Cost Accounting and Control System

REVIEWER:

Assignment 001

1. Scope of information of managerial accounting

Answer: Segment of organization

2. Purpose of information of managerial accounting

Answer: Helps managers to make decisions to fulfill an organization's objectives

3. Overriding criteria of financial accounting

Answer: Must conform with Generally Accepted Accounting Principles (GAAP)

4. One of the uses of financial accounting data is to determine product costs in order to
help management in making decisions.

Answer: False

5. Scope of information of financial accounting

Answer: Entire organization

6. The accountant is the personnel assigned in overseeing the overall financial

operations of the company.

Answer: False

7. If the resolution efforts of resolving ethical issues are not successful, the member
may wish to consider disassociating from the organization.

Answer: True

8. Purpose of information of financial accounting

Answer: Conveys financial information to investors, banks, government regulatory agencies

and other outside parties
 9. The need of independent examination and verification process for financial
accounting

Answer: Financial reports must be audited by an independent Certified Public Accountant

(CPA)

10. External parties and management never use product cost information for investment
decision and, planning and controlling.

Answer: False

SHORT QUIZ 010

1. External parties and management uses product cost information for investment
decision and, planning and controlling

Answer: True

2. It is a cycle of processes in an organization

Answer: Value Chain

3. Which of the following statements about cost accounting is not true?

Answer: Its generated information is not important to any company

4. Managerial accounting is most concerned with addressing the needs of the company
as a whole.

Answer: False

5. Financial accounting is most concerned with meeting the needs of external users.

Answer: True

6. Generally speaking, cost accounting can be defined as a

Answer: Internal reporting system that provides product costing and other information used
by managers in performing their functions
 7. Planning is a function that involves

Answer: Setting goals and objectives of the company

8. One major difference between financial and management accounting is that

Answer: All of the following

9. Cost accounting serves as a bridge between financial and managerial accounting.

Answer: True

10. Institute of Management Accountants' (IMA) overarching ethical principles include

the following except one:

Answer: Credibility

SHORT QUIZ 002

1. To be able to answer the following questions, kindly refer to the problem below:
ABC Co. provided the following information related to the production of a single product
Selling price per unit                              P        250
Total fixed cost                                         P150,000
Contribution margin percentage           40%
Desired profit after tax                          P250,000
Income tax rate 20%
Q: What should be the actual unit sales to realize the desired profit?

Answer: 4,625 units

2. Margin of Safety is the point wherein actual or planned sales maybe reduced without
incurring a loss

Answer: True

3. To be able to answer the following questions, kindly refer to the problem below:
ABC Co. provided the following information related to the production of a single
product
Selling price per unit                              P        250
Total fixed cost                                         P150,000
Contribution margin percentage           40%
Desired profit after tax                          P250,000
Income tax rate 20%
Q: What is the amount of total variable cost at desired profit calculation?
Answer: P693,750
4. To be able to answer the following questions, kindly refer to the problem below:
ABC Co. provided the following information related to the production of a single
product
Selling price per unit                              P        250
Total fixed cost                                         P150,000
Contribution margin percentage           40%
Desired profit after tax                          P250,000
Income tax rate 20%
Answer: P225,000
5. To be able to answer the following questions, kindly refer to the problem below:
ABC Co. provided the following information related to the production of a single
product
Selling price per unit                              P        250
Total fixed cost                                         P150,000
Contribution margin percentage           40%
Desired profit after tax                          P250,000
Income tax rate 20%
Answer: P375,000
6. To be able to answer the following questions, kindly refer to the problem below:
ABC Co. provided the following information related to the production of a single
product
Selling price per unit                              P        250
Total fixed cost                                         P150,000
Contribution margin percentage           40%
 Desired profit after tax                          P250,000
Income tax rate 20%
Q: How much should be the actual peso sales to realize the desired profit?

