Instruction: Answer the following questions. Strictly NO ERASURES are allowed.

MULTIPLE CHOICE. Encircle the letter of your choice. Show your solutions.

1. Which of the following is not an objective of managerial accounting?

A. To prepare external reports for investors, creditors, government agencies, and other
outside users.
B. To provide information for costing of services, products, and other objects of interest to
management.
C. To provide information for decision making.
D. To provide information for planning, controlling, evaluating and continuous improvement.

2. Which of the following statements is true?

A. All unexpired costs represent assets.
B. All assets represent unexpired costs.
C. All expired costs represent expenses.
D. d. a and b.
E. a and c.

3. In traditional cost systems, selling and administrative costs are treated as

A. product costs.
B. inventoriable costs.
C. unexpired costs.
D. period costs.
E. None of these

4. Which of the following is an example of the management activity referred to as planning?

A. Developing a strategy for disposing of hazardous waste.
B. The decision to eliminate an unprofitable segment of an organization.
C. The decision to outsource an organization's payroll processing.
D. All of these are correct

5. The standards of ethical conduct for managerial accountants include

A. competence, confidentiality, integrity, and credibility.
B. competence and performance.
C. confidentiality, confidence, integrity, and observance.
D. integrity and respect for others.

6. Which of the following would normally occupy a staff position?

A. cost accounting manager
B. assembly worker
C. factory manager
D. all of these

7. Selected data concerning the past year's operations of the Burner Corporation are as
follows:

Selling and administrative expenses P225,000

Direct materials used 397,500
Direct labor 450,000
Inventories
Dec. 1, 2011 Dec. 31, 2011
Direct materials P36,000 P42,000
Work in process 75,000 84,000
Finished goods 69,000 57,000

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 The cost of direct materials purchased is:
A. P397,500.
B. P403,500.
C. P367,500.
D. P405,000.

8. The term discretionary costs refers to those:

A. Costs which management decides to incur in the current period to enable the
company to achieve objectives other than the filling of orders placed by
customers.
B. Costs which are likely to respond to the amount of attention devoted to them by a
specified manager.
C. Costs which are governed mainly by past decisions that established the present levels
of operating and organizational capacity and which only change slowly in response to
small changes in capacity.
D. Amortization of costs which were capitalized in previous periods.

9. Which three of the following answers are recognized as objectives of financial

accounting?
A. To provide timely and accurate information to facilitate budgetary control over
revenues and costs
B. To measure the likely risks and returns associated with an enterprise
C. To provide quantitative information, primarily financial in nature, about
economic entities that is intended to be useful in making economic decisions and
in making resolved choice among alternative courses of action
D. To support informed judgments and decisions by users
E. To provide information about the reporting entity's financial performance and
financial position that is useful to present and potential investors for assessing
the stewardship of the entity's management and for making economic decisions

10. Investigating production variances and adjusting the production process is an example of
A. planning.
B. controlling.
C. decision making.
D. all of these.

11. The main purpose of management accounting and reporting is to:

A. Plan the activities of an enterprise in the future
B. Determine costs of production processes
C. Provide information for internal decision making
D. Set budgets against which actual costs can be compared
E. None of the above is correct

12. Information from the records of Place, Inc., for December 2011 is as follows:

Sales P820,000
Selling and administrative expenses 140,000
Direct materials purchases 176,000
Direct labor 200,000
Factory overhead 270,000
Direct materials, December 1 24,000
Work in process, December 1 50,000
Finished goods, December 1 46,000
Direct materials, December 31 28,000
Work in process, December 31 56,000
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 Finished goods, December 31 38,000

Net income for the month of December is:

A. P644,000.
B. P36,000.
C. P636,000.
D. P180,000.

13. Which of these statements is false?

A. The matching concept requires that we distinguish between expired and unexpired
costs.
B. To say that a cost has expired means that the benefits associated with the expenditure
have been obtained.
C. Matching is required for both internal and external reporting.
D. Unexpired costs represent future benefits.
E. Expired costs represent expenses.

14. Developing a company strategy for responding to anticipated new markets is an example
of
A. planning.
B. controlling.
C. decision making.
D. all of these are correct.

15. A fixed cost that would be considered a direct cost is:

A. Salary of the sales manager when the cost object is the sale department.
B. Salary of the controller when the cost object is a unit of product.
C. Fees of the Board of Directors when the cost object is the Production Department.
D. The rental cost of the finished goods warehouse when the cost object is the
Accounting Department.

16. Regression analysis is better than the high low method of cost estimation because
regression analysis:
A. Is more mathematical.
B. Fits its data into a mathematical equation.
C. Uses all the data points, not just two.
D. Takes more time to do.

17. If the coefficient of correlation between two variables is -0.95, how might a scatter
diagram of these variables appear?
A. A least squares line that slopes up to the right.
B. A least squares line that slopes down to the right.
C. Random points.
D. A least squares line that slopes down to the left.

18. Using equation method, Break-even point is calculated as

A. Sales = Variable expenses + Fixed expenses + Profit
B. Sales = Variable expenses + Fixed expenses Profit
C. Sales = Variable expenses - Fixed expenses + Profit
D. None of the above

19. Lonborg Co. had the following beginning and ending inventory balances for the year
ended December 31, 2011:

January 1, 2011 December 31, 2011

Materials P10,000 P 8,000
Work in Process P18,000 P17,000
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 Finished Goods P21,000 P16,500

In addition, direct labor costs of P30,000 were incurred, overhead equaled P42,000,
materials purchased were P27,000 and selling and administrative costs were P22,000.
Lonborg Co. sold 25,000 units of product during the year at a sales price of P5.00 per
unit.

What was Lonborg's operating income <loss> for the year?

A. P18,500
B. P125,000
C. P(3,500)
D. P5,500

20. The variable portion of the semi-variable cost of electricity for a manufacturing plant
is a:
Product cost Prime cost Conversion cost
A. No No Yes
B. Yes Yes No
C. Yes Yes Yes
D. Yes No Yes

21. Coed Novelties manufactures key chains for college bookstores. During 2003, the
company had the following costs:
Direct materials used P 31,000
Direct labor 18,000
Factory rent 12,000
Equipment deprecation factory 2,000
Equipment depreciation office 750
Marketing expense 2,500
Administrative expenses 40,000
35,000 units produced were in 2003.

What is the product cost per unit?

A. approximately P1.24
B. P1.80
C. approximately P3.04
D. P1.40
E. approximately P1.82

Shorter Company had originally expected to earn operating income of P130,000 in the coming
year. Shorter's degree of operating leverage is 2.4. Recently, Shorter revised its plans and now
expects to increase sales by 20% next year.

22. What is the percent change in operating income expected by Shorter in the coming year?
A. 8.33%
B. 48.0%
C. 20.0%
D. 54.17%
E. 30.0%

23. What is Shorter's revised expected operating income for the coming year?
A. P192,400
B. P156,000
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 C. P312,000
D. P130,000
E. P62,400

24. All of the following statements regarding budgeting is true except

A. Budgeting helps managers determine the resources needed to meet their goals and
objectives.
B. Budgeting is a key ingredient in good decision-making.
C. Budgeting is a bookkeeping task
D. The focus of budgeting is planning.
E. Budgeting is an executive responsibility.

25. Broihan Corporation has the following purchases budget for the last half of 2002:

July P100,000 October P 90,000

August 80,000 November 100,000
September 110,000 December 94,000

Historically, the company pays one half at the time of purchase and the remainder in the
month following purchase.

What are the expected cash disbursements in August?

