PRACTICAL ACCOUNTING PROBLEMS IT ReSA The Review School of Accountancy R. Papa Cor. S. H. Loyola Sts. Sampaloc, Manila _ Tel Nos.: 734-39-89; 735-98-07 Multiple Choice ~ Cost Accounting (AICPA/CMA/CIA Adapted) Job Order Costing Paula Company had inventories al the beginning and end of 2003 as follows: ire sagen | 4/1/2003 (Raw Materials | PSS, | Work in Process | Finished goods During 2003 the following costs were incu | Raw materials purchased Direct-labor payroil [Factory ovemnead Paula’s cost of goods sold for 2003 was a, 921,000 c. P-966,000 b. 956,000 4.979.000 i 3/4/2003 [ Direct materials |" P.36,000 TPaoo00 | TN Td0O 220,000 Read Heth Company had the following inventories at the beginning and of March 2003: 3/34/2003 P30,000 rk in process { 18,000 12,000 | | Finished goods 54,000 772,000 Te following adaltional manufacturing cost data were available for the month of March 3. age materials purchased 84,000 purses 80,000 en oom per hour FSO vill pes) cet | Factory dverhead rate per direct-labor hour | 10.00 on _200u hy rs ¥ oer MC 220m The cost of goods manufactured for March 2003 was, a a. a, P212,000 ©. 230,000 Gane b. 218,000 a 236,000 can Item 3 and 4 are based on the following data: Leslie Company uses job-order casting Factory overhead is applied to production at @ predetermined rate of 150% of direct labor cost.» Any. over- or underapplied factory ‘overhead is closed to the cost of goods sold account at the end of each month, Additional information is available as follows: Job 101 was the only job in process at January 31, with accumulated costs as follovrs: | Applied factory overtien: Job 102, 103, and 104 were started during February Direct materials requisitions for February totaled 26,000 Direct labor cost of P20,000 was incurred for February Actual factory averhead was P32,000 for February. P 4,000 | PM gu 080 [2000 | pt 20b00 3,000 on 2200 » B2,000 mc. #4000 isc (a, com F330 The only job still process on February 28 was Job 104, with costs of P2,800 for direct materials and P1,800 for direct labor. 3. The cost of goods manufactured for February was a. P77,700 ¢. P79,700 b. 76,000 d, 85,000 P2-CADi te ee ener mrmmeg rye SAe as PRACTICAL ACCOUNTING PROBLEMS II Page 2 Adval 22000 Pried 20000 D 4 Over r underappio actor overnoad shoud be close to the cas of Goods Sold eon i ay ‘account at February 28 in the amount of = a P 700 overapplied ©. P'1,700 underapplied b. 1,000 overapplied d_ 2,000 underapplied iS 5. Wilma Company has underapplied overhead of 45,000 for the year. Before disposition of the underapplied overhead, selected yearend balances from Wilma's accounting Tecords we i ees 2360 Cost of goods sold ~? zens f als inventory Fe Tete | Work-in-process inventory MO. Meade [Finished goods inventory x Under Wilma's cost accounting system. over- or underapplied overhead is allocated to C&S 206 24100 appropriate inventories and CGS based on year-end balances. in its year-end income “7 cx zens statement, Wilma should report CGS of fe qe 4eRS a. 682,500 © P 757,500 WOR ark ». 684,000 4. 765,000 3200004 29.5 = 369 sou D 6. A manufacturer employs a joborder cost system. All jobs ordinarily pass’ through all ———— ‘hwe-production departments, and Job 10% and Job 102 were completed during. the current month Pri ‘Direct | Manufacturing Overhead | ion Departmen Department 2 , [Department 3 | ‘| gob 102] Job 103 _P.32,400 | PO _Deparimeni 1 40,000 | P 26/000 | P_58,000 piaca, [SDepariment2 | 900_| PF 5.000 | P44,000 jp ton aK — a Depart 5 { ie tal Pe JL ck un case Deore Labor Foes | Tea Sl JOH Gok ay 4500 pariment i | 0 imc Tae iD eee Department 2” i 1 : aaa [Department 3 . MH: (Machine Hours) as MEE actune Hows) 1¢9300 12 25200 iment 3 Zis,200 ‘The cost of completed Job 101 is a. P131,500 ¢. P202,600 b. 189,700 4. 215,200 i 7. Information conceming Maida Maids Company's manufacturing activities for December. follows Direct materials. P2.40 per unit fectlabor. PO.80 per unt | Machine time a | Materials IPRACTICAL ACCOUNTING PROBLEMS IT page 3 q0c0 e000 Total December manutacturing cost was P180,000, of which P30,000 was direct labor 1500 cost, A total of 600 machine hours were used in the month, Maida uses a predetermined (4s00) overhead rate of P100 per machine hour fo assign factory overhead 0 work in process iaao and finished goods inventories. Matenals purchased in December were P84,000 and. —sc-q00 freight-in on these purchases totaled Pt, 500 oF cease Determined the raw materials used and cost of goods sold in December. MC (eo! Cost of goods sol 4 400 a 90,000 182.800 (i b 94,500 182,800 "2.600 ¢ - 93,000 481.300 Ciso0e) a 90,000 184,800 clas Sea — Items 8 and 9 are based on the following data: ‘Amie Corporation manufactures plastic coated metal clips. The following were among Armie's 2003 manufacturing costs, Wages ser: Machine operators Maintenarice workers Factory foreman (Materials used | Metal wire 7? 500,000_} Lubricant for oling machiriery 140,000) xeotrent | Plastic coating A @, Armie’s 2002 airet labor amounted to a.P 200,000 ©. P290,000 200,000 adhe. OF b.. 230,000 d. 320,000 = 8. Armie's 2003 direct materials amounted to ‘a, P890,000 ¢, P510,000 Gy ence a abi = 2D 880,000 4 500,000 io Rhe po A 40. Regine Company operates its factory on a two-shift basis and pays a late-shift differential fof 159. Regine also pays a premium of 50% for overtime work. Since Regine manufactures only for stock, the cost system provides for uniform directlabor hourly ‘charges for production cone without regard to shift worked or work done on an overtime basis. Overtime and iate-shit differentials are. included in Regine’s factory overhead application rate, The May 2003 payroll for production workers Is as follows [ Wages at base direct-labor rate [P 325,000. | | 125.000. | {Overtime pre 10,000 | For the month of May 2003, what amount of direct. labor should Regine charge to work- in-process? a. P325,000 c¢, P350,000 ». 