1. The selling price of the product is relatively high.

In the purchase of the inventory

a. Management must increase the price to cover the cost of carrying higher inventory.
b. The EOQ model will indicate frequent large orders.
c. The EOQ of the product is affected by the selling price.
d. The selling price has nothing to do with the EOQ of the product.
2. Thinking Co. sells 200 units of discs per week. Purchase order lead time is 3 weeks and the economic order quantity is 450 units. What is
the reorder point?
a. 425 units b. 1,750 units c. 600 units d. 2,250 units
3. The following data are presented:
Budgeted Actual
Production in units 50,000 55,000
Manufacturing overhead P 750,000 P 800,000
Sales in units No data 47,000
No beginning inventories
The underappllied or overapplied overhead is:
a. P 25,000 underappied. c. P 25,000 overapplied.
b. P 75,000 overapplied. d. P 75,000 underapplied.
4. At a volume of 20,000 direct labor hours, Tirso Company incurs P50,000 in factory overhead costs, including P10,000 in fixed costs. The
volume is expected to increase to 25,000 direct labor hours.
Tirso would expect to incur total factory overhead costs of:
a. P50,000 b. P60,000 c. P62,500 d. P72,500
5. Management scrutinizes variances because
a. Management desires to detect such variances to be able to plan for promotions
b. Management needs to determine the benefits forgone by such variances
c. It is desirable under conventional knowledge on good management
d. Management recognizes the need to know why variances happen to be able to make corrective actions and fairly reward good
performers
6. The C Company uses 20,000 units of Material A in making a finished product. The costs to place an order for Material A is P8.00 and the

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annual cost to carry one Material A is P2.00. The economic order quantity for material A is

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a. 100 units b. 400 units c. 283 units d. 565 units

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7. Using the same information in the previous number, if the cost to place one order increased by P10 and the costs to carry one Material A in
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stock remains the same, the economic order quantity will be
a. 600 units b. 447 units c. 425 units d. 500 units

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8. Roger Corporation accumulated the following cost information for its two products, A and B:
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A B Total
Production volume 2,000 1,000
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Total direct man. labor hrs. 5,000 20,000 25,000

Setup cost per batch P 1,000 P 2,000
Batch size 100 50
Total setup costs incurred P20,000 P40,000 P60,000
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DMLH per unit 2 1

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A traditional costing system would allocate setup costs on the basis of direct manufacturing labor hours (DMLH). An ABC system would
vi re

trace costs by spreading the costs per batch over the units in a batch. What is the setup cost per unit of product A under each costing system?

Traditional ABC
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a. P 4.80 P 10.00
b. P 2.40 P 10.00
ed d

c. P40.00 P200.00
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d. P 4.80 P 20.00
9. At economic order quantity, total ordering costs and total carrying costs for the period are equal.
a. True b. Sometimes c. False d. Maybe

10. Below are FLX Corporation’s standard cost to produce one concrete table:
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Direct raw materials 2 kgs. P 375 per kg.

Direct labor 30 minutes 31.25 per hour
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In September , FLX produced 250 concrete tables. 520 kgs. of raw materials were used at a total cost of P 193,440. A total of 128 direct labor
hours were used at a cost of P 4096. The direct labor rate variance is:
a. P 22.50 b. P 93.00 c. P 64.75 d. P 96.00
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11. During the month of March, Late Co. used P300,000 of direct materials. At March 31, Late’s direct materials inventory was P50,000 more
that it was at March 1. Direct material purchases during the month of March amounted to
a. P0 b. P250,000 c. P300,000 d. P350,000
12. Manufacturing costs do not include
a. prime costs c. conversion costs
b. indirect materials d. salary of the company president
Use the following information to answer the next five questions:
Listed below in alphabetical order are certain accounts of the Stable Manufacturing Company with balances for the year ending December 31,
2011.
Administrative expenses P 35,000
Customer returns and allowances 54,400
Depreciation – plant & equipment 38,800
Depreciation – selling 4,300
Direct Labor cost 164,500
Dividends 14,000
Factory heat, light & power 91,500
Factory Supplies expense 24,100
Finished Goods, 1/1/2011 74,400
Finished Goods, 12/31/2011 71,500
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 Goods In Process, 1/1/2011 20,800
Goods In Process, 12/31/2011 45,600
Indirect Labor 25,750
Insurance & Taxes – Factory 8,900
Interest Expense 9,000
Gain on disposal of Machinery 11,500
Provision for income taxes 24,500
Purchases 270,500
Raw Materials, 1/1/2011 158,300
Raw Materials, 12/31/2011 169,290
Selling Expense 792,500
13. If the cost to manufacture a complete unit in 2011 was P10, how many units were manufactured?
a. 62,286 b. 60,096 c. 67,246 d. 59,806 e. 64,366
14. If the unit cost was P10 (and if the beginning finished goods inventory was valued on the same basis), how many units were sold in 2011?
a. 62, 286 b. 60,096 c. 67,246 d. 59,806 e. 64,366
15. If a unit cost of P10 was applied consistently to both beginning and ending Finished Goods inventories, the net change in Finished Goods
between January 1 and December 31 was:
a. an increase of 2,480 units c. an increase of 290 units
b. an increase of 67,246 units d. a decrease of 290 units
c. a decrease of 2,480 units
16. In 2012, if the total cost of work in process is P728,260, the manufacturing costs incurred are:
a. P656,760 c. P773,860
b. P662,860 d. P682,660 e. P799,760
17. In 2012, if cost of goods available for sale is P694,360, the cost of goods manufactured is:
a. P656,760 c. P773,860
b. P622,860 d. P682,660 e. P799,760
Charlie, Inc. manufactures a product which goes through three consecutive processes: Process 1, Process 2, and Process 3. Data for the month of
September, 2008 are as follows:

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Process 1 Process 2 Process 3

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Opening Work in Process P 8,000 P13,000 P2,000
Materials Added 20,000 4,000 5,000

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Conversion 10,000
eH w 10,000 16,000
Closing Work in Process 6,000 9,000 4,000

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18. What was the value of the output transferred from Process 3 to finished goods warehouse for the month of September 2005?
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a. P63,000 b. P65,000 c. P67,000 d. P69,000
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19. Daniel incurred cost of P43,000 for material, P26,000 for labor, and P23,000 for factory overhead. There was no beginning or ending work in
process. 5,000 units were completed and transferred out. The cost per unit is:
a. P8.60 b. P5.20 c. P18.40 d. P4.60
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The following information is available for the month of April from the First department of the Twigg Corporation:
Units
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Work in process, August 1 (60% complete) 50,000

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Started in April 190,000

Work in process, August 30 (40% complete) 80,000
Materials are added in the beginning of the process in the First department.
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20. Using the average cost method, what are the equivalent units of production for the month of April?
Materials Conversion
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a. 192,000 240,000
b. 190,000 192,000
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c. 240,000 208,000
d. 240,000 192,000

Use the following information to answer the next three questions

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The following data for September were taken from the cost records of the mixing department, Fair Mftg. Co. which uses the average costing
method:
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Work in process, August 31

(all material, 50% converted) 1,000 units
Put into Process during the month 10,000 units
Work in process, September 30
(all material, 60% converted) 1,400 units
sh

Costs:
Work in process, August 31:
Materials P24,000
Labor 15,000
Factory overhead 7,600
Put into process during the month:
Materials P251,000
Labor 193,800
Factory overhead 149,000
21. Assuming no lost units, the unit cost for labor was:
a. P10 b. P15 c. P20 d. P2
22. The total cost of the units completed and transferred to the next department was:
a. P576,000 b. P640,400 c. P605,400 d. P693,800
23. Which of the following is an example of an expense?
a. the cost of a product delivered to a customer c. the cost of a proposed advertising campaign
b. the cost of the purchase of equipment d. the write-off of an obsolete product
24. Which of the following costs incurred by a bus manufacturer would NOT be directly attributable to the finished product?
a. the wages paid to assembly-line production workers c. the tires for buses
b. the
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25. Which of the following costs is NOT a product cost?

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 a. rent on office building c. indirect labor
b. repairs on manufacturing equipment d. steel used in inventory items produced
26. Which of the following costs is an indirect product cost?
a. Property taxes on plant facilities c. wages of assembly workers
b. materials used d. president’s salary
27. All of Jill Enterprise's operations are housed in one building with the costs of occupying the building accumulated in a separate account. The
total costs incurred in May amounted to P24,000. The company allocates these costs on the basis of square feet of floor space occupied.
Administrative offices, sales offices, and factory operations occupy 9,000, 6,000, and 30,000 square feet, respectively. How much will be
classified as a product cost for May?
a. P4,800 b. P3,200 c. P16,000 d. P24,000

28. Which of the following is an example of a committed fixed cost?

a. Investment in production facilities c. Advertising
c. Preventive maintenance d. Employee training programs
29. Which of the following items is not charged to manufacturing overhead?
a. Factory depreciation and supplies c. Costs of service departments
b. Costs of maintenance departments d. Costs of marketing departments
30. If the amount of "Cost of goods manufactured" during a period exceeds the amount of "Total manufacturing costs" for the period, then:
a. ending work in process inventory is greater than or equal to the amount of the beginning work in process inventory.
b. ending work in process is greater than the amount of the beginning work in process inventory.
c. ending work in process is equal to the cost of goods manufactured.
d. ending work in process is less than the amount of the beginning work in process inventory
31. ALPHA Co. uses a standard cost system. Direct materials statistics for the month of May, 19x7 are summarize below:
Standard unit price P90.00
Actual units purchased 40,000
Standard units allowed for actual production 36,250
Materials price variance- favorable P6,000

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What was the actual purchase price per unit?

