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Cost Accounting and Control System

The practice of identifying and reduce business expenses to increase profits, and it starts with the budgeting process in maintaining and growing profitability.

accountancy

accountant

business

expenses

control systems

time management

tracking earned value

budget properly

customer observation

Managerial accounting is most concerned with meeting the needs of internal users.

  • True
  • False

Budgeted Cost is the amount that is anticipated to be incurred in the future

  • True
  • False

Fletcher, Inc. disposes of under- or overapplied overhead at year-end as an adjustment to cost of goods sold. Prior to disposal, the firm reported cost of goods sold of $590,000 in a year when manufacturing overhead was underapplied by $15,000. If sales revenue totaled $1,400,000, determine (1) Fletcher's adjusted cost of goods sold and (2) gross margin:

  • Choice C
  • Choice D
  • Choice B
  • Choice A and E

Direct labor is an inappropriate cost driver to use if a company is highly automated.

  • True
  • False

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: What should be the actual unit sales to realize the desired profit?

  • 3,750 units
  • 4,625 units
  • 1,500 units
  • 2,500 units

IMA members have a responsibility to comply with and uphold the standards of Competence, Confidentiality, Integrity, and Credibility

  • True
  • False

Alamo's customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls were for the company's wholesale operation (the remainder were for the retail division), costs allocated to the retail division should amount to:

  • $117,740
  • $29
  • $0
  • $85,260

Product Costs are always presented in the income statement as part of cost of goods sold.

  • True
  • False

Generally speaking, cost accounting can be defined as aNo

  • Internal reporting system that provides product costing and other information used by managers in performing their functions
  • System used for providing the government and creditors with information about a company's internal operations
  • External reporting system that is based on activity-based costs.
  • Internal reporting system needed by manufacturers to be in compliance with government regulatory reportorial pronouncements.

Purpose of information of managerial accounting

  • Conveys financial information to investors, banks, government regulatory agencies and other outside parties
  • Helps managers to make decisions to fulfill an organization's objectives
  • Needed by manufacturers to be in compliance with government regulatory reportorial pronouncements.
  • Calculation of pool rates, identification of cost drivers, identification of cost pools, assignment of cost to products

Purpose of information of financial accounting

  • Helps managers to make decisions to fulfill an organization's objectives
  • Used for providing the government and creditors with information about a company's internal operations
  • Conveys financial information to investors, banks, government regulatory agencies and other outside parties
  • Needed by manufacturers to be in compliance with government regulatory reportorial pronouncements.

Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements.

  • True
  • False

Aladin's customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls were for the company's wholesale operation (the remainder were for the retail division), costs allocated to the wholesale operation should amount to:

  • $117,740
  • $0
  • $85,260
  • $29

All of the following are examples of opportunity costs: salary given up to start a business; rental income given up when you live in a house you own; interest income that could be earned on money spent for a car.

  • True
  • False

In the value chain, planning and controlling activities in the organization is to be managed on a sequential order of the business functions.

  • True
  • False

Period Costs are treated as outright expenses

  • True
  • False

Margin of Safety is the point wherein actual or planned sales maybe reduced without incurring a loss

  • True
  • False

In comparing financial and management accounting, which of the following more accurately describes management accounting information?

  • required, estimated, internal
  • comparable, verifiable, monetary
  • budgeted, informative, adaptable
  • historical, precise, useful

Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Media incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was:

  • $1,000 overapplied
  • $1,000 underapplied
  • $4,000 underapplied
  • $4,000 overapplied

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: How much should be the actual peso sales to realize the desired profit?

  • P693,750
  • P462,500
  • P1,156,250
  • P375,000

All of the following are examples of product costs except:

  • salary of the plant manager
  • depreciation on the company's retail outlets
  • rental costs of the factory facility
  • insurance on the factory equipment

A variable cost is constant if expressed on a per unit basis but the total dollar amount changes as the number of units' increases or decreases.

  • True
  • False

The following tasks are associated with an activity-based costing system: 1- Assignment of cost to products 2- Calculation of pool rates 3- Identification of cost drivers 4- Identification of cost pools Which of the following choices correctly expresses the proper order of the preceding tasks?

