POP QUIZ 11.

If a company closes any under- or overapplied

overhead to the Cost of Goods Sold account, then Cost
1. The formula for computing the predetermined
of Goods Sold will be credited if manufacturing
overhead rate is: Estimated total units in base ÷
overhead is overapplied for the period. TRUE
Estimated total manufacturing costs: FALSE

2. The following entry would be used to record the 12. When raw materials are purchased, they are recorded
transfer of material from the storeroom to as an expense. FALSE
production if 80% of the material was direct
material and 20% was indirect material: 13. If the actual manufacturing overhead costs for a
Work in Process 40,000 period exceed the manufacturing overhead costs
Manufacturing Overhead 10,000 applied, then overhead would be considered to be
Raw Material 50,000 overapplied. FALSE
TRUE
14. If a company applies overhead to production on the
3. The entire difference between the actual basis of a predetermined rate, a debit balance in the
manufacturing overhead cost for a period and the Manufacturing Overhead account at the end of the
applied manufacturing overhead cost is typically period means that: actual overhead cost was greater
closed to the Work in Process account. FALSE than the amount charged to production.

4. Which of the following entries would record correctly 15. Compute the October cost of direct materials used if
the application of overhead cost? raw material purchases for the month were $30,000
WIP (Dr) MO (Cr) and the inventories were as follows:
Beginning Ending
5. Which of the following entries would record correctly Direct materials 7,000 4,000
the monthly salaries earned by the top management WIP 6,000 7,500
of a manufacturing company? Finished goods 10,000 12,000
Salaries Expense (Dr) Salaries and Wages Payable (Cr) The cost of direct materials would be:

6. When manufacturing overhead is applied to (7,000 + 30,000) – 4,000 = 33,000

production, it is added to: WIP account
16. The accounting records of Oslo Company contained
7. Overapplied overhead means that: the applied the following information for last year:
overhead cost was greater than the actual overhead *Does not include over- or underapplied overhead.
cost.

8. Cherri Music Company manufactures violins, violas,

cellos, and fiddles. What account should Cherri debit
when the workers who carve the wood for the
instruments are paid? Work in Process

9. Cherri Music Company manufactures violins, violas,

cellos, and fiddles. What account should Cherri debit
when the production manager is paid? Manufacturing
overhead

10. Cherri Music Company manufactures violins, violas,

cellos, and fiddles. What is one of the accounts that The total costs added to Work in Process during the
Cherri should credit when goods are sold? Finished year were:
goods
72,000 + 24,000 + 80,000 = 176,000
17. The direct labor rate in BNY Company is P9.00 per 20. The Kylie Company began operations on January 1.
hour, and manufacturing overhead is applied to The predetermined overhead rate was set at P6.00 per
products using a predetermined overhead rate of direct labor-hour. Debits to Work in Process for the
P6.00 per direct labor hour. During May, the company year totaled P550,000. Credits to Work in Process
purchased 60,000 in raw materials (all direct totaled P480,000. Analysis of the Company's records
materials) and worked 3,200 direct labor hours. The indicates that direct labor cost totaled P250,000 for
Raw Materials inventory (all direct materials) the year, which represents 20,000 direct labor-hours.
decreased by 3,000 between the beginning and end of If the actual manufacturing overhead cost for the year
May. The Work in Process inventory on May 1 totaled P145,000, then overhead was:
consisted of one job which had been charged with Underapplied by 25,000 (20,000 x 6) – 145,000
$4,000 in direct materials and on which 300 hours of
direct labor time had been worked. There was no 21. At the beginning of the year, manufacturing overhead
Work in Process inventory on May 31. The balance in for the year was estimated to be P477,590. At the end
the Work in Process inventory account on May 1 was: of the year, actual direct labor-hours for the year were
4,000 + (300 x 9.00) + (300 x 6.00) = 8,500 29,000 hours, the actual manufacturing overhead for
the year was P472,590, and manufacturing overhead
18. The following partially completed T-accounts for the year was overapplied by $110. If the
summarize transactions for Wilcon Company during predetermined overhead rate is based on direct labor-
the year: hours, then the estimated direct labor-hours at the
beginning of the year used in the predetermined
overhead rate must have been:

