MANUFACTURING - ACTUAL COSTING REVIEWER

THEORIES

1. For a manufacturer, the three inventory accounts are

a. raw materials, finished goods, and cost of goods sold
b. raw materials, overhead, and cost of goods sold
c. raw materials, direct labor, and overhead
d. raw materials, work in process, and finished goods

2. A company has purchased some steel to use in the production of steel railings. If this steel has NOT been put into
production, it would be classified as
a. direct materials inventory d. office supplies
b. factory supplies e. finished goods inventory
c. work-in-process inventory

3. The expense that theoretically is not a correct part of inventory cost is:
A. freight-in D. accounting costs for materials received
B. freight-out E. purchasing costs
C. inspection costs

4. Which of the following costs is not an example of factory overhead that might be found on a cost of goods
manufactured statement
A Supplies C Depreciation
B Indirect Labor D Materials available for use

5. Which of the following accounts would appear on the financial statements of ONLY a manufacturing enterprise?
a. bonds payable d. ordinary share
b. work-in-process inventory
c. prepaid insurance

6. Conversion of inputs to outputs is recorded in the (E)

a. Work in Process Inventory account. c. Raw Material Inventory account.
b. Finished Goods Inventory account. d. both a and b.

7. The debits in work-in-process are BWIP, direct labor, direct materials, and factory overhead. The account should
be credited for production that is completed and sent to finished goods inventory. The balance is
A. EWIP, which is a credit.
B. EWIP, which is a debit.
C. Total production costs to be accounted for.
D. Closed out at the end of the accounting period.

8. The ending work-in-process inventory is deducted on the (E)

a. balance sheet d. statement of cash flows
b. statement of cost of goods manufactured e. statement of financial position.
c. income statement

9. Which type of inventory is normally sold to other organizations?

a. direct materials d. office supplies
b. factory supplies e. finished goods
 c. work-in-process

10. The merchandise inventory in a merchandising business corresponds most closely to which of the following
items in a manufacturing firm?
a. raw materials inventory d. work-in-process inventory
b. cost of goods available for sale e. finished goods inventory
c. cost of goods manufactured

11. The components of manufacturing cost are

a. Variable costs, fixed costs, and overhead costs.
b. Materials, direct labor, and overhead.
c. Purchases, wages, and manufacturing overhead.
d. Wages and salaries, maintenance and repairs, utilities, and depreciation.

12. The sum of the total additions to work-in-process during a period is

a. total manufacturing costs added d. cost of goods manufactured
b. factory overhead applied e. direct labor costs.
c. raw materials used

13. A good description of “cost of goods manufactured” is the recorded cost of the:
A. units completed during the period.
B. work done on all units during the period.
C. units started and completed during the period.
D. work done this period on units completed this period.

14. The cost of units completed during a period is called

a. cost of goods sold d. finished goods inventory
b. cost of goods manufactured e. goods available for sale.
c. current manufacturing costs

15. The final figure in the Schedule of Cost of Goods Manufactured represents the
a. cost of goods sold for the period.
b. total cost of manufacturing for the period.
c. total cost of goods started and completed this period.
d. total cost of goods completed for the period.

16. If a firm's work in process inventory has increased during the period,
A. its cost of goods sold will be less than its cost of goods manufactured
B. its cost of goods sold will be greater than its cost of goods manufactured
C. its manufacturing costs for the period will be less than its costs of goods manufactured
D. its manufacturing costs for the period will be more than its costs of goods manufactured

17. Cost of goods sold equals cost of goods manufactured

a. when finished goods inventories remain constant
b. when work-in-process inventories remain constant
c. plus beginning work-in-process inventory minus ending work-in-process inventory
d. when raw materials inventories remain constant
e. both a and c.
18. If the cost of goods sold is greater than the cost of goods manufactured, then:
a. work in process inventory has decreased during the period.
b. finished goods inventory has increased during the period.
c. total manufacturing costs must be greater than cost of goods manufactured.
d. finished goods inventory has decreased during the period.

