UNIVERSIDAD DE DAGUPAN

Arellano Street, Dagupan City

School of Business and Accountancy

COST ACCOUNTING AND CONTROL

CAEC21
Midterms Examination
AY 2022-2023
SET A

A. Multiple Choice. Choose the best answer.

1.)
S1: Total manufacturing costs for a period consists of the costs of direct material used, the cost
of direct labor incurred, and the manufacturing overhead applied during the period.
S2: Overapplied overhead means that actual manufacturing overhead costs were greater than
the manufacturing overhead costs applied to jobs.
S3: If monthly financial statements are prepared, underapplied overhead is shown as a prepaid
expense on the balance sheet.

a.) One statement is correct.

b.) Two statements are correct.
c.) All the statements are correct.
d.) None of the statements is correct.

2.)
S1: Cost accounting is primarily concerned with accumulating information about product costs.
S2: A job order cost system is most appropriate when a large volume of uniform products is
produced.
S3: A process cost accounting system is appropriate for homogeneous products that are
continuously mass produced.

a.) One statement is correct.

b.) Two statements are correct.
c.) All the statements are correct.
d.) None of the statements is correct.

3.)
S1: A good system of internal control requires that the job order cost sheet be destroyed as
soon as the job is complete.
S2: Finished Goods Inventory is charged for the cost of jobs completed during a period.
S3: When goods are sold, the Cost of Goods Sold account is debited and the Work in Process
Inventory account is credited.

a.) One statement is correct.

b.) Two statements are correct.
c.) All the statements are correct.
d.) None of the statements is correct.

4.)
S1: The perpetual inventory method cannot be used in a job order cost system.
S2: A job order cost system and a process cost system are two alternative methods for valuing
inventories.
S3: A job order cost system identifies costs with a particular job rather than with a set time
period.

a.) One statement is correct.

b.) Two statements are correct.
c.) All the statements are correct.
d.) None of the statements is correct.
5.)
S1: When raw materials are purchased, the Work in Process Inventory account is debited.
S2: Factory labor should be assigned to selling and administrative expenses on a proportionate
basis.
S3: Manufacturing overhead is the only product cost that can be assigned to jobs as soon as
the costs are incurred.

a.) One statement is correct.

b.) Two statements are correct.
c.) All the statements are correct.
d.) None of the statements is correct.

6.) A materials requisition slip showed that direct materials requested were P53,000 and indirect
materials requested were P9,000. The entry to record the transfer of materials from the
storeroom is
a. Work In Process Inventory 53,000
Raw Materials Inventory 53,000
b. Direct Materials 53,000
Indirect Materials 9,000
Work in Process Inventory 62,000
c. Manufacturing Overhead 62,000
Raw Materials Inventory 62,000
d. Work In Process Inventory 53,000
Manufacturing Overhead 9,000
Raw Materials Inventory 62,000

7.) Job cost sheets constitute the subsidiary ledger for the
a. Finished Goods Inventory account.
b. Cost of Goods Sold account.
c. Work In Process Inventory account.
d. Cost of Goods Manufactured account.

8.) Which of the following organizations would be most likely to use a job order costing
system?
a. the loan department of a bank
b. the check clearing department of a bank
c. a manufacturer of processed cheese food
d. a manufacturer of video cassette tapes

9.) A job order costing system is likely to provide better

(1) inventory valuations for financial statements.
(2) physical control over inventory.
(3) information about ability to accept additional production work.

(1) (2) (3)

a. yes no yes
b. no yes yes
c. yes no no
d. yes yes yes

10.) In a production environment that manufactures goods to customer specifications, a job

order costing system
a. can be used only if standard costs are used for materials and labor.
b. will provide reasonable product cost information only when all jobs utilize approximately
the same quantities of material and labor.
c. may be maintained using either actual or predetermined overhead rates.
d. emphasizes that large customers create the most costs even though they also provide
the most revenues.

11.) The following information pertains to XYZ Co. for September 2001.
 Direct Material Direct Labor Overhead
Job #123 P3,200 P4,500 ?
Job #125 ? 5,000 ?
Job #201 5,670 ? P5,550

XYZ Co. applies overhead for Job #123 at 140 percent of direct labor cost and at 150 percent of
direct labor cost for Jobs #125 and #201. The total cost of Jobs #123 and #125 is identical.

Assume that Jobs #123 and #201 are incomplete at the end of September. What is the balance
in Work in Process Inventory at that time?
a. P18,920
b. P22,620
c. P28,920
d. P30,120

12.) Adams Co. uses a job order costing system and the following information is available from
its records. The company has 3 jobs in process: #5, #8, and #12.

Raw material used P120,000

Direct labor per hour P8.50
Overhead applied based on direct labor cost 120%

Direct material was requisitioned as follows for each job respectively: 30 percent, 25 percent,
and 25 percent; the balance of the requisitions was considered indirect. Direct labor hours per
job are 2,500; 3,100; and 4,200; respectively. Indirect labor is P33,000. Other actual overhead
costs totaled P36,000.
If Job #12 is completed and transferred, what is the balance in Work in Process Inventory at the
end of the period if overhead is applied at the end of the period?

a. P96,700
b. P99,020
c. P170,720
d. P139,540

13.) Products at Redd Manufacturing are sent through two production departments: Fabricating
and Finishing. Overhead is applied to products in the Fabricating Department based on 150
percent of direct labor cost and P18 per machine hour in Finishing. The following information is
available about Job #297:

Fabricating Finishing
Direct material P1,590 P580
Direct labor cost      ?   48
Direct labor hours     22    6
Machine hours      5   15
Overhead applied    429    ?

What is the total cost of Job #297?

a. P2,647
b. P3,005
c. P3,093
d. P3,203

14.) Darrow Company uses a predetermined overhead rate based on direct labor-hours to apply
manufacturing overhead to jobs. Last year, the company worked 10,000 direct labor-hours and
incurred P80,000 of actual manufacturing overhead cost. If overhead was underapplied by
P2,000, the predetermined overhead rate for the company for the year must have been:
A) P7.80
B) P8.00
C) P8.20
D) P8.40
15.) Kirk Manufacturing Company uses a job-order costing system. At the beginning of April,
Kirk only had one job in process, Job #898. This job was finished during April by incurring
additional direct costs of P350 for materials and P700 for labor. Also during April, Job #899 was
started and finished. The direct costs assigned to this job were P1,200 for materials and P950
for labor. Job #900 was started during April but was not finished by the end of the month. The
direct costs assigned to this job were P820 for materials and P540 for labor. Kirk applies
manufacturing overhead to its products at a rate of 300% of direct labor cost. Kirk's cost of
goods manufactured for April was P14,570. What was Kirk's work in process inventory balance
at the beginning of April?
A) P3,440
B) P6,420
C) P6,590
D) P9,570

16.) In a job-order cost system, which of the following events would trigger recording data on a
job cost sheet?
a. the purchase of direct materials
b. the payment of fire insurance on the factory building
c. the payment for product advertising
d. none of the above

17.) In a predetermined overhead rate in a job-order costing system that is based on machine-
hours, which of the following would be used in the numerator and denominator?

Numerator Denominator
a. Actual manufacturing overhead Actual machine-hours
b. Actual manufacturing overhead Estimated machine-hours
c. Estimated manufacturing overhead Actual machine-hours
d. Estimated manufacturing overhead Estimated machine-hours

18.) When a manufacturing company has a highly automated plant producing many different
products, probably the most appropriate basis of applying factory overhead costs to Work in
Process is:
a. units processed
b. machine hours
c. direct labor hours
d. direct labor dollars

19.) In service businesses using job order costing, the most commonly used base for applying
overhead to jobs is:
a. machine hours
b. direct materials consumed
c. direct labor cost
d. meals, travel, and entertainment

20.) Given the following statements, which of the following is correct?

I. Including manufacturing overhead costs in product costs ensures that each product will earn a
profit.
II. Job-order costing is used in manufacturing companies and process costing is used in service
companies.

a. True, True
b. False, False
c. True, False
d. False, True

21.) Which of the following is not a reason to use predetermined overhead rates?
a. to overcome the problems of assigning overhead to diverse types of products
b. to compensate for fluctuations in monthly overhead costs
c. to provide a means for assigning overhead during the period rather than at the end of the
period
d. to smooth out the amount of overhead cost assigned to products when monthly production
activity differs

Use the following information for questions 22–25.

