Junior Philippine Institute of Accountants

College of Business Administration

University of the East - Caloocan

Qualifying Exam Reviewer 2017

Cost Accounting

1. Pitino Company has a beginning inventory of direct materials on March 1 of $30,000 and
an ending inventory on March 31 of $36,000. The following additional manufacturing
cost data were available for the month of March:

Direct materials purchased $84,000

Direct labor 60,000
Factory overhead 80,000

During March, prime cost added to production was:

a. $140,000
b. $138,000
c. $144,000
d. $150,000
e. none of the above

2. During March, conversion cost added to production was:

a. $80,000
b. $144,000
c. $140,000
d. $138,000
e. none of the above

3. When the number of units manufactured increases, the most significant change in
average unit cost will be reflected as:
a. a decrease in the variable element
b. a decrease in the nonvariable element
c. an increase in the semivariable element
d. an increase in the variable element
e. an increase in the nonvariable element

4. At the end of the year, Paola Company had the following account balances after applied
factory overhead had been closed to Factory Overhead Control:

Factory Overhead Control $ 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:
a. carry it as a deferred credit on the balance sheet
b. report it as miscellaneous operating revenue on the income statement
c. credit it to Cost of Goods Sold
 d. prorate it between Work in Process and Finished Goods
e. prorate it among Work in Process, Finished Goods, and Cost of Goods
Sold

5. Howell 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)

Howell 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?
a. $6,750
b. $2,250
c. $2,500
d. $4,250
e. $9,000

6. Selected cost data (in thousands) concerning the past fiscal year's operations of the
Moscow Manufacturing Company are presented below.

Inventories
Beginning Ending
Materials $ 75 $ 85
Work in process 80 30
Finished goods 90 110

Materials used, $326

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), $686
Cost of goods available for sale, $826
Selling and general expenses, $25

The cost of direct materials purchased during the year amounted to:
a. $360
b. $316
c. $336
d. $411
e. none of the above

7. Direct labor costs charged to production during the year amounted to:
a. $216
b. $135
c. $225
d. $360
e. none of the above
8. The cost of goods manufactured during the year was:
a. $736
b. $716
c. $636
d. $766
e. none of the above

9. The cost of goods sold during the year was:

a. $716
b. $691
c. $801
d. $736
e. none of the above

10. Applied Factory Overhead is debited and Factory Overhead is credited to:
a. close the estimated overhead account to actual overhead
b. record the actual factory overhead for the period
c. charge estimated overhead to all jobs worked on during the period
d. to record overapplied overhead for the period
e. none of the above

11. An item that does not appear on a cost of production report is:
a. work in processbeginning inventory
b. cumulative costs through the end of departmental production
c. finished goodsending inventory
d. materials used in the department
e. unit costs added by the department

12. Goode Manufacturing has three producing departments in its factory. The ending
inventory in the Milling Department consisted of 3,000 units. These units were 60%
complete with respect to labor and factory overhead. Materials are applied at the end of
the milling process. Unit costs for the complete process in the Milling Department are:
materials, $1; labor, $2; and factory overhead, $3. The appropriate unit cost for each unit
in the ending inventory is:
a. $2
b. $5
c. $3
d. $6
e. $4

13. In a process costing system, how is the unit cost affected in a production cost report
when materials are added in a department subsequent to the first department and the
added materials result in additional units?
a. The first department's unit cost is increased, but it does not necessitate
an adjustment of the transferred-in unit cost.
b. The first department's unit cost is decreased, but it does not necessitate
an adjustment of the transferred-in unit cost.
c. The first department's unit cost is not affected.
d. The first department's unit cost is increased, which necessitates an
adjustment of the transferred-in unit cost.
 e. The first department's unit cost is decreased, which necessitates an
adjustment of the transferred-in unit cost.

