Chap 11

Average
1. Red Corporation's production starts in Department 1. The following
data is available for April:
Units work in process, April 1 (50% complete)40,000
Units started in April 240,000
Units work in process, April 30 (60% complete)25,000
Materials are added at the beginning of the process in Department 1. Using the average cost method, what are the equivalent units
of production for the month of April?
MaterialsConversion Costs

a.255,000 255,000
b. 270,000 280,000
c. 280,000 270,000
d. 305,000 275,000

2. Information concerning Department 1 of Black Company for June 1 is as follows:

Units Material Costs
Work in process, beginning 17,000 P12,800
Started in June 82,000 69,700
Units completed 85,000
Work in process, ending 14,000
All materials are added at the beginning of the process. Using the
average cost method, the unit cost for material is:
a. P0.825
b. P0.833
c. P0.85
c. P0.97

3. White Company adds materials in the beginning of the process in Department 1, which is the first of two stages of its
production cycle. Information concerning the materials used in Department 1 in July is as follows:
Units Material costs
Work in process, July 1 6,000 P3,000
Started in process 50,000 25,560
Completed and transferred out 44,000
Using the weighted average cost method, what was the materials
cost of work in process on July 31?
a. P3,000
b. P6,120
c. P3,060
d. P6,000

4. During March, Brown Company's Department 2 equivalent unit costs, computed under the average cost method were as
follows:
Materials P10
Conversion 30
Transferred in 50
Materials are introduced at the end of the process in Department 2. 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. P360,000
b. P248,000
c. P272,000
d. P284,000
5. An equivalent unit production of material or conversion cost is equal to:
a. Prime cost.
b. The amount of material or conversion cost necessary to complete one unit of production.
c. A unit of work in process inventory.
d. The amount of prime cost necessary to start a unit of production into work in process.

6. An item that does not appear on a cost of production report is:

a. Work in process, beginning inventory.
b. Cumulative costs through the end of departmental production.
c. Finished goods, ending inventory.
d. Unit costs added by the department.
7. Transferred in costs as used in a process cost accounting system are:
a. Salaries that are transferred from an overhead cost center to a production cost center.
b. Ending work in process inventory of a previous process that will be used in a succeeding process.
c. Labor that is transferred from another department within the same plant.
d. Costs of the product of a previous process that is subsequently used in a succeeding process.

8. In accounting for beginning inventory costs, the method that allows the addition of beginning inventory costs with costs
incurred during the period is referred to as:
a. First In, First Out
b. Addition
c. Last In, First Out
d. Average

Chap 12
Fifo
Questions 5 through 9 are based on the following data:
Tom Manufacturing Company uses the FIFO costing method to account for their inventories. The following information pertains
to operations for the month of May 2018:
Beginning work in process inventory, May 1 16,000 units
Started in production during May 100,000 units
Completed production during May 92,000 units
Ending work in process inventory, May 31 24,000 units

The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was
90% com- plete for materials and 40% complete for conversion costs.

Costs pertaining to the month of May are as follows:

The beginning inventory costs are: materials, P54,560; direct la- bor, P20,320; and overhead, P15,240.
Costs incurred during May are: materials used, P468,000; direct labor, P182,880; and overhead, P391,160.
5. What are the equivalent units of production for materials?
a.97,600 units
b. 104,000 units
c.107,200 units
d. 108,000 units.

6. What are the equivalent units of production for conversion costs?

a. 85,600 units
b. 88,800 units
c. 95,200 units
d. 98,400 units

7. What is the equivalent unit cost of materials for May?

a. P4.12
b. P4.50
c. P4.60
d. P4.80

8. What is the equivalent unit conversion cost for May?

a. P5.65
b. P5.83
c. P6.00
d. P6.20

9. What is the total cost of units in the ending work in process inven- tory at May 31?
a. P153,168
b. P145,800
c. P155,328
d. P156,960
Items 10 and 11 are based on the following information:
The following data has been gathered from the records of Gerry Manufacturing Company for August 2018. The company uses
the FIFO process costing method. Materials are added at the beginning of processing; overhead is applied on a direct labor basis.
The units are transferred to a second department for packaging.
Beginning work in process inventory
(40% complete as to conversion costs) 5,000 units
Started in August 90,400 units
Ending work in process inventory
(70% complete as to conversion cost) 4,000 units
Materials cost incurred in August P433,920
Conversion costs incurred in August P115,250
Beginning inventory cost totaled P24,875.

