Review 1

Correct answer: It refers to the costs incurred in the factory for converting raw materials into
finished goods. => Manufacturing Costs

It refers to the costs that cannot be traced to a particular object of costing. => Indirect Costs

It refers to historical costs that will not make any difference in making a decision. => Sunk Costs

It refers to the benefit forgone or given up when an alternative is chosen over the other/s. =>
Opportunity Cost

It refers to the ongoing business expenses not including or related to direct labor or direct
materials used in creating a product or service. => Overhead Cost

Question 2
It refers to an inventory account which represents the costs of partially completed goods.
Correct answer: Work-in-Process Inventory

Question 3
It refers to a method of accumulating product costs that requires the costs of direct materials and
direct labor to be charged to the job.
Correct answer: Normal Costing System

Question 4
Explain the relevance of costing to manufacturing companies and non-manufacturing companies.

Question 5
It refers to an inventory account which serves as a controlling account for both direct and indirect
materials.
Correct answer: Raw Materials Inventory

Question 6
It is an inventory system which requires the need to maintain stock cards for each type of raw
materials.
Correct answer: Perpetual Inventory

Question 7
Which of the following is NOT included in the flow of costs of a manufacturing company?
Correct answer: Factory Overhead Not Charged to the Job
Review 2
Question 1
Correct answer: It is a method of costing which charges the product with the costs that vary with
volume. => Direct costing
It is a method of costing which ascertains the costs only after they have been incurred. =>
Historical costing
It is a method of costing which classifies costs into fixed and variable costs. => Marginal costing
It is a method of costing which allocates the fixed and variable costs to cost units, and total
overheads are absorbed according to the activity level. => Absorption costing
It is a method of costing which adopts identical costing principles and procedures by several units
of the same industry or several undertakings by mutual agreement. => Uniform costing

Question 2
It is a cost flow process of recalculating each inventory item after every inventory purchase.
Correct answer: Average cost

Question 3
What is the difference between FIFO and Moving Average costing methods in valuing raw
materials inventory?
Correct answer: FIFO (First in, first out) inventory valuation method is a cost flow process wherein
the first goods purchased are also the first goods sold. It is based on the assumption that goods
are sold or used in the same chronological order in which they are bought. On the other hand,
Moving Average inventory valuation method sets the cost of ending inventory and the cost of
goods sold at an average cost, which involves the total cost of each item purchased divided by
the number of items in stock. In other words, Moving Average is a cost flow process of
recalculating each inventory item after every inventory purchase.

Question 4
It is a cost flow process wherein the first goods purchased are also the first goods sold.
Correct answer: FIFO

Question 5
These are the defective or leftover materials in production.
Correct answer: Scrap materials

Question 6
Which of the following is NOT part of the basic transactions associated with raw materials?
Correct answer: Moving average

Question 7
It serves as the basis for recording the issuance of raw materials.
Correct answer: Materials requisition form
Review 3
Correct answer: Some of the bases used for apportionment of manufacturing overheads include
direct allocation, direct materials, and capital value. Direct allocation involves the direct
distribution of traceable overheads to a particular job or department, while direct materials involve
apportionment of overheads like material handling charges on the basis of the value of direct
materials consumed. In the same manner, capital value involves apportionment of overheads like
depreciation, insurance premium, repairs, and maintenance on the basis of the capital value of
assets.

Question 2
It refers to the costs which are required to run a business, but are not directly attributed to any
specific business activity, product, or service.
Correct answer: Overhead

Question 3
It pertains to the grouping of labor cost which includes basic wages or the basic rate of pay.
Correct answer: Monetary benefits

Question 4
These benefits are not paid in a given month but in the future time. => Deferred monetary benefits
It pertains to the costs which remain unaffected by the change in the volume of output. => Fixed
overhead\It pertains to the costs which possess the characteristics of both fixed and variable
costs. => Semi-variable overhead
These are costs which cannot be directly allocated to cost units. => Indirect expenses
These include hospital facilities, subsidized food, subsidized or free transport, and recreational
facilities that are being provided by an organization to their employees. => Non-monetary benefits

Question 5
It is the aggregate of indirect materials, indirect wages, and indirect expenses incurred for moving
finished products to central and local storage.
Correct answer: Distribution overhead

Question 6
It is the aggregate of the costs of formulating the policy, directing the organization, and controlling
the operations of an undertaking which is not directly related to production, selling, distribution
and research or development, or any other function.
Correct answer: Administration overhead

