Introduction to Cost Accounting

Part I
?When you should process costing techniques are used in assigning costs to products .1
a. In situations where standard costing techniques should not be used
b. If the product is composed of mass-produced homogeneous units
c. When production is only partially completed during the accounting period
d. If the product is manufactured on the basis of each order received

Under a job order system of cost accounting, Cost of Goods Sold is debited and Finished .2
:Goods is credited for a
a. .Transfer of materials to the factory
b. .Shipment of completed goods to the customer
c. .Transfer of completed production to the finished goods storeroom
d. Purchase of goods on account

:Cost accounting differs from financial accounting in that financial accounting .3

a. .Is mostly concerned with external financial reporting
b. .Is mostly concerned with individual departments of the company
c. .Provides the additional information required for special reports to management
d. Puts more emphasis on future operations

:Standard cost system is one .4

a. that provides a separate record of cost for each special -order product
b. that uses predetermined costs to furnish a measurement that helps management make
decisions regarding the efficiency of operations
c. that accumulates costs for each department or process in the factory
d. where costs are accumulated on a job cost sheet

Under a job cost system of accounting, the entry to distribute payroll to the appropriate .5
:accounts would be
a. Debit-Payroll Credit-Wages Payable
b. Debit-Work In Process Debit-Factory Overhead Debit-Selling and Administrative
Expense Credit-Payroll
c. Debit-Work In Process Debit-Finished Goods Debit-Cost of Goods Sold Credit-Payroll
d. Debit-Work in Process Debit-Factory Overhead Debit-Selling and Administrative
Expense Credit-Wages Payable

:An industry that would most likely use process costing procedures is .6
a. Beverage
b. Home Construction
c. Printing
d. Shipbuilding

:Payroll is debited and Wages Payable is credited to .7

 a. Pay the payroll taxes
b. Record the payroll
c. Pay the payroll
d. Distribute the payroll

S1: Cost accounting provides information for both management accounting and financial .8
accounting
professional
S2: Cost accounting measures and reports short-term, long-term, financial, and non-financial
.information
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

:Cost objects include .9

a. products
b. customers
c. departments
d. All of these answers are correct

?Which of the following statements about the direct/indirect cost classification is NOT true .10
a. .Direct costs are always traced
b. .Direct costs are always allocated
c. The design of operations affects the direct/indirect classification
d. The direct/indirect classification depends on the choice of cost object

:All of the following are true EXCEPT that indirect costs .11
a. may be included in prime costs
b. are not easily traced to products or services
c. vary with the selection of the cost object
d. may be included in manufacturing overhead

?Which statement is TRUE .12

a. .All variable costs are direct costs
b. .Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs
c. .All fixed costs are indirect costs
d. All direct costs are variable cost

:Cost allocation is .13

a. the process of tracking both direct and indirect costs associated with a cost object
b. the process of determining the actual cost of the cost object
c. the assignment of indirect costs to the chosen cost object
d. .a function of cost tracing
Planning for the long term goal or position of a business .14
a. Tactical Planning
b. Strategic Planning
c. Operations Planning
d. Statistical Planning

In determining whether planned goals are being met, a manager is performing the function .15
of
a. Planning
b. Controlling
c. Motivating
d. Follow-up

Part Il
Accounting systems are designed to .1
A. Analyze and interpret information
B. Allow managers to manage by exception
C. Provide information required to support decisions
D. Record and report business transactions

:Deciding whether to sell a product or process it further is an example of a(n) .2

A. Controlling activity
B. Operating activity
C. Planning activity
D. None of the given choices

Management accounting and cost accounting .3

A. .Are required for recordkeeping as are financial accounting and tax accounting
B. Provide cost information about products and services, as well as information about
.products services, as well as information for internal decision making
C. .Require an entirely separate group of accounts than financial accounting
D. .Focus solely on the determination of costs to produce a product or provide a service

Planning is a function that involves .4

A. Hiring the right people for a particular job
B. Coordinating the accounting information system
C. Setting goals and objectives for an entity
D. Analyzing financial statements

Management accounting information is generally prepared for .5

A. Stockholders
B. Creditors
C. Managers
 D. Regulatory agencies

?Which of the following is not a management function .6

A. Constraining
B. Planning
C. Controlling
D. Directing and motivating

Managerial accounting is applicable to .7

A. Service entities
B. Manufacturing entities
C. Merchandising entities
D. All of these

?Which of the following statements about cost accounting is not true .8

A. Is the intersection between financial and management accounting
B. Information generated by cost accounting is used by both financial and managerial
accounting
C. Cost accounting provides product cost information to internal parties such as managers
for planning and controlling
D. Cost accounting is not important to any company

