SOUTHERN PHILIPPINES INSTITUTE OF SCIENCE AND TECHNOLOGY

REVIEWER – MIDTERM EXAMINATION COST ACCOUNTNG & CONTROL NOVEMBER 09, 2023
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MULTIPLE CHOICES – THEORETICAL

1. The costing method that is no longer permitted by PAS No.2 is:

a. FIFO
b. LIFO
c. Moving average
d. Specific identification

2. How is recovery from a decrease in the allowance for the reduction of inventory to NRV shown?
a. Deduction from the sales revenue.
b. Addition to sales revenue.
c. Deduction from cost of goods sold.
d. Addition to cost of goods sold.

3. In period of rising prices, what effect would the use of FIFO have on the net income of a company?
a. No effect.
b. The net income increases.
c. The net income decreases.
d. There will be a loss.

4. How is the allowance for inventory write-down shown in the statement of financial position?
a. As a deduction from the inventory at cost.
b. As a deduction from the inventory of NRV.
c. As an asset.
d. As a liability.

5. What is the major advantage of using a perpetual inventory system?

a. It provides efficient internal control over materials.
b. It avoids inventory shortages and overages.
c. It minimizes error in posting receipts and issues of materials.
d. It avoids losses due to theft.

6. If the job is taken as a rush order with the knowledge that overtime will be necessary, the overtime premium
should be charged to:
a. Specific job
b. General expense
c. Factory overhead
d. Selling expense

7. If the overtime premium is charge to specific job, it should be debited to:

a. Work in process account
b. Selling expense account
c. General expense account
d. Manufacturing overhead account

8. What is the procedure for keeping records of the hours worked by each employee?
a. timekeeping
b. bookkeeping
c. accounting
d. record keeping

9. What is the certificate that is given to employee at the end of the year to aid him in the filing of his annual
income tax return?
a. Certificate of income tax withheld.
b. Certificate of salaries paid.
c. Certificate of employment.
d. Certificate of compensation payment - tax withheld.

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LINOFEL M. DE DIOS, CPA
SOUTHERN PHILIPPINES INSTITUTE OF SCIENCE AND TECHNOLOGY
REVIEWER – MIDTERM EXAMINATION COST ACCOUNTNG & CONTROL NOVEMBER 09, 2023
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10. The overtime premium spent on a regular job order that cannot be completed in the regular working hours
should be charged to:
a. Manufacturing overhead control account
b. Work-in process account
c. Selling expense account
d. General expense account

11. When the amount of overapplied manufacturing overhead is significant, the entry to close Overapplied
Manufacturing Overhead will most likely require:
a. a debit to Cost of Goods Sold
b. debits to Cost of Goods Sold, Finished Goods Inventory, and Work in Process Inventory
c. a credit to Cost of Goods Sold
d. credits to Cost of Goods Sold, Finished Goods Inventory, and Work in Process Inventory

12. The most common treatment of the underapplied overhead at the end of the year would be to:
a. carry it as a deferred charges on the balance sheet
b. report it as a miscellaneous expense on the income statement
c. debit it to Cost of Goods Sold
d. prorate between Work in Process Inventory and Finished Goods Inventory

13. An objection to the use of predetermined overhead rate based on direct labor costs is that:
a. these items are difficult to measure.
b. a job is charged with more overhead when a highly paid operator works on the job than when a low paid
operator performs the work
c. overhead is allocated in relation to units produced by workers
d. overhead rates will be distributed inequitably when there are no wage differentials in the department

14. All of the following phrases are used as alternate terminology for manufacturing overhead except:
a. manufacturing expense
b. indirect manufacturing cost
c. factory expense
d. other expense

15. If two service departments service the same number of other service departments when using the step
method, which service department's costs are allocated first?
a. The service department with the most direct cost.
b. The service department with the most employees.
c. The service department most crucial to the operation of the production department.
d. None of the above, the reciprocal method must be used.

16. A company has two production and two service departments that are housed in the same building. The most
reasonable basis for allocating building costs (rent, insurance, maintenance, security) to the production and
service departments is:
a. Direct labor hours
b. Number of employees
c. Square feet of floor occupied
d. Direct materials used

17. An automotive company has three divisions. One division manufactures new replacement parts for
automobiles; another rebuilds engines; and the third does not repair and overhaul work on a line of trucks.
All three divisions use the services of a central payroll department. The best method of allocating the cost of
the payroll department to the various divisions is:
a. Total labor hours incurred in the divisions.
b. Value of production in the divisions.
c. Direct labor costs incurred in the divisions.
d. Machine hours used in the divisions.

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LINOFEL M. DE DIOS, CPA
SOUTHERN PHILIPPINES INSTITUTE OF SCIENCE AND TECHNOLOGY
REVIEWER – MIDTERM EXAMINATION COST ACCOUNTNG & CONTROL NOVEMBER 09, 2023
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18. The most accurate method for allocating service department costs is the:
a. Step method
b. Direct method
c. Reciprocal method
d. Algebraic method

19. The method for allocating service department costs that requires the least clerical work is:
a. use of square footage in each department
b. step method
c. allocation to other service departments only
d. direct method

20. In which of the following overhead allocation methods may no other service departmental costs be charged
back to a particular service department after the first service departments cost has been allocated?
a. The reciprocal method and the direct method
b. The step method and the reciprocal method
c. The direct method and the step method
d. The step and algebraic method

MULTIPLE CHOICES – COMPUTATIONAL [SUPPORT YOUR ANSWER WITH COMPUTATIONS]

1. AMG Manufacturing Company which uses the periodic inventory system showed the following transactions
during the month of May.
Date Units Purchased Units Cost Units Issued
5/1(BI) 10 P15 一
5/5 20 20 一
5/15 一 一 15
5/19 一 一 10
5/24 15 18 一
5/30 － － 15

1. What is the cost of ending inventory under the specific identification method assuming that materials issued
on 5/15 came from the 5/5 purchase, materials issued on 5/19 came from beginning inventory, and those issued
on 5/30 came from the 5/5 and 5/24 purchases?
a. P90
b. P85
c. P95
d. P80

2. Using the data in No. 1, what is the cost of ending inventory under the weighted average costing method?
a. P91.11
b. P89.12
c. P90.50
d. P88.50

3. Using the data in No.1,what is the cost of the units issued under the FIFO costing method?
a. P730
b. P850
c. P830
d. P700

4. Maria Plastic Company presented the following data for the month of May 2018:
Finished Goods, May 1,2018 P 129,640
Finished Goods, May 31,2018 142,840
Cost of Goods Manufactured 395,440
Loss on inventory write-down 9,740

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LINOFEL M. DE DIOS, CPA
SOUTHERN PHILIPPINES INSTITUTE OF SCIENCE AND TECHNOLOGY
REVIEWER – MIDTERM EXAMINATION COST ACCOUNTNG & CONTROL NOVEMBER 09, 2023
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Compute the cost of goods sold to be shown in the statement of comprehensive income for the month ended
May 31,2018:
a. P372,500
b. P391,980
c. P327,500
d. P372,000

5. The following data pertain to Alpha Company for the month of June 2018:

Finished Goods, June 1,2018 P290,540

Finished Goods, June 30,2018 276,760
Cost of Goods Manufactured 805,820
Recovery from inventory write-down 10,720

Determine the cost of goods sold to be shown in the statement of comprehensive income of Alpha Company
for the month of June 2018:
a. P808,880
b. P880,880
c. P830,320
d. P808,080

6. Mike G, a production employee is paid P180 per hour for a regular work of 40 hours. During the week ended
March 23, Mike G worked 50 hours and earned time and a half for overtime hours. What is the amount that
should be charged to Work in Process account if the overtime premium is charged to production worked on
during the overtime hours?
a. P9,000
b. P9,900
c. P8,900
d. P9,500

7. Using the data in No. 6, what is the amount that should be charged to Work in Process account, if the overtime
premium is charged to manufacturing overhead?
a. P9,000
b. P9,900
c. P8,900
d. P9,500

8. Four factory workers and a supervisor make a team in the Machining Department. The supervisor earns P100
per hour, and the combined hourly charge of the four workers is P320. Each employee is entitled
to a 2-week paid vacation and a bonus equal to 4 week's wages each year. Vacation pay and bonuses are treated
as indirect costs and are accrued over the 50 week work year. A provision in the union contract does not allow
these employees to work in excess of 40 hours per week. What is the amount to be charged to Manufacturing
Overhead Control account?
a. P 1,344
b. P 2,016
c. P20,000
d. P 6,720

9. Ms. Jacky, a production worker earns P14,904 a month, and the company pays one month's salary as bonus at
the end of the year. Ms. Jacky is also entitled to a half month paid vacation. The company also pays P2,070 a
year into a pension fund of the worker. All labor-related fringe benefits of production workers are treated as
manufacturing overhead. Bonus, vacation pay, and pension costs are charged to production during the 11/2
months the employee is at work. What is the total liability for bonus, vacation, and pension?
a. P2,484
b. P2,124
c. P2,540
d. P1,206

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LINOFEL M. DE DIOS, CPA
SOUTHERN PHILIPPINES INSTITUTE OF SCIENCE AND TECHNOLOGY
REVIEWER – MIDTERM EXAMINATION COST ACCOUNTNG & CONTROL NOVEMBER 09, 2023
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10. Ms. Joy, a punch press operator in a metal fabricating plant is randomly assigned to various jobs. The straight-
time wage rate is P40 per hour with time and one-half for time over 40 hours per week. How much of these
earnings should be charged to Manufacturing Overhead Control account if 47 hours are worked in one week?
a. P1,974
b. P 280
c. P 140
d. P-0-

Rolex Corporation estimates that its production for the coming year will be 10,000 units, which is 80% of
normal capacity, with the following unit costs:

Materials P40
Direct labor 60

11. Direct labor is paid at the rate of P24 per hour. The machine should be run for 20 minutes to produce one unit.
Total estimated overhead is expected to consist of P400,000 for variable overhead and P400,000 for fixed
overhead.

What is the predetermined overhead rate base on units of production, using the expected actual capacity
activity level?
a. P80 per unit
b. P75 per unit
c. P65 per unit
d. P85 per unit

12. Using the data of Rolex Corporation, what is the predetermined overhead rate base on material cost?
a. 200%
b. 150%
c. 250%
d. 300%

13. Using the data of Rolex Corporation, what is the predetermined overhead rate base on direct labor cost?
a. 133%
b. 153%
c. 166%
d. 113%

14. Using the data of Rolex Corporation, what is the predetermined overhead rate base on direct labor hours?
a. P32 per direct labor hour
b. P35 per direct labor hour
c. P40 per direct labor hour
d. P45 per direct labor hour

15. Using the data in No. 1, what is the predetermined overhead rate base on machine hours?
a. P2.40 per machine hour
b. P3.00 per machine hour
c. P3.50 per machine hour
d. P4.00 per machine hour

Numbers 16 to 20 are based on the following data:

JGG Company has two service departments and three producing departments each producing a separate
product. For a number of years, the company has allocated the overhead costs of the service departments to
the producing departments on the basis of annual sales pesos which lead serious inequities. The auditor
recommended that maintenance and engineering service hours be used as a better service cost allocation
basis. The following data was available:
Service Departments Producing Departments

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LINOFEL M. DE DIOS, CPA
SOUTHERN PHILIPPINES INSTITUTE OF SCIENCE AND TECHNOLOGY
REVIEWER – MIDTERM EXAMINATION COST ACCOUNTNG & CONTROL NOVEMBER 09, 2023
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Maintenance Engineering Dept. A Dept.B Dept.C

Maintenance hours 400 800 200 200
Engineering hours 400 800 400 400
Overhead costs P12,000 P54,000 P80,000 P90,000 P50,000

16. If the Maintenance Department's total costs to be allocated is P24,000, what portion of the Maintenance
Department's costs is allocated to Department A under the reciprocal method?
a. 800/1,600
b. 800/1,200
c.200/1,200
d.200/1,600

17. Using the direct method of cost allocation, how much maintenance cost would be allocated to the Engineering
Department?
a. P3,000
b. P1,500
c. P6,000
d. P -0-

18. Using the direct method of cost allocation, how much amount of maintenance costs would be allocated to
Department C?
a. P3,000
b. P2,000
c.. P8,000
d. P -0-

19. Under the direct method of cost allocation, what amount of Engineering Department's cost would be allocated
to Department A?
a. P20,800
b. P27,000
c. P54,000
d. P -0-

20. Under the step method of cost allocation, what amount of Maintenance Department's cost is allocated to
Engineering Department?
a. P1,500
b. P6,000
c. P3,000
d. P -0-

SOLVING PROBLEMS – SUPPORT YOUR ANSWERS WITH COMPUTATIONS

1. The Papa Manufacturing Company uses the perpetual inventory system in controlling its materials. Data
relating to Material X-5 during March 2018 are given below:

March 1: Balance, 1,000 units at P125 each.

5: Issued 400 units, Requisition 091.
9: Received 600 units at P140 each, Purchase Order 016.
13: Issued 850 units, Requisition 094.
22: Received 200 units at P145 each, Purchase Order 023.
29: Issued 250 units, Requisition 098.
Required:
Enter the beginning balance on a materials ledger card for each of the two inventory costing methods; FIFO
and moving average. Record each of the transactions on each of the material ledger cards. Round unit costs
to the nearest centavo under the moving average costing method.

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LINOFEL M. DE DIOS, CPA
SOUTHERN PHILIPPINES INSTITUTE OF SCIENCE AND TECHNOLOGY
REVIEWER – MIDTERM EXAMINATION COST ACCOUNTNG & CONTROL NOVEMBER 09, 2023
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2. The Congres Corporation is a manufacturing concern that employs six people on an hourly basis. The following
data relate to the week ended October 31,2018:
Cumulative
Hours Worked Hourly Total Through
Employee Su M Tu W Th F Sa Rate October 24,2014
K. Reyes - 8 8 8 8 8 - P14.00 P 21,900
W. Santos - 8 9 8 8 9 4 26.00 49,200
A. Manalo - 8 10 8 8 9 - 17.50 29,600
T. Cruz - 8 10 8 8 9 - 10.30 15,890
L. Sanchez - 8 8 8 9 8 4 8.50 13,560
R. Webb - 8 8 8 8 8 - 23.00 46,180

Instructions:
1. Compute net earnings of each employee for the week,-assuming the following deductions:
Income tax 15%
SSS 6.2%
Phil. Health 1.5%
Pag-ibig 1.5%
Union dues P10 per employee

Employees are paid one and one-half times the regular rate for hours worked over 40.

2. Prepare journal entry to record the payroll.

3. Anita Company assembles and sells electric mixers. All parts are purchased, and the cost of the parts per mixer
totals P1,600.Labor i8 paid on the basis of P1,280 per mixer assembled. Budgeted manufacturing overhead
for the next fiscal year based on a production of 1,200,000 mixers, is as follows:

Indirect materials P8,800,000

Indirect labor 9,600,000
Light and power 1,200,000
Depreciation 800,000
Insurance 200,000
Miscellaneous 2,200,000

During the period, 1,160,000 mixers were assembled and actual manufacturing overhead incurred was
P22,384,000. These units were completed but not yet transferred to the finished goods storeroom.

Required:
1. Prepare the journal entries to record the above information.
2. Compute the amount of overapplied or underapplied overhead.

4. Allocation of Estimated Overhead Using Step Method The Cookie Company uses the step method in allocating
the costs of its two service departments, S1 and S2, to its two producing departments, P1 and P2. S1 is
allocated first on the basis of number of employees. S2 is allocated on the basis of machine hours.
Departmental overhead rates are based on machine hours in P1 and direct labor hours in P2. The following
budget data are available:
S1 S2 P1 P2
Budgeted overhead P20,000 P69,500 P400,000 P600,000
Number of employees 30 20 360 420
Machine hours 8,000 6,000
Direct labor hours 10,000 20,000

Required:
1. Compute the predetermined overhead rates for the producing departments.
2. If Cookie Company decides to change to a plantwide rate based on direct labor hours, what will that rate be?
3. Why are separate departmental rates preferable to a single plantwide rate.
**NOTHING FOLLOWS**

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LINOFEL M. DE DIOS, CPA