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QE - Cost & FM
QE - Cost & FM
What amount should be considered product costs under variable costing method?
a. P700,000 c. P880,000
b. P800,000 d. P898,000
3 to 4. The following selected budgeted data of Russ Company for the coming year:
Selling Price per unit P12.00
Budgeted Sales P600,000
Fixed Expenses P150,000
Variable cost per unit P8.00
5. A company has revenues of P500,000, variable costs of P300,000 and pretax profit of P150,000. If the
company increased the sales price per unit by 10%, reduced fixed costs by 20%, and left variable cost per
unit unchanged, what would be the new breakeven point in pesos?
a. P88,000 c. P110,000
b. P100,000 d. P125,000
6. Spades Co. uses a standard cost system. Direct labor statistics for the month of May follows:
Actual rate per hour
Standard rate per hour
Labor Efficiency per hour
Standard hours allowed for actual production
8. Santhol manufactures a particular computer component. Manufacturing cost per units are as follows:
Direct materials P50
Direct labor 500
Variable overhead 250
Fixed overhead 400
Total manufacturing costs P1,200
Frexx, Inc. has contracted Santhol with an ffer to sell 10,000 of the component for P1,100 per unit. Is
Santhol accepts the proposals, P2,500,000 of the fixed overhead will be eliminated. Should Santhol make
or buy the component and why?
a. Buy due to savings of P1,000,000
b. Make due to savings of P500,000
c. Buy due to savings of P2,500,000
d. Make due to savings of P3,000,000
9. Gatas Company plans to discontinue a department with P48,000 contributions to overhead, and
allocated overhead of P96,000, of which P42,000 cannot be eliminated. What would be the effect of this
discontinuance on Gatas’ pretax profit?
a. increase of P48,000 c. increase of P6,000
b. decrease of P48,000 d. decrease of P6,000
10. Isam Corporation is considering to keep or dispose P1 million obsolete inventory acquired several
years ago, this cost is
a. discretionary cost c. relevant cost
b. sunk cost d. prime cost
11. Nory Company is preparing its common-size financial statements and revealed the following
information (in thousands of pesos)
Accounts receivable 10,000
Inventory 20,000
Total current assets 35,000
Total assets 84,000
Bonds payable 21,000
Retained earnings 7,000
Sales revenue 75,000
Cost of goods sold 62,000
Income taxes expense 22,000
13. During 2019, Lilies Company purchased P960,000 of inventory. The cost of goods sold for 2019 was
P900,000, and the ending inventory at December 31, 2019 was P180,000. What was the inventory
turnover for 2019?
a. 6.4 b. 6.0 c. 5.3 d. 5.0
14. Short-term creditors would probably most interested in which ratio?
a. current ratio c. debt-to-equity ratio
d. earnings per share d. quick ratio
15 to 16
Becker Company developed the following data for the current year:
Beginning work in process inventory P60,000
Direct materials used 36,000
Actual overhead 72,000
Overhead applied 54,000
Cost of goods manufactured 66,000
Total manufacturing costs 180,000
17 to 20.
The UBA Company manufactures a product using standard costs as follows:
A. Standard Costs per unit (normal hours = 7,200)
Material 7 kilos at P3.50 per kilo
Labor 8 hours at P1.75 per hour
Overhead: Fixed P1.15 per hour or P9.20 per unit
Variable P0.85 per hour or P6.80 per unit
If the cost of goods manufactured during the year amounted to P840,000 and annual sales were
P1,100,000, the amount of gross profit for the year is
a. P260,000.
b. P800,000.
c. P300,000.
d. P220,000
23. The labor costs that have been identified as indirect labor should be charged to
a. manufacturing overhead.
b. direct labor.
c. the individual jobs worked on.
d. salary expense
24. Ace Company produced 20,000 units of Clubs, 15,000 units of Diamonds, and 10,000 units of Hearts.
If the company uses the average unit cost method of allocating joint production costs, which were
P120,000 for the period, the joint costs allocated to Diamonds would be:
a. P40,000
b. P20,000
c. P80,000
d. P45,000
25. Dover Corporation's production cycle starts in the Mixing Department. The following information is
available for April:
Units
Work in process, April 1 (50% complete) 40,000
Started in April 240,000
Work in process, April 30 (60% complete) 25,000
Materials are added at the beginning of the process in the Mixing Department. Using the average cost
method, what are the equivalent units of production for the month of April?
