COST ACCOUNTING & CONTROL

QUIZ NO. 1

THEORIES:

1. There are several alternative denominator measures for applying overhead. Which is not commonly used?
a. Direct labor hours
b. Direct labor cost
c. Machine hours
d. Sales value of product produced

2. When the amount of over-applied factory overhead is significant, the entry to close over-applied factory
overhead will most likely require
a. A debit to cost of goods sold.
b. Debits to cost of goods sold, finished goods inventory, and work in process inventory
c. A credit to cost of goods sold.
d. Credits to cost of goods sold, finished goods inventory, and work in process inventory

3. In job order costing, when materials are returned to the storekeeper that were previously issued to the factory for
cleaning supplies, the journal entry should be made to
a. Materials
Factory overhead
b. Materials
Work in process
c. Purchase returns
Work in process
d. Factory overhead
Work in process

4. In a job order cost system, the application of factory overhead is usually reflected in the general ledger as an
increase in
a. Factory overhead control
b. Finished goods control
c. Work in process control
d. Cost of goods sold

5. Under a job order cost system, the peso amount of the general ledger entry involved in the transfer of inventory
from work in process to finished goods is the sum of costs charged to all jobs
a. Started in process during the period.
b. In process during the period.
c. Completed and sold during the period.
d. Completed during the period

6. In job order cost system, payroll taxes paid by the employer for factory employees are usually accounted for as
a. Direct labor
b. Factory overhead
c. Indirect labor
d. Administrative costs

7. When a manufacturing company has a highly automated plant producing many different products, probably the
most appropriate basis of applying factory overhead costs to work in process is
a. Units processed
b. Machine hours
c. Direct labor hours
 d. Direct labor costs

8. At the end of the year, Phil Co. had the following account balances after applied factory overhead had been closed
to Factory Overhead Control:

Factory overhead control P1,000 cr.

Cost of goods sold 980,000 dr.
Work in process 38,000 dr.
Finished goods 82,000 dr.

The most common treatment of the balance in factory overhead control would be to
a. Carry it as a deferred credit on the balance sheet.
b. Report it as miscellaneous operating revenue on the income statement.
c. Credit it to cost of goods sold.
d. Prorate it among work in process, finished goods, and cost of goods sold

9. Cox Co. found the differences in product costs resulting from the application of predetermined overhead rates
rather than actual overhead rates were immaterial even though actual production was substantially less than
planned production. The most likely explanation is that
a. Overhead was composed chiefly of variable costs.
b. Several products were produced simultaneously.
c. Fixed factory overhead was a significant cost.
d. Costs of overhead items were substantially higher than anticipated.

10. The cost function y = 2,000 + 3X means that it

a. has a slope coefficient of 3.
b. has an intercept of 2,000.
c. is within the relevant range
d. All of the above.

11. The appropriate method for the disposition of under-applied or over-applied factory overhead.
a. is to cost of goods sold only.
b. is to finished goods inventory only.
c. is apportioned to cost of goods sold and finished goods inventory.
d. depends on the significance of the amount.

12. Which of the following statements is false?

a. At zero production level, fixed costs is also zero.
b. At zero production level, fixed costs are positive.
c. At zero production level, variable costs are usually zero.
d. At zero production level, total costs equal total fixed costs.

13. Variable costs are all costs

a. Of manufacturing incurred to produce units of output.
b. That are associated with marketing, shipping, warehousing, and billing activities.
c. That fluctuate in total in response to small changes in the rate of utilization of capacity.
d. That do not change in total for a given period and relevant range but become progressively smaller on a per unit
basis as volume increases.

14. RST’s average cost per unit is the same at all levels of volume. Which of the following is true?
a. RST must have only fixed costs.
b. RST must have only variable costs.
c. RST must have some fixed costs and some variable costs.
d. RST’s cost structure cannot be determined from this information.

15. Which of the following decision-making tools would NOT be useful in determining the slope and intercept of a
mixed cost?
 A. high-low method
B. least-squares method
C. linear programming
D. scatter diagrams

16. Costs that increase as the volume of activity decreases within the relevant range are
A. Average costs per unit.
B. Average variable costs per unit.
C. Total fixed costs.
D. Total variable costs.

17. Weaknesses of the high-low method include all of the following except
A. the mathematical calculations are relatively complex.
B. the high and low activity levels may not be representative.
C. only two observations are used to develop the cost function.
D. the method does not detect if the cost behavior is nonlinear.

18. The relevant range is

A. a relatively wide range of sales where all costs remain the same
B. a relatively wide range of sales where total variable costs remain the same
C. a relatively narrow range of production where total variable costs remain the same
D. a relatively wide span of production where total fixed cost is expected to remain the same

19. NTQ, Inc.’s net sales in 2021 were 15% below the 2020 level. NTQ’s semi-variable costs would
A. Increase in total and increase as a percentage of net sales.
B. Increase in total, but decrease as a percentage of net sales.
C. Decrease in total, but increase as a percentage of net sales.
D. Decrease in total and decrease as a percentage of net sales.

20. The least squares method of cost segregation is considered to be

a. Less accurate than the high-low method
b. More detailed than the high-low method
c. Less accurate than the scattergraph method
d. Easiest among all methods of segregating variable and fixed costs

PROBLEMS:

21. Smart Company is relocating its facilities. The company estimates that it will take three trucks to move office
contents. If the per truck rental charge is P1,000 plus 25 cents per mile, what is the expected cost to move 800
miles?
A. P1,000
B. P1,200
C. P2,400
D. P3,600

22. The following cost functions were developed for manufacturing overhead costs:
Manufacturing Overhead Cost Cost Function
Electricity P100 + P20 per direct labor hour
Maintenance P200 + P30 per direct labor hour
Supervisors’ salaries P10,000 per month
Indirect materials P16 per direct labor hour
 If July production is expected to be 1,000 units requiring 1,500 direct labor hours, estimated manufacturing
overhead costs would be
A. P10,366
B. P76,300
C. P99,000
D. P109,300

23. Total production costs of prior periods for a company are listed as follows. Assume that the same cost behavior
patterns can be extended linearly over the range of 3,000 to 35,000 units and that the cost driver for each cost is
the number of units produced.

Production in units per month 3,000 9,000 16,000 35,000

Cost X P23,700 P52,680 P86,490 P178,260
Cost Y 47,280 141,840 252,160 551,600

What is the average cost per unit at a production level of 8,000 units for cost X?
A. P4.83
B. P5.85
C. P5.98
D. P7.90

24. When 40,000 units are produced, fixed costs are P16 per unit. Therefore, when 80,000 units are produced, fixed
costs will
A. decrease to P8 per unit.
B. remain at P15 per unit.
C. increase to P32 per unit.
D. total P640,000

25. Logro Inc. manufactures stainless steel knives. Following are factory costs incurred during the year:

Material costs:
Stainless steel P950,000
Plastic for handles 55,600
Equipment oil and grease 18,000
Wood blocks for knife storage 44,800
Labor costs:
Equipment operators P600,000
Equipment mechanics 92,000
Factory supervisors 372,000

What is the factory overhead cost for the year?

A. P464,000
B. P482,000
C. P508,800
D. P519,600

26. Atlantic Co. used P200,000 of direct materials during June. At June 30, Atlantic’s direct materials inventory was
P30,000 more than it was at June 1. What were Atlantic’s direct materials purchases during June?
A. P30,000
B. P170,000
C. P200,000
D. P230,000

27. Mello Joy produces 200,000 units of a good that has the following costs: Direct material costs P2,000,000 Direct
manufacturing labor costs 1,000,000 Indirect manufacturing labor costs 600,000 Mello Joy’s per unit prime costs
and conversion costs, respectively, are
 A. P8 and P15.
B. P8 and P18.
C. P10 and P8.
D. P15 and P8

28. Historical records show the highest cost of P276,000 and the lowest cost of P208,000. The data shows P74,000
as the highest level of sales and P48,500 as the lowest level. What is the variable cost per peso sales?
a. P4.27
b. P2.67
c. P3.72
d. P23.78

29. When volume reached 4,000 units, fixed costs amounted to P 20,000 and total cost amounted to P 60,000.
If volume were to increase to a level of 5,000 units, total cost would be:
a. P70,000
b. P75,000
c. P100,000
d. P120,000

30. The following cost data for different hours of operations are made available to you by Love Manufacturing
Company for your analysis:
Number of Months 10
Sum of Hours 350
Sum of Costs 1,000
Sum of Hours x Costs 39,200
Sum of Hours Squared 14,250

Using the least-squares method, what is the value of the constant slope of the cost line?
a. P2.10 per hour
b. P26.50 per month
c. P316 per year
d. P735.00 for 10 months

31. The following selected information pertains to Ajax Processing Co.: direct materials, P62,500; indirect materials,
P12,500; factory payroll, P75,000 of direct labor and P11,250 of indirect labor; and other factory overhead
incurred, P37,500.

The total conversion cost was:

a. P136,250
c. P250,000
b. P137,500
d. P273,750

32. The following data are obtained from Gianne Manufacturing Company:

- Cost of goods manufactured is P187,500

- Inventory variations are as follows: raw materials ending inventory is one-third based on raw materials
beginning; no initial inventory of work-in-process, but at end of period P12,500 was on hand; finished
goods inventory was four times as large at end of period as at the start.
- Net income after taxes amounted to P26,000, income tax rate is 35%.
- Purchase of raw materials amounted to net income before taxes.
- Breakdown of costs incurred in manufacturing cost was as follows:

Raw materials consumed 50%

Direct labor 30%
Overhead 20%
 Compute the amount raw materials beginning inventory:
a. P38,571
b. 60,000
c. P90,000
d. 40,000

33. Flor Company consumed P450,000 worth of direct materials during May, 2021. At the end of the month, the
direct materials inventory of Flor was P25,000 lower than the May 1 inventory level. How much was the direct
materials procured during May 2021?
a. P475,000
b. P375,000
c. P400,000
d. 425,000

34. 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. 25,000
b. 30,000
c. 45,000
d. 50,000

35. Data pertaining to Lam Co.'s manufacturing operations:

Inventories 4/1 4/30

Direct materials P18,000 P15,000
Work-in-process 9,000 6,000
Finished goods 27,000 36,000

Additional information for the month of April:

Direct materials purchased P42,000

Direct labor payroll 30,000
Direct labor rate per hour 7.50
Factory overhead rate per direct labor hour 10.00

For the month of April, cost of goods manufactured was:

a. 118,000
b. 115,000
c. 112,000
d. 109,000

36. Ambo, Inc. manufactured 50,000 kilos of compound Am in 2021 at the following costs:
 Opening work-in-process of P88,125.
 Materials of P182,500 of which 90% is direct materials
 Labor of P242,500 of which 93% is direct labor.
 Closing work-in-process of P67,500.

Factory overhead is 125% of direct labor cost and includes indirect materials and indirect labor. The cost of goods
manufactured is:
a. 651,056
b. 692,306
c. 706,906
 d. 727,531

37. Durian Company has the following data on April 30,2013:

April manufacturing overhead P30,101.80

Decrease in ending inventories:
Materials 2,430.00
Goods in Process 590.00
Increase in ending inventory:
Finished Goods 1,320.40

The manufacturing overhead amounts to 50% of the direct labor, and the direct labor and manufacturing combined
equal 50% of the total cost of manufacturing. All materials are purchased F.O.B. shipping point.

What is the cost of goods manufactured?

a. P180,610.80
b. P181,200.80
c. P182,3 00.00
d. P183,200.80

38. The results of regressing Y against X are as follows:

Coefficient
Intercept 5.23
Slope 1.54

If the value of X is 10, then what is the estimated value of Y?

A. 15.23
B. 16.77
C. 20.63
D. 53.84

39. The chief executive of Dabid’s salon is interested in accumulating some information on the overhead costs
incurred by the Company. You have been asked to analyze the following six months' worth of data:
Month Overhead Cost No. of Appointments
April P 48,128 867
May 45,200 624
June 47,120 689
July 50,800 974
August 47,460 730
September 49,920 901

Using the least squares regression method, give an estimate of the fixed cost for each month
A. P34,371.72
B. P35,631.77
C. P36,804.09
D. P37,545.70

40. ABC Company is determining the relationship between maintenance costs and machine hours used. The data
pertaining to the two are presented below based on the past six months of operations

MONTH MAINTENANCE COSTS MACHINE HOURS

July P 250 200
August 42,880 2,460
September 64,000 3,480
October 63,360 4,380
November 59,200 3,204
 December 43,460 2,460

Using the high-low method, determine the estimated variable rate maintenance cost per machine hour.
A. 15.10
B. 20.05
C. 10.67
D. 20.71