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Quizzer No. 1
Basic Concepts:
1. Management and financial accounting are used for which of the following purposes?
Management accounting Financial accounting
a. internal external
b. external internal
c. internal internal
d. external external
4. Management accounting
a. is more concerned with the future than is financial accounting.
b. is less concerned with segments of a company than is financial accounting.
c. is more constrained by rules and regulations than is financial accounting.
d. all of the above are true.
9. Financial accounting
a. is primarily concerned with internal reporting.
b. is more concerned with verifiable, historical information than is cost accounting.
c. focuses on the parts of the organization rather than the whole.
d. is specifically directed at management decision-making needs.
10. Financial accounting and cost accounting are both highly concerned with
a. preparing budgets.
b. determining product cost.
c. providing managers with information necessary for control purposes.
d. determining performance standards.
11. Which of the following topics is of more concern to management accounting than to cost accounting?
a. generally accepted accounting principles
b. inventory valuation
c. cost of goods sold valuation
d. impact of economic conditions on company operations
14. Which of the following costs changes in direct proportion to a change in the activity level?
a. Variable cost b. Fixed cost c. Semi-variable cost d. Step-variable cost
15. Montgomery Company has a variable selling cost. If sales volume increases, how will the total variable cost and the
variable cost per unit behave?
Total Variable Cost Variable Cost Per Unit
a. Increase Increase
b. Increase Remain constant
c. Increase Decrease
d. Remain constant Decrease
e. Decrease Increase
17. Plaza Corporation observed that when 25,000 units were sold, a particular cost amounted to P70,000, or P2.80 per
unit. When volume increased by 15%, the cost totaled P80,500 (i.e., P2.80 per unit). The cost that Plaza is
studying can best be described as a:
a. variable cost d. discretionary fixed cost
b. fixed cost e. step-fixed cost
c. semi-variable cost
18. A company observed a decrease in the cost per unit. All other things being equal, which of the following is probably
true?
a. The company is studying a variable cost, and total volume has increased.
b. The company is studying a variable cost, and total volume has decreased.
c. The company is studying a fixed cost, and total volume has increased.
d. The company is studying a fixed cost, and total volume has decreased.
e. The company is studying a fixed cost, and total volume has remained constant.
19. Webster has the following budgeted costs at its anticipated production level (expressed in hours): variable overhead,
P150,000; fixed overhead, P240,000. If Webster now revises its anticipated production slightly downward, it would
expect:
a. total fixed overhead of P240,000 and a lower hourly rate for variable overhead.
b. total fixed overhead of P240,000 and the same hourly rate for variable overhead.
c. total fixed overhead of P240,000 and a higher hourly rate for variable overhead.
d. total variable overhead of less than P150,000 and a lower hourly rate for variable overhead.
e. total variable overhead of less than P150,000 and a higher hourly rate for variable overhead.
20. What type of cost exhibits the behavior that follows?
Manufacturing Total Cost
Volume (Units) Cost Per Unit
50,000 P150,000 P3.00
80,000 150,000 1.88
22. Norman Company pays a sales commission of 5% on each unit sold. If a graph is prepared, with the vertical axis
representing per-unit cost and the horizontal axis representing units sold, how would a line that depicts sales
commissions be drawn?
a. As a straight diagonal line, sloping upward to the right.
b. As a straight diagonal line, sloping downward to the right.
c. As a horizontal line.
d. As a vertical line.
e. As a curvilinear line.
24. Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are
termed:
a. step-fixed costs b. step-variable costs c. semi-variable costs d. curvilinear costs
26. Which of the following choices denotes the typical cost behavior of advertising and sales commissions?
Advertising Sales Commissions
a. Variable Variable
b. Variable Fixed
c. Fixed Variable
d. Fixed Fixed
e. Semi-variable Variable
27. Douglas Corporation recently produced and sold 100,000 units. Fixed costs at this level of activity amounted to
P50,000; variable costs were P100,000. How much cost would the company anticipate if during the next period it
produced and sold 102,000 units?
a. P150,000 b. P151,000 c. P152,000 d. P153,000
28. Extron, Inc., has only variable costs and fixed costs. A review of the company's records disclosed that when
100,000 units were produced, fixed manufacturing costs amounted to P200,000 and the cost per unit manufactured
totaled P5. On the basis of this information, how much cost would the firm anticipate at an activity level of 97,000
units?
a. P485,000 b. P491,000 c. P494,000 d. P500,000
29. A review of Parry Corporation's accounting records found that at a volume of 90,000 units, the variable and fixed
cost per unit amounted to P8 and P4, respectively. On the basis of this information, what amount of total cost would
Parry anticipate at a volume of 85,000 units?
a. P1,020,000 b. P1,040,000 c. P1,060,000 d. P1,080,000
30. Each of Davidson's production managers (annual salary cost, P45,000) can oversee 60,000 machine hours of
manufacturing activity. Thus, if the company has 50,000 hours of manufacturing activity, one manager is needed;
for 75,000 hours, two managers are needed; for 125,000 hours, three managers are needed; and so forth.
Davidson's salary cost can best be described as a:
a. variable cost b. semi-variable cost d. fixed cost d. step-fixed cost
31. A cost that has both fixed and variable component is termed a:
a. step-fixed cost b. step-variable cost c. semi-variable cost d. curvilinear cost
33. Richard Hamilton has a fast-food franchise and must pay a franchise fee of P350,000 plus 3% of gross sales. In
terms of cost behavior, the fee is a:
a. variable cost b. fixed cost c. step-fixed cost d. semi-variable cost
35. Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range of activity?
a. Semi-variable cost b. Curvilinear cost c. Step-fixed cost d. Step-variable cost
38. Within the relevant range, a curvilinear cost function can sometimes be graphed as a:
a. straight line b. vertical line c. curved line d. horizontal line
39. As a firm begins to operate outside the relevant range, the accuracy of cost estimates for fixed and variable costs:
Fixed Variable
a. increases increases
b. increases decreases
c. decreases increases
d. decreases decreases
e. decreases remains unchanged
44. Which of the following would not typically be classified as a discretionary fixed cost?
a. Equipment depreciation.
b. Employee development (education) programs.
c. Advertising.
d. Outlays for research and development.
45. Which of the following choices correctly classifies a committed fixed cost and a discretionary fixed cost?
Committed Discretionary
a. Promotion Management salaries
b. Building depreciation Charitable contributions
c. Management training Property taxes
d. Equipment rentals Equipment depreciation
e. Research and development Advertising
46. Which type of fixed cost (1) tends to be more long-term in nature and (2) can be cut back more easily in bad
economic times without doing serious harm to organizational goals and objectives?
Long Term in Can be Cut Back More Easily In
Nature Bad Economic Times
a. Committed Committed
b. Committed Discretionary
c. Discretionary Committed
d. Discretionary Discretionary
e. Committed No difference between
committed and discretionary
47. High-tech automation combined with a downsizing of a company's hourly labor force often results in:
a. increased fixed costs and increased variable costs.
b. increased fixed costs and reduced variable costs.
c. reduced fixed costs and increased variable costs.
d. reduced fixed costs and reduced variable costs.
e. increased discretionary fixed costs and reduced committed fixed costs.
48. Which of the following techniques is not used to analyze cost behavior?
a. Least-squares regression d. Linear programming
b. High-low method e. Multiple regression
c. Visual-fit method
49. The high-low method and least-squares regression are used by accountants to:
a. evaluate divisional managers for purposes of raises and promotions.
b. choose among alternative courses of action.
c. maximize output.
d. estimate costs.
e. control operations.
50. Which of the following methods of cost estimation relies on only two data points?
a. Least-squares regression c. Account analysis
b. The high-low method d. Multiple regression
Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee each month
and a charge for each copy made. Swanson made 7,000 copies and paid a total of P360 in March; in May, the firm
paid P280 for 5,000 copies. The company uses the high-low method to analyze costs.
Atlanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine hours best
explain the company's utilities cost. The company's relevant range of activity varies from a low of 600 machine
hours to a high of 1,100 machine hours, with the following data being available for the first six months of the year:
Month Utilities Machine Hours
January P8,700 800
February 8,360 720
March 8,950 810
April 9,360 920
May 9,625 950
June 9,150 900
55. Using the high-low method, the utilities cost associated with 980 machine hours would be:
a. P9,510 b. P9,660 c. P9,700 d. P9,790
56. Hitchcock, Inc., uses the high-low method to analyze cost behavior. The company observed that at 12,000 machine
hours of activity, total maintenance costs averaged P7.00 per hour. When activity jumped to 15,000 machine hours,
which was still within the relevant range, the average cost per machine hour totaled P6.40. On the basis of this
information, the variable cost per machine hour was:
a. P4.00 b. P6.40 c. P6.70 d. P7.00
57. Northridge, Inc., uses the high-low method to analyze cost behavior. The company observed that at 20,000
machine hours of activity, total maintenance costs averaged P10.50 per hour. When activity jumped to 24,000
machine hours, which was still within the relevant range, the average cost per machine hour totaled P9.75. On the
basis of this information, the company's fixed maintenance costs were:
a. P24,000 b. P90,000 c. P210,00 d. P234,000
58. The following data relate to the Hodges Company for May and August of the current year:
May August
Maintenance hours 10,000 12,000
Maintenance cost P260,000 P300,000
May and August were the lowest and highest activity levels, and Hodges uses the high-low method to analyze cost
behavior. Which of the following statements is true?
a. The variable maintenance cost is P25 per hour.
b. The variable maintenance cost is P25.50 per hour.
c. The variable maintenance cost is P26 per hour.
d. The fixed maintenance cost is P60,000 per month.
Yang Manufacturing, which uses the high-low method, makes a product called Yin. The company incurs three
different cost types (A, B, and C) and has a relevant range of operation between 2,500 units and 10,000 units per
month. Per-unit costs at two different activity levels for each cost type are presented below.
Type A Type B Type C Total
5,000 units P4 P9 P4 P17
7,500 units P4 P6 P3 P13
59. The cost types shown above are identified by behavior as:
Type A Type B Type C
a. Fixed Variable Semivariable
b. Fixed Semivariable Variable
c. Variable Semivariable Fixed
d. Variable Fixed Semivariable
e. Semivariable Variable Fixed
60. If Yang produces 10,000 units, the total cost would be:
a. P90,000 b. P100,000 c. P110,000 d. P125,000
61. The cost formula that expresses the behavior of Yang's total cost is:
a. Y = P20,000 + P13X b. Y = P40,000 + P9X c. Y = P45,000 + P4X d. Y = P60,000 + P5X
62. In regression analysis, the variable that is being predicted is known as the:
a. independent variable. d. interdependent variable.
b. dependent variable. e. functional variable.
c. explanatory variable.
63. Mohawk Products has determined that the number of machine hours worked (MH) drives the amount of
manufacturing overhead incurred (MOH). On the basis of this relationship, a staff analyst has constructed the
following regression equation:
64. Checkers Corporation, which uses least-squares regression analysis, has derived the following regression equation
for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the
primary cost driver is machine hours?
a. Total manufacturing overhead is represented by the variable "X."
b. The company anticipates P495,000 of fixed manufacturing overhead.
c. "X" is commonly known as the dependent variable.
d. "X" represents the number of machine hours.
e. Both "B" and "D" are true.
65. Boulder, Inc., recently conducted a least-squares regression analysis to predict selling expenses. The company has
constructed the following regression equation: Y = 329,000 + 7.80X. Which of the following statements is false if
the primary cost driver is number of units sold?
a. The company anticipates P329,000 of fixed selling expenses.
b. "Y" represents total selling expenses.
c. The company expects both variable and fixed selling expenses.
d. For each unit sold, total selling expenses will increase by P7.80.
e. "X" represents the number of hours worked during the period.
66. Tempe, Inc., is studying marketing cost and sales volume, and has generated the following information by use of a
scatter diagram and a least-squares regression analysis:
Scatter Diagram Regression Analysis
Variable cost per unit sold P6.50 P6.80
Total monthly fixed cost P45,000 P42,500
Tempe is now preparing an estimate for monthly sales of 18,000 units. On the basis of the data presented, compute
the most accurate sales forecast possible.
a. P159,500 b. P162,000 c. P164,900 d. P167,400
67. Waller Enterprises has determined that three variables play a key role in determining company revenues. To arrive
at an objective forecast of revenues for the next accounting period, Waller should use:
a. simple regression b. multiple regression c. a scatter diagram d. high-low method
68. Which of the following costing methods of valuation are acceptable in a job order costing system?
Actual Standard Actual Predetermined
Material Material Labor Overhead
Cost Cost Cost Cost
a. yes yes no yes
b. yes no yes no
c. no yes yes yes
d. yes yes yes yes
69. In a normal cost system, debits to Work in Process Inventory would not be made for
a. actual overhead b. applied overhead c. actual direct material d. actual direct labor
72. Total manufacturing costs for the year plus beginning Work in Process Inventory cost equals
a. cost of goods manufactured in the year c. total manufacturing costs to account for
b. ending Work in Process Inventory d. cost of goods available for sale
73. Which of the following would be least likely to be supported by subsidiary accounts or ledgers in a company that
employs a job order costing system?
a. Work in Process Inventory c. Accounts Payable
b. Raw Material Inventory d. Supplies Inventory
74. A journal entry includes a debit to Work in Process Inventory and a credit to Raw Material Inventory. The explanation
for this would be that
a. indirect material was placed into production c. direct material was placed into production
b. raw material was purchased on account d. direct labor was utilized for production
75. Which of the following journal entries records the accrual of the cost of indirect labor used in production?
a. debit Work in Process Inventory, credit Wages Payable
b. debit Work in Process Inventory, credit Manufacturing Overhead
c. debit Manufacturing Overhead, credit Work in Process Inventory
d. debit Manufacturing Overhead, credit Wages Payable
76. In job order costing, payroll taxes paid by the employer for factory employees are commonly accounted for as
a. direct labor cost c. indirect labor cost
b. manufacturing overhead cost d. administrative cost
77. The logical explanation for an entry that includes a debit to Manufacturing Overhead control and a credit to Prepaid
Insurance is
a. the insurance company sent the company a refund of its policy premium.
b. overhead for insurance was applied to production.
c. insurance for production equipment expired.
d. insurance was paid on production equipment.
78. The journal entry to apply overhead to production includes a credit to Manufacturing Overhead control and a debit to
a. Finished Goods Inventory c. Cost of Goods Sold
b. Work in Process Inventory d. Raw Material Inventory
80. In a job order costing system, the use of indirect material would usually be reflected in the general ledger as an
increase in
a. stores control c. manufacturing overhead applied
b. work in process control d. manufacturing overhead control
82. The journal entry to record the incurrence and payment of overhead costs for factory insurance requires a debit to
a. Cash and a credit to Manufacturing Overhead.
b. Manufacturing Overhead and a credit to Accounts Payable.
c. Manufacturing Overhead and a credit to Cash.
d. Work in Process Inventory and a credit to Cash.
85. In a perpetual inventory system, a transaction that requires two journal entries (or one compound entry) is needed
when
a. raw materials are purchased on account.
b. goods are sold for either cash or on account.
c. goods are finished and transferred out of Work in Process Inventory.
d. overhead is applied to Work in Process Inventory.
The following information has been taken from the cost records of Wilson Company for the past year:
86. The cost of raw material purchased during the year was
a. P316 b. P336 c. P360 d. P411
87. Direct labor cost charged to production during the year was
a. P135 b. P216 c. P225 d. P360
Brandt Company manufactures wood file cabinets. The following information is available for June 2014:
Beginning Ending
Raw Material Inventory P 6,000 P 7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300
90. Direct labor is P9.60 per hour and overhead for the month was P9,600. Compute total manufacturing costs for June,
if there were 1,500 direct labor hours and P21,000 of raw material was purchased.
a. P58,500 b. P46,500 c. P43,500 d. P43,100
91. Direct labor is paid P9.60 per hour and overhead for the month was P9,600. What are prime costs and conversion
costs, respectively if there were 1,500 direct labor hours and P21,000 of raw material was purchased?
a. P29,100 and P33,900 b. P33,900 and P24,000 c. P33,900 and P29,100 d. P24,000 and P33,900
92. Direct labor is paid P9.60 per hour and overhead for the month was P9,600. If there were 1,500 direct labor hours
and P21,000 of raw material purchased, Cost of Goods Manufactured is:
a. P49,100 b. P45,000 c. P51,000 d. P49,500
93. Direct labor is paid P9.60 per hour and overhead for the month was P9,600. If there were 1,500 direct labor hours
and P21,000 of raw material purchased, how much is Cost of Goods Sold?
a. P64,500 b. P59,800 c. P38,800 d. P53,800
94. Davis Company manufacturers desks. The beginning balance of Raw Material Inventory was P4,500; raw material
purchases of P29,600 were made during the month. At month end, P7,700 of raw material was on hand. Raw
material used during the month was
a. P26,400 b. P34,100 c. P37,300 d. P29,600
95. Urban Company manufacturers tables. If raw material used was P80,000 and Raw Material Inventory at the
beginning and end of the period, respectively, was P17,000 and P21,000, what was amount of raw material was
purchased?
a. P76,000 b. P118,000 c. P84,000 d. P101,000
96. Putnam Company manufacturers computer stands. What is the beginning balance of Finished Goods Inventory if
Cost of Goods Sold is P107,000; the ending balance of Finished Goods Inventory is P20,000; and Cost of Goods
Manufactured is P50,000 less than Cost of Goods Sold?
a. P70,000 b. P77,000 c. P157,000 d. P127,000
97. TMNT Products has no WIP or FG inventories at the close of business on December 31, 2014. The balances of TMNT’s
accounts as of December 31, 2014, are as follows:
98. The accounting records of Wagan Co. showed the following: Increase in raw materials inventory, P45,000; Decrease
in finished goods inventory, P150,000; Raw materials purchased, P1,290,000; Direct labor payroll, P600,000;
Factory overhead, P900,000; Freight-out, P135,000.
99. Killua Company is a manufacturing concern using the perpetual inventory system. The following materials inventory
account data is provided:
100. Eiji Company has the following data on April 30, 2014:
April manufacturing overhead P 30,101.80
Decrease in ending inventories
Materials 2,430.00
Goods in process 590.00
Increase in ending inventory:
Finished goods 1,320.40
The manufacturing overhead amounts to 50% of the direct labor and the direct labor and manufacturing, combined
equal 50% of the total cost of manufacturing. All materials are purchased FOB shipping point.
Selected data concerning the past fiscal year’s operations (000 omitted) of the Clark Manufacturing Company are
presented below:
Inventories
Beginning Ending
Raw materials P75 P85
Work in process 80 30
Finished goods 90 110
Other data:
Raw materials used P326
Total manufacturing costs incurred (FOH is applied at
a rate of 60% of DL) 686
Cost of goods available for sale 826
Selling and general expenses 25
101. The cost of raw materials purchased during the year amounted
a. P411 b. P360 c. P316 d. P336
102. Direct labor costs charged to production during the year amounted to
a. P135 b. P225 c. P360 d. P216
105. Milagrosa Manufacturing Company manufactured 50,000 kilos of compound BB in 2014 at the following costs: