ACTBFAR – Basic Financial Accounting and Reporting

ACCOUNTING FOR MANUFACTURING OPERATIONS

REVIEWER

TRUE OR FALSE
1. Predetermined costs are calculated before they are incurred on the basis of a specification of all factors
affecting the cost.
2. Direct material refers to all materials used in the production of a product.
3. Product costs are those that can be traced back to a specific product and are included in inventory values.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

4. Variable costs are those that do not vary proportionally and directly with output.
5. Fixed cost is defined as "The cost which is incurred for a period, with certain output & turnover limit, tend
to be unaffected by fluctuations in the level of activity.
6. Product costs are used to value inventories, which are shown as assets on the Statement of Financial
Position until they are sold.
7. As current technology changes manufacturing processes, it is likely that direct labor will decrease.
8. For inventoriable costs to become expenses under the matching principle, the cost of the product must be
settled first.
9. A manufacturing company includes the cost of goods manufactured in the calculation of the cost of goods
sold.
10. For product costing purposes, an indirect factory cost to conversion costs.
11. Merchandising firms buy products and sell them to customers in their original form.
12. The cost of a customized machine used only in the production of a single product would be classified as a
direct cost.
13. When 50,000 units are produced the fixed cost is P 10 per unit. As a result, when 100,000 units are
manufactured, fixed costs will remain at P 10 per unit.
14. Merchandising firms only keep two kinds of inventory: merchandise inventory and direct material.
15. Cost of goods sold refers to the products brought to completion, whether they were started before or
during the current accounting period.
16. Depending on what is being depreciated, depreciation can be classified as an inventoriable cost or a
period cost.
17. A factory's insurance can be classified as a period cost.
18. Philippine Financial Reporting Standards (PFRS) require costs to be classified as either variable or fixed for
reporting purposes.
19. When making decisions using fixed costs, the focus should be on total costs and not unit costs.
20. A cost accounting system has internal and external reporting objectives, one of the objectives is product
costing and inventory valuation.
21. Product costs or inventoriable costs are treated as assets before the products are sold.
22. The salary of a foreman in an automobile company's assembly division is a direct product cost.
23. Bookbinder of a commercial printer/publisher would be classified as indirect labor.
24. Conversion costs are period costs.
25. Product costs affect only the income statement.
26. Raw Materials Used are not a component of manufacturing overhead.
27. Depreciation, insurance, and property taxes for a factory building would be shown in the Operating
Expenses section of the Statement of Profit or Loss.
28. Total manufacturing cost is the sum of beginning work in process, direct materials used, direct labor
incurred, and manufacturing overhead.
29. Manufacturing overhead usually subdivided into three categories: indirect materials, indirect labor, and
other manufacturing overhead.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

 30. Direct materials are those materials used in the manufacturing process that become significant part of the
finished goods.
31. Raw materials ending inventory includes indirect materials.
32. Cost of Work put into process is Cost of Goods manufactured plus beginning Finished Goods Inventory.
33. Leather materials in shoes are considered manufacturing overhead.
34. The glue used in manufacturing armchairs and the thread used in sewing a suit are indirect materials.
35. Conversion costs indicates the costs required to convert the raw materials into finished products.
36. Work in Process reflects the cost of raw materials, direct labor, and manufacturing overhead of goods on
which manufacturing has begun but has not been completed at the end of fiscal period.
37. Finished Goods includes all partially completed goods during the year.
38. Normal Cost system is a system that accumulates only the actual amounts of direct materials and direct
labor costs.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

39. The essence of normal costing is that it uses a predetermined overhead rate to allocate manufacturing
overhead costs.
40. Overapplied results when product costs are understated because the actual overhead were higher than
expected.
41. All operating expenses are fixed costs.
42. Raw Materials, Work-in-Process, and Finished Goods Inventory accounts are real accounts.
43. Cost of goods sold represents the cost of goods that are sold and transferred out of finished goods
inventory into cost of goods sold.
44. Manufacturing overhead includes the costs of indirect materials, indirect labor, machine repairs, factory
depreciation, factory supplies, insurance – store equipment, factory utilities and other factory-related
expenses.

MULTIPLE CHOICE – THEORIES. Select the letter of the correct answer.

