COST ACCOUNTING QUIZ 4

1. The assignment of raw material costs to the major end products resulting from refining a barrel of
crude oil is best described as: Joint Costing
2. The amount of raw materials left over from a production process or production cycle for which there is
no further use is: Waste
3. Products of relatively small total value that are produced simultaneously from a common
manufacturing process with products of greater value and quantity are: By-products
4. A joint process is a manufacturing operation yielding two or more identifiable products from the
resources employed in the process. The two characteristics that identify a product generated from this
type of process as a joint product are that it: is identifiable as an individual product only upon reaching
the split-off point, and it has relatively significant sales value when compared with the other products
5. The principal disadvantage of using the physical quantity method of allocating joint costs is that: Costs
assigned to inventories may have no relationship to value

For the next two items

Travis Petroleum is a small company that acquires crude oil and manufactures it into 3 intermediate
products, differing only in grade. The products are Grade One, Grade Two, and Grade Three. No
beginning inventories of finished goods or work-in-process existed on November 1. The production
costs for November were as follows: (assume separable costs were negligible)
Crude oil acquired and put into production P4,000,000
Direct labor and related costs 2,000,000
Manufacturing overhead 3,000,000
The output and sales for November were as follows:
Grade One Grade Two Grade Three
Barrels produced 300,000 240,000 120,000
Barrels sold 80,000 120,000 120,000
Prices per barrel sold P30 P40 P50

6. The portion of Travis’ joint production costs assigned to Grade Two based upon physical output is:
(rounded to the nearest thousand pesos) P3,273,000
7. The portion of Travis’ joint production costs assigned to Grade One based upon the relative sales value
of output is: (rounded to the nearest thousand pesos) P3,293,000
8. Based on the relative sales values of output, the cost of Travis’ ending inventory of Grade Two is:
P1,756,000

For the next two items

Petro-Chemn, Inc., is a small company that acquires high-grade crude oil from low volume production wells
owned by individuals and small partnerships. The crude oil is processed in a single refinery into Two Oil, Six Oil,
and impure distillates. Petro Chem does not have the technology or capacity to process these products further
and sells most of its output each month to major refineries. There were no beginning inventories of finished
goods or work-in-process on November 1. The production costs and output of Petro Chem for November are
shown:
Crude oil acquired and placed in production P5,000,000
Direct labor and related costs P2,000,000
Manufacturing overhead P3,000,000
Production and sales
o Two Oil, 300,000 barrels produced; 80,000 barrels sold at P20 each
o Six Oil, 240,000 barrels produced; 120,000 barrels sold at P30 each
o Distillates, 120,000 barrels produced and sold at P45(?) each
9. The portion of Petro-Chem's joint production costs assigned to Six Oil based upon physical output
would be: P3,636,000
10. The portion of Petro-Chem's joint production costs assigned to Two Oil based upon the relative sales
value of output would be: P4,000,000
11. One of the requirements for a JIT system to be successful is: high quality and balanced work loads
12. All of the following are terms used to describe the JIT effort to reduce inventories of work in process
and raw materials, except: backflush production
13. The cost accounting system that is noted for its lack of detailed tracking of work in process during the
accounting period is: backflush costing
14. Key Co. changed from a traditional manufacturing operation with a job-order costing system to a just-
in-time operation with a backflush costing system. What is(are) the expected effect(s) of these changes
on Key's inspection costs and recording detail of costs tracked to jobs in process?
Inspection Costs Detail of Costs Tracked to Jobs
Decrease Decrease

15. Companies that adopt just in time purchasing system often experience: a reduction in the number of
suppliers
16. Bell Co. changed from a traditional manufacturing philosophy to a just-in-time philosophy. What are
the expected effects of this change on Bell's inventory turnover and inventory as a percentage of total
assets reported on Bell's balance sheet?

Invty Turnover Invty Percentage

Increase Decrease

17. Cheeta Company has materials cost in the June 1 Raw and In Process of P10,000, materials received
during June of P205,000 and materials cost in the June 30 Raw and In Process of P12,500. The amount
to be backflushed from Raw and In Process to Finished Goods at the end of June would be: P202,500
18. In backflush costing, if the conversion cost in the Raw and In Process was P500 on July 1 and P1,000 on
July 31, the account to be credited at the end of July for the P500 increase would be: Cost of Goods
Sold
19. In backflush costing, if the conversion cost in Raw and In Process was P1,000 on March 1 and P400 on
March 31, the account to be credited for the P600 decrease would be: Raw and In Process
20. Which changes in costs are most conducive to switching from a traditional inventory ordering system
to a just-in-time ordering system?
Cost / Invty Unit Purch Order Carrying Costs
Decreasing Increasing

PROBLEM 1. 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:

Beginning inventories none

Units finished 90,000
Units sold 88,000
Materials purchased and used P375,000
Direct labor and manufacturing overhead P525,000
 21. Compute the ending finished goods inventory balance. P20,000 = [(P375,000 + P525,000)/90,000 x
2,000]
22. Compute the cost of goods sold. P880,000 = [(P375,000 + P525,000)/90,000 x 88,000]

Materials and In-Process Inventory P375,000

Accounts Payable P375,000

Conversion Costs P525,000

Assorted accounts P525,000

Cost of Goods Sold P880,000

Finished Goods P20,000
Materials and In-Process Inventory P375,000
Conversion Costs P525,000

PROBLEM 2. Smart Manufacturing Company has a cycle time of 3 days, uses Raw and in Process account and
charges all conversion costs to Cost of Good Sold. At the end of each month, all inventories are counted, their
conversion cost components are estimated, and inventory account balances are adjusted. Raw material cost is
backflushed from RIP to Finished Goods. The following information is for the month of June:

Material purchase on credit P438,000

RIP, beginning, including P13,200 conversion costs 45,000
FG, beginning, including P32,400 conversion costs 108,000
RIP, end, including P23,400 conversion costs 72,000
FG, end, P19,500 conversion costs 54,000
Conversion cost - P240,000 direct labor and P300,000 overhead

23. Compute for the amount of materials backflushed from RIP to FG

24. Compute for the amount of materials backflushed from Finished Goods to COGS
25. Compute for the amount of conversion costs backflushed to RIP
26. Compute for the amount of conversion costs backflushed to FG

PROBLEM 3. The Chiz Manufacturing Company has a cycle time of 2 days, uses Raw and in Process account
and charges all conversion costs to Cost of Goods Sold. At the end of each month, all inventories are counted,
their conversion cost components are estimated, and inventory account balances are adjusted. Raw material
cost is backflushed from RIP to Finished Goods. The following information is for the month of May:

RIP, beginning, including P24,000 conversion costs 80,000

FG, beginning, including P17,600 conversion costs 70,000
Material purchase on credit P460,000
RIP, end, including P31,400 conversion costs 57,000
FG, end, P26,200 conversion costs 39,600

Conversion cost – P300,000 direct labor and P450,000 overhead

27. Compute for the amount of materials backflushed from RIP to FG
28. Compute for the amount of materials backflushed from Finished Goods to COGS
29. Compute for the amount of conversion costs backflushed to RIP
30. Compute for the amount of conversion costs backflushed to FG