Part I – Multiple Choices (5 points each) Use the following scenario for problem 7-8.

Instructions: Encircle your final answer. Erasures are not Enrique Hel Company has a cycle time of 2.0 days,
allowed and considered void. uses Raw and In-process Account and charges all
conversion cost to Cost of Goods Sold. At the end of
1. The following are the characteristics of High-Low each month, all inventories are counted, their
Method. Which isn’t? conversion cost components are estimated and
a. It does not consider outliers. inventory account balances are adjusted. Raw
b. The High-Low method is an easy way to materials cost is backflushed from RIP to Finished
separate Fixed and Variable costs. Goods. The following is for the month of May:
c. It only requires two or more data points and
basic math knowledge. RIP, Beg. Including P 4,400 of conversion P 15,000
d. None of the above cost
FG, Beg. Including P 10,800 of conversion 36,000
2. The following are true using High-Low Method. cost
Which is not? Raw materials purchased on credit 146,000
a. high-low method is relatively unreliable RIP end, including P 7,800 of conversion cost 24,000
because it only takes two extreme activity FG end, including P 6,500 of conversion cost 18,000
levels into consideration Conversion cost - P 80,000 of direct labor and P 100,000
b. The High-Low method assumes Variable and of overhead. Overhead is dependent on Direct Labor.
Fixed costs are constant throughout
different activity levels, which is usually the 7. The following statements are incorrect. Except
case in reality. a. A credit of Factory Overhead – Control
c. It is a simple analysis that takes less amounting P 100,000
calculation work. b. A debit of P 140,400 will be done for RIP account
d. All of the above. from Finished Goods.
c. A total of P 149, 400 will be debited for RIP
3. Which is not a consideration in Economic Order account.
Quantity (EOQ) program? d. None of the above.
a. Re-order point
b. Return of inventory investment 8. I. Cost of Goods sold for the month is P 335,000.
c. Discounts II. Payroll is 20% lower than Overhead costs.
d. All of the above III. A total debit of P 149,800 will be entered on
Finished Goods Account for the month.
4. The Economic Order Quantity (EOQ) Formula a. Only one statement is true.
assumes that, except: b. Only two statements are true.
a. Demand is known c. All of the statements are true.
b. Usage is uniform d. None of the statements are true.
c. The cost if inventory is constant
d. None of the above 9. I. Spoiled Goods may be sold at an amount higher
than the regular sales price.
5. I. An overstated ending inventory leads to II. Spoiled Goods are units that do not meet the
understated net income. production standards and must be processed further
II. An understated ending inventory leads to in order to be salable.
understated net income. a. Statement I is True, but statement II is false.
a. Only statement I is true. b. Both Statements are True.
b. Only statement II is true. c. Statement I is False, but statement II is True.
c. Both statements are true. d. Both Statements are False
d. None of the statements are true.
10. During June, Jerjer Company experienced scrap,
6. I. Ending Inventory has an inverse relationship on net normal spoilage, and abnormal spoilage in its
income. manufacturing process. The cost of units produced
II. Beginning Inventory has direct relationship on net includes
income. a. Scrap, but not spoilage
a. Only statement I is true. b. Normal spoilage, but neither scrap nor abnormal
b. Only statement II is true. spoilage
c. Both statements are true. c. Scrap and normal spoilage, nut not abnormal
d. None of the statements are true. spoilage
d. None of the above.
Part II – Problem Solving (10 points each)
Problem 1
The following were given by Athena Company:
Month Machine Overhead
Hours Costs
January 175 P 4,500
February 170 4,225
March 160 4,320
April 190 5,250
May 175 4,800
June 200 5,100
July 150 4,450
August 20 4,200
September 2500 5,475
October 180 4,760
November 170 4,325
December 145 5,600
Requirement:
1) Using least square method, the variable cost per unit
is?
2) Using high-low method, the variable cost per unit is?
3) Using high-low method, the fixed cost is?
Problem 2
The following data were taken from the records of Handsome
Company:
a. Work in process in the starting of the month is 20%
higher than work in process at the end and is 78% of
the total goods manufactured.
b. Finished goods reported at the month was 35% of
the total cost of goods sold and is 25% higher than
those finished at the starting of the month.
c. Overhead rate is half of direct labor rate.
d. An estimated 20,500 direct labor hours to be worked
during the year at P 358,750 in manufacturing
overhead.
e. Actual hours worked for the month is 6,206.
f. Materials used are estimated at 30% of the
manufacturing costs.
g. Gross profit margin is 37.5% on cost.
h. Sales for the month are P 825,000 net of discounts of
P 25, 000 but gross of P 50,000 of sales returns.
Question:
1) Total manufacturing cost
2) Total goods placed in process
3) Total goods manufactured
4) Total goods available for sale
5) Total cost of goods sold
Problem 3
A local TV repairs shop, in a year, has requirement of 12,000
units of a part each month (A maximum consumption of 100
units per working day). It costs P 20 to place and receive an
order. Currently, the shop orders in lots of 800 units. It cost P
4 to carry one unit per year of inventory.

1. The total annual ordering cost is?

2. Using EOQ, how much is the total savings on
inventory costs?