COLLEGE OF MARY IMMACULATE

BS ACCOUNTANCY
nd
2 YEAR – FIRST SEMESTER 2020 – 2021
SCM – STRATEGIC COST MANAGEMENT

ASSIGNMENT 1 (September 19, 2020)

NAME: _________________________________________ SCORE: ___________

Choose the letter corresponding to the correct answer.

1. Which of the following statements concerning the comparison among actual costing, normal costing
and standard costing is correct?
a. Actual costing system values manufactured products with the actual material costs, actual direct
labor costs, and actual manufacturing overhead costs.
b. Normal costing system values manufactured products with the actual material costs, actual
direct labor costs and manufacturing overhead based on a predetermined manufacturing
overhead rate with the possible over/under application of factory overhead to be closed to cost
of goods sold only if insignificant or to be closed prorated to cost of goods sold, work in process
and finished goods inventory if significant.
c. Standard costing system values manufactured goods with predetermined material cost,
predetermined labor cost, and predetermined manufacturing overhead costs with the possible
over/under application of factory overhead to be closed to cost of goods sold only if insignificant
or to be closed prorated to cost of goods sold, work in process and finished goods inventory if
significant.
d. All of the above.
e. None of the above

2. Which of the following instances will decrease the cost of good manufactured for the period ended?
a. Increase in the finished goods during the period
b. Decrease in the direct labor cost from prior year
c. Increase in the work in process inventory during the period
d. Decrease in the raw materials inventory during the period

3. When shall the job order costing be used instead of process costing?
a. When the production process performs standardized or uniform procedures
b. When the company performs a very long production runs
c. When the company intends to use it for billing customers
d. When the company produces low value and homogenous products

4. Which of the following costs shall be considered prime cost, conversion cost and product cost at the
same time?
a. Acquisition price of the main material of the product
b. Depreciation of the machinery used to manufacture the product
c. Salary of the factory supervisor, factory janitor and factory security guard
d. Employee benefits of the factory machine operator

5. Which of the following costs shall be considered prime cost but not conversion cost?
a. Acquisition price of the main material of the product
b. Depreciation of the machinery used to manufacture the product
c. Salary of the factory supervisor, factory janitor and factory security guard
d. Employee benefits of the factory machine operator

6. Which of the following costs shall be considered conversion cost but not prime cost?
a. Acquisition price of the main material of the product
b. Depreciation of the machinery used to manufacture the product
c. Salary of the factory supervisor, factory janitor and factory security guard
d. Employee benefits of the factory machine operator

7. Which of the following costs shall be considered as product cost instead of period cost?
a. Salary of the inventory accountant
b. Freight out, warranty cost and sales commission
c. Storage cost of work in process inventory
d. Costs of abnormal waste

8. Which of the following costs shall be considered as period cost instead of product cost?
a. Finance cost on inventory loan and foreign exchange differences arising from purchases
b. Freight-in and insurance while in transit of the raw materials
c. Non-creditable import duties and irrecoverable value added tax
 d. Cost of indirect material used and indirect labor incurred

9. Which of the following statements concerning spoilage in a job order costing is correct?
a. The cost of abnormal spoilage is recorded as period cost or expense
b. When normal spoilage occurs because of the specification of a particular job, cost of normal loss
shall be capitalized to that specific job reduced by the current disposal value/net realizable value
of the spoiled units
c. When normal spoilage is a characteristic of a given production cycle, the cost of normal loss is
not charged to a specific job but will be closed to manufacturing overhead control account
d. All of the above
e. None of the above

10. Which of the following statements concerning rework costs in a job order costing is correct?
a. If the normal rework cost is attributable to a specific job, it shall be capitalized to that particular
job.
b. If the normal rework cost is common to all jobs, it shall be debited to manufacturing overhead
control account.
c. If the rework cost is abnormal, it shall be recorded as period cost or expense.
d. All of the above
e. None of the above

11. Which of the following statements concerning scrap in a job order costing is correct?
a. If the scrap is insignificant, the realizable value of scrap is recognized as revenue at the time it is
sold.
b. If the scrap is insignificant but traceable to the job that yielded the scrap, the net realizable
value of scrap shall be recorded as a deduction from cost of that specific product.
c. If the scrap is insignificant but common to all jobs, the net realizable value of scrap shall be
credited to manufacturing overhead control.
d. If the scrap is significant, the net realizable value shall be capitalized as inventory of scrap with
the credit going to specific job if traceable to a particular job or manufacturing overhead control
if common to all jobs.
e. All of the above
f. None of the above

