Quiz 1 Cost Concepts Accounting 223 is primarily devoted to the understanding of the different elements of production costs, the manner in which they are recognized, measured, recorded, and summarized for inventory valuation and income determination. At t PDF

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Accounting 223 is primarily devoted to the understanding of the different elements of production costs, the manner in which they are recognized, measured, recorded, and summarized for inventory valuation and income determination. At the start of the course the basic concepts of costs as well as its ...

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UNIVERSITY OF CEBU- BANILAD COLLEGE OF ACCOUNTANCY BANILAD, CEBU CITY Accounting 108 (Cost Concepts) Name __________________________ Course & Yr. __________ Schedule _______________ Score _____________ I – Multiple Choice : Encircle the letter of the best answer in each of the given statement/s. 1.

Classifying a cost as either direct or indirect depends upon A. the behavior of the cost in response to volume changes. B. whether the cost is expensed in the period in which it is incurred. C. whether the cost can be easily identified with the cost object. D. whether an expenditure is avoidable or not in the future. 2. A manufacturing plant produces two product lines: football equipment and hockey equipment. Direct costs for the football equipment line are the A. beverages provided daily in the plant break room. B. monthly lease payments for a specialized piece of equipment needed to manufacture the football helmet. C. salaries of the clerical staff that work in the company administrative offices. D. utilities paid for the manufacturing plant. 3. A manufacturing plant produces two product lines: football equipment and hockey equipment. An indirect cost for the hockey equipment line is the A. material used to make the hockey sticks. C. a labor to bind the shaft to be brade of the hokey stick B. labor to bind the shaft to the blade of the hockey stick. D. plant spervisor 4. Which one of the following items is a direct cost? A. Customer-service costs of a multiproduct firm; Product A is the cost object. B. Printing costs incurred for payroll check processing; payroll check processing is the cost object. C. The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object. D. Utility costs of the administrative offices; the accounting department is the cost object. 5. Indirect manufacturing costs A. can be traced to the product that created the costs. B. can be easily identified with the cost object. C. generally include the cost of material and the cost of labor. D. may include both variable and fixed costs. 6. All of the following are true EXCEPT that indirect costs A. may be included in prime costs. C. vary with the selection of the cost object B. are not easily traced to products or services. D. may be included in manufacturing overhead 7. Which statement is TRUE? A. All variable costs are direct costs. B. Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs. C. All fixed costs are indirect costs. D. All direct costs are variable costs. 8. Cost behavior refers to A. how costs react to a change in the level of activity. B. whether a cost is incurred in a manufacturing, merchandising, or service company. C. classifying costs as either inventoriable or period costs. D. whether a particular expense has been ethically incurred. 9. An understanding of the underlying behavior of costs helps in all of the following EXCEPT A. costs can be better estimated as volume expands and contracts. B. true costs can be better evaluated. C. process inefficiencies can be better identified and as a result improved. D. sales volume can be better estimated. 10. At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually A. are considered a variable cost. C. depend on the scheduling of floor workers B. are considered a fixed cost. D. depend on the scheduling of production runs 11. Variable costs A. are always indirect costs. B. increase in total when the actual level of activity increases. C. include most personnel costs and depreciation on machinery. D. can always be traced directly to the cost object. 12. Fixed costs A. may include either direct or indirect costs. C. include parts and materials used to manufacture a product B. vary with production or sales volumes. D. can be adjusted in the short run to meet actual demands 13. Fixed costs depend on A. the amount of resources used. C. the volume of production B. the amount of resources acquired. D. the volume of sales 14. Which one of the following is a variable cost in an insurance company? A. Rent B. President’s salary C. Sales commissions D. Property taxes 15. Which of the following is a fixed cost in an automobile manufacturing plant? A. Administrative salaries C. Sales commissions B. Electricity used by assembly-line machines D. Windows for each car produced

16. If each furnace required a hose that costs $20 and 2,000 furnaces are produced for the month, the total cost for hoses is A. considered to be a direct fixed cost. C. considered to be an indirect fixed cost. B. considered to be a direct variable cost. D. considered to be an indirect variable cost. 17. The MOST likely cost driver of distribution costs is A. the number of parts within the product. C. the number of products manufactured B. the number of miles driven. D. the number of production hours 18. The MOST likely cost driver of direct material costs is A. the number of parts within the product. C. the number of products manufactured B. the number of miles driven. D. the number of production hours 19. Which of the following statements is FALSE? A. There is a cause-and-effect relationship between the cost driver and the level of activity. B. Fixed costs have cost drivers over the short run. C. Over the long run all costs have cost drivers. D. Volume of production is a cost driver of direct manufacturing costs. 20. Within the relevant range, if there is a change in the level of the cost driver then A. total fixed costs and total variable costs will change. B. total fixed costs and total variable costs will remain the same. C. total fixed costs will remain the same and total variable costs will change. D. total fixed costs will change and total variable costs will remain the same. II – Problem Solving. Give the requirements accordingly with supporting computation/s. A. Selected account balances for the year May 31, 2011, are provided below for Khyle Company. Raw materials inventory, June 1, 2010 P320,000 Raw materials inventory, May 31, 2011 296,000 Purchases of raw material 1,200,000 Insurance, factory 64,000 Work in process inventory, June 1, 2010 ? Utilities, factory 360,000 Indirect Labor 480,000 Finished goods inventory, June 1, 2010 680,000 Direct Labor ? Indirect materials 56,000 Work in process inventory, May 31, 2011 384,000 Rent, factory building 960,000 Finished goods inventory, May 31, 2011 ? Maintenance, factory 120,000 The goods available for sale for the year totaled P5,080,000; the total manufacturing costs were P4,504,000; and the cost of goods sold totaled P4,480,000 for the year. Required: 1. Work in process inventory, June 1, 2010 ______________________ 2. Direct labor _________________ 3. Finished goods inventory, May 31, 2011 _____________________ (Note: In answering number 4 and 5 assume that direct materials is a variable cost and that rent is a fixed cost). 4. Assuming the company produces 40,000 units during the year, compute the cost per unit of: Direct materials ___________________ Rent on the factory building ______________ 5. Assume that in 2012 the company produces 50,000 units, compute a. Direct materials cost per unit _________________ Direct materials total cost ____________ b. Rent on factory building per unit ______________ Total rent on factory building _________ B. Cherry Hill Glass Company employs a normal costing system. The following information pertains to the year just ended.  Total manufacturing costs were P5,000,000.  Cost of goods manufactured was P4,850,000.  Applied manufacturing overhead was 30 percent of total manufacturing costs.  Manufacturing overhead was applied to production at a rate of 80 percent of direct labor cost.  Work in process inventory on January 1 was 75 percent of work-in-process inventory on December 31. Required: 1. Total direct labor cost for the year __________________ 2. Total cost of direct materials used during the year ______________ 3. The value of the company’s work in process inventory on December 31 _____________. C. Jay Sports Equipment Company, Inc., incurred the following costs during 2011. Direct materials used P 452,400 Direct labor 842,400 Manufacturing overhead applied 468,000 During 2011, products costing 312,000 were finished, and products costing P343,200 were sold on account for P507,000. There were no purchases of raw material during the year. The beginning balances in the firm’s inventory accounts are as follows: Raw material P590,200 Work in process 46,800 Finished goods 78,000...