1.

The term "conversion costs" refers to:

The sum of direct labor costs and all factory overhead costs.
The sum of raw material costs and direct labor costs.
All costs associated with manufacturing other than direct labor costs.
Direct labor costs incurred to produce units of output.

2. ,Selected data concerning the past fiscal year's operations (000's omitted)
of the Sinulid Manufacturing
Company are presented below:
INVENT
ORIES
Beginning Ending
Raw materials P90 P85
Work in process 50 65
Finished goods 100 90
Other data:
Raw materials used P365
Total manufacturing costs charged to production during the year (includes raw
materials, direct labor, and factory overhead) 680
Cost of goods available for sale 765
Selling and general expenses 250

The cost of goods sold during the year was:

P765
P730
None of the choices
P675
P775

3. Statement I - Employer's share in the mandatory contributions are part of

direct labor costs
Statement II - Unused production materials reverted back to storage will cause
an increase in Work in Process inventory.

None of the statements are true

Both statements are true
Only Statement I is true
Only Statement II is true

4. Statement I - When the goods are sold, their costs are transferred from
Work in Process to Finished Goods.
Statement II - Raw materials inventory refers to direct materials on hand and
available for use in the manufacturing process.
 Only Statement I is true
Both statements are true
Only Statement II is true
None of the statements are true

5.Which of the following is not a cost that is accumulated in Work in process?

Administrative expense
Factory overhead
Direct labor
Direct materials

6.Selected data concerning the past fiscal year's operations (000's omitted) of
the Sinulid Manufacturing
Company are presented below:
INVENT
ORIES
Beginning Ending
Raw materials P90 P85
Work in process 50 65
Finished goods 100 90
Other data:
Raw materials used P365
Total manufacturing costs charged to production during the year (includes raw
materials, direct labor, and factory overhead) 680
Cost of goods available for sale 765
Selling and general expenses 250

The cost of raw materials purchased during the year was:

P360
P365
None of the choices
P450
P455

7. Statement I - If the under-applied FOH amount is immaterial, it is transferred

to the cost of goods sold at the end of the year.
Statement II - The sum of all costs of manufacturing costs except direct
materials is called prime cost.

Only Statement II is true

None of the statements are true
Only Statement I is true
Both statements are true
8.The recording of factory overhead applied to jobs would include a debit to

Payroll
Cost of Goods Sold
Factory Overhead
Work in Process

9.The Mimi Company’s payroll summary showed the following in November:

Sales department salaries P10,000
Factory supervisor salaries 20,000
Assembly workers’ wages 25,000
Machine operators’ wages 35,000
Maintenance workers’ wages 15,000
Accounting department salaries 5,000

What is the amount that would be included in factory overhead in November?

None of the choices

P120,000
P95,000
P35,000
P20,000

10.Statement I - Actual Factory Overhead is found on the credit side of

Factory Overhead Control Account.
Statement II - Credits in the Work in Process Account represents the cost of
goods manufactured during production.

Only Statement I is true

None of the statements are true
Only Statement II is true
Both statements are true

11.Statement I - Product costs are referred to as inventoriable costs.

Statement II - Operating expenses are product costs and are expensed when
the product is sold.

Only Statement II is true

Only Statement I is true
Both statements are true
None of the statements are true

12 Which of the following is the correct flow of manufacturing costs?

COGS, WiP, FG, RM

RM, FG, COGS, WiP
RM, WiP, FG, COGS
 FG, WiP, COGS, RM

13. Statement I - Only the value of the inventory that is sold will appear in the
income statement.
Statement II - If the over-applied FOH amount is material, it is transferred to
the cost of goods sold at the end of the year.

Only Statement II is true

Only Statement I is true
Both statements are true
None of the statements are true

14. Statement I - Labor costs that are not directly traceable to the product are
part of factory overhead.
Statement II - If factory overhead applied exceeds the actual costs, overhead
is said to be under-applied.

None of the statements are true

Only Statement I is true
Both statements are true
Only Statement II is true

15.Kahoy Company manufactures wood file cabinets. The following

information is available for June 2021:
Beginning Ending
Raw Material Inventory P6,000 P7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300

Direct labor is P9.60 per hour and overhead for the month was P9,600.

If there were 1,500 direct labor hours and $21,000 of raw material purchased,
how much is Cost of Goods Sold?

