PART I. The following are items that are normally found in the costs reports of a car assembly company.

pany. Classify each cost a

D/I V/F
1 Cost of engines shipped from producing plants D V
2 Salary of research and development officer in the assembly plant I F
3 Annual fire insurance policy for the assembly plant I V
4 Wages paid to assembly line workers on an hourly basis I V
5 Electricity cost in the assembly plant I V
6 Freight cost of parts received from suppliers I V
7 Depreciation of machines in the assembly plant I F
8 Salary of assembly plant supervisor I F
9 Rent paid for the assembly plant I F
10 Seats installed in cars D/I V
company. Classify each cost as either direct (D) or indirect (I) with respect to the assembly process and variable (V) or fixed (F) with respe

M
M
M
M
M
M
M
M
M
M
able (V) or fixed (F) with respect to how the total costs of the plant change as the number of cars assembled changes.
 PART II. True or False
T 1.        Factory rent is included in manufacturing overhead, but office rent is a period cost
T 2.        Factory supervision, telephone, heat, light, and power are all example of indirect manufacturing overhead co
T 3.        Another name for assignable product costs is inventoriable costs.
F 4.        The income statement of a manufacturing firm has a cost of goods manufactured and not a cost of goods so
T 5.        The relevant range is where a fixed cost remains constant
F 6.        Period costs are often called inventoriable costs.
T 7.        Variable costs per unit are affected by changes in activity
T 8.        A decrease in production will result in an increase in fixed production cost per unit
T 9.        A P50, 000 grinding machine purchased last year is a sunk cost even if not been paid for.
F 10.     If used to manufacture tables, all of the following would be indirect costs: electricity, glue, bolts, and wood fo
ct manufacturing overhead costs.

ed and not a cost of goods sold.

ricity, glue, bolts, and wood for legs.

Part III. Compute for the missing amount
The total maintenance costs of Silver Company in the last four months are presented below:
Month Machine hours Maintenance cost XY
January 7,200.00 450,000.00 3,240,000,000.00
February 6,800.00 422,000.00 2,869,600,000.00
March 7,000.00 440,000.00 3,080,000,000.00
April 6,400.00 418,000.00 2,675,200,000.00
Total 27,400.00 1,730,000.00 11,864,800,000.00

1.        Variable cost per machine hour

2.        Total fixed cost
3.        Budgeted maintenance cost in May if the company is planning to use 7, 500 hours.
4.        Budgeted maintenance cost in May if the company is planning to use 8, 000 hours.

11,864,800,000.00 = 27,400a + 188,040,000b

1,730,000.00 = 4a + 27,400b
11,850,500,000.00 = 27,400.00 + 187,690,000.00
14,300,000.00 = 350,000.00
b = 40.86

1,730,000.00 = 4a + 27,400b
1,730,000.00 = 4a + 1,119,485.71
610,514.29 = 4a
a = 152,628.57

3 y = bx + a
y = 306,428.57 + 152,628.57
y = 459,057.14

4 y = bx + a
y = 326,857.14 + 152,628.57
y = 479,485.71
 X2
51,840,000.00
46,240,000.00
49,000,000.00
40,960,000.00
188,040,000.00

VC = 32,000.00
800.00
= 40.00

6,850.00 FC = 450,000.00 - 288,000.00

= 162,000.00

Y = (40)(7500)+(162000)
= 300,000.00 + 162,000.00
= 462,000.00

Y = (40)(8000)+(162000)
= 320,000.00 + 162,000.00
= 482,000.00
PART IV. Hagler’s has the following machine hours and production costs for the last six month of last year:
Month Machine Hours Production Cost
July 15,000.00 12,075.00
August 13,500.00 10,800.00
September 11,500.00 9,580.00
October 15,500.00 12,080.00
November 14,800.00 11,692.00
December 12,100.00 9,922.00
Total 82,400.00 66,149.00

1. Compute the variable rate per machine hour

2. Compute the fixed amount of the production cost
3. Compute the total production cost using 17, 500 machine hours

917,432,800.00 = 82,400.00 +
66,149.00 = 6a +
908,446,266.67 = 82,400.00 +
8,986,533.33 = 13,573,333.33
b = 0.66

66,149.00 = 6a +
11,594.21 = 6a
a = 1,932.37

3 y = bx + a
y = 11,586.27 +
y = 13,518.64
onth of last year:
XY X2
181,125,000.00 225,000,000.00
145,800,000.00 182,250,000.00
110,170,000.00 132,250,000.00
187,240,000.00 240,250,000.00
173,041,600.00 219,040,000.00
120,056,200.00 146,410,000.00
917,432,800.00 1,145,200,000.00

