POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

SIMULATED MIDTERM EXAMINATION
COST ACCOUNTING

I. THEORIES

1. Cost and management accounting

a. Require an entirely separate group of accounts than financial accounting uses.
b. Provide product/service cost information as well as information for internal decision making.
c. Focus solely on determining how much it costs to manufacture a product or provide a service.
d. Are required for business recordkeeping as are financial and tax accounting.

2. Which of the following statements about cost accounting is not true?

a. Is the intersection between financial and management accounting.
b. Information generated by cost accounting is used by both financial and managerial accounting.
c. Cost accounting provides product cost information to internal parties such as managers for planning
and controlling.
d. Cost accounting provides cost information to internal users only.

3. Which of the following is not an internal user?

a. Creditor c. Department manager
b. Cost accountant d. Controller

4. Statement 1: Variable costs are costs that change, in total, in direct proportion to changes in the level of
activity
Statement 2: Total fixed costs decrease with increase in the number of units produced and increase
with decrease in output.
a. True, True c. False, False
b. False, True d. True, False

5. For a manufacturing company, the cost of goods available for sale during a given accounting period is
a. The beginning inventory of finished c. The sum of the above
goods d. None of the above
b. The cost of goods manufactured during
the period

6. If the amount of “Cost of Goods manufactured” during a period exceeds the amount of “Total
Manufacturing costs” for the period, then
a. Ending work in process inventory is greater than or equal to the amount of the beginning work in
process inventory.
b. Ending work in process inventory is greater than the amount of the beginning work in process
inventory.
c. Ending work in process inventory is equal to the cost of goods manufactured.
d. Ending work in process inventory is less than the amount of the beginning work in process
inventory.

7. The form prepared by the factory and sent to the inventory warehouse to obtain materials is known as
a:
a. Materials requisition form c. Purchase order form
b. Purchase requisition form d. Vendor’s invoice

8. The cost accounting system that significantly reduces inventory carrying costs is called:
a. JIT system b. Process costing
 c. Activity-based costing d. Job order cost system

9. In JIT operations, Raw Materials Inventory account

a. Is closely monitored to ensure that materials are always on hand in time
b. Can be expected to have a larger balance that with traditional manufacturing methods.
c. Is combined with the work in Process account
d. Is combined with the Finished Goods Inventory account

10. Statement 1: Indirect materials/factory supplies are classified as administrative expenses.

Statement 2: A factory supervisor’s salary would be classified as a direct cost of a unit of product.
a. True, True c. False, False
b. False, True d. True, False

11. In general, idle time of direct labor is classified as:

a. Overhead
b. Direct labor
c. Period cost
d. Not accounted because nothing is produced

12. Overtime wages, exclusive of overtime premium paid to the direct laborers should be:
a. Included as part of direct labor costs
b. Considered as part of manufacturing overhead
c. Treated as general and administrative costs
d. Treated as selling costs

13. TRUE or FALSE. If actual overhead is greater than the applied overhead, the variance is unfavorable
termed as underapplied overhead.
a. True
b. False
c. It depends
d. Situation is not possible

14. When the overhead variance is insignificant, the difference is closed to

a. FGI
b. WIP
c. RMI
d. COGS

15. The formula for computing the total overhead variance is:
a. Actual OH – Applied OH
b. Budgeted OH – Applied OH
c. Actual OH – Budgeted OH
d. No answer given

16. At the end of a period, after overhead has been applied to all jobs, Manufacturing Overhead has a
credit balance of P100.00. We say that overhead is
a. Misstated
b. Incorrectly applied
c. Over applied
d. Under applied

17. This service cost allocation method considers completely all interrelationships among all service
departments.
a. Direct method
b. Step method
c. Simultaneous method
 d. Sequential Method

18. What account is debited when materials are purchased in JIT system?
a. Raw materials Inventory
b. Raw and In process Inventory
c. Direct materials Inventory
d. No entry upon purchase

19. The principal difficulty with normal costing is that

a. The unit cost information is not received on a timely basis
b. It can result in fluctuating per-unit overhead cost
c. Estimated overhead and estimated activity are likely to differ from actual overhead and actual costs,
resulting in underapplied or overapplied overhead
d. There is no difficulty associated with using normal costing

20. Each group of overhead costs should be applied based on

a. Direct labor hours or cost
b. Units produced
c. Whatever activity drives those specific overhead costs
d. Machine time

21. It is a cost accounting system that focuses on an organization’s activities and collects costs on the
basis of the underlying nature and extent of those activities.
a. Activity based management c. Process costing
b. Activity based costing d. Job order costing

22. Statement 1: A non-value-added (NVA) activity increases the cost of product or services without adding
product or service value.
Statement 2: A value-added (VA) activity increases the worth of a product or service.
a. Only statement 1 is true. c. Both statements are true.
b. Only statement 2 is true. d. Both statements are false.

