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Mas Drills Weeks 1-7 & Diagnostic
Mas Drills Weeks 1-7 & Diagnostic
Question 2
Samantha Galloway is a managerial accountant in the accounting department of Mustang
Industries, Inc. Samantha has just discovered evidence that some of the corporation's marketing
managers have been wrongfully inflating their expense reports in order to obtain higher
reimbursements from the firm. According to the Institute of Management Accountants' Standards
of Ethical Conduct, what should Samantha do upon discovering this evidence?
Response: notify the controller
Correct answer: notify the controller
Score: 1 out of 1 Yes
Question 3
The reports are generally delayed and historical.
Response: Financial Accounting
Correct answer: Financial Accounting
Score: 1 out of 1 Yes
Question 4
Contribution approach income statement.
Response: Managerial Accounting
Correct answer: Managerial Accounting
Score: 1 out of 1 Yes
Question 5
The objectives of JIT include all of the following except
Response: Zero preventive maintenance
Correct answer: Zero preventive maintenance
Score: 1 out of 1 Yes
Question 6
A conventional manufacturer is more likely than a just-in-time manufacturer to
Response: hold large inventories to serve as buffers
Correct answer: hold large inventories to serve as buffers
Score: 1 out of 1 Yes
Question 7
Which of the following managerial functions involves a detailed financial and operational
description of anticipated operations?
Response: Planning
Correct answer: Planning
Score: 1 out of 1 Yes
Question 8
The unit of measurement used in management accounting is
Response: any measurement unit that is useful in a particular situation
Correct answer: any measurement unit that is useful in a particular situation
Score: 1 out of 1 Yes
Question 9
Benchmarking allows managers to
Response: compare certain internal processes, services and activities to those of other companies
in order to identify strengths and weaknesses
Correct answer: compare certain internal processes, services and activities to those of other
companies in order to identify strengths and weaknesses
Score: 1 out of 1 Yes
Question 10
Assists in measuring the performance of managers and subunits.
Response: Managerial Accounting
Correct answer: Managerial Accounting
Score: 1 out of 1 Yes
Question 11
Reliance on the criterion of usefulness rather than formal guidelines or restrictions for gathering
and reporting information.
Response: Managerial Accounting
Correct answer: Managerial Accounting
Score: 1 out of 1 Yes
Question 12
The audience tends to be stockholders, creditors, and tax authorities.
Response: Financial Accounting
Correct answer: Financial Accounting
Score: 1 out of 1 Yes
Question 13
After careful planning, Jammu Manufacturing Corporation has decided to switch to a just-in-
time inventory system. At the beginning of this switch, Jammu has 30 units of product in
inventory. Jammu has 2,000 labor hours available in the first month of this switch. These hours
could produce 500 units of product. Customer demand for this first month is 400 units. If just-in-
time principles are correctly followed, how many units should Jammu plan to produce in the first
month of the switch?
Response: 370
Correct answer: 370
Score: 1 out of 1 Yes
Question 14
The scope tends to be highly aggregated.
Response: Financial Accounting
Correct answer: Financial Accounting
Score: 1 out of 1 Yes
Question 15
A just-in-time manufacturer is more likely than a conventional manufacturer to
Response: receive more frequent deliveries of materials
Correct answer: receive more frequent deliveries of materials
Score: 1 out of 1 Yes
Question 16
Focuses on estimating future revenues, costs, and other measures to forecast activities and their
results
Response: Managerial Accounting
Correct answer: Managerial Accounting
Score: 1 out of 1 Yes
Question 17
A managerial accountant who prepares clear reports and recommendations after analyzing
relevant facts is exercising which of the following standards?
Response: Competence
Correct answer: Competence
Score: 1 out of 1 Yes
Question 18
Assisting in directing and controlling operations.
Response: Managerial Accounting
Correct answer: Managerial Accounting
Score: 1 out of 1 Yes
Question 19
It provides reasonable and timely estimates.
Response: Managerial Accounting
Correct answer: Managerial Accounting
Score: 1 out of 1 Yes
Question 20
The report is verifiable and reliable.
Response: Financial Accounting
Correct answer: Financial Accounting
Score: 1 out of 1
Question 3
When a mixed cost is graphed the slope of the line equals
Response: the variable cost per unit of the activity driver
Correct answer: the variable cost per unit of the activity driver
Score: 1 out of 1 Yes
Question 4
The management of Casablanca Manufacturing Corporation believes that machine-hours is an
appropriate measure of activity for overhead cost Shown below are machine-hours and total
overhead costs for the past six months:
Machine- Overhead
Hours Cost
Jan 150,000 P339,000
Feb 140,000 P328,000
Mar 160,000 P350,000
Apr 130,000 P319,500
May 170,000 P362,500
Jun 200,000 P400,000
Assume that the relevant range includes all of the activity levels mentioned in this problem.
What is Casablanca's dependent variable? The
Response: total overhead cost
Correct answer: total overhead cost
Score: 1 out of 1 Yes
Question 5
Variable costs within the relevant range
Response: all of the responses are correct
Correct answer: all of the responses are correct
Score: 1 out of 1 Yes
Question 6
The management of Casablanca Manufacturing Corporation believes that machine-hours is an
appropriate measure of activity for overhead cost Shown below are machine-hours and total
overhead costs for the past six months:
Machine- Overhead
Hours Cost
Jan 150,000 P339,000
Feb 140,000 P328,000
Mar 160,000 P350,000
Apr 130,000 P319,500
May 170,000 P362,500
Jun 200,000 P400,000
Assume that the relevant range includes all of the activity levels mentioned in this problem.
What is Casablanca's independent variable?
Response: the machine hours
Correct answer: the machine hours
Score: 1 out of 1 Yes
Question 7
The method of least squares
Response: uses the results of regression analysis to construct a cost formula
Correct answer: uses the results of regression analysis to construct a cost formula
Score: 1 out of 1 Yes
Question 8
The management of Casablanca Manufacturing Corporation believes that machine-hours is an
appropriate measure of activity for overhead cost Shown below are machine-hours and total
overhead costs for the past six months:
Machine- Overhead
Hours Cost
Jan 150,000 P339,000
Feb 140,000 P328,000
Mar 160,000 P350,000
Apr 130,000 P319,500
May 170,000 P362,500
Jun 200,000 P400,000
Assume that the relevant range includes all of the activity levels mentioned in this problem.
If Casablanca expects to incur 185,000 machine hours next month, what will the estimated total
overhead cost be using the high-low method?
Response: P382,750
Correct answer: P382,750
Score: 1 out of 1 Yes
Question 9
The following data pertains to activity and costs for two months:
June July
Activity level in units 10,000 20,000
Variable costs P20,000 P?
Fixed costs 15,000 ?
Mixed costs 10,000 ?
Total costs P45,000 P70,000
Assuming that these activity levels are within the relevant range, the mixed costs for July were:
Response: P15,000
Correct answer: P15,000
Score: 1 out of 1 Yes
Question 10
If sales revenue doubles, fixed costs will
Response: decrease on a per unit basis
Correct answer: decrease on a per unit basis
Score: 1 out of 1 Yes
Question 11
At an activity level of 10,000 units, variable costs totaled P35,000 and fixed costs totaled
P20,800. If 16,000 units are produced and this activity is within the relevant range, then:
Response: total unit cost would equal P4.80
Correct answer: total unit cost would equal P4.80
Score: 1 out of 1 Yes
Question 12
A mixed cost function has a constant component of P20,000. If the total cost is P60,000 and the
independent variable has the value 200, what is the value of the slope coefficient?
Response: P200
Correct answer: P200
Score: 1 out of 1 Yes
Question 13
In preparing the annual profit plan for the coming year, Wilkens Company wants to determine
the cost behavior pattern of the maintenance costs. Wilkens has decided to use linear regression
by employing the equation y =a + bx for maintenance costs. Based on the prior year's data
regarding maintenance hours and costs, the result of the regression analysis are given below.
Average cost per hour P9.00
A 684.65
B 7.2884
Standard error of a 49.515
Standard error of b .12126
Standard error of the estimate 34.469
R2 .99724
Based upon the data derived from the regression analysis, 420 maintenance hours in a month
would mean the maintenance costs (rounded to the nearest peso) would be budgeted at
Response: P3,746
Correct answer: P3,746
Score: 1 out of 1 Yes
Question 14
The following production and average cost data per unit for two levels of monthly production
volume have been supplied by a company that produces a single product:
Production volume 2,000 units 4,000 units
Direct materials P88.40 P88.40
Direct labor P20.60 P20.60
Manufacturing OH P86.90 P55.30
The best estimate of the total monthly fixed manufacturing cost is:
Response: P126,400
Correct answer: P126,400
Score: 1 out of 1 Yes
Question 15
A fixed cost within the relevant range
Response: does not change in total as output changes
Correct answer: does not change in total as output changes
Score: 1 out of 1
Question 2
Sta. Ana Appliance Company presents its budgeted data for the year. It is estimated that the
company will sell 240 refrigerators during the year. The estimated costs of these sales are as
follows:
Amount Per Unit
Direct labor P40,800 P 170
Materials 240,000 1,000
Fixed overhead 98,400 410
Administrative Expenses 100,800 420
P480,000 P2,000
Selling expenses are expected to be 20% of sales. Profit before tax is to amount to P500 per unit.
The company’s break-even point in units assuming that overhead and administrative expenses
are fixed but that other expenses are fully variable is equal to
Response: 150 units
Correct answer: 150 units
Score: 1 out of 1 Yes
Question 3
Consider the equation X = Sales - [(CM/Sales) x (Sales)]. What is X?
Response: Variable costs
Correct answer: Variable costs
Score: 1 out of 1 Yes
Question 4
Regal, Inc. sells product Rainbow for P5 per unit. The fixed costs are P210,000 and the variable
costs are 60% of the selling price. What would be the amount of sales if Regal is to realize a
profit of 10% of sales?
Response: P700,000
Correct answer: P700,000
Score: 1 out of 1 Yes
Question 5
8. Buffo Company fabricates metal folding chairs. Data concerning the company's revenue and
cost structure follow:
Selling price per unit P35
Manufacturing cost P4,000 per month plus P17 per unit
Administrative expense P2,500 per month plus P2.50 per unit
Sales commissions 15% of sales
Advertising expense P2,000 per month
If Buffo plans to produce sell 3,000 units next month, the expected contribution margin would
be:
Response: P30,750
Correct answer: P30,750
Score: 1 out of 1 Yes
Question 6
The following information is taken from Wampler Co.'s contribution income statement:
Sales - P200,000
Contribution margin - P120,000
Fixed costs - P90,000
Income taxes - P12,000
What was Wampler's margin of safety?
Response: P50,000
Correct answer: P50,000
Score: 1 out of 1 Yes
Question 7
Tropical Stuff Toys manufactures and sells dolls. The following information relates to the
operating results for the last quarter:
Stuff toys sold 19,375
Break-even point in number of toys 15,500
Break-even point in peso sales P65,875
Total fixed costs P47,275
What was Tropical Stuff Toys variable cost per doll?
Response: P1.20
Correct answer: P1.20
Score: 1 out of 1 Yes
Question 8
If the sales mix shifts toward higher contribution margin products, the break-even point
Response: decreases
Correct answer: decreases
Score: 1 out of 1 Yes
Question 9
11. Phil. Frames Inc. has the following revenue and cost budgets for the two products it sells
Plastic Glass
Frames Frames
The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is
budgeted at P4,875,000. Assume that the company plans to maintain the proportional mix. In
numerical calculations, the company rounds to the nearest centavo and unit. The total number of
units the company needs to produce and sell to breakeven is
Response: 150,000 units
Correct answer: 150,000 units
Score: 1 out of 1 Yes
Question 10
Which of the following equation(s) is(are) true?
Response: All of the equations are true
Correct answer: All of the equations are true
Score: 1 out of 1 Yes
Question 11
Dandy Corporation manufactures skateboards and is in the process of preparing next year's
budget. The pro-forma income statement for the current year is presented below.
Sales P1,500,000
Cost of sales
Direct materials P250,000
Direct labor 150,000
Variable OH 75,000
Fixed OH 100,000 575,000
Gross profit 925,000
Selling and G&A
Variable 200,000
Fixed 250,000 450,000
Operating income P475,000
For the coming year, the management of Dandy Corporation anticipates a 10 percent increase in
sales, a 12% increase in variable costs, and a P45,000 increase in fixed expenses. The breakeven
point for next year is:
Response: P729,051
Correct answer: P729,051
Score: 1 out of 1 Yes
Question 12
The following data have been provided by a retailer that sells a single product.
What is the best estimate of the company's contribution margin for this year?
Response: P252,000
Correct answer: P252,000
Score: 1 out of 1 Yes
Question 13
Last year, Black Company had sales of P640,000, a contribution margin of P160,000, and a net
loss of P40,000. Based on this information, the break-even point was
Response: P800,000
Correct answer: P800,000
Score: 1 out of 1 Yes
Question 14
If the profit margin before tax is 8%, contribution margin of 20%, and a margin of safety of
P80,000. What is Cott's fixed cost?
Response: P24,000
Correct answer: P24,000
Score: 1 out of 1 Yes
Question 15
Which of the following actions is most likely to mitigate the risk of loss due to high operating
leverage?
Response: Reducing the salary and increasing the commission rate paid to the sales staff
Correct answer: Reducing the salary and increasing the commission rate paid to the sales staff
Score: 1 out of 1
Question 2
Dickey Company had total underapplied overhead of P15,000. Additional data:
Variable:
Fixed:
Response: P87,000
Correct answer: P87,000
Score: 1 out of 1 Yes
Question 3
A major advantage of using standard costs is that
Response: they provide information for control purposes
Correct answer: they provide information for control purposes
Score: 1 out of 1 Yes
Question 4
An actual cost system differs from a normal cost system in that an actual cost system
Response: assigns overhead at the end of the manufacturing process
Correct answer: assigns overhead at the end of the manufacturing process
Score: 1 out of 1 Yes
Question 5
The fixed factory O/H application rate is a function of a predetermined activity level. If standard
hours allowed for good output equal this predetermined activity level for a given period, the
volume variance will be
Response: zero
Correct answer: zero
Score: 1 out of 1 Yes
Question 6
Information on Barber Company’s direct labor costs for the month of January is as follows:
Response: P20,700U
Correct answer: P20,700U
Score: 1 out of 1 Yes
Question 7
Information on Kennedy Company’s direct material costs is as follows:
What was the actual purchase price per unit, rounded to the nearest centavos?
Response: P3.45
Correct answer: P3.45
Score: 1 out of 1 Yes
Question 8
Standard cost
Response: can, if properly used, help motivate employees
Correct answer: can, if properly used, help motivate employees
Score: 1 out of 1 Yes
Question 9
For the month of August, M Company’s records disclosed the following data relating to direct labor:
For the month of August, M used 2,000 direct labor hours. The company’s standard direct labor rate
per hour is:
Response: P5.50
Correct answer: P5.50
Score: 1 out of 1 Yes
Question 10
Information on Overhead Company’s overhead costs is as follows:
Standard applied overhead P80,000
Response: P6,000 U
Correct answer: P6,000 U
Score: 1 out of 1 Yes
Question 11
A standard costing system is most often used by a firm in conjunction with
Response: flexible budgets
Correct answer: flexible budgets
Score: 1 out of 1 Yes
Question 12
Variances indicate
Response: that actual performance is not going according to plan
Correct answer: that actual performance is not going according to plan
Score: 1 out of 1 Yes
Question 13
A company produces widgets with budgeted standard direct materials of 2 pounds per widget at
P5 per pound. Standard direct labor was budgeted at 0.5 hour per widget at P15 per hour. The
actual usage in the current year was 25,000 pounds and 3,000 hours to produce 10,000 widgets.
What was the direct labor usage variance?
Response: P30,000 F
Correct answer: P30,000 F
Score: 1 out of 1 Yes
Question 14
Which department is typically responsible for a materials price variance?
Response: Purchasing
Correct answer: Purchasing
Score: 1 out of 1 Yes
Question 15
The total overhead variance is
Response: the difference between actual overhead costs and applied overhead
Correct answer: the difference between actual overhead costs and applied overhead
Score: 1 out of 1
What is the difference between operating incomes under absorption costing and variable costing?
Response: P70,000
Correct answer: P70,000
Score: 1 out of 1 Yes
Question 2
The following information was extracted from the first year of absorption-based accounting records of
Soconfused Co.
Based on variable costing, if Soconfused had sold 12,001 units instead of 12,000, its income before
taxes would have been
Response: P8.50 higher
Correct answer: P8.50 higher
Score: 1 out of 1 Yes
Question 3
The following information was extracted from the first year of absorption-based accounting records of
Soconfused Co.
If Soconfused Co. had used variable costing in its first year of operations, how much income (loss)
before taxes would they have reported?
Response: P2,000
Correct answer: P2,000
Score: 1 out of 1 Yes
Question 4
The following information was extracted from the first year of absorption-based accounting records of
Soconfused Co.
Response: P48,000
Correct answer: P48,000
Score: 1 out of 1 Yes
Question 5
Under variable costing
Response: inventory costs will be lower than under absorption costing
Correct answer: inventory costs will be lower than under absorption costing
Score: 1 out of 1 Yes
Question 6
Which of the following cost(s) are inventoried when using variable costing?
Response: direct manufacturing costs
Correct answer: direct manufacturing costs
Score: 1 out of 1 Yes
Question 7
A manufacturing company that produces a single product has provided the following data concerning
its most recent month of operations:
Fixed costs:
What is the net operating income for the month under absorption costing?
Response: P15,400
Correct answer: P15,400
Score: 1 out of 1 Yes
Question 8
The gross-margin format of the income statement
Response: distinguishes between manufacturing and nonmanufacturing costs
Correct answer: distinguishes between manufacturing and nonmanufacturing costs
Score: 1 out of 1 Yes
Question 9
With a production of 200,000 units of Product A during the month of June, Martin Corporation has
incurred costs as follows:
Response: P2.05
Correct answer: P2.05
Score: 1 out of 1 Yes
Question 10
During July, Roy Co. produced 10,000 units. Costs incurred by Roy during the month were as follows:
Under absorption costing, any unsold units would be carried in the inventory account at a unit product
cost of:
Response: P4.40
Correct answer: P4.40
Score: 1 out of 1 Yes
Question 11
Under absorption costing, fixed manufacturing overhead costs
Response: are deferred in inventory when production exceeds sales
Correct answer: are deferred in inventory when production exceeds sales
Score: 1 out of 1 Yes
Question 12
What is the primary difference between variable and absorption costing?
Response: inclusion of fixed factory overhead in product costs
Correct answer: inclusion of fixed factory overhead in product costs
Score: 1 out of 1 Yes
Question 13
In an income statement prepared using the variable costing method, fixed selling and
administrative expenses would
Response: be used in the computation of net operating income but not in the computation of the
contribution margin
Correct answer: be used in the computation of net operating income but not in the computation
of the contribution margin
Score: 1 out of 1 Yes
Question 14
A manufacturing company that produces a single product has provided the following data concerning
its most recent month of operations:
Fixed costs:
What is the net operating income for the month under variable costing?
Response: P15,700
Correct answer: P15,700
Score: 1 out of 1 Yes
Question 15
Advocates of variable costing argue that
Response: fixed production costs should be charged to the period in which they are incurred
Correct answer: fixed production costs should be charged to the period in which they are
incurred
Score: 1 out of 1
Question 2
Sta. Barbara is one of the manufacturers of a part used in the production of a popular consumer
product. Sales of the consumer product in 2021 are estimated at 5,000,000 units. Sta. Barbara
regularly supplies 40% of the parts used in the new products. Two parts units are needed for each
product unit. Aside from the new products, there is also a replacement parts market. Over the past
three years, the company has sold the following number of replacement parts:
2018 300,000
2019 330,000
2020 363,000
This trend is expected to continue. The parts are sold for P4 per piece in the new products market
and P4.50 in the replacement parts market.
Response: 4,399,300
Correct answer: 4,399,300
Score: 1 out of 1 Yes
Question 3
The following selected data pertain to Plaka Corporation:
Depreciation 60,000
Merchandise purchases in July 560,000
In June 220,000
In July 40%
Response: P674,000
Correct answer: P674,000
Score: 1 out of 1 Yes
Question 4
Wilson Corporation is budgeting its equipment needs on an on-going basis, with a new quarter
being added to the budget as the current quarter is completed. This type of budget is most
commonly known as a
Response: rolling budget
Correct answer: rolling budget
Score: 1 out of 1 Yes
Question 5
Given the following weekly demand and weights, what is the forecast for the 4 th period of or week 4
using the weighted moving average?
Week Demand
1 650
2 678
3 720
4
T – 1 0.5
T – 2 0.3
T – 3 0.2
Response: 693.4
Correct answer: 693.4
Score: 1 out of 1 Yes
Question 6
Vern's makes all sales on account, subject to the following collection pattern: 20% are collected
in the month of sale; 70% are collected in the first month after sale; and 10% are collected in the
second month after sale. If sales for October, November, and December were P70,000, P60,000,
and P50,000, respectively, what was the budgeted receivables balance on December 31?
Response: P46,000
Correct answer: P46,000
Score: 1 out of 1 Yes
Question 7
Chronologically, the last part of the master budget to be prepared would be the
Response: pro forma financial statements
Correct answer: pro forma financial statements
Score: 1 out of 1 Yes
Question 8
Sta. Barbara is one of the manufacturers of a part used in the production of a popular consumer
product. Sales of the consumer product in 2021 are estimated at 5,000,000 units. Sta. Barbara
regularly supplies 40% of the parts used in the new products. Two parts units are needed for each
product unit. Aside from the new products, there is also a replacement parts market. Over the past
three years, the company has sold the following number of replacement parts:
2018 300,000
2019 330,000
2020 363,000
This trend is expected to continue. The parts are sold for P4 per piece in the new products market
and P4.50 in the replacement parts market.
The amount of expected revenue based on the estimated number of parts to be sold in 2021 is
Response: P17,796,850
Correct answer: P17,796,850
Score: 1 out of 1 Yes
Question 9
Brooklyn makes all purchases on account, subject to the following payment pattern; 30% is paid
in the month of purchase, 65% is paid in the first month following purchase and 5% is paid in the
second month following purchase. If purchases for April, May, and June were P200,000,
P160,000, and P250,000, respectively, what was the firm's budgeted payables balance on June
30?
Response: P183,000
Correct answer: P183,000
Score: 1 out of 1 Yes
Question 10
Swanson plans to sell 10,000 units of a particular product during July and expects sales to
increase at the rate of 10% per month during the remainder of the year. The June 30 and
September 30 ending inventories are anticipated to be 1,100 units and 950 units, respectively. On
the basis of this information, how many units should Swanson purchase for the quarter ended
September 30?
Response: 32,950
Correct answer: 32,950
Score: 1 out of 1 Yes
Question 11
An enterprise has excess capacity in production-related property, plant, and equipment. If in a
given year these assets are being used to only 80% of capacity and the sales level in that year is 2
million, the full capacity sales level is
Response: 2,500,000
Correct answer: 2,500,000
Score: 1 out of 1 Yes
Question 12
Coleman, Inc., anticipates sales of 50,000 units, 48,000 units, and 51,000 units in July, August,
and September, respectively. Company policy is to maintain an ending finished-goods inventory
equal to 40% of the following month's sales. On the basis of this information, how many units
would the company plan to produce in August?
Response: 49,200
Correct answer: 49,200
Score: 1 out of 1 Yes
Question 13
When preparing the series of annual operating budgets, management usually starts the process
with the
Response: sales budget
Correct answer: sales budget
Score: 1 out of 1 Yes
Question 14
Jackson Co. has the following balance sheet as of December 31, 2020.
In 2020, the company reported sales of P5 million, net income of P100,000, and dividends of P60,000.
The company anticipates its sales will increase 20 percent in 2021 and its dividend payout will remain at 60
percent. Assume the company is at full capacity, so its assets and spontaneous liabilities will increase
proportionately with an increase in sales. Assume the company uses the AFN formula and all additional
funds needed (AFN) will come from issuing new long-term debt. Given its forecast, how much long-term
debt will the company have to issue in 2021?
Response: P112,000
Correct answer: P112,000
Score: 1 out of 1 Yes
Question 15
Quattro makes all sales on account, subject to the following collection pattern: 30% are
collected in the month of sale; 60% are collected in the first month after sale; and 10% are
collected in the second month after sale. If sales for April, May, and June were P60,000,
P80,000, and P70,000, respectively, what were the firm's budgeted collections for June?
Response: P75,000
Correct answer: P75,000
Score: 1 out of 1
DIAGNOSTIC EXAM
Question 1
What is Poppin' Corn's expected net profit if demand is predicted to be 1,100 boxes?
Response: 47,500
Correct answer: 47,500
Score: 1 out of 1 Yes
Question 2
When using the graph method, if unit outputs exceed the break-even point,
Question 3
At the end of a period, an insignificant material price variance should be
Response: allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold.
Correct answer: closed to Cost of Goods Sold.
Score: 0 out of 1 No
Question 4
Management accounting is the area of accounting that emphasizes
Response: developing accounting information for use within a company.
Correct answer: developing accounting information for use within a company.
Score: 1 out of 1 Yes
Question 5
The issuance of serial bonds in exchange for an office building, with the first installment of the bonds
due end of the year:
Question 6
Line management includes
Response: manufacturing managers.
Correct answer: manufacturing managers.
Score: 1 out of 1 Yes
Question 7
What is Poppin' Corn's expected net profit if demand is predicted to be 950 boxes?
Response: P45,000
Correct answer: P46,500
Score: 0 out of 1 No
Question 8
Universal Company uses a standard cost system and prepared the following budget at normal capacity
for the month of January.
Using the two-way analysis of overhead variances, what is the budget (controllable) variance for
January?
Response: P13,500 unfavorable
Correct answer: P3,000 favorable
Score: 0 out of 1 No
Question 9
Adventure Corporation was organized on January 1 with the following capital structure:
10% cumulative preferred stock, par and liquidation value of P100; authorized, issued
and outstanding 2,000 shares P200,000
Common stock, par value, P5; authorized 40,000 shares; Issued and outstanding
100,000
20,000 shares
Adventure’s net income for the first year ended December 31 was P1,880,000, but no dividends were
declared. How much was Adventure’s book value per common share at December 31?
Response: P99
Correct answer: P98
Score: 0 out of 1 No
Question 10
Bayan Company normally produces and sells 30,000 units of E14 each month. E14 is a small
electrical relay used in the automotive industry as a component part in various products. The selling
price is P22 per unit, variable costs are P14 per unit, fixed manufacturing overhead costs total
P150,000 per month, and fixed selling costs total P30,000 per month.
Employment-contract strikes in the companies that purchase the bulk of the E14 have caused Bayan
Company’s sales to temporarily drop to only 9,000 units per month. Bayan Company estimates that
the strikes will last for about two months, after which time sales of E14 should return to normal. Due
to the current low level of sales, however, Bayan Company is thinking about closing down its own
plant during the two months that the strikes are on. If Bayan Company does close down its plant, it is
estimated that fixed manufacturing overhead costs can be reduced to P105,000 per month and that
fixed selling costs can be reduced by 10%. Start-up costs at the end of the shutdown period would
total P8,000. Since Bayan Company uses just-in-time production method, no inventories are on hand.
At what level of unit sales for the two-month period should Bayan Company be indifferent between
temporarily closing the plant or keeping it open?
Response: 11,000
Correct answer: 11,000
Score: 1 out of 1 Yes
Question 11
Which of the following costs is relevant in deciding whether to sell joint products at split-off or
process them further?
Question 12
Arranging for a shipment of a number of different products to a customer is an example of an activity
at which of the following levels?
Response: Batch-level activity.
Correct answer: Batch-level activity.
Score: 1 out of 1 Yes
Question 13
Heavy Metal Corp. is a steel manufacturer that finances its operations with 40 percent
debt, 10 percent preferred stock, and 50 percent equity. The interest rate on the company’s
debt is 11 percent. The preferred stock pays an annual dividend of P2 and sells for P20 a
share. The company’s common stock trades at P30 a share, and its current dividend (D0) of
P2 a share is expected to grow at a constant rate of 8 percent per year. The flotation cost of
external equity is 15 percent of the peso amount issued, while the flotation cost on
preferred stock is 10 percent. The company estimates that its WACC is 12.30 percent.
Assume that the firm will not have enough retained earnings to fund the equity portion of
its capital budget. What is the company’s tax rate?
Response: 32.87%
Correct answer: 32.87%
Score: 1 out of 1 Yes
Question 14
Largo Company recorded for the past year sales of P750,000 and average operating assets of
P375,000. What is the margin that Largo Company needed to earn in order to achieve an ROI of 15%?
Response: 7.50%
Correct answer: 7.50%
Score: 1 out of 1 Yes
Question 15
Sales of big-screen televisions have grown steadily during the past five years. A dealer predicted that the demand for
February would be 148 televisions. Actual demand in February was 158 televisions. If the smoothing constant is á=0.3, the
demand forecast for March, using the exponential smoothing model, will be
Response: 151 televisions.
Correct answer: 151 televisions.
Score: 1 out of 1 Yes
Question 16
If the return on the market portfolio is 10% and the risk-free rate is 5%, what is the effect on a
company's required rate of return on its stock of an increase in the beta coefficient from 1.2 to 1.5?
Response: 1.5% increase
Correct answer: 1.5% increase
Score: 1 out of 1 Yes
Question 17
Adriano Company is developing its budgeted cost of goods sold for next year. Adriano has developed
the following range of sales estimates and their corresponding probabilities for the year.
P1,500,000 25%
P1,800,000 45%
P2,400,000 30%
Adriano Company’s cost of goods sold averages 75% of sales. What is the expected cost of goods
sold?
Response: P1,425,000
Correct answer: P1,428,750
Score: 0 out of 1 No
Question 18
The costing system that classifies costs by functional group only is
Response: absorption costing.
Correct answer: absorption costing.
Score: 1 out of 1 Yes
Question 19
The following information pertains to ABC and Co.
2020 2019
Response: P80,000 increase
Correct answer: P520,00 decrease
Score: 0 out of 1 No
Question 20
Given the following data, what is the marginal propensity to save?
Level of
Disposable income Consumption
P40,000 P38,000
48,000 P44,000
Response: 133
Correct answer: 0.25
Score: 0 out of 1 No
Question 21
Which of the following statements about a firm with zero fixed operating costs is true?
Question 22
A firm's balance sheet as of December 31 is shown below. The firm's sales for the year were
P1,000,000,000, and its after-tax margin on sales was 5%. Sales are expected to increase next year
to P1,300,000,000, and it plans to distribute 50% of its net profits to stockholders. Based on the
percentage-of-sales method, the amount of funds that must be obtained externally by borrowing or by
selling new stock is
Response: P144 million.
Correct answer: P111.50 million.
Score: 0 out of 1 No
Question 23
When using the PERT method for network analysis, the critical path through the network is
Response: The path with the most slack.
Correct answer: The longest path through the network.
Score: 0 out of 1 No
Question 24
A basic assumption of activity-based costing (ABC) is that
Response: products or services require the performance of activities, and activities consume
resources.
Correct answer: products or services require the performance of activities, and activities consume
resources.
Question 25
Which tool would most likely be used to determine the best course of action under condition of
uncertainty?
Question 26
Regina Company sells a product for P35 per unit and the variable production and sales costs are P21
per unit. If Regina Company adopts a 40% increase in selling price of its product, how many can unit
sales decline before total profits decline?
Response: 57%
Correct answer: 50%
Score: 0 out of 1 No
Question 27
A company had an income of P50,000 using direct costing for a given month. Beginning and ending
inventories for the month are 13,000 units and 18,000 units, respectively. Ignoring income tax, if the
fixed overhead application rate was P2 per unit, what was the income using absorption costing?
Response: P40,000
Correct answer: P60,000
Score: 0 out of 1 No
Question 28
Sales and costs data for Maripaz Corporation’s new product are as follows:
There was no inventory at the beginning of the year. Normal capacity of the plant is 12,500 units.
During the year, 12,500 units were manufactured. The total variable cost charged to expense for the
year under the direct costing method shall be
Response: P228,750
Correct answer: P165,000
Score: 0 out of 1 No
Question 29
Raul Corporation had a current ratio of 2.0 at the end of the current year. Current assets and current
liabilities increased by equal amounts during the following year. The effects on net working capital
and on the current ratio, respectively, were
Question 30
Which of the following groups would be least likely to receive detailed management accounting
reports?
Response: Stockholders
Correct answer: Stockholders
Score: 1 out of 1 Yes
Question 31
The Proway Corporation produces a variety of cleaning compounds and solutions for both industrial
and household use. While most of its products are processed independently, a few are related. “Sprit
357” is a coarse cleaning powder with many industrial uses. It costs P16 a pound to make and has a
selling price of P20 a pound. A small portion of the annual production of this product is retained for
further processing in the Mixing Department where it is combined with several other ingredients to
form a paste which is marketed as a silver polish selling for P40 a jar. This further processing requires
¼ pound of Sprit 357 per jar. Other ingredients, labor, and variable overhead associated with this
further processing cost P25 per jar. Variable selling costs amount to P3.00 per jar. If the decision
were made to cease production of the silver polish, P56,000 of fixed Mixing Department costs could be
avoided. Assume that the demand for Sprit 357 is unlimited. The minimum number of jars of silver
polish that would have to be sold to justify further processing of Sprit 357 is
Response: 7,000 jars
Correct answer: 8,000 jars
Score: 0 out of 1 No
Question 32
Based on the following partial comparative income for the year 2020 and 2019, compute the amount
of change in contribution margin due to a change in variable cost per unit.
2020 2019
Effective January 1, 2020, the selling price per unit was decreased by 10 percent.
Response: P72,450 increase
Correct answer: P60,375 decrease
Score: 0 out of 1 No
Question 33
Which of the following statements is most consistent with efficient inventory management? The firm
has
Question 34
Which one of the following statements is correct concerning credit periods?
Response: A firm may offer different credit terms to different customers.
Correct answer: A firm may offer different credit terms to different customers.
Score: 1 out of 1 Yes
Question 35
The proponents of throughput costing
Response: treat all costs, except those related to variable direct materials, as costs of the period in
which they are incurred.
Correct answer: treat all costs, except those related to variable direct materials, as costs of the
period in which they are incurred.
Question 36
Bradley Co. budgets its total production costs at P220,000 for 75,000 units of output and P275,000 for
100,000 units of output. Since additional facilities are needed to produce 100,000 units, fixed costs
are budgeted at 20% more than for 75,000 units. What is Bradley's budgeted fixed cost at 75,000
units?
Response: 55,000
Correct answer: 137,500
Score: 0 out of 1 No
Question 37
Gerald's Manufacturing is operating at 78 percent of its fixed asset capacity and has current sales of
P575,000. How fast can the firm grow before any new fixed assets are needed?
Response: 28.21%
Correct answer: 28.21%
Score: 1 out of 1 Yes
Question 38
The internal business processes perspective of the balanced scorecard comprises three subprocesses
that address all of the following EXCEPT:
Response: delivering existing products and services to best meet the needs of customers
Correct answer: motivating current employees
Score: 0 out of 1 No
Question 39
An old machine that originally cost P9,500 thus far has accumulated depreciation of P1,900. The
remaining useful life is four years, with no salvage value at the end of its useful life. A new machine is
now available that costs P8,500, with a useful life of four years and no residual value. The old machine
could be sold now for P4,200. The annual cash operating costs for the old machine are P5,000, but for
the new machine they would be only P2,500. Gross revenue from the products would be P12,000
annually for either machine. The company should
Question 40
Capital budgeting methods are often divided into two classifications: project screening and project
ranking. Which one of the following is considered a ranking method rather than a screening method?
Response: Profitability index.
Correct answer: Profitability index.
Score: 1 out of 1 Yes
Question 41
Morr Co. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Morr 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 optimum average cash balance?
Response: P55,000
Correct answer: P27,500
Score: 0 out of 1 No
Question 42
The McNally Co. is considering an investment in a project that generates a profitability index of 1.3.
The present value of the cash inflows on the project is P44,000. What is the net present value of this
project?
Response: P10,154
Correct answer: P10,154
Score: 1 out of 1 Yes
Question 43
The typical balanced scorecard is best described as containing:
Response: both financial and nonfinancial performance measures, the latter often covering a broad
range of perspectives that focus on customers, internal operations, and learning and growth.
Correct answer: both financial and nonfinancial performance measures, the latter often covering a
broad range of perspectives that focus on customers, internal operations, and learning and growth.
Question 44
A company using regression analysis to correlate income to a variety of sales indicators found that the
relationship between the number of sales managers in a territory and net income for the territory had
a correlation coefficient of -1. Which is the best description of this situation?
Question 45
Gardner Company’s stock is currently selling for P120 a share. The firm is expected to earn P10.80
per share and to pay a year-end dividend of P7.20. Investors require a 9% return. If Gardner
reinvests retained earnings in projects whose aggregate return is equal to the stock’s expected rate of
return and it will continue the constant dividend growth rate, how much is the year-end dividend next
year?
Response: P7.35
Correct answer: P7.42
Score: 0 out of 1 No
Question 46
Jones Construction currently uses traditional costing where overhead is applied based on direct labor
hours. Using traditional costing, the applied overhead rate is P20 per direct labor hour.
They are considering a switch to activity-based costing (ABC). The company controller has come up
with preliminary overhead rates for each of the following activities:
Number of deliveries 2
Number of inspections 3
Which of the following statements is true when comparing the total overhead allocated to the job
using traditional versus ABC costing?
Response: ABC costing will yield P735 less in overhead cost being allocated to the job.
Correct answer: ABC costing will yield P215 less in overhead cost being allocated to the job.
Score: 0 out of 1 No
Question 47
Nelson Company's current liabilities are P50,000, its long-term liabilities are P150,000, and its working
capital is P80,000. If Nelson Company's debt-to-equity ratio is 0.32, its total long-term assets must
equal:
Response: P825,000
Correct answer: P695,000
Score: 0 out of 1 No
Question 48
The decision to employ a resource in a specific way implies giving up the returns from other possible
uses of the same resource. Such returns are considered costs of the alternative chosen as they are
profits of the alternative forgone. These costs must be evaluated by the decision-maker and they are
called
Response: Incremental costs
Correct answer: Opportunity costs
Score: 0 out of 1 No
Question 49
Cost of capital is the
Response: cost the company must incur to obtain its capital resources.
Correct answer: cost the company must incur to obtain its capital resources.
Score: 1 out of 1 Yes
Question 50
The equation(s) required for applying the least squares method of computation of fixed and variable
production costs can be expressed as
Response: Sy = na + bSx
Correct answer: Sxy = aSx + bS x2, Sy = na + bSx
Score: 0 out of 1 No
Question 51
The following direct manufacturing labor information pertains to the manufacture of Product B.
Response: P24
Correct answer: P15
Score: 0 out of 1 No
Question 52
Castelo, Villasin and Barrera is a large, local accounting firm located in Cebu. Belle Castelo,
one of the Firm’s founders, appreciates the success her firm has enjoyed and wants to give
something back to her community. She believes that an inexpensive accounting services
clinic could provide basic accounting services for small businesses located in the province.
She wants to price the services at cost.
Since the clinic is brand new, it has no experience to go on. Belle decided to operate the
clinic for two months before determining how much to charge per hour on an ongoing basis.
As a temporary measure, the clinic adopted an hourly charge of P50, half the amount
charged by Castelo, Villasin and Barrera for professional services.
The accounting services clinic opened on January 1. During January, the clinic had 120
hours of professional service. During February, the activity was 150 hours. Costs for these
two levels of activity usage are as follows:
Response: P9,025
Correct answer: P9,025
Score: 1 out of 1 Yes
Question 53
The following is a standard cost variance analysis report on direct labor cost for a division of a
manufacturing company.
What is the total flexible budget direct labor variance for the division?
Response: P1,900 unfavorable.
Correct answer: P1,900 unfavorable.
Score: 1 out of 1 Yes
Question 54
What is the effective rate if the company borrows P200,000 on a 6 percent discounted loan with a 10
percent compensating balance for 3 months?
Response: 7.14 percent
Correct answer: 6.78 percent
Score: 0 out of 1 No
Question 55
Smoot Automotive has implemented a new project that has an initial cost, and then generates inflows
of P10,000 a year for the next seven (7) years. The project has a payback period of 4.0 years. What is
the project's internal rate of return (IRR)?
Response: 14.79%
Feedback:
Correct answer: 16.33%
Score: 0 out of 1 No
Question 56
The Glass Shop, a manufacturer of large windows, is experiencing a bottleneck in its plant. Setup time
at one of its workstations has been identified as the culprit. A manager has proposed a plan to reduce
setup time at a cost of P72,000. The change will result in 8,000 additional windows. The selling price
per window is P18, direct labor costs are P3 per window, and the cost of direct materials is P5 per
window. Assume all units produced can be sold. The change will result in an increase in the
throughput contribution of:
Response: P80,000
Correct answer: P104,000
Score: 0 out of 1 No
Question 57
In general, it is more expensive for a company to finance with equity capital than with debt capital
because
Question 58
A company enters into an agreement with a firm who will factor the company's accounts receivable.
