NATIONAL COLLEGE OF BUSINESS AND ARTS

Cubao-Fairview-Taytay
FIRST SEMESTER SY 2015-2016

MID-TERM DEPARTMENTAL EXAMINATIONS 3 HRS

ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT

INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one
answer for each item by shading the corresponding letter of your choice on the answer sheet
provided. STRICTLY NO ERASURES ALLOWED. Use Pencil No. 2 only.

1. If a firms net income does not change as its volume changes, the firm (s)
A. Must be in the service industry
B. Must have n fixed costs
C. Sales price must equal P0.
D. Sales price must equal its variable costs.

2. Practical capacity as a plant capacity concept

A. Assumes all personnel and equipment will operate at peak efficiency and total plant
capacity will be used.
B. Does not consider idle time caused by inadequate sales demand.
C. Includes consideration of idle time caused by both limited sales orders and human and
equipment in inefficiencies.
D. Is the production volume that is necessary to meet sales demand for the next year.

3. Cost is allocated to cost object in many ways and for many reasons. Which one of the
following is a purpose of cost allocation?
A. Evaluating revenue center performance.
B. Measuring income and assets for external reporting.
C. Budgeting cash and controlling expenditures.
D. Aiding in variable costing for internal reporting.

4. In determining cot behaviour in business, the cost function is often expressed as Y = a + bX.
Which one of the following cost estimation methods should not be used in estimating fixed and
variable costs for the equation?
A. Graphic method.
B. Simple regression.
C. High and low point method.
D. Multiple regression.

5. The difference between variable costs and fixed cost is

A. Variable costs per unit fluctuate and fixed costs per unit remain constant.
B. Variable costs per unit are fixed over the relevant range and fixed costs per unit are
variable.
C. Total variable costs are variable over the relevant range and fixed in the long term,
while fixed costs never change.
D. Variable costs per unit change in varying increments, while fixed costs per unit change
in equal increments.

6. The high low method is criticized because it

A. Is not a graphical method.
B. Is a mathematical method.
C. Ignores much of the available data by concentrating on only the extreme points.
D. Does not provide reasonable estimates.

7. X Company changed its cost structure by increasing fixed costs and decreasing its per-unit
variable costs. The change:
A. Increases risk and increases potential profit.
B. Increases risk and decreases potential profit.
C. Decreases risk and decreases potential profit.
D. Decreases risk and increases potential profit.
ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT

8. The closeness of the relationship between the cost and the activity is called
A. Correlation
B. Regression Analysis
C. Spurious
D. Manufacturing Overhead

9. R-Squared is a measure of
A. The spurious relationship between cost and activity
B. The fixed cost component
C. The variable cost per unit of activity
D. How well t regression line accounts for the changes in the dependent variable

10. The flatter slope in the variable cost line indicates a

A. High variable cost per unit
B. High influence of activity on total variable costs
C. Low influence of activity on total variable costs
D. Large amount of fixed costs

*** Items 11 to 14 are based on the following information:

The local church want to rent a hall for P3,000 a day to hold a Bingo fundraiser. Every session of
bingo requires a caller for P200. There are supplies that are needed that cost P3 per person
playing bingo. On an average each bingo player spends P20 and 1,000 people attend each
session. P10,000 in prizes are awarded each session.

11. Total costs for 1 session can be classified as:

Fixed Costs Variable Costs
A. P13,200 P3,000
B. P3,000 P13,200
C. P13,200 P3,000
D. P10,000 P3,200

12. The church conducts 1 Bingo session per month. Over the course of the year, which cost
would not act as a variable cost based on just holding one more session?
A. Hall rental
B. Cost of supplies
C. Caller salary
D. Prize money

13. If the church conducts 12 sessions and 1,000 people attend each session, the average cost
per session is?
A. P9,600
B. P14,700
C. P15,200
D. 16,200

14. The church is thinking of holding 2 Bingo sessions per day with 1,000 people attending each
session. If they hold the 2 sessions, the average cost per session is?
A. P9,600
B. P14,700
C. P15,200
D. P16,200

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ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT

*** Items 15 to 19 are based on the following information:

X Company produces and sells rattan baskets. The number of units produced and the
corresponding total production costs for six months, which are representatives for the year, are
as follows:

Month Units Produced Production Costs

April 500 P4,000
May 700 P8,000
June 900 P6,000
July 600 P7,500
August 800 P8,500
September 550 P7,250

15. The cost function derived by the simple least squares method
A. Is linear.
B. Is curvilinear.
C. Is parabolic.
D. Must be tested for minimum and maximum points

16. The monthly production costs can be expressed as

A. Y = a + bx
B. Y = b + ax
C. Y = ax + b
D. X = a + by

17. Using the least squares method, the variable production cost per unit is approximately
A. P5
B. P10
C. P0.27
D. P3.74

18. Using the least squares method, the monthly fixed production cost is approximately
A. P1,500
B. P18,000
C. P4,350
D. P52,200

19. If the high-low points method is used, the results when compared with those under the method
of least squares, are
Variable Cost per Unit Total Fixed Costs
A. Equal Equal
B. Higher by P1.26 Lower by P2,850
C. Lower by P1.26 Higher by P2,850
D. Higher by P5 Lower by P1,500

20. X, the chief paraprofessional of the clinic, has estimated that the clinic will average 140
professional hours per month. If the clinic is to be operated as a nonprofit organization, how
much will it need to charge per professional hour?
A. P97.81
B. P87.06
C. P82.77
D. P22.60

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ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT
21. X Company manufactures pipes and uses a job order costing system. During May, he
following jobs were started (no other jobs were in process) and the following costs were
incurred:

Job X Job Y Job Z Total

Materials P10,000 P20,000 P15,000 P45,000
Direct Labor 5,000 4,000 2,500 11,500
P15,000 P24,000 P17,500 P56,500

In addition, estimated overhead of P300,000 and direct labor costs of P150,000 were
estimated to be incurred during the year. Actual overhead of P24,000 was incurred in May;
overhead is applied on the basis of direct labor costs. If only Job X and Job Z were completed
during the month, the journal entry to record the initiation of all jobs would be:

A. Work in Process P79,500

Materials P45,000
Wages Payable P11,500
Applied Factory Overhead P23,000

B. Work in Process P80,500

Direct Materials P45,000
Direct Labor P11,500
Factory Overhead P24,000

C. Work in Process P80,500

Direct Materials P45,000
Direct Labor P11,500
Applied Factory Overhead P24,000

D. Direct Labor P11,500

Direct Materials P45,000
Work in Process P56,500

22. If activity based costing is implemented in an organization without any other changes being
effected, total overhead costs will
A. Be reduced because of the elimination of non value added activities.
B. Be reduced because organizational costs will not be assigned to products or services.
C. Be increased because of the need for additional people to gather information on cost
drivers and cost pools.
D. Remain constant and simply be spread over products differently.

23. Traditional overhead allocation result in which if the following situations?

A. Overhead costs are assigned as period costs to manufacturing operations.
B. High-volume products are assigned too much overhead, and low-volume products are
assigned too little overhead.
C. Low-volume products are assigned too much, and high-volume products are assigned
too little overhead.
D. The resulting allocations cannot be used for financial reports.

24. Design of an ABC system requires

A. That the job bid process be redesigned.
B. That a cause-and-effect relationship exists between resource costs and individual
activities.
C. An adjustment to product mix.
D. Both B and C.

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ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT
*** Items 25 to 30 are based on the following information:

Special Products recently installed an activity-based relational data base. Using the
information contained in the activity relational table, the following pool rates were computed:

P200 per purchase order

P12 per machine hour, process A
P15 per machine hour, process B
P40 per engineering hour

Two products are produced by Special Products: A and B. Each product has an area in the
plant that is dedicated to its production. The plant has two manufacturing process, process A
and process B. Other processes include engineering, product handling and procurement. The
product relational table for Special is as follows:
Activity Usage
Activity Driver # Name Product A Product B

1 Units 200,000 25,000

2 Purchase Orders 250 125
3 Machine Hours 80,000 10,000
4 Engineering Hours 1,250 1,500

25. How much overhead cost will be assigned to product A using the number of purchase orders?
A. P50,000
B. P25,000
C. P40,000,000
D. P66,750

