.

Job-order costing system

Pre-determined Overhead Rate

1.
In developing a predetermined variable factory overhead application rate, which of
the following could be used in the numerator and denominator?
1) Numerator
2) Denominator

General Feedback
1) Estimated variable factory overhead 2) Estimated machine hours

2.
A job order cost system uses a predetermined fixed factory overhead rate based on
normal activity and expected fixed cost. At the end of the year, underapplied fixed
overhead might be explained by which of the following situations?
1) Actual volume
2) Actual fixed costs

General Feedback
1) Less than normal 2) Greater than expected

Cost of Goods Sold

1.
The following information was drawn from the books of Casajeros Company:

Inventories: 8/31/Year 1 9/30/Year

1

Raw materials P? P 50,000

Work in process 80,000 95,000

Finished goods 60,000 78,000

· Raw materials purchased, 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 Year 1, P25,000.

The inventory of raw materials at August 31, Year 1 was:

General Feedback
40,000

The amount of inventory of raw materials at August 31, Year 1 is P40,000, computed
as follows:
 Cost of goods P168,000
manufactured- 9 / Year 1
Add-Work in Process, 95,000
9/30/Year 1

Total costs placed in process P263,000

Less-Work in Process,
8/31/Year 1 80,000

Total manufacturing costs P183,000

Less- Conversion costs: P168,000

Direct labor (P63,000/75%) P84,00

0
Factory overhead 63,00 147,0
0 00

Raw materials used P

36,000
Add- Raw 50,000
materials,9/30/Year 1

Raw materials available for P 86,000

use
Less-Raw materials 46,000
purchases

Raw materials inventory, P 40,000

8/31/Year 1

2.
The following inventory data relate to the Casama Company:
Ending Beginning

Raw Materials P 95,000 P110,000

Work-in-Process 70,000

80,000

Finished goods 90,000

95,000

Cost Incurred During the Period

Cost of goods available for P684,000

sale
Total Manufacturing Costs 654,000

Factory overhead 167,000

Direct materials used 193,000

The cost of goods sold during the period was?

General Feedback
589,000

The cost of goods sold is P589,000, computed as follows:

Cost of goods available for sale P684,000

Less-Finished goods, ending 95,000

Cost of goods sold during the P589

period

3.
Bataan Industries has two production departments, KLM and NOP and uses a job order
cost system. In determining manufacturing costs, Bataan applies manufacturing
overhead to production orders based on direct labor cost using departmental rates
predetermined at the beginning of the year based on the annual budget.

The 2002 budget for the two departments are as follows:

KLM NOP

Direct Materials P630,00 P 90,000

0

Direct labor 180,00 720,00

0 0
Manufacturing overhead 540,00 360,00
0 0
Actual materials and labor costs for Job No. 567 in 2002 were:

Direct Materials P22,5

00
Direct labor:

Dept. P 7,200
KLM
 Dept. 10,800
NOP 18,00
0
What is the total manufacturing costs associated with Job No. 567 for 2002?

General Feedback
67,500

The total manufacturing costs associated with Job No. 567 for 2002 is P67,500,
computed as follows:
Direct materials P 22,500

Direct labor:

Dept. KLM P 7,200

Dept. NOP
10,800 18,000

Applied manufacturing
overhead :
Dept. KLM: P
7,200 x 300%* = P
21,600

Dept. NOP:
P10,800 x 50%* =
5,400 27,000

Total Manufacturing costs

associated

with Job 567 P 67,500

* Predetermined overhead rates:
Dept. KLM = P540,000 / P180,000 = 300% of DL cost.
Dept. NOP = P360,000 / P720,000 = 50% of DL cost.

4.
Del Rosario Corporation transferred P72,000 of raw materials to its production
department in February and incurred P37,000 of conversion costs (P22,000 of
direct labor and P15,000 of overhead). At the beginning of the period, P14,000 of
inventory (material and conversion costs) was in process. At the end of the period,
P18,000 of inventory was in process.

What was the cost of goods manufactured?

General Feedback
105,000

The cost of goods manufactured is P105,000, computed as follows:

 Beginning work in P 14,000
process
Add - Costs
added in
February:

Materials P72,0
00
Conversion costs 37,0 109,000
00

Total P123,000

Less - Ending 18,000

work in process

Cost of goods P105,000

manufactured

5.
Batangas uses a job order cost system and applies factory overhead to production
orders on the basis of direct-labor cost. The overhead rates for 2002 are 200% for
department Axe and 50% for department Oxe. Job 123, started and completed during
2002, was charged with the following costs:

Department

Axe Oxe

Direct materials P25,000 P 5,000

Direct labor ? 30,000

Factory 40,000 ?
overhead

The total manufacturing costs associated with Job 123 should be:

General Feedback
135,000

The total manufacturing costs associated with Job 123 should be P135,000, computed
as follows:
Department
Axe Oxe Total

Direct P25,00 P P30,000

materials 0 5,000

Direct labor 20,00 30,000 50,000

 0*
Factory 40,00 15,000* 55,000
overhead 0 *

Total mfg. P85,00 P50,00 P135

Costs 0 0
* P40,000 / 200% = P20,000.
** P30,000 x 50% = P15,000.

6.
Selected cost data concerning the past fiscal year's operations of the Bencito
Manufacturing Company, which are presented below:
Inventories

Beginning Ending

Raw Materials P75,000 P85,000

Work-in-Process 80,000 30,000

Finished goods 90,000 110,000

Raw materials used 326,000

Total manufacturing cost

charged

to production during the

year
(including raw materials,
direct

labor, and factory overhead

applied at a rate of 60% of

direct labor cost) 686,000

Cost of goods available for 826,000

sale

Selling and general expenses 25,000

The cost of raw materials purchased during the year amounted to?

General Feedback
336,000
The amount of raw materials purchased during the year is P336,000, computed as
follows:
Raw material inventory, ending P 85,000

Add-Raw materials used 326,000

Available for use P 411,000

Less- Raw materials inventory, 75,000

beginning

Cost of raw materials purchased P 336,000

7.
Avilla Company provided the following inventory balances and manufacturing cost
data for the month of January Year 1:

Inventories 1/1/Year 1 1/31/Year 1

Direct materials P30,000 P40,000

Work in process 15,000 20,000

Finished goods 65,000 50,000

Direct materials

Work in process

Month of

January

Cost of goods manufactured P515,000

Factory overhead applied 150,000

Direct materials used 190,000

Actual factory overhead 144,000

Under Avilla's cost system, any over or under-applied overhead is closed to the cost of
goods sold account at the end of the calendar year.
What was the total amount of direct-material purchases during January Year 1?

General Feedback
200,000

The amount of direct-material purchases during January Year 1 is P200,000, computed

as follows:
Direct materials, 1/31/Year 1 P 40,000

Add-Direct materials used 190,000

Available for use 230,000

Less- Direct materials, 1/1/Year 1 30,000

Direct material purchases during January Year 1 P200

8.
De Castro Company incurred the following costs and expenses during the year:

Raw materials P 280,000

purchases

Direct labor cost 120,000

Indirect labor-
factory
75,000
Factory repairs and
maintenance
15,000
Taxes on factory
building
20,000
Depreciation,
factory building
18,000
Taxes on salesroom 12,000
and general office

Depreciation, sales
equipment
10,000

Advertising

30,000

Sales salaries

45,000

Office salaries

28,000

Utilities (60%
applicable to
factory, 25%
 to
salesroom and 15%
to office) 40,000

Beginning Ending

Inventories were:

Raw materials P 25,000 P30,000

Work in process 35,000 42,000

Finished goods 18,000 22,000

The cost of goods sold for the year was:

General Feedback
The cost of goods sold for the year is P536,000, computed as follows:

Inventories,
beginning:

Raw materials P25,00

0
Work in Process 35,00
0

Finished goods 18,0 P

00 78,000
Cost incurred
during the year:

Raw material P280,0

purchases 00
Direct labor cost 120,0
00

Factory overhead* 152, P552,0

000 00
Total cost available P630,0
00

Less-Inventories,
ending:
Raw materials P30,00
0

Work in Process 42,00

 0
Finished Goods 22,0
00 94,000

Cost of goods P536,0

sold for the year 00

* Factory Overhead:

Indirect labor - factory P75,000

Factory repairs and 15,000

maintenance
Taxes on factory building 20,000

Depreciation, factory building 18,000

Utilities (P40,000 x 60%) 24,000

Total factory overhead P152,000

9.
Catanduanes Corporation is a manufacturing company with a fiscal year which runs
from July 1 to June 30. The company uses a job order accounting system for its
production costs. A predetermined overhead rate based upon direct labor hours is
used to apply overhead to individual jobs. A flexible budget of overhead costs was
prepared for the 2000-2001 fiscal year.
Direct labor hours 100,000 120,000 140,000

Variable overhead P325,000 P390,000 P455,000

costs

Fixed overhead costs 216,000 216,000 216,000

Total overhead P541,000 P606,000 P671,000

Although the annual ideal capacity is 150,000 direct labor hours, company officials
have determined 120,000 direct labor hours to be normal capacity for the year.

The information presented below and on the next page is for November 2000. Jobs
20-50 and 20-51 were completed during November.

Inventories, November 1, 2000:

Inventories, November 1, 2000:

Raw materials and supplies P 10,500

Work-in-process (Job 20-50) 54,000

Finished goods 112,500
Materials and supplies requisitioned for production:

Job 20-50 P 45,000

Job 20-51 37,500

Job 20-52 25,500

Supplies 12,000

P120,000
Factory direct labor hours:

Job 20-50 3,500

Job 20-51 3,000

Job 20-52 2,000

8,500
Labor costs:

Direct labor wages P 51,000

Indirect labor wages (4,000 15,000

hours)

Supervisory salaries 6,000

P 72,000
Building occupancy costs(heat, light, depreciation, etc.):

Factory facilities P 6,500

Sales offices 1,500

Administrative offices 1,000

P 9,000

Purchases of raw materials and supplies:

Raw materials P135,000

Supplies 15,000

P150,000
Factory equipment costs:

Power P 4,000
Repairs and maintenance 1,500

Depreciation 1,500

Other 1,000

P 8,000

Actual factory overhead incurred during November was:

General Feedback
47,500

The actual factory overhead incurred during November was P47,500, computed as
follows:
Actual factory overhead incurred during November consisted of factory equipment
costs, factory occupancy costs (heat, light, depreciation, etc.). indirect labor wages
and supervisory salaries (P15,000 + P6,000), and supplies requisitioned for
production.
Factory equipment costs P 8,000

Factory occupancy costs 6,500

Indirect labor wages and

supervisory salaries 21,000

Supplies 12,000

Actual overhead P47,500

10.
The following inventory data relate to the Casama Company:
Ending Beginning

Raw Materials P 95,000 P110,000

Work-in-Process 70,000

80,000
Finished goods 90,000

95,000

Cost Incurred During the Period

Cost of goods available for P684,000

sale

Total Manufacturing Costs 654,000

Factory overhead 167,000

Direct materials used 193,000

Direct labor costs incurred during the period were?

General Feedback
294,000

The direct labor costs is P294,000, computed as follows:

Total manufacturing costs P654,000

Less- Direct materials used P193,000

Factory overhead 167,000 360,00

0
Direct labor costs incurred during P294,000
the year

11.
Ancayan Manufacturing Corporation makes aluminum fasteners. Among Ancayan's Year 1 manufacturing
costs were the following:

Wages and salaries:

Machine operators P80,000

Factory foremen 30,000

Machine mechanics 20,000

Materials and supplies:

Aluminum P400,000

Machine parts 18,000

Lubricants 5,000

Direct labor amounted to:

General Feedback
The direct labor cost is P80,000, the amount of salaries paid to machine operators and charged to
production .

12.
Mayon Corporation manufactures rattan furniture sets for export, using the job-order-
cost system in accounting for its costs. For the year ended December 31, 2001, you
obtained from the corporation's books and records the following information:
• Work in process, January 1, 2001 was 20% less than the work-in-process inventory
December 31, 2001.
• Total manufacturing costs added during 2001 was P900,000 based on actual direct
materials and direct labor, while manufacturing overhead was applied on actual direct
labor pesos.
• Manufacturing overhead applied to work-in-process was 72% of direct labor pesos.
Applied manufacturing overhead for the year is 25% of total manufacturing costs.
• Cost of goods manufactured, also based on actual direct materials, actual direct
labor and applied manufacturing overhead was P850,000.

Work-in-process December 31, 2001 was:

General Feedback
The ending work-in-process is P250,000, computed as follows:

Let X = Work-in-process December 31, 2001

.20X = Work-in-process January 1, 2001
Therefore:
X = P900,000 + .80X - P850,000
.20X = P50,000
X = P250,000

13.
The following information was taken from Kay Company’s accounting records for
the year ended December 31, 2018:
Increase in raw materials 15,000
inventory

Decrease in finished goods 35,000

inventory
Raw materials purchased 430,000

Direct manufacturing labor 200,000

payroll
Factory overhead 300,000

Freight-out 45,000

There was no work in process inventory at the beginning or end of the year. Kay’s
2018 cost of goods sold is

General Feedback
950,000

14.
The following information was drawn from the books of Casajeros Company:

Inventories: 8/31/Year 1 9/30/Year

1
 Raw materials P? P 50,000

Work in process 80,000 95,000

Finished goods 60,000 78,000

· Raw materials purchased, 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 Year 1, P25,000.

The cost of goods manufactured during September, Year 1 was:

General Feedback

Sales (25,000 / 12.5%) P200,000

Less- Gross profit on

sales:
Net income P25,00
0

Selling & Adm. expenses 25,00

0
50,000

Cost of goods sold P150,000

Add- FG, 9/30/Year 1

78,000
Finished goods available P228,000
for sale

Less-FG, 8/31/Year 1
60,000
Cost of goods P168,000
manufactured-9/Year 1

15.
The following inventory data relate to the Casama Company:
Ending Beginning

Raw Materials P 95,000 P110,000

Work-in-Process 80,000 70,000

Finished goods 95,000 90,000

Cost Incurred During the Period

Cost of goods available for P684,000
sale
Total Manufacturing Costs 654,000

Factory overhead 167,000

Direct materials used 193,000

Direct materials purchased during the year were?

General Feedback
P198,000

16.
De Taza Co., a manufacturer, had inventories at the beginning and end of its current
year as follows:
Beginning Ending

Raw materials P22,000 P30,000

Work in process 40,000 48,000

Finished goods 25,000 18,000

During the year the following costs and expenses were incurred:
Raw materials purchases P300,000

Direct-labor cost 120,000

Indirect factory labor

60,000
Taxes and depreciation on factory 20,000
building

Taxes and depreciation on

salesroom
and office 15,000

Salesmen's salaries 40,000

Office salaries 24,000

Utilities (60% applicable to

factory, 20%
to salesroom, and 20% to office) 50,000
De Taza' s cost of goods sold for the year is
General Feedback
521,000

The cost of goods sold is P521,000, compute as follows:

Beginning Inventories:

Raw materials P 22,000

Work-in-process
40,000

Finished goods P 87,000

25,000
Raw materials

Costs incurred during the

year:
Raw materials purchases P300,000

Direct labor costs 120,000

Factory overhead* 110,000 P530,000

Total P617,000

Less- ending inventories:

Raw materials P 30,000

Work-in-process 48,000

Finished goods 18,000 P 96,000

Cost of goods sold P521,000

* Factory Overhead:
Indirect factory labor P 60,000
Taxes and Depreciation on factory
building 20,000
Utilities (P50,000 x 60%) 30,000
Total Factory Overhead P110,000

17.
Bataan Industries has two production departments, KLM and NOP and uses a job order
cost system. In determining manufacturing costs, Bataan applies manufacturing
overhead to production orders based on direct labor cost using departmental rates
predetermined at the beginning of the year based on the annual budget.

The 2002 budget for the two departments are as follows:

KLM NOP
 Direct Materials P630,00 P 90,000
0
Direct labor 180,00 720,00
0 0

Manufacturing overhead 540,00 360,00

0 0
Actual materials and labor costs for Job No. 567 in 2002 were:

Direct Materials P22,5

00

Direct labor:

Dept. P 7,200
KLM

Dept. 10,800
NOP 18,00
0
What is the total manufacturing costs associated with Job No. 567 for 2002?

General Feedback
67,500

The total manufacturing costs associated with Job No. 567 for 2002 is P67,500,
computed as follows:
Direct materials P 22,500

Direct labor:

Dept. KLM P 7,200

Dept. NOP
10,800 18,000

Applied manufacturing
overhead :
Dept. KLM: P
7,200 x 300%* = P
21,600

Dept. NOP:
P10,800 x 50%* =
5,400 27,000

Total Manufacturing costs

associated

with Job 567 P 67,500

* Predetermined overhead rates:
 Dept. KLM = P540,000 / P180,000 = 300% of DL cost.
Dept. NOP = P360,000 / P720,000 = 50% of DL cost.

18.
Catanduanes Corporation is a manufacturing company with a fiscal year which runs
from July 1 to June 30. The company uses a job order accounting system for its
production costs. A predetermined overhead rate based upon direct labor hours is
used to apply overhead to individual jobs. A flexible budget of overhead costs was
prepared for the 2000-2001 fiscal year.
Direct labor hours 100,000 120,000 140,000

Variable overhead P325,000 P390,000 P455,000

costs
Fixed overhead costs 216,000 216,000 216,000

Total overhead P541,000 P606,000 P671,000

Although the annual ideal capacity is 150,000 direct labor hours, company officials
have determined 120,000 direct labor hours to be normal capacity for the year.

The information presented below and on the next page is for November 2000. Jobs
20-50 and 20-51 were completed during November.