Answer: P1,156,250
7. Net Income is the amount available to cover fixed costs

Answer: False

8. Break-even Point is the point of activity level where total revenue is equal to total
cost.

Answer: True

9. To be able to answer the following questions, kindly refer to the problem below:
ABC Co. provided the following information related to the production of a single
product
Selling price per unit                              P        250
Total fixed cost                                         P150,000
Contribution margin percentage           40%
Desired profit after tax                          P250,000
Income tax rate 20%
Q: What is the amount of desired profit before tax?
Answer: P312,500
10. To be able to answer the following questions, kindly refer to the problem below:
ABC Co. provided the following information related to the production of a single
product
Selling price per unit                              P        250
Total fixed cost                                         P150,000
Contribution margin percentage           40%
Desired profit after tax                          P250,000
Income tax rate 20%
Q: What is the amount of income tax?
 Answer: P62,500

SHORT QUIZ 002

1. The company's normal operating range is referred to as the operating cycle.

Answer: False

2. Based on the following given numbers, compute the fixed cost element (to the
nearest whole peso).

Answer: P138

3. A cost that remains constant in total but varies on a per-unit basis with changes in
activity is called a

Answer: fixed cost

4. A  ____ cost increases or decreases in intervals as activity changes

Answer: Step cost

5. Product Costs can either be presented in the balance or income statement

Answer: True

6. Budgeted Cost is the amount that is anticipated to be incurred in the future

Answer: True

7. A tailoring company has gathered information on utility costs for the past year. The
accountant has decided that utilities are a function of the hours worked during the
 month. The following information is available and representative of the company’s
utility costs:
                    Hours worked             Utility cost incurred
Low point       1,300                          P   903
High point      1,680                               1,074 
If 1,425 hours are worked in a month, total utility cost (rounded to the nearest peso)
using the high-low method should be
Answer: P 959
8. Product Costs are always presented in the income statement as part of cost of goods
sold.

Answer: False
9. Period Costs are also inventoriable costs.

Answer: False
10. Product Costs are also inventoriable costs

Answer: True

ASSIGNMENT 003

1. Purpose of information of managerial accounting

Answer: Helps managers to make decisions to fulfill an organization's objectives

2. Consumption ratios are useful in determining the existence of product-line diversity.

Answer: True

3. In an activity-based costing system, direct materials used would typically be classified

as a unit-level cost.

Answer: True

4. Traditional costing uses a host of different cost drivers (e.g., number of production
setups, inspection hours, orders processed) to improve the accuracy of product
costing.

Answer: False
 5. Which of the following is the proper sequence of events in an activity-based costing
system?

Answer: dentification of cost pools, identification of cost drivers, calculation of pool

rates, assignment of cost to products

6. All manufacturing costs are easily traceable to the goods produced.

Answer: False
7. Generally speaking, companies prefer doing business with customers who order
small quantities rather than large quantities.

Answer: False
8. Overhead costs are applied to products on the basis of volume-related measures.

Answer: True
9. Riverside Florists uses an activity-based costing system to compute the cost of
making floral bouquets and delivering the bouquets to its commercial customers.
Company personnel who earn $180,000 typically perform both tasks; other firm-wide
overhead is expected to total $70,000. These costs are allocated as follows:

Riverside anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year.
The cost of wages and salaries and other overhead that would be charged to each delivery
is closest to:
Answer: $19.63
10. Many traditional costing systems trace manufacturing overhead to individual
activities and require the development of numerous activity-costing rates.

Answer: False
SHORT QUIZ 003

1. A computer manufacturer recently shipped several laptops to a customer (cost:

$25,000) and billed the customer $30,000. Which of the following options correctly
expresses the accounts that are debited and credited to record this transaction?

Answer: Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-
Goods Inventory.

2. Armada Company applies manufacturing overhead by using a predetermined rate of

150% of direct labor cost. The data that follow pertain to job no. 831:

If Armada adds a 30% markup on total cost to generate a profit, which of the
following choices depicts a portion of the accounting needed to record the credit
sale of job no. 831?

Answer: Choice B
3. The estimates used to calculate the predetermined overhead rate will virtually always:

Answer: result in either underapplied or overapplied overhead that is closed to Cost of

Goods Sold if it is immaterial in amount

4. Howard Manufacturing's overhead at year-end was underapplied by $5,800, a small

amount given the firm's size. The year-end journal entry to record this amount would
include:

Answer: a debit to Cost of Goods Sold

5. Traditional costing is mainly focused on highly automated manufacturing industry

Answer: False
6. If a company opt to use the activity-based costing in allocating overhead costs,
companies do not need to classify at which level of activities costs were incurred.
Answer: False
7. Direct labor is gaining importance in many manufacturing applications with respect
to being a significant cost driver.

