Accounting Technology Program

Ateneo de Davao University

Jacinto St., Davao City

Departmental Examination
2nd Semester – S.Y: 2015-2016

Acc 5/7 – COST ACCOUNTING AND COST MANAGEMENT

SET A

Instruction: Read and analyze the problems carefully. Write your answer in the answer sheet provided. No credit will be given to an
altered final answer.

True/False
Indicate whether the statement is true or false.
1 T 6 T 11 F
2 F 7 F 12 F
3 F 8 T 13 T
4 T 9 T 14 F
5 F 10 F 15 T

1. A variable cost remains constant on a per-unit basis as production increases.

2. Fixed cost per unit varies directly with production.
3. If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced, the cost is classified as a step cost.
4. In a normal cost system, factory overhead is applied to Work in Process using a predetermined overhead rate.

5. A credit to the Factory Overhead account represents actual overhead costs.

6. The high-low method excludes outliers from the calculation of the slope of a regression line.
7. Plantwide overhead rates provide a more accurate computation of factory overhead than departmental overhead rates
8. The journal entry to record normal spoilage specifically identified with a particular job includes a credit to Work in Process.
9. Equivalent units are computed to assign costs to partially completed units.
10. The FIFO method combines beginning inventory and current production to compute cost per unit of production.
11. Abnormal continuous losses are absorbed by all units in ending inventory and transferred out on a EUP basis.
12. Costs of normal shrinkage and normal continuous losses in a process costing environment are handled by the method of
accretion.
13. The primary distinction between by-products and scrap is the difference in sales value.
14. Joint costs may be allocated to main products, but not to by-products.
15. Under the realized value approach, no value is recognized for by-products or scrap until they are actually sold.

16. Terrell Company manufactures computer stands. What is the beginning balance of Finished Goods Inventory if
Cost of Goods Sold is $107,000; the ending balance of Finished Goods Inventory is $20,000; and Cost of Goods
Manufactured is $50,000 less than Cost of Goods Sold?
a. $70,000 b. $77,000 c. $157,000 d. $127,000

17. Dynamic Corporation 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

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. $1,320

18. Adams Company is a graphic design shop that produces jobs to customer specifications. During January, Job #3051 was
worked on and the following information is available:
Direct material used $2,500
Direct labor hours worked 15
Machine time used 6
Direct labor rate per hour $7
Overhead application rate per hour of machine time $18

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

a. $2,713 b. $2,770 c. $2,812 d. $3,052

Briggs Company
Briggs Company uses a job-order costing system. At the beginning of January, the company had two jobs in
process with the following costs:

Direct Material Direct Labor Overhead

Job #456 $3,400 $510 $255
Job #461 1,100 289 ?

Briggs pays its workers $8.50 per hour and applies overhead on a direct labor hour basis.

19. Refer to Briggs Company. What is the overhead application rate per direct labor hour?
a. $ 0.50 b. $ 2.00 c. $ 4.25 d. $30.00

20. Refer to Briggs Company. How much overhead was included in the cost of Job #461 at the beginning of January?
a. $ 144.50 b. $ 153.00 c. $2,200.00 d. $2,456.50

21. Refer to Briggs Company. During January, Briggs’ employees worked on Job #649. At the end of the month,
$714 of overhead had been applied to this job. Total Work in Process at the end of the month was $6,800 and all
other jobs had a total cost of $3,981. What amount of direct material is included in Job #649?
a. $ 677.00 b. $1,391.00 c. $2,142.00 d. $4,658.00

Collins Corporation
Collins Corporation. has the following information for May:

Beginning Work in Process Inventory

(75% complete as to conversion) 7,500 units
Started 27,000 units
Ending Work in Process Inventory
(15% complete as to conversion) 9,400 units

Beginning WIP Inventory Costs:

Material $25,500
Conversion 52,725

Current Period Costs:

Material $34,300
Conversion 80,845

All material is added at the start of the process and all finished products are transferred out.

