AEC 105 COST ACCOUNTING AND CONTROL PRELIM PERIOD

EXERCISE 1:

Consider the following items:

A. Tomatoes used in the manufacture of Del Monte ketchup
B. Administrative salaries of executives employed by Philippine Airlines
C. Wages of assembly-line workers at a canned goods factory.
D. Marketing expenditures of a PBL basketball team.
E. Commissions paid to Coca-Cola's salespeople
F. Straight-line depreciation on manufacturing equipment.
G. Shipping charges incurred by National Bookstore on out-going orders
H. Speakers used in Sony home-theater systems
I. Insurance costs related to an Avon Cosmetics' manufacturing plant

Required:
Complete the table that follows and classify each of the costs listed as (1)
a product or period cost and (2) a variable or fixed cost by placing an "X"
in the appropriate column.

Product or Period Cost Variable or Fixed Cost

Item Product Period Variable Fixed

A X X

B X X

C X X

D X X

E X X

F X X

1
 G X X

H X X

I X X

EXERCISE 2:
BDC Company makes blue jeans. Last week, direct materials (denim, thread, zippers
and rivets) costing P48,000 were put into production. Direct labor of P30,000 (50
workers x 40 hours x P15 per hour) was incurred. Factory overhead equaled P72,000.
By the end of the week, BDC Company manufactured 30,000 pairs of jeans.

Calculate the:
1. Total product cost for the week.
48,000 (direct materials) + 30,000 (direct labor) + 72,000 (factory overhead)
= 150,000 pesos - total product cost for the week

2. The cost of one pair of jeans produced during the week.

150,000 (total product cost) / 30,000 (pairs of jeans manufactured for the week)
= 5 pesos per pair of jeans

3. The total prime costs for the week.

48,000 (direct materials) + 30,000 (direct labor)
= 78,000 pesos – total prime cost for the week

4. The prime costs per pair of jeans.

78,000 (total prime cost) / 30,000 (pairs of jeans manufactured)
= 2.6 pesos prime cost per pair of jeans

5. The total conversion costs for the week.

30,000 (direct labor) + 72,000 (factory overhead)
= 102,000 pesos total conversion cost for the week

6. The conversion costs per pair of jeans.

102,000 (total conversion costs) / 30,000 (pairs of jeans manufactured)
= 3.4 pesos conversion cost per pair of jeans.

2
EXERCISE 3:
BDC Company makes blue jeans. On May 1, BDC had P68,000 of materials in
inventory. During the month of May,.BDC purchased P210,000 of materials. On May 31,
materials inventory equaled P22,000.

Required: Calculate the cost of direct materials used in production for the month of May.

Raw Materials, Inventory, May 1 68,000

Add: Purchases during May 210,000
Total Materials Available for Use 278,000
Less: Raw Materials, Inventory, May 31 22,000
Cost of Direct Materials Used – May 256,000

EXERCISE 4:
BDC Company makes blue jeans. During the month of May, BDC purchased P210,000
of materials and incurred direct labor costs of P135,000 and manufacturing overhead of
P150,000. On May 31, materials inventory equaled P22,000. Inventory information is as
follows:
May 1 May 31
Materials P68,000 P22,000
Work in process 50,000 16,000

Required: Calculate the cost of goods manufactured for the month of May.

Raw Materials, Inventory, May 1 68,000

Add: Purchases during May 210,000
Total Cost of Materials Available for Use 278,000
Less: Raw Materials, Inventory, May 31 22,000
Cost of Direct Materials Used in Production 256,000
Direct Labor incurred 135,000
Manufacturing Overhead incurred 150,000
Total Manufacturing Costs 541,000
Add: Work in Process, Inventory, May 1 50,000
Total Cost of Goods Placed into Production 591,000
Less: Work in Process, Inventory, May 31 16,000
Cost of Goods Manufactured – May 575,000

EXERCISE 5:

3
BDC Company makes blue jeans. During the month of May , 115,000 pairs of jeans
were completed at a cost of goods manufactured of P575,000. Suppose that on May 1,
BDC had 10,000 pairs of jeans in the finished goods inventory costing P50,000 and on
May 31, the company had 26,000 pairs of jeans in finished goods inventory costing
P130,000.

Required:
1. Prepare a cost of goods sold statement for the month of May.

Cost of Goods Manufactured 575,000

Beginning Inventory 50,000
Ending Inventory 130,000
Cost of Goods Sold 495,000

2. Calculate the number of pairs of jeans that were sold during May.

Pairs Manufacture – May 115,000

Finished Goods Inventory – May 1 10,000
Finished Goods Inventory – May 31 26,000
Pairs of Jeans Sold – May 99,000

EXERCISE 6:
Hannah Bakers makes chocolate chips for coffee shops. In June, Hannah Bakers
purchased P15,500 of materials. On June 1, the materials inventory was P3,700. On
June 30, P1,600 of materials remained in materials inventory.

Required:

1. What is the cost of the direct materials used in production during June?
2. Briefly explain why there is a difference between the cost of direct materials that
were purchased during the month and the cost of direct materials used in
production during the month.

EXERCISE 7:

Allyson makes bars of bath soap. During the year, Allyson manufactured 42,000 bars of
bath soap. Finished goods inventory had the following units:

January 1 December 31

4
 4,300 units 3,900 units

Required:

1. How many bars of bath soap did Allyson sell during the year?
2. If each bar of bath soap had a product cost of P75, what was the cost of goods
sold during the year?

EXERCISE 8:

In March, Canda Company purchased materials costing P120,000 and incurred direct
labor cost of P200,000. Manufacturing overhead totaled P360,000 for the month.
Information on inventories was as follows:

March 1 March 31

Materials P72,000 P86,000

Work in process 17,000 90,000

Finished goods 70,000 95,000

Required:

1. What was the cost of materials used in production in March?

2. What was the total manufacturing cost in March?
3. What was the cost of goods manufactured in March?
4. What was the cost of goods sold for March?