DON JOSE ECLEO MEMORIAL FOUNDATION COLLEGE OF SCIENCE AND TECHNOLOGY

Justiniana, Edera, San Jose Dinagat Islands

Prelim Exam – Cost Accounting

Total Items:

I. Classify the following items as direct or indirect materials.

1) Gold make jewelry
2) Sandpaper-furniture making
3) Paper used in printing books
4) Milk to make ice cream
5) Water to make ice
6) Seats to be installed in a car
7) Leather to make gloves
8) Tape measure used by tailors
9) Flour used in making bread
10) Pineapple in a fruit cocktail

II. Classify the following as either manufacturing (M), selling/marketing (S/M), or administrative (A). Write the
letter only.
1) Factory supplies
2) Advertising
3) Rent on factory building
4) Freight-out
5) President’s salary
6) Cost of machine breakdown
7) Legal expenses
8) Samples
9) Bad debts
10) Travel expenses of salesmen

III. Classify the following selected costs below… (a) Variable or Fixed, (b) Product or Period costs, (c) Direct or
Indirect in relation to units of product.
1) Wood is used in the manufacture of the tables, at a cost P100 per table. –Wood---
2) The tables are assembled by workers, at a cost of P40 per table. –Salary-Workers---
3) Workers assembling the tables are supervised by a factory supervisor who is P12,000 per month. --
Supervisor’s Salary--
4) Electrical costs of P20 per machine hour are incurred in the factory in the manufactures of the tables. (4
machine hours per table). –Electrical Costs--
5) The depreciation cost of the machines used in the manufacture of the tables is P40,000 a year. ---Depreciation-
Machines--
6) The salary of the president of the company is P100,000 a month. –President’s Salary---
7) The company spends P250,000 per year to advertise its products. ---Advertising expense---
8) Salespersons are paid a commission of P300 for each table sold. –Sales Commissions---
9) Rent paid for the factory buildings is P20,000 a month. ---Rent expense---
10) Insurance premiums paid for the general office is P15,000 a year. ---Insurance premiums—
 IV. True or False
1) The materials, labor, and overhead costs incurred to produce a product are called period costs.
2) Marketing, Selling, and Administrative Costs are the three broad classifications of costs incurred by a
manufacturing company.
3) Lumber can be both a finished product and material.
4) Product cost consists of the sum of prime cost and conversion cost.
5) Total fixed costs decrease with increase in the number of units produced and increase with decrease in output.
6) Period costs are found in both merchandising and manufacturing firms.
7) The three cost elements of a manufactured good are direct materials, direct labor, and marketing costs.
8) A cost that is present under one alternative but absent in whole or part under another alternative is known as a
differential cost.
9) Like product costs, period costs are not necessarily treated as expenses in the period in which they are incurred.
10) Variable costs are costs that change, in total, in direct proportion to changes in the level of activity.
11) The salary paid to the manager in charge of a warehouse is probably a variable cost.
12) Indirect materials/ factory supplies are classified as administrative expense.
13) The salary paid to a factory foreman is classified as factory overhead.
14) In a manufacturing setting, prime costs are fixed.
15) Fixed cost remains constant if expressed on a unit basis.
16) Differential costs can either fixed or variable.
17) A fixed cost is constant per unit of product.
18) A decrease in production will ordinarily result in an increase in fixed production cost per unit.
19) A factory supervisor’s salary would be classified as a direct cost of a unit of product.
20) Factory rent is included in manufacturing overhead, but office rent is a period cost.

Prepared by:

HONEYZEL P. ONTOLAN

Instructor