335,000 4,360,000 A 11. Becky uses a job order cost system and applies factory overhead to production orders on the basis of direct-labor cost. The overhead rates for 2001 are 200% for department A ‘and 50% for department B. Job 123, started and completed during 2003 as charged with the following costs: : ia ‘ ek A i a | ate 25,000 5,000 [Direct labor 2 30,000 (Factory overhead t 40,000 BE 2 “The total manufactunng costs associated with Job 123 should be a P 135,000 . P 195,000 b, 180,000, 4 240,000 GH=DLX 2 = 4oK DS at Sao araneee P2-CA ss Le ian eee mee I OH HOO — }s000 Goowxs07) Me! #51070 F/O = 126. Coewom _ y POR “een” Acta si 20,000 peried PRACTICAL ACCOUNTING PROBLEMS IX (2° ¥ 9 {650.0% age qooted * adc. 12. Riza Company usps a predetermined factory overhead application rate based on direct labor cest. For the year ended December 31, 2003, Rizza's budgeted factory overhead was P600,000, based on a budgeted volume of 50,000 direct labor hours, at a standard direct labor rate of P6.00 per hour Actual factory overhead amounted to P620,000, with ‘actual direct labor cost of 325,000. Far 2003, overnpplied factory overhead was a, P 20,000 ¢. P 30,000 b. 24,000 450,000 a 13, Bea Corporation distributes service department overead costs directly to. producing departments without allocation to the other service department. Information for the ‘month of June 2003is as follows: Servi ] F sista Service Department t * Maintenance | Uulites | ‘Overhead costs incurred 20,000 10,000 Service provided to departments: | _ Maintenance (7 Utiities | Producing =A | Producing - 8 Totals The amount of maintenance department costs distibuted to Producing — A Department for June 2003was : a. P8,000 ©. P-30,000 PA | [orc ~b, 8,800 4. 11,000 PB B02 _10,000 Zo,c00. QD 14. Celeste Company distributes the service department overhead costs directly to producing department without allocation to the order service department. Information for the month of January 2003 is as follows: tapes Service Department] i 29,909 10% Producing - A re ae pe aoe Producing -B | 40% 1 60% ~ Totals _ T= oose 100% The amount of utities department costs distributed to Producing Department - B for January 2003 should be PA 207 fy a P3600 ©. P 5,400 oe b. 4,500 4. 6,000 Fe ests Hf rok * x Items 15 and 16 are based on the following data: be ‘Sol Company's Job 501 for the manufacturing of 2.200 coats was completed during August 2003 at the following unit costs: [Diet matenais [P20] Direct Final inspection of Job 501 disclosed 200 spoiled coats which were sold to a jobber for 6,000, 15. Assume that spoiled loss is charged attributable to exacting. specification of Job 501 during August 2003. What would be the unit cost of the good coats produced on Job. 501? B a, P.55.00, © b. 58.00 Ci ps7 6 P2-CA omg) +(55 X 200) = gore Reet et) 6+ ae Le = Psiso 2:00 aPRACTICAL ACCOUNTING PROBLEMS II os @& 46. Assume that the spoilage toss is charged to all production (or due to internal failure) ‘uring August. What would be the unil Cost of the good coats produced on Job 501? a P53.00 ©. P56.00 55.00 4. 58.60 CXL. Be, co 2000 == Items 17 and 18 are based on the following information: During March, Sofia Company incurred the follawing costs on Job 109 for the manufacture of 200 motors [Direct Materials A 47. The rework coats were attributable to the exacting specifications of Job 109, and the full rework costs were charged to this specific job 3 a.P 15.80 © P1400 160 + SM. Fim b. 14.60 a 13.30 200 = D 18. It the rework coal was the result of an internal failure due to the employee error, what is the cost per unit of Job 10977 a. P 15.80 ¢ P14.00 2660 fran = Fir20 b 1460 a 13.30 [ae — » 19. Under Hermie Gompany’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 handsaws was completed at the following costs per unit. (Direct materials ‘ [Ra | Direct labor 4 [Factory overhead (a i sa aire Bis Final inspection disclosed 100 defective saws, which were reworked at a cost of P2 per ‘nit for direct labor, plus overhead at the predetermined rate. The defective units fall with in the normal range. What is the total rework cost and to what account should it be charged? bur ne re ee ee heaps b. 200 to factory overhead control d. P50 to factory overhead control QF 2 XS" 3 ? ‘ 500 . Process Costing D 20. Kew had 3,000 units of work-in-process at April 1 which were 60% complete as to giwir conversion cost During Apri, 10,000-units were completed At April 30, 4,000 units sup-p Temained in work-in-process which were 40% complete as to coniversion cost. Direct aap OW ‘materials are added at the beginning of the process. How many units were started during Apri? i cuo-P J0.cce a, 9,000 ¢. 10,000 per 0, b 9.800 11,000 Th oe B21, win the foiving data fora company sing te FIFO process cost system, calculate the equivalent units for materials and conversion costs. | Whole | | Conversion i | Units | Materials Costs {Beginning inventory THO] 100% | 80%. UTransferred-in Sota, pesto [Transferred-out m2 80 t | Ending invent 30 0% | 40% [Enating inventory Tat aoe Zt P2-CA SC. 40 70 € 39 12 eur «(oo BB page 5PRACTICAL ACCOUNTING PROBLEMS IT page 6 a, 89 materials, 100 conversion costs. b. 100 materials, 89 conversion costs c. 110 materials, 99 conversion costs. " d. 130 materials, 119 conversion costs FB AP. og, KOK = cue f07 co ‘The Wilson Company manufactures the famous *Ticktock” watch on an assembly-ine basis. January 1 work-in process consisted of 5,000 units partially completed, Duting the month an additional +10:000 units were started and 105,000 units were completed. The tending work-in-process was 3/5 complete as to conversion costs, Conversion costs are added evenly throughout the process. The following conversion costs were incurred: 22. Beginning costs for workin process, Total current conversion costs, P 1,500 273,920 The conversion costs assigned to ending work-in process totaled P1,60 using the FIFO ‘method of process costing. What was the percentage of completion as'to copyersion ‘casts on the 5,000 units in BWIP? 20% b. 40% © 60% sc 4.80% z ee 00% wei iat 23. 2003, These units were 60% complete as to conversion costs, Materials are added in the beginning of the process. During the month of October, 34,000 units were started and 36,000 units completed. Winnie had 6,000 units of work in process on October 31, 2003. These units were 80% complete as to conversion costs, By how much did the equivalent Lunits for the month of October using the weighted-average method exceed the equivalent tunis forthe month of October using the fistin,tst-outmethod? 44 ce, FA NP © $/000 Materials Conversion Costs PO P 3,200 Sep aoe 5 i i SURF snow 8,000. 3,200 8,000 4800 ° ' sur 2800 w-? uct er “Gow ‘ove a b. & 4. 24. Rivera Corporation's production cycle starts in the Mixing department. The folowing information is available for the month of April 2003: [Wark in process, Apnl 30 (60% complete) | Started in Apni [Work in process: Apri 30 (60% complete) Materibis are added in the beginning of the process in the Mixing Department. Using the weighted-average method, what ate the equivalent units of production for the month of April 20037 Materials Conversion Pit, Hoes = 240,000, 255,000 270,000 280,000 GaP 980 0, ie 250,000 pisex | ae MF Jeon £ 280,000 ewe SON if eon. 270,000 ‘eolt sone apes The Alice Company had computed the physical low (of physical units) for Department A, forthe month of Apnil 2003 as follows: 25, |__From Apnl production Materials are added at the beginning of the process. Units of work in process at April 30, 2003, were 8,000. The work in process of April 1, 2003, was 80% complete as to conversion costs and the work in process at April 30, 2003, was 60% complete as to Conversion costs, What are the equivalent units of production forthe month of Apri 2003, using the FIFO methods? a ee = 200) wi? 7008 & SC pee pow ¢ fom 4900 pur See Sum P2-CA Winnie Incorporated had 8,000 units of work in process in Department A on October 1, 25 ar tooo Iso bul Sooo sump 100 rome “Fon OP oro%e eur _igen), Tis Ooo B 1H fra > ol anjse= 91 ee ry ee 2kPRACTICAL ACCOUNTING PROBLEMS II page 7 Material Gonversion Costs a 38.000 36 5 38.000 38.000 3 48.000 44.800 rl 48.000 48,000 aw 50600 v, 26, A company uses the firstin, fist-out method of costing in’a process costing system. S®-f 1rocm eo Material is added al the beginning of the process in Department A, and conversion costs “TAF Zou C50 | stun eater g undovnly throughout the process. Beginning work i process Inventory 09 «0°? 