Patricia D.

Masipag, the controller of Mahinay Company, is in process of analyzing the overhead costs for November
2018. She has the following data for the month: Direct Labor hours: Job #1, 7,000; Job #2, 6,000; Job #3, 4,000.
Labor Costs: Direct labor wages, PHP 2,040,000; Indirect labor wages (8,000 hrs.) PHP 600,000; Supervisory
salaries, PHP 240,000. Inventories, November 1: Raw Materials and Supplies, PHP 210,000; Work in Process (Job
#1) PHP 1,080,000; Finished goods, PHP 2,250,000. Purchases: Raw Materials, PHP 2,750,000; Supplies (Indirect
materials) PHP 300,000. Direct materials and supplies requisition for production: Job #1, PHP 1,800,000; Job #2,
PHP 1,500,000; Job #3, PHP 1,020,000; Supplies (indirect materials), PHP 480,000. Other Costs: Factory facilities,
PHP 128,000; Sales offices, PHP 32,000; Administrative offices, PHP 20,000. Production equipment costs: Power,
PHP 82,000; Repair and Maintenance, PHP 30,000; Depreciation, PHP 30,000; Other, PHP 20,000.

The firm’s job order system uses direct labor hours as the cost driver for overhead application. In December 2017,
Patricia had prepared the following budget for direct labor hours per year. However, Patricia estimates that normal
usage is 120,000 hours in a typical year.

Manufacturing Overhead
Direct Labor Hours Variable Fixed
100,000 6,500,000 4,320,000
120,000 7,800,000 4,320,000
140,000 8,640,000 8,640,000

1. During November, Job #1 and Job #2 were completed. What is the total costs of job completed?

2. In relation to above, determine the cost of the work-in-process ending.

Job 1 Job 2 Job 3

Direct Labor 840,000.00 720,000.00 480,000.00
Direct Materials 1,800,000.00 1,500,000.00 1,020,000.00
Overhead:
Fixed 455,000.00 390,000.00 260,000.00
Variable 252,000.00 216,000.00 144,000.00
Total Manufacturing Costs 3,347,000.00 2,826,000.00 1,904,000.00
WIP, beginning 1,080,000.00
Total Costs 4,427,000.00 2,826,000.00 1,904,000.00

Pebble Manufacturing Corp. uses job order costs system. The company purchased direct materials, 15,000 units at
PHP 11.20 per unit. The inventories on June 1.

Inventories Job No. Amount

Finished Goods A 96,000
Work-in-Process B 11,200
Direct Materials 36,000

Additional costs incurred for the month are as follows: Manufacturing overhead costs are charged to the jobs on the
basis of PHP 140 per direct labor hour used. The actual manufacturing overhead cost for the month totaled PHP
141,200. At the end of June, Job order D and G were still in process. Only Job Order B and F were left unsold. Sold
units is at 40% Gross Profit.

Job No. Direct Materials Direct Labor Cost Direct Labor Hours
B 32,800 24,000 50
C 73,200 72,000 150
D 89,200 168,000 350
E 27,200 96,000 200
F 51,600 120,000 250
G 21,600 38,400 80

3. The under-applied or (over-applied) factory overhead is?

4. Refer to Pebble Manufacturing Corp. Total sales amounted to

 OH
B 7,000.00
C 21,000.00
D 49,000.00
E 28,000.00
F 35,000.00
G 11,200.00
Applied Overhead 151,200.00
Actual Overhead 141,200.00
Over-applied Overhead 10,000.00

Direct Materials Direct Labor Overhead

C 73,200.00 72,000.00 21,000.00
E 27,200.00 96,000.00 28,000.00
COG Manufactured & Sold 100,400.00 168,000.00 49,000.00 317,400.00
Finished Goods, beginning 96,000.00
Total COGS 413,400.00
Total Sales (COGS/60%) 689,000.00

Sherra Company using FIFO costing method maintain a spoilage expense account for spoiled goods. This account
is charged with the cost of units spoiled in process. Each unit spoiled is considered 80 percent complete with respect
to conversion costs and 100 percent complete with respect to materials at the time of spoilage. The accounting
records show the following information for the activities in the work in process inventory account:

Beginning Inventory: (1,500 units, 100% materials, 80% conversion)

Direct materials PHP 14,800
Conversion costs 21,650
Current Period
Direct material costs 43,100
Conversion costs 79,220
Units transferred out 18,200
Units spoiled 2,300
Ending inventory (40% materials; 25% conversion) 6,400

