standard, it takes 2.5 hours to produce a finished unit.

17. Variable overhead spending variance

18. Variable efficiency variance
19. Fixed overhead spending variance
20. Fixed overhead volume variance

Problem 4

Selected data for SENTINEL COMPANY is as follows:

Standard wage rate - P5.00 Labor efficiency variance - P400 FAV

Actual wage rate - P4.75 Standard hours allowed for actual production - 7,500

21. Calculate the actual hours worked rounded to the nearest hour.
22. How much is the total labor variance?

Problem 5

During August 2012, WAR MACHINE Company produced 1,000 units of a product. Actual material cost is
P2.20 per pound. The direct material standard requires 4 pounds of material per unit of product at a
standard price of P2.00 per pound. The material price variance is P720. Assume the quantity purchased
and used is the same.

23. Compute for the material usage variance.

Problem 6

The BLACKHEART HOSPITAL performs blood tests in its laboratory. The following standards have been
set for each blood rest performed.
 Item Std. Price or Quantity Std. Rate or hours
Direct Materials 2 plates P2.75 per plate
Direct Labor 0.2 hours P15.00 per hour
Variable overhead 0.2 hours P7.00 per hours

During October, the laboratory performed 1,500 blood tests. On October 1, there were plates
on hand; after a plate is used for a blood test it is discarded. Variable overhead is assigned to blood tests
on the basis of direct labor hours.

The following events occurred during October:

A. 3,600 plates were purchased at a cost of P9,540
B. 3,00 plated were used for blood tests
C. 340 actual direct labor hours were worked at a cost of P5,100
D. Actual Variable overhead - P2,500

Compute the following:

24. The material price variance

25. The material quantity variance
26. The labor rate variance
27. The labor efficiency variance
28. The variable overhead spending variance

Answer Key

1. 8 000
2. 8 500
3. 1 000 UF
4. 10 300
5. 10 500
6. 9 500
7. 300 F
8. 18 500
9. 800 UF
10. 1 500 F
11. 1 767
12. 500 UF
13. 1 000 UF
14. 7 000 F
15. 7 800 F
16. 2 000 UF
17. 31 000 UF
18. 6 000 F
19. 12 500 UF
20. 20 000 UF
21. 7 420
22. 2 255 F
23. 800 F
24. 360 F
25. 550 UF
26. 0
27. 600 UF
28. 120 UF