BACOSTMX-QUIZ 1

General Instructions: Choose the letter which corresponds to the best answer. Good luck!
1. The relevant range is the range in which:
a. cost relationships are valid.
b. relevant costs are incurred.
c. production may vary.
d. costs may fluctuate.

2. Which of the following replaces the retailing component "Purchases" in computing Cost of
Goods Sold for a manufacturing company?
a. direct material used
b. cost of goods manufactured
c. total prime cost
d. cost of goods available for sale

3. In a perpetual inventory system, a transaction that requires two journal entries (or one
compound entry) is needed when:
a. raw materials are purchased on account
b. goods are sold for either cash or on account
c. goods are finished and transferred out of Work in Process Inventory
d. overhead is applied to Work in Process Inventory
4. If actual overhead is less than applied overhead, which of the following will be true? Upon
closing, overhead account is _________ and Cost of goods sold is __________.
a. Underapplied credited
b. Underapplied debited
c. Overapplied debited
d. Overapplied credited

5. Assuming that demand is determinable, what is the objective of the economic order quantity
(EOQ) model for inventory?
a. To minimize order costs or carrying costs, whichever are higher
b. To minimize order costs or carrying costs and maximize the rate of inventory turnover
c. To minimize the total order costs and carrying costs over a period of time
d. To order sufficient quantity to economically meet the next period's demand

6. Which of the following is not true about inventory valuation methods?

a. Under FIFO method, raw materials inventory is reported at latest cost
b. In a period of declining prices, FIFO method will yield a higher profit because cost of
goods sold is assigned at lower cost
c. Under moving average method, average unit cost changes every time raw materials are
acquired
d. Cost of goods sold is reported at earliest cost under FIFO method

7. These are mutually beneficial cost which occur when the same resource is used in the output of
two or more services or products, or simply the cost of facilities or services shared by two or
more departments or operations.
a. Joint costs
b. Common costs
c. Committed costs
d. Discretionary costs
8. Plastic used to manufacture dolls is a: prime cost____; product cost_____; direct cost_____;
fixed cost_____.
a. No, yes, yes, yes
b. Yes, no, yes, no
c. Yes, yes, no, yes
d. Yes, yes, yes, no

9. A materials requisition slip showed that direct materials requested were P30,000 and indirect
materials requested were P6,000. The entry to record the transfer of materials from the
storeroom is
a. Work In Process Inventory 30,000
Raw Materials Inventory 30,000
b. Direct Materials 30,000
Indirect Materials 6,000
Work in Process Inventory 36,000
c. Manufacturing Overhead 36,000
Raw Materials Inventory 36,000
d. Work In Process Inventory 30,000
Manufacturing Overhead 6,000
Raw Materials Inventory 36,000

10. The amount of factory payroll related to direct laborers that would be charged to Work in
Process includes
a. Net pay plus all the deductions like SSS, Philhealth and Pag-ibig contributions of
employees and the withholding taxes.
b. Gross pay less all the deductions like SSS, Philhealth and Pag-ibig contributions of
employees and the withholding taxes.
c. Gross pay less all the deductions like SSS, Philhealth and Pag-ibig contributions of
both employees and employer; and the withholding taxes.
d. Net pay plus all the deductions like SSS, Philhealth and Pag-ibig contributions of both
employees and employer; and the withholding taxes.

11. The primary focus of cost management is to

a. calculate product costs.
b. aid managers in budgeting.
c. help managers make different decisions.
d. distinguish between relevant and irrelevant information.

