Cost Accounting Systems

(A. Traditional Cost Accounting)

COST ACCOUNTING SYSTEMS C. should be cost effective in design and selection

D. all the above answers are correct
A. TRADITIONAL COST ACCOUNTING
Cost concepts
THEORIES: Committed vs. Discretionary fixed costs
Basic concepts Commited fixed costs
Cost Accounting 7. Which of the following is an example of a committed fixed costs?
1. Cost accounting involves the measuring, recording, and reporting of A. direct materials C. supervisor’s salary
A. product costs C. future costs B. depreciation on a factory building D. insurance on a building
B. manufacturing process D. managerial accounting decisions
16. An example of a committed fixed cost is:
Cost management A. a training program for salespersons.
3. The cost management function is usually under B. executive travel expenses.
A. the chief information officer. C. purchasing manager. C. property taxes on the factory building.
B. treasurer. D. controller. D. new product research and development.

2. The cost management information system provides information Discretionary fixed cost
A. that the accountant needs to prepare the financial statements. 8. Which of the following is an example of discretionary fixed cost?
B. that the manager needs to effectively manage the firm. A. direct labor C. property taxes on a factory building
C. that the manager needs to effectively manage not-for-profit organization. B. insurance on a building D. depreciation on a factory building
D. b and c.
Controllable costs
4. The main focus of cost management information must be 10. Controllable costs are:
A. usefulness and accuracy. C. usefulness and timeliness. A. Costs that management decides to incur in the current period to enable the company to
B. timeliness and accuracy. D. relevance and good format. achieve operating objectives other than the filling of orders placed by customers.
B. Costs that are governed mainly by past decisions that established the present levels of
5. With regard to the task of management’s decision making, cost management information is operating and organizational capacity and that only change slowly in response to small
needed to changes in capacity.
A. make sound strategic decisions regarding choice of products, methods, and techniques. C. Costs that will unaffected by current managerial decisions.
B. support recurring decisions regarding replacement of equipment, managing cash flow, etc. D. Costs that are likely to respond to the amount of attention devoted to them by a specified
C. provide a fair and effective basis for identifying inefficient operations. manager.
D. provide accurate accounting for inventory, receivables, and other assets.
11. Controllable costs for responsibility accounting purposes are directly influenced only by
Product costing A. A given manager within a given period.
6. Product costing system design or selection: B. A change in activity.
A. requires an understanding of the nature of the business C. Production volume.
B. should provide useful cost information for strategic and operational decision needs D. Sales volume.

739
 Cost Accounting Systems
(A. Traditional Cost Accounting)

47. Direct product expenses

Imputed costs
12. An imputed cost is
A. The difference in total costs which results from selecting one choice instead of another.
B. A cost that does not entail any cash outlay but which is relevant to the decision-making
process.
C. A cost that may be shifted to the future with little or no effect on current operations.
D. A cost that continues to be incurred even though there is no activity.
Cost According to Behavior
Semi-variable costs
14. Semi-variable costs
A. per unit remain the same regardless of total output
B. remain the same within the relevant range of output
C. increase in steps as the amount of the cost driver volume increases
D. have both fixed and variable components in them
A. are incurred for the benefit of the business as a whole
B. cannot be identified readily with a given product
C. can be assigned to product only by a process of allocation
D. would not be incurred if the product did not exist
9. The distinction between direct and indirect costs depends on whether a cost
A. is controllable or non-controllable.
B. is variable or fixed.
C. can be conveniently and physically traced to a cost object under consideration.
D. will increase with changes in levels of activity.
19. Of most relevance in deciding how indirect costs should be assigned to products is the degree
of
A. Linearity. C. Avoidability.
B. Causality. D. Controllability.

