ACCOUNTING FOR MATERIALS

The following information pertains to Material X used by Nikki Company

Annual usage in units 20,000

Working days per year 250
Safety stock in units 800
Normal lead time in working units 30

1. If units of Material X will be required evenly throughout the year, the reorder point
is

a. 800
b. 1,600
c. 2,400
d. 3,200

Norman buys baseball bats from a manufacturer at P10 each. Norman expects to sell
90,000 bats evenly over the next year. Norman’s cost of capital is 10 percent. The total
out-of-pocket cost to carry one bat in inventory is P0.50 and the cost of ordering bats is
P15 per order.

2. Suppose that Norman orders 3,000 bats at a time. What is the total annual
inventory cost?

a. P 750
b. P1,200
c. P2,250
d. P2,700
3. What is the economic quantity order?

a. 1,342 units
b. 1,643 units
c. 2,324 units
d. 3,000 units
4. How many times would Norman have to place an order in one year?

a. 67 times
b. 55 times
c. 39 times
d. 30 times
5. Norman sells bats for 300 days in a year. The lead time on orders is 2 days. At what
point should Norman place the order?

a. 900 units remaining in stock

b. 600 units remaining in stock
c. 300 units remaining in stock
d. 0 units remaining in stock

During March, Mark Company incurred the following costs on Job 209 for the 200
motors

Original cost accumulation P 660

Direct materials 800
Direct labor 1,200
Factory overhead P2,660

Direct costs of reworking 10 units:

Direct materials P 100
Direct labor 160
P 260

Method A – The rework cost were attributable to the exacting specifications of Job 209,
and the full rework costs were charged to this specific job.

Method B – The defective units fall within the normal range and the rework is not
related to a specific job, or the rework is common to all the jobs.

6. The cost per finished unit of Job 209 using Method A is:

a. P 15.60
b. P 15.80
c. P 13.30
d. P 13.50
7. The cost per finished unit of Job 209 using Method B is:

a. P 13.30
b. P 15.80
c. P 15.30
d. P 13.60

8. Harper Company’s Job 301 for the manufacture of 2,200 coats was completed
during August 2009 at the following unit costs:

Direct Materials P 20.00

Direct Labor 18.00
Factory Overhead (includes an allowance of P1.00 spoiled work) 18.00
56.00
Final inspection of Job 301 discloses 200 spoiled costs which were sold to a jobber
for P 6000. Assume that spoilage loss is charged to all production during August.
What would be the unit cost of the good units produced on Job 301?

a. P 53.00
b. P 55.00
c. P 56.00
d. P 58.00

9. Assume instead, that the spoilage loss is attributable to exacting specification of Job
301 and is charged to this specific job. What would be the unit cost of the good
coats produced on Job 301?

a. P 55.00
b. P 57.50
c. P 58.60
d. P 61.60