School of Business, Management & Accountancy

FINAL DEPARTMENTAL EXAMINATION

COST ACCOUNTING
SET-A
MULTIPLE CHOICE:
Instruction: Select the best answer by shading the box letter.
Strictly no erasures allowed.
1. Job order cost accounting systems and process accounting systems differ in the way:
A. costs are traced to cost objects
B. orders are taken and in the number of units in the orders
C. product profitability is determined and compared with planned costs
D. manufacturing processes can be accomplished and in the number of production runs that may be performed in a
year

2. In a job order cost system, the distribution of direct labor costs usually are recorded as an increase in:
A. Cost of Goods Sold
B. Factory Overhead Control
C. Finished Goods
D. Work in Process

3. Process costing techniques should be used in assigning costs to products:

A. if the product is manufactured on the basis of each order received
B. when production is only partially completed during the accounting period
C. if the product is composed of mass-produced homogeneous units
D. whenever standard costing techniques should not be used

4. A characteristic of a process costing system is:

A. partially processed inventory is restated in terms of completed units
B. costs are accumulated by order
C. it is used by a company manufacturing custom machinery
D. standard costs are not applicable

5. The use of a single indirect-cost rate is more likely to

a. undercost high-volume simple products.
b. undercost low-volume complex products.
c. undercost lower-priced products.
d. both (b) and (c).

6. In the computation of manufacturing cost per equivalent unit, the weighted average method of process costing considers:
A. current costs only
B. current costs plus cost of beginning work in process inventory
C. current costs plus cost of ending work in process inventory
D. current costs less cost of beginning work in process inventory

7. A total variance is best defined as the difference between total

a. actual cost and total cost applied for the standard output of the period.
b. standard cost and total cost applied to production.
c. actual cost and total standard cost of the actual input of the period.
d. actual cost and total cost applied for the actual output of the period.

8. An unfavorable variable overhead spending variance indicates that

a. variable overhead items were not used efficiently.
b. the price of variable overhead items was more than budgeted.
c. the variable overhead cost-allocation base was not used efficiently.
d. the denominator level was not accurately determined

9. A favorable price variance for direct materials indicates that

a. a lower price than planned was paid for materials.
b. a higher price than planned was paid for materials.
c. less material was used during production than planned for actual output.
d. more material was used during production than planned for actual output.

10. The support department allocation method that is the most widely used because of its simplicity is the
a. step-down method. b.reciprocal allocation method.
c. direct allocation method. d.sequential allocation method.

11. The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is
a. cost accumulation.
b. cost assignment.
c. cost tracing.
d. conversion costing.

12. Cost tracing is

a. the assignment of direct costs to the chosen cost object.
b. a function of cost allocation.
c. the process of tracking both direct and indirect costs associated with a cost object.
d. the process of determining the actual cost of the cost object.
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13. A manufacturing plant produces two product lines: football equipment and hockey equipment. Direct costs for the football
equipment line are the
a. beverages provided daily in the plant break room.
b. monthly lease payments for a specialized piece of equipment needed to manufacture the football helmet.
c. salaries of the clerical staff that work in the company administrative offices.
d. utilities paid for the manufacturing plant.

14. Depreciation on factory buildings and equipment is classified as:

A. selling expense B. administrative expense
C. direct labor D. factory overhead

15. All of the following are true EXCEPT that indirect costs
a. may be included in prime costs.
b. are not easily traced to products or services.
c. vary with the selection of the cost object.
d. may be included in manufacturing overhead.

16. Cost behavior refers to

a. how costs react to a change in the level of activity.
b. whether a cost is incurred in a manufacturing, merchandising, or service company.
c. classifying costs as either inventoriable or period costs.
d. whether a particular expense has been ethically incurred.

17. Usually, a cost easy to assign accurately to a specific operating department is a:

A. standard cost B. common cost
C. fixed cost D. variable cost

18. The term "relevant range" as used in cost accounting means the range over which:
A. relevant costs are incurred
B. cost relationships are valid
C. costs may fluctuate
D. sales volume fluctuates

19. An expense that is likely to contain both fixed and variable components is:
A. security guard wages
B. supplies
C. heat, light, and power
D. small tools

20. A type of employee whose wages are not a component of indirect labor is a(n):
A. inspector B. supervisor
C. assembler D. maintenance worker

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 21 THROUGH 23.

