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ATENEO DE NAGA UNIVERSITY

JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS


PRIME ACCOUNTING SUPPORT GROUP (1ST SEMESTER A/Y 2022-2023)

ACCA107 – STRATEGIC COST MANAGEMENT


SAMPLE EXAM

Instructions:
1. Answer this sample exam within 1 hour and 30 minutes without looking at the answer key.
2. While answering, note the questions you are confused about or do not know how to solve.
3. After 1 hour and 30 minutes, check your answers. Take note of the correct answer and explanation of the
items you got wrong as well as those identified in (2).
4. Make a document where you will have the summary of the things you noted in (3).

You don’t need the luck; you have this skills~

1. The method of cost accounting that lends itself to break-even analysis is


a. Variable
b. Standard
c. Absolute
d. Absorption

2. A favorable fixed overhead volume variance occurs if


a. there is a favorable labor efficiency variance.
b. there is a favorable labor rate variance.
c. production is less than planned.
d. production is greater than planned.

3. Actual fixed overhead minus budgeted fixed overhead equals the


a. fixed overhead volume variance.
b. fixed overhead spending variance.
c. noncontrollable variance.
d. controllable variance.

4. Ronald Corp. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should
take 4 direct labor hours. Ronald applies variable overhead to production on a direct labor hour
basis. The variable overhead efficiency variance
a. will be unfavorable.
b. will be favorable.
c. will depend upon the capacity measure selected to assign overhead to production.
d. is impossible to determine without additional information

5. In an income statement prepared as an internal report using the variable costing method, fixed
manufacturing overhead would
a. not be used.
b. be used in the computation of operating income but not in the computation of the
contribution margin.
c. be used in the computation of the contribution margin.
d. be treated the same as variable manufacturing overhead.

Prepared by: Precious


Source
6. Variable costing has an advantage over absorption costing for which of the following purposes?
a. analysis of profitability of products, territories, and other segments of a business
b. determining the CVP relationship among the major factors of selling price, sales mix, and
sales volume
c. minimizing the effects of inventory changes on net income
d. all of the above

7. The variance most useful in evaluating plant utilization is the


a. variable overhead spending variance.
b. fixed overhead spending variance.
c. variable overhead efficiency variance.
d. fixed overhead volume variance

8. At the end of a period, a significant material quantity variance should be


a. closed to Cost of Goods Sold.
b. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold.
c. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.
d. carried forward as a balance sheet account to the next period

9. If a firm’s net income does not change as its volume changes, the firm(s)
a. must be in the service industry.
b. must have no fixed costs.
c. sales price must equal ₱0.
d. sales price must equal its variable costs

10. With respect to fixed costs, CVP analysis assumes total fixed costs
a. per unit remain constant as volume changes.
b. remain constant from one period to the next.
c. vary directly with volume.
d. remain constant across changes in volume

11. Which of the following is an argument against the use of direct (variable) costing?
a. Absorption costing overstates the balance sheet value of inventories.
b. Variable factory overhead is a period cost.
c. Fixed manufacturing overhead is difficult to allocate properly.
d. Fixed manufacturing overhead is necessary for the production of a product.

12. According to CVP analysis, a company could never incur a loss that exceeded its total
a. a. variable costs.
b. b. fixed costs.
c. c. costs.
d. d. contribution margin.

13. CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable.
Consistent with these assumptions, as volume decreases total
a. fixed costs decrease.
b. variable costs remain constant.
c. costs decrease.
d. costs remain constant

14. A firm presently has total sales of ₱100,000. If its sales rise, its
a. net income based on variable costing will go up more than its net income based on
absorption costing.
b. net income based on absorption costing will go up more than its net income based on
variable costing.
c. fixed costs will also rise.
d. per unit variable costs will rise.

15. In the application of "variable costing" as a cost-allocation process in manufacturing,


a. variable direct costs are treated as period costs.
b. nonvariable indirect manufacturing costs are treated as product costs.
c. variable indirect manufacturing costs are treated as product costs.
d. nonvariable direct costs are treated as product costs.

16. Mart Manufacturing incurs annual fixed costs of ₱250,000 in producing and selling a single product.
Estimated unit sales are 125,000. An after-tax income of ₱75,000 is desired by management. The
company projects its income tax rate at 40 percent. What is the maximum amount that Harris can
expend for variable costs per unit and still meet its profit objective if the sales price per unit is
estimated at ₱6?
a. ₱3.37
b. ₱3.59
c. ₱3.00
d. ₱3.70

Dance Company
The following information relates to the financial projections of Dance Company:
Projected sales 60,000 units
Projected variable costs ₱2.00 per unit
Projected fixed costs ₱50,000 per year
Projected unit sales price ₱7.00

17. Refer to Dance Company. How many units would Folk Company need to sell to earn a profit before
taxes of ₱10,000?
a. 25,714
b. 10,000
c. 8,571
d. 12,000

