MAC 2: Strategic Cost Management

SEATWORK #3
1. Take home pay or net pay means
- GROSS PAY LESS ALL DEDUCTIONS
2. If an employee earns P10 per hour and receives time-and-a-half for hours worked in excess of 40 per week, in a week
when 45 hours were worked the total overtime premium would be:
- P25
3. Idle time of delivery workers is usually charged to
- MARKETING EXPENSE
4. The employer’s portion of SSS premium is
- AN EXPENSE FOR THE EMPLOYER
5. Income taxes withheld are levied on the
- EMPLOYEE ONLY
6. Overtime premium incurred on rush jobs as requested by the customer, who has agreed to pay for special service,
may be charged to
- WORK IN PROCESS ACCOUNT
7. Eric Never Stops Company produces a variety of products. The company operates 24 hours per day with three daily
work shifts. The 1st shift workers receive regular pay. The 2nd shift workers receive 10% pay premium and the 3rd shift
workers receive 20% pay premium. In addition, the Company pays overtime premium of 50% based on the pay rate for
the 1st shifts. The actual payroll for the month is as follows:
- Php 630,000.00
8. Using the same information in No. 7, how much is charged to Direct Labor?
- Php 560,000.00
9. Using the same information in No. 7, how much is charge to overtime pay?
- Php 52,500.00
10. Using the same information in No. 7, how much is charged to Factory Overhead?
- Php 70,000.00
MAC 2: Strategic Cost Management
SEATWORK #4

1. The benefits of a successful Just-In-Time system include all of the following except:
- INVENTORY BUFFERS ARE INCREASED
2. A key concept of the JIT inventory system is:
- INVENTORIES ARE COSTLY TO CARRY AND CAN BE KEPT TO MINIMUM LEVELS OR ELIMINATED COMPLETELY WITH
CAREFUL PLANNING.
3. A just-in-time manufacturer is more likely than a conventional manufacturer to
- RECEIVE MORE FREQUENT DELIVERIES OF MATERIALS
4. T When JIT manufacturing is used, which of the following costs is considered a direct product cost?
- REPAIR PARTS FOR THE MACHINERY
5. Problems encountered with using traditional product costing for JIT manufacturing usually stem from
- ASSIGNING OVERHEAD COSTS TO UNITS OF PRODUCT
6. Under JIT manufacturing, many overhead costs formerly classified as indirect costs are now
- DIRECTLY TRACEABLE TO THE PRODUCT
7. The flow of goods through a JIT system is based on:
- PRODUCING TO MEET CUSTOMER DEMAND WITH NO BUILDUP OF INVENTORY AT ANY POINT IN THE PRODUCTION
PROCESS
8. A successful JIT system is based upon which of the following concepts?
- A SMALL NUMBER OF SUPPLIERS MAKE FREQUENT DELIVERIES OF SPECIFIC QUANTITIES THUS AVOIDING THE
BUILDUP OF LARGE INVENTORIES OF MATERIALS ON HAND.
For items 9-10.
The Nasa Libro Lang to Company has a cycle time if 3.0 days, uses a Raw and In process account and charges all
conversion costs to Cost of Goods Sold. At the end of each month, all inventories are counted, their conversion cost
components are estimated and inventory account balances are adjusted. Raw materials cost is backflushed from RIP to
Finished Goods. The following information is for the month of June.
Materials purchased on credit P 146,000
RIP beginning, including P4,400 of conversion costs 15,000
FG beginning, including P10,800 of conversion costs 36,000
RIP end, including P7,800 of conversion costs 24,000
FG, end, including P6,500 of conversion costs 18,000
Conversion cost – P80,000 DL and P100,000 OH
9. Compute for the amount of materials backflushed from RIP to Finished Goods.
- 140,400.00
10. Compute for the amount of materials backflushed from Finished Goods to COGS.
- 154,100.00
MAC 2: Strategic Cost Management
MLEO1
For the next two questions: Midnight Hawk Construction manufactures and installs standard and custom- made
cabinetry for residential homes. Last year, the company incurred P 200,000 in overhead costs. After implementing
activity- based costings (ABC), the company’s accountant identified the following related information:
Activity: Material delivery and handling
Allocation Base: Number of deliveries
Proportion to Overhead Cost: 30%