5. Compute the costs to be assigned to the spoiled units.

6. The total cost assigned to the units transferred out would be

Direct Materials Conversion Costs

Beginning 1,500.00 - 300.00
Transferred out 16,700.00 16,700.00 16,700.00
Spoiled 2,300.00 2,300.00 1,840.00
Ending 6,400.00 2,560.00 1,600.00
Total Units as Accounted 26,900.00 21,560.00 20,440.00
Total Costs 43,100.00 79,220.00
2.00 3.88

Direct Materials Conversion Costs Total Costs

Beginning - 1,162.72 1,162.72
Transferred out 33,384.51 64,724.76 98,109.26 99,271.98

Spoiled 4,597.87 7,131.35 11,729.22 14,800.00

Superior Micro Products makes a unique syrup using sugar cane and local herbs. The syrup is solid in small bottles
and prized as a flavoring for drinks and for use in desserts. The bottles are sold for PHP 21 each. The first stage in
the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials
and mixes them in the proper proportions in large containers. The company uses the FIFO method in its process
costing system. A hastily prepared report for the Mixing Department in April appears below:

Quantity Schedule

Units to be accounted for:

Work-in-process, April 1 (Materials 90% complete; conversion 80% complete) 30,000
 Started in production 200,000
Total units to be accounted for 230,000
Units accounted for as follows:
Transferred to next department 190,000
Work-in-process, April 30 (Materials 75% complete; conversion 60% complete) 40,000
Total units accounted for 230,000

Total Cost

Cost to be accounted for:

Work-in-process, April 1 (Materials, PHP 67,800; conversion PHP 29,300) 97,100
Cost added during the month (Materials, PHP 579,000; conversion, PHP 248,900) 827,900
Total cost to be accounted for 925,000
Cost accounted for as follows:
Transferred to next department 805,600
Work-in-process, April 30 (Materials 75% complete; conversion 60% complete) 119,400
Total units accounted for 925,000

Superior Micro Product has just been acquired by another company, and the management of the acquiring company
wants additional information about Superior Micro Products.

7. How much material costs were charged to units transferred out to next departments?

8. How much conversion costs were charged in work-in-process ending inventory?

9. Assuming the company is using weighted average method of accounting units and costs, how much is the cost of
goods finished and transferred?

Survivor Company produces product X and Y from a common input. One production run costs PHP 162,000 and
results in 1,000 product X and 4,000 units of product Y. Neither product is salable at split-off, but must be processed
further such that the separable cost for X is PHP 30 and for Y is PHP 20 per unit. The eventual market price for X is
PHP 120 and for Y is PHP 140.

10. The manufacturing cost per unit of product X using the market value method of allocating joint cost is

11. The total joint cost allocated to product Y using the constant margin approach is

Orange Company purchases oranges and processes them into orange jam and orange powder. The standard yield
from each 100 pounds of unprocessed Oranges is 35 pounds of jam, 50 pounds of powder, and 20 pounds of orange
skin. The jam must be processed further before it can be sold. A further processing cost of PHP 17.50 per pound
was incurred for Jam before it can be sold for PHP 165 per pound. The jelly can be sold for PHP 120 per pound at
split-off point. The skin, which is considered as a by-product, sell for PHP 2 per pound. The company estimates net
realizable values at split-off, if no market price is available at that point. The cost of the Oranges is PHP 1.50 per
pound. It costs PHP 1,850 in labor and overhead to process each 100 pound of orange up to the split-off point.

12. Assuming that orange skin is recorded as other income at the time they are sold, compute the allocated joint
costs of orange jam produced from 100 pounds of oranges using the physical measure method of allocating joint
cost.

13. Assuming the net realizable value of orange skin is a deduction from the total joint costs, compute the allocated
joint costs to powder, using the net realizable method.

Anytime fitness has two operating departments: Programming & Classes and Individual Fitness. There are also two
service centers: Janitorial and Cafeteria. Janitorial costs are allocated based on square footage, while Cafeteria
costs are allocated based on the number of employees. The costs traceable to the operating and service centers
during 2018 were as follows:

Service Centers Operating Departments

Janitorial Cafeteria Programming & Classes Individual Fitness
Materials 10,000 200,000 8,000 5,000
Labor 100,000 300,000 265,000 150,000
MOH 20,000 40,000 75,000 90,000
Total 130,000 540,000 348,000 245,000
Square Footage 1,600 8,000 24,000 32,000
Employee no. 5 14 19 6
In addition to these costs, the Cafeteria generates revenues of PHP 480,000. Janitorial is allocated based on square
footage and Cafeteria is allocated based on the number of employee.

