Direction: Read each statement or question carefully then choose the

correct answer among the choices. Kindly encircle the correct answer.
Erasures and alterations are NOT allowed.

1. It is the expected future data that differ among alternative courses of

action.
a. Decisions
b. Decision view point
c. Relevant information
d. Estimate

2. In this process, their role is to is to supply information on changes in

cost and revenues
to facilitate the decision process.
a. Manager
b. Supplier
c. Management accountant
d. Auditor

3. Among the costs relevant to a make-or-buy decision, include variable

manufacturing
costs as well as.
a. Unavoidable costs.
b. Plant depreciation
c. Avoidable fixed cost.
d. Real estate taxes

4. Relevant or differential cost analysis

a. Takes all variable and fixed cost into account to analyze decision
alternatives.
b. Considers only variable cost as they change with each decision
alternative.
c. Considers the change in reported net income for each alternative to
arrive at the
optimum decision for the company.
d. Considers all variable and fixed cost as they change with each decision
alternative

5. In determining whether to manufacture a part or buy it from an outside

vendor, a cost
that is irrelevant to the short-run decision is
a. Direct labor.
b. Variable overhead.
c. Fixed overhead that will be avoided if the part is bought from an
outside vendor.
d. Fixed overhead that will continue even if the part is bought from an
outside vendor.

6. A study has been conducted to determine if one of the departments in

Parry Company
should be discontinued. The contribution margin in the department is
P50,000 per year.
fixed expenses charged to the department are P65,000 per year. It is
estimated that
P40,000 of these fixed expenses could be eliminated if the department is
discontinued.
These data indicate that if the department is discontinued, the company's
overall net
operating income would:
a. decrease by P25,000 per year.
b. increase by P25,000 per year.
c. decrease by P10,000 per year.
d. increase by P10,000 per year.

7. Gata Co. plans to discontinue a department that has a P48,000

contribution margin and
P96,000 of fixed costs. Of these fixed costs, P42,000 cannot be avoided.
What would be
the effect of this discontinuance on Gata's overall net operating income?
a. Increase of P48,000
b. Decrease of P48,000
c. Increase of P6,000
d. Decrease of P6,000

8. Manor Company plans to discontinue a department that has a

contribution margin of
P25,000 and P50,000 in fixed costs. Of the fixed costs, P21,000 cannot be
eliminated.
The effect on the profit of Manor Company of discontinuing this
department would be:
a. a decrease of P4,000.
b. an increase of P4,000.
c. a decrease of P25,000.
d. an increase of P25,000.

9. A product is composed of different parts.

a. True
b. False

10. Which of the following reasons is not a part of outsourced from a

supplier?
a. Lack of technology, man labor hours, machine hours, systems
expertise, or financing.
b. Savings or discontinuance of unprofitable segment operations.
c. Legal or cultural limitations,
d. Total relevant costs

11. It cannot be avoided regardless of decisions made whether make or

buy. It does not
change and it is irrelevant.
a. Variable Cost
b. Fixed Overhead
c. Fixed Change
d. Make or Buy

12. If the acceptance of the special sales order creates an unnecessary

competition to the
regular product sales, the special sales order normally?
a. Rejected
b. Accepted
c. Remain
d. Created

13. If there is no alternative use of capacity, the incremental profit (loss)

is the difference
between?
a. incremental expense and incremental costs.
b. incremental sales and incremental revenue.
c. incremental sales and incremental costs.
d. incremental cost and incremental sales.

14. If there is an alternative use of the capacity, the best benefit that may
be derived from
such should be _______ from the incremental profit to get the net
advantage or
disadvantage from accepting the special sales order.
a. Divided
b. Deducted
c. Added
d. Round-off

15. A __________ represents a division, product line, department or

business unit.
a. Business segment
b. Continue segment
c. Drop segment
d. Non-routine Operating Decisions

16. The profitability of a segment is measured by its ___________.

a. Non-routine operating decisions
b. Accept or reject component
c. Segment margin
d. Incremental cost

17. Segment margin is sometimes labeled as _______, _______,

_______.
a. Non-routine, accept or reject, make or buy
b. Contribution margin, avoidable fixed cost, segment margin
c. Positive segment margin, make or buy, accept or reject
d. Division margin, product margin, department margin.

