SA 2103 - COST ACCOUNTING B PRELIM EXAM TOPIC COVERAGE: ● Introduction and Cost Classification ● Cost Terminology and Cost Behavior ● Predetermined Overhead HEORIES: TRUE OR FALSE (5 Items) T 1. A variable cost remains constant on a per-unit basis as production increases 2.Acostthatshiftsupwardordownwardwhenactivitychangesbyacertainintervalisreferred to as a mixed cost. 3.Inanormalcostsystem,actualproductionoverheadcostsareaccumulatedinanOverhead Control account and assigned to Work in Process at the end of the period. 4. If underapplied factory overhead is immaterial, the account is closed by a debit to Cost of Goods Sold. 5. If sales exceed production, absorption costing net income exceeds variable costing net income. HEORIES: MULTIPLE CHOICE QUESTIONS (15 Items) T 6. The distinction between direct and indirect costs depends on whether a cost a. is controllable or non-controllable. b. is variable or fixed. c. can be conveniently and physically traced to a cost object under consideration. d. will increase with changes in levels of activity. . Conversion cost does not include 7 a. direct labor. c. factory depreciation. b. direct material. d. supervisors' salaries. . Which of the following would need to be allocated to a cost object? 8 a. direct material c. direct production costs b. direct labor d. indirect production costs . Period costs 9 a. are generally expensed in the same period in which they are incurred. b. are always variable costs. c. remain unchanged over a given period of time. d. are associated with the periodic inventory method. 0. The formula to compute cost of goods manufactured is 1 a. beginning Work in Process Inventory plus purchases of raw material minus ending Work in Process Inventory. b. beginning Work in Process Inventory plus direct labor plus direct material used plus overhead incurred minus ending Work in Process Inventory. c. direct material used plus direct labor plus overhead incurred. d. direct material used plus direct labor plus overhead incurred plus beginning Work in Process Inventory. 1. When the number of units manufactured increases, the most significant change in unit cost 1 will be reflected as a(n) a. increase in the fixed element. c. increase in the mixed element. b. decrease in the variable element. d. decrease in the fixed element. 2. Statement 1: A specific product cannot be a cost object 1 Statement 2: Fixed cost per unit varies directly with production. a. Statement 1 is True, Statement 2 is false b. Both statements are true c. Statement 2 is True, Statement 1 is false d. Both statements are false 3. Since overhead costs are indirect costs, 1 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. 4. Statement 1: The portion of an asset that was consumed during a period is referred to an 1 expired cost. Statement 2: An indirect cost can be easily traced to a cost object. a. Statement 1 is True, Statement 2 is false b. Both statements are true c. Statement 2 is True, Statement 1 is false d. Both statements are false 5. An example of a fixed cost is 1 a. total indirect material cost. b. total hourly wages. . cost of electricity. c d. straight-line depreciation. 6. A cost driver 1 a. causes fixed costs to rise because of production changes. b. has a direct cause-effect relationship to a cost. . can predict the cost behavior of a variable, but not a fixed cost. c d. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume. 7. A cost driver 1 a. causes fixed costs to rise because of production changes. b. has a direct cause-effect relationship to a cost. c. can predict the cost behavior of a variable, but not a fixed cost. d. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume. 8. Product costs are deducted from revenue 1 a. as expenditures are made. c. as goods are sold. b. when production is completed. d. to minimize taxable income. 9. Which of the following is not a product cost component? 1 a. rent on a factory building b. indirect production labor wages c. janitorial supplies used in a factory d. commission on the sale of a product 0. Which of the following is not a reason to use predetermined overhead rates? 