Cost Accounting Final Examination

Name:_ _____________________________________- Score: ___________________

Section: _____________________________________ Date: ___________________

1. Which of the following statement is correct?

a. An inventory control method that review the entire inventory at regular intervals, such as 30
days, 60 days or 90 days and after the review, placed an order for an item with low quantities
is called Automatic Order System.
b. Moving Average is another term for average periodic method of materials costing.
c. Lead time refers to the time between placing an order with the supplier and receiving of the
inventories.
d. Inventory shortage/loss under normal limits is charged to current period by debiting Inventory
Loss or Shortage and crediting Raw Materials inventory.

2. Which of the below statements is incorrect?

a. FIFO method not always produces the same amount of ending inventories for both periodic
and perpetual system.
b. Cost Accounting is a system of accounting that deals with the determination and
accumulation of cost of a product, activity or services.
c. The sum of direct materials, indirect labor and other indirect production cost is called
manufacturing overhead cost.
d. Total production cost is the sum of direct materials and conversion cost.

3. Which of the following statements is false?

a. When the production levels are expected to increase within the relevant range the fixed costs
per unit decreases and variable costs per unit remain constant.
b. The sum of indirect materials, indirect labor and other indirect production cost is called
factory overhead cost.
c. Fixed costs increase per unit when the actual level of activity increases.
d. The key document used to accumulate costs in job order costing is called Job Order Cost
sheet.

4. Which of the following statements is true?

a. Total fixed cost at break-even point is equal to contribution margin.
b. Normal idle time cost should be charged to loss for the current period.
c. When the production levels are expected to increase within the relevant range the fixed costs
per unit decreases and the total variable costs remain constant.
d. In job order costing, production is transferred from one process to another until the products
are fully completed.

5. Product A accounts 75% of a company’s total sales revenue and has a variable cost equal to 60%
of its selling price. Product B accounts for 25% of total sales revenue and has a variable cost equal
to 85% of its selling price. What is the breakeven point given the fixed costs of P150,000.00.
a. P375,000.00 c. P500,000.00
b. P444,444.45 d. P545,455.55
Cost Accounting Final Examination

6. Cost-volume-profit (CVP) analysis is a key factor in many decisions, including choice of product
lines, pricing of products, marketing strategy, and use of productive facilities. A calculation used
in a CVP analysis is the breakeven point. Once the breakeven point has been reached, operating
income will increase by the
a. Gross margin per unit for each additional unit sold
b. Contribution margin per unit for each additional unit sold
c. Fixed cost per unit for each additional unit sold
d. Variable cost per unit for each additional unit sold

7. A company’s breakeven point in sales pesos maybe affected by equal percentage increases in both
selling price and variable cost per unit (assume all other factors are constant within the relevant
range). The equal percentage changes in selling price and variable cost per unit will cause the
breakeven point in sales pesos to
a. Decrease by less than the percentage increase in the selling price
b. Decrease by more than the percentage increase in the selling price
c. Increase by the percentage change in variable cost per unit
d. Remain unchanged

8. In process cost system, the application of factory overhead usually would be recorded as increase
in:
a. Finished goods inventory c. Factory overhead control
b. Work in process inventory control d. Cost of goods sold

9. ABC Company started 9,000 units in October 2019. The company transferred out 9,500 finished
units and ended the period with 1,500 units that were 40% complete as to both prime and factory
overhead costs. Beginning work in process inventory units were:
a. 1,100 units c. 1,500 units
b. 1,400 units d. 2,000 units

10. No Chan Ged Company provided the following information for the month of October 2020:
Factory overhead incurred P310,000.00
Applied Factory Overhead 340,600.00
Cost of Goods Sold 217,000.00
Ending Work In Process 62,000.00
Ending Finished Goods Inventory 31,000.00

The management consider the amount of over or under applied factory overhead significant if it is
more than 5% of the actual factory overhead incurred. At what amount should the cost of goods
sold be adjusted for the under or over applied factory overhead?
a. P21,420 debit c. P30,600 debit
b. P21,420 credit d. P30,600 credit

11. Inventoriable costs are expense in the statement of profit and loss
a. When direct materials for the c. After the products are
product are purchased manufactured
b. When the products are sold d. When the materials are put into
production
Cost Accounting Final Examination

12. Cost associated with normal idle time should be:

a. Included as part of direct labor cost d. Included as part of selling and
b. Treated as part of overhead cost administrative cost
c. Added directly to cost of goods sold
for the period

13. The margin of safety is a key concept of CVP Analysis. The margin of safety is
a. The contribution margin rate
b. The difference between budgeted sales and breakeven sales
c. The difference between budgeted contribution margin and breakeven contribution margin
d. The difference between the breakeven point in sales and cash flow breakeven

14. Which of the following will result in lowering the breakeven point?
a. An increase in variable cost per c. A decrease in mixed cost
unit d. An increase in income taxes
b. A decrease in the contribution
margin per unit

15. If the operating leverage of Company A is 5. Which of the following statement is true?
a. An increase of 10% in Sales of Company A will result to a corresponding 50% decrease in
profit.
b. A 50% increase in profit of Company A is a result of the 10% increase in its Sales
c. An increase of 10% in Sales will result to a 50% increase in Contribution Margin.
d. A 10 % decrease in contribution margin will result to a 50% decrease in fixed cost

16. Which of the following would decrease unit contribution margin the most?
a. A 10% decrease in selling price c. A 10% decrease in variable cost
b. A 10% increase in variable cost d. A 10% decrease in fixed cost

17. All of the following items are debited to work in process inventory except
a. Allocated manufacturing overhead
b. Materials from production returned to storeroom
c. Direct Labor Distributed
d. Direct Materials Used

18. Cost incurred to convert raw materials into finished goods.

a. Direct costs c. Prime costs
b. Indirect costs d. Conversion costs

19. Factory overhead of 428 machine hours was applied to production at a rate P55.00/machine hour
and the actual factory overheads are P24,680, there is an:
a. Under applied overhead of P1,140 c. Over applied overhead of P1,140
b. Under applied overhead of P45,940 d. Over applied overhead of P45,940

20. If the raw material prices are affected by inflation, which of the following methods of valuing
stocks will give the highest gross profit?
Cost Accounting Final Examination

a. LIFO c. FIFO
b. Replacement cost d. Simple average

(Item No. 21 to 24)

Activity in UNCEAN Company’s production Department 1 for the month of October 2019
follows:
Percentage of Completion
Units Materials Labor & FOH
Work in process inventory, Oct. 1 6,000 60% 45%
Started into production during October 55,000
Work in process inventory, Oct. 31 4,000 35% 20%

21. The Equivalent units for labor and overhead for October, using the weighted average method, are:
a. 59,600 units c. 61,000 units
b. 57,800 units d. 59,000 units

22. The Equivalent units for labor and overhead for October, using the FIFO method, are:
a. 53,100 units c. 52,500 units
b. 55,000 units d. 55,100 units

23. The Equivalent units for Materials for October, using the FIFO method, are:
a. 54,800 units c. 56,000 units
b. 49,800 units d. 57,200 units

24. The Equivalent units for Materials for October, using the weighted average method, are:
a. 59,000 units c. 58,400 units
b. 55,000 units d. 57,000 units

25. Fourth step in process costing system is to

a. summarize the flow of physical c. summarize total costs

units d. compute cost for each equivalent
b. compute total output in equivalent unit
units

26. A company uses material A for production of Product Z. The supplier of Material A quotes a
delivery period of 2 weeks. If the company uses 500 units of Material A per week according to
activity levels, and with a safety stock equivalent to a weekly consumption of Material A, the Re-
order Point of Material A will be
a. 1,000 units
b. 1,500 units
c. 2,000 units
d. 2,500 units
Cost Accounting Final Examination

27. Choco Company uses the FIFO costing method. It had 4,000 units at the beginning of the month
that were 70% complete as to conversion costs and 6,000 units at the end of the month that were
40% complete as to conversion costs. Choco started 15,000 units during the month. All materials
are added at the beginning of the process. Calculate the equivalent units for materials.
a. 11,000 c. 15,000
b. 13,000 d. 19,000

28. The usage of materials during the production does not include an entry to:
a. Debit work in process c. Debit factory overhead
b. Credit accounts payable d. Credit materials inventory

29. In a job order cost system, the use of indirect materials previously purchased usually is recorded as
an increase in:
a. Materials control c. Factory overhead control
b. Work in process d. Factory overhead applied

30. All of the following represent expense except?

a. Cost of goods sold c. Factory overhead
b. Work in process inventory d. Expired insurance

31. Under the variable costing method, which of the following costs are allocated to inventory?
Variable factory Variable Selling and
Overhead costs Administrative costs
a. No No
b. No Yes
c. Yes Yes
d. Yes No

32. The monthly sales commission of a sales supervisor is an example of:

a. Cost of goods sold c. Selling and distribution cost
b. Administrative cost d. Research and development cost

33. Which inventory control method is commonly used in a computerized environment and an order is
automatically placed when the stock level reaches a predetermined level?
a. Order Cycling System c. ABC System
b. Automatic Order System d. Min-Max method

34. It refers to that level of inventory order that minimizes the total cost associated with inventory
management.
a. Reorder Point c. Safety stock
b. Economic Order Quantity d. Automatic Order System

