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I. Cost Accounting

16. It is a costing system that values manufactured products with the actual material costs, actual direct
labor costs and manufacturing overhead based on a predetermined manufacturing overhead rate.
a. Actual costing system
b. Normal costing system
c. Standard costing system
d. Budgeted costing system

17. If the under or over applied factory overhead is significant, it shall be closed to
a. Cost of goods sold only
b. Finished goods and cost of goods sold proportionately
c. Work in process, finished goods and cost of goods proportionately
d. Raw materials, work in process, finished goods, and cost of goods sold proportionately

18. Which of the following will increase the cost of goods manufactured for the period?
a. Decrease in finished goods inventory for the period
b. Decrease in work in process for the period
c. Increase in direct materials for the period
d. Decrease in salaries payable for the period

19. In job order costing, normal spoilage which is a characteristic of a given production cycle shall be
a. Expensed as incurred
b. Charged or capitalized to a specific job.
c. Closed to factory overhead account.
d. Debited to work in process account.

20. In job order costing, normal rework cost which is attributable to a specific job shall be
a. Expensed as incurred
b. Charged or capitalized to that particular job.
c. Closed to factory overhead account.
d. Debited to work in process account.

21. What is the only reason for the difference between the equivalent unit of production computed under
average process costing and FIFO process costing?
a. Completed portion in beginning work in process inventory
b. Incomplete portion in beginning work in process inventory
c. Completed portion in ending work in process inventory
d. Incomplete portion in ending work in process inventory

22. When will the average process costing method produce the same cost of goods manufactured as the first
in first out process costing method?
a. When materials are added 100% at the end of the process.
b. When materials are added 100% at the beginning of the process.
c. When the beginning work in process inventory and ending work in process inventory are equal.
d. When there is no beginning work in process inventory.

23. Under which process costing method will the cost of the work in process inventory beginning be ignored
in the computation of cost per unit?
a. FIFO process costing
b. Average process costing
c. Both A and B
d. Neither A nor B

24. In a manufacturing company, which of the following product costs shall be considered as prime cost and
conversion cost at the same time?
a. Salary of the factory security guard
b. Freight in of the direct materials
c. Depreciation expense of sewing machine
d. Employee benefits of factory worker

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25. In a manufacturing company, which of the following product costs shall be considered as prime cost but
not conversion cost?
a. Insurance while in transit of the direct materials
b. Utility cost of the factory
c. Salary of the factory workers
d. Creditable value added tax

26. In a manufacturing company, which of the following product costs shall be considered as
conversion cost but not prime cost?
a. Irrecoverable import duties of direct materials
b. Employee benefits of factory worker
c. Foreign exchange difference on inventory loan
d. Amortization cost of the patent covering a machinery used for production

27. In a manufacturing company, which of the following shall be considered as period cost?
a. Employee benefits of factory security guard
b. Freight out, warranty cost and sales commission
c. Costs of normal waste
d. Storage costs of work in process inventory

28. It is an inventory strategy a company employs to increase efficiency and decrease waste by receiving
and producing goods as they are needed in the production process, thereby reducing inventory costs.
a. Just In Time Inventory System
b. Min-max inventory system
c. Pareto/80-20 inventory rule
d. ABC inventory system

29. It is a product costing system generally used in just-in-time inventory environment. This costing system
delays the costing process until the production of goods is completed by eliminating the detailed
tracking of cost throughout the production system and preparing journal entries only at trigger points.
a. Backflush costing
b. Standard costing
c. Normal costing
d. Traditional costing

30. Which costing system is ideal for backflush costing and just in time inventory system?
a. Actual costing system
b. Normal costing system
c. Standard costing system
d. Budgeted costing system

31. This method of service department costs allocation is also called sequential method that allocates the
costs of some service departments to other service departments, but once a service department’s costs
have been allocated, no subsequent costs are allocated back to it.
a. Direct method
b. Reciprocal method
c. Step-down method
d. Bottom-top method

32. If the net realizable value of the by-product of a joint production process is significant, how shall it be
accounted for?
a. The net realizable value of the by-product shall be recorded as deduction from the total joint
manufacturing cost thereby reducing the cost of the main products also known as replacement
cost method.
b. The net realizable value of the by-product shall be recorded as deduction from the net sales of
the main product.
c. The net realizable value of the by-product shall be recorded as deduction from the cost of sales
of the main product.
d. The net realizable value of the by-product shall be recorded as other income.

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33. Under Standard Costing System, direct material price variance shall be appropriately computed using
a. Actual direct materials used
b. Actual direct materials purchased
c. Actual direct materials wasted
d. Actual direct materials converted to work in process

34. Under Standard Costing System, if the journal entry to record usage of direct materials include a credit
to direct material usage variance, it means that
a. Actual price of direct material is higher than the standard price
b. Actual price of direct material is lower than the standard price
c. Actual direct materials used is higher than the standard quantity of direct materials
d. Actual direct materials used is lower than the standard quantity of direct materials

35. Under Standard Costing System, if the actual direct labor hours is more than the standard direct labor
hours, the journal entry to record the incurring of direct labor cost will result to
a. Debit to labor efficiency variance
b. Credit to labor rate variance
c. Credit to labor efficiency variance
d. Debit to labor rate variance

36. Under Standard Costing System, when cost of direct material or cost of direct labor will be
journalized, the work in process account will be debited at
a. Actual cost
b. Standard cost
c. Future cost
d. Historical cost

37. Which of the following factory overhead variances is pure variable?

a. Spending variance
b. Controllable variance
c. Efficiency variance
d. Volume variance

38. Which of the following factory overhead variances is pure fixed?

a. Spending variance
b. Controllable variance
c. Efficiency variance
d. Volume variance

39. Under IAS 18, what is the proper measurement of revenue at the date of its recognition?
a. Fair value of the consideration received or receivable.
b. Book value of the consideration received or receivable.
c. Historical cost of the consideration received or receivable.
d. Amortized or depreciated cost of the consideration received or receivable.

40. Which of the following will increase the cost of goods sold of a manufacturing concern during the
year?
a. Adjusting entry for insignificant over-application of factory overhead.
b. Decrease in the salary of the factory workers during the year.
c. Increase in the work in process inventory during the year.
d. Decrease in the finished goods inventory during the year.

41. The journal entry to record the usage and purchase of direct materials during the year includes a debit
to direct material efficiency variance. Which of the following statements is correct?
a. The actual direct material used in production is higher than the standard direct material that
should have been used.
b. The actual direct material used in production is lower than the standard direct materials that
should have been used.
c. The actual purchase price of direct material is higher than the standard price of direct material.
d. The actual purchase price of direct material is lower than the standard price of direct material.

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