P1 Exam

1. The professional certification developed by the IMA indicating professional competence in the
management accounting field is the:
a. CIA b. CMA c. RCA d. CPA

2. The Standards of Ethical Conduct for Management Accountants presents responsibilities of the
management accountant that encompass all of the following categories, except:
a. competence b. confidentiality c. dependability d. integrity

3. A managerial accountant who prepares clear reports and recommendations after analyzing
relevant facts is exercising which of the following standards?
a. competence b. confidentiality c. credibility d. integrity

4. The controller of a company or other organization is

a. a staff manager. c. an accountant, not a manager.
b. an operating manager. d. a natural manager.

5. Which of the following topics is of more concern to management accounting than to cost
accounting?
a. generally accepted accounting principles
b. inventory valuation
c. cost of goods sold valuation
d. impact of economic conditions on company operations

6. Which of the following is true?

I. Financial accounting is most concerned with meeting the needs of internal users.
II. Financial accounting is most concerned with addressing the needs of individual departments
of the firm.

a. I only b. II only c. I and II d. Neither I nor II

7. Which of the following is true?

I. Managerial accounting is highly regulated by rules and regulations.

II. Internal financial statements must be prepared using generally accepted accounting principles.

a. I only b. II only c. I and II d. Neither I nor II

8. Which of the following is true?

I. Line personnel give assistance to staff employees.

II. Line managers are directly responsible for achieving organizational goals.

a. I only b. II only c. I and II d. Neither I nor II

This study source was downloaded by 100000827972403 from CourseHero.com on 08-09-2022 21:17:13 GMT -05:00

https://www.coursehero.com/file/130782136/FIN-073-P1-Exampdf/
 9. Which of the following is true?

I. A variable cost remains constant on a per-unit basis as production increases.

II. Fixed cost per unit varies directly with production.

a. I only b. II only c. I and II d. Neither I nor II

10. Which of the following is true?

I. The relevant range is valid for all levels of activity.

II. An indirect cost cannot be easily traced to a cost object.

a. I only b. II only c. I and II d. Neither I nor II

11. Which of the following defines fixed cost behavior?

Total cost reaction to increase in activity Cost per unit reaction to decrease in activity
a. remains constant remains constant
b. remains constant increases
c. increases increases
d. increases remains constant

12. Which of the following would generally be considered a variable overhead cost?
Straight-line depreciation Factory insurance Units-of-production depreciation
a. no no no
b. yes no yes
c. yes yes no
d. no no yes

13. A(n) ________ cost increases or decreases in intervals as activity changes.

a. historical cost b. fixed cost c. step cost d. budgeted cost

14. When the number of units manufactured increases, the most significant change in total cost will
be reflected as a(n)
a. increase in the fixed element. c. increase in the variable element.
b. decrease in the variable element. d. decrease in the fixed element.

15. Product costs are deducted from revenue

a. as expenditures are made. c. as goods are sold.
b. when production is completed. d. to minimize taxable income.

16. Which of the following is a product cost component?

a. rent on an office building c. janitorial supplies used in an office
b. indirect production labor wages d. commission on the sale of a product

17. Conversion cost does not include

a. direct labor. b. direct material. c. factory depreciation. d. supervisors' salaries.

18. The cost estimation method that gives the least mathematically precise cost prediction equation
a. the high-low method. c. the contribution margin method.
b. the scatter-diagram method. d. regression analysis.

This study source was downloaded by 100000827972403 from CourseHero.com on 08-09-2022 21:17:13 GMT -05:00

https://www.coursehero.com/file/130782136/FIN-073-P1-Exampdf/
 19. Which cost is most likely to be committed?
a. Repairs and maintenance.
b. Sum-of-the-years'-digits depreciation on the factory building.
c. Fee for a consultant on the company's long-range planning.
d. Advertising.

20. The closeness of the relationship between the cost and the activity is called
a. correlation. b. spurious. c. regression analysis. d. manufacturing overhead.

