11/9/2020 BSMA 2103 - ACC 204 - MIDTERM EXAMINATION (PART 1 - THEORIES)

BSMA 2103 - ACC 204 - MIDTERM

EXAMINATION (PART 1 - THEORIES)
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PART I. Theories

Choose the best answer.

Two basic accounting systems for assigning costs to products or services 1 point

are job order and process costing. These two costing systems are usually
viewed as being on opposite ends of a spectrum. The fundamental
criterion employed to determine whether job costing or process costing
should be employed is *

Type of bases used in allocating the indirect cost pool to the product or service

Proportion of direct (traceable) costs expended to produce the product or service

Number of cost pools employed to allocate the indirect costs to the product or
service

The nature and amount of the product or service brought to the market place for
customer consumption

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Which of the following could not be used in job order costing? * 1 point

an average cost per unit for all jobs

overhead allocation based on the job's direct labor hours

Standards

normal costing

Wages of the security guard for a small plant would be an example of I. 1 point
Indirect labor II. Fixed factory overhead *

Neither I nor II

Both I and II

I only

II only

What is the common component of prime costs and conversion costs? * 1 point

Factory overhead

Indirect labor

Direct labor

Direct material

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Indirect materials are * 1 point

Fixed cost

Factory overhead cost

Irrelevant cost

Prime cost

When the amount of overapplied factory overhead is significant, the entry 1 point
to close overapplied factory overhead will most likely require *

Credits to cost of goods sold, finished goods inventory, and work in process inventory

A credit to cost of goods sold

Debits to cost of goods sold, finished goods inventory, and work in process inventory

START A debit to cost of goods sold

A target in balanced scorecard framework is * 1 point

A statement of what the strategy must achieve and what is critical to its success

A key action program required to achieve strategic objectives

A diagram of the cause-and-effect relationships between strategic objectives

The level of performance or rate of improvement needed in the performance measure

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Wages earned by machine operators in producing the firm’s product 1 point

should be categorized as I. Direct labor II. Controllable by the machine
operator’s foreman *

Both I and II

I only

II only

Neither I nor II

If a firm produces more units than it sells, absorption costing relative to 1 point

variable costing, will result in *

Higher income but lower assets

Lower income and assets

Lower income but higher assets

Higher income and assets

The process of establishing objectives or goals for the firm and 1 point
determining the means by which they will be met is: *

assigning responsibility.

controlling.

planning.

analyzing profitability.

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Arnold Malibiran is the supervisor of the Machining Department of Bennett 1 point

Corporation. He has control over and is responsible for manufacturing
costs traced to the department. The Machining Department is an example
of a(n): *

inventory center.

cost center.

worker’s center.

supervised work center.

The following information regarding fixed production costs from a 1 point

manufacturing firm is available for the current year: Fixed Costs in the
beginning inventory = Php 16,000 Fixed Costs incurred in this period = Php
100,000 Which of the following statements is not true? *

If this firm produced substantially more units than it sold in the current year, variable
costing will probably yield a lower income than absorption costing

The maximum amount of fixed production costs that this firm could deduct using
absorption costs in the current year is Php 116,000

The maximum difference between tis firms the current year income based on
absorption costing and its income based on variable costing is Php 16,000

Using variable costing, tis firm will deduct no more than Php 16,000 for fixed
production costs

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Which of the following costs exhibit both decreasing and increasing 1 point

marginal costs over a specific range of activity? *

Step-variable cost

Semivariable cost

Curvilinear cost

Step-fixed cost

In a traditional job order cost system, the issuance of supplies to a 1 point

production department increases *

Factory Overhead Control

Work in process control

Factory Overhead Applied

Stores control

An example of a direct labor is wages paid to: I. Factory machine operator 1 point
II. Supervisor in a factory *

Neither I nor II

II only

Both I and II

I only

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Which of the following is an advantage of using variable costing? * 1 point

Variable costing is most relevant to long-run pricing strategies

Variable costing complies with the National Internal Revenue Code

Variable costing makes cost-volume-profit relationships more easily apparent

Variable costing complies with Generally Accepted Accounting Principles

Absorption costing differs from variable costing in all of the following 1 point
except *

Arrangement of the income statement

Treatment of fixed manufacturing overhead

Treatment of variable production costs

Acceptability for external reporting

What are prime costs? * 1 point

Direct materials and factory overhead

Indirect labor and indirect materials

Direct labor and Factory overhead

Direct materials and direct labor

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Factory supplies for a manufacturing plant are generally * 1 point

Period cost

Variable cost

Excluded from product cost

Prime cost

Unit cost information is important for making all of the following marketing 1 point

decisions except: *

Bidding on contracts.

Determining the amount of advertising needed to promote the product.

Determining the selling price of a product.

Determining the amount of profit that each product earns.

In a job order cost system, the use of direct materials previously purchased 1 point

usually recorded as an increase in *

Work in process control

Factory Overhead Applied

Factory Overhead Control

Stores control

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Direct materials are: I. Prime Cost II. Conversion cost III. Manufacturing cost 1 point
*

I, II and III

I and II only

I and III only

II and III only

Total manufacturing costs for the year plus beginning Work in Process 1 point
Inventory cost equals *

cost of goods manufactured in the year.

total manufacturing costs to account for.

cost of goods available for sale.

ending Work in Process Inventory.

There are several alternative denominator measures for applying overhead. 1 point
Which is not commonly used? *

Sales value of product produced

Direct Labor Cost

Direct Labor Hours

Machine Hours

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What are conversion costs? * 1 point

Direct materials and direct labor

Direct materials and factory overhead

Direct labor and Factory overhead

Indirect labor and indirect materials

Supervisory salaries for a manufacturing plant would be an example of 1 point

which of the following cost? I. Prime cost II. Conversion cost *

I only

II only

Both I and II

Neither I nor II

Which of the following statements best describes a characteristic of a 1 point

performance report prepared for use by a production line department

head? *

It is more important that the report be precise than timely.

The report should include information on all costs chargeable to the department,
regardless of their origin or control.

The costs in the report should include only those controllable by the department head.

The report should be stated in peso rather than in physical units so the department
head knows the financial magnitude of any variances.

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Supplies needed for use in the factory are issued on the basis of: * 1 point

Job cost sheets

Material requisitions

Factory overhead analysis sheets

Time tickets

Wages paid to a timekeeper in a factory are I. Prime cost II. Conversion 1 point
cost *

Neither I nor II

II only

I only

Both I and II

The fixed portion of the semivariable cost of electricity for a 1 point

manufacturing plant is I. Product cost II. Conversion cost *

Neither I nor II

II only

I only

Both I and II

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Which of the following items of cost would be least likely to appear on a 1 point
performance report based on responsibility accounting for the supervisor
of an assembly line in a large manufacturing situation? *

Repairs and maintenance

Direct labor

Indirect materials

Selling expenses

What is the most important purpose of a balanced scorecard? * 1 point

Set priorities

Develop strategy

Measure performance

Develop cause-and-effect linkages

A direct labor overtime premium should be charged to a specific job when 1 point
the overtime is caused by the *

Management’s failure to include the job in the production schedule

Increased overall level of activity

Management’s requirement that the job be completed before the annual factory
vacation closure

Customer’s requirement for early completion of the job

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Responsibility accounting would most likely hold a manager of a 1 point

manufacturing unit responsible for: *

the number of units ordered.

amount of taxes incurred.

cost of raw materials.

quantity of raw materials used.

A credit to Work in Process Inventory represents * 1 point

the transfer of completed items to Finished Goods Inventory.

work still in process.

raw material put into production.

the application of overhead to production.

In a manufacturing environment, the job order costing system and process 1 point
cost system differ in the way *

Product profitability is determined and compared with planned costs

Orders are taken and the number of units in the orders

Processes can be accomplished and the number of production runs that may be
performed in a year

Costs are assigned to production runs and the number of units for which costs are
averaged

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Property taxes on a manufacturing plant are an element of I. Conversion 1 point

cost II. Period cost *

I only

II only

Both I and II

Neither I nor II

Hakdog Distribution Company operates 400 hotdog stands in Manila. 1 point

Depreciation expense for the 400 carts amounts to Php 160,000 a year, or
Php 400 per cart. Depreciation with regard to number of hotdog stands
should be considered as *

Mixed cost

Fixed cost

Variable cost

Discretionary cost

Under job order cost accumulation, the factory overhead control account 1 point
controls: *

Factory overhead analysis sheets

Material inventories

Cost reports by processes

Job order cost sheets

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Normal spoilage is properly classified as * 1 point

Deferred Charge

Product Cost

Extraordinary item

Period Cost

If a firm’s net income (loss) does not change as its volume changes, the 1 point
firm(‘s) *

Must have no fixed costs

Sales price must equal its variable costs

Sales price must equal Php 0

Must be in the service industry

The cost of the insurance for a manufacturing plant is generally * 1 point

Semivariable cost

Conversion cost

Nonmanufacturing cost

Period cost

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A basic tenet of variable costing is that the period costs should be 1 point
currently expensed. What is the rationale behind this procedure? *

Allocation of period costs is arbitrary at best and could lead to erroneous decision by
management

Period costs are uncontrollable and should not be charged to a specific product

Period costs are generally immaterial in amount and the cost of assigning the
amounts to specific products would outweigh the benefits

Because period costs will occur whether production occurs it is improper to allocate
these costs to production and defer a current cost of doing business

Factory overhead includes * 1 point

All manufacturing costs which may be variable or fixed, except direct material and
direct labor

All manufacturing costs

Indirect labor but not indirect materials

Indirect materials but not indirect labor

In job order costing, when materials are returned to the storekeeper that 1 point

were previously issued to the factory for cleaning supplies, the journal
entry should be made to *

DR Purchase Returns; CR Work in Process

DR Materials; CR Work in Process

DR Materials; CR Factory Overhead

DR Factory Overhead; CR Work in Process

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In job order cost system, payroll taxes paid by the employer for factory 1 point
employees are usually accounted for as *

Indirect Labor

Administrative Costs

Direct labor

Factory Overhead

Under a job order cost system, the peso amount of the general ledger 1 point
entry involved in the transfer of inventory from work in process to finished
goods is the sum of costs charged to all jobs *

Started in process during the period

In process during the period

Completed and sold during the period

Completed during the period

Generally, individual department rates rather than a plantwide rate for 1 point
applying overhead would be used if *

A company’s manufacturing operations are all highly automated

A company wants to adopt a standard cost system

The manufactured products differ in the resources consumed from the individual
departments in the plant

Manufacturing overhead is the largest cost component of its product cost

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The business entity that purchases finished goods for resale is a: * 1 point

For-profit service business.

Service business.

Merchandiser.

Manufacturer.

Indirect labor is a * 1 point

Period cost

Prime cost

Nonmanufacturing cost

Conversion cost

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