Accounting
End Chapter Test
. Non-manufacturing costs that include the costs of top administrative functions and various
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0
staff departments.
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. The sum of direct labor and manufacturing overhead costs.
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. A financial measure of the resources used or given up to achieve a stated purpose.
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. Partially manufactured products.
6
. Includes the costs of all resource put into production.
5
. Labor costs of all employees actually working on materials to convert them into finished
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goods.
3
. Costs that directly vary in total amount with changes in the volume of production activity or
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output.
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. Completed manufactured products ready to be sold.
. Costs that remain constant in total amount over wide variations in the level of manufacturing
activity.
. The services of factory employees that cannot or will not, for practical reasons, be traced to
the products being manufactured.
. Materials used in the manufacture of a product that cannot or will not, for practical reasons,
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be traced directly to the products being manufactured.
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5
. The cost incurred to produce or create a product. It includes direct materials, direct labor,
and manufacturing overhead costs.
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4
. All manufacturing costs except for those costs accounted for as direct materials and direct
labor.
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3
. Expresses manufacturing overhead costs in relation to some measure of manufacturing
activity.
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2
. Unprocessed items that will be used in the manufacturing process.
. Costs related more closely to periods of time than to products produced.
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1
Problem 1
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Presented below is a list of costs and expenses usually incurred by Ram Corporation, a
manufacturer of furniture, in its factory.
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8
. Metal used in manufacturing tables
. Insurance on factory machines
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. Leather used in manufacturing furniture
. Wages paid to machine operators
6
. Depreciation of factory machinery
5
. Salaries of factory supervisors
4
. Wood used in manufacturing furniture
3
. Sandpaper, bolts and nails
2
. Property taxes on factory building
. Rent of factory building
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Instructions
Classify the above items into the following categories
(a) direct materials
(b) direct labor
(c) manufacturing overhead.
Problem 2
Classify the following as to fixed, variable or mixed
. Factory rent
. Wages for workers paid based on units produced
. Equipment maintenance . Cast accountant's salary
. Depreciation based on output
. Salary of factory supervisor
. Telephone (monthly)
. Paper in the manufacture of books
. Wages of machine operators
. Commission of salesmen
Problem 3
Classify the following as either manufacturing (M), selling (S), or administrative (A)
. Metal for the manufacture of golf clubs
. Wages of drivers of delivery trucks
. Rent on factory building
. Freight-in of materials purchased
. President's salary
Problem 4
Classify each
oF the following costs of Bug Company in two ways: (a) as variable
(V) fixed costs (F): (b) as inventoriable costs (I) or period costs (P):
(a) Vor F (b) Lor P
Example: Direet labor
1. Wood used in
bookcases
2. Machine depreciation
based on mach. Hrs.
based on mach. Hrs.
3. Fire insurance on
factory equipment
4. Wiring used in radios
5. Indirect materials
6. Sales commissions
7. Bottles used to
package liquid
8. Gasoline for a
delivery truck
9. Straight-line
depreciation of trucks
used
for delivery of sales to
customers
10. Machine operator's
hourly wages
Problem 5
Sportsman, Ine. produces different sizes of basketballs. The following costs were incurred during
the year for PBA-sized basketball production.
Materials
P81,250 (23% is indirect)
Labor
87,500 (27% is indirect)
Actual Factory overhead
70,000 (including indirect materials and indirect labor)
Selling expenses
3,250
General and Administrative expenses
23,250
Sportsman applies overhead to production at 100% of direct labor cost. There were no work in
process at the end of the year and there were no finished goods inventory at the beginning. 5,000
units were produced, and 90% of the units produced were sold.
Required:
. Compute the prime costs
. Compute the conversion costs
. Compute the total product costs
. Compute the total period costs
. Calculate the overhead variance and explain why it is favorable or unfavorable
Problem 6
The financial statements of Silvina Company included these items:
Marketing costs 160,000
Direct labor cost 245,000
Administrative costs 145,000
Direct materials used 285,000
Fixed factory overhead costs 175,000
Variable factory overhead costs 155,000
Compute for the following
. Prime cost
. Conversion cost
. Total inventoriable/product cost
. Total period cost
Problem 7
Given below are financial information for Saint Martin Company
Sales price
P 200 per unit
Fixed costs:
Marketing and administrative
24.000 per period
Manufacturing overhead
30,000 per period
Variable costs:
Marketing and administrative
6 per unit
Manufacturing overhead
9 per unit
Direct labor
30 per unit
Direct materials
60 per unit
Units produced and sold
1,200 per period
Required:
Compute for the following
. Variable manufacturing cost per unit
. Variable cost per unit
. Full manufacturing cost per unit
. Full cost to make and sell per unit
Chapter 2 Costs - Concepts and Classifications
TRUE-FALSE QUESTIONS
Indicate whether the following statements are true or false by inserting in the blank space provided
a capital T" for true or "F" for false.
. The materials,labor, and overhead costs incurred to produce a product are called period
costs.
. Marketing, Selling, and Administrative Costs are the three broad classifications of costs
incurred by a manufacturing company.
. Lumber can be both a finished product and a material.
. Product cost consists of the sum of prime cost and conversion cost.
. Total fixed costs decrease with increase in the number of units produced
. Period costs are found in both merchandising and manufacturing firms.
. The three cost elements of a manufactured good are direct materials, direct labor, and
marketing costs.
. A cost that is present under one alternative but absent in whole or part
under another alternative is known as a differential cost.
. Like product costs, period costs are not necessarily treated as expenses in the period in
which they are incurred.
. Variable costs are costs that change, in total, in direct proportion to changes in the level of
activity.
. The salary paid to the manager in charge of a warehouse is probably a variable cost.
. Indirect materials/factory supplies are classified as administrative expense.
. The salary paid to a factory foreman is classified as factory overhead.
. In a manufacturing setting, prime costs are fixed.
. Fixed cost remains constant if expressed on a unit basis.
. Differential costs can be either fixed or variable
. A fixed cost is constant per unit of product.
. A decrease in production will ordinarily result in an increase in fixed production cost per
unit.
. A factory supervisor's salary would be classified as a direct cost of a unit of product.
. Factory rent is included in manufacturing overhead, but office rent is a period cost.
. Product costs are also known as manufacturing costs.
. Prime costs are always variable
. Cost accounting is not needed by a merchandising entity
. The statement of financial position of a service business is the same as that of a
manufacturing business
. Selling and administrative expenses are sometimes called non-manufacturing costs