Answer: False
8. Only the traditional costing is being used in allocating the overhead costs to the
products manufactured.

Answer: False
9. Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct
professional labor hours. Overhead was estimated to be $150,000, direct professional
labor hours were estimated to be 15,000, and direct professional labor cost was
projected to be $225,000. During the year, Media incurred actual overhead costs of
$146,000, actual direct professional labor hours of 14,500, and actual direct labor
cost of $222,000. By year-end, the firm's overhead was:

Answer: $1,000 underapplied

10. Fletcher, Inc. disposes of under- or overapplied overhead at year-end as an
adjustment to cost of goods sold. Prior to disposal, the firm reported cost of goods
sold of $590,000 in a year when manufacturing overhead was underapplied by
$15,000. If sales revenue totaled $1,400,000, determine (1) Fletcher's adjusted cost of
goods sold and (2) gross margin:

Answer: Choice D
ASSIGNMENT 004

1. To compute equivalent units of production using the FIFO method of process

costing, work for the current period must be stated in units processed during the
period and units completed during the period.

Answer: False

2. To compute equivalent units of production using the FIFO method of process

costing, work for the current period must be stated in units completed during the
period and units in ending inventory

Answer: False

3. Using FIFO costing, equivalent units of production (EUP) can be determined by

subtracting EUP's in Beginning work in process from weighted average EUP

Answer: True

4. The FIFO costing method assumes that units in beginning inventory are the first units
transferred.

Answer: True

5. The FIFO method of process costing will produce the same cost of goods transferred
out amount as the weighted average method when

Answer: there is no beginning Work in Process Inventory.

6. To compute equivalent units of production using the FIFO method of process

costing, work for the current period must be stated in units completed from
beginning inventory, units started and completed during the period, and units
partially completed in ending inventory.

Answer: True

7. Equivalent Units of Production (EUP) are partially completed units which are being
estimated based on the total number of units to be produced.

Answer: True
8. How many units were started and completed in the period?

Answer: 111,800

9.

How many units must be accounted for?

Answer: 130,000
 10.

Answer: 123,860

ASSIGNMENT 006

1.

Answer: If joint costs are allocated based on relative weight of the outputs (weighted
average method), how much of the joint costs would be allocated to product A? (All
products are joint products).
2. Regardless of the methods of presentation used in by-products, the company will
generate the same amount of net income if proceeds from sale of by-product will be
accounted at the time it is produced.

Answer: False
 3. are products with substantial value which are produced simultaneously by the same
process up to a split-off point

Answer: Joint products.

4. Under Net Realizable Value (NRV) at Split-off Allocation, joint costs are being
assigned based on the inventory valuation of the joint products at split-off point.

Answer: True

5.

What is the net income of ABC Company if the net realizable value method of joint cost
allocation is used?

Answer: P 50,000

6. If proceed from sale of a by-product generates a substantial amount of revenue to

the company, it is appropriate and just to recognize by-product at the time it is sold.

Answer: False

7. In the weighted average method of allocation, a weight factor such as "points" is

being assigned.

Answer: True

8. Products with relatively low sales value are known as

Answer: By-products

9. By-products are to be carried at its original cost.

 Answer: False

10. ABXY Company makes two products, X and Y. they are initially processed from the
same materials and then, after split-off, further processed separately. Additional
information is as follows:

Using the net realizable value approach, compute the assigned joint cost of A and B
respectively.

Answer: P4,400 and P2,200

LONG QUIZ 001

1.

How much is the factory overhead cost per unit for TV under activity-based costing?

