MIDTERM EXAM

Prepared by: Shirley Olivo, CPA, MBA

1. A cost that remains constant in totals but varies in a per unit basis with changes in activity is called
a. Expired cost
b. Fixed cost
c. Variable cost
d. Mixed cost

2. Which of the following is not a product cost component?

a. Rent on a factory building
b. Indirect production labor wages
c. Janitorial supplies used in factory
d. Commission on the sale of a product

3. The indirect cost of converting raw material into finished goods are called
a. Period costs
b. Prime costs
c. Overhead costs
d. Conversion costs

4. Conversion cost does not include

a. Direct labor
b. Direct material
c. Factory depreciation
d. Supervisor’s salaries

5. The distinction between the direct and indirect costs depends on whether the cost
a. Is controllable or non-controllable
b. Is variable or fixed
c. Can be conveniently and physically traced to a cost object under consideration
d. Will increase with changes in levels of activity

6. Edge Cut Company is a construction company that builds greenhouses on special request. What is the proper
classification of the carpenter’s wages?
Product Period Direct
a. Yes Yes No
b. Yes No Yes
c. No No No
d. No Yes Yes

7. All costs related to manufacturing function of a company are

a. Prime costs
b. Direct costs
c. Product costs
d. Conversion costs

8. Which of the following statements are true?

I. A company that produces sugar will use a process costing system to track production cost
II. A company that produces custom bridal gown will use a job order costing system to track production cost
 a. Both I and II
b. I only
c. II only
d. None of the statements are true

9. Which of the following statements are true?

I. In a normal job order costing system, factory overhead is applied using predetermined rates times actual
input
II. In a job order costing system, costs are accumulated for each individual job
a. I only
b. II only
c. Both I and II
d. None of the statements are true

10. Over-applied overhead that is material in amount is allocated between Finished Goods inventory, Work in process
Inventory and Cost of Goods sold at year end. Over-applied factory overhead that is immaterial in amount is
closed to Cost of Goods Sold at year end.
a. First and second sentence are true
b. First and second sentence are false
c. Only the first statement is true
d. Only the second statement is true

11. Process costing is most appropriate when manufacturing large batches of homogeneous products. Conversion cost
includes all manufacturing cost other than direct materials.
a. First and second sentence are true
b. First and second sentence are false
c. Only the first statement is true
d. Only the second statement is true

12. Under applied overhead occurs when

a. Actual overhead is less than applied overhead
b. The actual overhead rate is less than the predetermined overhead rate
c. The predetermined overhead rate is less than the actual rate
d. The predetermined overhead rate is overstated

13. A security guard’s wages at a factory would be an example of:

Indirect labor Fixed manufacturing overhead
a. No No
b. Yes Yes
c. Yes No
d. No Yes

14. During the month of July, direct labor cost totaled P12, 000 and direct labor cost was 30% of prime cost. If total
manufacturing costs during July were P86, 000, the manufacturing overhead was:
a. P46, 000
b. P40, 000
c. P28, 000
d. P74, 000

The following information has been taken from the cost records of Richards Company for the past year:
 Raw material used in production $326
Total manufacturing costs charged to production during the year (includes direct 686
material, direct labor, and overhead equal to 60% of direct labor cost)
Cost of goods available for sale 826
Selling and Administrative expenses 25

Inventories Beginning Ending

Raw Material $75 $ 85
Work in Process 80 30
Finished Goods 90 110

15. Refer to Richards Company. The cost of raw material purchased during the year was
a. 316
b. 336
c. 360
d. 411

16. Refer to Richards Company. Direct labor cost charged to production during the year was
a. 135
b. 216
c. 225
d. 360

17. Refer to Richards Company. Cost of Goods Manufactured was

a. 636
b. 16
c. 736
d. 766

18. Refer to Richards Company. Cost of Goods Sold was

a. 691
b. 716
c. 736
d. 801

T1 Thibodeaux Tailors has gathered information on utility costs for the past year. The
controller has decided that utilities are a function of the hours worked during the month.
The following information is available and representative of the company’s utility costs:

Hours worked Utility cost incurred

Low point 1,300 $ 903
High point 1,680 1,074

19. If 1,425 hours are worked in a month, total utility cost (rounded to the nearest dollar)
using the high-low method should be
a. 947
b. 954
c. 959
d. 976