1. Direct material and direct labor is classified as:
A. Overhead
B. Fixed Costs
C. Variable Cost
D. None of the above

2. Manufacturing cost includes:

A. Direct material
B. Direct labor
C. Manufacturing Overhead expenses
D. All of the above

3. For a manufacturing company, the cost of goods sold available for sale during a given accounting period is
A. The beginning inventory of finished goods
B. The cost of goods manufactured during the period
C. The sum Cost of Goods manufactured and Finished Goods from previous period
D. None of the above

4. Which of the following would not be classified as manufacturing overhead?

A. Indirect labor
B. Direct materials
C. Insurance on factory building
D. Indirect material

5. Which of the following is not a product cost?

A. Wages paid to workers for rework on defective products.
B. Wages paid to truck loaders who load finished goods onto outgoing delivery trucks.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

C. Wages paid to factory workers.
D. Wages paid to workers for idle time due to machine breakdown in a production department.

6. Which of the following is NOT a period cost in a manufacturing concern?

A. Legal costs.
B. Sales commissions.
C. Wages of assembly-line workers.
D. The salary of a company's chief financial officer (CFO).

7. Which of the following inventories would a manufacturing company ordinarily hold for sale?
A. Raw Materials.
B. Finished Goods.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

C. Raw Materials and Finished goods.
D. Work In Process and Finished Goods.

8. Which of the following statements is FALSE?

A. It is possible for a raw material such as glue to be considered as an indirect material by one furniture
manufacturer and as a direct material by another furniture manufacturer.
B. Product costs are all costs of a product that are considered as assets in the balance sheet when they are incurred
and which become cost of goods sold only when the product is sold.
C. Both normal costing and actual costing systems use actual prices and quantities to calculate direct costs. The
difference between the two systems is that the normal costing system uses applied overhead rates based on the
overhead budget, instead of actual overhead rates.
D. Cost data, once classified and recorded for a specific application, are appropriate for use in any application.

9. A manufacturing plant produces gym equipment and sports equipment. Direct costs for the gym equipment
lines are the:
A. Beverages provided daily in the plant break room
B. Monthly lease payments for a specialized piece of equipment needed to manufacture the dumbbells
C. Salaries of the clerical staff that work in the company administrative offices
D. Utilities paid for the manufacturing plant

10. Which of the following costs is NOT a component of manufacturing overhead?

A. Indirect materials.
B. Factory equipment.
C. Indirect labor.
D. Depreciation on the manufacturing plant.

11. Which of the following statements is TRUE?

A. Product costs affect only the Statement of Financial Position.
B. Product costs affect only the income statement.
C. Period costs affect only the Statement of Financial Position.
D. Product costs eventually affect both the Statement of Financial Position and the income statement.

12. Which of the following equations is used to calculate cost of goods sold during the period?
A. Beginning Finished Goods + Cost of Goods Manufactured + Ending Finished Goods.
B. Beginning Finished Goods + Cost of Goods Manufactured.
C. Beginning Finished Goods + Cost of Goods Manufactured - Ending finished goods.
D. Beginning Finished Goods + Ending Finished Goods - Cost of Goods Manufactured.

13. As activity decreases, unit variable cost:

A. increases proportionately with activity.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

B. decreases proportionately with activity.
C. remains constant.
D. decreases by a fixed amount.

14. Which of the following is NOT an example of a variable cost?

A. Straight-line depreciation on a machine that has a five-year service life.
B. Wages of manufacturing workers whose pay is based on hours worked.
C. Tires used in the production of tractors.
D. Commissions paid to sales personnel.

15. When 10,000 units are produced, variable costs are P 6 per unit. Therefore, when 20,000 units are produced:
A. Variable costs will total P 120,000

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

B. Variable costs will total P 60,000
C. Unit variable costs will increase to P 12 per unit
D. Unit variable costs will decrease to P 3 per unit

16. For a manufacturing company, direct material costs may be INCLUDED in:
A. Raw Materials Inventory only
B. Merchandise inventory only
C. Both Work-In-Process inventory and Finished Foods inventory
D. Raw Materials Inventory, Work-In-Process inventory, and Finished Goods Inventory accounts

17. Total manufacturing costs equal:

A. Direct materials + Prime Costs
B. Direct materials + Conversion Costs
C. Direct manufacturing labor costs + prime costs
D. Materials + Direct manufacturing labor costs + factory overhead including indirect materials