Answer: P67.37 per unit

2. The amount that was paid by a company for a building to house its operations is an
example of a sunk cost.

Answer: True

3. Manufacturing overhead includes:

Answer: all manufacturing costs except direct labor and direct materials

4. All costs in a manufacturing company are product costs.

Answer: False
5. The one cost that would be classified as part of both prime cost and conversion cost
would be:

Answer: direct labor

6. The cost of the cushions that are used to manufacture sofas is best described as a:

Answer: variable

7. Inventoriable costs that have become expenses can be found in:

Answer: cost of goods sold

8. As activity increases within the relevant range, fixed costs remain constant on a per
unit basis.

Answer: False

9.

How much is the factory overhead cost per unit for Computer under activity-based
costing?
Answer: P25.48 per unit

10.

If the company still employs the plantwide factory overhead rate method, how much is
the overhead cost per unit for TV, Computer and cellphone using the total direct labor
hours as a basis of allocation.

Answer: P7.00 per direct labor hour

11.

How much is the factory overhead cost per unit for Cellphone under activity-based
costing?
Answer: P0.83 per unit
12.

What amount of these costs would be considered as period costs?

Answer: P56,000

13. Prime cost is the sum of direct labor and manufacturing overhead.
Answer: False

14. Thread used in the production of bed sheet set, an indirect material, is classified as
manufacturing overhead.

Answer: True

15.

What amount of overhead is applied to Job #100?

Answer: P6,300

16.

P0.83 per factory overhead

Answer: Activity Based Costing

17. A variable cost is constant if expressed on a per unit basis but the total dollar
amount changes as the number of units' increases or decreases.

Answer: True

18.

What amount of these costs would be considered as product costs?

Answer: P97,000

19.

Answer: P19,000
20. What is the amount of total variable cost at break-even point calculation?

Answer: Monthly depreciation of the equipment in a fitness room used by factory

workers

21. The cost of goods sold of a manufacturing company equals beginning finished
goods inventory + cost of goods manufactured - ending finished goods inventory.

Answer: True

22.

23. What is the amount of direct materials for Job #200?

Answer: P1,500

24.

P1,500

25. The sum of all costs that composed manufacturing costs except direct materials is
called manufacturing overhead.

Answer: False

26. The sum of all costs that composed manufacturing costs except direct materials is
called manufacturing overhead.

Answer: False
 27. The sum of all costs that composed manufacturing costs except direct materials is
called manufacturing overhead.

Answer: False

28. All of the following are examples of opportunity costs: salary given up to start a
business; rental income given up when you live in a house you own; interest income
that could be earned on money spent for a car.

Answer: True

29. Direct costs:

Answer: can be easily traced to a particular cost object.

Prime costs consist of:

Answer: direct labor and direct materials

Using the high-low method of separating mixed costs, how much is the fixed cost?

Answer: P1,200
Assume that Jobs #100 and #300 are incomplete at the end of December. What is the
balance in Work in Process Inventory at that time?

P28,920

SHORT QUIZ 004

1.

Determine the costs per equivalent unit.

Answer: Materials     Conversion

  $9.60          $35.10
 2.

Answer: Materials        Conversion

$96,960          $354,510
3. Process costing is most appropriate when manufacturing large batches of
homogenous products

Answer: True

4.

All material is added at the start of the process and all finished products are transferred
out.
 
How many units were transferred out in August?
Answer: 21,500
5. The difference between EUP calculated using FIFO and EUP calculated using
weighted average is the equivalent units residing in ending Work in Process
Inventory

Answer: False
6. Weighted average equivalent units of production (EUP) can be determined by adding
EUP's in ending work in process to units transferred out

Answer: True
7. The numerator in the formula for equivalent units includes all beginning inventory
costs when using the weighted average costing assumption.

Answer: True

8.
Assume that weighted average process costing is used. What is the cost per equivalent
unit for material?
Answer: P1.83
9. The weighted average costing method assumes that units in beginning inventory are
the first units transferred.

Answer: False
 10.

Determine the cost of ending work in process inventory.

Answer: Materials    Conversion

  $6,912      $5,616

Assignment 005

1. These are type of production spoilage that are not expected on a production process
that is operating efficiently.

Answer: Abnormal Spoilage

2. This is a type of production process where components of the finished goods can be
easily counted.

Answer: discrete production type

3. In a job order costing, normal losses are accounted

Answer: depending on whether such losses are anticipated on all jobs or specifically
identified on a particular job.

