Junior Philippine Institute of Accountants Junior Philippine Institute of Accountants
College of Business Administration College of Business Administration
University of the East - Caloocan University of the East - Caloocan
Qualifying Exam Reviewer 2017 Qualifying Exam Reviewer 2017
Cost Accounting Cost Accounting
1.
1. Pitino Company Pitino Company has a beginning inventory has a beginning inventory of direct materials of direct materials on March 1 on March 1 of $30,000 andof $30,000 and an ending inv
an ending inventory on Mentory on March 31 of arch 31 of $36,000. $36,000. The following The following additional manufacturingadditional manufacturing cost data were available for the month of March:
cost data were available for the month of March: Direct
Direct materials materials purchased purchased $84,000$84,000 Direct
Direct labor labor 60,00060,000 Factory
Factory overhead overhead 80,00080,000 During March, prime cost added to
During March, prime cost added to production was:production was: a. $140,000 a. $140,000 b. $138,000 b. $138,000 c. $144,000 c. $144,000 d. $150,000 d. $150,000 e.
e. none onone of the f the aboveabove 2.
2. During MDuring March, convarch, conversion cost ersion cost added to added to production wproduction was:as: a. $80,000 a. $80,000 b. $144,000 b. $144,000 c. $140,000 c. $140,000 d. $138,000 d. $138,000 e.
e. none of none of the abovethe above 3.
3. When the number of units manufacWhen the number of units manufactured increases, the most situred increases, the most significant change ingnificant change in average unit cost will be reflected
average unit cost will be reflected as:as: a.
a. a decrease in the a decrease in the variable elementvariable element b.
b. a decrease in the a decrease in the nonvariable elementnonvariable element c.
c. an increase in an increase in the semivariable the semivariable elementelement d.
d. an increase in the an increase in the variable elementvariable element e.
e. an increase in the an increase in the nonvariable elementnonvariable element 4.
4. At the end At the end of the yof the year, Paola Cear, Paola Company had the ompany had the following account balfollowing account balances after appliedances after applied factory overhead had been closed to
factory overhead had been closed to Factory Overhead Control:Factory Overhead Control: Factory
Factory Overhead Overhead Control Control $ $ 1,000 1,000 CRCR Cost
Cost of of Goods Goods Sold Sold 980,000 980,000 DRDR Work
Work in in Process Process 38,000 38,000 DRDR Finished
Finished Goods Goods 82,000 82,000 DRDR
The most common treatment of the balance in Factory Overhead Control would be to: The most common treatment of the balance in Factory Overhead Control would be to:
a.
a. carry it carry it as a as a deferred credit deferred credit on the on the balance sheetbalance sheet b.
b. report it report it as miscellaneous as miscellaneous operating revenue operating revenue on the on the income staincome statementtement c.
d. prorate it between Work in Process and Finished Goods
e. prorate it among Work in Process, Finished Goods, and Cost of Goods Sold
5. 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 $ 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 $2,250. What was the amount of direct materials charged to Job 1040? a. $6,750 b. $2,250 c. $2,500 d. $4,250 e. $9,000
6. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow Manufacturing Company are presented below.
Inventories Beginning Ending Materials $ 75 $ 85 Work in process 80 30 Finished goods 90 110 Materials used, $326
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), $686
Cost of goods available for sale, $826 Selling and general expenses, $25
The cost of direct materials purchased during the year amounted to: a. $360
b. $316 c. $336 d. $411
e. none of the above
7. Direct labor costs charged to production during the year amounted to: a. $216
b. $135 c. $225 d. $360
8. The cost of goods manufactured during the year was: a. $736
b. $716 c. $636 d. $766
e. none of the above
9. The cost of goods sold during the year was: a. $716
b. $691 c. $801 d. $736
e. none of the above
10. 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
11. An item that does not appear on a cost of production report is: a. work in process—beginning inventory
b. cumulative costs through the end of departmental production c. finished goods—ending inventory
d. materials used in the department e. unit costs added by the department
12. Goode Manufacturing has three producing departments in its factory. The ending inventory in the Milling Department consisted of 3,000 units. These units were 60% complete with respect to labor and factory overhead. Materials are applied at the end of the milling process. Unit costs for the complete process in the Milling Department are: materials, $1; labor, $2; and factory overhead, $3. The appropriate unit cost for each unit in the ending inventory is:
a. $2 b. $5 c. $3 d. $6 e. $4
13. In a process costing system, how is the unit cost affected in a production cost report when materials are added in a department subsequent to the first department and the added materials result in additional units?
a. The first department's unit cost is increased, but it does not necessitate an adjustment of the transferred-in unit cost.
b. The first department's unit cost is decreased, but it does not necessitate an adjustment of the transferred-in unit cost.
c. The first department's unit cost is not affected.
d. The first department's unit cost is increased, which necessitates an adjustment of the transferred-in unit cost.
e. The first department's unit cost is decreased, which necessitates an adjustment of the transferred-in unit cost.
