REVIEW IN MIDTERM EXAMINATION

ACC 204

I. Multiple Choice.

Choose the best answer.

1. Cost accounting ________.

A) measures the costs of acquiring or using
resources in an organization
B) helps managers to develop, communicate, and
implement strategies
C) coordinates product design, production, and
marketing decisions and evaluate a company's
performance
D) communicates information to investors, banks,
regulators, and other outside parties.

Ans: A

2. Which of the following differentiates cost accounting

and financial accounting?

A) The primary users of cost accounting are the

investors, whereas the primary users of financial
accounting are the managers.
B) Cost accounting deals with product design,
production, and marketing strategies, whereas
financial accounting deals mainly with pricing of the
products.
C) Cost accounting measures only the financial
information related to the costs of acquiring fixed
assets in an organization, whereas financial
accounting measures financial and non-financial
information of a company's business transactions.
D) Cost accounting measures information related to
the costs of acquiring or using resources in an
 organization, whereas financial accounting measures
a financial position of a company to investors, banks,
and external parties.

Ans: D

3. Job costing information is used:

A) to develop strategies
B) to make pricing decisions
C) for external financial reporting
D) All of these answers are correct.

Ans: D

4. The actual indirect-cost rate is calculated by

A) dividing actual total indirect costs by the actual
total quantity of the cost-allocation base.
B) multiplying actual total indirect costs by the actual
total quantity of the cost-allocation base.
C) dividing the actual total quantity of the cost
allocation base by actual total indirect costs.
D) multiplying the actual total quantity of the cost
allocation base by actual total indirect costs.

Ans: A

5. Under which inventory cost flow assumption is the cost

of the most recent purchases likely to remain in inventory?
A. FIFO Method
B. LIFO Method
C. Average Method
Ans: A
Under FIFO the first or oldest costs come out of inventory
first, leaving the most recent costs in inventory.

6. Which of the following costs would be included in

factory overhead in the manufacture of a student’s desk?

a. The wages of the operator of the machine that

bends the metal legs of the desk into shape.
b. The wages of the forklift operator who moves
finished desks to the finished goods warehouse.
c. The cost of the plastic used to form the writing
surface.
d. The wages of the worker who assembles the
components.

ANS: B. Explanation: The plastic used to form the writing

surface of the desk is a direct material as it can be traced
directly to the finished product. The wages of the machine
operator and the assembly worker are direct labor costs
as they add value to the product. The wages of the forklift
operator would be classified as indirect labor as s/he does
not actually work on the products themselves. Indirect
labor is included in factory overhead.

7. EwanKoSaU Jewelry sells 500 units resulting in

Php10,000 of sales revenue, Php4,000 of variable costs,
and Php1,500 of fixed costs. Calculate the variable cost
per unit.
A) PHP 12.00
B) PHP 6.00
C) PHP 2.00
D) PHP 8.00
Ans: D
Explanation: PHP 4,000 / 500 = PHP 8.00

8. AratNa Company's actual manufacturing overhead is

PHP 2,800,000. Overhead is allocated on the basis of
direct labor hours. The direct labor hours were 50,000 for
the period. What is the manufacturing
overhead rate?
A) PHP 47.00
B) PHP 56.00
C) PHP 75.00
D) None of the above are correct.

Ans: B
Explanation: B) 2,800,000/50,000 = 56.00

9. WehDinga Company calculated an indirect-cost rate of

PHP12.50 per labor hour for fringe benefits for use in their
normal costing system. At the end of the year, the actual
cost of fringe benefits was PHP 980,000. The total of labor
hours worked for the year was the same amount as
budgeted, 70,000 hours. If Job #640 required the use of
15 labor hours and the company used the adjusted
allocation rate approach, by what amount would the
cost of Job #640 change?

A. PHP560.00
B. PHP281.25
C. PHP22.50
D. PHP20.50

Ans: C

Explanation: 980.000/70,000 = PHP14.00 (actual rate)

PHP14.00– PHP12.50 = PHP 1.50 excess of actual over
budget
1.50 * 15 hours= PHP22.50 additional cost

II. True or False

10. Job costing is used by a business to price unique

products for different jobs.
A. TRUE
B. FALSE

Ans: T

12. Manufacturing overhead combined with direct

materials is known as conversion cost.
A. TRUE
B. FALSE

Ans: F

13.The materiality of the cost is a factor in classifying the

cost as a direct or indirect cost.
A.TRUE
B. FALSE

Ans: T

14.The following costs should be considered by a law firm

to be indirect costs of defending a particular client in court:
rent on the law firm's offices, the law firm's receptionist's
wages,the costs of heating the law firm's offices, and the
depreciation on the personal computer in the office of the
attorney who has been assigned the client.
A. TRUE
B. FALSE

Ans: T

15.A unit cost is valid at only one level of production.