472,590 + 110 = 472,200 / 29,000 = 16.3 PDOH

477,590 / 16.3 = 29,300 direct labor hours

22. At the beginning of the year, manufacturing overhead

for the year was estimated to be P670,700. At the end
of the year, actual direct labor-hours for the year were
36,200 hours, the actual manufacturing overhead for
the year was P665,700, and manufacturing overhead
for the year was overapplied by P22,100. If the
The Cost of Goods Manufactured is: 25,000 (in t- predetermined overhead rate is based on direct labor-
accounts, credit side of WIP is COGM) hours, then the estimated direct labor-hours at the
beginning of the year used in the predetermined
19. The following partially completed T-accounts overhead rate must have been:
summarize transactions for Wilcon Company during 665,700 + 22,100 = 687,800 / 36,200 = 19 PDOH
the year: 670,700 / 19 = 35,300 direct labor hours

23. At the beginning of the year, manufacturing overhead

for the year was estimated to be P670,530. At the end
of the year, actual direct labor-hours for the year were
29,400 hours, the actual manufacturing overhead for
the year was P665,530, and manufacturing overhead
for the year was underapplied by P27,550. 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:
665,530 – 27,550 = 637,980 / 29,400 = 21.7
670,530 / 21.7 = 30,900 direct labor hours
The manufacturing overhead was: P250 underapplied
24. Billy Corporation uses direct labor-hours in its 28. The following partially completed T-accounts
predetermined overhead rate. At the beginning of the summarize transactions for Wilcon Company during
year, the estimated direct labor-hours were 17,500 the year:
hours. At the end of the year, actual direct labor-hours
for the year were 16,000 hours, the actual
manufacturing overhead for the year was P233,000,
and manufacturing overhead for the year was
underapplied by P15,400. The estimated
manufacturing overhead at the beginning of the year
used in the predetermined overhead rate must have
been:
233,000 – 15,400 = 217,600 / 16,000 =13.6
17,500 x 13.6 = 238,000

25. In Bryan Corporation uses direct labor-hours in its

predetermined overhead rate. At the beginning of the
year, the estimated direct labor-hours were 11,500
hours. At the end of the year, actual direct labor-hours
The direct labor cost was: 9,000
for the year were 9,700 hours, the actual
manufacturing overhead for the year was P143,350,
29. The following partially completed T-accounts
and manufacturing overhead for the year was
summarize transactions for Wilcon Company during
underapplied by P18,220. The estimated
the year:
manufacturing overhead at the beginning of the year
used in the predetermined overhead rate must have
been:
143,350 – 18,220 = 125,130 / 9,700 = 12.9
11,500 x 12.9 = 148,350