14. Read, Inc. instituted a new process in October. During October, 10,000 units were
started in Department A. Of the units started, 7,000 were transferred to Department B,
and 3,000 remained in work in process at October 31. The work in process at October
31 was 100% complete as to material costs and 50% complete as to conversion costs.
Materials costs of $27,000 and conversion costs of $39,950 were charged to
Department A in October. What were the total costs transferred to Department B?
a. $46,900
b. $53,600
c. $51,800
d. $57,120
e. none of the above

15. Chicago 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:
a. 7,200 units
b. 16,000 units
c. 11,200 units
d. 13,200 units
e. 12,800 units

16. Dover 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 for the month of April?

Materials Conversion
a. 255,000 255,000
b. 270,000 280,000
c. 280,000 270,000
d. 305,000 275,000
e. 240,000 250,000

17. The first-in, first-out method of process costing will produce the same cost of goods
manufactured amount as the average cost method when:
a. there is no beginning inventory
b. there is no ending inventory
c. beginning and ending inventories are each 50% complete
d. beginning inventories are 100% complete as to materials
e. goods produced are homogeneous
18. During March, Quig Company's Department Y equivalent unit product costs, computed
under the average cost method, were as follows:

Materials $1
Conversion 3
Transferred-in 5

Materials are introduced at the end of the process in Department Y. There were 4,000
units (40% complete as to conversion costs) in work in process at March 31. The total
costs assigned to the March 31 work in process inventory should be:
a. $36,000
b. $28,800
c. $27,200
d. $24,800
e. none of the above

19. Department A is the first stage of Mann Company's production cycle. The following
information is available for conversion costs for the month of April:

Units
Beginning work in process (60% complete) 20,000
Started in April 340,000
Completed in April and transferred to Department B 320,000
Ending work in process (40% complete) 40,000

Using the fifo method, the equivalent units for the conversion cost calculation are:
a. 336,000
b. 360,000
c. 328,000
d. 320,000
e. 324,000

20. The labor efficiency variance is computed as:

a. the difference between standard and actual rates, multiplied by standard
hours
b. the difference between standard and actual hours, multiplied by standard
rate
c. the difference between standard and actual rates, multiplied by actual hours
d. the difference between standard and actual hours, multiplied by the
difference between standard and actual rates
e. a percentage of the labor time variance

21. In analyzing factory overhead variances, the volume variance is the difference between
the:
a. actual amount spent for overhead items during the period and the amount
applied during the period
b. variable efficiency variance and fixed efficiency variance
c. amount shown in the flexible budget and the amount shown in the master
budget
d. master budget application rate and the flexible budget application rate,
multiplied by actual hours worked
 e. budget allowance based on standard hours allowed for actual production
for the period and the amount of applied factory overhead during the
period

22. In its reports to management, a company disclosed the presence of a fixed efficiency
variance. The procedure used to analyze variances was the:
a. four-variance method
b. mix and yield variances method
c. two-variance method
d. alternative three-variance method
e. three-variance method

23. When computing variances from standard costs, the difference between actual and
standard price multiplied by actual quantity yields a:
a. price variance
b. volume variance
c. mix variance
d. yield variance
e. combined price-quantity variance

24. Information about Sargent Company's direct material costs is as follows:

Standard unit price $ 3.60

Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450
Materials purchase price varianceunfavorable $ 240

What was the actual purchase price per unit, rounded to the nearest penny?
a. $3.06
b. $3.11
c. $3.45
d. $3.75
e. $3.60

25. Using the following symbols, which formula represents the calculation of the labor rate
variance?

AH = Actual hours
SH = Standard hours allowed for actual production
AR = Actual rate
SR = Standard rate

a. SR(AH - SH)
b. AR(AH - SH)
c. AH(AR - SR)
d. SH(AR - SR)
e. SH(SR - AR)

26. When a change in the manufacturing process reduces the number of direct labor hours
and standards are unchanged, the resulting variance will be:
a. an unfavorable labor usage variance
b. an unfavorable labor rate variance
 c. a favorable labor rate variance
d. a favorable labor usage variance
e. both (C) and (D) above

27. Information on Orman Company's direct labor costs is as follows:

Standard direct labor rate $ 3.75

Actual direct labor rate $ 3.50
Standard direct labor hours 10,000
Direct labor usage (efficiency) variance $ 4,200 U

What were the actual hours worked, rounded to the nearest hour?
a. 11,914
b. 10,714
c. 11,120
d. 11,200
e. none of the above

28. Each unit of Product 8in1 requires two direct labor hours. Employee benefit costs are
treated as direct labor costs. Data on direct labor are as follows:

Number of direct employees 25

Weekly productive hours per employee 30
Estimated weekly wages per employee $ 240
Employee benefits (related to weekly wages) 25%

The standard direct labor cost per unit of Product 8in1 is:
a. $8.00
b. $10.00
c. $12.00
d. $20.00
e. none of the above

29. The following information relates to Department 1 of Ruiz Company for the fourth
quarter. The total overhead variance is divided into three variances: spending, variable
efficiency, and volume.

