NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 1

Partner Ae first contributed P50,000 of capital into existing partnership on March 1, 2019. On June 1, 2019,
said partner contributed another P20,000. On September 1, 2019, he withdrew P15,000 from the partnership.
Withdrawal in excess of P10,000 are charged to the partner’s capital accounts. What is the annual weighted
average capital balance of Partner Ae?
a. 32,500
b. 51,667
c. 60,000
d. 48,333

Answer: b

Date Balances Months Unchanged Total

March 1 P50,000 3 P150,000
June 1 70,000 3 210,000
September 1 65,000 4 260,000
Total 12 P620,000
Annual weighted average capital (P620,000 /12) P51,667

NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 2
Hot Pizza granted a franchise to Shake King. Shake King was to pay a franchise fee of P100,000 payable in five
equal annual installments starting with the payment upon signing of the agreement. The franchisee was to
pay monthly 1% of gross sales of the preceding month. Should the operation of the outlet prove to be
unprofitable, the franchise may be cancelled with whatever obligation owing Hot Pizza, in connection with the
P100,000 franchise fee, waived. The first year of operations generated a gross sales of P500,000. For the first
year, Hot Pizza earned franchise fee of
a. 5,000
b. 20,000
c. 25,000
d. 105,000

Answer: c

Payment made upon signing of contract (P100,000 /5) P20,000

Periodic franchise fee (1% x P500,000) 5,000
Earned franchise fee for the first year P25,000

NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 3
Fish Ball Co. charges P90,000 for a franchise, with P18,000 paid when the agreement is signed and the balance
in four annual payments. The present value of the annual payments, discounted at 9% is P58,315. The
 franchisee has the right to purchase P20,000 of equipment for P16,000. If collectability of the payments is
reasonably assured and substantial performance by Fish Ball has occurred, what is the amount of revenue
from franchise fee that should be recognized?
a. 72,000
b. 72,315
c. 76,315
d. 90,000

Answer: b

Down payment 18,000

Add present value of annual payments 58,315
Total franchise fee 76,315
Less loss on sale of equipment (20,000 – 16,000) 4,000
Net revenue from franchise fee 72,315

The loss on sale of equipment is deducted from the total franchise fee, because the purchase of equipment is related
with the franchise agreement.

NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 4
The Robert Construction Corporation uses the percentage-of-completion method of accounting.
In 2019, Robert began work on a contract it had received which provided for a contract price of P8,000,000. Other
details follow:
Costs incurred during the year P1,200,000
Estimated costs to complete as of December 31 4,800,000
Billings during the year 1,440,000
Collections during the year 1,000,000

What should be the gross profit recognized in 2019?

a. P160,000
b. P240,000
c. P400,000
d. P1,600,000

Answer: c

Contract price P8,000,000

Estimated Cost:
Cost incurred during the year P1,200,000
Cost to complete 4,800,000 6,000,000

Estimated gross profit 2,000,000

% of completion (P1,200,000 ÷ P6,000,000) 20%

Gross profit earned in 2019 P400,000

NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 5
 East Builders works on a P70 million contract in 2019 to construct a shopping mall for SM Inc.
During 2019, East Builders uses the percentage of completion method of revenue recognition. At December 31, 2019,
the account balances were:
Construction in Progress P24.55 million
Accounts receivable 2.4 million
Contract billings 12.0 million
Estimated costs to complete 31.85 million

How much is the actual cost incurred in 2019?

a. P24.5 million
b. P49 million
c. P7.5 million
d. P17.150 million

Answer: b

Direct labor 750,000

Factory overhead:
Indirect materials 125,000
Indirect labor 112,500
Other factory overhead 375,000
Conversion costs 1,362,500

NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 6
The following selected information pertains to Top Gun Manufacturing, Inc.: direct materials of P625,000,
indirect materials of P125,000, direct labor of P750,000, indirect labor of P112,500, and factory overhead (not
including indirect materials and indirect labor) of P375,000. Compute conversion costs:
a. 1,375,000
b. 1,362,500
c. 1,500,000
d. 2,737,500

Answer: b

Direct labor 750,000

Factory overhead:
Indirect materials 125,000
Indirect labor 112,500
Other factory overhead 375,000
Conversion costs 1,362,500

NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 7
At the end of the last fiscal year, Baehr Co. had the following account balances:

Overapplied overhead 6,000

Cost of goods sold 980,000
Work in process 38,000
Finished goods 82,000 If the most common treatment of
assigning overapplied overhead was used, the final balance in cost of goods sold would have been
 a. 985,340
b. 974,660
c. 974,000
d. 986,000

Answer: c

Cost of goods sold 980,000

Less overapplied overhead 6,000
Cost of goods sold, balance 974,000

The most common treatment of over or underapplied overhead is to close this to cost of goods sold, moreover if the
amount is immaterial. When the amount is immaterial, the closing process of overapplied overhead causes cost of
goods sold to decrease.

NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 8
For the month of March, Payaso Inc. registered the following information:
Beginning work in process (70% complete) 40,000 units
Started in March 300,000 units
Ending work in process (80% complete) 60,000 units

The cost of beginning work in process was P140,000 while the production costs for the month registered at
P1,172,000. Using eh average method, what is the unit cost of production for March?
a. P4.00
b. P3.86
c. P3.91
d. P4.69

Answer: a

Total cost of units in process beginning and cost for the month
(P140,000 + P1,172,000) P1,312,000
Divided by the equivalent production:
Units finished and transferred (340,000 – 60,000) 280,000
Work in process, end (60,000 x 80%) 48,000 ÷ 328,000

Unit cost of production P 4.00

NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 9
Hart Co. purchased the net assets of Larry Co. for P700,000. The net assets of Larry were recorded as follows
on the acquisition date:
Cash 70,000
Inventory 120,000
Land 100,000
Building (net) 350,000
Liabilities (140,000)
Net assets 500,000
The market values were as follows: inventor, P130,000; Land P120,000; Building, P400,000. What is the amount that
will appear as cash applied to investing as a result of this purchase?
a. 700,000
b. 630,000
c. 840,000
d. 640,000

Answer: c

Materials price variance = (AP – SP) x Actual Qty. purchased

P3,600 = (P3.60 – SP) x 18,000
P3,600 = P64,800 – 18,000 SP
Std. Unit price = P61,200 / 18,000
Std. Unit price = P 3.40 unfavorable *
Actual quantity 15,000
Standard quantity 16,000
Variance 1,000 f
Multiply by standard piece 3.40___
Materials usage variance P 3,400 f

NCR CUP 6: AFAR

ELIMINATION ROUND EASY QUESTION NO. 10
Information on Esteban’s direct material costs for the month of January was as follows:
Actual quantity purchased 18,000
Actual unit purchase price P 3.60
Materials purchase price variance – unfavorable (based on purchases) P3,600
Standard quantity allowed for actual production 16,000
Actual quantity used 15,000

For the month of January, there was a favorable direct material usage variance of
a. 3,360
b. 3,375
c. 3,400
d. 3,800

Answer: b

Amount paid for the purchase of net assets 700,000

Amount of cash from the net assets acquired 70,000
Net cash outflow – investing activities 630,000

The cash purchase of a firm by a controlling interest is considered an investing activity and would appear as a cash
outflow in the cash flows from investing activities section of the statement of cash flows. Thus, the net cash outflow is
P630,000 as shown above.

NCR CUP 6: AFAR

 ELIMINATION ROUND AVERAGE QUESTION NO. 1
Peter, Queen, and Roy are partners with capital balances of P300,000, P300,000, and P200,000, respectively;
and sharing profits and losses equally. Roy is to retire and it is agreed that he is to take certain office
equipment with second hand value of P50,000 and a note for his interest. The office equipment carried in the
books at P65,000 but brand new would cost P80,000. Roy’s acquisition of the office equipment would result in
a. Reduction in capital of 5,000 each for Peter, Queen, and Roy.
b. Reduction in capital of P7,5000 each for Peter, Queen, and Roy.
c. Reduction in capital of P15,000 for Roy.
d. Reduction in capital of P55,000 for Roy.