14. Using the step method to allocate the service center costs, what is the total cost of Individual Fitness?

15. Using the direct method of allocating service center costs, compute the total cost of Programming & Classes.

16. Using the algebraic method of allocating service center costs, determine the total costs of Programming &
Classes.

Believing that its traditional cost system may be providing misleading information, an organization is considering an
activity-based costing (ABC) approach. It now employs a full cost system and has been applying its manufacturing
overhead on the basis of machine hours. The organization plans on using 50,000 direct labor hours and 30,000
machine hours in the coming year. The following data show the manufacturing overhead that is budgeted.

Activity Cost Driver Budgeted Activity Budgeted Costs

Material Handling No. of parts handled 6,000,000 PHP 2,880,000
Setup Costs No. of setups 720 1,260,000
Machine Costs Machine hours 30,000 2,160,000
Quality Control No. of batches 500 900,000

Cost, sales, and production data for one of the organization’s products for the coming year are: direct material’s cost
per unit, PHP 17.60; direct labor cost per unit (0.05 DLH @ PHP 60/DLH) PHP 3; expected sales, 20,000 units;
batch size, 5,000 units; setups, 2 per batch; total parts per finished unit, 5 parts; machine hours required, 80 MH per
batch.

17. If the organization employs an activity based costing system the cost per unit for the product described for the
coming year will be

18. If the organization uses the full cost system the cost per unit for the product described for the coming year will
be

Normal annual capacity for Easy Company is 48,000 units with production being constant throughout the year. The
October budget shows fixed factory of PHP 14,400 and an estimated variable factory overhead rate of PHP 21 per
unit. During October, actual output is 4,100 units with total factory overhead of PHP 90,000.

19. The controllable variance is

20. The volume variance should be

Actual BAAH BASH Applied

Fixed Fixed Spending
Variable Variable Spending
Fixed Volume Variance
Variable Efficiency Variance
Fixed
Total Spending Variance
Variable
Fixed
Budget Variance Budget Variance
Variable

Faith Company uses a standard costing system. The standard for one unit of its product, is 2 units of raw materials
at a cost of PHP 10 per unit. During April, 17,600 were manufactured. Inventory of raw materials on April 1 was
8,000 units costing PHP 84,000; purchases were 32,000 units at PHP 10.40 per unit; and ending inventory was
6,000 units, costing PHP 10.40 each.

21. The actual cost of materials issued to production is

On January 1, 2018, Pantene Company acquired the identifiable net assets of Sunsilk Inc. On this date, the
identifiable assets acquired and liabilities assumed have fair values of PHP 6,400,000 and PHP 3,600,000,
respectively. Pantene incurred the following acquisition-related costs: legal fees, PHP 40,000, due diligence costs,
PHP 400,000, and general and administrative costs of maintaining an internal acquisition, PHP 80,000.

As consideration, Pantene transferred 8,000 of its own shares with par value and fair value per share of PHP 400
and PHP 500, respectively, to Sunsilk’s former owners. Costs of registering and listing the shares (previously issued
and newly issued) amounted to PHP 160,000 (PHP 20,000 pertains to listing fees of previously issued shares).

22. How much is the goodwill (gain on bargain purchase) on the business combination?
P Company acquired 4,000 shares of the outstanding stock of S Company for PHP 1,200,000 on January 1, 2018.
P Company also paid PHP 100,000 direct costs related to the combination. On this date, the stockholder’s equity of
S Company consisted of Ordinary Shares (PHP 100 par), PHP 500,000, and Retained Earnings, PHP 600,000. The
carrying values of S Company identifiable net assets and liabilities are equal to their fair market values. At the
beginning of the year, S Company sold equipment costing PHP 100,000 with accumulated depreciation of PHP
50,000 to P Company for PHP 120,000. S Company was depreciating the equipment for 10 years with no salvage
value using straight-line method and P Company continued the same method. At the end of the year, P Company
reported net income of PHP 300,000 and paid dividends of PHP 250,000 while S Company reported net income of
PHP 200,000 and paid dividends of PHP 10 per share. The parent company measures its non-controlling interest
using the proportionate method.