Financial accounting information is used for reporting to .9

A. External parties
B. Investors
C. Creditors
D. Managers

?Which of the following statement is false .10

A. .Cost accounting is a tool of both financial and managerial accounting
B. Managerial accounting draws heavily on economics, statistics, operation research, and
.other disciplines as necessary in providing accounting and financial information
C. In management accounting, emphasis is given to identifying or matching costs with
.functions, projects, or responsibilities rather than with time periods
D. Financial accounting provides information to individuals within the business organization,
while management accounting provides information to parties outside the business
.entity

Financial and managerial accounting differ in a number of ways, In contrast to financial .11
.accounting. managerial accounting
A. .Focuses on providing data to external users
B. .Emphasizes relevance and flexibility rather than precision
C. Is mandatory
D. .Is governed by Generally Accepted Accounting Principles
In a broad sense, cost accounting can be defined within the accounting system as .12
A. Internal and external reporting that may be used in making non -routine decisions and in
developing plans and policies
B. .External reporting to the government, various outside parties, and stockholders
C. Internal reporting for use in management planning and control, and external reporting to
.the extent its product-costing function satisfies external reporting requirements
D. .Internal reporting for use in planning and controlling routing operations

?Which of the following statements is true .13

A. .The management information system is part of an organization's accounting system
B. The cost accounting system is part of an organization's overall accounting system
C. Management accounting accumulates cost information for both cost accounting financial
accounting
D. Two primary hallmarks of cost and management accounting are standardization of
.procedures and use of generally accepted accounting principles

Management accountants would not .14

A. Assist in budget planning
B. Prepare reports primarily for external users
C. Determine cost behavior
D. Be concerned with the impact of cost and volume on profits

Internal reports must be communicated .15

A. Daily
B. Monthly
C. Annually
D. As needed

COST CONCEPTS AND BEHAVIOR

EXERCISES
THEORIES

.S1. Cost is the same as an expense .1

.S2: All costs require at least an outlay of resources
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

:The term "relevant range" as used in cost accounting neans the range over which .2
 a. costs may fluctuate
b. cost relationships are valid
c. production may vary
d. relevant costs are incurred

Cost Estimation is the process of .3

a. estimating the relationship between costs and th cost drivers that cause those costs
b. documenting costs in terms of direct and indired costs
c. summarizing pasts costs into fixed and variable components
d. .all of the given choices

.S1: Product cost consists of the sum of prime costs and onversion cost .4
.S2: Period costs are found in both merchandising and manufacturing firms
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false

Indirect labor is a .5
a. Prime cost
b. Conversion cos
c. Period cost
d. Non-manufacturing cost

When the number of units manufactured increases, the most significant change in unit cost .6
will bereflected as a (an)
a. increase in the fixed element
b. decrease in the variable element
c. increase in the mixed element
d. decrease in the fixed element

Which of the following best describes a fixed cost .7

a. It may change in total when such change is unrelated to changes in production
b. It may change in total when such charge is related to changes in production
c. It is constant per unit of change in production
d. It may change in total when such change depends an production within the relevant
range

Property taxes on a company's factory building would be dassified as .8

a. Product cost
b. Period Cost
c. Variable Cost
d. Opportunity Cost
:All of the following are examples of product costs except .9
a. depreciation on the company's retail outlets
b. salary of the plant manager
c. insurance on the factory equipment
d. rental costs of the factory facility

Indirect Cost is also known as .10

a. Differential costs
b. Common costs
c. Opportunity costs
d. Sunk costs

For analysis purposes, the high-low method usually produces a (an) .11
a. reasonable estimate
b. precise estimate
c. overstated estimate
d. understated estimate

The high-low may give unsatisfactory results if .12

a. the data points all fall on a line
b. volume of activity is heavy
c. the points are not representative
d. volume of activity is light

Which of the following methods estimates costs bridentifying costs as variable or fixed on .13
?qualitative analysis
a. Regression Analysis
b. Account Analysis
c. Engineering Method
d. High-Low Method

:The engineering method of estimating costs .14

a. can be used to estimate for totally new actrities
b. can detail each step required to perform aroperation
c. sometimes can be quite expensive
d. all of the given choices are true