Inventories, November 1, 2000:

Inventories, November 1, 2000:

Raw materials and supplies P 10,500

Work-in-process (Job 20-50) 54,000

Finished goods 112,500

Materials and supplies requisitioned for production:

Job 20-50 P 45,000

Job 20-51 37,500

Job 20-52 25,500

Supplies 12,000

P120,000
Factory direct labor hours:

Job 20-50 3,500

Job 20-51 3,000

Job 20-52 2,000

 8,500
Labor costs:

Direct labor wages P 51,000

Indirect labor wages (4,000 15,000

hours)
Supervisory salaries 6,000

P 72,000
Building occupancy costs(heat, light, depreciation, etc.):

Factory facilities P 6,500

Sales offices 1,500

Administrative offices 1,000

P 9,000

Purchases of raw materials and supplies:

Raw materials P135,000

Supplies 15,000

P150,000
Factory equipment costs:

Power P 4,000

Repairs and maintenance 1,500

Depreciation 1,500

Other 1,000

P 8,000
The predetermined overhead rate to be used to apply overhead to individual jobs
during the 2000-2001 fiscal year is:

General Feedback
P5.05 per DLH.

The predetermined overhead rate to be used to apply overhead to individual jobs

during the 2000-2001 fiscal year is P5.05 per DLH, compute as follows:
The predetermined overhead rate is the estimated total overhead divided by the
direct labor hours at normal capacity. The normal capacity for the year is 120,000
hours and the related overhead costs are P606,000. The overhead rate is therefore
P5.05 (P606,000/120,000 hours).
Note: Without prejudice to your answer to Question 1, assume the predetermined
overhead rate is P4.50 per direct labor hour. Use this amount in answer Question 2-5.

19.
Helper Corporation manufactures one product and accounts for costs by a job order
cost system. You have obtained the following information for the year ended
December 31, 2000 from the Corporation's books and records:
• Total manufacturing cost added during 2000 was P1,000,000 based on actual direct
material, actual direct labor, and factory overhead applied based on actual direct
labor pesos.
• Cost of goods manufactured was P970,000 also based on actual direct material,
actual direct labor, and applied factory overhead.
• Factory overhead was applied to work-in-process at 75% of direct labor pesos.
Applied factory overhead for the year was 27% of the total manufacturing cost.
• Beginning work-in-process inventory, January 1, was 80% of ending work-in-process
inventory, December 31.

How is the amount of overhead applied determined by cost personnel at Helper

Corporation given no direct labor cost figure?

General Feedback
Multiply 27% by total manufacturing cost

In this instance, factory overhead applied can be determined by its proportion of total
manufacturing cost. Total manufacturing cost is equal to P1,000,000. Factory
overhead is P270,000, which is 27% of P1,000,000 or of the total.

20.
Benguet Company manufactures tools to customers specifications. The following data
pertain to Job 5011 for February:
Direct materials used P4,200

Direct labor hours worked 300

Direct labor rate per hour P 8.00

Machine hours used 200

Applied factory overhead rate/machine hr. P15.00

What is the total manufacturing cost recorded on Job 5011 for February?

General Feedback
9,600

The total manufacturing cost recorded on Job 5011 for February is P 9,600, computed
as follows:

The total manufacturing costs includes direct material, direct labor and overhead.
 Direct materials used P4,200

Direct labor cost (300 hrs. x P8.00) 2,400

Applied factory overhead (200 machine

hrs. x P15.00/ machine hour) 3,000

Total manufacturing costs P 9,600

21.
The following cost data pertain to Arque Company for the month of February, Year 1:
Inventories Feb. 1/Year 1 Feb. 28/Year 1

Materials P40,000 P50,000

Work in process 25,000 35,000

Finished goods 60,000 70,000

Direct labor cost 120,000

Factory overhead 108,000

applied
Cost of goods sold 378,000
The cost of goods manufactured for February, Year 1 was:

General Feedback

Cost of Goods Sold P378,000

Add- Finished Goods, Feb. 29, Year 70,000

1

Available for sale P448,000

Less- Finished Goods, Feb. 1, Year 60,000

1

Cost of Goods Manufactured-Feb. P388,000

Year 1

22.
Astoveza Company had the following inventories at the beginning and end of March
Year 1:
March 1 March 31

Direct materials P36,000 P30,000

Work-in-process 18,000 12,000

Finished goods 54,000 72,000

The following additional manufacturing cost data were available for the month of
March:

Direct materials purchased P 84,000

Direct-labor payroll 60,000

Direct-labor rate per hour 7.50

Factory overhead rate per direct-labor hour 10.00

During March Year 1 conversion cost added to production was:

General Feedback
140,000

The amount of conversion cost added to production is P140,000, computed as follows:

Direct labor cost P 60,000

Factory overhead applied (8,000* DLH x 80,000

P10)
Conversion cost added to production-

March Year 1 P140,000

* DLH = P60,000 DL cost/P7.50 DL rate.

23.
Andaleon Company's manufacturing costs for Year 1 are shown below:
Direct materials P300,000

Direct labor 400,000

Variable factory overhead 80,000

Fixed factory overhead 50,000

Total manufacturing costs totaled:

General Feedback

Direct materials costs P300,000

Direct labor costs 400,000

Variable factory overhead 80,000

Fixed factory overhead 50,000

Total manufacturing costs P830,000

24.
Following cost data for September , Year 1, are from the books of Credito
Manufacturing Company:
Aug. 31, Year 1 Sept.30, Year 1
Opening and Closing Inventories:
Raw materials P20,000 P25,000
Work in process 30,000 36,000
Finished goods 40,000 45,000

· Direct labor cost, P60,000.

· Factory overhead, 60% of direct labor cost.
· Cost of goods sold, P125,000.
· Selling and administrative expenses, P37,000.
Sales for September, Year 1, P185,000.

The net income of the company for the month was:

General Feedback
The amount of net income for the month is P23,000, computed as follows:
Sales P185,00
0
Cost of goods sold 125,00
0

Gross profit on sales

60,000
Selling and administrative
expenses 37,000

Net income for the month P

23,000

25.
The books of Casimsiman Manufacturing Company showed the following data for
October, Year 1:

Opening and Closing Inventories:

10/31/Year 1 10/01/Year 1
Raw materials P17,200 P16,000
Work in process 24,000 16,000
Finished goods 36,000 28,000
· Direct labor cost, P32,000.
· Factory overhead, 75% of direct labor cost.
· Cost of goods sold, P112,000.
· Selling and administrative expenses, P11,200.
 · Sales for the month, P150,000.

The cost of materials purchased during the month would be?

General Feedback
The cost of materials purchased during the month is P73,200, computed as follows:

Cost of goods manufactured P120,000

Add-Work in process, Oct. 31

24,000
Total costs placed in process P144,00

Less-Work in process, October 1

16,000

Total manufacturing costs P128,000

Less- Conversion Costs:

Direct labor costs

P32,000

Factory overhead (75% of P32,000)

24,000
56,000

Direct materials used P

72,000
Add- raw materials, October 31

17,200
Raw materials available for use P
89,200

Less- Raw materials, Oct. 1

16,000

Cost of raw materials purchased P

73,200

26.
Ancayan Manufacturing Corporation makes aluminum fasteners. Among Ancayan's Year 1 manufacturing
costs were the following:

Wages and salaries:

Machine operators P80,000
Factory foremen 30,000

Machine mechanics 20,000

Materials and supplies:

Aluminum P400,000

Machine parts 18,000

Lubricants 5,000

Factory overhead amounted to:

General Feedback
This amount is computed as follows:

Wages and salaries of factory foremen P30,000

Wages and salaries of machine mechanics 20,000

Machine parts 18,000

Lubricants 5,000

Total factory overhead P73,000

27.
If the cost of goods sold for the Escalante Corp., is P105,000 and finished goods
inventory decreased by P9,000 during Year 1. What was the cost of goods
manufactured for Year 1?

General Feedback
The cost of goods manufactured during 2004 was P96,000, computed as follows:

Cost of goods manufactured = P109,000 - P9,000

= P 96,000

28.
Catanduanes Corporation is a manufacturing company with a fiscal year which runs
from July 1 to June 30. The company uses a job order accounting system for its
production costs. A predetermined overhead rate based upon direct labor hours is
used to apply overhead to individual jobs. A flexible budget of overhead costs was
prepared for the 2000-2001 fiscal year.
Direct labor hours 100,000 120,000 140,000

Variable overhead P325,000 P390,000 P455,000

costs
Fixed overhead costs 216,000 216,000 216,000

Total overhead P541,000 P606,000 P671,000

Although the annual ideal capacity is 150,000 direct labor hours, company officials
have determined 120,000 direct labor hours to be normal capacity for the year.

The information presented below and on the next page is for November 2000. Jobs
20-50 and 20-51 were completed during November.

Inventories, November 1, 2000:

Inventories, November 1, 2000:

Raw materials and supplies P 10,500

Work-in-process (Job 20-50) 54,000

Finished goods 112,500

Materials and supplies requisitioned for production:

Job 20-50 P 45,000

Job 20-51 37,500

Job 20-52 25,500

Supplies 12,000

P120,000
Factory direct labor hours:

Job 20-50 3,500

Job 20-51 3,000

Job 20-52 2,000

8,500
Labor costs:

Direct labor wages P 51,000

Indirect labor wages (4,000 15,000

hours)
Supervisory salaries 6,000

P 72,000
Building occupancy costs(heat, light, depreciation, etc.):

Factory facilities P 6,500

Sales offices 1,500

Administrative offices 1,000

P 9,000

Purchases of raw materials and supplies:

Raw materials P135,000

Supplies 15,000

P150,000
Factory equipment costs:

Power P 4,000

Repairs and maintenance 1,500

Depreciation 1,500

Other 1,000

P 8,000

The factory overhead costs applied to Job 20-52 during November were:

General Feedback
The factory overhead costs applied to Job 20-52 is P 9,000, computed as follows:
The overhead rate is given as P4.50 per hour. Job 20-52 incurred 2,000 direct labor
hours resulting in P9,000 (P4.50 x 2,000 DLH) of overhead applied to that job.

29.
The work in process of Escalante Corporation increased P11,500 from the beginning to
the end of November. Costs incurred during November were material, P12,000, labor,
P63,000 and overhead, P21,000. What was the cost of goods manufactured during
November?

General Feedback
The cost of goods manufactured during November is P84,500, computed as follows.
Costs incurred during November:

Materials P 12,000

Labor 63,000

Overhead 21,000

Total P 96,000

Less - Increase in WIP 11,500

inventory
 Cost of goods P 84,500
manufactured

30.
Helper Corporation manufactures one product and accounts for costs by a job order
cost system. You have obtained the following information for the year ended
December 31, 2000 from the Corporation's books and records.
• Total manufacturing cost added during 2000 was P1,000,000 based on actual direct
material, actual direct labor, and factory overhead applied based on actual direct
labor pesos.
• Cost of goods manufactured was P970,000 also based on actual direct material,
actual direct labor, and applied factory overhead.
• Factory overhead was applied to work-in-process at 75% of direct labor pesos.
Applied factory overhead for the year was 27% of the total manufacturing cost.
• Beginning work-in-process inventory, January 1, was 80% of ending work-in-
process inventory, December 31.

If factory overhead applied is P270,000, how much direct labor was incurred?

General Feedback
The factory overhead is applied at 75% of direct labor cost. The direct labor cost is
equal to P360,000, computed as follows:
P270,000/75% = P360,000

31.
Catanduanes Corporation is a manufacturing company with a fiscal year which runs
from July 1 to June 30. The company uses a job order accounting system for its
production costs. A predetermined overhead rate based upon direct labor hours is
used to apply overhead to individual jobs. A flexible budget of overhead costs was
prepared for the 2000-2001 fiscal year.
Direct labor hours 100,000 120,000 140,000

Variable overhead P325,000 P390,000 P455,000

costs
Fixed overhead costs 216,000 216,000 216,000

Total overhead P541,000 P606,000 P671,000

Although the annual ideal capacity is 150,000 direct labor hours, company officials
have determined 120,000 direct labor hours to be normal capacity for the year.

The information presented below and on the next page is for November 2000. Jobs
20-50 and 20-51 were completed during November.

Inventories, November 1, 2000:

Inventories, November 1, 2000:

Raw materials and supplies P 10,500

Work-in-process (Job 20-50) 54,000

Finished goods 112,500

Materials and supplies requisitioned for production:

Job 20-50 P 45,000

Job 20-51 37,500

Job 20-52 25,500

Supplies 12,000

P120,000
Factory direct labor hours:

Job 20-50 3,500

Job 20-51 3,000

Job 20-52 2,000

8,500
Labor costs:

Direct labor wages P 51,000

Indirect labor wages (4,000 15,000

hours)
Supervisory salaries 6,000

P 72,000
Building occupancy costs(heat, light, depreciation, etc.):

Factory facilities P 6,500

Sales offices 1,500

Administrative offices 1,000

P 9,000

Purchases of raw materials and supplies:

Raw materials P135,000

Supplies 15,000
 P150,000
Factory equipment costs:

Power P 4,000

Repairs and maintenance 1,500

Depreciation 1,500

Other 1,000

P 8,000
The total cost of Job 20-50 is:

General Feedback
135,750

The total cost of Job 20-50 is P135,750, computed as follows:

Job 20-50 was completed during November after having been started in a previous
period (beginning WIP was P54,000). During the period, P45,000 in material costs
were added. Additionally, direct labor was incurred at the rate of P6.00 per hour
(P51,000/8,500 total DLH). Direct labor cost for November for Job 20-50 was thus
P21,000 (P6.00 x 3,500 DLH). Overhead applied was P15,750 (given overhead rate
of P4.50 x 3,500 DLH). Total cost was P135,750 (P54,000 + P45,000 + P21,000 +
P15,750).

32.
The following information was drawn from the books of Casajeros Company:

Inventories: 8/31/Year 1 9/30/Year 1

Raw materials P? P 50,000

Work in process 80,000 95,000

Finished goods 60,000 78,000

· Raw materials purchased, 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 Year 1, P25,000.
The cost of goods sold for September, Year 1 was:

General Feedback
The cost of goods sold is P150,000, computed as follows:
Finished goods, 8/31/Year 1 P 60,000

Add-Cost of goods manufactured 168,000

Finished goods available for sale P228,000

Less-Finished goods, 9/30/Year 1 78,000

 Cost of goods sold for September Year 1 P150,000

33.
The following cost data pertain to Arque Company for the month of February, Year 1:
Inventories Feb. 1/Year 1 Feb. 28/Year 1

Materials P40,000 P50,000

Work in process 25,000 35,000

Finished goods 60,000 70,000

Direct labor cost 120,000

Factory overhead 108,000

applied

Cost of goods sold 378,000

The total amount of direct material purchases during February, Year 1 was:

General Feedback

Cost of goods manufactured - Feb. P338,000

Year 1
Add - Work in Process, February 29, 35,000
Year 1

Total costs placed in process P423,000

Less-Work in Process, February 1, Year 25,000

1
Total manufacturing costs P398,000

Less-Conversion costs:

Direct labor cost P120,000

Factory overhead 108,000 228,000

Direct materials used P170,000

Add-Materials, February 29, Year 1 50,000

Materials available for use P220,000

Less-Materials, February 1, Year 1 40,000

Direct materials purchases-February P180,000

Year 1

34.
Andaleon Company's manufacturing costs for Year 1 are shown below:
Direct materials P300,000

Direct labor 400,000

Variable factory overhead 80,000

Fixed factory overhead 50,000

Prime costs totaled:

General Feedback
The amount of prime cost is P700,000, computed as follows:
Direct Material Cost P300,000

Direct Labor Cost 400,000

Total Prime Cost P700,000

35.
The following information pertaining to Arp Co.’s manufacturing operations:
Inventories 3/1/1 3/31
8 /18

Direct materials 36,0 30,0

00 00
Work in process 18,0 12,0
00 00

Finished goods 54,0 72,0

00 00

Additional information for the month of March 2018:

Direct materials purchased 84,000
Direct manufacturing labor payroll 60,000
Direct manufacturing labor rate per hour 7.50
Factory overhead rate per direct labor hour 10.00

For the month of March 2018, cost of goods manufactured was

General Feedback
236,000

35.
Aurora Corporation uses a job order cost system and has two production departments,
L and O. Budgeted manufacturing costs for 2000 are as follows:
Dept. L Dept. O

Direct materials P700,000 P100,000

 Direct labor 200,000 800,000

Manufacturing 600,000 400,000

overhead

The actual material and labor costs charged to Job No. 123 in 2000 were as follows:
Direct P 25,000
materials

Direct
labor
Dept. L P 8,000

Dept. O 20,000
12,000

Aurora applies manufacturing overhead to production orders on the basis of direct

labor cost using departmental rates predetermined at the beginning of the year based
on the annual budget.

The total manufacturing cost associated with Job No. 123 for 2000 should be?

General Feedback
The total manufacturing cost associated with Job No. 123 for 2000 is P75,000,
computed as follows:
Direct P
materials 25,000
Direct labor

Dept. L P 8,000

Dept. O
12,000 20,000

36.
Selected cost data concerning the past fiscal year's operations of the Bencito
Manufacturing Company, which are presented below:
Inventories

Beginning Ending

Raw Materials P75,000 P85,000

Work-in-Process 80,000 30,000

Finished goods 90,000 110,000

Raw materials used 326,000

Total manufacturing cost
charged

to production during
the year
(including raw materials,
direct

labor, and factory

overhead
applied at a rate of 60%
of

direct labor cost) 686,000

Cost of goods available for 826,000

sale

Selling and general 25,000

expenses

Direct labor costs charged to production during the year amounted to?

General Feedback
The direct labor costs charged to production is P225,000, computed as follows:

Total manufacturing costs P686,000

Raw materials used 326,000
Factory overhead applied 60% of direct labor
Let X = Direct labor costs
X = P686,000 - P326,000 - .60X
1.60X = P360,000
X = P225,000

37.
Following cost data for September , Year 1, are from the books of Credito
Manufacturing Company:
Aug. 31, Year 1 Sept.30, Year 1
Opening and Closing Inventories:
Raw materials P20,000 P25,000
Work in process 30,000 36,000
Finished goods 40,000 45,000

· Direct labor cost, P60,000.

· Factory overhead, 60% of direct labor cost.
· Cost of goods sold, P125,000.
 · Selling and administrative expenses, P37,000.
· Sales for September, Year 1, P185,000.

The cost of goods manufactured during the month was :

General Feedback
The cost of goods manufactured during the month is P130,000, computed as follows:
Cost of goods sold P125,000

Add-Finished goods, September 30 45,000

Finished goods available for sale P170,000

Less- Finished goods, August 31 40,000

Cost of goods manufactured P130,000

38.
Catanduanes Corporation is a manufacturing company with a fiscal year which runs
from July 1 to June 30. The company uses a job order accounting system for its
production costs. A predetermined overhead rate based upon direct labor hours is
used to apply overhead to individual jobs. A flexible budget of overhead costs was
prepared for the 2000-2001 fiscal year.
Direct labor hours 100,000 120,000 140,000

Variable overhead P325,000 P390,000 P455,000

costs
Fixed overhead costs 216,000 216,000 216,000

Total overhead P541,000 P606,000 P671,000

Although the annual ideal capacity is 150,000 direct labor hours, company officials
have determined 120,000 direct labor hours to be normal capacity for the year.

The information presented below and on the next page is for November 2000. Jobs
20-50 and 20-51 were completed during November.

Inventories, November 1, 2000:

Inventories, November 1, 2000:

Raw materials and supplies P 10,500

Work-in-process (Job 20-50) 54,000

Finished goods 112,500

Materials and supplies requisitioned for production:

Job 20-50 P 45,000

Job 20-51 37,500

Job 20-52 25,500

Supplies 12,000

P120,000
Factory direct labor hours:

Job 20-50 3,500

Job 20-51 3,000

Job 20-52 2,000

8,500
Labor costs:

Direct labor wages P 51,000

Indirect labor wages (4,000 15,000

hours)

Supervisory salaries 6,000

P 72,000
Building occupancy costs(heat, light, depreciation, etc.):

Factory facilities P 6,500

Sales offices 1,500

Administrative offices 1,000

P 9,000

Purchases of raw materials and supplies:

Raw materials P135,000

Supplies 15,000

P150,000
Factory equipment costs:

Power P 4,000

Repairs and maintenance 1,500

Depreciation 1,500

Other 1,000
 P 8,000

The total amount of overhead applied to jobs during November was:

General Feedback
The total amount of overhead applied to jobs during November was P38,250,
computed as follows:
During November, 8,500 direct labor hours were incurred. The overhead
application rate is given as P4.50 per hour. Thus, the total overhead applied was
P38,250 (P4.50 x 8,500 DLH).

39.
Selected cost data concerning the past fiscal year's operations of the Bencito
Manufacturing Company, which are presented below:
Inventories

Beginning Ending

Raw Materials P75,000 P85,000

Work-in-Process 80,000 30,000

Finished goods 90,000 110,000

Raw materials used 326,000

Total manufacturing cost

charged
to production during
the year

(including raw materials,

direct
labor, and factory
overhead

applied at a rate of 60%

of
direct labor cost) 686,000

Cost of goods available for 826,000

sale
Selling and general 25,000
expenses
The cost of goods sold during the year was

General Feedback
The cost of goods sold is P716,000, computed as follows:

CGS = Goods available for sale - Ending FG inventory

= P826,000 - P110,000
= P716,000

40.
Avilla Company provided the following inventory balances and manufacturing cost
data for the month of January Year 1:

Inventories 1/1/Year 1/31/Year

1 1
Direct materials P30,000 P40,000

Work in process 15,000 20,000

Finished goods 65,000 50,000

Direct materials

Work in process

Month of

January

Cost of goods P515,00

manufactured 0
Factory overhead 150,00
applied 0

Direct materials used 190,00

0
Actual factory 144,00
overhead 0

Under Avilla's cost system, any over or under-applied overhead is closed to the cost of
goods sold account at the end of the calendar year.
How much direct-labor cost was incurred during January Year 1?

General Feedback
The direct labor cost incurred during the month is P180,000, computed as follows:
Cost of goods manufactured P515,000

Add- Work in process, January 31,

Year 1 20,000

Total costs placed in process P535,000

Less-WIP, January 1, Year 1

15,000

Total manufacturing costs P520,000

Less: Direct materials used P190,000

Factory overhead applied 340,000

150,000

Direct labor cost incurred during P180,000

January Year 1

41.
Selected cost data concerning the past fiscal year's operations of the Bencito
Manufacturing Company, which are presented below:
Inventories

Beginning Ending

Raw Materials P75,000 P85,000

Work-in-Process 80,000 30,000

Finished goods 90,000 110,000

Raw materials used 326,000

Total manufacturing cost

charged
to production during
the year

(including raw materials,

direct
labor, and factory
overhead

applied at a rate of 60%

of
direct labor cost) 686,000

Cost of goods available for 826,000

sale
Selling and general 25,000
expenses
The cost of goods manufactured during the year was?

General Feedback
The cost of goods manufactured is P736,000, computed as follows:

CGM = Cost of goods available for sale - Beginning FG

= P826,000 - P90,000
= P736,000

42.
Helper Corporation manufactures one product and accounts for costs by a job order
cost system. You have obtained the following information for the year ended
December 31, 2000 from the Corporation's books and records:
• Total manufacturing cost added during 2000 was P1,000,000 based on actual direct
material, actual direct labor, and factory overhead applied based on actual direct
labor pesos.
• Cost of goods manufactured was P970,000 also based on actual direct material,
actual direct labor, and applied factory overhead.
• Factory overhead was applied to work-in-process at 75% of direct labor pesos.
Applied factory overhead for the year was 27% of the total manufacturing cost.
• Beginning work-in-process inventory, January 1, was 80% of ending work-in-process
inventory, December 31.

What is the ending work-in-process inventory?

General Feedback
The amount of ending work-in-process inventory is P150,000, computed as follows:

Let X = Work in Process, ending

Therefore: X = P1,000,000 + .80X - P970,000
.20X = P1,000,000 - P970,000
.20X = P30,000
X = P150,000

Over and Under Applied Overhead

1.
At the end of the last fiscal year, Aiza Company had the following account
balances:

Overapplied overhead 6,000

Cost of Goods Sold 980,00

0
 Work in Process 38,000
Inventory
Finished Goods 82,000
Inventory

If the overapplied overhead is allocated inventory accounts, the final balance in

Cost of Goods Sold is:

General Feedback
974,655.

2.
Avilla Company provided the following inventory balances and manufacturing cost
data for the month of January Year 1:

Inventories 1/1/Year 1 1/31/Year 1

Direct materials P30,000 P40,000

Work in process 15,000 20,000

Finished goods 65,000 50,000

Month of

January

Cost of goods P515,000

manufactured
Factory overhead 150,000
applied

Direct materials used 190,000

Actual factory 144,000

overhead

Under Avilla's cost system, any over or under-applied overhead is closed to the cost of goods sold
account at the end of the calendar year.
What would cost of goods sold be if under-or over-applied overhead were allocated to inventories and
cost of goods sold?

General Feedback
The cost of goods sold if under or over-applied overhead were allocated to
inventories and cost of goods sold is P524,700, computed as follows:

Fraction Over-applied
Cost Allocation OH-Allocated
WIP inventory P20,000 20/600 P 200
Finished goods
 Inventory 50,000 50/600 P 500
Cost of goods sold 530,000 5,300
P600,000 P 6,000

Cost of goods sold-unadjusted P530,000

Less-Over-applied overhead 5,300
Cost of goods sold-adjusted P524,700

3.
Hamilton Company uses job order costing. Factory overhead is applied to
production at a predetermined rate of 150% of direct-labor cost. Any over-or
under-applied factory overhead is closed to the cost of goods sold account at the
end of each month. Additional information is available as follows:
Job 101 was the only job in process at January 31, 2002, with accumulated costs as follows:
Direct materials P4,000

Direct labor 2,000

Applied factory overhead 3,000

P9,000

Ø Jobs 102, 103, and 104, were started during February.

Ø Direct materials requisitions for February totaled P26,000.
Ø Direct-labor cost of P20,000 was incurred for February.
Ø Actual factory overhead was P32,000 for February.
The only job still in process at February 28, 2002, was Job 104, with costs of P2,800 for direct materials
and P1,800 for direct labor.
The cost of goods manufactured for February 2002 was:

General Feedback
The cost of goods manufactured for February 2002 is P77,700, computed as
follows:

Work in process, Feb. 1 P 9,000

Add: Manufacturing
costs-February:

Direct materials P26,00

0

Direct labor 20,00

0

Applied OH

(P20,000 x 30,00 76,000

150%) 0

Total costs placed in P85,00

process 0

Less-Work in process,
Feb. 28:

Direct materials P 2,800

Direct labor 1,800

Applied OH

(P1,800 x 150%) 2,700 7,300

Cost of goods P77,70

manufactured- 0
February

4.
Avilla Company provided the following inventory balances and manufacturing cost
data for the month of January Year 1:

Inventories 1/1/Year 1 1/31/Year 1

Direct materials P30,000 P40,000

Work in process 15,000 20,000

Finished goods 65,000 50,000

Month of

January

Cost of goods P515,000

manufactured

Factory overhead 150,000

applied
Direct materials used 190,000

Actual factory 144,000

overhead

Under Avilla's cost system, any over or under-applied overhead is closed to the cost of
goods sold account at the end of the calendar year.
What would cost of goods sold be if under-or over-applied overhead were closed to cost of goods sold?

General Feedback
Choice 1

The cost of goods sold if under or over-applied overhead were closed to cost of goods sold is P524,000,
computed as follows:

Finished goods, 1/1/Year 1 P 65,000

Add-Cost of goods manufactured 515,000

Available for sale P580,000

Less-Finished goods, 1/31/Year 1

50,000

Cost of goods sold - unadjusted P530,000

Less- Over-applied factory

overhead:

Applied P150,000

Actual 144,000 6,000

Cost of goods sold- adjusted P524,000

5.
Worley Company has under-applied overhead of P45,000 for the year ended December 31, 2002.
Before disposition of the under-applied overhead, selected December 31, 2002, balances from Worley's
accounting records are as follows:

Sales P1,200,000

Cost of goods sold 720,000

Inventories:

Direct materials 36,000

Work-in-process 54,000

Finished goods 90,000

Under Worley's cost accounting system, over or underapplied overhead is allocated
to appropriate inventories and cost of goods sold based on year-end balances.

It its 2002 income statement, Worley should report cost of goods sold of

General Feedback
The cost of goods sold that Worley should report in its 2002 income statement is
P757,500, computed as follows:

Cost of goods sold before adjustment P720,000

Add--Underapplied overhead applicable
to cost of goods sold
P720,000
-------------------------------------- x P45,000 = 37,500
P720,000 + P54,000 + P90,000
Cost of goods sold after adjustment P757,500

6.
Canon Cannery, Inc. estimated its factory overhead at P510,000 for 2001, based on a normal
capacity of 100,000 direct labor hours. Standard direct labor hours for the year totaled
105,000, while the factory overhead control account, at the end of the year showed a balance
of P540,000. How much was the under-applied factory overhead for 2001?

General Feedback
The under-applied factory overhead for 2001 was P4,500, computed as follows:
Under applied overhead is the difference between the actual overhead and the applied
overhead.

Overhead rate = Budgeted FOH / Standard

DLH

= P510,000 / 105,000

= P5.10/DLH

Actual factory overhead

Actual factory overhead

(105,000 DLH x 535,500

P5.10/DLH)

Underapplied factory P
overhead
4,500

7.
Hamilton Company uses job order costing. Factory overhead is applied to
production at a predetermined rate of 150% of direct-labor cost. Any over-or
under-applied factory overhead is closed to the cost of goods sold account at the
end of each month. Additional information is available as follows:
Job 101 was the only job in process at January 31, 2002, with accumulated costs as follows:

Direct materials P4,000.

Direct labor 2,000.

Applied factory 3,000.

overhead

P9,000.
Ø Jobs 102, 103, and 104, were started during February.
Ø Direct materials requisitions for February totaled P26,000.
Ø Direct-labor cost of P20,000 was incurred for February.
Ø Actual factory overhead was P32,000 for February.
The only job still in process at February 28, 2002, was Job 104, with costs of P2,800 for direct materials
and P1,800 for direct labor.

Over-or under-applied factory overhead should be closed to the cost of goods sold account at February
28, 2002, in the amount of ?

General Feedback
The difference between the actual factory overhead incurred and the applied factory overhead is the
over-or-under-applied factory overhead.

Actual factory overhead P32,000

incurred

Less-Applied OH (P20,000 x 30,000

150%)

Under-applied overhead P 2,000

8.
The Carlo Company budgeted Department A's overhead at P255,000 for the period based on a
budgeted volume of 100,000 direct labor hours. At the end of the period the factory overhead control
for Department A had a balance of P270,000; actual direct labor hours were 105,000. What was the
over-or under -applied overhead for the period?

Incurred overhead P270,000

Applied overhead (105,000 DLH x 267,750

P2.55)

Underapplied overhead P

2,250

General Feedback
The over- or (under) -applied overhead was P(2,250), computed as follows:
Over- or underapplied overhead is determined by comparing actual overhead incurred
with overhead applied based upon the predetermined overhead rate. The predetermined overhead rate
is P2.55/hour (budgeted overhead of P255,000/budgeted volume of 100,000direct labor hours).

9.
At the end of the last fiscal year, Roberts Company had the following account
balances:

Overapplied 6,00
overhead 0
Cost of Goods Sold 980,0
00

Work in Process 38,0

Inventory 00
Finished Goods 82,0
 Inventory 00

If the most common treatment of assigning overapplied overhead were used, the
final balance in Cost of Goods Sold is:

General Feedback
974,000.

10.
At the end of the last fiscal year, Bulacan Company had the following account
balances:

Over-applied overhead P 1,000

Cost of goods sold 980,000
Work-in-process inventory 38,000
Finished goods inventory 82,000

The most common treatment of the over-applied overhead would be to:

General Feedback
Credit it to cost of goods sold

While the theoretically preferable treatment is to allocate overapplied overhead among cost of goods
sold, work-in-process, and finished goods inventory, the common practice is to credit cost of goods
sold, thereby fully recognizing the overapplied overhead in the current period.

11.
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 600,000 550,000
Factory overhead costs P 720,000 P 680,000

The factory overhead for Woodman for the year is:

General Feedback
The factory overhead for Woodman during the year is underapplied by P20,000,
computed as follows:

Budgeted FOH costs, P720,000

Overhead application rate = --------------------------------------
Budgeted DLH , 600,000
= P1.20/DLH

Actual factory overhead costs P 680,000

Less-- Applied factory overhead
(550,000 DLH x P1.20/DLH) 660,000
Underapplied factory overhead P 20,000

12.
 The Bohol Company uses a predetermined overhead rate. Bohol made the
following budget at the beginning of the year:

Direct labor cost P12,000

Factory overhead 25,000
Direct labor hours 9,000
Machine hours 1,500
During the month of January, the cost sheet for order number 107
indicates P20 of raw materials, P50 of direct labor, 10 hours of direct labor, 5
machine hours. Order number 107 consists of 49 units of product. Bohol
applied overhead based on direct labor cost.

What amount of overhead should be applied to order number 107?

General Feedback
The amount of overhead that should be applied to order number 107 is P104.17,
computed as follows:
The company applies overhead based on direct labor cost.
Budgeted FOH, P25,000
Overhead rate = ------------------------------ = 208- 1/3 %
Budgeted DLC, P12,000 of DLC.
Overhead applied to
order number 107= P50.00 x 208- 1/3 %
= P104.17

13.
At the end of the last fiscal year, Bulacan Company had the following account
balances:

Over-applied overhead P 1,000

Cost of goods sold 980,000
Work-in-process inventory 38,000
Finished goods inventory 82,000

The most common treatment of the over-applied overhead would be to:

General Feedback
Credit it to cost of goods sold

While the theoretically preferable treatment is to allocate overapplied overhead among cost of goods
sold, work-in-process, and finished goods inventory, the common practice is to credit cost of goods
sold, thereby fully recognizing the overapplied overhead in the current period.

14.
Hamilton Company uses job order costing. Factory overhead is applied to
production at a predetermined rate of 150% of direct-labor cost. Any over-or
under-applied factory overhead is closed to the cost of goods sold account at the
end of each month. Additional information is available as follows:
Job 101 was the only job in process at January 31, 2002, with accumulated costs as follows:
Direct materials P4,000

Direct labor 2,000

Applied factory overhead 3,000

P9,000

Ø Jobs 102, 103, and 104, were started during February.

Ø Direct materials requisitions for February totaled P26,000.
Ø Direct-labor cost of P20,000 was incurred for February.
Ø Actual factory overhead was P32,000 for February.
The only job still in process at February 28, 2002, was Job 104, with costs of P2,800 for direct materials
and P1,800 for direct labor.
The cost of goods manufactured for February 2002 was:

General Feedback
The cost of goods manufactured for February 2002 is P77,700, computed as
follows:

Work in process, Feb. 1 P 9,000

Add: Manufacturing
costs-February:

Direct materials P26,00

0

Direct labor 20,00

0

Applied OH

(P20,000 x 30,00 76,000

150%) 0

Total costs placed in P85,00

process 0

Less-Work in process,
Feb. 28:

Direct materials P 2,800

Direct labor 1,800

Applied OH

(P1,800 x 150%) 2,700 7,300

Cost of goods P77,70

manufactured- 0
February

15.
Canon Cannery, Inc. estimated its factory overhead at P510,000 for 2001, based on a normal capacity
of 100,000 direct labor hours. Standard direct labor hours for the year totaled 105,000, while the
factory overhead control account, at the end of the year showed a balance of P540,000. How much
was the under-applied factory overhead for 2001?

