MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y.

21-22

THEORY:

1. Managers who properly apply the concept called "management by exception" will:
a. Investigate only unfavorable variances.
b. Investigate only favorable variances.
c. Always investigate unfavorable and favorable variances regardless of size.
d. Investigate only variances of a certain size or scope.

2. Which of the following is a disadvantage of participative budgeting?

a. It is more time consuming.
b. It decreases acceptance.
c. It decreases motivation.
d. It is less accurate.

3. In most companies, machines break down occasionally and employees are often less than perfect.
Which type of standard acknowledge these characteristics when determining the standard cost of a
product?
a. Ideal standard
b. Budgeted standard
c. Efficiency standard
d. Practical standard

4. Which of the following should be least considered when deciding whether to investigate a variance?
a. Whether the variance is favorable or unfavorable.
b. Significance of the variance.
c. Cost of investigating the variance.
d. Trend of the variances over time.

5. The absolute minimum cost possible under the best conceivable operating conditions is a description
of the which type of standard?
a. Currently attainable
b. Normal
c. Theoretical
d. Practical

6. The unique feature of an ABC system is the emphasis on:

a. Costing individual jobs
b. Department indirect-cost rates
c. Multiple-cost pools
d. Individual activities

7. The sum of materials purchase price variance and materials quantity variance is?
a. Total materials variance
b. Total budgeted materials variance
c. Total standard materials variance
d. No meaningful amount

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

8. The primary purpose of using a standard cost system is to

a. Make things easier for the managers in the production facility.
b. Provide a distinct measure of cost control.
c. Minimize the cost per unit of production.
d. Assure continuous production of goods.

9. The unfavorable volume variance may be due to all but which of the following factors?
a. Failure to maintain an even flow of work.
b. Machine breakdown.
c. Unexpected increases in the cost of utilities.
d. Failure to obtain enough sales orders.

10. Which of the following statements is correct regarding budgeting?

a. It is primarily focused on past performance.
b. It is primarily a bookkeeping task.
c. It should be built from the ground up each year.
d. It involves input from a broad range of managers.

11. Belle Manufacturing has an unfavorable direct labor rate variance. Which of the following would be
the most likely reason for this variance?
a. The company used lower-paid workers than they had expected.
b. The company gave employees an unexpected raise due to union negotiations.
c. Employees took a longer amount of time to produce the product than expected.
d. Employees used more direct materials in the production process than expected.

12. The sum of materials yield variance and materials mix variance is?
a. Materials price variance
b. Materials quantity variance
c. Total materials variance
d. No meaningful amount

13. In contrast o a company that uses a single overhead rate, one that uses activity-based costing
a. Will have higher product costs than one using a single overhead rate
b. Cannot compute budget variances
c. Will incur additional costs for record keeping
d. Must have a preponderance of fixed overhead costs

14. A budget that includes costs for the actual number of units produced is called a
a. Master budget
b. Summary cash budget
c. Static budget
d. Flexible budget

15. The following is acceptable regarding the allocation of joint product cost to a by-product
None Allocated Some Portion Allocated
a. Not acceptable Not acceptable
b. Acceptable Acceptable

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

c. Acceptable Not acceptable

d. Not acceptable Acceptable

16. In a pure activity-based cost system which of the following might be treated as period costs?
a. Facility-level costs
b. Product-level costs
c. Batch-level costs
d. Unit-level costs

17. Which of the following is incorrect?

a. An imposed budget is the same as a participative budget
b. The preparation of the budget would be the responsibility of each responsibility unit
c. Top management’s support is necessary to promote budget participation
d. The top management should review and approve each responsibility unit’s budget

18. A manufacturer generally wants to set a standard that:

a. Can be achieved only under the most efficient operating conditions
b. Is high enough to provide motivation and promote efficiency, but is still attainable
c. Makes no allowance for normal waste or spoilage
d. None of these is correct