Wayland Manufacturing uses a normal cost system and had the following data available for 20x4.
Direct materials purchased on account P 74,000
Direct materials requisitioned 41,000
Direct labor cost incurred 65,000
Factory overhead incurred 73,000
Cost of goods completed 146,000
Cost of goods sold 128,000
Beginning direct materials inventory 13,000
Beginning WIP inventory 32,000
Beginning finished goods inventory 29,000
Overhead application rate, as a percent of direct-labor costs 125 percent

21. The journal entry to record the materials placed into production would include a
a. credit to Direct Materials Inventory for P41,000.
b. debit to Direct Materials Inventory for P74,000.
c. credit to WIP Inventory for P41,000.
d. debit to WIP Inventory for P74,000.

22. The ending balance of work-in-process inventory is

a. P219,250.
b. P73,250.
c. P65,000.
d. P211,000.

23. The ending balance of finished goods inventory is

a. P29,000.
b. P18,000.
c. P47,000.
d. P146,000.

24. PRECISION, Inc. manufactures specialized precision electronic kits. In late March, Job orders # 0311 and #0322
were started. Estimated materials cost were P90,000 for both orders (60% for #0311) while direct labor hours were
estimated at 700 for #0311 and 400 for #0322. Labor rate is P18 per hour while variable overhead rate is P10 per
hour.
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By the end of April, 75% of the required materials have been issued to production in the amount of P90,000 and
both job orders have been 50% converted with 360 hours charged to #0311 and 180 hours charged to #0322 at
the hourly rates given.

The total cost charged to Job order #0311 was:

a. P45,800
b. P52,350
c. P64,080
d. P67,600
(Phil. CPA, adapted)

25. JACK CO. uses a job order cost system, and relevant data for the month of May, 2008 are summarized below:
Work in process, opening P100,000
Direct materials used 200,000
Direct labor incurred 160,000
Factory overhead:
(based on labor cost) 120,000
Goods completed and transferred
to stock 501,800

The closing work in process included Job #12 with direct labor cost of P12,000 and Job #15 with overhead
applied of P9,600.
The total cost of materials included in the closing work in process was:
a. P16,800
b. P30,000
c. P34,800
d. P36,000
(Phil. CPA, adapted)

26. The KAPPA Manufacturing Co. uses a job-order costing system, and it applies factory overhead to production at a
pre-determined rate based on direct labor cost. The following account appears in the general ledger:

Work In Process

Beg. Balance P 50,000 Finished goods P250,900

Direct materials 100,000
Direct labor 80,000
Applied OH 60,000

The ending work in process represents the cost of Job # 26 which has been charged with P6,000 of direct labor
and the cost of Job # 27 which has been charged with applied overhead of P4,800. Total cost of direct materials
in the ending work in process was:
a. P 8,400
b. P 9,000
c. P15,200
d. P17,400
(Phil.CPA, adapted)

Use the following information for questions 27–29.

Forte Co. has the following information for May:

Beginning Work in Process Inventory

(70% complete as to conversion) 6,000 units
Started 24,000 units
Ending Work in Process Inventory
(10% complete as to conversion) 8,500 units

Beginning WIP Inventory Costs:

Material P23,400
Conversion 50,607

Current Period Costs:

Material P31,500
Conversion 76,956

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

27. How many units were transferred out in May?

a. 15,500
b. 18,000
c. 21,500
d. 24,000

28. Assume that weighted average process costing is used. What is the cost per equivalent unit for material?
a. P1.83
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b. P1.05
c. P0.55
d. P1.31

29. Assume that FIFO process costing is used. What is the cost per equivalent unit for conversion?
a. P7.03
b. P3.44
c. P4.24
d. P5.71

Use the following information for questions 30–31.

BCW Co. adds material at the start to its production process and has the following information available for November:

Beginning Work in Process Inventory

(40% complete as to conversion) 7,000 units
Started this period 32,000 units
Ending Work in Process Inventory
(25% complete as to conversion) 2,500 units
Transferred out ?

30. Calculate equivalent units of production for conversion using FIFO.

a. 34,325
b. 30,125
c. 37,125
d. 39,000

31. Calculate equivalent units of production for conversion using weighted average.
a. 39,925
b. 37,125
c. 34,325
d. 38,375

Use the following information for questions 32–34.

T Co. has the following information for July:

Units started 100,000 units

Beginning Work in Process: (35% complete) 20,000 units
Normal spoilage 3,500 units
Abnormal spoilage 5,000 units
Ending Work in Process: (70% complete) 14,500 units
Transferred out 97,000 units
Beginning Work in Process Costs:
Material P15,000
Conversion 10,000

All materials are added at the start of the production process. T Co. inspects goods at 75 percent completion as to
conversion.

