COST ACCOUNTING

COMPREHENSIVE EXAMINATION 1

1. The appropriate method for the disposition of underapplied or overapplied factory overhead.

a. Is to the cost of goods sold only.

b. Is to finished goods inventory only.

c. Is appropriated to cost of goods sold and finished goods inventory.

d. Depends on the significance of the amount.

2. During the current accounting period, a manufacturing company purchased P70,000 of raw
materials, of which P50,000 of direct material and P5,000 of indirect materials were used in
production. The company also incurred P45,000 of total labor cost and P20,000 of other factory
overhead cost. An analysis of the work-in-process control account revealed P40,000 of direct
labor cost. Based upon the above information, what is the total amount accumulated in the
factory overhead control account?

a. P25,000

b. P30,000

c. P45,000

d. P50,000

3. A company allocates overhead to jobs in process using direct labor cost, raw material costs, and
machine hours. The overhead application rates for the current year are:

100% of direct labor

20% of raw materials

P117 per machine hours

A particular production run incurred the following costs:

Direct labor, P8,000

Raw Materials, P2,000

A total of 140 Machine hours were require for the production run

What is the total cost that would be charged to the production run?

a. P18,000

b. P18,400

c. P34,780

d. P34,680

Items 4 through 8 are based on the following information

 COST ACCOUNTING
COMPREHENSIVE EXAMINATION 1

The managers of Kobe Manufacturing are discussing ways to allocate the cost of service departments
such as Quality and Maintenance to the production departments such as Quality Control and
Maintenance to the production departments. To aid them in this discussion the controller has provided
the following information:

Quality Maintenance Machining Assembly Total

Control

Budgeted P350,000 P200,000 P400,000 P300,000 P1,250,000

overhead
cost before
allocation

Budgeted - - 50,000 50,000

machine
hours

Budgeted - - - 25,000 25,000

Direct labor
hours

Budgeted - 7,000 21,000 7,000 35,000

hours of
service:

Quality
Control

Maintenance 10,000 - 18,000 12,000 40,000

4. If Kobe Manufacturing uses the direct method of allocating service department costs, the total
service costs allocated to the assembly department would be

a. P80,000

b. P87,500

c. P120,000

d. P167,500

5. Using direct method, the total amount of overhead allocated to each machine hour at Kobe
Manufacturing would be

a. P2.40

b. P5.25

c. P8.00

d. 15.65
 COST ACCOUNTING
COMPREHENSIVE EXAMINATION 1
6. If Kobe Manufacturing uses the step-down method of allocating service cost beginning with
quality control. The maintenance cost allocated to the assembly department would be

a. P70,000

b. P108,000

c. P162,000

d. P200,000

7. If Kobe Manufacturing uses the reciprocal method of allocating service costs, the total amount
of quality control costs(rounded to the nearest peso) to be allocated to the other departments
would be

a. P284,211

b. P336,842

c. P350,000

d. P421,053

8. If Kobe Manufacturing decides not to allocate service cost to the production departments, the
overhead allocated to each direct labor hour in the Assembly Department would be

a. P3.20

b. P3.50

c. P12.00

d. 16.00

9. John Company consumed P450,000 worth of direct materials during May 2018, at the end of the
month, direct materials inventory of John was P25,000 lower than May 1 Inventory level. How
much was the direct materials procured during May 2018?

a. P475,000

b. P375,000

c. P400,000

d. P425,000

10. Kangkong Corporation transferred P72,000 of raw materials to its production department in
February and incurred P37,000 of conversion cost(P22,000 of direct labor and P15,000 of
overhead). at the beginning of the period. P14,000 of inventory(materials and conversion costs)
was in process. At the end of the period, P18,000 of inventory was in process. What was the cost
of goods manufactured?

a. P105,000
 COST ACCOUNTING
COMPREHENSIVE EXAMINATION 1
b. P109,000

c. P123,000

d. P141,000

11. Dan Co. has an average unit cost of P45 at P10,000 units and P25 at 30,000 units. What is the
variable cost per unit?
a. P10 c. P20
b. P15 d. cannot be determined

