ACC 122: Cost Accounting and Control

Pre- Final Examination

Name: _______________________________ Section: ____________ Date: ___________

PHINMA UNIVERSITY OF ILOILO

COLLEGE OF ACCOUNATANCY

SET A

Multiple Choice Questions: Choose the letter of the correct answer. Don’t forget to shade
the set of your scantron.

1. One of the requirements for a JIT system to be successful is:

a. Cyclical production.
b. Coupling it with job order costing
c. Adequate inventory stock
d. High quality and balanced workloads.

2. Consider the following statements about joint product cost allocation:

I. Joint product cost is allocated because it is necessary for inventory valuation.
II. Joint cost may be allocated to products by using several different methods.
III. Joint product cost is allocated because it is necessary for making economic decisions
about
individual products (e.g., sell at split-off or process further).

Which of the above statements is (are) correct?

a. I, II and III.
b. III only.
c. I and II.
d. I and III.

3. In backflush costing with no finished goods account, the journal entry to record finished
goods sold includes a credit to
a. Raw Materials Inventory
b. No Entry
c. Raw In Process Inventory
d. Cost of Goods Sold

4. When a company adopts a just-in-time inventory system, it would expect:

a. higher inventories and less frequent purchases.
b. higher inventories and more frequent purchases.
c. lower inventories and less frequent purchases.
d. lower inventories and more frequent purchases.

5. Consider the following statements about characteristics of Just in Time:

I. Good Communication.
II. Demand Forecast
III. Less Waste
IV. Actual Demand
V. More supplies.
VI. Small Inventories
VII. Production Precision
VIII. Large Lots.

Which of the above statements is (are) correct characteristics of JIT?

a. I, II, III, IV, V, VI, VII
b. I, III, IV, VI, VII
c. I, II, III, V,VI,VII,VIII.
d. I, III, IV, V, VI, VII, VIII
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Pre- Final Examination

6. For purposes of allocating joint costs to joint products, the relative sales value at spilt-off
method could be used in which of the following situations?

No Costs Beyond Split-off Costs beyond Split-off

a. Yes Yes
b. Yes No
c. No Yes
d. No No

7. Joint costs are used for

a. Controlling costs
b. Setting the selling price of a product
c. Determining whether to continue producing an item
d. Determining inventory cost for accounting purposes

8. The costs to be offset against the savings from lower work in process levels in a JIT
system include all of the following, except:
a. handling a larger number of small batches of work in process
b. the higher probability of shutdowns due to the smaller safety stock
c. the possibility that setup costs cannot be reduced enough to offset the larger number of
setups
d. the possibility of customer dissatisfaction due to slower response time to orders.

9. Which of the following is often subject to further processing in order to be salable?

By-products Scrap
a. No No
b. No Yes
c. Yes Yes
d. Yes No

10. When allocating joint costs, Wolstein calculates the final sales value of the various
products manufactured and subtracts appropriate separable costs. The company is
using the:
a. Gross Margin at Split-off Method.
b. Reciprocal-Accounting Method.
c. Hypothetical Market Value Approach
d. Relative-Sales-Value Method.

11. By-products are

a. allocated a portion of joint production cost
b. also known as scrap, waste and no value
c. secondary product recovered in the course of manufacturing a primary product.
d. not sufficient alone, in terms of sales value, for management to justify undertaking the
joint process.

12. Which of the following statements about joint-cost allocation is false?

a. Joint-cost allocation is useful in deciding whether to further process a product
after split-off.
b. Joint-cost allocation is useful in making a profit determination about individual joint
products.
c. Joint-cost allocation is helpful in inventory valuation.
d. Joint-cost allocation can be based on the number of units produced.

13. In backflush costing, if the conversion cost in Raw and In Process was P1,000 on
January 1 and P400 on January 31, the account to be credited for the decrease amount
would be:
a. Finished Goods
b. Raw Materials
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Pre- Final Examination

c. Cost of Goods Sold

d. Raw and In Process.

14. The characteristic that is most often used to distinguish a product as either a joint
product or a by-product is the:
a. amount of labor used in processing the product
b. amount of separable product costs that are incurred in processing
c. relative sales value of the products produced in the process.
d. amount (i.e., weight, inches, etc.) of the product produced in the manufacturing process

15. The following statement that best describes a by-product is:

a. a product that has a lower unit selling price than the main product
b. a product that has relatively minor sales value.
c. a product that does not bear any portion of the joint processing costs
d. a product that is produced from material that would otherwise be scrap

16. A company produces three main joint products and one by-product. The by-product's
relative market value is quite low compared to that of the main products. The preferable
accounting for the by-product's net realizable value is as:
a. an addition to the revenues of the other products allocated on their respective net
realizable values
b. written-off.
c. a reduction in the joint cost to be allocated to the three main products.
d. a separate net realizable value upon which to allocate some of the joint costs and
reduction to the separable costs.

17. Reporting revenue from by-product sales on the income statement as additional sales
revenue:
a. reduces the Cost of Goods Sold the net realizable value of the by-product.
b. reduces the main product cost by the estimated market value of the by-product
c. overstated ending inventory costs of the main product.
d. credits main product costs only when the by-product is used in further production

18. Does Backflush costing comply with the GAAP?

a. Not, but it can be used for external reporting purposes
b. No and cannot be used for external reporting.
c. Yes, but with certain limitations.
d. Yes because it simplifies the production process.

19. Ideally, the number of units that should be produced in a just-in-time manufacturing
system is equal to
a. the maximum productive capacity for the current period.
b. actual customer demand for the current period.
c. budgeted customer demand for the current period.
d. budgeted customer demand for the following period

20. In the pull method of coordinating a production process:

a. departments early in the production process continually make components in order to
ensure that later departments do not run out.
b. defective products are "pulled" off the line and sent to a special department for
rework.
c. work-in-process inventories are increased throughout the plant.
d. nothing is manufactured at a work center until a need is signaled from a subsequent
process.

21. The point in a joint production process where each individual product becomes
separately identifiable is commonly called the:
a. separation point.
b. individual product point.
c. split-off point.
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Pre- Final Examination

d. joint product point.

22. The joint-cost allocation method that recognizes the revenues at split-off but does not
consider any further processing costs is the:
a. relative-sales-value method.
b. net-realizable-value method.
c. physical-units method.
d. reciprocal-accounting method.

23. Joint costs are most frequently allocated based upon relative
a. Profitability
b. Conversion costs
c. Sales value
d. Prime costs-

24. The entry to record the acquisition of raw materials on account is

a. Work in Process Inventory
Accounts Payable
b. Manufacturing Overhead
Raw Materials Inventory
c. Accounts Payable
Raw Materials Inventory
d. Raw Materials Inventory
Accounts Payable

25. All of the following are obstacles to JIT purchasing, except:

a. the layout of the production process
b. the frequency of schedule changes
c. the attitudes of purchasing agents and suppliers
d. all of the above are obstacles

26. The costs to be offset against the savings from lower work in process levels in a JIT
system include all of the following, except:
a. handling a larger number of small batches of work in process
b. the higher probability of shutdowns due to the smaller safety stock
c. the possibility of customer dissatisfaction due to slower response time to orders.
d. the possibility that setup costs cannot be reduced enough to offset the larger number of
setups

27. A just-in-time manufacturing process should have substantially less of which of the
following than a traditional manufacturing process?

A. B. C. D.
Idle Time Yes Yes Yes No
Value-added Time Yes No No No
Cycle Time Yes Yes Yes No
Transfer Time Yes No Yes Yes

Changi Ong, general manager of Casio Corporation's Midwest Division, has provided the
following information for transactions that occurred during March. This division uses a JIT
costing system.
(a)Raw materials were purchased at the cost of P97,000,
(b)All materials purchased were requisitioned for production.
(c)Direct labor costs of P77,000 were incurred.
d)Actual factory overhead costs amounted to P 225,000.
(e)Applied conversion costs totaled P300,000. This included P77,000 of direct labor.
(f) All units were completed.