32. What are equivalent units of production for material, assuming FIFO?
a. 100,000
b. 96,500
c. 95,000
d. 120,000

33.What are equivalent units of production for conversion costs, assuming FIFO?
a. 108,900
b. 103,900
c. 108,650
d. 106,525

34.Assume that the costs per EUP for material and conversion are P1.00 and P1.50, respectively. What is the amount of
the period cost for July using FIFO?
a. P0
b. P9,375
c. P10,625
d. P12,500

35. During March, Quig Company's Department Y equivalent unit product costs, computed under the average cost
method, were as follows:

Materials............................................ P1
Conversion........................................ 3
Transferred-in.................................... 5
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Materials are introduced at the end of the process in Department Y. There were 4,000 units (40% complete
as to conversion costs) in work in process at March 31. The total costs assigned to the March 31 work in
process inventory should be:
A. P36,000
B. P28,800
C. P27,200
D. P24,800

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 36 THROUGH 37.

Yakima Manufacturing purchases trees from Cascade Lumber and processes them up to the splitoff point where two
products (paper and pencil casings) are obtained. The products are then sold to an independent company that markets
and distributes them to retail outlets. The following information was collected for the month of November:

Trees processed: 50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap)

Production: paper 30,000 sheets

pencil casings 30,000

Sales: paper 29,000 at P0.04 per page

pencil casings 30,000 at P0.10 per casing

Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000
pencil casings is P1,500.

Yakima’s accounting department reported no beginning inventories and ending inventory of 1,000 sheets of paper.

36. If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending inventory for
paper?
a. P14.29
b. P50.00
c. P435.00
d. P750.00

37. If the sales value at splitoff method is used, what is the approximate production cost for each pencil casing?
a. P0.0250
b. P0.0255
c. P0.0335
d. P0.0357

Use the following information for questions 38-40.

The following March information is available for Batt Manufacturing Company when it produced 2,100 units:

Standard:
Material 2 pounds per unit @ $5.80 per pound
Labor 3 direct labor hours per unit @ $10.00 per hour

Actual:
Material 4,250 pounds purchased and used @ $5.65 per pound
Labor 6,300 direct labor hours at $9.75 per hour

38. What is the material price variance?

a. $637.50 U
b. $637.50 F
c. $630.00 U
d. $630.00 F

39. What is the material quantity variance?

a. $275 F
b. $290 F
c. $290 U
d. $275 U

40. What is the labor rate variance?

a. $1,575 U
b. $1,575 F
c. $1,594 U
d. $0

41. What would be the appropriate journal entry if the following labor wages were incurred in a furniture
manufacturing company?

Assembly workers P30,000

Janitors P20,000

a. Work-in-Process Control 50,000

Wages Payable Control 50,000
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b. Work-in-Process Control 30,000
Manufacturing Overhead Control 20,000
Wages Payable Control 50,000
c. Manufacturing Overhead Control 50,000
Wages Payable Control 50,000
d. Wages Payable Control 50,000
Work-in-Process Control 50,000

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 42 THROUGH 43.

Joni’s Kitty Supplies applies manufacturing overhead costs to products at a budgeted indirect-cost rate of P60 per direct
manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for
this order include: Direct materials P40,000; 500 direct manufacturing labor-hours @ P20 per hour; and a 20% markup
rate on total manufacturing costs.

42. Estimated total product costs for this special order equal
a. P96,000.
b. P50,000.
c. P80,000.
d. P60,000.

43. The bid price for this special order is

a. P50,000.
b. P60,000.
c. P80,000.
d. P96,000.

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 44 THROUGH 45.

Sunni Company manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost
rate of P15 per direct labor-hour. The following data are obtained from the accounting records for June 20x2:

Direct materials P280,000

Direct labor (7,000 hours @ P11/hour) P 77,000
Indirect labor P 20,000
Plant facility rent P 60,000
Depreciation on plant machinery and equipment P 30,000
Sales commissions P 40,000
Administrative expenses P 50,000

44. The actual amount of manufacturing overhead costs incurred in June 20x2 total
a. P557,000. b.P200,000. c.P110,000. d.P 80,000

45. The amount of manufacturing overhead allocated to all jobs during June 20x2 totals
a. P77,000 b.P105,000. c.P110,000. d.P200,000.