19. A company employing very tight (high) standards in a standard cost system should expect that
a. No incentive bonus will be paid
b. Most variances will be unfavorable
c. Employees will be strongly motivated to attain the standard
d. Costs will be controlled better than if lower standards were used

20. Activity drivers differ from resource drivers in that activity drivers
a. Are used to assign indirect costs while resource drivers are used to assign direct costs
b. Assign the cost of activities to cost object while resource drivers assign the cost of resources
to activities
c. Assign the cost of activities to resources and resource drivers assign the cost of resources
to cost objects
d. Are used to assign direct costs while resource drivers are used to assign indirect costs

21. The process of developing budget estimates by requiring all levels of management to estimate sales,
production, and other operating data as though operations were being initiated for the first time is
referred to as:
a. Forecasting
b. Zero-based budgeting
c. Continuous budgeting
d. Program budgeting

22. A company uses a two-way analysis for overhead variances: budget (controllable) and volume. The
volume variance is based on the
a. Total overhead application rate
b. Volume of total expenses at various activity levels

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

c. Variable overhead application rate

d. Fixed overhead application rate

23. The standard price and quantity of direct materials are separated because
a. PFRS require this separation
b. Direct materials prices are controlled by the purchasing department and quantity used is
controlled by the production department
c. Standard quantities are more difficult to estimate than the standard price
d. Standard price changes more frequently than the standard quantities

24. Joint costs are most frequently allocated based upon relative
a. Profitability
b. Conversion costs
c. Prime costs
d. Sales value

25. Which of the following is a likely advantage in activity-based costing (ABC)?

a. A decrease in the need to maintain accurate cost driver information
b. A decrease in the need to maintain accurate overhead cost information
c. An increase in the ability to trace indirect costs to specific activities
d. An increase in the cost of accumulating, tracking, and assigning costs to products and
services

26. The choice of production volume as a denominator for calculating its factory overhead rate has
a. No effect on the fixed factory overhead rate for applying costs to production
b. An effect on the variable factory overhead rate for applying costs to production
c. No effect on the fixed factory overhead budget variance
d. No effect on the fixed factory overhead production volume variance

27. For purposes of allocating joint costs to joint products using the relative sales value at split-off
method, the costs beyond split-off
a. Are allocated in the same manner as the joint costs
b. Are deducted from the relative sales value at split-off
c. Are deducted from the sales value at the point of sale
d. Do not affect the allocation of the joint costs

28. Examples of unit-level costs are

a. Portions of electricity and indirect material
b. Salaries of schedulers and setup personnel
c. Salaries of designers and programmers
d. Depreciation and insurance of building

29. Favorable volume variances may be harmful when:

a. Machine repairs cause work stoppages
b. Supervisors fail to maintain an even flow of work
c. Production in excess of normal capacity cannot be sold
d. There are insufficient sales orders to keep the factory operating at normal capacity

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

30. A formal written statement of management’s plans for the future, packaged in financial terms, is a:
a. Responsibility report
b. Performance report
c. Cost of production report
d. Budget

PROBLEM-SOLVING

1. Josh company has a standard of 15 parts of component AB costing P1.50 each. Josh purchased
14,910 units of component AB for P22,145. Josh generated a P220 favorable price variance and
a P3,735 unfavorable quantity variance. If there were no changes in the component inventory, how
many units of finished product were produced?
a. 994 units b. 1,090 units c. 828 units d. 1,160 units

2. Miggy Co. projects the following monthly revenues for next year:
January 100,000 July 250,000
February 500,000 August 275,000
March 452,000 September 300,000
April 450,000 October 350,000
May 557,000 November 400,000
June 300,000 December 525,000

Miggy’s terms are net 30 days. The company typically receives payment on 80% of sales the month
following the sale and 17% is collected two months after the sale. Approximately 3% of sales are
deemed bad debt.