Question 7
Which of the following is NOT a classification of overhead cost based on behavior?
Correct answer: Selling overhead
04 Review
It is a fundamental cost concept which focuses on individual activities such as products,
customers, services, and locations. => Cost objects
These are the causes or reasons for occurrence of overhead costs. => Cost drivers
These designate activities based on how easily they can be traced to a product. => Cost
hierarchies
It pertains to the grouping of individual cost items. => Cost pool
These are events, tasks, or units of work with a special purpose. => Activities

Question 2
Which of the following is NOT a salient feature of Activity-Based Costing (ABC) system?
Correct answer: Facility-sustaining costs

Question 3
It states that Activity-Based Costing (ABC) system involves the accumulation of overheads which
is completed by various activities.
Correct answer: Accumulation of overhead costs

Question 4
This special feature of Activity-Based Costing (ABC) system states that cost data are more
reliable and accurate.
Correct answer: Traceability

Question 5
This level of cost hierarchy involves the cost of activities performed on each unit of product or
service.
Correct answer: Output unit-level costs

Question 6
It states that Activity-Based Costing (ABC) system involves the overhead costs which are
charged to different products in proportion to the cost-driving activities.
Correct answer: Costs in proportion to cost driving activities

Question 7
Identify and explain the four (4) levels of cost hierarchy.
Correct answer: The first level of cost hierarchy is the output unit-level costs, which involves the
cost of activities performed on each unit of product or service. The second level is the batch-level
costs which pertain to the costs of activities performed on each batch or group of units of products
or services. The third level is the product-sustaining costs, which involves the costs of activities
undertaken to support products or services irrespective of the number of units or batches. Lastly,
the fourth level of cost hierarchy is the facility-sustaining costs, which pertains to the costs of
activities which cannot be traced to individual products.
05 Review
Question 1
Which of the following is NOT a feature of job costing?
Correct answer: Products are manufactured for general consumption.

Question 2
This feature states that unit costing computes the average unit cost by dividing the total costs by
the number of units produced in a specified period. => Average unit cost
This feature states that unit costing is applied to industries where the manufacturing process is
not continuous. => Applicability
This feature states that unit costing involves only one (1) product or a number of grades of the
product. => Single product
It is a method of costing which is commonly used in industries that produce identical products. =>
Unit costing
It is a cost allocation method used by companies that make custom products. => Job costing

Question 3
Which of the following is NOT an objective of job costing?
Correct answer: To determine the profitability of each job in order to undertake present orders of
different nature

Question 4
Explain the concept of unit costing.
Correct answer: Unit costing is commonly used in industries that produce identical products. In
addition, it is used in uniform manufacturing processes and situations when cost units have
identical costs. Examples of companies that employ unit costing include industries that
manufacture homogeneous products like sugar, bricks, cement works, collieries, and breweries.
Unit costing has three (3) features, namely average unit cost, single product, and applicability.

Question 5
This method of costing is used in industries which are engaged in printing, steel structures,
switchgear, among others.
Correct answer: Job costing

Question 6
It is a method of costing which is used by industries that manufacture homogeneous products
like sugar, bricks, cement works, collieries, and breweries.
Correct answer: Unit costing

Question 7
Which of the following is NOT a feature of unit costing?
Correct answer: Multiple product
06 Review
Question 1
It is a cost allocation method used by companies that make custom products.
Correct answer: Batch costing

Question 2
Match each item to a choice.
Correct answer: It is the cost incurred for setting up tools and machines for each batch. => Set-
up cost
It is also known as storage costs. => Carrying cost
It involves allocation of batch number and associated costs for each batch of products. => Batch-
wise cost collection
It involves classifying items for costing. => Grouping
It involves the costs relating to direct material, direct wages, and factory overheads charged to
the process accounts. => Costs flow from one process to another

Question 3
It consists of interest on capital, defective work, storage loss, obsolescence, and premium.
Correct answer: Carrying cost

Question 4
Which of the following is NOT a feature of process costing?
Correct answer: Distinguishable

Question 5
Which of the following is NOT a feature of batch costing?
Correct answer: Normal spoilage

Question 6
It is a method of costing which is generally suitable for firms where goods or services result from
a sequence of continuous or repetitive operations.
Correct answer: Process costing

