COST ACCOUNTING & CONTROL

MIDTERM EXAMINATION

1. Multiple or departmental overhead rates are considered preferable to a single or plant-wide overhead rate when
a. Manufacturing is limited to a single product flowing through identical departments in a fixed sequence.
b. Various products are manufactured that do not pass through the same departments or use the same
manufacturing techniques.
c. Individual cost drivers cannot accurately be determined with respect to cause-and-effect relationships.

d. The single or plant-wide rate is related to several identified cost drivers.

2. In an activity-based costing (ABC) system, cost reduction is accomplished by identifying and eliminating
All Cost Drivers Nonvalue-Adding Activities
a. No No
b. Yes Yes
c. No Yes
d. Yes No

3. Because of changes that are occurring in the basic operations of many firms, all of the following represent trends
in the way indirect costs are allocated except.
a. Treating direct labor as an indirect manufacturing cost in an automated factory.
b. Using throughput time as an application base to increase awareness of the costs associated with lengthened
throughput time.
c. Preferring plant-wide application rates that are applied to machine hours rather than incurring the cost of
detailed allocations.
d. Using several machine cost pools to measure product costs on the basis of time in a machine center.

4. Chang Co.'s cost allocation and product costing procedures follow activity-based costing principles. Activities
have been identified and classified as being either value-adding or nonvalue-adding as to each product. Which of
the following activities, used in Chang's production process, is nonvalue-adding?
a. Design engineering activity.
b. Heat treatment activity.
c. Drill press activity.
d. Raw materials storage activity.

5. The logical explanation for an entry that includes a debit to Overhead control and a credit to Prepaid Insurance is
a. The insurance company sent the company a refund of its policy premium.
b. Overhead for insurance was applied to production.
c. Insurance for production equipment expired.
d. Insurance was paid on production equipment.

6. Over-applied factory overhead would result if

a. The plant was operated at less than normal capacity.
b. Factory overhead costs incurred were less than costs charged to production.
c. Factory overhead costs incurred were unreasonably large in relation to units produced.
d. Factory overhead costs incurred were greater than costs charged to production.

7. In service businesses using job order costing, the hourly rate used to charge costs to a job usually includes
a. Both labor and overhead cost
b. Labor cost only
c. Overhead cost only
d. Labor, overhead and miscellaneous costs

8. Which of the following organization would be most likely to use a job order costing system?
a. The loan department of a bank.
b. The check clearing department of a bank.
c. A manufacturer of processed cheese food.
d. A manufacturer of video cassette tapes.

9. At the end of the last fiscal year, Baehr Company had the following account balances.
Overapplied overhead P1,000
Cost of goods sold 980,000
Work-in-process inventory 38,000
Finished goods inventory 82,000

The most common treatment of the overapplied overhead would be to

a. Prorate it between work-in-process inventory and finished goods inventory.
b. Prorate it among work-in-process inventory, finished goods inventory and cost of goods sold.
 c. Report it as miscellaneous operating revenue on the income statement.
d. Credit it to cost of goods sold.

10. Horn Company has a variable selling cost. If sales volume increases, how will the total variable cost and the
variable cost per unit behave?
Total Variable Cost Variable Cost Per Unit
a. Increase Increase
b. Increase Remain constant
c. Increase Decrease
d. Remain constant Decrease

11. Within a relevant range, the amount of variable cost per unit:
a. moves in the same direction as fixed cost per unit
b. differs at each production level
c. remains constant at each production level
d. increases as production increases

12. Within the relevant range of activity, costs:

a. can be estimated with reasonable accuracy.
b. can be expected to change radically.
c. exhibit decreasing marginal cost patterns.
d. exhibit increasing marginal cost patterns.

