IAC ADVANCED FINANCIAL ACCOUNTING AND REPORTING PROBLEM 4

COST ACCOUNTING The ABC Chemical Company produces a product known as “formulex” from which the by-product results. This by-
product can be sold at P2.50 a pound. The manufacturing costs of the main product and by-product can be sold at
PROBLEM 1 P2.50 a pound. The manufacturing costs of the main product and by-product up to the point of separation for the three
Versatile Company produces four solvents from the same process. C,D,E and G. Joint product costs are P9,000. (Round months ended March 31, 2011 follows: Materials , P35,000; Labor, P20,000; Overhead, P20,000. The units processed
all answers to the nearest peso) were 20,000 pounds of the main product and 2,000 pounds of the by-product. During the period of 18,000 pounds of the
Sales prices per Disposal cost per Further Final sales “formulex” were sold at P12, while the company was able to sell 1,500 pounds of the by-product. Selling and admin.
Barrels barrel at split-off barrel at split-off processing costs price per barrel expenses related to the main product amounted to P42,000. Disposal cost per each unit of the by-product is P0.20.
C 750 P10.00 P6.50 P2.00 P13.50 1. Assume that the by-product is inventoried and recorded at net realizable value. The net realizable value of the
D 1,000 8.00 4.00 2.50 10.00 by-product reduces the manufacturing costs of “formulex”. What is the unit cost of “formulex”? Assume that
E 1,400 11.00 7.00 4.00 15.50 the by-product is recorded as realized. What is the cost of inventory of “formulex”?
G 2,000 15.00 9.50 4.50 19.50 2. Assume that the by-product is inventoried and the net realizable value of the by-product is deducted from the
CGS of “formulex”. What is the net income? Assume that the by product is not inventoried. The net amount
If Versatile sells the products after further processing, the following disposal costs will be incurred: C, P2.50; D, P1.00; E, realized from the sale of the by-product is reported as other revenue. What is the net income?
P3.50; G, P6.00.
1. Using the physical measurement method, what amount of joint processing cost is allocated to Product D? PROBLEM 5
2. Using sales value at split-off, what amount of joint processing cost is allocated to Product C? Whalen Company manufactures products X and Y from a joint process that also yields a by-product, Z. Revenue from
3. Using net realizable value at split-off, what amount of joint-processing cost is allocated to product E? sales of Z is treated as a reduction of joint costs. Additional information is as follows:
Products
PROBLEM 2 X Y Z Total
Uniflo Company produces three products from the same process that has joint processing costs of P4,100. Products R, Units produced 20,000 20,000 10,000 50,000
S, and T are produced in the following quantities: 250 gallons, 400 gallons, and 750 gallons. Uniflo Company also Joint costs ? ? ? P262,000
incurred advertising costs of P60,000. The ad was used to run sales for all three products. The three products occupy Sales value at
floor space in the following ratio: 5:4:9. (Round all answers to the nearest dollar. split-off P300,000 P150,000 P10,000 P460,000
1. Using gallons as the physical measurement, what amount of joint processing cost is allocated to Product R? Joint costs were allocated using the sales value at split-off approach.
2. Using gallons as the physical measurement, what amount of joint processing cost is allocated to Product S? 1. The joint costs allocated to product X were
3. Using gallons as the physical measurement, what amount of joint processing cost is allocated to Product T? 2. Refer to Whalen Company. The joint costs allocated to product Y were
4. Assume that Uniflo chooses to allocate its advertising cost among the three products. What amount of
advertising cost is allocated to Product R using the floor space ratio? PROBLEM 6
5. Assume that Uniflo chooses to allocate its advertising cost among the three products. What amount of Gable Company produces two main products jointly, A and B, and C, which is a by-product of B. A and B are produced
advertising cost is allocated to Product S using the floor space ratio? form the same raw material. C is manufactured from the residue of the process creating B. Costs before separation are
6. Assume that Uniflo chooses to allocate its advertising cost among the three products. What amount of apportioned between the two main products by the net realizable value method. The net revenue realized from the sale
advertising cost is allocated to Product T using the floor space ratio? of C is deducted from the cost of B. Data for April were as follows:

PROBLEM 3 Costs before separation P200,000

The LMN Company manufactures joint products D and F as well as by-product X. Cumulative cost data for the period Costs after separation:
amounts to P204,000 representing 20,000 completed units. Costs are assigned to products D and F by the net realizable A 50,000
value method, which considers further processing costs in subsequent operations. Cost is allocated to by-product X using B 32,000
the reversal cost method. C 4,000
Production for April, in pounds:
Additional data: A 800,000
Product X Product D Product F B 200,000
Quantity produced 2,000 units 8,000 units 10,000 units C 20,000
Sales price per unit P10 P20 P25 Sales for April:
Further processing cost per unit P1 P5 P7 A 640,000 pounds @ P.4375
Marketing and administrative expenses P2 B 180,000 pounds @ .65
Operating profit per unit P3 C 20,000 pounds @ .30