Step cost Comprehensive

15. A step cost is 13. Almos, Inc. makes ski-boards in Davao. Identify the correct matching of terms.
A. the same as semi-fixed cost A. Fiberglass is factory overhead
B. the same as mixed cost B. Plant real estate taxes are a period cost
C. a cost that increases in steps as the amount of cost-driver volume increases C. Depreciation on delivery trucks is a product cost
D. a and c only. D. Payroll taxes for workers in the Packaging Dept. are direct labor

Product Cost vs. Period Cost Traditional Costing Accounting

Period cost 28. An accounting system that focuses on transactions is
18. Which of the following would NOT be a period cost for a manufacturing firm? A. an activity-based accounting system. C. a traditional accounting system.
A. Selling expenses B. a product life cycle costing system. D. all of the above.
B. Salary paid to the CEO of the company
C. Repairs to the Receptionist's computer 29. Traditionally, managers have focused cost reduction efforts on
D. Utilities in manufacturing plant A. activities. C. departments.
B. processes. D. costs.
Direct vs. indirect costs
17. What kind of costs can be conveniently and economically traced to a cost object or pool? 33. Which of the following is a trait of a traditional cost management system?
A. Indirect Costs. C. Direct Costs. A. unit-based drivers C. tracing is intensive
B. Relevant Costs. D. Overhead Costs. B. detailed activity information D. focus on managing activities

740
 Cost Accounting Systems
(A. Traditional Cost Accounting)

23. Which of the following is typically regarded as a cost driver in traditional accounting practices?
A. number of purchase orders processed C. number of transactions processed 32. Product costs can be distorted if a unit-based cost driver is used and
B. number of customers served D. number of direct labor hours worked A. nonunit-based overhead costs are a significant proportion of total overhead
B. the consumption ratios differ between unit-based and nonunit-based input categories
21. Which of the following is not a trait of a traditional cost management system? C. both a and b
A. unit-based drivers C. focus on managing activities D. neither a nor b
B. allocating intensive D. narrow and rigid product costing
Process Costing
24. Which of the following is not typical of traditional costing systems? 40. Which of the following items is not a characteristic of a process cost system?
A. Use of a single predetermined overhead rate. A. Once production begins, it continues until the finished product emerges
B. Use of direct labor hours or direct labor cost to assign overhead. B. The products produced are heterogeneous in nature
C. Assumption of correlation between direct labor an incurrence of overhead cost. C. The focus is on continually producing homogeneous products
D. Use of multiple cost drivers to allocate overhead. D. When the finished product emerges, all units have precisely the same amount of
materials, labor, and overhead
Overhead allocation
35. Conventional product costing uses which of the following procedures? Actual Costing, Normal costing, & Standard Costing
A. Overhead costs are traced to departments, then costs are traced to products. Predetermined overhead rate
B. Overhead costs are traced to activities, then costs are traced to products. 39. The formula for computing the predetermined manufacturing overhead rate is estimated
C. Overhead costs are traced directly to product. annual overhead costs divided by an expected annual operating activity, expressed as
D. All overhead costs are expensed as incurred. A. direct labor cost C. direct labor hours
B. machine hours D. any of these
36. The overhead rates of the traditional approach to product costing use
A. nonunit-based cost drivers C. unit-based cost drivers 37. The two main advantages of using predetermined factory overhead rates are to provide more
B. process costing D. job-order costing accurate unit cost information and to:
A. simplify the accounting process
Effect of Traditional overhead allocation B. provide cost information on a timely basis
22. The use of unit-based activity drivers to assign costs tends to C. insure transmission of correct data
A. overcost low-volume products. C. overcost all products. D. adjust for variances in data sources
B. overcost high-volume products. D. undercost all products.
34. The effect of uniform production levels on production cost per unit can be achieved
30. Traditional overhead allocations result in which of the following situations? A. by using a factory overhead rate based on different production levels for each year
A. Overhead costs are assigned as period costs to manufacturing operations. B. by using a factory overhead rate based on selling price
B. High-volume products are assigned too much overhead, and low-volume products are C. by closing the factory overhead at the end of the accounting period
assigned too little overhead. D. by using a factory overhead rate based on long-run normal production activity level
C. Low-volume products are assigned too much, and high-volume products are assigned too
little overhead. 38. No matter which method is used, underapplied or overapplied overhead usually is adjusted
D. The resulting allocations cannot be used for financial reports. only:

741
 Cost Accounting Systems
(A. Traditional Cost Accounting)

A. at the end of a year. C. large volumes of production occur

B. monthly during the year D. Both a and b are correct.
C. if the difference exceeds P1,000 or one percent of total overhead.
D. when the company's profit projections require an adjustment Activity-based Costing
25. An activity that has a direct cause-effect relationship with the resources consumed is a(n)
Actual Costing A. cost driver. C. cost pool.
43. Disadvantages of actual costing include B. overhead rate. D. product activity.
A. actual cost systems cannot provide accurate unit cost information on a timely basis
B. actual cost systems produce unit costs that fluctuate from period to period 27. The term cost driver refer to:
C. estimates must be used when calculating the actual overhead rate A. any activity that can be used to predict cost changes.
D. a and b B. the attempt to control expenditures at a reasonable level.
C. the person who gathers and transfers cost data to the management accountant.
Normal Costing D. any activity that causes costs to be incurred.
42. The principal difficulty with normal costing is that
A. the unit cost information is not received on a timely basis 26. Each group of overhead costs should be applied based on
B. it can result in fluctuating per-unit overhead costs A. direct labor hours or cost.
C. estimated overhead and estimated activity are likely to differ from actual overhead and B. units produced.
actual costs, resulting in underapplied or overapplied overhead C. whatever activity drives those specific overhead costs.
D. there is no difficulty associated with using normal costing D. machine time.

46. Normal costing and standard costing differ in that 31. Which of the following statements is true?
A. the two systems can show different overhead budget variances. A. The traditional approach to costing uses many different cost drivers.
B. only normal costing can be used with absorption costing. B. Costs that are indirect to products are by definition traceable to directly to products.
C. the two systems show different volume variances if standard hours do not equal actual C. Costs that are indirect to products are traceable to some activity.
hours. D. All of the above statements are true.
D. normal costing is less appropriate for multiproduct firms.
41. Why is it better to use separate overhead rates?
Standard Costing A. Some departments are labor-intensive, some are machine-intensive.
20. The product cost which is determined in a conventional standard cost accounting system is B. Labor rates vary considerably among departments.
a(an) C. The resulting overhead rates are all about the same.
A. Joint cost. C. Expected cost. D. All jobs require about the same percentage of time in all departments.
B. Fixed cost. D. Direct cost.
Operating Leverage
Plant-wide vs. Department-side Overhead Rates 45. If company A has a higher degree of operating leverage than company B, then:
44. Volume-based plant-wide rates produce inaccurate product cost when: A. the company A has higher variable expenses.
A. a large share of factory overhead cost is not volume-based B. the company A's profits are more sensitive to percentage changes in sales.
B. firms produce a diverse mix of product C. the company A is more profitable.

742
 Cost Accounting Systems
(A. Traditional Cost Accounting)

D. the company A is less risky. PROBLEMS:

Total manufacturing costs
1
. Direct materials and direct labor costs total P120,000, conversion costs total P100,000, and
factory overhead costs total P400 per machine hour. If 150 machine hours were used for Job
#201, what is the total manufacturing cost for Job #201?
A. 120,000 C. 180,000
B. 160,000 D. 280,000

Overhead
Budgeted overhead
2
. Machine hours used to set the predetermined overhead rate were 25,000, actual hours were
24,000, and overhead applied was P60,000. Budgeted overhead for the year was
A. P57,600. C. P60,000.
B. P59,000. D. P62,500.

Overhead per unit

3
. ABC Company had a total overhead of P360,000 and selling and administrative expense of
P140,000 for the year. 1,000 units of A and 3,000 units of B were produced. A requires 3
machine hours and B requires one machine hour per unit. What is overhead chargeable per
unit of A
A. P 60 C. P120
B. P 90 D. P180
4
. ABC Company had a total overhead of P360,000 and selling and administration expense of
P140,000 for the year. 1,000 units of A and 3,000 units of B were produced. A requires 3 and
B requires one machine hours per unit. A requires 6 direct labor hours and B requires 4 direct
labor hours per unit. 40% of overhead is related to labor and the balance to machines. Labor-
related overhead per hour amounts to
A. P 8 C. P18
B. P12 D. P24
5
. ABC Company had a total overhead of P360,000 and selling and administration expense of
P140,000 for the year. 1,000 units of A and 3,000 units of B were produced. A requires 3 and
B requires one machine hours per unit. A requires 6 direct labor hours and B requires 4 direct
labor hours per unit. 40% of overhead is related to labor and the balance to machines. The
overhead per unit of B amounts to
A. P 60 C. P156

