ACC 122: Cost Accounting and Control

Student Activity Sheet Module # 21

Name: Class number:

Section: Schedule: Date:

Materials:
QUIZ # 5 Writing materials & calculator

GENERAL DIRECTIONS
READ THIS PAGE BEFORE STARTING THE ASSESSMENT

This is an 8 paged test and is composed of 2 sections and has a total score of forty (40) points. You have
eighty (45) Minutes to finish this test. The breakdown of the exam is as follows:
(1) Multiple-choice Theory Section. The questions in this LEARNING OBJECTIVE:
section is with four answer choices. The test is composed of 20
questions and is rated as 1 point each. This assessment measures the
competence of the student in
(2) Problem Solving Section. The questions in this section is terms of his/her application of
without any choices. The test is composed of 10 questions and is knowledge and skills in the
rated as 2 point each. No solution, no points. following topics:

All things unnecessary for the test must be put in front of the 1. Backflush Costing System
testing area. Use BLACK or BLUE ink ballpen only. Write all your
answers on the designated answer sheet. Further, erasures are 2. Service Department
Overhead Cost Allocation
strictly NOT allowed and will invalidate your answers.

You may NOT use smart phones or reference materials during the testing session. Only the allowed
calculators should be used.

Try to answer all questions. In general, if you have some knowledge about a question, it is better to try to
answer it. You will not be penalized for guessing.

Be sure to allocate your time carefully so you can complete the entire test within the exam session. You
may go back and review your answers at any time during the exam session.

Those who are caught cheating or doing acts not allowed during the exam shall be instructed to surrender
their test papers and shall leave the testing room immediately. Subsequently, their papers shall be rated as
ZERO.

This concludes the instruction page.

You may now begin answering.

Page 1 of 8
This document is the property of PHINMA EDUCATION.
Name: Class number:
Section: Schedule: Date:

I. Multiple Choice Question: Encircle the letter of the correct answer:

1. Ideally, the number of units that should be produced in a just-in-time manufacturing system is equal
to a. the maximum productive capacity for the current period.
b. actual customer demand for the current period.
c. budgeted customer demand for the current period.
d. budgeted customer demand for the following
period

2. The cost allocation policy most likely to encourage use of a service is based
on a. budgeted total costs of the service department
b. actual total costs of the service department
c. budgeted variable costs for the service
department d. actual variable costs for the service
department

3. All of the following are obstacles to JIT purchasing, except:

a. the layout of the production process
b. the frequency of schedule changes
c. the attitudes of purchasing agents and
suppliers d. all of the above are obstacles

4. To backflush materials cost from Raw and In Process (RIP) to Finished Goods, the calculation would be:
a. Ending RIP Inventory + Materials Received during the period - Beginning RIP
Inventory b. Beginning RIP Inventory + Materials Received during the period - Ending
RIP inventory
c. Ending Finished Goods Inventory + Materials Cost Transferred from RIP - Beginning Finished
Goods Inventory
d. Beginning Finished Goods Inventory + Materials Cost Transferred from RIP - Ending Finished
Goods Inventory

5. In backflush costing, if the conversion cost in Raw and In Process was P1,000 on March 1 and P400 on
March 31, the account to be credited for the P600 decrease would be:
a. Raw and In Process.
b. Finished Goods
c. Raw Materials
d. Cost of Goods Sold

6. The costs to be offset against the savings from lower work in process levels in a JIT system include
all of the following, except:
a. handling a larger number of small batches of work in process
b. the higher probability of shutdowns due to the smaller safety stock
c. the possibility of customer dissatisfaction due to slower response time to orders.
d. the possibility that setup costs cannot be reduced enough to offset the larger number of setups

7. Which of the following statements regarding quality is (are) true for a company that has implemented a
JIT system?
I. JIT requires quality production facilities, methods, and
employees. II. JIT requires the acquisition of quality raw materials.
Name: Class number:
Section: Schedule: Date:

III. JIT requires that long-term contracts be negotiated with quality

suppliers. a. II and III.
b. I and III.
c. I, II, and III.
d. I and II.

8. Which of the following inventories would a company try to reduce and/or eliminate under a just-in-
time system?
Raw-Material Inventory
a. No
b. No
c. Yes
d. Yes

9. When a company adopts a just-in-time inventory system, it would expect:

a. higher inventories and less frequent purchases.
b. higher inventories and more frequent
purchases.
c. lower inventories and less frequent purchases.
d. lower inventories and more frequent
purchases.

10. Harold Corporation recently abandoned its traditional production and inventory system in favor of a
just- in-time system. The company typically ordered 700 units of raw material at a time and purchased
units that scored a 7 on a 10-point quality scale, with 10 being very close to perfection. All other things
being equal, which of the following choices denotes a likely scenario under the just-in-time system?
Order Size Quality Purchased
a. 300
b. 300
c. 700
d. 950

11. In the pull method of coordinating a production process:

a. departments early in the production process continually make components in order to ensure
that later departments do not run out.
b. defective products are "pulled" off the line and sent to a special department for
rework. c. work-in-process inventories are increased throughout the plant.
d. nothing is manufactured at a work center until a need is signaled from a subsequent process.

12. When the step-down method is used, the service department whose costs are allocated first is often
the department that:
a. obtains the highest yield.
b. has the lowest cost.
c. serves the greatest number of other service
departments. d. serves the fewest other service
departments.
Name: Class number:
Section: Schedule: Date:

13. Which of the following methods is the most accurate among the three methods for allocating
service department costs?
a. Direct method.
b. Indirect method.
c. Step-down method.
d. Reciprocal method.

14. Does Backflush costing comply with the GAAP?

a. Not, but it can be used for external reporting
purposes b. Yes, but with certain limitations.
c. Yes because it simplifies the production
process. d. No and cannot be used for external
reporting.

15. A department that would be classified as support department is:

a. Purchasing
b. Packaging
c. Icing (frosts top of snack cakes and adds decorative squiggle)
d. Filling (injects creme mixture into baked snack cakes)

16. A department that would be classified as a producing department

is a. Production Control
b. Utilities
c. Finishing
d. Medical

17. Consider the following statements about the direct method of service department cost allocation:
I. Under the direct method, all service department costs are eventually allocated to
production departments.
II. The order in which service department costs are allocated to production departments is
important. III. Once a service department's costs have been allocated, no costs are re-circulated
back to that
department.
Which of the above statements is (are) correct?
a. I only.
b. I, II and III.
c. I and II.
d. I and III.

18. Which of the following is not a benefit of just-in-time processing?

a. Control of significant inventory
balances. b. Enhanced product quality.
c. Reduction of rework costs.
d. Production cost savings

19. Small Computer Company has the following

personnel: I. Two inspectors: inspect the final
computers
II. Four fabricators: make the computer cases
Name: Class number:
Section: Schedule: Date:

III. Two computer programmers: run all of the bookkeeping for the accounting records
IV. Seven assemblers: manufacture the mother boards
V. One owner: writes the paychecks
Which groups of employees are value-added workers?
a. I and II
b. II and III
c. III and V
d. II and IV

20. A just-in-time manufacturing process should have substantially less of which of the following than
a traditional manufacturing process?
A. B. C. D.
Idle Time
Transfer Time
Value-added Time
Cycle Time

II. Problem Solving: Write your answer on the space provided.

1. Cheetah Company has materials cost in the December 1 Raw and In Process of P100,000, materials
received during June of P505,000 and materials cost in the December 31 Raw and In Process of
P105,000. What is the amount to be backflushed from Raw and In Process (RIP) to Finished Goods at
the end of
December?

2. The Car Racer Manufacturing Company produces only for customer order, and most work is shipped
within twenty-four hours of the receipt of an order. Car Racer uses a Raw and In Process (RIP)
inventory account and expenses all conversion costs to the Cost of Goods Sold account. At the end of
each month, inventory is counted, its conversion cost component is estimated, and the RIP account
balance is adjusted accordingly. The following information is for the month of June:

Beginning balance of RIP account, including P900,000 of conversion cost….

Raw materials received on credit………………………………………………….
Ending RIP inventory per physical count, including P1,100,000 conversion
cost estimate………………………………………………………………………..
Using backflush costing with no finished goods account. What is the journal entry when the finished
goods inventory is sold?

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Name: Class number:
Section: Schedule: Date:

3. Saunders Company has two service departments (Cafeteria and Human Resources) and two
production departments (Machining and Assembly). The number of employees in each department
follows.
Cafeteria
Human Resources
Machining
Assembly

Saunders uses the direct method of cost allocation and allocates cost on the basis of employees.
Human Resources cost amounts to P9,000,000, and the department provides more service to the firm
than Cafeteria. How much Human Resources cost would be allocated to Machining?

4. Peterson Company has two service departments (Cafeteria and Human Resources) and two
production departments (Machining and Assembly). The number of employees in each department
follows.

Cafeteria
Human Resources
Machining
Assembly

Peterson uses the direct method of cost allocation and allocates cost on the basis of employees. If
Cafeteria and Human Resources cost amounts to P2,000,000 and P1,800,000 respectively, how much
of the department's cost would be allocated to Assembly?

5. The Dollar Store has a Human Resources Department and a Janitorial Department that provide
service to three sales departments. The Human Resources Department cost is allocated on the
basis of employees, and the Janitorial Department cost is allocated on the basis of space. The
following information is available:

Human Resources Janitorial Sales #1 Sales #2 Sales #3

Budgeted cost
Space in square feet
Nos. of employees

Using the step-down method and assuming that Human Resources is allocated first, the amount of
Human Resources cost allocated to Sales Department no. 3 is:

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Name: Class number:
Section: Schedule: Date:

6. The Dexter Manufacturing Company has two production departments (Assembly and Finishing) and
two service departments (Human Resources and Janitorial). The projected usage of the two service
departments is as follows:

Human Resources
Janitorial
Assembly
Finishing

The budgeted costs in the service departments are: Human Resources, P90,000 and Janitorial,
P50,000. Using the direct method, the amount of Janitorial Department cost allocated to the Finishing
Department is:

7. Using Problem Number 6 but the step-down method is to be used and assuming the Human
Resources Department is allocated first, the amount of Human Resources cost allocated to the
Assembly Department is:

8. Alexander Ford, general manager of a highly automated coffee production plant in Batanes, has
provided the following information for a transaction that occurred during January. The production plant
uses a backflush costing system.

I. Raw materials costing P300,000 were purchased

II. All materials costing P300,000 were requisitions for production
III. Direct labor costs of P300,000 were incurred
IV. Actual factory overhead costs amounted to P995,000
V. Conversion costs allocated totaled P3,100,000. This includes the direct labor
cost. VI. All units are completed and immediately sold.
Assuming no adjustment has been made for overallocated or under-allocated conversion cost, what is
the balance of the cost of goods sold in January?

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Name: Class number:
Section: Schedule: Date:

9. The Futaba Manufacturing Company uses a Raw and In Process (RIP) inventory account. At the end
of each month, all inventories are counted, their conversion costs components are estimated, and
inventory account balances are adjusted accordingly. Raw materials costs are backflushed from RIP
account to Finished Goods account. The following data is for the month of August:

Beginning balances of RIP account

Conversion costs incurred
Raw materials purchased
Conversion costs allocated
Ending balance of RIP account
The amount of conversion costs to be backflushed to finished goods is:

10. After careful planning, Zilong Style, Inc. has decided to switch to a just-in-time inventory system
effective on September 1 of the current year. As of September 1, the corporation has 170 units of
product in inventory. It has 1,000 labor hours available for the month of September. These hours could
produce 250 units of product. Customer demand for September is 1,200 units. If just-in-time principles
are correctly followed, how many units should Zilong Style Inc. plan to produce in September?

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