COST ACCOUNTING AND CONTROL

Quizzer No. 1

1. The relationship between cost and activity is termed:

a. cost estimation
b. cost prediction
c. cost behavior
d. cost analysis

2. Which of the following costs changes in direct proportion to a change in the activity level?
a. Variable cost
b. Fixed cost
c. Semi-variable cost
d. Step-variable cost

3. Plaza Corporation observed that when 25,000 units were sold, a particular cost amounted to P70,000,
or P2.80 per unit. When volume increased by 15%, the cost totaled P80,500 (i.e., P2.80 per unit). The
cost that Plaza is studying can best be described as a:
a. variable cost
b. fixed cost
c. semi-variable cost
d. discretionary fixed cost

4. A company observed a decrease in the cost per unit. All other things being equal, which of the
following is probably true?
a. The company is studying a variable cost, and total volume has increased.
b. The company is studying a variable cost, and total volume has decreased.
c. The company is studying a fixed cost, and total volume has increased.
d. The company is studying a fixed cost, and total volume has decreased.

5. The following statement that best describes a fixed cost is:

a. it may change in total when such change depends on production within the relevant range
b. it increases on a per-unit basis as production increases
c. it decreases on a per-unit basis as production increases
d. it may change in total when such change is related to changes in production
e. it is constant per unit of production

(AICPA Adapted)

6.The term "relevant range" as used in cost accounting means the range over which:
a. cost relationships are valid
b. production may vary
c. relevant costs are incurred
d. costs may fluctuate
e. none of the above

(AICPA Adapted)

7. What type of cost exhibits the behavior that follows?

Manufacturing Total Cost
Volume (Units) Cost Per Unit
50,000 P150,000 P3.00
80,000 150,000 1.88

a. Variable cost
b. Fixed cost
c. Semi-variable cost
d. Step-variable cost

8. When graphed, a typical variable cost appears as:

a. a horizontal line
b. a vertical line
c. a u-shaped line

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 d. a diagonal line that slopes downward to the right
e. a diagonal line that slopes upward to the right

9.Norman Company pays a sales commission of 5% on each unit sold. If a graph is prepared, with the
vertical axis representing per-unit cost and the horizontal axis representing units sold, how would a
line that depicts sales commissions be drawn?
a. As a straight diagonal line, sloping upward to the right.
b. As a straight diagonal line, sloping downward to the right.
c. As a horizontal line.
d. As a vertical line.

10.The term "variable costs" refers to:

a. all costs whose total amounts change in proportion to changes in activity within a relevant range
b. all costs that are likely to respond to the amount of attention devoted to them by a specified
manager
c. all costs that are associated with marketing, shipping, warehousing, and billing activities
d. all costs that do not change in total for a given period and relevant range, but become progressively
smaller on a per-unit basis as volume increases
e. all manufacturing costs incurred to produce units of output

(ICMA Adapted)

11. Which of the following choices denotes the typical cost behavior of advertising and sales
commissions?
Advertising Sales Commissions
a. Variable Variable
b. Variable Fixed
c. Fixed Variable
d. Fixed Fixed

12.When the number of units manufactured increases, the most significant change in average unit cost will
be reflected as:
a. a decrease in the variable element
b. a decrease in the nonvariable element
c. an increase in the semivariable element
d. an increase in the variable element
e. an increase in the nonvariable element

(CIA Adapted)

13. A cost that has both fixed and variable component is termed a:
a. step-fixed cost
b. step-variable cost
c. semi-variable cost
d. curvilinear cost

14. A mixed cost is often known as a:

a. semi-variable cost
b. step-fixed cost
c. variable cost
d. curvilinear cost

15. Which of the following are examples of a mixed cost?

I. A building that is used for both manufacturing and sales activities.

II. An employee's compensation, which consists of a flat salary plus a commission.
III. Depreciation that relates to five different machines.
IV. Maintenance cost that must be split between sales and administrative offices.

a. I only
b. II only
c. I and III

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 d. I, III, and IV

16. The relevant range is that range of activity:

a. where a company achieves its maximum efficiency.
b. where units produced equal units sold.
c. where management expects the firm to operate.
d. where the firm will earn a profit.

