‭CHIPS: Crunching on Accounting‬

‭Cost Accounting‬

‭Theoretical - Part 1. True or False. 10 items.‬

‭1.‬ ‭Management Accounting is optional for organizations‬

‭2.‬ ‭Management‬ ‭by‬ ‭exception‬ ‭will‬ ‭be‬ ‭involved‬ ‭when‬ ‭performance‬ ‭meets‬
‭expectations‬
‭3.‬ ‭Fixed Cost per unit decreases when the activity level increases‬
‭4.‬ ‭Last in, First Out is the least accurate method of pricing‬
‭5.‬ ‭Holding cost is lower than order cost under EOQ‬
‭6.‬ ‭Just-in-time aims to increase non-value activities‬
‭7.‬ ‭Organizations‬ ‭with‬ ‭low‬‭percentage‬‭of‬‭indirect‬‭cost‬‭in‬‭total‬‭cost‬‭should‬‭use‬
‭sophisticated systems to provide high level of accuracy‬
‭8.‬ ‭When‬‭budgeted‬‭overhead‬‭is‬‭higher‬‭compared‬‭to‬‭actual‬‭overhead,‬‭there‬‭is‬
‭an over absorbed‬
‭9.‬ ‭When finished goods is credited, then cost of goods sold will increase‬
‭10.‬ ‭Interlocking‬ ‭systems‬ ‭combines‬ ‭cost‬ ‭and‬ ‭financial‬ ‭accounts‬ ‭in‬ ‭one‬ ‭set‬ ‭of‬
‭accounts‬

‭Theoretical - Part 2. Multiple Choice. 20 items‬

‭1.‬ ‭Which is not true about Job Order Costing‬

‭a) there is a different manufacturing cost per batch or order‬
‭b) it produced heterogeneous products or services‬
‭c) it is continuous mass production of homogeneous products‬
‭d) it can be used in customized manufacturing‬
‭2.‬ ‭Under Job Order Costing System, issues of direct materials is debited to‬
‭a) Raw Materials‬
‭b) WIP‬
‭c) COGS‬
‭d) Finished Goods‬
‭3.‬ ‭When a product is sold, what is the treatment for product cost?‬
‭a) recorded as income‬
‭b) recorded as inventory‬
‭c) recorded as expense‬
‭d) recorded as sales‬
‭4.‬ ‭Prime cost is‬
‭a) direct materials + direct labor‬
‭b) direct materials + overhead‬
‭c) direct labor + overhead‬
‭d) product cost + period cost‬
‭5.‬ ‭Overtime wages is considered as‬
‭a) direct labor‬
‭b) direct materials‬
‭c) overhead‬
‭d) indirect materials‬
‭6.‬ ‭During production process, what is the treatment for uncontrollable losses‬
‭a) treated as period cost‬
‭b) will be absorbed by by the good production‬
‭c) treated as abnormal gains‬
‭d) transferred to the WIP account‬
‭7.‬ ‭Which one will not happen when the overhead is over absorbed?‬
‭a) higher gross profit‬
‭b) lower gross profit‬
‭c) adjustment of COGS‬
‭d) adjustment of WIP‬
‭8.‬ ‭Why budgeted overhead is used instead of actual overhead‬
‭a) the former is more accurate than latter‬
‭b) the product cost is immediately needed for pricing and control purposes‬
‭c) the actual overhead is unpredictable‬
‭d)‬ ‭to‬ ‭guarantee‬ ‭the‬ ‭accuracy‬ ‭of‬ ‭product‬ ‭cost‬ ‭for‬ ‭pricing‬ ‭and‬ ‭control‬
‭activities‬
‭9.‬ ‭Which of the following utilizes process costing‬
‭a) a public accounting firm‬
‭b) gasoline refinery‬
‭c) retailer‬
‭d) airplane manufacture‬
‭10.‬ ‭A‬ ‭system‬ ‭of‬ ‭job‬ ‭costing‬ ‭that‬ ‭is‬‭applied‬‭to‬‭relatively‬‭large‬‭cost‬‭units,‬‭which‬
‭normally take a considerable length of time to complete‬
‭a) process costing‬
‭b) contract costing‬
‭c) payroll accounting‬
‭d) labor cost accounting‬
‭11.‬ ‭Which‬ ‭of‬ ‭the‬ ‭followings‬ ‭are‬ ‭drawbacks‬ ‭to‬ ‭applying‬ ‭actual‬ ‭overhead‬ ‭to‬
‭production‬
‭a) a delay in assigning costs to jobs or products‬
‭b)‬‭fluctuations‬‭in‬‭quantities‬‭produced‬‭during‬‭a‬‭period‬‭could‬‭cause‬‭varying‬
‭per-unit charges for fixed overhead‬
‭c)‬ ‭seasonality‬ ‭of‬ ‭overhead‬ ‭costs‬ ‭may‬ ‭cause‬ ‭distortions‬ ‭in‬ ‭job‬ ‭or‬ ‭product‬
‭costs‬
‭d) all of the above‬
‭12.‬ ‭Joint costs are useful for‬
‭a) setting the selling price of a product‬
‭b) determining whether to continue producing an item‬
‭c) evaluating management by means of a responsibility reporting system‬
‭d) determining inventory cost for accounting purposes‬
‭13.‬ ‭Scrap is defined as a‬
‭a) finished unit that has no sales value‬
‭b) residual of the production process that has limited sales value‬
‭c)‬ ‭residual‬ ‭of‬ ‭the‬ ‭production‬ ‭process‬ ‭that‬ ‭can‬ ‭be‬ ‭reworked‬ ‭for‬ ‭sale‬ ‭a‬ ‭an‬
‭irregular unit of product‬
‭d) residual of the production process that has no sales value‬
‭14.‬ ‭Sunk cost is‬
‭a) cost that cannot be recovered regardless of what happened‬
‭b) cost that relates to money poured into the ground‬
 ‭c) considered the original cost of an item‬
‭d) also known as opportunity cost‬
‭15.‬ ‭If‬‭a‬‭company‬‭obtains‬‭two‬‭salable‬‭products‬‭from‬‭the‬‭refining‬‭of‬‭one‬‭ore,‬‭the‬
‭refining process should be accounted for as a(n)‬
‭a) mixed cost process‬
‭b) joint process‬
‭c) extractive process‬
‭d) reduction process‬
‭16.‬ ‭Overhead Absorption Rate can be based on the following, except‬
‭a) materials‬
‭b) direct labor‬
‭c) machine hours‬
‭d) period cost‬
‭17.‬ ‭All of the following are characteristics of simplistic costing systems, except‬
‭a) inexpensive‬
‭b) low levels of accuracy‬
‭c) extensive use of arbitrary cost allocations‬
‭d) low cost of errors‬
‭18.‬ ‭Costs that contain both a fixed and a variable component‬
‭a) semi-variable cost‬
‭b) semi-fixed cost‬
‭c) step-fixed cost‬
‭d) semi-step cost‬
‭19.‬ ‭All‬‭of‬‭them‬‭could‬‭be‬‭considered‬‭in‬‭search‬‭for‬‭alternative‬‭courses‬‭of‬‭action,‬
‭except‬
‭a) developing new products for sale in existing market‬
‭b) developing new products for new markets‬
‭c) developing new markets for existing product‬
‭d) developing existing product for new market‬
 ‭20.‬‭Economic Theory assumes that‬
‭a) firms seek to build empire‬
‭b) firms seek to establish power base‬
‭c) firms seek to make this world a better place‬
‭d) firms seek to maximize profits‬