A. TRUE
B. FALSE

Ans: T

16. There is two basic product costing which are Job order
costing and Process Costing.
A. TRUE
B. FALSE

Ans: T

17. When you issue the manufacturing Overhead

production, you debit: Applied OH, credit: Work in Process.
A. TRUE
B. FALSE

Ans: F
18. The term "prime cost" refers to: The sum of raw
material costs and direct labor costs.
A. TRUE
B. FALSE

Ans: T
The term "prime cost" refers to the sum of raw materials
costs and direct labor costs.

19. Opportunity Cost refers to the benefits given up in

favor of another choice.
A. TRUE
B. FALSE

Ans: T

20. There is five method in regards to allocation of service

department cost to producing Department.
A. TRUE
B. FALSE

ANS:F
There is 3 methods: direct, step, and algebraic method
III. PROBLEM SOLVING

Choose the correct answer.

1. PanoMoNasabi Company has a beginning inventory of

direct materials on March 1 of P30,000 and an ending
inventory on March 31 of P36,000. The following
additional manufacturing cost data were available for the
month of March:

Direct materials
purchased ..........................................................P84,000
Direct labor ......................................................… 60,000
Factory overhead ..........................................… .. 80,000

During March, prime cost added to production was:

A. P140,000
B. P138,000
C. P144,000
D. P150,000

CALCULATION:
P84,000;DMP + P60,000;DL- (P36,000end- P30,000beg)
= P138,000

2. ArayKoPho Company produced 20,000 blankets in

June to be sold during the holiday season. The
manufacturing costs were:

Direct materials P125,000

Direct labor 55,000
Factory overhead 60,000
Selling expense 25,000
Administrative expense 30,000
The cost per blanket is:
a.P6.25
b.P9.00
c.P12.00
d.P14.75

ANS: C

Direct materials P125,000

Direct labor 55,000
Factory overhead 60,000
Total manufacturing costs P240,000

P240,000 / 20,000 units = P12.00 cost per unit

3. Let’s assume the following:

Number of materials required annually 30,000

Cost of placing an order P3.00
Annual Carrying cost per unit of inventory P0.90

What is the economic order quantity?

Ans: EOQ = √2CN/K

= √2 P3.00 30,000 /P0.90
= √180,000/P0.90
= √200,000
= 447 units

4. The following data was taken from the general ledger

and other records of KayaMoYan Manufacturing
Co. at July 31, the end of the first month of operations in
the current fiscal year:
Sales P50,000
Materials inventory (July 1) 15,000
Work in process inventory (July 1) 20,000
Finished goods inventory (July 1) 28,000
Materials purchased 21,000
Direct labor cost 12,500
Factory overhead (including
P5,000 of indirect materials
used and P2,500 of
indirect labor cost, other P4,000) 11,500
Selling and administrative expense 8,000

Inventories at July 31:

Materials 16,000
Work in process 18,000
Finished goods 30,000

What is the cost of goods manufactured.

A. P41,000
B. P55,00
C. P39,000

ANS: A

Solution:

Direct Materials:
Inventory, July 1 P15,000
Purchases 21,000
Total cost of available materials P36,000
Less: inventory, July 31 16,000
Cost of materials used P20,000
Less: indirect materials used 5,000
Cost of direct materials used in
Production P15,000
Direct labor 12,500
Total factory overhead 11,500
Total manufacturing cost P39,000
Add work in process inventory, July 1 20,000
Total P59,000
Less: work in process inventory, July 31 18,000
Cost of goods manufactured during the month P41,000

5. Refer to the #4 data. Determine the cost of goods sold

for the month.
A. P56,000
B. P42,000
C. P39,000

ANS: C

SOLUTION:

Finished goods inventory, July 1 P28,000

Add: cost of goods manufactured during July 41,000
Goods available for sale P69,000
Less: finished goods inventory, July 31 30,000
Cost of goods sold P39,000

6. The following data were taken from PHAGODNAH

Merchandisers on January 31:

Merchandise inventory, January 1 P90,000

Sales salaries 35,000
Merchandise inventory, January 31 65,000
Purchases 560,000

What was the Cost of goods sold in January?