149 ao/ LOK ‘April 1 in Department A consisted of 50,000 urits estimated to be 30% complete, During eux? _qocw aor 1g0,000 ents were stated in Department A, and 160,000 units were completed and © Gove encore to Deparment & Ending work in process Inventory an Apt 30 in Department ‘A was estimated to be 20% complete. What were the total equivalent units in Li Ss Department A for April for materials and conversion costs, respectively? Bt ecm 2 180,000 and 138.000 200.000 and 139,000 Se woo noo 180,000 and 159,000 4 200,000 and 158,000 cs el es ¢ 27. fa Ihe. ad 8,000 uns of workin process In ks Department A on March 1, 2003, wrientY? Dae (Shame ae: were 50% complete as to conversion costs. Materials are introduced at the beginning of ‘Meprocess, During March 17-000 units were stated, 18,000 unis were completed and Tree eee 2600 ute of narnal spoilage. Rina had 5,000 units of workin process al yayc> 4.000 March’'31, 2003, which was 60% complete as to conversion costs, Under Rina’s cost cuo-r oc eee oeasit apolioge urls reduce the humber of unis over which total cost canarmr is qo ) Ste Be gpreae. “Using the weighled-average method, the equivalent units for March for o jyqy/ conversion cost were’ Sern a, 17,000 cc. 21,000 is _za00) 12.000 4. 231000 aor pana % 28. Dorle Co. hal the folowing production forthe month of June iso gee im Sr icone. Fi TU] « om em ‘Work in process at June 1 i “f00007| g yom Zot | Started during june = eae a, | Gompleted and tanafered fo nished goods dung June goo} oN oT | Abnormal spoilage incured : =| 2000 wes [Werk n process af Junie 30 a s000-] = ~~ ce Materials are added at ihe beginning of the process, As to conversion cost, the B toe aero work process was TO% completed. andthe ending work in process was 60% i aaa eee stage i devoted atthe end of the process. Using the weightedeaverage Se 2 eee ine eguWvalent unis for June, with respect to conversion costs, were 2 % a. 42,000 ‘ © 45,000. a ie b 44.000 6 500000 ‘ A eo & 29 A company manufactures’ a product that’ passes through two production departments, ak A sins ai aesembly. Direct materials are added inthe assembly department when = a ae asoat worplete, Conversion costs ae incurred uniformly. The actly in is forthe assembly department during Apa is a follows. te fork in process inventory, ApAl 1 (60% complete as to _conwersion oosts) i Transferred in from molding department | Detective at final mepection (win nora its) xd out to finished goods inventory Work in process inventory, Apni 30 (40% complete as ‘conversion costs) = ‘The number of equivalent units for direct materials in the assembly department for Apri, calculated on the weighted-average basis is. a, 26,000 units ©, 34,000 units b. 31,000 units 4, 37,000 units 20. Lea Company adds materials in the beginning of the process in the Forming Department ‘which is the first of two stages of ts production cycle. Information concerning the materials used in the Forming Department in October 2003 is as follows: P2-CABwip 0b, SY S000. TuTAt Reco \ sun? a 36009, ee? 44000 eur ipo PRACTICAL ACCOUNTING PROBLEMS II ee ‘during October "Units completed and transferred to next _Departiment during October Using the weighted-average’ method, what was the materials cost of work in process at October 31, 20037 a. P3,060 © P 6,000 coe b. ° 5,520 a 6,120 ce 31. Informat concerning Department B of the Loren Company is as follows: Units | Costs 71M -ce._—_| Beginning workin process Shae Sek Units transferred 8 i Se aR RR IM eer : t t ax — jo [Ending work in process oh aT gr 40K te = i } Transterred in. erg ae iw Hn ~ “yeas process P2900 |p -_ 208i Units transfered in| 47 [25500 "|" 45,000 Se least cota “Bz0.400 25,500 | _Pig.400 | 1s Conversion cosis were 20% complete as to the beginning work in process and 40% . = complete as to the ending work in process. All materials are added at the end of the process. Loren uses the weighted-average method, The portion of the total cost of ‘ending work in process attributable to transferred in cost is a Po ©. P 1,530 b. 1,500 4 11650 22. Roy Comparty manufactures product X in a two-stage production cycle in’Depantment A pap gam and B. Materials are added at the beginning ofthe process in Deparment B Roy used PS ye, the welghtea-average method. Conversion costs for Department B were 50% complete SS” 2S ‘as to the 6,000 units in the beginning work in process and 75% complete as to the 8,000 UT = tits in the ending work in process. 12,000 units were completed and transferred out of eup-? 129° TY MSS Department B dunng February 2003. An analysis of the casts relating to work in process fui 20 1B Ge "Le GE WIP) and production activity in Department B for February 2003 is as follows oe St ORR a = - w0-Pe Gott ew % Ow ~~ | Transferved in = got aoe 1 —P.12,000__ Seem ae Se 29.000 cup+# RICE ae ee 4,080, team e231 lerts Zoe 2k The total cost per equivalent unit transferred out for February 2003 of product X, rounded °\ ¢o.4 e2ct 2% G8 tothe nearest centavo, was a ah 275 & P282 10 2A b. 2.78 d@ 2.85 7 A 38, information for the month of May ‘concerning Department A, the fist stage of Leo ant Corporation's production cycle, is as follows: 7 Conversion Werk in process, beginning {Current costs | Total Costs : Equivalent units Based on weigited- average ‘method A Goods completed | 90;000'anis [Work in process, Se 10,000 unitsPRACTICAL ACCOUNTING PROBLEMS IT page 9 “Materials costs are added at the beginning of the process. The ending work in process is 50% complete as to conversion costs. How wauld the total cost accounted for be distributed, using the weighted-average method? Goods Work-in- Selle “5 = ev K O44 = 29,600 Completed process, end ae » PF 39600 P3400 eH eNoe fuera) 39.600 4.400 f ¢ 13.000 0 ee a 4. 