18. Direct materials inventory would normally INCLUDE:

A. Direct materials in stock and awaiting use in the manufacturing process
B. Goods partially worked on but not yet fully completed
C. Products in their original form intended to be sold without changing their basic form
D. Supplies used in manufacturing a product

19. Actual costs are:

A. the costs incurred
B. budgeted costs
C. estimated costs
D. forecasted costs

20. Classifying a cost as either direct or indirect depends upon:

A. the behavior of the cost in response to volume changes
B. whether the cost is expensed in the period in which it is incurred
C. whether the cost can be easily identified with the cost object
D. whether an expenditure is avoidable or not in the future

21. Gross profit for a manufacturing business is calculated by:

A. deducting cost of goods manufactured from net sales.
B. deducting cost of goods sold from net sales.
C. deducting the ending finished goods inventory from the total goods available for sale.
D. deducting operating expenses from the costs of goods sold.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

22. The Statement of Financial Position of a manufacturing firm includes which account that will not be included in
the Balance Sheet of a merchandising or service firm
A. Prepaid Insurance
B. Work in Process Inventory
C. Prepaid Wages
D. Accounts Payable

STRAIGHT PROBLEMS
PROBLEM #1 BFAR Manufacturing Company had the following account balances for the month
ending Dec 31, unless Otherwise noted:

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

Work-in-process inventory (December 1) P 140,400
Work-in-process inventory (December 31) 171,000
Finished goods inventory (December 1) 540,000
Finished goods inventory (December 31) 510,000
Direct materials used 378,000
Indirect materials used 84,000
Direct manufacturing labor 480,000
Indirect manufacturing labor 186,000
Property taxes on manufacturing plant building 28,800
Salespersons' company vehicle costs 12,000
Depreciation of manufacturing equipment 264,000
Depreciation of office equipment 123,600
Miscellaneous factory overhead 135,000
Factory utilities expense 92,400
General office expenses 305,400
Marketing distribution costs 30,000
1. Compute the total period costs.
2. Compute the total product costs.
3. Compute the Manufacturing overhead.
4. Compute the total inventory that should be reported in the Statement of Financial Position.

PROBLEM #2 The accounting records of BFAR Company revealed the following costs:
Factory utilities 156,000
Wages of assembly-line personnel 170,000
Customer entertainment 45,000
Indirect materials used 119,000
Depreciation on salespersons' cars 51,000
Production equipment rental costs 110,000
Compute the costs that would be considered in the calculation of manufacturing overhead:

PROBLEM #3 BFAR Tire Manufacturing currently produces 2,000 tires per month. The following per unit data
apply for sales to regular customers (based on 2,000 tires):
Direct materials 20
Direct manufacturing labor 3
Variable manufacturing overhead 6
Fixed manufacturing overhead 10
Total manufacturing costs 39
1. Compute the total variable cost of producing 3,000 tires.
2. Compute the total fixed cost of producing 3,000 tires.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

PROBLEM #4
BFAR Company is planning to rent a car for an upcoming four-day business trip. The car rental agency charges a flat
fee of P2,900 per day plus P120 per mile driven.
BFAR plans to drive
• 140 miles on Day 1 of his trip
• 15 miles on Day 2
• 15 miles on Day 3
• 140 miles on Day 4
Compute BFAR’s total costs for the car rental.

PROBLEM #5

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

In the month of May, BFAR Manufacturing had the following costs:
1. Property Taxes, P50,900 (P40,200 for sales office, P10,700 for factory)
2. Insurance, P45,000 (P15,000 for factory building insurance, P14,200 for accidental injury insurance of factory
workers, P15,800 for office building insurance)
3. Utilities, P5,500 (P2,300 for sales office, P3,200 for factory)
4. Depreciation, P1,090,000 (P95,000 for office equipment, P340,00 for factory building, P550,000 for office
building, P105,000 for factory equipment)
Required:
1. Compute BFAR’s total product costs for the month of May.
2. Compute BFAR’s total period costs for the month of May.

