ADVANCED FINANCIAL ACCOUNTING & REPORTING

Cost Concepts & Behavior, Job-order Costing, ABC

Compiled by: Marilou E. Malqusito

Name: ___________________________________________ Class Schedule: ______________________

1. Abel Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is ₱38,000
and if direct materials are ₱47,000, the manufacturing overhead is:
a. ₱152,000 c. ₱11,750
b. ₱21,250 d. ₱9,500

2. Management of Mcgibboney Corporation has asked your help as an intern in preparing some key
reports for November. The beginning balance in the raw materials inventory account was ₱25,000.
During the month, the company made raw materials purchases amounting to ₱54,000. At the end of
the month, the balance in the raw materials inventory account was ₱37,000. Direct labor cost was
₱25,000 and manufacturing overhead cost was ₱62,000. The beginning balance in the work in process
account was ₱22,000 and the ending balance was ₱23,000. The beginning balance in the finished
goods account was ₱44,000 and the ending balance was ₱50,000. Selling expense was ₱21,000 and
administrative expense was ₱38,000. The prime cost for November was:
a. ₱59,000 c. ₱79,000
b. ₱67,000 d. ₱87,000

3. Last year, Vashanda Corporation incurred the following costs to produce 18,000 units:
Cost of raw materials used ₱86,400
Property taxes on factory building ₱9,000

What should be the cost per unit for the above costs if 20,000 units of product are produced next
year?
Raw materials Property taxes
a. ₱4.32 ₱0.45
b. ₱4.32 ₱0.50
c. ₱4.80 ₱0.45
d. ₱4.80 ₱0.50

4. Vignana Corporation manufactures and sells hand-painted clay figurines of popular sports heroes.
Shown below are some of the costs incurred by Vignana for last year:
Cost of clay used in production ₱65,000
Wages paid to the workers who paint the figurines ₱90,000
Wages paid to the sales manager’s secretary ₱22,000
Cost of junk mail advertising ₱47,000

What is the total of the inventoriable (product) costs above?

a. ₱0 c. ₱155,000
b. ₱69,000 d. ₱159,000

5. Reamer Company uses a predetermined overhead rate based on machine-hours to apply

manufacturing overhead to jobs. The company has provided the following estimated costs for next
year:
Direct materials ₱1,000
Direct labor ₱3,000
Sales commissions ₱4,000
Salary of production supervisor ₱2,000
Indirect materials ₱400
Advertising expense ₱800
Rent on factory equipment ₱1,000

Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during the
year. The predetermined overhead rate per hour will be:
a. ₱6.80 c. ₱3.40
b. ₱6.00 d. ₱3.00
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6. Consider the following information for a local concession stand’s first four weeks of operation:
Week Number of Drinks Served Total Costs
1 1,000 ₱ 2,500
2 2,000 3,250
3 1,750 3,000
4 2,250 3,200

What is the equation for total operating costs for this concession stand?
a. Operating cost = ₱ 1,750 + (0.75 x number of drinks served)
b. Operating cost = ₱ 1,000 + (1.75 x number of drinks served)
c. Operating cost = ₱ 1,940 + (0.56 x number of drinks served)
d. Operating cost = ₱ 1,750 + (0.56 x number of drinks served)

7. Justine Company budgeted total variable overhead costs at ₱180,000 for the current period. In
addition, they budgeted costs for factory rent at ₱215,000, costs for depreciation on office equipment
at ₱12,000, costs for office rent at ₱92,000, and costs for depreciation of factory equipment
at ₱38,000. All these costs were based on the estimated machine hours of 80,000. Actual
factory overhead for the period amounted to ₱387,875 and machine hours used totaled 74,000
hours. What was the over or underapplied factory overhead for the period?
a. P12,650 overapplied c. ₱108,850 overapplied
b. ₱12,650 underapplied d. ₱108,850 underapplied

8. Collins Company uses a predetermined overhead rate based on direct labor cost to apply
manufacturing overhead to jobs. The following information applies to the company for the current
year:
Direct labor-hours:
Estimated for the year 24,000
Actual hours worked 19,500
Direct labor cost:
Estimated for the year ₱300,000
Actual cost incurred ₱210,000
Manufacturing overhead:
Estimated for the year ₱240,000
Actual cost incurred ₱185,000

The manufacturing overhead cost for the current year will be:
a. ₱17,000 overapplied c. ₱55,000 overapplied
b. ₱17,000 underapplied d. ₱55,000 underapplied.

Items 9 – 10: Below are balances and information taken from the records of Bulls Company for the last
quarter of the current year:
Inventories: Oct. 1
Raw materials P 134,000
Work-in-process 354,000
Finished goods 594,600

Manufacturing overhead P 4,200,000 Dr.

P 4,600,000 Cr.
Cost of Goods sold P 10,800,000

Supplementary data:
1) During the quarter, purchases of raw materials totaled P 1,093,400 while physical count of
raw materials revealed that P 250,000 were unused.
2) 39,800 direct labor hours were utilized and distributed as follows:
• 25,000 hours worked on regular time at a regular rate of P 42.50 per hour.
• 14,000 hours worked at a regular rate plus 10% special night premium.
• 800 hours worked on overtime at regular rate plus 30% overtime premium.
3) Overhead is charged to production at 80% of direct labor costs.
4) Actual overhead incurred was P 1,420,000 including indirect materials of P 12,000 but
excluding special night and overtime premium. Overhead variance is closed to all accounts
with overhead elements at the end of the year.
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 5) At the end of the year, records show that work in process increased by P 80,000 while
Finished Goods decreased by P 150,000.

9. The total factory costs for the quarter amount to:

a. P 4,147,560 c. P 4,376,100
b. P 4,022,100 d. P 4,010,100
10. The cost of goods manufactured amount to:
a. P 3,942,100 c. P 3,930,100
b. P 4,090,100 d. P 3,880,900

11. Vahedi Company manufactures a specialty line of silk-screened ties. The company uses a job-order
costing system. During the month, the following costs were incurred on Job 1041: direct materials
₱54,800 and direct labor ₱19,200. In addition, selling and shipping costs of ₱28,000 were incurred on
the job. Manufacturing overhead was applied at the rate of ₱25 per machine-hour (MH) and Job 1041
required 320 MHs. If Job 1041 consisted of 5,000 ties, the cost of goods sold per tie was:
a. ₱ 50.00 c. ₱ 16.40
b. ₱ 22.00 d. ₱ 14.80

Items 11 – 12: Banana Republic Company uses job order costing system and the following information is
available from its records:
Jobs in process
Job 100, Job 200 and Job 300
Raw materials used, P 400,000; Direct labor per hour, P 68.50
Pre-determined overhead rate – 120% of direct labor cost

Direct materials were requisitioned as follows: 30% to Job 100; 25% to Job 200; and 25% to Job 300.
Direct labor hours per job are: 2,500 for Job 100; 3,100 hours for Job 200; and 4,200 hours for Job
300. Indirect labor is P 233,000 while other actual overhead costs amounted to P 536,000, excluding
indirect materials.

12. The total factory costs for the period amounted to:
a. P 633,040 c. P 732,940
b. P 1,796,740 d. P 1,876,860
13. The costs of goods manufactured amounted to:
a. P 36,560 over applied c. P 43,440 over applied
b. P 36,560 under applied d. P 43,550 under applied

Items 14 – 15: Nikon Manufacturing Company makes only one product. The company has a normal
capacity of 32,000 units annually. The firm is expecting to produce 30,000 units next year but during
the year, it actually produced 31,000 units. The company accountant has budgeted the following
factory overhead costs for the coming year:
Indirect materials P 2 per unit
Indirect labor P 144,000 plus P 2 per unit
Plant utilities P 60,000 plus P 0.04 per unit
Repairs for the plant P 20,000 plus P 0.34 per unit
Material handling costs P 16,000 plus P 0.12 per unit
Depreciation – plant assets P 210,000 per year
Rent of plant building P 50,000 per year
Insurance on plant building P 12,000 per year

14. The total budgeted factory overhead is

a. P 651,500 c. P 502,000
b. P 653,500 d. P 656,000
15. Using the most appropriate overhead application based, the factory overhead rate is
a. P 20.50 c. P 21.87
b. P 21.16 d. P 21.02

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16. Toshiba Electronics, Inc. accepted 1,000 custom-designed computer monitors from PUP Video Shack
on July 2016. The following cost information is available in connection with this order:
Direct materials used:
Material A: 1 unit costing ₱ 120 per monitor
Material B: 1 unit costing ₱ 240 per monitor
Direct labor used:
Assembly: 6 hours per monitor at the rate of ₱ 38.75 per hour
Inspection: 1 hour per monitor at the rate of ₱ 45 per hour.

In addition, manufacturing support costs are applied to the job at the rate of ₱ 25 per direct labor
hour. The cost per monitor is
a. ₱ 812.50 c. ₱ 618.75
b. ₱ 787.50 d. ₱ 637.50

17. Elliott Company uses a predetermined overhead rate based on machine-hours to apply manufacturing
overhead to jobs. The company manufactures tools to customer specifications. The following data
pertain to Job 1501:
Direct materials used ₱4,200
Direct labor-hours worked 300
Direct labor rate per hour ₱8.00
Machine-hours used 200
Predetermined overhead rate per machine-hour ₱15.00

What is the total manufacturing cost recorded on Job 1501?

a. ₱8,800 c. ₱10,300
b. ₱9,600 d. ₱11,100

Items 18 – 22: M Manufacturing Company uses job order cost system. Its job cost sheets for the month
of August were as follows:

Job 410 Job 411 Job 412 Job 413 Job 414 Job 415
Work in process, Aug. 1
Direct materials P 1,800 P 1,125
Direct labor 2,700 2,160
Applied factory overhead 1,755 1,404
Finished goods, Aug. 1
Direct materials P 13,500 P 5,040
Direct labor 18,000 6,300
Applied factory overhead 11,700 4,095
Cost utilized in August
Direct materials P 8,190 P 9,900 P 27,000 P 2,600
Direct labor 10,800 12,600 31,500 5,400
Applied factory overhead 7,020 8,190 20,475

The company completed three jobs (Job Nos. 412, 413 and 414) during August. The applied factory
overhead rate 65% of direct labor cost is the same for each job. Thus, overhead was added to the cost
sheets of said jobs based on the above mentioned rate. Actual factory overhead as at August 1,
amounted to P 18,500. Actual overhead for the month of August totaled P 40,500.

18. Total manufacturing cost is

a. P 147,185 c. P 148,490
b. P 158,129 d. P 146,619
19. Beginning work in process is
a. P 58,635 c. P 10,944
b. P 69,579 d. P 11,510
20. Ending work in process is
a. P 19,944 c. P 11,510
b. P 58,635 d. P 69,579
21. Total cost of goods manufactured is
a. P 147,185 c. P 148,490
b. P 158,129 d. P 146,619

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22. The over- or under- applied during August must be:
a. P 1,305 underapplied c. P 851 underapplied
b. P 1,854 overapplied d. P 16,646 underapplied

23. Fisher Company uses a predetermined overhead rate based on direct labor cost to apply
manufacturing overhead to jobs. The following information about Fisher Company's Work in Process
inventory account has been provided for the month of May:
May 1 balance ........................................... P26,000
Debits during May:
Direct Materials ...................................... P40,000
Direct Labor ........................................... P50,000
Manufacturing Overhead ........................ P37,500

During the month, Fisher Company's Work in Process inventory account was credited for P120,500,
which represented the Cost of Goods Manufactured for the month. Only one job remained in process
on May 31; this job had been charged with P9,600 of applied overhead cost. The amount of direct
materials cost in the unfinished job would be:
a. P10,600 c. P 12,800
b. P 16,700 d. P 23,400

Items 24 – 25: Aura Company provided you with the following data:

Job #1 Job #2
Units produced & sold 14,400 1,500
Dept. 1 Dept. 2 Dept. 1 Dept. 2
Direct labor hours 5,000 1,000 400 600
Machine hours 200 500 200 3,000
Prime costs P 100,000 P 20,000 P 10,000 P 40,000

Bid price policy – maintain a gross margin of 25%

Budgeted Factory Overhead:
Department 1 – P 97,200 Department 2 – P 77,800

24. Assuming Aura Company uses a plant-wide rate based on direct labor hours, the billing price per unit
of Job #1 and Job #2 is:
Job #1 Job #2 Job #1 Job #2
a. P 25.00 P 66.67 c. P 18.75 P 50.00
b. P 23.44 P 62.50 d. P 6.25 P 16.67
25. Assuming Aura Company uses departmental rates (Dept. 1 based on DLH and Dept. 2 based on MH),
how much is the manufacturing costs per unit of Job #1 and Job #2?
Job #1 Job #2 Job #1 Job #2
a. P 21.77 P 76.94 c. P 15.08 P 85.20
b. P 15.36 P 82.59 d. P 14.80 P 86.28

Questions 26 – 28: A company has identified the following overhead costs and cost drivers for the coming
year.

Overhead Item Cost Driver Budgeted Cost Budgeted Activity Level

Machine setup No. of setups ₱ 20,000 200
Inspection No. of inspections ₱130,000 6,500
Material handling No. of material moves ₱ 80,000 8,000
Engineering Engineering hours ₱ 50,000 1,000
₱280,000

The following information was collected on three jobs that were completed during the year:
Job 101 Job 102 Job 103
Direct materials ₱5,000 ₱12,000 ₱8,000
Direct labor ₱2,000 ₱ 2,000 ₱4,000
Units completed 100 50 200
Number of setups 1 2 4
Number of inspections 20 10 30
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 Number of material moves 30 10 50
Engineering hours 10 50 10

Budgeted direct labor cost was ₱100,000, and budgeted direct material cost was ₱280,000.

26. If the company uses activity-based costing, how much overhead cost should be allocable to Job 101?
a. ₱1,300 c. ₱5,000
b. ₱2,000 d. ₱5,600
27. If the company uses activity-based costing, compute the cost of each unit of Job 102.
a. ₱340 c. ₱440
b. ₱392 d. ₱520
28. The company prices its products at 140% of cost. If the company uses activity-based costing, the
price of each unit of Job 103 would be
a. ₱98 c. ₱116
b. ₱100 d. ₱140

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