cost.docx

New Era University College of Accountancy Cost ACCOUNTING AND CONTROL Qualifying Examination Mr. A recently took over as the controller of ABC Company. Last month, the previous controller left the company with little notice and left the accounting records in disarray, Mr. A needs the ending inve...

New Era University College of Accountancy Cost ACCOUNTING AND CONTROL Qualifying Examination Mr. A recently took over as the controller of ABC Company. Last month, the previous controller left the company with little notice and left the accounting records in disarray, Mr. A needs the ending inventory balances to report first quarter numbers, For the previous month (October 2023), Mr. A was able to piece together the following information: 1\. What is the cost of work-in-process inventory as of October 31, 2023? 2\. What is the cost of finished goods inventory as of October 31, 2023? 3\. The term direct cost and Indirect cost are commonly used in accounting. A particular cost might be considered a direct cost of a manufacturing department but an indirect cost of the product produced in the manufacturing department. Classifying cost as either direct or indirect depends upon 4\. Which of the following statements is correct? 5\. In the preparation of the schedule of Cost of Goods Manufactured, the accountant incorrectly included as part of manufacturing overhead the rental expense on the firm\'s retail facilities. This inclusion would: 6\. Arlo\'s T-shirt Shop only has three costs: T-shirt cost, rent cost on the shop, and utilities cost. Arlo\'s sells the T-shirt for P145.00 each. Management has prepared the following estimated cost information for next month: Assume that all of the activity levels mentioned are within the relevant range. If 9,000 T-shirts are sold next month, Arlo\'s should expect net operating income of (use high-low method to separate mixed costs, if any): a\. P661,500 b. P646,300 c. P654,300 d. P653,500 7\. Caraco Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total cost to manufacture 7,300 units is closest to: a\. P1,526,430 c.1,487,375 b\. P1,448,320 d.1,500,750 8\. Sandalwood Corp. incurred the following manufacturing costs in 2023: **Variable manufacturing costs:** In 2023, the total unit cost at production levels of 40,000 units and 60,000 units is P37.50 and P33.00, respectively. The relevant range is 35,000 units to 70,000 units. How many units were produced during 2023? 9\. Which of the following statements concerning cost behavior is true? 10\. The following data have been collected for four different cost items: Which of the following classifications of these cost items by cost behavior is correct? 11\. At the beginning of the year, manufacturing overhead for the year was estimated to be P250,860. At the end of the year, actual direct labor-hours for the year were 20,800 hours, the actual manufacturing overhead for the year was P245,860, and manufacturing overhead for the year was underapplied by P10,820. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: 12\. Brabec Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 19,700 hours. At the end of the year, actual direct labor-hours for the year were 17,700 hours, the actual manufacturing overhead for the year was \$392,940, and manufacturing overhead for the year was underapplied by P35,400. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: 13\. Daffe Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was P165,600. At the end of the year, actual direct labor-hours for the year were 141,900 hours, manufacturing overhead for the year was overapplied by P10,760, and the actual manufacturing overhead was P160,600. The predetermined overhead rate for the year must have been closest to: 14\. ABC Corporation distributes its service department overhead costs to producing departments. Information for January is presented here Under the algebraic method, what is the total overhead cost allocated to the revenue producing and service departments from the Maintenance department? 5\. Zor Company has a Custodial Services department which services the company\'s Maintenance department and its two operating departments. Costs of the Custodial Services department are allocated to other departments on the basis of square feet of space occupied. The amount of space occupied by each department is given below: Budgeted costs in the Custodial Services department total P36,000. If Zorn Company uses the step-down method and allocates the Custodial Services costs first, the amount of this cost allocated to the Maintenance department would be closest to: 16\. Reno Corporation has two service departments (Maintenance and Human Resources) and three production departments (Machining, Assembly, and Finishing). The two service departments service each other, and studies have shown that Maintenance provides the greatest amount of service. Given the various cost allocation methods, which of the following choices correctly denotes whether Maintenance cost would be allocated to Human Resources? 17\. Consider the following statements about the step-down method of service department cost allocation: II\. The order in which service department costs are allocated is important. Ill. Once a service department\'s costs have been allocated, no costs are re-circulated back to that department. Which of the above statements is (are) correct? 