COST ACCOUNTING AND CONTROL

FORMATIVE ASSESSMENT 1

1. The branch of accounting that is most concerned with addressing the needs of the firm as a
whole is managerial accounting.
2. The branch of accounting that is most concerned with addressing the needs of specific
departments of the firm is managerial accounting.
3. The branch of accounting that serves as a bridge between financial and managerial accounting
is cost accounting.
4. Costs that can be conveniently traced to a cost object are referred to as direct costs. 
5. A cost that remains unchanged in total within the relevant range is known as a fixed cost.
6. A cost that varies in total in direct proportion to changes in activity is known as a variable cost.
7. A cost that remains constant on a per unit basis within the relevant range is a variable cost.
8. A cost that varies inversely with the level of production is known as a fixed cost.
9. A cost that has both fixed and variable components is known as a mixed cost.
10. A cost that is recognized in the income statement as expense when incurred period costs.
ITEMS PRODUCT PERIOD VARIABLE FIXED
Cost of fabric used in T-shirts. / /
Wages of shirtmakers. / /
Cost of new sign in front of retail / /
T-shrt shop.
Wages of the employee who / /
repairs the firm's sewing machines
Cost of electricity used in the / /
sewing department
Wages of T-shirt designers and / /
painters.
Salaries of sales personnel. / /
Depreciation on sewing machines. / /
Rent on the factory building. / /
Cost of daily advertisement in / /
local media.
Wages of designers who / /
experiment with new fabrics,
paints, and T-shirt designs.
Salary of the owner's secretary. / /
Cost of insurance for the / /
production employees.
Salary of the accountant. / /
Depreciation of the store / /
equipment
Segregating Variable and Fixed Costs

The cost of maintenance for animated exhibits at Ocean Park is partly variable and partly fixed. Supplies
and other materials tend to vary with hours of operation while the salaries of the maintenance workers
are fixed. Cost data are given as follows:

Hrs. of Operations Total Cost

500 9,000

700 11,200

450 8,250

800 12,000

600 8,100

900 12,615

1. Using the high-low method, what is the amount of fixed cost? 3,885
2. Using the high-low method, what is the amount of variable cost per hour? 9.7
3. Using the high-low method, how much would be the total cost of maintenance for 950
hours? 13,100
4. If using the least squares method, what is the amount of fixed cost? 3275.08 or
3272.29 (excel)
5. If using the least squares method, what is the amount of variable cost per hour? 10.18
or 10.51(excel)

The following information is the AXA Manufacturing Co. 2020. Assume that the Raw Materials Inventory
Account contains both direct materials and indirect materials.

Inventories Beginning Ending

Raw Materials 17,400 13,200

Work in Process 31,150 28,975

Finished Goods 19,200 25,500

Direct labor paid 273,000 Depreciation-factory equipment 17,300

Raw material purchases on account 120,000 Depreciation-office equipment 3,500
Indirect labor paid 11,200 Repairs and Maintenance-Factory 7,400
Office supplies expense 900 (75% for factory, 25% for office)
1. How much is the cost of direct materials used? 120,175
2. How much is the total manufacturing overhead? 51,925
3. How much is the cost of goods manufactured? 447,275
4. How much is the cost of goods sold? 440,975
5. How much is the total operating expense? 41,100