35. ABC Company shows the following production information for the month of October 2019:
Materials cost (including P80,000.00 indirect materials) P400,000.00
Labor cost (including P50,000.00 indirect labor) P250,000.00
Factory Overhead representing utilities P150,000.00
How much is the Conversion Cost?
Cost Accounting Final Examination

a. P400,000.00 c. P480,000.00
b. P450,000.00 d. P520,000.00

36. Which inventory costing method of materials is used when the value assigned to materials closing
inventory is the latest purchased price?
a. FIFO Method c. Average Method
b. LIFO Method d. Specific Identification

37. Peregrine Company uses periodic inventory system. The following information was provided for
October 2019.
Materials Purchased during the month P 52,000.00
Materials Available for use (P25,000 is indirect materials) 75,000.00
Materials Issued to Production 40,000.00
How much is the increase in the inventory of materials?
a. P35,000.00 c. P23,000.00
b. P12,000.00 d. P20,000.00

38. BCD Company show the following data. What is the Cost of Materials Used using LIFO Perpetual
Inventory?
Date Transactions Units Unit Cost Total
October 1 Beginning Balance 50 P50.00 P2,500.00
October 17 Issued to Factory 50
October 30 Purchases 20 P40.00 800.00
a. P1,000.00 c. P800.00
b. P2,300.00 d. P2,500.00

39. (Same data in No. 38) What is the Closing Materials Inventory of BCD Company under LIFO
costing?
a. P1,000.00 c. P800.00
b. P2,300.00 d. P2,500.00

40. X Company uses activity-based costing for Product B and Product D. The total estimated
overhead cost for the parts administration activity pool was P550,000 and the expected activity
was 2000 part types. If Product D requires 1200 part types, the amount of overhead allocated to
product D for parts administration would be:
a. P275,000 c. P330,000
b. P300,000 d. P345,000

(Items 41 and 42) Y Company estimated that its total overhead cost of P600,000. It is considering
implementing activity-based costing. Three cost pools (and activity measures) have been
identified: machine-related (machine-hours), production orders (number of orders), and product
testing (number of tests). The estimated overhead was assigned to the pools as follows: P200,000
to machine-related, P100,000 to production orders, and P300,000 to product testing. Y Company
produces two products. The following information is available:
Machine-hours Orders Test Direct Labor Hour
Product 1 40,000 800 6,000 25,000
Product 2 10,000 200 9,000 15,000
Cost Accounting Final Examination

The company currently uses traditional costing and allocates overhead based on direct labor-
hours.

41. How much overhead is assigned to Product 1 using traditional costing?

a. P375,000 c. P325,000
b. P300,000 d. P225,000

42. How much overhead would be assigned to Product 1 if ABC is used?

a. P300,000 c. P420,000
b. P173,000 d. P360,000

43. Alexandra Company provided the following information for the month of October 2020.
Raw Materials Purchased P100,000.00
Raw Materials Inventory October 1 150,000.00
Raw Materials Inventory October 31 165,000.00
Factory Overhead (includes indirect materials
Amounting to P25,000.00 and indirect
Labor amounting to P85,000.00) 320,000.00
Total Manufacturing Cost 640,000.00
How much is the Direct Labor Cost?
a. P235,000.00 c. P345,000.00
b. P260,000.00 d. P320,000.00

44. All of the following expenses are Fixed costs except?

a. Rental of warehouse c. Commission of Salesman
b. Property Taxes d. Accountant’s Salary

45. Determine the reorder point from the below data:

Average daily usage = 50 Units Lead Time = 15 days Safety Stock = 2 days average usage

a. 750 Units c. 1,500 Units

b. 850 Units d. 1,550 Units

46. DEF Company shows the following materials data in its books:
Transactions No. of Units Unit Cost Total Cost
Beginning Inventory 100 Units P10.00 P1,000.00
Purchases 100 Units P 8.00 P 800.00

Issuance 85 Units
If DEF Company reported Materials Ending Inventory value of P1,120.00, which of the
following method was used?
a. FIFO c. Specific Identification
b. LIFO d. Weighted Average

47. Using the same data in number 50. What is the Cost of Materials Used under FIFO method of
costing materials?
a. P680.00 b. P765.00
Cost Accounting Final Examination

c. P850.00 d. P950.00

48. A direct labor overtime premium should be charged to a specific job when the overtime is caused
by the:
a. Management’s failure to include the job in the production schedule.
b. Customer’s requirement for the early completion of the job.
c. The overtime rendered was due to the delayed transfer of materials from storeroom.
d. Management’s requirement that the job be completed before the annual factory closure due to
vacation.

49. For a manufacturing company, direct labor costs may be included in

a. Direct materials inventory only. d. Direct materials inventory, work in
b. Work-in-process inventory and process inventory, and finished
finished goods inventory goods inventory.
c. Merchandise inventory only.

50. When there is no Finished goods inventory beginning, what is the difference of Cost of goods
manufactured and finished goods ending inventory?
a. Cost of Goods Available for Sale
b. Work in Process Inventory End
c. Cost of Goods Sold
d. Gross Margin
Cost Accounting Final Examination

51. The abnormal cost of rework would be recorded as:

a. Increase in finished goods inventory d. Increase in loss from abnormal
b. Increase in factory overhead control rework
c. Decrease in factory overhead control

52. An estimated cost of normal spoilage cost excluding any disposal value that are common to all
jobs would be:
a. Charged to work in process c. Charged to loss account
b. Charged to factory overhead d. Charged to cost of goods sold

53. ABC Company manufactured the following units:

Completed Units 5,000
Spoiled Units (normal) 200
Abnormal Spoilage 300
The company recognizes spoiled units in computing output in equivalent units. Total
manufacturing costs is P99,000.00. What amount should ABC Company debit to finished goods?
a. 90,000.00 c. 95,400.00
b. 93,600.00 d. 99,000.00

54. In manufacturing its products, BCD Company incurred normal spoilage of P14,000.00 and
abnormal spoilage of P6,000.00 for the month of October 2019. How much spoilage cost should
BCD Company charged as inventoriable for the month?
a. P6,000.00 c. P14,000.00
b. P0.00 d. P20,000.00
Abnormal Normal
55. Spoilage from a manufacturing process a. No Yes
was discovered during an inspection of b. No No
work in process. In a process costing c. Yes No
system, the cost of spoilage would be d. Yes Yes
added to the cost of good units produced
if the spoilage is:

56. P Company produces three types of products- product A, product B and product C. Product A
requires 200 machine setups and machine hours used on it were 1,000. Product B requires 400
machine setups and machine hours used on it were 500. Product C requires 620 machine setups
and machine hours used on it were 1,500. The company has defined an activity cost pool machine
set-up for which the cost driver is number of machine setups. The total overhead cost assigned to
that cost pool was P183,000. The machine setups overhead assigned to each of the products was:
a. P61,000 for A; P61,000 for B; P61,000 for C
b. P61,000 for A; P30,500 for B; P91,500 for C
c. P30,000 for A; P60,000 for B; P93,000 for C
d. P30,000 for A; P63,000 for B; P90,000 for C

(Item number 57 and 58) A Company has two products: X and Y. It has prepared the following
analysis showing budgeted cost and activity for each of its three activity cost pools:
Per Budget
Cost Accounting Final Examination

Cost Pool Cost Product X Activity Product Y Activity

Activity 1 P3,600 25,200 46,800
Activity 2 P4,800 36,000 44,000
Activity 3 P6,300 43,200 46,800

Annual production and sales level of Product X is 161,100 units, and the annual production and
sales level of Product Y is 275,200 units.

57. How much is the overhead cost per unit of Product X?

a. 0.03 c. 0.05
b. 0.04 d. 0.06
58. How much is the overhead cost per unit of product Y?
a. 0.03 c. 0.05
b. 0.04 d. 0.06

(Items 59 and 60) W Company manufactures spoked and solid bicycle wheels. The company relies
on an activity based costing system. The following information is for the cost pools:
Cost Pool Activity Activity Rate Spoked Solid
Machine set-up Set-ups P180.00 200 800
Assembly / Polish Labor hours P4.00 40,000 30,000
Inspection Inspections P20.00 100 1,100
Total production 10,000 10,000

59. How much is the total overhead assigned to spoked product?

a. P286,000 c. P242,000
b. P198,000 d. P484,000

60. How much is the total overhead assigned to solid product?

a. P286,000 c. P242,000
b. P198,000 d. P484,000

61. How much is the overhead cost per unit of solid product?
a. P28.60 c. P24.20
b. P19.80 d. P48.40

62. How much is the overhead cost per unit of spoked product?
a. P28.60 c. P24.20
b. P19.80 d. P48.40
63. How much is the estimated machine rental cost based on the chart below if the company operates
at 2,750 machine hours?
Cost Accounting Final Examination

a. 3,666.66 c. 3,750.00
b. 3,667.00 d. 3,600.00

64. What are the steps required for activity-based costing in administration?
a. Identify activities that consume resources.
b. Identify cost drivers associated with activities.
c. Compute activity rate per cost driver.
d. All of the above

65. Which of the following is true of activity-based costing relative to traditional costing?
a. It requires less detailed cost measures.
b. Accounting department alone can handle all the work.
c. It needs more cost pools
d. It is less costly to implement.

End of the Exam

Good Luck!!