The following information has been taken from the cost records of Mines View Co. for the past
year:

Raw material used in production P326

Total manufacturing costs charged to
production during the year (includes
direct material, direct labor, and
overhead equal to 60% of direct labor cost) 686
Cost of goods available for sale 826
Selling and Administrative expenses 25

Inventories Beginning Ending

Raw Material P75 P85
Work in Process 80 30
Finished Goods 90 110

22.) The cost of raw material purchased during the year was
a. P316
b. P336
c. P360
d. P411

23.) Direct labor cost charged to production during the year was
a. P135
b. P216
c. P225
d. P360

24.) Cost of Goods Manufactured was

a. P636
b. P716
c. P736
d. P766

25.) Cost of Goods Sold was

a. P691
b. P716
c. P736
d. P801

26.) Nevada Company uses a predetermined overhead application rate of P.30 per direct
labor hour. During the year it incurred P345,000 dollars of actual overhead, but it planned to
incur P360,000 of overhead. The company applied P363,000 of overhead during the year. How
many direct labor hours did the company plan to incur?
a. 1,150,000
b. 1,190,000
c. 1,200,000
d. 1,210,000

27.) Job 910 was recently completed. The following data have been recorded on its job cost
sheet:

Direct materials P3,193

Direct labor-hours 21 labor-hours
Direct labor wage rate P12 per labor-hour
Machine-hours 166 machine-hours
The company applies manufacturing overhead on the basis of machine-hours. The
predetermined overhead rate is P15 per machine-hour. The total cost that would be recorded on
the job cost sheet for Job 910 would be:
a. P3,220
b. P3,760
c. P5,935
d. P3,445

28.) Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply
manufacturing overhead to jobs. For the month of October, Avery's estimated
manufacturing overhead cost was P300,000 based on an estimated activity level of
100,000 direct labor-hours. Actual overhead amounted to P325,000 with actual direct
labor-hours totaling 110,000 for the month. How much was the overapplied or
underapplied overhead?
a. P25,000 overapplied
b. P25,000 underapplied
c. P5,000 overapplied
d. P5,000 underapplied

29.) J. D. Doonesbury Company manufactures tools to customer specifications. The following

data pertain to Job 1501 for April:

Direct materials used P4,200

Direct labor hours worked 300
Direct labor rate per hour P8.00
Machine hours used 200
Applied factory overhead rate per machine hour P15.00

What is the total manufacturing cost recorded on Job 1501 for April?
a. P9,600
b. P10,300
c. P11,100
d. P5,400

30.) Darrow Company uses a predetermined overhead rate based on direct labor-hours to apply
manufacturing overhead to jobs. Last year, the company worked 10,000 direct labor-hours and
incurred $80,000 of actual manufacturing overhead cost. If overhead was underapplied by
$2,000, the predetermined overhead rate for the company for the year must have been:
A) $7.80
B) $8.00
C) $8.20
D) $8.40

31.) At the beginning of the year, manufacturing overhead for the year was estimated to be
$250,860. At the end of the year, actual direct labor-hours for the year were 20,800 hours, the
actual manufacturing overhead for the year was $245,860, and manufacturing overhead for the
year was underapplied by $10,820. If the predetermined overhead rate is based on direct labor-
hours, then the estimated direct labor-hours at the beginning of the year used in the
predetermined overhead rate must have been:
A) 22,200 direct labor-hours
B) 20,800 direct labor-hours
C) 21,758 direct labor-hours
D) 22,715 direct labor-hours

32.) Brabec Corporation uses direct labor-hours in its predetermined overhead rate. At the
beginning of the year, the estimated direct labor-hours were 19,700 hours. At the end of the
year, actual direct labor-hours for the year were 17,700 hours, the actual manufacturing
overhead for the year was $392,940, and manufacturing overhead for the year was
underapplied by $35,400. The estimated manufacturing overhead at the beginning of the year
used in the predetermined overhead rate must have been:
A) $357,540
B) $397,940
 C) $431,775
D) $387,940

33.) Daffe Corporation uses direct labor-hours in its predetermined overhead rate. At the
beginning of the year, the total estimated manufacturing overhead was $165,600. At the end of
the year, actual direct labor-hours for the year were 11,900 hours, manufacturing overhead for
the year was overapplied by $10,760, and the actual manufacturing overhead was $160,600.
The predetermined overhead rate for the year must have been closest to:
A) $14.40
B) $13.92
C) $13.50
D) $14.90