Actual total overhead (fixed plus variable) $178,500

Budget formula $110,000 + $ .50 per hour
Total overhead application rate $1.50 per hour
Actual hours worked 121,000

What was the spending variance in this department during the quarter?
a. $8,000 favorable
b. $4,500 favorable
c. $8,000 unfavorable
d. $4,500 unfavorable
e. none of the above

30. The following information relates to Department 1 of Ruiz Company for the fourth
quarter. The total overhead variance is divided into three variances: spending, variable
efficiency, and volume.
 Actual total overhead (fixed plus variable) $178,500
Budget formula $110,000 + $ .50 per hour
Total overhead application rate $1.50 per hour
Actual hours worked 121,000
Standard hours allowed for production 130,000

What was the variable efficiency variance in this department during the quarter?
a. $4,500 favorable
b. $8,000 favorable
c. $4,500 unfavorable
d. $8,000 unfavorable
e. none of the above

31. Under the two-variance method for analyzing factory overhead, the controllable (budget)
variance is the difference between the:
a. actual fixed factory overhead and the budgeted fixed overhead
b. budget allowance based on standard hours allowed and the factory
overhead applied to production
c. budget allowance based on standard hours allowed and the budget
allowance based on actual hours worked
d. actual factory overhead and the factory overhead applied to production
e. actual factory overhead and the budget allowance based on standard
hours allowed

32. Under the two-variance method for analyzing factory overhead, the factory overhead
applied to production is used in the computation of the:

Controllable Volume
(Budget) Variance Variance
a. yes no
b. yes yes
c. no yes
d. no no

33. Under the three-variance method for analyzing factory overhead, which of the following
is used in computation of the spending variance?

Actual Factory Budget Allowance

Overhead Based on Actual Hours
a. no yes
b. no no
c. yes no
d. yes yes

34. Compute the variable efficiency variance, using the following data:

Standard labor hours per good unit produced 2

Good units produced 1,000
Actual labor hours used 2,100
Standard variable overhead per standard labor hour $3
Actual variable overhead $ 6,500
 a. $200 favorable
b. $200 unfavorable
c. $300 favorable
d. $300 unfavorable
e. none of the above

35. In the alternate three-variance method, the efficiency variance is:

a. Standard factory overhead rate x (Actual units of allocation base -
Standard units of allocation base allowed)
b. Actual factory overhead incurred - Budget allowance based on actual
hours
c. Budget allowance based on actual hours - (Actual hours x Factory
overhead rate)
d. Budgeted fixed factory overhead - (Actual hours x Fixed overhead rate)
e. none of the above

36. The four-variance method reconciles to the two-variance method by combining which of
the following to get the controllable variance?
a. fixed efficiency variance and idle capacity variance
b. spending variance and fixed efficiency variance
c. spending variance and idle capacity variance
d. spending variance and variable efficiency variance
e. none of the above

37. The four-variance method reconciles to the two-variance method by combining which of
the following to get the volume variance?
a. spending variance and variable efficiency variance
b. fixed efficiency variance and idle capacity variance
c. variable efficiency variance and fixed efficiency variance
d. spending variance and idle capacity variance
e. none of the above

38. Information on Duke Co.'s direct material costs for May is as follows:

Actual quantity of direct materials purchased and used 30,000 lbs.

Actual cost of direct materials $ 84,000
Unfavorable direct materials usage variance 3,000
Standard quantity of direct materials allowed for production 29,000 lbs.