a.P585,000
b.P650,000
 c.P620,000
ANS: A

Merchandise Inventory, January 1 P90,000

Add: Purchases 560,000
Cost of Goods Available for Sale P650,000
Less: Merchandise Inventory, January 31 65,000
Cost of Goods Sold P585,000

7. The following inventory data relate to the LODIH

Company:
INVENTORIES
Beginning Ending
Finished goods P80,000 P100,000
Work in process 65,000 70,000
Direct materials 60,000 64,000

Revenues and costs for the period:

Sales P740,000
Cost of goods available for sale 650,000
Total manufacturing costs 575,000
Factory overhead 154,000
Direct materials used 164,000
Selling and administrative expenses 51,000

Compute for the direct material purchased.

A. P159,000
B. P175,000
C. P168,000

Ans: C
SOLUTION:

Direct materials used during the period P164,000

Add: inventory of direct materials
at the end of the period 64,000
Direct materials available during the period P228,000
Less: inventory of direct materials at
the beginning of the period 60,000
Direct materials purchased during the P168,000
Period

8. Selected data concerning the past fiscal year's

operations (000's omitted) of the SanaOl Manufacturing
Company are presented below:

INVENTORIES
Beginning Ending
Raw materials P90 P85
Work in process 50 65
Finished goods 100 90
Other data:
Raw materials used P365
Total manufacturing
costs charged to production
During the year
(includes raw materials,
direct labor,
and factory
overhead) 680
Cost of goods available for sale 765
Selling and general expenses 250

The cost of goods sold during the year was:

a. P730
b. P775
c. P675
 d. P765

ANS:C
Solution:
Beginning finished goods inventory P100
Add: cost of goods manufactured during the year
(P680 + P50 -P65) P665
Total cost of goods available for sale P765
Less: ending finished goods inventory 90
Cost of goods sold during the year P675
9. Assume the following information pertaining to
PATAPOS NAH Company:

Beginning Ending
Finished goods inventory P130,000 P124,000
Work in process inventory 85,000 104,000
Direct materials 117,000 130,000

Costs incurred during the period are as follows:

Total manufacturing costs P896,000

Factory overhead 199,000
Direct materials used 156,000

Cost of goods sold is calculated to be:

A) P890,000
B) P896,000
C) P883,000

Answer: C

Explanation: COGM = P85,000;WIPbeg + P896,000;TMC

− P104,000;WIPend = P877,000

COGS = P130,000 + P877,000 − P124,000 = P883,000

10. Compute for the order point.

Daily Usage: 1,000 units

Lead time: 7 days
Safety Stock: 3,000 units
Solution:
1,000 units x 7 days 7,000 units
Add: Safety Stock 3,000 units
Order point 10,000 units

11. The following data were taken from ToDaMun

Merchandisers on July 31, for the first month of its fiscal
year:

Merchandise Inventory, July 31 P25,000

Purchases 735,000
Cost of Goods Sold 750,000

Compute the inventory at July 1.

A. P29,000
B. P40,000
C. P55,000

ANS: B

Cost of Goods Sold P750,000

Add: Merchandise Inventory, July 31 25,000
Cost of Goods Available for Sale P775,000
Less: Purchases 735,000
Equals Merchandise Inventory, July 1 P40,000

12. Selected data concerning the past fiscal year's

operations (000's omitted) of the SanaOl Manufacturing
Company are presented below:

INVENTORIES
Beginning Ending
Raw materials P90 P85
Work in process 50 65
Finished goods 100 90
Other data:
 Raw materials used P365
Total manufacturing
costs charged to production
During the year
(includes raw materials,
direct labor,
and factory
overhead) 680
Cost of goods available for sale 765
Selling and general expenses 250

The cost of raw materials purchased during the year

amounted to:
a.P455
b.P450
c.P360

ANS: C

SOLUTION:
Raw materials used P365
Add: ending inventory of raw materials 85
Materials available during the year P450
Less: beginning inventory of raw materials 90
Purchases of raw materials during the year P360
Estimated factory overhead is P600,000, and the hours
usage of machinery is expected to be 150,000. Factory
overhead is applied at the rate of P10 per direct labor hour.
The wage rate for direct labor is P6 per hour, and the total
number of estimated direct labor hours for the period is:

A. 100,000
B. 150,000
C. 60,000

Ans: 60,000

Solution:

P600,000/x=10/Dlhr
x=60,000