Republic of the Philippines

SORSOGON STATE UNIVERSITY

College of Business and Management
BS Accountancy - Sorsogon City Campus
Magsaysay St., Sorsogon City
Tel. No.: 056 211-0103; E-mail Add.: bsa.cbm@sorsu.edu.ph

Cost accounting and control

1st semester, AY 2023-2024
Q1 – Introduction to cost accounting and basic managerial accounting concepts
Multiple Choice
Identify the choice that best completes the statement or answers the question.

____ 1. Costs that are incurred when customers complain are:

a. failure costs c. prevention costs
b. appraisal costs d. detection costs

Mitchell Company

The following information has been taken from the cost records of Mitchell Company for the
past year:

Raw material used in production P326

Total manufacturing costs charged to production during the year (includes 686
direct material, direct labor, and overhead equal to 60% of direct labor
cost)
Cost of goods available for sale 826
Selling and Administrative expenses 25

Inventories Beginning Ending

Raw Material P75 P 85
Work in Process 80 30
Finished Goods 90 110

____ 2. Refer to Mitchell Company. Cost of Goods Sold was

a. P801. b. P736. c. P691. d. P716.
____ 3. Refer to Mitchell Company. The cost of raw material purchased during the year was
a. P360. b. P411. c. P316. d. P336.
____ 4. Period costs include

distribution costs outside processing sales

costs commissions

a. yes no yes
b. no yes yes
c. no no no
d. yes yes yes
____ 5. The distinction between direct and indirect costs depends on whether a cost
a. can be conveniently and physically traced to a cost object under consideration.
b. is variable or fixed.
c. is controllable or non-controllable.
d. will increase with changes in levels of activity.
____ 6. The formula to compute cost of goods manufactured is
a. beginning Work in Process Inventory plus purchases of raw material minus
ending Work in Process Inventory.
b. direct material used plus direct labor plus overhead incurred plus beginning
Work in Process Inventory.
c. direct material used plus direct labor plus overhead incurred.
d. beginning Work in Process Inventory plus direct labor plus direct material used
plus overhead incurred minus ending Work in Process Inventory.
____ 7. Cost accounting is directed toward the needs of

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 a. regulatory agencies. c. internal users.
b. external users. d. stockholders.
____ 8. Financial accounting
a. is specifically directed at management decision-making needs.
b. is primarily concerned with internal reporting.
c. focuses on the parts of the organization rather than the whole.
d. is more concerned with verifiable, historical information than is cost
accounting.
____ 9. Which of the following would need to be allocated to a cost object?
a. direct material c. direct labor
b. direct production costs d. indirect production costs
____ 10. When cost relationships are linear, total variable prime costs will vary in proportion to changes
in
a. direct labor hours.
b. total overhead cost.
c. total material cost.
d. production volume.

Davis Company.

Davis Company manufactures wood file cabinets. The following information is available for June
2008:

Beginning Ending
Raw Material Inventory P 6,000 P 7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300

____ 11. Refer to Davis Company. Direct labor is P9.60 per hour and overhead for the month was
P9,600. Compute total manufacturing costs for June, if there were 1,500 direct labor hours and
P21,000 of raw material was purchased.
a. P43,500 b. P43,100 c. P58,500 d. P46,500
____ 12. Refer to Davis Company. Direct labor is paid P9.60 per hour and overhead for the month was
P9,600. If there were 1,500 direct labor hours and P21,000 of raw material purchased, Cost of
Goods Manufactured is:
a. P51,000. b. P45,000. c. P49,100. d. P49,500.
____ 13. A cost that remains constant in total but varies on a per-unit basis with changes in activity is
called a(n)
a. fixed cost. c. variable cost.
b. mixed cost. d. expired cost.
____ 14. Which of the following defines variable cost behavior?

Total cost reaction Cost per unit reaction

to increase in activity to increase in activity

a. increases increases
b. increases remains constant
c. remains constant remains constant
d. remains constant increases
____ 15. Which of the following costs would be considered overhead in the production of chocolate chip
cookies?
a. sugar c. flour
b. oven electricity d. chocolate chips
____ 16. Which of the following would generally be considered a fixed factory overhead cost?