18. A firm estimates that it will sell 100,000 units of its sole product in the coming period. It projects the
sales price at ₱40 per unit, the CM ratio at 60 percent, and profit at ₱500,000. What is the firm
budgeting for fixed costs in the coming period?
a. ₱1,600,000
b. ₱2,400,000
c. ₱1,100,000
d. ₱1,900,000
Far Company
The following information is available for Far Company for its first year of operations:
Sales in units 5,000
Production in units 8,000
Manufacturing costs:
- Direct labor ₱3 per unit
- Direct material 5 per unit
- Variable overhead 1 per unit
- Fixed overhead ₱100,000
Net income (absorption method) ₱30,000
Sales price per unit ₱40

19. Refer to Far Company. If Far Company had used variable costing, what amount of income before
income taxes would it have reported?
a. ₱30,000
b. (₱7,500)
c. ₱67,500
d. can't be determined from the information given

20. Refer to Far Company. What was the total amount of Selling, General and Administrative expense
incurred by Far Company?
a. ₱30,000
b. ₱62,500
c. ₱6,000
d. can't be determined from the information given

Chime Company
The following information has been extracted from the financial records of Chime Corporation for its
first year of operations:
Units produced 10,000
Units sold 7,000
Variable costs per unit:
- Direct material ₱8
- Direct labor 9
- Manufacturing overhead 3
- SG&A 4
Fixed costs:
- Manufacturing overhead ₱70,000
- SG&A 30,000

21. Refer to Chime Corporation. Based on absorption costing, Chime Corporation's income in its first
year of operations will be
a. ₱21,000 higher than it would be under variable costing.
b. ₱70,000 higher than it would be under variable costing.
c. ₱30,000 higher than it would be under variable costing.
d. higher than it would be under variable costing, but the exact difference cannot be
determined from the information given.
22. Refer to Chime Corporation. Based on absorption costing, the Cost of Goods Manufactured for Chime
Corporation's first year would be
a. ₱200,000.
b. ₱270,000.
c. ₱300,000.
d. ₱210,000.

23. Char Inc. uses a standard cost system for its production process. Char applies overhead based on
direct labor hours. The following information is available for July:

Using the four-variance approach, what is the variable overhead efficiency variance?
a. P9,570 F
b. P9,570 U
c. P2,200 F
d. P2,200 U

24. The following information is available from the Patty Company:

Assuming that Patty uses a three-way analysis of overhead variances, what is the spending variance?
a. P750 F
b. P750 U
c. P950 F
d. P200 U

25. L&C Company uses the equation P300,000 + P1.75 per direct labor hour to budget manufacturing
overhead. L& C has budgeted 125,000 direct labor hours for the year. Actual results were 110,000
direct labor hours, P297,000 fixed overhead, and P194,500 variable overhead. What is the fixed
overhead volume variance for the year?
a. P35,000 U
b. P36,000 U
c. P2,000 F
d. P3,000 F
26. Western Company uses a standard cost accounting system. The following overhead costs and
production data are available for August:
- Standard fixed OH rate per DLH ₱1
- Standard variable OH rate per DLH ₱4
- Budgeted monthly DLHs 40,000
- Actual DLHs worked 39,500
- Standard DLHs allowed for actual production 39,000
- Overall OH variance-favorable ₱2,000
The total applied manufacturing overhead for August should be
a. ₱195,000.
b. ₱197,000.
c. ₱197,500.
d. ₱199,500.

27. Cap Processing applied factory overhead based on machine hours at the following rates per machine
hour: Mixing - P7.75 Wasing - P15.10 and Packing - P2.125.

In 2022, actual machine hours are 19,000, 27,500, and 5,500 respectively, for mixing, washing,
and packing departments. If the actual factory overhead incurred is P574,375, the amount of over
applied (under applied) overhead is:
a. (P187,50)
b. P11,875.00
c. P23,562.50
d. (P76,125.00)

28. Dahil Com. uses a standard costing system in connection with the manufacture of a "one suze fits all"
article of clothing. Each unit of finished product contains 2 yards of direct materials. However, a 20%
direct material spoilage calculated on input quantities occurs during the manufacturing process. The
cost of the direct materials is P3 per yard. The standard direct material cost per unit of finished
products is?
a. P4.80
b. P6.00
c. P7.20
d. P7.50

29. The following were among Cage Co.'s 2022 costs:


- Normal spoilage.................................P5,000
- Freight Out............................................P10,000
- Excess of actual manufacturing costs over standard cost......P20,000
- Standard manufacturing costs................................P100,000
- Actual prime manufacturing costs........................P80,000
Cage's 2022 actual manufacturing overhead costs was:
a. P40,000
b. P45,000
c. P55,000
d. P120,000
30. Hala ka Co. manufactures one product with a standard direct manufacturing labor cost of 4 hours at
P24.00 per hour. During June, 1,000 units were produced using 4,100 hours at P24.40 per hour. The
unfavorable direct labor efficiency variance was
a. 2,440
b. 2,400
c. 1,640
d. 800

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