1.

If a company increases its selling price by P2 per unit due to an increase in its variable
labor cost of P2 per unit, the break-even point in units will:
A. change but direction cannot be determined
B. increase
C. not change
D. decrease

2. During last year, Thor Lab supplied hospitals with a comprehensive diagnostic kit for P120.
At a volume of 80,000 kits, Thor had fixed expenses of P1,000,000 and net operating income of
P200,000. Because of an adverse legal decision, Thor's liability insurance expenses this year
will be P1,200,000 more than they were last year. Assuming that the volume and other costs are
unchanged, what should be the sales price this year if Thor is to make the same P200,000 net
operating income?
A. 240
B. 135
C. 150
D. 120

3. How much will a company's net operating income increase if it undertakes an advertising
campaign given the following data:
Cost of advertising
P25,000
campaign.........................................
Variable expense as a percentage of sales...................... 42%
Increase in
P60,000
sales............................................................
Correct
A. 9,800
B. 25,200
C. 15,000
D. 200

4. Moruzzi Corporation is a single-product company that expects the following operating

results for next year:
Sales........................................................... P320,000
Contribution margin per unit........................ P0.20
Contribution margin ratio............................. 25%
Degree of operating leverage....................... 8

How many units would Moruzzi have to sell next year to break-even?
A. 280,000
B. 50,000
C. 350,000
D. 200,000

5. Spencer Company expects to sell 60,000 units next year. Variable production costs are P4
per unit, and variable selling costs are 10% of the selling price. Fixed expenses are P115,000
per year, and the company has set a target profit of P50,000. Based on this information, the
unit selling price should be:
A. 7.50
B. 7.00
C. 10.75wered
D. 6.75

6. Company X sold 25,000 units of product last year. The contribution margin per unit was P2,
and fixed expenses totaled P40,000 for the year. This year fixed expenses are expected to
increase to P45,000, but the contribution margin per unit will remain unchanged at P2. How
many units must be sold this year to earn the same net operating income as was earned last
year?
A. 2,500
B. 27,500
C. 35,000
D. 22,500
7. Chibu Corporation is a single product firm with the following cost formula for all of its
costs for next year:

Y = P225,000 + P30X

Chibu sells its product for P120 per unit. What would Chibu's total sales pesos have to be
next year in order to generate P270,000 of net operating income?
A. 618,750
B. 1,980,000
C. 1,080,000
D. 660,000

8. Roberts Company bases its budget on the following data:

3,600
Sales...................................
units
P50 per
Selling price........................
unit
P15 per
Variable expense.................
unit
Fixed expenses.................... P40,530
If the company wants to increase its total contribution margin by 40%, how much will it need
to increase its sales?
A. 48,840rect!
B. 72,000
C. 50,400
D. 34,188

9. Roberts Company bases its budget on the following data:

3,600
Sales...................................
units
P50 per
Selling price........................
unit
P15 per
Variable expense.................
unit
Fixed expenses.................... P40,530
If the company wants its margin of safety to equal P40,000, how many units will it need to
sell?
A. 800
B. 1,158
C. 2,300
D. 1,958

10. Roberts Company bases its budget on the following data:

3,600
Sales...................................
units
P50 per
Selling price........................
unit
P15 per
Variable expense.................
unit
Fixed expenses.................... P40,530
If the company's fixed expenses decrease by 20%, the break-even point will change by how many
units?
A. 510-unit decrease
B. 510-unit increase
C. 232-unit increase
D. 232-unit decrease

11. A manufacturer of premium wire strippers has supplied the following data:
Units produced and sold.................................................... 560,000
Sales
P4,704,000
revenue....................................................................
Variable manufacturing expense........................................ 2,436,000
 Fixed manufacturing expense............................................ 1,200,000
Variable selling and administrative expense....................... 616,000
Fixed selling and administrative expense............................ 272,000
Net operating
P180,000
income........................................................
The company's margin of safety in units is?
A. 263,704
B. 522,740
C. 384,762
D. 61,017

12. A manufacturer of premium wire strippers has supplied the following data:
Units produced and sold.................................................... 560,000
Sales
P4,704,000
revenue....................................................................
Variable manufacturing expense........................................ 2,436,000
Fixed manufacturing expense............................................ 1,200,000
Variable selling and administrative expense....................... 616,000
Fixed selling and administrative expense............................ 272,000
Net operating
P180,000
income........................................................
The company's unit contribution margin is?
A. 5.45
B. 2.95
C. 7.30
D. 4.05

13. A manufacturer of premium wire strippers has supplied the following data:

Units produced and sold.................................................... 560,000

Sales
P4,704,000
revenue....................................................................