18\. Marvel Company produces two products (A and B). Direct material and labor costs for Product A total P35 (which reflects direct labor hours); direct material and labor costs for Product B total P22 (which reflects 1.5 direct labor hours). Three overhead functions are needed for each product. Product A uses 2 hours of Function 1 at P10 per hour, 1 hour of Function 2 at P7 per hour, and 6 hours of Function 3 at P18 per hour. Product B uses 1, 8, and 1 hours of Functions 1, 2, and 3, respectively, Marvel produces 800 units of A and 8,000 units of Beach period. If total overhead is assigned to A and B on the basis of overhead activity hours used, the total product cost per unit assigned to Product A will be: 19\. The following are data available for ABC\'s project: Contract Price 600,000 ------------------------ ----------- Contract Quantity 12,000 Material cost per unit 20 Molding time per batch 45 hours Batch Size 300 units Annual Budgeted overhead is as follows: **Activity** **Cost Driver** **Cost Driver Volume per year** **Cost Pool** ----------------------- ----------------- --------------------------------- --------------- Molding Molding Hours 12,000 P900,000 Inspection Batches 900 P450,000 Production Management Contracts 120 P750,000 How much is the cost per unit of ABC\'s project? 20\. ABC Company produces two products in a single factory. The following production and cost information has been determined: *Model 1 Model 2* The controller has determined total overhead to be P480,000. P120,000 relates to material moves; P150,000 relates to testing; the remainder is related to labor time. If Kimball uses direct labor hours to allocate overhead to each model, what would be the overhead cost per unit for Model 1? 21\. Of the following, which is the best reason for using activity-based costing? 22\. An activity-based costing system uses which of the following procedures? 23\. Design of an ABC system requires: 24\. ABC Incorporated is a job-order costing firm that uses activity-based costing to apply overhead to its jobs. The following budgets were available: Setup 396,000 33,000 setups Machining 715,000 110,000 machine hours Fabricating 294,000 210,000 direct labor hours The company worked on 3 jobs during the current month. All jobs paid a rate of P20 per direct labor hour to the direct labor workers. Data are as follows: Work in process, beginning 408,000 23,000 0 By the end of the month, jobs 20017 and 20018 were finished and sold. How much is the cost of goods sold? 25\. Marc has a job-order costing system. The following debits (credits) appeared in the Work in Process account for month of May: May 1 Balance P10,000 May 31 Direct materials P60,000 May 31 Direct labor P40,000 May 31 Manufacturing overhead P32,000 May 31 To finished goods P(120,000) Marc applies overhead to jobs at a predetermined rate of 80% of direct labor cost. Job No. 23, the only job still in process at the end of May has been charged with direct labor of P5,000. The amount of direct materials charged to Job No. 23 was: 26\. Kirk Manufacturing Company uses a job-order costing system. At the beginning of April, Kirk only had one job in process, Job \#898. This job was finished during April by incurring additional direct costs of P350 for materials and P700 for labor. Also during April, Job \#899 was started and finished. The direct costs assigned to this job were P1,200 for materials and P950 for labor. Job \#900 was started during April but was not finished by the end of the month. The direct costs assigned to this job were P820 for materials and P540 for labor. Kirk applies manufacturing overhead to its products at a rate of 300% of direct labor cost: Kirk\'s cost of goods manufactured for April was P14,570. What was Kirk\'s work in process inventory balance at the beginning of April? a\. P3,440 b\. P6,420 c\. P6,590 d\. P9,570 27\. Hamilton Company uses job-order costing. Manufacturing overhead is applied using a predetermined rate of 150% of direct labor cost. Any over- or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of each month. Additional information is available as follows: - Jobs 102, 103, and 104 were started during February. - Direct materials requisitions for February totaled P26,000. - Direct labor cost of P20,000 was incurred for February. - Actual manufacturing overhead was P32,000 for February. - The only job still in process at February 28 was Job 104, with costs of P2,800 for direct materials and P1,800 for direct labor. The cost of goods manufactured for February was: [Use the following information to answer the next two questions] Meyers Company had the following inventory balances at the beginning and end of November: During November, P39,000 in raw materials (all direct Heal) were drawn from inventory and used in production, The company\'s predetermined rate Was PS per direct Tabor-hour, and it paid its direct labor workers P10 per hour. A total of 300 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained P4,700 of direct materials cost. The Company incurred P28,000 of actual manufacturing overhead cost during the month and applied P26,400 in manufacturing overhead cost. 28\. The actual direct labor-hours worked during November totaled: 29\. Amount of direct labor cost in the November 30 Work in Process inventory was: [Use the following information to answer the next two questions] The information below has been taken from the cost records of Tercel Company for the past year: Raw materials used in production P326,000 Total manufacturing costs charged to jobs during the year (includes raw materials, direct labor, and manufacturing overhead applied at the rate of 60% of direct labor cost) P686,000 Cost of goods available for sale P826,000 Selling and administrative expenses P25,000 **Inventories** 30\. Direct labor-costs charged to production during the year amounted to: 31\. The Cost of Goods Manufactured during the year was: 32\. ABC Company\'s Job 168 for the manufacture of 2,500 coats in August was on dues Oe with a cost pat per unit of P120 net of allowance for spoilage o{P5) The direct labor rate for the job amounted to i. The total cost of direct materials used for Job 168 amounted to P150,000. The records revealed that one-half hour is needed in producing a unit of product. Final inspection of Job 168 revealed that 300 coats are spoiled and these are sold for P20,000. If the spoilage is charged to a specific job, what is the cost per unit of Job 1687 33\. Which of the following statements regarding work in process is not correct? 