UNIVERSITY OF SAN CARLOS

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTANCY

AC 1203
COST ACCOUNTING & CONTROL

INSTRUCTIONS. WRITE ALL YOUR FINAL ANSWERS AND SOLUTIONS ON THE ANSWER SHEET PROVIDED.
YOU MAY WRITE ANYTHING ON THIS TEST QUESTIONNAIRE FOR AS LONG AS FINAL ANSWERS AND
SOLUTIONS WILL BE WRITTEN ON THE ANSWER SHEET. ERASURES ARE NOT ALLOWED IN THE FINAL
ANSWER. YOU MAY USE PENCIL IN YOUR SOLUTIONS. DO YOUR BEST, STAY FOCUSED AND GOD BLESS!

I. True or False. Write TRUE if the statement is true and FALSE if otherwise. (nx1)

1. Manufacturing and service firms producing unique products or services require job -order
accounting systems.
2. The key feature of job-order costing is that the cost of one job differs from that of another job
and must be kept track of separately.
3. Production costs consist of direct materials, direct labor, and overhead.
4. The difference between actual overhead and applied overhead is called an overhead variance.
5. If actual overhead is greater than applied overhead, the variance is called underapplied
overhead.
6. Costs reported on the financial statements must be estimated costs.
7. If the overhead variance is immaterial, it is allocated among the ending balances of Work in
Process, Finished Goods, and Cost of Goods Sold.
8. In an actual cost system, actual direct materials, actual direct labor and estimated overhead are
used to determine unit cost.
9. A job-order cost sheet is the source document where direct labor costs are assigned to
individual jobs.
10. Using a time ticket, the cost accounting department can enter the cost of direct materials onto
the correct job-order cost sheet.
11. The work-in-process account consists of all the job-order cost sheets for the completed jobs.
12. There are other source documents besides the time ticket and the material requisition form
used to fill out the job-order cost sheet.
13. The raw materials account is an inventory account located on the income statement.
14. The use of normal costing means that actual overhead costs are assigned directly to jobs.
15. The use of a departmental rate has the advantage of being simple and reduces data collection
requirements.
16. Actual overhead is reconciled with applied overhead at the beginning of the period.
17. Actual overhead is used to arrive at the cost of goods manufactured.
18. When materials are put into production, they are taken from the Raw Materials account and put
into the Work in Process account.
19. Overhead costs are assigned to Finished Goods using a predetermined rate.
20. Actual overhead costs are accumulated in the overhead control account.
21. The cost of completed units is always debited to Work-in-Process and credited to Finished
Goods.
22. The journal entry for P17,000 materials purchased on account is:
Raw materials 17,000
Accounts Payable 17,000
23. . In job-order costing, the journal entry for P7,200 raw materials requisitioned for use in
production is:
Work in Process 7,200
Raw Materials 7,200

24. In job-order costing, the journal entry for P1,700 of unpaid direct labor is:
Work in Process 1,700
Wages Payable 1,700

25. In job-order costing, the journal entry for overhead applied at the rate of P3 per direct labor hour
when 210 direct labor hours were worked is
Work in Process 630
Applied OVerhead 630

II. Multiple Choice. Write the letter of the best answer on the answer sheet provided. Show
solutions for problems. (nx1.75)

1. Under job order cost accumulation, the factory overhead control account controls:
A. factory overhead analysis sheets D. all general ledger subsidiary accounts
B. job order cost sheets E. cost reports by processes
C. materials inventories

2. Supplies needed for use in the factory are issued on the basis of:
A. job cost sheets D. materials requisitions
B. time tickets E. factory overhead analysis sheets
C. clock cards

3. Finished Goods is debited and Work in Process is credited for a:

A. transfer of completed goods out of the factory
B. transfer of completed production to the finished goods storeroom
C. purchase of goods on account
D. transfer of materials to the factory
E. return of unused materials from the factory

4. In job order costing, when materials are returned to the storekeeper that were previously issued
to the factory for cleaning supplies, the journal entry should be made to:
A. Materials
Factory Overhead
B. Materials
Work in Process
 C. Purchases Returns
Work in Process
D. Work in Process
Materials
E. Factory Overhead
Work in Process