FINANCIAL STATEMENTS OF MANUFACTURING OPERATIONS

PROBLEM #6 Actual Costing
BFAR Manufacturing Co. manufactured 200,000 units in 2022 with the following information.
Factory supplies P 32,000
Indirect materials 320,000
Coolants & lubricants 22,400
Indirect Manufacturing Labor 275,200
Direct Manufacturing Labor 2,000,000
Raw Materials, 1/1/2022 384,000
Finished goods, 1/1/2022 672,000
Finished goods, 12/31/2022 1,280,000
Work-in-process, 1/1/2022 96,000
Work-in-process, 12/31/22 64,000
Rent — Plant 384,000
Depreciation — Factory Equipment 224,000
Property taxes — Factory 32,000
Fire insurance — Factory 16,000
Direct Material purchases 3,136,000
Raw Materials, 12/31/2022 275,200
Sales Revenue 12,800,000
Sales Commissions 640,000
Sales Salaries 576,000
Advertising Expenses 1,480,000
General & Administrative Expenses 1,800,000

Required:

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

1. Compute the actual manufacturing overhead.
2. Compute the Cost of goods sold.
3. Compute the net income at the end of the year.
4. Compute the total Inventories in the Statement of Financial Position.

PROBLEM #7. Normal Costing System

BFAR Manufacturing Co. manufactured 200,000 units in 2022 with the following information. BFAR uses normal
costing system which calculates predetermined overhead rate at 70% of the Direct Labor cost.
Factory supplies P 32,000
Indirect materials 320,000
Coolants & lubricants 22,400
Indirect Manufacturing Labor 275,200

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

Direct Manufacturing Labor 2,000,000
Raw Materials, 1/1/2022 384,000
Finished goods, 1/1/2022 672,000
Finished goods, 12/31/2022 1,280,000
Work-in-process, 1/1/2022 96,000
Work-in-process, 12/31/22 64,000
Rent — Plant 384,000
Depreciation — Factory Equipment 224,000
Property taxes — Factory 32,000
Fire insurance — Factory 16,000
Direct Material purchases 3,136,000
Raw Materials, 12/31/2022 275,200
Sales Revenue 12,800,000
Sales Commissions 640,000
Sales Salaries 576,000
Advertising Expenses 1,480,000
General & Administrative Expenses 1,800,000

Required:
1. Compute the manufacturing overhead under normal costing system.
2. Compute the actual manufacturing overhead.
3. Compute the over or underapplied manufacturing overhead.
4. Compute the Cost of goods sold prior disposition of over/underapplied overhead.
5. Compute the adjusted cost of Goods Sold.
6. Compute the net income at the end of the year.
7. Compute the total Inventories in the Statement of Financial Position.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

PROBLEM #8. Comprehensive Financial Statements
Accounts Dr Cr
Cash in Bank 12,000,000
Cash on hand 2,000,000
Petty Cash 50,000
Accounts Receivable 1,900,000
Allowance for Doubtful Accounts 85,500
Notes Receivable - short-term 500,000
Interest Receivable 50,000
Finished Goods inventory, 12/1/2022 1,250,000
Raw Materials inventory, 12/1/2022 560,000
Work in Process inventory, 12/1/2022 800,000

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

Prepaid Rent 3,600,000
Prepaid Insurance 360,000
Supplies 80,000
Factory plant and equipment 15,000,000
Accumulated Depreciation - Factory plant and equipment 6,000,000
Office Building 10,000,000
Accumulated Depreciation - Office Building 4,000,000
Office Equipment 1,500,000
Accumulated Depreciation - Office Equipment 600,000
Accounts Payable 2,900,000
Accrued Payroll Payable 1,240,000
Utilities Payable 500,000
Mortgage Payable 7,000,000
BFAR, Capital 15,221,400
BFAR, Drawings 1,250,000
Sales 28,000,000
Sales Returns and Allowances 560,000
Sales Discounts 840,000
Interest Income 50,000
Purchases 9,800,000
Purchase Discounts 490,000
Purchase Returns and Allowances 98,000
Freight-in 588,000
Direct Labor 744,000
Salaries Expense 496,000
Commissions Expense 560,000
Depreciation Expense - Office Building 300,000
Depreciation Expense - Office Equipment 150,000
Depreciation Expense - Factory plant and equipment 200,000
Doubtful Accounts Expense 38,000
Utilities expense 500,000
Supplies expense 20,000
Freight-out 140,000
Insurance expense 30,000
Miscellaneous expense 18,900
Rent expense (Store) 300,000
TOTAL 66,184,900 66,184,900

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

Additional Information:
• Salaries, Utilities, Supplies, Insurance - 50% production-related activities, 30% Selling related activities
and 20% managament activities.
• The ending Inventories:
Finished Goods inventory 1,000,000
Raw Materials inventory 392,000
Work in Process inventory 480,000

Required: Prepare Statement of Profit or Loss, Statement of Financial Position and Changes in Equity along
with accompanying notes to Financial Statements.

