CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING GERMAN/LIM/VALIX/K. DELA CRUZ/MARASIGAN

JOB ORDER COSTING

Part I: THEORIES

1. In a normal costing system, a debit to Work in Process would not be made for
a. actual overhead
b. applied overhead
c. actual direct material
d. actual direct labor

2. Which of the following are the characteristics of job order costing?

a. homogeneous products and large quantities
b. homogeneous products and small quantities
c. heterogeneous products and large quantities
d. heterogeneous products and small quantities

3. A credit to Work in Process Inventory represents

a. work still in process
b. raw material put into production
c. the application of overhead into production
d. the transfer of completed goods to Finished Goods Inventory

4. Which of the following journal entries records the accrual of the cost of indirect labor used in production?
a. debit Work in process inventory credit Wages payable
b. debit Work in process inventory credit Manufacturing overhead control
c. debit Manufacturing overhead control credit Wages payable
d. debit Manufacturing overhead control credit Work in process inventory

5. In a job order costing system, the net cost of normal spoilage is equal to
a. estimated disposal value plus the cost of spoiled work
b. the cost of spoiled work minus the estimated disposal value
c. the cost of spoiled work minus the estimated spoilage cost
d. the units of spoiled multiplied by the predetermined overhead rate

6. The net cost of normal spoilage in a job order costing system in which spoilage is common to all
jobs should be
a. assigned directly to the jobs that caused the spoilage
b. charged to manufacturing overhead control during the period of spoilage
c. charged to loss account during the period of spoilage
d. allocated only to jobs that are completed during the period

7. The rework cost in a job order costing system in which the defective goods are charged to a specific
job should be
a. treated as expense immediately
b. charged to manufacturing overhead control
c. capitalized to the particular job as an additional cost in the work in process
d. ignored
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8. Which of the following statements concerning scrap in a job-order costing is correct?

a. If the scrap is insignificant, the realizable value of scrap is recognized as revenue at the time it
is sold.
b. If the scrap is insignificant but traceable to the job that yielded the scrap, the net realizable
value of scrap shall be recorded as a deduction from cost of that specific product.
c. If the scrap is insignificant but common to all jobs, the net realizable value of scrap shall be
credited to manufacturing overhead control.
d. All of the above.

Part II: PROBLEMS

1. Triple V Company uses a job-order costing system and the following information is available from
its records. The company has three jobs in process: #1, #2, and #3.

Raw material used P260,000

Direct labor per hour P19.00
Overhead applied based on direct labor cost 125%

Of the raw materials used, total of 85% were traceable to the specific jobs (Job #1: 25%; Job #2:
30%; Job #3: 30%) and the balance of the requisitions was considered indirect. Direct labor hours
per job are 2,800; 3,300; and 4,000; respectively. Indirect labor is P90,000. Other actual overhead
costs totaled P100,000.

1. Assuming all of the jobs were completed and the company used actual costing, what is the
total cost of goods manufactured?
a. 641,900
b. 602,900
c. 512,900
d. 652,775

2. Assuming only Jobs No. 2 and 3 were completed and sold, what is the cost of goods sold at
year end?
a. 523,700
b. 468,075
c. 484,700
d. 394,700

3. What is the under (DR) or over (CR) applied overhead?

a. 10,875 CR
b. 49,875 CR
c. 139,875 CR
d. 55,625 DR

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2. Triple A Company uses a job-order costing system. At the beginning of January, the company had
two jobs in process with the following costs:
Direct Material Direct Labor Overhead
Job 001 P3,400 P510 P255
Job 002 1,100 289 ?
Triple A pays its workers P8.50 per hour and applies overhead on a direct labor hour basis.

1. What is the overhead application rate per direct labor hour?

a. 0.50
b. 2.00
c. 4.25
d. 30.00

2. How much overhead was included in the cost of Job 002 at the beginning of January?
a. 144.50
b. 153.00
c. 2,200.00
d. 2,456.50

3. During January, Triple A’s employees worked on Job 003. P714 of overhead had been
applied to this job. Total manufacturing cost was P6,800 including the total cost of all
other jobs in the amount of P3,981. What amount of direct material is included in Job
003?
a. 677
b. 1,391
c. 2,142
d. 4,658

3. Benz Manufacturing was a company engaging in manufacturing car parts. During this year, Benz
Manufacturing made 30,000 units of clutch kits. However after further inspection, it was
determined that 4% of the units made were spoiled. These spoiled units can be sold at P150 each.

The following were the total cost of the 30,000 clutch kits:
Direct materials P2,760,000
Direct labor (P140 per direct labor hour) P840,000
Applied overhead
P1,800,000
(300 per direct labor hour inclusive of P50 allowance for spoiled work)

1. Assume that the spoiled goods were due to internal failure, what is the cost transferred to
finish goods at the end of the year?
a. 5,400,000
b. 5,100,000
c. 5,184,000
d. 5,220,000

2. Assume that the spoiled goods were due to exacting specifications, what is the cost per
good unit at the end of the year?
a. 170.00
b. 170.83
c. 180.00
d. 181.25

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4. KW Inc. manufactured coil over springs for cars. During this year, KW Inc. manufactured 200 units
coil over springs. After final inspection, it was determined that 15 units were defective. The cost
per unit to rework the defective units were the following: P100 for direct materials, P160 for direct
labor and the appropriate factory overhead rate.

The following were the unit cost for the 200 coil over springs:

Direct materials P800

Direct labor P350
Applied overhead 160% of direct labor cost
(150% in case defective units were charged to specific order)

1. Assume that the defective goods were charged to all jobs, what is the cost transferred to
finish goods at the end of the year?
a. 342,000
b. 335,000
c. 349,740
d. 342,500

2. Assume that the defective goods were due to specific job, what is the unit cost of each good
unit at the end of the year?
a. 1,710.00
b. 1,675.00
c. 1,851.35
d. 1,712.50

5. RWB was a company specializing in aftermarket bodykits for cars. During the year RWB produced
1,500 units of bodykits. After final inspection, it was determined that 150 units were spoiled and 50
units were defective, but can be reworked. the following were the cost of the 1,500 units of
bodykits produced:

Direct materials P4,650,000

Direct labor P1,200,000
Applied overhead (based on direct labor cost) P2,400,000

The spoiled units can be sold for P1,200 each and the unit cost for reworking each defective unit
were P1,200 for direct materials, P500 for direct labor and the appropriate applied overhead.

1. Assume that the spoiled and defective goods were charged to all jobs, what is the unit cost
of each good unit at the end of the year?
a. 5,711.54
b. 5,500.00
c. 5,977.78
d. 5,600.00

2. Assume that the spoiled and defective goods were exacting specification, what is the unit
cost of each good unit at the end of the year?
a. 5,500.00
b. 6,311.54
c. 6,077.78
d. 6,211.11

END
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