What amount represents the expected cash collection in the second calendar quarter of next year?
a. 1,405,540 b. 1,293,630 c. 1,320,540 d. 1,234,250

3. Buknoy was analyzing variances for one of its operations. The initial budget forecast production of
20,000 units during the year with a variable manufacturing overhead rate of P10 per unit. Buknoy
produced 19,000 units during the year. Actual variable manufacturing costs were P210,000. What
amount would be Buknoy's flexible budget variance for the year?
a. P20,000 unfavorable.
b. P10,000 favorable.
c. P10,000 unfavorable.
d. P20,000 favorable.

4. Under a standard cost system, the materials quantity variance was recorded at P1,970 unfavorable,
the materials price variance was recorded at P3,740 favorable, and the Goods in Process was
debited for P51,690. Ninety-six thousand units were completed. What was the per unit price of the
actual materials used?
a. PO.53 each b. PO.52 each c. PO.54 each d. P0.51 each

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

5. The operating results in summarized form for a retail computer store for the year then ended are
Revenues:
Hardware sales 4,800,000
Software sales 2,000,000
Maintenance contracts 1,200,000 8,000,000

Costs and expenses:

Cost and hardware sales 3,360,000
Cost of software sales 1,200,000
Marketing expenses 600,000
Customer maintenance costs 640,000
Administrative expenses 1,120,000 6,920,000

Operating income 1,080,000

The computer store is in the process of formulating its operating budget for next year and has made
the following assumptions:
• The selling prices of hardware are expected to increase 10% but selling prices will not
increase for software or maintenance contracts.
• Hardware unit sales are expected to increase 5% with a corresponding 5% growth in the
number of maintenance contracts; growth in units software sales is estimated at 8%.
• The cost of hardware and software is expected to increase 4%.
• Marketing expenses will be increased 5% in the coming year.
• Three technicians will be added to the customer maintenance operations in the coming year,
increasing the customer maintenance costs by P120,000.
• Administrative costs will be held at the same level.

The retail computer store's budgeted total revenue for next year would be
a. 8,804,000 b. 8,904,000 c. 8,460,000 d. 8,964,000

6. The following direct labor information pertains to the manufacture of Part '35:
Number of hours required to make a part 2.5 DLH
Number of direct workers 75
Number of total productive hours per week 3,000
Weekly wages per worker P1,000
Laborers' fringe benefits treated as direct labor costs 25% of wages

What is the standard direct labor cost per unit of Part '35?
a. P62.500 b. P41.670 c. P84.125 d. P78.125

7. The payment schedule on purchases made on account is 60% during the month of purchase, 30% in
the following month, 10% in the subsequent month. Total credit purchases were P200,000 in May,
and P100,000 in June. Total payments on credit purchases were P140,000 in June. What were the
credit purchases in the month of April?
a. 100,000 b. 145,000 c. 215,000 d. 200,000

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

8. Muning Corporation has a used a traditional accounting system to apply quality control costs
uniformly to all products at a rate of P20 per direct labor hour. The average monthly direct labor
hours for its main products are 9,600 hours.

Muning wants to shift to ABC system in order to allocate quality control costs to its product in a
more equitable manner. To start with, the process value analysis was conducted. Quality control
activities were determined, as well as the appropriate cost drivers and cost driver rates. The analysis
yielded the following:
Activity Cost Driver Rate Quantity for
Main Product
Inspection of materials deliveries Classes of materials P500 per class 20 classes
Inspections of goods in process Number of units 10 per unit 12,000 units
Final inspection before delivery of
finished goods Number of orders 200 per order 100 orders

The quality control cost that would be assigned to the main products using traditional costing
system
a. 120,000 b. 150,000 c. 192,000 d. 240,000

9. Clemency makes two products: Y and Z. They are initially processed from the same materials and
then after split—off, further processed separately. Additional information is as follows:
Y Z Total
Final sales value 45,000 35,000 80,000
Sales value at split—off 32,000 28,000 60,000
Cost beyond split—off 5,000 6,000 11,000
Joint cost prior to split 18,000

Using the Approximated Net Realizable Value approach, how much is the joint cost assigned to Y
and Z?
a. 9,918 and 8,082
b. 10, 435 and 7,565
c. 9,600 and 8,400
d. 7,500 and 7,500

