COST OF GOODS MANUFACTURED AND SOLD

Multiple Choice Questions (Problem):

1. The books of Spiral Manufacturing Co. showed the following data for the month of November 2018.

Opening and Closing inventories:

November 1 November 30
Raw Materials P 15,200 P 19,200
Work in process 17,000 29,000
Finished Goods 29,500 37,000
Direct labor cost P33, 000
Factory Overhead 75% of direct labor cost
Cost of goods sold P130,500

What is the cost of materials purchased during the month?

a. P 85,650
b. P 85,570
c. P 85,750
d. P 85,560

2. Fruit Soda Company provided the following information for the current year:

Increase in goods in process inventory P500,000

Increase in raw materials inventory 180,000
Decrease in finished goods inventory 250,000
Direct Labor payroll 2,500,000
Factory Overhead 3,500,000
Freight Out 525,000
Cost of Goods Sold 9,470,000

Compute for: (1) Raw Materials purchased, and (2) Cost of Goods Manufactured.
a. (1) P 4,000,000; (2) P 9,400,000
b. (1) P 4,000,009; (2) P 9,700,000
c. (1) P 4,000,000; (2) P 9,470,000
d. (1) P 4,000,000; (2) P 9,740,000

3. Woody Company has the following data on January 30, 2017:

January Manufacturing Overhead P30, 000.00

Decrease in ending inventories
Materials 3, 500.00
Work in Process 500.00
Increase in ending inventory:
Finished Goods 1,400
The manufacturing overhead amounts to 50% of the direct labor, and the direct labor and
manufacturing combined equal 50% of the total cost of manufacturing. All materials are purchased
F.O.B. shipping point.

What is the cost of goods manufactured?

a. P 180,500
b. P 180,400
c. P 185,200
d. P 181,500

4. Gardenia Co. reported the following inventories

Beginning Ending
Raw Materials P 230,000 P 250,000
Goods in process 350,000 370,000
Finished Goods 200,000 130,000
During the current year, the following costs were incurred:
Raw Materials purchased P 2,800,000
Direct Labor 1,100,000
Indirect labor 450,000
Taxes and depreciation of factory building 175,000
Taxes and depreciation on sales room and office 140,000
Utilities (70% applicable to factory, 15% to storeroom,
and 15% to office) 500,000

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 What is the cost of goods sold for the current year?
a. P 4,500,000
b. P 4,900,000
c. P 4,509,000
d. P 4,905,000

5. Microsoft Co. provided the following data for the current year.

Finished Goods, May 1 P 1,530,000

Finished Goods, May 31 2,020,000
Cost of Goods Manufactured 4,050,000
Loss on Sales of plant equipment 150,000
Selling & Administrative expenses 80,000
Depreciation expenses 15,000

What is the cost of goods sold for the current year?

a. P 3,650,000
b. P 3,560,000
c. P 5,360,000
d. P 5,630,000

CASH FLOW

Multiple Choice Questions (Problem):

1. De Jesus Company uses the direct method to prepare its statement of cash flows. De Jesus had the
following cash flows during 2017:

Cash receipts from issuance of ordinary shares P800,000

Cash receipts from customers 500,000
Cash receipts from dividends on long term investments 80,000
Cash receipts from repayment of loan made to another company 440,000
Cash payments for wages & other operating expenses 250,000
Cash payments for insurance 20,000
Cash payments for dividends 40,000
Cash payments for taxes 50.000
Cash payments to purchase land 180,000

What is the net cash provided (used) from operating activities?

a. P 80,000
b. P260,000
c. P140,000
d. (P60,000)

2. Tan Company had the following account balances for the current year:

December 31 January 1
Accounts Payable P500,000 P650,000
Inventory 300,000 250,000
Accounts Receivable 800,000 900,000
Prepaid Expenses 400,000 600,000

All purchases of inventory were on account.

Depreciation during the year was P800,000.
Equipment was sold during the year a gain of P350.000.