28. Compute the March 31 balance in the Conversion Cost:

a. P2,000 debit
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Pre- Final Examination

b. P2,000 credit
c. P25,000 credit
d. 22,000 debit

29. Using the same information in No. 28, compute the March 31 balance in the Finished
goods account:
a. P 397,000 credit
b. P 397,000 debit
c. P 320,000 debit
d. P 377,000 debit

30. The Iloilo Manufacturing Company uses a raw and in process (RIP) inventory account
and expensed all conversion costs to the cost of goods sold account. At the end of each
month, all inventories are counted, their conversion cost components are estimated, and
inventory account balances are adjusted accordingly. Raw material cost is backflushed
from RIP to Finished Goods. The following information is for the month of April:

Beginning balance of RIP account, including P1,400

of conversion cosT……………………………………………………………….P 31,000
Raw materials received on credit………………………………………………………...367,000
Ending RIP inventory per physical count, including
P1,800 conversion cost estimate………………………………………………………….33,000

Compute the amount to be backflushed from RIP to Finished goods:

a. P365,000
b. P368,600
c. P367,000
d. P365,400

31. Katherine, owner of KCO Supply Company in Cebu, which manufactures chopsticks for
restaurants, has recently decided to implement a JIT costing system. Transactions for
August are as follows:
a. Raw materials were purchased at the cost of P950,000.
b. All materials purchased were requisitioned for production.
c. Direct labor costs of P2,500,000 were incurred.
d. Actual factory overhead costs amounted to P6,000,000.
e. Applied conversion costs totaled P8,100,000. This included P2,500,000 of direct labor.
f. All units were completed.

Compute the amount to be backflushed from RIP to Finished Goods:

a. P 2,100,000
b. P2,550,000
c. P 950,000
d. P3,100,000

32. Using the same information in No. 31, compute the amount of Finished goods after all
transactions have been completed
a. P8,500.000
b. P9,050,000
c. P10,600,000
d. P9,650,000

Use the following data for the next 2 question:

The Bulacan Manufacturing Company produces only for customer order and most work is
shipped within thirty-six hours of the receipt of an order. Bulacan uses a raw and in process
(RIP) inventory account and expenses all conversion costs to the cost of goods sold account.
Work is shipped immediately upon completion, so there is no finished goods account. At the end
of each month, inventory is counted, its conversion cost component is estimated, and the RIP
account balance is adjusted accordingly. Raw material cost is backflushed from RIP to Cost of
Goods Sold. The following information is for the month of May:
 ACC 122: Cost Accounting and Control
Pre- Final Examination

Beginning balance of RIP account, including P1,300

of conversion cost…………………………………………………………………P 12,300
Raw materials received on credit…………………………………………………………246,000
Ending RIP inventory per physical count, including
P2,100 conversion cost estimate………………………………………………………….12,100

33. Compute the amount to be backflushed from RIP to Cost of Goods Sold:
a. P246,000
b. P246,200
c. P247,000
d. P245,000

34. Using the same information in No. 33, compute the amount of Cost of Goods Sold after
all transactions and adjustments were made:
a. P 246,000
b. P 246,200
c. P 247,000
d. P245,000\

35. Ube Jewelry Factory manufactures a variety of costume jewelry. The owner Rita Conrad
had recently decided to implement a JIT Costing System. Transactions during
September were as follows:
A. Raw materials totaling P45,000 were purchased.
B. All materials purchased were requisitioned for production.
C. Direct labor costs of P11,000 were incurred.
D. Indirect labor costs amounted to P 120,000.
E. Utilities costs totaled P15,000.
F. Other actual factory overhead costs amounted to P85,000.
G. Applied conversion costs totaled P221,000. This includes the direct labor costs
H. All units were completed.

Determine the September 30 balance in the cost of goods sold amount. No adjustment has
been made for overapplied or underapplied conversion cost:
a. P 266,000
b. P 276,000
c. P 221,000
d. P 220,000

36. Using the same information in No. 35, what was the overapplied or underapplied
conversion cost for the month?
a. P16,000 overapplied
b. P16,000 underapplied
c. P10,000 underapplied
d. P10,000 overapplied

37. G. Bello, general manager of a highly automated coffee production plant in Laguna,
locos Sur, has provided the following information for transactions that occurred during
October. The production plant uses.a JiT costing system.
a. Raw materials costing P300,000 were purchased.
b. All materials costing P300,000 were requisitioned for production.
c. Direct labor costs of P200,000 were incurred.
d. Actual factory overhead costs amounted to. P995,000.
e. Applied conversion costs totaled P1,300,000. This includes the direct labor cost.
f. All units are completed and immediately sold.