13. In a normal cost system, debits to Work in Process Inventory would not be made for
a. actual overhead
b. applied overhead
c. actual direct material
d. actual direct labor

14. The source document that records the amount of raw material that has been requested by production is the
a. job-order cost sheet
b. bill of lading
c. inter-office memo
d. material requisition

15. In a job-order costing system, the amount of the entry that debits Finished Goods Inventory and credits
Work in Process Inventory is the sum of the costs charged to all jobs
a. started in process during the period
b. in-process during the period
c. completed and sold during the period
d. completed during the period

16. In manufacturing roller blades, Wesley Co.'s plant used 400 direct labor hours, 500 machine hours, and 20 set ups.
The following overhead costs were taken from the factory accounts:

OVERHEAD VOLUME
COSTS
Machine center P 120,000 20,000 machine
hours
Set up center 40,000 100 setups
Total 160,000 4,000 DL hours

The plant was using a factory-wide overhead rate based on direct labor hours. A new ABC system will use
machine hours in the Machining Department and number of set ups in the Set up Department as cost drivers. By
what amount would overhead costs assigned to roller blades differ between the prior system and the ABC system?
a. 7,800
b. 7,000
c. 5,000
d. 4,800

17. Cebu Enterprises is a Philippine exporter of souvenir items manufactured in the capital city of Jerusalem. The
following overhead cost data have been accumulated:
Amount
Activity Center Cosf Driver of Activity Center Costs
Materials Handling Grams handled 100,000 grams P 50,000
Painting Units painted 50,000 units 200,000
Assembly Labor hours 4,000 hours 120,000
 Job 1234 contains 3,000 units. It weighs 10,000 grams and uses 300 hours of labor.

Compute the total overhead costs that should be assigned to Job 1234.
a. P31,955
b. P 27,750
c. P26,000
d. 32,000

18. Yokomo Inc. accumulated the following cost information for its two products, A and B.

Product A Product B
Units produced 2,000 1,000
Total direct labor hours 5,000 20,000
Set-up cost per batch PI,000 P2,000
Batch size 100 50
Total set-up cost incurred P20,000 P40,000
Direct labor hour per unit 2 1

A traditional costing system would allocate setup costs on the basis of direct labor hours. An ABC system would
trace costs by spreading the cost per batch over the units in a batch. What is the setup cost per unit of Product A
under each costing system.
Traditional Costing ABC
A. P 4.80 P 10
B. P 2.40 P 10
C. P40.00 P200
D. P4.80 P 20

For numbers 19 to 21:

Build Company is a manufacturing company and uses job order costing system. At the beginning of 2022,
there were no jobs in process, but the following costs were incurred during the year:

Job A Job B Job C

Direct materials 10,000 20,000 15,000
Direct labor 5,000 4,000 2,500

Build Company also estimated in 2022 an overhead in the amount of P300,000 and direct labor cost in the
amount of P150,000. Actual overhead incurred for the year was P24,000. It was the company's policy to
apply overhead into production based on direct labor costs. At the end of the year, only Jobs A and C
were completed.

19. What is the cost of goods manufactured at the end of the year?
A. 47,500
B. 32,500
C. 56,500
D. 48,500

20. What is the ending work-in-process?

A. a. 48,000
b. 24,000
c. 32,000
d. 40,000

21. What is the under / over applied overhead?

a. 9,000 under
b. 1,000 under
c. 9,000 over
d. 1,000 over

22. The following selected information pertains to Ajax Processing Co.: direct materials, P62,500; indirect materials,
P12,500; factory payroll, P75,000 of direct labor and P11,250 of indirect labor; and other factory overhead
incurred, P37,500.

The total conversion cost was:

a. P136,250
 b. P137,500
c. P250,000
d. P273,750

23. The following data are obtained from Gianne Manufacturing Company:

- Cost of goods manufactured is P187,500

- Inventory variations are as follows: raw materials ending inventory is one-third based on raw materials
beginning; no initial inventory of work-in-process, but at end of period P12,500 was on hand; finished goods
inventory was four times as large at end of period as at the start.
- Net income after taxes amounted to P26,000, income tax rate is 35%.
- Purchase of raw materials amounted to net income before taxes.
- Breakdown of costs incurred in manufacturing cost was as follows:

Raw materials consumed 50%

Direct labor 30%
Overhead 20%

Compute the amount raw materials beginning inventory:

a. P38,571
b. P60,000
c. P90,000
d. P40,000

24. The following data were taken from the records of Best Company:

08/31/2021 09/30/2021
Inventories:
Raw materials P ? P50,000
Work in process 80,000 95,000
Finished goods 60,000 78,000

 Raw materials purchases, P46,000.

