Clark Textile. Co. Manufacture - Accounting Question & Answers

1. Clark Textile. Co. manufacture various wood products that yield sawdust as a by product. The only costs associated with the sawdust are selling costs P0 per ton sold. The company accounts for sales of sawdust by deducting sawdust’s net realizable value from the major product’s cost of goods sold. Sawdust sales in 2010 were 12,000 tons at P40 each. If Clark Textiles changes its method of accounting for sawdust sales to show that net realizable as other revenue, how would its gross margin and net income be affected? DIFFICULT

Gross Profit                                        Net Income

1. None                                                None
2. P408,000 decrease                                        P408,000 decrease
3. P408,000 increase                                        None
4. P408,000 decrease                                        None

1. Ganda Inc. employs FIFO process costing system in accounting for its product. For the year ended, December 31,2016, the following data are provided: DIFFICULT

• The 30,000 work-in-process inventory on Jan 1,2016 is 40% complete as regards to conversion cost while the 20,000 work-in-process inventory on Dec 31,2016 is 90% incomplete as regards to conversion cost.
• The total units started during the year amounted 60,000 units. There is no spoilage during the period.
• It is the company’s policy to apply direct labor and factory overhead uniformly throughout the period while 3\4 of direct materials are added at the start of the process while the remaining direct materials are added at the end of the process.
• The cost of Jan 1,2016 work-in-process inventory consists of 200,000 direct material, 300,000 direct labor and 500,000 factory overhead.
• The total manufacturing cost for the year consisted of P1M direct material, P3M direct labor and P4M factory overhead.

What is the cost per equivalent unit of production of Direct Material and Conversion Cost, respectively?

1. 19.2 and 130                        c. 14.81 and 89.74
2. 16 and 116.67                        d. 11.76 and 100

1. Nestle Inc. is employing a sophisticated just-in-time manufacturing system. The company uses backflush costing for recording its production. The following transaction occurred for the year ended December 31,2016: DIFFICULT

1. Purchased P170,000 of raw materials on account
2. All materials purchased were requisitioned for production
3. Incurred direct labor costs of P80,000
4. Actual factory overhead costs amounted 122,000
5. Applied conversion costs totaled P202,000 including direct labor cost of P80,000
6. All telephones were completed and sold

What is the cost of goods and sold for the year ended Dec 31,2016?

1. P372,000        b. P202,000        c. P250,000        d. P292,000

1. Merge Inc. manufactures Zen product from a process that yields a by-product called Yan. The by-product requires additional processing costs P30,000. The by-product will require selling and administrative expenses totaling P20,000. It is merge’s accounting policy to charge the joint costs to the main product only. Information concerning a batch produced during the year ended December 31,2016 follows:

Product                Units Produced                Market Value at Split Off        Units Sold

Zen                100,000                        P50                        60,000

Yan                 8,000                                P10                        8,000

The joint costs incurred up to split-off point are:

        Direct Materials                        P2,000,000

        Direct Labor                        800,000

        Factory Overhead                200,000

The selling and administrative expense of Merge Inc. for the year ended December 31,2016 is P1,000,000 exclusive of that for the by-product. What is the gross profit for the year if the net venue from by-product is presented as other income? DIFFICULT

1. 1,200,000                b. 1,230,000                c. 1,218,000                d. 1,118,000

1. Mix Inc. is concluding a joint process which result to three products. The following production data were provided by Mix Inc. for the current period: DIFFICULT

Product Name                Units Produced                Selling price per unit at split off point

Ace                        10,000                                P40

Bat                        15,000                                P20

Can                        25,000                                P12

        Additional data for the period were provided:

• All the Ace items were sold for a gross profit of P100,000
• The joint costs were allocated using physical method.

What is the gross profit/(loss) if all the Bat items are sold in the current year?

1. 200,000                b. (150,000)                c.(100,000)                d. 50,000

1. XYZ Co. experienced scrap, normal spoilage and abnormal spoilage in its manufacturing process. The cost of units produced includes DIFFICULT

1. Scrap but not spoilage                
2. Normal spoilage but neither scrap nor abnormal spoilage        
3. Scrap and normal spoilage but not normal spoilage

d .Scrap, normal spoilage and abnormal spoilage

1. Progressive Co. employs the traditional job order cost system. When Progressive issues indirect materials of P125,000 to its production department, it increase: DIFFICULT

1. Stores control                        c. Factory overhead control
2. Factory overhead applied        d. Work in process control

1. Langdon Inc. manufactures a product that gives rise to a by=product called “Cerca.” The only costs associated with Cerca are additional processing costs of P1.00 for each unit. Langdon accounts for Cerca sales first by deducting its separable costs from such sales and then by deducting this net amount from the cost of sales of the major product. For the past year, 2,000 units of Cerca were produced which were sold for P3.00 each. DIFFICULT

Sales revenue and cost of goods sold from the main product were P500,000 and P400,000 respectively. Compare the gross margin after considering the by-product sales and costs.