Question 7
Differentiate batch costing from process costing.
Correct answer: Batch costing is a cost allocation method used by companies that make custom
products while process costing is generally suitable for firms where goods or services result from
a sequence of continuous or repetitive operations or processes. Batch costing involves three (3)
special features, namely batch-wise cost collection, identical products, and grouping. On the other
hand, process costing involves five (5) features which are costs flow from one process to another,
average unit cost consumption, not distinguishable, normal spoilage, and equivalent production
computation.
08 Review
XYZ Corporation is producing 2,000 units of imported products in a given month with a total cost
of P50,000. The total cost increases to P70,000 after producing additional 200 outputs. What is
the marginal cost associated with the production of XYZ Corporation?
Correct answer: P1,000

The cost per unit associated with the production of BTLC Manufacturing are the following: Direct
Materials – P20; Direct Wages – P20; Variable Overhead – P25; and Fixed Overhead – P30.
Given the data, what is the product cost?
Correct answer: 95

The cost per unit associated with the production of BTLC Manufacturing are the following: Direct
Materials – P20; Direct Wages – P20; Variable Overhead – P25; and Fixed Overhead – P30.
Given the data, what is the marginal cost?
Correct answer: 65

Explain the contribution of gross margin.

Correct answer: The contribution of gross margin represents the amount each unit contributes
towards absorbing fixed costs and generating profit. It is determined by deducting the variable
cost from sales revenue for a particular segment of a business. Moreover, contribution includes
both fixed cost and profit.

Correct answer: It is the difference between the selling price of a product or service and its
marginal cost. => Sales at profit
It is the difference between the sales value and the marginal cost of particular transactions. =>
Contribution in total
It is determined by deducting the variable cost from sales revenue for a particular segment of a
business. => Contribution of gross margin
It refers to the additional cost incurred for the production of an additional unit of output. =>
Marginal cost
It is a principle whereby fixed and variable costs are allotted to cost units. => Absorption costing

The cost per unit associated with the production of Xen Merchandising are the following: Direct
Materials – P1,000; Direct Wages – P200; Variable Overhead – P1,500; and Fixed Overhead –
P2,000. Given the data, what is the product cost?
Correct answer: 4,700

The cost per unit associated with the production of Xen Merchandising are the following: Direct
Materials – P1,000; Direct Wages – P200; Variable Overhead – P1,500; and Fixed Overhead –
P2,000. Given the data, what is the marginal cost?
Correct answer: 2,700
09 Review
A shoemaker desires to achieve a profit of P50,000 by selling 500 pairs of shoes. The fixed cost
in producing the product is P70,000 while the variable cost per pair of shoes is P300. Determine
the appropriate price per pair which will achieve the desired profit of the shoemaker.
Correct answer: P540

Purple Wax is sold at P100 per bottle with a variable cost of P30 per bottle. The fixed expenses
of the business are equivalent to P15,000 per year. Using the break-even analysis, what is the
break-even point (BEP) in units?
Correct answer: 214

Purple Wax is sold at P100 per bottle with a variable cost of P30 per bottle. The fixed expenses
of the business are equivalent to P15,000 per year. Using the break-even analysis, what is the
break-even point (BEP) in values?
Correct answer: 21,429

Explain the break-even analysis.

Correct answer: Break-even analysis is an analytical technique for studying the relationship
between costs and revenues. It shows the profitability or non-profitability of an undertaking at
various levels of activity, and as a result, it indicates the point at which sales will equal total costs
or the break-even point. The break-even analysis depicts the variable costs, fixed costs, total
costs, sales value, break-even point, and profit or loss at different levels of production or activities.

Purple Wax is sold at P100 per bottle with a variable cost of P30 per bottle. The fixed expenses
of the business are equivalent to P15,000 per year. Using the break-even analysis, what is the
profit-volume (P/V) ratio?
Correct answer: 70%

Match each item to a choice.

Response: It states that cost-volume-profit (CVP) analysis assists in analyzing the relationship
among profits, costs, and volume in order to precisely forecast the expected income of a business
undertaking. => Forecasting profit

Response: It states that cost-volume-profit (CVP) analysis assists in framing the pricing policies
of products to earn profit. => Determination of optimum selling price

Response: It states that cost-volume-profit (CVP) analysis is essential in estimating the profit or
loss at different levels of activity. => Profit planning

Response: It refers to the assumption of break-even analysis, which states that the selling price
of a product does not change as the volume of sales changes. => Constant selling price
Response: It refers to the assumption of break-even analysis, which states that the semi-variable
costs can be separated into fixed and variable. => Segregation of semi-variable costs