23. Statement 1: Cost drivers allow costs to be pooled together such that they have a common activity
base that can be used to allocate those costs to products or services.
Statement 2: Cost drivers does not promote the effective and efficient management of costs.
Statement 3: Cost drivers help identify costs related to product variety and product/process complexity
a. Only statement 1 is correct. c. Statement 1 and 3 are incorrect.
b. Only statement 2 is incorrect. d. All statements are correct

24. Activity based costing is appropriate in an organization that:

a. Produces and sells a wide variety of products or services.
b. Uses a wide range of techniques to manufacture products or to provide services.
c. Has experienced significant changes in its business environment, including widespread adoption of
new technologies.
d. All of the above.

25. The primary benefit of activity-based costing is it provides

a. Faster management decision
b. Enhanced control over overhead costs
c. More cost pools
d. More accurate product costing

26. In allocating factory service department costs to producing departments, which one of the following
items would most likely be used as an activity base.
a. Units of product sold
b. Salary of service department employees
 c. Units of electric power consumed
d. Direct material usage

27. All of the following items are debited to the Work in Process account except
a. Direct labor consumed
b. Allocated manufacturing overhead
c. Completed goods being transferred out of the plant
d. Direct materials consumed

28. The cost of rework units that are normal and due to the nature of the particular jobs should be charged
to
a. Loss account c. Work in process
b. Factory overhead d. Materials
29. Unacceptable units of production that are subsequently repaired and sold as acceptable finished
goods.
a. Defective units c. Spoilage
b. Scrap d. Reworked units
30. In developing a predetermined factory overhead application rate for use in production, which of the
following could be used in the numerator and denominator?
Numerator Denominator
a. Actual FOH Actual Machine Hours
b. Actual FOH Estimated Machine Hours
c. Estimated FOH Actual Machine Hours
d. Estimated FOH Estimated Machine Hours
II. PROBLEMS

31. The following were from the books of YG Company for August 2019.
Inventories August 1, 2019 August 31, 2019
Raw Materials P ? P 20,000
Work in Process 90,000 100,000
Finished goods 120,000 180,000
Raw Materials purchased 100,000
Factory Overhead, 75% of direct labor cost 126,000
Selling and Administrative expense, 10% of sales 50,000
Net Income for August 2019 50,000
What is the inventory of raw materials as of August 1?
a. P 94,000 b. P 96,000 c. P 86,000 d. P 125,000

32. The FINESTS Manufacturing Company has a cycle time of 2.0 days, uses a Raw and In Process
account (RIP) and charges all conversion cost to Cost of Goods Sold. At the end of each month, all
inventories are counted, their conversion cost components are estimated, and inventory account
balances are adjusted. Raw materials cost is back flushed from RIP to Finished Goods. The following is
for the month of May.
RIP beginning, including P 7,200 of conversion cost P 14,500
FG beginning, including P 8,800 of conversion cost 16,000
Materials purchased on credit 246,000
RIP end, including P 15,700 of conversion cost 22,400
FG end, including P 13,100 of conversion cost 19,800
Conversion cost – P 98,000 of direct labor and P 125,000 of overhead
Compute for materials backflushed from Finished Goods to Cost of Goods Sold.
 a. P 247,100 b. P 246,600 c. P 238,100 d. P 234,300

33. The following information relates to JPIA Company

Units required per year 60,000

Cost of placing an order P 900
Carrying cost per unit per year P 1,200
Assuming that the units will be required evenly throughout the year, what is the EOQ?
a. 200 b. 450 c. 300 d. 400

34. The following information pertains to Material X used by NMMC Company

Annual usage in units 20,000
Working days per year 250
Safety stocks in units 800
Normal lead time in working days 30
If units of Material X will be required evenly throughout the year, the reorder point is
a. 3,000 b. 3,200 c. 2,400 d. 2,600

35. BP Company produces and sells a single item of product. Inventory at the beginning of September was
400 units valued at P 1.80 per unit. Further receipts and sales during the month were as follows
Units Cost per unit
September 8 Receipts 600 P 2.10
20 Receipts 500 ?
25 Sales 1,250 4.00
The inventory uses the FIFO method of stock valuation. Gross margin for September was P 2,500.
What was the cost per unit of the 500 units received on September 20?
a. P 1.04 b. P 1.94 c. P 2.00 d. P 2.08