MULTIPLE CHOICE APPLICATION

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

1. Compute the amount of direct materials used during November if P20,000 in raw materials were purchased
during the month and if the inventories were as follows:
Balance
1-Nov 30-Nov
Raw materials 4,000 3,000
Work in process 12,000 15,000
Finished goods 24,000 27,000

A. P21,000.
B. P19,000.
C. P18,000.
D. P15,000.

2. Under BFAR Company's manufacturing overhead is applied to Work in Process inventory using a
predetermined overhead rate. During January, BFAR’s transactions included the following:
Direct materials issued to production ....P 90,000
Indirect materials issued to production ..8,000
Manufacturing overhead cost incurred .....125,000
Manufacturing overhead cost applied ......113,000
Direct labor cost incurred ...............107,000
BFAR Company had no beginning or ending inventories. What was the cost of goods manufactured for
January?
A. P302,000
B. P310,000
C. P322,000
D. P330,000

3. The following data are for BFAR Company:

1-Dec 31-Dec
Finished goods inventory 30,000 40,000
Work in process inventory 20,000 13,000
Raw materials inventory 21,000 26,000
Purchases of raw materials 71,000
Factory depreciation 5,000
Other factory costs 10,000
Direct labor 27,000
Indirect labor 6,000
Selling expense 12,000
1. The cost of goods manufactured was:

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

A. P114,000.
B. P133,000.
C. P121,000.
D. P138,000.

2. The cost of goods sold was:

A. P131,000.
B. P91,000.
C. P81,000.
D. P111,000.

4. BFAR Company reported a cost of goods manufactured of P260,000, with the firm's year-end balance sheet

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

revealing work in process and finished goods of P35,000 and P67,000, respectively. If supplemental
information disclosed raw materials used in production of P40,000, direct labor of P70,000, and manufacturing
overhead of P120,000, the company's beginning work in process must have been:
A. P5,000.
B. P37,000.
C. P65,000.
D. P97,000.

5. The following data have been taken from the accounting records of BFAR Corporation for the just completed
year.
Sales 800,000
Raw materials inventory, beginning 60,000
Raw materials inventory, ending 70,000
Purchases of raw materials 180,000
Direct labor 100,000
Manufacturing overhead 190,000
Administrative expenses 110,000
Selling expenses 150,000
Work in process inventory, beginning 70,000
Work in process inventory, ending 80,000
Finished goods inventory, beginning 120,000
Finished goods inventory, ending 80,000
The cost of goods sold for the year was:
A. P610,000
B. P410,000
C. P490,000
D. P570,000

6. The following data pertain to BFAR Company's operations during July:

1-Jul 31-Jul
Raw materials - 5,000
Work in process ? 4,000
Finished goods 12,000 ?

Other data:
Cost of goods manufactured ........ P105,000
Raw materials used ................ 40,000

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

 Manufacturing overhead costs ...... 20,000
Direct labor costs ................ 39,000
Gross profit ...................... 100,000
Sales ............................. 210,000
The beginning Work In Process inventory was:
A. P10,000.
B. P14,000.
C. P1,000.
D. P4,000.

7. BFAR Steel Corporation produces large sheets of heavy gauge steel. The company showed the following
amounts relating to its production for the year just completed:

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

Direct materials used in production ... P110,000
Direct labor costs for the year ....... 55,000
Work in process, beginning ............ 22,000
Finished goods, beginning ............. 45,000
Cost of goods available for sale ...... 288,000
Cost of goods sold .................... 238,000
Work in process, ending ............... 16,000
The balance of the Finished Goods Inventory at the end of the year was:
A. P95,000.
B. P50,000.
C. P193,000.
D. P45,000.

8. BFAR Company reported the following data for the month of January:
1-Jan 1/31/22
Raw materials 32,000 31,000
Work in process 18,000 12,000
Finished goods 30,000 35,000

Additional information:
Sales revenue ................. P210,000
Direct labor costs ............ 40,000
Manufacturing overhead costs .. 70,000
Selling expenses .............. 25,000
Administrative expenses ....... 35,000
Assume that cost of goods sold for BFAR Company for January was P140,000. What would be the cost of goods
manufactured for the month?
A. P140,000
B. P135,000
C. P145,000
D. P139,000

9. BFAR Company reported the following data for the year just ended:
Raw materials used in production ......... P 800,000
Direct labor ............................. 700,000
Total overhead costs ..................... 900,000
Ending work in process inventory ......... 400,000
Cost of goods manufactured ............... 2,500,000
The beginning work in process inventory was:

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

A. P300,000.
B. P500,000.
C. P1,300,000.
D. P100,000.
10. BFAR Manufacturing has the following information:
Beginning finished goods, 1/1/2022 P 80,000
Ending finished goods, 12/31/2022 67,000
Cost of goods manufactured 257,000
Sales revenue 500,000
Operating expenses 145,000
How much should be reported as net income?
A. P85,000

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

B. P112,000
C. P62,000
D. P230,000

11. The following miscellaneous data has been collected for a manufacturing company for the most recent year-
end:
Inventories: Beginning Ending
Raw material P50,000 P55,000
Work in process 40,000 45,000
Finished goods 60,000 50,000

Costs recorded during the year:

Purchases of raw material P195,000
Direct labor 150,000
Cost of goods sold 595,000
How much is the prime costs?
A. 190,000
B. 350,000
C. 340,000
D. 345,000

12. The following information appears on the income statement of the BFAR Company at the end of the year.
Beginning finished goods inventory P 197,000
Ending finished goods inventory 204,000
Sales 360,000
Cost of Goods Manufactured 136,000
Gross Profit is:
A. P217,000.
B. P231,000.
C. P143,000.
D. P129,000.

13. BFAR Company reported the following data for the month of January:

1-Jan 1/31/22
Raw materials 32,000 31,000
Work in process 18,000 12,000
Finished goods 30,000 35,000

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

Additional information:
Sales revenue ................. P210,000
Direct labor costs ............ 40,000
Manufacturing overhead costs .. 70,000
Selling expenses .............. 25,000
Administrative expenses ....... 35,000
Assume that cost of goods sold for January was P124,000. The net income for January would be:
A. P61,000.
B. P26,000.
C. P51,000.
D. P25,000.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

14. The BFAR Company's records for May contained the following information:
Actual direct labor-hours ....... 9,000 hours
Actual direct labor cost ........ P 47,000
Direct material purchased ....... 16,000
Direct material used ............ 14,000
Cost of goods sold .............. 100,000
Overapplied overhead ............ 5,000
Ending inventories:
Raw materials ................. 30,000
Work in process ............... 50,000
Finished goods ................ 70,000
The company uses a predetermined overhead rate of P5.00 per direct labor hour to apply manufacturing
overhead.
The actual overhead cost incurred during the month was:
A. P50,000.
B. P55,000.
C. P40,000.
D. P45,000.

15. BFAR Company has provided the following inventory balances and manufacturing cost data for the month of
January:
Inventories: January 1 January 31
Direct materials ....... P30,000 P40,000
Work in process ........ P15,000 P20,000
Finished goods ......... P65,000 P50,000

Month of January
Cost of goods manufactured ........ P515,000
Manufacturing overhead applied .... P150,000
Direct materials used ............. P190,000
Actual manufacturing overhead ..... P144,000
Any over or underapplied overhead is closed to the Cost of Goods Sold account at the end of the calendar year
(i.e., December 31). How much direct labor cost was incurred during January?
A. P170,000
B. P175,000
C. P180,000
D. P186,000

16. BFAR Company has the following estimated costs for next year:

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

 Direct materials .................... P15,000
Direct labor ........................ 55,000
Sales commissions ................... 75,000
Salary of production supervisor ..... 35,000
Indirect materials .................. 5,000
Advertising expense ................. 11,000
Rent on factory equipment ........... 16,000
BFAR estimates that 10,000 direct labor and 16,000 machine hours will be worked during the year. If overhead is
applied based on machine hours, the overhead rate per hour will be:
A. P8.56.
B. P7.63.
C. P6.94.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

D. P3.50.

17. The following miscellaneous data has been collected for a manufacturing company for the most recent year-
end:
Inventories: Beginning Ending
Raw material P50,000 P55,000
Work in process 40,000 45,000
Finished goods 60,000 50,000

Costs recorded during the year:

Purchases of raw material P195,000
Direct labor 150,000
Cost of goods sold 595,000
How much is the total manufacturing costs?
A. 590,000
B. 600,000
C. 595,000
D. 585,000

