No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Management Services
First Preboard

INSTRUCTIONS: Choose the best answer among the given choices.

1. Which if the following statements is true?

a. A fixed cost is constant per unit of product.
b. The cost of goods manufactured is an expense in a manufacturing firm.
c. A supervisor’s salary would be considered direct labor if the supervisor works
directly in the factory.
d. Part of a cost such as factory depreciation can end up on the balance sheet
as an asset if goods are uncompleted or unsold at the end of the period.

2. In relation to high-low method, which of the following is correct?

a. High-low has no major weaknesses.
b. In applying high-low method, complex mathematical calculations is required.
c. High-low method gives a reasonable cost estimation and helpful in detecting
outliers.
d. None from the choices

3. Which of the following statements is false?

a. The accountant assumes the relationship between costs and activity is
approximately a straight line within the relevant range.
b. A cost formula produced by the high-low-points method and a cost formula
produced in the scattergraph method would be the same within rounding error.
c. The scattergraph method is more accurate than the high-low method, since all
the observed data points can be taken into account when the straight line is
drawn.
d. The high-low method is the least accurate method of analyzing mixed costs
because the high and low points may not be representatives of costs
throughout the entire relevant range.

4. The total production cost for 20,000 units was P21,000 and the total production cost
for making 50,000 units was P34,000. Once production exceeds 25,000 units,
additional fixed costs of P4,000 were incurred. The total production cost for making
30,000 units is:
a. P9,000
b. P24,000
c. P28,000
d. P31,900

5. In contrast to managerial accounting, financial accounting

a. places more emphasis on the future.
b. focuses on providing data for internal users.
c. emphasizes relevance and flexibility rather than precision.
d. looks at the organization as a whole rather than emphasizing the segments of
an organization.

6. Gascon Brothers, Inc., used the high-low method to derive its cost formula for
electrical power cost. According to the cost formula, the variable cost per unit of activity
is P3 per machine-hour. Total electrical power cost at the high level of activity was
P7,600 and at the low level of activity was P7,300. If the high level of activity was
1,200 machine hours, then the low level of activity was:

1|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

a. A. 800 machine hours

b. 1,000 machine hours
c. B. 900 machine hours
d. 1,100 machine hours

7. Setting goals and objectives is most associated with the management function of
a. Controlling
b. Motivating
c. Directing
d. Planning

8. ALEXA Company sells a single product for P25. It had no beginning inventories.
Operating data for 200A follows:

Sales, 54,000 units P1,350,000

Normal Capacity 60,000 units
Production Costs:
Variable per unit P12
Fixed Production P300,000
Selling and Administrative Expenses
Variable per unit sold P2
Fixed Selling P40,000
Number of units produced 66,000 units
Assume actual costs were as budgeted.

Income under standard variable costing and absorption costing are:

Standard Standard
Variable Costing Absorption Costing
a. P254,000 P314,000
b. P254,000 P284,000
c. P245,000 P314,000
d. P341,000 P254,000

9. Short-term objectives, tactics for achieving these objectives, and operational

planning (master budget) must be congruent with what?
a. The organization’s internal environmental factors
b. The organization’s external environmental factors
c. The organization’s strategic plan and long-term strategic goals
d. The organization’s performance evaluation and incentive compensation factors

10. The correct sequence in a typical budgeting process shall be:

a. Materials budget, production budget, sales budget
b. Production budget, sales budget, materials budget
c. Sales budget, materials budget, production budget
d. Sales budget, production budget, materials budget

11. COVID-19 provides the following summary of its total budgeted production costs at
three production levels.

10,000 units 15,000 units 20,000 units

Alpha P 1,420 P 2,130 P 2,840
Beta 1,550 2,200 2,900
Delta 1,000 1,000 1,000
Omicron 1,630 2,445 3,260

2|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

The cost behavior of each of the Costs Alpha through Omicron, respectively, is:
a. variable, fixed, fixed, and variable.
b. variable, semi-variable, fixed, and variable.
c. semi-variable, variable, fixed, and variable.
d. variable, semi-variable, fixed, and semi-variable.

12. Atty. LACO wishes to prepare a budget that will enable him to compare the amount
actually spent to service 20,000 clients with the amount that should have been spent
to service 20,000 clients. Which budgeting system would be the most appropriate
system for Atty. LACO to use?
a. A master budgeting system
b. A flexible budgeting system
c. A zero-based budgeting system
d. A continuous or rolling budgeting system

13. A multiple regression equation has

a. More than one dependent variable
b. More than one independent variable
c. More than one amount for total fixed cost
d. More than one amount for total variable cost

14. Budgets set at very high levels of performance (i.e., very low costs)
a. can lead to low levels of performance.
b. assist in planning the operations of the company.
c. are helpful in evaluating the performance of managers.
d. stimulate people to perform better than they ordinarily would.

