Masters Technological Institute of Mindanao

Department of Accountancy
Acctng 312 (Cost Acctng)
PRELIM EXAM

I. PROBLEM SOLVING. Answer the following problems. Show your supporting computations in a separate sheet of
paper.

1. Under Pick Companys job order costing system, manufacturing overhead is applied to work-in-process using a
predetermined annual overhead rate. During January 2016, Picks transactions included the following:

Direct materials issued to production P90 000

Indirect materials issued to production 8 000
Manufacturing overhead incurred125 000
Manufacturing overhead applied 113 000
Direct Labor cost..107 000

Pick had neither beginning nor ending work-in-process inventory. What was the cost of jobs completed in January 2016?

2. Ajax Corporation transferred P72 000 of raw materials to its production department in February and incurred P37
000 of conversion costs (P22 000 of direct labor and P15 000 of overhead). At the beginning of the period, P14 000 of
inventory (material and conversion costs) was in process. At the end of the period, P18 000 of inventory was in process.
What was the cost of goods manufactured?

3. The Childers Company manufactures widgets. During the fiscal year just ended, the company incurred prime costs
of P1 500 000 and conversion costs of P1 800 000. Overhead is applied at the rate of 200% of direct labor cost. How
much of the above costs represent material cost?

4. The following cost data were taken from the records of a manufacturing company:

Depreciation on factory equipment 1 000

Depreciation on sales office 500
Advertising 7 000
Freight-out (shipping) 3 000
Wages of production workers 28 000
Raw materials used 47 000
Sales salaries and commission 10 000
Factory rent 2 000
Factory insurance 500
Materials handling 1 500
Administrative salaries 2 000

Based upon the above information, the manufacturing costs incurred during the year was?

5. The following selected information pertains to Ajax Processing Co.: direct materials, P62 500; indirect materials, P12,
500; factory payroll, P75 000 of direct labor and P11 250 of indirect labor, and other factory overhead incurred, P37
500. The total conversion cost was?

6. Ambo Inc. manufactured 50 000 kilos of compound Am in 2016 at the following costs:
Opening work-in-process of P88 125
Materials of P182,500 of which 90% is direct materials
Labor of P242 500 of which 93% is direct labor
Closing work-in-process of P67 500
Factory overhead is 125% of direct labor cost and includes indirect materials and indirect labor. The cost of goods
manufactured is?

7. The work-in-process account of the Malinta Co which uses a job order cost system follows:

WORK-IN-PROCESS
APR 1 BALANCE P25 000 Finished Goods P125 450
DIRECT MATERIALS 50 000
DIRECT LABOR 40 000
OVERHEAD APPLIED 30 000

Overhead is applied to production at a predetermined rate based on direct labor cost. The work-in-process on Apr 30
represents the cost of Job No. 456, which has been charged with direct labor cost of P3 000 and Job No. 789 which has

By: Ms. SAHARA U. MAROHOM, CPA

 Masters Technological Institute of Mindanao
Department of Accountancy
Acctng 312 (Cost Acctng)
PRELIM EXAM
been charged with applied overhead of P2 400. The cost of direct materials charged to Job No. 456 and Job No. 789
amounted to?

8. Flor Company consumed P450 000 of direct materials during May 2016. At of the month, the direct materials inventory
of Flor was P25 000 lower than the May 1 inventory level. How much was the direct materials purchased during May
2016?

9-10. The following data are available for two companies at the end of their fiscal years: Determine the amounts
indicated by question marks.

Company A: Company B:
Finished goods, Jan1 $600,000 Gross Profit $96,000
Cost of goods manufacture 3,800,000 Cost of goods manufactured 340,000
Sales 4,000,000 Finished goods, Jan 1 45,000
Gross profit on sales 20% Finished goods, Dec 31 52,000
Finished goods inventory, end ? Work in process, Jan 1 28,000
Work in process, Dec 3 38,000
Sales ?

II. THEORIES. Classify each cost by completing the table provided.

Porter Company manufactures furniture, including tables. Selected costs are given below:
1. The tables are made of wood that costs $100 per table.
2. The tables are assembled by workers, at a wage cost of $40 per table.
3. Workers assembling the tables are supervised by a factory supervisor who is paid $25,000 per year.
4. Electrical costs are $2 per machine-hour. Four machine-hours are required to produce a table.
5. The straight-line amortization cost of the machines used to make the tables totals $10,000 per year.
6. The salary of the president of Porter Company is $100,000 per year.
7. Porter Company spends $250,000 per year to advertise its products.
8. Salespersons are paid a commission of $30 for each table sold.
9. Instead of producing the tables, Porter Company could rent its factory space out at a rental income of
$50,000 per year

Period
To Units Of Cost To Units of
COST Product Cost
Products Sold (Selling & Product Sold
Admin)
Direct Direct Manufacturing
Variable Fixed Direct Indirect
Materials Labor Overhead
1. Wood used in a table ($100
per table)
x x x
2. Labor cost to assemble a
table ($40 per table)
3. Salary of the factory
supervisor ($25,000 per year)
4. Cost of electricity to produce
tables ($2 per machine hour)
5. Amortization of machines
used to produce tables ($10,000
per year)
6. Salary of the company
president ($100,000 per year)
7. Advertising expense
($250,000 per year)
8. Commissions paid to sales
persons ($30 per table sold)
9. Rental income forgone on
factory space ($50,000 per year)

By: Ms. SAHARA U. MAROHOM, CPA