Chapter 1 9.

Cost information is useful in making an

1. In Managerial accounting, the information may be current or important making decision such as
forecasted, quantitative or qualitative, monetary, or non- determining the selling price of a
monetary and most of all the data are futuristic and some of product, meeting competition, bidding
the costs are not recorded on the accounting books of the on contracts, and analyzing profitability.
organization. 10. It is the process of establishing objectives
2. Cost accounting is not an interaction between financial and or goals for the firm and determining the
managerial accounting. means by which the firm will attain them.
3. These are the inventory accounts of a manufacturing company 11. Job order costing is a product costing
4. Business entities that require information systems which system used by companies that make a
provide the necessary financial data. large number of similar products or
5. Manufacturing company normally buys a product that is ready maintain a continuous production flow.
for resale when it is received. 12. The use of accounting information for
6. The information produced by cost accounting system provides a reporting to external parties, including
basis for determining product cost and aids management in investors and creditors.
planning and controlling operations. 13. Job order costing and process costing are
7. It is the expanded phase of general or financial accounting the two traditional basic approaches to
8. It is the process of monitoring the company's operations and product cost accounting systems.
determining whether the objectives identified in the planning 14. Cost accounting can't relate to
process are being accomplished. motivation and behavior because it is
used in planning and performance
evaluation.
15. What are the two basic product costing
system?

Answer Key

1. TRUE
2. FALSE – IS NOT AN
3. Materials inventory, Work in process inventory, Finished goods inventory
4. manufacturing, merchandising, service
5. FALSE - MERCHANDISING
6. TRUE
7. Cost Accounting
8. Control
9. TRUE
10. Planning
11. FALSE- STANDARD
12. Financial Accounting
13. TRUE
14. FALSE
15. Job order and standard costing
Chapter 2
Answer Key
1. In a service organizations cost are charged to responsibility centers
1. TRUE
for performance evaluation.
2. Direct materials
2. Components of manufacturing or product costs
Direct labor
3. Classification of costs
4. Fixed cost may be classified into two categories depending on the Factory overhead
ability of management to influence its level. 3. Relation to a product, as to variability,
5. Total variable costs = Variable cost per unit x total output relation to manufacturing departments, nature,
6. Methods of separating mixed costs into fixed and variable. accounting period,
7. A merchandising organization starts with a finished product and planning control & analytical processes
markets it. 4. Committed Fixed costs

8. Joint cost and common costs are cost classified to their nature as Managed fixed costs

common or joint. 5. TRUE

9. Other term for non-manufacturing cost is product cost 6. Scatter graph

10. In a manufacturing organization accounting system focus on work in High-low point

process, which reflects the costs involved in transforming input Method of least square

materials into finished goods. 7. TRUE

11. It is the cash or cash equivalent value sacrificed for goods and 8. TRUE

services that are expected to bring a current or future benefit to the 9. FALSE -PERIOD COST

organization. 10. TRUE

12. Costs classified as to variability 11. COST

12. Variable, fixed and mixed cost
13. Direct and indirect departmental charges are cost classified as to
13. TRUE
relation to manufacturing departments.
14. TRUE
14. Other term for manufacturing costs is product costs.
15. EXPENSES
15. These are expired cost that are deducted from revenues in the
16. Standard costs,
income statement to determine the period's profit.
Opportunity costs
16. Cost for planning, control and analytical processes
Differential costs
17. Components of Non-manufacturing costs or period costs
Relevant costs
18. Cost classified as to accounting period are capital and revenue
Out-of-pocket costs
expenditures
Sunk cost
Controllable cost
17. Marketing or selling expense
General or administrative expense
18. TRUE
Chapter 3 Answer Key
1. Underapplied factory overhead is unfavorable because it increases the 1. FALSE – DECREASE IN GROSS PROFIT
cost of goods sold thereby increases the gross profit. 2. TRUE
2. Manufacturing entities has three inventory accounts 3. FALSE
3. Laborers working directly on the product earned salaries and 4. Finished goods --> Cost of goods sold, Selling and
administrative expenses Administrative --> Operating expense
4. Show or draw the cost flow of merchandising firm 5. finished goods inventory
5. What replaces Merchandise inventory, end in computing Cost of goods 6. Direct materials
sold in a manufacturing concern? Direct labor
6. Elements of manufacturing cost Factory overhead
7. Work in process inventory has counterpart in merchandise accounting 7. FALSE
8. Show the cost flow of manufacturing firms 8. Direct materials, direct labor, factory overhead ---
9. In a manufacturing company the entry to purchase materials on account
> work in process ---> finished goods inventory ---
is as follows:
Materials. xxx > cost of goods sold --> Selling and Administrative
Cash xxx
--> Operating expenses
10. Show or draw the cost flow of a service firm
11. Salaries and wages of factory supervisors who do not work directly on 9. FALSE- ACCOUNTS PAYABLE
the product are charged to Factory overhead control. 10. Direct materials, direct labor, factory overhead ---
12. In a manufacturing concern what replaces Purchases (merchandise) in
computing the total goods available for sale? > Cost of services --> Selling and Administrative -->
13. Cost of goods sold in a merchandising concern is computed as: Operating expenses
Beginning merchandise inventory
Add: Purchases(merchandise) 11. TRUE
Merchandise available for sale 12. Cost of good manufactured
Less: Merchandise inventory end
Cost of goods sold 13. TRUE
14. The journal entry to set up and pay payroll without considering 14. TRUE
deductions is:
Payroll xxx 15. Materials Inventory
Accrued payroll xxx Work in process inventory

