NATIONAL COLLEGE OF BUSINESS AND ARTS Cubao-Fairview-Taytay FIRST SEMESTER SY 2015-2016 MID-TERM DEPARTMENTAL EXAMINATIONS ACCOUNTING ACCOUNTING 7
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07
3 HRS
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 firm’s net income does not change as its volume changes, the firm (‘s) A. Must be in in the service service industry 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 personnel and equipment equipment will operate at peak efficiency and total plant capacity will be used. B. Does not consider 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 Evaluating revenue revenue center performance. 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 per unit fluctuate fluctuate and and fixed costs per unit remain remain constant. 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 graphica graphicall method. B. Is a mathematical method. C. Ignores much of the available 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 per-uni t variable costs. The change: A. Increases risk and increases 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
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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
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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 April May June July August September
Units Produced 500 700 900 600 800 550
Production Costs P4,000 P8,000 P6,000 P7,500 P8,500 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
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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:
Materials Direct Labor
Job X P10,000 5,000 P15,000
Job Y P20,000 4,000 P24,000
Job Z P15,000 2,500 P17,500
Total P45,000 11,500 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 Materials Wages Payable Applied Factory Overhead
P79,500
B. Work in Process Direct Materials Direct Labor Factory Overhead
P80,500
C. Work in Process Direct Materials Direct Labor Applied Factory Overhead
P80,500
D. Direct Labor Direct Materials Work in Process
P11,500
P45,000 P11,500 P23,000
P45,000 P11,500 P24,000
P45,000 P11,500 P24,000
P45,000 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
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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 2 3 4
Units Purchase Orders Machine Hours Engineering Hours
200,000 250 80,000 1,250
25,000 125 10,000 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
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COST ACCOUNTING & COST MANAGEMENT
*** Items 31 to 33are based on the following information: Baby Company’s beginning and ending inventories for the month of November are:
Direct Materials Work in Process Finished Goods
November 1 P67,000 P145,000 P85,000
November 30 P62,000 P171,000 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 Company’s prime cost for November is: A. P370,000 B. P168,000 C. P363,000 D. P170,000 32. Baby Company’s cost of goods sold for November is: A. P484,000 B. P491,000 C. P502,000 D. P476,000 33. Baby Company’s 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 Page 6 of 11
ACCOUNTING 7
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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 Direct Labor Administrative Costs Selling Costs
P27,400 P9,600 P2,800 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 Worley’s accounting records are as follows: Sales Cost of Goods Sold Inventories: Direct Materials Work in Process Finished Goods
P1,200,000 P720,000 P36,000 P54,000 P90,000
Under Worley’s 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 Page 7 of 11
ACCOUNTING 7
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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 corporation’s 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 Page 8 of 11
ACCOUNTING 7
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COST DATA: Work in Process, August 1 Transferred – in Materials Conversion Costs Current Period Costs Materials Conversion Costs Transferred – in
COST ACCOUNTING & COST MANAGEMENT
P -9,000 6,500
P 3,710 -4,000
88,000 67,500 --
62,100 49,300 ?
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
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COST ACCOUNTING & COST MANAGEMENT
*** Items 50 and 51 are based on the following information: The Forming Department is the first stage Squaw Manufacturing Company’s 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 Beginning WIP Units Started Completed and Transferred Ending WIP
50,000 200,000 175,000 72,000
Conversion Costs P88,280 P493,000
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 Page 10 of 11
ACCOUNTING 7
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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 valuat ion, 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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