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Stretegic Cost Management

This document contains quiz questions and answers related to strategic cost management and accounting. Some key points covered include: - Period costs are expensed in the period they are incurred. - Management accounting information is budgeted, informative and adaptable. - Cost of goods manufactured was P1,470,000 and cost of goods sold was P1,540,000 based on provided inventory and production cost data. - Overhead costs are accumulated on the right side of the manufacturing overhead account throughout the accounting period.

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Collin Madriaga
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0% found this document useful (0 votes)
236 views23 pages

Stretegic Cost Management

This document contains quiz questions and answers related to strategic cost management and accounting. Some key points covered include: - Period costs are expensed in the period they are incurred. - Management accounting information is budgeted, informative and adaptable. - Cost of goods manufactured was P1,470,000 and cost of goods sold was P1,540,000 based on provided inventory and production cost data. - Overhead costs are accumulated on the right side of the manufacturing overhead account throughout the accounting period.

Uploaded by

Collin Madriaga
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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STRETEGIC COST MANAGEMENT

PRELIM QUIZ 1
Period costs
=are expensed in the same period in which they are incurred

In comparing financial and management accounting, which of the following


more accurately describes management accounting information?
=budgeted, informative, adaptable

One major difference between financial and management accounting is that


=All of the answers correct

Plastic used to manufacture dolls is a


=PRODUCT COSY = YES

=DIRECT COST = YES

=FIXED COST = NOS

Internal reports must be communicated


=As needed

Which of the following costs would be considered overhead in the production of


chocolate chip cookies?
=oven electricity

Which of the following statements about cost accounting is not true?


=Its generated information is not important to any company

A tailoring company has gathered information on utility costs for the past year.
The accountant has decided that utilities are a function of the hours worked
during the month. The following information is available and representative of
the company's utility costs:
Hours worked Utility cost incurred
Low point 1,300P 903
High point 1,680 1,074
If 1,425 hours are worked in a month, total utility cost (rounded to the
nearest peso) using the high-low method should be
=P 954X

= P 947X

Managerial accounting is most concerned with meeting the needs of internal


users.
=TRUE

The term "relevant range" as used in cost accounting means the range over which

=cost relationships are valid

PRELIM QUIZ 2
Product costing in a manufacturing firm is the process of:?
= assigning costs to the firm's inventoryX

= allocating costs among the firm's departmentsX


=accumulating the company's period costsX

Throughout the accounting period, the right side of the Manufacturing Overhead
account is used to accumulate:?
= actual manufacturing overhead costsX
The left side of the Manufacturing Overhead account is used to accumulate:?
= actual manufacturing overhead costs incurred throughout the accounting
period

The assignment of direct labor cost to individual jobs is based on:


=the actual time spent on each job multiplied by the wage rate

The accounting records of PQR Manufacturing Company revealed the following


costs:
Direct materials used, P250,000
Direct labor, P425,000
Manufacturing overhead, P375,000
Selling and administrative expenses, P220,000

Georgia's product costs total:?


= P1,050,000.

For the year just ended, DDD Corporation's manufacturing costs (raw materials
used, direct labor, and manufacturing overhead) totaled P1,500,000. Beginning
and ending work-in-process inventories were P60,000 and P90,000, respectively.
Cole's balance sheet also revealed respective beginning and ending finished-
goods inventories of P250,000 and P180,000. On the basis of this information,
how much would the company report as cost of goods manufactured (CGM) and
cost of goods sold (CGS)?
= CGM, P1,470,000; CGS, P1,540,000.

WX Appliance Manufacturing Company produces washers and dryers in an


assembly-line process. Labor costs incurred during a recent period were:
Corporate executives, P500,000
Assembly-line workers, P180,000
Security guards, P45,000
Plant supervisor, P110,000
The total of Lake's direct labor cost was:?
= P735,000.X

= P235,000.X

ABC Manufacturing Company applies overhead based on machine hours. At the


beginning of 20xx, the company estimated that manufacturing overhead would
be P500,000, and machine hours would total 20,000. By 20xx year-end, actual
overhead totaled P525,000, and actual machine hours were 25,000. On the
basis of this information, the 20xx predetermined overhead rate was:?
= P25 per machine hour.