15. All of the following are examples of drawbacks of using absorption costing except
a. management has the ability to manipulate operating income via production
schedules.
b. decreasing maintenance activities and increasing production result in
increased operating income.
c. manipulation of operating income may ultimately increase the company's costs
incurred over the long run.
d. operating income solely reflects income from the sale of units and excludes the
effects of manipulating production schedules.

16. A budget is often the result of a management-by-objectives (MBO) program. A

characteristic of MBO is
a. statement of objectives in general terms.
b. a flexible time frame for achievement of objectives.
c. development of a single measure of employee performance.
d. establishment of objectives through both top-down and bottom-up processes.

17. In relation to Activity-based Costing (ABC), which of the following statements is

incorrect?
a. A. Implementation of ABC might be costly.
b. B. ABC involves two stage allocation process.
c. C. ABC assumes that products consume resources.
d. D. None from the choices is incorrect.

18. Which of the following statements is false?

a. There will never be any factory overhead variance when activity-based-
costing is used.
b. One key assumption underlying activity-based accounting is that activities are

3|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

caused by products and services and that activities consume resources.

c. The use of activity-based costing normally results in substantially greater unit
costs for low-volume products than is reported by traditional product costing.
d. If direct labor is used as a base for overhead cost assignment and direct labor
does not cause the overhead cost, the result will be distorted product costs.

For the next two items: SHERIDAN Inc. produces two types of products, REGULAR
and LUXURY types. Currently, overhead are allocated to the two products on a single
cost pool on the basis of direct labor hours. Reports about competitors’ products show
signs of poor cost data. With these, SHERIDAN’s management is considering to
switch to activity-based costing. ABC revealed that there are 3 significant cost pools
for overhead and they are as follows:

Cost Pool Amount Appropriate cost driver

Quality control P300,000 Number of inspections
Machine set-ups 400,000 Number of set-ups
Others 100,000 Direct labor hours

Information about SHERIDAN’s two products are as follows:

REGULAR LUXURY
Production 10,000 units 5,000 units
Direct labor hours 40,000 hrs. 10,000 hrs.
Direct labor cost per hour 3 3
Direct material cost 50,000 60,000
Set-ups 80 120
Inspections 100 400

SHERIDAN determines selling prices by adding 40% to a product's total cost.

19. What are the selling prices of REGULAR and LUXURY products, respectively under
the existing system?
a. P64.00;P32.00 c. P89.60;P44.80
b. P113.40;P70.00 d. P81.00;P50.00

20. What are the selling prices of REGULAR and LUXURY products, respectively under
the ABC system?
a. P30.00;P100.00 c. P65.80;P165.20
b. P42.00;P140.00 d. Answer not given

21. If activity-based costing is implemented in an organization without any other

changes being implemented, total overhead costs will
a. be reduced because of the elimination of non-value-added activities.
b. be reduced because organizational costs will not be assigned to products or
services.
c. be increased because of the need for additional people to gather information
on cost drivers and cost pools.
d. remain constant and simply be spread over products differently.

22. Howe Company increased its ROI from 20% to 25%. Net operating income and sales
remained at their previous levels of P40,000 and P1,000,000 respectively. The
increase in ROI was attributed to a reduction in operating assets brought about by the
sale of obsolete inventory at cost (the proceeds from the sale were used to reduce
bank loans). By how much was inventory reduced?
a. P8,000.

4|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

b. P40,000.
c. P10,000.
d. it is impossible to determine from the data given.

23. In decentralized organizations, it is necessary to prepare reports on the performance

of managers. The term used to describe the reporting process is:
a. responsibility accounting
b. decentralized accounting
c. performance accounting
d. accounting decentralization

24. Residual income:

a. is the net operating income earned above a certain minimum required return
on average operating assets, after considering tax expense
b. is the net operating income earned above a certain minimum required return
on average operating assets, before considering tax expense
c. is the net operating sales earned above a certain minimum required return on
average operating assets, after considering tax rate
d. is the net income earned above a certain minimum required return on
average operating assets, before considering tax rate

25. On a balanced scorecard, which of the following would be most appropriate to

measure production process integrity?
a. Rapid time-to-market of new products
b. Corporate financial profits
c. Low employee turnover
d. Decrease in reworked products

26. Elsa Products has a budget of P1,800,000 in 2020 for prevention costs. If it decides
to automate a portion of its prevention activities, it will save P120,000 in variable costs.
The new method will require P36,000 in training costs and P240,000 in annual
equipment costs. Management is willing to adjust the budget for an amount up to the
cost of the new equipment. The budgeted production level is 150,000 units.

