Professional Documents
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I. TRUE-FALSE (10 points) – Sh ade “A” if th e statem ent is tru e and “B” i f the st atement is
false.
1. For merch andising-s ecto r compani es, all costs in the income statement ar e period costs.
2. Invento riable costs ar e repo rted as an asset in the company’s balanc e sheet when incu rr ed
and expensed on the incom e statement wh en the product is sold.
4. For manu facturing -sector comp anies, all man ufacturing costs are invento riabl e costs.
5. Cost of goods sold refers to the produ cts bro ught to completion, whether they w er e start ed
befo re or during th e cur rent accounting p erio d.
6. All costs report ed on the income stat ement of a service-s ecto r company are p eriod costs.
7. If a wo rker is paid for 8 hours, but is idle for 1 of those 8 hours, the 1 hour of idle time
would be considered a component of dir ect labor.
9. For m anuf actu ring-s ector companies, all w ag es and fring e ben efits p aid to machine op er ato rs
and assembly-lin e work ers who conv ert direct mat erials to finished goods ar e call ed
manufacturing ov erh ead costs.
10. Goods completed du ring the period are tr ans fer red to the finished goods inventory. Thes e
costs becom e cost of goods sold in the accou nting period.
II. MULTIPLE CHOICE THEORIES (10 points) - Shade the best choi ce.
15. Which of the following formulas d etermin e cost of goods sold in a manufacturing entity?
A. Beginning work-in -pro cess inv entory + Cost of goods manufactur ed – Ending
work-in -pro cess inve ntory = Cost of Goods Sold
B. Beginning work-in -pro cess inv entory + Cost of goods manufactur ed + Ending
work-in -pro cess inve ntory = Cost of Goods Sold
C. Cost of goods manufactu red – Beginning fini shed goods inventory – Ending
finished goods invento ry = Cost of Goods Sold
D. Cost of goods manufactu red + Beginning fini shed goods inventory – Ending
finished goods invento ry = Cost of Goods Sold
16. Which of the following statements is true?
A. Period costs ar e found o nly in manuf actu ring companies, not in merchandising compani es.
B. Rent on a f acto ry building used in th e prod uction process would be classi fied as a p eriod
cost and as a fix ed cost.
C. Manuf acturing ov erh ead o r factory ov erh ead costs are all prod uction costs that are r elat ed
to the cost object, but cannot b e tr aced to that cost object in an economi cally f easibl e
way.
D. The cost of go ods manuf actu red is calcul ated by adding the amount o f work in p roc ess at
the end of the year to the cost of raw materi als used, direct labor wor ked, and
manufacturing ov erh ead in cur red for the y ear and then subtr acting wo rk in process at th e
beginning of the ye ar .
17. All of the following ar e part of the Cost of G oods Sold, EXCEPT:
A. Oper ating Expens es
B. Direct Materi als
C. Direct Manuf actu ring Labor
D. Manuf acturing Ov erh ead
18. All of the following ar e true EXCEPT:
A. Total manuf acturin g costs = Prime Costs + Conversion Costs
B. For mer chandising -sector compani es, inventoriable costs ar e the costs of purchasing
goods that are r esold in the same fo rm.
C. The abs ence of inv entori es of t angible p rodu cts for s ale means s ervice-s ecto r comp anies
have no invento riabl e costs.
D. Manuf acturing costs include costs incur red t o produce goods, including direct materi als,
direct labo r, and manuf actu ring overhead
19. All of the following ar e true EXCEPT:
A. Depr eci ation on offi ce equipment would not be included in the cost of goods
manufactur ed.
B. Rent on a factory building used in the p rodu ction process would be classifi ed as a fixed
manufacturing ov erh ead.
C. Depr eci ation on a personal comput er used in the marketing dep artm ent of a manufacturing
firm would be classi fied as op erating expens es.
D. Property tax es identifi ed and assess ed on pro duction equipment would not b e included in
the cost of goods manuf actu red.
