CostAccount

ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

COSTACCOUNTI
NGSYSTEMS
Pr
oductcosti
ng
A.TRADI
TIONALCOSTACCOUNTI
NG 6.Productcost
ingsyst
em desi gnorselect
ion:
A.r equir
esanunderstandingofthenatureofthebusiness
THEORIES: B.shoul dprovi
deus efulcostinformationforstr
ategicandoper
ati
onal
Basi
cconcept s decisi
onneeds
CostAccounti
ng C.shoul dbecostef
fectiveindesignandselecti
on
1. Costaccountinginvolvest
hemeasur
ing,r
ecordi
ng,andr epor
ti
ngof D.al lt
heaboveanswer sarecorrect
A.productcost s C.futur
ecosts
B.manuf acturi
ngpr ocess D.manager i
alaccounti
ngdeci
si
ons Costconcepts
Commi t
ted vs.Discret
ionaryfi
xedcosts
Costmanagement Commi t
edf i
xedcost s
3.Thecostmanagementfunct
ioni
susual
l
yunder 7.Whi choft hefoll
owingisanexampl eofacommittedfi
xedcosts?
A.thechiefi
nfor
mat
ionof
fi
cer. C.purchasi
ngmanager
. A.directmat er
ial
s C.supervi
sor’
B.treasur
er. D.contr
oll
er. B.depr eciat
iononaf actor
ybuil
dingD.insur
anceonabui l
ding

2.Thecostmanagementinfor
mationsystem pr
ovi
desi nformat
ion 1
6.Anexampleofacommi t
tedfixedcostis:
A.t hatt
heaccount
antneedstopreparethefi
nancialstat
ements. A.atrai
ningprogram forsalespersons.
B.t hatt
hemanagerneedstoeffect
ivel
ymanaget hef i
rm. B.executi
vetravelexpenses.
C.t hat the manager needs to ef f
ecti
vel
y manage not -
for
-pr
ofi
t C.propertyt
axesont hef act
or ybui
ldi
ng.
organi
zati
on. D.newpr oductresearchanddevel opment.
D.bandc.
Di
scr
eti
onaryfi
xedcost
4.Themai
nf ocusofcostmanagementi
nfor
mationmustbe 8.Whichofthefol
lowi
ngisanexampl
eofdiscr
eti
onaryfi
xedcost
?
A.usef
ulnessandaccuracy. C.useful
nessandt
imel
i
ness. A.directl
abor C.propert
y taxes on a f actor
y
B.ti
meli
nessandaccuracy. D.rel
evanceandgoodfor
mat. bui
ldi
ng
B.insuranceonabuil
ding D.depreci
ati
ononaf act
orybui
l
ding
5.Wit
h regard to the t ask of management ’ , cost
managementinf
ormat i
oni sneededt o Contr
ollablecosts
A.make sound st rategic decisi
ons r egarding choi ce of products, 10.Controll
ablecostsare:
methods,andtechniques . A.Cost sthatmanagementdeci destoi ncuri nthe curr
entperiod t
o
B.supportrecurr
ing deci si
ons regarding replacementofequi pment, enabl ethecompanyt oachieveoper ati
ngobj ect
ivesotherthanthe
managingcashf l
ow,et c. fi
ll
ingofor der
splacedbycust omers.
C.provi
deaf ai
randef fecti
vebasisforidenti
fyi
ngi neff
icientoper
ations. B.Cost sthataregovernedmai nlybypastdeci si
onsthatestabl
i
shedthe
D.provi
de accurate account i
ng forinventory,r ecei
vabl es,and other presentlevelsofoper at
ingandor gani
zationalcapacit
yandt hatonl
y
asset
s. changesl owlyinresponsetosmallchangesi ncapacit
y.

