MIDTERM EXAMINATION: (COST ACCOUNTING)

1. The distinction between indirect and direct costs depends on

a. Whether a cost is controllable or non-controllable
b. Whether a cost is variable and fixed
c. Whether a cost is a product or a period cost
d. Whether a cost can be conveniently and physically traced to a unit under consideration
2. Factory supplies used would be an example of which of the following?
Prime cost Conversion cost
a. Yes Yes
b. Yes No
c. No Yes
d. No No
3. It’s two o’clock in the morning and you’ve been studying job-order costing for the past three hours. You drift off to
sleep and in your first dream you visit JOB-ORDER COSTING LAND. You are direct labor peso and are travelling
through a giant ledger. By the time you finish your journey, which accounts will you travel through and in what
order?
a. Work in process, Cost of goods manufactured, Finished goods, and cost of goods sold
b. Direct labor, Work in process, Finished goods, and Cost of goods sold
c. Work in process, Finished goods, and Cost of goods sold
d. Manufacturing overhead, Work in process, cost of goods manufactured, and Finished goods
e. Direct labor, Work in process, Finished goods, Cost of goods manufactured, and cost of goods sold
4. Someone told Marco de Santos, president of the company, that under-or-overapplied manufacturing overhead
can be allocated to three accounts. What are those three accounts?
a. Cost of goods sold, Finished goods, and Raw Materials
b. Raw Materials, Work in process, and Finished goods
c. Cost of goods sold, Work in process and raw materials
d. Raw materials, Direct Labor and Manufacturing Overhead
e. Finished goods, Cost of goods sold, and Work in process
5. Which of the following is not a characteristic of Job order costing?
a. Each job is distinguishable from other jobs
b. Identical units are produced on an ongoing basis
c. It is not possible to compare actual costs with estimated costs
d. Job cost data are used for setting prices and bidding prices
6. When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should
be made would be:
a. Finished goods inventory
Direct Materials
Direct labor
Factory overhead
b. Work in process Inventory
Direct Materials
Direct labor
Factory overhead
c. Raw materials inventory
Work in process Inventory
d. Finished goods inventory
Work in process inventory
Illustration#1
HAZEL Corporation has a job order cost system. The following debits (credits) appeared in the work-in-process account
for the month of March of the current year.

March Description Amount

1 Balance 2,000
31 Direct Materials 12,000
 31 Direct labor 8,000
31 Factory Overhead 6,400
31 To Finished goods (24,000)

Hazel applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job No. 30, the only job
still in process at the end of March has been charged with direct labor of P1,000.
7. The amount of direct materials charged to Job was?
a. 12,000
b. 4,400
c. 2,600
d. 1,500

Question#8-10:
ANNE Company produces and sells chocolates. Over the last five months the company had the following production costs
and production volume.
Month Cost Volume
March P6,000 11
April 6,659 12
May 8,370 16
June 1,560 4
July 8,050 18

8. Using the high-low method, what is the fixed cost per month for chocolate production?
a. 710.00
b. 1,535.44
c. 786.00
d. 2778.52
9. What is the variable cost per volume of chocolate production?
a. 567.50
b. 474.00
c. 292.86
d. 570.00
10. How much is the total costs, assuming 21 volumes (units) were produced?
a. 8,928.58
b. 10,740.00
c. 12,627.50
d. 12,840.00

The Work in process account of the RN Company follows:

Work in process
Apr. 1 balance Finished Goods
P25,000 P124,450
Direct materials
50,000
Direct labor
40,000
Factory Overhead-applied 30,000
Overhead is applied to production at a predetermined rate, based on direct labor cost. The work in process at April 30,
represents the cost of Job No. 456, which has been charged with direct labor cost of P3,000, and Job No. 789, which has
been charged with applied overhead of P2,400.
11. The cost of direct materials charged to Job No. 456 and Job No. 789 amounted to:
a. 8,700
b. 7,600
c. 4,500
d. 9,700
 12. The conversion cost during the month amounted to:
a. 70,000
b. 90,000
c. 120,000
d. 145,000
13. The company has manufactured 100,000 units of compound X in 2024 at the following costs. Labor of
Php242,500 of which 90% represents direct labor. Materials of Php182,500 of which 90% represents direct
materials. Opening work in process is Php88,125. Closing work in process inventory is Php67,500. Overhead is
applied at 125% of direct labor cost.
The cost of goods manufactured is
a) 675,938 b) 692,306 c) 651,036 d) 629,900

14. The company employs the job order costing system. The following are the data for the month.
Work in process beginning 100,000
Direct materials used for the month 200,000
Direct labor cost for the month 160,000
Overhead applied based on direct labor 128,000
Cost of goods completed 501,800
Ending work in process referred to Job 106 which was charged with direct labor of Php12,000 and Job 107
charged with overhead of Php9,600.