When using regression analysis to predict mixer cost behavior, which of the following would .15
?be the dependent variable
a. the highest level of activity
b. the lowest level of activity
c. the mixed cost at a given level of producion
d. the variable cost per unit
PROBLEMS

Problem 1
The following costs relate to TRIPLE A Company for the last quarter
.Direct Materials 000 ,534
.Prime Cost 1,000,000
Manufacturing Overhead 000 ,448
Selling Expenses 269,000
administrative expense 100,000

?What is TRIPLE A's Direct Labor and Conversion cost .1

?TRIPLE A's total manufacturing cost is .2
?TRIPLE A's total period cost is .3

Problem 2
An analysis of maintenance cost of LMNOP Company is given below
Hours Cost Hours x Cost Hours Squared
30 900 27,000 900
40 1,000 40,000 1,600
50 1,150 500 ,57 500 ,2
60 300 ,1 000 ,78 600 ,3

?Using the High-Low Method, how much is the LMNOP's fixed cost .4
?Using Least Squares Method, how much is the LMNOP's fixed cost .5

Problem 3
:The following data for the past 12 months of operations were provided below
Sum of DLHrs 426
Sum of Mixed Costs 7,911
Sum of the Hrs x Costs 207 ,284
Sum of the Mixed Cost Squared 62,583
Sum of DLHrs Squared 620 15

?The company uses the least-squares method, how much is the variable cost per unit .6
?How much is the company's fixed cost .7

Problem 4
In the FGH Manufacturing Company, at an activity level of 60, 000 machine hours, total
overhead costs were 164, 000. Of this amount, utilities were 30, 000 (all variable) and
.depreciation were 40, 000 (all fixed)
The balance of the overhead cost consisted of maintenance cost (mixed). At 80, 000 machine
.hours, maintenance costs were 106, 000
.Assume that all of the activity levels mentioned in this problem are within the relevant range

?The variable cost for maintenance per machine hour is .8

?The total fixed overhead costs for FGH is .9
1f 110, 000 machine hours are projected for the next period, the total overhead cost would .10
?be

Problem 5

:Data gathered by WXY Company regarding the first two quarters of operation are given below
1st Quarter 2nd Quarter
Sales 000 000 9 000 000 12
Cost of Sales 000 000 8 667 666 10
SellingExpenses 500 337 000 420
AdministrativeExpenses 000 270 000 320
OperatingIncome 500 392 333 593

The projected sale for the 3rd Quarter is expected to decline to 10 800 000 based on anticipated
.changes on economic and seasonal factors

?The projected selling expense for the 3rd Quarter is .11

?The projected administrative expense for the 3rd Quarter is .12
?The projected operating income for the 3rd Quarter is .13

COST CYCLE IN BUSINESS ORGANIZATION

THEORIES
?Which of the following is the primary source of revenue for a service business .1
a. the production of products from raw materials
b. the purchase and resale of finished products
c. providing intangible goods and services
d. the sale of raw materials to manufacturing firms

?Which of the following is the primary source of revenue for a merchandising business .2
a. the production of products from raw materials
b. the purchase and resale of finished products
c. the provision of intangible goods and services
d. the sale of raw materials to manufacturing firms

?Which of the following is the primary source of revenue for a manufacturing business .3
 a. .The production of products from raw materials
b. .The purchase and resale of finished products
c. .The provision of intangible goods and services
d. .Both the provision of services and the sale of finished goods

:Inventory accounts for a manufacturer include all of the following except .4

a. Merchandise Inventory
b. Finished Goods
c. Work in Process
d. Materials

:The statement of costs of goods manufactured shows .5

a. Office supplies used in an accounting office
b. Depreciation of factory building
c. Salary of sales manager
d. Rent paid on finished goods warehouse

For a manufacturing company, the cost of goods available for sale during a given accounting .6
period is
a. .The beginning inventory of finished goods
b. .The cost of goods manufactured during the period
c. .The sum of the above
d. .None of the above

The cost of goods manufactured in a manufacturing company is analogous to .7

a. Ending inventory in a merchandising company
b. Beginning inventory in a merchandising company
c. Cost of good available for sale in a merchandising company
d. Cost of goods purchased in a merchandising company

If the amount of "Cost of goods manufactured" during a period exceeds the amount of "Total .8
manufacturing costs" for the period, then
a. Ending work in process inventory is greater than or equal to the amount of the beginning
.work in process inventory
b. Ending work in process is greater than the amount of the beginning work in process
.inventory
c. .Ending work in process is equal to the cost of goods manufactured
d. Ending work in process is less than the amount of the beginning work in process
.inventory

