La Salle University

College of Accountancy
ACADEMIC COUNCIL’s THE FORUM
ADVANCED FINANCIAL ACCOUNTING AND REPORTING

DRILL ON COST ACCOUNTING

Part 1 – Job Order Costing Use the following to answer the next two questions:
1. Product costing in a manufacturing firm is the process Work in process of Alonzo Corporation in July 1, 2017
of: (per general ledger) is ₱22,800.
a. accumulating the company's period costs.
b. allocating costs among the firm's departments. Per cost sheets:
c. placing a value on the company's fixed assets. Direct materials Direct labor
d. assigning costs to the firm's inventory. Job 101 ₱6,000 ₱3,000
Job 102 8,000 2,500
2. Which of the following manufacturers would most
likely use job-order costing? Amount charged to Work in process for July 2017
a. Chemical manufacturers. Direct materials Direct labor
b. Microchip processors. Job 101 ₱3,000 ₱1,000
c. Custom-furniture manufacturers. Job 102 2,000 1,500
d. Gasoline refiners. Job 103 6,000 2,600
Job 104 4,500 2,000
3. As production takes place, all manufacturing costs are
added to the: Factory overhead is applied to production based on
a. Work-in-Process Inventory account. direct labor cost. Jobs 101 and 103 are completed
b. Manufacturing-Overhead Inventory account. during the month.
c. Cost-of-Goods-Sold account.
d. Finished-Goods Inventory account. 7. Cost of goods put into process must be:
a. ₱42,100
4. Which of the following statements about materials is b. ₱26,860
false? c. ₱45,400
a. Acquisitions of materials are normally charged to d. ₱49,660
the Purchases account.
b. The use of direct materials gives rise to a debit to 8. The cost of goods manufactured for the month of July
Work-in-Process Inventory. is
c. The use of indirect materials gives rise to a debit a. ₱21,600
to Manufacturing Overhead. b. ₱15,400
d. The use of indirect materials gives rise to a credit c. ₱25,560
to Manufacturing Supplies Inventory. d. ₱31,800

5. Longview Corporation recently used ₱72,000 of direct 9. The accounting records for 2017 of Wagner Music Co.
materials and ₱3,000 of indirect materials in showed the following:
production activities. The journal entries reflecting Decrease in raw materials inventory ₱45,000
these transactions would include: Decrease in finished goods inventory 150,000
a. a debit to Raw-Material Inventory for ₱72,000. Raw materials purchased 1,290,000
b. a debit to Manufacturing Overhead for ₱3,000. Direct labor payroll 600,000
c. a credit to Manufacturing Overhead for ₱3,000. Factory overhead 900,000
d. a debit to Work-in-Process Inventory for ₱75,000. Freight-out 135,000

6. Tudors, Inc. purchases and resells a single item of The cost of raw materials used for the period
product. Inventory at the beginning of September amounted to
2017 was 400 units, values at ₱1.80 each. Further a. ₱1,245,000
receipts and sales during the month were as follows: b. ₱1,290,000
Units Pesos Per Unit c. ₱1,335,000
Sept. 8 Receipts 600 ₱2.10 d. ₱1,380,000
Sept. 14 Receipts 500 ?
Sept. 25 Sales 1,250 4.00 10. The following information relates to Job No. 2468,
which being carried out by Flexy Co. to meet a
The company uses the FIFO. Gross margin for customer’s order.
September was ₱2,500. Dept. A Dept. B
Direct materials used ₱5,000 ₱3,000
What was the cost per unit of the 500 units received Direct labor hours employed 400 200
on Sept. 14? Direct labor rate per hour ₱4.00 ₱5.00
a. ₱2.08 Overhead rate per DL hour ₱4.00 ₱4.00
b. ₱2.00 Adm. and other overhead 20% of full
c. ₱1.94 production cost
d. ₱1.04 Profit markup 25% of selling price

AFAR 14D – COST ACCOUNTING Page 1 of 9

 The selling price to the customer for Job 2468 is: 15. The cost of goods sold is:
a. ₱16,250 a. ₱4,091,500
b. ₱20,800 b. ₱4,109,500
c. ₱17,333 c. ₱4,901,500
d. ₱19,500 d. ₱4,910,500