Materials Conversion
a. 255,000 255,000
b. 270,000 280,000
c. 280,000 270,000
d. 240,000 250,000
26. An item that does not appear on a cost of production report is:
a. work in process beginning inventory
b. cumulative costs through the end of departmental production
c. finished goods ending inventory
d. materials used in the department
27. The average and fifo process costing methods differ in that the average method:
a. can be used under any cost flow assumption
b. requires that ending work in process inventory be stated in terms of equivalent units of production
c. considers the ending work in process inventory only partially complete
d. does not consider the degree of completion of beginning work in process inventory when computing
equivalent units of production
28. Rapid Falls Corp. has three producing departments, A, B, and C, with 50, 30, and 20 employees,
respectively, in each department. Factory payroll costs other than direct labor are accumulated in a
Payroll Department account and are assigned to producing departments on the basis of number of
employees. The total payroll in each department was: A, P300,000; B, P275,000; C, P325,000; and
Payroll, P50,000. Other costs accumulated in the Payroll Department amounted to P200,000. The
amount of Payroll Department costs chargeable to Department C is:
a. P100,000
b. P40,000
c. P10,000
d. P50,000
29. Allen Corporation recently sold equipment for P16,000. The equipment was purchased five years ago
for P100,000. The accumulated depreciation on the equipment on the date of sale was P75,000. Alaric
uses the indirect method to prepare its statement of cash flows. What net effect will this sale have on the
investing activities section of Alaric's statement of cash flows for the current year?
a. no effect
b. P9,000 decrease
c. P16,000 increase
d. P7,000 increase
32. Jones Goods has P5 million in inventory and P2 million in accounts receivable. Its average daily sales
are P100,000. The firm’s payables deferral period is 30 days. What is the length of the firm’s cash
conversion period?
a. 60 days
b. 100 days
c. 50 days
d. 40 days
33. Marsman Co. has determined the following for a given year:
Economic order quantity (standard order size) 5,000 units
Total cost to place purchase orders for the year P40,000
Cost to place one purchase order P 100
Cost to carry one unit for one year P4
39. Waltz Corporation’s books disclosed the following information as of and for the year ended December
31, 2020:
Net credit sales P3,000,000
Net cash sales P480,000
Accounts receivable beginning P400,000
Accounts receivable ending P800,000
Reich Manufacturing Company's total manufacturing costs for the period are
a. P240,000.
b. P230,000.
c. P180,000.
d. cannot be determined from the data provided.
41. Jeffrey Co. manufactures Products A and B from a joint process. Market value at split-off was
P700,000 for 10,000 units of A, and P300,000 for 15,000 units of B. Using the market value at split-off
approach, joint costs properly allocated to A were P140,000. Total joint costs were:
a. P98,000
b. P200,000
c. P233,333
d. P350,000
42. Roger Company manufactures Product X in a two-stage production cycle in Departments A and B.
Materials are added at the beginning of the process in Department B. Roger uses the average costing
method. Conversion costs for Department B were 50% complete as to the 6,000 units in beginning work
in process and 75% complete as to the 8,000 units in ending work in process. A total of 12,000 units were
completed and transferred out of Department B during February. An analysis of the costs relating to work
in process and production activity in Department B for February follows:
The total cost per equivalent unit transferred out for February of Product X, rounded to the nearest penny,
was:
a. P2.82
b. P2.85
c. P2.75
d. P2.78
43. The Hilo Company computed the physical flow of units for Department A for the month of April as
follows:
Units completed:
From work in process on April 1 10,000
From April production 30,000
Total 40,000
Materials are added at the beginning of the process. Units of work in process at April 30 were 8,000. The
work in process at April 1 was 80% complete as to conversion costs, and the work in process at April 30
was 60% complete as to conversion costs. What are the equivalent units of production for the month of
April using the fifo method?
44. An objection to the use of a factory overhead rate based on direct labor dollars is that:
a. these items are difficult to measure
b. a job is charged with more overhead when a highly paid operator works on the job than when a low-
paid operator performs the work
c. overhead is allocated in relation to units produced by workers
d. overhead rates will be distributed inequitably when there are no wage differentials in the department
45. Underapplied factory overhead related to a significant decrease in production should be charged to:
a. Finished Goods Inventory
b. Cost of Goods Sold
c. Work in Process Inventory and Finished Goods Inventory
d. Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold
48. Working capital management involves investment and financing decisions related to:
a. plant and equipment and current liabilities.
b. current assets and capital structure.
c. current assets and current liabilities.
d. sales and credit.
49. Simile Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile
has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40
for every cash conversion to marketable securities.
What is the optimal cash conversion size?
a. P60,000 c. P45,000
b. P55,000 d. P72,500
50. Caja Company sells on terms 3/10, net 30. Total sales for the year are P900,000. Forty percent of
the customers pay on the tenth day and take discounts; the other 60 percent pay, on average, 45 days
after their purchases.
51. During the most recent year. Dear Evans Company had a profit of P90,000 using absorption costing
and P84,000 using variable costing. The fixed overhead application rate was P6 per unit. There were no
beginning inventories. If 22,000 units were produced last year, then sales for last year were:
a. 15,000 units c. 23,000 units
b. 21,000 units d. 28,000 units
52. For Raw Material L12, a company maintains a safety stock of 5,000 pounds. Its average inventory
(taking into account the safety stock) is 12,000 pounds. What is the apparent order quantity?
a. 18,000 lbs. c. 14,000 lbs.
b. 6,000 lbs. d. 24,000 lbs
53. Merch Inc., sells Product X to retailers for P200. The unit variable productions cost is P40 with a selling
commission of 10%. Fixed manufacturing costs total P1,000,000 per month while fixed selling and
administrative costs total P420,000. The income tax rate is 30%. The target sales if after tax income is
P123,200 would be.
a. 10,950 units c. 13,750 units
b. 15,640 units d. 11,400 units
54. A company has 7,000 obsolete toys carried in inventory at manufacturing cost of P6 per unit. If the
toys are reworked for P2 per unit they could be sold for P3 per unit. If the toys are scrapped, they could
be sold for P1.85 per unit. Which alternative s more desirable (rework or scrap), and what is the total
peso amount of the advantage of that alternative?
a. Scrap, P5,950 c. Scrap, P47,950
b. Rework, P36,050 d. Rework, P8,050
55. Spare Corporation has an acid test ratio 1.5 to 1. Which of the following will cause this ratio to
deteriorate?
a. payment of cash dividends previously declared
b. borrowing short-term loan from a bank
c. sale of inventory on account
d. sale of equipment at a loss
56. R & R, Inc. has an annual capacity of 2,800 units of output. Its predicted operations for the year as
follows:
Sales 2,000 units at P760 each P1,520,000
Manufacturing costs:
Variable P500 per unit
Fixed P360,000
Selling and Administrative costs:
Variable (sales and commissions) P120 per unit
Fixed P40,000
Assume there would be no effect on regular sales at regular prices and that the usual sales commission
will be reduced to half. Should the company accept at one-time only special order for 600 units at a selling
price of P640 each?
a. Yes, due to incremental income of P48,000.
b. Either on would do as the net effect would be the same
c. Yes, due to incremental income of P30,000
d. No due to the resulting loss of P37,714.
57. During March, Quig Company's Department Y equivalent unit product costs, computed under the
average cost method, were as follows:
Materials P1
Conversion P3
Transferred-in P5
Materials are introduced at the end of the process in Department Y. There were 4,000 units (40%
complete as to conversion costs) in work in process at March 31. The total costs assigned to the March 31
work in process inventory should be:
A. P36,000
B. P28,800
C. P27,200
D. P24,800
58. Annual demand for squash racquets is 50,000 units, and carrying costs amount to $2 per unit. Order
costs for the company amount to $5. The optimum order quantity in units for squash racquets is
(rounded to the nearest unit):
a. 191
b. 500
c. 250
d. 625
59. An inventory control technique that reviews quantities on hand periodically and orders sufficient
quantities to bring inventory up to a desired level expressed as a number of days' or weeks' supply is the:
a. two-bin method
b. ABC inventory control method
c. order cycling method
d. min-max method
60. Profit reported under absorption costing will exceed profit reported under variable costing for a given
period if:
a. production equals sales for that period
b. production exceeds sales for that period
c. sales exceed production for that period
d. the variable manufacturing overhead exceeds the fixed manufacturing overhead.
65. In considering a special order situation that will enable a company to make use of presently idle
capacity, which of the following costs would be irrelevant?
a. Depreciation c. Materials
b. Variable overhead d. Direct labor
67. The allocation of joint costs to individual products is useful primarily for purposes of:
a. determining whether to produce one of the joint products
b. inventory costing
c. deciding whether to sell at the split-off point
d. evaluating whether an output is a main product or a by-product
68. Which of the following would represent a use of funds and, indirectly, a reduction in cash balances?
a. An increase in inventories
b. A decrease in marketable securities
c. An increase in accounts payable
d. The sale of new bonds by the firm
69. The goal of managing working capital, such as inventory, should be to minimize the:
a. costs of carrying inventory
b. opportunity cost of capital
c. aggregate of carrying and shortage costs
d. amount of spoilage or pilferage
70. The length of time between payment for inventory and the collection of cash is referred to as:
a. payables deferral period c. operating cycle
b. receivables conversion period d. cash conversion cycle
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