22. Refer to Collins Corporation. How many units were transferred out in May?
a. 17,600 b. 19,500 c. 25,100 d. 27,000

23. Refer to Collins Corporation. Assume that weighted average process costing is used. What is the cost per
equivalent unit for material?
a. $0.99 b. $1.18 c. $1.64 d. $1.73

24. Refer to Collins Corporation. Assume that FIFO process costing is used. What is the cost per equivalent unit for
conversion?
a. $3.05 b. $3.87 c. $4.25 d. $6.40
25. Rapid Falls Corp. has three producing departments, A, B, and C, with 50, 30, and 20 employees, respectively, in
each department. Factory payroll costs other than direct labor are accumulated in a Payroll Department account
and are assigned to producing departments on the basis of number of employees. The total payroll in each
department was: A, $300,000; B, $275,000; C, $325,000; and Payroll, $50,000. Other costs accumulated in the
Payroll Department amounted to $200,000. The amount of Payroll Department costs chargeable to Department
C is:
a. $125,000 d. $10,000
b. $100,000 e. $50,000
c. $40,000

26. Brandy, Inc. makes two products, Wet and Dry, from a joint operating process. For the month of May, 2013, the
total joint costs of processing was P120,000 and the costs of further processing after the point of split-off, as well
as other relevant data, are shown below:
Wet Dry
Units after split-off 1,600 800
Sales price per unit P200 P400
Further processing costs P100,000 P140,000

The company uses the net realizable value method for allocating the joint costs of processing. For the month
of May, 2013, the joint costs allocated to product Wet was:
a. 60,000 b. 66,000 c. 72,000 d. 80,000

Warfield Corp.
Warfield Corp., which manufactures products C, D, and E from a joint process. Joint costs are allocated on
the basis of relative sales value at split-off. Additional information is presented below:

27. Refer to Warfield, how much of the joint costs should Warfield allocate to product D?
a. 24,000 b. 28,800 c. 30,000 d. 32,000

28. Refer to Warfield, assuming that the 2,000 units of product E were processed further and sold for P40,000, what
was Warfield’s gross profit on the sale?

a. 4,000 b. 14,000 c. 16,000 d. 22,000

Venus Mfg Co.

Venus Manufacturing Company uses 12,500 units of Chip annually in its production. Order costs consists of
P10 for placing a long-distance call to make the order and P40 for delivering the order by truck to the
company warehouse. Each chip costs P100 and the carrying costs are estimated at P20 per unit.

29. Refer to Venus Mfg Co., what is the economic order quantity for Chip?
a. 250 b. 112 c. 224 d. 200

30. Refer to Venus Mfg Co., what is the total order cost?
a. 5,580 b. 2,232 c. 2,500 d. 3,125

31. Refer to Venus Mfg. Co., what is the total ordering cost and carrying cost if the order size is 125 chips?
a. 2,250 b. 5,250 c. 6,250 d. 6,000

32. Jose Santos worked 46 hours in one week at a rate of P45 an hour. He is paid one and a half times the regular rate for
hours worked in excess of 40. What is teh gross earnings of Jose Santos?
a. 2,205 c. 2,340
b. 2,070 d. 1,800

33. Ms. Joy, a punch press operator in a metal fabricating plant is randomly assigned to various jobs. The straight - time wage
rate is P40 per hour with time and one - half for time over 40 hours per week. How much of these earnings should be
charged to Manufacturing Overhead Control account if 47 hours are worked in one week?
a. 280 c. 1,974
b. zero d. 140
 Wit Corporation
Information for the month of June concerning Department A, the first stage of Wit Corporation’s productive cycle, is as
follows:
Materials conversion costs
Work in process, beg. P 4,000 P 3,000
Current costs 20,000 16,000
Total costs P24,000 P19,000
====== ======
Equivalent units based on
Weighted average method 100,000 95,000
Average units costs P0.24 P0.20
Goods completed 90,000 units
Work in process, end 10,000 units

Materials are added at the beginning of the process. The ending work in process is 50% completed as to conversion
costs.

34. How much the total cost accounted for be distributed to goods completed using the weighted average method?
Answer: 39,600

35. How much the total cost accounted for be distributed to work in process ending using the weighted average method?
Answer: 3,400

Basic Chemical Industries, Inc.

Basic Chemical Industries, Inc. produces a product through a continuous process in different departments. Each
department has an independent cost accountant who is tasked with cumulating costs and the preparation of reports
for the department assigned to him. You have been assigned as cost accountant for Department A.

Production data of Department A for the month of September, 2008 were as follows:

work in process, Sept. 1 14,000 kg.

Percentage of completion 70%
Started in process 70,000 kg.
Work in process, Sept. 30 12,000 kg.
Percentage of completion 60%
lost units (normal) at the end of process 2,000 kg.
In this department, costs are applied as follows:
Materials - added at start
Labor and overhead - evenly distributed

Department costs incurred in September were:

Materials P 56,000
Labor 17,350
Overhead 13,880
Work in process cost, Sept. 1 8,000

36. Refer to Basic Chemical Industries, Inc., compute the current total unit for materials, labor, and overhead.
a. 1.23 c. 1.17
b. 1.04 d. 1.25

37. Refer to Basic Chemical Industries, Inc., compute the adjustment for normal lost per unit.
a. .0368 c. .0298
b. .0360 d. .0357

38. Refer to Basic Chemical Industries, Inc., what is the cost of the units transferred to the next department?
Units transferred work in process Sep. 30
a. 82,390 9,600
b. 81,890 9,600
c. 72,000 12,840
d. 82,390 12,840
 Hart Company
During March, Hart Company incurred the following costs on Job 109 for the anufacture of 200 motors:

Original cost accumulation:

Direct materials P 660
Direct labor 800
Factory overhead (150% of DL) 1,200
P2,660
=====
Direct costs of reworking 10 units:

Direct materials P 100

Direct labor 160

The rework costs were attributable to the exacting specifications of Job 109, and the full rework costs were charged to
this specific job.

39. Refer to Hart Company, what is the cost per finished unit of Job 109?
a. 15.80 c. 14.00
b. 14.60 d. 13.30

40. Refer to Hart Company, assuming the rework cost were attributable to internal failure or charged to factory overhead, what
is the cost per finished unit Job 109?
a. 15.80 c. 14.00
b. 14.60 d. 13.30

The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments
such as Quality Control and Maintenance to the production departments. To aid them in this discussion the
controller has provided the following information:

Quality Maintenance Machining Assembly

Control
Budgeted overhead costs
before allocation P 350,000 P 200,000 P 400,000 P 300,000
Budgeted machine hours - - 50,000 10,000
Budgeted direct labor hours - - 5,000 25,000
Budgeted hours of service:
Quality control - 7,000 21,000 7,000
Maintenance 10,000 - 18,000 12,000

Job 120, which was completed early in the year 2011, required the following costs:

Machining Assembly
Material cost P5,000 P5,000
Direct labor hours ( at P8/DLH) 550 900
Machine hours 800 450

Required: show computations in good form. Round off rates to nearest centavo.
41. Refer to Rochester Mfg, Compute the plantwide overhead rate based on direct labor hours. 4.67
42. Refer to Rochester Mfg ,Using the plantwide overhead rate, how much is the total production cost of Job 120? 82,021.50
43. Refer to Rochester Mfg ,Compute the overhead rate for Machining using direct method. 15.65
44. Refer to Rochester Mfg , Using answer in requirement c above, how much is the total production cost of Job 120? 54,080
45. Refer to Rochester Mfg , Compute the overhead rate for Assembly using step method. Round off rates to nearest centavo
19.12

46. Leni Co. has materials cost in the June 1 Raw and In Process (RIP) of P10,000 materials received during the month of June of
P205,000 and materials cost in the June 30 Raw and In Process (RIP) of P12,500. What would be the amount to be
backflushed from RIP to Finished Goods at the end of June?

Answer. 202,500