Saint Vincent College of Cabuyao

Brgy. Mamatid, City of Cabuyao, Laguna

Business Planning and Cost Accounting

MIDTERM EXAM
Name: Score:
Course & Section: Date:

Business Planning :
1. It refers to top management’s plans to develop and sustain competitive advantage-- a
state whereby a firm’s successful strategies cannot be easily duplicated by its
competitors-- so that the organization’s mission is fulfilled.
2. A broader term than strategy and is a process that includes top management’s analysis of
the environment in which the organization operates prior to formulating a strategy, as
well as the plan for implementation and control of the strategy
3. Enumerate the five steps in Strategic Management Process.
4. An effective strategy is built on the foundation of the organization’s business model, the
mechanism whereby the organization seeks to earn a profit by selling its goods or
services.
5. A branch of microeconomics, emphasizes the influence of the industry environment upon
the firm.
6. Refers to the board of directors, institutional investors (e.g., pension and retirement
funds, mutual funds, banks, insurance companies, among other money managers), and
large shareholders known as block holders who monitor firm strategies to ensure
effective management.
7. Obstacles to entering an industry, including economies of scale, brand identity and
product differentiation, capital requirements, switching costs, access to distribution
channels, cost disadvantages independent of size, and government policy.

Cost Accounting:

1. The Work in Process inventory account of a manufacturing company shows

a balance of P2,400 at the end of an accounting period. The job cost sheets of
the two uncompleted jobs show charges of P400 and P200 for direct materials,
and charges of P300 and P500 for direct labor. From this information, it
appears that the company is using a predetermined overhead rate, as a
percentage of direct labor costs, of:

2. Freeman Company uses a predetermined overhead rate based on direct labor

hours to apply manufacturing overhead to jobs. At the beginning of the year,
the company estimated manufacturing overhead would be P150,000 and direct
labor hours would be 10,000. The actual figures for the year were P186,000 for
manufacturing overhead and 12,000 direct labor hours. The cost records for the
year will show underapplied or overapplied overhead of how much?:

3. Harrell Company uses a predetermined overhead rate based on direct labor

hours to apply manufacturing overhead to jobs. At the beginning of the year
the company estimated its total manufacturing overhead cost at P400,000 and
its direct labor-hours at 100,000 hours. The actual overhead cost incurred
during the year was P350,000 and the actual direct labor hours incurred on jobs
during the year was 90,000 hours. The manufacturing overhead for the year
would be underapplied or overapplied of how much?

4. For the current year, Paxman Company incurred P150,000 in actual

manufacturing overhead cost. The Manufacturing Overhead account showed
that overhead was overapplied in the amount of P6,000 for the year. If the
predetermined overhead rate was P8.00 per direct labor hour, how many hours
were worked during the year?

5. Carlo Company uses a predetermined overhead rate based on direct labor

hours to apply manufacturing overhead to jobs. The company estimated
manufacturing overhead at P255,000 for the year and direct labor-hours at
100,000 hours. Actual manufacturing overhead costs incurred during the year
totaled P270,000. Actual direct labor hours were 105,000. What was the
overapplied or underapplied overhead for the year?

6. Sawyer Manufacturing Company uses a predetermined overhead rate based

on direct labor hours to apply manufacturing overhead to jobs. Last year, the
company worked 57,000 actual direct labor hours and incurred P345,000 of
actual manufacturing overhead cost. The Company had estimated that it would
work 55,000 direct labor hours during the year and incur P330,000 of
manufacturing overhead cost. The company's manufacturing overhead cost for
the year was underapplied of overapplied of how much?

7. Compton Company uses a predetermined overhead rate in applying

overhead to production orders on a labor cost basis in Department A
and on a machine hours basis in Department B. At the beginning of the
most recently completed year, the company made the following
estimates:

Dept. A Dept. B
Direct labor cost ........ P56,000 P33,000
Factory overhead ......... 67,200 45,000
Direct labor hours ....... 8,000 9,000
Machine hours ............ 4,000 15,000

What predetermined overhead rate would be used in Department A and

Department B, respectively?

