ACC103

Mid Semester Notification, Revision Question & Additional Practice

Format
 40 multiple-choice questions
 Coverage: Chapter 1 - 3
Chapter 1
 Read till page 15.
 Test covers: 6 questions

Chapter 2
Read all pages.
Test covers: 21 questions (13 calculations) – including wages calculations and entries.

Chapter 3
Read all pages.
Test covers: 13 questions (11 calculations and entries)
Rrevision questions (to be discussed by Mr Madhavan during revision session on
Monday, 8 April 2024)
Question 1
Following are the balance of inventories on
1 Jan 2023 31 Dec 2023
Finished Goods 400,000 500,000
Work in process 250,000 300,000
Material 190,000 280,000
During the year:
Sales 1,000,000
Material purchases 600,000
Labor cost (5% indirect) 400,000
Indirect material (30% of cost of direct material used)
Equipment (70% used by factory) 1,500,000
Equipment insurance 90,000
Factory Rental 13,000
Depreciation of office building 100,000
Depreciation of office furniture 12,000
Depreciation of equipment 20,000
Other overhead 150,000
Additional Information:
• Rental is shared between office & factory on the ratio of 4:1
You are required to prepare the schedule of cost of goods manufactured & profit loss
statement for the year ended 31 Dec 2023
Question 2
THE NASI LEMAKS produces frozen nasi lemak for local consumption. The summary of
details for THE NASI LEMAKS are as follows:

Building (80% used by factory for production) 300,000

Carriage inwards on direct material (20% of net direct material purchases)
Cost of idle time 12,000
Depreciation of Building 18,000
Depreciation of factory vehicles 90,000
Depreciation of office furniture 56,000
Direct Material Purchases 750,000
Direct Material Purchases Return 10,000
Factory vehicle 330,000
Fire insurance (80 % allocated to factory) 60,000
Indirect Material (15% of cost of direct material used)
Labour Cost (60% direct labour) 400,000
Maintenance of building 90,000
Office furniture 80,000
Overtime Premium 25,000
Sales 1,000,000
Selling Expenses 75,000
Utilities (30% of the space occupied by office) 45,000

Following are the balance of inventories as at

1 January 2023 31 December 2023
Work In Process 35,000 50,000
Direct Material 60,000 95,000

Required to calculate:
a. Direct Material cost
b. Direct Labour cost
c. Manufacturing overhead
d. Prime cost
e. Conversion cost
f. Cost of goods manufactured.
g. Cost of goods sold.
h. Period cost
i. Gross profit
j. Net profit

Question 3
Kiddos involved in producing customised toys. It uses a job order costing system and the
factory overhead is allocated based on machines hours. Total factory overhead is estimated to
be RM750,000 for the current year. Kiddos estimate that its total machine hours for the year
are 50,000 hours.
The following information is for the month of June 2023:

Inventories on June 1, 2023:

Work in Process - RM20,000: Job TAP (RM12,000) and Job SHOOT (RM8,000)

During June, the factory worked on its existing product: Job TAP and Job SHOOT as well as
new product SLAP. Materials (including supplies) purchased during the month amounted to
RM20,000. Materials issued to TAP amounted to RM3,000, SHOOT was issued materials of
RM3,500 and SLAP was started during the month and received materials amounting
RM5,500.

During the month, the direct labor rate was RM15 per hour. Labour and machine hours
recorded for the month of June 2012:
Job Direct Labor Hours Machine Hours
TAP 200 350
SHOOT 250 420
SLAP 300 330

During June, indirect material used were RM1,100, indirect labour cost incurred were
RM3,000, insurance amounted to RM2,500 (all relates to the factory operations);
depreciation on factory machinery amounted to RM6,000 and rental amounted to RM30,000
(20% of rental is related to the administrative office).

Job TAP and SLAP were completed during June and transferred to Finished Goods. Job TAP
was sold for RM40,000 and Job SLAP was sold for RM50,000 in June.

Required:
a. Show the workings for pre-determined overhead rate
b. Prepare the necessary journal entries to record the transaction.
c. Prepare a Job Cost Sheet for Job TAP & SLAP
d. Determine whether the overhead was under or over applied. What is the record?
e. Work in Process Inventory A/C
Question 4
TERBANG FACTORY manufactures customised flight miniatures for luxury gifts.
TERBANG FACTORY uses a job order costing system and the factory overhead is allocated
based on machine hours. Total factory overhead is estimated to be RM800, 000 for the
current year. TERBANG FACTORY estimates that its total machine hours for the year are
80,000 hours.