44,000 3,400 2400-4 1Om = Hou 34, The Cutting Department in the first stage of Marlene Company's production cycle. Conversion costs for this department were 80% complete to the beginning work in process and 50% complete as to the ending work in process. Information as to Conversion costs in the Cutting Department for January 2003 is as Jollows: | | Conversion BwIF 2F Units | Costs | cer 350% | Work in’process at January 1, 2003 _|-25,000 |" 22,000 ture “Tooceo | Ser | Units started and costs incurred during January a. igieeaa eee Units completed and transferred to next’department | fr On tea ____ during en 100,000 _ | se Using the FIFO method, what was the conversion cost of the work in process in the B cao Cutting Department at January 31, 20037 a, P 33,000 c. P 39,000 SK Bom b 38,100 4 45,000 i £ pen ax 000 35. The Forming Department is the fist of a two-stage production process. Spoilage is identiied when the units have completed the Forming process. Costs of spoiled units are ‘PE 3% /yo aw assigned {0 units completed and transferred (0 the second department in the period = 4.3 spoilage is identified. The folowing information concerns Formng's conversion costs ina May 2002 ae Bae work in process (50%) complete fed during May @ 2006 Se Eee aha ce ‘Units completed and transfeired : ; [Ending work in process (80% complete). Ee 500 Jw? Using the weighted-average method, what was Forming’s conversion cost transferred to ie the second production department? Br 4x00 a. 50.880 e. P67.500 , b 64,125 a. 71.250 sevied cre > P| arm Few 4 S60 = zcq0 4, XA 's Value Further Sales | , G4, 500 Splitott Value 32 80,000 si [890,000 60,000. |~ 6,000 70,000 40,000 4,000 [50.000 | 20,000 2.500 P200,000 20,000 ‘Assuming the total joint costs of P160,000 were allocated using the relative-sales-vaiue at split-off approach, what were the joint costs allocated to its product? 5 lie hk ie | P 40,000 P 40,000 } 35,556. | 26.667 | 20,000 [32000 16,000 P2-CAPRACTICAL ACCOUNTING PROBLEMS It page 10 37. Teresa Company manutactures products S and T trom a joint process. The sales value at Split-off was P50,000 for 6,000 units of Product S and P25,000 for 2,000 units of product T Assuming that the portion of the total joint costs property allocated to Product S using the relative-sales-value at split-off approach was P 30,000, what were the total joint costs? a, P 40,000 ©. 45,000 b. 42,000 a 60,000 38, Aiko, Ine,, manufactures product P; G, and. R from a joint process. Additional information is as follows Product ee a R | Total [Units produced 4000 | 2,000 | ~~ 1,000" | ~7,000 ‘Joint cost 36,000 [> 2? | P 60,000] [Sales vaiue at spit-ott 2 z P 45,000 | P700,000 | Additional cost if processed | 1 further P 5.000 | P 3,000 | P 15,000 | [Sales value if processed further | P 70,000 | P 30,000 | P20,000 | P120,000 | Asstiming that joint cost is allocated using the relative-sales-value-at-splitoff approach, what were the joint costs allocated to product Q and R? a, P12,000 for @ and P12,000forR —_¢. P 15,000 for @ and P 9,000 for R b 14,400forQ and 9.600forR d. 18,000for Qand 8,000 forR 39, Gil Manufacturing Company manufactures two products, All and Bat, Initially, they are processed frem the same raw materials and then, after splitoff, they are further processed separately. Additional information 1s as fotlows: ee alt Bat | Total FBT Sales price =~} Pa000 "| 6,000 | P18 000 Joint cost prior to Split-olf point 7 2, 6,600 Costs beyond split-off point 3,000 3,006 6,000 | Using the relative-sales-value-approich, what are the assigned joint costs of Alt and Bat, respectively? a. P 3,300 and P 3,300 ¢. P'4\400 and’P 2,200 b. 3,960. ana 2.640, 4, 4,560 and 2.040 40. From a particular joint process, Vangie Company produces three products, X,Y, and 2 Each product may be sold at the time point of spli-off or processed further, Additional processing requires no special facilities, .and production costs of further processing are contirely variable ‘and traceable to the product involved. In 2003, all three products were. processed beyond split-off. Joint production costs for the year were P60,000. Sales Values and costs needed to evaluate Vangie 2003 production policy follow: Additional Costs and Sales Value if process Further Units | Sales Value | | Product | Produced | atSplitoff _ Sales Value | Added costs % [76.000 25,000 P1200 |” P9000 | [4,000 41,000 [45,000 7,000 Z~ [2.000 24,000 32,000 8,000 Joint costs are allocated to the products in proportion to the relative physical volume of output. For units of Z, the unit production cost most relevant to a sell-or-process-further decision, a PS P4 b 12 9 41. Stella Corporation manufactures products Rand S from a joint process. Additional information is as follows P2-CAPRACTICAL ACCOUNTING PROBLEMS II 42, 43 45. (Units proauced “Joint costs y Sales value al spli-off ‘Assuming that joint costs are allocated on the basis of relative-sales-value at split -off for product S? a, P72,000 © P_ 98,000 b, 82,000 100,000 Jonathan Co. manufactures products N. P. and R from a joint process. The foltowing information is available N Units produced 6,000 | Sales value at spit-ot hart Joint costs 24,000" Sales vale processed er | P 55.000 | Pas.o00 | P20 processed furher [P3000 |P 7,000-|F Assuming that joint product costs, are allocated using the relative-sales-value at spii-off approach, what was the sales value at split off for product N? a, P33,000 ©. P 46,000 b, 40,000 d 50,000 ‘The following information pertains to a by-product called Moy Sales in 2003 5,000 units. Selling price per unt. Pe Selling costs per unit 2 Processing costs 0 Inventory of Moy was recorded at net realizable value when produced in 2002. No units, ‘of Moy were produced in 2003, What amount should be recognized as profit on Moy's 2003 sales? ae Ped . P 20,900 b. 10,000 d, 30,000, Kode Co. manufactures a major product that gives ‘ise to by-product called May. May's: only separable cost is a P1 selling cost when a unit is sold for P4. Kode accounts for May's sales by deducting the P3 net amount from the cost of goods sold: of the major product. There are no inventories. if Kode were to change its method of accounting for May from a by-product to a joint product, what would be the effect on Kode’s overall (gross margin? No effect Gross margin increases by P1 for each unit of May sold. Gross margin increases by P3 for each unit of May sold Gross margin increases by P4 for each unit of May sold Jasmin Co. manufactures product J and K from a joint process. For Product J, 4,000 Units were’ produced having a sales value at split-off of P15.000._ If product J were ‘processed further the additional costs would be P3,000 and the sales value would be 20,000, For Product K, 2,000 units were produced having a sales value at split-off 10,000. If product K was processed further, the additional cost would be P1,000 and the sales value would be P12,000, Using the sales-relative-value at split-off approach the portion of the total joint product costs allocated to product J was P9.000. What were the total joint product costs? a 14,400 ©. 