Straight- Factory Units-of-production

line
depreciation insurance depreciation

a. yes no yes
b. no no no
c. no yes no
d. yes yes no

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____ 17. Cost accounting is necessitated by
a. external reporting requirements for manufacturing companies.
b. management's need to be aware of all production activities.
c. the high degree of conversion found in certain businesses.
d. management's need for information to be used for planning and controlling
activities.
____ 18. Product costs are deducted from revenue
a. as goods are sold.
b. as expenditures are made.
c. to minimize taxable income.
d. when production is completed.
____ 19. Conversion cost does not include
a. direct labor. c. direct material.
b. supervisors' salaries. d. factory depreciation.
____ 20. The indirect costs of converting raw material into finished goods are called
a. period costs. c. overhead costs.
b. prime costs. d. conversion costs.
____ 21. Modern management accounting can be characterized by its
a. standardization. c. flexibility.
b. complexity. d. precision.

Long Enterprises

Inventories: March 1 March 31

Raw material P18,000 P15,000
Work in process 9,000 6,000
Finished goods 27,000 36,000

Additional information for March:

Raw material purchased P42,000
Direct labor payroll 30,000
Direct labor rate per hour 7.50
Overhead rate per direct labor hour 10.00

____ 22. Refer to Long Enterprises. For March, Cost of Goods Manufactured was
a. P112,000. b. P115,000. c. P118,000. d. P109,000.
____ 23. Refer to Long Enterprises. For March, conversion cost incurred was
a. P70,000. b. P72,000. c. P40,000. d. P30,000.
____ 24. Cost of Goods Sold is an
a. unexpired product cost. c. unexpired period cost.
b. expired product cost. d. expired period cost.
____ 25. Financial accounting and cost accounting are both highly concerned with
a. determining product cost.
b. determining performance standards.
c. preparing budgets.
d. providing managers with information necessary for control purposes.
____ 26. In a perpetual inventory system, the sale of items for cash consists of two entries. One entry is
a debit to Cash and a credit to Sales. The other entry is a debit to
a. Cost of Goods Sold and a credit to Finished Goods Inventory.
b. Finished Goods Inventory and a credit to Cost of Goods Sold.
c. Work in Process Inventory and a credit to Finished Goods Inventory.
d. Finished Goods Inventory and a credit to Work in Process Inventory.
____ 27. Broadly speaking, cost accounting can be defined as a(n)
a. system used for providing the government and creditors with information
about a company's internal operations.
b. internal reporting system that provides product costing and other information
used by managers in performing their functions.
c. external reporting system that is based on activity-based costs.
d. internal reporting system needed by manufacturers to be in compliance with
Cost Accounting Standards Board pronouncements.
____ 28. Which of the following is not a product cost component?
a. janitorial supplies used in a factory

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 b. indirect production labor wages
c. commission on the sale of a product
d. rent on a factory building
____ 29. Which of the following is not a valid method for determining product cost?
a. systematic allocation c. arbitrary assignment
b. direct measurement d. cost-benefit measurement
____ 30. Which of the following topics is of more concern to management accounting than to cost
accounting?
a. impact of economic conditions on company operations
b. generally accepted accounting principles
c. cost of goods sold valuation
d. inventory valuation
True/False
Indicate whether the statement is true or false.

____ 1. Distribution costs are an example of product costs.

____ 2. In a service industry, direct materials are usually insignificant in amount and cannot easily be
traced to a cost object.
____ 3. A specific product cannot be a cost object
____ 4. Managerial accounting is most concerned with addressing the needs of the firm as a whole
____ 5. A variable cost will be an effective cost driver.
____ 6. A mixed cost will be an effective cost driver.
____ 7. If the cost of an additive is P5,000 + P0.50 for every unit of solvent produced, the cost is
classified as a step cost.
____ 8. Financial accounting is most concerned with meeting the needs of external users.
____ 9. There is a direct relationship between prevention costs and failure costs.
____ 10. The portion of an asset that was consumed during a period is referred to an expired cost.
____ 11. The relevant range is valid for all levels of activity
____ 12. Distribution costs are an example of period costs.
____ 13. The portion of an asset’s value on the balance sheet is referred to as an expired cost.
____ 14. A production plant could be a cost object.
____ 15. Variable cost per unit remains constant within the relevant range.

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