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The standard cost card for product Z shows the following details: Standard costs per unit of Z produced: 4 kgs of material A 3.10 per kg 3 litres of material B @ 1.70 per litre 2.5 hours of direct labour 12 per hour Variable production overhead @ 10 per direct labour hour Standard factory cost per unit 12.40 5.10 30.00 25.00 72.50 In period 3 2,600 units of Z were produced. Materials used in production were 10,000 kgs of A purchased for 3.12 per kg, and 8,160 litres of B purchased for 1.65 per litre. 5,980 hours of direct labour were worked and paid for at the standard rate. Variable production overhead incurred amounted to 74,400. calculate total variances for materials, labour and overhead and to reconcile actual factory cost of production in period 3 with the standard cost.

21. If two or more products share a common process before they are separated, the joint costs should be allocated in a manner that: of the total cost to each product equitably. (a) Assigns proportionate amount b. Maximizes total earnings. c. Minimizes variations in a unit of production cost. d. Does not introduce an element of estimation into the process of accumulating costs for each product. 22. I a company using the adjusted sales value method to assign joint costs produces two products, A and B, from a joint process, and B requires additional processing after the split-off in order to be salable, how is the joint cost allocated to B determined? a. The costs of the additional processing are ignored in allocating joint costs. b. The costs of the additional processing are subtracted from the joint costs allocated to B. c. The relative sales value used to allocate the joint cost are determined after the costs of further processing are subtracted from the ultimate sales value of B. None of these are correct. 23. Thomas Lumber Company produces furniture grade lumber and building grade lumber from a joint process. Sawdust, a by-product of the manufacturing process is sold to a local toy manufacturer to stuff leather toys for $10 per ton. In February, the company produced 3,000 tons of sawdust. What is the entry to reduce the cost of the main products by the estimated sales value of the by-product? a By-product inventory. Work in process $30,000 $30,000 b. Work in process. Other income Cost of goods sold $30,000 $30,000 $30,000 000

Alonzo Manufacturing uses a process costing system to accumulate costs related to the production of "Supergrow" an industrial strength hair grower. Material costs and conversion costs for last quarter are provided below: Costs in beginning work in process Current costs for the quarter Materials P 6,544 281,656 Conversion P 16,803 344,817 The equivalent bottles of production under the weighted average method are 262,000 for materials and 258,300 for conversion costs. All materials are added at the beginning of the production process. Beginning work in process was composed of 3,600 bottles that were 80% complete with respect to conversion costs.

1. If the number of bottles completed during the quarter is 255,200, what is the total cost that should be assigned to these bottles under the weighted average method? 2. If Alonzo had used the FIFO method, total cost assigned to ending work in process would have been P 11,597. If bottles during the quarter are 255,200, what is the total cost that should be assigned to the completed bottles under the FIFO method?

7. A share of common stock has just paid a dividend of $2.00. If the expected long-run growth rate for this stock is 15 percent, and if investors require a 19 percent rate of return, what is the price of the stock? a. $57.50 b. $62.25 c. $71.86 d. $64.00 e. $44.92 98. Cartwright Brothers' stock is currently selling for $40 a share. The stock is expected to pay a $2 dividend at the end of the year. The stock's dividend is expected to grow at a constant rate of 7 percent a year forever. The risk-free rate (kRF) is 6 percent and the market risk premium (kM - kRF) is also 6 percent. What is the stock's beta? a. 1.06 b. 1.00 c. 2.00 d. 0.83 e. 1.08 99. A project has an up-front cost of $100,000. The project's WACC is 12 percent and its net present value is $10,000. Which of the following statements is most correct? a. The project should be rejected since its return is less than the WACC. b. The project's internal rate of return is greater than 12 percent. c. The project's modified internal rate of return is less than 12 percent. d. All of the statements above are correct. e. None of the statements above is correct.

102. Which of the following statements best describes the optimal capital structure? a. The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company's earnings per share (EPS). b. The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company's stock price. c. The optimal capital structure is the mix of debt, equity, and preferred stock that minimizes the company's weighted average cost of capital (WACC). d. Statements a and b are correct. e. Statements b and c are correct. 102. Which of the following factors is likely to encourage a corporation to increase the proportion of debt in its capital structure? a. An increase in the corporate tax rate. b. An increase in the personal tax rate. c. An increase in the company's degree of operating leverage. d. The company's assets become less liquid.