10. What is the cost of units transferred out to the Packaging Department in August?
a. P551,345
b. P522,720
c. P547,595
d. P526,470
Chap 10

1. In process cost system, costs are assigned only:

a. to one work in process inventory account.
b. to work in process and finished goods inventories.
c. to work in process, finished goods, and cost of goods sold.
d. to work in process inventory accounts.

2. Indicate which of the following statements is not correct.

a. Both a job order and a process cost system track the same three manufacturing cost elements - direct materials, direct labor,
and manufacturing overhead.
b. In a job order cost system, only one work in process is used, while in process cost system, multiple work in process inventory
accounts are used.
c. Manufacturing costs are accumulated the same way in a job order and in a process cost system.
d. Manufacturing costs are assigned the same way in a job order and in a process cost system.

3. In making the journal entry to record raw material costs:

a. the debit is to Finished Goods Inventory.
b. the debit is often to two or more work in process inventory ac counts.
c. the credit is generally to two or more work in process accounts.
d. the credit is to Finished Goods Inventory.

4. The analysis of the activity in a department or cost center for a period is called a:
a. Quantity report.
b. Cost of production report.
c. Cost of goods manufactured
d. Equivalent production.

5. A cost of production report:

a. is an external report.
b. shows costs charged to department and costs accounted for.
c. shows equivalent units of production but not physical flow of units.
d. contains six sections.

6. The restatement of incomplete units in terms of completed units is called:

a. Quantities produced.
b. Total production.
c. Equivalent production.
d. Approximate production.
7. Purchased materials are added in the second department of a three- department process; this increases the number of units
produced in the second department and would always:
a. Change the direct labor cost percentage in the ending work in process inventory.
b. Cause no adjustment to the unit cost transferred in from the first department.
c. Increase total unit costs.
d. Decrease total ending work in process in inventory.

9. An equivalent unit of material or conversion cost is equal to:

a. The manufacturing costs necessary to complete one unit of production.
b. A unit of work in process inventory.
c. The manufacturing costs necessary to start a unit of production into work in process.
d. Fifty percent of manufacturing costs of a unit of finished goods
inventory.

10. Which statement is correct?

a. Units started in process (or received from preceding depart ments) plus units added to production will always equal to
units transferred out plus units completed and still in hand plus ending units in process.
b. Units added in subsequent departments will affect the transferred in equivalent unit cost in the costs to be accounted for
section.
c. The stage of completion of ending work in process is most often based upon the actual physical state of completion of each
unit in ending work in process.
d. The Cost Accounted For section of the cost of production report shows which costs were accumulated by the department.

11. An item that does not appear on a cost of production report is:
a. beginning work in process inventory
b. cumulative costs through the end of departmental production
c. ending work in process inventory
d. ending finished goods inventory

Items 8 to 11 are based on the following data for the Grinding Depart ment of the West Company in November:
Beginning inventory -0-
Units placed in production during month 73,000
Units transferred to next department during month 67,000
Ending work in process (1/3 complete as to overhead) ?
Overhead costs incurred for month P282,900

8. What is the number of units in the ending work in process?

a. 6,000
b. 4,000
c. 5,000
d. 7,000

9. What is the equivalent production for overhead during the month?

a. 69,000
b. 73,000
c. 71,000
d. 67,000

10. What is the overhead cost in the units transferred out?

a. P247,000
b. P274,700
c. P247,700
d. P250,800

11. What is the overhead cost in the ending inventory of work in process?
a.P 8,200
b. P24,600
c. P 7,720
d. P 7,960
Questions 16 and 17 relate to Spring Company which bottles mineral water. The water is filtered in Department 1 and then flows
through to Department 2 where it is bottled. The company's only direct material cost occurs in the bottling stage. The quantity
schedules of Spring Company are as follows:
Department 1
Units started in process 110,000
Units transferred to Department 2 80,000
Units in process, end 30,000
Department 2
Units received from Department 1 80,000
Units transferred to finished goods inventory 61,400
Units in process, end 18,600

Ending units in process in both departments are 72% complete as to conversion costs.
16. Direct materials equivalent units of production for Department 1
are:
a.0
b. 80,000 units
c. 101,600 units
d. 110,000 units