When using normal costing, the total production cost of a job is composed of:?
= direct material, direct labor, and applied manufacturing overhead

UV Manufacturing Company recently computed total product costs of P567,000


and total period costs of P420,000, excluding P35,000 of sales commissions that
were overlooked by the company's administrative assistant. On the basis of this
information, Yang's income statement should reveal operating expenses of:?
=P455,000.

Planning is a function that involves


=Setting goals and objectives of the company

When the number of units manufactured increases, the most significant change
in unit cost will be reflected as a

=increase in the fixed elementX

= increase in the mixed elementX

Financial statements for external users can be described as


=General purpose
A selling cost is a

Product No
Cost Answer 1
Period Cost Yes
Answer 2

Financial accounting is most concerned with addressing the needs of individual


departments of the company
=FALSE

The indirect costs of converting raw material into finished goods are called
Overhead costs

DEF Corporation uses a predetermined overhead application rate of P0.30 per


direct labor hour. During the year it incurred P345,000 dollars of actual
overhead, but it planned to incur P360,000 of overhead. The company applied
P363,000 of overhead during the year. How many direct labor hours did the
company plan to incur?
=1,200,000

ABC Company is a construction company that builds houses on special request.


What is the proper classification of the carpenters' wages?

Produc Answer 1
t Yes

Answer 2
Direct
Yes

Answer 3
Period
No

Internal reports must be communicated


As needed
Which of the following would generally be considered a fixed factory overhead
cost?

Factory Insurance Yes


Answer 1
Units-of-production No
depreciation Answer 2
Straight-line depreciation Yes
Answer 3

Financial accounting is most concerned with meeting the needs of external


users.
True

A ____ cost increases or decreases in intervals as activity changes

step cost

Information from financial accounting is primarily used for reporting and


communicating to
External parties

Which of the following always has a direct cause-effect relationship to a cost?

Cost driver Yes


Answer 1
Predictor No
Answer 2

Managerial accounting is most concerned with addressing the needs of the


company as a whole.
False

ABC Corporation has the following data for use of its machinery.
Using the high-low method, compute the variable cost element.
P1.02 (wrong)
=P1.31X

Which of the following is not a product cost component?


commission on the sale of a product

Management and financial accounting are used for which of the following
purposes?

Management Accounting Internal


Answer 1
Financial Accounting External
Answer 2

A cost that remains constant in total but varies on a per-unit basis with changes
in activity is called a
fixed cost

Which of the following defines variable cost behavior?


Total cost reaction Cost per unit reaction to increase in activity to increase in
activity

increases remains constant

Which of the following costs would be considered overhead in the production of


chocolate chip cookies?
oven electricity
In comparing financial and management accounting, which of the following
more accurately describes management accounting information?
budgeted, informative, adaptable

Which of the following statements is false?


Two primary trademarks of cost and management accounting are
standardization of procedures and use of generally accepted accounting
principles.

Which of the following statements is true?


Cost accounting is a subset of both management and financial accounting.

Which of the following statements about cost accounting is not true?


Its generated information is not important to any company

For the year just ended, DDD Corporation's manufacturing costs (raw materials
used, direct labor, and manufacturing overhead) totaled P1,500,000. Beginning
and ending work-in-process inventories were P60,000 and P90,000, respectively.
Cole's balance sheet also revealed respective beginning and ending finished-
goods inventories of P250,000 and P180,000. On the basis of this information,
how much would the company report as cost of goods manufactured (CGM) and
cost of goods sold (CGS)?
CGM, P1,470,000; CGS, P1,540,000.

AAA Manufacturing Company reported a cost of goods manufactured of


P520,000, with the firm's year-end balance sheet revealing work in process and
finished goods of P70,000 and P134,000, respectively. If supplemental
information disclosed raw materials used in production of P80,000, direct labor
of P140,000, and manufacturing overhead of P240,000, the company's
beginning work in process must have been:?
P130,000.

Throughout the accounting period, the right side of the Manufacturing Overhead
account is used to accumulate:?
overhead applied to Work-in-Process Inventory

Which of the following is the correct method to calculate a predetermined


overhead rate?
Budgeted overhead cost budgeted amount of cost driver

When using normal costing, the total production cost of a job is composed of:?
direct material, direct labor, and applied manufacturing overhead

Use the given figure below to answer the question.

If direct materials used during the year were P135,000, what was cost of goods
manufactured?
=Some other amount.

As production takes place, all manufacturing costs are added to the:?


Work-in-Process Inventory account

DEF Manufacturing Company, which applies overhead at the rate of 190% of


direct material cost, began work on job no. 101 during June. The job was
completed in July and sold during August, having accumulated direct material
and labor charges of P27,000 and P15,000, respectively. On the basis of this
information, the total overhead applied to job no. 101 amounted to:?
P51,300.

If purchases of raw materials were P135,000 during the year, what was the
amount of raw materials used during the year?
P140,800
Manufacturing overhead:?
= is a pool of indirect production costs that must somehow be attached to each unit manufactured

If a company sells goods that cost P95,800 for P110,170, the firm will:?
= report sales revenue on the balance sheet of P110,170X

= reduce Finished-Goods Inventory by P110,170X

GHI Manufacturing Company charges manufacturing overhead to products by


using a predetermined application rate, computed on the basis of machine
hours. The following data pertain to the current year:
Budgeted manufacturing overhead: P480,000
Actual manufacturing overhead: P440,000
Budgeted machine hours: 20,000
Actual machine hours: 16,000
Overhead applied to production totaled:
= P384,000.

The accounting records of XYZ Manufacturing Company revealed the following


costs, among others:

Costs that would be considered in the calculation of manufacturing overhead


total:
= P171,000X
=P186,000X

Multimedia Arts Inc., an advertising agency, applies overhead to jobs on the


basis of direct professional labor hours. Overhead was estimated to be
P150,000, direct professional labor hours were estimated to be 15,000, and
direct professional labor cost was projected to be P225,000. During the year,
Media incurred actual overhead costs of P146,000, actual direct professional
labor hours of 14,500, and actual direct labor cost of P222,000. By year-end, the
firm's overhead was:?
= P1,000 underapplied.

ABC Corporation uses a predetermined overhead rate of P20 per machine hour.
In deriving this figure, the company's accountant used:?
= a denominator of actual machine hours for the previous accounting periodX

=a numerator of budgeted machine hours for the current accounting periodX

=numerator of actual machine hours for the current accounting periodX

AA Industries began July with a finished-goods inventory of P48,000. The


finished-goods inventory at the end of July was P56,000 and the cost of goods
sold during the month was P125,000. The cost of goods manufactured during
July was:?
=P133,000.

The accounting records of ST Manufacturing Company revealed the following


selected costs:
Sales commissions, P65,000
Factory supervision, P190,000
Administrative expenses, P185,000

Reynolds's period costs total:?


=P440,000.X

=P255,000.X

Glass Industries reported the following data for the year just ended: sales
revenue, P1,750,000; cost of goods sold, P980,000; cost of goods manufactured,
P560,000; and selling and administrative expenses, P170,000. Glass' net income
would be:?
=P600,000.