743
 Cost Accounting Systems
(A. Traditional Cost Accounting)

B. P 68 D. P180 Selling price per unit P10 P10

Direct materials and direct labor per unit P 5 P 5
6
. ABC Company had a total overhead of P360,000 and selling and administration expense of The company assumes that the long-run production level is 20,000 direct labor hours per year.
P140,000 for the year. 1,000 units of A and 3,000 units of B were produced. Assuming that The actual factory overhead cost for the end of 2006 and 2007 was P60,000. Assume that it
20% of all overhead are batch-related for 1,000 batches, 40% of which was for producing takes one direct labor hour to make one finished unit.
product A, batch-related overhead for product A per unit amounts to When the annual estimated factory overhead rate is used, the gross profits for 2006 and 2007,
A. P20 C. P60 respectively, are
B. P40 D. P80 A. P 75,000 and P 75,000 C. P125,000 and P125,000
B. P 75,000 and P 55,000 D. P 75,000 and P 50,000
7
. ABC Company had a total overhead of P360,000 and selling and administration expense of
P140,000 for the year. 1,000 units of A and 3,000 units of B were produced. Assuming that Process costing
30% of overhead is product related overhead - 20% of which is related to product A, product- Work in process
related overhead per unit of A amounts to 11
. Britney Company has unit costs of P10 for materials and P30 for conversion costs. If there are
A. P30 C. P50 2,500 units in ending work in process, 40% complete as to conversion costs, and fully
B. P40 D. P60 complete as to materials cost, the total cost assignable to the ending work in process inventory
is
Total overhead variance A. P 45,000 C. P 75,000
8
. Cooke Company uses the equation P450,000 + P1.50 per direct labor hour to budget B. P 55,000 D. P100,000
manufacturing overhead. Cooke has budgeted 150,000 direct labor hours for the year. Actual
results were 156,000 direct labor hours and P697,500 total manufacturing overhead. The total Overhead component
overhead variance for the year is 12
. In the Star Company, the predetermined overhead rate is 80% of direct labor cost. During the
A. P4,500 favorable. C. P4,500 unfavorable. month, P210,000 of factory labor costs are incurred, of which P180,000 is direct labor and
B. P18,000 favorable. D. P18,000 unfavorable. P30,000 is indirect labor. Actual overhead incurred was P200,000. The amount of overhead
debited to Work in Process Inventory should be
Over(under)-applied overhead A. P120,000 C. P168,000
9
. If estimated annual factory overhead is P800,000, estimated annual direct labor hours are B. P144,000 D. P160,000
400,000, actual June factory overhead is P82,000, and actual June direct labor hours are
38,000, then overhead is: Equivalent unit of production
A. P6,000 overapplied C. P1,800 underapplied 13
. The Assembling Department’s output during the period consists of 20,000 units completed and
B. P1,800 overapplied D. P6,000 underapplied transferred out, and 5,000 units in ending work in process 60% complete as to materials and
conversion costs. Beginning inventory is 1,000 units, 40% complete as to materials and
Gross profit conversion costs. The equivalent units of production are
10
. BKY Company predicted that factory overhead for 2006 and 2007 would be P60,000 for each A. 22,600 C. 24,000
year. The predicted and actual activity for 2006 and 2007 were 30,000 and 20,000 direct labor B. 23,000 D. 25,000
hours, respectively.
2006 2007 . The Amor Company has 2,000 units in beginning work in process, 20% complete as to
14

Sales in units 25,000 25,000 conversion costs, 23,000 units transferred out to finished goods, and 3,000 units in ending