Variable manufacturing expense........................................ 2,436,000

Fixed manufacturing expense............................................ 1,200,000

Variable selling and administrative expense....................... 616,000

Fixed selling and administrative expense............................ 272,000

 Net operating
P180,000
income........................................................

The company's degree of operating leverage is?

A. 3.11
B. 2.07
C. 26.13
D. 9.18

14. A company that makes organic fertilizer has supplied the following data:
Bags produced and sold................................................ 240,000
Sales
P1,896,000
revenue...............................................................
Variable manufacturing expense.................................... P804,000
Fixed manufacturing expense....................................... P520,000
Variable selling and administrative expense................... P180,000
Fixed selling and administrative expense....................... P270,000
Net operating
P122,000
income....................................................
The company's margin of safety in units is?
A. 202,238
B. 140,000
C. 32,105
D. 125,714

15. A company that makes organic fertilizer has supplied the following data:
Bags produced and sold................................................ 240,000
Sales
P1,896,000
revenue...............................................................
Variable manufacturing expense.................................... P804,000
Fixed manufacturing expense....................................... P520,000
Variable selling and administrative expense................... P180,000
Fixed selling and administrative expense....................... P270,000
Net operating
P122,000
income....................................................
The company's unit contribution margin is?
A. 3.80
B. 4.55
C. 7.15
D. 4.10

16. A company that makes organic fertilizer has supplied the following data:
Bags produced and sold................................................ 240,000
Sales
P1,896,000
revenue...............................................................
Variable manufacturing expense.................................... P804,000
Fixed manufacturing expense....................................... P520,000
Variable selling and administrative expense................... P180,000
Fixed selling and administrative expense....................... P270,000
Net operating
P122,000
income....................................................
The company's degree of operating leverage is?
A. 15.54
B. 1.97
C. 1.25
D. 7.48
17 Jazz Corporation's income statement for last year appears below:
Sales...................................................... P1,500,000
Cost of sales:
Direct materials................................... P250,000
Direct labor (variable).......................... 150,000
Variable overhead................................ 75,000
Fixed overhead.................................... 100,000 575,000
Gross margin.......................................... 925,000
Selling, general, and administrative:
Variable............................................... 200,000
Fixed................................................... 250,000 450,000
Net operating income.............................. P 475,000
The break-even point in peso last year was?
A. 146,341
B. 729,730
C. 181,818
D. 636,364

18. Jazz Corporation's income statement for last year appears below:
Sales...................................................... P1,500,000
Cost of sales:
Direct materials................................... P250,000
Direct labor (variable).......................... 150,000
Variable overhead................................ 75,000
Fixed overhead.................................... 100,000 575,000
Gross margin.......................................... 925,000
Selling, general, and administrative:
Variable............................................... 200,000
Fixed................................................... 250,000 450,000
Net operating income.............................. P 475,000
The management of Jazz Corporation anticipates a 10 percent increase in total sales, a 12
percent increase in total variable expenses, and a P45,000 increase in total fixed expenses
next year. The break-even point in peso for next year is? (rounded to the nearest whole
number)
A. 474,000
B. 862,103
C. 729,027
D. 214,018

19. Marston enterprises sell three chemicals: petrol, septine, and tridol. Petrol's unit
contribution margin is higher than septine's which is higher than tridol's. Which one of the
following events is most likely to improve the company's overall break-even point?

A. The installation of new computer-controlled equipment and subsequent lay-off of assembly-

line workers.
B. An increase in the overall market demand for septine.
C. A decrease in tridol's selling price.
D. A change in the relative market demand for the products, with the increase favoring petrol
relative to septine and tridol.

20. The margin of safety in the Flaherty Company is P24,000. If the company's sales are
P120,000 and its variable expenses are P80,000, its fixed expenses must be:
A. 32,000
B. 24,000
C. 16,000
D. 8,000
21. Dodero Company produces a single product which sells for P100 per unit. Fixed expenses
total P12,000 per month, and variable expenses are P60 per unit. The company's sales average
500 units per month. Which of the following statements is correct?
A. All of the choices are correct.
B. The fixed expenses remain constant at P24 per unit for any activity level within the
relevant range.
C. The company's break-even point is P12,000 per month.
D. The company's contribution margin ratio is 40%.