Accrued payroll xxx Finished goods inventory

Cash xxx 16. TRUE
15. What are the three inventory accounts of Manufacturing entities?
17. TRUE
16. or a manufacturing concern the journal entry to record the direct and
indirect materials issued in a factory is as follows:
Work in process xxx
Factory overhead xxx
Materials xxx
17. Product cost are comprises of Direct materials, direct labor and
overhead cost.
Chapter 4 Answer Key
1. Balance of the Materials account = to materials inventory end of the 1. TRUE
period = to total of the balances of all materials stock cards. 2. FALSE
2. Product costs are historical figures and therefore are of the little use 3. TRUE
to the manager. 4. FALSE
3. Debit-Factory overhead and credit-Materials to record the issuance 5. TRUE
of indirect materials 6. FALSE
4. When raw materials are purchased, the work in process inventory 7. TRUE
account is debited. 8. Cost of direct materials issued Cost
5. Factory overhead control is used to accumulate actual overhead of indirect materials issued Cost of
incurred while factory overhead applied is used to accumulate materials returned to suppliers
estimated factory overhead applied to production. 9. job-order cost sheet
6. The entry to record the issuance of indirect materials is Materials stockcard
Work in process xxx
Finished goods and stockcard
Materials xxx
Factory control cost record
7. Job order cost keeps the costs of various jobs or contracts separate during their
Materials requisition, Time ticket
manufacture or constructions.
and clockcard
8. The credit side of Materials or materials control account may be summarized as
10. TRUE
follows:
11. TRUE
9. Source documents for job order costing
12. Inventory beginning
10. The entry to record the payroll and the set up of liability is:
Payroll xxx Purchase of materials Freight in
Withholding tax payable xxx
(using direct charging)
SSS Premium payable xxx
Philhealth contribution payable xxx Cost of excess materials returned
Accrued factory payroll xxx from factory
11. Payroll period can be weekly, semi-monthly or monthly. 13.TRUE
12. The debit side of Materials or materials control account may be 14. Job order cost sheet
summarized as follows: 15.FALSE
13. In most factories, clock cards/time records are used to record the
days or hours worked by each employee. These clock cards/time
records are used as the basis in computing the gross earnings of
employees who are paid hourly wages. Its also the basis in
determining the amount to be charged to direct labor cost and
indirect labor cost.
14. A summary sheet where the cost of each order produced for a given
customer or the cost of each lot to be placed in stock is recorded.
15. Accrued factory payroll is credited to record the payment of payroll.
1. Give the five (5) elements of JIT and explain them.
Raw In Process Inventory
Direct Labor
Factory Overhead
Finished Goods Inventory
Cost of Goods Sold
2. EXPLAIN BACKFLUSHING
Backflush costing is a simple way of managing costs in manufacturing. It is a shortened version
of traditional method of accounting for cost. It's like keeping your finances tidy. You don't have
to track every little cost as it happens. Instead, you wait until a product is done before writing
down what it cost. This makes the accounting less fussy. You also don't need lots of extra
paperwork to keep track of every little step. Under this inventory are not adjusted during the
accounting period, instead adjustments are made at the end of the period. Plus, some
categories in the financial books are put together to make it all easier to understand. Like
'materials' and 'work in process', it will be 'raw in process' because these raw materials are put
immediately to production. It's good if you want to keep things simple and make products just
in time.
3. EXPLAIN JUST IN TIME
Just-in-time (JIT) is a production and inventory management strategy where raw materials are
received precisely when they are needed for production, manufactured parts are completed
just in time for assembly, and products are finished just in time for shipment to customers. JIT
aims to minimize inventory and reduce storage costs by ensuring materials arrive precisely
when they're required for manufacturing. Additionally, it reduces the need for warehouses,
lowers handling costs, and often allows for smaller and more efficient shipments directly to
customers, which can eliminate the need for expensive bulk-moving equipment. This approach
helps companies operate with greater efficiency and cost-effectiveness.
4.JUST IN TIME COMPARED TO TRADITIONAL COSTING
Traditional costing puts expenses into separate categories like "Overhead," then spreads them
out to products using preset rates, and these costs are tallied up regularly, which might not
catch real-time changes in production expenses. Just-in-Time (JIT) costing, on the other hand,
directly connects costs to specific products or activities as they happen, skipping the need for
separate "Overhead" categories. It records expenses immediately, which means you get a more
accurate picture of the actual cost of making something right when it happens, making it handy
in situations where costs can change quickly, like in efficient, streamlined manufacturing.