11. Hamilton Company uses a job order costing. Factory Part 2 – Process Costing
overhead is applied to production at a budgeted rate 16. Which of the following items is not a characteristic of a
of 150% of direct labor costs. any overapplied or process cost system?
underapplied factory overhead is closed to the cost of a. Once production begins, it continues until the
goods sold account at the end of the month. Additional finished product emerges
information is avaiable as follows: Job 101 was the b. The products produced are heterogeneous in
only job in process at January 31, 2017 with nature
accumulated costs as follows: c. The focus is on continually producing
Direct materials ₱4,000 homogeneous products
Direct labor 2,000 d. When the finished product emerges, all units have
Factory overhead applied 3,000 precisely the same amount of materials, labor, and
overhead
Jobs 102, 103, and 104 were started during February.
Direct materials requisitions for February totaled 17. Britney Company has unit costs of ₱10 for materials
₱26,000. Direct labor costs of ₱20,000 were incurred and ₱30 for conversion costs. If there are 2,500 units
for February. Actual factory overhead was ₱32,000 for in ending work in process, 40% complete as to
February. The only job still in process at the end of conversion costs, and fully complete as to materials
February was Job 104, with costs of ₱2,800 for direct cost, the total cost assignable to the ending work in
materials and ₱1,800 for direct labor. process inventory is
a. ₱ 45,000
The cost of goods manufactured for February was: b. ₱ 55,000
a. ₱77,700 c. ₱ 75,000
b. ₱79,700 d. ₱100,000
c. ₱78,000
d. ₱85,000 18. In the Star Company, the predetermined overhead rate
is 80% of direct labor cost. During the month,
12. Dale Company, which applies overhead at the rate of ₱210,000 of factory labor costs are incurred, of which
190% of direct labor cost, began work on job no. 101 ₱180,000 is direct labor and ₱30,000 is indirect labor.
during June. The job was completed in July and sold Actual overhead incurred was ₱200,000. The amount
during August, having accumulated direct material and of overhead debited to Work in Process Inventory
labor charges of ₱27,000 and ₱15,000, respectively. should be
On the basis of this information, the total overhead a. ₱120,000
applied to job no. 101 amounted to: b. ₱144,000
a. ₱0. c. ₱168,000
b. ₱28,500. d. ₱160,000
c. ₱51,300.
d. ₱70,500. 19. The Assembling Department’s output during the
period consists of 20,000 units completed and
Use the following to answer the next three questions: transferred out, and 5,000 units in ending work in
The following were taken from the books of Marvin process 60% complete as to materials and conversion
Company. costs. Beginning inventory is 1,000 units, 40%
January 1 March 31 complete as to materials and conversion costs. The
Raw materials ₱268,000 ₱167,000 equivalent units of production are
Work in process 0 0 a. 22,600
Finished goods ₱43,000 ? b. 23,000
(100 units) (200 units) c. 24,000
Materials purchased ₱1,946,700 d. 25,000
Direct labor 2,125,800
Factory overhead 764,000 20. The Amor Company has 2,000 units in beginning work
Sales (12,400 units at ₱535) in process, 20% complete as to conversion costs,
23,000 units transferred out to finished goods, and
The company uses the FIFO method for costing 3,000 units in ending work in process one-third
inventories. complete as to conversion costs. The beginning and
ending inventory is fully complete as to materials
13. The number of units manufactured is: costs. Equivalent units for materials and conversion
a. 11,900 costs are
b. 12,000 a. 22,000 and 24,000
c. 12,500 b. 26,000 and 24,000
d. 15,200 c. 24,000 and 26,000
d. 26,000 and 26,000
14. The cost of goods manufactured per unit is:
a. ₱300 21. Lucas Co. adds materials in the beginning of the
b. ₱350 process in the Forming Dept., which is the first of two
c. ₱395 stages of its production cycle. Information converting
d. ₱420 the materials used in the Forming Dept. in October are
as follows:
AFAR 14D – COST ACCOUNTING Page 2 of 9
 Units Costs of the abnormal loss or gain, net of scrap, is written off
Work in process, Oct. 1 6,000 ₱3,000 to the profit and loss account.
Units stated in October 50,000 25,560 Materials input 1,000 units ₱5,100
Units comp. & transf. to next dept. 44,000 Conversion cost ₱3,000
Output to finished goods 800 units
Using the weighted-average method, what was the
materials cost of work in process at October 31? What was the full cost of the finshed output that
a. ₱3,000 passed the quality control check?
b. ₱6,000 a. ₱7,040
c. ₱5,250 b. ₱7,920
d. ₱6,120 c. ₱7,200
d. ₱8,100
Use the following to answer the next two questions:
On April 1, the Collins Co. had 6,000 units of work in Use the following to answer the next three questions:
Dept. B, the second and last stage of their production Opening inventory 4,000 units
cycle. The costs attached to these 6,000 units were
₱12,000 of costs transferred in from Dept. A, ₱2,500 of Percentage of completion Value
material cost added in Dept. B and ₱2,000 of Materials 100% ₱1,992
conversion cost added in Dept. B. Materials are added Labor 50% 1,074
in the beginning of the process in Dept. B. Conversion Overhead 50% 846
was 50% complete on April 1. During April, 14,000
units were transferred in from Dept. A at a cost of Put in process 20,000 units
₱27,000 and materials costs of ₱3,500 and conversion Materials value ₱12,000
costs of ₱3,000 were added in Dept. B. On April 30, Labor 9,984
Dept. B had 5,000 units in work in process 60% Overhead is 100% of labor cost
complete as to conversion costs. The costs attached to Units completed and tranferred 21,000 units
these 5,000 units were ₱10,500 of costs transferred in Units in process at the end 3,000 units
from Dept. A, ₱1,800 of materials costs added in Dept. Materials 100%
B and ₱800 of conversion costs added in Dept. B. Labor and overhead 60%