19. The formula to compute cost of goods manufactured is

a. beginning Work in Process Inventory plus purchases of raw material minus ending Work in Process
Inventory.
b. beginning Work in Process Inventory plus direct labor plus direct material used plus overhead incurred
minus ending Work in Process Inventory.
c. direct material used plus direct labor plus overhead incurred.
d. direct material used plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

20. Which of the following formulas determine cost of goods sold in a merchandising entity?
a. Beginning inventory + Purchases + Ending inventory = Cost of goods sold
b. Beginning inventory + Purchases - Ending inventory = Costs of goods sold
c. Beginning inventory - Purchases + Ending inventory = Cost of goods sold
d. Beginning inventory - Ending inventory - Purchases = Cost of goods sold

21. The formula for cost of goods sold for a manufacturer is

a. beginning Finished Goods Inventory plus Cost of Goods Manufactured minus ending Finished Goods
Inventory.
b. beginning Work in Process Inventory plus Cost of Goods Manufactured minus ending Work in Process
Inventory.
c. direct material plus direct labor plus applied overhead.
d. direct material plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

22. Which of the following formulas determine cost of goods sold in a manufacturing entity?
a. Beginning work-in-process inventory + Cost of goods manufactured - Ending work-in-process inventory =
Cost of goods sold
b. Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process inventory =
Cost of goods sold
c. Cost of goods manufactured - Beginning finished goods inventory - Ending finished goods inventory = Cost
of goods sold.
d. Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory = Cost
of goods sold.

23. Debits to Cost of Goods Sold typically represent the

a. transfer of completed items to Finished Goods Inventory.
b. costs of items sold.
c. selling price of items sold.
d. the cost of goods manufactured.

24. The journal entry to record the incurrence and payment of overhead costs for factory insurance requires a debit to
a. Cash and a credit to Manufacturing Overhead.
b. Manufacturing Overhead and a credit to Accounts Payable.
c. Manufacturing Overhead and a credit to Cash.
d. Work in Process Inventory and a credit to Cash.
25. The logical explanation for an entry that includes a debit to Manufacturing Overhead control and a credit to
Prepaid Insurance is
a. the insurance company sent the company a refund of its policy premium.
b. overhead for insurance was applied to production.
c. insurance for production equipment expired.
d. insurance was paid on production equipment

26. Finished Goods is debited and Cost of Goods Sold is credited for:
A. transfer of completed goods to the customer
B. sale of a customer order
C. return of materials to the supplier
D. return of goods by the customer

27. A journal entry includes a debit to Work in Process Inventory and a credit to Raw Material Inventory. The
explanation for this would be that
a. indirect material was placed into production.
b. raw material was purchased on account.
c. direct material was placed into production.
d. direct labor was utilized for production.

28. The journal entry to record the incurrence and payment of overhead costs for factory insurance requires a debit to
a. Cash and a credit to Manufacturing Overhead.
b. Manufacturing Overhead and a credit to Accounts Payable.
c. Manufacturing Overhead and a credit to Cash.
d. Work in Process Inventory and a credit to Cash.

29. What is the correct journal entry if P5,000 of direct labor and P1,250 of indirect labor were incurred?
a. Work-in-process P6,250
Accrued payroll P6,250
b. Work-in-process P5,000
Overhead control 1,250
Accrued payroll P6,250
c. Work-in-process P6,250
Overhead control 1,250
Accrued payroll P6,250
Applied overhead 1,250
d. Payroll expense P6,250
Accrued payable P6,250

30. A credit to Work in Process Inventory represents

a. work still in process.
b. raw material put into production.
c. the application of overhead to production.
d. the transfer of completed items to Finished Goods Inventory
PROBLEM

1. The following information for Cedric Company during March

Accounts payable, March 1 36,000

Work in process, March 1 180,000
Finished goods, March 1 300,000
Materials, March 31 90,000
Accounts payable, March 31 60,000
Finished goods, March 31 360,000
Actual factory overhead for March 900,000
Cost of goods sold 1,800,000
Payment of accounts payable (account is used for materials only) 210,000

The work in process on March 31 have been charged P36,000 for materials and P72,000 for direct labor (3,000
hours), Factory overhead P144,000. Actual direct labor hours, 60,000 at P8 per hour.

A. Compute the materials inventory on March 1:

A. 204,000 C. 348,000
B. 234,000 D. 408,000

B. How much is the Total goods available for sale?

C. How much is the Conversion Cost?

2. The B Company provides the following data for 2018:

Dec. 31, 2017 Dec. 31, 2018
Inventories:
Raw materials * P12,000 P 13,500
Work in process 15,100 17,600
Finished goods 19,500 21,200
Operating data:
Cost of goods manufactured 151,700
Direct labor cost 50,000
Factory overhead cost (utilities expense only) 62,500
Indirect materials cost 5,000

* Only Direct materials

 Consisting of both direct and indirect materials, the cost of materials purchases for 2018:

A. P33,200 C. P38,200
B. P36,700 D. P43,200

3. The following information with regard to Brisbane Company’s inventory for 2017 is available:
January 1 December 31
Raw materials 2,000,000 2,500,000
Work in process 5,100,000 4,300,000
Finished goods 6,000,000 4,000,000

The gross profit margin historically approximated 30% of sales. The sales for the year amounted to
P25,000,000. Direct labor costs for the year were P6,000,000, and manufacturing overhead is 60% of direct
labor.