8. Kelsh 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 .................. P10,000

Direct labor ...................... 30,000
Sales commissions ................. 40,000
Salary of production supervisor ... 20,000
Indirect materials ................ 4,000
Advertising expense ............... 8,000
Rent on factory equipment ......... 10,000

9. Kelsh estimates that 5,000 direct labor hours and 10,000 machine
hours will be worked during the year. The predetermined overhead
rate per hour will be:

Simplex Company has the following estimated costs for next year:

Direct materials .................... P15,000

Direct labor ........................ 55,000
Sales commissions ................... 75,000
Salary of production supervisor ..... 35,000
Indirect materials .................. 5,000
Advertising expense ................. 11,000
Rent on factory equipment ........... 16,000

Simplex estimates that 10,000 direct labor and 16,000 machine hours will be
worked during the year. If overhead is applied on the basis of machine hours,
the overhead rate per hour will be:

10. CR Company has the following estimated costs for the next year:

Direct materials ..................... P 4,000

Direct labor ......................... 20,000
Rent on factory building ............. 15,000
Sales salaries ....................... 25,000
Depreciation on factory equipment .... 8,000
Indirect labor ....................... 10,000
Production supervisor’s salary ....... 12,000

CR Company estimates that 20,000 labor hours will be worked during the year.
If overhead is applied on the basis of direct labor hours, the overhead rate per
hour will be:
11. Lucy Sportswear manufactures a specialty line of T-shirts. The company uses a job-order
costing system. During March, the following costs were incurred on Job ICU2: direct materials
P13,700 and direct labor P4,800. In addition, selling and shipping costs of P7,000 were
incurred on the job. Manufacturing overhead was applied a the rate of P25 per machine-hour
and Job ICU2 required 800 machine-hours. If Job ICU2 consisted of 7,000 shirts, the Cost of
Goods Sold per shirt was:

12. Lucas Co. has a job order cost system. For the month of April, the
following debits (credits) appeared in the Work in Process
account:

April
1 Balance .................. P 24,000
30 Direct materials ......... 80,000
30 Direct labor ............. 60,000
30 Manufacturing overhead ... 54,000
30 To finished goods ........ (200,000)

Lucas applies overhead at a predetermined rate of 90% of direct labor cost. Job
No. 100, the only job still in process at the end of April, has been charged with
manufacturing overhead of P4,500. The amount of direct materials charged to
Job No. 100 was:

13. Worrell Corporation has a job-order cost system. The following

debits (credits) appeared in the Work in Process account for the
month of March:

March 1, balance ....................... P 12,000

March 31, direct materials ............. 40,000
March 31, direct labor ................. 30,000
March 31, manufacturing overhead applied 27,000
March 31, to finished goods ............ (100,000)

14. Worrell applies overhead at a predetermined rate of 90% of direct

labor cost. Job No. 232, the only job still in process at the end of
March, has been charged with manufacturing overhead of P2,250.
What was the amount of direct materials charged to Job No. 232?

15. Beaver Company used a predetermined overhead rate last year of

P2 per direct labor hour, based on an estimate of 25,000 direct
labor hours to be worked during the year. Actual costs and
activity during the year were:

Actual manufacturing overhead cost incurred P47,000

Actual direct labor hours worked .......... 24,000
 The under- or overapplied overhead last year was:

16. Dowan Company uses a predetermined overhead rate based on direct labor
hours to apply manufacturing overhead to jobs. Last year Dowan Company
incurred P156,600 in actual manufacturing overhead cost. The Manufacturing
Overhead account showed that overhead was underapplied by P12,600 for the
year. If the predetermined overhead rate is P6.00 per direct labor hour, how
many hours did the company work during the year?