22. Using the weighted average method, the equivalent 26. The equivalent production for material is
units for the month of April were: Under Average Under FIFO
Transferred a. 24,000 20,000
from Dept. A Materials Conversion b. 20,000 21,000
a. 15,000 15,000 15,000 c. 20,000 24,000
b. 19,000 19,000 20,000 d. 21,000 20,000
c. 20,000 20,000 18,000
d. 25,000 25,000 20,000 27. The equivalent production for labor and overhead is
Under Average Under FIFO
23. Using the weighted average method, what was the cost a. 21,000 20,000
per equivalent unit for conversion cost? b. 24,000 22,000
a. ₱4,200/15,000 c. 22,800 20,800
b. ₱5,800/20,000 d. 21,000 21,000
c. ₱5,800/18,000
d. ₱5,000/18,000 28. The total cost of the work in process at the end is
Under Average Under FIFO
24. Sanley, Inc. manufactures a product which goes a. 3,577 3,500
through three consecutive processes, Process 1, b. 3,477 3,528
Process 2, and Process 3. Data for the month of c. 3,528 3,477
September 2017 are as follows: d. 3,500 3,577
PROCESS
1 2 3 Use the following for the next two questions:
Work in process, beg. ₱8,000 ₱13,000 ₱2,000 Complete the following process account of Lei
Materials added 20,000 4,000 5,000 Manufacturing Company by supplying the peso
Conversion costs 10,000 10,000 16,000 amounts of (A) and (B) on the credit side of the
Closing work in process 6,000 9,000 4,000 account.
Process Y
What was the value of the output transferred from May 1 May 1-31
Process 3 to the finished goods warehouse for the 6,000 units ₱4,800 16,000 units (A)
month of September? 1/3 completed completed
a. ₱63,000 May 1-31 May 31
b. ₱65,000 Mat. 12,000 ₱6,000 2,000 units (B)
c. ₱67,000 @₱0.50 1/2 completed
d. ₱69,000 Labor 3,600
Overhead 5,400
25. Ten-ten Company produces a small standard
component in a process operation. There is a quality 29. The peso amount of the 16,000 units completed (A) is
control check at the end of the processing. Items which a. ₱17,800
fall this check are sold off as scrap for ₱1.80 per unit. b. ₱18,200
The expected rate of rejection is 10%. Normal loss is c. ₱17,600
not given a cost except that whatever scrap value it d. ₱16,400
has is credited to the process account. The cost/value
AFAR 14D – COST ACCOUNTING Page 3 of 9
30. The peso amount of the 2,000 units 1/2 completed (B)
is
a. ₱2,200
b. ₱1,600
c. ₱2,000
d. ₱1,400
Part 3 – JIT and Backflush
31. The primary objective of just-in-time processing is to
a. accumulate overhead in activity cost pools
b. eliminate or reduce all manufacturing inventories
c. identify relevant activity cost drivers
d. none of them
32. The benefits of a successful Just-In-Time system
include all of the following except:
a. funds tied up in inventories are released for use
elsewhere.
b. inventory buffers are increased.
c. throughput time is reduced.
d. defect rates are decreased.
33. Which of the following is not a benefit of just-in-time
processing?
a. Control of significant inventory balances.
b. Enhanced product quality.
c. Reduction of rework costs.
d. Production cost savings.
34. A key concept of the JIT inventory system is:
a. the raw materials, work in process, and finished
goods inventories of manufacturing companies act
as buffers so that operations can proceed
smoothly even if suppliers are late with deliveries
or a department is unable to operate for a brief
period due to breakdowns or other reasons.
b. the use of many suppliers so as to ensure rapid
delivery of materials for production.
c. the maintenance of a stock of raw materials so
that defective materials can be replaced quickly so
as to maintain a high rate of productivity.
d. inventories are costly to carry and can be kept to
minimum levels or eliminated completely with
careful planning.
35. The flow of goods through a JIT system is based on:
a. a workstation efficiently completing its processing
of a batch of units so that the units can proceed
forward to the next workstation before the next
workstation is ready to receive them.
b. processing goods in large batch sizes rather than
less economical small batches.
c. maintaining a stockpile of raw materials in
anticipation of materials shortages.
d. producing to meet customer demand with no
buildup of inventory at any point in the
production process.
36. A successful JIT system is based upon which of the
following concepts?
a. The company must rely upon a large number of
suppliers to ensure frequent deliveries of small
lots.
b. The company should always choose those
suppliers offering the lowest prices.
c. The company should avoid long-term contracts
with suppliers so as to exert pressure on suppliers
to make prompt and frequent deliveries.
d. A small number of suppliers make frequent
deliveries of specific quantities thus avoiding the
buildup of large inventories of materials on hand.
AFAR 14D – COST ACCOUNTING
37. A company adopting the JIT approach would:
a. produce large batches of products so as to recoup
the costs associated with setups.
b. attempt to reduce setup time so as to
economically produce in smaller batches.
c. adapt a functional plant layout so as to enhance
production flexibility.
d. require workers to become highly specialized in
operating a single machine.
38. Which account is used in just-in-time processing?
a. Raw materials inventory
b. Work in process inventory