20. The nursing station on the fourth floo r of Central Hospital is responsibl e for the car e of
patients who hav e undergon e orthop edic s ur gery. Th e costs o f dru gs administe red b y th e
nursing station to patients would be classi fied as:
A. overh ead costs of th e nursing station.
B. indirect costs o f the patients.
C. direct c osts of the patients.
D. period costs of the hospit al..
SET B
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III. MULTIPLE CHOICE PROBLEMS (30 points, 1.5 pts each) Show your solution in good
form and double rule your final answ er. NO SOLUTION, NO CREDIT plus MINUS (-) one
for ev ery numbe r shad ed without solution.
21. The following info rmation is taken f rom the records of DW Company for last year:
Direct Materi als ........................................... ₱ 78,000
Direct Labor ................................................ ₱ 43,000
Manuf acturing Ov erh ead ............................... ₱ 11,000
Ending work in process inventory .................. ₱ 45,000
Cost of Goods Manufactur ed ......................... ₱ 19,000
What was the amount of beginning work in p rocess inventory?
A. ₱24,000 C. ₱22,000
B. ₱2,000 D. ₱3,000
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22. Last month a manufacturing comp any had the following data:
Direct Materi als ........................................... ₱ 36,000
Direct Labor ................................................ ₱ 20,000
Manuf acturing Ov erh ead ............................... ₱ 19,000
Beginning work in process inventory .............. ₱ 10,000
Ending work in process inventory .................. ₱ 13,000
What was the cost of goods manuf actu red fo r the month?
A. ₱78,000 C. ₱72,000
B. ₱85,000 D. ₱75,000
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23. Last month a manufacturing comp any had the following oper ating results:
Beginning finished goods invento ry ................ ₱ 472,000
Ending finished goods invento ry .................... ₱ 466,000
Sales .......................................................... ₱ 465,000
Gross margin ............................................... ₱ 488,000
What was the cost of goods manuf actu red fo r the month?
A. ₱371,000 C. ₱383,000
B. ₱459,000 D. ₱377,000
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24. The following info rmation is taken f rom the records of CL Company for last year:
Direct Materi als ........................................... ₱ 475,000
Manuf acturing Ov erh ead ............................... ₱ 466,000
Total Manuf actu ring Costs ............................ ₱ 417,000
Beginning work in process inventory .............. ₱ 461,000
Cost of goods manufactu red .......................... ₱ 415,000
What are the co rr ect amounts fo r the followi ng?
Direct Labor Ending Work in Process
A. ₱12,000 ₱2,000
B. ₱11,000 ₱2,000
C. ₱46,000 ₱1,000
D. ₱56,000 ₱3,000
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Nos. 25 & 26 are based on the following inform ation:
The manuf actu ring oper ations of QC Compan y had the following inventor y balan ces fo r the
month of July:
Inv entories July 1 July 31
Raw Materi als ₱10,000 ₱12,000
Work in process 16,000 ₱17,000
Finished goods 30,000 22,000
25. If the company pur chas ed ₱18,000 of raw materi als during July, what was the cost of raw
materi als used in production:
A. ₱41,000 C. ₱19,000
B. ₱20,000 D. ₱16,000
SET B
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26. If the comp any tr ansf err ed ₱38,000 of comp leted goods from work in p rocess to finishe d
goods during July, what was the amount of cost of goods sold:
A. ₱30,000 C. ₱43,000
B. ₱38,000 D. ₱46,000
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27. The balance in Electric Industri es’ Finished Goods account at August 31 was ₱325,000. Its
August cost o f goods man ufactur ed w as ₱ 1,350,000, its total manufacturing costs w ere
₱1,500,000 and its cost of goods sold in Au gust was ₱1,455,000. What was the balan ce in
Electri c’s Finish ed Goods at August 1?