14. Read, Inc. instituted a new process in October. During October, 10,000 units were started in Department A. Of the units started, 7,000 were transferred to Department B, and 3,000 remained in work in process at October 31. The work in process at October 31 was 100% complete as to material costs and 50% complete as to conversion costs. Materials costs of $27,000 and conversion costs of $39,950 were charged to Department A in October. What were the total costs transferred to Department B?
a. $46,900 b. $53,600 c. $51,800 d. $57,120
e. none of the above
15. Chicago Processing Co. uses the average costing method and reported a beginning inventory of 5,000 units that were 20% complete with respect to materials in one department. During the month, 11,000 units were started; 8,000 units were finished; ending inventory amounted to 8,000 units that were 60% complete with respect to materials. Total materials cost during the period for work in process should be spread over: a. 7,200 units b. 16,000 units c. 11,200 units d. 13,200 units e. 12,800 units
16. Dover Corporation's production cycle starts in the Mixing Department. The following information is available for April:
Units Work in process, April 1 (50% complete) 40,000
Started in April 240,000
Work in process, April 30 (60% complete) 25,000
Materials are added at the beginning of the process in the Mixing Department. Using the average cost method, what are the equivalent units of production for the month of April?
Materials Conversion a. 255,000 255,000 b. 270,000 280,000 c. 280,000 270,000 d. 305,000 275,000 e. 240,000 250,000
17. The first-in, first-out method of process costing will produce the same cost of goods manufactured amount as the average cost method when:
a. there is no beginning inventory b. there is no ending inventory
c. beginning and ending inventories are each 50% complete d. beginning inventories are 100% complete as to materials e. goods produced are homogeneous
18. During March, Quig Company's Department Y equivalent unit product costs, computed under the average cost method, were as follows:
Materials $ 1 Conversion 3 Transferred-in 5
Materials are introduced at the end of the process in Department Y. There were 4,000 units (40% complete as to conversion costs) in work in process at March 31. The total costs assigned to the March 31 work in process inventory should be:
a. $36,000 b. $28,800 c. $27,200 d. $24,800
e. none of the above
19. Department A is the first stage of Mann Company's production cycle. The following information is available for conversion costs for the mo nth of April:
Units Beginning work in process (60% complete) 20,000
Started in April 340,000
Completed in April and transferred to Department B 320,000 Ending work in process (40% complete) 40,000
Using the fifo method, the equivalent units for the conversion cost calculation are: a. 336,000
b. 360,000 c. 328,000 d. 320,000 e. 324,000
20. The labor efficiency variance is computed as:
a. the difference between standard and actual rates, multiplied by standard hours
b. the difference between standard and actual hours, multiplied by standard rate
c. the difference between standard and actual rates, multiplied by actual hours d. the difference between standard and actual hours, multiplied by the
difference between standard and actual rates e. a percentage of the labor time variance
21. In analyzing factory overhead variances, the volume variance is the difference between the:
a. actual amount spent for overhead items during the period and the amount applied during the period
b. variable efficiency variance and fixed efficiency variance
c. amount shown in the flexible budget and the amount shown in the master budget
d. master budget application rate and the flexible budget application rate, multiplied by actual hours worked
e. budget allowance based on standard hours allowed for actual production for the period and the amount of applied factory overhead during the period
22. In its reports to management, a company disclosed the presence of a fixed efficiency variance. The procedure used to analyze variances was the:
a. four-variance method
b. mix and yield variances method c. two-variance method
d. alternative three-variance method e. three-variance method
23. When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity yields a:
a. price variance b. volume variance c. mix variance d. yield variance
e. combined price-quantity variance
24. Information about Sargent Company's direct material costs is as follows:
Standard unit price $ 3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450 Materials purchase price variance—unfavorable $ 240 What was the actual purchase price per unit, rounded to the nearest penny?
