COST ACCOUNTING and COST CONTROL

DISCUSSION TARNSCRIPT PART 2 [DECEMBER 2, 2020]

GOOD AFTERNOON CLASS!

AFTER THE FIRST DISCUSSION LAST WEEK, YOU MAY NOW TRY ANSWERING THE FOLLOWING
SELF-TEST QUESTIONS - FOR OUR DISCUSSION AFTERWARDS; GOOD LUCK!
SELF-TESTS/CONCEPT CHECKER:
N.B. Official answers shall be provided during the online class discussion, afterwards!

PART 1 – MULTIPLE CHOICE:

Select the letter of the best answer.

1. Which of the following is not true?

a. managerial accounting information is prepared for internal users

b. managerial accounting information is not required by various laws
c. there are specific standards of acceptability for managerial accounting
d. the structure of managerial accounting practice is relatively flexible

2. Which of the following are basic inventories for a manufacturer?

a. indirect materials, goods in process, and raw materials

b. finished goods, raw materials, and direct materials
c. raw materials, goods in process, and finished goods
d. raw materials, factory overhead, and direct labor

3. The three basic elements of the cost of a manufactured product are:

a. indirect materials, indirect labor, and manufacturing overhead

b. merchandise inventory, work in process, and finished goods inventory
c. direct materials, work in process, and finished goods inventory
d. direct materials, direct labor, and manufacturing overhead

4. Which of the following would not be an element of factory overhead?

a. salary of a marketing manager

b. amortization on the maintenance equipment
c. salary of the plant supervisor
d. property taxes on the plant buildings
5. A firm had beginning finished goods inventory of $20,000; its cost of goods manufactured
was $75,000; its gross margin was $80,000; and its sales were $140,000. The ending finished
goods inventory was:

a. $60,000
b. $40,000
c. $95,000
d. $35,000

6. A firm had beginning finished goods inventory of $15,000; ending finished goods inventory of
$20,000; and its cost of goods sold was $80,000. The cost of goods manufactured was:

a. $80,000
b. $85,000
c. $75,000
d. $65,000

7. A firm had $200,000 in sales; $120,000 in goods available for sale; ending finished goods
inventory of $20,000; and selling and administrative expenses of $55,000. Which of the
following is true?

a. net income was 25.0% of sales

b. the cost of goods sold was $140,000
c. the gross profit was $80,000
d. the beginning finished goods inventory is not determinable

8. A cost which changes in proportion to changes in volume of activity is called a:

a. fixed cost
b. controllable cost
c. variable cost
d. opportunity cost

9. A 'direct' cost is a cost that is classified by:

a. behavior
b. traceability
c. controllability
d. relevance
10. A 'sunk' cost is a cost that is classified by:

a. behavior
b. traceability
c. controllability
d. relevance

11. A 'product' cost is a cost that is classified by:

a. behavior
b. function
c. controllability
d. relevance

12. Which of the following costs is not capitalized as inventory?

a. costs of delivering finished goods

b. factory (manufacturing) overhead
c. insurance of factory building and equipment
d. factory amortization

13. Which of the following is a period cost?

a. direct materials
b. indirect materials
c. factory utilities
d. administrative expenses

14. A management concept under which all managers and employees at all stages of company
operations strive toward higher standards and a reduced number of defective units is called:

a. Continuous Improvement
b. Total Quality Management (TQM)
c. Theory of Constraints (TOC)
d. Total Quality Control (TQC)
15. Expenditures incurred in the process of converting raw materials to finished goods are
called:
a. prime costs
b. conversion costs
c. not given
d. a and b

PART 2 – TRUE or FALSE:

Write True if the statement(s) is/are correct, otherwise, write False.

1. An activity that provides financial and nonfinancial information to managers and other
internal decision makers of an organization is called managerial accounting.

2. Planning is the process of monitoring planning decisions and evaluating an organization's

activities and employees.

3. The purpose of using information provided by the accounting system is quite different for
investors and creditors than it is for managers of the firm.

4. The emphasis of the focus of information generated through managerial accounting is on

segments of the organization rather than the organization as a whole.

5. The information that management needs to plan and control operations is provided by the
accounting system, and is under the rigid standards of GAAP.

6. The accounting system will provide managers with accurate and precise information for
planning and decision making much faster than the information is provided to external users.

7. The financial information provided to external users focuses on the entity as a whole,
whereas the financial information that is used by managerial accountants focuses on segments
of the entity.

8. Manufacturers have only two classes of inventory; goods in process and finished goods.

9. The three basic elements of a manufactured product are direct materials, direct labor, and
factory overhead.

10. The labor cost for janitors, supervisors, materials handlers, engineers, and maintenance
personnel would be considered a direct labor cost.
11. Indirect labor, indirect materials, factory heat and light, factory property taxes, and
amortization and insurance on production equipment would be classified as factory overhead.

12. The income statement for a manufacturer does not contain the line item 'Cost of Goods
Sold'.

13. Costs can be classified by their behavior, which is a useful tool in management accounting.

14. Cost can be classified as to traceability.

15. All costs are controllable.

16. Opportunity costs are irrelevant to future decisions.

17. Costs are capitalized if they produce benefits that are expected to have value in the future.

18. Costs that are involved in the manufacture of a product are called period costs.

19. Product costs can be incurred in one accounting period and recognized as a cost of a
subsequent accounting period.

20. The sales price of a product less the total variable cost of the product is called contribution
margin.

-Compiled by: DR. LOVELL M. ABELLO, CPA, LPT, Ll. B.