ACYCST 2 COST ACCOUNTING PART 2

MOCK COMPREHENSIVE EXAMINATION

February 14/15, 2022
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I. MULTIPLE CHOICE THEORIES (1 point each)

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

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

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

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

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

6. Unacceptable units of production that are subsequently repaired and sold as acceptable finished goods are
a. reworked units c. scrap
b. spoilage d. defective units

7. Material left over when making a product is referred to as

a. reworked units c. scrap
b. spoilage d. defective units

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

9. Costs of abnormal spoilage are usually accounted for as

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

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

11. What type of cost is the result of an event that results in more than one product or service simultaneously?
a. By-product cost c. Main cost
b. Joint cost d. Separable cost

12. By-products and main products are differentiated by

a. number of units per processing period c. the amount of sales value per unit
b. weight or volume of outputs per period d. none of the above

13. Which of the following methods of allocating costs use market-based data?
a. Sales value at split-off method c. Constant gross-margin percentage method
b. Net realizable value method d. All of the above use market-based methods

14. Products with a relatively low sales value are known as

a. scrap c. joint products
b. main products d. by-products

15. Which method of accounting recognizes byproducts in the financial statements, specifically statement of
financial position, at the time their production is completed?
a. Production method c. Sale method
b. Production allocation method d. None of the above

16. An unfavorable variance indicates that

a. actual costs are less than budgeted costs
b. actual revenues exceed budgeted revenues
c. the actual amount decreased operating income relative to the budgeted amount
d. all of the above are true

17. The flexible budget contains

a. budgeted amounts for actual output c. actual costs for actual output
b. budgeted amounts for planned output d. actual costs for planned output

18. An unfavorable sales-volume variance could result from

a. decreased demand for the product
b. competitors taking market share
c. customer dissatisfaction with the product
d. all of the above

19. A favorable efficiency variance for direct manufacturing labor indicates that
a. a lower wage rate than planned was paid for direct labor
b. less direct manufacturing labor-hours were used during production than planned for actual output
c. a higher wage rate than planned was paid for direct labor
d. more direct manufacturing labor-hours were used during production than planned for actual output

20. In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are
a. allocated costs c. fixed costs
b. budgeted costs d. variable costs

21. A process costing system is used by a company that

a. accumulates costs by job.
b. produces homogeneous products.
c. produces heterogeneous products.
d. produces items by special request of customers.

22. Transferred-in cost represents the cost from

a. all prior departments. b. the current period only

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 c. the last department only. d. the last production cycle.

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

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

25. Normal spoilage units resulting from a continuous process

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

26. The cost of abnormal continuous losses is

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

27. If two or more products share a common process before they are separated, the joint costs should be assigned
in a manner that
a. maximizes total earnings
b. minimizes variations in unit production costs
c. assigns a proportionate amount of the total cost to each product on a quantitative basis
d. does not introduce an element of estimation into the process of accumulating costs for each product

28. Company Q produces three products from a joint process. The products can be sold at split-off or processed
further. In deciding whether to sell at split-off or process further, management should
a. ignore the joint cost in making the decision
b. allocate the joint cost to the products based on relative sales value prior to making the decision
c. allocate the joint cost to the products based on a physical quantity measure prior to making the decision
d. subtract the joint cost from the total sales value of the products before determining relative sales value
and making the decision

29. Which of the following is a primary reason for allocating joint costs?
a. cost justification and insurance settlement cost information requirements
b. cost justification and asset measurement
c. income measurement and rate regulation requirements
d. all of the above

30. For purposes of allocating joint costs to joint products using the relative sales value at split-off method, the costs
beyond split-off
a. do not affect the allocation of the joint costs.
b. are allocated in the same manner as the joint costs.
c. are deducted from the relative sales value at split-off.
d. are deducted from the sales value at the point of sale.

31. By-products are

a. also known as scrap
b. allocated a portion of joint production cost
c. the primary reason management undertook the production process

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 d. not sufficient alone, in terms of sales value, for management to justify undertaking the joint process

32. A product may be processed beyond the split-off point if management believes that
a. its marketability will not be enhanced.
b. the joint cost assigned to it is not already greater than its prospective selling price.
c. the incremental cost of further processing will be less than the incremental revenue of further
processing.
d. both a and c

33. Joint costs are allocated to joint products to

a. obtain a cost per unit for financial statement purposes
b. compute variances from expected costs for each joint product
c. provide accurate management information on production costs of each type of product
d. all of the above

34. Each of the following is a method to allocate joint costs except

a. average unit cost
b. relative sales value
c. relative net realizable value
d. relative weight, volume, or linear measure

35. A difference between standard costs used for cost control and budgeted costs can exist because
a. Standard costs must be determined after the budget is completed.
b. Establishing budgeted costs involves employee participation and standard costs do not.
c. Budgeted costs are historical costs while standard costs are based on engineering studies.
d. Standard costs represent what costs should be while budgeted costs represent expected actual costs.