12. Phoenix Company analyzed 3 months of its production costs:

Sum of the units: 60 units

Sum of the costs: P420
Sum of the units x costs: 8,800
Sum of the units squared: 1,400

Using the least-squares technique, how much is the estimated variable costs of producing 20 units?
a. P24 c. P200
b. P40 d. P240

13. Fab Co. manufactures textiles. Among Fab’s manufacturing costs were the following salaries
and wages:

Loom operators P120,000

Factory foremen 45,000
Machine mechanics 30,000

What was the amount of Fab’s direct manufacturing labor?

a. P195,000 c. P150,000
b. P165,000 d. P120,000

14. Regan Company operates its factory on a two-shift basis and pays a late-shift differential of 15%.
Regan also pays a premium of 50% for overtime work. Because Regan manufactures only for
stock, the cost system provides for uniform direct-labor hourly charges for production done
without regard to shift worked or work done on an overtime basis. Overtime and late-shift
differentials are included in Regan’s factory overhead application rate. The May payroll for
production workers is as follows:

Wages at base direct-labor rates P325,000

Shift differentials 25,000
Overtime premiums 10,000

For the month of May, what amount of direct labor should Regan charge to work-in-process?
a. P325,000 c. P350,000
b. P335,000 d. P360,000

15. The Childers Company manufactures widgets. During the fiscal year just ended, the company
incurred prime costs of P1,500,000 and conversion costs of P1,800,000. Overhead is applied at
the rate of 200% of direct labor cost. How much of the above costs represent direct materials
cost?
a. P300,000
b. P600,000
c. P900,000
d. P1,500,000
16. PROSPERO Corp., which manufactures watches according to the designs and specifications of
customers, uses a job order system. In May, 2013, it completed 500 pieces on Jo “Star” at
cost per unit of P500 for direct materials and P400 for direct labor. Factory overhead is applied
at 100% of direct labor cost. Job “Star” suffered 50 defective units (a normal occurrence)
which were re-worked at a labor cost of P100 per unit in addition to the predetermined factory
overhead. PROSPERO treats normal defective work as part of the predetermined factory
overhead rate. What was the total cost of work on the defective units, and what account was
charged for this?
a. P5,000 to Work in Process c. P10,000 to Work in Process
b. P5,000 to FOH Control d. P10,000 to FOH Control

17. Pane Company uses a job costing system and applies overhead to products on the basis of direct
labor cost. Job No. 75, the only job in process on January 1, had the following costs assigned as
of that date: direct materials, P40,000; direct labor, p80,000; and factory overhead, P120,000.
The following selected costs were incurred during the year:

Traceable to jobs:
Direct materials P178,000
Direct labor 345,000 P523,000
Not traceable to jobs:
Factory materials and supplies 46,000
Indirect labor 235,000
Plant maintenance 73,000
Depreciation on factory equipment 29,000
Other factory costs 76,000 459,000

Pane's profit plan for the year included budgeted direct labor of P320,000 and factory overhead of
P448,000. Assuming no work-in-process on December 31, Pane's overhead for the year was
a. P11,000 overapplied. c. P11,000 underapplied.
b. P24,000 overapplied. d. P24,000 underapplied.

18. The Work-in-Process Account of Malinis Co. which uses a job order cost system follows:
Work in Process
Apr 1 Balance P25,000 Finished goods P125,450
Direct materials 50,000
Direct labor 40,000
Factory overhead applied 30,000

Overhead is applied to production at a predetermined rate based on direct labor cost. The work
in process at April 30 represents the cost of Jon No. 456 which has been charged with direct labor
cost of P3,000 and Job No. 789 which has been charged with applied overhead of P2,400.

