Cost Accounting and Control: Finals Reviewer | Exercises Cost Accounting

Junior Philippine Institute of Accountants

ACCTG 1203 ”Cost Accounting and Control”

2019 – 2020 (Finals Reviewer)

I. TRUE OR FALSE

1. Direct material cost combined with manufacturing overhead cost is known as conversion cost.

2. Although depreciation is always a period cost in a merchandising firm, it can be a product cost in a

manufacturing firm.

3. In a manufacturing firm, all costs are product costs.

4. Advertising is a product cost as long as it promotes specific products.

5. In a process costing system, overhead is allocated to departments before being applied to units of product.

6. The “costs accounted for” portion of the cost reconciliation report includes the cost of ending work in process

inventory and the costs of units transferred out.

7. In order to use process costing, the output of a processing department should be homogenous.

8. The “costs to be accounted for” portion of the cost reconciliation report includes the cost of beginning work in

process inventory and the cost of ending work in process inventory.

9. The production manager is usually held responsible for the labor efficiency variance.

10. From a standpoint of cost control, the most effective time to recognize materials price variances is when the

materials are placed into production.

11. The materials quantity variance is computed based on the amount of materials purchased during the period.

12. Purchase of poor quality materials will generally result in a favorable materials price variance and an

unfavorable labor rate variance.

13. Net realizable value at split-off is used to allocate separable cost

14. In a sell-or-process further decision, joint costs are irrelevant.

15. The split-off in a joint situation refers to the stage of processing where two or more products are separated.

16. The price variance reflects the difference between the price paid for inputs and the standard price for those

inputs.

17. The usage variance reflects the difference between the price paid for inputs and the standard price for those

inputs.

18. The formula for usage variance is (AQ – SQ)

19. The difference between the actual wages paid to employees and the standard wages for all hours worked is the

labor efficiency variance.

20. The difference between the standard hours worked for a specific level of production and the actual hours

worked is the labor efficiency variance.

21. A standard cost system is applicable only to process costing where the operation is repetitive.

22. A fixed overhead volume variance is a noncontrollable variance.

23. A budget variance is a controllable variance.

24. Unfavorable variances are represented by debit balances in the overhead account.

25. Favorable variances are represented by credit balances in the overhead account.

26. If the net realizable value of by-product will be treated as additional revenue of the main product, it has the

same effect if by-product will be treated as a deduction from production cost assuming that there is ending

inventory of main product.

27. If the net realizable value of by-product will be treated as other income, it has the same effect if by-product will

be treated as a deduction from production cost assuming that there is no ending inventory.

28. Under the FIFO method, units transferred out are treated in separate blocks – one block consisting of the units

in the beginning inventory, and the other block consisting of the units started and complete during the period.

29. The controller is responsible for reporting and interpreting results of operations and system installation.

30. The treasurer is responsible for the protection of asset.

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Junior Philippine Institute of Accountants ACCTG 1203 ”Cost Accounting and Control” 2019 – 2020 (Finals Reviewer) I. TRUE OR FALSE

Direct material cost combined with manufacturing overhead cost is known as conversion cost.
Although depreciation is always a period cost in a merchandising firm, it can be a product cost in a manufacturing firm.
In a manufacturing firm, all costs are product costs.
Advertising is a product cost as long as it promotes specific products.
In a process costing system, overhead is allocated to departments before being applied to units of product.
The “costs accounted for” portion of the cost reconciliation report includes the cost of ending work in process inventory and the costs of units transferred out.
In order to use process costing, the output of a processing department should be homogenous.
The “costs to be accounted for” portion of the cost reconciliation report includes the cost of beginning work in process inventory and the cost of ending work in process inventory.
The production manager is usually held responsible for the labor efficiency variance.
From a standpoint of cost control, the most effective time to recognize materials price variances is when the materials are placed into production.
The materials quantity variance is computed based on the amount of materials purchased during the period.
Purchase of poor quality materials will generally result in a favorable materials price variance and an unfavorable labor rate variance.
Net realizable value at split-off is used to allocate separable cost
In a sell-or-process further decision, joint costs are irrelevant.
The split-off in a joint situation refers to the stage of processing where two or more products are separated.
The price variance reflects the difference between the price paid for inputs and the standard price for those inputs.
The usage variance reflects the difference between the price paid for inputs and the standard price for those inputs.
The formula for usage variance is (AQ – SQ)
The difference between the actual wages paid to employees and the standard wages for all hours worked is the labor efficiency variance.
The difference between the standard hours worked for a specific level of production and the actual hours worked is the labor efficiency variance.
A standard cost system is applicable only to process costing where the operation is repetitive.
A fixed overhead volume variance is a noncontrollable variance.
A budget variance is a controllable variance.
Unfavorable variances are represented by debit balances in the overhead account.
Favorable variances are represented by credit balances in the overhead account.
If the net realizable value of by-product will be treated as additional revenue of the main product, it has the same effect if by-product will be treated as a deduction from production cost assuming that there is ending inventory of main product.
If the net realizable value of by-product will be treated as other income, it has the same effect if by-product will be treated as a deduction from production cost assuming that there is no ending inventory.
Under the FIFO method, units transferred out are treated in separate blocks – one block consisting of the units in the beginning inventory, and the other block consisting of the units started and complete during the period.
The controller is responsible for reporting and interpreting results of operations and system installation.
The treasurer is responsible for the protection of asset.

