BACOSTMX

FINALS QUIZ 1
Term 3, Academic Year 2020-2021

Direction: Read each question CAREFULLY. Choose the letter which corresponds to the best answer.

1. Costing systems that are used for the costing of like or similar units of products in mass production are called
a. inventory-costing systems c. process-costing systems
b. job-costing systems d. weighted-average costing systems

2. Conversion costs
a. include all the factors of production
b. include direct materials
c. in process costing are usually considered to be added evenly throughout the production process
d. include both (b) and (c)

3. When a bakery transfers goods from the Mixing Department to the Assembly Department, the accounting entry
is
a. Work in Process - Mixing Department
Work in Process - Assembly Department
b. Work in Process - Assembly Department
Accounts Payable
c. Work in Process - Assembly Department
Work in Process - Mixing Department
d. Work in Process - Mixing Department
Accounts Payable

4. Under the weighted-average method, the stage of completion of beginning work in process
a. is relevant in determining the equivalent units
b. is irrelevant in determining the equivalent-unit calculation
c. must be combined with the work done during the current period in determining the equivalent units
d. can always be determined with a high degree of precision

5. A disadvantage of the weighted-average method compared to the FIFO process-costing method is that
a. the information it provides about changes in unit prices from one period to the next is less useful than the
information provided by FIFO
b. FIFO is computationally simpler
c. FIFO provides better management information for planning and control purposes
d. when unit cost per input prices fluctuate markedly from month to month, its per unit cost is less representative
than FIFO

6. Spoilage that is an inherent result of the particular production process and arises under efficient operating
conditions is referred to as
a. ordinary spoilage
b. normal spoilage
c. abnormal spoilage
d. there is no special term for this type of spoilage

7. Costs of abnormal spoilage are usually accounted for as

a. part of the cost of goods sold
b. part of the cost of goods manufactured
c. a separate line item in the income statement
d. an asset in the balance sheet

8. The costs of normal spoilage discovered during the process are allocated to the units in ending work-in-process
inventory, in addition to completed units
a. if the units in ending inventory have not passed the inspection point
b. if the units in ending work-in-process inventory have passed the inspection point
c. if the units in ending work in process inventory are more than 50% complete
d. if the units in ending work-in-process inventory are less than 50% complete

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9. A process costing system is used by a company that
a. accumulates costs by job.
b. produces homogeneous products.
c. produces heterogeneous products.
d. produces items by special request of customers.

10. Transferred-in cost represents the cost from

a. all prior departments. c. the last department only.
b. the current period only d. the last production cycle.

11. The difference between EUP calculated using FIFO and EUP calculated using weighted average is the equivalent
units
a. started and completed during the period.
b. uncompleted in Work in Process Inventory.
c. residing in ending Work in Process Inventory.
d. residing in beginning Work in Process Inventory.

12. If normal spoilage is detected at an inspection point within the process (rather than at the end), the cost of that
spoilage should be
a. Included with the cost of the units sold during the period
b. Allocated to the good units that have passed the inspection point
c. Included with the cost of the units completed in that department during the period
d. Allocated to ending work in process units and units transferred out base on their relative costs

13. Normal spoilage units resulting from a continuous process

a. result in a loss being incurred
b. Are extended to the EUP schedule
c. cause estimated overhead to increase
d. Result in a higher unit cost for the good units produced

14. The cost of abnormal continuous losses is

a. considered a product cost.
b. absorbed by all units past the inspection point.
c. written off as a loss on an equivalent unit basis.
d. absorbed by all units in ending inventory and transferred out on an equivalent unit basis.