P59,800
P38,800
P64,500
None of the choices
P53,800

16. Kahoy Company manufactures wood file cabinets. The following

information is available for June 2021:
Beginning Ending
Raw Material Inventory P6,000 P7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300
Direct labor is P9.60 per hour and overhead for the month was P9,600.

What are prime costs and conversion costs, respectively if there were 1,500
direct labor hours and $21,000 of raw material was purchased?

P33,900 and P24,000

P24,000 and P33,900
None of the choices
P29,100 and P33,900
P33,900 and P29,100

17. Statement I - Applied Factory Overhead is computed on a predetermined

rate based on direct labor hours.
Statement II - Payroll accounts are used to accumulate all labor costs
pertaining to direct and indirect labor.

Both statements are true

Only Statement I is true
None of the statements are true
Only Statement II is true

18. Pipino Company has a beginning inventory of direct materials on March 1

of P30,000 and an ending inventory on March 31 of P36,000. The following
additional manufacturing cost data were available for the month of March:
Direct materials
purchased........................................................................................... P84,000
Direct labor ..................................................................................... 60,000
Factory overhead.............................................................................. 80,000

During March, prime cost added to production was:

P138,000
P140,000
P150,000
P144,000
None of the choices

19. The payroll account is debited

when employees' salaries are incurred and paid

when a new employee is hired
when the related labor costs are transferred into the work in process account
when good are manufactured and completed
20. Statement I - When finished goods are sold, the entry to record the cost of
sales is to debit the Finished Goods inventory and credit to Cost of Sales.
Statement II - Factory overhead cost includes all manufacturing costs except
direct materials and direct labor.

None of the statements are true

Only Statement II is true
Both statements are true
Only Statement I is true

21.Selected data concerning the past fiscal year's operations (000's omitted)
of the Sinulid Manufacturing
Company are presented below:
INVENT
ORIES
Beginning Ending
Raw materials P90 P85
Work in process 50 65
Finished goods 100 90
Other data:
Raw materials used P365
Total manufacturing costs charged to production during the year (includes raw
materials, direct labor, and factory overhead) 680
Cost of goods available for sale 765
Selling and general expenses 250

The cost of goods manufactured during the year was:

P705
P735
P710
None of the choices
P665

22.Kahoy Company manufactures wood file cabinets. The following

information is available for June 2021:
Beginning Ending
Raw Material
Inventory P6,000 P7,500
Work in Process
Inventory 17,300 11,700
Finished Goods
Inventory 21,000 16,300

Direct labor is P9.60 per hour and overhead for the month was P9,600.
Compute total manufacturing costs for June, if there were 1,500 direct labor
hours and $21,000 of raw material was purchased.

P46,500
None of the choices
P58,500
P43,500
P43,100

23. Kahoy Company manufactures wood file cabinets. The following

information is available for June 2021:
Beginning
Ending
Raw Material
Inventory P6,000 P7,
500
Work in Process
Inventory 17,300 11,700
Finished Goods
Inventory 21,000 16,300

Direct labor is P9.60 per hour and overhead for the month was P9,600.

If there were 1,500 direct labor hours and $21,000 of raw material purchased,
Cost of Goods Manufactured is:

P51,000
P49,100
None of the choices
P49,500
P45,000

24. Which of the following will not be found on the balance sheet of a
manufacturing company?

Cost of Goods Sold

Materials
Work in Process
Finished Goods

25. A typical factory overhead cost is:

Freight out.
Stationery and printing.
Depreciation on machinery and equipment.
 Postage

26. The statement of costs of goods manufactured shows:

Salary of sales manager.

Rent paid on finished goods warehouse.
Deprecation of factory building.
Office supplies used in accounting office.

27. Pipino Company has a beginning inventory of direct materials on March 1

of P30,000 and an ending inventory on March 31 of P36,000. The following
additional manufacturing cost data were available for the month of March:
Direct materials
purchased........................................................................................... P84,000
Direct labor ................................................................................... 60,000
Factory overhead.................................................................... 80,000

During March, conversion cost added to production was:

None of the choices

P80,000
P140,000
P144,000
P138,000

28.Payroll is debited and Wages Payable is credited to:

Pay the payroll taxes.