34.) Serritella Manufacturing Corporation uses a job-order costing system. At the beginning of
the year, Serritella had $38,000 in its Work in Process inventory account. The following
information relates to Serritella's operations for the year:

Direct materials cost assigned to production $114,000

Direct labor cost assigned to production $78,000
Selling, general, and administrative expenses incurred $25,000
Manufacturing overhead cost incurred $296,000
Underapplied manufacturing overhead cost $11,000
Cost of goods manufactured $502,000
Cost of goods sold $509,000

What is the balance in Serritella's Work in Process inventory account at the end of the year?
(Assume that the Manufacturing Overhead account has not yet been closed out.)
A) $13,000
B) $24,000
C) $35,000
D) $60,000

35.) Marc Corp. has a job-order costing system. The following debits (credits) appeared in the
Work in Process account for the month of May:

May 1 Balance $10,000

May 31 Direct materials $60,000
May 31 Direct labor $40,000
May 31 Manufacturing overhead $32,000
May 31 To finished goods $(120,000)

Marc applies overhead to jobs at a predetermined rate of 80% of direct labor cost. Job No. 23,
the only job still in process at the end of May has been charged with direct labor of $5,000. The
amount of direct materials charged to Job No. 23 was:
A) $6,250
B) $7,500
C) $13,000
D) $17,000

36.) Kirk Manufacturing Company uses a job-order costing system. At the beginning of April,
Kirk only had one job in process, Job #898. This job was finished during April by incurring
additional direct costs of $350 for materials and $700 for labor. Also during April, Job #899 was
started and finished. The direct costs assigned to this job were $1,200 for materials and $950
for labor. Job #900 was started during April but was not finished by the end of the month. The
direct costs assigned to this job were $820 for materials and $540 for labor. Kirk applies
manufacturing overhead to its products at a rate of 300% of direct labor cost. Kirk's cost of
goods manufactured for April was $14,570. What was Kirk's work in process inventory balance
at the beginning of April?
A) $3,440
B) $6,420
C) $6,590
D) $9,570
37.) The following information relates to Zamudio Manufacturing Company:
Total manufacturing overhead estimated for the year $864,000
Predetermined overhead rate (based on direct labor-hours) $5.00 per DLH
Total direct labor-hours incurred during the year 25,000 DLHs
Manufacturing overhead overapplied for the year $4,600

How much manufacturing overhead cost did Zamudio actually incur?

A) $103,500
B) $119,600
C) $120,400
D) $129,600

38.) Worley Company has underapplied overhead of $45,000 for the year ended December 31.
Before disposition of the underapplied overhead, selected December 31 data from Worley's
accounting records are as follows:

Sales $1,200,000
Cost of goods sold $720,000
Overhead applied during the year in ending inventories:
Work in process $54,000
Finished goods $90,000

Under Worley's cost accounting system, over- or underapplied overhead is allocated to ending
inventories and cost of goods sold based on the amount of overhead applied during the year in
the ending balance of each account. In its income statement, Worley should report cost of
goods sold of:
A) $682,500
B) $684,000
C) $756,000
D) $757,500

39.) Mallet Company has only Job 844 in process on March 1 of the current year. The job has
been charged with $2,000 of direct material cost, $2,500 of direct labor cost, and $1,750 of
manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined
rate of 70% of direct labor cost. Any underapplied or overapplied overhead cost is closed to
Cost of Goods Sold at the end of the month.

During March, the following activity and amounts were recorded by the company:

Raw materials (all direct materials):

Purchased during the month $29,500
Used in production $30,500
Labor:
Direct labor-hours worked during the month 2,500
Direct labor cost incurred $26,500
Indirect labor costs incurred $5,500
Manufacturing overhead costs incurred (total) $18,500
Inventories:
Raw materials (all direct) March 31 $7,500
Work in process, March 31 $14,500

Work in process inventory contains $5,500 of direct labor cost.

The entry to dispose of the underapplied or overapplied overhead cost for the month would
include:
A) a debit of $50 to Cost of Goods Sold
B) a debit of $50 to Manufacturing Overhead
C) a debit of $5,500 to Manufacturing Overhead
D) a credit of $5,500 to Cost of Goods Sold
40.) (Use the data from #39) The balance in the March 1 Raw Materials inventory was:
A) $10,500
B) $9,500
C) $6,500
D) $8,500

41.) Which of the following would be accounted for using a job order cost system?
a. The production of personal computers
b. The production of automobiles
c. The refining of petroleum
d. The construction of a new campus building

42.) An important feature of a job order cost system is that each job
a. must be similar to previous jobs completed.
b. has its own distinguishing characteristics.
c. must be completed before a new job is accepted.
d. consists of one unit of output.