If raw materials used during the year were P135,000 what was the amount of
raw materials used during the year?
=P129,200

The accounting records of BBB Manufacturing Company revealed the following


information:

BBB's cost of goods manufactured is:


=P571,000X
= Some other amount. X
=P522,000X

JKL Manufacturing Company uses a predetermined overhead application rate of


P8 per direct labor hour. A review of the company's accounting records for the
year just ended discovered the following:
Underapplied manufacturing overhead: P7,200
Actual manufacturing overhead: P392,000
Budgeted labor hours: 50,000
Simone's actual labor hours worked totaled:
=50,900X

=49,100X

=49,900X

MNO Manufacturing Company worked on four jobs during its first year of
operation: nos. 401, 402, 403, and 404. A review of job no. 403's cost record
revealed direct material charges of P40,000, direct labor cost of P4,000 and total
manufacturing costs of P50,000. If Trenton applies overhead at 150% of direct
labor cost, the overhead applied to job no. 403 must have been:?
=P6,000

The accounting records of CCC Manufacturing Company revealed the following


information:
Dolphin's cost of goods sold is:
=P508,000X
= P529,000X
=553,000X

PRELIM EXAM
GHI Corporation has developed the following flexible budget formula for monthly
overhead
For output of less than 200,000 units:P36,600 + P.80(units)
For output of 200,000 units or more:P43,000 + P.80(units)
How much overhead should Jordan expect if the firm plans to produce 200,000
units
= P52,600X

Which of the following statements about management or financial accounting is


false?
= Management accounting should be flexible.X

Which one of the following alternatives correctly classifies the business


application to the appropriate costing system?
= Job Order Costing System; Process CostingX

The distinction between direct and indirect costs depends on whether a cost
= can be conveniently and physically traced to a cost object under consideration.

Generally speaking, cost accounting can be defined as a

= Internal reporting system that provides product costing and other information
used by managers in performing their functions.

Manufacturing overhead:?
= includes direct materials, indirect materials, indirect labor, and factory
depreciationX
ABC Corporation has the following data for use of its machinery.
Use the high-low method, compute the fixed cost element (to the nearest whole
peso)
= P138

ABC Company develops 35mm film using a four-step process that moves
progressively through four departments. The company specializes in overnight
service and has the largest drug store chain as its primary customer. Currently,
production costs are being accumulated by department. The product cost
system that best describes the system ABC Company is using is
=Activity based costingX

Financial accounting and cost accounting are both highly concerned with
=Determining product cost.

Cost accounting serves as a bridge between financial and managerial


accounting
=TRUE

MIDTERM QUIZ 1
The weighted average method separates beginning inventory and current
production to compute cost per unit of production
=FALSE

Doz Corporation uses the weighted-average method in its process costing


system. This month, the beginning inventory in the first processing department
consisted of 600 units. The costs and percentage completion of these units in
beginning inventory were:

A total of 5,000 units were started and 4,200 units were transferred to the
second processing department during the month. The following costs were
incurred in the first processing department during the month:

The ending inventory was 75% complete with respect to materials and 35%
complete with respect to conversion costs.
What are the equivalent units for conversion costs for the month in the first
processing department?
=4,690
XYZ Company uses a weighted average process costing system. Material is
added at the start of production. XYZ Company started 13,000 units into
production and had 4,500 units in process at the start of the period that were 60
percent complete as to conversion costs. If XYZ Company transferred out 11,750
units, how many units were in ending Work in Process Inventory?
=3,500X

Doz Corporation uses the weighted-average method in its process costing


system. This month, the beginning inventory in the first processing department
consisted of 600 units. The costs and percentage completion of these units in
beginning inventory were:

A total of 5,000 units were started and 4,200 units were transferred to the
second processing department during the month. The following costs were
incurred in the first processing department during the month:

The ending inventory was 75% complete with respect to materials and 35%
complete with respect to conversion costs.
How many units are in ending work in process inventory in the first processing
department at the end of the month?
=1,400

Safia Corporation uses the weighted-average method in its process costing


system. The Fitting Department is the second department in its production
process. The data below summarize the department's operations in March.
The Fitting

Department's cost per equivalent unit for conversion cost for March was $4.70.
How much conversion cost was assigned to the units transferred out of the
Fitting Department during March?
=$297,886.00X

Soft Clothing Company makes fabric-covered hatboxes. The company began July
with 500 boxes in process that were 100 percent complete as to cardboard, 80
percent complete as to cloth, and 60 percent complete as to conversion costs.
During the month, 3,300 boxes were started. On April 30, 350 boxes were in
process (100 percent complete as to cardboard, 70 percent complete as to cloth,
and 55 percent complete as to conversion costs). Using the FIFO method, what
are equivalent units for cloth?
=3,395X

Colby Company has a process costing system in which the weighted-average


method is used. The company adds all materials at the beginning of the process
in the Molding Department, which is the first of two stages of its production
process. Information concerning the materials used in the Molding Department
during March is as follows:

What was the materials cost of the work in process inventory at March 31?
=$7,500X

How many units must be accounted for?