Pay the payroll.
Distribute the payroll
Record the payroll.

29.Which of the following is not a prime cost?

Assembly line wages

Direct labor wages
Machine operator wages
Supervisor's wages

30.Statement I - Merchandising businesses buy merchandise and sell it to

customers without any changes in the merchandise including its accessories
and packaging.
Statement II - A manufacturing business maintains the same level and classes
of inventory found in a merchandising company.

Only Statement I is true

None of the statements are true
 Only Statement II is true
Both statements are true

Quiz 2

1. Is backflush costing is concerned with standard costs and minimizing

variances from standards?
No and yes respectively
Yes and no respectively
No for both
Yes for both

2. Alibaba began operations in January 2022. Alibaba manufactures

vehicular seat covers using a just-in-time production system supported
by a backflush costing system. This system has two trigger points: (1)
the purchase of raw materials, and (2) the sale of finished good
units. Standard unit costs are P40 for raw materials and P25 for
conversion costs. The following data were available for January 2022:

Production in good units 19,800

Sales of good units 19,750
Purchases of raw materials [20,000 units at P40] P800,000
Conversion costs incurred P496,000

The journal entry to record the manufacture of finished good units is

Dr. Finished Goods 1,287,000; Cr. Raw and In-Process Inventory 792,000 Cr. Conversion
Costs Applied 495,000
Dr. Raw and In-Process Inventory 800,000 Dr. Conversion Costs Applied 495,000 Dr.
Underapplied Conversion Costs 1,000; Cr. Various Accounts 1,296,000
Dr. Finished Goods 1,287,000 Dr. Underapplied Conversion Costs 1,000; Cr. Raw and In-
Process Inventory 792,000 Cr. Conversion Costs Control 496,000
none of the choices
Dr. Finished Goods 1,287,000; Cr. Raw and In-Process Inventory 792,000 Cr. Conversion
Costs Control 495,000

3. Statement I - In a just-in-time (JIT) environment, design changes must

be made early in the production process.

Statement II - In a just-in-time (JIT) environment, quality is determined

continually during the manufacturing process.
Only Statement I is true
 None of the statements are true
Both statements are true
Only Statement II is true

4. Statement I - In a just-in-time (JIT) environment, the optimal situation is

to have only one vendor for any given item.
Statement II - In a just-in-time (JIT) environment, design changes may
be made at any time during the production process.
Only Statement II is true
None of the statements are true
Both statements are true
Only Statement I is true

5.Cherrios Company has materials cost in the June 1 Raw and In Process of
P10,000, materials received during June of P205,000 and materials cost in
the June 30 Raw and In Process of P12,500. The amount to be backflushed
from Raw and In Process to Finished Goods at the end of June would be:
none of the choices
P202,500
P217,500
P215,000
P207,500

6.All of the following statements apply to a JIT work cell except that
all workers in a cell are responsible for product quality
a cell's workers may be evaluated and rewarded as a team
a cell is responsible for the entire production of a product or part
every worker in the cell specializes in a single task
all of the statements apply

7. An implication of the demand-pull nature of the JIT production process is

that
problem areas become less visible as inventories are reduced
finished products are packaged and shipped to customers immediately, thus requiring
minimal finished goods inventories.
more storage space for inventories is necessary.
finished goods inventories must be available to meet customer demand, although raw
material is delivered on an as-needed basis.

8. Statement I - In a JIT system, the quality of each product begins with a

company's vendors.
Statement II - Reducing inventory to the lowest possible levels is a major
focus of JIT philosophy.
Only Statement I is true
 Only Statement II is true
Both statements are true
None of the statements are true
Correct1/1 Points

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

the distance from suppliers
all of the choices are obstacles
the frequency of schedule changes
the attitudes of purchasing agents and suppliers
the layout of the production process

10.Statement I - No journal entries are made in the incurrence of conversion

costs in a JIT system as this is not included in the trigger points.
Statement II - Inventory balances may differ depending on the method
used for trigger points in the backflush costing.
Both statements are true
Only Statement II is true
Only Statement I is true
None of the statements are true

11.According to JIT philosophy,

long production runs and large production lot sizes take advantage of economies of scale.
maintaining inventories wastes resources and frequently covers up poor work or other
problems.
inventories of finished goods always should be available to meet customer demand.
push-through manufacturing flows are the most efficient.

