ACCOUNTING 223 PRELIM EXAM

I.MULTIPLE CHOICE: On the blank, write the CAPITAL LETTER of the correct
answer in each of the given question.

__B__ 1. Cost accounting concepts include:

a. Planning, controlling and sharing
b. Planning, controlling and costing
c. Controlling, costing and sharing
d. Planning, controlling, sharing and decision-making
__C__ 2. The main purpose of cost accounting is to:
a. Maximize revenues
b. Facilitate inventory valuation
c. Provide information to management for decision-making
d. To ascertain the selling price
__B__ 3. The following are the uses of cost data, except:
a. It determines appropriate selling price.
b. It is used to decide whether to manufacture or purchase from outside.
c. It helps in planning and controlling cost of production.
d. None of the above.
__D___ 4. The primary users of information provided by a management accountant are
a. Manufacturing department
b. Purchasing department
c. Customers of the organization
d. Managers within the organization
__A__ 5. Which of the following statements is false?
a. Factory overhead cost is the sum of indirect materials, indirect labor, and other
indirect production costs.
b. Prime cost is the sum of direct materials and direct labor and other direct production
cost.
c. Total production cost is the sum of prime cost and factory overhead.
d. Total production cost is the sum of prime cost and conversion cost.
__A__ 6. Which of the following incurs cost that may or may not be attributed to cost units?
a. Cost center
b. Profit center
c. Revenue center
d. Investment center
__A__ 7. If a company uses predetermined overhead rate based on the actual quantity of cost
allocation, which of the following costing method is most likely to be used?
a. Actual costing
b. Normal costing
c. Standard costing
d. Variable costing
__B__ 8. A cost that is expended in the past and cannot be retrieved on product, service, or
activity is called:
a. Opportunity cost
b. Sunk cost
c. Period cost
d. Historical cost
__C__ 9. Which of the following industries is most likely using the job order costing:
a. Meat processing
b. Steel manufacturing
c. Office machine and equipment
d. Leather
__A___10. Which of the following industries is most likely to use the process costing?
a. Sugar c. paper boxes
b. Wooden furniture d. pianos
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__A___11. Sprinter Company management desires cost information regarding their brand
“Geneva”. The Geneva brand is:
a. A cost object c. a cost assignment
b. A cost driver d. an actual cost
__C___12. The following are the elements of product costs except:
a. Direct materials c. indirect labor
b. Direct labor d. factory overhead
__B___13. Inventoriable costs are:
a. Classification of costs for finished goods
b. Classification of costs for manufacturing companies
c. Recorded as period cost when incurred and later reclassified as assets
d. Recorded as assets when incurred.
__D___14. Which of the following vary with the level of activity:
a. Total fixed cost c. variable cost per unit
b. Fixed cost per unit d. total cost
__D___15. Which of the following statements is/ are true:
a. Variable costs per unit are constant within the relevant range.
b. Total fixed costs are constant within the relevant range.
c. Total variable costs are constant within the relevant range.
d. Both a and b.
__A___16. Under the variable costing method, which of the following costs are allocated to
inventory?
Variable selling and administrative costs Variable factory overhead costs
a. Yes Yes
b. Yes No
c. No No
d. No Yes
__D___17. When production levels are expected to increase within a relevant range, and a
flexible
budget is used, what effect would be anticipated with respect to each of the following
costs?
Fixed costs per unit Variable costs per unit
a. Decrease Decrease
b. No change No change
c. No Change Decrease
d. Decrease No change
__B___18. An example of fixed cost includes:
a. Costs of materials fixed per unit
b. Salary of supervisor
c. Indirect expenses
d. Depreciation of factory equipment
__C___19. The difference between costs of goods manufactured and cost of goods sold is:
a. Opening finished goods inventory
b. Closing finished goods inventory
c. Change in the finished goods inventory
d. The change in work in process and finished goods inventory
__B___20. Which of the following describes indirect costs?
a. Indirect materials and indirect labor
b. Indirect manufacturing overhead
c. Costs that do not vary with a change in the cost object
d. Costs that do not form part of a finished product
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II. The Bacoor, Cavite plant of Duke United Motor Manufacturing, Inc. (DUMMI), a joint
venture of Honda and Toyota, assembles two types of cars (Corollas and Civics). Separate
assembly lines are used for each type of car.

Classify each of the following cost items as:

a. Direct or indirect ( D or I ) costs with respect to the total number of cars of each type
assembled (Corolla or Civic).
b. Variable or fixed (V or F) costs with respect to how the total costs of the plant change as
the number of cars of each type assembled changes. (If in doubt, select on the basis of
whether the total costs will change substantially if there is a large change in the number
of cars of each type assembled.)

You will have two answers (D or I ; V or F) for each of the following items:

Cost Item D or I V or F
A. Cost of tires used on Civic _D____ __V___
B. Salary of public relations manager for
DUMMI plant _I____ __F___
C. Annual awards dinner for Corolla suppliers _D____ __F___
D. Salary of engineer who monitors design changes
On Civic _D____ __F___
E. Freight costs of Corolla engines shipped from
Toyota City, Japan to Bacoor Cavite _D____ __V___
F. Electricity costs for DUMMI plant (single bill
Covers entire plant) _I____ __V___
G. Wages paid to temporary assembly-line workers
Hired in periods of high production( paid on
Hourly basis) _D____ __V___
H. Annual fire-insurance policy cost for DUMMI
Plant. _I____ __F___

III. Match the following lettered terms on the left with the appropriate numbered description on
the right.

__8___ a. Budgeted cost 1. An expense or loss

__3___ b. Direct costs
__9___ c. Distribution cost
__1___d. Expired cost
__2___ e. Fixed cost
__5___ f. Inventoriable cost
__7___g. Period cost
__4___h. Product costs
__6___i. Variable cost
2. A cost that remains constant on a per-unit basis
3. A cost associated with a specific cost object.
4. Direct material, direct labor,and manufacturing overhead
5. Product cost
6. A cost that varies inversely on a per-unit basis with
changes in activity.
7. A cost primarily associated with the passage of time
rather than production activity.
8. An expected future cost
9. A cost of transporting a product.

IV. Indicate whether each of the following terms is associated with a manufacturing (Mfg.), a
retailing or merchandising (Mer.), or a service (Ser.)company. There can be more than one
correct answer for each term .
__Mfg, Mer, Ser_____ 1. Prepaid Rent
__Mer,______________ 2. Merchandise Inventory
__Mfg, Mer__________ 3. Cost of goods sold
__Mfg, Mer, Ser_______ 4. Sales Salaries Expense
__Mfg________________ 5. Finished goods inventory
V. Classify the following as direct materials, direct labor, factory overhead , or selling and
administrative expense.

___direct materials_ ___ 1. Steel used in an overhead door plant.

___direct materials____ 2. Cloth used in a shirt factory.
___direct materials____ 3. Fiberglass used by a sailboat builder.
___factory overhead___ 4. Cleaning solvent for the factory floor.
___direct labor________ 5. Wages of a binder employed in a printing plant.
___factory overhead___ 6. Insurance on factory machines.
___selling and administrative expense_ 7. Rent paid for factory buildings.
___factory overhead___ 8. Wages of the Machining Department supervisor.
___direct materials____ 9. Leather used in a shoe factory.
___factory overhead___10. Wages of a factory janitor.
___factory overhead___11. Electric power consumed in operating factory machines.
___factory overhea____12. Depreciation on corporate offices.
___factory overhead___13. Fuel used in heating a factory.
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___direct materials____14. Paint used in the manufacturing of jet skis.

___direct labor_______15. Wages of an ironworker in the construction business.

VI. The following data are taken from the general ledger and other records of CPP Co. on January 31, the
end of the first month of operations in the current fiscal year:
Sales P 75,000
Materials inventory ( January 1 ) 25,000
Work in Process inventory ( January 1 ) 24,000
Finished goods inventory ( January 1) 32,000
Materials purchased ( including P1,000 of indirect materials) 21,000
Direct labor costs 18,000
Factory overhead ( including P1,000 of indirect materials used and
P3,000 of indirect labor cost) 12,000
Selling and administrative expenses 10,000
Inventories at January 31:
Materials 22,000
Work in process 20,000
Finished goods 30,000
Required:
1. Prepare a statement of cost of goods manufactured and sold.

1. Prepare a statement of cost of goods manufactured and sold.

CPP Co.
Statement of Cost of Goods Manufactured
For the Month Ended on January 31, 20xx

Direct Materials Used:

Raw Materials Inventory, beginning P25,000
Add: Net Purchases:
Purchases – Raw Materials 20,000
Raw Materials Available for Use P45,000
Less Raw Materials Inventory , end
22,000
Direct Materials Used P23,000
Direct Labor 18,000
Manufacturing Overhead
Indirect Labor P3,000
Indirect Materials 1,000
Others 8,000 12,000
Total Manufacturing Costs P53,000
Add: Work in Process, beginning 24,000
Total Cost of Goods Placed in Process P77,000
Less: Work in Process, end 20,000
Cost of Goods Manufactured P57,000

CPP Co.
Statement of Cost of Goods Sold
For the Month Ended on January 31, 20xx

Finished Goods Inventory, Beginning P 32,000

Add: Cost of Goods Manufactured 57,000
Goods Available for Sale P 89,000
Less: Finished Goods Inventory, End 30,000
Cost of Goods Sold P 59,000

2. Prepare the income statement of CPP Co.

CPP Co.
Income Statement
For the Month Ended on January 31, 20xx

Sales P 75,000
Less: Cost of Sales
Finished Goods Inventory, Beginning P 32,000
Add: Cost of Goods Manufactured 57,000
Goods Available for Sale P 89,000
Less: Finished Goods Inventory, End 30,000
Cost of Goods Sold 59,000
Gross Profit P 16,000
Less: Selling and Administrative Expense 10,000
Net Profit 6,000

VII. The following inventory data relate to Rubens, Inc.:

Inventories
Ending Beginning
Finished goods P75,000 P110,000
Work in Process 80,000 70,000
Direct Materials 95,000 90,000
Revenues and Costs for the period:
Sales P900,000
Cost of goods available for sale 775,000
Total manufacturing costs 675,000
Factory overhead 175,000
Direct materials used 205,000

Calculate the following for the year:

1. Direct materials purchased
Direct Material Used P205,000
Add: Direct Material, End 95,000
300,000
Less: Direct Material, beginning _ (90,000)
Direct Materials purchased P210,000
2. Direct labor costs incurred
Total Manufacturing costs P675,000
Less: Direct Materials Used (205,000)
Factory Overhead (175,000)
Direct labor costs incurred            P295,000

3. Cost of goods sold

Finished Goods, Beg. P110,000
Add: COGM 665,000
775,000
Less: Finished Goods, End (75,000)
Cost of goods sold P700,000

Total Manufacturing Cost P675,000

Add: Work in process, Beg. 70,000
745,000
Less: Work in process, End (80,000)
Cost of Goods Manufacturing P665,000

4. Gross Profit
SALES P900,000
Less: COGS 700,000
Gross Profit P200,000

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