General Feedback
The under-applied factory overhead for 2001 was P4,500, computed as follows:
Under applied overhead is the difference between the actual overhead and the applied
overhead.

Overhead rate = Budgeted FOH / Standard

DLH

= P510,000 / 105,000

= P5.10/DLH

Actual factory overhead

Actual factory overhead

(105,000 DLH x 535,500

P5.10/DLH)

Underapplied factory P
overhead
4,500

16.
At the end of the last fiscal year, Aiza Company had the following account
balances:

Overapplied 6,00
overhead 0

Cost of Goods Sold 980,0

00
Work in Process 38,0
Inventory 00

Finished Goods 82,0

Inventory 00

If the overapplied overhead is allocated inventory accounts, the final balance in

Cost of Goods Sold is:

General Feedback
974,655.

Spoiled output units

1.
In a job order costing system, the net cost of normal spoilage is equal to
General Feedback
the cost of spoiled work minus the estimated disposal value.

2.
Tope Company manufactures electrical drills to the exact specifications of various
costumers. During April 2018, Job 403 for the production of 1,100 drills was
completed at the following costs per unit:
Direct materials P 10

Direct labor 8

Applied factory 12
overhead

Total P 30
Final inspection of Job 403 disclosed 100 spoiled units which were sold to a jobber
for P1,500. What would be the unit cost of the good units produced on Job 403?

General Feedback
P31.5

Defective output units

1.
Simpson Company manufactures electrical drills to the exact specifications of
various costumers. During May 2018, Job 404 for the production of 1,100 drills was
completed at the following costs per unit:
Direct P
materials 10
Direct labor

8
Applied
factory 12
overhead

Total P
30
Final inspection of Job 404 disclosed 50 defective whiche were reworked at a total
cost of P500. What would be the unit cost of the good units produced on Job 404?

General Feedback
P30.45

2.
A unit that is rejected at a quality control inspection point, but that can be reworked
and sold, is referred to as a

General Feedback
defective unit.

Labor Cost details

1.
In job order costing, payroll taxes paid by the employer for factory employees are
commonly accounted for as

General Feedback
manufacturing overhead cost.

2.
Evan’s Enterprises operates its factory on a two-shift basis and pays a late-shift
differential of 15 percent above the regular wage rate of P18 per hour. The
company also pays a premium of 50 percent for overtime work. During 2018, work
occurred in the following categories:

Number of hours worked during the regular shift 10,000

Number of overtime hours for regular shift workers 300
Number of hours worked during the late shift 6,000

Compute the amount of labor-related cost to assign to factory overhead.

General Feedback
P18,900

Overhead Allocation of Service Departments

1.
Pomelo Company has two service departments (1 and 2) and two operating
(producing) departments (A and B). data provided are as follows:
Service Operating
Departments Departments

1 2 A B

Direct costs P150 P300 P5,000 P6,000

Services performed by 40% 40% 20%

Department 1
Services performed by 205 70% 10%
Department 2

Assuming the direct method is used to allocate service department costs, What is
the service department cost allocated to Department B?

General Feedback
P87.50

2.
Parat College allocates support department costs to its individual schools using the
step method. Information for May 2018 is as follows:
Support
departments
Mainte Power
nance

Costs incurred 99,0 54,0

00 00
Service percentages
provided to:

Maintenance -- 10%

Power 20 --
%

School of 30% 20
Education %
School of 50% 70
Technology %
What is the amount of May 2018 support department costs allocated to the School
of Education?

General Feedback
46,100

Process costing system

General Concepts

1.
Process costing techniques should be used in assigning costs to products
General Feedback
If a product is composed of mass-produced homogeneous units.

2.
Transferred-in cost represents the cost from

General Feedback
All prior departments.

3.
If the FIFO method were being used, how would the table of data on the preceding
page differ?

General Feedback
Work that was completed last period in the beginning work-in-process would be deleted from the
equivalent unit of production data, and costs incurred last period in beginning work-in-process would be
deleted from the cost data

In comparison with the weighted average, the FIFO method only considers work done and costs
incurred this period. The weighted average method averages the costs incurred last period that
remain in beginning work in process with the costs incurred this period. Accordingly, the table of
data computing equivalent unit of production under the weighted average method would be modified
by eliminating equivalent unit of production completed last period and also last period's costs in
beginning work-in-process.

Losses in Production

1.
When the cost of lost units must be assigned, and those same units must be included
in an equivalent unit schedule, these units are considered

General Feedback
abnormal and continuous.

2.
Colours Company adds materials at the beginning of the process in Department
A. Information concerning the materials used in April production is as follows:
Units
Work-in-process at April 1 10,000
Started during April 50,000
Completed and transferred to next
department during April 36,000
Normal spoilage incurred 3,000
Abnormal spoilage incurred 5,000
Work-in-process at April 30 16,000

Under Colours' cost accounting system, costs of normal spoilage are treated as a part of
the costs of the good units produced. The costs of abnormal spoilage are charged to factory overhead,
however. Using the weighted average method, what are the equivalent units of production (EUP) for
the materials unit cost calculation for the month of April?

General Feedback
The company uses the weighted average method of process costing. Hence,
previous and current work are commingled. Materials are added at the beginning of
the process. Normal spoilage is absorbed by the good units produced, and
abnormal spoilage is charged to factory overhead. Consequently, EUP are
calculated for the abnormal spoilage but not for normal spoilage.
Work Materials
Units Done EUP
Completed and transferred 36,000 100% 36,000
WIP-ending 5,000 100% 16,000
Normal spoilage 3,000 -- --
Abnormal spoilage 5,000 100% 5,000
Total EUP 57,000
3.
The Forming Department is the first of a two-stage production process. Spoilage is
identified when the units have completed the Forming process. Costs of spoiled
units are assigned to units completed and transferred to the second department in
the period spoilage is identified. The following information concerns Forming’s
conversion costs in May 2018:
Units Conversi
on costs

Beginning work in 2,00 10,000

process (50% 0
complete)
Units started during 8,00 75,500
May 0

Spoilage—normal 500

Units completed and 7,00

transferred 0

Ending work in process 2,50

(80% complete) 0

Using the weighted-average method, what was Forming’s conversion cost

transferred to the second production department?

General Feedback
67,500

4.
Lee Company adds materials at the beginning of the process in department M.
Data concerning the materials used in March 2000 production are as follows:
Units
Work in process at March 1 16,000
 Started during March 34,000
Completed and transferred to next
department during March 36,000
Normal spoilage incurred 4,000
Work in process at March 31 10,000

Using the weighted average method, the equivalent units for the materials unit cost
calculation are:

General Feedback
Materials are added at the beginning of the process. Normal spoilage is absorbed
by the good units. All units completed and in ending WIP are 100% complete with
respect to materials. Thus, the EUP for materials equals 46,000, computed as
follows:

Units completed and transferred 36,000

Work-in-process 10,000
Equivalent production (in units) 46,000

Quantity Schedule

1.
Beginning work-in-process was 60% complete as to conversion costs, and ending
work-in-process was 45% complete as to conversion costs. The peso amount of the
conversion cost included in ending work-in-process (using the weighted average
method) is determined by multiplying the average unit conversion costs by what
percentage of the total units in ending work-in-process? (AICPA, adapted)

General Feedback
45%

Equivalent units of conversion costs in ending WIP inventory using the weighted average method are
computed as percentage completed (45%) in ending WIP inventory times total number of units in
ending WIP inventory

2.
A company which uses FIFO cost system furnished you the following information:
● Opening inventory consisting of 1,000 units 80 percent complete as to materials
and 30 percent complete as to conversion work.
● 11,.000 units completed and transferred.
● No lost units.
● Closing inventory of 900 units, 40 percent complete as to materials and 20
percent complete as to conversion.

Costs allocated to the goods transferred out amounted to:

· Total cost of the opening inventory before completion was P8,000.

· Current unit costs: materials, P2; conversion, P8.
General Feedback
Cost allocated to the goods transferred out is equal P114,000 computed as
follows:

Opening inventory; finished

and transferred (1,000 units):
Cost, last month P 8,000
Cost, last month:
Materials : 200 EUP x P2 = 400
Conversion: 700 EUP x P8 = 5,600 P14,000
Started, finished and transferred:
Materials : 10,000 EUP x P2 = P20,000
Conversion: 10,000 EUP x P8 = 80,000 100,000
Total costs allocated to goods transferred out P114,000

3.
A company which uses FIFO cost system furnished you the following information:
· Opening inventory consisting of 1,000 units 80 percent complete as to
materials and 30 percent complete as to conversion work.
· 11,.000 units completed and transferred.
· No lost units.
· Closing inventory of 900 units, 40 percent complete as to materials and 20
percent complete as to conversion.
· Total cost of the opening inventory before completion was P8,000.
Current unit costs: materials, P2; conversion, P8

The total current materials costs amounted to:

(CMA, adapted)

General Feedback
To determine the total current materials costs, the equivalent production for
materials should be multiplied by the current unit cost for materials. When using
the FIFO method of process costing, equivalent units of production for a period
include only the work done that period and exclude any work done in a prior
period. The equivalent units of production for materials for the period is
calculated below:
Units % EUP
WIP - opening; finished
and transferred 1,000 20 200
Started, finished &
transferred 10,000 100 10,000
WIP - closing 900 40 360
Equivalent units of production 10,560

Total current materials costs = 10,560 EUP x P2

= P21,120

4.
 A company which uses FIFO cost system furnished you the following information:
· Opening inventory consisting of 1,000 units 80 percent complete as to
materials and 30 percent complete as to conversion work.
· 11,.000 units completed and transferred.
· No lost units.
· Closing inventory of 900 units, 40 percent complete as to materials and 20
percent complete as to conversion.
· Total cost of the opening inventory before completion was P8,000.
Current unit costs: materials, P2; conversion, P8

Costs allocated to the goods transferred out amounted to:

General Feedback
Cost allocated to the goods transferred out is equal P114,000 computed as
follows:

Opening inventory; finished

and transferred (1,000 units):
Cost, last month P 8,000
Cost, last month:
Materials : 200 EUP x P2 = 400
Conversion: 700 EUP x P8 = 5,600 P14,000
Started, finished and transferred:
Materials : 10,000 EUP x P2 = P20,000
Conversion: 10,000 EUP x P8 = 80,000 100,000
Total costs allocated to goods transferred out P114,000

5.
A company which uses FIFO cost system furnished you the following information:
● Opening inventory consisting of 1,000 units 80 percent complete as to materials
and 30 percent complete as to conversion work.
● 11,.000 units completed and transferred.
● No lost units.
● Closing inventory of 900 units, 40 percent complete as to materials and 20
percent complete as to conversion.
● Total cost of the opening inventory before completion was P8,000.
● Current unit costs: materials, P2; conversion, P8.

Total current conversion costs amounted to:

General Feedback
To determine the total current conversion costs, the equivalent production for
conversion should be multiplied by the current unit cost for conversion. When
using the FIFO method of process costing, equivalent units of production for a
period include only the work done that period and exclude any work done in a
prior period. The equivalent units of production for conversion for the period is
calculated below:

Units % EUP
 WIP - opening; finished
and transferred 1,000 70 700
Started, finished &
transferred 10,000 100 10,000
WIP - closing 900 20 180
Equivalent units of production 10,880

Total current conversion costs = 10,880 x P8

= P87,040

6.
Green Company started 9,000 units in February. The company transferred out 7,000
finished units and ended the period with 3,500 units that were 40 percent complete as
to both material and conversion costs. Beginning Work in Process Inventory units were

General Feedback
1,500.

7.
Beginning work-in-process was 60% complete as to conversion costs, and ending
work-in-process was 45% complete as to conversion costs. The peso amount of the
conversion cost included in ending work-in-process (using the weighted average
method) is determined by multiplying the average unit conversion costs by what
percentage of the total units in ending work-in-process?

General Feedback
45%

Equivalent units of conversion costs in ending WIP inventory using the weighted
average method are computed as percentage completed (45%) in ending WIP
inventory times total number of units in ending WIP inventory.

8.
Long Company transferred 5,500 units to Finished Goods Inventory during September.
On September 1, the company had 300 units on hand (40 percent complete as to both
material and conversion costs). On June 30, the company had 800 units (10 percent
complete as to material and 20 percent complete as to conversion costs). The number
of units started and completed during September was:

General Feedback
5,200.

9.
A company which uses FIFO cost system furnished you the following information:
● Opening inventory consisting of 1,000 units 80 percent complete as to materials
and 30 percent complete as to conversion work.
● 11,.000 units completed and transferred.
● No lost units.
 ● Closing inventory of 900 units, 40 percent complete as to materials and 20
percent complete as to conversion.
● Total cost of the opening inventory before completion was P8,000.
● Current unit costs: materials, P2; conversion, P8.
The total current materials costs amounted to:

General Feedback
To determine the total current materials costs, the equivalent production for
materials should be multiplied by the current unit cost for materials. When using
the FIFO method of process costing, equivalent units of production for a period
include only the work done that period and exclude any work done in a prior
period. The equivalent units of production for materials for the period is
calculated below:
Units % EUP
WIP - opening; finished
and transferred 1,000 20 200
Started, finished &
transferred 10,000 100 10,000
WIP - closing 900 40 360
Equivalent units of production 10,560

Total current materials costs = 10,560 EUP x P2

= P21,120

10.
A company which uses FIFO cost system furnished you the following information:
· Opening inventory consisting of 1,000 units 80 percent complete as to
materials and 30 percent complete as to conversion work.
· 11,.000 units completed and transferred.
· No lost units.
· Closing inventory of 900 units, 40 percent complete as to materials and 20
percent complete as to conversion.
· Total cost of the opening inventory before completion was P8,000.
Current unit costs: materials, P2; conversion, P8

Total current conversion costs amounted to:

General Feedback
To determine the total current conversion costs, the equivalent production for
conversion should be multiplied by the current unit cost for conversion. When
using the FIFO method of process costing, equivalent units of production for a
period include only the work done that period and exclude any work done in a
prior period. The equivalent units of production for conversion for the period is
calculated below:

Units % EUP
WIP - opening; finished
and transferred 1,000 70 700
Started, finished &
 transferred 10,000 100 10,000
WIP - closing 900 20 180
Equivalent units of production 10,880

Total current conversion costs = 10,880 x P8

= P87,040

Equivalent Units of Production

1.
You are engaged in the audit of the December 31 financial statements of Spirit
Corporation, a manufacturer of digital watches. You are attempting to verify the
costing of the ending work-in-process and finished goods which were recorded on
Spirit's books as follows:
Units Cost
Work -in-process (50% complete
as labor and overhead) 300,000 P 660,960
Finished goods 200,000
1,009,800

Materials are added to production at the beginning of the manufacturing process,

and overhead is applied to each product at the rate of 60% of direct labor costs.
There was no finished goods inventory on January 1. A review of Spirit's inventory
cost records disclosed the following information:
Costs
Units Materials Labor
Work-in-process, 1/1
(80% complete as to
labor and overhead) 200,000 P 200,000 P315,000
Unit started in
production 1,000,000
Material costs P1,300,000
Labor costs
P1,995,000
Units completed 900,000
If the FIFO method were being used, how would the table of data on the
preceding page differ?

General Feedback
Work that was completed last period in the beginning work-in-process would be deleted from the
equivalent unit of production data, and costs incurred last period in beginning work-in-process would be
deleted from the cost data

In comparison with the weighted average, the FIFO method only considers work done and costs
incurred this period. The weighted average method averages the costs incurred last period that remain
in beginning work in process with the costs incurred this period. Accordingly, the table of data
computing equivalent unit of production under the weighted average method would be modified by
eliminating equivalent unit of production completed last period and also last period's costs in beginning
work-in-process
2.
Bobson Company had 6,000 units in work-in-process at January 1, 2002, which were 60% complete as
to conversion costs. During January 20,000 units were completed. At January 31, 2002, 8,000 units
remained in work in process which were 40% complete as to conversion costs. Materials are added at
the beginning of the process.
How many units were started during January?
(AICPA, adapted)

General Feedback
Units started during January were 22,000, computed as follows:

Units completed 20,000

WIP-January 31 8,000
Units accounted for 28,000
Less-WIP, January 1 6,000
Units started during January 22,000

3.
Jocarno Manufacturing Company uses a process cost system to account for the
costs of its only product, Product D. Production begins in the fabrication
department where units of raw material are molded into various connecting parts.
After fabrication is complete, the units are transferred to the assembly department.
After assembly is complete, the units are transferred to a packaging department
where packing material is placed around the units. After the units are ready for
shipping, they are sent to a shipping area.

At year-end, June 30, the following inventory of Product D is on hand:

• No unused raw material or packing material.
• Fabrication department:
300 units, 1/3 complete as to raw material and 1/2 complete
as to direct labor.
• Assembly department:
1,000 units, 2/5 complete as to direct labor.
• Packaging department:
100 units, 3/4 complete as to packing material and 1/4
complete as to direct labor.
• Shipping area: 400 units
The number of equivalent units of fabrication department direct labor in all inventories at
June 30 is:
(AICPA, adapted)

General Feedback
All units beyond the fabrication department are completed in terms of
fabrication direct labor. In the fabrication department, 50% of the 300 units are
completed as to labor. Therefore, total EUP is 1,650.