739
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

C.Cost
sthatwi
l
lunaff
ectedbycurr
entmanager
ial
deci
sions.
D.Cost
sthatar
eli
kelytorespondtotheamountofat
tenti
ondevot
edt
o ProductCostvs.Peri
odCost
t
hem byaspeci
fi
edmanager . Peri
odcost
18.Whichoft hefol
lowingwouldNOTbeaper i
odcostf
oramanuf
act
uri
ng
1
1.Contr
oll
able cost
sf orr esponsibi
l
it
y account
ing pur
poses ar
e di
rect
ly fi
rm?
i
nfl
uencedonl yby A.Selli
ngexpenses
A.Agi venmanagerwi thi
nagi venperi
od. B.SalarypaidtotheCEOoft hecompany
B.Achangei nacti
vi
ty. C.Repai r
stotheReceptioni
st'
scomput
er
C.Productionvolume. D.Ut i
l
it
iesinmanufactur
ingplant
D.Salesvolume.
Dir
ectvs.i
ndir
ectcosts
I
mput
edcosts 17.Whatkindofcostscanbeconveni
entl
yandeconomicall
ytr
acedt
oacost
1
2.Animputedcostis obj
ectorpool?
A.Thedi f
ferenceintotalcostswhi chresult
sfrom sel
ecti
ngonechoi ce A.Indi
rectCosts. C.Dir
ectCost
s.
inst
eadofanot her. B.RelevantCosts. D.OverheadCosts.
B.Acostt hatdoesnotent ai
lanycashout laybutwhichisrelevanttothe
decisi
on- maki
ngpr ocess. 47.Di
rectproductexpens es
C.Acostt hatmaybeshi ft
edtot hefut
urewi t
hli
ttl
eornoeffectoncur r
ent A.areincurredforthebenef i
tofthebusi nessasawhole
operati
ons . B.cannotbei denti
fi
edr eadil
ywithagi venproduct
D.Acostt hatconti
nuestobei ncurr
edevent houghther
eisnoact i
vi
ty. C.canbeassi gnedt opr oductonlybyapr ocessofal
l
ocati
on
D.wouldnotbei ncurr edift
hepr oductdidnotexi
st
CostAccordingt oBehavi
or
Semi-var
iablecosts 9.Thedisti
ncti
onbet weendi r
ectandi ndi
rectcost
sdependsonwhet hera
14.Semi-vari
ablecosts cost
A.peruni tremainthesamer egardl
essoft
otaloutput A.iscont r
oll
abl
eornon- contr
oll
able.
B.remai nthesamewi thint
her el
evantr
angeofout put B.isvariabl
eorfixed.
C.increasei nst
epsast heamountofthecostdrivervol
umei
ncr
eases C.can be conveni ent
ly and physical
l
yt r
aced to a costobj
ectunder
D.havebot hf i
xedandvar i
ablecomponentsi
nt hem consi
derati
on.
D.wi l
li
ncreasewi t
hchangesinlevelsofacti
vi
ty.
Stepcost
15.Astepcosti
s 1
9.Ofmostrelevanceindeci
dinghow i
ndi
rectcostsshouldbeassi
gnedt
o
A.thesameassemi -fi
xedcost pr
oduct
sist hedegr
eeof
B.thesameasmi xedcost A.Li
neari
ty. C.Avoidabil
it
y.
C.acostt hati
ncreasesinstepsast
heamountofcost
-dr
ivervol
ume B.Causal
ity. D.Control
labil
i
ty.
i
ncr
eases
D.aandconl y. Compr
ehensi
ve

740
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

1
3.Al
mos,Inc.makesski -boardsinDavao.Identi
fythecor
rectmatchi
ngof C.Assumption ofcorr
elat
ion bet
ween di
rectlaboran i
ncur
rence of
t
erms. overheadcost.
A.Fibergl
assisfact
oryoverhead D.Useofmul t
ipl
ecostdri
verst
oall
ocat
eoverhead.
B.Plantrealest
atet
axesar eaperi
odcost
C.Depreciati
onondeliver
yt r
ucksisaproductcost Overheadall
ocati
on
D.Payrollt
axesforworkersinthePackagi
ngDept .ar
edi
rectl
abor 35.Conventi
onalproductcost
inguseswhi chofthefol
lowi
ngprocedures?
A.Overheadcost saretracedtodepar tments,t
hencostsaretracedto
Tradi
ti
onalCosti
ngAccount i
ng pr
oducts.
28.Anaccountingsystem t
hatfocusesontr
ansact
ionsi
s B.Overhead costsar etraced to acti
vi
ti
es,then cost
saret r
aced to
A.anact i
vi
ty-basedaccountingsyst
em. C. a t
radi
ti
onal pr
oducts.
account
ingsystem. C.Overheadcost saretr
aceddirectl
ytoproduct.
B.apr oductli
fecycl
ecosti
ngsyst em. D. alloft
heabove. D.Alloverheadcostsareexpensedasi ncur
red.

29.
Tradi
ti
onall
y,manager
shavef
ocusedcostr
educti
oneff
ort
son 36.
Theover
headratesofthetr
adit
ional
appr
oachtoproductcosti
nguse
A.act i
vi
ti
es. C.department
s. A.nonunit
-basedcostdri
vers C.uni
t-
basedcostdr i
ver
s
B.pr ocesses. D.costs
. B.processcosti
ng D.j
ob-ordercost
ing

33.
Whi
choft hefol
lowingisat
rai
tofat
radi
ti
onalcostmanagementsyst
em? Eff
ectofTr
adit
ionaloverheadall
ocat
ion
A.uni
t-baseddr i
vers C.traci
ngisint
ensi
ve 22.Theuseofunit-
basedact i
vi
tydri
verstoassi
gncoststendsto
B.det
ailedacti
vit
yinfor
mati
on D.focusonmanagi ngact
ivi
ti
es A.overcostl
ow- volumeproducts. C.overcostal
lproduct
s.
B.overcosthi
gh- volumeproducts.D.undercostal
lproduct
s.
23.
Whichoft hef ol
l
owi ngistypical
l
yr egardedasacostdri
veri
ntradi
ti
onal
accounti
ngpr act
ices? 30.
Tradi
ti
onal overheadal l
ocati
onsr esulti
nwhi choft hef
oll
owingsit
uati
ons?
A.numberofpur chaseor dersprocessed C. number of A.Over head cost s ar e assigned as per i
od costst o manufacturi
ng
t
ransacti
onspr ocessed operati
ons .
B.numberofcust omer sserved D.number of di
rect l
abor hours B.Hi gh-volume pr oductsar e assigned too much over head,and low-
worked volumepr oductsar eassignedt oolit
tl
eover head.
C.Low- volume pr oducts are assi gned too much,and hi gh-vol
ume
21
.Whi choft hefol
lowing i
snotat
rai
tofat radi
ti
onalcostmanagement productsar eassignedtool i
tt
leover head.
syst
em? D.Ther esul t
ingall
ocationscannotbeusedf orfi
nanci
alreport
s.
A.uni t
-baseddri
vers C.focusonmanagi ngact
ivi
ti
es
B.allocat
ingint
ensive D.narrowandrigi
dproductcost
ing 32.
Productcostscanbedistor
tedifauni
t-
basedcostdr i
veri
susedand
A.nonuni t
-based over
head costsare a si
gnif
icantpropor
ti
on oftotal
24.
Whi
chofthefol
lowingisnottypi
caloftradi
ti
onalcost
ingsystems? overhead
A.Useofasinglepredet
erminedover headrat
e. B.t heconsumptionrati
osdiff
erbetweenunit-
basedandnonuni t
-based
B.Useofdir
ectlaborhoursordir
ectlaborcosttoassignoverhead. i
nputcategori
es