17. Department 2 would have how many equivalent units of production, on the basis of a conversion cost computation?
a. 61,400 units
b. 68,929 units
c. 74,792 units
d. 80,000 units

18. Below is the quantity schedule for Department 2 of Tuason Company.

Units to be accounted for:
Units received from Department 1 37,000
Units accounted for:
Units transferred to finished goods 28,000
Units in process, end
(35% complete as to conversion cost) 9,000

Cost data:
Cost from preceding department P24,050
Conversion costs added this period 18,690

What is the cost of units in process, end?

a. P5,850
b. P7,740
C. P1,890
d. P6,540
Job order

30. The Work in Process account of Lourdes Company, which uses job order costing, follows:
Work in Process
Dr
May 1 balance P100,000
Direct Materials used200,000
Direct Labor 160,000
Applied Factory Overhead 120,000
Cr
Finished Goods P501,800

Factory overhead is applied to production at a predetermined rate based on direct labor cost.

The work in process at May 31 represents the costs of Job No. 123 which has been charged with direct labor cost of P12,000, and
Job No. 456 which has been charged with applied overhead of P9,600.

The cost of direct materials charged to Job order Nos. 123 and 456 totaled -
a.P16,800.
b. 18,000.
c. 34,800.
d.30,000.

31. Ronella uses a job order cost system and applies factory overhead to production orders on the basis of direct-labor cost. The
overhead rates for 2018 are 200% for Department A and 50% for Department B. Job 123, started and completed during 2018,
was charged with the following costs:
Departments
AB
Direct materials P25,000 P5,000
Direct labor ? 30,000
Factory overhead 40,000 ?

The total manufacturing costs associated with Job 123 should be:
a. P135,000
b. 180,000
c. 195,000
d. 240,000
27. Chan Corporation uses job order costing. Factory overhead cost is applied to all production activities at the rate of P7 per
direct labor hour based on predetermined annual estimates. The following information were available for the year ended
December 31, 2018:
Direct materials used P250,000
Direct labor 300,000
Indirect labor 6,000
Rent-factory building 60,000
Indirect materials used 8,000
Other factory overhead costs 40,000
Direct labor hours worked 16,000

There were no work in progress inventories or finished job inventories at either the beginning or end of the year.
Compute for: (1) the total factory overhead costs for the year; (2) factory overhead applied to jobs completed during the year, and
(3) cost of goods sold for the year based on applied factory overhead:
a. (1) P114,000; (2) P114,000; (3)P664,000
b. (1) 112,000; (2) 114,000 (3)664,000
c. (1) 112,000 (2) 112,000; (3)662,000
d. (1) 114,000 (2) 112,000 (3) 664,000

28. The Arlyn Company uses job order costing. Overhead applied to production is at a predetermined rate of 80% based on direct
labor costs. The following accounts appear in the general ledger of the company for the month of April 2018:
Debits
Work in process, April 1 P 60,000
Direct Materials 120.000
Direct Labor 100,000
Factory overhead 80,000

On April 30, 2018 finished goods completed from work in process cost P320,000. Job No. 30 was the only job not completed in
April and had been charged P9,200 for factory overhead.
The cost of Job No. 30 at April 30 was:
a. P27,360
b. 29,200
c. 50,000
d. 40,000
24. Last month Marjorie Company put P60,000 of materials into production. The Grinding Department used 8,000 labor hours at
P5.60 per hour, and the Machining Department used 4,600 hours at a cost of P6 per hour. Factory overhead is applied at a rate of
P6 per labor hour in the Grinding Department and P8 per labor hour in the Machining Department. Inventory accounts had the
following beginning and ending balances:
Beginning Ending
Finished Goods P22,000 P17,000
Work in process 15,000 17,600
Materials 20,000 18,000
Compute for: (1) conversion cost, and (2) cost of goods sold:
a. (1) P92,800 (2) P219,600
b. (1) 157,200; (2) 214,600
c. (1) 64,400 (2) 155,200
d. (1) 157,200 (2) 221,600

25. The records of the Eunice Equipment Company show the following information for the three months ended June 30, 2018.
Materials purchased P1,946,700
Inventories: April 1, 2018
Finished goods (100 equipments) 43,000
Materials 268,000
Direct labor 2,125,800
Factory overhead (40% variable) 764,000
Marketing expenses (all fixed) 516,000
General and administrative expenses (all fixed) 461,000
Sales (12,400 equipments) 6,634,000

