Cost Acc

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1. Many companies recognize three major categories of costs of manufacturing a product.

These are
direct materials, direct labor, and overhead. Which of the following is an overhead cost in the
production of an automobile?

a. The cost of small tools used in mounting tires on each automobile


b. The cost of the tires on each automobile
c. The cost of the laborers who place tires on each automobile
d. The delivery costs for the tires on each automobile

2. When the amount of overapplied factory overhead is significant, the entry to close
overapplied factory
overhead will most likely require:

a. Credits to cost of goods sold, finished goods inventory, and work in process inventory
b. A credit to cost of goods sold
c. Debits to cost of goods sold, finished goods inventory, and work in process inventory
d. A debit to cost of goods sold

3. The materials control method that is based on physical observation that an order point has
been
reached is the:

a. Two-bin method
b. Cycle review method
c. Min-max method
d. ABC plan

4. An inventory control technique that reviews quantities on hand periodically and orders
sufficient
quantities to bring inventory up to a desired level expressed as a number of days’ or weeks’
supply is
The:

a. Order cycling method


b. Two-bin method
c. ABC inventory control method
d. Min-max method
5. Materials returned to storeroom are recorded in the following documents EXCEPT:

a. Bin tag
b. Returned materials report
c. Materials ledger card
d. Purchase order
6. How is a loss on inventory write-down shown on the statement of comprehensive income?

a. As an addition to sales revenue


b. As a deduction from the sales revenue
c. As an addition to cost of goods sold
d. As a deduction from the cost of goods sold

7. What is the major advantage of using a perpetual inventory system?

a. It provides efficient internal control over materials.


b. It avoids inventory shortages and overages.
c. It minimizes error in posting receipts and issues of materials.
d. It avoids losses due to theft.

8. The costing method that is no longer permitted by PAS No. 2 is:

a. FIFO
b. LIFO
c. Moving average
d. Specific identification

9. When must a new unit cost be calculated under the moving average method?

a. After each issue


b. After each receipt
c. Before each issue
d. Before each receipt

10. How is the allowance for inventory write-down shown in the statement of financial position?

a. As a deduction from the inventory at cost


b. As a deduction from the inventory of NRV
c. As an asset
d. As a liability

11. An example of labor-related costs is:

a. Bonus pay
b. Factory labor
c. Fringe benefits
d. Operating expense
12. If overtime premium is charged to specific job, it should be debited to:

a. Work in process account


b. Selling expense account
c. General expense account
d. Manufacturing overhead account

13. The document that is used to secure information as to the type of work performed is the

a. Requisition report
b. Clock card
c. Time ticket
d. Labor voucher

14. If the job is taken as a rush order with the knowledge that overtime will be necessary, the
overtime
premium should be charged to:

a. Selling expense
b. Specific job
c. General expense
d. Factory overhead

15. Wages in excess of the regular rate paid for work after normal closing time is:
a. Vacation and holiday pay
b. Regular wage
c. Pension pay
d. Overtime premium

16. A debit balance in the manufacturing overhead control account is:


a. Overapplied overhead
b. Underapplied overhead
c. Idle capacity variance
d. Spending variance

17. The most common treatment of the underapplied overhead at the end of the year would be
to:
a. Carry it as a deferred charge on the balance sheet
b. Report it as a miscellaneous expense on the income statement
c. Debit it to Cost of Goods Sold
d. Prorate between Work in Process Inventory and Finished Goods Inventory
18. An objection to the use of predetermined overhead rate based on direct labor costs is that:
a. These items are difficult to measure
b. A job is charged with more overhead when a highly paid operator works on the job than when
a low paid operator performs the work
c. Overhead is allocated in relation to units produced by workers
d. Overhead rates will be distributed inequitably when there are no wage differentials in the
Department

19. What costing system is used to avoid any delay in the costing of jobs as experienced in
actual costing?
a. Process costing
b. Job order costing
c. Historical costing
d. Normal costing

20. A credit balance in manufacturing overhead control account is:


a. Overapplied overhead
b. Underapplied overhead
c. Idle capacity variance
d. Spending variance

21. The most accurate method for allocating service department costs is
a. Step method
b. Direct method
c. Reciprocal method
d. Algebraic method

22. If two service departments service the same number of other service departments when
using the step
method, which service department’s costs are allocated first.