18,400 b. 15,000 6. 19,000 ; P2-CAPRACTICAL ACCOUNTING PROBLEMS II page 12 46. Andy Co. manufactures N, P and R from a joint process. The following information is 47. 48. 49, available | Units produced f zo Sales value at spiit-off 48,000 Sales value if processed further 110,000 ‘Additional costs if processed | 18,000 ‘Assuming that joint product costs aré allocated using the sales-relative value at spli-off approach, what was the sales value. at split-off for product N and P? Product Product P a P66,000 P-84,000 b. 80,000 70,000 c. — 98,000 84,000 d. 100,000 50,000 ‘Superior Co. manufactures A and B from a joint process, which also yields a by-product, X. Superior accounts for the revenues from its by-product sales as a deduction from the Cost of goods sold of iis main products, Additional information is as a follows oducts [eee sp abit) x A] “voted Units produced | 15,000 | 9,000 _|'6.000 | 30,000 | Soint costs 2 2 2 84,000 | Sales value at spia-off | P290,000_| P150,000"| P¥0,000| 450,000 ‘Aésuming that joint product costs are allocated using the relative-sales-value’ at spit-off ‘approach, what was the joint cost allocated to product B? ‘a P79,200 ‘. P80,000 b. 88,000 4. 99,000 Lite Go, manufactures products X and Y from a joint process that also yields a by- product, Z. Revenue from sales Of Z is treated as a reduction of joint costs. Additional Information Is as follows vas Products Bee eons 20,000 | 20,000 | 10,000 | Sale vate a spon” TP300000 TP 150,000 10,000" [aso 000 | Joint costs were allocated using the sales value at spli-off approach. The joint costs allocated to product X were: a, P 75,000 © P 150,000 b. 100,000 d. 168,000 Mig Company began operations in 2003, produces gasoline and a gasoline by-product, The following information is available pertaining to 2003 sales and production: Total production costs to Spiit-off point. P 120,000 Gasoline sales. 270,000 By-product sales. 30,000 Gasoline inventory, 12/31/2003. 15,000 Additional by-product costs: Marketing, P 10,000 Production 15,000 ‘Mig accounts for the by-product ssales for gasoline and by-product? the time of production. What is Mig’s 2003 cost of Gasoline By-product Gasoline By-product a. P105,000 P 25,000 ©, P108,000 P.37,000 b. 115,000 0 . 100,000 9 P2-CAPRACTICAL ACCOUNTING PROBLEMS IT page 13 50, A cheese company produces natural cheese from cow's milk. As a result of the process, a secondary product, Whey is produced in the proportion of one pound for each pound of cheese. The following are the standards for 1,000 pounds of mik: Input: 1,000 pounds of milk at P.20/pound 40 hours of labor at P1Q/hour Overtiead applied equaling 100% of direct labor cost Output: 450 pounds of Cheese 450 pounds of Whey, ‘The following prices and demand are expected Price per Pound . Demand in Pounds Cheese P 2.00 450) Whey 80 375 Given that the company allocates common costs on the basis of NRV's, the allocated ‘common costs per 1,000 pounds of milk (rounded) are Cheese ‘Whey a R450 F150 b, 500 500 c 714 286 4 750 250 51. A company processes. @ raw material into products F1, F2, and F3. Each ton of raw ‘material produces five units of F1, two units of F2, and three units of F3. Joint processing costs to the split-off point are P15 per ton. Further processing results in the following per unit figures. Fae et 2) Ee Additional processing costs per unit P28 P30 P25 Selling price per unit Sai, a5 hiss: If joint cdsts are allocated based on the net realizable value of finished product, what proportion of joint costs should be allocated to F1? a, 20% © 33 13% b. 30% 4. 50% Items.52 and 53 are based on the following information: Petro-Chem, Inc. is a small company that acquires high grade crude-oil from low-volume production wells owned by individuals and small partnerships. The crude oil is processed in a single refinery into Two Oil, Six Oil, and impure distillates, Petro-Chem does not have the technology or capacity to process these products further and sells most of its output ‘each month to major refineries, There were ho beginning inventories of finished goods or in-process on November 1. The production costs and output of Petro-Chem for November are as follows: Crude oil acquired and placed in production, P 5,000,000 Direct labor and related costs. 2,000,000 Factory overhead. 3,000,000 Production and sales, “Two Oil, 300,000 barrels produced; 80,000 barrels sold at P20 each. *Six Oil, 240,000 barrels produced; 120,000 barrels sold at P30 each, *Distilates, 120,000 barrels produced and sold at P15 per barrel 52. The portion of the joint production costs assigned to Six Oil based on physical output would be: a, P3,636,000 ¢. P1,818,000 b, 3,750,000 4. 4,800,000 53. The portion of the joint production costs assigned to Two Oil based upon the relative sales value of output would be: a, P4,800,000 ‘¢, P2,286,000 b. 4,000,000 6. 2,500,000 P2-CAPRACTICAL ACCOUNTING PROBLEMS II page 14 Items 54 through 58 are based on the following information: Items 59.and 60 are based on the following informatio Allas Foods produces three supplemental food products simultaneously through a refining process costing P93,000, ‘ The joint products, Alfa and Betters, have a final selling price of P4 per pound and P10 per pound respectively, after-additional processing costs of P2 per pound of each product are incurred alter the split-off point. Morefeed, a by-product, Is sold at the split-off point for P3 per pound, Alfa: 10,000 pounds of Alfa, a popular but relatively rare grain supplement having a caloric value 4,400 calories per pound Betters: 5,000 pounds of Betters, a flavoring material high in carbohydrates with a calone value of 11;200 calories per pound, Morefeed: 1,000 pounds of Morefeed, used as a cattle feed supplement with a caloric value of 1,000 calories per pound. 54. Assuming that Atlas Foods inventories Morefeed, the by-product (with joint costs allocated), the joint costs to be allocated to Alfa using the net realizable value method is: a. P_ 3,000 ©. P-31,000 b. 30,000 6. 60,000 55, Assuming Atlas Foods inventories Morefeed, the by-product (with joint costs allocated), the joint cost allocated to Alfa, using the physical quantity method is: a.P_ 3,000 ©. P-31,000 b. 30,000 4, 60,000 ‘56. Assuming Allas Foods inventories Morefeed, the by-product (with joint costs allocated) to Betters using the weighted quantity method based on caloric value per pound is: a P-39,208 ©, P50,400 b. 39,600 4. 52,080 57. Assuming Atlas Foods inventories Moreleed. the by-product (with joint costs allocated), the joint costs to be allocated to Alfa, using the gross market value method is: a P 36,000 oc PA 3% b. 40,000 4. 