CARD-MRI Development Institute, Inc.

PRE-FINALS EXAM
1st Semester - A.Y. 2019-2020
ACCTG 5 313: Cost Accounting and Management II
Name: Course/ Year/ Block: Date:

Write the capital letter of your selected answer in the space provided. Strictly no erasures.

____1. The economic order quantity is the order quantity that results in __________.
A. The minimum total inventory costs
B. The maximum total inventory costs
C. No inventory charges
D. Minimum ordering costs

____2. Which of the following equations determines the total annual ordering costs?
A. Cost of placing an order times the order quantity
B. Cost of placing an order times the number of orders per year
C. Cost of placing an order times one-half of the order quantity
D. Unit carrying costs per year times the order quantity

____3. The reorder point in the EOQ model is:

A. The inventory level at which an order is placed
B. When all inventory has been used
C. The day of ordering
D. When an inventory level is below the order quantity

____4. In a backflush costing system, a single account is used for the following:
A. Work in process and finished goods inventory
B. Finished goods inventories and cost of goods sold
C. Factory overhead and raw materials
D. Raw materials and work in process inventories

____5. Why is direct labor often used as basis for applying overhead costs to jobs?
A. Overhead is very similar to direct labor
B. Overhead includes direct labor
C. Overhead occurs before direct labor is charged to job
D. Overhead occurs in relation to the direct labor costs

____6. Since overhead costs are indirect costs,

A. They require some process of allocation
B. They can be easily traced to production
C. A predetermined overhead rate is not advantageous
D. They cannot be allocated

____7. The formula for computing the predetermined manufacturing overhead rate is estimated
annual overhead costs divided by an expected annual operating activity.
A. Direct labor cost
B. Direct labor hours
C. Machine hours
D. Direct materials costs
E. Any of the above

____8. Manufacturing overhead

A. Consist of all manufacturing costs other than direct labor
B. Consist of all manufacturing costs other than indirect costs
C. Consist of all manufacturing costs other than direct materials
D. Consist of all manufacturing costs other than direct costs

____9. Which of the following can be used in calculating predetermined overhead rate?
A. Estimated factory overhead divided by actual machine hours
B. Estimated factory overhead divided by estimated machine hours
 C. Estimated direct labor costs divided by estimated machine hours
D. Estimated direct labor costs divided by actual machine hours

____10. Manufacturing overhead is underapplied if:

A. Actual rate is equal to predetermined rate
B. Actual overhead is less than applied
C. Actual rate is not equal to predetermined rate
D. Actual overhead is greater than applied

____11. A decrease in inventory order costs will

A. Decrease the economic order quantity
B. Increase the reorder point
C. Have no effect on the economic order quantity
D. Decrease the carrying cost percentage

____12. The economic order quantity (EOQ) will rise following:

A. A decrease in annual unit sales/
B. An increase in carrying costs.
C. An increase in the per-unit purchased price of inventory.
D. An increase in the variable costs of placing and receiving an order.

____13. One of the elements included in the EOQ formula is:

A. Safety stock
B. Yearly demand
C. Selling price of item
D. Lead time for delivery

____14. Cross Company’s average demand for a special motor used in production is
12,000 per month. These motors costs the company P20 each from the supplier and
required a one-day lead time. The ordering costs is P5 per order and the carrying costs is
10% of purchase price. The number of orders per year is _____________.

A. 170 C. 49
B. 45 D. 100

____15. Jeff Company sells 20,000 radios evenly throughout the year. The costs of
carrying one unit in inventory for one year is P8, and the purchase order cost per order is
P32. What is the economic order quantity?

A. 200 C. 283
B. 400 D. 625

____16. Red Company sells 10,000 RTW pants evenly throughout the year. The costs of
carrying one unit in inventory for one year is P6 and the purchase costs is P108. What is the
economic order quantity?

A. 468 C. 1208
B. 600 D. 1000

____17. The following data relate to inventories for a given year of Cloud Company:
Economic order quantity 7,500 units
Cost to place one purchase order P75
Total cost to place purchase orders for the year P15,000
Cost to carry one unit for one year P6

The estimated annual usage in units will be ___________.

