Junior Philippine Institute of Accountants College of Business Administration University of the East - Caloocan
Qualifying Exam Reviewer 2017 Cost Accounting
1. Pitino Company has a beginning inventory of direct materials on March 1 of $30,000 and an ending inventory inventory on March March 31 of $36,000. The following additional manufacturing cost data were available for the month of March: Direct materials purchased Direct labor Factory overhead
$84,000 60,000 80,000
During March, prime cost added to production was: a. $140,000 b. $138,000 c. $144,000 d. $150,000 e. none of of the above 2. During March, March, conversion conversion cost added to production was: was: a. $80,000 b. $144,000 c. $140,000 d. $138,000 e. none of the above 3. When the number of units manufactured manufactured increases, the most significant significant change in average unit cost will be reflected as: a. a decrease in the variable element b. a decrease in the nonvariable element c. an increase in the semivariable element d. an increase in the variable element e. an increase in the nonvariable element 4. At the end of the year, year, Paola Company Company had the following account balances balances after applied factory overhead had been closed to Factory Overhead Control: Factory Overhead Control Cost of Goods Sold Work in Process Finished Goods
$ 1,000 980,000 38,000 82,000
CR DR DR 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 statement c. credit itit to Cost 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 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 July 31, direct materials July 31, direct labor July 31, factory overhead July 31, to finished goods
$ 12,000 40,000 30,000 27,000 (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 Materials Work in process Finished goods
Beginning $ 75 80 90
Ending $ 85 30 110
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 e. none of the above
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: Work in process, April 1 (50% complete) Started in April Work in process, April 30 (60% complete)
Units 40,000 240,000 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? a. b. c. d. e.
Materials 255,000 270,000 280,000 305,000 240,000
Conversion 255,000 280,000 270,000 275,000 250,000
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 Conversion Transferred-in
$1 3 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: Beginning work in process (60% complete) Started in April Completed in April and transferred to Department B Ending work in process (40% complete)
Units 20,000 340,000 320,000 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 Actual quantity purchased Standard quantity allowed for actual production Materials purchase price variance—unfavorable
$ 3.60 1,600 1,450 $ 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. b. c. d. e.
SR(AH - SH) AR(AH - SH) AH(AR - SR) SH(AR - SR) 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 Actual direct labor rate Standard direct labor hours Direct labor usage (efficiency) variance
$ 3.75 $ 3.50 10,000 $ 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 Weekly productive hours per employee Estimated weekly wages per employee Employee benefits (related to weekly wages)
25 30 $ 240 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) Budget formula Total overhead application rate Actual hours worked
$178,500 $110,000 + $ .50 per hour $1.50 per hour 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) Budget formula Total overhead application rate Actual hours worked Standard hours allowed for production
$178,500 $110,000 + $ .50 per hour $1.50 per hour 121,000 130,000
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:
a. b. c. d.
Controllable (Budget) Variance yes yes no no
Volume Variance no yes yes no
33. Under the three-variance method for analyzing factory overhead, which of the following is used in computation of the spending variance?
a. b. c. d.
Actual Factory Overhead no no yes yes
Budget Allowance Based on Actual Hours yes no no yes
34. Compute the variable efficiency variance, using the following data: Standard labor hours per good unit produced Good units produced Actual labor hours used Standard variable overhead per standard labor hour Actual variable overhead
2 1,000 2,100 $3 $ 6,500
a. b. c. d. e.
$200 favorable $200 unfavorable $300 favorable $300 unfavorable 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 Actual cost of direct materials Unfavorable direct materials usage variance Standard quantity of direct materials allowed for production
30,000 lbs. $ 84,000 3,000 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 Cost of material used
7,800 lbs. $ 40,950
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. 2. 3. 4. 5.
B. C. B. C. D.
6. C. 7. C. 8. A. 9. A. 10. A. 11. C. 12. C. 13. E. 14. C.
15. E. 16. C. 17. A. 18. D. 19. E. 20. B. 21. E. 22. A. 23. A. 24. D. 25. C. 26. D. 27. C. 28. D. 29. C. 30. A. 31. E. 32. C. 33. D. 34. D. 35. A. 36. D. 37. B.
[( $ 30,000 + $ 84,000) - $ 36,000] + $60,000 = $ 138,000 $ 60,000 + $ 80,000 = $ 140,000 a decrease in the nonvariable element credit it to Cost of Goods Sold $ 12,000 + $ 40,000 + $ 30,000 + $ 27,000 - $ 100,000 = $ 9,000 $ 9,000 - $ 2,250 – ($ 2,250/ 90%) = $ 4,250 $ 326 + $ 85 - $75 = $ 336 $686 - $326 = $ 360/ 160% = $ 225 $ 80 + $ 686 - $ 30 = $ 736 $ 90 + $ 736 - $ 110 = $ 716 close the estimated overhead account to actual overhead finished goods—ending inventory ( $2 + $3) x 60% = $3 The first department's unit cost is decreased, which necessitates an adjustment of the transferred-in unit cost. $ 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 8,000 + (8,000 x 60%) =12,800 units Materials = $ 40,000 + $ 240,000 = $ 280,000 Conversion = ($ 280,000 - $ 25,000) + ($ 25,000 x 60%) = $ 270,000 there is no beginning inventory ( $5 x 4,000) +[( $3 x 4,000) x 40%] = $24,800 ($ 20,000 x 40%) + $340,000 - $ 40,000 + ($ 40,000 x 40%) = $ 324,000 the difference between standard and actual hours, multiplied by standard rate budget allowance based on standard hours allowed for actual production for the period and the amount of applied factory overhead during the period four-variance method price variance [( 1,600 x $3.60 ) + $ 240] / 1,600 = $ 3.75 AH(AR - SR) a favorable labor usage variance [( 10,000 x $ 3.75) + $ 4,200] / $ 3.75 = 11,120 hours [ $240/ (30/2)] x 125% = $20 [$ 110,000 + ($ .50 x 121,000)] - $ 178,500 = $ 8000 U (130,000 x $ .50) – (121,000 x $ .50) = $ 4,500 F actual factory overhead and the budget allowance based on standard hours allowed no yes yes yes (1,000 x 2 x $3) – (2,1000 x $3) = $ 300 U Standard factory overhead rate x (Actual units of allocation base - Standard units of allocation base allowed) spending variance and variable efficiency variance fixed efficiency variance and idle capacity variance
38. D.
39. A. 40. 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 x = $5.10 [7,800 - (2,000 x 4)] x = ($1,020) favourable x = $10 [2,000 - (900 x 2)] x = $2,000 unfavorable