50,000 58. Assuming Atlas Foods does no adjust the joint costs for the value of Morefeed, the by- product, the joint costs to be allocated to Betters using the net realizable value {s’ ‘a, P30,000 . P52,080 b, 31,000 d. 62,000 Emma Corporation, which manufactures a product that gives rised to a by-product called “Zata’. The only cast associated with Zafa is selling cost of P1 for each unit sold, Emma accounts for Zafa sales first by deducting the net amount from costs of sales of the major product. This year 1,000 units of Zafa were sold at P4 each 59, if Emma changes its method of accounting for Zafa sales by showing the net amount as additional sales revenue, Emma's gross margin would a, be unaffected cc. decrease by P3,000 b. increase by P3,000 d. increase by P4,000 60. if Emma changes its method of accounting for Zafa sales by showing the net amount as "Other Income”, Emma's gross margin would a. be unaffected c, decrease by P3,000 b. increase by P3,000 d. decrease by 4,000 P2-CAPRACTICAL ACCOUNTING PROBLEMS II page 15 ‘Standard Costing ne 61, Malou Co. uses a standard cost system, Information for raw materials for product RBI for the month of October is as follows andard unit price ‘Actual purchase price p | Aetual quantity purchase ‘Actual quantity used ‘Standard quantity allowed for actual productio What is the material purchase price vanance? 2 P 80 favorable eds (igs \c6) 200 DBO untyorabte @ 100 favorabe = 10F d= 100 unfavorable: = Items 62 through 64 are based on the following information: The data below relate to the month of April 2003 for Marilyn, Inc., which uses a standard system. id hours allowed for good Gulput rect labor rate variance-debit Cader, Ongevereti”) Actual total overhead | Budgeted fixed costs a *Normal’ activity in hours 42,000 = 1400 det | Total oveiead appeation ate per standard aeetiabir ) 226 | hour (aw-ce) AW 2 (vai) Mowe | ed ‘Marilyn uses a two- way analysis of overhead variances: budget (controllable) and volume A 62. What was Marilyn's direct labor usage (efficiency) vanance for Apri! 2003? a, P3,000 favorable © P3,200 favorable mkck ena b. 3,000 unfavorable , 3,200 unfavorable REED CRE TELA AB & 63, What was Mariyn's budget (contllabe) vaiance for Apr 20037. Etoag st — Yenes a, P 500 favorable . P2,250 favorable re F b, 500 unfavorable d, 2250untavorable | y ¥ Ce " pace ‘33466 64. What was Marilyn's volume for Apri 20037 a. P'500 favorable © P2,250 favorable b, 500 unfavorable 4G. 2,250 unfavorable c 65. Home Co. manufactures tables with vinyl tops. The standard materials cost for the viny! sed per Type-R table is P7 80 based on six square feet of vinyl at a cost of P1.30 per square foot. A production run of 1,000 tables in January 2003 resulted in usage of 6.400 square feet of vinyl al a cost of at a cost of P'1.20 per square foot, a total cost of P7,680. ‘The usage variance resulting {rom the above production run was - a. P120 favorable b. 480 unfavorable c. $20 unfavorable d, 640 favorable 66. Durable Company installs shingle roofs on a residential house. The standard material cost for a type R house is P1,250 based on 1,000 units at a cost of P1.25 éach. During April 2003 Durable installed roofs on 20 Type R houses, using 22,000 units of material at ‘a cost of P1 20 per unit, and a total cost of P26,400. Durables material price variance for ‘April 2003 fs a. P1,000 favorable b. 1,100 favorable 1,400 unfavorable d. 2,500 unfavorableD PRACTICAL ACCOUNTING PROBLEMS II 67. Information on Material Company's direct-material costs is as follows: Standard price unt of dire materiais Direcl-material ‘What were Material's direct-materials price vanance? a, P1,000 favorable b. 1,000 untavorabie 4, "Slanidard unit price" [Actual quantity purchased {or actual production * ‘What was the actual purchase price per unit, round to the nearest centavo? />— a.P 3.06 batt ©. P3.45, a 3.75 © P-2,000 favorable 2,000 unfavorable nee Us 3.00) xem = 240 F 89. Each finished unit of Product DX-25 contains 60 pounds of raw material. The manufacturing process must provide for a 20% waste allowance. The raw material can be purchased for P2.50 a pound under terms of 2/10, 9/20. The company takes all cash discounts. The standard direct material cost for each unit of DX-25 is: a. P180,00 © P183.75 b. 187.50 4. 176.40 70. Lilla corporation uses a standard cost system. Direct \abor information for Product CER for the month of October is as follows: Standard rate n | Directtabor rate variance-unfaverabie Total payroll What was Luz’s direct-labor efficiency vaniance? a. P-6,000 favorable ©. P'6,300 favorable 6,150 favorable 4d. 6,450 favorable (0-1) 6 = cap ur 1608 Lev= (20K-2e) 72. Each unit of Product XK-46 requires 3 direct labor hours. Employee benefit costs are treated as direct labor costs, Data on direct iabor are as follows ‘Number of direct employees ‘Weekly productive hours per employee Estimated weekly wages per employee. Employee benefits (related to weekly wages) ‘The standard per direct labor cost per unit of Product XK-48 is a. P21.00 c. P29.40, b 26.25 d. 36.75 25 35 P2465 25%PRACTICAL ACCOUNTING PROBLEMS II page 17. Items 73 and 74 are based on the following data: Beth Company which has budgeted fixed factory overhead costs of P50,000 per month ‘and a variable factory overhead rate of P4 per direct labor hour. The standard direct labor hours allowed for October production were 18,000. An analysis of the factory overhead indicates, that, in Oclober, Beth had an unfavorable budget (controllable) variance of P1,000 and a favorable volume variance of P500. Beth uses a two-way analysis of overhead variances: 73. The actual factory overhead incurred in October is a. P121,000 ©. P122,500 b. 122,000 4) 123,000 74 Beth's applied factory overhead in October is: a. P121,000 © P122,500 b. 122,000 3. 