741
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

C.bot
haandb
D.nei
theranorb 38.
Nomat t
erwhi chmethodi sused,underappli
edorover appl
iedover
head
usual
l
yi sadjustedonl
y:
ProcessCosti
ng A.att heendofayear .
40.Whichoft hef ol
lowing itemsi snotachar acter
ist
icofapr ocesscost B.mont hlydur i
ngtheyear
syst
em? C.ifthediff
erenceex ceedsP1,000oroneper centoft
otalover
head.
A.Once pr oduction begi ns,itcont i
nues unt i
lthe fini
shed product D.whent hecompany' sprof
itproj
ect
ionsrequi
reanadjustment
emerges
B.Thepr oductsproducedar eheter
ogeneousi nnature Act
ualCosting
C.Thef ocusisoncont inuall
yproducinghomogeneouspr oducts 43.
Disadvantagesofactual
cost
ingi
nclude
D.Whent hefini
shedpr oductemer ges,allunit
shavepr eci
selythesame A.act ualcostsyst
emscannotprovi
deaccurateunitcosti
nfor
mati
onona
amountofmat eri
als,labor,andoverhead ti
mel ybasi
s
B.act ualcostsystemsproduceunitcostst
hatfluctuat
efrom per
iodt
o
ActualCosting,Normalcosti
ng,&StandardCosti
ng period
Predeter
mi nedoverheadrate C.est i
mat esmustbeusedwhencal cul
ati
ngtheactualover
headrat
e
39.Thef ormulaforcomput ingthepredeter
minedmanuf actur
ingover
head D.aandb
rat
ei sest i
matedannualoverheadcostsdivi
dedbyanexpect edannual
operati
ngact i
vit
y,expr
essedas NormalCosti
ng
A.di r
ectlaborcost C.dir
ectlaborhour
s 42.
Thepr i
nci
pal dif
fi
cult
ywi t
hnormal costi
ngisthat
B.machi nehours D.anyoft hese A.t heunitcostinformati
onisnotreceivedonat i
melybasis
B.itcanr esulti
nf l
uctuat
ingper-uni
toverheadcosts
37.
Thetwomai nadvantagesofusingpredetermi
nedfact
oryover
headr
ates C.est i
mated over head and esti
mated activi
tyareli
kel
yt o di
ff
erf r
om
aret
opr ovi
demor eaccurat
eunitcostinf
ormat
ionandt
o: actualover head and act ualcost s,result
ing i
n underappl
ied or
A.simplif
yt heaccounti
ngprocess overappli
edover head
B.providecostinformati
ononat imelybasi
s D.t herei
snodi f
fi
cultyassoci
atedwithusingnormalcost
ing
C.insuretransmissi
onofcorrectdat
a
D.adjustforvari
ancesindatasources 46.
Nor
mal costi
ngandst andardcosti
ngdi f
feri
nthat
A.thetwosyst emscanshowdi f
ferentover
headbudgetvar i
ances.
34.
Theef f
ectofuni f
orm producti
onlevel
sonproducti
oncostperuni tcanbe B.onlynormal cost
ingcanbeusedwi thabsorpti
oncosti
ng.
achieved C.thetwosyst emsshow diff
erentvolumevar i
ancesifstandar
dhoursdo
A.byusi ngaf actor
yover headratebasedondiff
erentproduct
ionlevel
s notequal actual
hours.
foreachyear D.normal costi
ngislessappropri
ateformulti
productf
ir
ms .
B.byusi ngaf actoryoverheadratebasedonsel
li
ngpr i
ce
C.bycl osingthefactoryoverheadattheendoftheaccounti
ngper i
od Standar
dCost i
ng
D.byusi ngaf actoryoverheadratebasedonlong-runnormalproducti
on 20.Thepr oductcostwhichisdet
ermi
ned i
naconvent
ionalst
andar
d cost
acti
vit
ylevel accounti
ngsystem i
sa(an)

742
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

A.Joi
ntcost
. C.Expect
edcost
. 41
.Whyi sitbettertouseseparateoverheadr ates?
B.Fi
xedcost. D.Dir
ectcost
. A.Somedepar tmentsarelabor-i
ntensive,somearemachine-i
ntensi
ve.
B.Laborr at
esvar yconsi
derablyamongdepar tment
s.
Pl
ant-
wi devs.Depart
ment- sideOver headRates C.Ther esult
ingoverheadratesareallaboutthesame.
44.
Volume- basedpl
ant-wider atesproduceinaccurat
epr
oductcostwhen: D.Allj
obsr equireaboutt
hesameper cent ageoft
imeinal
ldepartments.
A.al ar
geshareoffactor yoverheadcostisnotvol
ume-based
B.f irmsproduceadiver semi xofproduct Operat
ingLever
age
C.l argevolumesofproduct i
onoccur 45.
IfcompanyAhasahigherdegr eeofoperat
ingl
ever
agethancompany
D.Bot haandbar ecorrect. B,then:
A.t hecompanyAhashighervari
abl
eexpenses.
Act
ivi
ty-
basedCost i
ng B.t hecompanyA'
spr of
it
saremor esensit
ivet
opercent
agechangesi
n
25.
Anact i
vit
ythathasadi
rectcause-
eff
ectrel
ati
onshi
pwi tht
her
esour
ces sales.
consumedi sa(n) C.t hecompanyAi
smor eprofi
tabl
e.
A.costdr i
ver. C.costpool. D.t hecompanyAi
slessri
sky.
B.over headrate. D.productacti
vi
ty.