17. Within the relevant range, a curvilinear cost function can sometimes be graphed as a:
a. straight line
b. vertical line
c. curved line
d. horizontal line

18.The technique that can be used to determine the variable and fixed portions of a company's costs is:
a. scattergraph method
b. poisson analysis
c. linear programming
d. game theory
e. queuing theory

(AICPA Adapted)

19.The number of variables used in simple regression analysis is:

a. two
b. three
c. more than three
d. three or less
e. one

(AICPA Adapted)

20. Which of the following is not an example of a committed fixed cost?

a. Property taxes
b. Depreciation on buildings
c. Salaries of management personnel
d. Outlays for advertising programs

21. Committed fixed costs would include:

a. advertising
b. research and development
c. depreciation on buildings and equipment
d. contributions to charitable organizations

22. Amounts spent for charitable contributions are an example of a(n):

a. committed fixed cost
b. committed variable cost
c. discretionary fixed cost
d. discretionary variable cost

23. Which type of fixed cost (1) tends to be more long-term in nature and (2) can be cut back more easily
in bad economic times without doing serious harm to organizational goals and objectives?
Long Term in Can be Cut Back More Easily In
Nature Bad Economic Times
a. Committed Committed
b. Committed Discretionary
c. Discretionary Committed
d. Discretionary Discretionary

24.The appropriate range for the coefficient of correlation (r) is:

a. -infinity  r  infinity
b. 0  r  1

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 c. -1  r  1
d. -100  r  100
e. none of the above

(AICPA Adapted)

25.The covariation between two variables, such as direct labor hours and electricity expense, can best be
measured by:
a. correlation analysis
b. simple regression analysis
c. multiple regression analysis
d. high-low method
e. scattergraph method

(AICPA Adapted)

26.The quantitative method that will separate a semivariable cost into its fixed and variable components
with the highest degree of precision is:
a. simplex method
b. least squares method
c. scattergraph method
d. account analysis
e. high-low method

(AICPA Adapted)

27.Multiple regression analysis involves the use of:

Dependent Independent
Variables Variables
A. 1 none
B. 1> 1
C. 1> 1>
D. 1 1>

(AICPA Adapted)

28. Which of the following techniques is not used to analyze cost behavior?
a. Least-squares regression
b. High-low method
c. Multiple regression
d. Linear programming

29. The high-low method and least-squares method are used by accountants to:
a. evaluate divisional managers for purposes of raises and promotions
b. choose among alternative courses of action
c. maximize output
d. estimate costs

30.As a result of analyzing the relationship of total factory overhead to changes in machine hours, the
following relationship was found:

Y = P1,000 + P2x

The “Y” in the equation is an estimate of:

a. total factory overhead
b. total fixed costs
c. total machine costs
d. total variable costs

(ICMA Adapted)

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31.Using the same data in No. 30, the P2 in the equation is an estimate of:
a. fixed costs per machine hour
b. total fixed costs
c. variable costs per machine hour
d. total variable costs

(ICMA Adapted)

32.Using the same data in No. 31, the use of such a relationship of total factory overhead to changes in
machine hours is said to be valid only within the relevant range, which means:
a. within the range of reasonableness as judged by the department supervisor
b. within the budget allowance for overhead
c. within a reasonable peso amount for machine costs
d. within the range of observations of the analysis

(ICMA Adapted)

Use the following to answer questions 33 and 34:

Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee
each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of P360
in March; in May, the firm paid P280 for 5,000 copies. The company uses the high-low method to
analyze costs.

33. Swanson's variable cost per copy is:

a. P0.040
b. P0.051
c. P0.053
d. P0.056

34. Swanson's monthly fixed fee is:

a. P80
b. P102
c. P106
d. P112

Use the following to answer questions 35 to 37:

Atlanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine
hours best explain the company's utilities cost. The company's relevant range of activity varies from
a low of 600 machine hours to a high of 1,100 machine hours, with the following data being available
for the first six months of the year:

Month Utilities Machine Hours

January P 8,700 800
February 8,360 720
March 8,950 810
April 9,360 920
May 9,625 950
June 9,150 900

35. The variable utilities cost per machine hour is:

a. P0.18
b. P4.50
c. P5.00
d. P5.50

36. The fixed utilities cost per month is:

a. P3,764
b. P4,400
c. P4,760

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 d. P5,100

37. Using the high-low method, the utilities cost associated with 980 machine hours would be:
a. P9,510
b. P9,660
c. P9,700
d. P9,790