The cost of direct materials charged to Job Order Nos. 456 and 789 totaled
a. P4,200 c. P7,600
b. P4,500 d. P8,700

19. NATIONAL Marketing Corporation uses a job-order costing system. It has three production
departments, X, Y, and Z.

The manufacturing cost budget for 2014 is as follows:

Dept. X Dept. Y Dept. Z

Direct materials P600,000 P400,000 P200,000
Direct labor 200,000 500,000 400,000
Mfg. Overhead 600,000 100,000 200,000

For Job No. 01-90 which was completed in 2014, direct material cost was P75,000 and direct labor
costs was as follows:

Dept. X P 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.

The total manufacturing cost of Job No. 01-90 which was completed in 2014 is
a. P235,000 c. P385,000
b. P310,000 d. P150,000

20. The Irap Corp. manufactures office tables and chairs and accounts for cost using the job order
cost system. The following data were taken from Company records as of April 30. No jobs
were in process at the beginning of the month.

Job No. Materials No. of Hours Cost

121 P2,160.00 650 P 800.00
122 4,575.00 1,850 3,625.00
123 5,637.50 4,100 7,162.50
124 1,612.50 750 1,400.00
125 3,250.00 1,600 3,050.00
126 1,375.00 490 825.00

In April Job Nos. 121 and 122 were completed and sold for P4,500 and P10,000, respectively. Job
Nos. 124 and 125 were likewise completed during the month. Manufacturing overhead costs are
applied to jobs at P1.50 per direct labor hour. Actual manufacturing overhead cost for the month
amounted to P15,175.00
The gross margin on Job No. 122 was:
a. (P975)
b. P565
c. P1,800
d. (P950)

21. JASMIN Mfg. Co. started 150 units in process on Job Order #13. The prime costs placed in
process consisted of P30,000 and P18,000 for materials and direct labor, respectively, and a
pre-determined rate was used to charge factory overhead to production at 133–1/3% of the
direct labor cost. Upon completion of the job order, units equal to 20% of the good output
were rejected for failing to meet strict quality control requirements. The company sells
rejected units as scrap at only 1/3 of production cost, and bills customers at 150% of production
cost. If the rejected units were ascribed to company failure, the billing price of Job Order #13
would be
a. P86,400 c. P102,000
b. P90,000 d. P108,000

22. Department Z of BILMOKO, Inc. uses the average cost method, and the department’s
production data for May 2013 was as follows:

Opening work in process (50% complete) 2,000 units

Placed in process during the month 20,000 units
Closing work in process (60% complete) 2,500 units

Direct labor cost in the opening work in process was P60,000, while direct labor cost added during
the month was P780,000. The direct labor cost per equivalent unit is
a. P30.00 c. P37.50
b. P34.50 d. P40.00

23. A company employs a process costing system for its two-department manufacturing operation
using the first-in-first-out (FIFO) inventory method. When units are completed in Department
 1, they are transferred to Department 2 for completion. Inspection takes place in Department
2 immediately before the direct materials are added, when the process is 70% complete with
respect to conversion. The specific identification method is used to account for lost units.
The number of defective units (that is, those failing inspection) is usually below the normal
tolerance limit of 4% of units inspected. Defective units have minimal value, and the company
sells them without any further processing for whatever it can. Generally, the amount collected
equals, or slightly exceeds, the transportation cost. A summary of the manufacturing activity
for Department 2, in units for the current month is presented below.

Physical Flow
(output units)
Beginning inventory (60% complete with respect to conversion) 20,000
Units transferred in from Department 1 180,000
Total units to account for 200,000

Units completed in Department 2 during the month 170,000

Units found to be defective at inspection 5,000
Ending inventory (80% complete with respect to conversion) 25,000
Total units accounted for 200,000

The equivalent units for direct materials for the current month would be
a. 175,000 units. c. 195,000 units.
b. 181,500 units. d. 200,000 units.

24. Juniper Manufacturing uses a weighted-average process costing system at its satellite plant.
Goods pass from the Major Assembly Department to the Finishing Department to finished goods
inventory. The goods are inspected twice in the Finishing Department. The first inspection
occurs when the goods are 30% complete, and the second inspection occurs at the end of
production. The following data pertain to the Finishing Department for the month of July.