17. Paul Company used a predetermined overhead rate during the year just
completed of P3.50 per direct labor hour, based on an estimate of 22,000
direct labor hours to be worked during the year. Actual overhead cost and
activity during the year were:

Actual manufacturing overhead cost incurred .. P90,000

Actual direct labor hours worked ............. 25,000

The under- or overapplied overhead for the year would be:

18. Sweet Company applies overhead to jobs on the basis of 125% of direct
labor cost. If Job 107 shows P10,000 of manufacturing overhead applied, how
much was the direct labor cost on the job?

19. Knowlton Company applies overhead to completed jobs on the basis of 70% of direct labor
cost. If Job 501 shows P21,000 of manufacturing overhead applied, the direct labor cost on the
job was:

20. Under Lamprey Company's job-order costing system, manufacturing overhead is applied to
Work in Process inventory using a predetermined overhead rate. During January, Lamprey's
transactions included the following:

Direct materials issued to production .... P 90,000

Indirect materials issued to production .. 8,000
Manufacturing overhead cost incurred ..... 125,000
Manufacturing overhead cost applied ...... 113,000
Direct labor cost incurred ............... 107,000

Lamprey Company had no beginning or ending inventories. What was the cost of goods
manufactured for January?

21. Compute the amount of direct materials used during November if P20,000 in raw materials
were purchased during the month and if the inventories were as follows:

Balance Balance
November 1 November 30
Raw materials .... P 4,000 P 3,000
 Work in process .. 12,000 15,000
Finished goods ... 24,000 27,000

Wayne company uses a job costing system and applies overhead to jobs using a predetermined
overhead rate based on direct labor-hours. The company had the following inventories at the
beginning and end of March:

March 1 March 31
Direct Materials....... P36,000 P30,000
Work in Process........ 18,000 12,000
Finished Goods......... 54,000 72,000

The following additional data pertain to operations during March:

Direct materials purchased... P84,000

Direct labor cost............ P60,000
Direct labor rate............ P7.50 per direct labor-hour
Overhead rate................ P10.00 per direct labor-hour

22. During March total debits to Work in Process were:

a. P84,000.
b. P220,000.
c. P144,000.
d. P230,000.

23. The Cost of Goods Manufactured for March was:

a. P212,000.
b. P218,000.
c. P230,000.
d. P236,000.

Hamilton Company uses job-order costing. Manufacturing overhead is applied using a

predetermined rate of 150% of direct labor cost. Any over- or underapplied manufacturing
overhead is closed to the Cost of Goods Sold account at the end of each month. Additional
information is available as follows:

 Job 101 was the only job in process at January 31. The job cost sheet for
this job contained the following costs at the beginning of the month:

Direct materials .................. P4,000

Direct labor ...................... P2,000
Applied manufacturing overhead .... P3,000
 Jobs 102, 103, and 104 were started during February.
 Direct materials requisitions for February totaled P26,000.
 Direct labor cost of P20,000 was incurred for February.
 Actual manufacturing overhead was P32,000 for February.
 The only job still in process at February 28 was Job 104, with costs of
P2,800 for direct materials and P1,800 for direct labor.

24. The cost of goods manufactured for February was:

a. P77,700.
b. P78,000.
c. P79,700.
d. P85,000.

25. For the month of February, the manufacturing overhead was:

a. P700 overapplied.
b. P1,000 overapplied.
c. P2,000 overapplied.
d. P2,000 underapplied.

The Milo Company's records for May contained the following information:

Actual direct labor-hours ....... 9,000 hours

Actual direct labor cost ........ P 47,000
Direct material purchased ....... 16,000
Direct material used ............ 14,000
Cost of goods sold .............. 100,000
Overapplied overhead ............ 5,000
Ending inventories:
Raw materials ................. 30,000
Work in process ............... 50,000
Finished goods ................ 70,000

The company uses a predetermined overhead rate of P5.00 per direct labor
hour to apply manufacturing overhead to jobs.

26. The actual overhead cost incurred during the month was:
a. P50,000.
b. P55,000.
c. P40,000.
d. P45,000.
27. The total cost added to Work in Process during May was:
a. P101,000.
b. P106,000.
c. P61,000.
d. P111,000.