COSTCON/PRICOST

FORMULAS:

Total Manufacturing Cost = Direct Materials + Direct Labor + Manufacturing Overhead

Total Manufacturing Cost = Fixed Cost + Variable Cost

Prime Cost = Direct Material + Direct Labor

Conversion Cost = Direct Labor + Manufacturing Overhead

Product Cost (all cost attributable to product) = Direct Materials + Direct Labor + Manufacturing
Overhead

Gross Profit = Sales – Cost of Goods Sold

Net Income = Gross Profit – Operating Expenses

COST OF GOODS SOLD

Materials Inventory, Beginning XXX

Add: Purchases XXX

Freight In XXX

Less: Purchase Returns and Discounts (XXX)

Total Available for Use XXX

Less: Materials Inventory, End (XXX)

Direct Materials Used XXX

Add: Direct Labor XXX

Manufacturing Overhead XXX

Total Manufacturing Costs XXX

Add: Work In Process, Beginning XXX

Cost of goods put into process XXX

Less: Work In Process, End (XXX)

Cost of goods manufactured XXX

Add: Finished Goods, Beginning XXX

Total Goods Available for Sale XXX

Less: Finished Goods, End (XXX)

Cost of Goods Sold XXX

Order Point = (Daily Usage x Lead Time) + Safety Stock

EOQ = √2CN/K ( C=order cost; N=annual quantity demand; K=carrying cost )

Order Cost = Number of order x order cost per unit

Carrying Cost = Average Inventory x carrying cost per unit

Net Pay = Gross Pay – Allowable Deductions (Government Deductions)

FACTORY OVERHEAD RATES (PREDETERMINED RATES):

(1)Overhead Cost per Unit of Production = Estimated Manufacturing Overhead Costs/units of production

(2)Percentage of Material Cost = Estimated Manufacturing Overhead Costs/Direct Material Cost

(3)Percentage of Labor Cost = Estimated Manufacturing Overhead Costs/Direct Labor Cost

(4)Rate per Direct Labor Hour = Estimated Manufacturing Overhead Costs/Direct Labor Hour

(5)Machine Hour = Estimated Manufacturing Overhead Costs/Machine Hour

Over/Under Applied Factory Overhead = Actual Factory Overhead Applied Factory Overhead

*** Actual FO > Applied FO = Under applied

*** Actual FO < Applied FO = Over applied

Volume/Capacity Variance (shows how efficiently a company is utilizing its existing resources, if your
are producing less or more)

Volume Variance = Fixed Overhead Applied – Fixed Overhead Budgeted

Spending Variance (shows how efficiently a company performing efficiently, how much they are
spending on production operations)

Spending Variance = Actual Overhead Cost – Budgeted Fixed Overhead – Budgeted Variable
Overhead Cost
THEORIES:

1. Many firms use two overhead accounts: Factory overhead control and factory overhead applied.
During the period, which account receives numerous debits and credits?
a. Factory Overhead Applied
b. Factory Overhead Control
c. Both
d. Neither
2. A company has been ordering more than the economic order quantity. This would result in:
a. More frequent order points
b. Carrying costs greater than order costs
c. Equal safety stock costs and carrying costs
d. Carrying Cost less than order cost
3. A material ledger card should indicate the following except:
a. Each type of material on hand
b. Quantity Issued
c. Quantity received
d. Purchase order number
4. When must a new unit cost be calculated under the moving average method?’
a. After each issue
b. After each receipt
c. Before each issue
d. Before each receipt
5. What is the procedure for keeping records of the hours worked by each employee?
a. Timekeeping
b. Bookkeeping
c. Accounting
d. Record Keeping
6. All of the following phrases are used as alternate terminology for manufacturing overhead
except:
a. Manufacturing expense
b. Indirect manufacturing expense
c. Factory Expense
d. Other expense
7. In which of the following overhead allocation methods may no other service department costs
be charged back to a particular service department after the first service departments cost has
been allocated?
a. The reciprocal method and direct method
b. The step method and the reciprocal method
c. The direct method and step method
d. The step and algebraic method

For 8-11.

Lebron Manufacturing Corporation makes aluminum fasteners. Among the Lebron’s 2022
manufacturing costs were the following:
 Wages and Salaries:
Machine Operators P 80,000
Factory Foremen P 30,000
Machine mechanics P 20,000
Materials and Supplies:
Aluminum P 400,000
Machine Parts P 18,000
Lubricants P 5,000
8. Direct Materials amounted to:
a. P 400,000
b. P 405,000
c. P 418,000
d. P 423,000
9. Direct Labor amounted to:
a. P 80,000
b. P 100,000
c. P 110,000
d. P 130,000
10. Factory overhead amounted to:
a. P 53,000
b. P 23,000
c. P 73,000
d. P 55,000
11. Prime Costs:
a. P 153,000
b. P 553,000
c. P 480,000
d. P 423,000
12. The work in process of Kris Corporation increased P 11,500 from the beginning to the end of
November. Costs incurred during November were material, P 12,000, labor P 63,000 and
overhead P 21,000. What is the cost of goods manufactured during November?
a. P 93,500
b. P 84,500
c. P 126,000
d. P 132,500
 13. The following information was available from the inventory records of Anthony Company for
January 2022:

  Units Unit Cost Total Cost

Balance at Jan. 01 2000 P 9.775 P 19,550
Purchase Orders:  
6-Jan 1500 P 10.30 P 15,450
26-Jan 3400 P 10.75 P 36, 550
Issues:  
7-Jan 1800  
31-Jan 3200  
  1900    

Assuming that Anthony maintains perpetual inventory records, what should be the inventory at January
31, 2022, using the moving average costing method rounded to the nearest peso?

a. P 19,993
b. P 19,523
c. P 19,703
d. P 19,950

Assuming that Anthony does not maintains perpetual inventory records, what should be the inventory at
January 31, 2022, using the weighted average costing method rounded to the nearest peso?

a. P 19,505
b. P 19,306
c. P 19,702
d. P 18,704

14. Jose Santos worked 46 hours in one week at a rate of P 45 an hour. He is paid one and a half
times the regular rate for hours worked in excess of 40. What is the gross earnings of Jose
Santos?
a. P 2,205
b. P 2,070
c. P 2,340
d. P 1,800
For 15-18

Selected data for the Palawan Manufacturing Company for the year 2022 follow

Budgeted for Actual for the

  the Year year
Direct Labor Hours 260000 248300
Manufacturing Overhead:  
Fixed P 585,000 P 578,400
Variable P 1,092,00 P 1,039,940
Total P 1,677,000 P 1,618,340

Overhead is applied on the basis of direct labor hours.

What is the over-under applied overhead for the year?

a. P 16,805 overapplied
b. P 16,805 underapplied
c. P 15,800 overapplied
d. P 15,800 underapplied

What is the fixed volume variance?

a. P 26,325 favorable
b. P 26,325 unfavorable
c. P 36,325 favorable
d. P 36,325 unfavorable

What is the spending variance?

a. P 8,500 favorable
b. P 8,500 unfavorable
c. P 9,520 favorable
d. P 9,520 unfavorable

What is the net variance?

a. P 16,805 overapplied
b. P 16,805 underapplied
c. P 15,800 overapplied
d. P 15,800 underapplied