The cost of direct materials charged to Jobs 106 and 107 was
a) Php34,800 b) Php16,800 c) Php43,000 d) Php36,000

15. ABC Corporation has sales of Php100,000, variable expenses of Php70,000, fixed expenses of Php30,000, and
a net loss of Php5,000. How much would ABC have to sell to achieve a profit of 10% of sales?
a) Php180,000 b) Php187,500 c) Php200,000 d) Php150,000

16. If sales price increase by 25% and variable cost per unit decrease by 15%, break even sales in peso will
a. Fall
b. Rise
c. Stay the same
d. Still be indeterminable until and preferred dividends paid are known

Question#17-21:
The company produces and sells a single product and has provided its contribution format income statement for July:
Sales (3,200 units) Php238,080
Variable Expenses 145,920
Contribution Margin 92,160
Fixed Expenses 74,400
Net Operating Income 17,760
*for computation of CM ratio, used two decimal places.
17. Assuming the company sells 4,000 units, its net operating income would be
a) 115,200
b) 92,160
c) 40,800
d) 17,760
18. What is the Degree of Operating leverage? Assuming 3,200 units were sold. (round off in two decimal places)
a) 13.41 times
b) 0.07 times
c) 5.19 times
d) 0.19 times
 e) 4.19 times
19. What is the margin of safety (MOS)? Assuming 3,200 units were sold. (round off in two decimal places)
a) Php40,480.00
b) Php45,881.60
c) Php35,410.43
d) Php59,534.28
20. What is the Break-even point in pesos? Assuming 3,200 units were sold. (round off in two decimal places)
a) 197,600.00
b) 192,198.40
c) 202,669.57
d) 178,545.72
21. What is the Break-even point in units? Assuming 3,200 units were sold. (round off in two decimal places)
a) 2,583.33
b) 2,683.33
c) 3,583.33
d) 3,683.33

Question#22-27:
The company uses a job order costing system and applies factory overhead to production orders on the basis of direct
labor costs. The overhead rates for 2024 are 200% for Dept. A and 50% for Dept. B. Job 123 started and completed
during the year 2024, and was charged with the following costs:
Departments
A B
Direct material used ? ?
Direct Labor ? 30,000
Factory Overhead 40,000 ?
Additional info:
Cost of goods sold was P350,000
Finished Goods, beg. P48,000
Finished Goods, end. P36,000
Work in process, beg. P79,000
Work in process, end. P54,000
22. What is the Total Manufacturing Cost (TMC)?
a. Php387,000
b. Php313,000
c. Php338,000
d. Php343,000
23. How much is the Total Goods Available for Sale (TGAS)?
a. Php460,000
b. Php338,000
c. Php386,000
d. Php411,000
24. How much is the Cost of Goods Manufactured?
a. Php412,000
b. Php338,000
c. Php363,000
d. Php375,000
25. How much is the Direct Materials used for Dept A and B?
a. Php282,000
b. Php208,000
c. Php233,000
d. Php238,000
26. How much is the Prime Costs?
a. Php332,000
 b. Php258,000
c. Php283,000
d. Php288,000
27. How much is the Conversion Costs?
a. Php100,000
b. Php55,000
c. Php50,000
d. Php105,000

28. If sales price increase by 25% and variable cost per unit decrease by 15%, Degree of Operating Leverage (DOL)
will
a. Decrease
b. Increase
c. Stay the same
d. Still be indeterminable until and preferred dividends paid are known

29. Chachaein Inc. sells action figures in Soloist Studios. It has 3 types of products namely: Iron, Tank and Jima. The
amount of sales of Iron is thrice as much as the sale of Tank. On the other hand, Jima’s sales are twice the sales
of Iron. During the current year, revenues had increased by 50% resulting to 250% increase in operating income.
Using the information above, what is the degree of operating leverage?
a. 4
b. 0.25
c. 5
d. 0.20

30. Paru-paru G, Inc. had the following service income results for 2024:
Fly High Butterfly
Peso sales component ratio 0.30 0.30 0.40
Contribution margin ratio 0.40 0.40 0.60
Paru-paro G, Inc. had fixed costs of P2,400,000. The break-even sales in pesos for paru-paro G, Inc. are:

A B C D
Fly 1,428,571 2,000,000 1,500,000 1,531,915
High 1,428,571 2,000,000 1,500,000 1,531,915
Butterfly 2,857,143 3,000,000 2,000,000 2,042,553

31. The Margin of Safety would be negative, if a company(‘s)

a. Present fixed cots were less than its contribution margin
b. Variable costs exceeded its fixed costs
c. Degree of Operating leverage is greater than 100
d. Was presently operating at a volume that is below the break-even point.
32. If a firm’s ne income does not change as its volume chanes, the firm(‘s)
a. Contribution margin is 100%
b. Must have no fixed cost
c. Operating leverage is equal to 1
d. Sales price must equal its variable costs.
33. Which of the following is true regarding fixed costs on a per-unit basis?
a. It increases as output increases
b. It decreases as output decreases
c. It remains the same as output changes
d. It can be misleading and lead to poor decisions

Question#34-36:
The Company has estimated that following cost formulas for overhead:
 Expenses Cost formula
Lubricants Php7,245 plus Php0.60 per machine hour
Utilities Php9,660 plus Php0.72 per machine hour
Depreciation Php4,830
Maintenance Php966 plus Php0.12 per machine hour
Machine Setup Php0.36 per machine hour
34. If the company expects to incur a total of 1,500 machine hours, what would be the expected cost?
a. Php24,435
b. Php25,401
c. Php24,321
d. Php14,661
35. How much is the variable cost?
36. How much is the fixed cost?

Bonus Question:
Write a pick up line about cost accounting.

“BEST OF LUCK”