23. The non-controlling interest on December 31, 2018 is

CAF Company uses process cost system to process its product IQ for its BSA customer, that requires four processes.
Work in process in Department 4 shows the following data for October: Balance, October 1 (1,600 units, ¼
completed), PHP 8,120; from Department 3 (4,300 units), PHP 15,050; Direct labor, PHP 24,500; Factory overhead,
PHP 6,370. Processing for the Month of October consisted of completing the 1,600 units in process October 1;
completing the processing on 3,500 additional units and leaving 800 units that are ¼ completed. During November
the charges to work-in-process, Department 3, (5,500 units), PHP 16,500; Direct Labor, PHP 23,520; Factory
Overhead, PHP 5,080. By November 30, all beginning work-in-process units were completed. Of the 5,500 new
units, 1,500 units were left only 1/5 completed.

24. The processing cost per unit for October is

25. The cost of work in process at October 31 is

26. The cost of goods completed and transferred to finished goods for November is

PBB Company manufactures high-end product. Because of the high volume of this type of product, the company
employs a process cost system using weighted average method to determine costs. Product parts are manufactured
in the Molding Department and transferred to the assembly Department were they are partially assembled. After
assembly, the product is sent to packaging department. Cost per unit data for the high end product has been
completed through the Molding Department. Annual cost and production figures for the Assembly Department are
presented below:

Production Data

Beg. Inventory (50% Complete as to assembly materials, 20% complete as to conversion) 3,000 units
Transferred-in during the year 45,000 units
Transferred to Packaging Department 40,000 units
Ending Inventory 80% complete 4,000 units

Cost Data

Transferred-in Materials Conversion

Current Period 1,240,800 97,020 236,470
Work-in-Process, beg 82,200 6,660 11,930

Damaged products are identified on inspection when the Assembly process is 70% complete, all assembly materials
has been added at this point of the process. The normal rejection rate for damage product is 5% of good output. Any
damage above the 5% quota are considered abnormal. All damaged products are remove from the production
process and destroyed

27. The cost of normal spoilage

28. The cost of completed and transferred to the packaging department is

Rainbow Company uses standard cost system for its production process. Rainbow Company applies overhead
based on direct labor hours. The following information is available for October:

Standard:
Direct labor hours per unit 2.20
Variable overhead per hour PHP 2.50
Fixed overhead per hour (based on 11,990 DLHs) 3.00

Actual:
Units produced 4,400
Direct labor hours 8,800
 Variable overhead 29,950
Fixed overhead 42,300

29. Using the four-variance approach, what is the variable overhead spending variance?

30. Using the three-variance approach, what is the efficiency variance?

31. Using the two-variance approach, what is the controllable variance?

A home office ship inventory to its branch at a mark-up of 125% above cost. The required balance of the allowance
for overvaluation account is PHP 1,425,000. During the year, the home office sent merchandise to the branch costing
PHP 9,000,000. At the start of the year, the branch’s Statement of Financial Position shows PHP 1,800,000 of
inventory on hand that was acquired from the home office.

32. By what amount will the allowance for unrealized gross profit in branch inventory account be debited at the end
of the year?

Honda Motors, sells automobiles on installment basis. On May 2, 2018, Mr. Y bought a car for PHP 2,250,000;
terms-25% down; and the balance in 48 months. The cost of the new car is 1,601,250. In lieu of the down payment,
Honda Motors accepted the buyer’s slightly used van. The van has an actual value of PHP 600,000. The cost to
recondition the van was PHP 255,000. Commission of 5% is normally allowed for this type of sale. However, by the
end of October, Mr. Y suffered a major financial setback and was not able to meet his monthly installments. Thus,
by December 21, 2018, Honda Motors repossessed the car. The repossessed car has a resale value before incurring
reconditioning and body repair of PHP 993,700 before incurring reconditioning and body repair of PHP 360,000.

33. The loss on repossession is

Toby’s sold a fitness equipment on installment basis on October 1, 2018. The unit cost to the company was PHP
120,000, but the selling price was set at PHP 170,000. Terms of payment included the acceptance of used equipment
given a trade-in value of PHP 60,000. Cash of PHP 10,000 was paid in addition to the traded-in equipment with the
balance to be paid in ten (10) monthly installments due at the end of each month of sale. It would require PHP 2,500
to recondition the used equipment so that it could be resold for PHP 50,000. A 15% gross profit rate was usual from
the sale of used equipment.