26. How much overhead cost will be assigned to product B using engineering hours?
A. P50,000
B. P60,000
C. P1,000,000
D. P400,500

27. How much overhead cost will be assigned to product A using process A?
A. P1,200,000
B. P2,400,000
C. P960,000
D. P120,000

28. How much overhead cost will be assigned to product B using process B?
A. P1,200,000
B. P960,000
C. P120,000
D. P150,000

29. What is the unit cost of Product A?

A. P4.71
B. P3.76
C. P252.00
D. P5.30

30. What is the unit cost of Product B?

A. P9.40
B. P6.00
C. P252.00
D. P6.41

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ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT
*** Items 31 to 33are based on the following information:

Baby Companys beginning and ending inventories for the month of November are:

November 1 November 30
Direct Materials P67,000 P62,000
Work in Process P145,000 P171,000
Finished Goods P85,000 P78,000

Production data for the month of November follows:

Direct Labor P200,000

Actual Factory Overhead P132,000
Direct Materials Purchased P163,000
Transportation-in P4,000
Purchase returns and allowances P2,000

Baby uses one factory overhead control account and charges factory overhead to production at
70% of direct labor cost. The company does not formally recognize over/under applied overhead
until year-end.

31. Baby Companys prime cost for November is:

A. P370,000
B. P168,000
C. P363,000
D. P170,000

32. Baby Companys cost of goods sold for November is:

A. P484,000
B. P491,000
C. P502,000
D. P476,000

33. Baby Companys net charge to factory overhead control for the month of November is:
A. P8,000 debit, overapplied
B. P8,000 debit, underapplied
C. P8,000 credit, overapplied
D. P8,000 credit, underapplied

*** Items 34 and 35 are based on the following information:

Roque Metal Chop Inc., manufactures metal products that require casting, such as engine
blocks, pistons, and engine housings. During the current year, an order of 30,000 custom
housing was begun on job number 202 for Mr. German. After the job was completed, the
housing was inspected and 4% of the units were determined to be defective. Mr. German
agreed to accept the goods units only at 140% of cost. The spoiled units can be sold as
seconds for P15 each. Spoiled goods are kept in an inventory account separate from finished
goods.

Total costs charged to job number 202 are:

Materials P276,000
Labor (6,000 hours x P14 per hour) P84,000
Factory Overhead (P30 per labor hour) P180,000

34. If the spoilage units are the result of an internal failure, what is the unit cost of good units?
A. P18.00 C. P18.50
B. P19.50 D. P19.00

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ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT
35. If the spoilage is attributable to Job 202 only, what is the unit selling price of the goods units?
A. P25.375
B. P20.50
C. P25.00
D. P20.375

36. During the current accounting period, a manufacturing company purchased P70,000 of raw
materials, of which P50,000 of direct materials and P5,000 of indirect materials were used in
production. The company also incurred P45,000 of total labor costs and P20,000 of other
factory overhead costs. An analysis of the work-in-process control account revealed P40,000
of direct labor costs. Based upon the above information, what is the total amount accumulated
in the factory overhead control account?
A. P25,000
B. P30,000
C. P45,000
D. P50,000

37. Felicity Corporation manufactures a specialty line of dresses using a job-order cost system.
During January, the following costs were incurred in completing job J-1.

Direct Materials P27,400

Direct Labor P9,600
Administrative Costs P2,800
Selling Costs P11,200

Factory overhead was applied at the rate of P50 per direct labor hour, and job J-1 required 400
direct labor hours. If job J-1 resulted in 4,000 good dresses, the cost of goods sold per unit is
A. P9.25
B. P14.25
C. P14.95
D. P17.75

38. Lucy Sportswear manufactures a specify line of T-Shirts using a job-order cost system. During
March, the following costs were incurred in completing job ICU2: direct materials, P13,700;
direct labor, P4,800; administrative, P1,400; and selling, P5,600. Factory overhead was
applied at the rate of P25 per machine hour, and Job ICU2 required 800 machine hours. If Job
ICU2 resulted in 7,000 good shirts, the cost of goods sold per unit would be:
A. P6.50
B. P6.30
C. P5.70
D. P5.50

39. Kasoy Company has underapplied overhead of P45,000 for the year ended December 31,
2015. Before disposition of the underapplied overhead, selected December 31, 2015 balances
from Worleys accounting records are as follows:

Sales P1,200,000
Cost of Goods Sold P720,000
Inventories:
Direct Materials P36,000
Work in Process P54,000
Finished Goods P90,000

Under Worleys cost accounting system, over or underapplied is allocated to appropriate

inventories and cost of goods sold based on year-end balances. In his 2015 income statement,
Kasoy should report cost of goods sold of:
A. P682,500 C. P756,000
B. P684,000 D. P757,500

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ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT
40. Macopa Corporation manufactures rattan furniture sets for export and uses the job order cost
system in accounting for its costs. You obtained from the corporations books and records the
following information for the year ended December 31, 2015:

- The work in process inventory in January 1 was 20% less than the work in process
inventory on December 31.
- The total manufacturing costs added during 2015 was P900,000 based in actual direct
materials and direct labor but with manufacturing overhead applied on actual direct labor
pesos.
- The manufacturing overhead applied to process was 72% of the direct labor pesos, and it
was equal to 25%of the total manufacturing costs.
- The cost of goods manufactured, also based in actual direct materials, actual direct labor
and applied manufacturing overhead, was P850,000

The cost of direct materials used and the work in process inventory on December 31, 2015
are:
Direct Materials Used WIP Inventory, 12/31/15
A. P1,075,000 P200,000
B. P362,500 P250,000
C. P312,500 P250,000
D. P1,100,000 P275,000

41. Smile Labs develops 35mm film using a four-step process that moves progressively through
four departments. The company specializes in overnight service and has the largest drug store
chain as it primary customer. Currently, direct labor, direct materials, and overhead are
accumulated by department. The cost accumulation system that best describes the system
Smile Labs is using
A. Operation Costing
B. Activity Based Costing
C. Job Order Costing
D. Process Costing

42. Which one of the following alternatives correctly classifies the business application to the
appropriate costing system?
Job Costing System Process Costing System
A. Wallpaper Manufacturer Oil Refinery
B. Aircraft Assembly Public Accounting Firm
C. Paint Manufacturer Retail Banking
D. Print Shop Beverage Drink Manufacturer

*** Items 43 to 49 are based on the following information:

Splash Manufacturing Company applies process costing in the manufacture of its sole product,
EXTRACT. Manufacturing starts in Department 1 where materials are added at the start of
the processing. The good units are then transferred to Department 2 where al; the incremental
materials needed for its completion are added after final inspection. In both departments, units
are inspected at the end of processing.
Assume that Department 1 uses FIFO while Department 2 uses average costing.

The following production data for the month of August show:

Department 1 Department 2
QUANTITY SCHEDULE:
BWIP 6,000 4,000
Stage of Completion 1/3 4/5
EWIP 9,000 7,000
Stage of Completion 2/3 5/7
Put into process 44,000 --
Normal Loss 1,200 1,000
Abnormal Loss 800 500
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ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT

COST DATA:
Work in Process, August 1
Transferred in P -- P 3,710
Materials 9,000 --
Conversion Costs 6,500 4,000
Current Period Costs
Materials 88,000 62,100
Conversion Costs 67,500 49,300
Transferred in -- ?

DEPARTMENT 1

43. What is the total equivalent unit of production under FIFO for Materials and Conversion?
A. 50,000 & 43,000
B. 44,000 & 45,000
C. 50,000 & 47,000
D. 44,000 & 43,000

44. How much is the cost per EUP for Material and Conversion?
A. P2.00 & P1.50
B. P1.76 & P1.57
C. P2.20 & P1.64
D. P1.94 & P1.57

45. How much is the total cost transferred to Department 2?

A. P137,500
B. P115,200
C. P141,200
D. P125,700

46. How much is the cost of ending work in process inventory?

A. P18,000
B. P29,800
C. P27,000
D. P20,800

DEPARTMENT 2

47. What is the equivalent units of production under Average Costing for Transferred in ,
Materials and Conversion?
A. 43,000, 41,000 & 34,500
B. 43,000, 34,500 & 41,000
C. 34,500, 43,000 & 41,000
D. 34,500, 41,000 & 43,000

48. How much is the total cost transferred to Finished Goods Inventory?
A. P223,215
B. P226,585
C. P227,885
D. P224,515

49. How much is the cost of ending work in process inventory?

A. P30,090
B. P29,800
C. P27,000
D. P28,000

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ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT

*** Items 50 and 51 are based on the following information:

The Forming Department is the first stage Squaw Manufacturing Companys production cycle.
Beginning WIP Inventory was 10% to be done as to conversion while Ending WIP still needs
10% conversion. Inspection point is made when the units reached 80% conversion. The
company normally incurs a 1.5% loss on the units started. Information as to conversion in the
Forming Department follows:

Units Conversion Costs

Beginning WIP 50,000 P88,280
Units Started 200,000 P493,000
Completed and Transferred 175,000
Ending WIP 72,000

50. What is the total conversion cost transferred out using FIFO Costing?
A. P413,280
B. P414,836
C. P417,232
D. P420,204

51. What is the total conversion cost of the ending WIP using the weighted average costing?
A. P157,076
B. P160,048
C. P159,232
D. P158,153

*** Items 52 and 58 are based on the following information:

Rebel Corporation uses a process-costing system. Products are manufactured in a series of
three departments. The following data relate to Department Two for the month of February:

Beginning Work in Process (70% complete) 10,000 units

Goods started in Production 80,000 units
Ending Work in Process (60% complete) 5,000 units

The beginning work in processes was valued at P66,000 consisting of P20,000 of transferred
in cost, P30,000 of Material costs, and P16,000 of conversion costs. Materials are added at the
beginning of the process; conversion costs are added evenly throughout the process. Costs
added to production during February were:

Transferred in P16,000
Materials used P88,000
Conversion Costs P50,000

All preliminary and final calculations are rounded to two decimal places.

52. Under the weighted average method, how much conversion cost did Rebel Corporation
transfer out of Department Two during February?
A. P69,259
B. P63,750
C. P66,000
D. P64,148

53. Under the weighted average method, how much material cost did Rebel Corporation transfer
out of Department Two during February?
A. P88,000
B. P93,500
C. P111,350
D. P112,500

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ACCOUNTING 7 07 COST ACCOUNTING & COST MANAGEMENT
54. Under the weighted average method, what is the total of equivalent units for transferred in
costs for the month?
A. 75,000 units
B. 80,000 units
C. 81,000 units
D. 90,000 units

55. Assume that the company uses the first in, first out (FIFO) Method of inventory valuation.
Under FIFO, how much conversion cost did Rebel Corporation transfer out of Department
Two during February?
A. P63,750
B. P64,360
C. P66,000
D. P74,500

56. Assume that the company uses the first in, first out (FIFO) Method of inventory valuation.
Under FIFO, how much material cost did Rebel Corporation transfer out of Department Two
during February?
A. P88,000
B. P111,350
C. P112,500
D. P114,615

57. Assuming the company uses the FIFO method of inventory valuation, conversion costs
included in the ending work in process inventory equal
A. P1,860
B. P2,250
C. P3,100
D. P5,500

58. Assuming the company uses the FIFO method of inventory valuation, what amount of
materials cost is included in the ending work in process inventory?
A. P1,860
B. P3,300
C. P5,500
D. P6,450

59. A department adds material at the beginning of a process and identifies defective units when
the process is 40% complete. At the beginning of the period, there was no work in process. At
the end of the period, the number of work in process units equaled the number of units
transferred to finished goods. If all units in ending work in process were 66 2/3% complete,
then ending work in process should be allocated
A. 50% of all normal defective unit costs
B. 40% of all normal defective unit costs
C. 50% of the material costs and 40% of the conversion costs of all normal defective unit
costs.
D. None of the normal defective unit costs.

60. In a job-costing system, issuing indirect materials to production increases which account?
A. Material control
B. Work in process control
C. Manufacturing Overhead Control
D. Manufacturing Overhead Allocated

**** THE END ****

GOD BLESS!

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