‭Theoretical - Part 3. Identification. 10 Items‬

‭1.‬ ‭Length‬ ‭of‬ ‭time‬ ‭from‬ ‭start‬ ‭to‬ ‭completion‬ ‭of‬‭a‬‭product‬‭or‬‭service‬‭and‬‭is‬‭the‬

‭sum of processing time, move time, wait time and inspection time‬
‭2.‬ ‭The time that elapses between reorder point and delivery‬
‭3.‬ ‭The budgeted overhead is higher compared to actual overhead‬
‭4.‬ ‭Unexpected losses in production process‬
‭5.‬ ‭Direct Labor + Manufacturing Overhead‬
‭6.‬ ‭Assigning‬ ‭costs‬ ‭when‬ ‭the‬ ‭quantity‬ ‭of‬‭resources‬‭consumed‬‭by‬‭a‬‭particular‬
‭cost object cannot be directly measured.‬
‭7.‬ ‭Basis that is used to allocate cost to cost objects‬
‭8.‬ ‭Future cost and revenues that will be changed by a decision‬
‭9.‬ ‭The point where holding cost equals with ordering cost‬
‭10.‬ ‭Cost that can be saved and relevant for decision making‬
‭Computation - 10 Items‬

‭Assume the following inventory events‬

‭November 5‬ ‭Purchased 800 widgets at a total cost of $8,000‬

‭November 7‬ ‭Purchased 300 widgets at $11 per unit‬
‭November 8‬ ‭Purchased 320 widgets at $12.25 per unit‬
‭November 15‬ ‭Purchased 200 widgets at $14.7 per unit‬

‭November 10 Sold 750 units at $15 unit unit‬

‭November 14 Sold 460 units at $15.55 per unit‬
‭November 18 Sold 220 units at $14.45 per units‬

‭1.‬ ‭Using the FIFO method, how much is the Cost of Goods Sold?‬
‭a) 15,367‬ ‭b) 21,582‬
‭b) 16,537‬ ‭d) 22,582‬
‭2.‬ ‭Using the LIFO method, how much is the Ending Inventory?‬
‭a) 2,793‬ ‭b) 1,900‬
‭c) 2,130‬ ‭d) 1,998‬