744
 Cost Accounting Systems
(A. Traditional Cost Accounting)

work in process one-third complete as to conversion costs. The beginning and ending materials and conversion costs ? units
inventory is fully complete as to materials costs. Equivalent units for materials and conversion Work in process, April 30, 2003, 30% completed as to
costs are materials and conversion costs 24,000 units
A. 22,000 and 24,000 C. 24,000 and 26,000 Equivalent units of production for April 2003 64,000
B. 26,000 and 24,000 D. 26,000 and 26,000 Units started and completed in April 50,000
How many units were in the beginning work-in-process?
. Dodge Company has a mixing department and a refining department. Its
15
A. 6,800 C. 17,000
process-costing system in the mixing department has two direct materials cost B. 11,333 D. 24,000
categories (material J and material P) and one conversion costs pool. The 18
company uses First-in, First out cost flow method. The following data pertain . Had the company used the weighted-average method of accounting for its production, the
equivalent units should be
to the mixing department for November 2006
A. 74,200 C. 81,000
Units
B. 57,200 D. 53,800
Work in process, November 1: 50 percent completed
15,000
Units to be accounted for
Work in process, November 30, 70 percent completed 25,000 19
. In the Newman Company, there are zero units in beginning work in process, 7,000 units
Units started 60,000
started into production, and 500 units in ending work in process 20% completed. The physical
Completed and transferred 50,000
units to be accounted for are
Costs
A. 7,000 C. 7,600
Work-in-process, November 1 P218,000
B. 7,360 D. 7,340
Material J 720,000
Material P 750,000
Cost of Finished Goods Transferred
Conversion Costs 300,000 20
. For the month of May, the Production Control Department of La Mesa, Inc. reported the
Material J is introduced at the start of operations in the Mixing department, and Material P is
following production data for Finishing Department (second department):
added when the product is three-fourths completed in the mixing department. Conversion
Transferred-in from Assembly Department 75,000
costs are added uniformly during the process.
Transferred-out to Packaging Department 59,250
The respective equivalent units for Material J and Material P in the mixing department for
In-process end of May (with 1/3 labor and factory overhead) 15,750
November 2006, are
All materials were put into process in Assembly Department. The Cost Accounting Department
A. Both 50,000 units C. 75,000 units and 60,000 units
collected these figures for Finishing Department.
B. 60,000 units and 50,000 units D. 60,000 units and 75,000 units
Unit cost for unit transferred-in from Assembly Department P 2.70
16 Labor cost in Finishing Department 41,280.00
. The cost of goods completed and transferred out to the Refining department was
Applied factory overhead 112.5% of labor cost
A. P1,930,750 C. P1,600,500
How much was the cost of Finished goods transferred out to the Packaging Department?
B. P1,350,000 D. P1,550,500
A, P240,555 C. P260,580
17 B. P 80,580 D. P159,975
. The Amor Company’s accounting records reflected the following data for April 2003. The
company accounts its production using First-in, First-out cost flow method:
Work in process, March 31,2003, 60% completed as to Comprehensive

745
 Cost Accounting Systems
(A. Traditional Cost Accounting)

Use the following data to answer question Nos. 18 through 20. A. P5.00 C. P5.45
Mergy Company uses process costing in accounting for its production department, which uses two B. P6.00 D. P5.35
raw materials. Material Alpha is placed at the beginning of the process. Inspection is at the 85%
completion stage. Material Bravo is then added to the good units. Normal spoilage units amount to Lost units
5% of good output. The company records contain the following information for April: 25
. Lapid Company uses process costing. All materials are added at the beginning of the process.
The product is inspected when it is 90 percent converted, and spoilage is identified only at that
Started during the period 20,000 units point. Normal spoilage is expected to be 5% of good output.
Material Alpha P26,800 The following are extracted from the production records of Lapid Company for May 2003:
Material Beta P22,500 Units put into process 21,000
Direct labor cost P75,160 Units transferred to finished goods 14,000
Factory overhead P93,950 In-process, May 31, 75% complete 6,000
Transferred to finished goods 14,000 How many are considered abnormal lost units?
Work in process (95% complete), April 30 4,000 A. Zero C. 15
B. 300 D. 850
21
. How much were Material cost per equivalent unit for Alpha and Beta, respectively?
A. P1.40; P1.36 C. P1.34; P1.06 Statement of Cost of Goods Manufactured & Sold
B. P1.40; P1.06 D. P1.34; P1.25 Use the following information that pertains to beta manufacturing company to answer questions 21
through 23:
22
. The equivalent units of production for Material Alpha and Beta are
Alpha Beta Beginning direct materials inventory P 20,000
A. 18,000 14,000 Beginning WIP inventory 20,000
B. 18,000 18,000 Beginning finished goods inventory 40,000
C. 20,000 18,000 Ending direct materials inventory 10,000
D. 20,000 14,000 Ending WIP inventory 100,000
Ending finished goods inventory 50,000
23
. The number of normal and abnormal lost units are: Purchases 140,000
Normal Abnormal Direct labor 160,000
A. 700 1,400 Factory overhead 200,000
B. 1,400 700
C. 900 1,100 . What is the amount of direct materials used during the period?
26