Units
Good units started and completed during July 65,000
Normal spoilage - first inspection 2,000
Abnormal spoilage - second inspection 150
Ending work-in-process inventory, 60% complete 15,000

There was no beginning work-in-process inventory in July. Juniper recognizes spoiled units to
make the cost of all spoilage visible in its management reporting. What are the equivalent units for
assigning costs for July?
a. 74,000 c. 74,600
b. 74,150 d. 74,750

25. Ablan Co. produces a special kind of insecticides. Materials are added in the first stage of
production which is the Mixing Dept. For the month of March 2013, the following data were
gathered:

Units
Work-in-process March 1st, 40% complete as to conversion costs 40,000
Started in process during the month 100,000
Transferred to the Molding Department 85,000
Lost units in processing 10,000
Work-in-process, March 31, 60% complete as to conversion costs 45,000

The costs corresponding to the lost units were absorbed by the remaining units. Using the
weighted-average method, the equivalent units for the material costs were:
a. 112,000 c. 130,000
b. 140,000 d. answer not given

26. Dex Co. had the following production for the month of June:
 Units

Work-in-process at June 1 10,000

Started during June 40,000
Completed and transferred to finished goods during 33,000
June
Abnormal spoilage incurred 2,000
Work-in-process at June 30 15,000

Materials are added at the beginning of the process. As to conversion cost, the beginning
work-in-process was 70% completed, and the ending work-in-process was 60% completed.
Spoilage is detected at the end of the process. Using the weighted-average method, the
equivalent units for June, with respect to conversion costs, were
a. 42,000 c. 45,000
b. 44,000 d. 50,000

27. On November 1, Yankee Company had 20,000 units of WIP in Department No. 1. They were
100% complete as to materials costs and 20% as to conversion costs. During November,
160,000 units were started in Department No. 1, and 170,000 units were competed and
transferred to Department No 2. WIP on November 30 was 100% complete as to materials
costs and 40% complete as to conversion costs. By what amount would the equivalent units
for conversion costs for the month of November differ if the FIFO method were used instead of
the weighted-average method?
a. 20,000 decrease. c. 6,000 decrease.
b. 16,000 decrease. d. 4,000 decrease.

28. A manufacturing firm has a normal spoilage rate of 4% of the units inspected; anything over this
rate is considered abnormal spoilage. Final inspection occurs at the end of the process. The
firm uses the FIFO inventory flow assumption. The processing for the current month was as
follows:

Beginning work-in-process inventory 24,600 units

Units entered into production 470,400 units
Good units completed (460,800) units
Units failing final inspection (22,600) units
Ending work-in-process inventory 11,600 units

The equivalent units assigned to normal and abnormal spoilage for the current month would be

a. b. c. d.
Normal spoilage 904 units 18,432 units 18,816 units 19,336 units

Abnormal spoilage 21,696 units 4,168 units 3,784 units 3,264 units

29. Fabricating and Finishing are the two production departments of a manufacturing company.
Building Operations and Information Services are service departments that provide support to
the two production departments as well as to each other. The company employs department
overhead rates in the two production departments to allocate the service department costs to
the production departments. Square footage is used to allocate building operations, and
computer time is used to allocate information services. The costs of the service departments
and relevant operating data for the departments are as follows:

Building Information
Operations Services Fabricating Finishing

Costs:
Labor and benefit costs P200,000 P 300,000
Other traceable costs 350,000 900,000
Total P550,000 P1,200,000
Operating Data:
Square feet occupied 5,000 10,000 16,000 24,000
Computer time (in hours) 200 1,200 600

If the company employs the step method to allocate the costs of the service departments and if
information services costs are allocated first, then the total amount of service department costs
(Information Services and Building Operations) allocated to Finishing would be
a. P657,000 c. P730,000
b. P681,600 d. P762,000

30. A company has two service departments. Power and Maintenance, and two production
departments, Machining and Assembly. All costs are regarded as strictly variable. For
September, the following information is available:

Service Departments Production Departments

Power Maintenance Machining Assembly
Direct costs P62,500 P40,000 P25,000 P15,000