27.
Thet er
m costdriverr
eferto:
A.anyact i
vitythatcanbeusedt opr edictcostchanges.
B.t heatt
emptt ocontrolexpendi
turesatar easonablel
evel
.
C.t hepersonwhogat hersandtransferscostdat atothemanagement
accountant.
D.anyact i
vitythatcausescostst
obei ncurred.

26.
Eachgroupofoverheadcostsshoul
dbeappli
edbasedon
A.dir
ectlaborhoursorcost
.
B.unit
spr oduced.
C.what everact
ivi
tydr
ivest
hosespeci
fi
cover
headcost
s.
D.machi neti
me.

31
.Whichoft hefol
lowingstatementsistr
ue?
A.Thetradi
ti
onalappr oachtocosti
ngusesmanydi ffer
entcostdr
ivers.
B.Coststhatareindi
recttoproductsarebydefini
ti
ontraceabl
etodirect
ly
toproducts.
C.Coststhatareindi
recttoproductsaret
raceabletosomeactivi
ty.
D.All
oftheabovest atementsaretrue.

743
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

PROBLEMS: admini
strati
onexpenseofP1 40,
000f ort heyear.1,000unit
sofA and
Tot
almanufactur
ingcost
s 3,000unitsofBwer eproduced.Arequires3andBr equi
resonemachi ne
i
. Dir
ectmat eri
alsanddi r
ectl
aborcoststot
alP1 20,
000,conver
sioncost
s hoursperunit.Arequi
res6directl
aborhour sandBr equi
res4dir
ectlabor
tot
alP100,000,andf act
oryover
headcoststotalP400permachinehour. hoursperuni t.40% ofoverheadisrelatedtol aborandthebalancet o
If150 machi ne hours were used f
orJob #201 ,whati sthe t
otal machines.TheoverheadperunitofBamount sto
manufacturi
ngcostforJob#201? A.P 60 C.P1 56
A.1 20,
000 C.180,000 B.P 68 D.P1 80
B.1 60,
000 D.280,000
vi
.ABC Company had a t otaloverhead ofP360, 000 and selli
ng and
Overhead administr
ati
onexpenseofP1 40,000f ortheyear.1,000unitsofA and
Budgetedoverhead 3,000uni t
sofBwer eproduced.Assumi ngthat20% ofalloverheadare
i
i. Machinehoursusedtosetthepr
edeter
minedoverheadr
atewere25,000, batch-rel
atedfor1,
000bat ches,40% ofwhichwasf orproduci
ngpr oduct
actualhour
swere24,000,andover
headappliedwasP60,000.Budgeted A,batch-relat
edoverheadforproductAperunitamount sto
overheadfort
heyearwas A.P20 C.P60
A.P57, 600. C.P60,000. B.P40 D.P80
B.P59, 000. D.P62,
500.
vi
i
.ABC Company had a t ot
alover head ofP360, 000 and sell
ing and
Overheadperunit admi ni
str
ationexpenseofP1 40,000f ortheyear .1 ,
000uni t
sofA and
i
ii
.ABC Company had a t otaloverhead ofP360, 000 and sell
i
ng and 3,000 unitsofB wer e produced.Assumi ng that30% ofover head i
s
administ
rat
iveexpenseofP1 40,000 fortheyear.1,000 uni
tsofA and productrelatedover
head-20% ofwhi chisrel
atedt oproductA,product
-
3,000 unit
sofB wer e produced.A r equi
res3 machine hoursand B rel
atedover headperuni
tofAamount sto
requi
resonemachi nehourperunit.Whatisover
headchar geabl
eperuni
t A.P30 C.P50
ofA B.P40 D.P60
A.P 60 C.P1 20
B.P 90 D.P1 80 Totaloverheadvariance
vi
ii
.CookeCompanyusest heequat i
onP450, 000 +P1 .
50 perdi r
ectlabor
i
v.ABC Company had a t otaloverhead ofP360, 000 and sel
li
ng and hourt obudgetmanuf actur
ingoverhead.Cookehasbudget ed1 50,000
admini
strati
onexpenseofP1 40,
000f ort heyear
.1,000unit
sofA and directlaborhoursf ortheyear .Actualresult
swer e156,000di r
ectlabor
3,000unitsofBwer epr oduced.Arequires3andBr equi
resonemachi ne hour sandP697, 500 totalmanufacturi
ng overhead.Thet otaloverhead
hoursperunit.Arequires6directl
aborhour sandBrequi
res4dir
ectlabor variancefortheyeari s
hoursperuni t.40% ofover headisrelatedtolaborandthebalancet o A.P4, 500favorable. C.P4, 500unfavorabl
e.
machines.Labor-rel
atedoverheadperhouramount sto B.P1 8,000favorable. D.P1 8,000unfavorabl
e.
A.P 8 C.P1 8
B.P1 2 D.P24 Over(
under
)-appl
iedoverhead
i
x.Ifest
imatedannualf
actoryoverheadi
sP800,000,esti
mat
edannualdi
rect
v. ABC Company had a t
otalover
head ofP360,
000 and sel
l
ing and l
aborhoursare400,000,actualJunefact
oryoverheadi
sP82,000,and