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a. P75.00 b. P88.50 c. P85.89 d. P89.85
32. Information on Kennedy Company's direct material costs follows:

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Standard price per pound of raw materials .......
eH w P3.60
Actual quantity of raw materials purchased ...... 1,600 pounds
Standard quantity allowed for actual production.. 1,450 pounds

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Materials purchase price variance--favorable .... P 240
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What was the actual purchase price per unit, rounded to the nearest penny?
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a. P3.06. b. P3.45. c. P3.11. d. P3.75

33. Cascade Company bought 10,000 pounds of material and used 9,500. The material price variance was P300 unfavorable and the standard
price per pound is P3. The cost of materials purchased was
a. P28,200 b. P29,700 c. P28,800 d. P30,300
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34. During December, 6,000 pounds of raw materials were purchased at a cost of P16 per pound. If there was an unfavorable direct materials
price variance of P6,000 for December, the standard cost per pound must be
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a. P17 b. P15 c. P16 d. P14

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35. Cox Company's direct material costs for the month of January were as follows:
Actual quantity purchased 18,000 kilograms
Actual unit purchase price P 3.60 per kilogram
Materials price variance – unfavorable (based on purchases) P 3,600
y

Standard quantity allowed for actual production 16,000 kilograms

ed d

Actual quantity used 15,000 kilograms

For January there was a favorable direct material quantity variance of:
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a. P3,360 b. P3,400 c. P3,375 d. P3,800

Information on ABC Company’s direct labor costs for the month of August is as follows:
is

Actual direct labor rate P7.50

Standard direct labor hours allowed 11,000
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Actual direct labor hours 10,000

Direct labor price variance – unfavorable P5,000

36. The standard direct labor rate in January was

a. P8,05 b. P7.00 c. P6.95 d. P8.00
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37. Yola Co. manufactures one product with a standard labor cost of 4 hours at P12.00 per hour. During June 1,000 units were produced
using 4,100 hours at P12.20 per hour. The unfavorable direct labor efficiency variance was
a. P1,220 b. P820 c. P1,200 d. P400

38. The direct labor standards for producing a unit of a product are two hours at P10 per hour. Budgeted production was 1,000 units. Actual
production was 900 units, and direct labor cost was P19,000 for 2,000 direct labor hours. The direct labor efficiency variance was:
a. P1,000 favorable c. P1,000 unfavorable
b. P2,000 favorable d. P2,000 unfavorable

39. DIGITAL Products produces a product, Digit, and uses standard costing methods. The standard direct labor cost of Digit is one and one-
half hours at P180 per hour. During October, 2010, 500 Digit units were produced in 1,000 hours at P176 per hour. The direct labor
efficiency variance is a favorable (an unfavorable)
a. P30,000 b. P(30,000) c. P45,000 d. P(45,000)

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 Problem 1

The Best of the Season Corporation makes plastic christmas trees in two departments: Cutting and Boxing. In the Cutting department, wire wrapped
with green needles is placed into production at the beginning of the process and is cut to various lengths depending on the size of the trees being
made at that time. The branches are then transferred to the Boxing department where the lengths are separated into the necessary groups to make a
tree. These are then placed in the boxes and immediately sent to finished goods. The following data are available related to October 2008 production
in each of the two departments:

Percent of Completion
Units Transferred-In Material Conversion
Cutting Department:
Beginning Inventory 8,000 n/a 100 30
Started in process 36,000
Ending inventory 3,600 n/a 100 70

Boxing Department:
Beginning inventory 2,500 100 0 55
Transferred-in ?
Ending inventory 1,200 100 0 60

COSTS: Transferred-In Material Conversion

Cutting Department:
Beginning inventory n/a 73,250 20,000
Current period n/a 344,750 323,360

Boxing Department;

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Beginning inventory 41,605 - 2,100

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Current period ? 95,910 61,530

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Compute the following: (Weighted Average)
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a. Cost of units transferred out from Cutting Department

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b. Cost of work in process end, Cutting Department
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c. Cost of Units transferred to finished goods from Boxing Department
d. Cost of work in process end, boxing Department
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Problem 2
Good Company began 2012 with three jobs in process:
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TYPE OF COST
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Job No. Direct Material Direct Labor Overhead Total

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247 77,200 91,400 34,732 203,332

251 176,600 209800 79,724 466,124
253 145,400 169,600 64,448 379,448
During 2012, the following transactions occurred:
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1. The firm purchase and paid for P600,000 of raw material.

2. Factory payroll records revealed the following:
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 Indirect labor incurred was P54,000.

 Direct labor incurred was P602,800 and was associated with the jobs as follows:
Job No. Direct Labor cost
247 17,400
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251 8,800
253 21,000
254 136,600
Th

255 145,000
256 94,600
257 179,400
3. Material requisition forms issued during the year revealed the following:
sh

 Indirect material issued total P76,000.

 Direct material issued totaled P466,400 and was associated with jobs as follows:
Job No. Direct Labor cost
247 12,400
251 6,200
253 16,800
254 105,200
255 119,800
256 72,800
257 133,200
4. Overhead is applied to jobs on the basis of direct labor cost. Management budgeted overhead of P240,000 and total direct labor cost of
P600,000 for 2012. Actual total factory overhead costs (including indirect labor and indirect material) for the year totaled P244,400.
5. Jobs #247 through #255 were completed and delivered to customers.
Required:

a. Determine ending balances for jobs still in process.

b. Determine the costs of goods sold adjusted for under or over applied overhead.

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