What is the cost allocated to product D and F? Required: Determine the gross profit for April.
PROBLEM 7 PROBLEM 11
The MNO Manufacturing Company uses a Materials and In-Process (MIP) inventory account. At the end of each month, Work in process of Alonzo Corporation on July 1, 2004 (per general ledger) is P22,800.
all inventories are counted, their conversion costs components are estimated, and inventory account balances are Per cost sheets:
adjusted accordingly. Raw materials is backflushed from MIP account to Finished Goods account. The following data is Job 101 Job 102
for the month of August: Direct material P6,000 P8,000
Beginning balance of MIP account P38,700 Direct labors 3,000 2,500
Conversion cost incurred 4,800 Amount charged to Work in process for July, 2004
Raw materials purchased 680,000
Job 101 Job 102 Job 103 Job 104
Conversion cost allocated 5,300
Direct material P3,000 P2,000 P6,000 P4,500
Ending balance of MIP account 41,900
Direct labors 1,000 1,500 2,600 2,000
The amount of direct materials and conversion costs to be backflushed to finished goods are:
The cost of goods manufactured for the month of July is
PROBLEM 8
The EFG Corporation manufactures electrical meters. For October, there were no beginning inventories of materials. PROBLEM 12
EFG uses a Just in Time system and backflush costing with three trigger points for making entries to record their AB Company uses job order cost system and the following information is available from its records. The company has 3
manufacturing process. EFG’s October standard cost per meter are direct materials, P25 and conversion costs, P20. jobs, #5, #8, and #12.
The following data pertains to October operations: Raw materials used P120,000
Materials purchased P137,500 Direct labor per hour P8.50
Conversion costs incurred 110,000 Overhead applied based on direct labor cost 120%
Number of finished units 5,250 Direct material was requisitioned as follows for each job respectively: 30%, 25% and 25%, the balance of the requisitions
Number of units sold 5,000 were considered indirect. Direct labor hours per job are 2,500, 3,100 and 4,200, respectively. Indirect labor is P33,000.
What are the balances of MIP inventory and Finished Goods Inventory accounts at the end of October? Other actual overhead costs totaled P36,000. Compute the (1) total amount of overhead applied to Job #8; and (2) and
total amount of actual overhead.
PROBLEM 9
Finale Company has a cycle time of 3 days, uses a Materials and In Process (MIP) account, and charges all conversion PROBLEM 13
costs to Cost of Goods Sold. At the end of each month, all inventories are counted, their conversion costs components NOP Company manufactures a highly sensitive smoke alarm and uses the FIFO method for process costing. The total
are estimated, and inventory account balances are adjusted. Raw material cost is backflushed from MIP to Finished manufacturing costs for the month of June is P264,000 and 2,750 units are completed during the month.
Goods. The following information is for August: The inventories at the beginning of June are:
Beginning balance of MIP account, including P22,500 of conversion costs P219,375 Units in process (20% to be done) 1,250 units P128,000
Beginning balance of finished goods account, including P75,000 of conversion 225,000 Units on hand( complete) 600 units 76,800
Raw material received on credit 4,218,750 The inventories at the end of June are:
Direct labor cost, P2,812,500; Factory overhead applied P3,375,000 6,187,500 Units in process (50% done) 500 units
Ending MIP inventory per physical count, including P33,750 of conversion costs 240,000 Units on hand (complete) 700 units
Ending finished goods inventory per physical count, including P65,625 of conversion costs 196,875 1. What is the equivalent unit of production?
Compute: 2. What is the total cost of units completed?
1. Material backflushed to completed units/finished goods. 3. What is the total cost of units in process at the end?
2. Material backflushed to sold units/cost of goods sold.
3. Conversion cost backflushed to completed units/finished goods.
4. Conversion cost backflushed to sold units/cost of goods sold.