18. In deciding whether to sell a product "as is" or process it further,

which of the following
pieces of information would not be relevant to the decision?
a. Costs of further processing.
b. Costs incurred up to the decision point.
c. Sales price if processed further.
d. Customer demand with further processing

19. Lotty Patatas Inc. currently sells cut sweet potatoes for P42.50 per
can. The cost of
producing the sweet potatoes is P9 per can. Lotty Patatas is considering
starting a line
of mashed sweet potatoes. The additional processing costs would be P3
per can and
each can would sell for P47.50. Which of the following pieces of
information is not
relevant to the decision to sell "as is" or process further?
a. P3 additional processing cost
b. P9 production cost
c. P47.50 sales price
d. demand for pureed sweet potatoes
20. It is the level of operations where the loss from continuing is equal to
the loss from
discontinuing.
a. Shutdown Point
b. Break-even Point
c. Margin of error
d. Drop Segment

21. Which of the following statements is incorrect?

a. If operations are temporarily shut down, the business will still incur a
loss because of
the shutdown cost.
b. Costs incurred even after operations temporarily stopped are called as
shutdown
costs.
c. Restart-up costs include fixed costs, variable costs, and contractual
obligations.
d. Certain seasonal businesses may shut down almost entirely during the
off-season.

22. This price should not be less than your incremental costs.
a. Maximum bid price
b. Contract price
c. Incremental cost
d. Minimum bid price

23. What is the highest possible benefit that may be derived from the best
alternative use of
capacity?
a. Incremental cost
b. Opportunity cost
c. Operating cost
d. Variable cost

24. To optimize scarce resources, sales, and production. should be

allotted to?
a. A product that gives the highest profit per scarce resource
b. A product that gives the lowest profit per scarce resource
c. A product that gives the high and low profit per scarce resource
d. None of the above
25. It happens when two or more legally independent but related
companies transact with
each other.
a. Transfer pricing
b. Skimming pricing
c. Penetration pricing
d. Life-cycle-based pricing

26. Any transaction entered into by the parent company with any of its
related entities or
entered into by any two or more of its related parties.
a. Single-party transaction
b. Party transaction
c. Related transaction
d. Related-party transaction

27. When the overall goal of the organization prevails over that of the
divisional goals. It is
called?
a. Goal congruence
b. Suboptimization
c. Neither a and b
d. None of the above

28. When the entity goal of the division prevails over the overall
organization goals. It is
called?
a. Suboptimization
b. Goal congruence
c. Neither a and b
d. None of the above

29. It has the advantage of isolating variances.

a Variable cost
b. Actual cost
c. Standard cost
d. Cost

30. What is the best transfer price?

a. Market Price
b. Negotiated transfer price
c. Arbitrary transfer pricing
d. None of the above

31. It may occur when segments are free to determine the prices at which
they buy and sell
internally.
a. Negotiated transfer price
b. Arbitrary transfer pricing
c. Dual pricing
d. Transfer pricing

32. It set by the management in the corporate headquarters.

a. Negotiated transfer price
b. Arbitrary transfer pricing
c. Dual pricing
d. Transfer pricing

33. What is the desire to attain a specific goal and the commitment to
accomplish the goal?
a. Goal
b. Mission
c. Vision
d. Motivation

34. It include that of variable production costs, incremental overhead, and

regular marketing,
selling and administration expenses.
a. Cost
b. Incremental costs
c. Regular incremental costs
d. Irregular incremental costs

35. It is the point where the cumulative discounted cash inflows from
investment equals the
cost of investment.
a. Breakeven point
b. Breakeven time
c. Breakeven
d. All of the above

36. It pertains to the period where the product is conceptualized,

designed, approved, and
the prototype made and readied for commercial production.
a. Time
b. Development
c. Product
d. Product development time

37. They must constantly make decisions. In making these decisions, they
must estimate
how each decision could affect operating income.
a. Employee
b. Managers
c. Stockholders
d. Shareholders

38. Which of the following are referred to as planned costs, budgeted

costs, projected costs,
or estimated costs?
a. Fixed costs
b. Variable costs
c. Future costs
d. Cost

39. It is an important part in economic transactions. It is more important

when participating in
a bidding process to get a contract or secure a project.
a. Sales
b. Price
c. Pricing
d. Time

40. It anchors on the universal and basic laws of supply and demand
which state that as the
demand for a product increases, the price correspondingly increases, and
vice-versa.
a. The Economist’s model
b. The Economic model
c. The Market model
d. None of the above