10. Noypi manufactures products A, B, and C from a joint process. Additional Information is as follows:
A B C Total
Units sold 2,000 1,000 500 3,500
Units on hand 2,000 1,000 500 3,500
Sales value at split-off ? ? 15,000 100,000
Joint cost 36,000 ? ? 60,000
Cost after split-off 7,000 5,000 3,000 ?
Sales value at final point 70,000 30,000 20,000

Assuming the joint cost are allocated using the relative sales value method, what joint costs were
allocated to product B and what is the sales value at split—off of A, respectively:
a. 16,000 and 63,000
b. 14,286 and 63,000

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

c. 15,000 and 60,000

d. 12,000 and 60,000

11. Special Products recently installed an activity-based relational data base. Using the information
contained in the activity table, the following pool rates were computed:
P200 per purchase order
P12 per machine hour, process A
P15 per machine hours, process B
P40 per engineering hour

Two products are produced: A and B. Each product has an area in the plant that is dedicated to its
production. The plant has two processes, process A and B. Other processes include engineering,
product handling, and procurement. The product relational table for Special is as follows:

Product A:
Activity Driver # and Name Activity Usage
Units 200,000
Purchase orders 250
Machine hours 80,000
Engineering hours 1,250

Product B:
Activity Driver # and Name Activity Usage
Units 25,000
Purchase orders 125
Machine hours 10,000
Engineering hours 1,500

How much overhead cost will be assigned to product B using process B?

a. 1,200,000 b. 960,000 c. 120,000 d. 150,000

12. Refer to #11. What is the unit cost of Product A?

a. 4.71 b. 252.00 c. 4.80 d. 5.30

13. The Avenida Company has the following historical pattern on its credit sales
70 percent collected in month of sale
15 percent collected in the first month after sale
10 percent collected in the second month after sale
4 percent collected in the third month after sale
2 percent uncollectible

The sales on open account budgeted for the last six months of 2020 are shown below:
July 60,000
August 70,000
September 80,000
October 90,000
November 100,000

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

December 85,000

The estimated total cash collections during the fourth calendar quarter from sales made on open
account during the fourth calendar quarter would be
a. 172,500 b. 230,000 c. 265,400 d. 251,400

14. Clean Harry Corp. uses two different types of labor to manufacture its product. The types of labor,
Mixing and Finishing, have the following standards:
Labor Type Standard Mix Std Hourly Standard
Rate Cost
Mixing 500 hours P10 P5,000
Finishing 250 hours P5 P1,250

Yield: 4,000 units

During January, the following actual production information was provided:

Labor Type Actual Mix
Mixing 4,500 hours
Finishing 3,000 hours

Yield: 36,000 units

What is the labor mix variance?

a. 2,500 F b. 5,000 F c. 2,500 U d. 5,000 F

15. Refer to #14. How much labor yield variance should be reported?
a. 6,250 U b. 6,250 F c. 5,250 F d. 5,250 U

16. Lane Co. produces main products Kul and Wu. The process also yields by-product Zef. Net realizable
value of by-product Zef is subtracted from joint production cost of Kul and Wu. The following
information pertains to production in July at a a joint cost of P54,000:
Product Units produced Market value Additional costs
after split-off
Kul 1,000 P 40,000 P0
Wu 1,500 35,000 0
Zef 500 7,000 3,000

If Lane uses the net realizable value method for allocating joint cost, how much of the joint cost
should be allocated to product Kul?
a. 18,800 b. 20,000 c. 26,667 d. 27,342

17. Monalbo Company’s sales budget shows the following expected sales for the following year:
Quarter Units
First 120,000
Second 160,000
Third 90,000
Fourth 110,000

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

Total 480,000

The inventory at December 31 of the prior year was budgeted at 36,000 units. The quantity of
finished goods inventory at the end of each quarter is to equal 30% of the next quarter’s budgeted
unit sales.