26. Celso Corporation uses direct labor-hours in its

predetermined overhead rate. At the beginning of the
year, the estimated direct labor-hours were 17,900
hours and the total estimated manufacturing
overhead was P341,890. At the end of the year, actual
direct labor-hours for the year were 16,700 hours and
the actual manufacturing overhead for the year was
P336,890. Overhead at the end of the year was:
341,890 (beg applied) / 17,900 = 19.1
19.1 x 16,700 = 318,970 (end applied) – 336,890 = The direct materials cost was: 6,500
17,920 underapplied
30. The Kyra Company began operations on January 1. The
predetermined overhead rate was set at P6.00 per
27. When Daple Corporation uses direct labor-hours in its direct labor-hour. Debits to Work in Process for the
predetermined overhead rate. At the beginning of the year totaled P550,000. Credits to Work in Process
year, the total estimated manufacturing overhead was totaled P480,000. Analysis of the Company's records
P423,870. At the end of the year, actual direct labor- indicates that direct labor cost totaled P250,000 for
hours for the year were 19,400 hours, manufacturing the year, which represents 20,000 direct labor-hours.
overhead for the year was underapplied by P5,650, The direct materials used in production during the
and the actual manufacturing overhead was P418,870. year totaled:
The predetermined overhead rate for the year must MO = 20,000 x 6 = 120,000
have been closest to: DL = 250,000
418,870 – 5,650 = 413,220 /19,400 = 21.3 DM = 550,000 – 120,000 – 250,000 = 180,000
Job-order and Process Costing
1. The weighted-average method of process costing
4. Osol Company uses the FIFO method in its process
differs from the FIFO method of process costing in
costing system. In the Cutting Department in June,
that the weighted-average method:
units were 80% complete with respect to
a. can be used under any cost flow assumption.
conversion in the beginning work in process
b. does not require the use of predetermined
inventory and 25% complete with respect to
overhead rates.
conversion in the ending work in process
c. does not consider the degree of completion of
inventory. Other data for the department for June
units in the beginning work in process inventory
follow:
when computing equivalent units of production.
d. keeps costs in the beginning inventory separate Units Conversion Cost
from current period costs.
Beg. WIP 20,000 40,000
2. Phoebe Corporation uses a job-order cost system.
Units started and cost 150,000 186,000
The information below is from the financial
records of the company for last year: Units compl and trans 130,000
Total manufacturing costs 2,500,000
The cost per equivalent unit for conversion cost is closest
Cost of goods manufactured 2,425,000
to:
Predetermined overhead rate 80% of DL
Applied overhead was 30% of total manufacturing a. P1.82
costs. The Work in Process inventory at January 1 b. P1.48
was 75% of the Work in Process inventory at c. P1.16
December 31. The Work in Process inventory at d. P1.50
December 31 was:
a. P225,000 5. Blue Co. uses a predetermined overhead rate
b. P100,000 based on direct labor cost to apply manufacturing
c. P75,000 overhead to jobs. The predetermined overhead
d. P300,000 (2,500,000 – 2,425,000) / 25% rates for the year are 200% for Department A and
50% for Department B. Job 123, started and
3. Josh Corporation uses a job-order cost system and completed during the year, was charged with the
applies overhead on the basis of direct labor cost. following costs:
At the end of October, Josh had one job still in
process. The job cost sheet for this job contained
the following information:
Direct materials P480
Direct labor P150
Manufacturing overhead applied P600
An additional P100 of labor was needed in a. P240,000
November to complete this job. For this job, how b. P135,000 (DL Dept. A = 40,000 / 200% = 20,000 ;
much should Josh have transferred to finished MO Dept. B = 30,000 x 50% = 15,000)
goods inventory in November when it was = 25,000 + 20,000 + 40,000 + 5,000 + 30,000 +
completed? 15,000 = 135,000
a. P1,230 c. P180,000
b. P1,730 (600/150 = 4 PDOH x 100 = 400 addt. MO) d. P195,000
= 480 + 150 + (100 DL) + 600 + (400 addt. MO)
c. P500 6. Costs in an operation costing system are
d. P1,330 accumulated by:
a. department
b. by both job and departments
c. by individual job Cost of Goods Sold..............
7. In a job-order cost system, depreciation on factory XXX
equipment should be charged directly to the Work 14. If a company uses predetermined overhead rates,
in Process account. actual manufacturing overhead costs of a period