Actual activity:
Kilowatt hours 50,000 150,000 50,000
Maintenance hours 250 1,125 1,125

Assume the company uses the sequential or step method for allocating service department costs to
production departments. The company begins with the service department which receives the
least service from other service departments. What dollar amount of Power Department costs
will be allocated to the Maintenance Department for September?
a. P -–0-- c. P6,250
b. P12,500 d. P8,000

31. A chemical company which uses a joint process manufactures products O, P, and M, which are
derived from one input. The company allocated joint costs to the products in proportion to
the relative physical volume of output. The company may either sell the products at the point
of split-off or process them further in order to maximize profits. The following data were
obtained for February 2013:
If Processed Further
Number of Sales Price per Sales Price Add’l Cost
Units Unit Per Unit Per Unit
Produced At Split-off
O 2,000 P4,00 P5.00 P0.80
P 3,000 2.25 4.00 1.50
M 1,500 3.00 3.75 0.90

Joint production costs were P15,000. Additional processing on products O and P were performed,
while M was sold at the point of split-off. The gross profit of the company derived from the
production process for the month of February 2013 was:
a. P4,250 c. P5,400
b. P5,175 d. P6,525

32. Lankip Company produces two main products and a by-product out of a joint process. The
ratio of output quantities to input quantities or direct material used in the joint process remains
consistent from month to month. Lankip has employed the physical-volume method to
allocate joint production costs to the two main products. The net realizable value of the
by-product is used to reduce the joint production costs before the joint costs are allocated to
the main products. Data regarding Lankip’s operations for the current month are presented in
the chart below. During the month, Lankip incurred joint production costs of P2,520,000.
The main products are not marketable at the split-of-point, and this, have to be processed
further.

First Second
Main Product Main Product By-Product

Monthly output in pounds 90,000 150,000 60,000

Selling price per pound P30 P14 P2
Separable process costs P540,000 P660,000
The amount of joint production cost that Lankip would allocate to the Second Main Product by
using the physical-volume method to allocate joint production costs would be
a. P1,200,000 c. P1,500,000
b. P1,250,000 d. P1,575,000

33. A manufacturing company uses a joint production process that produces three products at the
split-off point. Joint production costs during April were $720,000. The company uses the
sales value method for allocating joint costs. Product information for April was as follows:

Product

R S T

Units produced 2,500 5,000 7,500

Units sold 2,000 6,000 7,000

Sales prices:

At the split-off P100 P80 P20

After further processing P150 P115 P30

Costs to process after split-off P150,000 P150,000 P100,000

Assume that all three products are main products and they can be sold at the split-off point or
processed further, whichever is economically beneficial to the company. What is the total cost of
Product S in April?
a. P375,000 c. P510,000
b. P390,000 d. P571,463

34. Company manufactures products N, P, and R from a joint process. The following information is
available:

N P R Total
Units produced 12,000 ? ? 24,000
Joint costs P 48,000 ? ? P120,000
Sales value at split-off ? ? P50,000 P200,000
Additional costs if processed further P 18,000 P14,000 P10,000 P 42,000
Sales value if processed further P110,000 P90,000 P60,000 P260,000

Assuming that joint product costs are allocated using the relative sales value at split-off approach,
what was the sales value at split-off for products N and P?

a. b. c. d.
Product N P66,000 P80,000 P98,000 P150,000
Product P P56,000 P70,000 P84,000 P 50,000

35. A joint process produces three products at the split-off point. Product A can be sold without
further processing at the split-off point. Products B and C require further processing before they
can be sold. There were no beginning or ending inventories for the year just ended. Joint
processing costs were P56,000, and separable costs were P12,000 for B and P8,000 for C. Sales
were as follows: 5,000 gallons of A at P1 per gallon, 3,000 gallons of B at P15 per gallon, and
4,000 gallons of C at P12.50 per gallon. The company uses the estimated net realizable value
method for allocating joint costs.