c. Merchandise inventory
d. Raw and In-Process inventory
39. Under just-in-time processing, all of the following are
received or completed “just in time” except
a. finished goods.
b. raw materials.
c. supplies.
d. subassembly parts.
40. Just-in-time processing
a. is based on a just-in-case philosophy.
b. results in a push approach.
c. minimizes inventory storage and waiting time.
d. all of these.
41. Problems encountered with using traditional product
costing for JIT manufacturing usually stem from
a. assigning direct materials costs to units of
product.
b. assigning direct labor costs to units of product.
c. assigning overhead costs to units of product.
d. all of the above
42. A characteristic of the just-in-time manufacturing
environment is
a. frequent deliveries of materials
b. manufacturing cells
c. little or no inventory of finished product
d. all of the above
43. Just-in-time relates to
a. people getting to their job location just in time to
begin their work.
b. machinery placed in service just in time to begin
production.
c. materials received from suppliers just in time for
production needs.
d. all of the above.
44. When JIT manufacturing is used, which of the
following costs is considered an indirect product
cost?
a. the cost to set up cell equipment
b. the cost of maintenance on equipment
c. property taxes on the plant
d. salary of the cell supervisor
45. When JIT manufacturing is used, which of the
following costs is considered a direct product cost?
a. insurance on the plant and equipment
b. repair parts for the machinery
c. janitors’ salary
d. salary of the plant supervisor
Part 4 – Activity Based Costing
46. When a firm redesigns a product to reduce the number
of component parts, the firm is
a. increasing consumer value.
Page 4 of 9
 b. increasing the value added to the product. If the company uses activity-based-costing, how much
c. decreasing product variety. overhead cost should be assigned to Job 103?
d. decreasing non-value-added costs. a. ₱1,300
b. ₱2,000
47. Non-value-added activities that are necessary to c. ₱5,000
businesses, but not costs that customers are willing to d. ₱5,600
pay for are known as
a. business-value-added activities. 52. One of Alien Company’s activity cost pools is machine
b. long-term variable activities. setups, with estimated overhead of ₱300,000. Alien
c. short-term variable activities. produces slacks (400 setups) and shirts (600 setups).
d. superior business activities. How much of the machine setup cost pool should be
assigned to slacks?
48. The term cost driver refers to a. ₱0
a. any activity that can be used to predict cost b. ₱120,000
changes. c. ₱150,000
b. the attempt to control expenditures at a d. ₱180,000
reasonable level.
c. the person who gathers and transfers cost data to 53. Empire Company makes two products, E and M. E is
the management accountant. being introduced this period, whereas M has been in
d. any activity that causes costs to be incurred. production for 2 years. For the period about to begin,
1,000 units of each product are to be manufactured.
49. Which of the following statements is true? The only relevant overhead item is the cost of
a. The traditional approach to costing uses many engineering change orders. E and M are expected to
different cost drivers. require eight and two change orders, respectively. E
b. Costs that are indirect to products are by and M are expected to require 2 and 3 machine hours,
definition traceable to directly to products. respectively. The cost of a change order is ₱600.
c. Costs that are indirect to products are traceable to
some activity. If Empire applies engineering change order cost on
d. All of the above statements are true. the basis of machine hours, the overhead cost per
unit to be assigned to E and M, respectively, are
50. Why is it better to use separate overhead rates? a. ₱2.40 and ₱3.60, respectively
a. Some departments are labor-intensive, some are b. ₱3.60 and ₱2.40, respectively
machine-intensive. c. ₱4.80 and ₱3.60, respectively
b. Labor rates vary considerably among d. ₱3.60 and ₱4.80, respectively
departments.
c. The resulting overhead rates are all about the 54. Empire Company makes two products, E and M. E is
same. being introduced this period, whereas M has been in
d. All jobs require about the same percentage of time production for 2 years. For the period about to begin,
in all departments. 1,000 units of each product are to be manufactured.
The only relevant overhead item is the cost of
51. A company has identified the following costs and cost engineering change orders. E and M are expected to
drivers for the coming year. require eight and two change orders, respectively. E
Budgeted Budgeted and M are expected to require 2 and 3 machine hours,
Overhead item Cost driver activity overhead respectively. The cost of a change order is ₱600.
Machine set-up Number of 200 ₱20,000
set-up If Empire is using direct tracing, the amount of
Inspection Number of 6,500 130,000 overhead per unit that will be assigned to E and M,
inspection respectively, are
Material Number of a. ₱2.40 and ₱3.60, respectively
handling material 8,000 80,000 b. ₱3.60 and ₱2.40, respectively
moves c. ₱4.80 and ₱1.20, respectively
Engineering Number of d. ₱1.20 and ₱4.80, respectively
engineering 1,000 50,000