The following information is for the month of January 2018:

Inventories on January 1, 2018:
Finished Goods Inventory: EMAS – RM55, 000
Work in Process: AYER ASIA (RM45, 000) and MELINDO (RM40, 000)

During January, the factory worked on its existing product: MELINDO and AYER ASIA as
well as new product PRATAN. Materials (including indirect materials) purchased during the
month amounted to RM300, 000.

Direct material cost, direct hours and machine hours recorded for the month of January 2018
were:
Job Direct materials Direct Labour Machine Hours
Hours
MELINDO 35,000 120 190
AYER ASIA 30,000 150 110
PRATAN 45,000 130 125

During the month, the professional direct labour rate was RM15 per hour.

During February, following manufacturing overheads were incurred: indirect labour worth
RM800 were incurred, indirect material cost worth RM900 were used, factory maintenance
incurred amounted to RM500 incurred but yet to be paid (all relates to the factory
operations); depreciation on factory machinery amounted to RM700 and insurance of factory
workers that were prepaid RM350.

MELINDO & PRATAN and were completed during January 2018 and transferred to
Finished Goods. EMAS was sold for RM90, 000 and PRATAN was sold for RM60, 000 in
the same month itself.
Required:
a. Calculate pre determined overhead rate
b. Calculate cost of direct material used & recording
c. Total wages payable & recording
d. Applied manufacturing overhead & recording
e. Overhead variance & recording
f. Calculate cost of goods completed and recording
g. Calculate and record sales.
h. Calculate WIP balance at the end of the month
i. Calculate and record actual manufacturing overhead
Question 5
Melinda worked for 350 hours during the month of Jan 2023. Her normal working month
consists of 270 hours (Monday – Friday), of which 20% of the hours were non-productive
idle time. Out of 80 hours overtime worked, 50 hours were worked for housekeeping purpose
and remaining were worked to complete the production requirement to fulfil the customer’s
request. The human resource department has the following scheme for overtime worked: 50%
premium if overtime worked on any day.
Melinda’s normal wage rate is RM 40 per hour.
Required: calculate the total wages, the amount to be treated as manufacturing overhead,
direct labor cost and the records.

Question 6
Hungry Factory has the following policy for its labours:
 Wage rate per normal hours RM50
 Overtime premium of 75% for weekdays

During the month of February 2018, a total labour of 600 hours was worked. labour has a
total contracted hour of 450 hours of which 50 hours were non-productive idle time.

The remaining total 150 hours were overtime worked during the month of February. The
details of the overtime worked are as follows:
 A total of 60 hours was worked during the month to complete and deliver the order
to the customer on time.
 The remaining 90 hours were worked on other factory production and factory
support activities.
Required: calculate the total wages, the amount to be treated as manufacturing overhead,
direct labor cost and the records.

Question 7
A factory produces 25,000 units with a total cost of $300,000 and total fixed cost of
RM100,000.
a. What is the variable cost incurred?
b. If 30,000 units were produced, (i) what is the total fixed cost, (ii) total variable cost &
(iii) total cost

Question 7
A factory produces 40,000 units with a total cost of $500,000 and total fixed cost of
RM200,000.
a. What is the variable cost incurred?
b. If 45,000 units were produced, (i) what is the total fixed cost, (ii) total variable cost &
(iii) total cost
Part 2: Additional Revision Question (Textbook). – to be discussed by UFM Lecturers.
 These questions are to-be attempted and you can perform a self-check with suggested
solution below. Should you have any problem in understanding or answering them,
please refer to tutor during tutorial session.
 Chapter 2: Practice these questions too: 2.25, 2.26, 2.29, 2.38 & 2.40
 Chapter 3: Practice these questions too: 3.27, 3.28, 3.29, 3.32, 3.34, 3.35, 3.43, 3.49,
3.53
Suggested solution (textbook)
Solutions:
EXERCISE 2-25 (10 MINUTES)

1. Hours worked....................................................................................................... 40
Wage rate..............................................................................................................  $ 18
Total compensation.............................................................................................. $720

2. Classification:

Direct labor (36 hours  $18)........................................................................ $648

Overhead (idle time: 4 hours  $18)............................................................. 72
Total compensation......................................................................................... $720

EXERCISE 2-26 (10 MINUTES)

1. Regular wages (40 hours  $16)...................................................................... $ 640

Overtime wages (5 hours  $24)...................................................................... 120
Total compensation........................................................................................... $ 760

2. Overtime hours.................................................................................................. 5 hrs.