Inventories, June 30, 2018:

No unfinished work on hand
Finished goods (200 equipments), costed at P395 each
Materials 167,000

Compute for: (1) unit cost for each equipment manufactured, (2) gross profit per unit sold, and (3) income per unit sold.
a. (1) P398 (2) P139.72; (3) P60.93
b. (1) 395 (2) 138.60; (3) 60.44
c. (1) 395 (2) 139.72; (3) 60.93
d. (1) 349; (2) 137.50; (3) 59.96
1. The following cost data were taken from the records of JGG manu-
facturing company:
Depreciation on factory equipment P 1,000
Depreciation on sales office 500
Advertising 7,000
Freight-out (shipping) 3,000
Wages of production workers 28,000
Raw materials used 47,000
Sales salaries and commissions 10,000
Factory rent 2,000
Factory insurance 500
Materials handling 1,500
Administrative salaries 2,000
Based upon this information, the manufacturing cost incurred dur
ing the year was:
a. P18,500
b. 80,000
c. 80,500
d. 83,000
6. The accounting department of Mafe Company provided the following data for 2018:
Sales P144,000
Marketing expenses 7,200
Administrative expense 1,440
Other expense 720
Purchases ?
Factory overhead 20,000
Direct labor 30,000
Cost of goods sold 100,600

Inventories, January 1:
Finished goods 14,000
Work in process 16,000
Materials 16,000

Inventories, December 31:

Finished goods 20,400
Work in process 30,000
Materials 17,000
Compute for 2018 the cost of materials purchased:
a. P82,640
b. 72,000
c. 29.200
d. 72,000

7. The following data were taken from the records of Marlene Company for the fiscal year ended December 31, 2018:
Materials issued:
Direct P100,000
Factory supplies 6,000 P106,000
Factory payroll:
Direct labor P250,000
Indirect labor 50,000 300,000
Machine maintenance and repair10,000
Factory rent, light and power 24,000
Depreciation of machinery 10,000
Payroll taxes (factory payroll) 30,000

Inventories:
January 1 December 31
Work in process P30,000 P40,000
Finished goods 50,000 60,000
Compute for 2018: (1) the cost of goods manufactured, and (2) the cost of goods sold:
a. (1)P470,000; (2)P470,000
b. (1) 460,000 (2) 470,000
c. (1) 470,000 (2) 460,000
d. (1) 480,000 (2) 460,000
ABC
1. An accounting system that collects financial and operating data based on the underlying nature and extent of the cost drivers is
a. Direct costing
b. Variable costing
c. Cycle-time costing
d. Activity-based costing

2. Rank the following methods of assigning overhead costs from least accurate to most accurate.
a. Departmental rates, plantwide rate, activity-based costing
b. Plantwide rate, departmental rates, activity-based costing.
c. Plantwide rate, activity-based costing, departmental rates.
d. Activity-based costing, departmental rate, plantwide rate.

3. Overhead allocation based solely on a measure of volume such as direct labor hours
a. Must be used for external financial reporting.
b. Is a key aspect of the activity-based costing model.
c. Will systematically overcost high-volume products and undercost low-volume products.
d. Will systematically overcost low-volume products and uncdercost high-volume products.

4. Multiple or departmental overhead rates are considered preferable to a single or plant-wide overhead rate when
a. Cost drivers, such as direct labor, are the same over all processes.
b. Individual cost drivers cannot accurately be determined with respect to cause-and-effect relationships.
c. Manufacturing is limited to a single product flowing through identical departments in a fixed sequence.
d. Various products are manufactured that do not pass through the same departments or use the same manufacturing
techniques.

5. When using activity-based costing techniques, which one of the following departmental activities would be expected to use
machine hours as a cost driver to allocate overhead costs to production?
a.Plant cafeteria
b. Machine setups
c.Material handling
d. Robotics planning

8. The use of activity-based costing normally results in

a. Equalizing setup costs for all product lines.
b. Decreased setup costs being charged to low-volume products.
c. Substantially lower unit costs for low-volume products than is reported by traditional product costing.
d. Substantially greater unit costs for low-volume products than is reported by traditional product costing.

