LONG TEST MIDTERM COVERAGE- STRATCOST

NAME: _______________________________________________________________________

BLOCK: _____________________________

Theories I- True or False

Instruction:
Provide your answer on the space provided before Q#.
TRUE- if the statement is true, FALSE- if the statement is false.

________1. Management accounting places less emphasis on precision and more emphasis on flexibility
and relevance than financial accounting.

________2. When carrying out their directing and motivating activities, managers select a course of
actions and specify how the action will be implemented.

________3. The controller’s position in a retail company is considered a line position rather than a staff
position.

________4. The Standards of Ethical Conduct promulgated by the Institute of Management Accountants
specifically states, among other things, that management accountants have a responsibility to disclose
fully all relevant information that could reasonably be expected to influence an intended user’s
understanding of the reports, comments and recommendations presented.

________5. The corporate treasurer’s focus tends to be more external, while the controller’s focus is
more internal.

________6. Psychological criteria is a way of defining quality that focuses on judgmental evaluations of
what constitutes product or service excellence.

________7. Prevention costs associated with discovering poor product quality before the product
quality before the product reaches the customer.

________8. Benchmarking is studying the business practices of other companies for purposes of
comparison.

________9. One of the goals of TQM (Total quality management) is to satisfy customer needs by
producing the exact product that customers want.

________10. The concept of quality at the source is part of TQM.

________11. JIT is also called lean production.

________12. One key feature of a JIT production system is maintaining a limited and high-quality
suppliers.

________13. Benefits of JIT includes higher production volume, high production costs, high attrition rate
and low returns.
________14. Theory of constraints is a technique used to improve speed in the manufacturing process
and thus speed.

________15. Life Cycle in production includes decline and maturity.

Problem solving- 2pts each

Instruction:
Provide your answer on the space provided before Q#. Show your solution. No solution, no point will be
given.

P-1

SABAW Corp. uses 84,275 units of Material Y each year. The cost of placing an order is P120 and the
carrying cost for one unit of material Y is P3.00. It takes 20 days to receive the order once placed.

1. Compute for the reorder point.

2. How many orders are made each year?
3. What is the frequency of placing an order?
4. Total cost of ordering.
5. Total cost of carrying the inventory.
6. Total inventory costs.

P-2

Eloise Co. purchases 7,500 units of laundry soap per annum. The company works 300 days per year. The
average or normal purchase lead time is 7 working days while maximum lead time is 10 working days.

1. How many units should Eloise maintain as safety (buffer) stock?

2. What is Eloise Com.'s reorder point for the laundry soaps?
P-3

Gundha Bayu has 150 units of raw materials X on hand at January 1, 2021 at P21 each. Purchases of raw
materials during the month of January were as follows.

Jan. 10 200 units @ P22

18 250 units @ P23

28 100 units @ P24

A physical count was made on January 31. It showed 250 units of raw materials X was on hand.

1. How much was the raw materials issued to production using FIFO method?

P-4

For June, MPD Co. had cost of goods manufactured equal to P120,000, materials purchases of P33,000;
depreciation of factory assets, P17,000; cost of goods sold, P140,000; expired insurance on factory
assets, P2,000; cost of goods available for sale, P190,000; and total factory labor, P49,000. Inventories
were as follows:

June 1 June 30
Materials P 15,000 P 19,000
Work in process 40,000 30,000
Finished goods ? ?

General factory overhead of P13,000 was incurred in June, this figure includes all factory overhead
except indirect labor, indirect materials, depreciation, and insurance. Direct labor cost for the month
was six times larger than indirect labor cost. The cost of indirect materials used was P1,000. The
company used a single materials account for direct and indirect materials.

1. How much was the direct materials used?

2. How much was the manufacturing cost used?
3. How much was the finished goods at the end of the month?
P-5

Below are balances and information taken from the records of Bulls Company for the last quarter of the
current year:

Inventories, October 1

Raw Materials P 134,000

Work in process 354,000

Finished goods 594,000

Cost of goods sold 10,800,000

Manufacturing overhead 4,200,000 debit

4,600,000 credit

Supplementary data:

1. During the period, purchases of raw materials totaled P1,093,400 while physical count of raw
materials revealed that P250,000 were unused.
2. 39,800 direct labor hours were utilized distributed as follows:
a. 25,000 hours worked on regular time at P42.50 per hr.
b. 14,000 hours worked at P42.50 plus 10% special night premium
c. 800 hrs worked on overtime at regular rate plus 30% OT premium
3. Overhead is charged to production at 80% of direct labor costs.
4. Actual overhead incurred were P1,420,000. Overhead variance is closed to all accounts with
Overhead elements only at the end of the year.
5. At the end of the year, records show that work in process increased by P80,000 while Finished
Goods decreased by P150,000

Required:

1. Total factory costs for the quarter amounted to _____.

2. The cost of goods manufactured for the quarter amounted to _____.
3. The balances of WIP, FG, COGS after closing the overhead variance are ______.
P-6

Budgeted data Department 1 Department 2

Production 10,000 units 50,000 units
Direct labor hours 80,000 120,000
Direct labor cost P2,160,000 P2,700,000
Direct materials P1,350,000 P1,950,000
Machine hours 60,000 40,000
Overhead costs P2,700,000 P2,040,000

Actual data Department 1 Department 2

Production 9,400 units 56,000
Direct labor hours 79,000 122,000
Direct labor cost P2,145,000 P2,820,000
Direct materials P1,296,000 P1,962,000
Machine hours 57,000 43,000
Overhead costs P2,793,000 P2,061,000

Required:

1. Determine the overhead applied to the job by department assuming Department 1 applies
overhead based on direct labor hours and Department 2 uses machine hours.
2. Compute for the overhead applied to the job if plant-wide rate based on direct labor hours is
used.

P-7

Beyhive Co. has departmentalized its operations into two service departments, General Factory Office
and Employee relations and three producing departments, Mixing, Fabricating and Finishing. General
Factory office is allocated first based on labor hours and employee relations is allocated second on the
basis of number of employees. The Company provides the following estimated data:

General Employee Mixing Fabricating Finishing

Factory office relations
Dept. OH costs P43,000 P79,000 P233,000 P266,000 P320,000
DLH 10,000 12,000 23,200 25,600 19,200
Number of employees 60 30 144 228 168
MH 63,540 105,800 85,725

The company estimates that indirect costs will be insurance expenses, P32,200; and heating and lighting
expense, P48,600. It will use the following bases to allocate indirect expenses:

Insurance expenses: On the bases of equipment book values

Heating and Lighting expenses: On the basis of space occupied

 Departments Equipment Book values Space occupied
General factory office P20,000 1,000 sq ft
Employee relations 25,000 800 sq ft
Mixing 130,000 4,000 sq ft
Fabricating 175,000 2,000 sq ft
Finishing 110,000 3,000 sq ft

Required:

How much is the allocated service costs to the producing departments using

a. Direct method
b. Step method
c. Algebraic method

How much is the total cost of producing departments after service cost allocations using

a. Direct method
b. Step method
c. Algebraic method