20. Welch Corporation uses a predetermined overhead application rate of $.30 per direct
labor hour. During the year it incurred $345,000 dollars of actual overhead, but it
planned to incur $360,000 of overhead. The company applied $363,000 of overhead
 during the year. How many direct labor hours did the company plan to incur?
A. 1,150,000
B. 1,190,000
C. 1,200,000
D. 1,210,000

Machine Master, Inc. had the following data regarding monthly power costs:

Month Machine hours Power cost

Jan 300 $680
Feb 600 720
Mar 400 695
Apr 200 640

21. Assume that management expects 500 machine hours in May. Using the high-low
method, calculate May’s power cost using machine hours as the basis for prediction.
a. 700
b. 705
c. 710
d. 1320

The records of Phoenix Corporation revealed the following data for the current year.

Work in Process $ 73,150

Finished Goods 115,000
Cost of Goods Sold 133,650
Direct Labor 111,600
Direct Material 84,200

22. Refer to Phoenix Corporation. Assume, for this question only, actual overhead is
$98,700 and applied overhead is $93,250. Manufacturing overhead is:
a. overapplied by $12,900.
b. underapplied by $18,350.
c. overapplied by $5,450
d. underapplied by $5,450

23. Refer to Phoenix Corporation. Assume that Phoenix has underapplied overhead of
$10,000 and that this amount is immaterial. What is the balance in Cost of Goods
Sold after the underapplied overhead is closed?
a. 133,650
b. 123,650
c. 143,650
d. 137803
24. Refer to Phoenix Corporation. Assume that Phoenix has overapplied overhead of
$25,000 and that this amount is material. What is the balance in Cost of Goods Sold
after the overapplied overhead is closed?
a. 123267
b. 144033
c. 158650
d. 108650

Durian Company has the following data on April 30, 2008:

April manufacturing overhead P30, 101.80
Decrease in ending inventories:
 Materials P2, 430. 00
Goods in process P590. 00
Increase in ending inventory
Finished Goods P1, 320.40

25. The manufacturing overhead amounts to 50% of the direct labor, and the direct labor and manufacturing overhead
combined equal 50% of the total cost of manufacturing. All materials are purchased FOB shipping point
What is the cost of goods manufactured?
a. P180, 610. 80
b. P182, 300. 00
c. P181, 200. 80
d. P183, 200. 80
The Apple Manufacturing Company manufactures a product exclusively to customer order, employing a job order cost
system.

On August 1, 2008, its work in process inventory (5 partially completed jobs) had a cost of P3, 000. During August, no
additional orders were put into production and 18 orders were completed (total cost, P24, 000) of which 14 (cost P20,
000) were shipped.

Materials requisition in August totalled P17, 000 and direct labor costs were P8, 000. At the beginning of the year 2008, a
predetermined overhead rate of 150% of expected direct labor cost was established.

26. The August 31, 2008 work in process inventory is:

a. P4, 000
b. P16, 000
c. P14, 000
d. 20, 000
Job no. 210 has, at the end of the second week of February, an accumulated total cost of P4, 200. In the third week, P1,
000 of direct materials were used on the Job, together with P10 of indirect materials. Twenty hours of direct labor services
were applied to the job at a cost of P5 per hour.
Manufacturing overhead was applied at the basis of P2. 50 per direct labor hour for fixed overhead and P2 per hour for
variable overhead.
27. Job no. 210 was the only job completed during the third week. The total cost of Job Order No. 210 is:
a. P5, 390
b. P5, 350
c. P5, 360
d. P5, 400
Pomelo Company has two service departments (1 and 2) and two operating (producing) departments (A and B). Data
provided are as follows:

Service Departments Operating Departments

1 2 A B
Direct Costs P150 P300 P5, 000 P6, 000
Services performed by 40% 40% 20%
Dept. 1
Services performed by 20% 70% 10%
Dept. 2
 28. Assuming the direct method is used to allocate service department costs, what is the service department cost
allocated to Department B?
a. P50. 00
b. P87. 50
c. P60. 00
d. P150. 00
29. What is the total cost of Department A?
a. P5, 000. 00
b. P5, 362. 50
c. P5, 295. 83
d. P5, 270. 00
30. Assuming the step down method is used to allocate service department costs. What is the service department costs
allocated to Department B?
a. P60. 00
b. P75. 00
c. P100. 00
d. P66. 00
31. What is the total cost of Department A?
a. P5, 375
b. P5, 075
c. P5, 350
d. P5, 270
32. Assuming the reciprocal method is used to allocate service department costs, what is the service department cost
allocated to Department B (rounded)?
a. P60. 00
b. P84. 78
c. P75. 00
d. P135. 00
33. What is the total cost of Department A (rounded)?
a. P5, 365. 00
b. P5, 375. 00
c. P5, 087. 00
d. P5, 085. 00
Jacksonville Company uses a job order costing system. During May, the following costs appeared in the Work in process
inventory account:

Beginning balance P30, 000

Direct materials used P90, 000
Direct labor incurred P75, 000
Applied overhead P52, 500
Cost of Goods manufactured P225, 000

34. Jacksonville Company applies overhead on the basis of direct labor cost. There was only one job left in work in
process at the end of May which contained P6, 300 of overhead. What amount of direct material was included?
a. P7, 200
b. P9, 000
c. P11, 160
d. P11, 790

35. Wyman Company is a graphic design shop that produces job to customer specifications. During January, Job
#3051 was worked on and the following information was available:
 Direct materials used P2, 500
Direct labor hours worked 15
Machine time used 6
Direct labor rate per hour P7
Overhead application rate per hour of machine time P18

What was the total cost of Job #3051 for January?

a. P2, 713
b. P2, 770
c. P2, 812
d. P3, 052

36. Mayflower Corporation manufactures products on a job order basis. The job cost sheet for Job #656 shows the
following for September:

Direct material P5, 000

Direct Labor (100 hours at P7.25) P725
Machine hours incurred 40
Predetermined overhead rate per machine hour P26

At the end of September, what total cost appears on the job cost sheet for Job #656?
a. P5, 725
b. P5, 765
c. P6, 765
d. P8, 325

37. M. Munda Company produces and sells rattan baskets. The number of units produced and the corresponding total
production costs for six month, which are representatives for the year, are as follows:
Month Units produced Production costs
April 500 P4, 000
May 700 P8, 000
June 900 P6, 000
July 600 P7, 500
August 800 P8, 500
September 550 P7, 250
The monthly production cost can be expressed as
a. Y = a + bx
b. Y = b +ax
c. Y = ax + b
d. X = a +by
38. Using the least-square method, the variable production cost per unit is
a. P5
b. P10
c. P0.27
d. P3.74
39. Using the least-square method, the monthly fixed production cost is
a. P1, 500
b. P18, 000
c. P4, 350
d. P52, 200
40. If the high-low points method is used, the results when compared to those under the method of least squares are
 Variable cost per unit Total fixed costs
a. Equal Equal
b. Higher by P1.26 Lower by P2, 850
c. Lower by P1.26 Higher by P2, 850
d. Higher by P5 Lower by P1, 500
41. Which of the following costs is not a product?
a. Wages paid to workers for rework on defective products
b. Wages paid to truck loaders who load finished goods onto outgoing
delivery trucks
c. Fringe benefits paid to factory workers
d. Wages paid to workers to idle time due to machine breakdown in a
production department
42. ABC differs from traditional product costing because it uses multiple allocation bases and therefore, allocates
costs (such as overhead costs) more accurately. This normally results in
a. Equalizing set up costs for all product lines
b. Lower set up costs being charged to low volume products
c. Decreased units costs for low-volume products than is reported by
traditional product costing systems
d. Substantially greater unit costs for low-volume products than is reported
by traditional product costing system.
43. The allocation base that would most likely be the best for allocating the indirect costs of marketing function is
a. Number of shipments
b. Number of sales person
c. Number of customer phone calls
d. Direct labor hours
44. The allocation base that would be most likely to be the best for allocating the indirect costs of the distribution
function is
a. Number of shipments
b. Number of sales person
c. Direct labor hours
d. Machine hours
45. Of the following, which is the best reason for using the activity-based costing?
a. To assign indirect overhead costs to different overhead pools
b. To better assign overhead costs to products
c. To keep better track of overhead costs
d. To more accurately assign overhead costs to cost pool so that these costs
are better controlled