units 55. Wesleyan University Hospital plans to use activity-
Total ₱280,000 based costing to assign hospital indirect costs to the
care of patients. The hospital has identified the
The following information was collected on three jobs following activities and activity rates for the
that were completed during the year: hospital’s indirect costs:
Job Job Job Activity Activity Rate
101 102 103 Room and meals ₱150 per day
Direct materials 5,000 12,000 8,000 Radiology ₱ 95 per image
Direct labor 2,000 2,000 4,000 Pharmacy ₱ 20 per physician order
Units computed 100 50 200 Chemistry lab ₱ 85 per test
Number of setups 1 2 4 Operating room ₱550 per operating room hour
Number of inspections 20 10 30
Number of material moves 30 10 50 The records of two representative patients were
Number of engineering hours 10 50 10 analyzed, using the activity rates. The activity
information associated with the two patients is as
Budgeted direct labor cost was ₱100,000 and follows:
budgeted direct material cost ws ₱280,000.
Patient Patient
Flor Laura
Number of days 7.0 3
AFAR 14D – COST ACCOUNTING Page 5 of 9
 Number of images 4.0 2 X-MAN Machman
Number of physician orders 5.0 1 Direct labor hours 15,000 25,000
Number of tests 6.0 2 Machine setups 600 400
Number operating room hours 4.5 1 Machine hours 24,000 26,000
Inspections 800 700
Determine the activity cost associated with Patient
Flor: Overhead applied to Machman using activity-based
a. ₱4,500 costing is
b. ₱4,550 a. ₱ 640,000.
c. ₱4,495 b. ₱ 768,000.
d. ₱4,515 c. ₱ 832,000.
d. ₱1,000,000.
Use the following to answer the next two questions:
Hughes Company produces three products with the
following production and cost information: Part 5 – Joint and By Product
Model Model Model 61. When allocating joint process cost based on tons of
A B C output, all products will
Units produced 2,000 6,000 12,000 a. be salable at split-off.
Direct labor hours (total) 4,000 2,000 4,000 b. have the same joint cost per ton.
Number of setups 100 150 250 c. have a sales value greater than their costs.
Number of shipments 200 225 275 d. have no disposal costs at the split-off point.
Engineering change orders 15 10 5
62. Which of the following statements is true regarding
by-products or scrap?
Overhead costs include setups ₱90,000; shipping costs
a. Process costing is the only method that should
₱140,000; and engineering costs ₱180,000.
result in by-products or scrap.
b. Job order costing systems will never have by-
56. What would be the per unit overhead cost for Model A
products or scrap.
if direct labor hours were the allocation base?
c. Job order costing systems may have instances
a. ₱20.50
where by-products or scrap result from the
b. ₱41.00
production process.
c. ₱82.00
d. Process costing will never have by-products or
d. ₱76.00
scrap from the production process.
57. What would be the per unit overhead cost for Model A
63. Incremental revenues and costs need to be considered
if activity-based costing were used?
when using which allocation method?
a. ₱20.50
a. Physical measures
b. ₱74.00
b. Sales value at split-off
c. ₱82.00
c. Either a or b
d. ₱76.00
d. Neither a nor b
58. The overhead rate for Machine Setups is ₱100 per
64. For purposes of allocating joint costs to joint products
setup. Products A and B have 80 and 60 setups,
using the relative sales value at split-off method, the
respectively. The overhead assigned to each product
costs beyond split-off
is
a. are allocated in the same manner as the joint
a. Product A ₱8,000, Product B ₱8,000
costs.
b. Product A, ₱6,000, Product B ₱6,000
b. are deducted from the relative sales value at split-
c. Product A ₱8,000, Product B ₱6,000
off.
d. Product A, ₱6,000, Product B ₱8,000
c. are deducted from the sales value at the point of
sale.
59. Sylvia Company has identified an activity cost pool to
d. do not affect the allocation of the joint costs.
which it has allocated estimated overhead of
₱1,920,000 and determined the expected use of cost
65. The method of pricing by-products/scrap where no
drivers per that activity to by 160,000 inspections.
value is assigned to these items until they are sold is
Widgets require 40,000 inspections, Gadgets 30,000
known as the
inspections, and Targets, 90,000 inspections.
a. net realizable value at split-off point method.
b. sales value at split-off method.
The overhead assigned to each product is
c. realized value approach.
a. Widgets ₱40,000, Gadgets ₱30,000, Targets
d. approximated net realizable value at split-off
₱90,000
method.
b. Widgets ₱480,000, Gadgets ₱360,000, Targets
₱1,080,000
66. Lego Plastics, Inc. has two joint products, ABBA and
c. Widgets ₱360,000, Gadgets ₱480,000, Targets
ADDA, and uses the net realizable value method of
₱1,080,000
allocating joint costs. The total joint costs for the year
d. Widgets ₱480,000, Gadgets ₱360,000, Targets
2017 amounted to ₱300,000. During the year,
₱1,080,000
additional processing costs after split-off were
₱160,000 for ABBA and ₱240,000 for ADDA. Lego
60. Toylandia Company manufactures two products, X-
produced 16,000 units of ABBA and 8,000 units of
MAN and Machman. Toylandia's overhead costs
ADDA during the year. The selling price for ABBA is
consist of setting up machines, ₱400,000; machining,
₱20.00 and for ADDA is ₱50.00.
₱900,000; and inspecting, ₱300,000.

