FAR EASTERN UNIVRSITY

COST ACCOUNTING
Name: Section Date:

Test 1THEORY: Encircle the letter of your final answer (1PT EACH)

1. A standard cost system may used in

a. Job order costing but not process costing.
b. Either job-order costing or process costing.
c. Process costing but mot job-order costing.
d. Neither process costing nor job-order costing.

2. A company that uses job-order costing

a. cannot use standard costs.
b. accumulates costs by department.
c. probably makes a single product.
d. does not have to calculate equivalent production.

3. Which of the following is a purpose of standard costing?

a. Determine breakeven production level.
b. Control costs.
c. Eliminate the need for subjective decisions by management.
d. Allocate cost with more accuracy.

4. Which of the following is NOT relevant in determining weighted-average unit cost in process costing?
a. Cost of beginning inventory.
b. Equivalent unit production in beginning inventory.
c. Equivalent unit production in ending inventory.
d. Units completed.

5. Which one of the following is true concerning standard costs?

a. Standard costs are estimates of costs attainable only under the most ideal conditions, but
rarely practicable.
b. Standard costs are difficult to use with a process costing system.
c. If properly used, standard can help motivate employees.
d. Unfavorable variances, material in amount, should be investigated but large favorable
variances need not be investigated.

6. During the period, labor costs incurred on account amounted to P250,000 including P200,000 for
production orders and P50,000 for general factory use. In addition, factory overhead applied to
production was P23,000. From the following, select the entry to record the actual factory overhead
costs incurred.
a. Accounts Payable 50,000
Factory Overhead 50,000
b. Factory Overhead 23,000
Accounts Payable 23,000
c. Work in Process 50,000
Wages Payable 50,000
d. Factory Overhead 50,000
Wages Payable 50,000

7. It is usually necessary to calculate equivalent unit production for

a. materials.
b. conversion costs.
c. materials and conversion costs.
d. materials, conversion costs, and overhead.

8. CDE Company made the following journal entry.

Finished Goods Inventory P250,000
Work in Process Inventory P250,000

From this entry we can tell that CDE uses

a. job-order costing.
b. process costing.
c. standard costing.
d. any of the above.

9. The numerator of weighted-average unit cost calculations is

a. current period cost.
b. cost of beginning inventory.
c. current period cost plus cost of beginning inventory.
d. cost of goods sold.
10. The difference between the actual labor rate multiplied by the actual hours worked and the standard
labor rate multiplied by the standard labor hours in the
a. Total labor variance.
b. Labor rate variance
c. Labor usage variance
d. Labor efficiency variance

11. The four steps necessary to determine the cost of goods completed and the ending inventory valuation
in a process cost system are:
1. allocate costs to transferred and partially completed units
2. determine the units to be assigned costs
3. determine the cost per equivalent unit
4. calculate equivalent units of production

The correct ordering of the steps is:

a. 2, 4, 3, 1
b. 4, 2, 3, 1
c. 2, 3, 4, 1
d. 2, 3, 1, 4

12. Which of the following is not a characteristic of a job order costing system?
a. It accumulates cost for each department within the factory.
b. It provides a separate record for the cost of each quantity of product that passes through
the factory.
c. It is best suited for industries that manufactures custom goods.
d. Uses only one work in process account.

13. Which company is most likely to use process costing?

a. A manufacturer of nuclear reactors.
b. A construction contractor.
c. A cannery.
d. A textbook publisher.

14. Which formula gives weighted-average equivalent unit production? (UC = units completed, BI =
equivalent units in beginning inventory, EI = equivalent units in ending inventory)
a. UC + BI + EI.
b. UC + BI - EI.
c. UC + EI - BI.
d. UC + EI.

15. The entry to apply overhead in a job-order system is

a. debit Cost of Goods Sold, credit Manufacturing Overhead.
b. debit Finished Goods Inventory, credit Work-in-Process Inventory.
c. debit Work-in-Process Inventory, credit Manufacturing Overhead.
d. debit Work-in-Process Inventory, credit Direct Labor.

16. Backflushing, or backflush costing

a. requires significantly less recordkeeping than other methods.
b. can be used by any company.
c. ignores inventories.
d. does not distinguish between materials and conversion costs.

17. In the standard cost formula Y = a + bX, what does the b represent?
a. total cost
b. total fixed cost
c. total variable cost
d. variable cost per unit

18. For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and
installed in every automobile would best be described as a:
a. fixed cost.
b. mixed cost.
c. step-variable cost.
d. variable cost.

19. Both actual and normal costing

a. Require predetermined overhead rate.
b. Are likely to result in over or under-applied factory overhead.
c. Include material, labor and factory overhead in product cost.
d. All of the above
20. An advantage of normal costing over actual costing is that
a. The company can compute the exact cost of a unit of product.
b. The company need not forecast the level of productive activity for the year.
c. Unit costs are not affected by monthly fluctuations in production activity.
d. Control over fixed costs is improved.

21. The most accurate method of allocating the service department cost is
a. Step method
b. Direct method
c. Reciprocal method
d. Plant-wide method

22. When spoilage is a result of exacting specification of a job, any loss is charged to:
a. Factory overhead control
b. Selling and Administrative expenses
c. Ordinary losses
d. Specific job on which the spoilage occurred

23. If the value of the scrap is not material, the scrap is sold after its production, and the scrap is
common to all jobs in the production process, the scrap is recorded as a:
a. Debit to factory overhead control
b. Credit to factory overhead control
c. Credit to work in process inventory
d. Debit to work in process inventory

24. A fringe benefit of office staff is charged to

a. Work in Process account
b. Administrative Expenses
c. Selling Expenses
d. Factory Overhead Control

25. Shift Premium of factory laborer is charged to:

a. Work in Process account
b. Administrative Expenses
c. Selling Expenses
d. Factory Overhead Control

Test 2 STRAIGHT PROBLEMS: (2PTS EACH)

26. Information on Honeys direct labor costs for the month of January is as follows:

Actual direct labor rate P7.50

Standard direct labor hours allowed 11,000
Actual direct labor hours 10,000
Direct labor rate variance favorable P5,500
The standard direct labor rate in January was P 8.05

27. Sullivan Corp. direct labor costs for the month of March were follows:

Standard direct labor hours 42,000

Actual direct labor hours 40,000
Direct labor rate variance favorable P8,400
Standard direct labor rate per hour P6.30
What was Sullivans total direct labor payroll for the month of March? $243,600
Solution:
Labor rate variance = Actual hours (Actual rate Standard rate)
$8,400 = 40,000 (Actual rate $6.30)
Actual rate = $6.09
Direct labor payroll = Actual rate Actual hours
= $6.09 40,000 = $243,600
28. Universal Company uses a standard cost system and prepared the following budget at normal
capacity for the month of January:
Direct labor hours 24,000
Variable factory overhead P 48,000
Fixed factory overhead P 108,000
Total factory overhead per DLH P 6.50

Actual data for January were as follows:

Direct labor hours worked 22,000
Total factory overhead P 147,000
Standard DLH allowed for capacity attained 21,000

Using the two-way analysis of overhead variances, what is the budget (controllable) variance for January?
$3,000 Favorable

29. The following information is available from Tyro Company:

Actual factory overhead P15,000

Fixed overhead expenses, actual P7,200
Fixed overhead expenses, budgeted P7,000
Actual hours 3,500
Standard hour 3,800
Variance overhead rate per DLH P2.50

Assuming that Tyro uses a three-way analysis of overhead variance, what is the spending variance? $750
Favorable

30. Dubois Corp. has a just-in-time manufacturing system and maintains no ending materials or work in
process inventory balances. Dubois uses backflush costing and had the following data for March. The
company uses two trigger points(Purchase and Sale) to account for its inventories.

Beginning inventories none

Units finished 90,000
Units sold 88,000
Materials purchased and used P375,000
Direct labor and manufacturing overhead P525,000

Prepare journal entries to reflect the purchased of materials in March activity.

31. Prepare the journal entries to reflect the used of materials.

32. Prepare the journal entries to record the conversion costs incurred.

33. Prepare the journal entries to record the goods completed

34. How much is the cost of goods sold.

Solution:
a.Materials and In-Process Inventory $375,000
Accounts Payable $375,000
Conversion Costs $525,000
Assorted accounts $525,000
Cost of Goods Sold $880,000
Finished Goods $ 20,000
Materials and In-Process Inventory $375,000
Conversion Costs $525,000
b.$20,000[($375,000 + $525,000)/90,000 x 2,000]
c.$880,000[($375,000 + $525,000)/90,000 x 88,000]

35. Selected accounts with some debits and credits omitted are presented as follows:

Work in Process
Oct. 1 Balance 20,000 Oct. 31 Goods finished X
31 Direct materials 96,700
31 Direct labor 201,000
31 Factory overhead X

Finished Goods
Oct. 1 Balance 52,000
31 Goods finished 360,000
If the balance of Work in Process at October 31 is P21,000, what was the amount of factory overhead
applied in October? $63,300

36. Zeke Company is a manufacturing company that has worked on several production jobs during the
1st quarter of the year. Below is a list of all the jobs for the quarter:

Balance
Job 356 P 450
Job 357 1,235
Job 358 378
Job 359 689
Job 360 456

Job 356, 357, 358, & 359 were completed. Jobs 356 & 357 were sold at a profit of P500 on each
job.

What is the ending balance of Work in Process for Zeke Company as of the end of the 1st quarter?

37. What is the ending balance of Finished Goods for Zeke Company as of the end of the 1st quarter?

38. Cranston Company estimates the following overhead costs for the coming year:

Equipment depreciation P160,000

Equipment maintenance 60,000
Supervisory salaries 40,000
Factory rent 100,000
Total P360,000

Cranston is also budgeting P600,000 in direct labor costs and 15,000 machine hours for the
coming year.

Calculate the predetermined overhead rate using direct labor costs as the allocation base.

39. Calculate the predetermined overhead rate using machine hours as the allocation base.
Solution:
a. $360,000 / $ 600,000 = $ 0.60 per direct labor dollar
b. $360,000 / 15,000 machine hours - $24.00 per machine hours

40. The debits to Work in Process--Assembly Department for April, together with data concerning
production, are as follows:

April 1, work in process:

Materials cost, 3,000 units P 8,000
Conversion costs, 3,000 units,
66.7% completed 6,000
Materials added during April, 10,000 units 30,000
Conversion costs during April 31,000
Goods finished during April, 11,500 units ---
April 30 work in process, 1,500 units,
50% completed ---

All direct materials are placed in process at the beginning of the process and the first-in, first-out method
is used to cost inventories. The materials cost per equivalent unit for April is: $3.00

41. The cost per equivalent units of direct materials and conversion in the Bottling Department of
Mountain Springs Water Company is P.45 and P.12, respectively. The equivalent units to be assigned
costs are as follows.

Direct Materials Conversion

Inventory in process, beginning of period 0 3,500
Started and completed during the period 57,000 57,000
Transferred out of Bottling (completed) 57,000 60,500
Inventory in process, end of period 3,500 1,800
Total units to be assigned costs 60,500 62,300

The beginning work in process inventory had a cost of P2,200.

Determine the cost of completed and transferred out production,

Direct Materials Conversion Total

Inventory in process, balance $2,200
 Inventory in process, beginning of period 0 + 3,500 x $0.12 420
Started and completed during the period 57,000 x $0.45 + 57,000 x $0.12 32,490
Transferred out of Bottling (completed) $35,110
Inventory in process, end of period 3,500 x $0.45 + 1,800 x $0.12 1791
Total units to be assigned costs $36,901

Completed and transferred out production: $35,110

Inventory in process, ending $ 1,791

42. Jackson, Inc., is preparing a budget for next year and requires a breakdown of the cost of steam used
in its factory into fixed and variable components. The following data on the cost of steam used and
direct labor hours worked are available for the last six months:

Cost of Steam Direct Labor-Hours

July.................... P 15,850 3,000
August................ 13,400 2,050
September.......... 16,370 2,900
October............... 19,800 3,650
November........... 17,600 2,670
December........... 18,500 2,650
Total................... P101,520 16,920