A. ₱280,000 C. ₱430,000
B. ₱220,000 D. ₱370,000
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Nos. 28 & 29 are based on the following inform ation:
Inv entories June 1 June 30
Raw Materi als ₱17,000 ?
Work in process 14,000 ₱12,000
Finished goods ? 9,000
Additional Data:
Sales Revenu e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ₱102,000
Direct labor costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Manuf acturing ov erh ead costs . . . . . . . . . . . . . . . . . . 12,000
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000
Administrative ex pens es . . . . . . . . . . . . . . . . . . . . . . 16,000
Cost of goods manufactu red . . . . . . . . . . . . . . . . . . . 40,000
Raw materi als purch ases . . . . . . . . . . . . . . . . . . . . . . 10,000
29. If the net operating incom e was ₱40,000, then the beginning finished goods invento ry was .
A. ₱22,000 C. ₱42,000
B. ₱9,000 D. ₱1,000
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Nos. 30 to 33 are based on the following inform ation:
The following dat a (in thousands of pes os) h ave be en take n from the a ccounting r ec ords o f
Chansey Corpor ation for th e just completed y ear.
Chansey Corporation
(in thousands of pesos)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ₱880
Raw materi als inventory, beginning . . . . . . . . . . . . . . . . . 20
Raw materi als inventory, ending . . . . . . . .. . . . . . . . . . . . 30
Purchas es of ra w materi als . . . . . . . . . . . . . . . . . . . . . . . 150
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Manuf acturing ov erh ead. . . . . . . . . . . . . . . . . . . . . . . . . 230
Administrative ex pens es. . . . . . . . . . . . . . . . . . . . . . . . . 100
Selling expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Work in process inventor y, beginning . . . . . . . . . . . . . . . 80
Work in process inventor y, ending . . . . . . . .. . . . . . . . . . 30
Finished goods invento ry, beginning . . . . . . . . . . . . . . . 120
Finished goods invento ry, ending . . . . . . . .. . . . . . . . . . 100
30. The cost of the r aw materials used in produ cti on during the year (in thousands of p esos) w a s:
A. ₱180 C. ₱160
B. ₱140 D. ₱170
31. The cost of goods manuf actu red f or the year (in thousands of pesos ) was:
A. ₱580 C. ₱500
B. ₱600 D. ₱630
SET B
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32. The cost of goods sold for the year (in thous ands of pesos) was
A. ₱620 C. ₱720
B. ₱580 D. ₱700
33. The oper ating income f or the year (in thous ands of pesos) was
A. ₱260 C. ₱30
B. ₱90 D. ₱(30)
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Nos. 34 to 37 are based on the following inform ation:
Regice, In c., produ ces w ater pumps. Each w at er pump contains a small v alve th at costs ₱50 0.
During May, 600 valv es w er e drawn f rom the supply room and inst alled in w ater pumps in
the production process. Eighty perc ent of these units were compl eted and trans ferr ed into
finished goods w ar ehouses. O f the units comp leted, thirty per cent we re still unsold at the e nd
of the month. There we re no begin ning inven tories.
34. The cost of valv es in work in process invento ry at the end of May would be:
A. ₱300,000 C. ₱60,000
B. ₱240,000 D. ₱72,000
35. The cost of goods manuf actu red at the end of May would be:
A. ₱300,000 C. ₱60,000
B. ₱240,000 D. ₱72,000
36. The finished goods inventory at the end o f May would be:
A. ₱90,000 C. ₱168,000
B. ₱72,000 D. ₱210,000
37. The cost of valv es in the cost of goods sold for May would be:
A. ₱90,000 C. ₱168,000
B. ₱72,000 D. ₱210,000
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Nos. 38 to 40 are based on the following inform ation:
Finished goods invento ry, 1/1/20X8 ............... ₱280,000
Finished goods invento ry, 12/31/20X8 ............ 267,000
Cost of Goods Sold ...................................... 270,000
Sales Revenu e ............................................. 500,000
Oper ating Expens es ...................................... 145,000
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