Information on the two products is:

AFAR 14D – COST ACCOUNTING Page 6 of 9
 The portion of joint costs allocated to ADDA during the
year is 71. Lee Company produces two products in a single
a. ₱175,000 operation, Bex and Rom. Joint production cost for June
b. ₱225,000 2017 were ₱30,000. During the month, further
c. ₱180,000 processing costs beyond split-off point needed to
d. ₱150,000 convert the products into salable form were ₱25,000
and ₱35,000 for 1,600 units of Bex and 800 units of
67. Janice Corporation processes direct materials up to Rom, respectively. Bex sells for ₱50 per unit and Rom
the split-ff point, where products R and S are produced sells for ₱100 per unit. Lee uses the net realizable
and therefore sold. For the month just ended, the method for allocating joint product costs.
following information were made available
For June 2017, the joint cost allocated for product Bex
Direct materials processed- 20,000 gallons (yield- were
19,000 gallons of good product and 1,000 gallon of a. ₱20,000
shrinkage) b. ₱16,500
c. ₱13,500
Production Unit selling price d. ₱10,000
R 10,000 gallons ₱1,500 per gallon
S 9,000 gallons ₱1,000 per gallon 72. Life Company manufactures products X and Y from a
joint process that also yields a by-product Z. Revenue
The cost of buying 20,000 gallons of direct materials from sales of Z is treated as a reduction of joint costs.
and processing up to split off point to yield a total of Additional information is as follows:
19,000 gallons of good products was ₱19,500,000. The Units produced Joint costs SV at SOP
beginning inventories totaled 100 gallons for R and 50 X 20,000 ? ₱300,000
gallons for S. Ending inventories amounts reflected Y 20,000 ? 150,000
600 gallons for R and 1,050 gallons for S. Z 10,000 ?_____ 10,000
Total 50,000 ₱262,000 ₱460,000
Using the volume of production as the basis for
allocating joint costs, the assigned costs to R and S Joint costs were allocated using SV at SOP method.
would be
a. R, ₱ 9,750,000.00 and S, ₱9,750,000.00 The joint costs allocated to Product X were
b. R, ₱10,550,000.00 and S, ₱8,950,000.00 a. ₱75,000
c. R, ₱10,028,571.43 and S, ₱9,471,426.57 b. ₱100,000
d. R, ₱10,263,157.89 and S, ₱9,236,842.11 c. ₱150,000
d. ₱168,000
Use the following to answer the next three questions:
Comely Products manufatures three products, R, S and Use the following to answer the next two questions:
T, in a joint process. For every ten kilos of raw From a particular joint process, Knives Company
materials input, output is five kilos of R, three kilos of produces products, X, Y and Z. Each product may be
S, and two kilos of T. During August, 50,000 kilos of sold at split-off or processed further. Additional
raw materials costing ₱120,000 were processed and processing requires no special facilities, and
completed, with joint conversion costs of ₱200,000. production costs of further processing are entirely
Conversion costs are to be allocated to the products on variable and traceable to the products involved. In
the basis of market values. To make the products 2017, all three products were processed beyond split-
saleable, further processing which does not require off. Joint production costs for the year were ₱60,000.
additional raw materials was done at the following Sales value and costs for 2017 are as follows:
costs: X Y Z
Product Further processing cost Selling price Units produced 6,000 4,000 2,000
R ₱30,000 ₱10.00 Sales value at SOP ₱25,000 ₱41,000 ₱24,000
S 20,000 12.00 If processed further
T 30,000 15.00 Final Sales Value 42,000 45,000 32,000
Separable costs 9,000 7,000 8,000
68. The unit cost of Product R is:
a. ₱ 7.12 Joint costs are allocated to the products in proportion
b. ₱ 8.00 to the relative physical volume of output.
c. ₱10.00
d. ₱25.32 73. The relevant unit cost for a decision to sell Product Z
or process further is
69. Assuming that all units are sold, the gross margin on a. ₱5.00
sales for Product S is: b. ₱12.00
a. ₱80,000 c. ₱4.00
b. ₱72,000 d. ₱9.00
c. ₱60,000
d. ₱48,000 74. To maximize operating income, Knives would subject
the following products to additional processing:
70. If all units of Product T are sold, and selling and a. X only
administrative expenses are 20% of sale, the net b. X, Y and Z
income from the sale of Product T is: c. Y and Z only
a. ₱18,000 d. Z only
b. ₱22,000
c. ₱24,000 75. In Burns Company produces two joint products, X and
d. ₱64,000 Y. in separating products X and Y a by-product is also