36. The primary difference between a fixed (static) budget and a variable (flexible) budget is that a fixed budget
a. Cannot be changed after the period begins; while a variable budget can be changed after the period
begins.
b. Is a plan for a single level of sales (or other measure of activity); while a variable budget consists of
several plans, one for each of several levels of sales (or other measure of activity).
c. Includes only fixed costs; while variable budget includes only variable costs.
d. Is concerned only with future acquisitions of fixed assets; while a variable budget is concerned with
expenses that vary with sales.

37. The fixed overhead application rate is a function of a predetermined activity level. If standard hours allowed for
good output equal the predetermined activity level for a given period, the volume variance will be
a. Zero
b. Favorable
c. Unfavorable
d. either favorable or unfavorable, depending on the budgeted overhead

38. A favorable fixed overhead volume variance occurs if

a. There is a favorable labor efficiency c. production is less than planned
variance d. production is greater than planned
b. There is a favorable labor rate variance

39. The variance least significant for purposes of controlling costs is the
a. material quantity variance. c. fixed overhead spending variance.
b. fixed overhead volume variance. d. variable overhead efficiency variance.

40. Management scrutinizes variances because

a. It is desirable under conventional knowledge on good management.
b. Management needs to determine the benefits foregone by such variances.
c. Management desires to detect such variances to be able to plan for promotions.
d. Management recognizes the need to know why variances happen to be able to make corrective actions
and fairly reward good performers.

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Problem Solving (2 points each)

Use the following information for the next two items:

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

41. How many units were started during November?

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

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

43. Raichu Company’s direct material costs for the manufacture of product Pokeball wereas follows:

Actual unit purchase price P 8.50

Standard quantity allowed for actual production 4,900
Quantity purchased and used for actual production 5,000
Standard unit price 9.50

Material quantity variance was:

a. P 950 favorable c. P 850 favorable
b. P 950 unfavorable d. P 850 unfavorable

44. Bulbasaur Company uses a standard costing system in the manufacture of its single product. The 50,000 units
of raw material in inventory were purchased for P100,000, and three units of raw material are required to
produce one unit of final product. In November, the company produced 15,000 units of product. The standard
cost allowed for material was P67,500, and there was an unfavorable quantity variance of P4,500. The
materials price variance for the units used in November was
a. P 22,500 favorable c. P 24,000 favorable
b. P 22,500 unfavorable d. P 24,000 unfavorable

45. Ivysaur manufactures one product with a standard direct labor cost of three hours at P6.00 per hour. During
November, 800 units were produced using 2,300 hours at P6.50 per hour. The favorable direct labor efficiency
variance was:
a. P 0 b. P 600 c. P 650 d. P 1,150
Use the following information for the next two items:
Information on Venusaur Company’s overhead costs is as follows:

Standard applied overhead P 150,000

Budgeted overhead based on standard direct labors allowed 160,000
Budgeted overhead based on actual direct labors allowed 155,000
Actual overhead 175,000

46. What was the overhead spending variance?

a. P 10,000 unfavorable c. P 20,000 unfavorable
b. P 5,000 favorable d. P 25,000 unfavorable

47. What was the total overhead variance?

a. P 10,000 unfavorable c. P 20,000 unfavorable
b. P 5,000 favorable d. P 25,000 unfavorable

48. Charmander has a standard factory overhead rate of P15 per direct labor hour (P12 for variable factory
overhead and P3 for fixed factory overhead) based on 100% capacity of 50,000 direct labor hours. The
standard cost and the actual cost of factory overhead for the production of 10,000 during November were as
follows:

Standard: 45,000 hours at P15 P 675,000

Actual:Variable factory overhead 145,000
Fixed factory overhead 535,000
What was the amount of the factory overhead volume variance?
a. P 5,000 unfavorable c. P 15,000 unfavorable
b. P 15,000 favorable d. P 5,000 unfavorable

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49. Charmeleon Inc manufactures two products, Jessie and James, from a joint process. Production run costs
P75,000 and results in 1,550 units of Jessie and 850 units of James. Both products must be processed past the
split-off point, incurring separable cost for Jessie of P5 per unit and for James of P6 per unit. The market price
of Jessie is P50 and for James is P45.

How much is joint cost allocated to Jessie using the physical measures method?

a. P 26,562.50 c. P 50,215.98
b. P 48,437.50 d. P 24,784.02

50. Charizard has the following products: Product AHA sold for P8 a unit and Product NYE is sold for P12 a unit.
Each product can also be sold at the splitoff point. Product AHA can be sold for P5 and Product NYE for P4.
Joint costs for the two products totaled P4,000 for 600 units of AHA and 500 units of NYE. What are the
respective joint costs assigned each unit of products AHA and NYE if the sales value at split-off method is
used?
a. P2.96 and P4.44 c. P4.00 and P3.20
b. P4.00 and P4.55 d. P4.55 and P4.55
Use the following information for the next three items:
Squirtle Ltd. Produces joint products, Bubbles and Wiggle. The process also yields by-product Drip. Net
realizable value of by-product is treated using the production method. The following information pertains to
production in November 2017 at a joint cost of P525,000.
Product Units Produced Sales Value Additional cost after
split-off
Bubbles 1,500 P900,000 P10,000
Wiggle 250 125,000 15,000
Drip 250 45,000 20,000