Answer: d

Peter Queen Roy

Second hand value taken 50,000
Loss on realization (65,000 – 50,000) (equally) 5,000 5,000 5,000
Total reduction in capital 5,000 5,000 55,000

NCR CUP 6: AFAR

ELIMINATION ROUND AVERAGE QUESTION NO. 2
Pal and Mall are partners with capitals of P200,000 and P100,000 and sharing profits and losses 3:1
respectively. They agree to admit Kent as partner, Kent invests P150,000 for a 50% interest in the firm. Pal and
Mall transfer part of their capitals to Kent as a bonus.
The capital balances of the partners after Kent’s admission are:
a. Pal, P168,750; Mall, P56,250; and Kent, P225,000.
b. Pal, P112,500; Mall, P37,500; and Kent, P150,000.
c. Pal, P200,000; Mall, P100,000; and Kent, P150,000.
d. Pal, P143,750; Mall, P81,250; and Kent, P225,000.

Answer: d

Total agreed capital (P200,000 + P100,000 + P150,000) 450,000

Agreed capital of Ken (450,000 x 50%) P225,000

Contributed capital of Kent 150,000
Bonus from Pal & Mall, 3:1 to Kent P75,000

NCR CUP 6: AFAR

ELIMINATION ROUND AVERAGE QUESTION NO. 3
Sta. Lucia Realty Corporation sells residential subdivision lots on installment basis. The following data were
taken from the company’s accounting records as of December 31, 2019. The company uses a uniform gross
profit rate:
Installment accounts receivable:
January 1, 2019 P1,510,000
December 31, 2019 1,680,000
Unrealized gross profit - January 1, 2019 679,500
Installment sales – 2019 1,180,000
Installment sales – 2019 1,900,000

How much is the gross profit realized during the year 2019?
a. P778,500
 b. P579,500
c. P756,500
d. P630,500

Answer: a

Collections during 2019 (P1,510,000 + P1,900,000 – P1,680,000) P1,730,000

Gross profit rate (P679,600 / P1,510,000) 45%
Realized gross profit, 2019 P778,500

NCR CUP 6: AFAR

ELIMINATION ROUND AVERAGE QUESTION NO. 4
The Company uses the installment method of accounting to recognize income. Pertinent data are as follows:
2017 2018 2019
Installment sales P300,000.00 P375,000.00 P360,000.00
Cost of sales 225,000.00 285,000.00 252,000.00

Balance of deferred gross profit at Year end

2017 P52,500.00 P15,000.00 P-
2018 - 54,000.00 9,000.00
2019 - - 72,000.00

The total balance of the Installment Accounts Receivable on December 31, 2019 is:
a. P270,000
b. P277,500
c. P279,000
d. P300,000

Answer: b

2018 Sales 2019Sales

Deferred gross profit – Dec. 31, 2019 P9,000 P72,000
Divide by GPR (GP/IS) ÷ 24% ÷ 30%
Installment accounts receivable, Dec. 31, 2019 P37,500 P240,000
Total balance of receivable on Dec. 31, 2019 is
(P37,500 + P240,000) P277,500

NCR CUP 6: AFAR

ELIMINATION ROUND AVERAGE QUESTION NO. 5
The following data relating to a construction job started by SS Co. during 2019:
Total contract price P100,000
Actual costs during 2019 20,000
Estimated remaining costs 40,000
Billed to customer during 2019 30,000
Received from customer during 2019 10,000

How much gross profit should SS Co. recognized for 2019 under the zero profit method and the percentage-of-
completion method?
a. P0 and P13,333, respectively
b. P0 and P26,667, respectively
c. P4,000 and P13,333, respectively
d. P12,000 and P33,333, respectively

Answer: a

Under the zero profit method no gross profit is to be recognized since the project is not yet completed, under the
percentage-of-completion method the gross profit to be recognized in 2019 is computed below:

Contract price P100,000

Estimated cost:
Cost to date P20,000
Cost to complete 40,000 60,000
Estimated gross profit 40,000
% of completion (P20,000 ÷ P60,000) 33-1/3%

Gross profit recognized P13,333

NCR CUP 6: AFAR

ELIMINATION ROUND AVERAGE QUESTION NO. 6
The following information was taken from Kay Co.’s accounting records for the year ended December 31:
Increase in raw materials inventory 15,000
Decrease in finished goods inventory 35,000
Raw materials purchased 430,000
Direct manufacturing labor payroll 200,000
Factory overhead 300,000
Freight out 45,000

There was no work in process inventory at the beginning or end of the year. Kay’s cost of goods sold is:
a. 950,000
b. 965,000
c. 975,000
d. 995,000

Answer: a

Raw materials used:

Raw materials purchased 430,000
Less increase in raw materials inventory 15,000 415,000
Direct manufacturing labor payroll 200,000
Factory overhead 300,000
Total manufacturing costs/ Cost of goods manufactured 915,000
Add decrease in finished goods inventory 35,000
Cost of goods sold 950,000

NCR CUP 6: AFAR

ELIMINATION ROUND AVERAGE QUESTION NO. 7
 The following information pertains to Lapu-Lapu Co.’s Palo Division for the month of April:
Number of Units Cost of Materials
Beginning work in process 15,000 P5,500
Started in April 40,000 18,000
Units completed 42,500
Ending work in process 12,500

All materials are added at the beginning of the process. Using the weighted average method, the cost per equivalent
unit for materials is
a. 0.59
b. 0.55
c. 0.45
d. 0.43

Answer: d

Materials
Completed units 42,500
Add work in process, end 12,500
Equivalent production, Average 55,000

Total cost of materials (P5,500 + 18,000) 23,500

Divide by equivalent unit of production 55,000
Cost per equivalent unit for materials 0.43

Under the weighted average method, equivalent units of production and cost per unit are based on all work including
the beginning work in process done on units completed plus all work done to date on the units in ending work in
process. It should be pointed out that since all materials are added at the beginning of the process, both completed
units and ending work in process are 100% complete as to materials.

NCR CUP 6: AFAR

ELIMINATION ROUND AVERAGE QUESTION NO. 8
For the month of May, the Cutting Department of Cruz Co. had 80% complete as to the beginning work in
process and 50% complete as to the ending work in process. Related data follow:
Units Conversion Cost
Work in process, May 1 50,000 P88,000
Units started and cost incurred in May 270,000 572,000
Units completed and transferred to the next department in May 200,000

If the company uses FIFO method, the conversion cost of the work in process in the Cutting Department at the end of
May would amount to
a. 156,000
b. 254,000
c. 132,000
d. 176,000

Answer: a
 Conversion
Completed units 200,000
Add work in process, end
[(50,000 + 270,000 – 200,000) x 50%) 60,000
Equivalent production, Average 260,000
Less work in process, beginning (50,000 x 80%) 40,000
Equivalent production, FIFO 220,000

Equivalent units for conversion in ending work in process inventory 60,000

Multiply by equivalent unit cost of conversion (P572,000/220,000) 2.60
Conversion cost of the work in process at the end of May 156,000

Under FIFO costing method, the balance of the units to be accounted for contain only current period costs. As a
consequence of this inventory layering method, equivalent units are computed for current period costs only.

NCR CUP 6: AFAR

ELIMINATION ROUND AVERAGE QUESTION NO. 9
V. Mapa Co., which has a standard cost system, had 500 units of raw materials X in its inventory at June 1,
purchased in May for P1.20 per unit and carried at a standard cost of P1.00. the following information
pertains to raw material X for the month of June:
Actual number of units purchased 1,400
Actual number of units used 1,500
Standard number of units allowed for actual production 1,300
Standard cost per unit P1.00
Actual cost per unit 1.10

The unfavorable materials purchase price variance for raw material X for June was
a. 0
b. 130
c. 140
d. 150

Answer: c

Qty. Price Total

Actual (purchased) 1,400 P1.10 P1,540
Standard 1,300 1.00 1,300
Variance 100 u P 0.10 u P 240 u

Materials purchase price variance

(1,400 x P0.10 u) P 140 unfavorable

It should be pointed out that the requirement is to determine the materials purchase price variance (actual unit price –
standard unit price x actual quantity purchased) for the month of June. Thus, the actual and standard cost per unit for
the month of June was used.

NCR CUP 6: AFAR

ELIMINATION ROUND AVERAGE QUESTION NO. 10
 Payaso Inc. produces chemicals Koo and Lam. The processing also yields a by-product, Wiz, another chemical.
The joint costs of processing is reduced by the net realizable value of Wiz. For the month of March, the joint
costs were registered at P3,840,000. Below are additional data.

In Thousands
Product Production Market Value
Koo 2,000 P3,000
Lam 3,000 2,000
Wiz* 1,000 420

*An additional P180,000 were spent to complete the processing of Wiz.