The entity provided the following cash flows for the current year:
Cash collected from customers P9,500,000
Cash paid for inventory (4,100,000)
Cash paid for other expenses (1,400,000)
Cash flow from operations P4,000,000

What is the net income for the current year?

a. P3,400,000
b. P3,700,000
c. P3,100,000
d. P3,800,000

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3. Gutierrez Company had the following account balances for the current year:

December 31 January 1
Accounts Payable P500,000 P800,000
Inventory 300,000 550,000
Accounts Receivable 800,000 750,000

All purchases were on account. The entity provided the following income statement information for the
current year:

Revenue P9,800,000
Cost of goods sold (4,000,000)
Other expenses (1,300,000)
Depreciation expense (1,200,000)
Loss on sale equipment (200,000)
Net income P3,100,000

What is the net cash flow from operating activities?

a. P4,700,000
b. P4,300,000
c. P4,600,000
d. P4,500,000
4. The balance in Accumulated Profits and Losses at December 31,2016 was P750,000 and at December
31,2017 was P580,000. Net income for 2016 was P400,000. A share dividend was declared and
distributed which increased ordinary share by P260,000 and share premium by P100,000. A cash
dividend was declared and paid. What is the amount of cash dividends being declared and paid?
a. P530,000
b. P210,000
c. P240,000
d. P450,000

5. Espiritu Company provides the following information for the current year:

Net income P3,920,000

Depreciation expense 1,520,000
Amortization 350,000
Decrease in accounts receivable 1,280,000
Increase in inventory 600,000
Increase in accounts payable 440,000
Payments of dividends 540,000
Purchase of financial asset at amortized cost 220,000
Decrease in income tax payable 160,000
Increase in long-term note payable 2,000,000

What is the net cash flow from operating activities?

a. P5,400,000
b. P4,620,000
c. P6,650,000
d. P5,080,000

COST - VOLUME PROFIT ANALYSIS

Multiple Choice Questions (Problem):

Tiffany’s textile company sells shirts for men and boys. The average selling price and variable cost for each
product are as follows:
MEN’S BOYS’
Selling Price P28.80 P24.00
Variable Cost P20.40 P16.80
Fixed Costs are P38,400.

1. What is the breakeven point in units for each type of shirt, assuming the sales mix is 2:1 in favor of men’s
shirts?
a. 1,600 units
b. 1,333 units
c. 3,200 units
d. 1,882 units

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2. What is the operating income, assuming the sales mix is 2:1 in favor of men’s shirts, and sales total 9,000
shirts?

a. P172,000
b. P72,000
c. P33,600
d. P24,600

Miller, Inc., sells a single product. The company’s most recent income statement is given below.

Sales (4,000 units) P120,000

Variable Expenses (68,000)
Contribution Margin 52,000
Fixed Costs (40,000)
Net Income P12,000

3. Contribution Margin per unit

a. 13
b. 17
c. 15
d. 14

4. Compute how many units must be sold to breakeven.

a. 3,077
b. 2,353
c. 2,667
d. 2,857

5. Compute how many units must be sold to achieve profits of P20,000.

a. 4,615
b. 3,529
c. 4,000
d. 4,286

HIGH – LOW METHOD / REGRESSION ANALYSIS

Multiple Choice Questions (Problem):

1. Hungarian Sausage wishes to analyze the fixed and variable components of the semi – variable costs.
The following information is available:

Month Output (Units) Costs Month Output (Units) Costs

1 1,000 P12,000 4 800 P11,000
2 700 10,000 5 1,400 18,750
3 1,100 14,000 6 1,200 15,000

Using the high – low method, which one of the following is correct?
a. Variable costs are P15 per unit.
b. Variable costs are P10 per unit.
c. Fixed costs are P1,250 per month.
d. Fixed costs are P1,000 per month

2. Marina Company has developed a regression equation to analyze the behavior of its maintenance
costs (Q) as a function of machine hours (Z). The following equation was developed by using 30
monthly observations with a related coefficient of determination of 0.90:
Q = P6,000 + P5.25Z
If 1,000 machine hours are worked in one month, the related point estimate of total maintenance costs
would be
a. P11,250
b. P10,125
c. P5,250
d. P4,725

3. Jackson, Inc., is preparing a flexible budget for next year and requires a breakdown of the cost of
steam used in its factory into the fixed and variable elements. The following data on the cost of steam
used and direct labor hours worked are available for the last 6 months of this year.