a. The service department most crucial to the operation of the production department
b. The service department with the most employees
c. The service department with the most direct cost
d. None of the above, the reciprocal method must be used

23. In which of the following overhead allocation methods may no other service departmental
costs be
charged back to a particular service department after the first service departments cost has
been
Allocated?

a. The reciprocal method and the direct method


b. The step method and the reciprocal method
c. The direct method and the step method
d. The step and algebraic method

24. Several methods are used to allocate service department costs to the production
departments. The
method to recognizes service department to another but does not allow for two-way allocation of
costs
between service department is the:

a. Step method
b. Reciprocal method
c. Linear method
d. Direct method

25. The method for allocating service department costs that requires the least clerical work is:
a. Use of square footage in each department
b. Step method
c. Allocation to other service departments only
d. Direct method

26. An accounting system that collects financial and operating data on the basis of the
underlying nature
and extent of the cost drivers is
a. Activity – based costing
b. Target costing
c. Cycle – time costing
d. Variable costing

27. Cost drivers are


a. Activities that cause costs to increase as the activity increases
b. Accounting techniques used to control costs
c. Accounting measurements used to evaluate whether performance is proceeding according to
plan
d. A mechanical basis, such as machine hours, computer time, size of equipment, or square
footage of factory, used to assign costs to activities

28. Which of the following would be a reasonable basis for allocating the materials handling
costs to the
units produced in an activity – based costing system?

a. Number of production runs per year


b. Number of components per completed unit
c. Amount of time required to produce one unit
d. Amount of overhead applied to each completed unit
29. All of the following are distinctions that usually exist between traditional and ABC costing
systems,
EXCEPT that:

a. The number of overhead cost pools tend to be lower in ABC systems.


b. The number of allocation bases tends to be higher in ABC system.
c. Costs within an ABC cost pool tend to be more homogeneous than the costs within a
traditional
system’s cost pool.
d. All ABC systems are two-stage costing systems, while traditional systems may be one or two
Stage.

30. Any activity that causes resources to be consumed is called:

a. Just in time activity


b. Facility level activity
c. Cost driver
d. Nonvalue added activity

31. When traditional production volume based overhead allocations are made, rather than
activity based
Allocations,

a. The unit costs of high volume and large size products tend to be overstated, while the unit
cost
of low volume and small products tend to be overstated.
b. The unit costs of high volume and large size products tend to be understated, while the unit
cost
of low volume and small products tend to be overstated.
c. The unit costs of high volume and small products tend to be overstated, while the unit costs of
low volume and large products is understated.
d. The unit costs of high volume and small products tend to be understated, while the unit costs
of
low volume and large products is overstated.

32. Activity based cost systems would probably provide the greatest benefits for organizations
that use

a. Job order costing


b. Process costing
c. Historical costing
d. Standard costing
33. Which of the following types of characteristics tend to cause too little overhead costs to be
charged to
the product using traditional cost allocations?

a. A relatively small product


b. A relatively low volume product
c. A relatively simple product
d. A and B
e. All of the above

34. Which audience was activity-based costing originally designed to serve?


a. Users of external financial statements
b. Front line managers who plan and control activities or processes on a daily basis
c. Managers who make short term strategic decisions such as outsourcing
d. Managers who make long term strategic decisions concerning investments
e. None of the above

35. The main difference (or differences) between how traditional costing and activity based
costing treat
indirect manufacturing costs is (are) that

a. Traditional costing uses only production volume based drivers while activity based costing
uses
only non-production volume based drivers
b. Traditional costing treats only unit level costs as variable, whole ABC systems treat unit level,
batch level and product level costs as variable.
c. Traditional cost allocations are usually based on a plant wide overhead rate, while ABC
systems
departmental overhead rates
d. A and B
e. B and C

36. A manufacturing company had inventories at the beginning and end of 2019 as follows:
____________________________________________________________________________
Beg. End
a. P1,078,000
b. 1,044,000
c. 1,042,000
d. 1,028,00