=130,000

Camelin Inc. uses the weighted-average method in its process costing system.
The following data concern the operations of the company's first processing
department for a recent month.
Using the weighted-average method, determine the equivalent units of
production for materials and conversion costs.
Materials ; Conversion
=$19,800 ; $19,800X
=$5,150 ; $5,080
ABC Company transferred 5,500 units to Finished Goods Inventory during
October. On October 1, the company had 300 units on hand (40 percent
complete as to both material and conversion costs). On October 31, the
company had 800 units (10 percent complete as to material and 20 percent
complete as to conversion costs). The number of units started and completed
during October was
=5,200.

MNL Company uses a weighted average process costing system and started
30,000 units this month. MNL had 12,000 units that were 20 percent complete
as to conversion costs in beginning Work in Process Inventory and 3,000 units
that were 40 percent complete as to conversion costs in ending Work in Process
Inventory. What are equivalent units for conversion costs?
=40,800X

XYZ Manufacturing Inc. adds material at the start of production. The following
production information is available for September:
Beginning Work in Process Inventory (45% complete as to conversion) 10,000
units
Started this period 120,000 units
Ending Work in Process Inventory (80% complete as to conversion) 8,200 units
Beginning Work in Process Inventory Costs:

 Material P24,500
 Conversion 68,905

Current Period Costs:

 Material P75,600
 Conversion 130,053

What is the total cost to account for?


=P205,653X

In a process costing system using the weighted average method, cost per
equivalent unit for a given cost component is found by dividing which of the
following by EUP?
=current period cost plus the cost of ending inventoryX
Material is added at the beginning of a process in a process costing system. The
beginning Work in Process Inventory for the process was 30 percent complete as
to conversion costs. Using the FIFO method of costing, the number of equivalent
units of material for the process during this period is equal to the
=units started and completed this period plus the units in ending Work in
Process Inventory.

Avignon Inc. uses the weighted-average method in its process costing system.
The following data concern the operations of the company's first processing
department for a recent month.
Determine the cost of ending work in process inventory.
Materials ; Conversion

=$103,872 ; $360,126X

In a FIFO process costing system, which of the following are assumed to be


completed first in the current period?
=units started this periodX

Whitney Company uses the weighted-average method in its process costing


system. The following data were taken from the records of the first processing
department for a recent month.
What were the equivalent units of production for materials and for conversion
costs for the month?
Materials ; Conversion
=160 ; 150X

The numerator in the formula for equivalent units includes all beginning
inventory costs when using the weighted average costing assumption.
=TRUE

The weighted average method combines beginning inventory and current


production to compute cost per unit of production
=TRUE
The following data have been provided by Cutts Corporation, which uses the
weighted-average method in its process costing. The data are for the company's
Shaping Department for February.
Compute the equivalents units of production for both materials and conversion
costs for the Shaping Department for February using the weighted-average
method.
Materials ; Conversion
=$2,044 ; $2,020X

To compute equivalent units of production using the FIFO method of process


costing, work for the current period must be stated in units
=completed from beginning inventory, units started and completed during the
period, and units partially completed in ending inventory.

DaBest Pharmaceutical Company manufactures a product called DB Vitamins.


Direct materials are added at the beginning of the process, and conversion
activity occurs uniformly throughout production. The beginning work-in-process
inventory is 60% complete with respect to conversion; the ending work-in-
process inventory is 20% complete. The following data pertain to May:
Using the weighted-average method of process costing, the equivalent units of
direct materials total:
=75,000

The FIFO method of process costing will produce the same cost of goods
transferred out amount as the weighted average method when
=there is no beginning Work in Process Inventory.

