University of Luzon

College of Business Administration

Midterm Examination in Costing and Pricing

Name: _______________________________________________________ Date: ____________ Score: __________

Reminder: Strictly NO ERASURE, ALTERATIONS and SUPERIMPOSITIONS allowed.
Part 1. True or False. Indicate whether the following statements are true or false by inserting in the blank space provided a
capital “T” for true and “F” for 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 a 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 cost are found in both merchandising and manufacturing firms.
7. The three costs elements of 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 costs.
9. Like product cost, period cost, 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 costs remains constant if expressed on a unit basis.

Part 2. Computational. Round off to the nearest tenths.

Problem 1. ABCDE Corporation is preparing a flexible budget and desires to separate its electricity expense, which is semi-
variable and fluctuates with total machine hours, into its fixed and variable components. Information for the first three
months of 1999 is as follows:
Machine Hours Electricity Expense
January 3,500 Php 31,500
February 2,000 Php 20,000
March 4,000 Php 35,600
Required:

1. Compute the variable rate per machine hour.

2. Compute the fixed portion of ABCDE’s electricity expense.

Problem 2. MP Motors which specializes in replacing motor parts has the following cost incurred during the month of
January which they replaced 600 motor parts. Fill in the missing amounts.

Number of replaced motor parts

500 600 700
Total Cost
Fixed Costs A Php 42,000 B
Variable Costs C Php 30,000 D
Total Costs E Php 72,000 F

Cost per replaced motor parts

Fixed Cost G H I
Variable Cost J K L
Total Costs per replacement M N O