If Jackson uses the high-low method of analysis, the estimated variable cost of steam per direct labor
hour would be: $4.00
Solution:
Variable cost = Change in cost Change in activity
= ($19,800 $13,400) (3,650 2,050) = $4.00

43. Shown below are units produced and total manufacturing costs for the past four months at Minga
Manufacturing Corporation:

Units Produced Total Cost

Jul............... 120 P446,000
Aug.............. 150 P508,000
Sep............... 180 P668,000
Oct............... 160 P574,000

What is Minga's cost formula for total manufacturing cost under the high-low method?
Y = $2,000 + $3,700X
44. The management of Dinky Tree Trimming believes that the number of trees trimmed each month is
an appropriate activity measure for total operating cost. Shown below are the number of trees
trimmed and operating costs in each of the last three months:

Trees Trimmed Operating Cost

March....................... 12 P2,600
April......................... 18 P2,990
May.......................... 20 P3,250

What is Dinky's cost formula for monthly operating cost using the least-squares regression
method? Y = $1,655 + $77.50X
Solution:
slope = $77.50 per tree
intercept = $1,655 per month

45. Vector Company employs process cost system. A unit of product passes through two departments:
Assembly and Finishing before it is complete. Information regarding Assembly Department follows:
Work in-process, Aug 1 4,000 units
Spoiled units 3,000
Started in Production 26,000
Transferred out 24,000

Raw materials are added at the beginning of processing in the Assembly department without
changing the number of units being processed. Work in Process on August 1 was 90% complete as to
conversion while 80% converted on August 31. In the Assembly Department, the inspection takes
place when the units are 75% converted. The company usually experienced a 5% loss based on the
completed units. Cost data for the month of August follow:

Materials Labor Overhead

 Work in-process beginning P 32,400 P26,400 P 28,500
Current cost P 111,600 P88,200 P 114,750

Using Weighted Average Costing, compute

Total cost of units transferred-out and total cost of work in process, end
P 343,684; P 37,376

46. The total cost of work in process, end

47. The following information is available for Detox Company for the current year:

Beginning Work in Process Costs of Beginning Work in Process:

(75% complete) 14,500 units Material P 25,100
Started 75,000 units Conversion 50,000
Ending Work in Process Current Costs:
(60% complete) 16,000 units Material P120,000
Abnormal spoilage 2,500 units Conversion 300,000
Normal spoilage 5,000 units
(continuous)
Transferred out 66,000 units

All materials are added at the start of production.

Using FIFO, what is the cost per equivalent unit for conversion costs? P 4.46

48. Faye Corp. has two service departments and two producing departments. The following are data
available for the year 2030:

Service Department Production Department

Personnel Medical Refining Finishing
Factory Overhead Costs 150,000 300,000 5,000,000 6,000,000
Service Performed by Personnel 40% 40% 20%
Service Performed by Medical 20% 70% 10%

The producing department uses labor hours with 100,000 for refining and 250,000 for finishing in
determining its overhead rate. The personnel department supports the greatest number of
departments.

Using direct method, the service cost allocated to refining department is:

49. Using step method, the personnel cost allocated to finishing department is:

50. Using the reciprocal method, the medical cost allocated to refining department is:

51. Joven manufacture goods to the exacting specification of various customers. During December,
Job#765 for the production of 5,500 units is completed at the following cost per unit:
Direct Materials 10
Direct Labor 8
Factory Overhead applied 12
 After inspection of Job#765, 250 defective units and 500 units of normal spoilage attributable to this
specific job. The defective units are reworked at a total cost of P2,500 and the spoiled units are sold
to a customer for P7,500. What is the unit cost of the good units produced on Job#765?

52. Irish Corp provides for an incentive scheme for its factory workers which features a combined
minimum guaranteed wage and a piece rate. Each worker is paid P200 per piece with a minimum
guaranteed wage of P15,000 per week. Production report for the week show:

Employee Name Units Produced

Irene 70
Aileen 90
Julius 80
Harold 65

What is the amount of the weekly payroll that should be charged to work in process account?

53. What is the amount of the weekly payroll that should be charged to the factory overhead control
account?

54. The total payroll for the week would be: