Cost Accounting

Job Order Costing

Problem 1: The factory ledger of PAMATAY Corporation contains the following cost data for the
year ended December 31, 2011:

Inventories
Opening Closing
Raw Materials 150,000 170,000
Work in Process 160,000 60,000
Finished Goods 180,000 220,000
Raw Materials Used 652,000
Total manufacturing 1,372,000
costs charged to
production during the
year (including raw
materials, direct labor
and factory overhead
applied at the rate of
50% of labor cost

1.) Compute for the cost of raw materials purchased and direct labor charged to production
during the year, respectively:

A. 632,000 and 240,000

B. 672,000 and 480,000
C. 672,000 and 720,000
D. 360,000 and 480,000

Problem 2: PAMBANSANG COMPANY uses a job-order costing system. It has three production
departments, X, Y, and Z.

The manufacturing cost budget for 2011 is as follows:

Dept. X Dept. Y Dept. Z

Direct Materials 600,000 400,000 200,000
Direct Labor 200,000 500,000 400,000
Manufacturing 600,000 100,000 200,000
Overhead

For Job No. 01-90 which was completed in 2011, direct materials costs was P75,000 and direct
labor cost was as follows:

Dept. X 40,000
Dept. Y 100,000
Dept. Z 20,000

The corporation applies manufacturing overhead to each job order on the basis of direct labor
cost, using departmental rates predetermined at the beginning of the year based on the
manufacturing cost budget.

2.) The total manufacturing cost of Job No. 01-90 which was completed in 2011 is:
A. 235,000
B. 310,000
C. 385,000
 D. 150,000

Problem 3: TSONGGO A Co. employs a job order cost system. Its manufacturing activities in
July, 2011, its first month of operation, are summarized as follows:

JOB Numbers
1201 1202 1203 1204
Direct Materials P7,000 P5,800 P11,600 P5,000
Direct Labor P6,600 P6,000 P8,400 P2,400
Direct Labor 1,100 1,000 1,400 400
hours
Units produced 200 100 1,000 300

Manufacturing overhead is applied at a rate of P2 per direct labor hour for variable overhead
and, P3 per hour for fixed overhead.

Jobs 1201, 1202, and 1203 were completed in July.

3.) What is the cost of the completed jobs?

A. 62,900
B. 62,500
C. 72,900
D. 65,900

Problem 4: JUMBO HOTDOG’s year-end manufacturing costs were as follows:

Direct materials and direct labor 500,000

Depreciation of manufacturing equipment 70,000
Depreciation of factory building 40,000
Janitor’s wages for cleaning factory premises 15,000

4.) How much of these costs should be inventoried for external reporting purposes?
A. 625,000
B. 610,000
C. 585,000
D. 500,000

Problem 5: MANGANGAHOY applies factory overhead on the basis of direct labor hours.
Budget and actual data for direct labor and overhead for the year are as follows:

Budget Actual
Direct labor 600,000 550,000
Factory overhead 720,000 680,000

5.) The factory overhead for Woodman for the year is

A. Overapplied by P20,000
B. Overapplied by P40,000
C. Underapplied by P20,000
D. Underapplied by P40,000

Problem 6: ARUJUSKO uses a predetermine factory overhead rate based on direct labor hours.
For the month of October, ARUJUSKO’s budgeted overhead was P300,000 based on a
budgeted volume of 100,000 direct labor hours. Actual overhead amounted to P325,000 with
actual direct labor hours totalling 110,000.
 6.) How much was the overapplied or underapplied overhead?
A. 30,000 overapplied
B. 30,000 underapplied
C. 5,000 overapplied
D. 5,000 underapplied

Problem 7: AJUJUBE Company has underapplied overhead of P45,000 for the year. Before
disposition of the underapplied overhead, selected year-end balances from AJUJUBE’s
accounting records were:

Sales 1,200,000
Cost of Goods Sold 720,000
Direct Materials inventory 36,000
Work-in-process inventory 54,000
Finished goods inventory 90,000
7.) Under AJUJUBE’s cost accounting system, over- or underapplied overhead is allocated
to appropriate inventories and CGS based on year-end balances in its year-end income
statement, AJUJUBE should report COGS of:
A. 682,500
B. 684,000
C. 756,000
D. 757,500

Problem 8: During March, ARTE Company incurred the following costs on Job 109 for the
manufacture of 200 motors:

Original cost accumulation

Direct materials 660
Direct labor 800
Factory overhead (150% of DL) 1,200
2,660

Direct costs of reworking 10 units:

Direct materials 100
Direct labor 160
260

The rework costs were attributable to the exacting specifications of Job 109, and the full rework
costs were charged to this specific job.

8.) What is the cost per finished unit of Job 109?

A. 15.80
B. 14.60
C. 14.00
D. 13.30

9.) Using the same information in number 8, assuming the rework cost were attributable to
internal failure or charged to factory overhead, what is the cost per finished unit of Job
109?
A. 15.80
B. 14.60
C. 14.00
D. 13.30
Process Costing

Problem 9: Items 10 to 13 are based on the following information

You are engaged to audit the December 31 financial statements of DOTA Corporation, a
manufacturer of digital watches. You are attempting to verify the costing of the EWIP and
finished goods which were recorded on Spirit’s books as follows:

Units Cost
WIP (50% complete as to 300,000 660,960
labor and overhead)
Finished goods 200,000 1,009,800

Materials are added to production at the beginning of the manufacturing process, and overhead
is applied to each product at a rate of 60% of direct labor costs. There was no finished goods
inventory on January 1. A review of Spirit’s inventory cost records disclosed the following
information:

Units and costs are in thousands

Units Materials Labor
WIP, 1/1 (80% 200 P200 P315
complete as to labor
and overhead)
Units started in 1,000
production
Materials Cost 1,300
Labor Cost 1,995
Units completed 900

10.) The equivalent units for labor under both FIFO and Average, respectively
A. 1,050,000; 890,000
B. 1,050,000; 1,050,000
C. 890,000; 1,050,000
D. 890,000; 890,000

11.) What is the total cost for overhead under FIFO and Average, respectively?
A. 1,197,000; 1,386,000
B. 1,386,000; 1,197,000
C. 1,197,000; 1,197,000
D. 1,386,000; 1,386,000

12.) What is the cost per equivalent unit for labor under FIFO and Average,
respectively?
A. 2.20; 2.24
B. 2.24; 2.20
C. 2.20; 2.20
D. 2.24; 2.24

13.) What is the total cost for the ending inventory of finished goods using the
weighted average method?
A. 869,000
B. 954,000
C. 900,000
D. 786,000
Problem 10: ARF ARF Company adds materials at the beginning of the process in Department
N. Data concerning the materials used in March 2011 production are as follow:

Units
WIP at March 1 16,000
Started during March 34,000
Completed and Transferred to next department 36,000
during march
Normal spoilage incurred 4,000
WIP at March 31 10,000

14.) The equivalent units for materials unit cost calculation for FIFO and average,
respectively are
A. 46,000; 30,000
B. 30,000; 46,000
C. 46,000; 46,000
D. 30,000; 30,000

Problem 11: TORO Company manufactures compact disks. In June 2011, production for
2,000,000 units were started. At the end of the month, the following data were gathered:

Completed units 2,700,000

Defective units 400,000
In process, ½ complete 800,000

15.) How many units were in process at the beginning of the month?
A. 1,500,000
B. 2,300,000
C. 2,000,000
D. 1,900,000

Problem 12: Items 16 to 18 are based on the following information:

Given for a certain process:

Beginning work in process, 2/5 completed 500 units

Transferred in 2,000 units
Normal spoilage 200 units
Abnormal spoilage 300 units
Goods completed and transferred out 1,700 units
Ending work in process, 1/3 completed 300 units
Conversion costs in beginning inventory P610
Current period conversion costs P3,990

All spoilage occurs at the end of the process.

16.) The conversion cost per equivalent unit under FIFO and Average, respectively
amounted to
A. 1.90; 1.73
B. 2.19; 2.00
C. 2.00; 1.90
D. 1.90; 2.00

17.) The conversion costs components of normal spoilage under FIFO and Average,
respectively amounted to
A. 438; 400
 B. 380; 346
C. 400; 380
D. 380; 400

18.) The conversion costs components of abnormal spoilage under FIFO and
Average, respectively amounted to
A. 570; 519
B. 657; 600
C. 570; 600
D. 600; 570

Joint and By-Products

Problem 13: Items 19 and 20 are based on the following information

ARAY Co. manufactures products X, Y, and Z from a joint process. Joint product costs were
P60,000. Additional information is provided below.

If processed further
Product Units Produced Sales Value at Sales Values Additional Costs
Split-off
X 6,000 40,000 55,000 9,000
Y 4,000 35,000 45,000 7,000
Z 2,000 25,000 30,000 5,000

19.) Assuming that joint product costs are allocated using the physical measures
approach, what were the total costs allocated to product X?
A. 27,000
B. 29,000
C. 33,000
D. 39,000

20.) Assuming that joint product costs are allocated using the relative sales value at
split-off approach, what were the total costs allocated to product Y?
A. 27,000
B. 28,000
C. 28,350
D. 32,200

Problem 14: A Company manufactures products X and Y using a joint process. The joint
processing costs are P10,000. Products X and Y can be sold at split-off for P12,000 and
P8,000 respectively. After split-off, product X is processed further at a cost of P5,000 and sold
for P21,000 whereas product Y is sold without further processing.

21.) If the company uses the net realizable value method for allocating joint costs, the
joint cost allocated to X is.
A. 4,000
B. 5,000
C. 6,000
D. 6,667

Standard Costing
Problem 13: WHOOPS Company had budgeted 50,000 units of output using 50,000 units of raw
materials at a total material cost of P100,000. Actual output was 50,000 units of product,
requiring 45,000 units of raw materials at a cost of P2.10 per unit.

22.) Compute for the material price and usage variance respectively.
A. 4,500 U; 10,000 F
B. 5,000 F; 10,500 U
C. 5,000 U; 10,500 F
D. 10,000 F; 4,500 U

Problem 14: During March, BATANG Company’s direct material costs for the manufacture of
product T were as follows:

Actual unit purchase price P6.50

Standard quantity allowed for actual production 2,100
Quantity purchased and used for actual 2,300
production
Standard unit price P6.25

23.) The material usage variance for March is

A. 1,250 U
B. 1,250 F
C. 1,300 U
D. 1,300 F

Problem 15: BOY GUPIT Company’s direct labor costs for the month of January is as follows:

Actual direct labor hours 34,500

Standard direct labor hours 35,000
Total direct labor payroll P241,500
Direct labor efficiency variance – favorable P3,200

24.) What is the direct labor rate variance?

A. 17,250 U
B. 20,700 U
C. 21,000 U
D. 21,000 F

Problem 16: HANGIN uses a standard cost system. Overhead cost information for Production
for the month of October is as follows:

Total actual overhead incurred P12,600

Fixed overhead budgeted P3,300
Total standard overhead rate per DLH P4
Variable overhead rate per DLH P3
Standard hours allowed for actual production 3,500

25.) What is the overall or net overhead variance?

A. 1,200 F
B. 1,200 U
C. 1,400 F
D. 1,400 U
Problem 17: ALDUB Company has a standard absorption and flexible budgeting system and
uses a two-way analysis of overhead variances. Selected data for the February production
activity are:

Budgeted fixed factory overhead costs P64,000

Actual factory overhead incurred P230,000
Variable factory overhead rate per DLH P5
Standard DLH 32,000
Actual DLH 32,000

26.) The budget (controllable) variance for February is

A. 1,000 F
B. 1,000 U
C. 6,000 F
D. 6,000 U