All of the following methods may be used to account for the revenue from scrap sales except

Chapter 7

THE COST OF QUALITY AND

ACCOUNTING FOR PRODUCTION LOSSES

MULTIPLE CHOICE

Question Nos. 16, 17, 22, and 23 are AICPA adapted.

Question No. 24 is CIA adapted.

A 1. The quality costs that are associated with materials and products that fail to meet quality

standards and result in manufacturing losses are known as:

A. internal failure costs

B. external failure costs

C. prevention costs

D. appraisal costs

E. none of the above

D 2. The quality costs that are associated with designing, implementing, and maintaining the quality

system are known as:

A. appraisal costs

B. internal failure costs

C. external failure costs

D. prevention costs

E. none of the above

C 3. The quality costs that are incurred to ensure that materials and products meet quality standards

are known as:

A. external failure costs

B. prevention costs

C. appraisal costs

D. internal failure costs

E. none of the above

B 4. The quality costs that are incurred because inferior quality products are shipped to customers

are known as:

A. internal failure costs

B. external failure costs

C. prevention costs

D. appraisal costs

E. none of the above

1. Per record, total payroll is 1,000,000, net of deductions from employee's salary which includes taxes of 40,000, Pagibig / SSS contributions of 55,000 and Philhealth. It shows that company's contributions (employer's contribution) to Pagibig and SSS totaled P 25,000 and 30,000, respectively. Total Phil health contributions remitted to PHILHEALTH amounted to 100,000. 80% of the company's employees are working in the production area and the remaining are selling / admin personnel. 10% of the production employees are indirect laborer. Based on the given data, what is the direct labor cost?

2. X Corp obtained the balances of different accounts at the end of 2010 as follows: Over-applied overhead P 22,000, Work in Process P 128,000, Finished Goods P 32,000; Cost of goods Sold P 240,000. The materiality threshold is 5% of the combined ending balances of all accounts containing overhead. What is the adjusted Cost of Goods Sold?

3. The net earnings of factory workers for X Corp during the month of December totaled 100,000. The employees w/taxes are 10,000, SSS are 12,000 and Pagibig of 5,000. Employer's share totaled 20,000. Of the total cost of factory labor, 90% is related to direct labor. What is the total amount debited to Overhead account?

4. Giants Inc. manufactures specialized precision electronic kits. In late March, Job Orders #0311 and #0322 were started. Estimated material costs were P90,000 for both orders (60% for #0311) while direct labor hours were estimated at 700 for #0311 and 400 for #0322. Labor rate is P18 per hour while variable overhead rate is P10 per hour. By the end of April, 75% of the required materials have been issued to production in the amount of P90,000 and both job orders have been 50% converted with 360 hours charged to #0311 and 180 hours charged to #0322 at the hourly rates given. What was the total cost charged to Job Order #0311?

5. All of the following methods maybe used to account for the revenue from scrap sales except:

a. Credit factory overhead control, if the scrap cannot be identified with a specific job.

b. Credit materials, if the scrap would have been able to be recycled

c. Credit work in process, if the scrap is identified with a specific job.

d. Credit scrap revenue, which is included in the other income section of the income statement

6. Someone told Marco de Santos, president of D' Santos Company, that under-or overapplied manufacturing overhead can be allocated to three accounts. What are those three accounts:

a. Raw materials, Manufacturing overhead and Direct labor.

b. Raw materials, Finished goods, and Cost of goods sold.

c. Cost of goods sold, Work in process, Finished goods.

d. Cost of goods sold, Work in process, and Raw materials.

e. None of the above

7. 

I. The higher the production within relevant range, the higher is fixed cost per unit.
II. The higher is the production within relevant range, the higher is the variable cost per unit.
III. The lower the production, the lower the total fixed cost.

• TFF

• TTT

• FFT

• FFF

• FTF

8. How does the job order costing differs from process costing:

• Most of journal entries that require debits and credits to WIP account are different

• Subsidiary ledgers are necessary for WIP and FG for Job order costing

• The procedure in applying overhead are different

• Both the timing and nature of entries to transfer cost from WIP to FG are different

9. In general, idle time of direct laborer is classified as

• Overhead

• Direct labor

• Period cost

• Not accounted because nothing is produced

• None of the above

10. 

Statement 1: Cost Accounting relates to the conventional costing methods and techniques in accumulating the cost of a product, process, project or service, including both product and period cost in accumulating cost.

Statement 2: Cost Accounting aims to reflect the correct complete financial picture/information of the entity to the different shareholders.

• Statement 1 is False, Statement 2 is True

• Statement 1 is True, Statement 2 is False

• Both statements are true

• Both statements are false

Answer & Explanation

Solved by verified expert

1. 860,400

2. 226,800

3. 14,700

4. 110,700

5. A. Factory Overhead Control if charged to all production. 

6. C

7.FFF. 

   I. The higher the production within relevant range, the LOWER is fixed cost per unit.
II. The higher is the production within relevant range, the variable cost per unit is Still fixed.
III. The lower the production, the total fixed cost is fixed. 

8. Subsidiary ledgers are necessary for WIP and FG for Job order costing.

9. Overhead

10. Both statements are false

Step-by-step explanation

Image transcriptions
Question 1 Total payroll, net 1,000,000.00 Taxes 40,000.00 Pagibig 25,000.00 5SS 30,000.00 Philhealth 100,000.00 Total payroll, gross 1,195,000.00 Allot to production 0.80 Payroll for production 956,000.00 Allot to direct labor 0.90 Direct Labor Cost 860,400.00
Work in process 128,000.00 Finished goods 32,000.00 Cost of good sold 240,000.00 Total 400,000.00 Materiality Threshold 0.05 Total 20,000.00 Thus, 22,000 is material Cost of Finished Work in good sold goods process Balance 240,000.00 32,000.00 128,000.00 Over applied overhead 13,200.00 1,760.00 7,040.00 Adjusted Balance 226,800.00 30,240.00 120,960.00
Job Order # Job Order Total 0311 # 0322 Material Cost 54,000.00 36,000.00 90,000.00 Direct Labor 12,600.00 7,200.00 19,800.00 Factory Overhead 44,100.00 28,800.00 72,900.00 Total 110,700.00 72,000.00 182,700.00

What methods can be used to account for the sales value of scrap material?

Which of the following must be maintained by the Company to have an effective control of materials?

What distinguishes a product as being spoiled or defective?