38. Hitchcock, Inc., uses the high-low method to analyze cost behavior. The company observed that at
12,000 machine hours of activity, total maintenance costs averaged P7.00 per hour. When activity
jumped to 15,000 machine hours, which was still within the relevant range, the average cost per
machine hour totaled P6.40. On the basis of this information, the variable cost per machine hour was:
a. P4.00
b. P6.40
c. P6.70
d. P7.00

39. Northridge, Inc., uses the high-low method to analyze cost behavior. The company observed that at
20,000 machine hours of activity, total maintenance costs averaged P10.50 per hour. When activity
jumped to 24,000 machine hours, which was still within the relevant range, the average cost per
machine hour totaled P9.75. On the basis of this information, the company's fixed maintenance costs
were:
a. P24,000
b. P90,000
c. P210,00
d. P234,000

Use the following to answer questions 40 to 42:

Yang Manufacturing, which uses the high-low method, makes a product called Yin. The company
incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,500
units and 10,000 units per month. Per-unit costs at two different activity levels for each cost type are
presented below.

Type A Type B Type C Total

5,000 units P4 P9 P4 P17
7,500 units P4 P6 P3 P13

40. The cost types shown above are identified by behavior as:
Type A Type B Type C
a. Fixed Variable Semivariable
b. Fixed Semivariable Variable
c. Variable Semivariable Fixed
d. Variable Fixed Semivariable

41. If Yang produces 10,000 units, the total cost would be:
a. P90,000
b. P100,000
c. P110,000
d. P125,000

42. The cost formula that expresses the behavior of Yang's total cost is:
a. Y = P20,000 + P13X
b. Y = P40,000 + P9X
c. Y = P45,000 + P4X
d. Y = P60,000 + P5X

43. In regression analysis, the variable that is being predicted is known as the:
a. independent variable
b. dependent variable
c. explanatory variable
d. interdependent variable

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44. Mohawk Products has determined that the number of machine hours worked (MH) drives the amount
of factory overhead incurred (FOH). On the basis of this relationship, a staff analyst has constructed
the following regression equation:

FOH = 240,000 + 8MH

Which of the choices correctly depicts the nature of Mohawk's variables?

Dependent Independent
a. FOH FOH
b. FOH MH
c. MH FOH
d. MH MH

45. Boulder, Inc., recently conducted a least-squares regression analysis to predict selling expenses. The
company has constructed the following regression equation: Y = 329,000 + 7.80X. Which of the
following statements is false if the primary cost driver is number of units sold?
a. The company anticipates P329,000 of fixed selling expenses.
b. "Y" represents total selling expenses.
c. The company expects both variable and fixed selling expenses.
d. "X" represents the number of hours worked during the period.

46. Tempe, Inc., is studying marketing cost and sales volume, and has generated the following
information by use of a scatter diagram and a least-squares regression analysis:
Scatter Diagram Regression Analysis
Variable cost per unit sold P6.50 P6.80
Total monthly fixed cost P45,000 P42,500

Tempe is now preparing an estimate for monthly sales of 18,000 units. On the basis of the data
presented, compute the most accurate sales forecast possible.
a. P159,500
b. P162,000
c. P164,900
d. P167,400

47. Waller Enterprises has determined that three variables play a key role in determining company
revenues. To arrive at an objective forecast of revenues for the next accounting period, Waller should
use:
a. simple regression
b. multiple regression
c. a scatter diagram
d. high-low method

48. Which of the following costing methods of valuation are acceptable in a job order costing system?

Actual Standard Actual Predetermined

Material Material Labor Overhead
Cost Cost Cost Cost
a. yes yes no yes
b. yes no yes no
c. no yes yes yes
d. yes yes yes yes

49. A credit to Work in Process Inventory represents

a. work still in process.
b. raw material put into production.
c. the application of overhead to production.
d. the transfer of completed items to Finished Goods Inventory.

50. Total manufacturing costs for the year plus beginning Work in Process Inventory cost equals
a. cost of goods manufactured in the year.
b. ending Work in Process Inventory.

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 c. total manufacturing costs to account for.
d. cost of goods available for sale.