12. The reorder point in the EOQ model is:

a. Inventory level below the order quantity
b. Level when all inventory has been used
c. Inventory level at which an order for additional units is placed
d. Number of inventories to be ordered to minimize ordering and carrying costs

13. Overtime wages, exclusive of overtime premium, paid to direct laborers should be
a. Included as part of direct labor
b. Excluded as manufacturing costs
c. Included as part of administrative costs
d. Included as part of manufacturing overhead

14. Material amounts of under-applied or over-applied overhead should be:

a. Treated as an adjustment to COGS
 b. Treated as an adjustment to work in process inventory
c. Allocated to direct materials inventory, work in process inventory, finished goods
inventory, and COGS
d. Allocated to work in process inventory, finished goods inventory, and COGS

15. Which of the following statements about normal costing is true?

a. Direct costs and indirect costs are allocated using an actual rate
b. Direct costs and indirect costs are traced using budgeted rates
c. Direct costs are traced using a budgeted rated, and indirect costs are allocated using an
actual rate
d. Direct costs are traced using an actual rate, and indirect costs are allocated using a
budgeted rate

16. The following statements are provided to you:

Statement 1: In a service industry, direct materials are usually significant in amount and can be
easily traced to a cost object.

Statement 2: A predictor which has an absolute cause and effect relationship to a cost is referred
to a cost driver.
a. True, False
b. False, True
c. Both statements are true.
d. Both statements are false.

17. In relation to factory payroll, you are given the following statements:
Statement 1: In the Philippines, OT premium for a regular day is 25% of the hourly rate for
work performed in excess of 8 hours. Only the premium is charged to factory overhead, as a
rule.
Statement 2: In the Philippines, night shift differential is plus 10% of the hourly rate for work
between 10:00 O’clock in the evening and 6:00 O’clock in the morning. Both the basic pay and
the night shift differential for work performed during this time are charged to factory overhead.
a. True, False
b. False, True
c. Both statements are true.
d. Both statements are false.

18. In relation to Linear regression, the following statements are provided:

Statement 1: Coefficient of Correlation (r) shows percentage variation in y which is explained
by all the x variables together. It can go from -1 to 1.
Statement 2: Coefficient of determination (r2) is the degree of relationship between two
variables say x and y. It can go from 0 to 1.
a. True, False
b. False, True
c. Both statements are true.
d. Both statements are false.
 19. Which among the following is the criticism against the use of the high-low method?
a. It is not a graphical method.
b. It is mathematical.
c. Ignores much of the available data by focusing on extreme points
d. It does not provide reasonable estimates

20. In relation to cost behavior within a relevant range, the following statements are given:
Statement 1: When production increases, unit variable cost remains constant while total
variable cost increases.
Statement 2: When production decreases, unit fixed costs decreases while total fixed costs
remain the same.
a. True, False
b. False, True
c. Both statements are true.
d. Both statements are false.

The following information are available for Fortified Company during the 6-months period ending in
June 30:
Accounts Beginning Ending
Direct Materials P174,000 P132,000
Work in process 311,500 289,750
Finished Goods 192,000 255,000

Supplementary data:
a. Purchases during the period:
Direct materials P1,500,000
Factory supplies 60,000
b. Supervision fee 175,000
c. Direct labor hours worked, 21,000 @P45,
excluding 1,000 hours overtime. The
company’s policy on overtime is time and a
half (50% premium).
d. Other factory overhead including factory
supplies used of P25,000 but excluding 300,000
overtime premium.
e. Actual overhead is applied to the job.

21. The prime costs during the period amounted to:

a. P2,487,000
b. P2,448,000
c. P2,532,000
d. P2,403,000
22. The conversion costs during the period amounted to:
a. P1,532,500
b. P1,442,500
c. P2,012,500
d. P1,487,500
The following information has been taken from the cost records of T Co. for the past years:
Raw materials used in the production P326,000
Prime costs for the period P551,000
Conversion cost for the period P360,000
(OH applied is equal to 60% of direct labor)
Cost of goods available for sale 826,000
Selling of Administrative expenses 25,000
Inventories Beginning Ending
Raw Materials P75,000 P85,000
Work in Process 80,000 30,000
Finished Goods 90,000 110,000
23. The cost raw material purchased amounted to:
a. P316,000
b. P336,000
c. P360,000
d. P411,000
24. The total factory costs for the period amount to:
a. P911,000
b. P551,000
c. P686,000
d. P767,000