18. The following data (in thousands of pesos) have been taken from the accounting records of Espiritu
Corporation for the just completed year.
Sales 1,040,000
Raw materials inventory, beginning 40,000
Raw materials inventory, ending 70,000
Purchases of raw materials 120,000
Direct labor 200,000
Manufacturing overhead 230,000
Administrative expenses 150,000
Selling expenses 140,000
Work in process inventory, beginning 70,000
Work in process inventory, ending 50,000
Finished goods inventory, beginning 120,000
Finished goods inventory, ending 160,000
The net income for the year was:
A. P150,000
B. P200,000
C. P490,000
D. P250,000

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

19. The BFAR Corporation has obtained the following information for the year ended December 31, 2022 from the
corporation's books and records:
a. Total manufacturing cost added during 2022 based on actual direct materials, actual direct labor and
applied factory overhead on actual direct labor cost - P2,000,000
b. Cost of goods manufactured based on actual direct materials and direct labor and applied factory
overhead, 1,840,000
c. Applied factory overhead to work in process based on direct labor cost – 75%
d. Applied factory overhead for the year, based on total manufacturing cost - 30%
Beginning work in process inventory was 80% of ending work in process inventory.
What is the cost of direct materials used for year ended December 31, 2022?
A. 670,000

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

B. 600,000
C. 690,000
D. 770,500

20. BFAR Company is a manufacturing concern using the perpetual inventory system. The following data is
provided:
Beginning balance, P275,000
Purchased materials, P860,000
Indirect materials issued to production, P5,000.
Excess of ending inventory over beginning inventory, 55,000
How much is the cost of materials issued (used) to production?
A. 800,000
B. 910,000
C. 855,000
D. 805,000

21. BFAR Company has the following data in August 31, 2022:
August Manufacturing Overhead 900,000
Decrease in Ending Inventories:
Materials inventory 80,000
Work in process inventory 90,000

Increase in Ending Inventories:

Finished goods inventory 75,000
The manufacturing overhead amounts to 50% of the direct labor, and the direct labor and manufacturing overhead
combined equal 50% of the total cost manufacturing. What is the cost of goods manufactured?
A. 3,690,000
B. 3,510,000
C. 3,600,000
D. 3,615,000

22. BFAR Company used a predetermined overhead rate last year of P2 per direct labor hour, based on an
estimate of 25,000 direct labor hours to be worked during the year. Actual costs and activity during the year
were:
Actual manufacturing overhead cost incurred P47,000
Actual direct labor hours worked .......... 24,000
The under- or overapplied overhead last year was:
A. P1,000 underapplied.
B. P1,000 overapplied.
C. P3,000 overapplied.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS

D. P2,000 underapplied.

23. BFAR Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing
overhead. At the beginning of the year the company estimated its total manufacturing overhead cost at
P400,000 and its direct labor-hours at 100,000 hours. The actual overhead cost incurred during the year was
P350,000 and the actual direct labor hours incurred during the year was 90,000 hours. The manufacturing
overhead for the year would be:
A. P10,000 underapplied.
B. P10,000 overapplied.
C. P50,000 underapplied.
D. P50,000 overapplied.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS | DE LA SALLE UNIVERSITY – MANILA | MJ ESPIRITU

24. BFAR Co. has underapplied overhead of P45,000 for the year ended December 31, 2022. Before disposition of
the underapplied overhead, selected December 31, 2022, balances from BFAR’s records are as follows:

Cost of goods sold 720,000

Inventories:
Direct materials 36,000
Work in process 54,000
Finished goods 90,000
Under BFAR’s cost accounting system, over or underapplied overhead is transferred to the cost of goods sold.
In its 20202 Statement of Profit or Loss, BFAR should report cost of goods sold at
A. P682,500
B. P765,000
C. P675,000
D. P757,500

25. BFAR Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing
overhead. At the beginning of the year, the company estimated manufacturing overhead would be P150,000
and direct labor hours would be 10,000. The actual figures for the year were P186,000 for manufacturing
overhead and 12,000 direct labor hours. The cost records for the year will show:
A. overapplied overhead of P30,000.
B. underapplied overhead of P30,000.
C. underapplied overhead of P6,000.
D. overapplied overhead of P6,000.

REVIEWER – ACCOUNTING FOR MANUFACTURING OPERATIONS