PEREZ 1TAY2223 BACOSTMX MIDTERMS QUIZ 2

General Instructions: Choose the letter which corresponds to the best answer. Good luck!
1. In a perpetual inventory system, a transaction that requires two journal entries (or one compound entry)
is needed when:
a. raw materials are purchased on account
b. goods are sold for either cash or on account
c. goods are finished and transferred out of Work in Process Inventory
d. overhead is applied to Work in Process Inventory
2. If actual overhead is less than applied overhead, which of the following will be true? Upon closing,
overhead account is _________ and Cost of goods sold is __________.
a. Underapplied credited
b. Underapplied debited
c. Overapplied debited
d. Overapplied credited

3. Assuming that demand is determinable, what is the objective of the economic order quantity (EOQ)
model for inventory?
a. To minimize order costs or carrying costs, whichever are higher
b. To minimize order costs or carrying costs and maximize the rate of inventory turnover
c. To minimize the total order costs and carrying costs over a period of time
d. To order sufficient quantity to economically meet the next period's demand

4. Which of the following is not true about inventory valuation methods?

a. Under FIFO method, raw materials inventory is reported at latest cost
b. In a period of declining prices, FIFO method will yield a higher profit because cost of goods
sold is assigned at lower cost
c. Under moving average method, average unit cost changes every time raw materials are acquired
d. Cost of goods sold is reported at earliest cost under FIFO method

5. A materials requisition slip showed that direct materials requested were P30,000 and indirect materials
requested were P6,000. The entry to record the transfer of materials from the storeroom is
a. Work In Process Inventory 30,000
Raw Materials Inventory 30,000
b. Direct Materials 30,000
Indirect Materials 6,000
Work in Process Inventory 36,000
c. Manufacturing Overhead 36,000
Raw Materials Inventory 36,000
d. Work In Process Inventory 30,000
Manufacturing Overhead 6,000
Raw Materials Inventory 36,000

6. The amount of factory payroll related to direct laborers that would be charged to Work in Process
includes
a. Net pay plus all the deductions like SSS, Philhealth and Pag-ibig contributions of employees
and the withholding taxes.
b. Gross pay less all the deductions like SSS, Philhealth and Pag-ibig contributions of employees
and the withholding taxes.
c. Gross pay less all the deductions like SSS, Philhealth and Pag-ibig contributions of both
employees and employer; and the withholding taxes.
 d. Net pay plus all the deductions like SSS, Philhealth and Pag-ibig contributions of both
employees and employer; and the withholding taxes.

7. The reorder point in the EOQ model is:

a. Inventory level below the order quantity
b. Level when all inventory has been used
c. Inventory level at which an order for additional units is placed
d. Number of inventories to be ordered to minimize ordering and carrying costs
8. Overtime wages, exclusive of overtime premium, paid to direct laborers should be
a. Included as part of direct labor
b. Excluded as manufacturing costs
c. Included as part of administrative costs
d. Included as part of manufacturing overhead

9. Material amounts of under-applied or over-applied overhead should be:

a. Treated as an adjustment to COGS
b. Treated as an adjustment to work in process inventory
c. Allocated to direct materials inventory, work in process inventory, finished goods inventory,
and COGS
d. Allocated to work in process inventory, finished goods inventory, and COGS

10. The following statements are provided to you:

Statement 1: In a service industry, direct materials are usually significant in amount and can be easily
traced to a cost object.

Statement 2: A predictor which has an absolute cause and effect relationship to a cost is referred to a
cost driver.
a. True, False
b. False, True
c. Both statements are true.
d. Both statements are false.

11. In relation to factory payroll, you are given the following statements:
Statement 1: In the Philippines, OT premium for a regular day is 25% of the hourly rate for work
performed in excess of 8 hours. Only the premium is charged to factory overhead, as a rule.
Statement 2: In the Philippines, night shift differential is plus 10% of the hourly rate for work between
10:00 O’clock in the evening and 6:00 O’clock in the morning. Both the basic pay and the night shift
differential for work performed during this time are charged to factory overhead.
a. True, False
b. False, True
c. Both statements are true.
d. Both statements are false.

12. In relation to cost concepts, the following statements are provided to you:
Statement 1: Product costs are expensed on the income statement when the raw materials are issued to
the production.
Statement 2: The employer’s share in SSS, PhilHealth, and Pag-ibig is considered as additional benefit to
the factory workers; hence, this is part of direct labor.
a. Statement 1 is true ; statement 2 is false.
b. Statement 1 is false ; statement 2 is true.
c. Both statements are true.
d. Both statements are false.
13. If a company used two overhead accounts (actual overhead and applied overhead), the one that would
receive the most debits would be:
a. Actual overhead
b. Applied Overhead
c. Both would receive an equal amount of debits
d. None of the above

14. When a manufacturing company has a highly automated manufacturing plant, what is probably the
most appropriate basis of applying factory overhead costs to work in process?
a. Machine hours c. Cost of materials used
b. Direct labor hours d. Direct labor cost
15. A direct labor overtime premium should be charged to a specific job when the overtime is caused by
a. the increased overall level of activity
b. customer's requirement for early completion of job
c. management's failure to include the job in the production schedule
d. management's requirement that the job be completed before the annual factory vacation
closure

16. Sampaguita Manufacturing Company uses 84,375 units of Material Y each year. The cost of placing an
order is P120 and the carrying cost for one unit of material Y is P3.00. It takes 20 days to receive the
order once placed. Assume that Sampaguita’s year is composed of 360 days. What is the reorder point?
4,687.50
17. Murphy Company uses 3,000 yards of material each day to make hats. It usually takes five days from
the time Murphy orders the material to when it is received. If Murphy’s desired safety stock is 6,000
yards, what is Murphy’s order point? 21,000

