Costs in Management Accounting Concepts Classifications Accumulation Multiple Choice PDF Free
Costs in Management Accounting Concepts Classifications Accumulation Multiple Choice PDF Free
Costs in Management Accounting Concepts Classifications Accumulation Multiple Choice PDF Free
MULTIPLE CHOICE:
1. Cost is the monetary measure of the amount of resources given up in obtaining goods
and services. Costs may be classified as unexpired or expired.
Which of the following costs is not always considered to be expired immediately upon
being recognized?
a. salesmen’s commission
b. depreciation expense for factory equipment
c. cost of goods sold
d. salary of the company president
3. It refers to anything (a product, product line, a business segment) for which cost is
computed.
a. Cost object
b. Cost driver
c. Cost control
d. Cost variance
5. It is an event, action, transaction, task, or unit of work that consumes resources and
with a specified purpose.
a. Cost object
b. Activity
c. Cost driver
d. Direct labor
6. An activity that adds costs to the product or service, but does not make such product
or service more valuable to customers is called
a. non-value-added activity
b. value-adding activity
c. costly activity
d. valuable activity
Following are costs incurred by Abtina Manufacturing Corporation during the previous month:
Data about Maritz Company’s production and inventories for the month of June are as follows:
Freight in 5,000
Maritz Company applies factory overhead to production at 80% of direct labor cost. Over- or
underapplied overhead is closed to cost of goods sold at year-end. The company’s accounting
period is on the calendar year basis.
17. For the month of June, Maritz Company’s total manufacturing cost was
a. P469,000
b. P444,000
c. P644,000
d. P449,000
18. For June, Maritz Company’s cost of goods transferred to the finished goods inventory
account was
a. P579,000
b. P461,000
c. P469,000
d. P444,000
21. The cost of goods sold for the month of June should be increased (decreased) by the
amount of over/under-applied factory overhead of
a. P20,000
b. (P20,000)
c. (P120,000)
d. P0
26. The variable portion of the semi-variable cost of electricity for a manufacturing plant is
a
Product Cost Prime Cost Conversion Cost
a. No No Yes
b. Yes Yes No
c. Yes Yes Yes
d. Yes No Yes
27. The salaries of the factory janitorial and maintenance staff should be classified as
a. direct labor cost
b. period cost
c. prime cost
d. factory overhead cost
30. An income or benefit that is give up when one alternative is selected over another is
called
a. loss
b. opportunity cost
c. relevant cost
d. differential cost
31. Sunk costs
a. are relevant costs
b. are anticipated future costs that will differ among various alternatives
c. are irrelevant for decision-making purposes
d. are decreases in costs from one alternative to another
32. Which of the following costs would be considered relevant in short-term decision-
making?
a. Production costs of goods available for sale
b. Incremental fixed costs
c. Acquisition costs of idle asset to be used in a proposed project
d. Variable costs
34. In cost accounting, the term relevant range refers to the range over which
a. relevant costs are incurred
b. production should be confined
c. total fixed costs fluctuate
d. cost relationships are valid
37. When production (in units) decreases, the average cost per unit of product increases.
This increase in the average cost per unit is due to the
a. increase in variable cost per unit
b. increase in fixed cost per unit
c. increase in total variable costs
d. increase in total fixed costs
A
COST
COST
COST
A B
A
a. total sales line fixed cost per unit line total variable cost line
b. variable cost per line total variable cost line total fixed cost line
c. total variable cost line total fixed cost line total cost line
d. break-even line parallel line total sales line
39. When activity changes, this cost shifts upward or downward by a certain interval.
a. Step cost
b. Cost interval
c. Shifting cost
d. Incremental cost
40. These costs are long-term in nature and cannot be eliminated even for short periods of
time without affecting the probability or long-term goals of the firm.
a. Avoidable costs
b. Committed fixed costs
c. Variable costs
d. Controllable costs
41. This type of fixed costs usually arises from periodic decisions by management to
spend in certain fixed costs area. They may be changed by management from period
to period or even within the period if circumstances demand such change.
a. Period costs
b. Committed fixed costs
c. Variable costs
d. Discretionary fixed costs
45. The following data were collected from the records of the Receiving Department of a
company:
Month Number of Items Received Receiving and Handling costs
January 2,800 P17,500
February 2,000 12,500
March 1,190 7,450
April 5,200 32,500
May 4,410 27,600
June 4,016 25,100
a. step cost
b. variable cost
c. fixed costs
d. semi-variable cost
Charity Company wants to analyze the behavior of its selling costs for budgeting
purposes. Cost drivers (activity measures) and costs incurred in the first quarter and the
first month of the second quarter are as follows:
Selling costs:
Cost drivers:
46. In relation to the appropriate cost drivers, how should the company’s selling costs be
classified?
47. Using the high-low method and the algebraic equation y = a + bx (where y equals total
shipping costs; a equals total fixed costs; b equals variable shipping cost per unit; and
x is the number of units sold), the cost formula for the shipping costs may be
expressed as
a. y = 10,000 + 0.80x
b. y = 0.80 + 10,000
c. y = 10,000 + 0.80
d. y = 10,000 + 5,600
48. If the company plans to sell 36,000 units in May and fixed costs will remain at the April
level, the total selling costs for May would be
a. P122,600
b. P125,800
c. P127,800
d. P 81,000
Maco Corporation’s Research and Development Department was able to develop a new
product – a flashlight powered by solar energy. After reviewing the data prepared by the
company’s controller, Maco’s management is confident that the new product will
contribute profit to the company.
Costs: Materials P 60
The total research and development cost incurred to develop the new product amounted
to P200,000. The company is planning to spend half of this amount for promotion and
advertising.
The company’s fixed overhead includes rent, equipment depreciation, and salaries of
factory supervisors.
50. The difference between the flashlight’s suggested selling price of P200 and the total
cost of P167 represents each flashlight’s
a. gross profit
b. contribution margin
c. net profit
d. operating income
52. The total research and development costs of P200,000 incurred to develop the new
product is a(n)
a. relevant cost
b. sunk cost
c. avoidable cost
d. postponable cost
54. the planned spending on promotion and advertising for the flashlight is a
a. variable cost
b. discretionary cost
c. sunk cost
d. past cost
55. The least exact method for separating the variable and fixed cost components of a
mixed cost is
a. matrix algebra
b. the high-low method
c. the least squares method
d. computer simulation
Meng Company is preparing a flexible budget for next year and requires a breakdown of
the factory maintenance cost into the fixed and variable elements.
The maintenance costs and machine hours (the selected cost driver) for the past six
months are as follows:
56. If Meng Company uses the high-low method of analysis, the estimated variable rate of
maintenance cost per machine hour is
a. P7.23
b. P8.73
c. P5.46
d. P5.33
58. What is the average rate per hour at a level of P1,500 machine hours?
a. P5.33
b. P8.11
c. P7.23
d. P5.46
59. The manager of the mixing department of Ali Van Company wants to determine the
fixed variable components of the department’s costs. He collected information on total
cost and the number of kilos mixed for the past 12 months. He wants more accurate
results, so he is planning to use a sophisticated method for cost separation. The
manage should use
a. high-low method
b. regression analysis
c. game theory
d. queuing theory
Frances Corporation conducted a regression analysis of its factory overhead costs. The
analysis yielded the following cost relationship:
Each unit of product requires 6 direct labor hours. The company’s normal production is
20,000 units of product per year.
62. The total overhead cost for a month’s production of 2,000 units is
a. P60.000
b. P50,000
c. P110,000
d. P0
The management of a hotel is interested in the relationship between room cleaning costs
and guest-days in its hotel. Using regression analysis on room cleaning costs and guest-
days collected over 12 months, the relationship was shown graphically as follows:
66. The estimated increase in the room cleaning cost for each additional guest-day is
a. P26.27
b. P10.00
c. P60,000
d. P25,000
67. The cost formula for the cleaning costs may be expressed as
a. Cost = P25,000 + guest-days
b. Cost = P25,000
c. Cost = P25,000 + P10
d. Cost = P25,000 + P10 (guest days)
68. If the relevant range is from 0 to 2,000 guest-days, how much is the total room
cleaning cost for 2,200 guest-days?
a. P47,000
b. P22,000
c. P25,000
d. Cannot be determined from the given information
M. Munda Company produces and sells rattan baskets. The number of units produced
and the corresponding total production costs for six months, which are representatives
for the year, are as follows:
Based on the given information and using the least squares method of computation, `
select the best answer for each question, where:
n = number of months
∑ = summation
69. If the least squares method is to be used to segregate the variable and fixed cost
components of the total production costs, the equation(s) required to express the
relationship between the fixed and variable costs are
a. ∑y = na + b∑x and ∑xy = a∑x + b∑x2
b. ∑xy = a∑x + b∑x2
c. ∑y = na + b∑x
d. y = a + b∑x2 and ∑y = na + b∑x
70. The cost function derived by the simple least squares method
a. is linear
b. is curvilinear
c. is parabolic
d. must be tested for minimum and maximum points
72. Using the least squares method, the variable production cost per unit is approximately
a. P5
b. P10
c. 0.27
d. 3.74
73. Using the least squares method, the monthly fixed production cost is approximately
a. P1,500
b. P18,000
c. P4,350
d. P52,200
74. If the high-low points method is used, the results when compared with those under the
method of least squares, are
Variable Cost Per Unit Total fixed Costs
a. Equal Equal
b. Higher by P1.26 Lower by P2,850
c. Lower by P1.26 Higher by P2,850
d. Higher by P5 Lower by P1,500
The cost accountant of Ginatemple Corporation has complied the actuals costs for six
different levels of activity. The data shown in the table and graph below:
A 40 P100,000
B 80 100,000
C 120 300,000
D 160 400,000
E 200 500,000
F 200 600,000
76. If only the pints that lie on the line are to be considered, a cost analysis will show that
such costs are
a. variable costs
b. fixed costs
c. mixed costs
d. step costs
77. If points B and F will not be considered in the computation, a cost function for the given
data will be expressed as
a. y = a + bx
b. y = a
c. y = bx
d. y = a + b
As part of cost study, the cost accountant of Shinly Corporation has recorded the cost of
operations at seven different levels of materials usage. The records show the following:
79. Using the same high-low points method, the fixed cost of operations is
a. P320
b. P103
c. P160
d. P206
80. Using the least squares method, the average rate of variability per kilo of materials
used is
a. P8.00
b. P0.11
c. P10.00
d. P8.71
81. Using the least squares method, the fixed portion of the cost is
a. P320
b. P103
c. P160
d. P206
83. The cost accountant of Trisha Company conducted an analysis of total costs in relation
to the number of labor hours uses and came up with the function for a relevant range
of 50,000 labor hours to 400,000 labor hours, as follows:
Total cost = P400,000 + 20x*
*x = number of direct labor hours
How much is the total cost for 40,000 direct labor hours?
a. P1,200,000
b. P800,000
c. P400,000
d. Cannot be determined from the given information
84. It is the measure of the co-variation between the dependent and independent
variables.
a. correlation
b. ratio
c. standard error
d. variance
85. Correlation is a term frequently used in conjunction with regression analysis and is
measured by the valued of the coefficient of correlation r. The value of r
a. is always positive
b. is always negative
c. is a measure of the relative relationship between two variables
d. ranges in size from negative one to zero
86. The coefficient of correlation that indicates the strongest linear association between
the dependent and independent variables is
a. -0.08
b. 0.40
c. -0.80
d. 0.04
88. A scatter diagram is a tool which may be used to demonstrate correlations. The scatter
diagram’s objective is to
a. show frequency distribution in graphic form
b. display a population of items for analysis
c. indicate the critical path
d. divide a universe of data into homogenous groups
89. If the coefficient of correlation between two variables is -0.95, how might a scatter
diagram of these variables appear?
a. A least squares line that slopes up to the right
b. A least squares line that slopes down to the right
c. Random points
d. A least squares line that slopes to the left
90. Using regression analysis, Melody the accountant of Lacuata Company graphed the
following relationship of its most expensive product line’s sales with its customer’s
income levels:
If there is a strong statistical relationship between the sales and customers’ income levels,
which of the following best represents the correlation coefficient for this relationships?
a. 0
b. -0.96
c. +0.96
d. +9.6
92. Verfermin Company uses regression analysis to develop a cost formula for predicting
productions costs. The company’s accountant is considering two different cost drivers
(units produced and direct labor hours) as the independent variable [x]. The analysis
showed the following results”
Independent Variable Y-intercept Slope (b) r r2
Units produced P30,000 12 0.85 0.72
Direct labor hours 50,000 8 0.95 0.90
a. Cost = 30,000
b. Cost = 50,000 + 8x
c. Cost = 30,000 + 0.85x
d. Cost = 50,000 + 7.60x
If the regression analysis is applied to the data on the graph, the coefficients of
correlation (r) and determination (r2) will indicate the existence of a
a. high direct linear relationship, high explained variation ratio
b. low direct linear relationship, low explained variation ratio
c. high inverse linear relationship, high explained variation ratio
d. low inverse linear relationship, low explained variation ratio
94. Odessa, the auditor of Sta. Maria Appliance Center has developed a multiple
regression model that has been used for a number of years to estimate the amount of
installment sales from credit applicants’ income levels. During the current year,
Odessa applied the model and discovered that the r2 value decreased dramatically
although the model seems to be working well. Which conclusion is justified by the
change?
a. Regression analysis is no longer an appropriate technique to estimate installment
sales.
b. Some new factors, not included in the model, are causing installment sales
to change.
c. The model is no longer reliable.
d. The decrease in the value of r2 should not be considered in the model.
95. It is a part of the accounting system that measures costs for decision-making and
financial purposes.
a. Financial accounting
b. Cost accounting
c. Responsibility accounting
d. Segment accounting
97. A cost accounting system has internal and external reporting objectives. Some
objectives include the following, except
a. income determination
b. product costing and inventory valuation
c. planning, evaluating, and controlling operations
d. determination of sales commission
101. This costing system is a hybrid of job-order and process costing systems wherein
materials are allocated on the basis of batches of production.
a. job-process costing system
b. pro-job costing system
c. operation costing system
d. backflush costing system
104. Which of the following alternatives does not correctly classify the business
application to appropriate costing system?
Process Costing System Job Order Costing System
a. Car repair shop Paint manufacturer
b. Softdrinks manufacturer Public accounting firm
c. Wallpaper manufacturer Print shop
d. Pen manufacturer Renovation job contractors
105. Operation costing system is a hybrid process and job-order costing systems. It is
used by companies that produce goods that undergo some similar and some
dissimilar processes. Which of the following would most likely use the operation
costing system?
a. movie production
b. clothing manufacturing
c. paper manufacturing
d. custom printing
106. It is a costing method that delays much of the accounting for production cost until the
completion of production even the sale of goods. It is most appropriate when
inventories are low or when the change in inventories is minimal, that is, when most
production costs for a period flow into cost of goods sold. This costing method is
called
a. standard costing
b. process costing
c. job-order costing
d. backflush costing
Duque Corporation uses backflush costing in accounting for the cost of its product.
During the period, the following the following data were recorded:
b. Materials 562,800
Accounts payable 562,800
d. No entry
d. No entry
111. The journal entry to record the incurrence of conversion costs is
a. Work in process 300,000
Conversion costs 300,000
d. No entry
d. No entry
113. The journal entry to record the completion and sale of finished goods is
a. Finished good 86,000
Cost of goods sold 774,000
Materials 560,000
Conversion costs control 300,000
d. No entry
114. In this costing system, the various activities performed in business segment or in the
entire organization are identified, costs are collected on the basis of underlying nature
and extent of such activities, and then assigned to the products or services based on
consumption of such activities by the products or services.
a. Operation costing system
b. Activity-based costing system
c. Job-order costing system
d. Process costing system
A company produces and sells two types of products. It classifies its costs as belonging
to four functions – production, marketing, distribution, and customer services. For
purposes of setting selling prices for products, all company costs are assigned to the two
products. The direct costs of the four functions are traced directly to the products. The
indirect costs, on the other hand, are accumulated into four separate cost pools and then
assigned to the two products using appropriate allocation bases.
115. The allocation base that would most likely be the best for allocating indirect costs of
the marketing function is
a. number of shipments
b. number of sales persons
c. number of customer phone calls
d. direct labor hours
116. The allocation base that would most likely be the best for allocating the indirect costs
of the distribution function is
a. number of shipments
b. number of sales persons
c. direct labor hours
d. machine hours
117. The allocation base that would most likely be the best for allocating the indirect costs
of the customer services function is
a. number of shipments
b. number of sales persons
c. number of customer phone calls
d. number of units produced
120. In ABC system, costs are grouped in cost pools and then allocated by common
allocation base, which ordinarily is the cost’s cost driver. Such allocation base is the
common denominator for systematically correlating indirect costs and a cost object.
In a homogeneous cost pool, the allocation base should
122. ABC differs from traditional product costing because it uses multiple allocation bases
and therefore, allocates costs (such as overhead costs) more accurately. This
normally results in
a. equalizing setup costs for all product lines
b. lower setup costs being charged to low volume products
c. decreased unit costs for low-volume products than is reported by traditional
product costing systems
d. substantially greater unit costs for low-volume products than is reported
by traditional product costing systems
T. Formaloza Corp. has used a traditional cost accounting system to apply quality
control costs uniformly to all products at a rate of P20 per direct labor hours for its main
products are 9,600 hours.
Trisha wants to shift ABC system in order to allocate quality control costs to its products
in more equitable manner. To start with, process value analysis was conducted. Quality
control activities were determined, as well as the appropriate cost drivers and cost driver
rates. The analysis yielded the following:
123. The quality control cost that would be assigned to the main product using the
traditional costing system is
a. P240,000
b. P150,000
c. P120.000
d. P192.000
124. The quality control cost that would be assigned to the main product using ABC
costing system is
a. P240.000
b. P150,000
c. P120,000
d. P192,000
The cost accountant of L. Rosales, Inc. is considering to use the ABC costing system in
determining the cost of its products.
At the present, the company uses the traditional costing system wherein factory
overhead costs are allocated based on direct labor hours. The cost accountant believes
that the present accounting system may be providing misleading cost information,
hence, the plan to change the ABC system.
For the coming period, the company is planning to use 5,000 direct labor hours, and its
total budgeted factory overhead amounts to P90,000, broken down as follows:
Projected data for one company’s products, Product X, for the coming period are as
follows:
Number of setups 4
125. If the company will use the traditional full cost system, the cost per unit of product X
for the coming period will be
a. P36
b. P50
c. P86
d. P68
126. If the company will use the ABC system, the cost per unit of product X for the coming
year will be
a. P62
b. P50
c. P86
d. P12
Jarred converted his house into a nursery home where children are provided with
sleeping areas, play pen, and study areas, as well as meals, milk, and snacks. Nursery
fee is computed by adding a markup to the total cost of service provided to each child.
At present, Jarred uses the traditional costing system in computing the cost of service
per child, where the total cost is divided by the number of child served.
During the previous month, the nursery served 100 children, for which the company
incurred P50,000 total cost of service. Jarred observed, however, that it is not right to
just divide the total cost by the number of children because incurrence of some costs
may vary depending on some factors. For example, children between 2 to 3 years old
need more attention and are provided more services than those above 3 years old.
Considering this, Jarred pans to apply ABC system in determining the cost of service per
child. He conducted a study of the previous month’s operations, and the following results
came out:
127. If the traditional costing system were used and nursery fee was computed at 300% of
the cost of service per child, Daddy’s Nursery could have charged each child a fee of
a. P1,500
b. P500
c. P166.67
d. P650
128. If the ABC system were used, nursery fee per child should have been
a. P1,850 for the babies, P975 for the kiddies
b. P616,.67 for the babies, P325 for the kiddies
c. P1,500 for both the babies and kiddies
d. P1,412.50 for both the babies and kiddies
129. The Activity-Based Costing System is one means of avoiding what has been called
Peanut-butter costing. Inaccurately averaging or spreading costs like peanut-butter
over products of service units that use different amounts of resources results in
cross-subsidization of product costs. Cross-subsidization
a. describes the condition in which the miscasting of one product causes the
miscasting of other products
b. involves a determination of which activities that use resources are value-adding
or non-value-adding and how the latter may be reduced or eliminated
c. is the linkage of product costing and continuous improvement of process, it
encompasses driver analysis, activity analysis, and performance measurement
d. is a hybrid of job order costing and process costing that emphasizes physical
processes or operations for cost management and control purposes
130. Mich Roxa Corp. produces and sells two products, A and B. Data about the two
products are as follows:
Product A Product B
Budgeted production 3,000 units 3,000 units
Direct labor hours 9,000 hours 15,000 hours
Number of setups 4 6
Cost per setup P1,800
If Mich applies the setup cost on the basis of direct labor hours, the cross subsidy
per unit arising from the peanut-butter costing approach is
a. P0.15
b. P1.20
c. P3.00
d. P1.50
131. Costs that are common to many different activities within an organization are known as
______ costs.
a. product-or process level
b. unit level
c. organizational level
d. batch-level
135. Traditionally, overhead has been assigned based on direct labor hours or machine
hours. What effect does this have on the cost of a high-volume product?
a. under-costs the product
b. over-costs the product
c. has no effect on the product cost
d. cost per unit is unaffected by product volume
136. Relative to traditional product costing, activity-based costing differs in the way costs
are
a. incurred
b. benchmarked
c. allocated
d. processed
138. Of the following, which is the best reason in using activity-based costing?
a. to assign indirect overhead costs to different over head pools
b. to better assign overhead costs to products
c. to keep better track of overhead costs
d. to more accurately assign overhead costs to cost pools so that these costs are
better controlled
139. These activities are needed to support an entire product line regardless of the number
of units and batches produced.
a. Batch-level Activities
b. Unit-level Activities
c. Facility-level Activities
d. Product-level Activities