744
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

act
ual
Junedirectl
aborhour
sar
e38,
000,t
henoverheadis: A.P1
20,
000 C.P1
68,
000
A.P6,000overappl
ied C.P1,800underappli
ed B.P1
44,
000 D.P1
60,
000
B.P1,
800over appl
i
ed D.P6,000underappli
ed
Equival
entuni
tofpr oducti
on
Grossprofi
t xi
ii
.TheAssembl i
ngDepar tment ’ ,
000
x. BKYCompanypr edict
edt hatf actoryover headf or2006and2007woul d unit
scompl et
edandt ransferr
edout ,and5,000unitsinendingworkin
beP60, 000foreachyear .Thepr edictedandact ualactivit
yf or2006and process60% compl et
east omat er
ial
sandconver
sioncosts.Begi
nning
2007wer e30, 000and20, 000di rectlaborhour s,respectivel
y. i
nventoryis1,000 units,40% compl et
east omateri
alsandconver
sion
2006 2007 costs.Theequivalentunit
sofpr oducti
onar
e
Sal
esi nunits 25,000 25,000 A.22, 600 C.24,000
Sel
li
ngpr i
ceperuni t P10 P10 B.23, 000 D.25,000
Dir
ectmat eri
alsanddi rectlaborperuni t P5 P5
Thecompanyass umest hatthel ong-runpr oducti
onl evelis20, 000dir
ect xi
v.TheAmorCompanyhas2, 000uni tsinbeginni
ngwor ki nprocess,20%
l
aborhour speryear . Theact ualfactoryover headcostf ort heendof completeastoconver si
oncost s,23,000unitst
ransf
erredoutt ofini
shed
2006and2007wasP60, 000.Assumet hatittakesonedi rectlaborhour goods,and3,000unitsinendingwor kinprocessone-thir
dcompl eteasto
tomakeonef i
nishedunit. conversi
oncosts. Thebegi nningandendi nginvent
oryi sf
ullycompl et
e
Whent heannual esti
mat edf actoryover headr at
ei sused,t hegr osspr
ofi
ts astomat er
ial
scosts.Equivalentunitsformater
ial
sandconver si
oncosts
for2006and2007,r espect i
vely,are are
A.P 75, 000andP 75, 000 C.P1 25,000andP1 25,000 A.22,000and24, 000 C.24, 000and26, 000
B.P 75, 000andP 55, 000 D.P 75, 000andP 50, 000 B.26,000and24, 000 D.26, 000and26, 000

Processcosti
ng xv.DodgeCompanyhasami xingdepar t
mentandar ef
ini
ngdepar t
ment.It
s
Wor kinprocess process-cost ingsystem i nthemi xingdepart
menthast wodirectmat er
ial
s
xi
.Br i
tney Company has unitcosts ofP1 0format eri
als and P30 f or costcategor ies( materialJandmat eri
alP)andoneconversioncost spool.
conversi
oncosts.Ifther
eare2,500uni
tsinendingwor kinpr ocess,40% ThecompanyusesFi rst-
in,Firstoutcostfl
ow method.Thef oll
owingdata
completeast oconversi
oncost
s,andful
lycompl et
east omat er
ial
scost, pertai
ntot hemi xingdepar tmentf orNovember2006
thetot
alcostassi
gnabletot
heendingworkinprocessinventoryis Unit
s
A.P 45, 000 C.P 75,000 Work i n pr ocess, November 1 : 50 per
cent
B.P 55, 000 D.P1 00,
000 completed 15,000
Worki n pr ocess,November 30,70 per cent 25, 000
Overheadcomponent completed
xi
i
.Int heSt arCompany,t hepredeter
mi nedoverheadrateis80% ofdi r
ect Unit
sst ar t
ed 60, 000
l
aborcost .Duri
ngt hemonth,P210,000offact
orylaborcost
sareincurred, Compl etedandt ransferred 50, 000
ofwhi chP1 80,
000i sdir
ectlaborandP30, 000i si
ndir
ectlabor
. Actual Costs
overheadi ncur
redwasP200, 000. Theamountofover headdebi t
edt o Work- i
n- process,November1 P21 8,000
Wor kinProcessInvent
oryshouldbe Material J 720, 000