123,000 75. Baxter Corporation’ master. budget calls for the production of 5,000 units of product monthly. The master budget includes indirect labor of P144,000 annually; Baxter ‘considers indirect labor to be a variable cost, Ouring the month of April, 4,500 units of product were produced, and indirect labor costs of P10,100 were incurred. A performarice report utilizing flexible budgeting would report a budget (controllable) variance for indirect labor of a. P1,900 unfavorable ©. P1,900 favorable b. 700 favorable 4, 700 unfavorable 76. Air, inc. uses a standard cost system. Overtiead cost information for Product CO for the month of October 1s as follows Total actual overtiead incurred. P 12,600 Fixed overtiead budgeted P 3,300 Total standard overhead rate per OLH. Pawo Variable overead rate per DLH 3 Standard hours allowed for actual production, 3,800 What is the overall or net overhead variance? ‘a, P1,200 favorable .P1,400 favorable b. 1,200 untavorable d_ 1,000 unfavorable 77. in connection with a standard cost system being developed by Flint Co., the following information is being considered with regard to standard hours allowed for output of one unit of product: i core a | \ Hours = ‘Average historical performance for the past 3 years 185: | F Production level to satisfy average consumer demand over __a seasonal time span “Engineering estimates based on attainable performance | Engineering estimates based on ideal performance, To measure controllable production inefficiencies, what is the best basis for Flint to use in establishing standard hours allowed? a 1.25 1.60 b. 1.50 0.1.85 78. Dahl Co. uses a standard costing system in connection with the manufacture of a ‘one size fits al” article of clothing Each unit of finished product contains 2 yards of direct material. However, a 20% direct material spoilage calculated on input quantities occurs during the manufacturing process, The cost of the direct material is P3 per yard. The standard direct material cost per unit of finished product is: a P4.80 ©. P7.20 P2-CA b 600 4. 750PRACTICAL ACCOUNTING PROBLEMS IT page 18 79. The following direct manufacturing labor information pertains to the manufacture of product Glu: ime required fo make one uit Number of direct workers Number of productive hours per week, per worker [ Weekly wages per worker as direct manufacturing labor | Worker's benefits treat costs What is the standard direct manufacturing labor cost per unit of products Glu? a. P30 P15 bv, 24 4, 12 80. The following were among Gage Cos 2003 costs: (Normal spoilage : Freight out i . [Excess of actual manufacturing costs over standard costs "Standard manufactunng costs ‘Actual prime manufacturing costs Gage's 2003 actual manufacturing overhead was a. P 40,000 cP 55,000 b 45,000 @. 120,000 81, Peters Company uses a flexible budgel system and prepared the following information ‘forthe year: **[Bercent of eapacty en [Direct labor hours i | Variable factory overhead | . pet factory overhead _ i P 108,000 I Total P650 } Pelers operated at 80% of capacity during the year but applied factory overhead based ‘on the 90% capacity level. Assuming that actual factory overhead was equal to the budgeted amount for the attained capacity, what is the amount of overhead variance for the year? a, P8,000 overabsorbed ¢. 12,000 overabsorbed b. 6.000 underabsorbed . 12,000 underabsorbed 82. Simson Company's master budget shows straight-line depreciation on. factory ‘equipment of P258,000. The master budget was prepared at an annual production volume of 103,200 units of product. This production volume is expected to occur uniformly throughout the year. Dung September, Simson produced 8,170 units of product and the accounts reflected actual depreciation of on factory machinery of 20,500. Simson controls manufacturing costs with a flexible budget. The flexible budget amount for depreciation on factory machinery for September should be. a. P19,875 c. P20,500 b. 20,425 4. 21,500 ACTIVITY-BASED COSTING 83. Cadolt Manufacturing produces three products. Production and cost information show thefollowing: _ModelX | “Model ] ee os 000 | 3,000 2,000 7,000. 207} 30 Inspection costs totaled P50,000. Using direct labor hours as the allocation base, inspections costs allocated 10 each unit of Model X would be: a P 5.00 c. P20,00. b. 10.00 d. Some other answer Answer: ¢ ~ P50,000 x (2,000/5,000) = P20,000 / 1,000 units = aePRACTICAL ACCOUNTING PROBLEMS II page 19 84, Cadott Manufacturing produces three products. Production and cost information show the following Model x Model Y Model 2 Units produced 4,000 3,000 6,000 Direct labor hours 2,000 + 4,000 2,000 ‘Number of inspections 20 30 50, Inspection costs totaled 50,000. Using ABC, inspections costs allocated to each unit Model ¥ would be: a P 3.33 b. P5.00 6. P10.00 d_ Some other answer ‘Answer: b ~ P50,000 x (30/100) = P15,000 / 3,000 units = PS. 85. Genco manufactures two yersions of a product. Production and cost information show the following: Model A Model 8 Units produced 100) 200 Material moves 10 40 Direct labor hours per unit 1 3 Material handling costs total P100,000. Direct labor hours are used to allocate ‘overhead costs. The material handling costs allocated to each unit of Mode! A would be a P143 b.P200 ©. P333 4d. Some other answer 100,000 /{(100 x 4) + (200 x 3)] = P143. 86. Genco manufactures two versions of a product. Production and cost information show the following ‘Model A Model B Units produced : 100 200 Material moves 10 40 Direct labor hours per unit 1 2 Material handling costs total P100,000. Under ABC. the matenal handling costs allocated to each unit Model B would be: a. P200 b.P333 c. R400 d. Some other answer ‘Answer: c - P100,000 x 40/50 = P80,000 / 200 = P400. 87. Waupaca Company produces three products with the following production and cost information ModelA ModelB Model Units produced 2,000 6000 12,000 Direct labor hours (total) 4,000 2,000 4,000 Number of setups 400 150 250 Number of shipments 200 225 275 Engineering change orders 15 10 5 ‘Overhead costs include setups 45,000: shipping costs P70,000; and engineering costs 90,000, What would be the per unit overhead cost for Model B if activity-based ‘costing were used? a, P11,00 b, P33,00 ©. P61 50 d. Some other answer ‘Answer:-a — [(P45,000 x 150/500) / 6,000] + [(P70,000 x 225/700) / 6,000} + [(P90,000 x 10/30) / 6,000] = P11.00 88. Kimball Company produces two products in a single factory. The following production and cost information has been determined Model 1 Model 2 Unit produced 10,000 000 Material moves (total) 100 40 Testing time (total) 250 125 Direct labor hours per unit 1 2 ‘The controller has determined total overtiead to be P480,000, 120,000 relates to ‘material moves; P150,000 relates to testing; the remainder is related to labor time. If Kimball uses direct labor hours to’ allocate overhead to each model, what would ‘overhead per unit be for Model 1? a P 1,00 12.00 c. P24.00 . P40.00 ‘Answer: ¢ ~ P480,000 /[(10,000 x 1) + (2,000 x 5)] = P24. 89. Kimball Company produces two products in a single factory. The following production ‘and coast information has been determined Model 1 Model Units produced 10,000 2,000 Material moves (total) 100 40 Testing time (total) 250 125 Direct labor hours per unit 1 5 The controller has determined total overhead to be P480,000. P140,000 relates to material moves; P150,000 relates to testing; the remainder is related to labor time. 2-CAPRACTICAL ACCOUNTING PROBLEMS IT page 20 if Kimball uses activity-based Costing to allocate overhead to each model, what would ‘overhead per unit be for Model 1? a. P4000 b, P29.50 , P24.00 4. P12.00 Answer: b - [P140,000 x (100/140)] / 10,000 + [P150,000 x (250/375)} / 10,000 + {(P480,000 — P140,000 ~ P150,000) x (10,000 x 1) + (2,000 x 5)} = P29.50, 90. Superior inc: produces three products. Production and cost information is as follows: Mode! Q ModelR — Model S Units produced 2,000 6,000 12,000 Direct labor hours 4,000 2,000 4,000 ‘Number of setups. 