4. The cost of normal discrete losses is written off as a loss on an equivalent unit basis.

Answer: False

5. If normal losses are accounted for as specifically identified on a particular job,

estimated amount of losses should be accounted depending on whether lost units
has disposal value or without disposal value.

Answer: True

6. These are type of production spoilage that are inherent and inevitable, thus,
expected in the production process even if the production process is operating
efficiently

Answer: Normal Spoilage

7. The cost of normal discrete losses is absorbed by all units in ending inventory.

Answer: False

8. The cost of normal discrete losses is considered a period cost.

Answer: False

9. This is a type of production process where components of finished goods placed to

production cannot be counted on a per piece basis

Answer: continuous production type

10. The amount incurred in this type of spoilage is treated as part of product costs.

Answer: Normal Spoilage

SHORT QUIZ 005

1. If normal losses are accounted for as specifically identified on a particular job,
estimated amount of losses should be accounted as an outright expense.

Answer: False

2. If normal spoilage is detected at an inspection point within the process (rather than
at the end), the cost of that spoilage should be included with the cost of the units
sold during the period.

Answer: False

3. Continuous production losses are assumed to occur uniformly throughout the

process.

Answer: True

4. When the cost of lost units must be assigned, and those same units must be
included in an equivalent unit schedule, these units are considered

Answer: abnormal and continuous

5. If normal spoilage is detected at an inspection point within the process (rather than
at the end), the cost of that spoilage should be allocated to ending work in process
units and units transferred out based on their relative values.

Answer: False

6. A discrete loss is assumed to occur at a specific point in the production process.

Answer: True
 7.

What are equivalent units of production for conversion costs, assuming FIFO?

Answer: P10,625

8. Under the discrete production type, components of finished goods placed to

production cannot be counted on a per piece basis

Answer: False

9. Discrete production losses are assumed to occur at the end of a process.

Answer: True

10. If normal spoilage is detected at an inspection point within the process (rather than
at the end), the cost of that spoilage should be Included with the cost of the units
completed in that department during the period.

Answer: False

SHORT QUIZ 006

1. The common costs that were incurred during the production but prior to splitting off
to its intended group of variety are called joints costs.
Answer: True

2. The common processes where products of wide varieties go through are called joint
process.

Answer: True

3. Joint products are the main products of a manufacturing company.

Answer: True

4. Joint cost allocation is optional, thus, not necessary since it is not required for
financial reporting.

Answer: False

5. If two or more products share a common process before they are separated, the joint
costs should be assigned in a manner that

Answer: Assigns a proportionate amount of the total cost to each product on a

quantitative basis

6. A joint process is a manufacturing operation yielding two or more identifiable

products from the resources employed in the process. The two characteristics that
identify a product generated from this type of process as a joint product are that

Movie Equipments Inc. has two joint products called, EX and Y's, and uses the net
realizable value method of allocating joint costs. The total joint costs for the year
2000 amounted to P300,000. During the year, additional processing costs after split-
off were P160,000 for EX and P240,000 for Y's. The company produced 16,000 units
of EX and 8,000 units of Y's during the year. The selling price for EX is P20 and for Y's
is P50. The portion of joint costs allocated to Y's during the year is
{
= P150,000
~ P175,000
~ P225,000
~ P180,000

Answer: It is identifiable as an individual product only upon reaching the split-off point,
and it has relatively significant sales volume when compared with the other products.
 7.

Total production cost for each product will be:

 
 Product A       Product B       Product C
Answer: P32,640     P35,405       P18,285

8. Joint products are incidental to the production of by-products.

Answer: False

9. Hopeful Products manufactures three joint products: A, B, C and a by-product ABC,

all in a single process. Results for the month of December were as follows:

Revenue from by-product is credited to the sales account. Joint costs are apportioned on a
relative sales value approach.
What was the cost per kilogram of Product A for the month?
Answer: P5.72
 10. If a company obtains two saleable products from the refining of one ore, the refining
process should be accounted for a/an

Answer: Joint process