a. $3.06 b. $3.11 c. $3.45 d. $3.75 e. $3.60
25. Using the following symbols, which formula represents the calculation of the labor rate variance?
AH = Actual hours
SH = Standard hours allowed for actual production AR = Actual rate
SR = Standard rate a. SR(AH - SH) b. AR(AH - SH) c. AH(AR - SR) d. SH(AR - SR) e. SH(SR - AR)
26. When a change in the manufacturing process reduces the number of direct labor hours and standards are unchanged, the resulting variance will be:
a. an unfavorable labor usage variance b. an unfavorable labor rate variance
c. a favorable labor rate variance d. a favorable labor usage variance e. both (C) and (D) above
27. Information on Orman Company's direct labor costs is as follows: Standard direct labor rate $ 3.75
Actual direct labor rate $ 3.50 Standard direct labor hours 10,000 Direct labor usage (efficiency) variance $ 4,200 U What were the actual hours worked, rounded to the nearest hour?
a. 11,914 b. 10,714 c. 11,120 d. 11,200
e. none of the above
28. Each unit of Product 8in1 requires two direct labor hours. Employee benefit costs are treated as direct labor costs. Data on direct labor are as follows:
Number of direct employees 25 Weekly productive hours per employee 30 Estimated weekly wages per employee $ 240 Employee benefits (related to weekly wages) 25% The standard direct labor cost per unit of Product 8in1 is:
a. $8.00 b. $10.00 c. $12.00 d. $20.00
e. none of the above
29. The following information relates to Department 1 of Ruiz Company for the fourth quarter. The total overhead variance is divided into three variances: spending, variable efficiency, and volume.
Actual total overhead (fixed plus variable) $178,500
Budget formula $110,000 + $ .50 per hour Total overhead application rate $1.50 per hour
Actual hours worked 121,000
What was the spending variance in this department during the quarter? a. $8,000 favorable
b. $4,500 favorable c. $8,000 unfavorable d. $4,500 unfavorable e. none of the above
30. The following information relates to Department 1 of Ruiz Company for the fourth quarter. The total overhead variance is divided into three variances: spending, variable efficiency, and volume.
Actual total overhead (fixed plus variable) $178,500
Budget formula $110,000 + $ .50 per hour Total overhead application rate $1.50 per hour
Actual hours worked 121,000
Standard hours allowed for production 130,000
What was the variable efficiency variance in this department during the quarter? a. $4,500 favorable
b. $8,000 favorable c. $4,500 unfavorable d. $8,000 unfavorable e. none of the above
31. Under the two-variance method for analyzing factory overhead, the controllable (budget) variance is the difference between the:
a. actual fixed factory overhead and the budgeted fixed overhead
b. budget allowance based on standard hours allowed and the factory overhead applied to production
c. budget allowance based on standard hours allowed and the budget allowance based on actual hours worked
d. actual factory overhead and the factory overhead applied to production e. actual factory overhead and the budget allowance based on standard
hours allowed
32. Under the two-variance method for analyzing factory overhead, the factory overhead applied to production is used in the computation of the:
Controllable Volume (Budget) Variance Variance
a. yes no
b. yes yes
c. no yes
d. no no
33. Under the three-variance method for analyzing factory overhead, which of the following is used in computation of the spending variance?
Actual Factory Budget Allowance Overhead Based on Actual Hours
a. no yes
b. no no
c. yes no
d. yes yes
34. Compute the variable efficiency variance, using the following data: Standard labor hours per good unit produced 2
Good units produced 1,000
Actual labor hours used 2,100
Standard variable overhead per standard labor hour $ 3 Actual variable overhead $ 6,500
a. $200 favorable b. $200 unfavorable c. $300 favorable d. $300 unfavorable e. none of the above
35. In the alternate three-variance method, the efficiency variance is:
a. Standard factory overhead rate x (Actual units of allocation base -Standard units of allocation base allowed)
b. Actual factory overhead incurred - Budget allowance based on actual hours
c. Budget allowance based on actual hours - (Actual hours x Factory overhead rate)
d. Budgeted fixed factory overhead - (Actual hours x Fixed overhead rate) e. none of the above
36. The four-variance method reconciles to the two-variance method by combining which of the following to get the controllable variance?
a. fixed efficiency variance and idle capacity variance b. spending variance and fixed efficiency variance c. spending variance and idle capacity variance d. spending variance and variable efficiency variance e. none of the above
37. The four-variance method reconciles to the two-variance method by combining which of the following to get the volume variance?
a. spending variance and variable efficiency variance b. fixed efficiency variance and idle capacity variance c. variable efficiency variance and fixed efficiency variance d. spending variance and idle capacity variance
e. none of the above
38. Information on Duke Co.'s direct material costs for May is as follows:
Actual quantity of direct materials purchased and used 30,000 lbs. Actual cost of direct materials $ 84,000
Unfavorable direct materials usage variance 3,000 Standard quantity of direct materials allowed for production 29,000 lbs. For the month of May, Duke's direct materials price variance was:
a. $2,800 favorable b. $2,800 unfavorable c. $6,000 unfavorable d. $6,000 favorable e. none of the above
39. A company uses a standard cost system to account for its only product. The materials standard per unit was 4 lbs. at $5.10 per lb. Operating data for April were as follows:
Material used 7,800 lbs.
