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CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING GERMAN / LIM / VALIX / K. DELA CRUZ / MARASIGAN

HOBA AND COST ACCOUNTING

SELFTEST

Number 1

The Home Office in Makati shipped merchandise costing P40,000 to Manila branch and paid for the
freight charges of P300. The home office bills the branch at 125% of cost. Manila branch was
subsequently instructed to transfer one-half of the merchandise to Quezon City branch wherein Quezon
City branch paid for P100 freight. If the shipment was made directly from Makati to Quezon City, the
freight cost would have been P200.

By how much will Manila Branch charge the Home Office account?
a. 25,650
b. 25,300
c. 25,150
d. 25,250

Number 2

On December 31, 2020, the Investment in Branch account on the home office’s books has a balance of
P437,000. In analyzing the activity in each of these accounts for December, you find the following
differences:

A. A P39,000 branch remittance to the home office initiated on December 27, 2020, was recorded
twice by the home office in 2020.
B. A home office inventory shipment to the branch of P54,000 on December 29, 2020, was
recorded by the branch on December 31, 2020 at P45,000. The home office transfers
merchandise to the branch at cost.
C. The home office incurred P12,000 of advertising expenses and allocated 1/4 of this amount to
the branch on December 21, 2020. The branch inadvertently recorded half of the advertising
expense allocated by the home office during the year.
D. A home office customer remitted P7,000 to branch. The branch recorded this cash collection
on December 23, 2020. Meanwhile, back at the home office, no entry has been made yet.
E. Inventory costing P11,500 was returned by the branch to the home office on December 19,
2020. The billing was at cost, but the home office recorded the transaction at P1,150.

Compute the unadjusted balance of the Home Office account as of December 31, 2020:
a. 483,150
b. 472,650
c. 426,150
d. 462,150

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Number 3
The Ivonne Inc. opened an agency in Sampaloc, Manila in 2020. The following is a summary of the
transactions of the agency:

Sales Orders sent to Home office 55,000

Sales Orders filled by Home Office in 2020 46,500
Freight on shipment to agency 1,100
Collection, net of 2% discount 39,690
Selling expenses paid from the agency working fund 2,280
Administrative expenses charged to agency 5% of gross sales
Samples shipped to agency
Cost 2,000
Inventory, Dec. 31, 2020 1,100

The Company maintains its gross margin on agency sales at 30% excluding freight cost on
shipment to agency. The agency’s net income must be:
a. P4,995
b. P5,995
c. P5,390
d. P6,535

Number 4
A home office transfers inventory to its branch at a 40% markup based on cost. During 2020, the
account Shipment to Branch amount to P262,500. At year-end, the home office adjusted its Allowance
for Overvaluation account downward to P65,000. The branch's balance sheet at the beginning of the
year shows P85,750 of inventory acquired from the home office.

How much is the ending inventory per branch books?

a. P162,500
b. P453,250
c. P225,750
d. P227,500

Number 5
The home office bills ABC branch at 125% of cost during the year 2020 and 130% of cost during the
year 2019. In 2020 goods billed at P297,500 were shipped to the branch. The account Allowance for
Overvaluation has a balance of P16,800 at the end of last year. The branch started to acquire
merchandise from outsiders during the year in the amount of P21,700.

How much is the total goods available for sale of the branch at cost?
a. P370,300
b. P315,700
c. P385,500
d. P309,200

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Number 6

Phoenix Trading Co. has a branch in Quezon City. On December 31, 2020, Quezon City Branch
account in the home office books showed a balance of P386,355. The interoffice accounts were the
same at the beginning of the year. For purposes of reconciling the reciprocal accounts, the following
facts were ascertained:

A. The home office inadvertently recorded a remittance for P4,800 from its Bacolod branch as a
remittance from its Quezon City branch.
B. The branch failed to take up a P580 debit memo from the home office representing the share of the
branch in marketing expense.
C. Home office credit memo representing a discount on merchandise for P2,100 was not recorded by
the branch.
D. Advertising expense of P1,225 charged by the home office was taken up twice by the branch.
E. Freight charge on merchandise made by the home office for P1,125 was recorded in the branch
books as P1,215.
F. An equipment costing the home office P2,500 was picked up by the branch as P250.

Compute the balance of unadjusted balance of the home office account as of December 31, 2020.
a. P391,740
b. P387,870
c. P397,140
d. P390,570

Number 7
IYOOPI Manufacturing Corporation provided the following information with regard its process
costing system during the month of July: At the start of the month, 40,000 units were still 40%
incomplete. During the month, 100,000 units were started in process, of which 15,000 remained 80%
incomplete by the end of the month. Three-fifths of the direct materials are added at the beginning of
the process and the remaining two-fifths at the end. There were no lost units during the month and
everything is accounted for using the FIFO assumption.

What is the equivalent units of production as to CC and as to DM for July?

a. 104,000 and 104,000
b. 104,000 and 110,000
c. 128,000 and 128,000
d. 128,000 and 134,000

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Numbers 8 and 9
In the third department of Neks Dep Inc’s process costing manufacturing operations, the following
information were available:
Beginning work in process 10,000 units (40% completed) DM P137,000
CC P239,000
T-in P450,000
Transferred in from previous department 100,000 units DM P600,000
CC P955,000
T-in P1,200,000
Completed and transferred to finished goods 95,000 units
Ending work in process ? units (30% completed)
Direct materials are added at the start of the manufacturing process.

8. Assuming the company uses FIFO assumption in accounting for the operations of the third
department, how much is the cost of goods manufactured?
a. 3,201,500
b. 2,380,000
c. 2,440,000
d. 3,266,000

9. Assuming the company uses the weighted average assumption in accounting for the
operations of the third department, how much is the ending work in process?
a. 505,500
b. 451,500
c. 488,318
d. 379,500

Number 10
Low Sis Manufacturing Corp. manufactures products in one process where DM are added at the
beginning and inspection point occurs at the end. Units that went in and out of the department at
different points during the month were as follows:
Units Percentage of completion
Beginning work in process 15,000 33.33333%
Started in production 85,000 -
Completed in production 70,000 -
Ending work in process 25,000 20%
Losses up to 4,000 units are still within the tolerance threshold of the company. The company uses the
weighted average costing method for the valuation of its inventory balances. The following costs were
noted:
Costs
Beginning work in process DM 180,000
CC 140,000
Current costs DM 800,000
CC 900,000
How much is the cost of goods transferred to the next department?
a. 1,596,000
b. 1,663,200
c. 1,687,200
d. 1,710,000

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Number 11
Oh Beerhead Company uses job order costing to account for its manufacturing process, which takes
place in two departments: assembly and finishing. The assembly department mainly uses robotic arms
in its operations, which the finishing department relies on the steady hands and artistic skills of its
employees. Overhead is applied at a rate of P18 per machine hour for the assembly department and
applied at 150% of direct labor cost for the finishing department. Details regarding Job #719 are as
follows:

Assembly Finishing
Direct material P5,800 P15,900
Direct labor cost 480 ?
Direct labor hours 60 ?
Machine hours 150 50
Overhead applied ? 4,290

How much is the total cost of Job #719?

a. 32,030
b. 30,930
c. 30,050
d. 26,470

Numbers 12 and 13
Since its incorporation 25 years ago, NYNM Inc. has been using the machine hours consumed as its
basis of applying overhead. You, a competent CPA, recommended to the management the use of
activity-based costing and explained its benefits. The budget for the whole year is presented and
approved in a meeting with the top management:

Item Budgeted Cost Activity driver Budgeted Activity Level

Setup cost 100,000 Number of setups 2,500
Maintenance cost 200,000 Machine hours 4,000
Power cost 150,000 Kilowatt hours 7,500
Total 450,000 - -
During the first month of the year, the company was able to complete one job with the following
details:
Direct materials 24,000
Direct Labor 35,000
Number of setups 500
Machine hours 800
Kilowatt hours 750

12. If the management continues to use the traditional method of applying overhead, how much
is the total cost of the job?
a. P59,000
b. P90,000
c. P149,000
d. P509,000

13. If the management took your advice and adopted activity-based costing, how much is the
conversion cost of the job?
a. P59,000
b. P75,000
c. P110,000
d. P134,000

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Number 14

JKL Company completed a job with 1,100 units of finished goods with the following costs per unit:

Direct materials P2,000

Direct labor 1,000
Overhead (including allowance of P300 for spoiled work) 1,300

Final inspection of the job revealed that 100 finished goods were spoiled, and were sold for P200,000.

How much is the unit cost of a finished product from this job if spoilage is charged to all
production?
a. 4,000
b. 4,100
c. 4,300
d. 4,400

Number 15
Justin Thyme Corporation implements backflush costing to account for its streamlined operations. The
company has an inventory balance of zero at the beginning of the current month. During the month, the
company purchased P500,000 worth of raw materials and incurred P650,000 for conversion cost. The
cost transferred to finished goods during the month totaled P980,000, of which P330,000 was
attributable to raw materials used. There are no indirect materials needed in the process of making the
finished goods.

How much is the balance of Raw Materials and In-Process account at the end of the month?
a. 170,000
b. 330,000
c. 650,000
d. 0

Number 16
Bakplas Inc. uses a JIT manufacturing system and accounts for it using backflush costing. The
standard unit cost for direct materials and conversion cost is P15 and P20, respectively. The following
information are available for the current month:
Direct materials purchased 140,000
Conversion cost incurred 460,000
Number of units manufactured 15,000
Number of units sold 10,000
Assume that there were no beginning balances for both Materials and In-Process account and Finished
Goods Inventory account.
How much is the ending balance of the finished goods inventory account?
a. 75,000
b. 85,000
c. 175,000
d. 250,000

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Number 17

Break Corp. manufactures 3 different types products from a common process: Model EJ, Model BJ,
and Model JJ. Manufacturing costs that are common among the three products are allocated using the
approximated net realizable value at split-off method. Selected data are presented below:

Model EJ Model BJ Model JJ

Units produced 2,000 3,000 5,000
Total sales value at split off 100,000 200,000 220,000
Total further processing cost 48,000 82,000 70,000
Total selling price if processed further 400,000 300,000 500,000

If joint cost totaled P800,000, how much is the allocated share of JJ?
a. 333,333
b. 338,462
c. 344,000
d. 400,000

Number 18

Bry Paddock Inc. manufactures 2 main products, CPL and RTA, in a joint process which also yields
WEO, a by-product. The company treats the revenue from sale of by-products as a deduction to the
manufacturing cost. The following relevant information are available:

CPL RTA WEO Total

Units produced 15,000 21,000 9,000 45,000
Sales value at split-off 90,000 174,000 15,000 279,000

Joint cost amounted to P396,000 and is allocated among the main products using the sales value at
split-off method. All

How much is the joint cost allocated to RTA?

a. 129,886
b. 143,385
c. 251,114
d. 261,000

Number 19

Stanley Dard Manufacturing Company uses the standard costing system. During the month, the
company debited direct labor efficiency variance amounting to P10,000. It consumed a total of 5,000
direct labor hours, which is 1,000 more than its budget. Total wages payable attributable to direct labor
amounted to P40,000.

How much should be debited/credited to direct labor price variance?

a. 10,000 debit
b. 10,000 credit
c. 5,000 debit
d. 0

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Number 20

Sun Dart Incorporated uses the standard costing system. The purchase price of 10,000 units of raw
materials was P15,000 less than its standard cost. Upon checking the receipt, one unit of raw material
costed P8.50. During the same month, the company used 9,500 units of raw materials to make 19 units
of finished goods. Based from past experience, it takes a standard of 520 raw materials to produce one
unit of finished goods.

How much should be debited/credited to materials usage variance?

a. 3,800 debit
b. 3,800 credit
c. 15,000 debit
d. 15,000 credit

Suggested Answers:

1. C 6. A 11. A 16. C

2. D 7. B 12. C 17. C

3. D 8. D 13. C 18. C

4. D 9. D 14. C 19. B

5. B 10. C 15. A 20. B

END

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