21. Which of the following is true?

I. High-low, scatter diagram, and regression analysis are methods of developing formulas to
predict mixed costs which are all equal in precision.
II. As volume increases, the per-unit amount of a mixed cost decreases.
a. I only b. II only c. I and II d. Neither I nor II

22. The Nocheating Co.’s president would like to know the estimated fixed and variable components
of a particular cost. Actual data for this cost for four recent periods appear below.
Activity Cost
Period 1 24 ₱174
Period 2 25 179
Period 3 20 165
Period 4 22 169
Using the least-squares regression method, what is the cost formula for this cost?
a. y = ₱ 0.00 + P7.55x c. y = ₱103.38 + ₱3.00x
b. y = ₱101.44 + P2.70x d. y = ₱110.44 + P2.70x

23. To which function of management is CVP analysis most applicable?

a. Planning b. Organizing c. Directing d. Controlling

24. Which of the following would not affect the breakeven point?
a. Number of units sold. c. Total fixed costs.
b. Variable cost per unit. d. Sales price per unit.

25. A company’s breakeven point in peso sales may be affected by equal percentage increases in
both selling price and variable cost per unit (assume all other factors are equal within the relevant
range). The equal percentage changes in selling price and variable cost per unit will cause the
breakeven point in peso sales to
a. Decrease by less than the percentage increase in selling price.
b. Decrease by more than the percentage increase in the selling price.
c. Increase by less than the percentage increase in selling price.
d. Remain unchanged.

26. If the fixed costs attendant to a product decrease while variable costs and sales price remains
constant, what will happen to contribution margin (CM) and breakeven point (BEP)?
A. B. C. D.
CM Decrease Increase Unchanged Unchanged
BEP Unchanged Unchanged Increase Decrease

27. In a cost-volume-profit graph

This study source was downloaded by 100000827972403 from CourseHero.com on 08-09-2022 21:17:13 GMT -05:00

https://www.coursehero.com/file/130782136/FIN-073-P1-Exampdf/
 a. the total revenue line crosses the horizontal axis at the breakeven point.
b. beyond the breakeven sales volume, profits are maximized at the sales volume where total
revenues equal total costs.
c. an increase in unit variable costs would decrease the slope of the total cost line.
d. an increase in the unit selling price would shift the breakeven point in units to the left.

28. If variable cost ratio increases, the

a. contribution margin percentage decreases. c. break-even point in pesos decreases.
b. selling price increases. d. fixed costs decrease.

29. If a company is earning a profit, its fixed costs

a. are greater than total contribution margin. c. are greater than total variable costs.
b. are equal to total contribution margin. d. are constant in total.

30. A very high degree of operating leverage (DOL) indicates that a firm:
a. has high fixed costs. c. has high variable costs.
b. has a high net income. d. is operating close to its breakeven point.

31. On January 1, 2020, Nocheating Co. increased its direct labor wage rates. All other budgeted
costs and revenues were unchanged. How did this increase affect Nocheating Co.’s budgeted
margin of safety and budgeted break-even point?
A. B. C. D.
Expected Margin of Safety Increase Increase Decrease Decrease
Budgeted Break-even Point Increase Decrease Decrease Increase

32. Nocheating Co. has an average unit cost of ₱20 at 20,000 units and ₱15.37 at 40,000 units. What
is the total fixed cost?
185,200

33. Nocheating Co. had the following experience regarding power costs:
Month Machine hours Power cost
Jan. 300 P680
Feb. 600 720
Mar. 400 695
Apr. 200 660
Assume that management expects 500 machine hours in May. Using the high-low method,
calculate Nocheating Co.'s power cost using machine hours as the basis for prediction.
705

34. At a sales level of P300,000, Nocheating Co.'s gross margin is P1,500 more than its contribution
margin, its net income is P50,000, and its selling and administrative expenses total P120,000. At
this sales level, its contribution margin would be:
168,500

Question Nos. 35 through 37 are based on the following:

In the Nocheating Co., at an activity level of 80,000 machine hours, total overhead costs were P232,000.
Of this amount, utilities were P48,000 (all variable) and depreciation was P60,000 (all fixed). The balance
of the overhead cost consisted of maintenance cost (mixed). At 100,000 machine hours, maintenance
costs were P130,000.
Assume that all of the activity levels mentioned in this problem are within the relevant range.

This study source was downloaded by 100000827972403 from CourseHero.com on 08-09-2022 21:17:13 GMT -05:00

https://www.coursehero.com/file/130782136/FIN-073-P1-Exampdf/
 35. The variable cost for maintenance per machine hour is:
0.30

36. The total fixed overhead cost for Nocheating Co. is:
160,000

37. If 110,000 machine hours of activity are projected for the next period, total expected overhead
cost would be:
259,000

38. Nocheating Co. produces a product that sells for P60. The variable manufacturing costs are P10
per unit. The fixed manufacturing cost is P30 per unit based on the current level of activity, and
fixed selling and administrative costs are P8 per unit. A selling commission of 10% of the selling
price is paid on each unit sold.
The contribution margin per unit is:
44

39. An organization's break-even point is 4,000 units at a sales price of P50 per unit, variable cost of
P30 per unit, and total fixed costs of P80,000. If the company sells 500 additional units, by how
much will its profit increase?
10,000

40. Consider the following:

Fixed expenses P78,000
Unit contribution margin 12
Target operating profit 24,000
How many unit sales are required to earn the target operating profit?
8,500

41. The following is the Nocheating Co.'s contribution format income statement for last month:
Sales P2,000,000
Less variable expenses 1,600,000
Contribution margin 400,000
Less fixed expenses 360,000
Net income P 40,000
The company has no beginning or ending inventories. A total of 40,000 units were produced and
sold last month. What is the company's degree of operating leverage?
10

42. Nocheating Co. has fixed costs of P100,000 and breakeven sales of P800,000. Based on this
relationship, what is its projected profit at P2,100,000 sales?
162,500

43. Nocheating Co. sells lawn ornaments for P15 each. Seal's contribution margin ratio is 40%. Fixed
costs are P23,000. Should fixed costs increase 30%, how many additional units will Nocheating
Co. have to produce and sell in order to generate the same net profit as under the current
conditions?
1,150

This study source was downloaded by 100000827972403 from CourseHero.com on 08-09-2022 21:17:13 GMT -05:00

https://www.coursehero.com/file/130782136/FIN-073-P1-Exampdf/
 44. Nocheating Co. produces a product that sells for P10 per unit. The variable cost per unit is P6
and total fixed costs are P21,000. At this selling price, the company earns a profit equal to 10%
of total peso sales. By reducing its selling price to P9 per unit, the manufacturer can increase its
unit sales volume by 25%. Assume that there are no taxes and that total fixed costs and variable
cost per unit remain unchanged. If the selling price were reduced to P9 per unit, the company’s
profit would have been
5,250

45. A firm has fixed costs of P200,000 and variable cost per unit of P6. It plans to sell 40,000 units
in the coming year. If the firm pays income taxes on its income at a rate of 40%, what sales price
must the firm use to obtain an after-tax profit of P42,000?
12.75

46. The Nocheating Co. product mix includes P300,000 in sale of X and P200,000 in sale of Y. X's
contribution margin is 60% and Y's is 40% of sales. Fixed costs amount to P182,000. Y's sale at
breakeven point should amount to
140,000

47. Nocheating Co. had sales of P210,000 for the month of May. It has a margin of safety ratio of 25
percent, and an after-tax return on sales of 6 percent. The company assumes its sales being
constant every month. If the tax rate is 40 percent, how much is the annual fixed cost?
63,000

48. Nocheating Co. sells loose biscuits for P5 per unit. The fixed costs are P120,000 and the variable
costs are 45% of the selling price. What would be the amount of sales if Nocheating Co. were to
realize a profit of 15% of sales?
300,000

49. Nocheating Co. had a margin of safety ratio of 20%, variable costs of 60% of sales, fixed costs of
P240,000, a break-even point of P600,000, and an operating income of P60,000 for the current
year. What are the current year's sales?
750,000

50. Nocheating Co. sells two products, BakaBumagsak and PagNagCheat. Last year, Nocheating
Co. sold 12,000 units of BakaBumagsak and 24,000 units of PagNagCheat.

Related data for last year are:

Product Unit Selling Price Unit Variable Cost Unit Contribution Margin
BakaBumagsak P120 P80 P40
PagNagCheat 80 60 20

Assuming that last year’s fixed costs totaled P910,000, what was Solar Company’s break-even
point for product PagNagCheat?
22,750

This study source was downloaded by 100000827972403 from CourseHero.com on 08-09-2022 21:17:13 GMT -05:00

https://www.coursehero.com/file/130782136/FIN-073-P1-Exampdf/
 For the next two items:
Nocheating Co, had the following activities during 20X5:

Direct materials:
Beginning inventory $ 40,000
Purchases 122,300
Ending inventory 20,800
Direct manufacturing labor 32,000
Manufacturing overhead 24,000
Beginning work-in-process inventory 8,000
Ending work-in-process inventory 1,600
Beginning finished goods inventory 48,000
Ending finished goods inventory 32,000

51. What is cost of goods manufactured for 20X5?

$141,500 + $32,000 + $24,000 + $8,000 – $1,600 = $203,900

52. What amount of prime costs was added to production during 20X5?
$141,500 + $32,000 = $173,500

For the next three items:

Nocheating Co. manufactured 100,000 units in 20X5and reported the following costs:
Sandpaper $ 32,000 Leasing costs — plant $ 384,000
Materials handling 320,000 Depreciation — equipment 224,000
Coolants & lubricants 22,400 Property taxes — equipment 32,000
Indirect manufacturing labor 275,200 Fire insurance — equipment 16,000
Direct manufacturing labor 2,176,000 Direct material purchases 3,136,000
Direct materials, 1/1/X5 384,000 Direct materials, 12/31/X5 275,200
Finished goods, 1/1/X5 672,000 Sales revenue 12,800,000
Finished goods, 12/31/X5 1,280,000 Sales commissions 640,000
Work-in-process, 1/1/X5 96,000 Sales salaries 576,000
Work-in-process, 12/31/X5 64,000 Advertising costs 480,000
Leasing costs — admin office 400,000 Other Administration costs 400,000

53. What is total manufacturing overhead for 20X5?

1,305,600

54. What is the cost of goods sold for 20X5?

6,150,400

55. What is the operating income for 20X5?

4,153,600

For the next two items:

Nocheating Co. earned $150,000 on sales of $1,000,000. It earned $303,000 on sales of $1,400,000.

56. Find the contribution margin ratio.

38.25% ($303,000 - $150,000)/($1,400,000 - $1,000,000

This study source was downloaded by 100000827972403 from CourseHero.com on 08-09-2022 21:17:13 GMT -05:00

https://www.coursehero.com/file/130782136/FIN-073-P1-Exampdf/
 57. Find the total fixed costs.
$232,500 [$1,000,000 x 38.25%) - $150,000]

58. Nocheating Co. predicts it will produce and sell 40,000 units of its sole product in the current year.
At that level of volume, it projects a sales price of $30 per unit, a contribution margin ratio of 50
percent, and fixed costs of $4 per unit. What would the company's projected profit be if it produced
and sold 30,000 units?
Projected profit would be:
Sales (30,000 x $30) $900,000
Variable costs (30,000 x $15) (450,000)
Contribution margin $450,000
Fixed costs (160,000)
Profit $290,000

59. Information relating to the current operations of Nocheating Co. follows:

Sales $120,000
Variable costs (36,000)
Contribution margin $ 84,000
Fixed costs (70,000)
Profit before taxes $ 14,000
Nocheating Co.’s break-even point was 1,000 units. Compute Nocheating Co.'s sales price per
unit.

$84,000/$120,000 = 70%. Breakeven would then be:

$70,000/.70 = $100,000. Since we also know that the break-even point is defined as 1,000 units, it must
follow that the unit sales price is $100,000/1,000 = $100.

60. Nocheating Co. breaks even at ₱300,000 sales and earns ₱40,000 at ₱400,000 sales. How much
is the company’s fixed cost?
120,000

- End -

This study source was downloaded by 100000827972403 from CourseHero.com on 08-09-2022 21:17:13 GMT -05:00

https://www.coursehero.com/file/130782136/FIN-073-P1-Exampdf/
Powered by TCPDF (www.tcpdf.org)