34\. A direct labor premium should be charged to a specific job when the overtime is caused by the 35\. In a job order costing system, the net cost of normal spoilage is equal to: 36\. The balance in White Company\'s Work in Process inventory account was P15, 000 on August 1 and P18,000 on August 31. The company incurred P30,000 in direct labor cost during August and requisitioned P25,000 in raw materials (all direct material). If the sum of the debits to the Manufacturing Overhead account total P28,000 for the month, and if the sum of the credits totaled P30,000, then: ABC Company uses the weighted-average Method in its process costing system. The following information available about one of the company\'s processing departments: - There were 108,000 equivalent units of production with respect to conversion costs during the current month, - There were 15,000 units in the department\'s beginning work in process inventory, which were two-thirds complete with respect to conversion costs. - During the current month, 105,000 units were started and 100,000 were completed and transferred out of the department. The ending work in process inventory in the department: 38\. The Archer Company\'s accounting records reflected the following data for April 2023. The company accounts its production using FIFO. How many units were in the beginning work-in-process? 39\. You Belong With Me manufactures concrete garden border sections. June 2023 production and cost information are as follows: All materials are added at the beginning of processing. How many units were in beginning inventory and at what percentage of completion was the direct labor component? 40\. Mastermind Company makes small metal containers. The company began December with 250 containers in process that were 30 percent complete as to material and 40 percent complete as to conversion costs. During the month, 5,000 containers were started. At month end, 1,700 containers were still in process (45 percent complete as to material and 80 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs? 41\. Cartwright Custom Carpentry manufactures chairs in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to nondetectible material defects. Spoiled units generally constitute 8% pf the good units. Data provided for March 20X5 are as follows: WIP, beginning inventory 3/1/20X5 30,000 units Started during March 80,000 units Completed and transferred out 86,000 units WIP, ending inventory 3/31/20X5 20,000 units Costs: What costs Would be associated with normal and abnormal spoilage, respectively, using the FIFO method of process costing? 42\. Midnight Rain Company makes fabric-covered hat boxes. The company began September with 500 boxes in process that were 100 percent complete as to cardboard, 80 percent complete as to cloth, and 60 percent complete as to conversion costs. During the month, 3,300 boxes were started. On September 30, 350 boxes were in process (100 percent complete as to cardboard, 70 percent complete as to cloth, and 55 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth? 43\. Which of the following INCORRECTLY reflects what units passed inspection this period? Assume beginning work in process was completed and ending work in process was started during the period.. 44\. Companies that use a process-cost accounting system would: 45\. Michael, Inc., uses a process-costing system. A newly hired accountant has identified the following procedures that must be performed by the close of business on Friday: Which of the following choices correctly expresses the proper order of the preceding tasks? 46\. Department Love Story had 4,000 units in Work in Process that were 40% completed at the beginning of the period at a cost of P12,500. Of the P12,500, P8,000 was for material and P4,500 was for conversion costs. 14,000 units of direct materials were added during the period at a cost of P28,700. 15,000 units were completed during the period, and 3,000 units were 75% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was P32,450 and factory overhead was P18,710. If the average cost method is used, the material cost per unit would be: 47\. Willow Manufacturing has three producing departments in its factory. The ending inventory in the Milling Department consisted of 7,500 units. These units were 80% 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, P50; labor, P20; and factory overhead, P30. What is the total cost of the ending inventory? 48\. Fearless Company processes a single type of aluminum. During the current period the following information was given: **Units** **Material Costs** **Conversion Costs** --------------------------------- ----------- -------------------- ---------------------- Beginning Inventory 3,000 P4,500 P4,800 Added During the Current Period 20,000 P48,000 P65,000 Ending Inventory 2,500 All materials are added at the beginning of the production process. The beginning inventory was 30% complete as to conversion, while the ending inventory was 40% completed for conversion purposes. Fearless Company uses the first-in, first-out system of process costing. What were the costs assigned to the units transferred out this period (round equivalent unit cost to the nearest decimal)? 