5. Under a job order cost system, the dollar amount of the entry to transfer the inventory from
Work in Process to Finished Goods is the sum of the costs charged to all jobs:
A. completed during the period D. started in process during the period
B. in process during the period E. none of the above
C. completed and sold during the period

6. When a manufacturing company has a highly automated plant producing many different
products, probably the most appropriate basis of applying factory overhead costs to Work in
Process is:
A. units processed D. machine hours
B. direct labor hours E. none of the above
C. direct labor dollars

7. Cherokee Company applies factory overhead on the basis of direct labor hours. Budget and
actual data for direct labor and overhead for the year are as follows:

Budget Actual
Direct labor hours 600,000 650,000
Factory overhead costs P720,000 P760,000

The factory overhead for Cherokee for the year is:

A. overapplied by P20,000 D. overapplied by P40,000
B. underapplied by P20,000 E. underapplied by P40,000
C. neither underapplied nor overapplied

8. At the end of the year, Paola Company had the following account balances after applied factory
overhead had been closed to Factory Overhead Control:

Factory Overhead Control P1,000 CR

Cost of Goods Sold 980,000 DR
Work in Process 38,000 DR
Finished Goods 82,000 DR

The most common treatment of the balance in Factory Overhead Control would be to:
A. carry it as a deferred credit on the balance sheet
B. report it as miscellaneous operating revenue on the income statement
C. credit it to Cost of Goods Sold
D. prorate it between Work in Process and Finished Goods
E. prorate it among Work in Process, Finished Goods, and Cost of Goods Sold
9. Overapplied factory overhead would result if:
A. the plant were operated at less than normal capacity
B. factory overhead costs incurred were less than costs charged to production
C. factory overhead costs incurred were unreasonably large in relation to units
produced
D. factory overhead costs incurred were greater than costs charged to production
E. a firm incurred a significant amount of overhead

10. The Waitkins Company estimated Department A's overhead at P255,000 for the period based on
an estimated volume of 100,000 direct labor hours. At the end of the period, the factory overhead
control account for Department A had a balance of P265,500; actual direct labor hours were
105,000. What was the over- or under-applied overhead for the period?
A. P2,250 D. P(2,250)
B. P15,000 E. P(15,000)
C. P(5,000)

11. Howell Corporation has a job order cost system. The following debits (credits) appeared in
Work in Process for the month of July:

July 1, balance P 12,000

July 31, direct materials 40,000
July 31, direct labor 30,000
July 31, factory overhead 27,000
July 31, to finished goods (100,000)

Howell applies overhead to production at a predetermined rate of 90% based on the direct labor
cost. Job 1040, the only job still in process at the end of July, has been charged with factory
overhead of P2,250. What was the amount of direct materials charged to Job 1040?
A. P6,750 D. P2,250
B. P2,500 E. P4,250

12. Valentino Corporation makes aluminum fasteners. Among Valentino's 19-- manufacturing costs
were:

Wages and salaries:

Machine operators P80,000
Factory supervisors 30,000
Machine mechanics 20,000

Direct labor amounted to:

A. P50,000 D. P100,000
B. P110,000 E. none of the above
C. P130,000
 13. Rudolpho Corporation makes aluminum fasteners. Among Rudolpho's 19-- manufacturing costs
were:

Materials and supplies:

Aluminum P400,000
Machine parts 18,000
Lubricants for machines 5,000

Direct materials amounted to:

A. P23,000 D. P400,000
B. P405,000 E. P418,000
C. P423,000

For items 14-15:

14. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow
Manufacturing Company are presented

Beg End
Materials P75 P85
Work-in-process P80 P30
Finished goods P90 P110

Materials used P326

Total manufacturing costs charged to production during the year (including direct materials, direct labor,
and factory overhead applied at the rate of 60% of direct labor cost), P686
Cost of goods available for sale, P826
Selling and general expenses, P25

14. The cost of direct materials purchased during the year amounted to:
A. P360 D. P316
B. P336 E. none of the above
C. P411

15. The cost of goods manufactured during the year was:

A. P736 D. P716
B. P636 E. none of the above
C. P766
16. Work in Process is debited and Materials is credited for:
A. the issuance of direct materials into production
B. the issuance of indirect materials into production
C. the return of materials to the storeroom
D. the application of materials overhead
E. none of the above