Dove Manufacturing Company’s Cost of Goods Sold for the year amounted to P6,900,000. The work
in process at the end was 90% of the beginning Work in Process inventory. Factory overhead was
applied at 60% of direct labor costs. On January 1, inventories showed the following balances

• Finished Goods P2,040,000

• Work in Process 800,000
• Direct Materials 400,000
• Factory Supplies 180,000

During the period, the following purchases were recorded:

• Direct Materials P3,200,000

• Factory Supplies 900,000

It was also noted that Finished Goods decreased by P320,000 while direct materials and factory supplies
increased by P180,000 and P50,000, respectively.
25. The cost of materials, labor and overhead added during the period amount to:
Materials Labor Overhead
a. P3,870,000 P2,918,750 P1,751,250
b. 3,020,000 3,312,000 2,206,000
c. 3,870,000 3,450,000 2,070,000
d. 3,020,000 2,175,000 1,305,000

The following data are available from the records of Sunflower Manufacturing Company for the period
just ended:

• Gross Profit P1,920,000

• Increase in Finished Goods 200,000
 • Increase in Work in process 480,000
• Decrease in Raw Materials 250,000
• Prime costs 6,750,000
• Conversion costs (FOH is 50% of 4,500,000
DL costs)
26. The raw materials purchased during the period amounted to:
a. P3,750,000
b. P3,000,000
c. P3,500,000
d. P4,000,000

The following cost information is available from the records of Johnson Company for the year just
ended:
Inventories January 1 December 31
Finished Goods P2,400,000 P2,950,000
Work in process 3,000,000 2,400,000
Raw Materials 4,400,000 2,800,000
Store Supplies 850,000 700,000
Office Supplies 150,000 280,000
Purchases:
Raw Materials P9,000,000
Store Supplies 1,200,000
Office Supplies 850,000
Other costs and expenses:
Salaries & Benefits:
Direct labor P6,500,000
Indirect labor 560,000
Supervision fee 1,250,000
Administrative & selling 2,360,000
Depreciation (60% factory; 40% adm & Sell) 1,500,000
Rent (60% factory; 40% adm & sell) 1,200,000
Utilities (60% factory; 40% adm & sell) 600,000
Advertising 320,000
Factory supplies used 850,000

Additional information:
The company applies actual overhead to production and sells their produce at price to give the
company a gross profit rate of 25%. If problem is silent, assume gross profit based on sales.
27. The cost of goods manufactured amounts to:
a. P21,490,000
b. P22,340,000
c. P18,490,000
d. P20,940,000
28. The total sales for the period amounted to:
a. P27,920,000
b. P26,175,000
c. P29,787,667
d. P27,925,000
The balance sheet of Joyful Manufacturing Company showed the following balances on January 1:

• Finished Goods P1,500,000

• Work in process 1,200,000
• Raw Materials 2,000,000

During the 1st quarter of the year, prime costs amounted to P13,680,000 while conversion costs
amounted to P7,920,000. The average direct labor rate was P38.50 and overhead was applied to P30.80
per direct labor hour. Purchases of raw materials were P10M while cost of goods manufactured was
P17,400,000. The company continues its pricing policy to maintain a gross profit rate of 30%. At the
end of the quarter, costs of sales amounted to P16,800,000.
29. The change in work in process inventory and finished goods inventory during the first quarter
of the year was:
Work in process inventory Finished goods inventory
a. No change No change
b. Increase of P200,000 Decrease of P600,000
c. Decrease of P200,000 Increase of P600,000
d. Increase of P5,400,000 Increase of P2,100,000

The following data were taken from the records of Serendra Company:
Inventories June 1 June 30
Raw Materials ? P50,000
Work in process P80,000 P95,000
Finished goods P60,000 P78,000
Raw materials purchased P46,000
Factory overhead, 75% of Direct labor costs 63,000
Operating expenses, 12.5% of sales 25,000
Net income 25,000