Determined the October 31 balance in the Cost of Goods Sold account. No adjustment has
been made for overapplied or underapplied conversion cost.

a. P 1,300,000
b. P 1,495,000
c. P 1,600,000
d. P 1,195,000
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38. Using the same information in No. 37, what was the overapplied or underapplied
conversion cost for the month?
a. P305,000 overapplied c. P105,000 overapplied
b. P195,000 underapplied d. P105,000 underapplied

39. Using the same information in Nos. 37 and 38, what is the Cosf of Goods Sold after all
transactions-adjustments have been completed?
a. P 1,304,000
b. P 1,495,000
c. P1,600,000
d. P 1,195,000

40. Kara Manufacturing uses backflush costing to account for an electronic meter it makes.
During August 2008, the firm produced 16,000 meters, of which it sold 15,800. The
standard cost for each meter is:
Direct materials………………………………………………………………………….P20
Conversion costs…………………………………………………………………………44
P64

Assume that the firm had no inventory on August 1. The following events took place in
August:
1. Purchased P320,000 of direct materials.
2. Incurred P708,000 of conversion costs.
3. Applied P704,000 of conversion costs to Raw and In Process inventory (RIP).
4. Finished 16,000 meters.
5. Sold 15,800 meters for P100 each.

Compute the amount to be backflushed from RIP to Finished goods:

a. P 320,000
b. P 704,000
c. P 1,024,000
d. P 1,028,000

41. Using the same information in No. 40, determine the August 31 (ending balance) of
Finished goods account:
a. P -0-
b. P12,850
c. P12,962
d. P12,800

42. Ithaca Corporation uses the physical-units method to allocate costs among its three joint
products: X, Y, and Z. The following data are available for the period just ended:

● Joint processing cost: P800,000

● Total production: 150,000 pounds
● Share of joint cost allocated to X: P160,000
● Share of joint cost allocated to Y: P400,000

Which of the following statements is true?

a. The company would have relied on the sales value of each product when allocating joint
costs to X, Y, and Z.
b. Ithaca produced 45,000 pounds of Z during the period.
c. Ithaca produced 105,000 pounds of Z during the period.
d. Based on the data presented, it is not possible to determine Ithaca's production of Z
during the period.

43. Garvin Corporation manufactures joint products P and Q. During a recent period, joint
costs amounted to P80,000 in the production of 20,000 gallons of P and 60,000 gallons
of Q. Garvin can sell P and Q at split-off for P2.20 per gallon and P2.60 per gallon,
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respectively. Alternatively, both products can be processed beyond the split-off point, as
follows:
P Q
Separable processing costs P15,000 P35,000
Sales price (per gallon) if processed
beyond split-off P3 P4

The joint cost allocated to Q under the relative-sales-value method would be:
a. P40,000.
b. P62,400.
c. P64,000.
d. P65,600.

44. Cruz Company produces joint products A and B from a process that also yields a by-
product, C. The by-product requires additional processing before it can be sold. The cost
assigned to the by-product is its market value less additional costs incurred after split-off
(NRV method). Information concerning a batch produced in January at a joint cost of
P40,000 is as follows:

Product Units Produced Market Value Costs after Split-off

A 800 P44,000 P4,500
B 700 32,000 3,500
C 500 4,000 1,000

How much of the joint cost should be allocated to the joint products?
a. P35, 000
b. P37, 000
c. P36,000
d. P39,000

45. Lily Co. produces main products K and W. The process also yields by-product Z. Net
realizable value of by-product Z is subtracted from joint production cost of K and W. The
following information pertains to production in July 2001 at a joint cost of P54,000:

Product Unit Produced Market value Additional cost after split-off

K 1,000 P40,000 P0
W 1,500 35,000 0
Z 500 7,000 3,000

If Lily uses the net realizable value method for allocating joint cost, how much of the joint
cost should be allocated to product K?
a. P18, 800
b. P26, 667
c. 20,000
d. 27,342

46. The following statement that best describes a by-product is:

a. a product that usually produces a small amount of revenue when compared to
the main product's revenue.
b. a product that does not bear any portion of the joint processing costs
c. a product that is produced from material that would otherwise be scrap
d. a product that has a lower unit selling price than the main product

47. Brad, Inc., makes two products, Wet and Dry, form a joint process. For the month of
May, 2008, the total joint costs of processing was P120,000 and the costs of further
processing after the point of split-off, as well as other relevant data are shown below:

Wet Dry
Units after split-off………………………………….. 1,600 800
Sales price per unit………………………………….P 200 P 400
Further processing costs………………………… P100,000 P140,000
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The company uses the net realizable value method for allocating the joint costs of
processing. For the month of May, 2008, the joint cost allocated to product Wet was:
a. P60,000
b. P72,000
c. P66,000
d. P80,000

48. Ohio Corporation manufactures liquid chemicals A and B from a joint process. Joint
costs are allocated on the basis of relative sales value at split-off. It costs P4,560 to
process 500 gallons of product A and 1,000 gallons of product B to the split-off point.
The sales value at split-off is P10 per gallon for product A and P14 for product B.
Product B requires an additional process beyond split-off at a cost of P1 per gallon
before it can be sold.

What is Ohio's cost to produce 1,000 gallons of product B?

a. P3,360
b. P3,660
c. P4,040
d. P4,360

49. Hovart Corporation, which manufactures two products out of a joint process -
Compod and Ultrasene. The joint (common) costs incurred are P250,000 for a
standard production run that generates 120,000 gallons of Compod and 80,000
gallons of Ultrasene. Compod sells for P2.00 per gallon while Ultrasene sells for
P3.25 per gallon.If there are no additional processing costs incurred after the split-off
point, the amount of joint cost of each production run allocated to Compod on a
physical-quantity basis is
a. P 100,000
b. P 120,000
c. P 130,000
d. P 150,000

50. Using the same information in No. 49, and if there are no additional processing costs
incurred after the split-off point, the amount of joint cost of each production run
allocated to Ultrasene on a realizable value (gross market value) basis is
a. P100,000
b. P120,000
c. P130,000
d. P150,000

51. Using the same information in No. 49, and if additional processing costs beyond the
split-off point are P.10 per gallon for Compod and P1.10 per gallon for Ultrasene, the
amount of joint cost of each production run allocated to Ultrasene on a physical
quantity basis is
a. P 100,000
b. P 148,000
c. P142,500
d. P 150,000

52. Using the same information in No. 49, and if additional processing costs beyond the
split-off point are P.10 per gallon for Compod and P1.10 per gallon for Ultrasene, the
amount of joint cost of each production run allocated to Compod on a net realizable
value (net market value) basis is
a. P100,000
b. P107,500
c. P142,500
d. P150,000

For next three items Use the following information:

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Rocky Mountain Company produces two products (X and Y) from a joint process. Each
product may be sold at the split-off point or processed further. Additional processing
requires no special facilities, and production costs of further processing are entirely
variable and traceable to the products involved. Joint manufacturing costs for the year
were P60,000. Sales values and costs were as follows:

If Processed Further
Units Sales Value Sales Separable
Product Made at Split-off Value Costs
X 9,000 P40,000 P78,000 P10,500
Y 6,000 80,000 90,000 7,500

53. If the joint production costs are allocated based on the physical-units method, the
amount of joint cost assigned to product X would be:
a. P20,000.
b. P24,000.
c. P30,000.
d. P36,000

54. If the joint production costs are allocated based on the relative-sales-value method, the
amount of joint cost assigned to product X would be:
a. P20,000.
b. P27,000.
c. P33,000.
d. P40,000.

55. If the joint production costs are allocated based on the net-realizable-value method, the
amount of joint cost assigned to product Y would be:
a. 20,000.
b. 27,000.
c. 33,000.
d. 40,000.

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