2 a. to overcome the problems of assigning overhead to diverse types of products b. to compensate for fluctuations in monthly overhead costs c. to provide a means for assigning overhead during the period rather than at the endofthe period d. to smooth out the amount of overhead costassignedtoproductswhenmonthlyproduction activity differs PROBLEM SOLVING (15 Items) he record of Base Corporation revealed the following date for the current year. T Work in Process P 73, 150 Finished Goods 115, 000 Cost of Goods Sold 133, 650 Direct Labor 111, 600 Direct Material 84, 200 1. Assume that Base has underapplied overhead of P10,000 and that this amount is 2 immaterial. What is the balance in Cost of Goods Sold after the underapplied overhead is closed? a. P 133,650 . P 123,650 b c. P 143,650 d. P 137,803 2. Refer to Base Corporation. Assume, for this question only, actual overhead is P98, 700 and 2 applied overhead is P 93, 250. Manufacturing overhead is: a. over applied by P12, 900 b. under applied by P18, 350 c. over applied by P5, 450 d. under applied by P5, 450 3. Assume that Base has overapplied overhead of P 25,000 and that this amount is material. 2 What is the balance in Cost of Goods Sold after the overapplied overhead is closed? a. P 123,267 b. P 144,033 c. P 158,650 d. P 108,650 4. Refer to Base Corporation. Assume that Base has under applied overhead of P37, 200 and 2 that this amount is material. What journal entry is needed to close the overhead account? (Round decimals to the nearest whole percent) a. Debit Work in Process P8,456; Finished Goods P13, 294; Cost of Good Sold P15, 450 and credit overhead P 37, 200 b. Debit Overhead P 37, 200 and credit work in process P 8, 456; Finished GoodsP13,294; Cost of Good Sold P15, 450 c. Debit Work in Process P37, 200 and credit overhead P37, 200 d. Debit Cost of Goods Sold P37, 200 and credit overhead P37, 200 he following information has been taken from the cost records of Wilson Company for the past T year: Raw material used in production 326 Total manufacturing costs charged to production during the year (includes direct 686 material, direct labor, and overhead equal to 60% of direct labor cost) Cost of goods available for sale 826 Selling and Administrative expenses 25 Inventories Beginning Ending Raw Material 75 85 Work in Process 80 30 Finished goods 90 90 5. Refer to Wilson Company. Direct labor cost charged to production during the year was 2 a. 135. c. 225. b. 216. d. 360. 6. Refer to Wilson Company. Cost of Goods Sold was 2 a. 691. c. 736. b. 716. d. 801 7. Refer to Wilson Company. Cost of Goods Manufactured was 2 a. 636. c. 736. b. 716. d. 766 8. Refer to Wilson Company. The cost of raw material purchased during the year was 2 a. 316. c. 360. b. 336. d. 411. lksCorporationhasprovidedthefollowingdataforthemonthofJune.Thebeginningbalance A in the finished goods inventory account was 35,000 and the ending balance was 26,000. Sales totaled 220,000. Cost of goods manufactured was 99,000, selling expense was 15,000, and administrative expense was 46,000. 9. The cost of goods sold for June was: 2 a. 99,000 c. 90,000 . 160,000 b d. 108,000 0. The net operating income for June was: 3 a. 51,000 c. 121,000 . 60,000 b d. 130,000.50 evel-upCorporationhasprovidedthefollowingdataforMay.Thebeginningbalanceintheraw L materials inventory account was 34,000. During the month, the companymaderawmaterials purchases amounting to 65,000. At the end of the month, the balance in the raw materials inventory account was 29,000.Directlaborcostwas30,000andmanufacturingoverheadcost was56,000.Thebeginningbalanceintheworkinprocessaccountwas15,000andtheending balancewas16,000.Thebeginningbalanceinthefinishedgoodsaccountwas41,000andthe ending balance was 57,000. Sales totaled 220,000. Selling expense was 21,000 and administrative expense was 42,000. 1. The total manufacturing cost for May was: 3 a. 156,000 c. 151,000 . 86,000 b d. 56,000 2. The net operating income for May was: 3 a. 71,000 c. 6,000 . 81,000 b d. 18,000 3. The following costs were incurred in July: 3 Direct Materials ....................35,000 Direct Labor ......................... 13,000 Manufacturing overhead ......15,000 Selling expenses ................. 14,000 Administrative expenses ….. 30,000 rime costs during the month totaled: P a. 48,000 b. 28,000 . 107,000 c d. 63,000 4.UbelCompany'smanufacturingoverheadis20%ofitstotalconversioncosts.Ifdirectlabor 3 is 38,000 and if direct materials are 47,000, the manufacturing overhead is: a. 152,000 c. 21,250 b. 11,750 d. 9,500 5. Smith & Steel Company has a beginning inventory of direct materials on March1ofPhp 3 30,000 and an ending inventory on March 31 of Php 36,000. The following additional manufacturing cost data were available for the month of March: Direct materials purchased ...................................................................Php84,000 Direct labor........................................................................................... Php60,000 Factory overhead ..................................................................................Php80,000 During March, conversion cost added to production was: a. 80,000 c. 140,000 b. 144,000 d. 138,000 nswer Key A THEORIES (TRUE OR FALSE) 1. True 2. False 3. False 4. True 5. False HEORIES (MULTIPLE CHOICE) T 6. C 11. 7 . B 12. 8. D 13. 9. A 14. 10. B 15. D C A A D 6. 1 17. 18. 19. 20. B B C D A ROBLEMS P 21. C. Cost of Goods Sold + 10,000 underapplied 22. D. under applied by P5, 450 = 98,700 - 93,250 23. A. P 123,267 = (73,150 + 115,000 + 133,650) = Total (133,650/321,800) x 25,000 = 10,383 133,650 - 10,383 = 123,267 24.A.DebitWorkinProcessP8,456;FinishedGoodsP13,294;CostofGoodSoldP15,450 and credit overhead P 37,200 5. C. 225 2 Total production costs .................. 686 Deduct: Ending WIP inventory ….(326) Conversion Costs ......................... 360 Let x = Direct Labor Let .60x = Factory Overhead x + .60x ........................................ 360 x..................................................225 6. B. 716 2 Beginning finished goods inventory .............. 90 Add: Cost of goods manufactured ................ 736 Deduct: Ending finished goods inventory......(110) Cost of goods sold......................................... 716 7. C. 736 2 Beginning WIP inventory ............... 80 Add: Cost of production ................ 686 Deduct: Ending WIP inventory......(30) Cost of goods sold........................ 736 8. B. 336 2 Beginning Inventory .................... 75 Add: Purchases ......................... 336 Goods Available for Sale .......... 411 Deduct: Ending Inventory ........(326) Materials Used in Production ... 736 9. D. 108,000 2 Beginning finished goods inventory ............. 35,000 Add: Cost of goods manufactured ................ 99,000 Cost of goods available for sale................... 134,000 Deduct: Ending finished goods inventory...... 26,000 Cost of goods sold....................................... 108,000 0. A. 51,000 3 Beginning finished goods inventory 56. ............... 35,000 Add: Cost of goods manufactured ....................... 99,000 Cost of goods available for sale...........................134,000 Deduct: Ending finished goods inventory ............ (26,000) Cost of goods sold............................................... 108,000 ales....................................................... 220,000 S Cost of goods sold..................................108,000 Gross margin .......................................... 112,000 Selling and administrative expenses: Administrative expenses ....................... (46,000) Selling expenses .................................(15,000) Net operating income ............................. 51,000 31. A. 156,000 2. D. 18,000 3 Beginning raw materials inventory...................... 34,000 Add: Raw materials purchased ...........................65,000 Raw materials available for use ........................... 99,000 Deduct: Ending raw materials inventory ............. (29,000) Raw materials used............................................. 70,000 Add: Direct labor costs ........................................ 30,000 Add: Manufacturing overhead.............................56,000 Total manufacturing costs ................................... 156,000 otal manufacturing costs ................................... 156,000 T Add: Beginning work in process inventory...........15,000 ubtotal................................................................ 171,000 S Deduct: Ending work in process inventory........... (16,000) Cost of goods manufactured............................... 155,000 eginning finished goods inventory .................... 41,000 B Add: Cost of goods manufactured .......................155,000 Cost of goods available for sale.......................... 196,000 Deduct: Ending finished goods inventory ............ (57,000) Cost of goods sold............................................... 139,000 ales....................................................... 220,000 S Cost of goods sold..................................139,000 Gross margin .......................................... 81,000 Selling and administrative expenses: Administrative expenses ....................... (42,000) Selling expenses ................................. (21,000) Net operating income ............................. 18,000 3. A. 48,000 3 Direct materials....... 35,000 Direct labor............. 13,000 Total ....................... 48,000 4. D. 9,500 3 Conversion costs = Direct labor + Manufacturing overhead Conversion costs = 38,000 + Manufacturing overhead 0.20 × Conversion costs = Manufacturing overhead 0.20 × (38,000 + Manufacturing overhead) = Manufacturing overhead 7,600 + 0.20 × Manufacturing overhead = Manufacturing overhead ,600 = 0.80 × Manufacturing overhead 7 Manufacturing overhead = 9,500 5. C. 140,000 3 Solution: - 60,000 + 80,000 = 140,000