745
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

Mat er
ial P 750,000 Unit
stobeaccountedf or
Conver sionCosts 300,000 xi
x.I
nt he Newman Company,t her
e ar e zero uni
tsi
n beginni
ng worki
n
Materi
al Ji
si ntr
oducedatthestartofoperationsi
ntheMixingdepartment, process,7,
000unit
sstart
edintoproduction,and500unit
sinendingwor
k
andMat eri
alPi saddedwhent hepr oductisthr
ee-four
thscompletedin i
npr ocess20% complet
ed.Thephysi calunit
stobeaccountedforar
e
themi xi
ngdepar t
ment.Conversioncostsar eaddeduniformlydur
ingthe A.7, 000 C.7, 600
process. B.7, 360 D.7, 340
Therespectiveequi val
entuni
tsforMat eri
alJandMat eri
alPinthemi xi
ng
departmentf orNovember2006,ar e CostofFinishedGoodsTr ansferred
A.Bot h50,000uni t
s C.75, 000unit
sand60, 000unit
s xx.Forthemont hofMay,t hePr oductionCont rolDepar tmentofLaMesa,I nc.
B.60, 000uni tsand50,000units D.60, 000unit
sand75, 000unit
s report
edt hefoll
owi ngpr oductiondat aforFi nishi
ngDepar tment( second
department ):
xvi
.The costofgoods compl
eted and t
ransfer
red outt
othe Ref
ini
ng Transf er
red-i
nf rom Assembl yDepar tment 75,
000
depar
tmentwas Transf er
red-outt oPackagi ngDepar t
ment 59,250
A.P1 ,
930,
750 C.P1,600,
500 In-processendofMay( with1 /
3l aborandf actoryover head)15,750
B.P1 ,
350,
000 D.P1,550,
500 Allmat erial
swer eputi ntopr ocessi nAssembl yDepar tment.TheCost
Account ingDepar t
mentcol l
ectedt hesefiguresf orFini
shingDepar tment .
xvi
i
. TheAmorCompany’ Unitcostf orunitt r
ansf er
red- i
nf r
om Assembl yDepar t
ment P
forApr i
l2003.Thecompanyaccount si
tspr oducti
onusingFi rst
-in,Fi
rst
- 2.70
outcostf l
owmet hod: Laborcosti nFini shingDepar t
ment 41,280.00
Wor k in pr ocess, March 31 ,2003, 60% Appl i
edf act
oryover head 1
1 2.
5% ofl aborcost
completedast omat eri
alsandconver sion ?unit
s How much was t he costofFi ni
shed goods t ransferred outt ot he
costs Packagi ngDepar t
ment ?
Wor k in pr ocess, Apri
l 30, 2003, 30% A,P240, 555 C.P260, 580
completedast omat eri
alsandconver sion 24,000uni t
s B.P 80, 580 D.P1 59, 975
costs
Equival
entuni t
sofproducti
onf orApri
l2003 64,000 Compr ehensive
Unit
ss t
artedandcompl et
edinApr i
l 50,000 Uset hefol
lowingdat
atoanswerquest i
onNos.1 8thr ough20.
Howmanyuni tswer ei
nt hebeginni
ngwor k-in-process? Mer gy Company uses process costi
ng in account i
ng forit
s producti
on
A. 6, 800 C.17,000 depar t
ment,whichusest woraw mat eri
als
.Mat erialAlphai spl
acedatt he
B.1 1,333 D.24,000 beginningoftheprocess.I
nspecti
onisatthe85% compl et
ionst
age.Mat er
ial
Bravoi st
henaddedt othegoodunits
.Nor mal spoilageuni t
samountt o5% of
xvi
i
i. Hadt hecompanyusedtheweighted-aver
agemet
hodofaccount
ing goodout put.Thecompanyrecordscontai
nt hefollowi nginf
ormati
onf orApri
l:
fori
tspr
oduct
ion,t
heequi
val
entuni
tsshoul
dbe
A.74,200 C.81,000 St
artedduri
ngtheper
iod 20,
000uni
ts
B.57,200 D.53,800 Materi
alAl
pha P26,
800
Materi
alBet
a P22,
500

746
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

Directlaborcost P75,160 beginningoft heprocess.Thepr oducti

sinspectedwheni ti
s90per cent
Factoryover head P93,950 converted,andspoi l
agei si
denti
fi
edonlyatt hatpoint
.Normalspoil
agei s
Transferredtofini
shedgoods 14,
000 expectedt obe5% ofgoodout put.
Wor ki npr ocess(95% complet
e), Apr
il 4,000 The following are extract
ed from the pr oduct
ion recor
ds of Lapid
30 Companyf orMay2003:
Unitsputintoprocess 21,000
xxi
.How muchwer eMat
eri
alcostperequi
valentuni
tforAl
phaand Bet
a, Unitstransfer
redtofini
shedgoods 14,000
respecti
vel
y? I
n- process,May31 ,75% compl et
e 6,000
A.P1 .40;P1.
36 C.P1.34;P1.
06 Howmanyar econsideredabnormal l
ostunit
s?
B.P1 .40;P1.
06 D.P1.34;P1.
25 A.Zer o C.1 5
B.300 D.850
xxi
i
. Theequi val
entunit
sofpr
oduct
ionf
orMat
eri
alAl
phaandBet
aar
e
Alpha Beta Stat
ementofCostofGoodsManuf act
ured&Sol
d
A.18,00014,
000 Usethefol
lowingi
nformati
onthatper
tai
nst
obet
amanuf
act
uri
ngcompanyt
o
B.18,00018,
000 answerquesti
ons21through23:
C.20,000 18,000
D.20,000 14,000 Beginningdi r
ectmat eri
alsinventor
y P 20,000
BeginningWI Pinventory 20,
000
xxi
i
i. Thenumberofnor
mal
andabnormal
lostuni
tsar
e: Beginningf i
nishedgoodsi nventory 40,
000
Nor
mal Abnor
mal Endingdirectmat erialsinventory 10,
000
A. 700 1,
400 EndingWI Pi nventory 100,
000
B.1,
400 700 Endingf i
nishedgoodsi nventory 50,
000
C. 900 1,
100 Purchases 140,
000
D.1,
100 900 Dir
ectlabor 160,
000
Factoryover head 200,
000
Mater i
alcost
Unitmat eri
alcost xxvi
. Whati
stheamountofdi
rectmat
eri
alsusedduri
ngt
heper
iod?
xxi
v. Cat ri
dgeCompanyhasnobegi nningwor kinprocess;9,
000unitsare A.P1
40,000 C.P 60, 000
transferr
edoutand3, 000uni
tsinendi ngwor kinprocessareone- t
hir
d B.P1
30,000 D.P1 50,
000
fi
nishedast oconversi
oncost
sandf ull
ycompl et
east omateri
alscost.If
totalmateri
alscosti
sP60,
000,theunitmateri
alscosti
s xxvi
i
. Whati
stheamountofcostofgoodsmanuf
act
ureddur
ingt
heper
iod?
A.P5. 00 C.P5. 45 A.P430,
000 C.P470,
000
B.P6. 00 D.P5. 35 B.P420,
000 D.P510,
000