Correct answer:
It states that cost-volume-profit (CVP) analysis assists in analyzing the relationship among profits,
costs, and volume in order to precisely forecast the expected income of a business undertaking.
=> Forecasting profit,
It states that cost-volume-profit (CVP) analysis assists in framing the pricing policies of products
to earn profit. => Determination of optimum selling price,
It states that cost-volume-profit (CVP) analysis is essential in estimating the profit or loss at
different levels of activity. => Profit planning,
It refers to the assumption of break-even analysis, which states that the selling price of a product
does not change as the volume of sales changes. => Constant selling price,
It refers to the assumption of break-even analysis, which states that the semi-variable costs can
be separated into fixed and variable. => Segregation of semi-variable costs

Purple Wax is sold at P100 per bottle with a variable cost of P30 per bottle. The fixed expenses
of the business are equivalent to P15,000 per year. Using the break-even analysis, what is the
contribution per unit?
Correct answer: P70
10 Review
It involves increasing the amount customers spend once they start to buy.
Correct answer: Optional product pricing

It involves determining the point wherein an organization would incur neither profit nor loss.
Correct answer: Break-even pricing

It involves minimizing the costs associated with marketing and production to keep the prices of
products or services relatively low.
Correct answer: Economy pricing

Match each item to a choice.

Correct answer: It denotes the amount of products or services the market can provide. => Supply,
It explains that the negative utility is greater when a product or service is paid/bought personally
by a consumer. => Free or paid,
It applies to the market’s desire to acquire a tangible or intangible item. => Demand,
It pertains to the price point that allows supply to reasonably serve the potential customers. =>
Equilibrium,
It explains that rebate provides the customers with additional positive utility. => Moon prices

It involves selling multiple products for a lower rate instead of purchasing the items individually.
Correct answer: Bundle pricing

Explain the concept of Price Theory.

Correct answer: The theory of price involves the concept of supply and demand to determine the
appropriate price point for a good or service. This theory aims to achieve equilibrium in which the
quantities of goods or services match the corresponding market's desire and ability to acquire the
good or service. The concept allows for price adjustments as market conditions change. For
instance, market forces determine that it costs P5 for a bread loaf. This suggests that the buyers
are willing to forgo the utility in P5 to possess the bread loaf and that the sellers perceive that P5
is a fair price in exchange for giving up the bread loaf.

It involves setting higher prices in comparison to the prices of the competitors or companies that
sell similar products or services.
Correct answer: Pricing at a premium
11 Review
XYZ Corporation is popular for their groundbreaking inventions as well as continual improvements
for their products and services. These efforts enable them sustain a high price position in the
market. Which success factor for a high-price strategy is being described in the given scenario?
Correct answer: Innovation is the foundation.

ABC Manufacturing is the largest supplier of handbags in the Philippines. The success of the
company is strongly attributed to its promotion efforts, which emphasizes their low-priced
products. Which success factor for a low-price strategy is being described in the given scenario?
Correct answer: Their advertisements focus on price.

The CEO of Global Industries confirmed that their company only employs people who meet the
highest standards and perform on a highest level. Which success factor for a premium-price
strategy is being described in the given scenario?
Correct answer: Top talent is essential.

Golden Spoon Corporation firmly evades discounts, special offers, and similar actions since they
believe that these will tarnish their products, brand, and company’s image. Which success factor
for a premium-price strategy is being described in the given scenario?
Correct answer: Strictly avoid promotional offers.

Manila Inc. knows that they have to make the value and advantages of their products perceptible
and understandable to consumers through heavily investing on advertisements and promotions.
Which success factor for a high-price strategy is being described in the given scenario?
Correct answer: Communication

Give an example of a global company that employs high-price strategy and explain its value
proposition to the market. The answer must be a company which is not included in the discussion
or the given case studies.

Correct answer: An example of a global company that employs high-price strategy to its product
is Victoria’s Secret. The company is famous for its iconic lingerie, which are endorsed by famous
supermodels. The company’s brassieres are typically sold for a 50% premium over its
competitors'. The high-price strategy of the company is strongly attributed to their strong brand
image to the public and prestige associated in their products.

Match each item to a choice.

Correct answer: It refers to the success factor of a low-price strategy, which states that successful
low-price companies are tough in their purchasing to obtain only low price but high quality
materials used in their production. => They are procurement champions.,
It refers to the success factor of a low-price strategy, which states that successful low-price
companies focused on low prices and high volumes since the beginning of their operations. =>
They began with a strategy from day one.,
It refers to the success factor of a high-price strategy, which states that successful high-price
companies derive their true competitive advantage from the high value of their products in terms
of objective and absolute terms. => The price-value relationship,
It refers to the success factor of a high-price strategy, which states that successful high-price
companies offer products or services with larger importance to the customer. => Superior value
is a must.,
It refers to the success factor of a premium-price strategy, which states that successful premium-
price companies deliver products and services with superior performance across all dimensions
including materials, product quality, service, communication, and distribution. => Highest level of
performance
12 Review
The organizational problem of Artic Enterprise is associated in a buyer’s resistance to purchase
their products. This problem resulted to a strong burden on the marketing team of the company.
Which basic indicator of crisis is being illustrated in the given scenario?
Correct answer: Selling pressure

In this pricing model, a customer can either get a basic version of a service for free or can
purchase an upgraded version of the service.
Correct answer: Freemium

The foreclosure of Patar Enterprise is brought by their unsold goods that pile up in their
warehouses, factory lots, and consignees. Which basic indicator of crisis is being illustrated in the
given scenario?
Correct answer: Inventory stack

Match each item to a choice.

Correct answer: This pricing model is the modern term for a lump-sum price. => Flat Rates,
This pricing model involves a consumer to either buy a card or load up a free card with a certain
amount of money, and then draws the balance down with each purchase. => Prepaid systems
This pricing model is also known as “name your own price,” which rests on the hope that the
customer will reveal his or her true willingness to pay for a product. => Customer-driven pricing,
This pricing model lets the buyer determine the price of a product or service, but the seller is
obligated to accept whatever price the buyer is willing to pay. => Pay what you want,
This pricing model is also referred to as metered services which involves any type of payment
structure in which a customer has access to potentially unlimited resources but only pays for what
they actually used. => Pay per use

Explain why it is better to suffer a volume decline than a price decline in times of crisis.
Correct answer: From a profit perspective, it is better in times of crisis to suffer a volume decline
than a price decline. The price decline has a full and direct impact on profit. The profit margin
which includes an allocation of fixed costs will fall by half as a result of price decline. The situation
is much different, though, when volume falls, but price remains constant. The drop in volume
means that variable costs also fall, resulting in a small impact on the profit gain of the company.

The response of Pacific Industries to their growing unsold inventories is extreme price cuts for
their products and services. Which basic indicator of crisis is being illustrated in the given
scenario?
Correct answer: Price pressure

The production and manpower of Atlantis Inc. is underutilized resulting to extreme job cuts and
wage cuts in the organization. Which basic indicator of crisis is being illustrated in the given
scenario?
Correct answer: Capacity utilization
13 Review
The pricing organization of Loreal Limited reports directly to the CEO to elevate the pricing agenda
and process to the top of the company, which in turn makes it easier to attract high-caliber pricing
talent. Which factor in setting up the organization is being illustrated in the given scenario?
Correct answer: The Reporting Structure

Which of the following is NOT included in the simple rules that are followed by smart companies?
Correct answer: They have ability to gather and analyze data without estimating the value of their
products and services.

It includes the ability to communicate clear and consistent instructions; develop, lead, and
motivate teams; foster customer relationships even with senior leaders; and establish working
relationships at all levels of an organization.
Correct answer: Soft skills

ABC Corporation ensures that their current organizational structure enables their strategic
accounts to negotiate favorable discounts and terms while facilitating the sharing of valuable
competitive intelligence among their business units. Which factor in setting up the organization is
being illustrated in the given scenario?
Correct answer: The Degree of Centralization

Match each item to a choice.

Response: It is the most effective profit driver. => Price

Correct answer: It is the most effective profit driver. => Price,
It states that pricing is a team effort that requires constant cooperation and coordination among
several functions. => Structure,
It states that a pricing organization requires people who possess hard and soft skills. => Skills
and Capabilities,
It states that the pricing organization should also have a dotted-line reporting relationship to a
pricing council. => The Reporting Structure,
It states that a pricing group can be organized by product family or business segment. => The
Organization Structure

Explain the important points that companies must consider in setting up their organization based
on its degree of centralization.
Correct answer: Companies must start by figuring out how centralized or decentralized the powers
of their pricing organization should be. The degree of centralization should reflect the extent to
which a company’s business units have the same customers and competitors and share internal
capabilities and assets. The more business units that serve the same customers, face the same
rivals, and use common capabilities and assets, the more important it is to coordinate pricing
decisions across units.
Question 7
XYZ Group evaluates the pros and cons of using customer type as their parameter in organizing
their pricing group to improve the effectiveness of their pricing efforts. Which factor in setting up
the organization is being illustrated in the given scenario?