12.To backflush materials cost from Raw and In Process (RIP) to Finished
Goods, the calculation would be
materials in ending RIP inventory plus materials received during the period minus materials
in the beginning RIP inventory
materials in beginning RIP inventory plus materials received during the period minus
materials in ending RIP inventory
none of the choices
materials in ending finished goods inventory plus materials cost transferred from RIP minus
materials in beginning finished goods inventory
materials in beginning finished goods inventory plus materials cost transferred from RIP
minus materials in ending finished goods inventory
Correct1/1 Points

13. Just-in-time (JIT) inventory systems

focus on a "push" type of production system.
result in a greater number of suppliers for each production process.
result in inventories being either greatly reduced or eliminated
can only be used with automated production processes.
14.Statement I - JIT is a philosophy concerned with how much of something
should be done.
Statement II - When JIT is implemented, elimination of standard costs is
to be expected in the accounting system.
Both statements are true
Only Statement I is true
Only Statement II is true
None of the statements are true

15.With JIT manufacturing, which of the following costs would be considered

a direct product cost?
salary of the plant supervisor
insurance on the plant
janitors' salaries
repair parts for machinery

16. Statement I - In a just-in-time (JIT) environment, end-of-period variance

analysis and reporting does not occur.
Statement II - Backflush costing requires fewer allocations than traditional
accounting methods.
Only Statement I is true
Only Statement II is true
Both statements are true
None of the statements are true
Correct2/2 Points

17. Statement I - Backflush costing eliminates the need for journal entries.
Statement II - Backflush costing uses two inventory accounts: raw materials
and combine work in process and finished goods account.
Both statements are true
Only Statement II is true
Only Statement I is true
None of the statements are true
18. Which of the following describes the effect on direct labor when
management adopts the JIT philosophy?
Machine operators are expected to run several different types of machines, help set up for
production runs, and identify and repair machinery needing maintenance.
Because each person runs a single machine in a JIT environment, there are more
employees classified as direct labor.
The environment becomes more labor-intensive.
Each direct labor person performs a single task, thereby allowing that person to reach his
or her theoretical potential.

19.Statement I - In a just-in-time (JIT) environment, quality is determined at

quality control checkpoints in the manufacturing process.
Statement II - In a just-in-time (JIT) environment, machines and workers are
often rearranged into manufacturing cells.
Only Statement I is true
Only Statement II is true
None of the statements are true
Both statements are true

20.Alibaba began operations in January 2022. Alibaba manufactures

vehicular seat covers using a just-in-time production system supported by a
backflush costing system. This system has two trigger points: (1) the
purchase of raw materials, and (2) the sale of finished good units. Standard
unit costs are P40 for raw materials and P25 for conversion costs. The
following data were available for January 2022:

Production in good units 19,800

Sales of good units 19,750
Purchases of raw materials [20,000 units at P40] P800,000
Conversion costs incurred P496,000

The January ending total for all inventory balances is

P11,250
P16,250
none of the choices
P12,250
P10,000
Correct2/2 Points

21. Statement I - Advantages that result from reducing raw materials

inventory include a need for less storage space.
Statement II - The cost accounting system that would be most apt to use a
single inventory account entitled Raw and In Process (RIP) would be
backflush costing.
Only Statement II is true
Both statements are true
Only Statement I is true
None of the statements are true

22.When a firm adopts the just-in-time method of management,

machinery and equipment are moved into small autonomous production lines called islands
or cells.
new, more efficient machinery and equipment are purchased and installed in the original
plant layout
new machinery and equipment must be purchased from franchised JIT dealers.
employees are retrained on different equipment, but the plant layout generally remains
unchanged.
23. JIT seeks to
radically redesign the production process for effectiveness.
all of the choices.
reduce production cost while increasing quality.
modify all non-value-added activities.
Correct1/1 Points

24. In accounting for JIT operations, the Raw Material Inventory account
is closely monitored to ensure that materials are always on hand in time.
is combined with the Work In Process Inventory account.
can be expected to have a larger balance than with traditional manufacturing methods.
is combined with the Finished Goods Inventory account.

25.The JIT philosophy does not focus on

finding the absolute lowest price for purchased parts.
standardizing parts used in products.
improving quality of output.
eliminating waste in the production process.
Correct2/2 Points

26.Statement I - One of the requirements for a JIT system to be successful is

coupling it with job order costing.
Statement II - Backflush production is used to describe the JIT effort to
reduce inventories of work in process and raw materials.
Both statements are true
None of the statements are true
Only Statement I is true
Only Statement II is true
Correct1/1 Points

27. The objective of reducing inventory to zero is possible if all of the

following conditions are present, except:
minimum lead times
long setup times
balanced and level work loads
low or insignificant setup costs
no interruptions due to stockouts

28. In backflush costing, if the conversion cost in the Raw and In Process
was P500 on July 1 and P1,000 on July 31, the account to be credited at the
end of July for the P500 increase would be:
Raw Materials
 Finished Goods
Raw and In Process
none of the choices
Cost of Goods Sold

29.Alibaba began operations in January 2022. Alibaba manufactures

vehicular seat covers using a just-in-time production system supported by a
backflush costing system. This system has two trigger points: (1) the
purchase of raw materials, and (2) the sale of finished good units. Standard
unit costs are P40 for raw materials and P25 for conversion costs. The
following data were available for January 2022:

Production in good units 19,800

Sales of good units 19,750
Purchases of raw materials [20,000 units at P40] P800,000
Conversion costs incurred P496,000

The January adjusted cost of goods sold is

P1,283,750
P1,284,750
P1,286,000
none of the choices
P1,296,000
Correct3/3 Points

30. Alibaba began operations in January 2022. Alibaba manufactures

vehicular seat covers using a just-in-time production system supported by a
backflush costing system. This system has two trigger points: (1) the
purchase of raw materials, and (2) the sale of finished good units. Standard
unit costs are P40 for raw materials and P25 for conversion costs. The
following data were available for January 2022:

Production in good units 19,800

Sales of good units 19,750
Purchases of raw materials [20,000 units at P40] P800,000
Conversion costs incurred P496,000

The January conversion cost is

P250 Underapplied
P1,000 Overapplied
none of the choices
P250 Overapplied
P1,000 Underapplied
Raw materials inventory, beg Sales
Add: Raw materials purchased Less: cost of good sold
Total raw materials available for Gross profit
use Less: selling and admin
Less: raw materials end expenses
Indirect raw materials used net income before tax
Direct materials Used Less: provision for tax
Direct labor Net income after tax
Factory overhead other comprehensive income
Total manufacturing cost Total comprehensive income
Add: WIP, beg
total costs of goods put into
process
Less: WIP, end
Cost of goods manufactured
Add: finished goods, beg
Total goods available for sale
Less: finished good, end
Cost of goods sold
Less: over-applied factory
overhead
Actual cost of good sold

Method 1

Journal Entry for Trigger Point 1

IP Inventory xxx
Accounts Payable xxx
Journal Entry for Conversion Costs

Conversion Costs Control xxx

Various Accounts xxx
Accrued Payroll xxx

Journal Entry for Trigger Point 2

Finished Goods xxx

RIP Inventory xxx
Cost Conversion Applied xxx

Journal Entry for Trigger Point 3

Cost of Goods Sold xxx

Finished Goods xxx

Method 2

Journal Entry for Trigger Point 1

RIP Inventory xxx
Accounts Payable xxx

Journal Entry for Conversion Costs

Conversion Costs Control xxx
Various Accounts xxx
Accrued Payroll xxx

Journal Entry for Trigger Point 2

Finished Goods xxx
Cost of Goods Sold xxx
RIP Inventory xxx
Cost Conversion Applied xxx

Method 3

Journal Entry for Conversion Costs

Conversion Costs Control xxx
Various Accounts xxx
Accrued Payroll xxx

Journal Entry for Trigger Point 1

Finished Goods xxx
RIP Inventory xxx
Accounts Payable xxx
Cost Conversion Applied xxx
Journal Entry for Trigger Point 2
Cost of Goods Sold xxx
Finished Goods xxx

Method 4

Journal Entry for Conversion Costs

Conversion Costs Control xxx
Various Accounts xxx
Accrued Payroll xxx

Journal Entry for Trigger Point 1

RIP Inventory xxx
Finished Goods xxx
Cost of Goods Sold xxx
Accounts Payable xxx
Cost Conversion Applied xxx