Assuming that the company uses the net realizable value method for allocating joint costs, the allocated costs to Koo
would amount to:
a. P2,160,000
b. P1,800,000
c. P2,208,000
d. P2,700,000

Answer: b

Joint Cost P3,840,000

Less: Cost of By Product-Wiz
Sales Value (1,000 x P420) 420,000
Less: Addt’l. processing cost 180,000 240,000
Joint cost to be allocated to Koo and Lam P3,600,000

The allocation is as follows:

Market Value Ratio Allocated JC

Koo - P6,000,000 50% P1,800,000
Lam - 6,000,000 50% 1,800,000

P12,000,000 P3,600,000

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 1
The condensed balance sheet of Alex, Jay, and John as of March 31, 2019 follows:
Cash P28,000 Liabilities P48,000
Other assets 265,000 Alex, capital 95,000
Jay, capital 80,000
_______ John, capital 70,000
Total P293,000 Total P293,000

The income and loss ratio is 50:25:25, respectively. The partners voted to dissolve their partnership and liquidate by
selling other assets in installments. P70,000 was realized on the first cash sale of other assets with a book value of
P150,000. After settlement with creditors, all cash available was distributed to the partners. How much cash was
received by John?
a. 10,500
b. 20,000
 c. 21,250
d. 32,5000

Answer: b

Alex Jay John

Capital balances P95,000 P80,000 P70,000
Loss on realization
(150,000 – 70,000) 2:1:1 (40,000) (20,000) (20,000)
Possible loss
(265,000 – 150,000) 2:1:1 (57,500) (28,750) (28,750)
Balances (2,500) 31,250 21,250
Absorption of Alex 1:1 2,500 (1,250) (1,250)
Cash distribution P0 P30,000 P20,000

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 2
Sarao Motors sells locally manufactured jeeps on installment basis. Data presented below rates to the
company’s operations for the last three calendar years:
2019 2018 2017
Cost of installment sales P8,765,625 P7,700,000 P4,950,000
Gross profit rates on sales 32% 30% 28%
Installment accounts receivable, 12/31:
From 2019 sales 9,728,125
From 2018 sales 3,025,000 8,387,500
From 2017 sales 1,512,500 4,812,500

On December 31, 2019 how much is the (1) total realized gross profit and (2) deferred gross profit?
a. (1) P3,044,250; and (2) P4,020,500
b. (1) P3,044,250; and (2) P4,125,000
c. (1) P3,733,740; and (2) P4,020,500
d. (1) P6,993,250; and (2) P4,020,500

Answer: a

(1) Total realized gross profit

2019 2018 2017

Installment accounts receivable, 1/1/019 P12,890,625 P8,387,500 P1,512,500
Installment accounts receivable, 12/31/19 9,728,125 3,025,000 -0-

Collections during 2019 P3,162,500 P5,362,500 P1,512,500

Gross profit rates 32% 30% 28%

Realized gross profit, 12/31/019 P1,012,000 P1,608,750 P432,500

(Total, P3,044,250)

(2) Deferred gross profit, December 31, 2019:

2019 2018 2017

Installment accounts receivable, 12/31/019 P9,728,125 P3,025,000 P-0-
Gross profit rates 32% 30% 28%
Deferred gross profit, 12/31/019 P3,113,000 P907,500 P-0-

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 3
The home office in Quezon City ships and bills merchandise to its provincial branch at cost. The branch carries
its own accounts receivable and makes its own collections. The branch also pays its expenses. The transactions
for 2019 are reflected in the branch trial balance that follows:
Cash P20,000
Accounts receivable 80,000
Home Office P180,000
Shipments from Home Office 250,000
Sales 225,500
Expenses 55,500 ________

Total P405,500 P405,000

December 31, inventory P65,000

Assuming all the transactions are properly recorded, what is the balance of the Investment in Branch account in the
home office books?
a. P180,000
b. P195,000
c. P165,000
d. P175,000

Answer: c

Home Office account before branch profit (loss) P180,000

Add: Profit (loss)

Sales P225,500
Cost of sales:
Shipment from HO P250,000
Inventory, 12/31 65,000 185,000

Gross profit P40,500

Expenses 55,500 (15,000)
Home Office account balance, December 31, 2019 P165,000

Therefore the balance of the Investment in Branch account is also P165,000.