34. The realized gross profit during 2018 as indicated from the foregoing information is

L, M, and N have decided to liquidate their partnership on March 31, 2018. At this time, the partnership has a cash
of PHP 157,500, non-cash assets of PHP 1,050,000 and liabilities of PHP 742,500. The partner’s capital balances
and profit/loss percentage are as follows:

L M N
Capital 180,000 142,500 195,000
Loan (Debit) (22,500) (30,000)
P/L Ratio 50% 25% 25%

The assets of the partnership are liquidated as follows:

April May June

April 70% of carrying value 680,000
May 20% of carrying value 175,000
June - balance 90,000
Payment of liabilities 420,000 150,000 Paid the balance
Liquidation of expenses 5,000 6,000 7,500
Payment to partners 80,000 170,000 All cash

35. The total restricted interest in the month of April is

36. The amount received by M in the 1st month is

37. In the month of June, the amount receivable to partners is

Accountancy Company acquired 75% of outstanding shares of Finance Company for PHP 900,000. Book value of
Finance Company’s net assets is PHP 1,000,000. Upon re-measurement of acquired net assets, it shows that
inventory has a fair value lower by PHP 40,000 than its book value and equipment held for 3 years has a fair value
and book value of PHP 450,000 and PHP 360,000, respectively. The original cost of Finance Company’s equipment
is PHP 576,000 with no residual value. Accountancy opt to measure NCI at fair value. During the year, Accountancy
reported net income from own operation of PHP 300,000 and received PHP 30,000 dividend from Finance. Finance
Company’s net income amounts to PHP 120,000. Goodwill, if partial, is impaired by PHP 13,500.
38. Compute the consolidated net income.

39. Non-controlling interest in Net Assets of Subsidiary (NCINAS) at the is

40. Net income attributable to Accountancy Company is

RMCI has consistently using the percentage of completion method in accounting for its long-term construction
contracts. During 2018, RMCI started work on a PHP 50M fixed price project. As of December 31, 2018, costs
incurred amounts to PHP 15,875,000. This amount includes PHP 1M cost of materials stored in the warehouse
intended for the next stage of construction sometime on the 1 st quarter of 2019. The engineer’s estimate of
construction costs at completion is PHP 42.5M. RMCI billed the client 30% of contract price and collected the same
amount.

In 2018, RMCI incurred PHP 17,875,000 more and billed the customer PHP 16.5M. At the end of the year, the
estimated cost to complete is still PHP 11,250,000. The project is completed in 2020.

41. On December 31, 2018, the Construction in Progress account has a ledger balance of

42. In 2018, the contract revenue and contract cost is

Sonny Company, a 75% own subsidiary of Panasonic Company sells inventory to its parent at 120% of cost, while
Panasonic Company sells merchandise to its subsidiary at 125% of cost. Inventories of the two companies for 2018
are as follows:

Panasonic Co. Sonny Co.

Beginning Inventory PHP 400,000 PHP 250,000
Ending Inventory 500,000 200,000

Panasonic Corporation beginning and ending inventories include merchandise acquired from Sonny Company of
PHP 150,000 and PHP 200,000, respectively. Sonny Company also reported beginning and ending inventories from
Panasonic Company of PHP 80,000 and PHP 60,000, respectively

43. If Sonny reported net income of PHP 300,000 for 2018, the non-controlling interest on subsidiary net income is

44. In the consolidated balance sheet, inventories should be reported at

The following information are extracted from the books and records of Salora Company and its Cebu branch. The
balances are at December 31, the fourth of the company’s operations.

HO Books Branch Books

Sales PHP 2,000,000
Shipments to branch PHP 600,000
Shipments from home office 800,000
Purchases 300,000

Operating Expenses: 600,000

Inventory, January 1
From home office 200,000
From outsider 40,000
Unrealized intercompany inventory profit 240,000

There are no shipments in transit between the home office and the branch. Both shipment accounts are properly
recorded. The ending inventory includes merchandise acquired from the home office in the amount of PHP 200,000
and PHP 60,000 from outsiders. The branch rent for the last quarter at PHP 15,000 per month was paid by the home
office and the branch was not properly notified.

45. The true net income of the branch is

MK Company received an order for 1,000 units of Item GC-10. Because of the workers’ negligence defective and
spoiled units exceed the normal rate. The materials cost per unit is PHP 140; labor cost, PHP 200 and factory
overhead is applied at 80% of direct labor cost. During production, 150 units were defective and required the following
total additional costs. Materials, PHP 3,000; labor, PHP 7,000 in addition to overhead. On final inspections, 50 units
were spoiled with no salvage value. The customer has agreed to accept the good units.

46. The unit cost of the finished product amounted to