MAS Module No.

1
MAS – 01, 02, 03 Multiple-Choice Questions (MCQs)
Sources: CMA/CIA/RCPA/AICPA/Various test banks

MAS – 01: COST BEHAVIOR ANALYSIS (35 MCQs)

1. Hunger Company has estimated the following cost formulas for overhead:
Cost Formula
Lubricants P 1,500 plus P 0.50 per machine-hour
Utilities P 2,000 plus P 0.60 per machine-hour
Depreciation P 1,000
Maintenance P 200 plus P 0.10 per machine-hour
Machine setup P 0.30 per machine-hour
Based on the cost formulas, what us the total expected overhead cost at 300 machine hours?
a. P 4,700 c. P 5,000
b. P 4,950 d. P 5,150
2. Which of the following statement is true?
a. The higher is the production within the relevant range, the higher is the variable cost per unit.
b. The higher is the production within the relevant range, the higher is the fixed cost per unit.
c. The lower is the production within the relevant range, the lower is the total fixed cost.
d. The lower is the production within the relevant range, the lower is the total variable cost.
3. As volume increases,
a. Total fixed cost remain constant and per-unit fixed cost increase.
b. Total fixed cost remain constant and per-unit fixed cost decrease.
c. Total fixed cost remain constant and per-unit fixed remain constant.
d. Total fixed cost increase and per-unit fixed cost increase.
4. Within the relevant range, the amount of Variable cost per unit.
a. Differs at each production level c. Decrease as production increases
b. Increase as production increases d. Remains constant at each production level
5. Which of the following best describes a fixed cost?
a. It is constant per unit of changes in production.
b. It may change in total when such change is related to change in production.
c. It may change in total when such change is unrelated to change in production.
d. It may change in total when such change depends upon production or within the relevant range.
6. What are fixed cost that cannot be reduced or avoided within a short period of time?
a. Committed c. Avoidable
b. Variable d. Unnecessary
7. What would be an example of a discretionary fixed cost?
a. Depreciation on equipment c. Salaries of top management
b. Rent on a factory building d. Researcher and development
8. Which of the following best describes a step cost?
a. It is partly variable and partly fixed c. It increases proportionately with volume
b. It remains constant in all cases d. It increase abruptly outside the relevant range
9. In describing the cost formula equation Y = a + bX, which of the following statements is correct?
a. ‘Y’ is the independent variable
b. ‘a’ is the variable rate
c. ‘a’ and ‘b’ are valid for all levels of activity
d. In the high-low method, ‘b’ equals the change cost (Y) divided be the change in activity (X)
10. The fixed cost of a semi-variable cost is comparable to the mathematical concept of
a. Y-intercept c. Dependent variable
b. Slope in the line d. Independent variable
11. Which of the following is NOT a method of splitting a semi-variable cost?
a. High and low point c. Scatter chart
b. Method of least squares d. Linear programming
12. Mockingbird Company applies the high-low method of cost estimation to customer order data for the
First 4 months of 2018:
Month Order Cost (P)
January 1,200 3,120
February 1,300 3,185
March 1,800 4,320
April 1,700 3,895
What is the estimated variable cost component per order?
a. P 2.00 c. P 2.48
b. P 2.42 d. P 2.50
13. Dawn Company estimated its materials handling cost at activity levels as follows:
Kilos Handled Cost
80,000 160,000
60,000 132,000
What is Dawn’s estimated cost for handling 75,000 kilos?
a. P 150,000 c. P 157,500
b. P 153,000 d. P 165,000
14. In March, Starbox had electrical costs of P 225.00 when total volume was 4,500 cups of coffee served.
In April, electrical costs were P 227.50 for 4,750 cups of coffee. Using the high-low method, what is
the estimated fixed cost of electricity per year
a. P 180 c. P 225
b. P 200 d. P 2,160
15. Night Inc. uses the high-low method to derive the cost formula for electrical power cost. According to
the cost formula, the variable cost per unit of activity is P 3 per machine hour. Total electrical power
cost at the high level of activity was P 7,600 and the low level of activity was P 7,300. If the high level
of activity was P 1,200 machine-hour, the what was the low level of activity?
a. 800 machine-hours c. 1,000 machine-hours
b. 900 machine-hours d. 1,100 machine-hours
16. Black Co. has an average unit cost of P 45 at 10,000 units and P 25 at 30,000 units. What is the unit
variable cost?
a. P 10.00
b. P 15.00
c. P 20.00
d. An amount that cannot be determined without more information
17. Total production costs of prior periods for a company are listed below. Assume that the same behavior
pattern can be extended linearly over the range of 3,000 to 35,000 units and that the cost driver for
each product is the number of units produced.
Production per month (units) 3,000 9,000 16,000 35,000
Product X P 23,700 P 52,680 P 86,490 P 178,260
Product Y 47,280 141,840 252,160 551,600
What is the average cost per unit at a production level of 8,000 units for product X?
a. P 7.90 c. P 5.85
b. P 5.98 d. P 4.83
18. When unit production decrease, the average product cost per unit increases. This increases in
average cost per unit is due to the
a. increase in the total variable cost c. Increase in the unit variable cost
b. Increase in the total fixed cost d. Increase in the unit fixed cost
19. White Inc. provides you with the following flexible budget of factory overhead at three different capacity
levels:
Capacity Factory Overhead
60% P 98,000
70% 106,000
85% 118,000
What will be the flexible budget of factory overhead at 90% capacity?
a. P 112,000 c. P 130,000
b. P 122,000 d. P 132,000
20. The major objective of preparing a scatter diagram is to
a. Determine the relevant range
b. Derive an equation to predict future cost
c. Perform regression analysis on the results
d. Find the high and low points to use for the high-low method of estimating costs.
21. The principal advantage of the scatter diagram method over the high-low method of cost estimation is
that the scatter-diagram method
a. Considers more than two points
b. Includes cost outside the relevant range
c. Gives a precise mathematical fit of the points to the line
d. Can be used with more types of costs than the high-low method
22. Which is an equation required for applying least square method of computing fixed and variable cost?
a. ∑y = a∑x + b∑x2 c. ∑y = na + b∑x
b. ∑xy = na + b∑x d. ∑xy = na + b∑x2
23. An analysis of maintenance cost at four levels of plant operations is shown below:
Hours Cost Hours x cost Hours Squared
40 P 1,000 40,000 1,600
30 900 27,000 900
60 1,300 78,000 3,600
50 1,150 57,500 2,500
180 P 4,350 202,500 8,600
Under the least squares regressions method, how much is the fixed cost of the maintenance?
a. P 480 c. P 520
b. P 500 d. P 600

24. The following cost data for different hours of operations are made available to you be Florida
Manufacturing Company for your analysis:
 Number of Months 10
Sum of Hours 350
Sum of Cost 1,000
Sum of Hours x Costs 39,200
Sum of Hours Squared 14,250
How much is the monthly fixed cost?
a. P 26.50 c. P 318.00
b. P 35.00 d. P 420.00
25. Simple regression analysis involves
a. One dependent variable and one independent variable
b. One dependent variable and many independent variables
c. Many dependent variables and one independent variable
d. Many dependent variables and many independent variables
26. Multiple regression analysis involves
a. One dependent variable and one independent variable
b. One dependent variable and many independent variables
c. Many dependent variables and one independent variable
d. Many dependent variables and many independent variables
27. In determining cost behavior, the cost function is often expressed as Y = a + bX. Which of the following
cost estimation methods should not be used in estimating fixed and variable costs for the equation?
a. Graphic method c. High and low point
b. Simple regression d. Multiple regression
28. Multiple regression analysis is used when
a. There is more than one cost category to analyze
b. All of the points on a scatter graph fall exactly on a regression line
c. The high-low method cannot be used because there is only one observation
d. There is more than one activity that drives the variable component of a mixed cost
29. In regression analysis, which of the following correlation coefficient (r) represents the strongest
relationship between dependent and independent variables?
a. - 1.05 c. - 0.03
b. 1.89 d. 0.78
30. A scatter diagram that manifest a regression line sloping down to the right would most likely show a
correlation coefficient (r) of
a. + 0.95 c. - 0.95
b. + 9.50 d. - 9.50
31. If the coefficient of correlation (r) between two variables is zero, how might a scatter diagram of these
variables appear?
a. Random points
b. A least square line that slopes up to the right
c. A least squares line that slopes down to the right
d. Under this condition, a scatter diagram could not be plotted on a graph
32. R-squared (r2) is measure of
a. The fixed cost component
b. The variable cost per unit of activity
c. The spurious relationship between cost and activity
d. How well the regression line accounts for the changes in the dependent variable
33. After constructing a scatter chart, the internal auditor of Madagascar Company provided you with the
following information:
Independent variable: 1,000,000
Slope of the line: 0.5
Y-axes intercepts: 7,500
Based on the above data, what is the estimated cost?
a. P 250,500 c. P 1,000,000
b. P 257,500 d. P 1,000,000
34. Jackrose Company uses regression analysis to develop a model for predicting overhead costs. Two
different cost drivers (machine hours and direst materials weight) are under consideration as the
independent variable. Relevant data were run on the computer using one of the standard regression
programs, with the following results:
Coefficient Coefficient
MACHINE HOURS DIRECT MATERIALS WEIGHT
Y-intercept 2,500 Y-intercept 4,600
B 5.0 B 2.6
r2 = 0.70 r2 = 0.70

What regression equation should be used?

a. Y = 2,500 + 5.0X c. Y = 4,600 + 2.6X
b. Y = 2,500 + 3.5X c. Y = 4,600 + 1.3X

35. The statistician of Madame Q has developed the following cost-prediction equation, using observation
from 12,000 to 30,000 machine hours:
Y = P 236,837 + 3.7625X
R-squared = 0.81
Standard error = P 24,363
Several ‘outliers’ are noted within tolerable limits
Y = total maintenance cost
X = machine hours
Compute the estimated maintenance cost at P 20,000 machine hours.
a. P 236,837 c. P 312,087
b. P 252,790 d. P 336,450

MAS – 02: COST-VOLUME-PROFIT ANALYSIS (50 MCQs)

1. Which cost is NOT subtracted form selling price to calculate contribution margin per unit?
a. Variable manufacturing overhead c. Direct labor
b. Variable selling expenses d. Fixed manufacturing overhead
2. Which of the following would decrease unit contribution margin the most?
a. A 15% decrease in selling price c. A 15% decrease in variable expenses
b. A 15% increase in variable expenses d. A 15% increase in fixed expenses
3. Jo Company sells its only product for P60 per unit and incurs the following variable costs per unit:
Direct material P 16
Direct labor 12
Manufacturing overhead 7
Total variable manufacturing overhead P 35
Selling expenses 5
Total variable costs P 40
Jo’s annual fixed cost are P 880,000. If prime costs increased by 20% and all other values remained the
same, what would be Jo Company’s contribution margin ratio ( to the nearest whole percentage)?
a. 75% c. 24%
b. 30% d. 20%
4. Abet Company plans to market a new product. Based on its market studies, Abet estimates that it can
selling price will be P 2 per unit. Variable cost is estimated to be 40% of the selling price. Fixed cost is
estimated to be P 6,000. What is the break-even point?
a. 3,750 units c. 5,500 units
b. 5,000 units d. 7,500 units
5. In planning its operation for 2019 based on a sales forecast of P 6,000,000, Cynth, Inc. prepared the
following estimated data:
Cost and Expenses
Variable Fixed
Direct materials P 1,600,000
Direct labor 1,400,000
Factory overhead 600,000 900,000
Selling expenses 240,000 360,000
Administrative expenses 60,000 140,000
P 3,900,000 P 1,400,000
What would be the amount of peso sales at the break-even point?
a. P 2,250,000 c. P 4,000,000
b. P 3,500,000 d. P 5,300,000
6. The most likely strategy to reduce breakeven point would be to
a. Increase both the fixed cost and the contribution margin
b. Decrease both the fixed costs and the contribution margin
c. Decrease the fixed costs and increase the contribution margin
d. Increase the fixed costs and decrease the contribution margin
7. For the period just ended, Val Company generated the following operating results in percentages:
Revenues 100%
Cost of sales:
Variable 50%
Fixed 10%
Total 60%
Gross profit 40%
Operating expenses:
Variable 20%
Fixed 15%
Total 35%
Net operating income 5%
Total sales amounted to P 3 million. How much was the break-even sales?
a. P 1,875,000 c. P 2,850,000
b. P 2,500,000 d. P 3,750,000

8. For the period just ended, Val Company generated the following operating results in percentages:
Revenues 100%
Cost of sales:
 Variable 50%
Fixed 10%
Total 60%
Gross profit 40%
Operating expenses:
Variable 20%
Fixed 15%
Total 35%
Net operating income 5%
Total sales amounted to P 3 million. How much was the break-even sales?
a. P 1,875,000 c. P 2,850,000
b. P 2,500,000 d. P 3,750,000
9. Once the breakeven point has been reached, operating income will increase by the
a. Gross margin per unit for each additional unit sold
b. Contribution margin per unit for each additional unit sold
c. Fixed costs per unit for each additional unit sold
d. Variable costs per unit for each additional unit sold
10. The following data refer to cost-volume-profit relationship of Albert Co.
Break-even point in units 1,000
Variable P 250
Total fixed P 75,000
How much will be contributed to operating income by the 1,001st unit sold?
a. P 250 c. P 75
b. P 325 d. Zero
11. Which of the following would cause the break-even point to change?
a. Sales increased
b. Total production decreased
c. Total variable costs increased as a function of high production
d. Fixed costs increased owing to additional equipment in physical plant
12. A company manufactures a single product. Estimated costs data regarding this product and other
information for the production and the company are as follows (effective income tax rate: 40%):
Sales price per unit P 40
Total variable production cost per unit 22
Sales commission (on sales) per unit 5%
Fixed costs and expenses:
Manufacturing overhead P 5,598,720
General and administrative P 3,732,480
What number of units must the company sell in the coming year in order to reach its breakeven point?
a. 388,800 units c. 583,200 units
b. 518,400 units d. 972,000 units
13. The present break-even sale of Beng Company is P 550,000 per year. It is computed that if the fixed
cost will go up by P 60,000, the sales required to break-even will also increase to P 700,000, without any
change in the selling price per unit and on the variable expenses. How much is the total fixed cost before
the increase of P 60,000?
a. P 200,000 c. P 280,000
b. P 220,000 d. P 330,000
14. One of the major assumptions limiting the reliability of breakeven analysis is that
a. Efficiency and productivity will continually increase
b. Total variable costs will remain unchanged over the relevant range
c. Total fixed costs will remain unchanged over the relevant range
d. The cost of production factors varies with changes in technology
15. How much will income change if a company makes an advertising campaign given the following data?
Cost of advertising campaign P 25,000
Increase in sales P 60,000
Variable expense as an percentage of sales 42%
a. P 200 increase c. P 15,000 increase
b. P 9,800 increase d. P 25,200 increase
16. Sher Company is planning to sell 200,000 units of product F. The fixed cost is P 400,000 and the
variable cost is 60% of the selling price. In order to realize a profit of P 100,000, what should be the
selling price per unit?
a. P 3.75 c. P 6.00
b. P 4.17 d. P 6.25
17. August Company sells Product Cynth for P 5 per unit. The fixed cost is P 210,000 and the variable cost
is 60% of the selling price. What amount of sales is needed to realize a profit of 10% of sales?
a. P 700,000 c. P 472,500
b. P 525,000 d. P 420,000

18. Dalen Company prepared the following preliminary forecast concerning Product D for 2019
Selling price per unit P 10
Unit sales 100,000
Variable costs P 600,000
Fixed costs P 300,000
 Based on a market study, Dalen estimates that it could increase the unit selling pnce by 15% and
increase the unit 10% if p 100,000 was spent in advertising. Assuming that Dalen incorporates these
changes in its 2019 forecast, what should be the operating income for Product D?
a. P 175,000 c. 205,030
b. P 190,000 d. P 365,000
19. Mice Corp. aims to earn a% return on its P 500,000 investment in equipment used in the manufacture of
Product Y. Based on estimated sales of 10,000 units of Product 'Y', the cost per unit were estimated as
follows:
Variable manufacturing cost P 25
Fixed selling and administrative cost 10
Fixed manufacturing cost 5
What should be the price of Product Y?
a. P 45.00 c. P 52.50
b. P 50.00 d. 55.00
20. Chris Company has fixed costs of P 100,000 and breakeven sales of P 800,000. What is its profit at P
1,200,000 sales? (Hint: compute the constant contribution margin ratio)
a. P 50,000 c. P 200,000
b. P 150,000 d. P 400,000
21. Delfin Company sells a product to retailers for P 200 The unit variable cost is P 40 plus a selling
commission of 10%. Fixed manufacturing cost totals P 1,000,000 per month, while fixed selling and
administrative cost equals P 420,000. The income tax rate is 30%. What will be the required sales to
achieve an after-tax profit of P 123,200?
a. 19,950 units c. 15,640 units
b. 18,750 units d. 11,400 units
22. Heth Electronics Company is developing a new product, surge Protectors for high-voltage electrical
flows. The cost information for this product is as follows:
Unit Cost
Direct materials P 3.25
Direct labor P 4.00
Distribution P 0.75
The company will also be absorbing P120,000 of additional fixed costs associated with this new product.
A corporate fixed charge of P 20,000 currently absorbed ray other products will he allocated to this new
product. Heth Electronics' effective income tax rate is 40%. How many surge protectors (rounded to
nearest hundred) must Heth Electronics sell at a selling price of P 14 per unit to increase after-tax
income by P30,000? (Hint: consider only additional/fixed cost)
a. 10,700 units c. 20,000 units
b. 12,100 units d. 28,300 units
23. A company has just completed the production of its only product. The product has taken 3 years and P
6,000,000to develop. The following costs are expected to be incurred on a monthly basis for the normal
production level of 1,000,000 pounds of the new product:
1,000,000 lbs.
Direct materials P 300,000
Direct labor 1,250,000
Variable factory overhead 450,000
Fixed factory overhead 2,000,000
Variable selling, general and administrative expenses 900,000
Fixed selling, general and administrative expenses 1,500 000
Total P 6,400,000
If sales price per pound is P 5.90, the sales needed to earn P 3,000,000 profit in the first year would be
a. 13,017,000 pounds c. 15,000,000 pounds
b. 14,000,000 pounds d. 25,600,000 pounds
24. Marz Company, which is subject to 40% tax, had the following operating data for the period just ended
Selling price per unit P 60
Variable cost per unit P 22
Fixed costs P 304,000
Management plans to improve the quality of its only product by way of implementing the following:
(1) Replacing a component that costs P 3 50 with a higher-grade unit that costs P 5.50, and
(2) Acquiring a P 180,000 packaging machine. Matz will depreciate the machine over a 10-year period
with no estimated salvage value by the straight-line method of depreciation.
If the company wants to earn after-tax of P 172,800 in the coming year, how many units must be sold
a. 10,300 units c. 22,500 units
b. 21,316 units d. 27,000 units
25. Cost-volume-profit relationships that are curvilinear may he analyzed linearly by considering only
a. Fixed and semi-variable costs c. Relevant variable costs
b. Relevant fixed costs d. Relevant range volume