‭Consider the following problem‬

‭Opening WIP:‬
‭Materials‬ ‭$2,100‬
‭Conversion Cost‬ ‭$2,030‬
‭Cost added to this month:‬
‭Materials‬ ‭$33,000‬
‭Conversion Cost‬ ‭$109,695‬
‭WIP, Beginning (25% Complete)‬ ‭10,000 units‬
‭Units Started in the Period‬ ‭120,000 units‬
‭WIP, Ending (30% Complete)‬ ‭30,000 units‬
 ‭3.‬ ‭Using weighted average, what is the total cost of completed units?‬
‭a) $129,500‬ ‭b) $147,852‬
‭c) $178,267‬ ‭d) $187,283‬
‭4.‬ ‭Using FIFO, what is the total cost of completed units?‬
‭a) $129,500‬ ‭b) $147,852‬
‭c) $129,305‬ ‭d) $192,432‬

‭ he Marco Company budgeted overhead at P 255, 000 for the‬

T
‭period for Department A, on the basis of a budgeted volume of 100, 000‬
‭direct labor hours. At the end of the period, the Factory Overhead Control‬
‭account for Department A had a balance of P 270, 000; actual direct labor‬
‭hours were 105,000‬

‭5.‬ ‭Compute for the overhead absorption rate‬

‭a) P2.54/Direct Labor per hour‬ ‭b) 2.58/Direct Labor per hour‬
‭c) P2.53/Direct Labor per hour‬ ‭d) 2.55/Direct Labor per hour‬
‭6.‬ ‭Compute for applied factory overhead‬
‭a) P256,705‬ ‭b) P267,750‬
‭c) P222,222‬ ‭d) P279,760‬
‭7.‬ ‭Compute for the over/under absorbed o overhead‬
‭a) P2,250 overapplied‬ ‭b) P2,250 underapplied‬
‭c) P2,520 overapplied‬ ‭d) P2,520 underapplied‬
‭AJD‬ ‭Company‬ ‭has‬ ‭two‬ ‭production‬ ‭departments‬ ‭(X‬ ‭and‬ ‭Y)‬ ‭and‬ ‭two‬ ‭service‬
‭departments (A and B). Data provided as follows.‬

‭Production Department‬ ‭Service Department‬

‭X‬ ‭Y‬ ‭A‬ ‭B‬

‭Overhead Allocation‬ ‭₱5,000‬ ‭₱6,000‬ ‭₱150‬ ‭₱300‬

‭Services performed by A‬ ‭40%‬ ‭20%‬ ‭40%‬

‭Services performed by B‬ ‭70%‬ ‭10%‬ ‭20%‬

‭ ote:‬ ‭If‬ ‭step/sequential‬ ‭method‬ ‭is‬ ‭used‬ ‭to‬ ‭allocate‬ ‭service‬ ‭department‬ ‭costs,‬
N
‭Department A costs are allocated first.‬

‭8.‬ ‭Using Direct Method, what is the total cost of Department X?‬
‭a) ₱5,362.50‬ ‭b) ₱6,087.50‬
‭c) ₱5,375.00‬ ‭d) ₱6,075.00‬
‭9.‬ ‭Using Direct Method, what is the total cost of Department Y?‬
‭a) ₱5,362.50‬ ‭b) ₱6,087.50‬
‭c) ₱5,375.00‬ ‭d) ₱6,075.00‬
‭10.‬ ‭Using the Step/Sequential method, what is the total cost of Department X?‬
‭a) ₱5,362.50‬ ‭b) ₱6,087.50‬
‭c) ₱5,375.00‬ ‭d) ₱6,075.00‬
‭11.‬ ‭Using the Step/Sequential method, what is the total cost of Department Y?‬
‭a) ₱5,362.50‬ ‭b) ₱6,087.50‬
‭c) ₱5,375.00‬ ‭d) ₱6,075.00‬
‭Sources:‬
‭Akawnting. (2022).‬‭Process Costing FIFO vs Weighted Average‬‭. YouTube.‬
‭https://youtu.be/jBlZF4n7Jio?si=-BQKX6AQpQXLB59I‬
‭Cairo University. (n.d.).‬‭Lecture 3‬‭.‬
‭https://scholar.cu.edu.eg/?q=mahmoudarafa/files/inventory_‬
‭Management_-_3.pdf‬
‭De Leon, N., De Leon, E., & De Leon, G. (2019).‬‭Cost Accounting and Control‬‭(2019‬
‭Edition). GIC Enterprises & Co., Inc.‬
‭Scribd. (n.d.).‬‭Module 9 Part 1 - Service Cost Allocation‬‭. Scribd.‬
‭https://www.scribd.com/presentation/513174757/Module-9-Part-1-Service-‬
‭Cost-Allocation‬
‭Studocu. (n.d.).‬‭Cost accounting 7 8 - Solution Manual‬‭.‬
‭https://www.studocu.com/ph/document/far-eastern-university/cost-acco‬
‭untin-and-cost-management/cost-accounting-7-8-solution-manual/59‬
‭63059‬