Stretegic Cost Management
Stretegic Cost Management
PRELIM QUIZ 1
Period costs
=are expensed in the same period in which they are incurred
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
The term "relevant range" as used in cost accounting means the range over which
PRELIM QUIZ 2
Product costing in a manufacturing firm is the process of:?
= assigning costs to the firm's inventoryX
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
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.
= P235,000.X
When using normal costing, the total production cost of a job is composed of:?
= direct material, direct labor, and applied manufacturing overhead
When the number of units manufactured increases, the most significant change
in unit cost will be reflected as a
Product No
Cost Answer 1
Period Cost Yes
Answer 2
The indirect costs of converting raw material into finished goods are called
Overhead costs
Produc Answer 1
t Yes
Answer 2
Direct
Yes
Answer 3
Period
No
step cost
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
Management and financial accounting are used for which of the following
purposes?
A cost that remains constant in total but varies on a per-unit basis with changes
in activity is called a
fixed cost
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.
Throughout the accounting period, the right side of the Manufacturing Overhead
account is used to accumulate:?
overhead applied to Work-in-Process Inventory
When using normal costing, the total production cost of a job is composed of:?
direct material, direct labor, and applied manufacturing overhead
If direct materials used during the year were P135,000, what was cost of goods
manufactured?
=Some other amount.
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
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
=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
=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
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
The distinction between direct and indirect costs depends on whether a cost
= can be conveniently and physically traced to a cost object under consideration.
= 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.
MIDTERM QUIZ 1
The weighted average method separates beginning inventory and current
production to compute cost per unit of production
=FALSE
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
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
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
What was the materials cost of the work in process inventory at March 31?
=$7,500X
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
Material P75,600
Conversion 130,053
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
The numerator in the formula for equivalent units includes all beginning
inventory costs when using the weighted average costing assumption.
=TRUE
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.
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
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
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:
= P299,058
XYZ Manufacturing Inc. adds material at the start of production. The following production information is
available for September:
= 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
The FIFO method of process costing will produce the same cost of goods transferred out amount as the
weighted average method when