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 4
The following are some of the account balances on the books of the home office and its branch
on December 31, 2019.
Home Office Books Branch Books
Inventory, January 1, 2019 P20,000 P58,000
Shipments from home office 150,800
Purchases 900,000 200,000
Shipments to branch 145,000
Allow for overvaluation of branch inventory 52,500
Sales 1,200,000 720,000
 Operating expenses 290,000 110,000

Per physical count, the ending inventory of the branch is P42,000 including goods purchased from outsiders of
P27,700 while the ending inventory of the home office is P120,000. Home office bills its branch for merchandise
shipments at 30% above cost. How much is the combined total comprehensive income on December 31, 2019?
a. P538,700
b. P547,400
c. P541,700
d. P498,200

Answer: a

The combined net income is computed by preparing a combined income statement as follows:

Sales P1,920,000
Cost of sales:
Inventory, January 1 (Sch. 1) P69,000
Purchases 1,100,000
Goods available for sale 1,169,000
Inventory, December 31 (Sch. 1) 187,700 981,300

Gross profit 938,700

Expenses 400,000
Combined net income P538,700

Schedule 1:
Inventory at cost
January 1 December 31
Home office P20,000 P120,000
Branch: Acquired from HO (Sch. 2) 30,000 40,000
Acquired from outsiders (P58,000 – P39,000) 19,000 27,700
Total 49,000 67,700
Combined P69,000 P187,700

Schedule 2:
Allow for overvaluation before adjustment P52,800
Overvaluation in the Shipments:
Shipment from HO at BP (P145,000 x 130%) P188,500
Shipment to branch at cost 145,000 43,500
Overvaluation in the branch beginning inventory P9,000
Branch beginning inventory at cost (P9,000 ÷ 30%) P30,000
Branch ending inventory at cost (per No. 39) P40,000

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 5
The following is the income statement of XYZ Branch in Cebu City for the six-month period ending June 30,
2019:
Sales P620,000
Cost of Sales:
Shipments from H.O. P550,000
 Purchases 50,000
Total 600,000
Inventory, June 30
From H.O. 75,000
Fr. Outsider 10,000 85,000 515,000
Gross profit 105,000
Expenses 85,000
Net profit P20,000

The home office ships merchandise to, and bills, the Branch office at 125% of cost. The rent of the branch office for six
months, at a monthly rate of P1,000 was paid by the home office.
The inventory of the Branch office in Cebu City, at cost, as of June 30, 201 is:
a. 85,000
b. 70,000
c. 60,000
d. 75,000

Answer: b

Merchandise purchased from outsiders 10,000

Merchandise acquired from home office 60,000
Total branch inventory at cost, 6/30/19 70,000

The merchandise acquired by the branch from outsiders was already recorded at cost, since it was acquired in a
monetary exchange. While the merchandise acquired from home office in the amount of P60,000 was determined
through the use of the above tabular computations

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 6
The following information relates to Job No. 2468, which being carried out by Flexy Feet to meet a customer’s
order:
Dept. A Dept. B
Direct materials consumed P5,000 P3,000
Direct labor rate per hour 4 5
Production overhead per direct labor hour 4 4
Direct labor hours employed 400 200
Administrative and other overhead cost 20% of full production cost
Profit markup 25% of selling price

What is the selling price to the customer of Job No. 2468?

a. 16,250
b. 17,333
c. 19,800
d. 20,800

Answer: d

Direct materials used (P5,000 + 3,000) 8,000

Direct labor [(400 x 4) + (200 x 5)] 2,600
Overhead costs [(400 x 4) + (200 x 4)] 2,400
Total production costs 13,000
Administrative and other overhead costs (13,000 x 20%) 2,600
Total costs and expense, Job No. 2468 15,600
Divide by ratio of cost to sales (100% - 25%) 75%
Selling price of Job No. 2468 20,800

1. Tillman Co. uses a job order cost system and has two production departments, M and A.

Budgeted manufacturing costs for the year are

Dept. M Dept. A
Direct materials 700,000 100,000
Direct labor 200,000 800,000
Manufacturing overhead 600,000 400,000

The actual materials and labor costs charged to Job #123 during the year were as follows:

Direct materials 25,000

Direct labor:
Dept. M 8,000
Dept. A 12,000 20,000

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 7
Tillman applies manufacturing overhead to production orders on the basis of direct labor cost using separate
departmental rates predetermined at the beginning of the year based on the annual budget. What is the total annual
manufacturing cost associated with Job #123?
a. 50,000
b. 55,000
c. 65,000
d. 75,000