36. Lisa Motors Co. makes motorcycles. Management wants to estimate overhead costs to plan its
operations. A recent trade publication revealed that overhead costs tend to vary with machine hours. To
check this, they collected the following data for the past 4 months.
Month No. Machine Hours Overhead costs
1 2700 P 5,000
2 3000 5,400
3 2500 5,200
4 2,000 4,800
Using the high-low method, how much is the overhead costs if the actual machine hours used is 2,200?
a. P5,000 b. P1.320 c. P4,920 d. P3,600

37. The balance sheet of Jennie Manufacturing Company showed the following balances on August 1:
Finished Goods P1,500,000
Work in Process 1,200,000
Raw Materials 2,000,000
st
During the 1 quarter of the year, prime cost amounted to P13,680,000 while conversion cost
amounted to P8,740,000. The average direct labor rate was P38.50 and overhead was applied at
P34.65 per direct labor hour. Purchase of raw materials were P10M while costs of goods manufactured
was P17,620,000. The company continues its pricing policy to maintain a gross profit rate of 30%. At
the end of the quarter, costs of sales amounted to P18,220,000.
 The change in work in process inventory and finished goods inventory respectively during the first
quarter of the year was:
a. Decrease of P200,000, Increase of c. Increase of 4,400,000, Increase of
P600,000 P1,200,000
b. Increase of P200,000, Decrease of d. No change, No change
P600,000

38. During the month of September 2019, Chaeyoung Manufacturing Co. incurred P 30,000, P 40,000 and
P 20,000 of direct material, direct labor and factory overhead costs respectively.

If the cost of goods manufactured was P 95,000 in total and the ending work in process inventory was
P 15,000, the beginning work in process must have been
a. P20,000 c. P50,000
b. P30,000 d. P25,000

39. The following information is to be used in costing inventory on August 31.

August 1 Beginning balance 1,600 units at 6.00
5 Purchased 400 units at 7.00
9 Purchased 400 units at 8.00
16 Issued 800 units
24 Purchased 600 units at 9.00
27 Issued 1,000 units

Using the Average inventory method, how much is the cost of materials issued?
a. P11,400 b. P8,620 c. P11,000 d. P12,380

40. Jisoo buys baseball bats from a manufacturer at 10 each. Jisoo expects to sell 90,000 bats evenly over
the next year. Jisoo’s cost of capital is 10 percent. The total out-of-pocket cost to carry one bat in
inventory is P0.50 and the cost of ordering bats is P 15 per order.

Suppose that Jisoo orders 3,000 bats at a time. What is the total annual inventory cost?

a. P 750 c. P 2,250
b. P 1,200 d. P 2,700

41. Emil Inc. accepted 1,000 custom-designed computer monitors from PUP Video Shack on July
2018. The following cost information is available in connection with this order.

Direct materials used:

Material A: 1 unit costing P120 per monitor
Material B: 1 unit costing P240 per monitor
Direct labor used:
Assembly:6 hours per monitor at the rate of P38.75 per hour
Inspection: 1 hour per monitor at the rate of P45 per hour
In addition, manufacturing support costs are applied to the job at the rate of P25 per direct
labor hour.
The cost per monitor is:
 a. P812.50 c. P618.75
b. P787.50 d. P637.50

42. The following information has been taken from the cost records for Dana Co. for the past year:
Raw materials used in production P350,000
Prime costs for the period P551,000
Conversion cost for the period P360,000
(OH applied is equal to 60% of direct labor)
Cost of goods available for sale P826,000
Selling and Administrative expenses P 25,000

Inventories Beginning Ending

Raw Materials P 75,000 P 85,000
WIP 80,000 30,000
FGI 90,000 110,000

Raw material purchases for the period amounted to:

a. P340,000 c. P360,000
b. P316,000 d. P336,000
43. Based on the above information, how much is the direct labor incurred?
a. P230,000 c. P135,000
b. P225,000 d. P326,000
44. Judith Co. uses job order costing and the following information is available from its records.

Job in process
Job 100, Job 200 and Job 300
Raw materials used, P400,000; Direct labor per hour, P68.50
Predetermined overhead rate, 120% of DLC.