Month Cost of Steam Direct Labor Hours

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 July P15,850 3,000
August 13,400 2,050
September 16,370 2,900
October 19,800 3,650
November 17,600 2,670
December 18,500 2,650
Total P101,520 16,920

Assuming that Jackson uses the high – low method of analysis. The estimate variable cost of steam per
direct labor hour is.
a. P4.00
b. P5.42
c. P5.82
d. P6.00

4. Y = P575, 000 + P8.50x represents the behavior of maintenance costs (Y) as a function of machine hours
(X). Thirty (30) monthly observations were used to develop the foregoing regression evaluation. The
related coefficient of determination was .90. If 2,500 machine hours were worked in one month, the
related point estimate of total variable maintenance costs would be:
a. P23,000
b. P21,250
c. P25,250
d. P19,125

5. In the Timbugan Country, Inc., a maintenance cost is partly and partly variable in nature. At the low
level of activity (150 direct labor hours), maintenance costs total P2,100. At high level of activity (270
direct labor hours), maintenance costs are P3,000. Using the high – low method, what is the variable
maintenance cost per unit and the total fixed maintenance cost?

Variable maintenance cost Fixed maintenance cost

a. P7.50 P975
b. P7.50 P2,100
c. P10.00 P600
d. P10.00 P2,100

STANDARD COSTING

Multiple Choice Questions (Problem):

1. Information on Apple Company’s material costs for December 2017 is as follows:

Actual cost of direct materials P 127,000

Actual quantity of direct materials
purchased and used 47,000 pieces
Standard quantity of direct materials
Allowed for December production 45,500 pieces
Direct materials efficiency variance 4,500 unfavorable

For the month of December, what was Apple’s direct materials spending variance?
a. 11,280 favorable c. 11,200 favorable
b. 11,000 unfavorable d. 11,820,000 unfavorable

2. Chocolate Company uses standard costing system in the production of its only product. The 82,000
units of raw materials inventory were purchased for P 125,000 and 4 units of raw materials are required
to produce one unit of final product. In April, the company produced 15,000 units of product. The
standard cost allowed for materials was P70,000, and there was an unfavorable usage variance of
P2,500.

Chocolate Company’s standard price for one unit of material is

a. 2.25 c. 1.17
b. 1.18 d. 1.25

3. Bitsoftechnology Company uses standard cost system. The following information pertains to direct labor
for Product D for the month of January:
Standard rate per hour P 15.00
Standards rate per hour 3,000 hours
Actual hours allowed for actual production P 13.00
Labor efficiency variance- unfavorable P 2,700

What were the actual hours worked?

a. 2,800 c. 3,000
b. 3,190 d. 3,180

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Items 4 to 6 are based on the following information:

Aquabest, Inc. manufactures water pump and uses a standard cost system. The standard factory
overhead costs per water pump are based on direct labor hours are as follows:

Variable overhead (4 hours at P8/hour) P32

Fixed overhead (4 hours at P5*/ hour) P20
Total overhead cost per unit P52
*based on a capacity of 100,000 direct labor hours per month.

The following additional information is available for the month of March:

22,000 pumps were produced although

25,000 had been scheduled for production.
94,000 direct labor hours were worked at a total cost of P940,000.
The standard direct labor rate is P9 per hour
The standard direct labor time per unit is 4 hours.
Variable overhead costs were P740, 000.
Fixed overhead costs were P540,000.