a. False will be recorded in the Manufacturing Overhead
b. True account, but they will not be recorded on the job
cost sheets for the period.
8. An item that does not appear on a cost of a. True
production report is: b. False
a. work in process, beginning inventory
b. finished goods, ending inventory 15. __________ costing is used by a business to price
c. materials used in the department unique products for different jobs.
d. cumulative costs through the end of departmental a. Process
production b. Job
c. Actual
9. The basic source document for direct d. Traditional
manufacturing labor is the:
a. job-cost record 16. The FIFO method provides a major advantage over
b. All of these answers are correct. the weighted-average method in that:
c. labor-time record a. the FIFO method provides measurements of work
d. materials-requisition record done during the current period.
b. the FIFO method treats units in the beginning
10. When materials are purchased in a process costing inventory as if they were started and completed
system, a work in process account is debited with during the current period.
the cost of the materials. c. the weighted-average method ignores units in the
a. False beginning and ending work in process inventories.
b. True d. the calculation of equivalent units is less complex
under the FIFO method.
11. Any difference in the equivalent units calculated
under the weighted-average and the FIFO 17. All of the following increase (are debited to) the
methods is due to the units in the ending work in Work-in-Process Control account EXCEPT:
process inventory. a. direct manufacturing labor
a. False b. allocated manufacturing overhead costs
b. True c. actual plant insurance costs
d. direct materials
12. Which of the following journal entries would be
used to record direct labor costs in a company 18. Marvin Company uses the weighted-average
having two processing departments (Department method in its process costing system. The first
A and Department B)? processing department, the Welding Department,
a. Work in Process-Department A XXX started the month with 20,000 units in its
Work in Process-Department B XXX beginning work in process inventory that were
Salaries and Wages Payable XXX 10% complete with respect to conversion costs.
The conversion cost in this beginning work in
13. The operations of Irish Company resulted in process inventory was P7,000. An additional
overapplied overhead for the month just 63,000 units were started into production during
completed. Which of the following journal entries the month. There were 10,000 units in the ending
can be correct if Irish allocates under- or work in process inventory of the Welding
overapplied overhead among accounts? Department that were 10% complete with respect
a. Manufacturing Overhead .................... XXX to conversion costs. A total of P237,600 in
Work in Process...................... XXX conversion costs were incurred in the department
Finished Goods.............. XXX during the month. What would be the cost per
 equivalent unit for conversion costs for the 5,000 + 62,000 = 2,000 + ? (65,000)
month? (Round off to three decimal places.)
65,000 + (2,000 x 20%) = 65,400 EUP of WA – (5,000 x 80%)
a. P3.255
b. P3.5 22. Stephen Company uses the FIFO method in its
c. P3.305 process costing system. Department A's beginning
work in process inventory consisted of 15,000
19. Lance Company uses the weighted-average units, 100% complete with respect to materials
method in its process costing system. Operating and 40% complete with respect to conversion
data for the first processing department for the costs. The total peso value of this inventory was
month of June appear below: P31,000. A total of 40,000 units were transferred
out during the month. The costs per equivalent
unit were computed to be P1.30 for materials and
P2.20 for conversion costs. The cost of the units
completed and transferred out was:
According to the company's records, the conversion cost in a. P140,000
beginning work in process inventory was P39,364 at the b. P118,500
beginning of June. Additional conversion costs of P721,035 c. P138,300
were incurred in the department during the month. What d. P131,700
was the cost per equivalent unit for conversion costs for
the month? (Round off to three decimal places.) 23. The direct labor rate in Brenda Company is P9.00
a. P7.361 per hour, and manufacturing overhead is applied
b. P7.57 to products using a predetermined overhead rate
WIP Beg. + Units started = WIP End + Units comp of P6.00 per direct labor hour. During May, the