Direct materials were requisitioned as follows: 30% to Job 100; 25% to Job 200; and 25% of
Job 300. Direct labor hours per job are: 2,500 for Job 100; 3,100 for Job 200 and 4,200 for
Job 300. Indirect labor is P233,000 while other actual overhead costs amounted to
P536,000, excluding indirect materials

The total factory costs for the period amounted to:

a. P633,040 c. P1,796,860
b. P1,796,740 d. P1,876,860

45. Based on the above, how much is the under or over application of overhead?

a. P36,560 overapplied
b. P36,560 underapplied
 c. P43,330 overapplied
d. P43,440 underapplied

46. Mark compute predetermined overhead rate based on the following information:

Monthly budgeted overhead = P1,200,000 + (160% of DL cost)

Its monthly direct labor cost is P2,000,000

The cost data for the month of January 2018 follows:

Total Jobs Sold WP, End FG, End
Material 1,300,000 1,020,000 160,000 120,000
DL Cost 2,020,000 1,640,000 200,000 180,000

Actual overhead cost for the month is P4,200,000.

The budgeted factory overhead for the year is:

a. P52,800,000
b. P4,400,000
c. P5,280,000
d. P8,800,000

47. Bien Company produces reusable Christmas cards in two departments: Printing and Laminating. These
departments are supported by two service departments: Personnel and Maintenance. Personnel
Department uses the number of employees as an allocation base while Maintenance Department uses
machine hours. The expected level of activity for the 1 st quarter of 2018 is shown below:

No. of employees Machine hours

Personnel 40 -
Maintenance 60 -
Printing 120 60,000
Laminating 180 40,000
Allocations are made in the order shown above. Budgeted costs for the 1 st quarter are P93,000 for
Personnel; and P68,000 for Maintenance.
What is the total amount of service costs that should be allocated to the Printing Department under the
direct method?

a. P68,700
b. P77,070
c. P78,000
d. P81,100

48. Using the information above, how much of the service cost is allocated to Printing Department using
step method?

a. P79,900
b. P83,000
c. P81,100
d. P68,700
49. You are given the following data for MAX Company’s operations for January 2018:

Purchase of raw materials on account P 70,000

Raw materials inventory, January 1 13,000
Raw materials inventory, January 31 10,000
Indirect materials used 4,000
Factory labor cost of which P2,000 was indirect 30,000
Other overhead costs incurred 22,000
WIP, January 1 16,000
WIP, January 31 20,000
FGI, January 1 40,000
FGI, January 31 25,000
COGS, normal 150,000

The rate of overhead applied based on direct labor cost was:

a. 66-2/3%
b. 100%
c. 120%
d. 150%

50. Yuri Co. uses budgeted factory overhead rate based on machine hours. For the month of February,
Yuri Co.’s budgeted overhead was P300,000 based on budgeted volume of 10,000 machine hours.
Actual overhead amounted to P325,000 with actual hours of 11,000.

How much was the over-applied or under-applied overhead?

a. P30,000 over
b. P30,000 under
c. P5,000 over
d. P5,000 under

51. Blackpink Company incurs P160,000 of overhead cost each year in its three main departments, setup
(P10,000), machining (P110,000) and packing (P40,000). The setup department performs 40 setups
per year, the machining department works 5,000 hours per year, and the packing department packs
500
orders per year. Information about Blackpink's two products is as follows:

Product JenLisa Product ChaeSoo

Number of setups 20 20
Machining hours 1,000 4,000
Orders packed 150 350
No. of products manufactured 600 400

Determine the pool rates for setup, machining and packing.

a. P250/setup, P22/mhr, P80/packed orders
b. P240/setup, P24/mhr, P70/packed orders
c. P350/setup, P23/mhr, P90/packed orders
d. P300/setup, P34/mhr, P65/packed orders

52. Using activity-based costing, how much overhead is assigned to Product JenLisa each year?
a. P32,000 b. P39,000 c. P120,000 d. P121,000
 53. Using activity-based costing, how much overhead is assigned to Product ChaeSoo each year?
a. P32,000 b. P39,000 c. P120,000 d. P121,000

54. If Product JenLisa and Product ChaeSoo has a prime cost of 100,000 and P200,000; And a conversion
cost of P80,000 and P180,000, respectively. Which of the following statement is correct?
a. Product JenLisa and Product ChaeSoo has a total manufacturing cost of P119,000 and P301,000
respectively.
b. Product JenLisa has P231.67 and Product ChaeSoo has P802.50 manufacturing cost per unit.
c. Product JenLisa and Product ChaeSoo has a total manufacturing cost of P239,000 and P221,000
respectively.
d. Product JenLisa has P198.33 and Product ChaeSoo has P752.50 manufacturing cost per unit.