How many units should be produced during the first quarter?

a. 48,000 b. 96,000 c. 132,000 d. 144,000

18. The management of Isner Company has prepared a graph showing the total costs of operating
branch warehouses throughout the country. The cost line crosses the vertical axis at P400,000.
The total cost of operating one branch is P650,000. The total cost of operating ten branches is
P2,900,000. For purposes of preparing a flexible budget based on the number of branch
warehouses in operation, what formula would be used to determine budgeted costs at various levels
of activity?
a. Y = 400,000 + 250,000X
b. Y = 400,000 + 290,000X
c. Y = 650,000 + 400,000X
d. Y = 650,000 + 250,000X

19. Dennis Manufacturing Co. manufactures two joint products. Product A sells at P30, while Product
B sells at P60. The company uses the net realizable value method for allocating joint costs. For the
month of June, the production activities were as follows:
Joint product costs:
Raw materials 30,000
Direct labor 15,000
Factory overhead 10,000

Further processing costs after the split-off point in order to finish the products into their final form
were P24,000 for Product A and P36,000 for Product B. Total number of unit produced during the
month were 2,000 for Product A and 1,000 for Product B. The joint cost allocated to A was:
a. 22,000 b. 33,000 c. 27,500 d. Answer not given

20. One of Alien Company’s activity cost pools is machine setups, with estimated overhead of
P300,000. Alien produces slacks (400 setups) and shirts (600 setups). How much of the machine
setup cost pool should be assigned to slacks?
a. 0 b. 120,000 c. 150,000 d. 180,000

21. The following information pertains to a by-product called Moy:

Sales in 2020 5,000 units
Selling price per unit P 6.00
Selling costs per unit P 2.00
Processing costs 0

Inventory of Moy was recorded at net realizable value when produced in 2019. No units of Moy were
produced in 2020. What amount should be recognized as profit on Moy’s 2020 sales?
a. 0 b. 10,000 c. 20,000 d. 30,000

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MOCK EXAM (2nd) FOR BA 116 – COST ACCOUNTING A.Y. 21-22

22. Petite Inc. incurred actual variable overhead expenses of P62,000 in the current year for the
production of 10,000 units. Variable overhead was applied at a rate of P2.00 per direct labor hour
and 3 direct labor hours were budgeted for each unit. The company used 29,000 direct labor hours
for production.

What was Petite’s variable overhead spending variance?

a. 4,000 U b. 4,000 F c. 2,000 U d. 2,000 F

23. Refer to #22. What was Petite’s variable overhead efficiency variance?
a. 4,000 U b. 4,000 F c. 2,000 U d. 2,000 F

24. Empire Company makes two products, E and M. E is being introduced this period, whereas M has
been in production for 2 years. For the period about to begin, 1,000 units of each product are to be
manufactured. The only relevant overhead item is the cost of engineering change orders. E and M
are expected to require eight and two change orders, respectively. E and M are expected to require
2 and 3 machine hours, respectively. The cost of a change order is P600.

If Empire applies engineering change order cost on the basis of machine hours, the overhead cost
per unit to be assigned to E and M, respectively, are
a. 2.40 and 3.60, respectively
b. 3.60 and 2.40, respectively
c. 4.80 and 3.60, respectively
d. 3.60 and 4.80, respectively

25. Bolt Company started its commercial operations on September 30 of the current year. Projected
manufacturing costs for the first three months of operations are P1,568,000, P1,952,000, and
P2,176,000, respectively. Depreciation, insurance, and property taxes represent P288,000 of the
estimated manufacturing costs. Insurance was paid on September 30, and property taxes will be
paid in July next year. Seventy-five percent of the remainder of the manufacturing costs are
expected to be paid in the month in which they are incurred, with the balance to be paid in the
following month. The cash payments for manufacturing costs in the month of November are:
a. 1,568,000 b. 1,952,000 c. 1,664,000 d. 1,856,000

(Sources: RPCPA/AICPA/Various test banks/Various review centers’ materials)

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