Fabrication (1/2 x 300 units) 150

Assembly 1,000
Packaging 100
 Shipping 400
Total equivalent production 1,650

4.
You are engaged in the audit of the December 31 financial statements of Spirit
Corporation, a manufacturer of digital watches. You are attempting to verify the
costing of the ending work-in-process and finished goods which were recorded on
Spirit's books as follows:
Units Cost
Work -in-process (50% complete
as labor and overhead) 300,000 P 660,960
Finished goods 200,000
1,009,800

Materials are added to production at the beginning of the manufacturing process,

and overhead is applied to each product at the rate of 60% of direct labor costs.
There was no finished goods inventory on January 1. A review of Spirit's inventory
cost records disclosed the following information:
Costs
Units Materials Labor
Work-in-process, 1/1
(80% complete as to
labor and overhead) 200,000 P 200,000 P315,000
Unit started in
production 1,000,000
Material costs P1,300,000
Labor costs
P1,995,000
Units completed 900,000
Using the FIFO method for equivalent unit of production, what is the cost per
equivalent unit of production of labor?

General Feedback
P1,995,000/890,000

The FIFO cost of labor per equivalent unit of production is the current period's
labor costs of P1,995,000 divided by the 890,000 equivalent unit of production
for the period.

5.
Beginning work-in-process has 10,000 units, 80% complete as to materials and 60% complete as to
conversion costs. Ending work-in-process has 15,000 units, 75% complete as to material cost and 50%
complete as to conversion costs. 30,000 units were completed and transferred during the period.
What are the equivalent units under the weighted average method for material and
conversion costs?

General Feedback
 The weighted average method of process costing combines the previous
periods and current period's costs. The EUP for materials and conversion costs is
calculated below.
Materials Conversion
Units % EUP % EUP
Completed and
Transferred 30,000 100 30,000 100 30,000
WIP-ending 15,000 75 11,250 50 7,500
Equivalent production 41,250 37,500

6.
Jocarno Manufacturing Company uses a process cost system to account for the
costs of its only product, Product D. Production begins in the fabrication
department where units of raw material are molded into various connecting parts.
After fabrication is complete, the units are transferred to the assembly department.
After assembly is complete, the units are transferred to a packaging department
where packing material is placed around the units. After the units are ready for
shipping, they are sent to a shipping area.

At year-end, June 30, the following inventory of Product D is on hand:

• No unused raw material or packing material.
• Fabrication department:
300 units, 1/3 complete as to raw material and 1/2 complete
as to direct labor.
• Assembly department:
1,000 units, 2/5 complete as to direct labor.
• Packaging department:
100 units, 3/4 complete as to packing material and 1/4
complete as to direct labor.
• Shipping area: 400 units
The number of equivalent units of packing material in all inventories at June 30 is:
(AICPA, adapted)

General Feedback
Units prior to the packaging department have no packaging material. All units
beyond the packaging department are complete in terms of packaging material.
The 100 units in the packing department are 3/4 complete as to packing
material. Therefore, the number of EUP of packaging material in all inventories is
475.
Packaging (3/4 x 100 units) 75
Shipping 400
Total equivalent production 475

7.
Assume that process conversion costs are uniform but a number of materials are
added at different points in the process. Material 1 is added at the beginning of the
process. The transferred-in costs are added at the 20% point in the process.
Material 2 is added uniformly from the 50% to the 70% points in the process.
 Material 3 is added at the 75% point in the process, and material 4 is added
uniformly at the 90% to the 100% points in the process.

The beginning work-in-process was 10,000 units 60% complete, 60,000 units were
added, and ending work-in-process was 20,000 units 95% complete.
What was the Material 1 equivalent units of production for the month?

General Feedback
60,000 70,000

Material 1 is added at the very beginning of the process. Accordingly, beginning

work-in-process had 10,000 units of material 1 in it. During the period, 60,000
units were added. Thus, for FIFO, the equivalent production is 60,000 units
(current work done); for weighted average it is 70,000 units (60,000 units added
this period plus the 10,000 units in beginning work-in-process). Tabular
calculations of EUPs for both methods are shown below:

Weighted
FIFO Average
Units % EUP % EUP
Units completed:
From WIP, beg. 10,000 0 --- 100 10,000
From current
production 40,000 100 40,000 100 40,000
WIP, ending 20,000 100 20,000 100 20,000
Totals 70,000 60,000 70,000

8.
Equivalent units of production are equal to the

General Feedback
number of whole units that could have been completed if all work of the period had
been used to produce whole units.

9.
Walton, Incorporated had 8,000 units of work-in-process in department A on October 1. These
units were 60% complete as to conversion costs. Materials are added at the beginning of the
process. During the month of October 34,000 units were started and 36,000 units were
completed. Walton had 6,000 units of work-in-process on October 31. These units were 80%
complete as to conversion costs. By how much did the equivalent units for October using the
weighted average method exceed the equivalent units for October using the FIFO method?
(AICPA, adapted)

General Feedback
The weighted average method combines previous and current period work, while
the FIFO method only includes the EUP for work done in the current period.
Therefore, the difference between the two methods is that weighted average
EUP will be greater than FIFO EUP by the EUP in beginning WIP.
 Beginning WIP equivalent units of production:
Materials : 8,000 x 100% = 8,000 EUP
Conversion : 8,000 x 60% = 4,800 EUP

Alternative Computations
Weighted Average Materials Conversion
Method : Units % EUP % EUP
Completed 36,000 100 36,000 100 36,000
WIP-ending 6,000 100 6,000 80 4,800
Equivalent production 42,000 40,800

FIFO Method:
WIP-Beginning 8,000 0 - 40 3,200
Started, finished
& transferred 28,000 100 28,000 100 28,000
WIP-ending 6,000 100 6,000 80 4,800
Equivalent production 34,000 36,000
Excess of weighted average over
FIFO method 8,000 4,800

10.
Department II of Hope Manufacturing Company presents their production data for
the month of May, 2000 below:

Opening inventory, 3/8 completed 4,000 units

Started in process 10,000 units

Transferred 9,000 units

Closing inventory, ½ completed 4,000 units

¾ completed 4,000 units

Using the first-in, first-out method, the equivalent production of Department II for the month of May is
(RPCPA, adapted)

General Feedback
The FIFO method of costing includes only work done (materials added and
conversion costs incurred) in the current period. The equivalent production of
Department II for the month of May is calculated as follows:

Work Equivalent Production

Units Done 2,500

Opening WIP 4,000 5/8

inventory

Started, finished and

 transferred

(9,000 - 4,000) 5,000 100% 5,000

Closing WIP 4,000 1/2 2,000

inventory
4,000 3/4 3,000

Equivalent 12,500
production

11.
You are engaged in the audit of the December 31 financial statements of Spirit
Corporation, a manufacturer of digital watches. You are attempting to verify the
costing of the ending work-in-process and finished goods which were recorded on
Spirit's books as follows:

Units Cost

Work -in-process (50% 300,000 P 660,960

complete
as labor and overhead)

Finished goods 200,000 1,009,800

Materials are added to production at the beginning of the manufacturing process,

and overhead is applied to each product at the rate of 60% of direct labor costs.
There was no finished goods inventory on January 1. A review of Spirit's inventory
cost records disclosed the following information:

Costs

Units Materials Labor

Work-in-process,
1/1

(80% complete 200,000 P 200,000

as to labor and
P315,000
overhead)

Unit started in

production 1,000,000

Material costs P1,300,000

Labor costs P1,995,000

Units completed 900,000

What is the total cost of overhead using the FIFO method?
(AICPA, adapted)

General Feedback
The total labor cost under FIFO is that incurred in the current period
(P1,995,000). This does not include the labor costs in beginning work-in-process.
The P315,000 of beginning work-in-process labor costs are not included in the
FIFO calculation. Since overhead applied at 60% of the labor cost, total FIFO
overhead costs are P1,197,000 (P1,995,000 x 60%).

12.
Assume that process conversion costs are uniform but a number of materials are
added at different points in the process. Material 1 is added at the beginning of the
process. The transferred-in costs are added at the 20% point in the process.
Material 2 is added uniformly from the 50% to the 70% points in the process.
Material 3 is added at the 75% point in the process, and material 4 is added
uniformly at the 90% to the 100% points in the process.

The beginning work-in-process was 10,000 units 60% complete, 60,000 units were added, and ending
work-in-process was 20,000 units 95% complete
What was the conversion equivalent units of production for the month?

General Feedback
63,000 69,000

Under the weighted average, complete conversion equivalent units of

production include the 50,000 units complete (10,000 beginning work-in-process
plus 60,000 started less 20,000 ending work-in-process) plus the 19,000
equivalent units of production in ending work-in-process (20,000 x 95%), or
69,000 EUP.

For FIFO, the 69,000 EUP for weighted average is reduced by the 6,000 (10,000
units x 60%) of work completed in beginning work-in-process. Tabular
calculations of EUPs for both methods are shown below:

Weighted
FIFO Average
Units % EUP % EUP
Units completed:
From WIP, beg. 10,000 40 4,000 100 10,000
From current
production 40,000 100 40,000 100 40,000
WIP, ending 20,000 95 19,000 95 19,000
Totals 70,000 63,000 69,000

13.
 The Cost Department of Mandaluyong Corporation operates a process cost system
using the average method. Production records showed the following data for one of
the three production departments:

Product received from previous 100,000 kilos

department

Product finished and sent to next 71,840 kilos

department

Product finished and remaining 4,160 kilos

in this department

Product unfinished in this department 24,000 kilos

In this department additional material is added to the work received from the
preceding department. Three distinctly different types of materials are used at
three separate stages of production in this department:
> Material A is added at the start of the process.
>Material B is added when the process is one-fourth
completed.
>Material C is added when the process is three-fourth
completed.

Labor and factory overhead are incurred at a uniform rate throughout the
manufacturing process in this department. Examination of the unfinished work
discloses that:
¼ was 7/8 completed.
½ was ½ completed.
¼ was 1/6 completed.
The equivalent production figure for material C would be:

General Feedback
Since material C is added when the process is three-fourth completed, all units
started and transferred out and those in the ending work-in-process with a
degree of completion equal to 3/4 or more, are complete as to material C.

Units % EUP

Finished and 71,840 100 71,840

transferred

Finished and on 4,160 100 4,160

hand

Unfinished:
1/4 : 7/8 6,000 100 6,000
completed

1/2 : 1/2 12,000 0 -

completed

1/4 : 1/6 6,000 0 -_

completed

Total 100,000 82,000

14.
Bobson Company had 6,000 units in work-in-process at January 1, 2002, which were 60% complete as
to conversion costs. During January 20,000 units were completed. At January 31, 2002, 8,000 units
remained in work in process which were 40% complete as to conversion costs. Materials are added at
the beginning of the process.
Using the weighted average method, the equivalent units for January for conversion
cost were:
(AICPA, adapted)

General Feedback
The weighted average method of process costing does not consider the degree
of completion of beginning work-in-process when computing the equivalent unit
of production.

Units % EUP
Completed 20,000 100% 20,000
WIP-ending 8,000 40% 3,200
EUP 23,200

15.
Milton, Inc. had 8,000 units of work-in-process in its Department M on March 1
which were 50% complete as to conversion costs. Materials are introduced at
the beginning of the process. During March, 17,000 units were started, 18,000
units were completed, and there were 2,000 units of normal spoilage. Milton
had 5,000 units of work-in-process at March 31 which were 60% complete as to
conversion costs. Under Milton's cost accounting system, spoiled units reduce
the number of units over which total cost can be spread. Using the weighted
average method, the equivalent units for March for conversion costs were:
(AICPA, adapted)

General Feedback

Work
Units Done EUP
Units completed 18,000 100% 18,000
WIP-ending 5,000 60% 3,000
Total EUP 21,000
16.
You are engaged in the audit of the December 31 financial statements of Spirit
Corporation, a manufacturer of digital watches. You are attempting to verify the
costing of the ending work-in-process and finished goods which were recorded on
Spirit's books as follows:
Units Cost
Work -in-process (50% complete
as labor and overhead) 300,000 P 660,960
Finished goods 200,000
1,009,800

Materials are added to production at the beginning of the manufacturing process,

and overhead is applied to each product at the rate of 60% of direct labor costs.
There was no finished goods inventory on January 1. A review of Spirit's inventory
cost records disclosed the following information:
Costs
Units Materials Labor
Work-in-process, 1/1
(80% complete as to
labor and overhead) 200,000 P 200,000 P315,000
Unit started in
production 1,000,000
Material costs P1,300,000
Labor costs
P1,995,000
Units completed 900,000

What is the cost per equivalent unit of production for labor using the weighted
average method?

General Feedback
The cost per equivalent unit of production for labor under the weighted average
method is equal to the labor cost in beginning work-in-process plus the current
cost, all divided by the EUP. EUP for labor is 1,050,000. Total labor cost is
P315,000 plus P1,995,000, or a total of P2,310,000. The unit cost of labor is thus
P2.20 (P2,310,000/1,050,000).

17.
A company uses the FIFO method of costing in a process costing system. Material is added at the
beginning of the process in Department A, and conversion costs are incurred uniformly throughout the
process. Beginning work-in-process inventory on April 1 in Department A consisted of 50,000 units
estimated to be 30% complete. During April, 150,000 units were started in Department A, and 160,000
units were completed and transferred to Department B. Ending work-in-process inventory on April 30 in
Department A was estimated to be 20% complete. What were the total equivalent units in Department
A for April for materials and conversion costs, respectively?

General Feedback
 Materials Conversion
Actual Work Work
Units Done EUP Done EUP
WIP, April 1 50,000 - - 70% 35,000
Started, finished &
transferred * 110,000 100% 110,000 100% 110,000
WIP, April 30** 40,000 100% 40,000 20% 8,000
Total equivalent units 150,000 153,000

*SFT = 160,000 - 50,000 = 110,000.

**WIP, Apr. 30 = 50,000 + 150,000 - 160,000 = 40,000.

18.
Jocarno Manufacturing Company uses a process cost system to account for the
costs of its only product, Product D. Production begins in the fabrication
department where units of raw material are molded into various connecting parts.
After fabrication is complete, the units are transferred to the assembly department.
After assembly is complete, the units are transferred to a packaging department
where packing material is placed around the units. After the units are ready for
shipping, they are sent to a shipping area.

At year-end, June 30, the following inventory of Product D is on hand:

• No unused raw material or packing material.
• Fabrication department:
300 units, 1/3 complete as to raw material and 1/2 complete
as to direct labor.
• Assembly department:
1,000 units, 2/5 complete as to direct labor.
• Packaging department:
100 units, 3/4 complete as to packing material and 1/4
complete as to direct labor.
• Shipping area: 400 units
The number of equivalent units of raw material in all inventories at June 30 is:
(AICPA, adapted)

General Feedback
Raw material is added only in the first department (fabrication). Therefore, all
units in subsequent departments are 100% complete in terms of raw materials. In
the fabrication department, however, 300 units are 1/3 complete with respect to
raw materials. Thus, the number of EUP of raw material in all inventories is 1,600.
Fabrication 100
Assembly 1,000
Packaging 100
Shipping 400
Total equivalent production 1,600

19.
A company uses the FIFO method of costing in a process costing system. Material is added at the
beginning of the process in Department A, and conversion costs are incurred uniformly throughout the
process. Beginning work-in-process inventory on April 1 in Department A consisted of 50,000 units
estimated to be 30% complete. During April, 150,000 units were started in Department A, and 160,000
units were completed and transferred to Department B. Ending work-in-process inventory on April 30 in
Department A was estimated to be 20% complete. What were the total equivalent units in Department
A for April for materials and conversion costs, respectively?

General Feedback
Materials Conversion
Actual Work Work
Units Done EUP Done EUP
WIP, April 1 50,000 - - 70% 35,000
Started, finished &
transferred * 110,000 100% 110,000 100% 110,000
WIP, April 30** 40,000 100% 40,000 20% 8,000
Total equivalent units 150,000 153,000

*SFT = 160,000 - 50,000 = 110,000.

**WIP, Apr. 30 = 50,000 + 150,000 - 160,000 = 40,000.

20.
The Cost Department of Mandaluyong Corporation operates a process cost system
using the average method. Production records showed the following data for one of
the three production departments:

Product received from previous

department 100,000 kilos

Product finished and sent to next

Product finished and remaining 71,840 kilos

in this department
in this department 4,160 kilos

Product unfinished in this department 24,000 kilos

In this department additional material is added to the work received from the
preceding department. Three distinctly different types of materials are used at
three separate stages of production in this department:
> Material A is added at the start of the process.
>Material B is added when the process is one-fourth
completed.
>Material C is added when the process is three-fourth
completed.

Labor and factory overhead are incurred at a uniform rate throughout the
manufacturing process in this department. Examination of the unfinished work
discloses that:
¼ was 7/8 completed.
½ was ½ completed.
¼ was 1/6 completed.
 The equivalent production figure for material A would be:

General Feedback
Since the weighted- average method is used, there is no need to segregate the
finished units into those units, which were in process at the beginning of the
period and those which were started during the current period. Considering that
there is no work-in-process inventory beginning, the solution under the average
method and FIFO method shall be the same. Since material A is added at the
start of the process, all units started and transferred out and those in the ending
work-in-process inventory are complete as to material A.
Units % EUP

Finished and 71,840 100 71,840

transferred

Finished and on 4,160 100 4,160

hand
Unfinished 24,000 100 24,000

Totals 100,000 100,000

21.
Walton, Incorporated had 8,000 units of work-in-process in department A on October 1. These
units were 60% complete as to conversion costs. Materials are added at the beginning of the
process. During the month of October 34,000 units were started and 36,000 units were
completed. Walton had 6,000 units of work-in-process on October 31. These units were 80%
complete as to conversion costs. By how much did the equivalent units for October using the
weighted average method exceed the equivalent units for October using the FIFO method?
(AICPA, adapted)

General Feedback
The weighted average method combines previous and current period work, while
the FIFO method only includes the EUP for work done in the current period.
Therefore, the difference between the two methods is that weighted average
EUP will be greater than FIFO EUP by the EUP in beginning WIP.