 Factory overhead, 75% of direct labor cost, P63,000.
 Selling and administrative expenses, 12.5% of sales, P25,000.
 Net income for September, 2021, P25.000.

What is the cost of raw materials inventory on August 31, 2021?

a. P30,000
b. 40,000
c. P46,000
d. 50,000

25. Rudolph Co. makes aluminum fasteners. Among Rudolph's manufacturing materials and supplies for the year
were:
Aluminum 400,000
Machine parts 18,000
Lubricants for machines 5,000

Direct materials amounted to:

a. 23,000
b. 400,000
c. 405,000
d. 418,000

26. The following information were taken from the accounting records of Yanni Music Company for 2021:

Increase in raw materials inventory P45,000

Decrease in finished goods inventory 150,000
Raw materials purchases 1,290,000
Direct labor payroll 600,000
Factory overhead 900,000
Freight out 135,000

The cost of raw materials used during the period amounted to:
a. 1,245,000
b. 1,290,000
c. 1,335,000
 d. 1,380,000

27. The Fork Corporation manufactures one product and accounts for cost by a job-order cost system. You have
obtained the following information for the year ended December 31, 2021 from the corporation's books and
records:

Total manufacturing cost added during 2021 based on actual direct materials, actual direct labor and applied
factory overhead on actual direct labor cost – P1,000,000

Cost of goods manufactured based on actual direct materials and direct labor and applied factory overhead
- 970,000
Applied factory overhead to work in process based on direct labor cost – 75%
Applied factory overhead for the year, based on total manufacturing cost – 27%

Beginning work in process inventory was 80% of ending work in process inventory. Compute the cost of direct
materials used for year ended December 31, 2021.
a. 370,000
b. 970,000
c. 990,000
d. 970,500

28. Ambo, Inc. manufactured 50,000 kilos of compound Am in 2011 at the following costs:
Opening work-in-process of P88,125.
Materials of P182,500 of which 90% is direct materials
Labor of P242,500 of which 93% is direct labor.
Closing work-in-process of P67,500.

Factory overhead is 125% of direct labor cost and includes indirect materials and indirect labor. The cost of
goods manufactured is:
a. 651,056
b. 692,306
c. 706,906
d. 727,531

29. X-Files Productions, Inc. has manufactured 100,000 units of compound X in May at the following costs:

Labor of P242,500 of which 93% represents direct labor.

Materials of P182,500 of which 90% represents direct materials.
Opening work in process of P88,125.
Closing work in process inventory of P67.500.

Factory overhead is 125% of direct labor costs and includes indirect materials and indirect labor. Compute cost of
goods manufactured.
a. 671,150
b. 692,306
c. 51,056
d. 629,900

For numbers 30 and 31:

Baker Co. has two departments (Processing and Packaging) and uses a job order costing system. Baker applies
overhead in Processing based on machine hours and on direct labor cost in Packaging. The following information
is available for July:

Processing Packaging
Machine hours 2,500 1,000
Direct labor cost P 44,500 P 23,000
Applied overhead 55,000 51,750

30. What is the overhead application rate per machine hour for Processing?
a. 22.00 c. 17.80
b. 1.24 d. 0.81

31. What is the overhead application rate for Packaging?

a. 23.00 c. 2.25
b. 51.75 d. 0.44
32. During the current accounting period, a manufacturing company purchased P70,000 of raw materials, of which
P50,000 of direct materials and P5,000 of indirect materials were used in production. The company also incurred
P45,000 of total labor costs and P20,000 of other factory overhead costs. An analysis of the work-in-process
control account revealed P40,000 of direct labor costs. Based upon the above information, what is the total
amount accumulated in the factory overhead control account?
a. 25,000
b. 30,000
c. 45,000
d. 50,000

33. Pane Company uses a job costing system and applies overhead to products on the basis of direct labor cost. Job
No. 75, the only job in process on January 1, had the following costs assigned as of that date: direct materials,
P40,000; direct labor, P80,000; and factory overhead, P120,000. The following selected costs were incurred
during the year:

Traceable to jobs:
Direct materials P178,000
Direct labor 345,000 P523,000
Not traceable to jobs:
Factory materials and supplies P 46,000
Indirect labor 235,000
Plant maintenance 73,000
Depreciation on factory equipment 29,000
Other factory costs 76,000 459,000

Pane's profit plan for the year included budgeted direct labor of P320,000 and factory overhead of P448,000.
Assuming no work-in-process on December 31, Pane's overhead for the year was
a. P11,000 overapplied
b. 24,000 overapplied
c. P11,000 underapplied
d. 24,000 underapplied

34. Woodman Company applies factory overhead on the basis of direct labor hours. Budget and actual data for direct
labor and overhead for the year are as follows:
Budget Actual
Direct labor hours P600,000 P550,000
Factory overhead costs 720,000 680,000

The factory overhead for Woodman for the year is

a. Overapplied by P20,000
b. Overapplied by P40,000
c. Underapplied by P20,000
d. Underapplied by P40,000

35. Mason Co. uses a job order cost system and applies manufacturing overhead to jobs using a predetermined
overhead rate based on direct labor pesos. The rate for the current year is 200% of direct labor pesos. This rate
was calculated last December and will be used throughout the current year. Mason had one job, No. 150, in
process on August with raw materials costs of P2,000 and direct labor costs of P3,000. During August, raw
materials and direct labor added were as follows:
No. 150 No. 151 No. 152
Raw materials P- P 4,000 P 1,000
Direct labor 1,500 5,000 2,500

Actual manufacturing overhead for the month of August was P20,000. During the month, Mason completed Job
Nos. 150 and 151. For August, manufacturing overhead was
a. Overapplied by P4,000
b. Underapplied by P7,000
c. Underapplied by P2,000
d. Underapplied by P1,000

36. Narra Marketing Corp. uses j ob-order cost system. It has three production departments, X, Y and Z. The manufacturing
budget cost for 2013 is as follows:
Dept. X Dept. Y Dept. Z
Direct Materials P600,000.00 P400,000.00 P200,000.00
Direct Labor 200,000.00 1,500,000.00 1,500,000.00
Mfg. Overhead 600,000.00 100,000.00 200,000.00
 For Job No. 01-90 completed in 2013„direct material cost was P75,000.00; direct labor, Dept. X, P40,000.00, Dept. Y,
P100,000.00, Dept. Z, P20,000.00. The corporation applies manufacturing overhead to each job on the basis of direct
labor cost using department rates predetermined at the beginning of the year based on the manufacturing budget cost.
The total manufacturing cost of Job No. 01-90 is:
a. P235,000
b. P310,000
c. P280,000
d. P150,000

37. Douglas Corporation recently produced and sold 100,000 units. Fixed costs at this level of activity amounted to
P50,000; variable costs were P100,000.

How much cost would the company anticipate if during the next period it produced and sold 102,000 units?
a. P150,000
b. P151,000
c. P152,000
d. P153,000

38. Extron, Inc., has only variable costs and fixed costs. A review of the company's records disclosed that when
100,000 units were produced, fixed manufacturing costs amounted to P200,000 and the cost per unit
manufactured totaled P5. On the basis of this information, how much cost would the firm anticipate at an activity
level of 97,000 units?
a. P485,000
b. P491,000
c. P494,000
d. P500,000

39. A review of Parry Corporation's accounting records found that at a volume of 90,000 units, the variable and fixed
cost per unit amounted to P8 and P4, respectively. On the basis of this information, what amount of total cost
would Parry anticipate at a volume of 85,000 units?
a. P1,020,000
b. P1,040,000
c. P1,060,000
d. P1,080,000

40. For a simple regression-analysis model that is used to allocate factory overhead, an internal auditor finds that the
intersection of the line of best fit for the overhead allocation on the y-axis is P50,000. The slope of the trend line
is 0.20. The independent variable, factory wages, amounts to P900,000 for the month. What is the estimated
amount of factory overhead to be allocated for the month?
a. P910,000
b. P950,000
c. P 50,000
d. P230,000