15. What is the method of accounting for spoilage wherein spoiled units are ignored in the computation of EUP?
a. FIFO method
b. Average method
c. Theory of neglect
d. Separation method

16. The method of distributing service department costs to production departments which makes no attempt to
determine the extent to which one service department renders its services to another service department is the
a. Direct distribution method c. Service department distribution method
b. Sequential distribution method d. Algebraic distribution method

17. Because this allocation method recognizes that service departments often provide each other with inter-
departmental service, it is theoretically considered to be the most accurate method for allocating service
department costs to production departments. This method is:
a. Direct distribution method c. Service department distribution method
b. Sequential distribution method d. Algebraic distribution method

18. All of the following are methods of allocating service department costs, except for one. Which of the following is
the exception?
a. Direct distribution method c. Service department distribution method
b. Sequential distribution method d. Algebraic distribution method

19. Which of the following is synonymous to the “algebraic method” of service cost allocation?

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 a. Sequential method c. Reciprocate method
b. Simultaneous method d. Step method

20. How are service departments ranked in using the step method of service cost allocation?
a. Percentage of services rendered to other service department/s
b. Cost of services rendered to other department/s
c. No ranking required since service costs can be allocated in any order under this method
d. None of the above

Use the following information for the next two items:

Pikachu Co. had 4,000 units work in process at November 1, 2017, which were 50% complete as to conversion
cost. During November, 27,000 units was completed. At November 30, 3,000 units remained in WIP which were
45% complete as to conversion cost. Direct materials are added at the start of the process.

21. How many units were started during November?

a. 26,000 b. 27,000 c. 28,000 d. 30,000

22. What is equivalent unit of production for conversion cost under FIFO method?
a. 30,000 b. 26,350 c. 26,300 d. 26,000

Use the following information for the next two items:

Wartortle Company manufactures chemical products through continuous process in different departments. Each
department has an independent cost accountant who prepares cost of production report. The company uses FIFO
costing method.

As the assigned cost accountant, the following production data for Department 1 for the month of November 2017
were provided:

Work in process, November 1 (70% completed) 7,000 liters

Started in process 35,000 liters
Work in process, November 30 (60% completed) 6,000 liters
Normal lost units – continuous 1,000 liters

In this department, costs are applied as follows:

• Materials – added at the start
• Labor and overhead – uniformly applied throughout the production process

The below were costs incurred in November for Department 1:

Materials P44,200
Direct Labor 15,750
Overhead 9,525
Work in process – November 1 10,000

23. What is the equivalent units of production for materials?

a. 34,000 c. 41,000
b. 35,000 d. 42,000

24. How much is the cost allocated to ending work in process?

a. P 10,500.00 c. P 9,168.29
b. P 10,199.33 d. P 8,936.48

25. Meowth Manufacturing add materials at the start of operations in Process A. The beginning inventory consisted
of 3,000 units with material cost of P100,000 and labor and overhead costs of P20,000. At the start of the period,
22,000 units were started in process with material cost of P450,000 . Conversion cost in the period
amounted to P280,000. As of the end of January, the inventory was 100% complete in materials but only 60% in
labor and overhead. The ending inventory consisted of 5,000 units. Using the weighted average method, the
equivalent units of production for conversion costs for the period was:
a. 22,000 b. 23,000 c. 20,000 d. 25,000

26. Persian Company has a cost per EUP of P20 for materials and P25 for conversion cost for its product. There are
2,500 physical units in ending work in process, 50% complete as to conversion cost; and 70% complete as to
material cost. The cost assignable to ending work in process inventory is:
a. P 112,500 b. P 81,250 c. P 68,750 d. P 66,250

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27. Cubone Inc. uses processing costing system. The company adds materials at the beginning of the process in the
Assembly Department, which is the first of two stages of its production process. Information concerning the
materials used in the Assembly Department during November 2017 is as follows:

Units started during November 30,000

Units completed and transferred 21,000
Units in process, end (20% complete) 9,000
Material cost P 100,500

There were no beginning inventories.