26. Delphi Company has developed a new project that will be, marketed for the first time during the next
fiscal year. Although the Marketing Department estimates that35,000 units could be soil at P 36
per unit, Delphi's management has allocated only enough manufacturing capacity to produce a
maximum of 25,000 units of the new product annually. The fixed costs associated with the new product
are budgeted at P 450,000 for the year, which includes P 60,000 for depreciation on new manure:1•)nm;
 equipment. Delphi is subject to a 40% income tax rate Data associated with each unit of product arc
presented on the next page.
Variable Cost
Direct material P 7.00
Direct labor 3.50
Manufacturing overhead 4.00
Total variable manufacturing cost P 14.50
Selling expenses 1.50
Total variable cost P 16.00
Delphi Company's management has stipulated that it will not approve the continued manufacture of the
new product after the next fiscal year unless the after tax profit is at least P 75,000 the first year. The unit
selling price achieve this target profit must be at least
a. P 34.60 c. P 37.00
b. P 36.60 d. P 39.00
27. Dan, Inc. is planning to produce two products, A and B. Dan is planning to sell
100,000 units of A at P 4 a unit and200,000 units of 13 at P 3 a unit. Variable cost is 70% of sales for A
and 80% of sales for B. In order to realize a total profit of P 160,000, what must the total fixed cost be?
a. P 80,000 c. P 240,000
b. P 90,000 d. P 600,000
28. The following data pertain to the two products manufactured by Beng, Inc
Per Unit
Products Selling Price Variable Cost
A P 240 P 140
B P 1,000 P 400
Fixed cost totals P600,000 annually. The expected sales mix in units is 60% for Product A and 40% for
Product B. How many units of the two products together must Bong sell to break-even?
a. 857 c. 2,000
b. 1,111 d. 2,459
29. A company sells two products, X and Y. The sales mix consists of a composite unit of two units of X for
every five units of Y (2:5). Fixed costs are P 49,500. The unit contribution margins for X and Y are,
respectively, P 2.50 and considering the company as a whole, what
the number of composite units to break even?
a. 4,500 c. 9,900
b. 8,250 d. 31,500
NOTE: Usual mistake is letter D. The requirement is to compute "the number of composite units to
break-even" so 31,500 units should be divided by 7 units since "a composite !Ant is composed of two
units of X for every five units of Y (2:5)." Consider the following:
⮚ The number of composite units to break-even: 4,500 units
⮚ The number of units to break-even: 31,500 units
30. Assuming same data in No. 29, if the company had a profit of P 22,000, the unit sales must have been
a. Product X: 5,000; Product Y: 12,500 c. Product X: 23,800; Product Y: 59,500
b. Product X: 13,000; Product Y: 32,500 d. Product X: 28,600; Product Y: 71,500
31. Kris Company sells Products M, T and V. Kris sells three units DI M for each unit of V and two units of
T for each unit of M. The contribution margins are P 1 per unit of M, P 1.50 ref unit of T, and P 3 per unit
of V. Fixed costs are P 600,000. How many units of V would Kris sell at the break-even point)
a. 40,000 units c. 240,000 units
b. 120,000 units d. 400,000 units
32. There are so many assumptions inherent in CVP analysis. Which of the following is not one of these
assumptions?
a. Cost and revenues are predictable and are linear over the relevant range
b. Variable costs fluctuate proportionately with volume
c. Changes in the beginning and ending inventory are insignificant in amount
d. Sales mix will change as fixed costs increase beyond the relevant range
33. If the sales mix shifts toward higher contribution margin products, the break-even point
a. Decreases c. Remains constant
b. Increases d. Is zero
34. Employee, Inc. had the following sales results for 2018:
TV sets CD Player Radios
Peso sales component ratio 0.30 0.30 0.40
Contribution margin ratio 0.40 0.40 0.60
Employee, Inc. had fixed costs of P 2,400,000. The break-even sales in pesos for Employee, Inc. are:
TV sets CD Player Radios TV sets CD Player Radios
a. P 1.8 M P 1.8 M P 3.6 M c. P 1.5 M P 1.5 M 0.40
b. P 1.8 M P 1.8 M P 1.6 M c. P 1,531,915 P 1,531,915 P 2,042,553
35. For a profitable company, the amount by which sales can decline before losses occur is known as the
a. Sales volume variance c. Variable sales ratio
b. Hurdle rate d. Margin of safety
36 The margin of safety is a key concept of CVP analysis. The margin of safety is
a. The contribution margin rate
b. The difference between budgeted sales and breakeven sales
c. The difference between the breakeven point in stiles and cash flow breakeven
d. The difference between budgeted contribution margin and breakeven contribution margin
37. Irish Company has sales of P 100,000, fixed costs of P 50,000, and a profit of P 10,000. What is Irish
Company's margin of safety?
a. P 10,000 c. P 33,333
b. P 16,667 d. P 83,333
38 Operating leverage is greatest in companies that have
a. Low fixed cost, low unit variable cost c. Low fixed cost, high unit variable cost
b. High fixed cost, low unit variable cost d. High fixed cost, high unit variable cost
39. Vivian Corporation sells sets of encyclopedias. Vivian sold 4,000 sets last year at P 250 a set. If the
variable cost per set was P 175, and the fixed costs for Vivian were P 100,000, what is the Vivian's
degree of operating leverage (DOL)?
a. 0.67 c. 1.5
b. 0.75 d. 3.0
40. Ube Company's variable costs are 75% of sales. At a sales level of P 400,000, the company's degree
of operating leverage is 8. At this level, fixed costs equal
a. P 87,500 c. P 50,000
b. P 100,000 d. P 75,000
41. A higher degree of operating leverage compared with industry average implies that the firm
a. Has higher variable costs
b. Has profits that are more sensitive to changes in sales volume
c. Is more profitable
d. Is less risky
42. Terry Company's variable costs are 70% of sales. At .1 P 307,000 sales level, the degree of operating
leverage is 10. If sales increase by P 60,000, what will be the degree of operating leverage?
a. 12 c. 6
b. 10 d. 4
43. If used in cost-volume-profit analysis, sensitivity analysis
a. Determines the most profitable mix of products to be sold
b. Allows the decision maker to use probabilities in the evaluation of decision alternatives
c. Is done through various possible scenarios and computes the impact on profit of various
predictions of future events
d. Is limited because in cost-volume-profit analysis, costs are not separated into fixed and variable
components
44. The indifference point is the level of volume at which a company
a. Earns no profit c. Earns large amount of profit
b. Earns its target profit d. Earns the same profit under different schemes
45. Machine )0( has fixed costs of P 225,000 and a variable cost of P 20. Machine YY has fixed costs of P
300,000 and a variable cost of P 14. What is the indifference point in units?
a. 11,250 c. 21,429
b. 12,500 d. Cannot be determined from given information
46. Bona Motors employs 40 sales personnel to market its line of automobiles. The average car sells for P
1,700,000 and a 6% commission is paid to the salesperson. Bona Motors is considering a change to a
scheme that would pay each salesperson a salary of P 24,000 per month plus a 2% commission of the
sales made by that salesperson. What is the amount of total car sales at which Bona Motors would be
indifferent as to which plan to select?
a. P 30,000,000 c. 22,500,000
b. P 24,000,000 d. P 12,000,000
SOLUTION:
6% commission: 1.2M (6%) = 72,000 vs. 2% commission: 1.2M (2%) - 24,000
72,000 X = 24,000 X + 24,000 (40) X = 960,000 + 48,000 - 20 units
Indifference Point: 20 units x P 1,200,000 per unit
47. John Corporation submitted to you the following condense income statement:
Sales (80% capacity) P 300,000
Variable costs P 180,000
Fixed costs 82,500 262,500
Net income P 37,500
What is the break-even point as a percentage of capacity?
a. 45% c. 67.85%
b. 55% d. 68.75%
SOLUTION
100% capacity: 300,000 +80°/0 = P 375,000 VCR: 180,000 ÷ 300,000 = 60% (CMR = 40%)
Breakeven sales: 82,500 + 40% = P 206,250 -r based on 100% capacity: 206,250 ÷ 375,000
48. Contribution margin ratio multiplied by the margin of safety ratio equals
a. Variable cost ratio c. Break even sales ratio
b. Fixed cost ratio d.Net profit ratio

_ 71.e.
MAS Module 1
49. The following is Cello Company's cost behavior
5,000 units or less More than 5,000 units
Fixed costs P 35,000 P 45,000
Contribution margin ratio 20% 12.5%
If selling price is set at P 40, then how many units must be sold to earn a profit of P 25,000?
a. 7,500 c. 12,500
 b. 11,000 d. 14,000
50. The management of Rhea Company performed cost studies and projected the following annual costs
based on 40,000 units of productions and sales:
Total costs % of variable costs to total costs
Direct materials P 400,000 100%
Direct labor 360,000 75%
Factory overhead 300,000 40%
Selling and administrative expense 200,000 25%
What unit-selling price will yield a 10% profit from sales of 40,000 units?
a. P 33.50 c. P 4000
b. P 35.00 d. P 50.00
SOLUTION GUIDE:
Total Costs Variable Costs Fixed Costs
Direct materials P 400,000
Direct labor 360,000
Factory overhead 300,000
S & A expense 200,000
Total P 1,260,000

MAS - 03: VARIABLE & ABSORPTION COSTING (35 MCQs)

1. Which method of inventory costing treats direct manufacturing costs and manufacturing overhead costs,
both variable and fixed, as inventoriable costs?
a. Direct costing c. Absorption costing
b. Variable costing d. Conversion costing
2. What is the costing method that treats all fixed costs as period costs?
a. Absorption costing c. Variable costing
b. Job-order costing d. Process costing
3. Black Co.'s 2018 fixed manufacturing overhead costs totaled P 100,000 and variable selling costs totaled
P 80,000. Under direct (variable) costing, how should these costs be classified?
Period Costs Product Costs
a. P0 P 180,000
b. P 80,000 P 100,000
c. P 100,000 P 80,000
d. P 180,000 P0
Items 4 and 5 are based on the following information
A manufacturer at the end of its fiscal year recorded the data below:
Prime cost P 800,000
Variable manufacturing overhead 100,000
Fixed manufacturing overhead 160,000
Variable selling and other expenses 80,000
Fixed selling and other expenses 40,000
4. If the manufacturer uses variable costing, the inventoriable costs for the fiscal year are
a. P 800,000 c. P 980,000
b. P 900,000 d. P1,060,000
5. Using absorption (full) costing, inventoriable costs are
a. P 800,000 c. P 1,060,000
b. P 900,000 d. P 1,086,000
6. For 1,000 per box, Gray, Inc. produces and sells delicacies. Direct materials are P 400 per box and
direct manufacturing labor averages P 75 per box. Variable overhead [5 P 25 per box and fixed
overhead cost is P 12,500,000 per year. Administrative expenses, all fixed, run P 4,500,000 per year,
with sales commissions of P 100 per box. Production is expected to be 100,000 boxes, which is met
every year. For the year just ended, 75,000 boxes were sold. What is the inventoriable cost per box
using absorption costing
a. P 500 c. P 670
b. P 625 d. P 770
7. Refer to No. 6, what is the inventoriable cost per box using variable costing,
a. P 770 c. P 625
b. P 670 b. P 500
8. Under variable costing,
a. Net income will tend to move based on changes in levels of production
b. Inventory costs will always be lower than under absorption costing
c. Net income will always be higher than under absorption costing
d. Net income will tend to vary inversely with production changes

9. The Rainbow Company had the following costs for 2018:

Raw materials P 700,000 Rent for factory building P 50,000
Direct labor 100,000 Rent for sales office 30,000
Miscellaneous FOH (fixed) 80,000 Depreciation on store equipment 20,000
Depreciation on machines 48,000
How much of these costs should be inventoried under absorption (A) and variable (V) costing methods?
a. (A)1,020,000 (V)880,000 c. (A) 970,000 (V) 800,000
 b. (A) 1,000,000 (V) 880,000 d. (A) 930,000 (V) 800,000
10. A company manufactures a single product for its customers by contracting in advance of production.
Therefore, the company produces only units that will be sold by the end of each period. During the last
period, the following sales were made and costs incurred:
Sales P 40,000 Salespeople's salaries P 1,300
Direct Materials 9,050 Insurance (2/3 factory, 1/3 office) 1,200
Direct labor 6,050 Office supplies 750
Rent (9/10 factory,1/10 office) 3,000 Advertising 700
Depreciated on factory equipment 2,003 Depreciation of an office equipment 500
Supervisor (2/3 factory, 1/3 office)1,200 Interest on loan 300
What was the gross margin percentage for the last period (rounded to the nearest %)?
a. 41% c. 46%
b. 44% d. 49%
11. White Company manufactures a single product and has the following cost structure:
Variable costs per unit:
Direct materials P3
Direct labor 4
Variable manufacturing overhead 1
Variable selling and administrative expense 2
Fixed costs per month:
Fixed manufacturing overhead P 100,000
Fixed selling and administrative 60,000
The company produces 20,000 units each month. The unit product cost under absorption costing
a. P 10 c. P 13
b. P 12 d. P 15
12. Refer to the data in No. 11, what is the unit product cost under variable costing?
a. P 8 c. P 11
b. P 10 d. P 13
13. Refer to the data in No. 11, assuming there are no beginning inventories, 20,000 units are produced
and 19,000 units are sold in a month. If the unit selling price is P 20, what is the net income under
absorption costing?
a. P 30,000 c. P 38,000
b. P 35,000 d. P 42,000
14. Refer to the data in No. 11 assuming there are no beginning inventories and 20,000 units are produced
and 19,000 units are sold in a month. If the unit selling price is P 20, what is the net income under
variable costing?
a. P 30,000 c. P 38,000
b. P 35,000 d. P 42,
15. Brown Company began its operations on January 1, 2018, and produces a single product that sells for
P 10 per unit. Brown uses an actual (historical) cost system. In 2018, 100,000 units were produced and
80,000 units were sold. There was no work-in-process inventory at December 31, 2018. Manufacturing
costs and selling and administrative expenses for 2018 were as follows:
Fixed costs Variable costs
Raw materials - P 2.00 per unit produced
Direct labor - P 1.25 per unit produced
Factory overhead 120,000 P 0.75 per unit produced
Selling and administrative 70,060 P 1.00 per unit sold
What would be Brown's operating income for 2018 under variable (direct) costing method?
a. P 114,000 c. P 234,000
b. P 210,000 d. P 330,000
Items 16 and 17 are based on the following information
A company manufactures and sells a single product. Planned and actual production in its first year of
operation was 100,000 units. Planned and actual costs for that year were as follows:
Manufacturing Non-manufacturing
Variable P 600,000 P 500,000
Fixed 400,000 300,000
The company sold 85,000 units of product at a selling price of P 30 per unit.
16. Using absorption costing, the company's operating profit was
a. P 750,000 c. P 975,000
b. P 900,000 d. P 1,020,000
17. Using variable costing, the company's operating profit was
a. P 750,000 c. P 915,000
b. P 840,000 d. P 975,000

18. Income under absorption costing may differ from income under variable costing. How is this difference
calculated?
a. Change in the quantity of units in inventory times the fixed factory overhead rate per unit
b. Number of units produced during the period times the fixed factory overhead rate per unit
c. Change in the quantity of units in inventory times the variable manufacturing cost per unit
d. Number of units produced during the period times the variable manufacturing cost per unit
19. Blonde, Inc. manufactured 7,000 unit last year. The ending inventory consisted of 100 units. There was
no beginning inventory. Variable manufacturing costs were P 6.00 per unit and fixed manufacturing
 costs were P 2.00. What would he the change in the peso amount of ending inventory if variable costing
was used instead of absorption costing?
a. P 800 decrease c. P 0
b. P 200 increase d. P 200 decrease
20. What best accounts for profit difference between absorption costing and variable costing method?
a. Difference in fixed costs incurred c. Difference in sales revenue
d. Difference in variable costs incurred d. Difference in inventory valuation
21. During its first year of operations, a company produced 275,000 units and sold 250,000 units. The
following costs were incurred during the year:
Variable costs per unit
Direct materials P 15.00
Direct labor 10.00
Manufacturing overhead 12.50
Selling and administrative 2.50
Total fixed cost
Manufacturing overhead P 2,200,000
Selling and administrative P 1,375,000
What is the difference between operating profit calculated on the absorption costing basis and on the
variable costing basis is that absorption costing operating profit?
a. P 200,000 greater c. P 325,C00 greater
b. P 220,000 greater d. P 62,500 less
22. When production exceeds sales, fixed manufacturing overhead costs
a. Are released from inventory under absorption costing
b. Are deferred in inventory under absorption costing
c. Are released from inventory under variable costing
d. Are deferred in inventory under variable costing
23. Lavender Company's income under absorption costing was P 3,600 lower than its income under
variable costing. The company sold 10,000 units during the year, and its variable costs were P 9 per unit,
P 1 of which represents the variable selling expense. If production cost was P11 per unit under
absorption costing, then how many units did the company produce during the year?
a. 8,200 units c. 11,200 units
b. 8,800 units d. 11,800 units
24. Variable costing and absorption costing will show the same incomes when there are no
a. Beginning inventories c. Variable costs
b. Ending inventories d. Beginning and ending inventories
25. Which one of the following statements is correct regarding absorption costing and variable costing?
a. Overhead costs are treated in the same manner under both costing methods
b. If finished goods inventory increases, absorption costing results in higher income
c. Variable manufacturing costs are lower under variable costing
d. Gross margins are the same under both costing methods
26. Red Co. had the same activity in 2018 as in 2017 except that production was higher in 2017 than in
2016. Red will
a. Higher income in 2018 than in 2017
b. The same income in both years
c. The same income in both years under variable costing
d. The same income in both years under absorption costing
27. Which of the following must be known in order to institute a direct (variable) costing system?
a. The controllable and non-controllable components of all costs related to production
b. Standard production rates and times for all elements of production
c. Contribution margin and break-even point for all goods in production
d. The variable and fixed components of all costs related to production
28. Absorption costing and variable costing differ in that
a. Standards can be used with absorption costing, but not with variable costing.
b. Absorption costing inventories are more correctly valued.
c. Production influences income under absorption, costing but not under variable costing
d. Companies using absorption costing have lower fixed costs.
29. When sales are constant but production fluctuates,
a. Net income will be erratic under variable costing
b. Absorption costing will always show a net loss
c. Variable costing will always show a positive net income
d. Net income will be erratic under absorption co-it.ncj

30. Which of the following statements is TRUE for a firm that uses variable costing?
a. The cost of a unit of product changes because of change in number of units manufactured
b. Profit fluctuate with Sales
c. An idle facility variation is calculated
d. Product costs include variable administrative costs
31. Violet Company manufactures a single product. Unit variable production costs are P 20 & fixed
production costs are P 150,000. Violet uses a normal activity of units to set it5 standard costs. Violet
began the year with no inventory, produced 11,000 units & sold 10,500 units. What is the ending
inventory under absorption costing?
 a. P 10,000 c. P 17,500
b. P 15,000 d. P 20,000
32. A company’s production facility has an ideal capacity of 12,500 units, which was used as the basis for
the normal capacity of 10,000 units. the company was able to produce 11,000 units during the period.
Fixed manufacturing costs were f' 200,000 while variable manufacturing costs woes also P 200,000.
What was the volume or capacity variance for the production?
a. P 20,000 unfavorable c. 24,000 favorable
b. P 20,000 favorable d. P 40,000 favorable
33. Super variable costing treats which of the following costs as the only variable and product costs?
a. Direct labor
b. Direct materials
c. Straight line depreciation of factory machine
d. Supervisory salary of an assembly line manager
34. Super variable costing is sometimes referred to as
a. Full costing c. Indirect costing
b. GAAP costing d. Throughput costing
35. A basic tenet of direct costing is that period cost. should be currently expensed. What is the basic
rationale behind this procedure'
a. Period costs are uncontrollable and should not be charged to a specific product
b. Period costs are generally immaterial in amount and the cost of assigning the amount to specific
products would outweigh the benefits
c. Allocation of permit costs is arbitrary at best and could lead to erroneous decisions by
management
d. Period costs will occur whether or not production occurs and so it is improper to allocate these
costs to production and defer a current cost of doing business

PRACTICE SET (40 MCQs)

Items 1 to 3 are based on the following information
Balong Company had the following materials handling cost at three months of activity levels:
Kilos handled Cost
Month 1 80,000 P 160,000
Month 2 60,000 P 132,000
Month 3 70,000 P 130,000
1. What is the value of the slope of the line at 80.000-kar-, level?
a. 1.4 c. 1.4 x number of kilos
b. 1.5 d. 112,000
2. What is the value of the y-intercept at 60,000-kilo level?
a. 0.80 c. 48,000 per month
b. P 48,000 per kilo d. 48,000 per year
3. What is the estimated cost for handling 500,000 kilos for the next operating year?
a. P 700,000 c. P 1,276,000
b. P 748.000 b. P 8,976 000
4. The statement "factory overhead is a function of machine hours with coefficient of determination (r2) = 80
percent” is correctly interpreted as
a. 80 percent of total variation of factory overhead is explained by the regression equation or the
change in machine hours while the remaining 20 percent is accounted for by something other than
machine hours.
b. An r-squared of 0.80 with a regression equatlti7. rears that predictions will be accurate 80% of
the time.
c. 20 percent of total variation of factory overhead is explained by the regression equation or the
change in machine hours while 80 percent is accounted for by something other than machine
hours.
d. 20% percent of overhead cost prediction might show results outside confidence interval
determined by the standard deviation.
5. A retail company determines selling price by marking up variable costs60%. In addition, the company
uses frequent selling price markdowns to stimulate Salt's. If the markdowns average 10%, what is the
company's contribution margin ratio?
a. 27.5% c. 37.5%
b. 30.6% d. 41.7%
6. if a company's variable cost ratio is 60%, which formula represents the computation of peso sales that
will yield profit equal to 20% of the contribution margin when S = sales in pesos and K = fixed cost?
a. S = F ÷ 1.2 c. S = F ÷ 0.2
b. S = F ÷ 0.32 d. S = F ÷ 0.12

7. The total production cost for P 20,000 and the total production cost for making 50,000 units was P
34,000. Once production exceed 25,000 units, additional fixed costs of P 4,000 were incurred. What is
the full production per unit for making 30,000 units?
a. P 0.30 c. P 0.84
b. P 0.68 d. P 0.93
8. Total production costs for Yeye Company are budgeted at P 230,000 for 50,000 units of budgeted output
and at P 280,000 for 60,000 units of budgeted output. Because of the need for additional facilities,
budgeted fixed costs for 60,000 units are 25% more than budgeted fixed costs for 50,000 units. How
much is Yeye's budgeted variable cost per occupied room per day?
a. P 1.60 c. P 3.00
b. P 1.67 d. P 5.00
9. Rafa, Inc. has a total of 2,000 rooms in nationwide chain of motels. On average,
70% of the rooms are occurred each day. The company's operating costs are P 21 per occupied room
per day at this occupancy level, assume a 30-day month. This P 21 figure contains both variable and
fixed cost elements. During October, the occupancy rate dropped to only 45%. A total of P 792,000 in
operating cost was incurred during October. What is the estimated the variable cost per occupied room
per day?
a. P 3.33 c. P 6.00
b. P 4.50 d. P 8.00
10. Andy Company is expecting an increase of fixed costs by 78,750 upon moving their place of business to
the downtown area. Likewise, it is anticipating that the selling price per unit and the variable expenses
will not change. At present scenario, the necessary to breakeven is P 750,000 but with the expected
increase in fixed costs, the sales volume necessary to breakeven would go up to P 975,000. Based on
these projections, what would be the total fixed costs after the increase of P 78,750?
a. P 341,250 c. P 183,750
b. P 262,500 d. P 300,00
11. For the past year, Ram-say Company had a contribution margin ratio of 20%, a margin of safety ratio of
33 1/3% and a profit of P 5,000. What was Ramsay's break-even peso sales?
a. P 15,000 c. P 60,000
b. P 50,000 d. P 75,000
12. The controller of SD Co. prepared the following income statements:
November December
Sales P 420,000 P 450,000
Cost of sales 226,000 235,000
Gross margin P 194,000 P 215,000
Selling and administrative expenses 105,000 108,000
Income before taxes P 89,000 P 107,000
If SD Co. produces a single product, now much peso sales should it generate to break-even?
a. P 271,667 c. P 407,500
b. P 228,260 d. Cannot be determined from given information
13. At 40,000 tints of sales, Rock Corporation operating loss of P 3.00 per unit When sales were 70,000
units, the company had a profit of P 1.20 per ,;nit. What is the number of units to breakeven?
a. 35,000 c. 857,142
b. 45,000 d. 57,647
14. Jill Company has fixed costs of P 300.000. It produces two products, X and Y. Product X has a variable
cost percentage equal to 60% of its P 10 per unit selling price. Product Y has a variable cost percentage
equal to 70% of its P 30 selling price. For the past several years, sales of product X have averaged
66.67% of the sales of product Y. That ratio is not expected to change. What is breakeven point in
pesos?
a. P 2,500 c. P 857,142
b. P 750,000 d. P 942,857
15. When sales level reaches P 100,000, return on sales is 10%. How much is the margin of safety if the
operating average at this sales level is 4 times?
a. P 2,500 c. 25% of sales
b. 25,000 units d. Cannot be determined from the green information
16. Jack Company sells 50,000 units of a gadget. these were taken from the company's records:
Accounts receivable: P 129,000 Days sales outstanding: 15 days
Contribution margin ratio: 49% Profit for the period: P 485,040
The ending receivables balance is the average balance during the year. Using a 360-day year and
assuming that all sales are made on credit, what is the company's breakeven point?
a. P 1,032,000 c. P 2,061,122
b. P 1,320,000 d. P 2,106,122
17. Julie Company, which is subject to 4094 income tax rate, had the following operating data for the period
just ended:
Selling price per unit P 60
Variable cost per unit P 22
Fixed costs P 504,000
Management plans to improve the quality of its role product by way of implementing the following
changes.
(1) Replacing a component that costs P 3.50 with a higher-grade unit that costs P 5.50, and
(2) Acquiring a P 180,000 packaging machine Julie will depreciate the machine over a 10-year period
with no estimated salvage value by the straight-line method of depreciation.
 If the company wants to earn after-tax of P 112,800 in the coning year, then how many units must it sell?
a. 10,300 units c. 22,500 units
b. 21,316 units D. 27,000 units
Items 18 to 22 are based on the following information
Ginger Co. is involved in selling an exclusive toy in the market. It sold 1,800 units of toys during the
current year. The manufacturing capacity of Ginger's facilities is 1000 units of toys. The operating results
of Ginger Co. during the current year show the following:
Sales P 900,000
Variable costs: Manufacturing P 315,000
Selling 180,000 495,000
Contribution margin P 405,000
Manufacturing P 90,000
Selling 112,500
Administration 45,000 247,500
Net income before taxes P 157,500
Income tax (40%) (63, 000)
Net income after taxes P 94,500
18. What is the break-even volume in units of toys lot the year?
a. 420 c. 550
b. 495 d. 1,100
19. If the sales volume is estimated to be 2,100 units in the next year, and if the prices and costs stay at the
same levels and amounts next year, the after-tax income that Ginger can expect for next year is
a. P 110,250 c. P 184,500
b. P 135,000 d. P283,500
20. Ginger has a potential foreign customer that has offered to buy 1,500 units at P 450 per unit. Assume
that all of Ginger's costs would be at the same levels and rates as last year. What net income after taxes
would Ginger expect if it took this order and rejected some business from regular customers so as not to
exceed capacity?
a. P 211,500 c. P 256,500
b. P 252,000 d. P 297,500
21. Ginger plans to market its product in a new territory. It estimates that an advertising and promotion
program costing P 61,500 annually would need to be undertaken for the next two to three years. In
addition, a P 25 per unit sales commission over and above the current commission to the sales force in
the new territory would be required. How many units would have to be soli.; in the new territory to
maintain Ginger's current after-tax income of P 94,500?
a. 273.30 c. 1,095.00
b. 307.50 d. 1,545.00
22. Assuming Ginger is expecting that per unit selling price will decline 10% next year. Variable costs will
increase P 40 per ton and the fixed costs will not change. What sales volume in pesos will be required
to earn an after-tax income of P 94,500 next year?
a. P 825,000 c. P 1,350,000
b. P 1,140,000 d. 1,500,000
Items 23 to 27 are based on the following information
Orange Ski can produce up to 15,000 pairs of cross-country skis of either the Mountaineering model or
Touring model. The sales department assures management that it can sell between
9,000 and 13,000 pairs (units) of either product this year. Because the models are very similar, Orange
Ski will produce only one of the two models. The information below was compiled by the accounting
department.
Mountaineering Touring
Selling price per unit P 88.00 P 80.00
Variable cost per unit P 52.80 P 52.80
Fixed costs will total P 369,600 if the mountaineering model is produced but will be only P 316,800 if the
touring model is produced. Orange Ski Company is subject to a 40% income tax rate.
23. If Orange Ski Company desires an after-tax net income of P 24,000, how many pairs of Touring model
skis will the company have to sell?
a. 13,853 c. 12,529
b. 13,118 d. 4,460
24. The total sales revenue at which Orange Ski Company would make the same profit or loss regardless of
the ski model it decided to produce is
a. P 924,000 c. P 686,400
b. P 880,000 d. P 422,400
25. How much would the variable cost per unit of the Touring model have to change before it had the same
breakeven point in units as the Mountaineering model?
a. P 5.03 decrease c. P 2.97 decrease
b. P 4.53 increase d. P2.68 increase
26. If the variable cost per unit of Touring skis decreases by 10%. and the total fixed cost of Touring skis
increases by 10%, the new breakeven point will be
a. 10,730 pairs
b. 12,812 pairs
c. 13,007 pairs
d. Unchanged from 11,648 pairs because the cost changes are equal and therefore somewhat
offsetting
27. If the Orange Ski Company sales department croak] guarantee the annual sale of 12,000 skis of either
model, orange would
a. Peeling. touring skis because they have a lower fixed cost
b. Produce only Mountaineering skis because they have a lower breakeven point
c. Produce Mountaineering .1ris because they are more Profitable
d. Be indifferent as to which is sold because each model has the same unit variable cost
28 A mail-order confectioner sells fine candy one-pound boxes. It has the capacity to produce 600,000
boxes annually but forecasts that it will produce and sell only 500,000 boxes in the coming year. The
costs to manufacture and distribute the candy are detailed below. The organization has invested capital
of P 6.75 million.
Variable costs per pound
Manufacturing P 4.85
Packaging 0.35
Distribution 1.80
Total P 7.00
Annual fixed costs:
Manufacturing overhead P 810,000
Marketing and distribution 270,000
What is the selling price per pound that the confectioner should charge for a one-pound box of candy to
obtain a 20% rate of return on invested capital?
a. P 9.70 c. P 11.50
b. P 11.05 d. P 11.86
29. The following information was taken from the first year absorption-based accounting records of Spain
Co.:
Total fixed costs incurred P 100,000
Total variable costs incurred 50,000
Total period costs incurred 70,000
Total variable period costs incurred 30,000
Units produced 20,000
Units sold 12,000
Unit sales price P 12
If Spain Company had used variable costing in its first year of operations, how much profit (loss) before
income taxes would it have reported?
a. (P 6,000) c. P 26,000
b. P 54,000 d. P 2,000
30. the following data are available for Monte Carlo Corporation:
Direct materials used P 22,500
Payroll P 30,000
Variable overhead (budgeted and actual) P 2 per unit
Fixed overhead (budgeted and actual) P 40,000
Unit produced 7,500 units
Units sold 7,000 units
Beginning inventory None
Normal capacity 8,000 units
Any capacity variance is closed to cost of sales.
How much is the cost of sales under (1) full costing and (2) direct costing?
a. (1) 98,000 (2) 63,000 c. (1) 103,333 (2) 65,500
b. (1) 100,310 (2) 65,500 d. (1) 100,500 (2) 63,000
31. The following information pertains to Italy Company's Product A-810:
Standard costs:
Variable manufacturing P 12 per unit
Fixed manufacturing (based on normal production of 20,000 units) P 4 per unit
Variances:
Variable manufacturing – unfavorable P 12,000
Capacity P 8,000
Other data:
Production 22,000 units
Sales (P 25/unit) 16,000 units
Operating costs P 64,000
All variances are closed to cost of goods sold. What is the company's profit under GAAP costing?
a. P 76,000 c. P 44,000
b. P 52,000 d. P 42,000
32. Universal, Inc. began operations on January 1. Standard costs were established in early January
assuming a normal production volume of 160,000 units. However, Universal, Inc. produced only
140,000 units of product and sold 100,000 units at a selling price of P 180 per unit during the year.
Variable costs amounted to P 7,000,000, of which 60% were manufacturing and 40% were selling.
Fixed costs totaled P 11,200,000, of which 50% were manufacturing and 50% were selling. Universal,
Inc. had no raw materials or work-in-process inventories at December 31. Actual input prices and
quantities per unit of product were equal to standard. Using absorption costing, what will be the (1)
standard cost of goods sold and (2) overhead volume variance?
a. (1) P 8,200,000 (2) P 800,000 U c. (1) P 6,500,000 (2) P 700,000 U
b. (1) P 7,200,000 (2) P 800,000 F d. (1) P 7,000,000 (2) P 700,000 F