30. The cost of goods sold for June amounted to:

a. P120,000
b. P150,000
c. P168,000
d. P183,000

The following information relating to the jobs accepted from three valued customers are summarized
below:
Accounts Charisse Dennise Felice
In process, Nov.1:
Materials P50,000 P30,000 -
Labor 80,000 60,000 -
Overhead 120,000 90,000 -
Cost added in November:
Materials 80,000 50,000 75,000
Labor 100,000 80,000 110,000
Overhead ? ? ?
Actual overhead incurred in November amounted to P420,000. The jobs ordered by Charisse and
Dennise were completed in November. Overhead is applied using a predetermined overhead rate based
on direct labor costs.
31. The costs of goods debited to Finished Goods at November 30 is:
a. P1,360,000
b. P930,000
c. P1,010,000
d. P1,190,000

32. The over or under applied overhead at November 30 is

a. P15,000 over applied
b. P15,000 under applied
c. P30,000 over applied
d. P30,000 under applied

33. JMP Industries electricity costs and machine hours over a nine-month period follow: (Relevant
range is from 2,000 to 5,000 machine hours)
Month Machine hours Cost
April 2100 P 9,750
May 3400 14,300
June 5800 21,640
July 4900 19,550
August 2500 11,150
September 3000 12,900
October 2400 10,800
November 1800 8,440
December 4800 22,000

Using the high-low method, how much is the electricity costs if the actual machine hours used
is 2,800?
a. P11,830
b. P12,200
c. P12,900
d. P11,740

Use the following simple regression results based on the data from the Madrigal Corporation to answer
questions 34 and 35:

• Dependent variable – machine maintenance costs

• Independent variable – machine hours
Computed values:

• Intercept: 3,500
• Slope of the line: 3.50
• R value: 0.856
• R2value: 0.733

34. What percentage of the variation in maintenance costs is explained by the independent variable?
a. 85.6%
b. 95.2%
 c. 47.3%
d. 73.3%

35. What is the total maintenance cost for an estimated activity level of 20,000 machine hours?
a. 73,500
b. 78,400
c. 82,300
d. 84,750

Below is the Inventory Stock Card maintained by Budah Corp for the Raw Material A for the month of
June 2016:
DATE RECEIPTS ISSUANCES BALANCES
JUNE UNITS UC AMOUNT UNITS UC AMOUNT UNITS UC AMOUNT
1 800 38.00 30,400.00
3 1200 40.00
4 1500
10 800 42.00
15 700
15 1500 41.00
15 1600
26 800 40.00
27 550
30 600 43.00
TOTAL

36. Using FIFO method, the raw materials ending inventory amounts to
a. P25,800 b. P23,650 c. P55,800 d. none of these

37. Using moving average method, the total raw materials issued on June 15 amounts to
a. P94,212 b. P65,568 c. P28,644 d. P175,221

38. Sampaguita Manufacturing Company uses 84,375 units of Material Y each year. The cost of
placing an order is P120 and the carrying cost for one unit of material Y is P3.00. It takes 20
days to receive the order once placed. Assume that Sampaguita’s year is composed of 360 days.
What is the reorder point?
a. 2,598.08 units
b. 4,687.5 units
c. 5,196.16 units
d. 2,343.75 units

39. Last week, 1,215 hours were worked in the factory of Johnson Company. Fifty five (55) of
these hours were overtime which pays time and a half (50% premium). Also, 42 of the hours
were idle time. All workers are paid a regular rate of P55 per hour. How should the total payroll
of P68,337.50 be allocated to direct labor and factory overhead?
a. P68,337.50 ; P0
b. P66,825.00 ; P1,512.50
c. P64,515.00 ; P3,822.50
d. P64,515.00 ; P1,512.50

40. Anong uri ka ng cost at bakit?

a. Budgeted cost kasi bago ako pumasok sa relasyon, kelangan pinag-iisipan ko munang
mabuti.
b. Discretionary cost dahil mahal niya lang ako kung kelan niya lang gusto.
c. Committed cost na po ako dahil nasa loving relationship na ako.
d. Common cost po kasi mahilig ako makihati sa pagmamahal.