22. Austin Manufacturing had the following operating data for the year just ended.
Selling price per unit ......... P60 per unit
Variable expense per unit ...... P22 per unit
Fixed expense .................. P504,000

Management plans to improve the quality of its only product by: (1) replacing a component that
costs P3.50 with a higher-grade component that costs P5.50; and (2) renting a packing machine
for P18,000 a year. If the desired target profit is P288,000, the company must sell how many
units?
A. 20,842
B. 19,300
C. 21,316
D. 22,500

23. Wilson Company prepared the following preliminary budget assuming no advertising
expenditures:
Selling price ............ P10 per unit
Unit sales ............... 100,000
Variable expenses ........ P600,000
Fixed expenses ........... P300,000

Based on a market study, the company estimated that it could increase the unit selling price
by 15% and increase the unit sales volume by 10% if P100,000 were spent on advertising.
Assuming that these changes are incorporated in its budget, what should be the budgeted net
income?
A. 205,000
B. 175,000
C. 365,000
D. 190,000

24. Assuming no change in sales volume, an increase in a firm's per-unit contribution margin
would?
A. have no effect on net income
B. increased fixed costs
C. increase net income
D. decrease net income

25. Line A is the?

A. total revenue line
B. variable cost line
C. fixed cost line
D. total cost line
 26. Line C represents the level of?
A. fixed cost
B. variable cost
C. Semi-variable cost
D. total cost

27. The slope of line A is equal to the?

A. selling price per unit
B. profit per unit
C. Semi-variable cost per unit
D. fixed cost per unit

28. The slope of line B is equal to the?

A. profit per unit
B. fixed cost per unit
C. variable cost per unit
D. selling price per unit

29. The vertical distance between the total cost line and the total revenue line represents?
A. profit or loss at that volume
B. fixed cost
C. variable cost
D. semi-variable cost

30. Assume that the firm whose cost structure is depicted in the figure expects to produce a
loss for the upcoming period. The loss would be shown on the graph:
A. by the area immediately above the break-even point
B. by the area immediately below the total cost line
C. by the area diagonally to the right of the break-even point
D. by the area diagonally to the left of the break-even point

31. At a given sales volume, the vertical distance between the fixed cost line and the total
cost line represents:
A. variable cost
B. Semi-variable cost
C. fixed cost
D. profit or loss at that volume

32. Assume that the firm whose cost structure is depicted in the figure expects to produce a
profit for the upcoming accounting period. The profit would be shown on the graph by the
letter:
A. E
B. F
C. D
D. G

33. If a company desires to increase its safety margin, it should:

A. decrease the contribution margin.
B. decrease selling prices, assuming the price change will have no effect on demand.
C. stimulate sales volume.
D. increase fixed costs.

34. The difference between budgeted sales revenue and break-even sales revenue is the:
A. contribution margin ratio
B. contribution margin
C. safety margin
D. target net profit
35. Which of the following does not typically appear on a contribution income statement?
A. contribution margin
B. total variable cost
C. gross margin
D. net income

36. The extent to which an organization uses fixed costs in its cost structure is measured by:
A. contribution leverage
B. fixed cost leverage
C. financial leverage
D. operating leverage

37. Which of the following statements is (are) true regarding a company that has implemented
flexible manufacturing systems and activity-based costing?
I. The company has erred, as these two practices used in conjunction with one another
will severely limit the firm's ability to analyze costs over the relevant range.
II. Costs formerly viewed as fixed under traditional-costing systems may now be
considered variable with respect to changes in cost drivers such as number of setups,
number of material moves, and so forth.
III. As compared with the results obtained under a traditional-costing system, the concept
of break-even analysis loses meaning.
A. III only
B. I and II
C. II only
D. I only

38. Edco Company produced and sold 45,000 units of a single product last year, with the
following results:
Sales revenue P1,350,000
Manufacturing
costs:
Variable 585,000
Fixed 270,000
Selling costs:
Variable 40,500
Fixed 54,000
Administrative
costs:
Variable 184,500
Fixed 108,000
Edco's operating leverage factor was?
A. 7
B. 5
C. 4
D. 6
39. Edco Company produced and sold 45,000 units of a single product last year, with the
following results:
Sales revenue P1,350,000
Manufacturing
costs:
Variable 585,000
Fixed 270,000
Selling costs:
Variable 40,500
Fixed 54,000
Administrative
costs:
Variable 184,500
Fixed 108,000
If Edco's sales revenues increase 15%, what will be the percentage increase in income before
income taxes?
A. 60%
B. 15%
C. 75%
D. 75%

40. When advanced manufacturing systems are installed, what effect does such installation
usually have on fixed costs and the break-even point respectively?

A. decrease; decrease
B. decrease; increase
C. increase; decrease
D. increase; increase