Appraisal costs for the year are budgeted at P1,200,000. The new prevention
procedures will save appraisal costs of P60,000. Internal failure costs average P31.50
per failed unit of finished goods. The internal failure rate is expected to be 3.25% of
all completed items. The proposed changes will cut the internal failure rate by 33.69%
Internal failure units are destroyed. External failure costs average P109 per failed unit.
The company's average external failures average 2.67% of units sold. The new
proposal will reduce this rate by 50%. Assume all of the units produced are sold and
no ending inventories to be remained. Management has offered to allow the
prevention changes if all changes take place as anticipated and the amounts netted
are less than the cost of the equipment. What is the net impact of all the changes
created by the preventive changes?

a. P156,000
b. (P78,348)
c. (P174,008)
d. (P151,834)

For the next five items: KUROMI Company has been accumulating operating data in order
to prepare an annual profit plan. Details regarding KUROMI’s sales for the first 6 months
of the coming year as follows:

5|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Estimated Monthly Sales Type of Monthly Sale Collection Pattern

January P600,000 Cash sales 20% Month of Sale
30%
February P650,000 Credit sales 80% One month after sale 40%
March P700,000 Second month after sale 25%
April P625,000 Balance uncollectible
May P720,000
June P800,000

KUROMI’s cost of goods sold averages 40% of the sales value. KUROMI’s objective is
to maintain a target inventory equal to 30% of the next month’s sales in units. Purchases
of merchandise for resale are paid for in the month following the sale.

The variable operating expenses (other than CGS) for KUROMI are 10% of sales and are
paid for in the month following the sale. The annual fixed operating expenses are
presented below. All of these are incurred uniformly throughout the year and paid monthly
except for insurance and property taxes. Insurance is paid quarterly in January, April, July
and October. Property taxes are paid twice a year in April and October.

Annual Fixed Operating Costs

Advertising P720,000
Depreciation 420,000
Insurance 180,000
Property Taxes 240,000
Salaries 1,080,000

27. the amount of cash collected in March for KUROMI Company from the sales made
during March will be:
a. P140,000
b. P308,000
c. P350,000
d. P636,000

28. KUROMI Company’s total cash receipts for the month of April will be:
a. P504,000
b. P629,000
c. P653,000
d. P707,400

29. The purchase of merchandise that KUROMI Company will need to make during
February will be:
a. P254,000
b. P260,000
c. P266,000
d. P338,000

30. The amount for cost of goods sold that will appear on KUROMI Company’s pro
forma income statement for the month of February will be:
a. P195,000
b. P254,000
c. P260,000
d. P272,000

31. The total cash disbursements that KUROMI Company will make for the operating
expenses during the month of April will be:

6|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

a. P255,000
b. P290,000
c. P385,000
d. P420,000

32. If unit costs remain unchanged and sales volume and sales price per unit both increase
from the preceding period when operating profits were earned, operating profits must
a. increase under the variable costing method.
b. decrease under the variable costing method.
c. increase under the absorption costing method.
d. decrease under the absorption costing method.

33. Three new companies (A, B, and C) began operations on January 1. Consider the
following operating costs that were incurred by these companies during the complete
calendar year:

Company ACompany BCompany C

Production in units 10,000 10,000 10,000
Sales price per unit P10 P10 P10
Fixed production costs P10,000 P20,000 P30,000
Variable production costs P30,000 P20,000 P10,000
Variable SG&A P10,000 P20,000 P30,000
Fixed SG&A P30,000 P20,000 P10,000

Based on sales of 10,000 units, which company will report the greater income before
income taxes under variable costing?
a. Company A
b. Company B
c. Company C
d. All of the companies will report the same income before income taxes.

34. Last year, KRISELLE Corporation's variable costing net operating income was
P126,800. Fixed manufacturing overhead costs released from inventory under
absorption costing amounted to P21,400. What was the absorption costing net
operating income last year?
a. P21,400 c. P126,800
b. P105,400 d. P148,200

35. MARSHALL Company produces a single product. Last year, MARSHALL's net
operating income under absorption costing was P3,600 lower than under variable
costing. The company sold 10,000 units during the year, and its variable costs were
P9 per unit, of which P1 was variable selling expense. If production cost was P11 per
unit under absorption costing, then how many units did the company produce during
the year?
a. 8,200 units C. 11,200 units
b. 8,800 units D. 11,800 units

36. Which of the following costs would not be accounted for in the company’s decision
making process?
a. An expired costs
b. An avoidable costs
c. An opportunity costs
d. All of the above are considered in the decision making process

37. All of the following describe a characteristic of relevant costing information, except

7|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

a. Associated with the decision under consideration

b. Significant to the decision maker
c. Readily determined from financial records
d. Related to a future endeavor

38. Which of the following costs would be relevant in short-term decision making?
a. Total costs of production
b. Total variable costs that are the same in the considered alternatives
c. Incremental fixed costs
d. The cost of a fixed asset that could be used in all the considered alternatives

39. Which of these is least likely a relevant cost?

a. Committed and incremental
b. Opportunity and committed
c. Sunk and committed
d. Sunk and incremental

40. A real estate developer has carried out a survey with a costs P50,000 so that he can
put in a bid to build a new subdivision. They paid P30,000 so far. Which survey costs
are relevant to his bid?
a. P20,000 unpaid portion
b. P50,000 total survey costs
c. P30,000 already paid
d. None of the above

41. In “make or buy” decision, savings arising from the alternative use of existing capacity
shall be included in the
a. Relevant costs to buy
b. Relevant costs to make
c. Bid price
d. Cost of purchase

42. Taguro Company is currently operating at capacity. Ohrah, a vlogger, wants to buy a
specific number of units from the company at a discounted price. Accepting the offer
will result to some reduction in the variable expenses since sales commission will not
be incurred anymore. Taguro will most likely accept if the offer price exceeds
a. Regular selling price
b. Discounted selling price
c. Regular selling price plus opportunity costs
d. Regular selling price less savings in variable expenses

43. Which of the following is least relevant in assessing the impact of decision
alternatives in a “sale or process further” decision?
a. The approach used in allocating joint costs
b. Net realizable value of joint products
c. Conversion costs to complete
d. Sales commission from sale of joint product

8|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

44. Which of the following scenario may lead to the decision to shut down a specific
segment?
a. The loss to be incurred if the operations are continued is less than the
shutdown costs.
b. The expected sales volume is higher than the shutdown point
c. The expected sales volume is higher than the breakeven point
d. The avoidable costs exceed the opportunity costs related to lost sales

45. Minkmink, Inc. sells two products, Slap and Face. Slap has higher contribution margin
per unit sold than Face. Face, on the other hand, consumes less resource than Slap.
Supposing Minkmink experiences a bottleneck in the inputs of production, which of
the following courses of action should be considered?
a. Prioritize Slap in the production
b. Prioritize Face in the production
c. Produce Slap and Face at the same level
d. Information is lacking

46. Omnicient Bookstore can publish 1,000 books at a unit costs of P126,000. The
company can purchase the 1,000 books externally for P125,000. Fixed costs
amounting to P10,000 is retained, if the units are purchased externally. What is the
cost savings if the company makes the books?
a. P1,000
b. P9,000
c. (P11,000)
d. None of the above

47. Heaven Wings, Inc. produces three versions lato-lato: rubber, ceramic and metal.
Information extracted from the condensed income statement are as follows:

Rubber Ceramic Metal

Contribution margin P175,000 60,000 7,000
Fixed costs 75,000 35,000 22,000
Profit (Loss) P100,000 P25,000 (P15,000)

Assuming Heaven Wings contemplates to remove Metal Segment and such removal
will result to the increase in the revenue of Ceramic Segment by 20%, and that
included in the fixed costs are allocated from the corporate headquarters amounting
to P5,000 for each segment, what amount will be the net advantage (disadvantage)?
a. P10,000
b. P45,000
c. P22,000
d. P57,000

9|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

48. Nano Mac, Corporation is operating at its manufacturing capacity of P150,000 units
per year. It regularly sells its product at P40 per unit. A customer has offered to buy
an additional 20,000 units at P32 each. The following data are available:

At 100% capacity Per unit Total

Direct materials P12.00 P1,800,000
Direct labor 9.00 1,350,000
Overhead applied 5.50 825,000
Commercial costs 5.00 750,000
Total P31.50 P4,725,000