Chapter 12 Joint Products a 3. and By-Products If Lane uses the net realizable value method of allocating joint costs, how much of should be allocated to product K. 387 the joint cost P 18,800 2. b. P 20,000 P 26,667 d. P 27,432 Abel Corp. manufactures a product that yields the by-product "Yum." The only costs associated with Yum are selling costs of P.10 for each unit sold. Abel accounts for sales of Yum by deducting Yum's separable costs from Yum's sales, and then deducting this net amount from the major product's cost of goods sold. Yum's sales were 100.000 units at P1.00 each. 4. If Abel changes its method of accounting for Yum's sales by showing the net amount as additional sales revenue, then Abel's gross margin would a. Increase by P 90,000 b. Increase by P 100,000 Increase by P 110,000 d. Be unaffected 5. If Abel changes its method of accounting for Yom's sales by showing the net amount as other income, then Abel's gross margin would a. Decrease by P 90,000 b. Increase by P 100,000 c. Increase by P 110,000 d. Be unaffected O'Donnell Company manufactures Product and Product K from a joint process. For Product J, 4,000 units were produced having a sales value at split-off of P15,000. If Product J were processed further, the additional costs would be P3,000 and the sales value would be P20,000. For Product K, 2,000 units were produced having a sales value at split-off of 10,000. If Product K were processed further, the additional costs would be 1,000 and the sales value would be P12,000. 6. Using the sales value at split-off method, the portion of the total joint costs allocated to Product J was P 9,000. What were the total joint costs? a. P 14,400 b. P 15,000 C. P 18,400 d. P 19,000

Cost Accounting Problem 12 icole Company employs a process costing system. A unit of product passes through three departments - Molding, Assembly, and Finishing, before it is completed. The following activity took place in the Finishing Department during May: Work in process, May 1-1,400 units; transferred in from the Assembly Department - 14,000, spoilage - 700; completed and transferred to finished goods inventory-11.200 Direct material is added at the beginning of the processing in the Finishing Department without changing the number of units being processed. Conversion costs are added evenly throughout the process. The work in process inventory was 70% complete to conversion costs in May 1 and 40 % complete as to conversion costs on May 31. All spoilage is discovered at final inspection, which occurs immediately after the units are completed: 560 of the units spoiled were within the limit considered normal. Nicole Company employs the weighted-average costing method. The costs per equivalent unit of production in May are as follows: transferred-in costs - P5.00; materials - P1.00 and conversion costs - P 3.00 1. Cost of the units transferred 2. Cost charged to factory overhead control 3. Cost of the units in process.

The Price Company will produce 55,000 widgets next year. Variable costs will equal 40 percent of sales, while fixed costs will total $110,000. At what price must each widget be sold for the company to achieve an EBIT of $95,000? a. $2.00 b. $4.45 c. $5.00 d. $5.37 e. $6.21 104. Which of the following statements best describes the theories of investors' preferences for dividends? a. Modigliani and Miller argue that investors prefer dividends to capital gains. b. The bird-in-hand theory suggests that a company can reduce its cost of equity capital by reducing its dividend payout ratio. c. The tax preference theory suggests that a company can increase its stock price by increasing its dividend payout ratio. d. One key advantage of a residual dividend policy is that it enables a company to follow a stable dividend policy. e. The clientele effect suggests that companies should follow a stable dividend policy. 105. Trenton Publishing follows a strict residual dividend policy. All else being equal, which of the following factors are likely to cause an increase in the firm's per-share dividend? a. An increase in its net income. b. The company increases the proportion of equity financing in its target capital structure. c. An increase in the number of profitable projects that it wants to fund this year. d. Statements a and b are correct. e. All of the statements above are correct.

The beginning work in process inventory showed a balance of 48,240. Of this amount, 16,440 is the cost of direct materials, and P31,800 are conversion costs. There were 8,000 units in the beginning inventory that were 30% complete with respect to both direct materials and conversion costs. During the period, 17,000 units were transferred out and 5,000 remained in the ending inventory. The units in the ending inventory were 80% complete with respect to direct materials and 40% complete with respect to conversion costs. Costs incurred during the period amounted to P126,852 for direct materials and P219,120 for conversion costs. Compute for the following using FIFO and Average 1. Equivalent production for materials and conversion costs. 2. Cost per equivalent unit for materials and conversion costs.