QUIZ 2 – COST ACCOUNTING

Prepared by: Olivo, CPA, MBA

Part 1: True or False

1. Factory overhead includes all manufacturing costs which may be variable or fixed, except direct material and
direct labor.
2. Wages earned by machine operators in producing the firm’s product should be categorized as direct labor.
3. In cost accounting, the term “relevant range” refers to the range over which the cost relationships are invalid.
4. A fixed cost is constant per unit of change in production.
5. Job Order Costing is the best cost accumulation procedure to use when many batches, each differing as to
product specification, are produced.
6. The fixed portion of the semi-variable cost of electricity for a manufacturing plant is both factory overhead cost
and period cost.
7. In a job order cost system, the application of factory overhead would usually be reflected in the general ledger
as an increase in work in process.
8. In a job order cost system, direct labor costs usually are recorded initially as an increase in factory overhead
control.
9. Underapplied factory overhead results when factory overhead costs incurred are less than the costs charged to
production.
10. In a job order cost system, the use of direct materials previously purchased usually is recorded as a decrease in
work in process.

Part 2: Problem
Provide the journal entry for the following. Prepare the entries (online exam in canvas may include questions about
journal entries on these transactions)

The following events took place at the Rounin Company over the past year.
Incurred direct labor costs of P47, 000
Purchased manufacturing equipment for P75, 000
Purchased direct materials for P176, 000
Incurred manufacturing overhead of P81, 000
Transferred 73% of the direct materials to work in process
Completed work on 85% of the goods in work in process
Sold 90% of the completed goods
Marketing and administrative costs were P85, 000
Sales amounted to P400, 000

There were no beginning balances in any of the inventory accounts. Costs are assigned equally across all work in process
Based on the above data:
11. What is the cost of goods sold?
12. What is the company’s net income or net loss?
13. How much is the value of the ending finished goods inventory?

The following events took place at the Dream Company for the current year.
Purchased P120, 000 in direct materials
Incurred labor costs as follows
Direct labor, P72, 000
Supervisor labor, P26, 000
Purchased manufacturing equipment for P94, 000
 Other manufacturing overhead (excluding supervisor labor) was P88, 000
Transferred 80% of the materials to the manufacturing assembly line
Completed work on 70% of the goods in process. Costs are assigned equally across all work in process
Sold 60% of the completed goods

There were no beginning balances in the inventory accounts. All costs incurred were debited to the appropriate account
and credited to accounts payable. Provide the following:

14. Ending balance in direct materials inventory

15. The cost of goods sold

The financial records of Ram Company have been destroyed in a fire. The following information has been obtained from
a separate set of books maintained by the accountant. The accountant now requires your assistance in computing the
missing items.

16. What is the amount of direct materials transferred out?

17. What is the amount of direct materials purchased?
18. What is the cost of goods transferred out of work in process?
19. What is the ending work in process inventory?
20. What is the cost of goods transferred out of finished goods inventory?

21. For the year 2009, the gross margin of Jumbo Co. was P96, 000; the cost of goods manufactured was P340, 000;
the beginning inventories of work in process and finished goods were P28, 000 and P45, 000 respectively; and
the ending inventories of work in process and finished goods were P38, 000 and P52, 000 respectively. The sales
of Jumbo Co. for 2009, must have been ______

Last month, Babe Company placed P60,000 of materials into production. The printing department used 8,000 labor
hours at P5.60 per hour and the binding department used 4,600 hours at P6.00 per hour. Factory overhead is applied at
a rate of P6.00 per labor hour in the printing department and P8.00 per labor in the binding department. Babe’s
inventory accounts show the following balances:
Beginning Ending

Finished Goods P22,000 P17,000

Work in Process P15,000 P17,600
 Materials P20,000 P18,000

22. What is the cost of goods sold?

The following data were taken from the record of Best Company
08/31/2019 09/30/2019
Inventories
Raw Materials ? P50,000
Work in process P80,000 P95,000
Finished Goods P60,000 P78,000
Raw materials purchases P46,000
Factory overhead, P63,000 which is 75% of direct labor cost
Selling and Administrative Expenses, 12.5%, P25,000
Net Income for September,2011, P25,000

23. What is the cost of raw materials inventory on August 31, 2019?

Worley Company has under applied overhead of P45, 000 for the year. Before disposition of the underapplied overhead,
selected year-end balances from Worley’s accounting records were

Sales P1,200,000
Cost of Goods Sold P720,000
Direct Materials Inventory P36,000
Work in Process Inventory P54,000
Finished Goods Inventory P90,000

24. Under Worley’s cost accounting system, over or under applied overhead is allocated to appropriate inventories
and cost of goods sold based on year-end balances in it’s year end income statement. Worley should report cost
of goods sold of _______.

The XYZ Company uses a predetermined overhead rate. XYZ 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 of 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. XYZ applies overhead
based on direct labor cost.

25. What amount of overhead should be applied to order number 100?

As part of a cost study, the cost accountant of Shinly Corporation has recorded the cost of operations at seven different
levels of materials usage. The records show the following:
Kilos of materials Costs of operation
80 P800
60 P480
20 P320
120 P1, 200
 140 P1, 280
40 P480
100 P1, 040

26. Using the high-low points method, the variable cost of operations per kilo of materials used is _______
27. Using the same high-low points method, the fixed cost of operations is _______
28. What is the cost function of the Operation cost?
29. Assuming 150 kilos of material usage is expected to occur next month, how much will be the estimated
operations cost based on the cost function generated from high-low method?
30. Using the least squares method, the average rate of variability per kilo of materials used is
31. Using the least square method, the fixed portion of the cost is _________
32. Assuming 98 kilos of material usage is expected to occur next month, how much will be the estimated
operations cost based on the cost function generated from least square method?

Data about Maritz Company’s production and inventories for the month of June are as follows:
Purchases – Direct materials P143, 440
Freight-in P5, 000
Purchase returns and allowances P2, 440
Direct labor P175, 000
Actual factory overhead P120, 000
Inventories:
Finished goods P68, 000 P56, 000
Work in Process P110, 000 P135, 000
Direct materials P52, 000 P44, 000
Maritz Company applies factory overhead to production at 80% of direct labor cost. Over or under applied overhead is
closed to cost of goods sold at year-end. The company’s accounting period is on the calendar year basis.

33. Maritz Company’s prime cost for June was _________.

34. Maritz Company’s conversion cost for June was ________.
35. For the month of June, Maritz Company’s total manufacturing cost was _______.
36. For June, Maritz Company’s cost of goods transferred to the finished goods inventory account was _________.
37. Maritz Company’s cost of goods sold for June was _________.
38. The journal entry for adjustment of cost of goods sold is _______.
39. The amount of over/under applied overhead factory for the month of June was ________.
40. The cost of goods sold for the month of June should be increased (decreased) by the amount of over/under
applied factory overhead of _________.