4. The fixed overhead spending variance for March was

a. P40,000 unfavorable c. P460,000 unfavorable
b. P70,000 unfavorable d. P240,000 unfavorable

5. The variable overhead spending variance for March was

a.P60,000 favorable
b. P12,000 favorable
c. P48,000 unfavorable
d. P40,000 unfavorable

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 COST OF GOODS MANUFACTURED AND SOLD

Multiple Choice Answers (Problem):

1. C
Cost of Goods Sold P120,000
Add Increase in Finished Goods Inventory 7,500
Cost of Goods Manufactured P127,500
Add Increase in WIP Inventory 12,000
Total Manufacturing Costs P139,500
Less Factory Overhead (33,000 x 75%) P24,750
Direct labor cost 33,000 57,750
Cost of raw materials P81,750
Add Increase in raw materials Inventory 4,000
Cost of raw materials purchased P85,750

2. C
Raw Materials Purchased P4,000,000
Increase in raw materials (180,000)
Raw materials used P3,820,000
Direct Labor payroll 2,500,000
Factory Overhead 3,500,000
Total Manufacturing Costs P9,820,000
Increase in goods in process inventory (500,000)
Cost of Goods Manufactured P9,320,000
Decrease in finished goods inventory 150,000
Cost of Goods Sold P9,470,000

3. A
Manufacturing overhead (50% of direct labor) P30,000.00
Direct labor (P30,000.00 x 2) 60,000.00
Total equals 50% of total manufacturing cost 90,000.00
Thus, the cost of raw materials used equals 90,000.00
Total Manufacturing Cost P180,000.00
Add decrease in work in process inventory 500.00
Cost of Goods Manufactured P180,500.00

4. D
Raw materials, beginning P230,000
Raw materials purchased 2,800,000
Raw Materials Available P3,030,000
Less Raw materials, ending (250,000)
Raw materials used P2,780,000
Direct labor 1,100,000
Indirect labor 450,000
Taxes and depreciation of factory building 175,000
Utilities (70% x 500,000) 350,000
Total Manufacturing cost P4,855,000
Add Goods in process, beginning 350,000
Total Goods Place in Process P5,205,000
Less Goods in process, ending (370,000)
Cost of goods manufactured P4,835,000
Add Finished goods, beginning 200,000
Total Goods Available for Sale P5,035,000
Less Finished Goods, ending (130,000)
Cost of Goods Sold P 4,905,000

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 5. B
Add Finished Goods, May 1 P1,530,000
Total Goods Available for Sale 5,580,000
Less Finished Goods, December 31 2,020,000
Total Cost of Goods Sold P3, 560,000

CASH FLOW

Multiple Choice Answers (Problem):

1. B
Cash receipts from customers P500,000
Cash receipts from dividends 80,000 P 580,000
Less: Cash payments for:
Wages & Other operating expenses P250,000
Insurance 20,000
Taxes 50,000 320,000
Net cash provided by operating activities P 260,000

2. C
Net income (SQUEEZE) P 3,100,000
Decrease in accounts payable ( 150,000)
Increase in inventory ( 50,000)
Decrease in accounts receivable 100,000
Decrease in prepaid expenses 200,000
Depreciation 800.000
Gain on sale equipment ( 350,000)
Cash flow from operation P3,650,000
The net income is “squeeze” by working back from the cash flow from operations.