Weighted average equivalent units of production (EUP) can be determined by


adding EUP's in ending work in process to units transferred out
=TRUE

JKL Corporation. has the following information for August:


All material is added at the start of the process and all finished products are
transferred out.
How many units were transferred out in August?
=18,000X
DaBest Pharmaceutical Company manufactures a product called DB Vitamins.
Direct materials are added at the beginning of the process, and conversion
activity occurs uniformly throughout production. The beginning work-in-process
inventory is 60% complete with respect to conversion; the ending work-in-
process inventory is 20% complete. The following data pertain to May:
Using the weighted-average method of process costing, the cost of
goods completed and transferred during May is:
=P249,560X

The weighted average costing method assumes that units in beginning


inventory are the first units transferred
=FALSE

Avignon Inc. uses the weighted-average method in its process costing system.
The following data concern the operations of the company's first processing
department for a recent month.
Determine the equivalent units of production
Materials ; Conversion
=720 ; 160X

MIDTERM QUIZ 2

How many units were started and completed in the period?


=TRUE

Process costing is most appropriate when manufacturing large batches of


homogenous products.
=TRUE
XYZ Manufacturing Inc. adds material at the start of production. The following
production information is available for September:
How many units were started and completed in the period?
=111,800

XYZ Manufacturing Inc. adds material at the start of production. The following
production information is available for September:
What is the cost of all units transferred out using the FIFO method?
=P204,624X

=P287,004X

The FIFO costing method assumes that units in beginning inventory are the first
units transferred.
=TRUE

XYZ Manufacturing Inc. adds material at the start of production. The following
production information is available for September:
ABC123 Company uses a FIFO process costing system. The company had 5,000
units that were 60 percent complete as to conversion costs at the beginning of
the month. The company started 22,000 units this period and had 7,000 units in
ending Work in Process Inventory that were 35 percent complete as to
conversion costs. What are equivalent units for material, if material is added at
the beginning of the process?
=18,000X

To compute equivalent units of production using the FIFO method of process


costing, work for the current period must be stated in units
=completed from beginning inventory, units started and completed during the
period, and units partially completed in ending inventory.

XYZ Manufacturing Inc. adds material at the start of production. The following
production information is available for September:
Soft Clothing Company makes fabric-covered hatboxes. The company began July
with 500 boxes in process that were 100 percent complete as to cardboard, 80
percent complete as to cloth, and 60 percent complete as to conversion costs.
During the month, 3,300 boxes were started. On April 30, 350 boxes were in
process (100 percent complete as to cardboard, 70 percent complete as to cloth,
and 55 percent complete as to conversion costs). Using the FIFO method, what
are equivalent units for cloth?
=3,295

Process costing is most appropriate when manufacturing large batches of homogenous products.

=true

XYZ Manufacturing Inc. adds material at the start of production. The following production information is
available for September:

What are the equivalent units for conversion using the FIFO method?

= 123,860

XYZ Manufacturing Inc. adds material at the start of production. The following production information is
available for September:

What is the total cost to account for?

= P299,058

XYZ Manufacturing Inc. adds material at the start of production. The following production information is
available for September:

How many units were started and completed in the period?

= 111,800

XYZ Manufacturing Inc. adds material at the start of production. The following production information is
available for September:

What is the conversion cost per equivalent unit using the FIFO method?

= P1.05
The FIFO method separates beginning inventory and current production to compute cost per unit of
production.

=true

To compute equivalent units of production using the FIFO method of process costing, work for the
current period must be stated in units

= completed from beginning inventory, units started and completed during the period, and units partially
completed in ending inventory.

The difference between EUP calculated using FIFO and EUP calculated using weighted average is the
equivalent units

= . residing in beginning Work in Process Inventory

The FIFO method of process costing will produce the same cost of goods transferred out amount as the
weighted average method when

=there is no beginning Work in Process Inventory.

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