Overtime premium per hour ($24  $16)......................................................... $ 8
Total overtime premium................................................................................... $ 40
EXERCISE 2-26 (CONTINUED)

3. Classification:

Direct labor (45 hours  $16)..................................................................... $ 720

Overhead (overtime premium: 5 hours  $8)........................................... 40
Total compensation...................................................................................... $ 760

EXERCISE 2-29 (CONTINUED)

3. ALEXANDRIA ALUMINUM COMPANY

INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 20X1

Sales revenue................................................................................................... $1,105,000

Less: Cost of goods sold................................................................................. 820,000
Gross margin.................................................................................................. $ 285,000
Selling and administrative expenses............................................................. 110,000
Income before taxes........................................................................................ $ 175,000
Income tax expense......................................................................................... 70,000
Net income....................................................................................................... $ 105,000

PROBLEM 2-38 (30 MINUTES)

1. Manufacturing overhead:
Indirect $109,000
labor……………………………….
Building depreciation ($80,000 x 75%).. 60,000
Other factory 344,000
costs………………………..
Total………………………………… $513,000
…...
PROBLEM 2-38 (CONTINUED)
2. Cost of goods manufactured:
Direct material:
Raw-material inventory, Jan. $ 15,800
1………………
Add: Purchases of raw material…………….. 175,000
Raw material available for $190,800
use……………….
Deduct: Raw-material inventory, Dec. 31…. 18,200
Raw material $172,600
used……………………………..
Direct 254,000
labor…………………………………………..
Manufacturing 513,000
overhead…………………………..
Total manufacturing $939,600
costs………………………..
Add: Work-in-process inventory, Jan. 1………. 35,700
Subtotal…………………………………… $975,300
……..
Deduct: Work-in-process inventory, Dec. 31…. 62,100
Cost of goods $913,200
manufactured……………………..

3. Cost of goods sold:

Finished-goods inventory, Jan. 1…………….. $ 111,100
Add: Cost of goods manufactured…………… 913,200
Cost of goods available for sale………………. $1,024,300
Deduct: Finished-goods inventory, Dec. 31… 97,900
Cost of goods $ 926,400
sold……………………………….

4. Net income:
Sales $1,495,000
revenue……………………………………..
Less: Cost of goods 926,400
sold……………………….
Gross $ 568,600
margin……………………………………...
Selling and administrative expenses:
Salaries…………………………………… $133,000
…...
Building depreciation ($80,000 x 25%)…... 20,000
Other……………………………………… 195,000 348,000
……
Income before $ 220,600
 taxes……………………………..
Income tax expense ($220,600 x 30%)……….. 66,180
Net $ 154,420
income………………………………………...

5. The company sold 11,500 units during the year ($1,495,000 ÷ $130). Since 160 of
the units came from finished-goods inventory (1,350 – 1,190), the company would
have manufactured 11,340 units (11,500 – 160).

PROBLEM 2-40 (25 MINUTES)

1. Fixed manufacturing overhead per unit:

$600,000  24,000 units produced = $25

Average unit manufacturing cost:

Direct $ 20
material………………………..
Direct 37
labor……………………………
Variable manufacturing overhead.. 48
Fixed manufacturing overhead…… 25
Average unit $130
cost………………..

Production………………………… 24,000 units

….
Sales……………………………… 20,000 units
……
Ending finished-goods inventory… 4,000 units

Cost of December 31 finished-goods inventory:

4,000 units x $130 = $520,000

2. Net income:
Sales revenue (20,000 units x $185)………… $3,700,000
Cost of goods sold (20,000 units x $130)….. 2,600,000
Gross $1,100,000
margin…………………………………….
Selling and administrative expenses……….. 860,000
Income before $ 240,000
taxes……………………………
Income tax expense ($240,000 x 30%)……… 72,000
Net $ 168,000
income……………………………………….
3. (a) No change. Direct labor is a variable cost, and the cost per unit will remain
constant.

