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Syllabus for Final Term Cost Accounting Spring 2019

1. Definition of cost accounting, difference between financial accounting, cost accounting and
managerial accounting.
2. Definitions of variable cost, fixed cost, mixed cost, sunk cost, opportunity cost, marginal cost,
differential cost, common cost, traceable cost, manufacturing cost, non-manufacturing cost,
controllable cost, uncontrollable cost, period cost, product cost, total cost, prime cost,
conversion cost.
3. Cost summary statements i.e. preparation of cost of goods manufactured and sold statement,
income statement and balance sheet by adjusting to under or applied FOH to 1) COGS or 2)
Entire production of the period ( Entire production includes work in process ending, finished
goods ending and cost of goods sold at normal/applied).
Note: This can be taken from chapter No. 2 of Cost Accounting by Matz Usry and Chapter
No.1 of Cost Accounting by Shahid Hussain Nadeem.
4. Job order costing. Chapter No. 3 Exercise No.1 to exercise No.9 of Matz Usry.
5. Process Costing, Chapter No.4 Exercise questions from Matz Usry.
6. Methods of allocating cost of by-products (Recognition of gross revenue method only) chapter
No.6 of Matz Usry.
7. Material controlling and costing Chapter 7 of Matz Usry and Chapter 4 of shahid Hussain
Nadeem including:
a. Re-order point , re-order level or ordering point with and without safety stock
b. Economic Order Quantity i.e. EOQ with proof table, knowing frequency of orders in a year,
EOQ proof with graph
c. Maximum stock level, minimum stock level, danger level
d. Inventory valuation methods i.e. Last-in-First-out, First-in-First-out, Weighted average
method. Chapter No. 7 of Matz Usry
e. Journal entries of spoiled and defective materials
8. Labor cost, payroll and incentive wage system Chapter No. 6 from Shahid Hussain Nadeem
including:
a. Journal entries of direct and indirect labour
b. Flow of labor cost in accounting cycle
c. Straight rate method of wades
d. Differential wage rate system
e. Bonus schemes ( Halsey Premium and Halsey Wire schemes, Rown Plan).
9. Factory Overhead Cost, estimated FOH, applied FOH, Actual FOH, Under/over applied foh
and its adjustments in either COGS at normal or to entire production Chapter 12 of Matz Usry
and chapter 7 of Shahid Hussain Nadeem.
10. Cost-Volume-Profit (CVP) analysis Chapter 20 of Matz Usry including:
a. Assumptions of CVP
b. Contribution margin
c. Break even points
d. Operating leverage
e. Margin of safety
11. Differential cost analysis Chapter 21 of Matz Usry including:
a. Deciding about additional production
b. Make or buy decision
c. Utilization of scarce resources
d. Continuing or dropping of a product line
e. Sell or process further
12. Decision about addition in plant, machinery etc including
a. Return on Investment (ROA)
b. Residual Income methods
Objective of all above topics, a few are given below:

1. In a business, total sales in a year is 1000 units at a sales price of Rs.10/unit. Variable cost per
unit is Rs. 4 and fixed cost of the year is Rs.1000.
Required: Prepare contribution format income statement.

2. All indirect factory cost is recorded under which head:

(a) Prime cost
(b) Direct labor
(c) FOH cost
(d) Non-manufacturing cost

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3. As a costing team member, calculate the gross profit /loss if; Sales Rs. 6000; cost
of goods sold Rs. 5,000; opening inventory Rs. 1,000; purchases Rs. 4,000; wages
Rs. 2,000, sales office rent Rs. 1,000? There are some other accounts in this
question also.
(a) Loss Rs. 2,500

(b) Loss Rs. 1,500

(c) Profit Rs. 2,500

(d) Profit Rs. 1,000

3. Which of the following is used to determine the cost of goods sold?

(a) Beginning inventory + Purchases

(b) Beginning inventory + Purchases – Sales

(c) Beginning inventory + Net Purchases + Direct expenses – Ending inventory

(d) Ending inventory + Purchases – Beginning inventory

4. Which of the following would not be considered a component of 'cost' of Goods Sold?

(a) Sales force Salaries

(b) Transportation for purchase

(c) Import duties or raw material

(d) Factory electricity expense

5. Consider the following information for costing purpose?

(a) Rs. 10,000

(b) Rs. 15,000

(c) Rs. 5,000

(d) Rs. 25,000

6. Direct expenses are?

(a) Carriage inward

(b) Carriage outward

(c) Carriage outward

(d) Both a & c

7.If the Gross profit is Rs. 5,000 and the net profit is 25% of the Gross profit. The
expenses?
(a) Rs. 3,750
(b) Rs. 1,250
(c) Rs. 4,150

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(d) Rs. 6,250

8. Which of the following product costs is both a prime cost and conversion cost?
(a) Direct labor
(b) Manufacturing overhead
(c) Indirect material
(d) All of the above

9. Which of the following is NOT included under the head of FOH cost?
(a) Indirect Material
(b) Indirect Labor
(c) Indirect Expense
(d) Direct labor

10. A firm had beginning finished goods inventory of Rs. 15,000, ending finished goods
inventory of Rs. 20,000 and cost of goods sold of Rs. 80,000. What was the cost of goods
manufactured?
(a) Rs. 80,000
(b) Rs. 85,000
(c) Rs. 75,000
(d) Rs. 65,000
11. Direct Labor is an element of?
(a) Prime cost
(b) Conversion cost
(c) Total production cost
(d) All of the given options

12. Total Manufacturing costs are also known as product costs. Which of the following
best describes those costs which are considered to be manufacturing costs?
(a) Direct materials, direct labor, and factory overhead
(b) Direct materials and direct labor only
(c) Direct materials, direct labor, factory overhead, and administrative overhead
(d) Direct labor and factory overhead

13. Which of the following cost is used in the calculation of cost per unit?
(a) Total production cost
(b) Cost of goods available for sales
(c) Cost of goods manufactured
(d) Cost of goods Sold
14. Factory overhead includes all manufacturing costs except direct material and direct
labor. Which of the following items would not be considered to be a factory overhead
cost?
(a) Repainting the corporate office building
(b) Indirect labor
(c) Repair and maintenance expenditures on multiple factory machinery
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(d) Small expenditures pertaining to items like rags, screws, etc., used in the production process

15. Which of the following is correct?

(a) Units sold= Opening finished goods units + Units produced – Closing finished goods units
(b) Units Sold = Units produced + Closing finished goods units - Opening finished goods units
(c) Units sold = Sales + Average units of finished goods inventory
(d) Units sold = Sales - Average units of finished goods inventory
16. Which of the following System applies when standardized goods are produced under
a series of inter-connected operations?
(a) Job Order Costing

(b) Process Costing

(c) Standard Costing

(d) All of the given options

17. The cost of material that is not completely processed, would be found in which
of the following inventory account on the Balance Sheet?
(a) Direct material inventory

(b) Work-in-process inventory

(c) Finished goods inventory

(d) Supplies inventory

18. In a process costing system, the journal entry to record the transfer of goods from
Department #2 to Finished Goods Inventory is a?
(a) Debit Work in Process Inventory #2, credit Finished Goods Inventory

(b) Debit Finished Goods Inventory, credit Work in Process Inventory #1

(c) Debit Finished Goods Inventory, credit Work in Process Inventory #2

(d) Debit Cost of Goods Sold, credit Work in Process Inventory #2

19. The first step in preparing the production cost report is to?
(a) Account for the number of physical units

(b) calculate the cost per equivalent unit

(c) Assign costs to the items completed and items in ending Work in Process inventory

(d) Account for the amount of product cost

20. A Company had no beginning work in process. During the period, 5,000 units were
completed, and there were 500 units of ending work in process. How many units were
started in production?
(a) 5,500
(b) 5,000
(c) 4,500
(d) 500
21. Which cost accumulation procedure is best suited to a continuous mass production
process of similar units?
(a) Job order costing
(b) Standard costing
(c) Actual costing
(d) Process costing
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22. Which of the following accounts is similar to the Inventory account of a

merchandising company?
(a) Raw Materials Inventory
(b) Work in Process Inventory
(c) Finished Goods Inventory
(d) Manufacturing Overhead
23. Finished Goods Inventory decreases by the?
(a) Cost of goods manufactured
(b) Overhead applied
(c) Cost of selling the product
(d) Cost of goods sold

24. A process costing system is used by a company that?

(a) Produces heterogeneous products
(b) Produces items by special request of customers
(c) Produces homogeneous products
(d) Accumulates costs by job
25. Which of the following is a characteristic of process cost accounting system?
(a) Material, Labor and Overheads are accumulated by orders
(b) Companies use this system if they process custom orders
(c) Only Closing stock of work in process is restated in terms of completed units
(d) Opening and Closing stock of work in process are related in terms of completed units
26. A cost incurred in one processing department that is transferred to the next
processing department is called a?
(a) Transferred-in cost
(b) Split cost
(c) Carry-over cost
(d) Conversion cost
27. If the beginning balance in the Raw Materials Inventory account for the month was
Rs. 25,000, the ending balance of Rs. 22,000 and material used during the month was Rs.
130,000, what is the amount of materials purchased during the month?
(a) Rs. 177,000
(b) Rs. 130,000
(c) Rs. 127,000
(d) Rs. 133,000
28. Which of the following companies is most likely to use a process costing system?
(a) A law office
(b) A custom home builder
(c) A car repair business
(d) A food manufacturer
29. If the beginning balance in Raw Materials Inventory is Rs. 5,000, the ending balance
is Rs. 3,500, and Rs. 60,000 was purchased, what is the amount of materials transferred
to Work in Process Inventory during the period?
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(a) Rs. 58,500

(b) Rs. 60,000
(c) Rs. 61,500
(d) Rs. 68,500
30. The Blending Department began the period with 20,000 units. During the period the
department received another 80,000 units from the prior department and at the end of
the period 30,000 units remained which were 40% complete. How much are equivalent
units in The Blending Department’s work in process inventory at the end of the period?
(a) 12,000
(b) 28,000
(c) 40,000
(d) 52,000
31. In a process costing system, when items are sold, th e cost of the items is moved from?
(a) Work in Process to Finished Goods
(b) Work in Process to Cost of Goods Sold
(c) Cost of Goods Sold to Finished Goods
(d) Finished Goods to Cost of Goods Sold
32.When partially completed units are converted to a compar able number of completed
units, they are referred to as?
(a) Converted units
(b) Split-off units
(c) Equivalent units
(d) Equitable units

33. Which of the following accounts does not appear on the Balance Sheet?
(a) Cost of Goods Sold
(b) Raw Materials
(c) Work in Process
(d) Finished Goods
34. The three components of product cost include?
(a) Direct material, indirect material, and labor
(b) Material, direct labor, and indirect labor
(c) Direct material, direct labor, and overhead
(d) Indirect material, indirect labor, and overhead
35. Which of the following is not classified as a fixed product cost?
(a) Machine depreciation
(b) Electricity
(c) Factory rent
(d) Production manager’s salary

36. When direct materials are used, which of the following accounts increases?
(a) Raw Materials Inventory
(b) Work in Process Inventory
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(c) Finished Goods Inventory

(d) Manufacturing Overhead
37. Finished Goods Inventory includes which of the following costs?
(a) Direct material
(b) Direct labor
(c) Overhead
(d) All of the above
38. When a product is sold to a customer, which of the following inventory accounts is
increased or decreased?
(a) Work in Process is decreased and Finished Goods is increased
(b) Finished Goods is increased and Cost of Goods Sold is decreased
(c) Finished Goods is decreased and Cost of Goods Sold is increased
(d) Raw Materials is decreased and Cost of Goods Sold is increased

39. Which of the following would be classified as direct material for a furniture
manufacturer?
(a) Wood
(b) Glue
(c) Screws
(d) Wood cleaner
40. Which of the following is not classified as a factory overhead cost?
(a) Electricity to run factory machines
(b) Insurance to protect the factory contents
(c) Security guards that protect the factory building
(d) Advertising cost to promote the finished goods
4. The process of assigning share of indirect costs to cost centers is called?
(a) Apportionment
(b) Variable costing
(c) Cost allocation
(d) Joint costing

42. Which of the following items would not be classified as direct material for an
automobile manufacturer?
(a) Steel
(b) Paint
(c) Tires
(d) screws

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