What was Brisbane’s raw material purchases in 2017?

A. 5,100,000 C. 7,100,000
B. 5,600,000 D. 7,600,000

4. The following information were taken from the accounting records of YANNI MUSIC Co. for 2017:
Increase in raw materials inventory P 45,000
Decrease in finished goods inventory 150,000
Raw materials purchases 1,290,000
Direct labor payroll 600,000
Factory overhead 900,000
Freight out 135,000

The cost of raw materials used during the period amounted to

 A. P1,245,000 C. P1,335,000
B. P1,290,000 D. P1,380,000

5. The Childers Company manufactures widgets. During the fiscal year just ended, the company incurred prime
costs of P1,500,000 and conversion costs of P1,800,000. Actual Overhead is 200% of direct labor cost.

How much of the above costs represent direct materials cost?

A. P1,500,000 C. P900,000
B. P300,000 D. P600,000

6. Logical Company showed cost of goods sold of P4,320,000 in its statement of comprehensive income
after the first year of operations. The total manufacturing cost comprised of 50% materials used, 30%
direct labor incurred, and 20% manufacturing overhead. Goods in process at year-end were 10% of
the total manufacturing cost. Finished goods at year-end amounted to 20% of the cost of goods
manufactured.

What is the direct labor cost incurred?

A. 1,800,000 C. 3,000,000
B. 2,400,000 D. 5,400,000

7. Twinks, Inc. had the following inventories at the beginning and end of the current period:

Beginning Ending
Finished goods inventory P20,000 P22,000
WIP inventory 13,000 15,000
Direct materials inventory 40,000 33,000

Additional information assembled:

Direct materials purchased P58,000
Purchase discounts 4,000
Transportation-in 12,000
Direct labor costs 42,000
Actual Factory overhead 13,000

Using the information above, compute total manufacturing costs for the period.

A. P126,000 C. P116,000
B. P109,000 D. P128,000

8. Kimber Company has the following unit cost for the current year.

Raw material P20.00

Direct labor 25.00
 Variable manufacturing overhead 10.00
Total Variable cost P55.00

Fixed manufacturing cost is P120,000. Based on these data, the total manufacturing cost expected to be
incurred to manufacture 8,000 units in the current year is

a. P560,000. c. P615,000.
b. P575,000. d. P630,000.

9. FRANK & STEIN Co.’s materials purchases during 2018 are P25,590 and materials put into production are direct
and indirect materials, respectively, worth P18,500 and P7,090. The total factory payroll is P74,000 of which
P50,000 represents direct labor. Other factory overhead costs amount to P32,000. Sales, cost of goods sold,
and cost of goods manufactured, respectively, are P130,000, P120,000 and P128,000.

By what amount did the company’s ending goods in process inventory exceed its beginning goods in process
inventory?

a. P1,590 c. P5,390
b. P3,590 d. P10,590

10. Jean Smith knows the following about the production process in her plant: Conversion costs are P100,000.
Prime costs are P100,000. Materials purchases are P70,000. Increase in materials inventory is P10,000.
Decrease in work in process inventory is P20,000.

Find the cost of goods manufactured.

A. P140,000 C. P180,000
B. P160,000 D. P200,000

11. Selected data concerning the past year’s operations of the Foyt Auto Production Company are as follows:

Selling and administrative expenses P150,000

Direct materials used 530,000
Direct labor (P12 per hour) 600,000
Actual Factory overhead P16 per Direct labor hours
Inventories

Beginning Ending
Direct materials P100,000 P90,000
Work-in-process 150,000 180,000
 Finished goods 80,000 50,000

Calculate the cost of goods manufactured.

a. P1,930,000 d. P1,910,000
b. P2,230,000 e. P1,960,000
c. P1,900,000

12. Argentina Company incurred the following costs and expenses during the current year:

Raw material purchases 4,000,000

Direct labor 1,500,000
Indirect labor - factory 800,000
Factory repairs and maintenance 200,000
Taxes on factory building 100,000
Depreciation - factory building 300,000
Taxes on salesroom and general office 150,000
Depreciation - sales equipment 50,000
Advertising 400,000
Sales salaries 500,000
Office salaries 700,000
Utilities (60% applicable to factory) 500,000

Beginning Ending
Raw materials 300,000 450,000
Work in process 400,000 350,000
Finished goods 500,000 700,000

What is the cost of goods manufactured for the current year?

