COST ACCOUNTING AND MANAGEMENT II

Write the capital letter of your selected answer in the space provided.

____ 1. The economic order quantity is the order quantity that results in __________.
A. The minimum total inventory costs
B. The maximum total inventory costs
C. No inventory charges
D. Minimum ordering costs

____ 2. The reorder point in the EOQ model is:

A. The inventory level at which an order is placed
B. When all inventory has been used
C. The day of ordering
D. When an inventory level is below the order quantity

___ 3. Why is direct labor often used as basis for applying overhead costs to jobs?
A. Overhead is very similar to direct labor
B. Overhead includes direct labor
C. Overhead occurs before direct labor is charged to job
D. Overhead occurs in relation to the direct labor costs

___ 4. Which of the following equations determines the total annual ordering costs?
A. Cost of placing an order times the order quantity
B. Cost of placing an order times the number of orders per year
C. Cost of placing an order times one-half of the order quantity
D. Unit carrying costs per year times the order quantity

___ 5. Since overhead costs are indirect costs,

A. They require some process of allocation
B. They can be easily traced to production
C. A predetermined overhead rate is not advantageous
D. They cannot be allocated

___ 6. Manufacturing overhead is underapplied if:

A. Actual rate is equal to predetermined rate
B. Actual overhead is less than applied
C. Actual rate is not equal to predetermined rate
D. Actual overhead is greater than applied

___ 7. In a backflush costing system, a single account is used for the following:
A. Work in process and finished goods inventory
B. Finished goods inventories and cost of goods sold
C. Factory overhead and raw materials
D. Raw materials and work in process inventories

___ 8. One of the elements included in the EOQ formula is:

A. Safety stock
B. Yearly demand
C. Selling price of item
D. Lead time for delivery

___ 9. The formula for computing the predetermined manufacturing overhead rate is estimated
annual overhead costs divided by an expected annual operating activity.
A. Direct labor cost
B. Direct labor hours
C. Machine hours
D. Direct materials costs
E. Any of the above

___ 10. . Manufacturing overhead

A. Consist of all manufacturing costs other than direct labor
B. Consist of all manufacturing costs other than indirect costs
C. Consist of all manufacturing costs other than direct materials
D. Consist of all manufacturing costs other than direct costs
___ 11.Violet Company sells 10,000 RTW pants evenly throughout the year. The costs of
carrying one unit in inventory for one year is P6 and the purchase costs is P108. What is the
economic order quantity?
A. 468
B. 600
C. 1208
D. 1000

___ 12. Which of the following can be used in calculating predetermined overhead rate?
A. Estimated factory overhead divided by actual machine hours
B. Estimated factory overhead divided by estimated machine hours
C. Estimated direct labor costs divided by estimated machine hours
D. Estimated direct labor costs divided by actual machine hours

___ 13. A decrease in inventory order costs will

A. Decrease the economic order quantity
B. Increase the reorder point
C. Have no effect on the economic order quantity
D. Decrease the carrying cost percentage

___ 14. Jaycee Company sells 20,000 radios evenly throughout the year. The costs of
carrying one unit in inventory for one year is P8, and the purchase order cost per order is
P32. What is the economic order quantity?
A. 200
B. 400
C. 283
D. 625

___ 15. The economic order quantity (EOQ) will rise following:
A. A decrease in annual unit sales
B. An increase in carrying costs.
C. An increase in the per-unit purchased price of inventory.
D. An increase in the variable costs of placing and receiving an order.

___ 16.Daisee Company’s average demand for a special motor used in production is
12,000 per month. These motors costs the company P20 each from the supplier and
required a one-day lead time. The ordering costs is P5 per order and the carrying costs is
10% of purchase price. The number of orders per year is _____________.
A. 170
B. 45
C. 49
D. 100

Conte Company applies factory overhead on the basis of a rate per direct labor hour. The
company provides you with the following data for the month of August, year 1. Selected
inventories have the following balances:

August 1 August 31

Inventories:
Work in Process P78,000 P85,000
Finished Goods 81,000 60,000
Prime Costs for the month were:
Direct materials used P48,000
Direct labor (45,000 actual labor hours) P294,000

___ 17. The factory overhead application rate is:

A. P1.20 of DL cost
B. P1.20 per DLH
C. P1.291 per DLH
D. 19.76 of DL cost
The following information are given with respect to product Lovely World Corporation in 2019:
Optimal production run in units 2,000
Average inventory in units 1,000
Number of production runs 5
Cost per unit production P75
Desired annual return on inventory investment 18%
Set-up cost per production run P5,000

___ 18. If the units will be required evenly throughout the year, the total annual relevant
costs using the economic-order-quantity approach is:
A. P 5,000
B. P 75,000
C. P 50,000
D. P150,000

___ 19. The carrying costs ratio is:

A. 31.25%
B. 18.00%
C. 13.25%
D. 49.25%

___ 20. JJJ Company sells 200 units of discs per week. Purchase order lead-time is 3
weeks and the economic order quantity is 450 units. What is the reorder point?
A.425 units
B. 1,750 units
C. 600 units
D. 2,250 units