Activity: Inspections
Allocation Base: Number of inspections
Proportion to Overhead Cost: 25%

Activity: Supervision
Allocation Base: Hours of supervisor time
Proportion to Overhead Cost: 20%

Activity: Purchasing
Allocation Base: Number of purchase orders
Proportion to Overhead Cost: 25%

The number of activities for standard and custom- made cabinets, respectively, is as follows:
Number of deliveries 200 and 100
Number of inspections 600 and 400
Hours of supervisor time 1,800 and 2,200
Number of purchase orders 1,000 and 1,000

During the past year, Midnight Hawk accepted a customer order for a set of custom- made cabinets that would require
the following:
Direct labor cost (25 hours at P 15 per hour)- P 375
Direct materials (wood) (900 ft. at P 3.00 per foot)- P 2,700
Number of deliveries- 3
Number of inspections- 5
Hours of supervisor time- 5
Number of purchase orders- 3

1. How much overhead should be applied to the above customer order?

- 975

2. What is the total product cost for the above customer order?
- 4,050
3. Analyze the following statements:
I - The cost accounting for purchased materials is the same as it is for any periodic inventory system.
II – As materials are ordered, the account materials is debited.
III – The flow of direct materials from factory to storeroom is accounted for as a transfer of cost from materials to work-
in-process.
Given these, you can conclude that:
- ALL STATEMENTS ARE FALSE
MAC 2: Strategic Cost Management
4. Harper Co.’s Job 501 for the manufacture of 2,200 coats, which was completed during August at the unit costs
presented below. Final inspection of Job 501 disclosed 200 spoiled coats which were sold to a jobber for P 6,000.
Direct materials 20
Direct labor 18
Factory overhead (includes allowance of 1 for spoiled work) 18
Total 56
Assume that spoilage loss is attributable to exacting specifications of Job 501 and is charged to this specific job. What
would be the unit cost of good coats produced on Job 501?
- 55*
5. Application of factory overhead is usually reflected in the general ledger as an increase in:
- WORK IN PROCESS CONTROL
6. At the end of the year, Phil Co. had the following account balances after applied factory overhead had been closed to
Factory Overhead Control:
Factory overhead control P 1,000 cr.
Cost of goods sold 980,000 dr.
Work in process 38,000 dr.
Finished goods 82,000 dr.
The most common treatment of the balance in factory overhead control would be to:
- CREDIT IT TO COST OF GOODS SOLD
7. During March, Hart Company incurred the following costs on Job 109 for the manufacture of 200 motors:
Original Cost accumulation:
Direct materials 660
Direct labor 800
FOH (150% of DL) 1,200
Total 2,660

Direct costs of reworking 10 units:

Direct materials 100
Direct labor 160
Total 260
The rework costs were attributable to exacting specifications of Job 109, and full rework costs were charged to this
specific job. What is the cost per finished unit of Job 109?
- NONE OF THE CHOICES
8. Beltran Company produces products X and Y. the direct cost of X is P 250 per unit (P 100 materials and P 150 labor)
and Y is P 350 (P230 material and P120 labor) per unit. Fifty units of X and 150 units of Y were produced.
Overhead amounts to P 130,000 and is composed of material handling P 12,000, labor support P 60,000, machine
operation P 48,000, and general administration P 10,000. Material handling cost driver is material cost, labor support
cost driver is labor cost.
Machine operation cost resulted from running the machines a total of 480 hours (three- fourth of which was for product
X.) General administration effort related equally to product X and Y. Material handling chargeable per unit of Y
(rounded) amounts to
- 70
MAC 2: Strategic Cost Management
9. Under Heller Company’s job order cost system, estimated costs of defective work (considered normal in the
manufacturing process) are included in the predetermined factory overhead rate. During March , Job No. 210 for 2,000
hand saws was completed at the following costs per unit:
Direct materials 5
Direct labor 4
Factory overhead (applies at 150% of direct labor of cost) 6
Total 15

Final inspection disclosed 100 defective saws which were reworked at a cost of P 2 per unit for direct labor, plus
overhead at the predetermined rate. The defective units fall within the normal range. What is the total rework cost and
to what account should it be charged?
- 500 TO FACTORY OVERHEAD CONTROL
10. Managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments such as
Quality Control and Maintenance to the production departments. To aid them in this discussion, the controller has
provided the following information:
Budgeted OH costs before allocation:
Quality Control 350,000
Maintenance 200,000
Machining 400,000
Assembly 300,000
Total 1,250,000