Answer: d

Overhead rates:

Dept. M (600,000/200,000) 300% of direct labor cost

Dept. A (400,000/800,000) 50% of direct labor cost

Direct material cost 25,000

Direct labor cost 20,000
Factory overhead applied:
Dept. M (300% x 8,000) 24,000
Dept. A (50% x 12,000) 6,000
Total manufacturing costs 75,000

Total manufacturing costs consist of direct materials, direct labor, and manufacturing overhead. Direct materials and
direct labor are given in the problem; overhead rates are to be determined for each department. Department rates are
calculated by dividing departmental manufacturing overhead by direct labor costs.
Again, conversion cost is the sum of direct labor and factory overhead.

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 8
Kundiman, Inc. manufactures their product in two departments in a continuous process. Production data for
the month of October 2019 are as follows:

Beginning work in process, 40% completed 500 Units

Received from preceding department 2,000 Units
Normal spoilage 200 Units
Abnormal spoilage 300 Units
Units completed and transferred out 1,700 Units
Ending work in process, 1/3 completed 300 Units
Conversion costs in beginning inventory P610
Current period conversion costs P3,990

All spoilage occurs at the end of the process.

What is the conversion cost per equivalent unit?
FIFO Method Average Method
a. P1.90 P1.73
b. P2.19 P2.00
c. P2.00 P1.90
d. P1.90 P2.00

Answer: d

Quantity Schedule Actual Work Done EP – CC

In process, beginning 500
Received from preceding department 2,000
2,500
Accounted for as follows – FIFO:
In process, beg., F&T 500 3/5 300
Received, F&T (1,700 – 500) 1,200 100% 1,200
In process, ending 300 1/3 100
Normal lost 200 100% 200
Abnormal lost 300 100% 300
2,500 2,100

Accounted for as follows – Average

Finished and transferred 1,700 100% 1,700
In process, ending 300 1/3 100
Normal lost 200 100% 200
Abnormal lost 300 100% 300
2,500 2,300
Conversion cost per equivalent unit: FIFO Average

In-process, beginning P- P610

Added Conversion Costs 3,990 3,990
 P3,990 P4,600

Divided by: Equivalent Units 2,100 2,300

EUP P1.90 P2.00

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 9
Alas Tres, Inc. manufactures their product in two departments in a continuous process. Production data for
the month of October 2019 are as follows:

Beginning work in process, 40% completed 500 Units

Received from preceding department 2,000 Units
Normal spoilage 200 Units
Abnormal spoilage 300 Units
Units completed and transferred out 1,700 Units
Ending work in process, 1/3 completed 300 Units
Conversion costs in beginning inventory P610
Current period conversion costs P3,990

All spoilage occurs at the end of the process.

What is the conversion cost of normal spoilage?
FIFO Method Average Method
a. P438 P400
b. P380 P346
c. P400 P380
d. P380 P400

Answer: d

FIFO: Conversion Costs component of normal lost: 200 x P1.90 = P380

Average: Conv. Costs component of normal lost: 200 x P2.00 = P400

NCR CUP 6: AFAR

ELIMINATION ROUND DIFFICULT QUESTION NO. 10
The following information pertains to Lucban Co.’s direct labor for March:

Standard direct labor hours 21,000

Actual direct labor hours 20,000
Favorable direct labor rate variance P8,400
Standard direct labor rate per hour 6.30

What was Lucban’s total actual direct labor cost for March?
a. 117,600
b. 118,000
c. 134,000
d. 134,400
Answer: a

Labor rate variance = (Actual rate – std. rate) x Actual hrs.

P8,400 favorable = (AR – P6.30) x 20,000
Actual rate = P 5.88

Total actual direct labor cost

(20,000 x P5.88) P117,600

The requirement is to determine the total actual direct labor cost for the month of March 1998. Given the labor rate
(price) variance of P8,400 (favorable), the actual rate is P5.88 then multiply by actual direct labor hours, thus the actual
direct labor cost is P117,600.

Since variance is the difference between actual and standard, an alternative approach to compute the total actual direct
labor cost is by working back, as shown below.

Total actual direct labor cost P117,600

Standard cost @ actual hours (P6.30 x 20,000) 126,000
Favorable labor rate variance (given) P8,400