100 150 250 THE CONSUMPTION RATIOS FOR NUMBER OF SETUPS WOULD BE: QR _ S_ a. 40%-20%-40% D. 20%-30%-50%, ©. 109%-30%-60% d. Some other numbers Answer: b ~ Q= 100 /(100 + 150 + 250) ; R= 150/500; $ = 250/500 91. Superior Inc. produces three products, Production and cost information is as follows: Model Model RR Model S Units produced 2,000 6,000 12,000 Direct labor hours 4.000 2,000 4,000 Number of setups, 100 150 250 The consumplién ratios’based on units produced would be Q Rs. Q RS a. 40%-20%-40% ©..10%-30%-60% Dd. 20%-30%-50% d. Some other answer Answer: ¢ — Q = 2,000 / (2,000+6,000+12,000); R = 6,000/20,000; S = . 12,000/20,000 Factory Overhead Allocation / Service Department Cost Allocation: tems 92 ~ 93 are based on the based on the following data: Sinclair company has two departments (A and B) and two producing departments (X and Y) Data provided | Service Departments | Operating Depariments 2 eee ee re or rs P 150 P300 { } vices performed by Dept. A | [540 [0% 20%] ; Dept. B 220% 70% 10% 92. Sinclair used the direct method fo allocate service depariment costs. The service department cost allocated to Department ¥ is a: P50 b.P6O cP 87.50 d. P150.00 Answer: ¢-[P150 x 20// (20 + 40)] + [P300 x 10 /(70 + 10) = P87.50 93. Sinclair uses the step-down method to allocate service department costs, Department A costs are allocated first. The service department cost allocated to Department Y is: a, P6O b. P66 © P75.00 . P87.50 ‘Answer: ¢— P75 94, department cost allocated to Department ¥ is a. P60 b.P75 + oP 85 J. P138,00 Answer: ¢ - P85. The equation would be: A = P150+ 208, B=P300+ 404 Using equation A: A= P150 + 20(P300 + 408) 210 + 08h 92A=P210 A= 226.26 i B=P300 + 40(P278 26) = P36 30 nino pitas A BX $50.00 (228.26) | 91.30) 97.30) 45.65) 78.26 | (394,20) | 273.91 | 39.43 2478 P2-CA Allocated cost toReSA The Review School of Accountancy R. Papa Cor. S.H. Loyola Sts,, Sampatoc, Manila PRACTICAL ACCOUNTING PROBLEMS II Answers to Multiple Choice — ‘COST ACCOUNTING (AICPA/CMA/CIA Adapted) SOLUTIONS iA 4.0 TA 20 5c BA 3A 60 ae 10. A (overtime premium and late-shitt differentials are included in the factory overhead) 4A 2c 413, C (P20,000 x .4/,8=P 10,000) Note: Allocation is DIRECTLY made io the service dept 14, D(P9,000 x 61.9) 18,0 18C 180 20.0 2.0 24.0 2B 26.8 1A | 18.0 21.8 2.0 25.8 7c 2B 30.¢ 31. GIP, end: 3,000xP.61P 1,530 (P20,400740,000=P 51) 32, B: UCPD: P12,000+28.900 =P 2.05 20,000 ucTo M'P2,500%P5,500 = 40 20,000 EP CC.21,000+P5,000 =___36 18,000EP 218 33. A’ $,000x(P.24+P.20)=P 39,600 ‘ IP, end cPo Po CTD IEP) M; 10,000x P.24 2.400 CG: 5,000x P20 1.000 400 34. G: IP.end: CC; 3,000x P1.30 = 39,000 (P143,000/110.000=P1.30) 95. UCTD.__{P10.000+P75,500) (7.000+(2,500x.8)+(5,000x1}= P 9,000 ‘NUu: (P9x500) 7,000 completed 9.642 P 9,642 11.000, P.67,300 36.0 37.¢ 38. 39.C 40. C. In decision-making, joint costs’ is irrelevant, what is relevant is the ad processing cost of 8,000 (PB,000/2,000=P4) 41. A (P126,000 ~ P26,000 ~ 28,000) 42.8 43. A. Because the inventory of by-product Moy was recorded at its net realizable value of 20,000 ((P6 ~ P2) x 6,000) when produced in 2000, no profit will be recognized in 2001 When the units of Moy were sold in 2001, the proceeds equaled the inventory cost plus disposal costs, resuiting in P -0- profit for 2001 44, B. The difference between treating ihe product named "May’, as a joint product versus @ by- product would be under by-product treatment, the seling cost 's netted against May's selling price thus reducing gross margin whereas under joint-product accounting, the selling cost would be deducting below the gross margin line as a selling expense. Thus, if the change to joint-product accounting were made, gross margin would increase. P2-CA-ANSWERScontinuation of Answers to Multiple Choice in Cost Accounting. 45.8 47.6 46.8 48.0 49. D. The requirement is to find the cost of sales for both gasoline and the gasoline by-product The value of the by-products may be recognized at two points in time: (1) at the time of production, or (2) at the time of stale. Under the production method (as given in the problem), the net realizable value of the by-products produced Is deducted from the cost of the major products produced. The net realizable value of the by-product is as follows: ‘Sales value of by-product. 'P-30,000 Less: Separable costs (10,000 + 18,000) 28.000 Net 5.000 Therefore, the cost of sales for gasoline is calculated as follows: Total production (joint) costs. sae ns P'120,000 Less: NRV of by-product. 5,000 ‘Net production cost. P115,000 Less: Costs in 12/31/2001 inventory... 15.000 Cost of sales... P100,000 50. D (Note: The 450 output of Cheese and Whey are stan dards not the actual production. ‘The actual production refers to the demand ) SLA S2A 548 56C 58D 60C 62A 64C 668 53.8 55.0 57.8 582A 61.6 638 65.C 67.C 68.¢ 69.¢ Finished goods (net) 60 ibs Divided by: %, net of waste allowance. 80% Finished goods (gross) 75 Ibs. Multiplied by: Purchase Price B25 Purchase Price (Gross)... P167.50 Multiplied by: Net of discount. 98% Purchase Price (net) standard price. PiB3. 780) 70.0 71.8 72.8 Weekly wages. Plus: benefits (25% x P245) Divided by: Hours per week Cost per Direct Labor hours. ‘Muttiplied by: DLH per unit, Unit Direct Labor Cost 73.0 74.¢ 75.8 76.6 ‘77. B. Standard costs are scientifically predetermined costs which should be attainable under efficient conditions. Currently attainable standards siould be achieved under efficient operating conditions. Therefore, engineering estimates based on attainable performance would provide the best basis for Flint in establishing standard hours allowed, and answer (b) is correct. 78. D. Each unit of finished product contains 2 yards of direct material. However, the problem states that the 20% direct material spoilage is calculated on the quantity of direct material input. Although not mentioned, the facts in this question infer that the spoilage is normal and should be part of the product's standard cost. The solutions approach would .2e to set up the following formula: Input quantity - Spoilage = Output amount oe : 2x 2 yards aX 2 yards x = 2.5 yards ‘Thus, the standard direct material cost per unit of finished product is P7 60 (2.6 yards x P3) 79.4, Weekly wages per worker. 500 ‘Add: Benefits treated as DL. Cost (20% x P500) —100 ‘Total DL. cost per week per worker. F600 Divided by: Hours per week __49 DL cost per hour... P45 Multiplied by: Hours required for each unit 2 2 Standard direct labor cost per unit... 2 a0.a) 80.4 81.0 82.0 P2-CR — ANSWERS