(b) No change. Despite the decrease in the number of units produced, this is a
fixed cost, which remains the same in total.

(c) No change. Selling and administrative costs move more closely with changes
in sales than with units produced. Additionally, this is a fixed cost.

(d) Increase. The average unit cost of production will change because of the per-
unit fixed manufacturing overhead. A reduced production volume will be
divided into the fixed dollar amount, which increases the cost per unit.
EXERCISE 3-27 (20 MINUTES)

1. Raw-material inventory, January 1..................................................................... $134,000

Add: Raw-material purchases.............................................................................. 191,000
Raw material available for use............................................................................. $325,000
Deduct: Raw-material inventory, January 31..................................................... 124,000
Raw material used in January.............................................................................. $201,000
Direct labor............................................................................................................. 300,000
Total prime costs incurred in January................................................................. $501,000

2. Total prime cost incurred in January.................................................................. $501,000

Applied manufacturing overhead (60%  $300,000)......................................... 180,000
Total manufacturing cost for January................................................................. $681,000
EXERCISE 3-27 (CONTINUED)

3. Total manufacturing cost for January................................................................. $681,000

Add: Work-in-process inventory, January 1....................................................... 235,000
Subtotal................................................................................................................... $916,000
Deduct: Work-in-process inventory, January 31................................................ 251,000
Cost of goods manufactured.................................................................................. $665,000

4. Finished-goods inventory, January 1................................................................... $125,000

Add: Cost of goods manufactured........................................................................ 665,000
Cost of goods available for sale............................................................................. $790,000
Deduct: Finished-goods inventory, January 31................................................... 117,000
Cost of goods sold................................................................................................... $673,000

Since the company accumulates overapplied or underapplied overhead until the end of
the year, no adjustment is made to cost of goods sold until December 31.

5. Applied manufacturing overhead for January................................................... $180,000

Actual manufacturing overhead incurred in January........................................ 175,000
Overapplied overhead as of January 31.............................................................. $ 5,000

The balance in the Manufacturing Overhead account on January 31 is a $5,000 credit

balance.

NOTE: Actual selling and administrative expense, although given in the exercise, is
irrelevant to the solution.

EXERCISE 3-28 (15 MINUTES)

1. Applied manufacturing = total manufacturing costs ¿ 30%

overhead
= ¿
$2,500,000 30%
= $750,000

Applied manufacturing = direct-labor cost ¿ 80%

overhead

Direct-labor cost = applied manufacturing overhead ¿ 80%

= ¿
$750,000 .8
= $937,500

2. Direct-material cost = total manufacturing cost

– direct labor cost
– applied manufacturing overhead
 = $2,500,000 – $937,500 – $750,000
= $812,500

3. Let X denote work-in-process inventory on December 31.

Total work-in-process work-in-process cost of

manufacturing + inventory, – inventory, = goods
cost Jan.1 Dec. 31 manufactured

$2,500,000 + .75X – X = $2,425,000

.25X = $2,500,000 – $2,425,000
X = $300,000

Work-in-process inventory on December 31 amounted to $300,000.

EXERCISE 3-29 (25 MINUTES)

JOB-COST RECORD

Job Number TB78 Description teddy bears

Date Started 4/1 Date 4/15

Completed

Number of Units 1,000

Completed

Direct Material
Date Requisition Number Quantity Unit Price Cost
4/1 101 400 $.80 $320
4/5 108 500 .30 150

Direct Labor
Date Time Card Number Hours Rate Cost
4/1 – 4/8 Various time cards 500 $12 $6,000

Manufacturing Overhead
Date Activity Base Quantity Application Rate Cost
4/15 Direct-labor hours 500 $2 $1,000

Cost Summary
Cost Item Amount
Total Direct Material $ 470
Total Direct Labor 6,000
Total Manufacturing Overhead 1,000
Total Cost $7,470
Unit Cost $ 7.47

Shipping Summary
Units Remaining
Date Units Shipped In Inventory Cost Balance
4/30 700 300 $2,241*