A. 2,250,000 C. 1,250,000
B. 2,000,000 D. 5.625,000
 Softdrinks Distributors, which buys in a pre-sell basis, is discussing with the route salesmen
on the proper cases to be ordered and the frequency of the call. From the route book and
other records the following are available: prior year’s purchases, 50,000 cases; carrying
costs per case of inventory, P1.20; distributor’s discount, 1 case for every 10 cases bought;
cost of placing an order, P3.00; weekly demand is approximately 952 cases. Safety stock
required is 140 cases. No change in demand is expected this year. (Use a 365-day, 52
week year).

____18. Determine the EOQ.

A. 482 cases C. 962 cases

B. 500 cases D. 250 cases

____19. Determine the reorder point assuming a two-day lead time.

A. 414 cases C. 275 cases

B. 500 cases D. 280 cases

One of the products Nature Health Products sells is a magnetic back support. The ordering
costs related to this product is P12.50 per order. The costs of carrying one item of inventory for
one year is P16.00. The business sells 40,000 of this type of product evenly throughout the
year.

____20. How much is the total ordering costs per year at the economic order quantity?

A. 1,562.50 C. 2,000.00
B. 2,560.00 D. 4,000.00

____21. How much is the total carrying costs per year at the economic order quantity?

A. 1,562.50 C. 2,000.00
B. 2,560.00 D. 4,000.00

Questions 19 and 20 are based in the following information. The following information are given
with respect to product Cute of Smile Corporation in 2019:
Optimal production run in units 2,000
Average inventory in units 1,000
Number of production runs 5
Cost per unit production P75
Desired annual return on inventory investment 18%
Set-up cost per production run P5,000

____22. If the units will be required evenly throughout the year, the total annual relevant
costs using the economic-order-quantity approach is:

A. P 5,000 C. P 50,000
B. P 75,000 D. P150,000

____23. The carrying costs ratio is:

A. 31.25% C. 13.25%
B. 18.00% D. 49.25%

____24. Felix Company sells 200 units of discs per week. Purchase order lead-time is 3
weeks and the economic order quantity is 450 units. What is the reorder point?

A. 425 units C. 600 units

B. 1,750 units D. 2,250 units
____25. The China Tee Store sells 100,000 tea bags a year. Additional data are
presented below:
1. Selling price per bag P2.50
2. Purchase cost per bag P1.50
3. Ordering cost: P5.40 an order
4. Carrying cost: 20% of unit cost
5. Number of days the company operates in a year: 250
6. Average lead time on purchases: 6 days

A. 2,400 bags C. 6,400 bags

B. 5,400 bags D. 8,800 bags

Burn Company uses a predetermined overhead rate to assign overhead to jobs on the basis
of machine hours. The practical level of company's plant is 50,000 machine hours. During
the year, Burn Company used 48,000 machine hours and incurred actual overhead costs of
P2M.

Burn Company also has the following balances of applied overhead in its accounts:

Work in Process P460,000

Cost of goods sold 1,440,000
Finished goods 500,000

____26. The predetermined overhead rate is:

A. P48/MH C. P50/MHH
B. P40/MH D. P41.67/MH

Satellite Company applies factory overhead on the basis of a rate per direct labor hour. The
company provides you with the following data for the month of August, year 1. Selected
inventories have the following balances:

August 1 August 31
Inventories:
Work in Process P78,000 P85,000
Finished Goods 81,000 60,000
Prime Costs for the month were:
Direct materials used P48,000
Direct labor (45,000 actual labor hours) P294,000

Sales have increased 20 percent over last month's sales of P500,0O0, as a result, gross margin
for August is P190,000. Actual factory overhead for August is P58,100.