.Service-sector companies report .9

a. .Only merchandise inventory
b. .Only finished goods inventory
 c. Direct materials inventory, work-in-process inventory, and finished goods inventory
.accounts
d. .No inventory accounts

.Manufacturing-sector companies report .10

a. .Only merchandise inventory
b. .Only finished goods inventory
c. Direct materials inventory, work-in-process inventory, and finished goods inventory
.accounts
d. .No inventory accounts

For a manufacturing company, direct material costs may be included in .11

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

For a manufacturing company, direct labor costs may be included in .12

a. Direct materials inventory the only
b. Merchandise inventory only
c. Both work-in-process inventory and finished goods inventory
d. Direct materials inventory, work-in-progress inventory, and finished goods inventory
accounts

For a manufacturing company, indirect manufacturing costs may be included in .13

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

?Which of the following would not be classified as manufacturing overhead .14

a. Indirect materials
b. Indirect labor
c. Direct labor
d. Property taxes on the factory

The income statement of a service-sector firm reports .15

a. Period costs only
b. Inventoriable costs only
c. Both period and inventoriable costs
d. Period and inventoriable costs but at different times, the reporting varies
Inventoriable costs are expensed on the income statement .16
a. When direct materials for the product are purchased
b. After the products are manufactured
c. When the products are sold
d. Not any particular time, it varies

For the merchandising companies, inventoriable costs include .17

a. The costs of the goods themselves
b. Incoming freight costs
c. Insurance costs for the goods
d. All of the above

In the preparation of the schedule of Cost of Good Manufactures, the accountant incorrectly .18
included as part of manufacturing overhead the rental expense on the firm's retail facilities. This
:inclusion would
a. Overstate period expenses on the income statement
b. Overstate the cost of goods sold on the income statement
c. Understate the cost of goods manufactured
d. Have no effect on the cost of goods manufactured

:Cost of goods manufactured will usually include .19

a. Only costs incurred during the current period
b. Only direct labor and direct materials
c. Some costs incurred during the prior period as well as costs incurred during the current
period
d. Some period costs as well as some product costs

Refers to the method in which expenses or costs move from beginning to end a business .20
a. Cost Statement
b. Expenses Flow
c. Cost Flow
d. Income Statement

PROBLEMS
Problem 1
Choi Manufacturing Company has the following data regarding its production and inventories for
.the year 202Y
Purchases - direct materials 143,440
Freight in 5,000
Purchase Return and Allowances 2,440
Direct labor 175,000
Factory overhead 120,000

Inventories 202X 202Y

 Finished Goods 68,000 56,000
Work in Process 110,000 135,000
Direct Material 52,000 44,000
?Choi's Total Manufacturing Cost is .1
?Cost of Goods transferred to the finished goods inventory account of Choi was .2
?For the year 202Y, Choi's Cost of Goods Sold is .3

Problem 2
Anthony, Benedict, and Colin own the ABC Attorney at Law and incurred the following expenses
.for the year
Administrative Salaries 150,000
Attorney Salaries 750,000
Office Expenses 12,000
Office Rent 20,000
Paralegal Salaries 100,000
Utilities Expense 12,500
Service Van Gasoline 55,000

.For the year, they have earned P1,500,000 service revenue

:Compute for the following

Cost of Services .4
Gross Profit .5
Operating Expense .6
Net Income .7

Problem 3
Saachi Couture is a clothing boutique that sells clothing and clothing accessories for dogs. In
they had gross revenues from sales totaling 126,000 and 150,000 for 2021. It maintains ,2020
its ending inventory at 40% of the current year's sales. Cost of Goods Sold for 2020 was 30% of
gross revenue for that year and purchases for the year 2021 are twice as last year's purchases
and incurred 5,000 freight charge. Their Operating expenses for the two periods were both
:If 2019's Sales revenue is 138,000 what is the .45,500

Ending inventory for the year 2020 and 2021 .8

.Merchandised purchased for the year 2020 .9
.Net Income for the year 2020 .10
.Merchandise Purchased for the year 2021 .11
.Cost of Goods Sold for the year 2021 .12
.Net Income For the year 2021 .13
Gross profit for the year 2020 and 2021 .14
:Assignment