*300 units remaining in inventory ´ $7.47 = $2,241

EXERCISE 3-32 (20 MINUTES)

1. Raw material:

Beginning inventory $ 71,000

Add: Purchases ?
 Deduct: Raw material used 326,000
Ending inventory $ 81,000

Therefore, purchases for the year were $336,000

2. Direct labor:

Total manufacturing cost $686,000

Deduct: Direct material 326,000
Direct labor and manufacturing overhead $ 360,000

Direct labor + manufacturing overhead = $360,000

Direct labor + (60%) (direct labor) = $360,000
(160%) (direct labor) = $360,000

$360,000
Direct labor =
1.6

Direct labor = $225,000

3. Cost of goods manufactured:

Work in process, beginning inventory................................................. $ 80,000

Add: Total manufacturing costs........................................................... 686,000
Deduct: Cost of goods manufactured................................................... ?
Work in process, ending inventory...................................................... $ 30,000

Therefore, cost of goods manufactured was........................................ $736,000

EXERCISE 3-32 (CONTINUED)

4. Cost of goods sold:

Finished goods, beginning inventory $ 90,000

Add: Cost of goods manufactured 736,000
Cost of goods available for sale $826,000
Deduct: Cost of goods sold ?
Finished goods, ending inventory $110,000

Therefore, cost of goods sold was: $716,000

EXERCISE 3-34 (15 MINUTES)

NOTE: Actual selling and administrative expense, although given in the exercise, is
irrelevant to the solution.
$997,500
1. Predetermined overhead rate = = $13. 30 per hour
75,000 hours
2. To compute actual manufacturing overhead:

Depreciation $ 231,000
Property taxes 21,000
Indirect labor 82,000
Supervisory salaries 200,000
Utilities 59,000
Insurance 30,000
Rental of space 300,000
Indirect material:
Beginning inventory, January 1........................................................ $ 48,000
Add: Purchases...................................................................................
94,000
Indirect material available for use....................................................$142,000
Deduct: Ending inventory, December 31......................................... 63,000
Indirect material used........................................................................ 79,000
Actual manufacturing overhead.............................................................. $1,002,000

actual applied
Overapplied = manufacturing – manufacturing
overhead overhead overhead

= $1,002,000 – ($13.30 ´ 80,000*) = $62,000

*Actual direct-labor hours.

3. Manufacturing Overhead.......................................................... 62,000

Cost of Goods Sold........................................................... 62,000
4. In the electronic version of the solutions manual, press the CTRL key and click on
the following link: Build a Spreadsheet 03-34.xls
EXERCISE 3-35 (20 MINUTES)
NOTE: Budgeted sales revenue, although given in the exercise, is irrelevant to the solution.
budgeted manufacturing overhead
1. Predetermined overhead rate =
budgeted level of cost driver
$364,000
(a) = $36.40 per machine hour
10,000 machine hours
$364,000
(b) = $18.20 per direct-labor hour
20,000 direct-labor hours
$364,000 $1.30 per direct-labor dollar or 130%
(c) =
$280,000* of direct-labor cost

*Budgeted direct-labor cost = 20,000 ´ $14

2. Actual applied overapplied or

manufacturing – manufacturing = underapplied
overhead overhead overhead

(a) $340,000 – (11,000)($36.40) = $60,400 overapplied overhead

(b) $340,000 – (18,000)($18.20) = $12,400 underapplied overhead

(c) $340,000 – ($270,000†) = $11,000 overapplied overhead

(130%)
†
Actual direct-labor cost = 18,000 ´ $15

PROBLEM 3-43 (20 MINUTES)

1. budgeted manufacturing overhead

Predetermined overhead rate =
budgeted direct-labor hours
$240,000
= = $12 per hour
( 2,000 )(10 )
2. Journal entries:

(a) Raw-Material Inventory...................................................... 33,000

Accounts Payable....................................................... 33,000

(b) Work-in-Process Inventory................................................. 460

Raw-Material Inventory........................................... 460
 (c) Manufacturing Overhead.................................................... 100
Manufacturing-Supplies Inventory.......................... 100

(d) Manufacturing Overhead.................................................... 8,000

Accumulated Depreciation: Building....................... 8,000

(e) Manufacturing Overhead.................................................... 400

Cash............................................................................. 400

(f) Work-in-Process Inventory................................................. 34,000

Wages Payable........................................................... 34,000

To record direct-labor cost [(1,000 + 700) x $20].