For the month of May, Duke's direct materials price variance was:
a. $2,800 favorable
b. $2,800 unfavorable
c. $6,000 unfavorable
d. $6,000 favorable
e. none of the above

39. A company uses a standard cost system to account for its only product. The materials
standard per unit was 4 lbs. at $5.10 per lb. Operating data for April were as follows:

Material used 7,800 lbs.

Cost of material used $ 40,950
 Number of finished units produced 2,000

The material usage variance for April was:

a. $1,020 favorable
b. $1,050 favorable
c. $1,170 unfavorable
d. $1,200 unfavorable
e. none of the above

40. The direct labor standards for producing a unit of a product are two hours at $10 per
hour. Budgeted production was 1,000 units. Actual production was 900 units, and direct
labor cost was $19,000 for 2,000 direct labor hours. The direct labor efficiency variance
was:
a. $1,000 favorable
b. $1,000 unfavorable
c. $2,000 favorable
d. $2,000 unfavorable
e. none of the above
Answer Key:

1. B. [( $ 30,000 + $ 84,000) - $ 36,000] + $60,000 = $ 138,000

2. C. $ 60,000 + $ 80,000 = $ 140,000
3. B. a decrease in the nonvariable element
4. C. credit it to Cost of Goods Sold
5. D. $ 12,000 + $ 40,000 + $ 30,000 + $ 27,000 - $ 100,000 = $ 9,000
$ 9,000 - $ 2,250 ($ 2,250/ 90%) = $ 4,250
6. C. $ 326 + $ 85 - $75 = $ 336
7. C. $686 - $326 = $ 360/ 160% = $ 225
8. A. $ 80 + $ 686 - $ 30 = $ 736
9. A. $ 90 + $ 736 - $ 110 = $ 716
10. A. close the estimated overhead account to actual overhead
11. C. finished goodsending inventory
12. C. ( $2 + $3) x 60% = $3
13. E. The first department's unit cost is decreased, which necessitates an adjustment
of the transferred-in unit cost.
14. C. $ 27,000/ 10,000 = $ 2.70
$ 39,950/ [ 7,000 + (3,000 x 50%)] = $ 4.70
($ 2.70 + $4.70) x 7,000 = $ 51,800
15. E. 8,000 + (8,000 x 60%) =12,800 units
16. C. Materials = $ 40,000 + $ 240,000 = $ 280,000
Conversion = ($ 280,000 - $ 25,000) + ($ 25,000 x 60%) = $ 270,000
17. A. there is no beginning inventory
18. D. ( $5 x 4,000) +[( $3 x 4,000) x 40%] = $24,800
19. E. ($ 20,000 x 40%) + $340,000 - $ 40,000 + ($ 40,000 x 40%) = $ 324,000
20. B. the difference between standard and actual hours, multiplied by standard rate
21. E. budget allowance based on standard hours allowed for actual production for the
period and the amount of applied factory overhead during the period
22. A. four-variance method
23. A. price variance
24. D. [( 1,600 x $3.60 ) + $ 240] / 1,600 = $ 3.75
25. C. AH(AR - SR)
26. D. a favorable labor usage variance
27. C. [( 10,000 x $ 3.75) + $ 4,200] / $ 3.75 = 11,120 hours
28. D. [ $240/ (30/2)] x 125% = $20
29. C. [$ 110,000 + ($ .50 x 121,000)] - $ 178,500 = $ 8000 U
30. A. (130,000 x $ .50) (121,000 x $ .50) = $ 4,500 F
31. E. actual factory overhead and the budget allowance based on standard hours
allowed
32. C. no yes
33. D. yes yes
34. D. (1,000 x 2 x $3) (2,1000 x $3) = $ 300 U
35. A. Standard factory overhead rate x (Actual units of allocation base - Standard units
of allocation base allowed)
36. D. spending variance and variable efficiency variance
37. B. fixed efficiency variance and idle capacity variance
38. D. $3,000 = x (30,000 - 29,000)
1,000 x = $3,000
x = $3
y = $2.80 - $3.00(30,000)
y = ($6,000) favourable
39. A. x = $5.10 [7,800 - (2,000 x 4)]
x = ($1,020) favourable
40. D. x = $10 [2,000 - (900 x 2)]
x = $2,000 unfavorable