Lostuni
ts xxvi
i
i.Whati
stheamountofcostofgoodssol
dduri
ngt
heper
iod?
xxv. LapidCompanyusespr
ocesscost
ing.Al
lmat
eri
alsar
eaddedatt
he A.P430,
000 C.P470,
000

747
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

B.P420,
000 D.P51
0,000
vi
.Answer :B
Bat
chrelatedcost
s:(360,000+1 40,000)×20% P1 00,
000
i
. Answer :C Bat
chrelatedcost
s,ProductA:100,000×40% 40,
000
Dir
ectmat er
ialsanddi
rectl
abor P1
20,
000 Bat
ch-relat
edoverheadperunitofProductA:40,
000/1 ,
000 P 40
FactoryoverheadP400x1 50 60,
000 I
n ABC cost i
ng,thereis no need t o make a dist
inct
ion between
Totalmanufacturi
ngcost P1
80,
000 manufact
uring andnon-manuf act
uri
ng costsincomputi
ng therelevant
pr
oductcosts
i
i
. Answer:D
Overheadrat
eperhour (
P60,
000÷24,
000) vi
iAnswer :A
P2.
50 Product-r
elat
edoverheadcost (360,
000+1 40,000)×30%
Budgetedoverhead (
25,
000xP2.
50) P62,
500 P150,000
Product-r
elat
edoverheadcost
,ProductA:1 50,000×20% P
i
i
i.Answer:D 30,000
Tot
alnumberofhours:(1,
000x3)+( 3,000x1) 6,000 Pr
oduct-r
elat
edoverheadcostperunit
,ProductA:30,000/1,000 P 30
Overheadcostperhour(P360,
000÷6, 000) P 60
Overheadchargedperuni
tofproductA:3hrs.xP60 P180 vi
i
i.Answer :A
Variableoverhead P1 .
50
i
v.Answer :A Predeterminedfixedoverhead (
P450,000÷150,000)
Labor-rel
atedoverhead:(
P360,000x0.40) P1
44,000 3.00
Totalnumberoflaborhours:(
1,000x6)+(3,000x4) 18,
000 Totaloverheadr at
e P4.50
Labor-rel
atedoverheadperDLH:(P144,
000÷1 8,
000) P8 Actual over
head P697,500
Appl i
edoverhead (156,
000hour
sxP4.50) 702,000
v. Answer:B Totaloverheadvar i
ance,f
avorabl
e P 4, 500
Machine-
rel
atedover
head:(P360,000x0.
6) P21
6,000
Tot
alnumberofmachinehours(1,
000x3)+3,000 6,000 i
x.Answer:D
Machine-
rel
atedOHperMH:( P216,
000÷6,000) P36 Appl
iedoverhead 38,
000xP2 P76,
000
Act
ual over
head 82,
000
Overheadappl i
edperuni
tofPr
oductB: Underappli
edoverhead P6,
000
Labor-r
elated(4hoursxP8) P32
Machine-relat
ed(1xP36) 36 Over
headr
ateperdi
rectl
aborhour (
P800,
000÷400,
000)
Overheadperuni t P68 P2.
00

Theover
headisbr
okendownint
otwovol
ume- basedcostpool
s.Thi
sis x. Answer:B
amoremodif
iedexampl
eoft
radi
ti
onal
cost
ing GrossProf
it
:
2006:(
25,000x1
0)-1
75,
000 =P75,
000