37. There are 1,000 trolls in stock, and 1,500 are due in from orders that were placed
previously. The
company sells Trolls at the rate of 100 per day and finds that it takes an average of 20 days for
an
order to be received. Because usage and lead times are known with certainty and because the
company has determined than an order must be placed now, the desired safety stock quantity
must be
equal to:

a. 500 units
b. 1,000 units
c. 2,500 units
d. 100 units

38. On December 31, 2019, the Materials account for the Saturn Manufacturing Company has a
balance of
P296,369. The company has been using the lower of cost or net realizable value method for
several years. The Allowance for Inventory write-down account has a balance of P8,930. The
net realizable value of the materials on December 31, 2019 is P291,250.
On December 31, 2019, what is the entry to adjust the value of the materials at the lower of cost
or net realizable value?

a. Dr. Allowance for inventory write-down 3,811 ; Cr. Recovery from inventory write-down 3,811
b. Dr. Loss on inventory write-down 5,119; Cr. Allowance for inventory write-down 5,119
c. Dr. Allowance for inventory write-down 3,821; Cr. Inventory 3,821
d. Dr. Allowance for inventory write-down 5,119; Cr. Recovery from inventory write-down 5,119

39. The Small Balls Company has decided to value its materials inventory at the lower of cost or
net realizable value. The Materials account has an ending balance of P110,492. The estimated
selling price and selling expenses are P134, 315 and P26,855 respectively.

What is the journal entry to value the inventory at the lower of cost or NRV?
a. Dr. Loss on inventory write-down 3,032; Cr. Allowance for inventory write-down 3,032
b. Dr. Loss on inventory write-down 23,823; Cr. Inventory 23,823
c. Dr. Allowance for inventory write-down 3,032; Cr. Gain on inventory write-down 3,032
d. Dr. Loss on inventory write-down 3,032; Cr. Inventory 3,032
40. XYZ Manufacturing Company which uses the periodic inventory system showed the
following transactions during the month of May.

What is the cost of ending inventory under the weighted average costing method?
a. P91.11 b. P88.50
c. P90.50 d. P89.12

41. Using the data in No. 40, what is the cost of the units issued under the FIFO costing
method?
a. P700
b. P730
c. P830
d. P850

42. Ms. Se Ri, a production worker earns P14,904 a month, and the company pays one month’s
salary as bonus at the end of the year. Ms. Se Ri is also entitled to a half month paid vacation.
The company also pays P2,070 a year into a pension fund of the worker. All labor-related fringe
benefits of production workers are treated as manufacturing overhead. Bonus, vacation pay,
and pension costs are charged to production during the 11 ½ months the employee is at work.
What is the total liability for bonus, vacation and pension?
a. P2,484
b. P1,206
c. P2,124
d. P2,540

43. For the fiscal year 2019, the XXY Corporation accumulated the following data:

What is the net income before provision of income tax for the year ended June 30, 2019
a. P227,770
b. P236,170
c. P240,370
d. P182,470

Use the following data in answering numbers 44 – 46


Apple Company has two service departments (1 and 2) and two operating (producing)
department (A and B).
Data provided are as follows:

44. Assuming the direct method is used to allocate service department costs, what is the service
department cost allocated to Department B?
a. P150.00
b. P87.50
c. P60.00
d. P50.00

45. Assuming the step-down method is used to allocate service department costs, what is the
total cost of
Department A (rounded)?
a. P5,365.00
b. P5,350.00
c. P5,087.00
d. P5,375.00

46. Assuming the reciprocal method is used to allocate service department costs, what is the
service department cost allocated to Department B (rounded)?
a. P60.00
b. P75.00
c. P84.78
d. P135.00

47. Tarzan Co. employs a job order system. Its manufacturing activities in July 2018, its first
month of
operation, are summarized as follows :
Manufacturing overhead is applied at a rate of P2 per direct labor hour for variable overhead, P3
per hour for fixed overhead. Jobs 1201, 1202 and 1203 were completed in July.
What is the cost of completed jobs?

a. P62,900
b. 62,500
c. P72,900
d. 65,900

48. The following data relates to the materials inventory of the SHISHI Factory :

What is the value of the inventory if the lower of cost or net realizable value method is applied to
the individual items?
a. P237,500
b. P317,050
c. P327,050
d. P371,050

49. Based on the data given in No. 48, what is the value of the inventory if the lower of cost or
net realizable value rule is applied to the inventory as a whole?
a. P327,450
b. P327,050
c. P353,450
d. P307,450

50. Using the same data in No. 48, what is the value of the inventory if the lower of cost or net
realizable
value rule is applied to the inventory by groups?
a. P327,000
b. P372,000
c. P218,950
d. P317,000

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