  • 4, 3, 2, 1
  • 1, 2, 3, 4
  • 2, 4, 1, 3
  • 3, 4, 2, 1

Thread used in the production of bed sheet set, an indirect material, is classified as manufacturing overhead.

  • True
  • False

Manufacturing overhead includes:

  • all manufacturing costs except direct labor
  • all manufacturing costs except direct labor and direct materials
  • all selling and administrative costs
  • all direct material, direct labor and administrative costs

Which of the following would not likely be used by service providers to accumulate job costs?

  • Processes
  • Contracts
  • Projects
  • All of the following because service providers cannot use job-costing systems

What amount of overhead is applied to Job #200?

  • P7,500
  • P5,000
  • P8,325
  • P7,000

In an activity-based costing system, direct materials used would typically be classified as a unit-level cost.

  • True
  • False

Financial accounting is most concerned with addressing the needs of individual departments of the company.

  • True
  • False

This analysisfocuses on how profits are affected by selling prices, sales volume, unit variable costs, total fixed costs, and mix of products sold

  • Least Square Regression Method
  • Cost-Volume-Profit Analysis
  • High-Low Method
  • Value Chain Analysis

Referring to the preceding problem, what is HiTech's pool rate for the automated machinery activity?

  • $49.42 per unit.
  • $24.50 per labor hour.
  • $50.00 per machine hour.
  • $24.00 per machine hour.

These are items for which management accumulates costs

  • Cost Pool
  • Cost Driver
  • Cost Object
  • Cost

If the company still employs the plantwide factory overhead rate method, how much is the overhead cost per unit for TV, Computer and cellphone using the total direct labor hours as a basis of allocation.

  • 7% of direct labor
  • P7.00 per direct labor hour
  • P0.07 per hour
  • P7.00 per machine hour

Financial accounting adheres strict compliance to Generally Accepted Accounting Principles (GAAP)

  • True
  • False

Cost accounting serves as a bridge between financial and managerial accounting.

  • True
  • False

Product Costs are treated as outright expenses.

  • True
  • False

The need of independent examination and verification process for managerial accounting

  • Financial reports do not need to be audited by an independent CPA
  • Financial reports must be audited by Certified Public Accountant (CPA) that is employed in the organization
  • Financial reports must be audited by an independent Certified Public Accountant (CPA)
  • Financial reports must be audited by internal auditors of the company

Contribution Margin is the amount remaining from sales revenue after deducting the variable expenses.

  • True
  • False

Activity-based costing systems have a tendency to distort product costs.

  • True
  • False

Traditional costing uses a host of different cost drivers (e.g., number of production setups, inspection hours, orders processed) to improve the accuracy of product costing.

  • True
  • False

One of the uses of financial accounting data is to determine product costs in order to help management in making decisions.

  • True
  • False

Scope of information of managerial accounting

  • None of the above
  • Entire organization
  • Segment of organization
  • Both the whole organization and its segments

The company's normal operating range is referred to as the operating cycle.

  • True
  • False

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: What is the amount of total variable cost at break-even point calculation?

  • P225,000
  • P312,500
  • P693,750
  • P462,500

External parties and management uses product cost information for:

  • investment decision and, planning and controlling
  • controlling only
  • planning only
  • investment decision only

Materials used in the operation of a factory, such as cleaning supplies, that are not an integral part of the final product should be classified as:

  • manufacturing overhead
  • a period cost
  • direct materials
  • administrative expense

Actual Cost is a past cost or historical cost.

  • True
  • False

In applying the Standards of Ethical Professional Practice, the member will never encounter unethical issues or behavior.

  • True
  • False

How much is the factory overhead cost per unit for Computer under activity-based costing?

  • P25.48 per factory overhead
  • P25.48 per unit
  • P25.98 per unit
  • P25.98 per factory overhead

Businesses are established because owners are just after the break-even point.

  • True
  • False

ANo ____ cost increases or decreases in intervals as activity changes

  • step cost
  • fixed cost
  • mixed cost
  • variable cost

These are the primary users of financial information

  • external and internal users
  • None of the above
  • External users only
  • Internal users only

Overriding criteria of managerial accounting

  • Must conform with Generally Accepted Accounting Principles (GAAP)
  • Does not conform with GAAP as long as it is relevant to management decision making and complies with standards set by the management
  • None of the above
  • Must partially conform with GAAP

Period Costs are also inventoriable costs.

  • True
  • False

This phase involves the process of gathering responses and feedbacks on the plan being executed through evaluation and monitoring

  • Communicating
  • Controlling
  • Motivating
  • Planning

The cost of goods sold of a manufacturing company equals beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory.

  • True
  • False

Direct labor is gaining importance in many manufacturing applications with respect to being a significant cost driver.

  • True
  • False

How much is the factory overhead cost per unit for TV under activity-based costing?

  • P69.80 per factory overhead
  • P67.37 per factory overhead
  • P69.80 per unit
  • P67.37 per unit

Overriding criteria of financial accounting

  • Does not conform with GAAP as long as it is relevant to management decision making and complies with standards set by the management
  • Must partially conform with GAAP
  • None of the above
  • Must conform with Generally Accepted Accounting Principles (GAAP)

What is the amount of direct materials for Job #200?

  • P3,700
  • P7,500
  • P1,950
  • P1,500

Direct costs:

  • are the variable costs of producing a product
  • are incurred due to a specific decision.
  • are incurred to benefit a particular accounting period.
  • can be easily traced to a particular cost object.

At Break-even Point, there could either be a net income or net loss.

  • True
  • False

All manufacturing costs are easily traceable to the goods produced.

  • True
  • False

HiTech Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which uses activity-based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below. What is HiTech's pool rate for the material-handling activity?

  • $2.25 per part
  • $6.62 per labor hour
  • $13.23 per part
  • $1.00 per part

If the resolution efforts of resolving ethical issues are not successful, the member should stay at the organization and must find other ways to resolve such issues.

  • True
  • False

What is the amount of total variable cost at break-even point calculation?

  • Salary of a billing clerk
  • Monthly depreciation of the equipment in a fitness room used by factory workers
  • Insurance on a company showroom, where current and potential customers can view new products
  • Cost of a seminar concerning tax law updates that was attended by the company's controller

The emphasis of information of managerial accounting is past oriented.

  • True
  • False

External parties and management never use product cost information for investment decision and, planning and controlling.

  • True
  • False

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: What should be the unit sales to break-even?

  • 4,625 units
  • 2,500 units
  • 3,750 units
  • 1,500 units

Scope of information of financial accounting

  • Entireorganization
  • None of the above
  • Segment of organization
  • Both the whole organization and its segments

The sum of all costs that composed manufacturing costs except direct materials is called manufacturing overhead.

  • True
  • False

Traditional costing is mainly focused on highly automated manufacturing industry

  • True
  • False

The Graphic Approach is the widely used method in calculating the break-even point.

  • True
  • False

Break-even Point is the point of activity level where total revenue is equal to total cost.

  • True
  • False

It is in the planning phase where the problems and issues of the company are identified.

  • True
  • False

A tailoring company has gathered information on utility costs for the past year. The accountant has decided that utilities are a function of the hours worked during the month. The following information is available and representative of the company’s utility costs: Hours worked Utility cost incurred Low point 1,300 P 903 High point 1,680 1,074 If 1,425 hours are worked in a month, total utility cost (rounded to the nearest peso) using the high-low method should be

  • P 959
  • P 947
  • P 954
  • P 976

The estimates used to calculate the predetermined overhead rate will virtually always:

  • result in a year-end balance of zero in the Manufacturing Overhead account
  • result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount
  • result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount
  • result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount

The accountant is the personnel assigned in overseeing the overall financial operations of the company.

  • True
  • False

It is the point of activity level where total revenue is equal to total cost

  • break-even point
  • margin of safety
  • split-off point
  • contribution margin

Using the high-low method of separating mixed costs,how much is the fixed cost?

  • P1,200
  • P1,600
  • P200
  • P600

Within the relevant range, the two main cost behaviors are direct and indirect costs.

  • True
  • False

Companies can use either direct labor cost or direct labor hours as a cost driver.

  • True
  • False

Based on the preceding number, compute the fixed cost element (to the nearest whole peso)

  • P364
  • P411
  • P138
  • P225

If direct labor is a good cost driver, increases in direct labor are matched with increases in manufacturing overhead.

  • True
  • False

As activity increases within the relevant range, fixed costs remain constant on a per unit basis.

  • True
  • False

How much is the factory overhead cost per unit for Cellphone under activity-based costing?

  • P3.83 per unit
  • P0.83 per factory overhead
  • P0.83 per unit
  • P3.83 per factory overhead

Direct labor is the most commonly used cost driver when calculating a predetermined overhead rate.

  • True
  • False

When faced with unethical issues, the member should follow the established policies of his or her organization, including use of an anonymous reporting system if available.

  • True
  • False

The distinction between direct and indirect costs depends on whether a cost

  • can be conveniently and physically traced to a cost object under consideration
  • will increase with changes in levels of activity
  • is variable or fixed
  • is controllable or non-controllable

Product Costs are also inventoriable costs

  • True
  • False

A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the customer $30,000. Which of the following options correctly expresses the accounts that are debited and credited to record this transaction?

  • Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts Receivable, Cost of Goods Sold
  • Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of Goods Sold.
  • Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods Inventory.
  • Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, Finished-Goods Inventory.

Which of the following is the proper sequence of events in an activity-based costing system?

  • Identification of cost drivers, identification of cost pools, calculation of pool rates, assignment of cost to products
  • Identification of cost pools, identification of cost drivers, calculation of pool rates, assignment of cost to products
  • Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of pool rates
  • Used for providing the government and creditors with information about a company's internal operations

Generally speaking, companies prefer doing business with customers who order small quantities rather than large quantities.

  • True
  • False

Managerial accounting adheres strict compliance to Generally Accepted Accounting Principles (GAAP)

  • True
  • False

ABC Corporation has the following data for use of its machinery

  • P1.21
  • P1.15
  • P0.98
  • P1.08

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: How much should be the peso sales to break-even?

  • P462,500
  • P1,156,250
  • P693,750
  • P375,000

Planning is a function that involves

  • Analyzing financial statements
  • Setting goals and objectives of the company
  • Hiring competent personnel for a particular position
  • Establishing the accounting information system

The emphasis of information of financial accounting is future oriented.

  • True
  • False

Financial accounting is most concerned with meeting the needs of external users.

  • True
  • False

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: What is the amount of net income by considering the desired profit calculations?

  • P250,000
  • P312,500
  • P375,000
  • P62,500

Activity based costing assigns overhead to products produced on a basis of usage of activities during the production process like purchase order activities, machine set-ups and other activities that are required to complete the manufacturing process.

  • True
  • False

It is a systematic process of providing financial information of an organization or unit that is intended to be useful in decision making

  • Information
  • Accounting
  • Financial Statements
  • Decision Making

Referring to the preceding problem, the cost of wages and salaries and other overhead that would be charged to each delivery is closest to:

  • $8.75
  • $7.15
  • $12.50
  • $19.63

Using the high-low method of separating mixed costs, what is the variable cost per unit?

  • P550
  • P400
  • P500
  • P450

Net Income is the amount available to cover fixed costs

  • True
  • False

External parties and management uses product cost information for investment decision and, planning and controlling

  • True
  • False

It is the position in the organization structure wherein the personnel assigned are directly involved in the responsibility of achieving the goals of an organization

  • Chief Financial Officer
  • Line position only
  • Both line and staff position
  • Staff position only

It is a cycle of processes in an organization

  • Value Chain
  • Business Functions
  • Analysis
  • Business Cycle

Tiffany charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of labor hours. The following data pertain to the current year:

  • Overapplied by $10,000
  • Underapplied by $10,000
  • Overapplied by $35,000
  • Underapplied by $35,000

Activity based costing is an approach to the costing and monitoring of activities which does not involve tracing resource consumption and costing final outputs.

  • True
  • False

Inventoriable costs that have become expenses can be found in:

  • cost of goods sold
  • selling expenses
  • period costs
  • administrative expenses.

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: What is the amount of desired profit before tax?

  • P462,500
  • P693,750
  • P375,000
  • P312,500

The need of independent examination and verification process for financial accounting

  • Financial reports must be audited by internal auditors of the company
  • Financial reports must be audited by Certified Public Accountant (CPA) that is employed in the organization
  • Financial reports must be audited by an independent Certified Public Accountant (CPA)
  • Financial reports do not need to be audited by an independent CPA

One major difference between financial and management accounting is that

  • All of the following
  • Government reportorial regulations do not apply to management accounting.
  • Financial accounting reports are prepared primarily for users external to the company
  • Management accounting is not under the jurisdiction of the Securities and Exchange Commission.

Purpose of informationof managerial accounting

  • Helps managers to make decisions to fulfill an organization's objectives
  • Used for providing the government and creditors with information about a company's internal operations
  • Needed by manufacturers to be in compliance with government regulatory reportorial pronouncements.
  • Conveys financial information to investors, banks, government regulatory agencies and other outside parties

The one cost that would be classified as part of both prime cost and conversion cost would be:

  • direct material
  • direct labor
  • indirect material
  • indirect labor

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: What is the amount of total variable cost at desired profit calculation?

  • P312,500
  • P462,500
  • P693,750
  • P225,000

Step costs can either be variable cost or fixed cost.

  • True
  • False

If the resolution efforts of resolving ethical issues are not successful, the member may wish to consider disassociating from the organization.

  • True
  • False

If a company opt to use the activity-based costing in allocating overhead costs, companies do not need to classify at which level of activities costs were incurred.

  • True
  • False

Using the high-low method of separating mixed costs,what is the mixed cost equation?

  • y=200+550x
  • y=1,600+450x
  • y=1,200+400x
  • y=600+450x

All costs in a manufacturing company are product costs.

  • True
  • False

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: What is the amount of income tax?

  • P375,000
  • P312,500
  • P462,500
  • P62,500

The term "normal costing" refers to the use of

  • predetermined overhead rates
  • job-costing systems
  • actual overhead rates.
  • targeted overhead rates

Managerial accounting is most concerned with addressing the needs of the company as a whole.

  • True
  • False

What amount of these costs would be considered as product costs?

  • P32,000
  • P97,000
  • P62,000
  • P40,000

Prime cost is the sum of direct labor and manufacturing overhead.

  • True
  • False

To be able to answer the following questions, kindly refer to the problem below: ABC Co. provided the following information related to the production of a single product Selling price per unit P 250 Total fixed cost P150,000 Contribution margin percentage 40% Desired profit after tax P250,000 Income tax rate 20% Q: What is the contribution margin per unit?

  • P50
  • P250
  • P100
  • P150

Overhead costs are applied to products on the basis of volume-related measures.

  • True
  • False

Which of the following defines variable cost behavior?

  • remains constant Increases
  • increases constant remains
  • increases increases

The amount that was paid by a company for a building to house its operations is an example of a sunk cost.

  • True
  • False

A cost that remains constant in total but varies on a per-unit basis with changes in activity is called aNo

  • variable cost
  • fixed cost
  • mixed cost
  • step cost

Product Costs can either be presented in the balance or income statement

  • True
  • False

P0.83 per factory overhead

  • Overhead Costing
  • Departmentalized Costing
  • Activity Based Costing
  • Plant-wide Costing

Which of the following statements about cost accounting is not true?

  • Its generated information is used by both financial and managerial accounting
  • Its generated information is not important to any company
  • It is the intersection between financial and managerial accounting
  • It provides product cost information to internal parties that is used for planning and controlling

Opportunity costs are the potential benefit that is given up when one alternative is selected over another.

  • True
  • False

Institute of Management Accountants' (IMA) overarching ethical principles include the following except one:

  • Fairness
  • Objectivity
  • Honesty
  • Credibility

Prime costs consist of:

  • direct labor and direct materials
  • indirect labor and the fixed portion of manufacturing overhead
  • direct labor and indirect labor
  • direct materials and the variable portion of manufacturing overhead