51. If Squirtle uses the net realizable value method for allocating joint cost, how much of the joint cost should be
allocated to product Bubbles?
a. P439,024.39 c. P467,250.00
b. P445,000.00 d. P460,975.61

52. If Squirtle uses the constant margin percentage method for allocating joint cost, how much is the total
manufacturing cost for product Wiggle?
a. P49,024.39 c. P55,000.00
b. P70,000.00 d. P64,024.39

53. How much is the revenue to be recognized in profit and loss for the by-products assuming all units were sold
during the period?
a. P 0 c. P25,000
b. P45,000 d. P20,000
Use the following information for the next two items:
Wartortle Company manufactures chemical products through continuous process in different departments. Each
department has an independent cost accountant who prepares cost of production report. The company uses
FIFO costing method.

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

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

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

In this department, costs are applied as follows:

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

The below were costs incurred in November for Department 1:

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

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54. What is the equivalent units of production for materials?
a. 34,000 c. 41,000
b. 35,000 d. 42,000

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

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

56. Meowth Manufacturing add materials at the start of operations in Process A. The beginning inventory consisted
of 3,000 units with material cost of P100,000 and labor and overhead costs of P20,000. At the start of the
period, 22,000 units were started in process with material cost of P450,00. Conversion cost in the period
amounted to P280,000. As of the end of January, the inventory was 100% complete in materials but only 60%
in labor and overhead. The ending inventory consisted of 5,000 units. Using the weighted average method, the
equivalent units of production for conversion costs for the period was:
a. 22,000 b. 23,000 c. 20,000 d. 25,000

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

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

Units started during November 30,000

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

There were no beginning inventories.

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

Use the following information for the next two items:

Marowak Manufacturing Company has the following production information (in units) for November of the
current year:

Work in process, beginning (10% complete) 3,500

Started 10,000
Work in process, ending (90% complete) 2,000

Marowak uses two kinds of materials in production. Material A is added when the process is 50% complete,
while 50% of Material B is added when the process is 40% complete and the balance at the end of the process.
Conversion cost is added uniformly throughout the process. Marowak uses FIFO method of costing.

59. The equivalent units of production of Materials A and B are:

a. 13,500; 13,500 c. 12,950; 12,455
b. 13,500; 12,500 d. 13,150; 11,835

60. The equivalent units of production for conversion costs is

a. 12,950 b. 13,150 c. 13,300 d. 13,500

Use the following for the next 4 items

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

Beginning Work in Process Inventory

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

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 Beginning Work in Process Inventory Costs:
Material P24,500
Conversion 68,905

Current Period Costs:

Material P75,600
Conversion 130,053

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

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

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

64. What is the cost of all units transferred out using the FIFO method?
a. P191,289 c. P287,004
b. P204,624 d. P298,029
Use the following for the next 3 items

Rainbow Company uses standard cost system for its production process. Rainbow Company applies overhead
based on direct labor hours. The following information is available for October:

Standard:
Direct labor labor hours per unit 2.20
Variable overhead per hour P 2.50
Fixed overhead per hour (based on 11,990 DLHs) 3.00
Actual:
Units produced 4,400
Direct labor hours 8,800
Variable overhead P 29,950
Fixed overhead 42,300

65. What is the variable overhead spending variance?

a. P25 F c. P7,975 U
b. P7,950 U d. P10,590 U

66. Using the three variance approach, what is the efficiency variance?
a. P 2,200 F c. P 7,975 U
b. P 5,775 U d. P11,770 F

67. Using the two variance approach, what is the controllable variance?
a. P 5,775 U c. P 16,480 U
b. P 12,080 U d. P 21,650 U

Use the following for the next two items

Nodalos Company has a maintenance shop where all kinds of trucks repairs are performed. Through
the years, various labor standards have been developed to judge performance. However, during a March
strike, some labor records vanished. The actual hours of input were 1,000. The direct labor variance was P
1,700, favorable. The standard labor rate was P14 per hour; however, a recent labor shortage had
necessitated using higher paid labor workers for some jobs and had produced a labor rate variance for March of
P400, unfavorable.

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68. What is the standard hours allowed for output achieved?
a. 850 b. 1,000 c. 1,093 d. 1,150

69. What is the actual labor rate?

a. P12.30 b. P13.60 c. P14.40 d. P15.70

70. Franklin Glass Works' production budget for the year ended November 30 was based on 200,000 units. Each
unit requires two standard hours of labor for completion. Total overhead was budgeted at P900,000 for the
year, and the fixed overhead rate was estimated to be P3 per unit. Both fixed and variable overhead are
assigned to the product on the basis of direct labor hours. The actual data for the year ended November 30 are
presented as follows:

Actual production in units 198,000

Actual direct labor hours 440,000
Actual variable overhead P352,000
Actual fixed overhead P575,000

Franklin's fixed overhead spending variance for the year is

a. P5,750 favorable.
b. P19,000 favorable.
c. P25,000 favorable.
d. P25,000 unfavorable.

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