Items 12 – 15 are based on the following information:

NBA Inc. is engaged in the business of manufacturing basketballs. The company employs actual costing
system. The company uses a single account for direct and indirect materials. The company provided the
following data for the year ended December 31, 2020:
Gross sales 9,500,000
Sales returns 500,000
Gross purchases 1,000,000
Purchase returns, allowance, and discount 200,000
Freight-in 400,000
Total costs of factory labor 1,000,000
Depreciation of factory assets 300,000
Expired insurance on factory assets 100,000
Utilities expense on factory 500,000
Total administrative expenses 2,000,000
Total marketing expenses 3,000,000

Inventories are as follows:

January 1 December 31
Raw materials 100,000 300,000
Work in process ? 200,000
Finished goods 500,000 600,000

The following additional data are provided:

 The net profit ratio of the company before income tax for the year ended December 31, 2020
was 10% of net sales
 The direct labor cost for the year was four times the cost of indirect labor
 The cost of indirect materials used was P100,000

12. What is the total prime cost?

a. 1,700,000 b. 2,000,000 c. 1,800,000 d. 1,900,000

13. What is the total conversion cost?

a. 2,000,000 b. 1,900,000 c. 2,100,000 d. 2,200,000
14. What is the cost of goods manufactured?
a. 3,200,000 b. 3,100,000 c. 3,300,000 d. 3,000,000

15. What is the cost of goods sold and the cost of work in process on January 1, 2020?
a. 3,100,000 and 500,000 c. 3,200,000 and 300,000
b. 3,000,000 and 400,000 d. 2,900,000 and 600,000

Items 16 – 20 are based on the following information:

JPL Inc. is employing normal costing for its job orders. The overhead is applied using a predetermined
overhead rate. The following information relates to the JPL Inc. for the year ended December 31, 2020:

Job No. 101 Job No. 102 Job No. 103

Job in process, January 1, 2020:
Direct materials 40,000 30,000 0
Labor 60,000 40,000 0
Factory overhead 30,000 20,000 0
Costs added during 2020
Materials 20,000 10,000 100,000
Labor 100,000 200,000 400,000
Factory overhead ? ? ?

Additional information:
 Actual overhead for the year 2020 amounted to 350,000
 Jobs No. 101 and 102 were completed and transferred to finished goods during 2020
 Job No. 101 was sold during year 2020
 The gross profit rate is 20% based on cost

16. What is the total manufacturing cost for 2020?

a. 1,400,000 b. 1,180,000 c. 480,000 d. 1,200,000

17. What is the cost of goods manufactured for 2020?

a. 680,000 b. 700,000 c. 580,000 d. 780,000

18. What is the cost of goods sold for 2020?

a. 1,180,000 b. 300,000 c. 700,000 d. 1,200,000

19. What is the gross profit for 2020?

a. 236,000 b. 60,000 c. 140,000 d. 240,000

20. What is the cost of work in process on December 31, 2020 and the cost of finished goods on
December 31, 2020, respectively?
a. 800,000 and 500,000 c. 600,000 and 300,000
b. 700,000 and 400,000 d. 900,000 and 200,000

21. ABC Inc. produces sports equipment made to customer’s specifications. The following data pertain
to Job 101.
6-month ending 06/30/2020 6-month ending 12/31/ 2020
Materials – Dept. 1 P100,000 P200,000
Direct labor rate – Dept. 1 P10/hour P15/hour
Labor hours used – Dept. 1 4,000 hours 2,000 hours
Direct labor rate – Dept. 2 P20/hour P30/hour
Labor hours used – Dept. 2 1,000 hours 3,000 hours
Machine hours used – Dept. 2 2,000 hours 1,000 hours

Additional data:
 ABC Inc. determined that the amount of operating expenses is 10% of full production cost of
job.
 The company has provided a net profit mark up of 20% based on sales
 Applied factory overhead:
Department 1 – P5.00 per direct labor hour
Department 2 – P2.00 per machine hour

What is the net profit if Job 101 was completed and sold in 2020?
a. 141,900 b. 193,500 c. 129,000 d. 113,520
22. DEF Inc. applies factory overhead as follows:
Department Per machine hour
Fabricating P10
Spreading P20
Packaging P30