Assume that products B and C are treated as joint products and product A is treated as a
by-product. What is the amount of joint cost allocated to product C?

a. P28,560 d. P29,143
b. P32,000
c. P28,642
36. Before prorating the manufacturing overhead costs at the end of 2008, the Cost of Goods Sold
and Finished Goods Inventory had applied overhead costs of P57,500 and P20,000 in them,
respectively. There was no work in process at the beginning or end of 2008. During the year,
manufacturing overhead costs of P74,000 were actually incurred. The balance in the Applied
Manufacturing Overhead was P77,500 at the end of 2008. If the under- or over applied
overhead is prorated between cost of Goods Sold and the inventory accounts, how much is the
Cost of Goods Sold after the proration?
a. P54,903 c. P58,403
b. P56,597 d. P60,197

37. For Job Order No. 369, Escalera Company incurred the following costs for the manufacture of
200 units of a novelty gadget:

Original cost accumulation:

Direct materials P13,200
Direct labor 16,000
Factory overhead (150% of direct labor) 24,000
Total P53,200

Direct costs of ten reworked units:

Direct materials P 2,000
Direct labor 3,200
Total P 5,200

The rework cost was attributable to exacting specifications required by the job and was charged to
the specific order. The unit cost of Job Order No. 369 is:
a. P266 c. P292
b. P280 d. P316

38. Kuchen Manufacturing uses backflush costing to account for an electronic meter it makes.
During August 2008, the firm produced 16,000 meters of which it sold 15,800. The standard
costs for each meter is:

Direct materials P20

Conversion costs 44
Total P64

Assume that the company had no inventory on August 1. The following transactions took place in
August:
 Purchased P320,000 of direct materials.
 Incurred P708,000 of conversion costs.
 Applied P704,000 of conversion costs to Raw and In Process Inventory.
 Finished 16,000 meters.
 Sold 15,800 meters for P100 each.

Compute the (1)Finished Goods, Ending and the (2)amount of Cost of Goods Sold after the
adjustment of over-under applied conversion cost:
a. P -0-; P1,015,200 c. P -0-; P1,024,000
b. P12,800; P1,011,200 d. P12,800; P1,015,200

39. Read, Inc. instituted a new process in October 2008. During October, 10,000 units were started
in Department A. Of the units started, 8,000 were transferred to Department B. and 2,000
remained in Work In Process at October 31, 2008. The Work In Process at October 31, 2008 was
100% complete as to materials costs and 50% complete as to conversion costs. Material costs of
P27,000 and conversion costs of P36,000 were charged to Department A in October. What were
the total costs transferred to Department B assuming Department A uses weighted average
costing?
a. P46,900 c. P56,000
b. P53,600 d. P57,120
40. The following information is available for KC Company for the month of June:

Started this month 80,000 units

Beginning, WIP (40% complete) 7,500 units
Normal spoilage (discrete) 1,100 units
Abnormal spoilage (discrete) 900 units
Ending WIP, (70% complete) 13,000 units
Transferred out 72,500 units

Beginning Work in Process costs:

Materials P10,400
Conversion costs 13,800

Current Costs(added):
Materials P120,000
Conversion costs 350,000

All materials are added at the start of the production. Compute the cost per equivalent unit for
materials:

Under FIFO Under Average Under FIFO Under Average

e. P1.50 P1.49 g. P1.49 P1.50
f. P1.50 P1.50 h. P1.49 P1.49

41. Goodman Company’s direct labor costs:

Standard direct labor hours 30,000

Actual direct labor hours 29,000
Direct labor efficiency variance - favorable P4,000
Direct labor rate variance - favorable P5,800
Total payroll P110,200

Compute the (1)standard direct labor rate and (2) actual direct labor rate:
a. P3.80; P4.00 c. P3.54; P3.80
b. P4.00; P3.80 d. P4.00; P3.60

42. During January 2012, F2 recorded the following information pertaining to its inventory:
Units Unit Cost Total Cost
January 1, balance 20,000 P 10 P 200,000
January 15 sales 15,000
January 18 purchases 20,000 11 220,000
January 20 purchases 15,000 12 180,000
January 25 sales 24,000
January 30 purchases 14,000 15 210,000
January 31 sales 10,000