VC =
1,145,200,000.00
82,400.00 13,733.33 =
1,131,626,666.67
FC =
=

Y = (.625)(17500)+(2392.50)
=
54,554.79 =

1,932.37
 2,500.00
4,000.00
0.625

12,080.00 - 9,687.50
2,392.50

(17500)+(2392.50)
10937.5 + 2,392.50
13,330.00
PART V. Norton Company’s manufacturing costs for 2009 were as follows: Direct materials, P300, 000; Direct labor – P400, 000
1.        Prime cost = 700,000.00
2.        Conversion cost = 530,000.00
3.        Total manufacturing cost = 830,000.00
00; Direct labor – P400, 000; Factory overhead variable – P80, 000 and fixed – P50, 000.
PART VI. The following data are available for Justine Corporation for the year ending December 31, 2009
1-Jan 31-Dec
Inventories
Materials 100,000.00 150,000.00
Work in process 180,000.00 128,000.00
Finished Goods 90,000.00 110,000.00
Direct labor cost 290,000.00
Materials purchased 320,000.00
Factory overhead – applied at 120% of direct labor cost
1.        Direct materials used = 270,000.00
2.        Total manufacturing cost = 908,000.00
3.        Cost of good manufactured = 960,000.00
4.        Cost of goods sold = 940,000.00
PART VII. The following is a partial list of costs incurred last month by the Fontana Company.
Product advertising 20,000.00
Fire insurance premium for factory 5,000.00
Electricity, sales office 2,000.00
Lubricating oil for sewing machines 4,000.00
Foam cushions used in production 32,000.00
Assembly line worker’s wages 46,000.00
Rent, factory building 10,000.00
Freight-out 6,000.00
Salary, company president 25,000.00
Property taxes, corporate headquarters 3,000.00
1.  What amount of these costs would be considered manufacturing overhead? 65,000.00
2. What amount of these costs would be considered period costs? 56,000.00
3. What amount of these costs would be considered product costs? 32,000.00
PART VIII. The financial statements of Michelle Company included these items.
Marketing costs 128,000.00
Direct labor costs 320,000.00
Administrative costs 94,000.00
Direct materials used 385,000.00
Fixed factory overhead costs 285,000.00
Variable factory overhead costs 175,000.00
1.        Prime cost = 705,000.00
2.        Conversion cost = 780,000.00
3.        Total product cost = 1,165,000.00
4. Total period cost = 222,000.00
PART IX. For June MLT Company had cost of good manufactured equal to P150, 000; materials purchase
cost of goods sold, P150, 000; expired insurance on factory assets, P2, 000; cost of goods avail
000. Inventories were as follows
1-Jun
Materials 25,000.00
Work in Process 50,000.00
General factory overhead of P13, 000 was incurred in June; this figure includes all factory overhea
depreciation and insurance. Direct labor cost for the month was six times larger than indirect labo
000. The company uses a single materials account for direct and indirect materials.

1.        The direct materials used 28,000.00

2.        Finished goods inventory, June 1 40,000.00
0, 000; materials purchases, P33, 000; depreciation of factory assets, P17, 000;
, 000; cost of goods available for sale, P190, 000; and total factory labor, P49,

30-Jun
30,000.00
40,000.00
cludes all factory overhead except indirect labor, indirect materials,
s larger than indirect labor cost. The cost of indirect materials used was P1,
materials.
PART X. The accounting records for 2008 of EGGS Manufacturing Company showed the following
Decrease in raw materials inventory 45,000.00
Increase in Finished goods inventory 150,000.00
Increase in work in process inventory 60,000.00
Raw materials purchased 1,290,000.00
Direct labor payroll 600,000.00
Factory overhead 900,000.00
1.        The cost of raw materials used for the period amounted to 45,000.00
2. The cost of goods manufactured is 1,755,000.00
PART XI. Brand Company manufactures computer stands. Cost of Goods Sold is P125, 000, the ending b
less than its beginning balances. The Cost of Goods Manufactured is 60% of cost of goods sold.
1.        What is the beginning balance of Finished Goods Inventory?

COGM 75000
FG BEG 62500
TGAS 137500
FG END 12500
COGS 125000
125, 000, the ending balance of Finished Goods Inventory is 80%
f goods sold.
PART XII. The following information was taken from the records of PARIS Manufacturing Company:
Increase in Finished Goods 36,500.00
Purchases 70,000.00
Increase in work in process 18,200.00
Direct labor 84,875.00
Decrease in raw materials 9,700.00
Work in process, beginning 64,000.00
Total costs placed in process 310,000.00
1.        The amount of cost of goods sold 413,875.00
2.        The amount of applied factory overhead 310,000.00

The following information pertains to Ashley Company’s manufacturing operations:

Decrease in raw materials P6, 000
Direct labor payroll P60, 000
Decrease in work in process P8, 000
Direct labor rate / hour P7.50
Increase in finished goods P18, 000
Factory overhead rate per hour P10
Purchases P84, 000
3.        The amount of prime cost 144,000.00
4.        The amount of conversion cost. 140,000.00