41. If the elasticity of demand is greater than 1, demand is considered as

what?
a. Inelastic
b. Elastic
c. Elasticity
d. Inelasticity

42. If the elasticity of demand is less than 1, demand is considered as

what?
a. Inelastic
b. Elastic
c. Elasticity
d. Inelasticity

43. This pricing model resides on the psychology of the market

participants.
a. Skimming pricing
b. Controlled-market-based pricing
c. Premium pricing
d. Target pricing

44. This pricing model considers time as the basis in setting a price.
a. Skimming pricing
b. Time pricing
c. Loss Leader pricing
d. Transfer pricing

45. In this model, price is based on the expected amount of materials to

be used.
a. Skimming pricing
b. Time pricing
c. Materials-based pricing
d. Transfer pricing

46. This model, like the life-cycle costing, is in line with the trend of
increasing efficiency,
productivity and competitiveness for long-term survival.
a. Target pricing
b. Skimming pricing
c. Controlled-based-market pricing
d. Premium pricing

47. It refers to all other costs and expenses not included in the cost-based.
a. Costs
b. Cost-based
c. Fixed costs
d. Non-cost based
48. This model reduces managerial efforts to control costs.
a. Target pricing
b. Dual pricing
c. Cost-based pricing
d. Transfer pricing

49. When an entity goal of the division prevails over the overall
organization goal.
a. Goal Congruence
b. Suboptimization
c. Related Party Transaction
d. Special Purpose Entity

50. When the overall goal of the organization prevails over that of the
divisional goals.
a. Related Party Transaction
b. Suboptimization
c. Goal Congruence
d. Special Purpose Entity

51. When the transacting divisions are addressed or located in different

countries of
operations.
a. Cost-based Transfer Pricing
b. Multinational Transfer Pricing
c. Minimum Transfer Prices
d. Negotiated Transfer Pricing

52. Any transaction entered into by the parent company with any of its
related entities or
entered by any two or more of its related parties.
a. Transfer Price Transaction
b. Related-party Transaction
c. Dual Pricing
d. Negotiated Transfer Price

53. This is used when the selling and buying divisions use two different
prices in
recording their intercompany transfers.
a. Dual Pricing
b. Cost-based transfer price
c. Negotiated transfer price
d. Arbitrary transfer pricing

54. What is the special focus of multinational transfer pricing?

a. Analysis on international tax effects incurred or paid by the parent or
holding company
to the host countries.
b. Govern to minimize costs and maximize profit.
c. The transfer pricing policy is normally set by the top management.
d. Transfer pricing occurs when an independent unit sells to or buys from
another
independent unit within the same business conglomerate.

55. The following are some products that are expected to have an increase
in sales price
as they age except:
a. Canned goods
b. Artifacts
c. Land
d. Wines

56. Minimum bid price is computed as?

a. Incremental cost / opportunity cost = minimum bid price
b. Incremental cost - opportunity cost = minimum bid price
c. Incremental cost + opportunity cost = minimum bid price
d. Either A or B

57. If the incremental sales are ________ the incremental costs of further
processing, it is
advisable to process further the product to maximize profit.
a. Less than
b. Greater than
c. Not equal
d. None of the above

58. It includes variable production costs, incremental overhead, regular

marketing, seeking
and administration expenses.
a. Regular incremental costs
b. Sunk cost
c. Opportunity cost
d. Fixed cost

59. A type of cost-based transfer pricing that does not promote long-term
manufacturing
efficiencies.
a. Actual cost-based transfer pricing
b. Standard cost-based transfer pricing
c. Both a and b
d. None of the above

60. Transfer price is a/an _____ price used to record interdivisional

transactions of goods or
services and correspondingly evaluate a/an ________ performance in line
with the
overall objective of the enterprise.
a. Artificial ; regional
b. Natural ; divisional
c. Natural ; regional
d. Artificial ; divisional

For 60-62
The management of Triple Star Corporation is analyzing the factors that
cause an
increase in it's gross profit in 2020. The information shown below is
assembled for this
purpose.

2019 2020 Increase (Decrease) Sales 2,640,000

2,750,000 110,000 Less: Cost of Goods Sold 1,760,000
2,125,000 365,000 Gross Profit 880,000 625,000
(255,000) Units Sold 22,000 25,000 3,000 Unit Sales
Price 120.00 110.00 (10.00) Unit Cost Price 80.00 85.00
5.00

Provide a 2-way variance analysis.