9. A primary reason for a company to change from traditional costing to activity-based costing (ABC) is that ABC
a. Is a simpler costing method to use.
b. Reduces product undercosting or overcosting.
c. Eliminates indirect cost application to products.
d. Identifies the nonvalue-added cost of production.

10. If ABC information is prepared for internal purposes, which costs are most likely to be treated as period costs?
a. Unit-level
b. Batch-level
c. Product-level
d. Facility-level

11. Purchase order processing is an example of a

a. Unit-level activity
b. Batch-level activity
c. Product-level activity
d. Organization-sustaining activity

15. A company is considering the implementation of an activity-based costing and management program. The company
a. Would normally gain added insights into causes of cost.
b. Should focus on manufacturing activities and avoid implementation with service-type functions.
c. Would probably find a lack of software in the marketplace to assist with the related recordkeeping.
d. Would likely use fewer cost pools than it did under more traditional accounting methods.

16. Which of the following is the focus of activity-based management?

a. To reduce the number of cost pools.
b. To improve the effectiveness of activities.
c. To improve allocation of indirect production costs.
d. To increase the number of volume-related allocation bases.

17. Which of the following is not a benefit of activity-based management?

a. Better costing information.
b. Improving the value the customer receives.
c. Better allocation of resources to key value-added activities.
d. Improved competitive advantage by using continuous improvement methods.

18. Process value analysis is a key component of activity-based management that links product costing and
a. Continuous improvement
b. Reduction of the number of cost pools
c. Overhead rates based on broad averages
d. Accumulation of heterogeneous cost pools

22. Cost allocation is the process of assigning indirect costs to a cost object. The indirect costs are grouped in cost pools and then
allocated by a common allocation base to the cost object. The base that is employed to allocate a homogeneous cost pool should
a. Have a cause-and-effect relationship with the cost items in the cost pool.
b. Have a high correlation with the cost items in the cost pool as the sole criterion for selection.
c. Be a nonfinancial measure (e.g., number of setups) because a nonfinancial measure is more objective.
d. Assign the costs in the pool uniformly to cost objects even if the cost objects use resources in a non-uniform way.
23. Product X and Y have 96 and 90 setups, respectively. If the overhead rate for Machine setups is Php140 per setup, determine
the overhead assigned to each product
a. Php13,440 and Php13,440 for Product X and Y, respectively
b. Php12,600 and Php12,600 for Product X and Y, respectively
c. Php12,600 and Php13,440 for Product X and Y, respectively
d. Php13,440 and Php12,600 for Product X and Y, respectively

24. Coffee Company has identified an activity cost pool to which it has allocated estimated overhead of Php200,000. The cost
driver per that activity was number of machine setups. Product A requires 5,000 setups, Product B, 4,000 setups and Product C,
11,000 setups. Determine the overhead assigned to Product C.
a.Php50,000
b.Php40,000
c. Php110,000
d. Php200,000

25. One of ABC Company's activity cost pools is quality control, with estimated overhead cost of Php420,000. ABC Company
produces produc A (560 inspection hours) and product B (840 inspection hours). How much of the cost of quality control should
be assigned to product B?
a.Php168,000
b. Php210,000
c. Php252,000
d. Php420,000

26. Bean Company produces two products, A and B. The direct cost associated with Product A is Php300 per unit and Product B
is Php400 per unit. The company was able to produce 80 units and 120 units of Product A and B, respectively. Overhead
amounting to Php172,800 is to be allocated to products using direct costs as the relevant cost driver. Determine the per-unit cost
of Product A.
a. Php720/u
b. Php960/u
c. Php1,020/u
d. Php1,360/u
Items 36 and 37 are based on the following information:
INQ Corporation manufactures two versions of a product. Product and cost information show the following:
Version 1 Version 2
DLH per unit 2.00 hours 4.50 hours
Units produced 400 units 1,600 units
Material handling costs a total Php500,000. Number of material movement amounted to 120 times for Version 1 and 380 times
for Version 2.

36. Under the traditional costing method, the material handling costs are allocated based on direct labor hours. Determine the
material handling costs allocated to Version 1.
a. Php50,000
b. Php100,000
c. Php400,000
d. Php450,000

37. Under ABC, the material handling costs allocated to each unit of Version2 would be:
a. Php62.50
b. Php120.00
c. Php237.50
d. Php300.00