46. Clemson Co. incurs $700,000 of overhead costs each year in its three main departments, machining
($400,000), inspections ($200,000) and packing ($100,000). The machining department works 4,000 hours
per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year.
Information about Clemson’s two products is as follows:
Product X Product Y
Machining hours 1,000 3,000
Inspections 100 500
Orders packed 350 650
Direct labor hours 1,700 1,800

If traditional costing based on direct labor hours is used, how much overhead is assigned to Product X this year?
a. $168,334
b. $242,308
c. $340,000
d. $350,000

47. Clemson Co. incurs $700,000 of overhead costs each year in its three main departments, machining
($400,000), inspections ($200,000) and packing ($100,000). The machining department works 4,000 hours
per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year.
Information about Clemson’s two products is as follows:
Product X Product Y
Machining hours 1,000 3,000
Inspections 100 500
Orders packed 350 650
Direct labor hours 1,700 1,800

Using ABC, how much overhead is assigned to Product X this year?

a. $168,334
b. $242,308
c. $340,000
d. $350,000
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48. A company incurs $2,700,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and
Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in
producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available:
Department Expected use of Driver Cost
Ordering and Receiving 2,000 $ 800,000
Mixing 50,000 1,000,000
Testing 1,500 900,000

Production information for Goo is as follows:

Department Expected use of Driver
Ordering and Receiving 400
Mixing 20,000
Testing 500

Compute the amount of overhead assigned to Goo.

a. $ 675,000
b. $ 860,000
c. $1,054,764
d. $1,350,000

49. A company incurs $2,700,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and
Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests
per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available:
Department Expected use of Driver Cost
Ordering and Receiving 2,000 $ 800,000
Mixing 50,000 1,000,000
Testing 1,500 900,000

Production information for Slime is as follows:

Department Expected use of Driver
Ordering and Receiving 1,600
Mixing 30,000
Testing 1,000

Compute the amount of overhead assigned to Slime.

a. $1,350,000
b. $1,645,234
c. $1,840,000
d. $2,025,000

50. One of Hatch Company’s activity cost pools is machine setups, with estimated overhead of $300,000. Hatch
produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should
be assigned to sparklers?
a. $300,000
b. $120,000
c. $150,000
d. $180,000

51. At a volume of 15,000 units, Boston reported sales revenues of $600,000, variable costs of $225,000, and fixed
costs of $120,000. The company's contribution margin per unit is:
A. $17.
B. $25.
C. $47.
D. $55.
E. an amount other than those above.

52. A recent income statement of Banks Corporation reported the following data:

Sales revenue $8,000,000

Variable costs 5,000,000
Fixed costs 2,200,000

If these data are based on the sale of 20,000 units, the contribution margin per unit would be:
A. $40.
B. $150.
C. $290.
D. $360.
E. an amount other than those above.

53. A recent income statement of Fox Corporation reported the following data:

Sales revenue $3,600,000

Variable costs 1,600,000
Fixed costs 1,000,000
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If these data are based on the sale of 10,000 units, the break-even point would be:
A. 2,000 units.
B. 2,778 units.
C. 3,600 units.
D. 5,000 units.
E. an amount other than those above.

54. A recent income statement of Yale Corporation reported the following data:

Sales revenue $2,500,000

Variable costs 1,500,000
Fixed costs 800,000

If these data are based on the sale of 5,000 units, the break-even sales would be:
A. $2,000,000.
B. $2,206,000.
C. $2,500,000.
D. $10,000,000.
E. an amount other than those above.

55. Lawton, Inc., sells a single product for $12. Variable costs are $8 per unit and fixed costs total $360,000 at a
volume level of 60,000 units. Assuming that fixed costs do not change, Lawton's break-even point would be:
A. 30,000 units.
B. 45,000 units.
C. 90,000 units.
D. negative because the company loses $2 on every unit sold.
E. a positive amount other than those given above.

56. Green, Inc., sells a single product for $20. Variable costs are $8 per unit and fixed costs total $120,000 at a
volume level of 5,000 units. Assuming that fixed costs do not change, Green's break-even sales would be:
A. $160,000.
B. $200,000.
C. $300,000.
D. $480,000.
E. an amount other than those above.

57. Orion recently reported sales revenues of $800,000, a total contribution margin of $300,000, and fixed costs of
$180,000. If sales volume amounted to 10,000 units, the company's variable cost per unit must have been:
A. $12.
B. $32.
C. $50.
D. $92.
E. an amount other than those above.

58. Strand has a break-even point of 120,000 units. If the firm's sole product sells for $40 and fixed costs total
$480,000, the variable cost per unit must be:
A. $4.
B. $36.
C. $44.
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices "A," "B," and "C" but one that can be derived based on the information
presented.

59. Ribco Co., makes and sells only one product. The unit contribution margin is $6 and the break-even point in unit
sales is 24,000. The company's fixed costs are:
A. $4,000.
B. $14,400.
C. $40,000.
D. $144,000.
E. an amount other than those above.

60. At a volume level of 500,000 units, Sullivan reported the following information:

Sales price $60

Variable cost per unit 20
Fixed cost per unit 4

The company's contribution-margin ratio is:

A. 0.33.
B. 0.40.
C. 0.60.
D. 0.67.

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