AEC 6 – Cost Accounting

Quiz - Midterm

Name:

Date:

TRUE OR FALSE

1. Reports prepared in financial accounting are general-purpose reports, whereas reports prepared
in managerial accounting are usually special-purpose reports.
2. Process costing is used by companies making one-of-a-kind products
3. Cost accounting procedures help management in gathering the data needed to determine
product costs and thus generate meaningful financial statements and other reports.
4. The materials, labor, and overhead costs incurred to produce a product are called period costs.
5. Marketing, Selling, and Administrative Costs are the three broad classifications of costs incurred
by a manufacturing company.
6. A cost that is present under one alternative but absent in whole or part under another
alternative is known as a differential cost.
7. Variable costs are costs that change, in total, in direct proportion to changes in the level of
activity.
8. A decrease in production will ordinarily result in an increase in fixed production cost per unit.
9. Factory rent is included in manufacturing overhead, but office rent is a period cost.
10. In a manufacturing setting, prime costs are fixed.
11. Product costs are historical figures and therefore are of little use to the manager.
12. All of the raw materials purchased during a period are included in the cost of goods
manufactured figure.
13. The predetermined overhead rate is computed using estimates of cost and activity.
14. Manufacturing costs are generally incurred in one period and recorded in a subsequent period.
15. When raw materials are purchased., the Wok in Process Inventory account is debited.

MULTIPLE CHOICE

1. The most common treatment of under-or overapplied overhead is to close it to:

a. Work in process
b. Retained Earnings
c. Cost of Goods sold
d. Finished goods

2. Which of the following is the basic document that is used to accumulate the cost of each order in job
order costing:
a. Invoice
b. Purchase order
c. Requisition sheet
d. Job Cost sheet

3. ln a job-order costing system, indirect labor used should be debited to:

a. Payroll liability
b. Work in Process Control
c. Finished Goods Control
d. Factory Overhead Control

4. For inventoriable costs to become expenses under the matching principle,

a. the product must be finished and in stock
b. the product must be expensed based on its percentage of completion
c. the product to which they attach must be sold
d. all accounts payable must be settled

5. As current technology changes manufacturing processes, it is likely that direct

a. labor will increase
b. labor will decrease
c. materials will increase
d. materials will decrease

6. Sales commissions are classified as

a. prime costs
b. period costs
c. product costs
d. indirect labor

[For Items 7-9] Justine Co. produced 5,500 outdoor chairs for Job Order No. 610. Total material cost was
P 51,700. Each chair required 2.2 hours of direct labor at P8.90/ hour. A total of P 53,845 of factory
overhead was traced to Order 610.
7. What is the prime cost per unit of this order?
a. P19.58 c. P29.37
b. P28.98 d. P38.77

8. What is the conversion cost per unit of this order?

a. p 19.58 C. P29.37
b. P 28.98 d. P38.77

9. What is the unit cost of this order?

a. P 37.88 C. P28.09
b. P 38.77 d. P36.99

10. Dexter Company's 2011 manufacturing costs were as follows:

Direct materials and direct labor P 500,000
Depreciation of manufacturing equipment 70,000
Depreciation of factory building 40,000
 Janitor's wages for cleaning factory premises 15,000

How much of these costs should be inventoried for external reporting purposes?
a. P 625,000
b P 610,000
c. P 585,000
d. P 500,000

11. Peter Paul Company uses a job order cost system and applies factory overhead to production orders
on the basis of direct labor cost. The overhead rates for 2010 are 200% for Dept. A and 50% for Dept. B.
Job 123, started and completed during 20l l, was charged with the following costs:
A B
Direct materials 25,000 P 5,000
Direct labor ? 30,000
Factory overhead 40,000 ?
The total manufacturing costs associated with Job 123 should be
a. P 135,000
b. P 180,000
C. P 195,000
d. P 240,000

12. Blue Beach Industries has two production departments. ABC and XYZ, and uses a job order cost
system. To determine manufacturing costs, the company applies manufacturing overhead to production
orders based on direct labor cost using the departmental rates predetermined at the beginning of the
year based on the annual budget. The 2009 budget for the two departments was as follows:
ABC XYZ
Direct materials P 630,000 P 90,000
Direct labor 180,000 720,000
Factory overhead 540,000 360,000

Actual materials and labor costs of Job No. 676 during 2011 were as follows:
Direct materials P 22,500
Direct labor - ABC 7,200
Direct labor - XYZ 10,800

What was the total manufacturing cost associated with Job No. 676 for 2011?
a. P 45,000
b. P 49.500
c. P 58,500
d. P 67,500

13. Hamilton Company uses job-order costing. Factory overhead is applied to production at a budgeted
cost of 150% of direct labor costs. Any overapplied or underapplicd factory overhead is closed to the cost
of goods sold account at the end of each month. Job IOl was the only job in process at January 31, 20I,
v.ith accumulated costs as follows:

Direct materials P P 4,000

Direct labor P 2,000
 Factory overhead applied P 3,000
Total P 9,000
Jobs 102, 103, and 104 were started during February. Direct materials requisitions for February totaled
P26,000. Direct labor costs of P20,000 were incurred for February. Actual factory overhead was P32,000
for February. The only job still in process at February 28, 2011, was Job 104, with costs of P2,800 for
direct materials and P1,800 for direct labor.

14. The cost of goods manufactured for February 2011 was:

a. P 77,700
b. P 78,000
C. p 79,700
d. P 85,000