13,000 + 98,000 = 11,000 + ? company purchased P60,000 in raw materials (all
111,000 = 11,000 + 100,000 ; 100,000 + (11,000 x 30%) = direct materials) and worked 3,200 direct labor
103,300 hours. The Raw Materials inventory (all direct
(721,035 + 39,364)/103,300 = 7.361 materials) decreased by P3,000 between the
beginning and end of May. The Work in Process
20. The equivalent units in beginning work in process inventory on May 1 consisted of one job which
inventory plus the equivalent units for the work had been charged with P4,000 in direct materials
done during the period equals the units and on which 300 hours of direct labor time had
transferred out plus the equivalent units in ending been worked. There was no Work in Process
work in process inventory. inventory on May 31. If overhead was
a. True underapplied by P2,500 during May, the actual
b. False overhead cost for the month must have been:
a. P16,700
21. Carla Company uses the FIFO method in its b. P21,700 (6 x 3,200 = 19,200 + 2,500)
process costing system. The Assembly Department c. P18,500
started the month with 5,000 units in its beginning d. P23,500
work in process inventory that were 80%
complete with respect to conversion costs. An 24. Makayla Corporation uses a job-order cost system.
additional 62,000 units were transferred in from The information below is from the financial
the prior department during the month to begin records of the company for last year:
processing in the Assembly Department. There Total manufacturing costs P 2,500,000
were 2,000 units in the ending work in process COGM P 2,435,000
inventory of the Assembly Department that were Predetermined overhead rate 80% of DL
20% complete with respect to conversion costs. Applied overhead was 30% of total manufacturing costs.
What were the equivalent units for conversion The Work in Process inventory at January 1 was 75% of the
costs in the Assembly Department for the month? Work in Process inventory at December 31. Makayla
a. 61,400 use the shortcut method Company's total direct labor cost was:
b. 65,400 a. 937,500
 b. 900,000 27. The basic approach in job-order costing is to
c. 750,000 accumulate costs in a particular operation or
25. Eliza Company uses the FIFO method in its process department for an entire period (month, quarter,
costing system. The first processing department, year) and then to divide this total by the number
the Welding Department, started the month with of units produced during the period.
14,000 units in its beginning work in process a. False
inventory that were 70% complete with respect to b. True
conversion costs. The conversion cost in this
beginning work in process inventory was P20,580.
An additional 53,000 units were started into 28. The FIFO method of process costing will produce
production during the month. There were 17,000 the same cost of goods transferred out amount as
units in the ending work in process inventory of the weighted average method when
the Welding Department that were 20% complete a. beginning and ending Work in Process Inventories
with respect to conversion costs. A total of are each 50 percent complete
P80,660 in conversion costs were incurred in the b. the goods produced are homogeneous
department during the month. What would be the c. there is no ending Work in Process Inventory
cost per equivalent unit for conversion costs for d. there is no beginning Work in Process Inventory
the month on the department's production
report? (Round off to three decimal places.) 29. Under a job-order costing system, the dollar
a. P2.100 amount transferred from Work in Process to
b. P1.511 Finished Goods is the sum of the costs charged to
c. P1.850 all jobs:
d. P1.522 a. completed during the period.
b. in process during the period.
14,000 + 53,000 = 17,000 + ? (50,000)
c. started in process during the period.
50,000 + (17,000 x 20%) = 53,400 – (14,000 x 70%) = d. completed and sold during the period.
43,600
30. In a job-order cost system, indirect labor is
80,660/43,600 = 1.85
assigned to a job by using the labor time ticket as
26. Kath Manufacturing Company uses a job-order a source document.
costing system and started the month of October a. False
with a zero balance in its work in process and b. True
finished goods inventory accounts. During
Joint and By Product
October, Kath worked on three jobs and incurred
the following direct costs on those jobs: 1. Joint product costs are generally allocated using
a. Relative sales value
Job B18 Job B19 Job C11
b. Direct labor hours
DM P12,000 P25,000 P18,000 c. Relative profitability
d. Additional costs after split-off
DL P8,000 P10,000 P5,000