Beginning WIP equivalent units of production:

Materials : 8,000 x 100% = 8,000 EUP
Conversion : 8,000 x 60% = 4,800 EUP

Alternative Computations
Weighted Average Materials Conversion
Method : Units % EUP % EUP
Completed 36,000 100 36,000 100 36,000
WIP-ending 6,000 100 6,000 80 4,800
Equivalent production 42,000 40,800

FIFO Method:
WIP-Beginning 8,000 0 - 40 3,200
Started, finished
 & transferred 28,000 100 28,000 100 28,000
WIP-ending 6,000 100 6,000 80 4,800
Equivalent production 34,000 36,000
Excess of weighted average over
FIFO method 8,000 4,800

22.
Beginning work-in-process has 10,000 units, 80% complete as to materials and 60% complete as to
conversion costs. Ending work-in-process has 15,000 units, 75% complete as to material cost and 50%
complete as to conversion costs. 30,000 units were completed and transferred during the period.
What are the equivalent units under FIFO for materials and conversion costs?

General Feedback
When using the FIFO method process costing, EUP for a period include only work
done that period and exclude any work done in a prior period. The EUP for
materials and conversion costs is calculated below:
Materials Conversion
Units % EUP % EUP
WIP-beg., finished
& transferred 10,000 20 2,000 40 4,000
Started, completed
& transferred 20,000 100 20,000 100 20,000
WIP-ending 15,000 75 11,250 50 7,500
Equivalent production 33,250 31,500

23.
Walden Company has a process cost system using the FIFO cost flow method.
All materials are introduced at the beginning of the process in department 1.
The following information is available for the month of January 2001:

Units

Work-in-process, 1/1/01 (40% complete as to 500

conversion costs)

Started in January 2,000

Transferred to dept. 2 during January 2,100

Work in process, 1/31/01 (25% complete as 400

to conversion costs)

What are the equivalent units of production (EUP) for the month of January 2001?
(AICPA, adapted)

General Feedback

Materials Conversion
 Work Work

Actual Done EUP Done EUP

WIP, 1/1; 500 0 0 60% 300

finished &
transferred

Started, 1,600 100% 1,600 100% 1,600

finished&
transferred

WIP,1/31 400 100% 400 25% 100

Equivalent 2,000 2,000

units of
production

24.
Richardson Company computed the flow of physical units completed for
department M for the month of March 2002 as follows:

Units
completed:

From work-in- 15,000

process on
March 1, 2002
From March 45,000
production 60,000
60,000
Materials are added at the beginning of the process. The 12,000 units of work-in-process
at March 31, 2002, were 80% complete as to conversion costs. The work-in-process at March 1, 2002,
was 60% complete as to conversion costs. Using the FIFO method, the equivalent units for March
conversion costs were:
(AICPA, adapted)

General Feedback

Work Equivalent

Actual Done Production

Units
completed:
From WIP, 15,000 40% 6,000
March 1
From March 45,000 100% 45,000
production
Work-in- 12,000 80% 9,600
process, Mar. 31

Equivalent units 60,600

for March
conversion
costs

25.
On November 1, Yankee Company had 20,000 units of work-in-process in Department
No.1 which were 100% complete as to material costs and 20% complete as to
conversion costs. During November, 160,000 units were started in Department No.1
and 170,000 units were completed and transferred to Department No. 2. Work-in-
process on November 30 was 100% complete as to conversion costs. By what amount
would the equivalent units for conversion costs for the month of November differ if the
FIFO method were used instead of the weighted average method?

General Feedback
4,000 decrease

The weighted average method combines previous and current period work, while
the FIFO method only includes the EUP for work done in the current period.
Therefore, the difference between the two methods will be EUP for beginning
WIP.

Computation of EUP
Weighted average EUP: Units % EUP
Completed and
transferred 170,000 100 170,000
WIP-ending 10,000 40 4,000
Equivalent 174,000

FIFO EUP:
WIP-beg., finished and
transferred 20,000 80 16,000
Started and completed 150,000 100 150,000
WIP-ending 10,000 40 4,000
Equivalent production 170,000
Difference in EUP 4,000

If FIFO method instead of weighted average method was used, the EUP would
be 4,000 units less.

26.
Beginning work-in-process has 10,000 units, 80% complete as to materials and 60% complete as to
conversion costs. Ending work-in-process has 15,000 units, 75% complete as to material cost
 and 50% complete as to conversion costs. 30,000 units were completed and transferred during
the period.
What are the equivalent units under FIFO for materials and conversion costs?

General Feedback
When using the FIFO method process costing, EUP for a period include only work
done that period and exclude any work done in a prior period. The EUP for
materials and conversion costs is calculated below:
Materials Conversion
Units % EUP % EUP
WIP-beg., finished
& transferred 10,000 20 2,000 40 4,000
Started, completed
& transferred 20,000 100 20,000 100 20,000
WIP-ending 15,000 75 11,250 50 7,500
Equivalent production 33,250 31,500

27.
A factory transferred 8,800 completed units during its second period of operations.
At the beginning of the period, 400 units were 75% complete. At the end of the
period, 800 units were 50% complete. Assume the FIFO costing method is
used. The equivalent production for the period was

General Feedback
Solution:
Work Equivalent
Actual Done Production
Beginning WIP 400 25% 100
Started, finished and
transferred 8,400 100% 8,400
Ending WIP 800 50% 400
Equivalent production for the period 8,900

28.
Richardson Company computed the flow of physical units completed for department M
for the month of March 2002 as follows:
Units completed:
From work-in-process on March 1, 2002 15,000
From March production 45,000
60,000

Materials are added at the beginning of the process. The 12,000 units of work-in-
process at March 31, 2002, were 80% complete as to conversion costs. The work-in-
process at March 1, 2002, was 60% complete as to conversion costs. Using the FIFO
method, the equivalent units for March conversion costs were:

General Feedback
Letter "C" is the correct answer.
 Work Equivalent
Actual Done Production
Units completed:
From WIP, March 1 15,000 40% 6,000
From March production 45,000 100% 45,000
Work-in-process, Mar. 31 12,000 80% 9,600
Equivalent units for March conversion costs 60,600

29.
On November 1, Yankee Company had 20,000 units of work-in-process in
Department No.1 which were 100% complete as to material costs and 20%
complete as to conversion costs. During November, 160,000 units were started
in Department No.1 and 170,000 units were completed and transferred to
Department No. 2. Work-in-process on November 30 was 100% complete as to
conversion costs. By what amount would the equivalent units for conversion
costs for the month of November differ if the FIFO method were used instead of
the weighted average method?

General Feedback
The weighted average method combines previous and current period work,
while the FIFO method only includes the EUP for work done in the current
period. Therefore, the difference between the two methods will be EUP for
beginning WIP.

Computation of EUP
Weighted average EUP: Units % EUP
Completed and
transferred 170,000 100 170,000
WIP-ending 10,000 40 4,000
Equivalent 174,000

FIFO EUP:
WIP-beg., finished and
transferred 20,000 80 16,000
Started and completed 150,000 100 150,000
WIP-ending 10,000 40 4,000
Equivalent production 170,000
Difference in EUP 4,000

If FIFO method instead of weighted average method was used, the EUP would
be 4,000 units less.

30.
The Cost Department of Mandaluyong Corporation operates a process cost system
using the average method. Production records showed the following data for one of
the three production departments:
Product received from previous

department 100,000 kilos

Product finished and sent to next

department 71,840 kilos

Product finished and remaining
in this department 4,160 kilos

Product unfinished in this department 24,000 kilos

In this department additional material is added to the work received from the
preceding department. Three distinctly different types of materials are used at
three separate stages of production in this department:
> Material A is added at the start of the process.
>Material B is added when the process is one-fourth
completed.
>Material C is added when the process is three-fourth
completed.

Labor and factory overhead are incurred at a uniform rate throughout the
manufacturing process in this department. Examination of the unfinished work
discloses that:
¼ was 7/8 completed.
½ was ½ completed.
¼ was 1/6 completed.
The equivalent production figure for material B would be:

General Feedback
94,000

Since material B is added when the process is one-fourth completed, all units
transferred is one-fourth completed, all units transferred out and those in the
ending work-in-process inventory with a degree of completion equal to 1/4 or
more than 1/4 are complete as to material B.
Units % EUP

Finished and 71,840 100 71,840

transferred
Finished and on 4,160 100 4,160
hand

Unfinished

1/4 : 7/8 6,000 100 6,000

completed

1/2 : 12,000 100 12,000

1/2completed
1/4 : 1/6 6,000 0 _-__
completed

Total 100,000 94,000

31.
You are engaged in the audit of the December 31 financial statements of Spirit
Corporation, a manufacturer of digital watches. You are attempting to verify the
costing of the ending work-in-process and finished goods which were recorded on
Spirit's books as follows:
Units Cost
Work -in-process (50% complete
as labor and overhead) 300,000 P 660,960
Finished goods 200,000
1,009,800

Materials are added to production at the beginning of the manufacturing process,

and overhead is applied to each product at the rate of 60% of direct labor costs.
There was no finished goods inventory on January 1. A review of Spirit's inventory
cost records disclosed the following information:
Costs
Units Materials Labor
Work-in-process, 1/1
(80% complete as to
labor and overhead) 200,000 P 200,000 P315,000
Unit started in
production 1,000,000
Material costs P1,300,000
Labor costs
P1,995,000
Units completed 900,000
What are the equivalent units of production for labor under the weighted
average method?

General Feedback
The number of equivalent units of labor is equal to the units completed during
the period plus the equivalent units in ending work-in-process. Ending work-in-
process
Is 50% complete as to labor. Hence, the number of equivalent units of labor is
1,050,000 EUP (the 900,000 units completed during the year plus 50% of the
300,000 units in ending work-in-process).

32.
The Ace Company had computed the physical flow (of physical units) for
Department A, for the month of April 2000 as follows:
Units completed:
From work-in-process on April 1, 2000 10,000
 From April production 30,000
40,000

Materials are added at the beginning of the process. Units of work in process at
April 30, 2000 were 8,000. The work in process at April 1, 2000, was 80%
complete as to conversion costs and the work in process at April 30, 2000, was
60% complete as to conversion costs. What are the equivalent units of
production for the month of April 2000 using the FIFO method?
(AICPA, adapted)

General Feedback

Conversion
Materials Costs
Physical Work Work
Flow Done EUP Done EUP
Units completed:
From WIP, 4/1 10,000 - - 20% 2,000
From April
production 30,000 100% 30,000 100% 30,000
WIP, April 30 8,000 100% 8,000 60% 4,800
Total equivalent
units of production 38,000 36,800

33.
Kerner Manufacturing uses a process cost system to manufacture laptop
computers. The following information summarizes operations relating to laptop
computer model #KJK20 during the quarter ending March 31:
U Direct
n Materia
it ls
s

Work in process 1 70,0

inventory, January 1 0 00
0
Started during the 5
quarter 0
0

Completed during 4
the quarter 0
0
Work-in-process 2
inventory, March 31 0
0

Costs added during 750,

 the quarter 000

Beginning work in process inventory was 50% complete for direct materials. Ending
work in process inventory was 75% complete for direct materials. What were the
equivalent units of production with regard to materials for March using the FIFO
unit cost, inventory valuation method?

General Feedback
500

34.
Department A is the first stage of Drucker Company's production cycle. The following
information is available for conversion cost for the month of April:
Units
Work in process, April 1 (40% complete) 40,000
Started in April 320,000
Completed in April, and transferred to next department 340,000
Work-in-process, April 30 (60% complete) 20,000
Using FIFO method, the equivalent finished units for conversion cost calculations are:

General Feedback
Letter "B" is the correct answer
Work Equivalent
Actual Done Production
Work-in-process, Apr. 1 40,000 60% 24,000
Started, finished and
Transferred
(340,000 - 40,000) 300,000 100% 300,000
Work-in-process, Apr. 31 20,000 60% 12,000

Equivalent production for

conversion costs 336,000

35.
You are engaged in the audit of the December 31 financial statements of Spirit
Corporation, a manufacturer of digital watches. You are attempting to verify the
costing of the ending work-in-process and finished goods which were recorded on
Spirit's books as follows:
Units Cost
Work -in-process (50% complete
as labor and overhead) 300,000 P 660,960
Finished goods 200,000
1,009,800

Materials are added to production at the beginning of the manufacturing process,

and overhead is applied to each product at the rate of 60% of direct labor costs.
 There was no finished goods inventory on January 1. A review of Spirit's inventory
cost records disclosed the following information:
Costs
Units Materials Labor
Work-in-process, 1/1
(80% complete as to
labor and overhead) 200,000 P 200,000 P315,000
Unit started in
production 1,000,000
Material costs P1,300,000
Labor costs
P1,995,000
Units completed 900,000
What is the total cost for the ending inventory of finished goods using the
weighted average method?
(AICPA, adapted)

General Feedback
The calculation of the total cost of finished goods requires calculation of the
equivalent units of production and the unit cost per equivalent unit of
production, and the multiplication of the finished goods quantity by the cost per
equivalent unit. The calculation is presented below:
Equivalent Units of Production
(Weighted Average Method)

Materials Labor Overhead

Units % EUP % EUP % EUP
Units completed
during the year 900,000 100 900,000 100 900,000 100 900,000
End. WIP, 12/31 300,000 100 300,000 50 150,000 50 150,000
Total units
accounted for 1,200,000
EUP 1,200,000 1,050,000 1,050,000

Unit Costs of Production

Materials Labor Overhead Total
Beg. WIP costs P 200,000 P 315,000 P 189,000 P704,000
Current costs 1,300,000 1,995,000 1,197,000 4,492,000
Total costs P 1,500,000 P2,310,000 P1,386, 000 P 5,196,000
EUP 1,200,000 1,050,000 1,050,000 ---
Cost per EUP P 1.25 P 2.20 P 1.32 P 4.77

Finished goods = 200,000 units x P4.77 = P954,000

36.
Department A is the first stage of Mann Company's production cycle. The
following information is available for conversion costs for the month of April
2001:
 Units

Work in process, beg. (60% complete) 20,000

Started in April 340,000

Completed in April, and transferred to 320,000

Dept. B.

Work-in-process, ending (40% 40,000

complete)

Using FIFO method, the equivalent units for the conversion cost calculation are
(AICPA, adapted)

General Feedback
The equivalent units for conversion cost using the FIFO method is P324,000,
computed as follows:

Work Equivalen

Actual Done
Production
Work-in- 20,000
process, beg

Started in April 340,000

To be 360,000
accounted for

Work-in- 20,000 40% 8,000

process, beg.,

finished
and

Started, 300,000 100% 300,000

finished &

transferred

Work-in- 40,000 40% 16,000

process,
ending
Total 360,000
accounted for
Equivalent 324,000
production for
conversion
costs

37.
Sahara Corporation's production cycle starts in the Mixing Department. The
following information is available for April:
Units

Work in process, April 1 (50% complete) 40,000

Started in April 240,000

Work in process, April 30 (60% 25,000

complete)
Materials are added at the beginning of the process in the Mixing Department.
Using the weighted average method, what are the equivalent units of
production for the month of April?

General Feedback
The equivalent units of production for the month of April for materials and
conversion are 280,000 and 270,000, respectively, computed as follows:

Materials Conversio
n

Work Work

Units Done EUP Done EUP

Completed 255,000* 100% 255,000 100% 255,000

Ending WIP 25,000 100% 25,000 60% 15,000

Equivalent units 280,000 270,000

38.
Department II of Hope Manufacturing Company presents their production data for
the month of May, 2000 below:

Opening inventory, 3/8 completed 4,000 units

Started in process 10,000 units
Transferred 9,000 units
Closing inventory, ½ completed 4,000 units
¾ completed 4,000 units
Assuming the average cost method is used, the equivalent production figure for Department II is
General Feedback
The average method if process costing combines the previous
period's and current period's costs. The equivalent production of Department II
for the month of May is calculated as follows:
Work Equivalent
Units Done Production
Finished and transferred 9,000 100% 9,000
Closing WIP inventory 4,000 1/4 2,000
4,000 3/4 3,000
Equivalent production 14,000

39.
In process 2, material G is added when a batch is 60% complete. Ending work in
process units, which are 50% complete, would be included in the computation of
equivalent units for
1) Conversion costs
2) Material G

General Feedback
1) Yes 2) No

40.
You are engaged in the audit of the December 31 financial statements of Spirit
Corporation, a manufacturer of digital watches. You are attempting to verify the
costing of the ending work-in-process and finished goods which were recorded on
Spirit's books as follows:

Units Cost

Work -in-process (50%

complete

as labor and overhead 300,000 P 660,960

Finished goods 200,000 1,009,800

Materials are added to production at the beginning of the manufacturing process,

and overhead is applied to each product at the rate of 60% of direct labor costs.
There was no finished goods inventory on January 1. A review of Spirit's inventory
cost records disclosed the following information:

Costs

Units Materials Labor

Work-in-process,
 1/1

(80% complete 200,000 P 200,000

as to labor and P315,000
overhead)

Unit started in

production 1,000,000

Material costs P1,300,000

Labor costs P1,995,000

Units completed 900,000

What are the equivalent units of labor produced under the FIFO method?
(AICPA, adapted)

General Feedback
The weighted average equivalent unit of production for labor was determined to
be 1,050,000 EUP. The difference between weighted average and FIFO is that
FIFO does not include the equivalent unit of production or costs in beginning
work-in-process. There were 200,000 units as of January 1 that were 80%
complete. Hence, 160,000 EUP were in beginning inventory and must be
subtracted from the weighted average EUP of 1,050,000 to obtain the FIFO for
labor of 890,000. Alternatively, FIFO EUP may also be determined below:

Units % EUP

WIP - 1/1,
finished
200,000 20 40,000
and
transferred

Started,
finished
700,000 100 700,000
and
transferred

WIP - 1/31 300,000 50 150,000

Equivalent 890,000
production
41.
Assume that process conversion costs are uniform but a number of materials are
added at different points in the process. Material 1 is added at the beginning of the
process. The transferred-in costs are added at the 20% point in the process.
Material 2 is added uniformly from the 50% to the 70% points in the process.
Material 3 is added at the 75% point in the process, and material 4 is added
uniformly at the 90% to the 100% points in the process.
 The beginning work-in-process was 10,000 units 60% complete, 60,000 units were added, and
ending work-in-process was 20,000 units 95% complete
What was the Material 3 equivalent unit of production for the month?