17. Factory Overhead Control is debited and Payroll is credited for:

A. the recording of payroll D. the distribution of indirect labor costs
B. the distribution of direct labor costs E. none of the above
C. the distribution of withholding taxes

18. Applied Factory Overhead is debited and Factory Overhead is credited to:
A. close the estimated overhead account to actual overhead
B. record the actual factory overhead for the period
C. charge estimated overhead to all jobs worked on during the period
D. to record overapplied overhead for the period
E. none of the above

19. The best overhead allocation base to use in a labor-intensive manufacturing environment probably
would be:
A. materials cost D. machine hours
B. direct labor hours E. none of the above
C. units of production

20. Finished Goods is debited and Cost of Goods Sold is credited for:
A. transfer of completed goods to the customer
B. sale of a customer order
C. return of materials to the supplier
D. return of goods by the customer
E. none of the above

III.Open-ended problems. (nx3) Write your final answers and solutions on the answer sheet.

For items 1-4:

Teddy Company is to submit a bid on the production of 5,500 vases. It is estimated that the cost of
materials will be P8,500, and the cost of direct labor will be P12,000. Factory overhead is applied at 50%
of direct labor cost in the Molding Department and at P7.50 per direct labor hour in the Finishing
Department. Of the above direct labor, it is estimated that 500 direct labor hours at a cost of P4,000 will
be required in Finishing. The company wishes a markup of 100% of its total production cost.

Required: Determine the following:

(1) Estimated cost to produce.
(2) Estimated prime cost.
(3) Estimated conversion cost.
(4) Bid price.
For items 5-8:
GGG Company produces 50,000 units of Product Q and 6,000 units of Product Z during a period. In that
period, four set-ups were required for color changes. All units of Product Q are black, which is the color in
the process at the beginning of the period. A set-up was made for 1,000 blue units of Product Z; a set-up
was made for 4,500 red units of Product Z; a set-up was made for 500 green units of Product Z. A set-up
was then made to return the process to its standard black coloration and the units of Product Q were run.
Each set-up costs P500.

5. If set-up cost is assigned on a volume basis for the department, what is the approximate per-unit set-up
cost for Product Z?

6. If set-up cost is assigned on a volume basis for the department, what is the approximate per-unit set-up
cost for the red units of Product Z?

7. Assume that GGG Company has decided to allocate overhead costs using levels of cost drivers. What
would be the approximate per-unit set-up cost for the blue units of Product Z?

8. Assume that GGG Company has decided to allocate overhead costs using levels of cost drivers. What
would be the approximate per-unit set-up cost for the green units of Product Z?

IV. Journal entries (13pts) The following completed cost sheets were prepared for three jobs that
were in production during April in the Special Order Division of Byron Company:

Job 097 Job 781 Job 946

Direct materials P 6,000 P2,700 P4,100
Direct labor 9,200 7,300 8,200
Applied factory overhead 6,900 5,475 6,120
Allowance for commercial expenses and profit 11,050 7,738 9,210

On April 1, Job 097 was 75% complete as to materials, labor, and overhead. It was finished during the
month. The other jobs were started and finished during the month. Jobs 097 and 946 were sold on
account at the end of the month.

Required: Prepare general journal entries to be recorded in April to accumulate these job costs for Work
in Process as well as for Finished Goods and for the sale of the two jobs. Prepare also necessary T- accounts.
 UNIVERSITY OF SAN CARLOS
SCHOOL OF BUSINESS AND
ECONOMICS DEPARTMENT OF
ACCOUNTANCY

ANSWER
SHEET

NAME _ SCHEDULE DATE

I. TRUE OR FALSE (nx1)

1. 6. 11._ 16._ 21._ _
2. 7. 12._ 17. _ 22._ _
3. 8. 13._ 18._ 23._ _
4. 9. 14._ 19._ 24._ _
5. 10. _ 15._ 20._ 25._ _

II. MULTIPLE CHOICE (nx1.75)

1. 6. 11. 16.
2. 7. 12. 17.
3. 8. 13. 18.
4. 9. 14. 19.
5. 10. 15. 20.

III. OPEN – ENDED PROBLEMS

(nx3)

1. __________ 5. ___________
2. __________ 6. ___________
3. __________ 7. ___________
4. __________ 8. ___________

IV. Journal Entries and T-accounts (23pts):

SOLUTIONS (at the back)