Work-in-Process Inventory................................................. 20,400

Manufacturing Overhead................................ 20,400

To apply manufacturing overhead to work in process ($20,400 = 1,700 ´ $12 per hour).

(g) Manufacturing Overhead.................................................... 910

Property Taxes Payable............................................ 910

(h) Manufacturing Overhead.................................................... 2,500

Wages Payable........................................................... 2,500

(i) Finished-Goods Inventory................................................... 14,400

Work-in-Process Inventory....................................... 14,400

PROBLEM 3-43 (CONTINUED)

(j) Accounts Receivable............................................................ 13,500

Sales Revenue............................................................. 13,500

Cost of Goods Sold............................................................... 10,800*

Finished-Goods Inventory......................................... 10,800
 *$10,800 = (9/12)($14,400)

PROBLEM 3-49 (25 MINUTES)

budgeted manufacturing overhead

1. Predetermined overhead rate =
budgeted machine hours
$1,464,000
= =$20 per machine hou r
73,200
2. Journal entries:

(a) Raw-Material Inventory................................... 7,850

Accounts Payable..................................... 7,850

(b) Work-in-Process Inventory.............................. 180

Raw-Material Inventory......................... 180

(c) Manufacturing Overhead................................. 30

Manufacturing-Supplies Inventory....... 30

(d) Manufacturing Overhead................................. 800

Cash.......................................................... 800

(e) Work-in-Process Inventory.............................. 75,000

Wages Payable......................................... 75,000

(f) Selling and Administrative Expense................ 1,800

Prepaid Insurance................................... 1,800

(g) Raw-Material Inventory................................... 3,000

Accounts Payable..................................... 3,000

(h) Accounts Payable............................................... 1,700

Cash.......................................................... 1,700

(i) Manufacturing Overhead................................. 21,000

Wages Payable......................................... 21,000

(j) Manufacturing Overhead................................. 7,000

Accumulated Depreciation: Equipment 7,000

(k)
Finished-Goods Inventory................................ 1,100
Work-in-Process Inventory.................... 1,100
PROBLEM 3-49 (CONTINUED)

(l) Work-in-Process Inventory............................... 140,000*

Manufacturing Overhead....................... 140,000
 *Applied manufacturing overhead = 7,000 machine hours ´ $20 per hour.

(m) Accounts Receivable.......................................... 176,000

Sales Revenue........................................... 176,000

Cost of Goods Sold............................................. 139,000

Finished-Goods Inventory...................... 139,000

PROBLEM 3-53 (30 MINUTES)

budgeted manufacturing overhead

1. Predetermined overhead rate =
budgeted machine hours
$235,000
= = $5 per machine hour
47,000
2. Calculation of applied manufacturing overhead:

Applied manufacturing overhead = machine hrs. used x predetermined overhead rate

$20,000 = 4,000 hrs. x $5 per hr.

3. Underapplied overhead = actual overhead – applied overhead

$6,000 = $26,000 – $20,000

4. Cost of Goods Sold........................................................... 6,000

Manufacturing Overhead...................................... 6,000
PROBLEM 3-53 (CONTINUED)

5. (a) Calculation of proration amounts:

Calculation
Account Explanation Amount* Percentage of Percentage
Work in Process Job P82 only $ 2,500 12.5% 2,500 ¿ 20,000
Finished Goods Job N08 only 12,500 62.5% 12,500 ¿ 20,000
Cost of Goods
Sold Job A79 only 5,000 25.0% 5,000 ¿ 20,000
Total $20,000 100.0%

*Machine hours used on job ´ predetermined overhead rate.

Underapplied Amount Added

Account Overhead  Percentage to Account
Work in Process $6,000  12.5% $ 750
Finished Goods 6,000  62.5% 3,750
Cost of Goods Sold 6,000  25.0% 1,500
Total $6,000
(b) Journal entry:

Work-in-Process Inventory................................................ 750

Finished-Goods Inventory.................................................. 3,750
Cost of Goods Sold.............................................................. 1,500
Manufacturing Overhead......................................... 6,000