II. MULTIPLE CHOICE – THEORY

Cost classifications are based on the relationship of costs to all of the following except: a. Ledger accounts b. Accounting periods c. Products d. Volume of production
Depreciation on factory buildings and equipment is classified as: a. Selling expense b. Administrative expense c. Indirect Materials d. Factory Overhead
An expense that is likely to contain both fixed and variable components is: a. Security guard wages b. Supplies c. Heat, light and power d. Small tools
An equivalent unit of material or conversion cost is equal to: a. The prime cost b. The amount of material or conversion cost necessary to complete one unit of production c. A unit of work in process inventory d. The amount of material or conversion cost necessary to start a unit of production into work in process
The product flow format where certain portions of the work are done simultaneously and then brought together for completion is called: a. Applied b. Parallel c. Standard d. Selective
An item that does not appear on a cost of production report is: a. Work in process, beginning inventory b. Cumulative costs through the end of departmental production c. Finished goods ending inventory d. Materials used in the department
A characteristic of a process costing system is that: a. Costs are accumulated by order b. It is used by company manufacturing custom machinery c. Standard costs are not applicable d. Work in process inventory is restated in terms of completed units
The general model for calculating a quantity variance is: a. Actual quantity of inputs used x (actual price – standard price) b. Standard price x (actual quantity of inputs used – standard quality allowed for output)

a. yes no b. no yes c. no no d. yes yes

If a company obtains two salable products from the refining of one ore, the refining process should be accounted for as a(n): a. Mixed cost process b. Joint process c. Extractive process d. Reduction process
Which of the following is a commonly used joint cost allocation method? a. High-low method b. Regression analysis c. Approximated sales value at split-off method d. Weighted average quantity technique
A primary purpose of using a standard cost system is a. To make things easier for managers in the production facility. b. To provide a distinct measure of cost control. c. To minimize the cost per unit of production. d. B and c are correct
The standard cost card contains quantities and costs for a. Direct material only b. Direct labor only c. Direct material and direct labor only d. Direct material, direct labor, and overhead
Which of the following statements regarding standard cost system is true? a. Favorable variances are not necessarily good variances b. Managers will investigate all variances from standard. c. The production supervisor is generally responsible for material price variances. d. Standard costs cannot be used for planning purposes since costs normal change in the future. III. MULTIPLE CHOICE – PROBLEM Items 1 – 3 are based on the following information: Lozada, Bondoc, Ebido Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory is the first processing department consisted of 600 units. The costs and percentage completion of these units in beginning inventory were: COST PERCENT COMPLETE Materials P10,900 65% Conversion Cost P4,000 15% A total of 5,700 units were started and 4,900 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Materials Cost P127, Conversion Cost P201, The ending inventory was 85% complete with respect to materials and 70% 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? a. 5, b. 800 c. 1, d. 900
What are the equivalent units for conversion costs for the month in the first processing department? a. 4, b. 5, c. 6, d. 980
The cost per equivalent unit for materials for the month in the first processing department is closest to: a. P20. b. P21. c. P20. d. P22.
Gaboy Company computed the flow of physical units completed for Department M for the month of March as follows: Units completed: From work in Process on March 1 15, From March Production 45, Total ----------------------------------------------------------------------------- 60, Materials are added at the beginning of the process. The 12,000 units of work in Process at March 31 were 80% complete as to conversion costs. The work in process at March 1 was 60% complete as to conversion costs. Using the fifo method, the equivalent units for March conversion costs were: a. 60, b. 55, c. 57, d. 54,
Suficiencia Company computed the physical flow of units for Department for the month of April as follows: Units completed: From work in process on April 1 10, From April production 30, Total ----------------------------------------------------------------------------- 40, Materials are added at the beginning of the process. Units of work in process at April 30 were 8,000. The work in process at April 1 was 80% complete as to conversion costs, and the work in process at April 30 was 60% complete as to conversion costs. What are the equivalent units of production for the month of April using the fifo method?