General Feedback
70,000 70,000

Material 3 is added at the 75% point in the process. None of Material 3 was in
the beginning work-in-process. Accordingly, it had to be added to the 10,000
units in beginning work-in-process and all the 60,000 units started this period
since the ending work-in-process was 95% complete. Accordingly, the month's
Material 3 equivalent unit of production are 70,000 units for both FIFO and
weighted average. Tabular computations of EUPs for both methods follows:

Weighted
FIFO Average
Units % EUP % EUP
Units completed:
From WIP, beg. 10,000 100 10,000 100 10,000
From current
production 40,000 100 40,000 100 40,000
WIP, ending 20,000 100 20,000 100 20,000
Totals 70,000 70,000 70,000

42.
You are engaged in the audit of the December 31 financial statements of Spirit
Corporation, a manufacturer of digital watches. You are attempting to verify the
costing of the ending work-in-process and finished goods which were recorded on
Spirit's books as follows:
Units Cost
Work -in-process (50% complete
as labor and overhead) 300,000 P 660,960
Finished goods 200,000
1,009,800

Materials are added to production at the beginning of the manufacturing process,

and overhead is applied to each product at the rate of 60% of direct labor costs.
There was no finished goods inventory on January 1. A review of Spirit's inventory
cost records disclosed the following information:
Costs
Units Materials Labor
Work-in-process, 1/1
(80% complete as to
labor and overhead) 200,000 P 200,000 P315,000
Unit started in
production 1,000,000
Material costs P1,300,000
 Labor costs
P1,995,000
Units completed 900,000
The cost per books of finished goods in ending inventory is
(AICPA, adapted)

General Feedback
The cost per books of finished goods is given as P1,009,800. Evidently, some
cost allocations during 2001 were improperly estimated.

43.
Assume that process conversion costs are uniform but a number of materials are
added at different points in the process. Material 1 is added at the beginning of the
process. The transferred-in costs are added at the 20% point in the process.
Material 2 is added uniformly from the 50% to the 70% points in the process.
Material 3 is added at the 75% point in the process, and material 4 is added
uniformly at the 90% to the 100% points in the process.

The beginning work-in-process was 10,000 units 60% complete, 60,000 units were
added, and ending work-in-process was 20,000 units 95% complete.
What was the Material 4 equivalent unit of production for the month?

General Feedback
60,000 60,000

Letter "B" is the correct answer.

Material 4 is added uniformly between the 90% and the 100% point in the
process. Accordingly, beginning work-in-process was 60% complete would have
no Material 4. Thus, weighted average and FIFO EUP are the same. All 50,000
units completed contain Material 4,plus there would be 10,000 EUP in ending
work-in-process, half of the 20,000 ending work-in-process because Material 4 is
added uniformly between the 90% and 100% points. Tabular calculations of
EUPs for both methods are shown below.
Weighted
FIFO Average
Units % EUP % EUP
Units completed:
From WIP, beg. 10,000 100 10,000 100 10,000
From current
production 40,000 100 40,000 100 40,000
WIP, ending 20,000 50 10,000 50 10,000
Totals 70,000 60,000 60,000

44.
The Wiring Department is the second stage of Dansen Company's production cycle. On May 1, the
beginning work in process contained 25,000 units which were 60% complete as to conversion
costs. During May, 100,000 units were transferred in from the first stage of Dansen's
production cycle. On May 31, ending work-in-process contained 20,000 units which were 80%
 complete as to conversion costs. Materials are added at the end of the process. Using the
weighted average method, the equivalent units of production on May 31 were:
(AICPA, adapted)

General Feedback
Materials are added at the end of the process, and conversion costs are assumed
to be incurred uniformly. Transferred-in costs are always 100% complete. Units
completed equals beginning WIP plus units transferred-in less ending WIP.

Trans-in Materials Conversion

Units EUP % EUP % EUP
Completed 105,000* 105,000 100 105,000 100 105,000
Ending WIP 20,000 20,000 0 -- 80 16,000
EUP 125,000 105,000 121,000

* 25,000 + 100,000 - 20,000 = 105,000 units.

45.
The Ilang-Ilang Corporation, engaged in manufacturing business uses process costing,
and gave us the following production data from three different situations. Stages of
completion of inventories apply to all cost elements.
(1)Started in process, 6,500 units; completed, 5,500 units; in process, end, 400
units 50% completed and 600 units 25% completed.
(2)Beginning inventory, 6,250 units 40% completed; started in process, 25,000
units; completed, 26,250 units; in process at the end, 3,000 units 50%
completed and 2,000 units 25% completed.
Beginning inventory, 6,000 units, 30% completed; started in process, 13,000 units; lost in process, 500
units from production started this period (loss was normal and occurred throughout the production
process); completed, 14,000 units; in process at the end of the period, 3,000 units, 50% completed and
1,500 units, 75% completed.

Using average costing, the equivalent production figure are

(RPCPA, adapted)

General Feedback
The average method of process costing combines the previous period's and
current period's costs. The equivalent production figures for the different
situations using the average method are calculated below:
Equivalent Production (Average Costing)
Situation 1
Work Equivalent
Units Done Production
Completed & transferred 5,500 100% 5,500
Lost in process - - -
In process, end 400 50% 200
600 25% 150
Equivalent production 5,850

Situation 2
Work Equivalent
 Units Done Production
Completed & transferred 26,250 100% 26,250
Lost in process - - -
In process, end 3,000 50% 1,500
2,000 25% 500
Equivalent production 28,250

Situation 3
Work Equivalent
Units Done Production
Completed & transferred 14,000 100% 14,000
Lost in process 500 0 -
In process, end 3,000 50% 1,500
1,500 75% 1,125
Equivalent production 16,625

46.
You are engaged in the audit of the December 31 financial statements of Spirit
Corporation, a manufacturer of digital watches. You are attempting to verify the
costing of the ending work-in-process and finished goods which were recorded on
Spirit's books as follows:
Units Cost
Work -in-process (50% complete
as labor and overhead) 300,000 P 660,960
Finished goods 200,000
1,009,800

Materials are added to production at the beginning of the manufacturing process,

and overhead is applied to each product at the rate of 60% of direct labor costs.
There was no finished goods inventory on January 1. A review of Spirit's inventory
cost records disclosed the following information:
Costs
Units Materials Labor
Work-in-process, 1/1
(80% complete as to
labor and overhead) 200,000 P 200,000 P315,000
Unit started in
production 1,000,000
Material costs P1,300,000
Labor costs
P1,995,000
Units completed 900,000
The cost that should be assigned to the 300,000 units in ending work-in-process
using the weighted average method is:
(AICPA, adapted)

General Feedback
 The 300,000 units in ending work-in-process are 100% complete with respect to
materials and 50% complete as to labor and overhead. The ending work-in-
process is equal to the equivalent units in ending inventory times the respective
cost per equivalent unit of production.

Materials (300,000 x P1.25) P 375,000

Labor (150,000 x P2.20) 330,000
Overhead (150,000 x P1.32) 198,000
Total cost P 903,000

Allocation of Costs

1.
During March 2001, Polo Co.'s Department Y equivalent unit product costs,
computed under the weighted average method, were as follows:

Materials P1.00
Conversion 3.00
Transferred-in 5.00

Materials are introduced at the end of the process in Department Y. There

were 4,000 units (40% complete as to conversion cost) in work-in-process at March
31, 2001. The total costs assigned to the March 31, 2001, work-in-process inventory
should be:
(AICPA, adapted)

General Feedback
The total costs assigned to March 31, 2001, work-in-process inventory should be
P24,800, compute as follows:

Transferred-in costs (4,000 units x P5) P 20,000

Conversion costs (4,000 x 40% x P3) 4,800
Total costs assigned to work-in-process P 24,800

2.
During March 2001, Polo Co.'s Department Y equivalent unit product costs,
computed under the weighted average method, were as follows:

Materials P1.00
Conversion 3.00
Transferred-in 5.00

Materials are introduced at the end of the process in Department Y. There

were 4,000 units (40% complete as to conversion cost) in work-in-process at March
31, 2001. The total costs assigned to the March 31, 2001, work-in-process inventory
should be:
(AICPA, adapted)
General Feedback
The total costs assigned to March 31, 2001, work-in-process inventory should be
P24,800, compute as follows:

Transferred-in costs (4,000 units x P5) P 20,000

Conversion costs (4,000 x 40% x P3) 4,800
Total costs assigned to work-in-process P 24,800

3.
During March 2001, Polo Co.'s Department Y equivalent unit product costs,
computed under the weighted average method, were as follows:

Materials P1.00
Conversion 3.00
Transferred-in 5.00

Materials are introduced at the end of the process in Department Y. There were 4,000
units (40% complete as to conversion cost) in work-in-process at March 31, 2001. The total costs
assigned to the March 31, 2001, work-in-process inventory should be:
(AICPA, adapted)

General Feedback
The total costs assigned to March 31, 2001, work-in-process inventory should be
P24,800, compute as follows:

Transferred-in costs (4,000 units x P5) P 20,000

Conversion costs (4,000 x 40% x P3) 4,800
Total costs assigned to work-in-process P 24,800
4.
The Holiday Company makes wreaths in two departments: Forming and Decorating.
Forming began the month with 500 wreaths in process that were 100 percent
complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that
were still in process that were 100 percent complete as to material and 50 percent
complete as to conversion. Assume Forming uses the weighted average method of
process costing. Costs in the Forming Department are as follows:

Beginning Work in Process Costs:

Material 1,000
Conversion 1,500
Current Costs:
Material 3,200
Conversion 5,045

The Decorating Department had 600 wreaths in process at the beginning of the
month that were 80 percent complete as to material and 90 percent complete as to
conversion. The department had 300 units in ending Work in Process that were 50
percent complete as to material and 75 percent complete as to conversion.
 Decorating uses the FIFO method of process costing, and costs associated with
Decorating are:

Beginning WIP Inventory:

Transferred In 1,170
Material 4,320
Conversion 6,210
Current Period:
Transferred In ?
Material 67,745
Conversion 95,820

What was the cost transferred out of Forming during the month?

General Feedback
8,330

5.
Presented below is the cost of production report of Blu-Chem Mfg. Co. for its
Finishing Department, including all data, production and cost. Blu-Chem uses the
FIFO cost method in its process cost system.

Costs Charged to Finishing Dept.:

Work-in-process, May 1:
From preceding department P9,500
From this department:
Materials (all) P5,375
Labor (3/4) 9,750
Overhead (3/4) 10,500 25,625
Total P35,125
Transferred-in during May (10,000) P35,000

Cost added during May:

Materials P17,500
Labor 40,625
Overhead 32,500
Total departmental cost this month P90,625
Total costs P160,750

COST PRODUCTION REPORT

FINISHING DEPT.
Quantity Schedule: Units
Units in process, May 1 (all materials,
3/4 labor and overhead) 2,500
Transferred in during May 10,000
Total to be accounted for 12,500
Transferred to finished goods 8,750
 Units lost 1,250
Units in process, May 31 (all materials, ½
labor and overhead) 2,500
Total as accounted for 12,500
How much is the cost of the final work-in-process inventory?

General Feedback
The cost of the ending work-in-process inventory would be P26,250, computed
as follows:

Cost, this department:

Materials : 2,500 x P2.00 = P5,000
Labor : 1,250 x P5.00 = 6,250
Overhead: 1,250 x P4.00 = 5,000 P16,250
Cost, preceding department (2,500 x P3.50) 8,750
Cost, lost units (2,500 x P0.50) 1,250
Total cost of final work-in-process inventory P26,250

6.
Information for the month of May concerning Department A, the first stage of
White Corporation's production cycle, is as follows:
Conversion

Materials Costs

Work in process, May 1 P 4,000 P 3,000

Current costs 20,000 16,000

Total costs P24,000 P19,000

Equivalent units 100,000 95,000

based on weighted average
method

Average unit costs P0.24 P0.20

Goods completed 90,000 units

Work-in-process, ending 10,000 units

Materials costs are added at the beginning of the process. The ending work-in-
process is 50% complete as to conversion costs. How would the total costs
accounted for be distributed, using the weighted-average method?
Goods Work in
(AICPA, adapted)

General Feedback
The total costs to be accounted for is P43,000 (P39,600 + P3,400), computed as
follows:
 Total costs to be accounted for:

Materials Conversion Total

WIP-beginning P 4,000 P 3,000 P 7,000

Current costs 20,000 16,000 36,000

Totals P24,000 P 19,000 P43,000

Total costs accounted for:

Goods completed:

Materials: 90,000 x P0.24 = P21,600

Conversion: 90,000 x P0.20 = 18,000

P39,600

Work-in-process, end (10,000 x 100% x P.024) = P 2,400

Materials

Conversion (10,000 x 50% x P0.20) = 1,000 P

3,400

Total costs accounted for P 43,000

7.
Information concerning Department B of the Tobby Company is as follows:
Transferred
Units in
Beginning work-in-process 5,000 P 2,900
Units transferred-in 35,000 17,500
40,000 P 20,400

Units completed 37,000

Ending work-in-process 3,000

Materials Conversion Total Costs

Beginning WIP P--- P 3,400 P 6,300
Units transferred-in 25,500 15,000 58,000
P25,500 P 18,400 P 64,300

Conversion costs were 20% complete as to the beginning work-in-process and

40% complete as to the ending work-in-process. All materials are added at the
end of the process. Toby uses the weighted-average method.
The cost per equivalent unit for conversion costs, rounded to the nearest
centavo, is
(AICPA, adapted)

General Feedback
Since the weighted average method is used, there is no need to segregate the
finished units into those units which were in process at the beginning of the
 period and those which were transferred in during the current period. The
determination of equivalent units is as follows:

Work Materials
Units Done EUP
Units completed 37,000 100% 37,000
Ending, WIP 3,000 40% 1,200
Equivalent units- conversion costs 38,200

The total conversion costs charged to Department B for all units in

process during the period was P18,400 (given). Therefore, the equivalent unit
cost for conversion cost would be P0.482 (P18,400/38,200 EUP).

8.
ABC Company manufactures product X. It adds materials in the beginning of
the process in Department A, which is the first of the two stages of its
production cycle. The following are the information concerning the materials
used in Department A in September, Year 2:
Materials

Units Costs

Work-in-process, September 1 4,000 P 2,000

Started during September 48,000 23,480

Units completed, and transferred to next

department
during September 30,000

Using the weighted average method, the materials cost of the work-
in-process at September 30, Year 2 is:

General Feedback
The material cost of work in process at September Year 2 is P10,780, computed
as follows:
Work Materials
Units Done EUP
Completed 30,000 100% 30,000
Work-in-process 22,000 100% 22,000
Equivalent units 52,000

Cost per equivalent unit = P2,000 + P23,480 = P.49

52,000
Work in process, September:
Material cost: 22,000 x P.49 = P10,780

9.
Backflush costing system (JIT system)

Raw and In-Process Inventory

1.
The Love Company seeks to streamline the costing system at its Manila plant. It
will use a backflush costing system with three trigger points:
Purchase of raw
materials
Completion of
finished goods

Sale of finished
goods

There are no beginning inventories. The following data pertain to April 2013:
Raw materials purchased P880,
000

Raw materials used 850,

000
Conversion costs incurred 422,
000

Conversion allocated to 400,

finished goods 000
Costs transferred to finished 1,
goods 250,
000

Cost of goods sold 1,

190,
000

Assume no materials variances. The balance of RIP account at the end of April
2013 is:

General Feedback
P30, 000

2.
The Pit Shop Company produces telephones. For June, there were no beginning
inventory of raw materials and no beginning and ending work in process. Pit Shop
 uses a JIT manufacturing systems and backflush costing with trigger points for
making entries in its accounting systems.
· Purchase of raw materials
· Sales of finished goods

Pit Shop’s standard costs per unit of telephone in June are direct materials, P26;
and conversion costs, P15. The following data apply to June production:
Raw materials purchased P5,
300,
000
Conversion costs incurred 3,
080,
000

Number of finished units 200,

manufactured 000
Number of finished units sold 192,
000

The balances of Raw and In Process at the end of June is:

General Feedback
P508, 000

Cost Backflushed

1.
The Hudy Manufactuing Company uses a Raw and In Process (RIP) inventory
account and expensed all conversion costs to the cost of goods sold account. at the
end of each month, all inventories are counted, their conversion cost components
are estimated, and inventory account balances are adjusted accordingly. Raw
material cost is backflushed from RIP to finished goods. The following information is
for the month of April:
Beginning balance of RIP account, including P1, 400 P31, 000
of conversion cost

Raw materials received on credit 367, 000

Ending RIP inventory per physical count, including 33, 000

P1, 800
conversion cost estimate

What is the amount of materials used to be backflushed from RIP to finished

goods?

General Feedback
365, 400
2.
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 cost is backflushed from RIP account to Finished Goods
account. the following data is for the month of August:
Beginning balance of RIP P38,
account 700
Conversion costs incurred 4,
800

Raw materials purchased 680,

000
Conversion costs 5,
allocated 300

Ending balance of RIP 41,

account 900

The amount of direct materials and conversion costs to be backflushed to finished

goods are:

General Feedback
P676, 800 and P5, 300 respectively

Cost of Goods Sold

1.
The Pitbull Shop Company produces telephones. For June, there were no beginning
inventory of raw materials and no beginning and ending work in process. Pitbull
Shop uses a JIT manufacturing systems and backflush costing with trigger points
for making entries in its accounting systems.
· Purchase of raw materials
· Sales of finished goods

Pitbull Shop’s standard costs per unit of telephone in June are direct materials, P26;
and conversion costs, P15. The following data apply to June production:
Raw materials purchased P5, 300, 000

Conversion costs incurred 3, 080, 000

Number of finished units manufactured 200, 000

Number of finished units sold 192, 000

The balances of Cost of Goods Sold at the end of June is:

General Feedback
P7, 872, 000

2.
Basilio Company has a cycle time of 3 days, uses a Raw and In process (RIP)
account, and charges all conversion costs to Cost of Goods Sold. At the end of each
month, all inventories are counted, their conversion cost components are
estimated, and inventory account balances are adjusted. Raw material cost is
backflushed from RIP to Finished Goods. The following information is for June:
Beginning balance of RIP account, including P 3, 000 of conversion costs P29,
250

Beginning balance of finished goods account, including P10, 000 of 30,

conversion costs 000
Raw materials received on credit 562,
500

Direct labor cost, P375, 000; Factory overhead applied, P450, 000 825,
000
Ending RIP inventory per physical count, including P4, 500 of conversion 32,
costs 000

Ending finished goods inventory per physical count, including P8, 750 of 26,
conversion costs 250

What is the conversion costs of units sold in June?

General Feedback
P824, 750

Activity-based costing system (ABC costing)

Cost Pools, Cost Drivers

1.
The term cost driver refers to

General Feedback
any activity that causes costs to be incurred.

2.
The following items are used in tracing costs in an ABC system. In which order are
they used?
 (1) cost object
(2) cost driver
(3) activity driver
(4) cost pool

General Feedback
4, 3, 1, 2

ABC vs Traditional Costing

1.
Hoger Corporation accumulated the following cost information for its two products,
A and B:
A B Total

Production volume 2,000 1,000

Total direct man. labor 5,000 20,000 25,000
hrs.

Setup cost per batch 1,000 2,000

Batch size 100 50

Total setup costs 20,000 40,000 60,000

incurred
DMLH per unit 2 1

A traditional costing system would allocate setup costs on the basis of DMLH. An
ABC system would trace costs by spreading the costs per batch over the units in a
batch. What is the setup cost per unit of product A under each costing system?

1) Traditional
2) ABC

General Feedback
1) 4.80 2) 10.00

2.
Which of the following is true about activity-based costing?

General Feedback
It can be used with either process or job costing.
Accounting for joint and by-products

Cost allocation to Main Products

1.
Lane Co. produces main products Kul and Wu. The process also yields by-product
Zef. Net realizable value of by-product Zef is subtracted from joint production cost
of Kul and Wu. The following information pertains to production in July 2018 at a
joint cost of 54,000:
Produ Units Market Additional cost
ct produced value after split-off

Kul 1,000 40,00 0

0
Wu 1,50 35,00 0
0 0

Zef 500 7,000 3,000

If Lane uses the net realizable value method for allocating joint cost, how much of
the joint cost should be allocated to product Kul?

General Feedback
26,667

2.
For purposes of allocating joint costs to joint products, the sales price at point of sale,
reduced by cost to complete after splitoff, is assumed to be equal to the

General Feedback
Net sales value at split-off.

Cost allocation to By-Products

1.
Kode Co. manufactures a major product that gives rise to a by-product called May.
May’s only separable cost is a 1 selling cost when a unit is sold for 4. Kode accounts
for May’s sales by deducting the 3 net amount from the cost of goods sold of the
major product. There are no inventories. If Kode were to change its method of
accounting for May from a by-product to a joint product, what would be the effect on
Kode’s overall gross margin?

General Feedback
Gross margin increases by 1 for each unit of May sold.

2.
 In accounting for by-products, the value of the by-product may be recognized at
the time of
1) Production
2) Sale

General Feedback
1) Yes 2) Yes

Cost Per Unit - Assessment

Freego Company adds materials at the beginning of the process in department
N. Conversion costs were 75% complete as to the 8,000 units in work in
process at May 1 and 50% complete as to the 6,000 units in work in
process at May 31. During May, 12,000 units were completed and
transferred to the next department. An analysis of the costs relating to
work-in-process at May 1 and to production activity for May is as follows:

Costs
Materials Conversio
n
Work in process, May 1 P9,600 P 4,800
Costs added in May 15,600 14,400
Using the weighted average method, the total cost per equivalent unit for May was:
General Feedback
Materials are added at the beginning of the process, therefore, all units completed
as well as those in ending WIP are 100% complete with respect to materials.
Conversion costs are assumed to be incurred uniformly.

Materials Conversion
Units % EUP % EUP
Completed and
transferred 12,000 100 12,000 100 12,000
WIP- May 31 6,000 100 6,000 50 3,000
Equivalent units 18,000 15,000

Total cost per equivalent unit:

Materials: (P9,600 + p15,600)/18,000 = P1.40
Conversion: (P4,800 + P14,400)/15,000 = P1.28
P2.68
n April 1, 2000, the Collins Company had 6,000 units of work-in-process in
Department B, the second and last stage of their production cycle. The costs
attached to these 6,000 units were P12,000 of costs transferred-in from
Department A, P2,500 of material costs added in Department B and P2,000 of
conversion cost added in Department B. Materials are added at the beginning
of the process in Department B. Conversion was 50% complete on April 1,
2000. During April 14,000 units were transferred-in from Department A at a
cost of P27,000; and material costs of P 3,500 and conversion costs of P3,000
were added in Department B. On April 30, 2000, Department B had 5,000
units of work-in-process 60% complete as to conversion costs. The costs
attached to these 5,000 units were P10,500 of costs transferred in from
Department A, P1,800 of material costs added in Department B and P800 of
conversion cost added in Department B.
Using the weighted-average method, what was the cost per equivalent unit
for conversion cost?
General Feedback
The equivalent units for conversion costs for the month of April were 18,000. The
total conversion costs charged to Department B for all units in process during
April was P5,000 (P2,000 + P3,000). Therefore, the equivalent unit cost would be
P5,000/18,000.

On April 1, 2000, the Collins Company had 6,000 units of work-in-process in

Department B, the second and last stage of their production cycle. The costs
attached to these 6,000 units were P12,000 of costs transferred-in from
Department A, P2,500 of material costs added in Department B and P2,000 of
conversion cost added in Department B. Materials are added at the beginning
of the process in Department B. Conversion was 50% complete on April 1,
2000. During April 14,000 units were transferred-in from Department A at a
cost of P27,000; and material costs of P 3,500 and conversion costs of P3,000
were added in Department B. On April 30, 2000, Department B had 5,000
units of work-in-process 60% complete as to conversion costs. The costs
attached to these 5,000 units were P10,500 of costs transferred in from
Department A, P1,800 of material costs added in Department B and P800 of
conversion cost added in Department B.
Using the weighted-average method, what were the equivalent units for the
month of April?
Transferred-in
General Feedback
The equivalent units for the month of April are 20,000; 20,000; and 18,000 for
transferred in, materials, and conversion, respectively, computed as follows:

Transfer Materials Conversion

Units in % EUP % EUP
Completed* 15,000 15,000 100 15,000 100 15,000
Ending WIP 5,000 5,000 100 5,000 60 3,000
Equivalent units 20,000 20,000 18,000

* Units completed = 6,000 + 14,000 - 5,000

= 15,000.
The following data for the month of September were taken from the cost
records of Department A of New Life Products Company which uses the
average costing method:

Opening inventory of work-in-process:

Units -- 500 (with all materials needed and 50% of
labor and overhead)
Costs -- Materials P2,400
Labor
1,500
Factory overhead 760

Put into production:

Units -- 5,000
Costs -- Materials P25,100
Labor
19,380
Factory overhead
14,900
 Completed and transferred -- 4,800 units
Ending inventory of work-in-process:
Units -- 700 (with all materials, and 60% of labor and
overhead)
The equivalent production for the month for labor is
General Feedback
Under the weighted average method of process costing all costs associated with
beginning inventory are combined with current period costs to determine
equivalent production and product costs. The equivalent production for the month
for labor is 5,220, computed as follows:

Labor
Units % EUP
Completed and transferred 4,800 100 4,800
Work-in-process, end 700 60 420
Equivalent production 5,220

Jag Company manufactures product X in a two-stage production cycle in

Departments A and B. Materials are added at the beginning of the process
in Department B. Jag uses the weighted average method. Conversion
costs for Department B were 50% complete as to the 6,000 units in
beginning work in process and 75% complete as to the 8,000 units in
ending work in process. 12,000 units were completed and transferred out
of Department B during February. An analysis of the costs relating to work-
in-process and production activity in Department B for February follows:
Transferred Materials Conversion
In costs costs
costs
Work in process,
February 1:
Cost attached P12,000 P2,500 P1,000

February activity:
Costs added P29,000 P5,500 P5,000

The total cost per equivalent unit transferred-out for February of Product X,
rounded to the nearest centavo, was:
General Feedback
The total cost per equivalent unit transferred out is equal to the unit cost for
transferred-in costs, material costs, and conversion costs. Transferred costs are by
definition 100% complete. Given that materials are added at the beginning of the
process in Department B, all units are complete as to materials. Conversion costs are
assumed to be uniformly incurred.

Transf. Materials Conversion

Units In % EUP % EUP
Completed 12,000 12,000 100 12,000 100 12,000
Ending WIP 8,000 8,000 100 8,000 75 6,000
Equivalent units 20,000 20,000 18,000

Transferred-In = (P12,000 + P29,000) = P 2.05

 20,000
EUP Materials = (P2,500 + P5,500)
= .40
20,000 EUP
Conversion = (P1,000 + P5,000) = .33
18,000 EUP
Total unit cost P 2.78
Cutting Department is the first stage of Mark Company's production
cycle. Conversion costs for this department were 80% complete as to beginning
work in process and 50% complete as to ending work in process. Information as
to conversion costs in the Cutting Department for January is presented
below:
Units Conversion Costs
Work in process at January 1 25,000 P 2,000
Units started and cost
incurred during January 135,000 143,000
Units completed and trans-
ferred to next department
during January 100,000

Using the FIFO method, what was the conversion cost of work-in-process in the
Cutting Department at January 31?
General Feedback
The choice ''P 39,000'' is the correct answer.

The conversion cost of work-in-process in Cutting Department at January 31 using

the FIFO method is P39,000. When using the FIFO method process costing, EUP
for a period include only the work done that period and exclude any work done
in a prior period. The total of conversion cost EUP for the period is calculated
below.

Work Conversion
Units Done EUP
WIP - beginning 25,000 20% 5,000
Started and completed 75,000 100% 75,000
WIP - ending 60,000 50% 30,000
Total equivalent production (EUP) 110,000

Allocation unit cost = Conversion cost - January

(this department) Equivalent unit of production
= P 143,000
110,000
= P 1.30
WIP - January 31:
Conversion costs = EUP 30,000 x UC P1.30
= P 39,000

The following data for the month of September were taken from the cost
records of Department A of New Life Products Company which uses the
average costing method:
 Opening inventory of work-in-process:
Units -- 500 (with all materials needed and 50% of
labor and overhead)
Costs -- Materials P2,400
Labor
1,500
Factory overhead 760

Put into production:

Units -- 5,000
Costs -- Materials P25,100
Labor
19,380
Factory overhead
14,900

Completed and transferred -- 4,800 units

Ending inventory of work-in-process:
Units -- 700 (with all materials, and 60% of labor and
overhead)
The unit cost for material for the month is
General Feedback
The equivalent units of production for material is 5,500 units, computed as
follows:
Materials
Units % EUP
Completed and transferred 4,800 100 4,800
Work-in-process, end 700 100 700
Equivalent production 5,500

The total material costs charged to Department A for all units in process during
the month was P27,500 (P2,400 + P25,100). Therefore, the unit cost for materials
would be P5.00 (P27,500/5,500 EUP).

Jag Company manufactures product X in a two-stage production cycle in

Departments A and B. Materials are added at the beginning of the process in
Department B. Jag uses the weighted average method. Conversion costs for
Department B were 50% complete as to the 6,000 units in beginning work in
process and 75% complete as to the 8,000 units in ending work in
process. 12,000 units were completed and transferred out of Department B
during February. An analysis of the costs relating to work-in-process and
production activity in Department B for February follows:
Transferred Materials Conversion
In costs costs costs
Work in process,
February 1:
Cost attached P12,000 P2,500 P1,000

February activity:
Costs added P29,000 P5,500 P5,000

The total cost per equivalent unit transferred-out for February of Product X,
rounded to the nearest centavo, was:
General Feedback
The choice "P2.78" is the correct answer.

The total cost per equivalent unit transferred out is equal to the unit cost for
transferred-in costs, material costs, and conversion costs. Transferred costs are by
definition 100% complete. Given that materials are added at the beginning of the
process in Department B, all units are complete as to materials. Conversion costs are
assumed to be uniformly incurred.

Transf. Materials Conversion

Units In % EUP % EUP
Completed 12,000 12,000 100 12,000 100 12,000
Ending WIP 8,000 8,000 100 8,000 75 6,000
Equivalent units 20,000 20,000 18,000

Transferred-In = (P12,000 + P29,000) = P 2.05

20,000 EUP
Materials = (P2,500 + P5,500) = .40
20,000 EUP
Conversion = (P1,000 + P5,000) = .33
18,000 EUP
Total unit cost P 2.78

Cutting Department is the first stage of Mark Company's production cycle.

Conversion costs for this department were 80% complete as to beginning
work in process and 50% complete as to ending work in process. Information
as to conversion costs in the Cutting Department for January is presented
below:
Units
Conversion Costs
Work in process at January 1 25,000 P 2,000
Units started and cost
incurred during January 135,000 143,000
Units completed and trans-
ferred to next department
during January 100,000
Using the FIFO method, what was the conversion cost of work-in-process in the
Cutting Department at January 31?
General Feedback
The conversion cost of work-in-process in Cutting Department at January 31 using
the FIFO method is P39,000. When using the FIFO method process costing, EUP
for a period include only the work done that period and exclude any work done
in a prior period. The total of conversion cost EUP for the period is calculated
below.

Work Conversion
Units Done EUP
WIP - beginning 25,000 20% 5,000
Started and completed 75,000 100% 75,000
WIP - ending 60,000 50% 30,000
Total equivalent production (EUP) 110,000
 Allocation unit cost = Conversion cost - January
(this department) Equivalent unit of production
= P 143,000
110,000
= P 1.30
WIP - January 31:
Conversion costs = EUP 30,000 x UC P1.30
= P 39,000
Cutting Department is the first stage of Mark Company's production cycle.
Conversion costs for this department were 80% complete as to beginning
work in process and 50% complete as to ending work in process. Information
as to conversion costs in the Cutting Department for January is presented
below:
Units Conversion Costs
Work in process at January 1 25,000 P 2,000
Units started and cost
incurred during January 135,000 143,000
Units completed and trans-
ferred to next department
during January 100,000

What were the conversion costs per equivalent unit of production last
period and this period, respectively?
General Feedback
The choice "P1.10 and P1.30" is the correct answer.

This period's conversion cost per EUP is computed as P1.30 in the previous question.
Last period's conversion cost per EUP is P1.10, which is conversion costs of P22,000
divided by 20,000 EUP (25,000 units x 80%).

In computing the current period’s manufacturing cost per equivalent unit, the FIFO
method of process costing considers current period costs
General Feedback
Only.

Information concerning Department A of Chancellor Company for June is as

follows: Materials
Units Cost
s
Beginning work in process 17,000 P12,800
Started in June 82,000 69,700
Units completed 85,000
Ending work in process 14,000

All materials are added at the beginning of the process. Using the weighted
average method, the cost per equivalent unit for materials is:
General Feedback
The choice "P0.83" is the correct answer.
Previous period's and current period's costs are combined when the weighted average
method of process costing is used. Department A add materials at the beginning of the
process, therefore, all units completed as well as those in ending WIP are 100%
complete with respect to materials.

Materials____
Work
Units Done EUP
Completed 85,000 100% 85,000
Ending WIP 14,000 100% 14,000
Equivalent units 99,000

Cost per equivalent unit = P12,800 + P69,700

99,000
= P0.83
Cutting Department is the first stage of Mark Company's production cycle.
Conversion costs for this department were 80% complete as to beginning
work in process and 50% complete as to ending work in process. Information
as to conversion costs in the Cutting Department for January is presented
below:

Units Conversion Costs

Work in process at January 1 25,000 P 2,000
Units started and cost
incurred during January 135,000 143,000
Units completed and trans-
ferred to next department
during January 100,000
What is the per unit conversion cost of goods started last period and completed
this period?
General Feedback P28,500/25,000
The total of the units started last period and completed this period is 25,000.
These units were 80% completed at the start of the period, at a cost of P22,000.
The cost to complete was P6,500 (5,000 EUP x P1.30). The total cost of P28,500
(P22,000 + P6,500) is divided by 25,000 units to obtain the unit cost (P1.14).

The following information pertains to Lap Co.’s Palo Division for the month of
April:
Number of Cost of
units materials
Beginning work in 15,000 5,500
process
Started in April 40,000 18,000
Units completed 42,500
Ending work in 12,500
process

All materials are added at the beginning of the process. Using the weighted-
average method, the cost per equivalent unit for materials is
General Feedback
0.43