How much was the material cost of completed and transferred units?
a. P100,500 b. P 76,380 c. P 70,350 d. P 30,150

Use the following for the next 4 items

Storey Co. adds material at the start of production. February information for the company follows:

Beginning Work in Process Inventory

(45% complete as to conversion) 10,000 units
Started this period 120,000 units
Ending Work in Process Inventory
(80% complete as to conversion) 8,200 units

Beginning Work in Process Inventory Costs:

Material P24,500
Conversion 68,905

Current Period Costs:

Material P75,600
Conversion 130,053

28. What are the equivalent units for material using the weighted average method?
a. 120,000 c. 128,360
b. 123,860 d. 130,000

29. What is the cost of units completed using the weighted average?
a. P237,510 c. P278,400
b. P266,742 d. P282,576

30. What are the equivalent units for material using the FIFO method?
a. 111,800 c. 125,500
b. 120,000 d. 130,000

31. What is the cost of all units transferred out using the FIFO method?
a. P191,289 c. P287,004
b. P204,624 d. P298,029

Mimi company produces Medicine X in a two-department manufacturing cycle – Departments A and B. Materials
are requisitioned at the start of the process in the Department B. In Department B, labor and overhead were 50%
complete as to the 6,000 units in WIP, beginning and 75% complete as to the 8,000 units in WIP, ending. There
were 12,000 units of Medicine X transferred out of Department B during February.
The following are data included in the cost of production report for Department B in February:

Transferred – In Costs Materials Costs Conversion Costs

WIP, February 1
Costs attached P12,000 P2,500 P1,000
During February:
Costs added: P29,000 P5,500 P5,000

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32. Under the Average method, what is the total cost of units transferred out for February of Medicine X?
a. P33,120 b. 33,400 c. 33,000 d. 36,600

33. Under the FIFO method, what is the total cost of units transferred out for February of Medicine X?
a. P33,285.71 b. 32,578.57 c. 29,557.14 d. 28,850

34. Given for a certain process:

• Beginning Work in Process, 2/5 completed: 500 units
• Transferred in from Prior Department: 2,000 units
• Normal spoilage: 200 units
• Abnormal spoilage: 300 units
• Goods completed and transferred out: 1,700 units
• Ending Work in Process, 1/3 completed: 300 units

Conversion costs of beginning WIP is P610. Current period conversion costs total P3,990. Assume that all
spoilage occurs at the end of the process. Compute the conversion cost per EUP under the FIFO method:
a. 2.49
b. 2.19
c. 2.00
d. 1.90

KapitLang Company is exploring ways to allocate the cost-of-service departments such as Quality Control and
Maintenance to the production departments such as Machining and Assembly. The controller of the company has
provided the following information:

Quality
Maintenance Machining Assembly Total
Control

Budgeted OH before
allocation P200,000 P350,000 P400,000 P300,000 P1,250,000
Budgeted hours of
service quality control 7,000 21,000 7,000 35,000
Budgeted service hours
of maintenance 10,000 18,000 12,000 40,000

35. Under direct method of allocating service department costs, what is the total service cost allocated to the
machining and assembly departments, respectively?
a. P382,500 and P167,500 c. P330,000 and P220,000
b. P300,000 and P130,000 d. P262,500 and P87,500

36. Under the step method of allocating service cost department costs, what is the total MAINTENANCE costs
allocated to the machining and assembly departments, respectively?
a. P390,000 and P160,000 c. P162,000 and P108,000
b. P300,000 and P100,000 d. P90,000 and P60,000

37. Under the algebraic method of allocating service cost department costs, what is the total amount of QUALITY
CONTROL costs and total amount of MAINTENANCE, respectively, to be allocated?
a. P421,053 and P284,211 c. P380,526 and P169,474
b. P421,053 and P128,947 d. P200,000 and P350,000

38. RVA Company distributes the service department overhead costs directly to producing departments without
allocation to the other service departments. Information for the current month is presented below:

Maintenance Utilities
Overhead costs incurred P18,700 P9,000
Services provided to:
Maintenance department (M) - 10%
Utilities department (U) 20% -
Producing department A (A) 40% 30%
Producing department B (B) 40% 60%

The amount of utilities department costs distributed to producing department B for the current month should be:
a. P3,600 b. P4,500 c. P5,400 d. P6,000

39. Using the same information in Item 38, if RVA company uses the reciprocal method, what would be the formula
to determine the total utilities cost?

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 a. U = P18,700 + .10M
b. U = P9,000 + 0.20M
c. U = P18,700 + 0.30M + 0.40A + 0.40B
d. U = P27,700 + 0.40A + 0.40B

40. BONUS

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