Pudadera and Fernandez Company employs a standard absorption system for product costing. The standard cost of its product is as follows: Direct materials P14. Direct labor (2 direct labor hours x P8) P16. Manufacturing overhead (2 direct labor hours x P11) P22. Total Standard Cost P52. The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Pudadera planned to produce 25,000 units each month during the year. The budgeted annual manufacturing overhead is: Variable P3,600, Fixed P3,000, During November, Pudadera produced 26,000 units. Pudadera used 53,500 direct labor hours in November at a cost of P433,350. Actual manufacturing overhead for the month was P250,000 fixed and P325,000 variable.

The manufacturing overhead controllable variance for November is a. P9,000 U b. P13,000 U c. P9,000 F d. P4,000 F
The manufacturing overhead volume variance for November is: a. P12,000 U b. P10,000 F c. P3,000 U d. P9,000 U Items 11 – 13 are based on the following information: Guinabo, Gabanto, and Resol Company has established standards as follows: Direct Material 3 Pounds @ P4/pound = P12 per unit Direct labor 2 hours @ P8/ hour = P16 per unit Variable Overhead 2 hours @ P5/hour = P10 per unit Actual production figures for the past year were as follows: Units Produced 500 Direct Materials Used 1,600 pounds Direct Material Purchases (3,000 pounds) P12, Direct labor cost (950 hours) P7, Variable overhead cost incurred P4,
The materials price variance is a. P160 U b. P6,300 U

c. P300 U d. P150 U

The materials quantity variance is a. P400 U b. P410 F c. P410 U d. P6,000 U
The labor rate variance is: a. P210 F b. P190 F c. P399 F d. P190 U
Vito Company manufactures products S and T from a joint process. The market value at Split-Off was P50,000 for 6,000 units of product S and P50,000 for 2,000 units of product T. Assuming that the portion of the total joint cost properly allocated to product S using the market value method was P30,000, the total joint cost was: a. P40, b. P42, c. P45, d. P60,
Reyes Corporation manufactures liquid chemicals A and B from a joint process. Joint costs are allocated on the basis of relative market value at split-off. It costs P4,560 to process 500 gallons of product A and 1,000 gallons of product B to the split-off point. The market value at split-off is P10 per gallon for product A and P14 for product B. Product B requires an additional process beyond split-off at a cost of P2 per gallon before it can be sold. What is Reyes’ cost to produce 1,000 gallons of product B? a. P5, b. P4, c. P4, d. P5, Items 16 – 18 are based on the following information Tadiaque, Anduque, and Alonzaga Corp. Manufactures Products J, K, L, and M from a joint process. Additional information is as follows: IF PROECSSED FURTHER UNITS MV AT ADDITIONAL MARKET PRODUCT PRODUCED SPLIT-OFF COSTS VALUE J 6 ,000 P 80,000 P 7,500 P 90, K 5,000 60,000 6,000 70, L 4,000 40,000 4,000 50, M 3,000 20,000 2,500 30, 18,000 P 200,000 P 20,000 P 240,

I. TRUE OR FALSE

F
T
F
F
T
T
T
F
T
F
F
F
F
T
T
T
F
F
T
T
F
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F
F II. MULTIPLPE CHOICE – THEORY
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D
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III. MULTIPLE CHOICE – PROBLEMS

Cost Accounting and Control: Finals Reviewer, Exercises of Cost Accounting

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II. MULTIPLE CHOICE – THEORY