Budgeted machine hours:

Machining 50,000
Total 50,000

Budgeted direct labor hours

Assembly 25,000
Total 25,000

Budgeted hours of service for quality control:

Maintenance- 7,000
Machining - 21,000
Assembly 7,000
Total 35,000

Budgeted hours of service for maintenance:

Quality control 10,000
Machining 18,000
Assembly 12,000
Total 40,000

If Rochester Manufacturing decides not to allocate service costs to the production departments, the overhead allocated
to each direct labor hour in the Assembly Department would be
- 12
11. Overapplied manufacturing overhead would result if:
- MANUFACTURING OVERHEAD COSTS INCURRED WERE LESS THAN COSTS CHARGED TO PRODUCTION
MAC 2: Strategic Cost Management
12. The following data pertain to Alpha Company for the month of June 2020:
Finished Goods, June 1, 2020 P290,540
Finished Goods, June 31, 2020 276,760
Cost of goods manufactured 805,820
Recovery from inventory write-down 10,720

Determine the cost of goods sold shown in the statement of comprehensive income of Alpha Company for the month
June, 2020:

- P808,880

13. When must a new unit cost be calculated under the moving average method?

- AFTER EACH RECEIPT

14. The following statement that best described cost allocation is:
- A COMPANY’S TOTAL INCOME WILL REMAIN UNCHANGED NO MATTER HOW INDIRECT COSTS ARE ALLOCATED
15. Aries Company has an order point at 1,400 units, usage during normal lead time of 600 units, and an EOQ of 2,000
units. Its maximum inventory assuming normal lead time and usage would be:

- 2,800 UNITS
16. Fred Company employs a job order costing system. Only three jobs, #105, #106 and #107 were worked during May
and June, 2020. Job #105 was completed June 10; the other two jobs were still in production on June 30. Job cost sheets
on the three jobs follow:
JOB COST SHEET #105
May costs incurred
DM P16,500
DL P13,000
OH P20,800
June costs incurred
DM -
DL P4,000
OH ?
JOB COST SHEET #106
May costs incurred
DM P 9,300
DL P 7,000
OH P11,200
June costs incurred
DM P8,200
DL P6,000
OH ?
JOB COST SHEET #107
May costs incurred
DM -
DL -
OH -
June costs incurred
DM P21,300
DL P10,000
OH ?
MAC 2: Strategic Cost Management

The following additional information is available:

1. Manufacturing overhead is assigned to jobs on the basis of direct labor cost.
2. Indirect materials used during June totaled P4,000
3. Indirect labor cost for June totaled P8,000
4. Various Manufacturing overhead incurred during June was P19,000
5. Balances in the inventory accounts at May 31 were as follows:
Raw Materials P40,000
Work in Process ?
Finished Goods 85,000

The overhead resulted to a variance of

- P1,000 OVERAPPLIED

17. Summit Company provided the inventory balances and manufacturing cost data for the month of January.
Inventories: January 1
Direct materials P30,000
Work-in-process 15,000
Finished goods 65,000

January 31
Direct materials P40,000
Work-in-process 20,000
Finished goods 50,000

Month of January:
Factory overhead applied P150,000
Cost of goods manufactured 515,000
Direct materials used 190,000
Actual factory overhead 144,000
What would cost of goods sold be if under-or-overapplied overhead were closed to account(s) normally charged with
that particular cost-or-benefit?
- 524,000
18. The Faith company uses 20,000 units of Materials A in making a finished product. The cost to place one order for
Material A is P8.00 and the annual cost to carry one Material A is P2.00
If the cost to place one order increased by P10 and the cost to carry one Material A in stock remains the same, the
economic order quantity will be
- 600 UNITS
19. The Faith company uses 20,000 units of Materials A in making a finished product. The cost to place one order for
Material A is P8.00 and the annual cost to carry one Material A is P2.00
The economic order quantity for Material A is
- 400 UNITS
MAC 2: Strategic Cost Management
20. The following information relates to ABC Company
Units required per year 60,000
Cost of placing an order 900
Carrying cost per unit per month 100
Compute the EOQ for the year
- 300
21. In using method in recording the purchase of inventory, which of the following should be included in the cost of
inventory?
Freight Cost Purchase discount not taken
- Freight Cost- Yes Purchase discount not taken- No
22. Which of the following is true?
-An overstated ending inventory will lead to understatement of income
-Spoiled goods may be sold in a price higher than the regular sales price
-None of the above is true
-Inventory methods can be changed at will to control income
23. The following information pertains to Material A used by Love Company
Annual Usage in units 20,000
Working Days per year 250
Safety stock in units 800
Normal lead time in working days 30

If units of Material A will be required evenly throughout the year, the reorder point is

- 3,200

For the next two questions: XYZ Company has identified an activity cost pool to which it has allocated its overhead of
P1,920,000. It has determined the expected use of cost drivers for that activity to be 160,000 inspections. Product A
require 40,000 inspection and Product B require 30,000 inspections.
24. The overhead assigned to product A is
- 480,000
25. The overhead assigned to product B is
- 360,000
26. The only method of allocating service department costs to producing departments that considers reciprocal
services is called the

 - ALGEBRAIC METHOD

27. Depreciation based on the number of units produced would be classified as what type of cost?
- OUT OF POCKET COST*
MAC 2: Strategic Cost Management

28. The following information relates to Pure Corporation for the past accounting period

Service Department Direct Costs

A P80,000
B P60,000
Producing Department
C P15,000
D P20,000
Proportion of service by A to:
B 10%
C 60%
D 30%
Proportion of service by B to
A 30%
C 20%
D 50%
Using the simultaneous method, Department A’s allocated to Dept C is
- 60,619
29. In a period of rising prices, using which of the following inventory cost flow methods would result in the highest
ending inventory?

- FIFO
30. The following statement that best describes cost allocation is:
- A COMPANY'S TOTAL INCOME WILL REMAIN UNCHANGED NO MATTER HOW INDIRECT COSTS ARE ALLOCATED
31. The Baratheon Company is a manufacturer of golf clothing. During the month, the company cut and assembled
10,000 golf jackets. One hundred of jackets did not meet specifications and were considered “seconds”. Seconds are
sold for P1,000.00 per jacket, whereas first quality jackets sell for P2,500.00. During the month, Work in Process was
charged for P3,600,000 of materials, P4,000,000 of labor and factory overhead is applied at 120% of direct labor
(including allowance of 20% of direct labor for spoiled units). Compute the unit cost of the good units if Loss is due to
spoiled work charged to specific job.
- P1,161.62 PER UNIT
32. The purchase requisition may originate with all of the following except:
- A RECEIVING DEPARTMENT CLERK
33. For its economic order quantity model, a company has a P10 cost of placing an order and a P2 cost of carrying one
unit in stock. If the cost of placing an order increases by 20%, the annual cost of carrying one unit in stock increases by
25%, and all other considerations remain constant, the economic order quantity will:
- DECREASE
MAC 2: Strategic Cost Management

For the next two questions: Bagsak Pa Rin Co. operates with three producing departments (Cutting, Dividing, and Shelling
that are serviced by two service departments Equipment Maintenance and General Plant). Costs are allocated using the
step method with the service department servicing the greatest number of other departments allocated first. General
Plant is allocated on the basis of square footage and Equipment Maintenance is allocated on the basis of direct labor
hours. Relevant May data are:
Producing Departments
Cutting
Overhead before allocation of service department costs P105,000
Square footage 8,000
Machine hours used 6,000
Direct labor used 5,000

Producing Departments
Dividing
Overhead before allocation of service department costs P93,000
Square footage 12,000
Machine hours used 2,000
Direct labor used 6,000

Producing Departments
Shelling
Overhead before allocation of service department costs P87,000
Square footage 6,000
Machine hours used 7,000
Direct labor used 9,000

Service Departments
Equipment Maintenance
Overhead before allocation of service department costs P56,000
Square footage 4,000
Machine hours used -
Direct labor used -

Service Departments
General Plant
Overhead before allocation of service department costs P30,000
Square footage -
Machine hours used -
Direct labor used -

34. What is the rate per machine hour for Shelling Department?
- P17.14/Mhr
35. What is the total allocated cost to Dividing Department?
- 30,000