748
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

2007:(
25,
000x1
0)-1
95,
000=P55,
000 % of EUP % of EUP
Compl
eti
on Compl et
ion
Overheadappli
cati
onr
ates: Complet
edunit
s 100 23,
000 100.00 23,
000
2006:60,000/
30,000=P2.00 WIP-End 100 3,
000 33.33 1,
000
2007:60,000/
20,000=P3.00 Weight
ed-Aver
age 26,
000 24,
000
EUP
UnitCost
s:
2006:5+2 = P7.
00 xv.Answer
:B
2007:5+3 = P8.
00 Computat
ionofequi
val
entuni
ts
Mat
eri
alJ Mater
ial
P
Costsofgoodssold: Work-
in-process,Nov.1 - 15,
000
2006:25,000xP7 P1
75, 000 Uni
tsst
artedandcompl et
ed 35,000 35,
000
2007:(5,000xP7)+(20,
000xP8)
P1 95,000 Work-
in-process,Nov.30 25,000 -
Note:I
n2007t hecompanyhasabeginninginvent
oryof5,
000uni
tsat EUP 60,000 50,
000
uni
tcostofP7.
xvi
.Answer :C
xi
.Answer:B
Wor ki
npr ocess- begi
nni
ng
Materi
alscost(
2,500xP10) P25,
000
Cost,Nov.1 P21
8,000
Conversi
oncost( 2,
500x0.4xP30) 30,
000
Cost,November
Tot
alcostsofWor ki
nProcess P55,
000
Mat eri
alP( 15,
000xP5) 225,
000
Conver sion7,500xP5 37,
500 262,500 P 480,
500
xi
i
.Answer:B
Start
ed, complet
ed
Theamountofoverheadappl
i
edt opr
oducti
onshoul
dbe80per
centof
35,000P32 1
,120,
000
di
rectl
aborcost(
P180,000x0.80)=P144,
000
Costofgoodst ransf
err
ed
out P1
.600,
500
xi
i
i.Answer:B
UnitCosts
Complet
eduni t
s 20,
000
MaterialJ 720,
000/
60,
000 P12
Workinprocess,End (5,
000x0. 6)3,000
MaterialP 750,
000/
50,
000 15
Tot
alequi
valentuni
ts,aver
age23,000
Conver si
oncosts 300,
000/
60,
000 5
Total P32
xi
v.Answer:B
Uni
tscomplet
edandtransf
err
edout 23,
000
xvi
i
. Answer :C
WorkinPr
ocess,End 3,
000
Equival
entuni
tsf
orApr i
l 64,
000
Less:EU – star
ted and compl
eted
Mat
eri
als Conver
sionCost
s duri
ng:

749
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

Apri
l 50,
000 Abnormal
lostuni
t 1,
100 0
Work-in-
process,end Total 20,
000 1
8,000
(
24,000x3) 7,
200 57,
200 Uni
tcost
Equival
entunits -work-i
n-pr
ocess 6,
800 Al
phaP26,80020, 000=P1
.34
endMar31 Bet
aP22, 50018,000=P1.
25
Numberofuni tsi
nprocessasof
March31 6,
80040 1
7,000 xxi
i
. Answer :C
Equivalentunit
s Al
pha Bet
a
xvi
i
i. Answer:A TransferredtoF.G. 14,
000 1
4,000
Equi
val
entunit
s–FI FO 64,
000 EndPr ocess 4,
000 4,000
Addequival
entuni
tsinMar
ch31(
17,
000x.
6) 10,
200 Normal l
ostuni
ts 900
Weight
edAverageEUP 74,
200 Abnormal l
ostuni
t 1,
100 ______
Total 20,
000 18,000
xi
x.Answer
:A
Thenumberofunit
st obeaccount
edshoul
dbet hesum oftheunit
sin xxi
i
i. Answer:C
begi
nni
ngworkinprocessandt
henumberofuni
tsthathavebeenst
art
ed Tot
all
ostuni
ts(20,
000–18,000) 2,
000
duri
ngt
heperi
od Tot
all
ostuni
ts5% x18,
000 900
Abnor
mal l
ostuni
ts 1,
100
xx.Answer :A
EUP: xxi
v. Answer :A
Transfer
redouttoPackagingDept . 59,
250 Completedandt ransf
erredout 9,000
Inprocess,end15,750x1 /3 5,
250 Unit
sinwor k-i
n-process,End (3,
000x100%) 3,000
Total 64,
500 Equi
valentsunit
sofpr oduct
ion-Mater
ial
s 1
2,000
UnitCost: Materi
alscostperEUP ( P60,000÷12,
000) P5.00
Transfer
redin 2.
70
Laborandover head 87,720/64,
500 1.
36 xxv. Answer:B
Total 4.
06 Total
lostuni
ts(21,
000–20, 000) 1
,000
Costoffini
shedgoodst r
ansferr
edout59,
250x4.
06 P240,
555 Lessnormal l
ostuni
ts5% of14,
000 700
Abnormal l
ostuni
t 300
xxi
.Answer
:D
Equi
val
entuni
ts xxvi
. Answer :D
Al
pha Bet
a Begi
nningmat eri
alsi
nvent ory P 20,
000
Transf
erredtoF.
G. 1
4,000 1
4,000 AddMat er
ialsPurchased 140,
000
EndProcess 4,000 4,000 Tot
alcostofmat eri
alsavailabl
eforuse 160,
000
Normal l
ostuni
ts 900 0 DeductMat eri
al
sinventory,End 10,
000

750
 CostAccount
ingSyst
ems
(
A.Tr
adit
ional
CostAccounti
ng)

Costofmat
eri
al
sused P1
50,
000

xxvi
i
. Answer :A
Dir
ectmat eri
alsused P150,
000
Dir
ectlabor 160,
000
Overhead 200,
000
Total
manuf act uri
ngcost s 510,
000
AddWor kinpr ocess,beginni
ng 20,
000
Total
costspl acedi nprocess 530,
000
DeductWor kinpr ocess,end 100,
000
Costofgoodsmanuf actur
ed P430,
000

xxvi
i
i.Answer :B
Costofgoodsmanuf act
ur ed P430,
000
Addfini
shedgoodsinventory,beginni
ng 40,
000
Tot
alcostofgoodsavailableforsal
e 470,
000
Deductfi
nishedgoodsinventory,end 50,
000
Costofgoodssold P420,
000

751