Using the first in first out (FIFO) method, what amount of inventory should F2 report in its January
31, 2012 balance sheet?
e. P 240,000 g. P 282,000
f. P 260,000 h. P 300,000

43. Redd Co. uses a standard cost system for its production process and applies overhead based on
direct labor hours. The following information is available for August when Redd made 4,500
units:

Standard:
DLH per unit 2.5
Variable overhead per DLH P1.75
Fixed overhead per DLH P3.10
Budgeted variable overhead P21,875
Budgeted fixed overhead P38,750
Actual:
 Direct labor hours 10,000
Variable overhead P26,250
Fixed overhead P38,000

Using the two-way variance approach, what is the controllable variance?

a. P5,812.50 U c. P4,375.00 U
b. P5,812.50 F d. P4,375.00 F

44. Dan Co. has an average unit cost of P45 at P10,000 units and P25 at 30,000 units. What is the
variable cost per unit?
e. P10 g. P20
f. P15 h. cannot be determined

45. For the period just ended, Lamba Company budgeted its variable overhead at P40 per direct
labor hour and fixed overhead at P480,000. Budgeted production volume was 8,000 units and
the production time, which was the basis for allocation of variable and fixed overhead, was
budgeted at .80 hour per unit. The actual results for the period were: fixed overhead, P552,000;
variable overhead P283,480; units produced, 7,460; direct labor hours used, 5,595. What was
the budgeted variable overhead for the actual volume attained?
a. P223,800 c. P238,720
b. P226,784 d. P283,480

46. Bagley Company has two service departments and two producing departments. Square footage
of space occupied by each department follows:

Custodial Services 1,000 ft.

General Administration 3,000 ft.
Producing Department A 8,000 ft.
Producing Department B 8,000 ft.
Total 20,000 ft

The department costs of Custodial Services are allocated on a basis of square footage of space. If
these costs are budgeted at P38,000 during a given period, the amount of cost allocated to General
Administration under the direct method would be
a. P15,200 c. P6,000
b. P 7,125 d. P -0-

Items 47 & 48 are based on the following:

A chemical company manufactures joint products Pep and Vim and a by-product Zest. Costs are
assigned to the joint products by the market value method, which considers the further processing
costs in subsequent operations. For allocating the joint costs to the by-product, the market value or
reversal cost method is used. The total manufacturing cost for 10,000 units were P172,000 during
the quarter. Production and cost data follow:

Pep Vim Zest

Units produced 5,0000 4,000 1,000
Sales price per unit P50 P40 P5
Further processing costs per unit 10 5 -0-
Selling and administrative expense per unit 2
Operating profit per unit 1

47. The value of Zest to be deducted from the joint costs is:
a. P5,000 c. P2,000
b. P3,000 d. P -0-

48. Compute the gross profit for Pep:

a. P -0- c. P 80,000
b. P70,000 d. P100,000

49. Clark Textiles Company manufactures various wood products that yield sawdust as a by-product.
The only costs associated with the sawdust are selling costs of P6 per ton sold. The company
accounts for sales of sawdust by deducting sawdust’s net realizable value from the major
 product’s cost of goods sold. Sawdust sales in 2008 were 12,000 tons at P40 each. If Clark
Textiles changes its method of accounting for sawdust sales to show the net realizable value as
other revenue (presented at the bottom of the income statement), how would its gross margin
and net income be affected?

Gross Profit Net Income

a. None None
b. P408,000 decrease P408,000 decrease
c. P408,000 increase None
d. P408,000 decrease None

50. Cain Velasquez manufactures wood cabinets. The following information are available for
February 2013

Beginning Ending
Raw Materials Inventory P 6,800 P7,500
Work In Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300

The direct labor is P9.60 per hour and overhead cost is applied at 80% of the direct labor costs.
Compute total manufacturing costs for June, if there were 1,500 direct labor hours and P21,000 raw
materials was purchased.
a. P46,220
b. P46,920
c. P47,620
d. P51,820