In producing 20,000 additional units, total fixed costs of P975,000 would remain at
their current level since Nano will most likely get the required units from existing
customers. However, variable expenses amounting to P3 unit would be saved
shipping costs is avoided. What is the effect on income if Nano Mac accepts this offer?
a. Income will decrease by P0.50 per unit
b. Income will increase by P3.50 per unit
c. Income will decrease by P5.00 per unit
d. None of the above

49. Mac Nano, Corporation is operating at its manufacturing capacity of P150,000 units
per year. It regularly sells its product at P40 per unit. A customer has offered to buy
an additional 25,000 units at P32 each. The following data are available:

At 100% capacity Per unit Total

Direct materials P12.00 P1,800,000
Direct labor 9.00 1,350,000
Overhead and commercial 10.50 1,575,000
costs
Total P31.50 P4,725,000

In producing 25,000 additional units, the fixed costs would remain at their current level
since Nano will most likely get the required units from existing customers. However,
variable expenses amounting to P2 unit would be saved shipping costs is avoided.
What is the effect on income if Nano Mac accepts this offer?
a. Income will decrease by P0.50 per unit
b. Income will decrease by P6.00 per unit
c. Income will increase by P5.00 per unit
d. None of the above

50. Agalup Epat, Incorporated has been incurring losses in the past weeks due to loss of
advertisers and plummeting television ratings. Management is considering postponing
the operations for the next three months to avoid continued losses. Allocated fixed
operational monthly costs were determined from the records amount to P60,000,000.
Average monthly viewers during the year, before the continuous losses in TV ratings,
are 10,000,000.

The company averages only 2,500,000 viewers monthly during the third quarter.
Average revenue per viewer amounted to P30 each. Variable cost to produce the
entertainment segment per viewer is P18.

10 | P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

If the management decides to shut down operations they would save on allocated
fixed costs of 40%, but will incur additional shutdown costs of P4,000,000 per month.
What would be the advantage of continued operations?
a. P120,000,000
b. P90,000,000
c. P60,000,000
d. P30,000,000

51. A company that desires to lower its break-even point should strive to:
a. Decrease selling prices
b. Increase fixed costs
c. Sell more units
d. Reduce variable costs

52. Which of the following will most likely result to the increase in breakeven sales in units?
a. Decrease in fixed costs
b. Same percentage decrease in selling price and variable costs
c. Same per unit decrease in selling price and variable costs
d. Prioritize the sales mix towards the product with the highest profitability

53. When advanced manufacturing systems are installed, what effect does such
installation usually have on operating leverage and risk?
a. Increase, Increase
b. Decrease, Decrease
c. Same, Increase
d. Increase, Same

54. Company Aye and Bee sell their product at the same price. Both have the same
monthly fixed costs. Company Aye’s variable and fixed costs at breakeven total
P300,000 and P150,000, respectively. Company Bee’s variable and fixed costs at
breakeven total P150,000 and P300,000, respectively. Both companies have the
same profit. Which of the following has higher profit potential?
a. Company Aye
b. Company Bee
c. Both companies
d. Information is lacking

55. Which of the following statements is not true?

a. Operating leverage refers to the extent of usage of fixed costs in the operations
b. When a company with high operating leverage experiences booming sales
performance, the profit is expected to increase at a slower pace than the
increase in revenue.
c. Degree of operating leverage measures the sensitivity of a company’s profit in
relation to changes in revenues.
d. Companies that have higher fixed costs relative to variable costs have higher
operating leverage

56. During the year, Milcu Company sustained a favorable spending variance,
unfavorable efficiency variance and an adverse volume variance. Supposing the

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
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denominator level of activity is increased by a certain percentage for purposes of

computing the standard costs per unit, the effect on the variances incurred for the
period would be

Spending Efficiency Volume

a. Increase Decrease No change
b. Decrease Increase No change
c. No change No change Increase
d. No change No change Decrease

57. An adverse spending variance is primarily the responsibility of

a. Purchasing department
b. Production department
c. Engineering department
d. Receiving department

58. Which of the following does not reflect the same nomenclature for variances?
a. Rate, spending, flexible budget
b. Usage, quantity, efficiency
c. Price, rate, efficiency
d. Efficiency, quantity, capacity

59. In responsibility accounting, an adverse volume variance shall be associated to the

performance of the
a. segment only, in all cases
b. manager only, to the extent that managers can influence production by
modifying work or production schedules
c. manager and the segment, in all cases
d. manager and the segment, to the extent that managers can influence
production by modifying work or production schedules.