49\. Taylor Co, has a production process in which the inspection point is at 65 percent of conversion. The beginning inventory for July was 35 percent complete and ending inventory was 80 percent complete. Normal spoilage costs would be assigned to which of the following groups of units, using FIFO costing? 50\. The costs of normal spoilage are allocated to the units in ending work-in-process inventory, in addition to completed units if the units: 51\. Data on Golden Company\'s direct labor costs is given below: What was Golden\'s standard direct labor rate? 52\. Labba Corporation uses a standard costing system and uses a two-way analysis of overhead variances. Selected data for February 2023 production activity is as follows: The budget (controllable) variance for February is 53\. The following information relates to a given department of Haven Company for the fourth quarter of 200A: The company uses the 3-way variance analysis method. What were the actual hours worked in this department during the quarter? 54\. Company\'s direct labor costs for April are as follows: Standard direct labor hours 42,000 What is Pane\'s direct labor rate variance? 55\. Peters Company uses a flexible budget system and prepared the following information for the year Peters operated at 80% capacity during the year but applied factory overhead based on the 90% capacity level. Assuming that actual factory O/H was equal to the budgeted amount for the attained capacity, what is the amount of O/H variance for the year? 56\. The Fletcher Company uses standard costing. The following data are available for October. The standard quantity of material allowed for October production is: 57\. Web Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of machine hours. During February, the company used a denominator activity of 80,000 machine hours in-computing its predetermined overhead rate. However, only 75,000 standard machine hours were allowed for the month\'s actual production. If the fixed overhead volume variance for February was P6,400 unfavorable, then the total budgeted fixed overhead cost for the month was: 58\. The following data are the actual results for Wow Company for the month of May: Standard cost and budget information for Wow Company follows: I% « ¢ The total variable overhead efficiency variance is 59\. When the actual price paid on credit for.a.raw material exceeds Its standard price, the journal entry would include: 60\. During a recent lengthy strike at Morell Manufacturing Company, management replaced striking assembly line workers. The assembly line workers were being paid P18 per hour while the office workers are only paid \$10. What is the most likely effect on the labor variances in the first month of this strike? 61\. In a standard cost system, Work in Process Inventory is ordinarily debited with. 62\. If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n) 63\. During April, 80,000 units were produced. The standard quantity of material allowed per unit was 2 pounds al a standard cost of P5 per pound. If there was a favorable usage variance of P40,000 for April, the actual quantity of materials used must have been (M). [Use the following information to answer the next two questions] Tropical Company manufactures three products in a joint process which costs P25,000. Each product can be sold at split-off for processed further and then sold. 10,000 units of each product are manufactured. The following information is available for the three products: 64\. If Product B is processed beyond the split-off point, profit will: 65\. To maximize profits, which products should Tropical process further? 66\. JK Co. manufactures product J and K from a joint process. For product J, 4,000 units were produced having a sales-value at split-off of P15,000. If product J were processed further, the additional costs would be P3,000 and the sales value would be P20,000. For product K, 2,000 units were produced having a sales value at split-off of P10,000. If product K were processed further, the additional costs would be P1,000 and the sales value would be P12,000. Using the sales value at split-off method, the portion of the total joint costs allocated to product J was P9,000. What were the total joint costs? 67\. 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: a\. is identifiable as an individual product only upon reaching the split-off point, and it has relatively minor sales value when compared to the other products. b\. is identifiable as an individual product before the production process, and it has relatively significant physical volume when compared with the other products, c\. 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 d\. was relatively significant physical volume when compared with the other products, and it can be sold immediately without any additional processing. 68\. Sena Company produces three products from a joint process. The products can be sold at split-off or processed further in deciding whether to sell at split-off or process further, management should: 69\. Marco operates in a JIT manufacturing system. For August, Marco purchased 10,000 units of raw material at P1.00 per unit on account. The journal entry to record the transaction using three trigger point is b\. COGS 10,000 c\. No entry 70\. Changi Ong, general manager of Casio Corporation\'s Midwest Division, has provided the following information for transactions that occurred during March. This division uses a JIT costing system. Compute the March 31 balance in the Conversion Cost: