NAME:__________________________________ SECTION: __________________________________

ANSWER SHEET -- Quiz 1

I. THEORIES (1.5 POINTS EACH) II. PROBLEMS (2.5 POINTS EACH)

1. B 1. 62 500
2. B 2. 423 000
3. A 3. 197 500
4. A 4. 87.85x
5. B 5. 68 038.63
6. A 6. 678 500
7. B 7. 90
8. A 8. 65 000
9. A 9. 735 000
10. A 10. 9 000
11. A 11. 7 500
12. B 12. 41 400
13. A 13. 28 250
14. B 14. 56 500
15. A 15. 120 000
16. D 16. 3 456 000
17. C 17. 43.45
18. D 18. 46
19. B 19. 244 000
20. B 20. 77 000
21. B 21. Charlie – 288.75
22. D 22. 616 050
23. B 23. 53 925
24. D 24. 118 207
25. C 25. 547 793
26. D 26. 329 175
27. C 27. 154 000
28. D 28. 20.83
29. D 29. 20
30. B/D 30. 1 898 300
31. D
32. C
33. D
34. A
35. E

TEST I. THEORY. (40%)

PART A. Write A if the statement is TRUE and B if the statement is FALSE.

1. If the amount of over-applied factory overhead is insignificant, the account is closed by debiting cost of goods sold.
2. A fixed cost remains constant on a per-unit basis as production changes.
3. Cost management system is a set of formal methods developed for planning and controlling in organization’s cost
generating activities relative to its goals and objectives.
4. All product costs are inventoriable costs.
5. Authority is the obligation to accomplish or achieve an objective.
6. The prime cost plus conversion cost minus the direct labor cost equal the total product costs.
7. The relevant range is valid for all levels of activity.
8. If the cost of an additive is P5,000 + P0.50 for every unit of solvent produced, the cost is classified as a mixed cost.
9. A predictor which has an absolute cost and effect relationship to a cost is referred to a cost driver.
10. Retailers generally have much lower degree of conversion than do manufacturing or professional firms.
11. In a service industry, direct materials are usually insignificant in amount and cannot easily be traced to a cost object.
12. Only direct costs can be classified as product costs.
13. Manufacturing overhead includes all product costs except direct materials and direct labor.
14. A debit to the factory overhead account represents applied overhead costs.
15. Predetermined overhead rate is not applicable to actual cost system.

PART B. MULTIPLE CHOICES: USE CAPITAL LETTERS.

16. Which of the following topics is of more concern to management accounting than to cost accounting?
A. Generally accepted accounting principles
B. Cost of goods sold valuation
C. Inventory valuation
D. Impact of economic conditions on company operations

17. A company which manufactures custom-made machinery routinely incurs sizeable telephone costs in the process in
taking sales orders from customers. Which of the following is the proper classification of this cost?
A. Product cost
B. Conversion cost
C. Period cost
D. Prime cost

18. The terms direct cost and indirect cost are commonly used in accounting. A particular cost might be considered a
direct cost of a manufacturing department but an indirect cost of the product produced in the manufacturing
department. Classifying a cost as either direct or indirect depends upon:
A. Whether an expenditure is unavoidable because it cannot be changed regardless of any action taken
B. Whether the cost is expensed in the period in which it is incurred
C. The behavior of the cost in response to volume changes
D. The cost object to which the cost is being related

19. The Work-in-Process Inventory of the Rapid Fabricating Corp. was P3,000 higher on December 21, 2012 than it was
on January 1, 2012. This implies that in 2012
A. Cost of goods manufactured was higher than cost of goods sold
B. Cost of goods manufactured was less than manufacturing costs
C. Manufacturing costs were higher than cost of goods sold
D. Manufacturing costs were less than cost of goods manufactured
E. Cost of goods manufactured was less than cost of goods sold

20. Which of the following statements is true?

A. Management accounting is a subset of cost accounting
B. Cost accounting is a subset of both management and financial accounting
 C. Management accounting is a subset of both cost and financial accounting
D. Financial accounting is a subset of cost accounting

21. The balanced scorecard perspective that addresses things that an organization needs to do well to meet customer
needs and expectations:
A. Learning and growth perspective
B. Internal business perspective
C. Customer value perspective
D. Financial perspective

22. How would miscellaneous supplies used in an assembling a product be classified for a manufacturing company
classified?
A. Fixed, period cost
B. Variable, period cost
C. Fixed, product cost
D. Variable, product cost

23. If the Manufacturing Overhead account has a debit balance at the end of the period, it means that
A. Actual overhead costs were less than overhead costs applied to jobs
B. Actual overhead costs were greater than overhead costs applied to jobs
C. Actual overhead costs were equal to overhead costs applied to jobs
D. No jobs have been completed

24. Direct Labor would be part of the cost of ending inventory for which of these accounts?
A. Work in Process
B. Finished Goods
C. Direct Materials
D. Work in Process, Finished Goods
E. Direct Materials, Work in Process, Finished Goods

25. Cost accounting standards

A. Are legal standards set by the Institute of Management Accountants for use in all manufacturing and professional
businesses
B. Are set by the Cost Accounting Standards Board and are legally binding on all manufacturers, but not service
organizations
C. Do not exist for those legal pronouncements for companies bidding or pricing cost-related contracts with the
government
D. Are developed by the Cost Accounting Standards Board, issued by the Institute of Management Accountants, and
are legally binding on CMAs.

26. Prime costs of a company are P3,000,000, manufacturing overhead is P1,500,000 and indirect labor is P50,000. What
is the amount of direct materials?
A. P1,500,000
B. P2,250,000
C. P750,000
D. Cannot be determined

27. Sales commissions are classified as

A. Period costs and fixed cost
B. Product costs and variable cost
C. Period costs and variable cost
D. Selling expense and fixed cost
28. Which of the following is not a valid method for determining product cost?
A. Arbitrary assignment
B. Direct measurement
C. Systematic allocation
D. Cost-benefit measurement

29. A major purpose of cost accounting is to

A. Classify all costs as operating or non-operating
B. Measure, record, and report period costs
C. Provide information to stockholders for investment decisions
D. Measure, record, and report product costs

30. If the amount of “Cost of goods manufactured” during the period exceeds the amount of “Total manufacturing costs”
for the period, then
A. Ending work in process inventory is greater than or equal to the amount of the beginning work in process
inventory
B. Ending work in process is greater than the amount of the beginning work in process inventory
C. Ending work in process is equal to the cost of goods manufactured
D. Ending work in process is less than the amount of the beginning work in process inventory

31. Kline Manufacturing Co. has the following labor costs:

Factory-Gross wages P210,000
Withholding Taxes Payable 15,000
Overtime Premiums 11,000
SSS Premiums Pay 8,000
The entry to record the cost of factory labor and the associated payroll tax expense will include a debit to Direct Labor
for
A. P198,000
B. P210,000
C. P197,000
D. P199,000

32. If annual factory overhead costs are expected to be P1,200,000 and direct labor costs are expected to be P1,000,000,
then
A. .83 is the predetermined factory overhead rate.
B. For every peso of manufacturing overhead, 120% of direct labor will be applied.
C. For every peso of direct labor, P1.20 of manufacturing overhead will be applied
D. A predetermined overhead rate cannot be determined.

33. The term that describes all activities associated with providing a product or service is the:
A. Manufacturing chain
B. Supply chain
C. Product chain
D. Value chain

34. A product cost is deducted from revenue when

A. the finished goods are sold
B. the expenditure is incurred
C. the production process takes place
D. the production process is completed
E. the finished goods are transferred to the Finished Goods Inventory
35. The Cost of Goods Manufactured Schedule summarizes the periodic production operations for a company. On the
face of that schedule are intermediate calculations supporting the cost of goods manufactured amount. The
beginning Finished Goods Inventory plus the cost of goods manufactured equals
A. Total finished goods during the period.
B. Cost of goods sold for the period.
C. Total work-in-process during the period
D. Cost of goods manufactured for the period
E. Cost of goods available for sale for the period

TEST II. PROBLEM- SOLVING (60%)

PROBLEM A

1. MIAMI Company manufactures computer discs. What is the beginning balance of Finished Goods Inventory if Cost of
Goods Sold is P125,000; the ending balance of Finished Goods Inventory is 80% less than its beginning balance; and
Cost of Goods Manufactured is 60% of Cost of Goods Sold?

PROBLEM B

PROCTOR & GAMBLE MANUFACTURING COMPANY uses job order costing. The following production data are presented
to you:

Inventories JULY 1 JULY 31

Finished Goods P60, 000 P45, 000
Goods in Process 30, 000 38, 000
Raw Materials 15, 000 22, 000

Sales during JULY P500, 000

Gross Profit rate 25% on cost
Applied Factory Overhead (80% of DL cost) P90, 000

2. How was the Total Costs Placed in Process?

3. How much was the Raw Materials Purchased?

PROBLEM C

FREIGHT 21 Corporation has the following monthly telephone records and costs:

Calls Communication Expense

2,000 P240, 000

1,500 200,000
2,200 260,000
2,500 290,000
2,300 270,000
1,700 220,000

Using the LEAST SQUARESmethod, answer the following questions. Round off your answer to two decimal places.

4. How much is the estimated variable portion of communication expense?

5. How much is the estimated total fixed cost of communication expense?
6. How much is the budgeted quarterly Communication Expense if the average weekly call is 450?
Using HIGH LOW method:

7. How much is the estimated variable portion of communication expense?

8. How much is the estimated total fixed cost of communication expense?
9. How much is the budgeted quarterly Communication Expense if the average weekly call is 500?

PROBLEM D

NESCAFE MUGS produces and sells various types of ceramic mugs. The business began operations on January 1, 2012.
The cost incurred during the year follow:

Variable costs
Direct Material cost P100,800
Direct Labor 89,600
Indirect Manufacturing costs 50,400
Administrative and Marketing 58,200
Fixed costs:
Administrative and Marketing costs 75,000
Indirect manufacturing costs 61,600

On December 31, 2012, direct materials inventory consisted of 7,500 pounds of materials. Production in that year was
56, 000 mugs. All prices and unit variable costs remained constant during the year. Revenues for the year were P436,500.
Finished goods inventory was P40,500 on December 31. Each finished mug contained 1.5 pounds of material.

10. How much is the direct materials inventory cost, December 31?
11. How many units are there in the finished goods ending inventory as of December 31?
12. How much is the operating profit for 2012?

PROBLEM E

NIKKON Manufacturing is to submit a bid on the production of 2,500 mini-cameras. It is estimated that the cost of
materials will be P8,500 and the cost of direct labor will be P12,000. Factory overhead is applied at 50% of direct labor
cost in the MOLDING Department and P7.50 per direct labor hour in the FINISHING Department. Of the above direct
labor, it is estimated that 500 direct labor hours at a cost of P4,000 will be required in the FINISHING. The company
wishes a mark-up of 100% on its production cost.

13. How much is the estimated cost to produce the 2,500 mini cameras?
14. How much is the estimated bid price for the mini cameras?

PROBLEM F

MARTINI Manufacturing Company budgeted total variable overhead costs at P1,200,000 for the current period. In
addition, they budgeted costs for factory rent at P750,000, costs for depreciation on office equipment at P120,000, costs
for office rent at P360,000 and costs for depreciation of factory equipment at P450, 000. All these costs were based upon
estimated machine hours of 750,000. Actual factory overhead for the period amounted to P2,560,000 and machine
hours used totaled 762,500 hours.