3. A
Net income ` P3,400,000
Depreciation 1,200,000
Loss on sale equipment 200,000
Decrease in accounts payable ( 300,000)
Decrease in inventory 250,000
Increase in accounts receivable ( 50,000)
Net cash flow from operating activities P4,700,000

4. B
Accumulated and Profits and Losses, 12/31/16 P 750,000
Add: Net Income 400,000
Total P1,150,000
Less: Accumulated Profits 7 Losses, 12/31/17 P 580,000
Share dividend- market value 360,000 940,000
Cash Dividends P 210,000

5. C
Net income P3,920,000
Depreciation expense 1,520,000
Amortization 350,000
Decrease in accounts receivable 1,280,000
Increase in inventory ( 700,000)
Increase in accounts payable 440,000
Decrease in income tax payable ( 160,000)
Net cash flow from operating activities P6,650,000

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 COST - VOLUME PROFIT ANALYSIS

Multiple Choice Answers (Problem):

1. C
2:1 ratio
n = breakeven in boys’ shirts; 2n = breakeven in men’s shirts

P24.00(n) + P28.80(2n) – P16.80(n) – P20.40(2n) – P38,400 = 0

P81.60n – P57.60n - P38,400 = 0
P24.00n – P38,400 = 0
N = P38,400/24= 1,600 shirts
Therefore, to breakeven, 1,600 boys’ shirts and 3,200 men’s shirts need to be sold.

2. C
MEN’S BOYS’ TOTAL
Sales in units 6,000 3,000 9,000
Sales P172,800 P72,000 P244,800
Variable Costs 122,400 50,400 172,800
Contribution Margin P50,400 P21,600 P72,000
Fixed Costs 38,400
Net Income P33,600

3. A
Contribution margin per unit is
P120,000/4,000 units = 30
68,000/4,000 units = 17
52,000/4,000 units = 13

4. A
BEP in units = Fixed costs/ Contribution Margin per unit
= P40,000/13 per unit
= 3,077 units

5. A
[Fixed Costs of P40,000 +Profits P20,000]/ Contribution Margin per unit P13.00
= 4,615 units

HIGH – LOW METHOD / REGRESSION ANALYSIS

Multiple Choice Answers (Problem):

1. C
Costs Output
Highest P18,750 1,400
Lowest 10,000 700
Difference P 8,750 P700
The variable cost rate and the fixed costs shall be:
Variable cost rate = P8,750 / 700 = P12.50
Total fixed cost = [P18,750 – (1,400 X p12.50)] = P1,250

2. A
Q = P6,000 + (P5.25 X 1,000)
Q = P11,250

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 3. A
Direct Labor Hours Costs
Highest (October) 3,650 P19,800
Lowest (August) 2,050 13,400
Difference 1,600 P 6,400
Variable cost rate = P6,400 / 1,600 = P4 / DLH

4. B
Y = P8.50 X 2,500 hrs.
Y = P21,250

5. A
Variable cost rate = P900 (P3,000 – P2,100) / 120 (270 – 150) = P7.50
@ 270 DLH @ 150 DLH
Total costs P3,000 P2,100
-Variable costs (P7.50 x DLH) 2,025 1,125
Fixed costs P 975 P 975

STANDARD COSTING

Multiple Choice Answers (Problem):

1. A
Spending Variance = (Actual price- Standard price) x Actual quantity)
= (P 2.76-P 3.00) x 47,000
= 11,280 favorable

Actual price = Actual cost = P127,000 = 2.76

Actual quantity 47,000

Standard price may be computed from the efficiency variance formula:

Efficiency Variance = (AQ-SQ) x SP
4,500 U = (47,000-45,500) x SP
4,500 U = 1,500 SP
SP = 3.00

2. C
Total standard cost P70,000
Divided by: Standard quantity for actual
production* 60,000
standard price per unit of materials P1.17
*15,000 x 4

3. D
Efficiency variance = difference in time x Standard rate
2,700 U = difference in time x 15
Difference in time = P2,700/ P12
= 180 unfavorable

Standard time 3,000 hours

Add unfavorable difference in time 180
Actual hours worked 3,180 hours

4. A

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 Actual fixed overhead P540, 000
Budgeted fixed overhead (P100,000 x 5) 500,000
Fixed overhead spending variance 40,000 unfavorable

5. B
Actual cost P740,000
Less: (P8 standard rate x 94,000 actual hours) 754,000
Variable overhead spending variance P12,000 favorable

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