PROBLEM 10
Cool Designs manufactures metal trim used for a variety of projects. Cool Designs' ABC overhead rates are:
Purchasing $170 per order
Storing $1 per square foot/days
Machining $50 per machine hour
Supervision $2 per direct labor hour
Job 319 involved three purchase orders, 4,000 square feet/days, 60 machine hours, and 30 direct labor hours. The cost
of direct materials on the job was $8,500 and the direct labor rate is $15 per hour. Determine the total cost of Job 319.
 Work done 1/5 4/5
PROBLEM 14 Ending work in process, July 31 12,000 7,000
The production data for Department 1 for May 2011 are as follows: Work to be done 1/3 2/7
Physical Units Direct Material Conversion Started in process during July 60,000
WIP, May 1 (75% incomplete as to conversion costs) 10,000 P250,000 P30,000 Normal spoilage 2,400 1,000
Started in May 74,000 Abnormal spoilage 600 500
Transferred out during May 61,000 COST
Spoiled units 8,000 Work in process, July 1
Cost added during May P1,480,000 P942,000 Transferred in P - P 19,030
Unit costs P20 P12 Materials 9,000 14,325
Conversion costs 6,500 18,715
Materials are added at the start of the process. Conversion costs are added evenly during the process. The company Current costs:
uses the FIFO method of costing. Inspection occurs, when production is 100% complete. Normal spoilage is 11% of good Transferred in P - P ?
units transferred out during May. What are costs allocated to: Materials 132,000 56,000
1. Transferred out Conversion costs 205,920 85,500
2. Ending WIP Required: For both departments:
3. Abnormal spoilage 1. Compute equivalent units of production.
2. Compute unit costs.
PROBLEM 15 3. Compute cost of units finished and transferred
The cost data for OPQ Company for the month of May are as follows: 4. Compute cost of units in process, end.
Cost Data: 5. Compute cost of abnormal spoiled units
Work in process, May 1: Materials P 10,400
Conversion Costs 13,800 PROBLEM 17
Cost Added this month Materials 120,000 The MNO Company uses a Materials and In-Process (MIP) inventory account. At the end of each month, all inventories
Conversion Costs 320,400 are counted, their conversion costs components are estimated, & inventory account balances are adjusted accordingly.
Production Data Raw materials is backflushed from MIP account to Finished Goods account. The ff. data is for the month of August:
Work in process, May 1 (60% incomplete) 7,500 units Beginning balance of MIP account P38,700
Started in production this May 80,000 units Conversion cost incurred 4,800
Transferred out 72,500 units Raw materials purchased 680,000
Work in process, May 31, (30% to be done) 13,000 units Conversion cost allocated 5,300
Normal lost units 1,100 units Ending balance of MIP account 41,900
Abnormal lost units ? The amount of direct materials and conversion costs to be backflushed to finished goods are:
All materials are added at the start of the process and lost units are detected at the inspection point of 75% completion.
1. Under the FIFO method, what are the equivalent units for materials and conversion costs? PROBLEM 18
2. Under the average method, what are the equivalent units for materials and conversion costs? The EFG Corporation manufactures electrical meters. For October, there were no beginning inventories of materials.
3. Using the FIFO method, what are the costs assigned to units transferred out and units in ending WIP? EFG uses a Just in Time system and backflush costing with three trigger points for making entries to record their
4. Using the average method, what are the costs assigned to units transferred out and units in ending WIP? manufacturing process. EFG’s October standard cost per meter are direct materials, P25 and conversion costs, P20.
5. What is the cost of abnormal lost units using FIFO and average method? The following data pertains to October operations:
Materials purchased P137,500
PROBLEM 16 Conversion costs incurred 110,000
KLM Manufacturing Company applies process costing in the manufacture of its sole product, “vitamix”. Manufacturing Number of finished units 5,250
starts in Department 1 where materials are all added at the start of processing. The good units are then transferred to Number of units sold 5,000
Department 2 where all the incremental materials needed for its completion are added at the final inspection. In What are the balances of MIP inventory and Finished Goods Inventory accounts at the end of October?
Department 1, units are inspected at the end of processing while in Department 2, inspection takes place when the units
are 90% completed. Department 1, uses FIFO costing while Department 2 uses the average costing. The production data PROBLEM 9
for the month of July show the following: Finale Company has a cycle time of 3 days, uses a Materials and In Process (MIP) account, and charges all conversion
Department 1 Department 2 costs to Cost of Goods Sold. At the end of each month, all inventories are counted, their conversion costs components
UNITS are estimated, and inventory account balances are adjusted. Raw material cost is backflushed from MIP to Finished
Beginning work in process, July 1 8,000 4,000 Goods. The following information is for August:
 Beginning balance of MIP account, including P22,500 of conversion costs P219,375
Beginning balance of finished goods account, including P75,000 of conversion 225,000
Raw material received on credit 4,218,750
Direct labor cost, P2,812,500; Factory overhead applied P3,375,000 6,187,500
Ending MIP inventory per physical count, including P33,750 of conversion costs 240,000
Ending finished goods inventory per physical count, including P65,625 of conversion costs 196,875
Compute:
1. Material backflushed to completed units/finished goods.
2. Material backflushed to sold units/cost of goods sold.
3. Conversion cost backflushed to completed units/finished goods.
4. Conversion cost backflushed to sold units/cost of goods sold.