Number of finished units produced 2,000 The material usage variance for April was:
a. $1,020 favorable b. $1,050 favorable c. $1,170 unfavorable d. $1,200 unfavorable e. none of the above
40. The direct labor standards for producing a unit of a product are two hours at $10 per hour. Budgeted production was 1,000 units. Actual production was 900 units, and direct labor cost was $19,000 for 2,000 direct labor hours. The direct labor efficiency variance was:
a. $1,000 favorable b. $1,000 unfavorable c. $2,000 favorable d. $2,000 unfavorable e. none of the above
Answer Key:
1. B. [( $ 30,000 + $ 84,000) - $ 36,000] + $60,000 = $ 138,000 2. C. $ 60,000 + $ 80,000 = $ 140,000
3. B. a decrease in the nonvariable element 4. C. credit it to Cost of Goods Sold
5. D. $ 12,000 + $ 40,000 + $ 30,000 + $ 27,000 - $ 100,000 = $ 9,000 $ 9,000 - $ 2,250 – ($ 2,250/ 90%) = $ 4,250 6. C. $ 326 + $ 85 - $75 = $ 336 7. C. $686 - $326 = $ 360/ 160% = $ 225 8. A. $ 80 + $ 686 - $ 30 = $ 736 9. A. $ 90 + $ 736 - $ 110 = $ 716
10. A. close the estimated overhead account to actual overhead 11. C. finished goods—ending inventory
12. C. ( $2 + $3) x 60% = $3
13. E. The first department's unit cost is decreased, which necessitates an adjustment of the transferred-in unit cost.
14. C. $ 27,000/ 10,000 = $ 2.70 $ 39,950/ [ 7,000 + (3,000 x 50%)] = $ 4.70 ($ 2.70 + $4.70) x 7,000 = $ 51,800 15. E. 8,000 + (8,000 x 60%) =12,800 units 16. C. Materials = $ 40,000 + $ 240,000 = $ 280,000 Conversion = ($ 280,000 - $ 25,000) + ($ 25,000 x 60%) = $ 270,000 17. A. there is no beginning inventory
18. D. ( $5 x 4,000) +[( $3 x 4,000) x 40%] = $24,800
19. E. ($ 20,000 x 40%) + $340,000 - $ 40,000 + ($ 40,000 x 40%) = $ 324,000 20. B. the difference between standard and actual hours, multiplied by standard rate 21. E. budget allowance based on standard hours allowed for actual production for the
period and the amount of applied factory overhead during the period 22. A. four-variance method
23. A. price variance
24. D. [( 1,600 x $3.60 ) + $ 240] / 1,600 = $ 3.75 25. C. AH(AR - SR)
26. D. a favorable labor usage variance
27. C. [( 10,000 x $ 3.75) + $ 4,200] / $ 3.75 = 11,120 hours 28. D. [ $240/ (30/2)] x 125% = $20
29. C. [$ 110,000 + ($ .50 x 121,000)] - $ 178,500 = $ 8000 U 30. A. (130,000 x $ .50) – (121,000 x $ .50) = $ 4,500 F
31. E. actual factory overhead and the budget allowance based on standard hours allowed
32. C. no yes
33. D. yes yes
34. D. (1,000 x 2 x $3) – (2,1000 x $3) = $ 300 U
35. A. Standard factory overhead rate x (Actual units of allocation base - Standard units of allocation base allowed)
36. D. spending variance and variable efficiency variance 37. B. fixed efficiency variance and idle capacity variance
38. D. $3,000 = x (30,000 - 29,000) 1,000 x = $3,000 x = $3 y = $2.80 - $3.00(30,000) y = ($6,000) favourable 39. A. x = $5.10 [7,800 - (2,000 x 4)] x = ($1,020) favourable 40. D. x = $10 [2,000 - (900 x 2)] x = $2,000 unfavorable