The factor agrees to buy the company's receivables: which average P100,000 per month and have an
average collection period of 30 days. The factor will advance up to 80% of the face value of
receivables at an annual rate of 10% and charge a fee of 2% on all receivables purchased. The
controller of the company estimates that the company would save P18,000 in collection expenses over
the year. Fees and interest are not deducted in advance. Assuming a 360-day year, what is the
annual cost of financing?
Response: 14.0%
Correct answer: 17.5%
Score: 0 out of 1 No
Question 59
Which of the following capital budgeting techniques does not routinely rely on the assumption that all
cash flows occur at the end of the period?
Response: payback period
Correct answer: payback period
Score: 1 out of 1 Yes
Question 60
Compute the cost of capital (rounded to nearest percent) for an investment center with the following
information:
EVA 12,040,000
Response: 21 percent
Correct answer: 21 percent
Score: 1 out of 1 Yes
Question 61
The variance least significant for purposes of controlling costs is the
Question 62
Castelo, Villasin and Barrera is a large, local accounting firm located in Cebu. Belle Castelo,
one of the Firm’s founders, appreciates the success her firm has enjoyed and wants to give
something back to her community. She believes that an inexpensive accounting services
clinic could provide basic accounting services for small businesses located in the province.
She wants to price the services at cost.
Since the clinic is brand new, it has no experience to go on. Belle decided to operate the
clinic for two months before determining how much to charge per hour on an ongoing basis.
As a temporary measure, the clinic adopted an hourly charge of P50, half the amount
charged by Castelo, Villasin and Barrera for professional services.
The accounting services clinic opened on January 1. During January, the clinic had 120
hours of professional service. During February, the activity was 150 hours. Costs for these
two levels of activity usage are as follows:
Salaries:
Apple Baby, the chief paraprofessional of the clinic, has estimated that the clinic will
average 140 professional hours per month. If the clinic is to be operated as a nonprofit
organization, how much will it need to charge per professional hour?
Response: P87.06
Correct answer: P87.06
Score: 1 out of 1 Yes
Question 63
How will unfavorable volume variance affect net income under absorption and variable costing,
respectively?
Response: Reduce, No effect
Correct answer: Reduce, No effect
Score: 1 out of 1 Yes
Question 64
The major feature of zero-based budgeting is that it
Response: Questions each activity and determines whether it should be maintained as it is, reduced,
or eliminated.
Correct answer: Questions each activity and determines whether it should be maintained as it is,
reduced, or eliminated.
Question 65
Simile Corporation’s sales budget shows quarterly sales for the following year as follows:
Quarter Units
1 10,000
2 8,000
3 12,000
4 14,000
Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the
next quarter’s sales. Budgeted production for the second quarter of the next year would be
Response: 8,800 units
Correct answer: 8,800 units
Score: 1 out of 1 Yes
Question 66
The board of directors of Contemporary Company was unhappy with the current return on common
equity. Though the return on sales (profit margin) was impressively good at 12.5 percent, the asset
turnover was only 0.75. The present debt ratio is 0.40.
What debt ratio did Atty. Tristan propose in order to raise the return on equity (ROE) to 150 percent
of the present level?
Response: 0.68
Correct answer: 0.52
Score: 0 out of 1 No
Question 67
Ultra Vogue Co. sells 50,000 units of “yo” a top-of-the-line garden sprinkler. These were taken from
the company’s records:
Days sales outstanding, 15 days. Profit for the period was P485,040.
The ending receivables balance is the average balance during the year. Assume a 360-day year. All
sales are on credit. Determine the company’s break-even revenue.
Response: P3,096,000
Correct answer: P2,106,122
Score: 0 out of 1 No
Question 68
Key Corp. plans to replace a production machine that was acquired several years ago. Acquisition
cost is P450,000 with salvage value of P50,000. The machine being considered is worth P800,000 and
the supplier is willing to accept the old machine at a trade-in value of P60,000. Should the company
decide not to acquire the new machine, it needs to repair the old one at a cost of P200,000. Tax-wise,
the trade-in transaction will not have any implication but the cost to repair is tax-deductible. The
effective corporate tax rate is 35% of net income subject to tax. For purposes of capital budgeting,
the net investment in the new machine is
Response: P660,000
Correct answer: P610,000
Score: 0 out of 1 No
Question 69
The type of budget that is a moving twelve-month budget is called the:
Response: continuous budget
Correct answer: continuous budget
Score: 1 out of 1 Yes
Question 70
The Chip Division of Supercomp Corp. produces a high-quality computer chip. Unit production costs
(based on capacity production of 100,000 units per year) follow:
Direct material P50
Direct labor 20
Overhead (20% variable) 10
Other information:
Sales price 100
SG&A costs (40% variable) 15
Assume that the Chip Division is producing and selling at capacity. What is the minimum selling price
that the division would consider on a "special order" of 1,000 chips on which no variable period costs
would be incurred?
Response: P81
Correct answer: P94
Score: 0 out of 1
Question 2
Assume the following information for a product line:
Sales P500,000
Response: P215,000
Correct answer: P215,000
Score: 1 out of 1 Yes
Question 3
Which of the following perspectives of the balanced scorecard deal with objectives of increasing
market share and penetrating new markets?
Response: Customer
Correct answer: Customer
Score: 1 out of 1 Yes
Question 4
The following data relate to the Happy Division of Euphoria Company:
Sales P10,000,000
Response: 15 percent
Correct answer: 25 percent
Score: 0 out of 1 No
Question 5
Employee skill sets and the concept of balanced scorecard have received considerable
managerial attention in recent years. Under the balanced scorecard methodology, employee skill
sets are most likely to be addressed and measured under which category?
Response: Financial
Correct answer: Learning and growth
Score: 0 out of 1 No
Question 6
Compute the June cost of capital (rounded to nearest percent) for an investment center with the
following information:
Response: 14 percent
Correct answer: 21 percent
Score: 0 out of 1 No
Question 7
Adly Corp. wishes to earn a 30% return on its P100,000 investment in equipment used to produce
product X. Based on estimated sales of 10,000 units of product X next year, the costs per unit would
be as follows:
Response: P10
Correct answer: P11
Score: 0 out of 1 No
Question 8
The application of the balanced scorecard includes four categories of measures. Production
downtime would fall into one of those four categories. The specific category would be:
Response: internal business process
Correct answer: internal business process
Score: 1 out of 1 Yes
Question 9
Largo Company recorded for the past year sales of P750,000 and average operating assets of
P375,000. What is the margin that Largo Company needed to earn in order to achieve an ROI of
15%?
Response: 7.50%
Correct answer: 7.50%
Score: 1 out of 1 Yes
Question 10
Apple Division of the American Fruit Co. had the following statistics:
Assets available for use P1,000,000
If the manager of Apple Division is evaluated based on return on investment, how much would she be
willing to pay for an investment that promises to increase net segment income by P50,000?
Response: P333,333
Correct answer: P333,333
Score: 1 out of 1 Yes
Question 11
If the investment turnover increased by 20% and ROS decreased by 30%, the ROI would
Response: Increase by 20%
Correct answer: Decrease by 16%
Score: 0 out of 1 No
Question 12
James Webb is the general manager of the Industrial Park Division, and his performance is measured
using the residual income method. Webb is reviewing the following forecasted information for the
division for next year.
Revenue 30,000
If the imputed interest charge is 15% and Webb wants to achieve a residual income target
of P2,000,000, what will costs have to be in order to achieve the target?
Response: P9,000,000
Correct answer: P25,150,000
Score: 0 out of 1 No
Question 13
On a balanced scorecard, which of the following is not a customer measure?
Response: Warranty expense
Correct answer: Economic value added
Score: 0 out of 1 No
Question 14
The Valve Division of Fidelity Company produces a small valve that is used by various
companies as a component part in their products. Fidelity Company operates its divisions as
autonomous units, giving its divisional manager great discretion in pricing and other decisions.
Each division is expected to generate a rate of return of at least 14% on its operating assets. The
Valve Division has average operating assets of P700,000. The valves are sold for P5. Variable
costs are P3 per valve, and fixed costs total P462,000 per year. The Division has a capacity of
300,000 units. How many valves must the Valve Division sell each year to generate the desired
rate of return on its assets?
Response: 350,000
Correct answer: 280,000
Score: 0 out of 1 No
Question 15
If PFRS income of Genesis Company, adjusted for economic value added, is 15% of sales,
capital employed is P5,000,000, the cost of capital is 8%, and sales is P12,000,000, then
economic value added is:
Response: P3,200,000
Correct answer: P1,400,000
Score: 0 out of 1
WEEK 7
Question 1
Board Company makes and sells corrugated boxes for a price of P60 each. Unit costs based on
anticipated monthly sales of 1,000 boxes are as follows:
Variable manufacturing OH 3
Fixed costs 2
A chain store has offered to buy 100 boxes per month at P58 each. To accept this special order, Board
will have to restrict its sales to regular customers to only 900 boxes per month because its production
capacity cannot be expanded in the short run. However, no variable selling expenses will be incurred
for this special order. If Board accepts the chain store's offer, its profit will
Response: increase by P300
Correct answer: increase by P300
Score: 1 out of 1 Yes
Question 2
Clay Co. has considerable excess manufacturing capacity. A special job order's cost sheet includes the
following applied manufacturing overhead costs:
The fixed costs include a normal P3,700 allocation for in-house design costs, although no in-house
design will be done. Instead the job will require the use of external designers costing P7,750. What is
the total amount to be included in the calculation to determine the minimum acceptable price for the
job?
Response: P40,750
Correct answer: P40,750
Score: 1 out of 1 Yes
Question 3
What is the profit or loss of a decision to sell or process a product further given the following
information?
Response: P350
Correct answer: −P350
Score: 0 out of 1 No
Question 4
The opportunity cost of making a component part in a factory with excess capacity for which
there is no alternative use is
Response: zero
Correct answer: zero
Score: 1 out of 1 Yes
Question 5
Peluso Company, a manufacturer of snowmobiles, is operating at 70 percent of plant capacity.
Peluso’s plant manager is considering making the headlights now being purchased for P1,100
each, a price that is not expected to change in the near future. The Peluso plant has the equipment
and labor force required to manufacture the headlights. The design engineer estimates that each
headlight requires P400 of direct materials and P300 of direct labor. Peluso’s plant overhead rate
is 200 percent of direct labor costs, and 40 percent of the overhead is fixed cost. A decision by
Peluso Company to manufacture the headlights will result in a gain (loss) for each headlight of
Response: P40
Correct answer: P40
Score: 1 out of 1 Yes
Question 6
The Lantern Corporation has 1,000 obsolete lanterns that are carried in inventory at a
manufacturing cost of P20,000. If the lanterns are remachined for P5,000, they could be sold for
P9,000. Alternatively, the lanterns could be sold for scrap for P1,000. Which alternative is more
desirable and what are the total relevant costs for that alternative?
Response: Remachine and P5,000
Correct answer: Remachine and P5,000
Score: 1 out of 1 Yes
Question 7
In a make or buy decision, the opportunity cost of capacity could be considered to
Response: decrease the price of units purchased from suppliers
Correct answer: decrease the price of units purchased from suppliers
Score: 1 out of 1 Yes
Question 8
Crown Enterprises manufactures 3 products, A, B, and C. During the month of May, Jones' production,
costs, and sales data were as follows.
A B C TOTAL
Based on the above information, which one of the following alternatives should be recommended to
Crown's management?
Question 9
The Furniture Company currently has three divisions: Narra, Gem, and Mah. The Gem furniture line
does not seem to be doing well and the president of the company is considering dropping this line. If it
is dropped, the revenues associated with the Gem Division will be lost and the related variable costs
saved. Also, 50% of the fixed costs allocated to the Gem furniture line would be eliminated. The
income statements, by divisions, are as follows (in P’000).
Which one of the following options should be recommended to the president of the company?
Response: Continue operating the Gem Division as discontinuance would result in a P6,000 decline in
operating profits.
Correct answer: Continue operating the Gem Division as discontinuance would result in a P6,000
decline in operating profits.
Question 10
The following are a company’s monthly unit costs to manufacture and market a particular
product: Direct materials, P2.00; Direct labor, P2.40; Variable indirect manufacturing costs,
P1.60; Fixed indirect manufacturing costs, P1.00; Variable marketing costs, P2.50; Fixed
marketing costs, P1.50. The company must decide to continue making the product or buy it from
an outside supplier. The supplier has offered to make the product at the same level of quality that
the company can make it. Fixed marketing costs would be unaffected, but variable marketing
costs would be reduced by 30% if the company were to accept the proposal. What is the
maximum amount per unit that the company can pay the supplier without decreasing its
operating income?
Response: P8.50
Correct answer: P6.75
Score: 0 out of 1 No
Question 11
Nicholas, Inc., has provided the following unit data for review:
Which product, Simple or Advanced, is most profitable for Nicholas, Inc., to manufacture?
Response: Simple
Correct answer: Simple
Score: 1 out of 1 Yes
Question 12
Which of the following costs are relevant to a make-or-buy decision?
Response: the amount that would be received if the production equipment was sold
Correct answer: the amount that would be received if the production equipment was sold
Score: 1 out of 1 Yes
Question 13
When a scarce resource, such as space, exists in an organization, the criterion that should be
used to determine production is
Response: contribution margin per unit of scarce resource
Correct answer: contribution margin per unit of scarce resource
Score: 1 out of 1 Yes
Question 14
When deciding whether to discontinue a segment of a business, managers should focus on:
Response: how total costs differ among alternatives
Correct answer: how total costs differ among alternatives
Score: 1 out of 1 Yes
Question 15
The following standard costs pertain to a component part manufactured by Gore Co.:
Direct materials P4
Direct labor 10
Factory overhead 40
Factory overhead is applied at P1 per standard machine hour. Fixed capacity cost is 60 percent of
applied factory overhead and is not affected by any “make or buy” decision. It would cost P49 per
unit to buy the part from an outside supplier. In the decision to “make or buy;” what is the total
relevant unit manufacturing cost?
Response: P38
Correct answer: P30
Score: 0 out of 1