15. How much was the (over) or under-applied factory overhead for the period?

PROBLEM G
LOIRE Manufacturing Co. has over-applied overhead of P280,000 for the year ended December 31, 2012. Before
disposition of the over-applied overhead, selected December 31, 2012, balances from LOIRE’s records are as follows:
 Cost of goods sold P3,600,000
Inventories:
Direct materials P1,350,000
Work in process P1,250,000
Finished goods P2,150,000

Under the company’s cost accounting system, over or under-applied overhead is allocated to appropriate inventories and
cost of goods sold based on year-end balances.

16. How much cost of goods sold would be presented in the company’s statement of comprehensive income?

PROBLEM H
CARTIER Manufacturing Company estimated it would incur total manufacturing overhead cost of P640,000 and would
worked for 50,000 machine hours to produce 40,000 units. Factory overhead is applied based on machine hours. For the
month of July, the following manufacturing costs were incurred. The actual units produced was 55, 000 units.

Direct Materials P810,000

Direct Labor 840,000
Manufacturing Overhead
Warehousing 80,000
Purchasing Cost 50,000
Power 180,000
Rent 130,000
Machinery Related Cost 240,000
Others 60,000

17. How much is the manufacturing cost per unit using actual costing?
18. How much is the manufacturing cost per unit using normal costing?

PROBLEM I

The following information was taken from the records of MADAGASCAR Manufacturing INC.

Increase in Finished Goods 20,000

Decrease in Work-in-Process 18,000
Decrease in Raw Materials 9,000
Total Costs Placed in Process 310,000
Purchases 70,000
Direct Labor 90,000
Work in Process, beginning 64,000

19. How much is the amount of cost of goods sold?

20. How much is the amount of appliedfactory overhead?

PROBLEM J
To improve profitability, SARA LEE Corp instituted a bonus plan where employees are paid 75% of the time saved when
production performance exceeds the standard level of production. The company computes the bonus on the basis of
four-week periods. The standard production is set at 3 units per hour. Each employee works 37 hours per week and the
wage rate is P55 per hour. Below are data for on 4-week period

Weekly Production (Units)

Employees 1st 2nd 3rd 4th Total
Allan 107 100 110 108 425
Bernard 104 110 115 115 444
Charlie 108 112 112 133 465
Dave 123 120 119 124 486

21. Who was the employee who had performed inconsistently (sometimes performing below standard) who received the
bonus and how much was received?

PROBLEM J
The following information was taken from the records of BLIMS Manufacturing Inc.
 Increase in Finished Goods Inventory P82,125
 Raw Material Purchases 315,000
 Increase in Work-in-Process Inventory 49,950
 Direct Labor 210,968
 Decrease in Raw Materials Inventory 21,825
 Work in Process Inventory, beginning 256,500
 Total Costs Placed in Process 922,500

22. How much was the amount of cost of goods manufactured?

23. How much was the amount of Cost of Goods Sold?
24. How much was the amount of applied factory overhead?
25. How much was the amount of prime cost incurred during the period?
26. How much was the amount of conversion cost incurred during the period?

PROBLEM K
SILKY COMPANY MANUFACTURING COMPANY manufactures multiple products that pass through theWEAVING
Department and PAINTINGDepartment. For the coming year, management has determinedto use the following
manufacturing denominator.

WEAVING Dept: PAINTING Dept:

Budgeted Direct Materials P350, 000 P180, 000
Budgeted Direct Labor cost 240, 000 320, 000
Budgeted Factory Overhead 250, 000 200, 000
Budgeted Machine Hours 12, 000 3, 000
Budgeted Direct Labor Hours 2,500 10,000

Each product requires .5 machine hours in the WEAVING Department and 1.5 direct labor hours in the PAINTING
Department. Assume that all units put into production are completed at the end of the period. The company planned to
manufacture 20, 000 units in the coming year and expected to sell only 90% of the units manufactured.

27. Using the plant-wide factory overhead rate based on Machine hours, how much is the total cost of the ending
inventory?
28. What is the departmental overhead rate for the WEAVING Department using the appropriate cost drivers?
29. What is the departmental overhead rate for the PAINTING Department using the appropriate cost drivers?
30. Based on your answer in no. 28 & 29, how much is the total cost of the goods manufactured?