Handout 1

Question 1

It refers to the method and process of ascertaining the costs. It also involves classifying, recording, and
allocating the expenditure of an organization to determine the costs of products or services.

Answer 1

Costing

Question 2

It refers to the costs incurred in the factory for converting raw materials
into finished goods.

Answer 2

Manufacturing costs

Question 3

It refers to the unincurred costs in transforming materials to finished
goods.

Answer 3

Nonmanufacturing costs

Question 4

It refers to the costs that can be traced directly to a particular object of costing such
as a particular product, department, or branch.

Answer 4

Direct costs

Question 5

It refers to the costs that cannot be traced to a particular object of costing.

Answer 5

Indirect costs

Also called common cost or joint cost.

Question 6

It refers to the costs that form part of inventory and are charged against revenue.
They are also called inventoriable costs

Answer 6

Product costs

Question 7

It refers to the costs that are not inventoriable and are immediately charged against
revenue.

Answer 7

Period costs

Question 8

It refers to the ongoing business expenses not including or related to direct labor
or direct materials

Answer 8

Overhead cost

Question 9

It refers to the predetermined cost based on some reasonable basis such as past
experiences, budgeted amounts, and industry standards.

Answer 9

Standard cost

Question 10

It refers to the benefit forgone or given up when an alternative is chosen over
the other/s.

Answer 10

Opportunity cost

Question 11

It refers to the historical costs that will not make any difference in making a decision.

Answer 11

Sunk costs

Question 12

It refers to the costs resulting from an organization’s structure or the use of its
facilities.

Answer 12

Committed costs

Question 13

It refers to the costs resulting from a management decision to spend a
particular amount of money for a specific purpose.

Answer 13

Discretionary costs

Question 14

It refers to the costs that can be influenced or controlled by a supervisor or
manager for a given period of time.

Answer 14

Controllable costs

Question 15

It refers to the expenditure which results in the acquisition of an asset.

Answer 15

Capital expenditure

Question 16

It refers to the expenditure which occurs for the maintenance of assets in working condition and not intended for increasing the revenue-earning capacity.

Answer 16

Revenue expenditure

Question 17

These are constant costs which do not change with an increase or decrease in the
number of goods or services produced and sold.

Answer 17

Fixed costs

Question 18

Fixed Cost Formula

Answer 18

FC = Total Fixed Cost/Production

Question 19

These are costs that vary in total, in direct proportion to changes in the volume of
production.

Answer 19

Variable costs

Question 20

Variable Cost Formula

Answer 20

TVC= Production in units x variable cost per unit

Question 21

This shows the available raw materials to use in the manufacturing
process.

Answer 21

Raw Materials Inventory

Question 22

This represents the costs of partially completed goods on which
production activities have been started but not yet completed as of a certain period.

Answer 22

Work-in-Process Inventory

Question 23

This summarizes the costs of completed job stored in the warehouse
for delivery to the customers.

Answer 23

Finished Goods Inventory

Question 24

This system requires the need to maintain stock cards or records of
the status of the goods held in the inventory for each type of raw materials.

Answer 24

Perpetual Inventory System

Question 25

This system does not require a stock card for the raw materials,
however, a physical count of raw materials must be facilitated periodically to determine the units
on hand.

Answer 25

Periodic Inventory System

Question 26

This method requires that all production overhead is available prior any cost
allocation to the jobs in process.

Answer 26

Actual Costing System

Question 27

This method requires that all production overhead is available prior any cost
allocation to the jobs in process.

Answer 27

Actual Costing System

Question 28

This method requires the costs of direct materials and direct labor to be
charged to the job.

Answer 28

Normal Costing System

Question 29

Actual Cost Formula

Answer 29

Actual Cost = Actual Direct Cost + Actual Overhead Cost

Question 30

Normal Costing Formula

Answer 30

Normal Cost = Predetermined Overhead Rate x Actual Direct Labor Hours Utilized

Question 31

Predetermined Overhead Formula

Answer 31

POR = Fixed Cost + (Budgeted DLH x Variable DLH)/ Budgeted DLH