55. Using the information in no. 4, the total manufacturing cost of Product Chaesoo is
a. P139,000 b. P321,000 c. P119,000 d. P301,000

56. Liwayway Company employs a job order cost system. Its manufacturing activities in July 2019, 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 cost P6,600 P6,000 P8,400 P2,400
Direct labor hours 1,100 1,000 1,400 400
Units produced 200 100 1,000 300

Manufacturing overhead is applied at a rate of P2 per direct labor hour for variable overhead, P3 per
hour for fixed overhead.
Jobs 1201, 1202 and 1203 were completed in July.
What is the cost of the completed jobs?

a. P62,900 c. P72,900
b. P62,500 d. P65,900

57. The following selected information pertains to Isagon Processing Company: direct materials, P62,500;
indirect materials, P12,500; factory payroll, P75,000 of direct labor and P11,250 of indirect labor; and other
factory overhead incurred, P37,500.

Total conversion cost was:

a. P136,250 c. P250,000
b. P137,500 d. P273,750

58. Patrick uses a job order cost system and applies factory overhead to production orders on the basis of
direct-labor cost. The overhead rates for 2019 are 200% for Department A and 50% for Department B. Job
123, started and completed during 2019, was charged with the following costs:

Department
A B
Direct materials P25,000 P5,000
Direct labor ? P30,000
Factory overhead P40,000 ?
The total manufacturing cost associated with Job 123 should be
 a. P135,000 c. P195,000
b. P170,000 d. P240,000

59. The Nahirang Company uses a predetermined overhead rate. Nahirang prepared the following budget at
the beginning of the year:

Direct labor cost………………………………………………….. P12,000

Factory overhead…………………………………………………. P25,000
Direct labor hours………………………………………………… 9,000
Machine hours………………………………………………………. 1,500
During the month of January, the cost sheet order for order number 100 indicates P20 of raw materials,
P50 of direct labor, 10 hours of direct labor, and 5 machine hours. Order number 100 consists of 49
units of product. Nahirang applies overhead based on direct labor cost. What amount of overhead
should be applied to order number 100?

a. P50.00 c. P20.00
b. P104.17 d. P97.62

60. During March, Harot Company incurred the following costs on Job 109 for the manufacture of 200
motors:
Original cost accumulation:
Direct materials……………………………………… P 660
Direct labor……………………………………………… 800
Factory overhead (150% of DL)…………………… 1,200
P2,660
Direct costs of reworking 10 units:
Direct materials………………………………………. P 100
Direct labor……………………………………………… 160
P 260
The rework costs were attributable to the exacting specifications of Job 109, and the full rework costs
were charged to this specific job. What is the cost per finished unit of Job 109?

a. P 15.80 c. P 14.00
b. P 14.60 d. P 13.30

61. Using the same information above, 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. P 15.80 c. P 14.00
b. P 14.60 d. P 13.30

62. A company allocates overhead to jobs in process using direct labor costs, 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 hour
A particular production run incurred the following costs:
Direct labor, P8,000
Raw materials, P2,000
A total of 140 machine hours were required for the production run

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

a. P18,000 c. P34,780
b. P18,400 d. None of the answers are correct
63. PUP allocates support department costs to its individual schools using the step method. Information for
May 2019 is as follows:

Support Department
Maintenance Power
Costs incurred……………………………………… P99,000 P54,000
Service percentages provided to:
Maintenance………………………………… – 10%
Power……………………………………………… 20% -
School of Education………………………………… 30% 20%
School of Accountancy……………………………… 50% 70%
100% 100%

What is the amount of May 2019 support department costs allocated to School of Education?

a. P40,500 c. P46,100
b. P42,120 d. P49,125

64. Rem Company has two service departments (A and B) and two producing departments (X and Y). Data
provided are as follows:

Service Department Operating Department

A B X Y
Direct costs P150 P300 P5,000 P6,000
Services performed by Dept A - 40% 40% 20%
Services performed by Dept B 20% - 70% 10%

Rem Company uses the direct method to allocate service department costs. The service
department cost allocated to Department Y is:

a. P 50.00 c. P 87.50
b. P 60.00 d. P 150.00

65. Using the same information above, what is the total cost for Department X?
a. P5,000.00 c. P5,087.50
b. P5295.83 d. P5,270.00