Actual machine hours are:

Fabricating – 2,000 hours x 10 = 20,000
Spreading – 1,500 hours x 20 = 30,000
Packaging – 3,000 hours x 30 = 90,000 140,000
40,000 overapplied = 40% of
The following additional data are provided: Actual FOH (material)
 The actual factory overhead expense for the period is P100,000
 The ending balance of the inventories and cost of goods sold after the application of
overhead are as follows:
Raw materials 200,000
Work in process 100,000
Finished goods 400,000
Cost of goods sold 500,000 1,000,000
 The over/(under) applied overhead during the period is considered material if at least 30%
of actual factory overhead.

What is the adjusted cost of goods sold after closing the over/(under) application of factory
overhead?
a. 460,000 b. 480,000 c. 540,000 d. 483,333
Cost of goods sold before adjustment 500,000
Overapplied (40,000 x 5/10) (20,000)
Adjusted CGS 480,000

Items 23 – 24 are based on the following information:

GHI Inc. manufactures furniture sets for export and uses the job order costing system in accounting for
its costs. The following information is obtained from the accounting books and records for the year
ended December 31, 2020:
 The work in process on January 1 was 20% less than the work in process on December 31
 The total manufacturing costs added during 2020 was P1,800,000 based on actual direct
materials and direct labor but with manufacturing overhead applied on actual direct labor pesos
 The manufacturing overhead applied to process was 72% of the direct labor pesos, and it was
equal to 25% of the total manufacturing costs
 The cost of goods manufactured, also based on actual direct materials, actual direct labor and
applied manufacturing overhead, was P1,700,000

DM 725,000
DL 625,000 (450,000 / 72%)
FOH 450,000 72% of DL Pesos / 25% of TMC
= TMC 1,800,000
+ WIP beg 400,000 20% less than End
Less: WIP end 500,000
CGM 1,700,000

TMC 1,800,000 + WIP beg 0.80X = CGM 1,700,000 + X

0.80X – X = 1,700,000 – 1,800,000
-0.20X = -100,000
X = 100,000 / 0.20
X = 500,000

23. What is the cost of direct materials used?

a. 1,026,000 b. 1,350,000 c. 725,000 d. 1,150,000

24. What is the work in process on December 31, 2020?

a. 400,000 b. 600,000 c. 500,000 d. 300,000
Items 25 – 26 are based on the following information:
MNO Inc. has completed the Job 101, containing 1,100 shoes, during 2020 at the following unit costs:
Direct materials 2,000
Direct labor 1,000
Factory overhead (including an allowance of P300 for spoiled work) 1,300

Final inspection of Job 101 disclosed 100 spoiled shoes which were sold to a department for P200,000.
(2,000 per shoe)

25. What is the unit cost of the good shoes produced on Job 101 if spoilage loss is charged to all
production? normal
a. 4,000 b. 4,100 c. 4,400 d. 4,300

26. What is the unit cost of the good shoes produced on Job 101 if spoilage loss is charged to specific
Job 101?
a. 4,300 b. 4,000 c. 4,500 d. 4,200
DM 2,000 + DL 1,000 + FOH 1,000 = 4,000 x 100 spoiled = 400,000 – NRV of spoiled 200,000 = net
spoilage cost of 200,000

net spoilage cost of 200,000 / 1,000 good shoes = 200 + 4,000 = 4,200

Items 27 – 28 are based on the following information:

For the year ended December 31, 2020, PQR Inc. incurred the following costs on Job Order 201 for
manufacturing 500 units:
Original cost accumulation:
Direct materials 500,000
Direct labor 400,000
Factory overhead 100,000 25% of DL (100/400)
1,000,000

Direct costs of reworking 100 units:

Direct materials 100,000
Direct labor 200,000
50,000 FOH (25% of DL)
350,000

27. What is the cost per unit of Job Order 201 if the rework costs were attributable to the exacting
specification of Job Order 201?
a. 2,600 b. 2,500 c. 2,700 d. 2,200
Orig cost 1,000,000 + rework costs 350,000 = 1,350,000 / 500 units = 2,700

28. What is the cost per unit of Job Order 201 if the rework costs were attributable to internal failure?
a. 2,500 b. 2,400 c. 2,000 d. 2,300
Orig cost 1,000,000 / 500 units = 2,000

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