A. 6,900,000 C. 7,200,000
B. 7,100,000 D. 7,300,000

How much is the period cost?

A. 900,000
C. 2,000,000
B. 1,600,000
D. 1,800,000
13. Logan Corp.'s trial balance of income statement accounts for the year ended December 31, 2011 included the
following:
Debit Credit
Sales P140,000
Cost of sales P 50,000
Administrative expenses 25,000
Loss on sale of equipment 9,000
Commissions to salespersons 8,000
Interest revenue 5,000
Freight-out 3,000
Loss on disposition of wholesale division 12,000
Bad debt expense 3,000 .
Totals P110,000 P145,000

Other information:
Logan's income tax rate is 30%.

Finished goods inventory:

January 1, 2011 P80,000
December 31, 2011 70,000

On Logan's income statement for 2011, cost of goods manufactured is

a. P63,000. c. P43,000.
b. P60,000. d. P40,000.
14. Using the following data for a recent period, calculate the beginning finished goods inventory:

Sales P40,000
Beginning finished goods inventory ?
Cost of goods manufactured P16,000
Ending finished goods inventory P5,000
Cost of goods sold ?
Gross margin P17,000
Administrative and selling expenses ?
Net operating income P10,000

The beginning finished goods inventory was:

A. P7,000 C. P23,000
B. P12,000 D. P24,000

15. The Pedro Outfitters makes Artic Warmsuits. The general manager has a special board on his office wall where
he writes key statistics. On the board for March, he has written the following:

Production output 25,000 suits

Materials costs P50,000
Direct labor costs 2,000 hours at P10 per hour
Factory overhead P2 per outfit produced plus P40,000 per month
Selling expenses P1 per outfit sold plus P50,000 per month

He heard the sales manager brag about selling 20,000 suits this month.
 What was the cost of goods sold per unit?

A. P5.80 C. P7.00
B. P6.40 D. P9.20

16. The following information is available for the Continental Company for the year 2018:

Gross profit on sales P 76,800

Cost of goods manufactured 272,000
Goods in process inventory, beginning 22,400
Goods in process inventory, ending 30,400
Finished goods inventory, beginning 36,000
Finished goods inventory, ending 41,600

How much was the sales of Lilac Company for the year 2018?

A. P335, 200 C. P347, 200

B. P343, 200 D. P348, 800

17. The net sales of Flamingo Mfg. Company in 2017 is P5,800,000. The cost of goods manufactured is P4,800,000.
The beginning inventories of goods in process and finished goods are P 820,000 and P650,000, respectively.
The ending inventories are: Goods in process – P750,000; Finished goods – P550,000. The selling expenses
and general and administrative expenses are 5% and 2.5% of cost sales, respectively.

What is Flamingo’s profit for the year 2017?

A. P900, 000 C. P532, 500

B. P457, 250 D. P830, 000

18. The following data pertain to a recent period's operations:

Sales ?
Beginning finished goods inventory P12,000
Cost of goods manufactured P36,000
Ending finished goods inventory P6,000
Cost of goods sold ?
Gross margin 40% of Sales
Administrative and selling expenses P10,000
Net operating income ?

Net operating income was:

 A. P10,000 C. P18,000
B. P14,000 D. P46,000

The factory ledger of DIAMOND Corporation contains the following cost data for the year ended December 31, 2017:
Inventories

Beginning Ending
Raw materials P150,000 P170,000
Work in progress 160,000 60,000
Finished goods 180,000 220,000
Raw materials used P652,000
Total manufacturing costs charged to production P1,372,000
during the year (including raw materials, direct
labor, and factory overhead is 50% of direct
labor cost)

19. The total cost of raw materials purchased during the year amounted to

a. P632,000 c. P802,000
b. P672,000 d. P822,000

20.The cost of direct labor charged to production during the year amounted to

a. P240,000 c. P480,000
b. P368,000 d. P720,000