D. 1,100 900 A. P140,000 C. P 60,000

B. P130,000 D. P150,000
Material cost
Unit material cost . What is the amount of cost of goods manufactured during the period?
27
24
. Catridge Company has no beginning work in process; 9,000 units are transferred out and A. P430,000 C. P470,000
3,000 units in ending work in process are one-third finished as to conversion costs and fully B. P420,000 D. P510,000
complete as to materials cost. If total materials cost is P60,000, the unit materials cost is

746
 Cost Accounting Systems
(A. Traditional Cost Accounting)

28
. What is the amount of cost of goods sold during the period?
A. P430,000 C. P470,000
B. P420,000 D. P510,000

747
1
. Answer: C
Direct materials and direct labor P120,000
Factory overhead P400 x 150 60,000
Total manufacturing cost P180,000
2
. Answer: D
Overhead rate per hour (P60,000 ÷ 24,000) P2.50
Budgeted overhead (25,000 x P2.50) P62,500
3
. Answer: D
Total number of hours: (1,000 x 3) + (3,000 x 1) 6,000
Overhead cost per hour (P360,000 ÷ 6,000) P 60
Overhead charged per unit of product A: 3 hrs. x P60 P180
4
. Answer: A
Labor-related overhead: (P360,000 x 0.40) P144,000
Total number of labor hours: (1,000 x 6) + (3,000 x 4) 18,000
Labor-related overhead per DLH: (P144,000 ÷ 18,000) P 8
5
. Answer: B
Machine-related overhead: (P360,000 x 0.6) P216,000
Total number of machine hours (1,000 x 3) + 3,000 6,000
Machine-related OH per MH: (P216,000 ÷ 6,000) P36

Overhead applied per unit of Product B:

Labor-related (4 hours x P8) P32
Machine-related (1 x P36) 36
Overhead per unit P68

The overhead is broken down into two volume-based cost pools. This is a more modified example of traditional
costing
6
. Answer: B
Batch related costs: (360,000 + 140,000) × 20% P100,000
Batch related costs, Product A: 100,000 × 40% 40,000
Batch-related overhead per unit of Product A: 40,000 / 1,000 P 40
In ABC costing, there is no need to make a distinction between manufacturing and non-manufacturing costs in
computing the relevant product costs
7
Answer: A
Product-related overhead cost (360,000 + 140,000) × 30% P150,000
Product-related overhead cost, Product A: 150,000 × 20% P 30,000
Product-related overhead cost per unit, Product A: 30,000 / 1,000 P 30
8
. Answer: A
Variable overhead P1.50
Predetermined fixed overhead (P450,000 ÷ 150,000) 3.00
Total overhead rate P4.50
Actual overhead P697,500
Applied overhead (156,000 hours x P4.50) 702,000
Total overhead variance, favorable P 4,500
9
. Answer: D
Applied overhead 38,000 x P2 P76,000
Actual overhead 82,000
Underapplied overhead P6,000

Overhead rate per direct labor hour (P800,000 ÷ 400,000) P2.00

10
. Answer: B
Gross Profit:
2006: (25,000 x 10) - 175,000 = P75,000
2007: (25,000 x 10) - 195,000 = P55,000

Overhead application rates:

2006: 60,000/30,000 = P2.00
2007: 60,000/20,000 = P3.00

Unit Costs:
2006: 5 + 2 = P7.00
2007: 5 + 3 = P8.00

Costs of goods sold:

2006: 25,000 x P7 P175,000
2007: (5,000 x P7) + (20,000 x P8) P195,000
Note: In 2007 the company has a beginning inventory of 5,000 units at unit cost of P7.
11
. Answer: B
Materials cost (2,500 x P10) P25,000
Conversion cost (2,500 x 0.4 x P30) 30,000
Total costs of Work in Process P55,000
12
. Answer: B
The amount of overhead applied to production should be 80 percent of direct labor cost (P180,000 x 0.80) =
P144,000
13
. Answer: B
Completed units 20,000
Work in process, End (5,000 x 0.6) 3,000
Total equivalent units, average 23,000
14
. Answer: B
Units completed and transferred out 23,000
Work in Process, End 3,000

MaterialsConversion Costs% of CompletionEUP% of CompletionEUPCompleted units10023,000100.0023,000WIP - End100

3,00033.33 1,000Weighted-Average EUP26,00024,000
15
. Answer: B
Computation of equivalent units
Material JMaterial PWork-in-process, Nov. 1-15,000Units started and completed35,00035,000Work-in-process, Nov.
3025,000-EUP60,00050,000
16
. Answer: C
Work in process-beginning
Cost, Nov. 1P218,000Cost, November Material P (15,000 x P5)225,000 Conversion 7,500 x P5 37,500262, 500P
480,500Started, completed 35,000 P32
1,120,000Cost of goods transferred out
P1.600,500Unit Costs
Material J720,000/60,000P12 Material P750,000/50,00015 Conversion costs300,000/60,0005 TotalP32
17
. Answer: C
Equivalent units for April64,000Less: EU – started and completed during: April50,000 Work-in-process, end
(24,000 x 3)7,20057,200Equivalent units - work-in-process end Mar 316,800Number of units in process as of March
31 6,800  4017,000
18
. Answer: A
Equivalent units – FIFO 64,000
Add equivalent units in March 31 (17,000 x .6) 10,200
Weighted Average EUP 74,200
19
. Answer: A
The number of units to be accounted should be the sum of the units in beginning work in process and the number of
units that have been started during the period
20
. Answer: A
EUP:
Transferred out to Packaging Dept. 59,250
In process, end 15,750 x 1/3 5,250
Total 64,500
Unit Cost:
Transferred in 2.70
Labor and overhead 87,720/64,500 1.36
Total 4.06
Cost of finished goods transferred out 59,250 x 4.06 P240,555
21
. Answer: D
Equivalent units AlphaBeta Transferred to F.G.14,00014,000 End Process 4,000 4,000 Normal lost units
9000 Abnormal lost unit 1,100 0 Total20,00018,000Unit cost
Alpha P26,800  20,000 = P1.34
Beta P22,500  18,000 = P1.25
22
. Answer: C
Equivalent unitsAlphaBetaTransferred to F.G.14,00014,000End Process 4,000 4,000Normal lost units 900Abnormal lost
unit 1,100 ______Total20,00018,000
23
. Answer: C
Total lost units (20,000 – 18,000) 2,000
Total lost units 5% x 18,000 900
Abnormal lost units 1,100
24
. Answer: A
Completed and transferred out 9,000
Units in work-in-process, End (3,000 x 100%) 3,000
Equivalents units of production - Materials 12,000
Materials cost per EUP (P60,000 ÷ 12,000) P5.00
25
. Answer: B
Total lost units (21,000 – 20,000) 1,000
Less normal lost units 5% of 14,000 700
Abnormal lost unit 300
26
. Answer: D
Beginning materials inventory P 20,000
Add Materials Purchased 140,000
Total cost of materials available for use 160,000
Deduct Materials inventory, End 10,000
Cost of materials used P150,000
27
. Answer: A
Direct materials used P150,000
Direct labor 160,000
Overhead 200,000
Total manufacturing costs 510,000
Add Work in process, beginning 20,000
Total costs placed in process 530,000
Deduct Work in process, end 100,000
Cost of goods manufactured P430,000
28
. Answer: B
Cost of goods manufactured P430,000
Add finished goods inventory, beginning 40,000
Total cost of goods available for sale 470,000
Deduct finished goods inventory, end 50,000
Cost of goods sold P420,000