51. Direct labor is a:

Conversion Cost Manufacturing Cost Prime Cost

A. Yes Yes Yes
B. No Yes Yes
C. No No No
D. No No Yes
E. Yes Yes No

(AICPA Adapted)

52.A factory overhead cost:

a. is a direct cost
b. is a prime cost
c. can be a variable cost or a fixed cost
d. can only be a fixed cost

(AICPA Adapted)

53.Indirect materials are a(n):

a. fixed cost
b. irrelevant cost
c. factory overhead cost
d. direct cost

(AICPA Adapted)

54.Wages of the security guard for a small plant are an example of:

Fixed Factory
Indirect Labor Overhead
A. No Yes
B. No No
C. Yes Yes
D. Yes No

55. Wages paid to factory machine operators of a manufacturing plant are an element of:

Prime Cost Conversion Cost

A. Yes No
B. Yes Yes
C. No No
D. No Yes

(AICPA Adapted)

56. In job order costing, payroll taxes paid by the employer for factory employees are commonly
accounted for as
a. direct labor cost
b. manufacturing overhead cost
c. indirect labor cost
d. administrative cost

57. The logical explanation for an entry that includes a debit to Manufacturing Overhead control and a
credit to Prepaid Insurance is
a. the insurance company sent the company a refund of its policy premium.
b. overhead for insurance was applied to production.
c. insurance for production equipment expired.
d. insurance was paid on production equipment.

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58. The journal entry to apply overhead to production includes a credit to Manufacturing Overhead control
and a debit to
a. Finished Goods Inventory
b. Work in Process Inventory
c. Cost of Goods Sold
d. Raw Material Inventory

59. The term "conversion costs" refers to:

a. costs that are associated with marketing, shipping, warehousing, and billing activities
b. the sum of direct labor costs and all factory overhead costs
c. the sum of direct materials costs and direct labor costs
d. manufacturing costs incurred to produce units of output

(ICMA Adapted)

60. Production overhead does not include the costs of

a. factory depreciation and supplies
b. factory employees’ cafeteria departments
c. production line workers
d. the maintenance department for the factory

61. The journal entry to record the incurrence and payment of overhead costs for factory insurance
requires a debit to
a. Cash and a credit to Manufacturing Overhead.
b. Manufacturing Overhead and a credit to Accounts Payable.
c. Manufacturing Overhead and a credit to Cash.
d. Work in Process Inventory and a credit to Cash.

62. Overapplied overhead would result if

a. the plant were operated at less than normal capacity.
b. overhead costs incurred were less than costs charged to production.
c. overhead costs incurred were unreasonably small in relation to units produced.
d. overhead costs incurred were greater than costs charged to production.

63. Saitama Company manufactures tables. If raw material used was P80,000 and Raw Material Inventory
at the beginning and end of the period, respectively, was P17,000 and P21,000, what was amount of
raw material was purchased?
a. P76,000
b. P118,000
c. P84,000
d. P101,000

64. Nami Company manufactures computer stands. What is the beginning balance of Finished Goods
Inventory if Cost of Goods Sold is P107,000; the ending balance of Finished Goods Inventory is
P20,000; and Cost of Goods Manufactured is P50,000 less than Cost of Goods Sold?
a. P70,000
b. P77,000
c. P157,000
d. P127,000

65. Yusop Products has no WIP or FG inventories at the close of business on December 31, 2020. The
balances of Yusop’s accounts as of December 31, 2016, are as follows:

Cost of goods sold-unadjusted P 2,040,000

Factory overhead-control 700,000
Selling & administrative expenses 900,000
Factory overhead-applied 648,000
Sales 3,600,000

Pretax income for 2020 is

a. P 608,000

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 b. P 660,000
c. P 712,000
d. P 620,000

66. Eiji Company has the following data on April 30, 2020:

April manufacturing overhead P 30,101.80

Decrease in ending inventories
Materials 2,430.00
Goods in process 590.00
Increase in ending inventory:
Finished goods 1,320.40

The manufacturing overhead amounts to 50% of the direct labor and the direct labor and
manufacturing, combined equal 50% of the total cost of manufacturing. All materials are purchased
FOB shipping point.

What is the cost of goods manufactured?

a. P 180,610.80
b. P 181,200.80
c. P 182,300.00
d. P 183,200.80

67. Milagrosa Manufacturing Company manufactured 50,000 kilos of compound BB in 2020 at the
following costs:

Beginning work in process P 88,125

Materials (10% indirect) 182,500
Labor (7% indirect) 242,500
Ending work in process 67,500
Factory overhead 125% of DLC

The cost of goods manufactured is

a. P651,056
b. P692,306
c. P706,906
d. P727,531

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