Kath applies manufacturing overhead at a rate of 150% of 2. Yako, Inc. manufactures products X, Y, and Z from a
direct labor cost. During October, Kath completed Jobs B18 joint process. Joint product costs were P 60,000.
and B19 and sold Job B19. What is Kath's cost of goods Additional information is provided below.
manufactured for October?

a. P55,000
b. P82,000 (12,000 + 8,000 + 25,000 + 10,000 + (8,000
x 150%) + (10,000 x 150%)
c. P78,000
d. P50,000
Assuming that joint product costs are allocated using the P5.60 per unit. Product B either can be sold at the
relative sales value at split-off approach, what were the split-off point for P4.75 per unit or it can be further
total costs allocated to product Y? 28,000 (35k/100k) x 60k processed and sold for P7.20 per unit. If B is
+ 7k processed further, additional processing costs of
P3.10 per unit will be incurred. If B is processed
further and then sold, rather than being sold at the
3. Two products, CB and JM, emerge from a joint split-off point, the change in monthly net operating
process. Product CB has been allocated P30,800 of income would be a:
the total joint costs of P44,000. A total of 2,000 a. P147,000 decrease
units of product CB are produced from the joint b. P39,000 decrease
process. Product CB can be sold at the split-off c. P147,000 increase
point for P13 per unit, or it can be processed d. P39,000 increase
further for an additional total cost of P14,000 and
Unprocessed: 285,000 – 290,000 = -5,000
then sold for P15 per unit. If product CB is
processed further and sold, what would be the Processed: 432,000 – (P3.10 X 60,000 + 290,000) = 44,000
effect on the overall profit of the company
compared with sale in its unprocessed form directly
after the split-off point? 7. Which of the following is a false statement about
a. P40,800 less profit scrap and by-products?
b. P10,000 less profit a. By-products and scrap are the primary reason that
c. P20,800 more profit management undertakes the joint process
d. P16,000 more profit b. A by-product has a higher sales value than does
Unprocessed sale: 26,000 – 30,800 = -4,800 scrap
Processed: 30,000 – (30,800 + 14,000) = -14,800 c. Both scrap and by-products are incidental outputs
to the joint process
d. Both by-products and scrap are salable
4. TJ Corporation, which manufacturing a product that
gives rise to by-product called "Racen". The only
8. For purposes of allocating joint costs to joint
costs associated with Racen are selling costs of P 1
products, the sales price at point of sale, reduced
for each unit sold. TJ accounts for Racen sales first
by cost to complete after split-off is assumed to be
by deducting its separable costs from such sales,
equal to the
and then by deducting this net amount from cost of
a. Relative sales value at split off
sales of the major product. This year, 10,000 unit of
b. Sales price less a normal profit margin at the point
Racen were sold at P 4 each. TJ records the net
of sale
realizable value of Racen as inventory as it is
c. Total costs
produced, what will the per unit value be?
d. Joint costs
a. 1
b. 3 = 40,000 – (P1 x 10,000) = 30,000 / 10,000
9. Bright Company processes Duo into two joint
c. 4
products, Small and Mini. Duo is purchased in 1,000
d. 2
gallon drums for P2,000. Processing cost are P3,000
to process the 1,000 gallons of Duo into 800 gallons
5. Lumber produced in a lumber mill results in several
of Small and 200 gallons of Mini. The selling price is
different products being produced from each log;
P9 per gallon for Small and P4 per gallon for Mini. If
such products are called joint products.
the sales value at split-off method is used to
a. True
allocate joint costs to the final products, the per
b. False
gallon cost (rounded to the nearest cent) of
producing Small is;
6. Paul Company makes two products, A and B, in a
a. P5.63 gallon (P9 x 800) / 8,000 = 0.9 x (2,000 +
joint process. At the split-off point, 50,000 units of
30,000) = 4500 / 800 = 5.63
A and 60,000 units of B are available each month.
b. P4.50 per gallon
Monthly joint production costs are P290,000.
c. P3.38 per gallon
Product A can be sold at the split-off point for
 d. P5.00 per gallon

10. Fei Corporation, which manufactures product C, D,

and E from a joint process. Joint costs are allocated
on the basis of relative sales value at split-off.
Additional information is presented below:

a. The company would have relied on the sales value

of each product when allocating joint costs to X, Y,
and Z
b. Javee produced 45,000 pounds of Z during the
period
c. Javee produced 105,000 pounds of Z during the
period
d. Javee produced 30,000 pounds of Z during the
period
e. Based on the data presented, it is not possible to
determine Javee's production of Z during the
period
How much of the joint costs should Fei allocate to product
D? Prod. Units / Total Units x TJC = AJC (transpose)

a. 28,800 AJC x Total Units / TJC = 240,000 x 150,000 / 800,000

b. 24,000
240,000 = 160 + 400 – 800
c. 32,000
d. 30,000

SV / TSV x TJC (transpose) = Alloc.JC x TSV / TJC 13. Two or more products produced from a common
input are called:
72,000 x 200,000 / 120,000 = 120,000 SV of C
a. sunk costs.
120,000 + 30,000 – 200,000 = 50,000 SV of D b. joint costs.
c. joint products.
50,000 / 200,000 x 120,000 = 30,000 d. common costs.
11. Joint cost allocation is useful for
a. decision making 14. Joint processing after the split-off point is profitable
b. product costing if the incremental revenue from such processing
c. evaluating managers' performance exceeds the incremental processing costs.
d. Control a. True
b. False
12. Javee Corporation uses the physical-units method
to allocate costs among its three joint products: X, 15. TJ Corporation, which manufacturing a product that
Y, and Z. The following data are available for the gives rise to by-product called "Racen". The only
period just ended: costs associated with Racen are selling costs of P 1
for each unit sold. TJ accounts for Racen sales first
by deducting its separable costs from such sales,
and then by deducting this net amount from cost of
sales of the major product. This year, 10,000 unit of
Racen were sold at P 4 each. If TJ changes its
method of accounting for Racen sales by showing
 the net amount as additional sales revenue, TJ's
gross margin would
a. Be unaffected
b. Increase by P 3,000
c. Increase by P 4,000
d. Decrease by P 3,000