____27. The factory overhead application rate is:

A. P1.20 of DL cost C. P1.291 per DLH

B. P1.20 per DLH D. 19.76 of DL cost
The following schedule showing the allocation of service department using step method is given
below:

Producing Service Departments

Assembly Finishing Maintenance Personnel Finance
Budgeted
Costs by P1,000,000 P975,000 P300,000 P400,125 P150,875
dept.
Allocation:
Maintenance 150,000 90,000 (300,000) 36,000 24,000
Personnel 276,029 138,014 (436,125) 22,082
Finance 84,410 112,547 (196,957)
Budgeted
costs after P1,510,439 P1,315,561
allocation
Budgeted
35,000 15,000
direct LH
Space
500 sq 300 sq 100 sq 120 sq 80 sq
occupied
No. of
50 25 6 20 4
personnel

Bases of allocation:

Maintenance cost is allocated first using space occupied

Personnel cost is allocated second using number of employees
Finance cost is allocated: 30% -Assembly; 40%-Finishing; 15% Maintenance; 15% Personnel

____28. The plant wide factory overhead rate based on direct labor hours after allocating
the service cost using step method is:

A. 39.50 per dlh C. 56.52 per dlh

B. 26.31 per dlh D. 43.16 per dlh

____29. Using direct method to allocate service department cost, the factory overhead
rate for Assembly Department is:

A. 43.40 per dlh C. 87.140 per dlh

B. 56.52 per dlh D. 28.68 per dlh

____30. Villar 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 account for Department A was charged with P265,500; actual direct labor
hours used were 105,000.

The over or under applied overhead for the period is:

A. P2,250 C. P15,000
B. (P2,250) D. (P15,000)
Use the following information for Nos. 31-40. Write your answer in the space after the question.

Support Functions Producing Departments

Administration Maintenance Cutting Sewing
Overhead costs P1, 800,000 P800,000 P5,000,000 P6,000,000
DL hours 20,000 80,000 20,000
Machine hours 90,000 150,000
Space occupied 4,500sqm 7,000sqm 50,000sqm 25,000sqm

Administration costs are allocated based on direct labor hours while Maintenance costs are
allocated based on space occupied.
The company uses normal costing method and computes department overhead rate based on
direct labors hours' in Cutting department and machine hours in Sewing department, after
allocating support function costs using direct method. The company is considering changing the
method of allocating support costs to either step method or algebraic method.
During the year, Trinoma Department Store placed an order of 10,000 dresses. Data for this job
are as follows:
Cutting Sewing
Direct materials P950,000 P210,000
Direct labor hours 20,000 5,000
Direct labor costs P560,000 P1,200,000
Machine hours 16,000 30,000

31. What is the predetermined Cutting Departmental OH rate if Step method of allocation is
used starting from Administration costs? _________________

32. What is the predetermined Sewing Departmental OH rate if Step method of allocation is
used starting from Administration costs? _________________

33. Using your answer in Nos. 31 & 32, the total costs of producing 10,000 units is
_________________
34. What is the pre-determined Cutting Departmental OH rate if support function costs is
allocated using algebraic method? _________________

35. What is the pre-determined Sewing Departmental OH rate if support function costs is
allocated using algebraic method? _________________

36. Using your answer in Nos. 34 & 35, the total costs of producing 10,000 units is
_________________
37. Total overhead cost of Cutting Department under the step method is
_________________

38. Total overhead cost of Sewing Department under the step method is
_________________

39. Total overhead cost of Cutting Department using the algebraic method is
_________________

40. Total overhead cost of Sewing Department using the algebraic method is
_________________
Use the following information for Nos. 41-50.

Lily Manufacturing Company had the following transactions:

 Raw materials were purchased on account for P200,000
 Materials were placed into production
 Actual direct labor costs were P130,000
 Actual overhead costs, P150,000

The raw materials purchased were immediately charged to Raw and In Process account while
direct labor and actual overhead costs were charged to Cost of Sales. The inventories were as
follows at the beginning and end of the period.

Raw and in process:

Beginning were P75,000 of which P45,000 is conversion costs.
Ending were P50,000 of which P30,000 is conversion costs.

Finished goods:
Beginning were P80,000 of which P35,000 is conversion costs.
Ending were P90,000 of which P30,000 is conversion costs.

41-46. Entry to backflush materials from RIP to Finished Goods (show supporting
computation)

47-48. Entry to backflush RIP to Cost of Sales (show supporting computation to).

49-50. Entry to adjust the balances of the following accounts: RIP, FG and Cost of Sales
(show supporting computation)