18. Expected annual usage of a particular raw material is 1,200,000 units, and standard order size is 10,000
units. The invoice cost of each unit is P145, and the cost to place one purchase order is P105. The
estimated annual order cost is: 12,600

19. Legazpi Company had an invoice for raw materials A, B, C and D is received from the Roque
Corporation. The invoice totals are: A – P20,000; B – P35,000; C – P15,000 and D – P30,000. The
freight charge on this shipment weighing 20,000 pounds is P8,000. Shipping weights for the respective
materials are 6,000; 5,400; 4,000; and 4,600 respectively. The cost per pound to be entered in the
materials ledger cards for C and D if freight is allocated using shipping weight:
A. P3.75 and P6.52
B. P3.73 and P6.88
C. P4.15 and P6.92
D. P5.25 and P9.13
 20. Under a modified wage plan, Monmon works from Monday to Saturday and earns P1.50 for each unit
she produces. However, she is guaranteed P45 per hour at the minimum. Her production this week is
as follows:

Hours Pieces
Day Worked Finished
Monday 8 200
Tuesday 8 180
Wednesday 8 175
Thursday 8 260
Friday 8 200
Saturday 4 240

How much is to be debited to Factory Overhead Control?

A. P 97.50 C. P307.50
B. P210.00 D. P517.50

21. Viy Company applies factory overhead using a percentage of direct labor cost. Costs for the year
2020 have been estimated as follows:
• Direct labor cost: 120,000
• Factory overhead: 96,000

During January 2020, costs were recorded as follows:

• Direct labor cost: 8,000
• Factory overhead costs: 7,200

What is the amount of the factory overhead variance?

a. 2,800 unfavorable
b. 800 unfavorable
c. 800 favorable
d. 2,800 favorable

Below is the Inventory Stock Card maintained by Budah Corp for the Raw Material A for the month of June
2016:
DATE RECEIPTS ISSUANCES BALANCES
JUNE UNITS UC AMOUNT UNITS UC AMOUNT UNITS UC AMOUNT
1 800 38.00 30,400.00
3 1200 40.00
4 1500
10 800 42.00
15 700
15 1500 41.00
15 1600
26 800 40.00
27 550
30 600 43.00
TOTAL

22. Using FIFO method, the raw materials ending inventory amounts to
 a. P25,800 b. P23,650 c. P55,800 d. none of these

23. Using moving average method, the total raw materials issued on June 15 amounts to
a. P94,212 b. P65,568 c. P28,644 d. P175,221

For the next two questions:

A customer brings a rush order of 6,000 units of Product Q. Hokage Company agrees to produce
these units for the customer on Saturday, for shipment on Monday. Sixty five of the direct laborers who
earn P80 per hour worked eight hours on Saturday to complete the order. Hokage Company’s regular
working days are Monday to Friday. The company’s policy on overtime is time and a half. Materials
costing P8 per unit was used on the order. The factory overhead application rate is P30 per direct labor
hour.

24. How much is the OT premium charged to direct labor?

A. P20,800 C. P 62,400
B. P41,600 D. P104,000

25. What is the selling price per unit if the gross profit is 1/3 of cost?
A. P23.38 C. P28.00
B. P26.30 D. P31.50

For the next four items:

You are assigned as payroll accountant of two laborers: Erwan – a direct laborer and Anne – an indirect
laborer. For the month of September, they worked on a rush order to finish a project, which has forced
them to render overtime hours. The following pertains to their compensation for the month of
September:

You are asked to compute for their government contributions, withholding tax, and allocate the WIP
and Overhead. Required:
26. Total Employee’s share (SSS, PHIC, and HDMF): 3,480
27. Total Net Pay (rounded to the nearest hundredths): 65,138.88
28. Amount to be allocated to WIP: 55,687.50
29. Amount to be allocated to FOH: 25,640
 For the next three questions:
Doraemon produced variety of products all of which is processed in two departments. Budget
information for the current year is as follows:

Department 1 Department 2
Budgeted OH P810,000 P789,600
Budgeted DLH 54,000 9,984
Budgeted machine hours 850 65,800

During 2017, the company produced 4,500 units. Actual cost information for each unit of
product is presented below:
Department 1 Department 2
Direct materials P 25.00 P15.00
Direct labor hours 1.5 0.5
Direct labor rate (per hour) P45.00 P 37.50
Machine Hours 0.3 1.6
OH incurred P125,000.00 P150,000.00

30. Using the plant wide rate based on machine hours, the total overhead applied is
A. P225,000 C. P172,800
B. P205,200 D. P31.50

31. Using the plant wide rate based on direct labor hours, the manufacturing cost per unit is
A. P146.50 C. P171.85
B. P147.50 D. P176.25

32. If departmental rate is used, the total manufacturing cost would be

A. P517,500 C. P773,725
B. P755,775 D. P793,125

33. Prime Company is a manufacturer of wood products, uses a predetermined factory overhead rate based
on direct labor cost. For 2016, Prime Company’s budgeted manufacturing overhead was P 9,000,000,
based on 50,000 direct labor hours and a budgeted wage rate of P90 per hour. Actual manufacturing
overhead amounted to P 9,630,000. For 2016, the overapplied manufacturing overhead was P 330,000.
The amount of actual direct labor cost for 2016 is: 4,980,000

For the next two questions:

MODCOS Corp has the following data:
Inventories: March 1 March 31
Raw material P18,000 P15,000
Work in process 9,000 6,000
Finished goods 27,000 36,000

Additional information for March:

Raw material purchased P42,000
Direct labor payroll 30,000
Direct labor rate per hour 7.50
Overhead rate per direct labor hour 10.00

34. Prime cost incurred were: 75,000.

35. Cost of Goods Manufactured was: P118,000