60. Management by exception is based on

a. Positive attitude towards problem recognition
b. Negative attitude towards problem recognition
c. Indifferent attitude towards problem recognition
d. Ignoring attitude towards problem recognition

61. Assuming at sales of P4,000,000, the company generates a profit of P1,000,000 while
at sales amounting to P3,000,000, the company generates a profit of P500,000.
Compute for the margin of safety at a profit of P800,000.
a. P400,000
b. P800,000
c. P1,600,000
d. P2,400,000

62. Using the least-square regression approach, the cost accountant had developed the
annual cost formula Y = 2,500,000 + 50X for one of the product lines of the company.
The said product has a selling price of P90.00 per unit. What is the margin of safety
ratio if the actual sales during the year 100,000 units?

12 | P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

a. 50.00%
b. P37.50
c. 37.50%
d. 62.50%

63. If the degree of operating leverage is 4, breakeven sales is P4,000,000 and the fixed
costs is P2,200,000, what is the profit at P5,000,000 revenues?
a. P1,687,500
b. P687,500
c. P562,500
d. P2,062,500

64. Davey Company uses a standard cost system in which manufacturing overhead is
applied to units of product on the basis of machine hours. During February, the
company used a denominator activity of 160,000 machine hours in computing its
predetermined overhead rate. However, only 150,000 standard machine hours were
allowed for the month's actual production. If the fixed overhead volume variance for
February was P3,200 unfavorable, then the total budgeted fixed overhead cost for the
month was:
a. P48,000.
b. P51,200.
c. P50,000.
d. P49,000.

65. Constellation Corporation uses two materials in the production of their product. The
materials, Low and High, have the following standards:

Material Standard Mix Standard Unit Standard Cost

Price
Low 3,500 units P2.00 per unit P7,000
High 1,500 units 6.00 per unit P9,000
Yield 4,000 units

During January, the following actual production information was provided:

Material Actual Mix
Low 30,000 units
High 20,000 units
Yield 36,000 units

What is the materials mix variance?

a. P10,000 (F) c. P20,000 (F)
b. P20,000 (U) d. P30,000 (F)

66. The following data pertain to the two products manufactured by BARUSU, Inc.

PRODUCT Selling VC per unit

Price
REM 480 280
RAM 1,500 800

Fixed cost totals P1,200,000 annually. The expected sales mix in units is 60% for
Product REM and 40% for Product RAM. How many units of the Product RAM per
month must BARUSU sell to break-even?
a. 3,000 units

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b. 1,200 units
c. 250 units
d. 100 units

67. Setup time for a product is 8 hours. A firm that uses Just-In-Time Manufacturing and
Enterprise Resource Planning produces the same product has reduced setup time to
45 minutes. Setup labor is P250 per hour. Value-added costs are
a. P2,000
b. P1,812.50
c. P250
d. P187.50
68. Childe, the general manager of Fatui Manufacturing Inc. has determined the following
forecasted items for the coming year:

Working capital P4,000,000

Sales 45,000,000
Fixed assets 16,000,000

Determine the operating costs required to be incurred by Childe to achieve a residual

income of P10,000,000 using a minimum rate of return of 18%.
a. P31,400,000
b. P32,120,000
c. P36,900,000
d. P41,400,000

69. The Inventory control supervisor of Aura Pants Corporation reported that a large
quantity of a part purchased for a special order that was never completed remains in
stock. The order was not completed due to customer default. The part is not used in
any of Aura’s regular products. Since the vice president of production is on leave, the
production manager approved the substitution of the purchased part for a regular part
in a new product. Aura’s engineers indicated that the purchased part could be
substituted providing it was modified. The units manufactured with the substituted part
required additional direct labor hours resulting in an unfavorable direct labor efficiency
variance in the Production Department. The unfavorable direct labor efficiency
variance resulting from the substitution of the purchased part in inventory would best
be assigned to
a. Inventory control supervisor
b. Production manager
c. Engineers
d. Vice president of the production

70. Taba Co. uses the two-way variance analysis for overhead performance. The
budgeted factory overhead includes monthly fixed costs of P1,200,000 plus variable
costs of P96 per direct labor hour. Total standard direct labor hours allowed for the
May, 2021 production was 43,200 hours. Analysis showed that, in May, 2022, the
controllable variance of P24,000 is unfavorable while the volume variance of P12,000
is favorable. How much was the applied factory overhead in May 2022?
a. P5,335,200
b. P5,359,200
c. P5,347,200
d. P5,371,200

“Obstacles are those frightful things you see when you take your eyes off the
goal.” – Henry Ford

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