A. P 80,000.
B. P 90,000.
C. P 95,000.
D. P100,000
E. P105,000

26. Which of the following statements regarding graphs of fixed and variable costs is true?
A. Variable costs can be represented by a straight line where costs are the same for each
data point.
B. Fixed costs can be represented by a straight line starting at the origin and continuing
through each data point.
C. Fixed costs are zero when production is equal to zero.
D. Variable costs are zero when production is equal to zero.
E. Fixed and Variable costs are curvilinear form above zero on the Y axis.

27. The contribution margin ratio always increases when the

A. variable costs as a percentage of net sales increase.
B. variable costs as a percentage of net sales decrease.
C. break-even point increases.
D. break-even point decreases.

28. You are given the cost and volume information below:
Volume Cost
1 unit P 15
10 units 150
100 units 1500

What type of a cost is given?

A. fixed cost
B. variable cost
C. step cost
D. mixed cost
E. rent cost.

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29. Ledbetter Company reported the following results from sales of 5,000 units of Product A
for June:

Sales P200,000
Variable costs (120,000)
Fixed costs (60,000)
Operating income P 20,000

Assume that Ledbetter increases the selling price of Product A by 10 percent in July.
How many units of Product A would have to be sold in July to generate an operating
income of P20,000?
A. 4,000
B. 4,300
C. 4,545
D. 5,000

30. Consider the equation X = Sales - [(CM/Sales) (Sales)]. What is X?

A. net income
B. fixed costs
C. contribution margin
D. variable costs

31. In a multiple-product firm, the product that has the highest contribution margin ratio will
A. generate more profit for each P1 of sales than the other products.
B. have the highest contribution margin ratio.
C. generate the most profit for each unit sold.
D. have the lowest variable costs per unit.

32. A firm estimates that it will sell 100,000 units of its sole product in the coming period. It
projects the sales price at P40 per unit, the CM ratio at 60 percent, and profit at P500,000.
What is the firm budgeting for fixed costs in the coming period?
A. P1,600,000
B. P2,400,000
C. P1,100,000
D. P1,900,000

33. 10% is the profit margin when sales level last year reached P 100,000. If the operating
leverage last year was 4 times, then what would have been the variable costs last year to
break-even?
ANSWER: P 45,000

34. The data for an industrial unit is as follow:

Fixed costs of assets = P 20,000
Sales price per unit = P 8
Variable cost= P 60,000
Contribution for 6000 units = P 12,000
The sales volume for breakeven is
A. 8,000
B. 10,000
C. 12,000
D. 14,000

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35. Edwards Company has the following expected pattern of collections on credit sales: 70
percent collected in the month of sale, 15 percent in the month after the month of sale,
and 14 percent in the second month after the month of sale. The remaining 1 percent is
never collected.

At the end of May, Edwards Company has the following accounts receivable balances:

From April sales P21,000

From May sales 48,000

Edwards expected sales for June are P150,000. How much cash will Edwards Company
expect to collect in June?
A. P127,400
B. P129,000
C. P148,600
D. P152,520

36. On budgeting, all of the following are not valid, except

A. Responsibility budget identifies revenue and costs with the individual responsible
for their incurrence.
B. The best way to establish budget figures is to use last years actual cost and activity
data as this years budget estimates.
C. A sales budget and a sales forecast are the same thing.
D. The primary purpose of the cash budget is to show the expected cash balance at the end
of the budget period.

37. Budgeted sales for Knox Inc. for the first quarter the year are shown below:

JANUARY FEBRUARY MARCH

UNITS: 35,000 25,000 32,000

The company has a policy that requires the ending inventory in each period to be 10
percent of the following period's sales. Assuming that the company follows this policy,
what quantity of production should be scheduled for February?
A. 24,300 units
B. 24,700 units
C. 25,000 units
D. 25,700 units

38. Budgeted sales for the first six months for Porter Corp. are listed below:

JANUARY FEBRUARY MARCH APRIL MAY JUNE

UNITS: 6,000 7,000 8,000 7,000 5,000 4,000

Porter Corp. has a policy of maintaining an inventory of finished goods equal to 40

percent of the next month's budgeted sales. If Porter Corp. plans to produce 6,000 units in
June, what are budgeted sales for July?
A. 1,000 units
B. 3,600 units
C. 8,000 units
D. 9,000 units

39. In budgeting, which of the following statements is false?

A. Budgeting provides a measuring device to which subsequent performances are
compared and evaluated.
B. Planning and control are the essential features of the budgeting process
C. Budget preparation is not the sole responsibility of any one department and is
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 prepared by combining the efforts of many individuals
D. Capital expenditures budget shows the availability of idle cash for investment

40. Which of the following is not an assumption used to prepare a cost-volume-profit graph?
A. linear costs within the relevant range
B. units produced equals units sold
C. constant sales mix
D. constant cost fluctuation
E. All of these are assumptions used in preparing cost-volume-profit graphs.

41. For better management acceptance, the flow of data to be used for budgeting should
begin with
A. Accounting department
B. Lower levels of management
C. Top management
D. Budget committee

42. Which one of the following is not considered to be a benefit of participative budgeting?
A. individuals at all organizational levels are recognized as being part of the team, this
results in greater support of the organization
B. the budget estimates are prepared by those in direct contact with various activities
C. managers are more motivated to reach the budget goals because they participated in
setting them
D. when managers set the final targets for the budget, top management need not
be concerned with the overall profitability of current operations

Questions 43 thru 50 are based on the following information.

The following information has been gathered by the Budget Director of the Kareton Company,
another outfit managed by the Masugid Company. The firm manufactures and sells only one
product. The selling price during the coming month is expected to be the prevailing price of P5
per unit. Expected sales during the month is a total of 75,000 units of finished goods. Finished
goods expected to be on hand at the end of the month total 50,000 units. Finished goods expected
to be on hand at the beginning of he month total 42,000 units.

Direct labor cost is P3.00 per hour. One-fourth an hour of direct labor is required to manufacture
each unit of finished product.

Factory overhead is applied to work-in-process on the basis of direct labor hours. Variable factory
expenses at the planned level of operations is expected to amount to P33,200; fixed overhead is
expected to amount to P99,600.

The raw materials expected to be on hand at the beginning of the month total 5,000 gallons. Only
one kind of raw material is used to produce the finished goods. One and one-half gallons of raw
material are needed to manufacture each unit of finished product. Raw materials are expected to
cost P0.18 per gallon during the coming month, its prevailing cost. Raw materials expected to be
on hand at the end of the month total 8,000 gallons.

Variable administrative and selling expenses is P1.00 per unit.

In assisting the company to formulate the budget, you determined the following budget parameters.

43. Budgeted cost of raw materials to be used in production is

A. P124,500
B. P14,940
C. P8,910
D. P22,410

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44. Budgeted raw materials purchases cost is
A. P22,950
B. P22,410
C. P23,760
D. P124,500

45. Budgeted direct labor is

A. P20,750
B. P83,000
C. P62,250
D. P33,200

46. Variable overhead cost per direct labor hour is

A. P1.60
B. P4.80
C. P1.80
D. P6.40

47. Fixed overhead cost per direct labor hour is

A. P1.60
B. P4.80
C. P1.80
D. P6.40

48. Budgeted contribution margin is

A. P5.00
B. P1.80
C. P3.40
D. P2.58

49. Budgeted cost of goods sold (full cost) is

A. P76,500
B. P96,500
C. P196,500
D. P304,000

50. Net profit before tax is

A. P178,500
B. P103,500
C. P53,000
D. P249,500

51. Tyler Company currently sells 1,000 units of product M for P1 each. Variable costs are
P0.40 and avoidable fixed costs are P400. A discount store has offered P0.80 per unit for
400 units of product M. The managers believe that if they accept the special order, they
will lose some sales at the regular price. Determine the number of units they could lose
before the order become unprofitable.
A. 267 units.
B. 500 units.
C. 600 units.
D. 750 units

52. The budget that describes the long-term position, goals, and objectives of an entity
within its environment is the
A. capital budget
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 B. cash management budget
C. operating budget
D. strategic budget

53. A profit-volume graph differs from a cost-volume-profits graph in that a profit-volume

graph displays only
A. costs associated with units produced.
B. operating income associated with expected sales.
C. revenues and costs associated with sales volume.
D. revenues expected at targeted sales levels.
E. All of these are correct.

54. The following data pertain to the three products produced by Alberts Corporation:

A B C
Selling price per unit P5.00 P7.00 P6.00
Variable costs per unit 4.00 5.00 3.00
Contribution margin per P1.00 P2.00 P3.00
unit

Fixed costs are P90,000 per month.

60% of all units sold are Product A, 30% are Product B, and 10% are Product C.

55. What is the monthly break-even point for total units?

A. 45,000 units
B. 36,000 units
C. 60,000 units
D. 180,000 units

56. Which of the following are assumptions for break-even analysis?

I. Elements of cost cannot be divided in different groups.
II. Fixed cost remains certain from zero production to full capacity.
III. Behavior of different costs is linear
IV. Selling per price unit remains constant.

A. I, II, III
B. II, III, IV
C. I, III, IV
D. I, II, IV

57. Biggers Company expects the following results for the next accounting period:

Sales P240,000
Variable costs P135,000
Fixed costs P 40,000
Expected production and sales in units 3,000

The sales manager believes sales could be increased by 400 units if advertising
expenditures were increased by P10,000. If advertising expenditures are increased and
sales increase by 400 units, the effect on operating income will be a(n)
A. decrease of P4,000.
B. increase of P22,000.
C. increase of P4,000.
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 D. increase of P4,000.
E. cannot be determined from data given.

58. Information about the Harmon Company's two products includes:

Product X Product Y
Unit selling price P9.00 P9.00
Unit variable costs:
Manufacturing P5.25 P6.75
Selling .75 .75
Total P6.00 P7.50

Monthly fixed costs are as follows:

Manufacturing P 82,500
Selling and administrative 45,000
Total P127,500

What is the total monthly sales volume in units required to break even when the sales mix
in units is 70% Product X and 30% Product Y?
A. 8,333 units
B. 50,000 units
C. 16,667 units
D. 56,667 units

59. Data from a company's last period of operations shows sales of 2,000 units, total
contribution margin of P50,000, and income after subtracting fixed costs of P30,000 is
P20,000. Should the company experience sales of 2,400 units (within the relevant range,
no sales price increase), net income will be:
A. P40,000
B. P30,000
C. P10,000
D. P20,000

60. The sales mix for Emory's Hardware is as follows:Product A: 4 units @ $8 sales price;
$6 variable cost per unit.
Product B: 6 units @ $7 sales price; $4 variable cost per unit.
Product C: 8 units @ $5 sales price; $3 variable cost per unit.
Emory's fixed costs are $42,000. The composite break-even units are:
A. 10,000
B. 100
C. 1,000
D. 2,000

61. Which of the following would normally occupy a line position?

A. staff accountant
B. accounting manager
C. vice-president of marketing
D. treasurer

62. Materials in the raw materials account do not become direct materials
A. until they are withdrawn from inventory for use in production.
B. until the finished product is sold.
C. until they are purchased from a vendor.
D. none of these are correct.

63. Which of the following is an example of a discretionary fixed cost?

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 A. depreciation of equipment
B. advertising costs
C. rental of machinery
D. insurance on automobiles

64. Which of the following can be considered a measure of risk in cost-volume-profit

analysis?
A. margin of safety
B. contribution margin
C. break-even point
D. sales mix

65. In a (n) ____, as one month expires, an additional month in the future is added to the
budget so that the company always has a 12-month plan on hand.
A. continuous budget
B. financial budget
C. operational budget
D. yearly budget
E. master budget

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