AFAR 14D – COST ACCOUNTING Page 7 of 9

 produced. During the month of July, 20,000 gallons of
input were processed producing 12,000 gallons of X, 80. JKL Company has a standard of 15 parts of component
7,000 gallons of Y, and 1,000 gallons of the by-product. X costing P1.50 each. JKL purchased 14,910 units of
The materials and conversion costs incurred to component X for P22,145. JKL generated a P220
process and separate the products amounted to favorable price variance and a P3,735 favorable
₱57,000. The following were taken from the books for quantity variance. If there were no changes in the
the month of July. component inventory, how many units of finished
Addt’l product were produced?
Processing Cost Sales Price Sales Units a. 994 units.
X ₱0.50/gallon ₱6.50 10,000 b. 1,090 units.
Y 0.75/gallon 5.50 5,000 c. 1,000 units
Z 0.10/gallon 2.00 700 d. 1,160 units

Using physical measure to allocate the joint costs, the 81. The material mix variance for a product is ₱500
total manufacturing cost per unit of X, assuming that unfavorable, and the material yield variance is ₱600
the by-product is valued at zero cost at the split-off favorable. This means that the material
point, is a. Price variance is ₱100 favorable.
a. ₱3.50 b. Quantity variance is ₱100 favorable.
b. ₱3.75 c. Price variance is unfavorable but the amount
c. ₱3.40 cannot be determined from the information given.
d. ₱3.65 d. Quantity variance is ₱1,100.

Part 6 – Standard Costing 82. Margolos, Inc. ends the month with a volume variance
76. RTW Co. manufactures a “one-size-fits-all” ready-to- of ₱6,360 unfavorable. If budgeted fixed factory O/H
wear outfit and uses a standard cost system. Each unit was ₱480,000, O/H was applied on the basis of 32,000
of finished outfit contains two yards of fabric that cost budgeted machine hours, and budgeted variable
₱75 per yard. Based on experience, a 20% loss on factory O/H was ₱170,000, what were the actual
fabric input is incurred. For each unit of outfit, the machine hours (AH) for the month?
standard materials cost is a. 32,424
a. ₱150.00 b. 32,000
b. ₱180.00 c. 31,687
c. ₱187.50 d. 31,576
d. ₱200.00
83. Hart Company's labor standards call for 500 direct
77. Dahl Co. uses a standard costing system in connection labor hours to produce 250 units of product. During
with the manufacture of a “one size fits all” article of October the company worked 625 direct labor hours
clothing. Each unit of finished product contains 2 and produced 300 units. The standard hours allowed
yards of direct material. However, a 20% direct for October would be:
material spoilage calculated on input quantities occurs a. 625 hours
during the manufacturing process. The cost of the b. 500 hours
direct material is ₱3 per yard. The standard direct c. 600 hours
material cost per unit of finished product is d. 250 hours
a. ₱4.80
b. ₱6.00 84. Yola Co. manufactures one product with a standard
c. ₱7.20 labor cost of 4 hours at ₱12.00 per hour. During June
d. ₱7.50 1,000 units were produced using 4,100 hours at
₱12.20 per hour. The unfavorable direct labor
78. Fleece Company uses a standard-costing system in efficiency variance was
relation to its manufacture of scarves. Each finished a. ₱1,220
scarf contains 1.5 yards of direct materials. However, a b. ₱820
25% direct materials spoilage, which is calculated c. ₱1,200
based on input quantities, occurs during the d. ₱400
manufacturing process. The cost of the direct
materials is ₱2.00 per yard. The standard direct 85. JKL Company is using a direct labor cost standard of 4
materials cost per unit of finished product is hours and a ₱12 wage rate per hour for one of its
a. ₱2.25 products. Planned production was 300 units, but
b. ₱3.00 actual production was 250 units, using for each unit 3
c. ₱3.75 labor hours at a ₱13 wage rate. What is the labor price
d. ₱4.00 variance?
a. ₱750 unfavorable.
79. Garland Company uses a standard cost system. The b. ₱900 unfavorable.
standard for each finished unit of product allows for 3 c. ₱1,200 favorable.
pounds of plastic at ₱0.72 per pound. During d. ₱750 favorable.
December, Garland bought 4,500 pounds of plastic at
₱0.75 per pound, and used 4,100 pounds in the Use the following to answer the next five questions:
production of 1,300 finished units of product. What is ABC Company employs a standard absorption system
the materials purchase price variance for the month of for product costing. The standard cost of its product is
December? follows:
a. ₱117 unfavorable. Raw materials ₱14.50
b. ₱123 unfavorable. Direct labor 2 DLH @ ₱8 16.00
c. ₱135 unfavorable. Manufacturing Overhead 2 DLH @ ₱11 22.00
d. ₱150 unfavorable. Total standard costs ₱52.50

AFAR 14D – COST ACCOUNTING Page 8 of 9

 The manufacturing overhead rate is based upon a
normal annual activity level of 600,000 direct labor
hours. ABC planned to produce 25,000 units each
month during 2017. The budgeted manufacturing
overhead for 2017 is as follows:
Variable ₱3,600,000
Fixed 3,000,000
₱6,600,000

During November of 2017, ABC Company produced

26,000 units. ABC used 53,500 direct labor hours in
November at a cost of ₱433,350. Actual manufacturing
overhead for the month was ₱260,000 fixed and
₱315,000 variable. The total manufacturing overhead
applied during November was ₱572,000.

86. The variable manufacturing overhead spending

variance for November is
a. ₱9,000 unfavorable
b. ₱4,000 unfavorable
c. ₱11,350 unfavorable
d. ₱6,000 favorable

87. The variable manufacturing overhead efficiency

variance for November is
a. ₱3,000 unfavorable
b. ₱9,000 unfavorable
c. ₱1,000 favorable
d. ₱12,000 unfavorable

88. The fixed manufacturing overhead spending (budget)

variance for November is
a. ₱10,000 favorable
b. ₱10,000 unfavorable
c. ₱6,000 favorable
d. ₱4,000 unfavorable

89. The fixed manufacturing overhead volume variance

for November is
a. ₱10,000 favorable
b. ₱10,000 unfavorable
c. ₱3,000 unfavorable
d. ₱22,000 favorable

90. The total variance related to efficiency of the

manufacturing operation for November is
a. ₱9,000 unfavorable
b. ₱12,000 unfavorable
c. ₱21,000 unfavorable
d. ₱11,000 unfavorable

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