Problem 5
:Dalisay Company presented the following data
Cost of goods manufactured and cost of goods sold were P375,000 and P300,000 *
.respectively
.Purchases of raw materials amounted twice as much as net income before taxes *
Gross margin based on sales was 40%. There were no purchases returns but sales returns *
.amounted to P10,000
:Inventory valuations were as follows *
● .Raw Materials - on hand at end of period was 1/3 as large as at start •
● Work in process - No beginning inventory, but P25,000 was on hand at the end of •
.period
● .Finished goods - End of period was four times as large as at start •
:Breakdown of cost incurred in manufacturing was as follows *
● Raw materials %50
● Direct Labor %30
● Manufacturing Overhead %20
.Selling expenses amounted to four times larger than general expenses *
Net income after taxes amounted to P52,000. Income tax rate is 35% *

Construct the Cost of Good Sold Statement (1

Construct the Income Statement (2

Problem 6
:.The following information is provided by MAURICE CORP

COGM P470,000
Labor Cost 100,000
FOH 50,000
FG Beginning 30,000
FG Ending 20,000
COGS 480,000
Raw Materials Used of WIP end %500
WIP end of WIP beginning %75

?How much would be the costs of raw materials used

Problem 7
If the total manufacturing costs for the month is P142,000, while the finished goods beginning
and ending were P20,000 and P12,000 respectively. How much would be the costs of Work in
Process Beginning and Ending respectively, assuming cost of goods sold is P158,000 and that
.?the work in process ending is 80% of the work in process beginning

Problem 8
The following information was taken from the accounting books of CINDY MANUFACTURING
Decrease in Raw Materials Inventory 15,000
Increase in Finished Goods Inventory 35,000
Raw Materials Purchased 430,000
Direct Labor Payroll 200,000
Factory Overhead 300,000
Freight out 45,000
Indirect materials used 2,500
Purchase Discount 1,250
Purchase Return 2,250
Sales Return at cost 5,000
Excess materials issued (return from factory) 1,000

?How much is the cost of goods sold if there is no ending and beginning WIP inventory

JOB ORDER COSTING

THEORIES
?Which of the following statements is correct concerning job -order costing .1
a. .Job-order costing would be appropriate for a textbook publisher
b. .All the costs appearing on a job cost sheet are actual costs
c. .Indirect materials are charged to a specific job
d. Job-order costing is mainly used in firms with homogeneous products such as oil
refineries

Which of the following types of firms typically would use process costing rather than job -order .2
?costing
a. .A small appliance repair shop
b. .A manufacturer of commercial passenger aircraft
c. .A specialty equipment manufacturer
d. .A breakfast cereal manufacturer

Which of the following would usually be found on a job cost sheet under a normal cost .3
?system

Actual direct material cost Actual manufacturing overhead cost

 .a Yes Yes
.b Yes No
.c No Yes
.d No No
In a predetermined overhead rate in a job-order costing system that is based on machine .4
?hours, which of the following would be used in the numerator and denominator
Numerator Denominator
a. Actual manufacturing overhead Actual machine-hours
b. Actual manufacturing overhead Estimated machine-hours
c. Estimated manufacturing overhead Actual machine-hours
d. Estimated manufacturing overhead Estimated machine-hours

:In a job-order costing system, the cost of a completed but the unsold job is .5
a. .Closed to Cost of Goods Sold
b. .Part of the Work in Process inventory balance
c. .Adjusted to exclude any applied overhead
d. Part of the Finished Goods inventory balance

:If overhead is underapplied, then .6

a. .The actual overhead cost is less than the estimated overhead cost
b. The amount of overhead cost applied to work in process is less than the actual overhead
.cost incurred
c. .The predetermined overhead rate is too high
d. The Manufacturing Overhead account will have a credit balance at the end of the year

:Overapplied overhead would result if .7

a. .The plant was operated at less than normal capacity
b. Overhead costs incurred were less than estimated overhead costs
c. .Overhead costs incurred were less than overhead costs charged to production
d. Overhead costs incurred were greater than overhead charged to production

In a job order cost system, the journal entry to record the application of overhead cost to jobs .8
;would include
a. a credit to the Manufacturing overhead account
b. a credit to the Work in Process inventory account
c. a debit to Cost of Goods Sold
d. a debit to the Manufacturing Overhead Account

In a job order cost system, the use of indirect materials would usually be recorded as a debit .9
:to
a. Raw Materials
b. Work in Process
c. Manufacturing Overhead
d. Finished Goods
:In a job order cost system, direct labor costs usually are recorded initially with a debit to .10
a. Manufacturing Overhead
b. Finished Goods
c. Direct Labor
d. Work in Process

Which of the following companies would most likely to uses a job order costing system .11
?rather than a process costing system
a. fast food restaurant
b. shipbuilding
c. crude oil refining
d. candy making

:The most common treatment of under-or overapplied overhead is to close it to .12

a. Work in Process
b. Retained Earnings
c. Cost of Goods Sold
d. Finished Goods

?A material requisition form normally does not contain which of the following .13
a. Vendor's name
b. Quantity requisitioned
c. Unit cost
d. Job Number

A job order cost sheet normally does not contain which of the following .14
a. Direct materials
b. Direct labor
c. Actual factory overhead
d. Applied factory overhead

Under an effective system of internal control, the authorization for issuing materials is made .15
a. orally
b. on a prenumbered materials requisition slip
c. by the accounting department
d. by anyone on the company

ACCOUNTING FOR MATERIALS

THEORIES
The weighted average for the year inventory cost flow method applies to which of the .1
?following inventory system
Periodic Perpetual
a. Yes Yes
b. Yes No
c. No Yes
d. No No

I. The closing entries necessary under the perpetual and periodic inventory systems do not .2
.differ because all expenses and revenues must be closed
II. Periodic inventory system uses a purchase account while an Inventory account is used for a
.perpetual inventory system
a. Statement 1 is true
b. Statement 2 is true
c. Both statements are true
d. Both statements are false

It is an official document issued by a buyer committing to pay the seller for the sale of specific .3
.products or services to be delivered in the future
a. Purchase Requisition
b. Purchase Order
c. Receiving Report
d. Materials Requisition Slip

A document that is used when an employee needs to make a purchase or an order request .4
.on behalf of their company
a. Purchase Requisition
b. Purchase Order
c. Receiving Report
d. Materials Requisition Slip

A product or unit which did not meet the dimensional or quality standards and is reworked for .5
.rectification of defects by application of materials, labor, and factory overhead
a. Waste materials
b. Spoiled units
c. Defective Units
d. Scrap Material

.Statement 1: An overstated ending inventory leads to understated net income .6

Statement 2: An error in determining the cost of the ending inventory of a period generally
.results in misstated income for the current period only
a. Statement 1 is true
b. Statement 2 is true
c. Both statements are true
 d. Both statements are false

I. Graphically, the economic order quantity (EOQ) is the point where the carrying cost line .7
.intersects the ordering cost line
II. The primary goal of inventory management activity is to minimize the risk of a stock out while
.maximizing the return on inventory
a. Statement 1 is true
b. Statement 2 is true
c. Both statements are true
d. Both statements are false

If a loss is a result of a normal production process and can happen at any time or any stage .8
of production, charge the loss to
a. Abnormal Loss
b. Normal Loss
c. Specific Job
d. Total Production

.Statement I: The accounting for spoiled units and defective unity is the same .9
Statement II: The purchase price per unit of inventory is irrelevant in the economic order
quantity (EOQ) model
a. Statement 1 is true
b. Statement 2 is true
c. Both statements are true
d. Both statement are false

.Method of inventory control that uses two levels of inventory .10

a. Two-Bin System
b. ABC Analysis
c. Min-Max System
d. ABC Analysis

It acts as a buffer in case the sales of an item are greater than planned and/or the .11
.company's supplier is unable to deliver additional units at the expected time
a. Materials
b. Lead Time
c. Inventory
d. Safety Stock

Spoiled goods may be sold at an amount higher than the regular sales price .1 .12
II. If spoilage in a job is due to the exacting specifications of the job, the loss resulting from the
.spoiled goods should be shared by all units manufactured during the period
a. Statement 1 is true
b. b. Statement 2 is true
 c. Both statements are true
d. Both statements are false

Usually, total order cost and total carrying cost are equal, unless .13
a. .Numerous inventories are ordered
b. .There is an increase in warehouse rent
c. .The company maintains safety stock
d. .The company shortened the lead time

:Inventory process .14

I. Customer
II. Suppliers
III. Work-in-progress
IV. Raw Material
V. Finished Goods
a. 2,4,3,5,1
b. 1,2,3,4,5
c. 5,1,4,3,2
d. 2,3,4,5,1
I. Weighted average method is calculated after every sale and purchase transaction, and the .15
.calculation only considers current inventory status
.II. Moving average method is calculated for all purchases in a given period
a. Statement 1 is true
b. Statement 2 is true
c. Both statements are true
d. Both statements are false