43.) Cost of raw materials is debited to Raw Materials Inventory when the
a. materials are ordered.
b. materials are received.
c. materials are put into production.
d. bill for the materials is paid.

44.) Which of the following is not a control account?

a. Manufacturing Overhead
b. Factory Labor
c. Accounts Receivable
d. Raw Materials Inventory

45.) Which one of the following best describes a job cost sheet?
a. It is a form used to record the costs chargeable to a specific job and to
determine the total and unit costs of the completed job.
b. It is used to track manufacturing overhead costs to specific jobs.
c. It is used by management to understand how direct costs affect profitability.
d. It is a daily form that management uses for tracking worker productivity on which
employee raises are based.

46.) A materials requisition slip showed that direct materials requested were P53,000 and
indirect materials requested were P9,000. The entry to record the transfer of materials from the
storeroom is
a. Work In Process Inventory 53,000
Raw Materials Inventory 53,000
b. Direct Materials 53,000
Indirect Materials 9,000
Work in Process Inventory 62,000
c. Manufacturing Overhead 62,000
Raw Materials Inventory 62,000
d. Work In Process Inventory 53,000
Manufacturing Overhead 9,000
Raw Materials Inventory 62,000

47.) Under an effective system of internal control, the authorization for issuing materials is made
a. orally.
b. on a prenumbered materials requisition slip.
c. by the accounting department.
d. by anyone on the production line.

48.) A time ticket does not indicate the

a. employee's name.
b. account to be charged.
c. number of personal exemptions claimed by the employee.
d. job number.

49.) If the entry to assign factory labor did not show a debit to Work In Process Inventory, then
all labor costs were
a. direct labor.
b. indirect labor.
c. overtime related.
d. regular hours.

50.) Kinney Company applies overhead on the basis of 150% of direct labor cost. Job No. 176 is
charged with P50,000 of direct materials costs and P60,000 of manufacturing overhead. The
total manufacturing costs for Job No. 176 is
a. P110,000.
b. P200,000.
c. P150,000.
d. P135,000.

51.) The principal advantage of the scatter-diagram method over the high-low method of cost
estimation is that the scatter-diagram method
a. includes costs outside the relevant range.
b. considers more than two points.
c. can be used with more types of costs than the high-low method.
d. gives a precise mathematical fit of the points to the line.

52.) The major objective of preparing a scatter-diagram is to

a. derive an equation to predict future costs.
b. perform regression analysis on the results.
c. determine the relevant range.
d. find the high and low points to use for the high-low method of estimating costs.

53.) The cost estimation method that gives the most mathematically precise cost prediction
equation is
a. the high-low method.
b. the scatter-diagram method.
c. the contribution margin method.
d. regression analysis.

54.) Which cost is most likely to be mixed for a manufacturer?

a. Raw materials.
b. Direct labor.
c. Manufacturing overhead.
d. Insurance.

55.) A cost is variable if it varies with the

a. number of units manufactured.
b. number of units sold.
c. level of some activity.
d. selling price of the product.

56.) A non-value-adding cost is

a. usually direct to a product.
b. the same as a discretionary cost.
c. unavoidable.
d. not essential to manufacturing a product.

57.) Fixed costs that cannot be reduced within a short period of time are
a. committed.
b. variable.
c. avoidable.
d. unnecessary.

58.) Which cost is most likely to be committed?

 a. Repairs and maintenance.
b. Sum-of-the-years'-digits depreciation on the factory building.
c. Fee for a consultant on the company's long-range planning.
d. Advertising.

59.) RST's average cost per unit is the same at all levels of volume. Which of the following is
true?
a. RST must have only variable costs.
b. RST must have only fixed costs.
c. RST must have some fixed costs and some variable costs.
d. RST's cost structure cannot be determined from this information.

60.) A mixed cost

a. increases in steps as volume increases.
b. contains a fixed component and a variable component.
c. varies with more than one measure of volume.
d. cannot be accurately predicted.

-END-

Prepared by:
Marc Anthony Max P. Magbalon, CPA