61. What is the Net Price Variance?

a. (P255,000) - Unfavorable
b. P120,000 - Favorable
c. (P375,000) - Unfavorable
d. P240,000 – Favorable

62. What is the Gross Profit Variance?

a. (P255,000) - Unfavorable
b. P120,000 - Favorable
c. (P375,000) - Unfavorable
d. P240,000 – Favorable

63. What is the Net Quantity Variance?

a. (P255,000) - Unfavorable
b. P120,000 - Favorable
c. (P375,000) - Unfavorable
d. P240,000 – Favorable

64. This pricing model resides on the psychology of the market

participants.
a. Controlled-market-based pricing
b. Target pricing
c. Premium pricing
d. Life-cycle-based pricing

65. Some of the most considered factors affecting price elasticity are as
follows except:
a. Market Definition
b. Substitute Products
c. Disposable Income
d. None of the above

66. In this model, the company looks at the market, determines the
prevailing market price,
establishes its desired profit, then computes the should be amount of cost
to be incurred
in producing and selling a product.
a. Controlled-market-based pricing
b. Target pricing
c. Premium pricing
d. Life-cycle-based pricing

67. It may occur when segments are free to determine the prices at which
they buy and sell
internally. Also, it is especially appropriate when market prices are
subject to rapid
fluctuations.
a. Market Price
b. Cost-based Transfer Price
c. Negotiated Transfer Price
d. Arbitrary transfer pricing

68. Recall the formula of Minimum transfer price with excess capacity.
a. MTP = Regular Incremental Cost + Opportunity Cost - Savings
b. MTP = Regular Incremental Cost + Opportunity Cost + Savings
c. MTP = Regular Incremental Cost - Opportunity Cost - Savings
d. MTP= Regular Sales Price + Other Incremental Cost + Opportunity
Cost -Savings

69. This pricing techniques is used when there is an idle capacity,

competition is very stiff,
and businesses have to sell hard their products to at least breakeven.
a. Time Pricing
b. Cost-based pricing
c. Materials-based pricing
d. Distress pricing

70. Gross profit is affected by at least three major variables

a. unit sales price, unit cost price, and unit sold
b. unit sales price, cost profit and quantity
c. cost of production, unit cost price, and markup ratio
d. unit sold, gross profit, and sales variances

71. The following are the factors to be considered in the decision to

accept or reject a
special order, except?
a. Unnecessary competition
b. Idle Capacity
c. Both A and B
d. None of the above

72. It refers to a cost that differs from one option or alternative to another.
a. Incremental Costs
b. Sunk Costs
c. Fixed Costs
d. Future Costs

73. It means that the segment is contributing to the overall profitability of

the organization.
a. If the Segment margin is negative
b. If the Segment margin is discontinue
c. If the Segment margin is positive
d. If the segment margin is Drop

74. This pricing model is based on the principle of scarcity of resources

and rationality of
men.
a. The Economist’s model
b. Premium pricing
c. Controlled market-based pricing
d. Target pricing

75. It is a condition that occurs when demand for a product is less than
the amount of
product that a business could potentially supply to the market.
a. No excess capacity
b. Excess capacity
c. Transfer Price
d. None of the above

76. These are variable production except;

a. Direct Material
b. Direct Labor
c. Variable incremental costs
d. Unavoidable fixed overhead

77. Whenever there is an interdivisional transaction, there are at least

three (3) independent
but related parties affected thereto;
I. The selling division
II. The buying division, and
III. The wholly-owned company
IV. The parent company
a. I & IV only
b. I, II, II & IV
c. I, II & IV only
d. II & III only

78. It is a means of performance measurement that gives managers a

chance to look at their
company from the perspectives of internal and external customers,
employees, and
shareholders.
a. Calibration Meeting
b. Balanced Scorecard
c. Quality Management Measurement
d. Alternative Work Arrangements

79. Whenever there is an interdivisional transaction, there are at least

three (3) independent
but related parties affected and this are the following, EXCEPT:
a. Selling Division
b. Company Division
c. Buying Division
d. Parent Company

80. In the perspective of the selling division, the minimum transfer price
(MTP) without
excess capacity is computed as:
a. Regular incremental cost + Opportunity cost - savings
b. Regular Sales Price + Other incremental cost + opportunity cost -
savings
c. Regular incremental - opportunity cost + other incremental cost
d. Regular sales price - savings + opportunity cost

81. Which of the following types of transfer prices do not encourage the
selling division to be
efficient?
a. transfer prices based upon market prices
b. transfer prices based upon actual costs
c. transfer prices based upon standard costs
d. transfer prices based upon standard costs plus a markup for profit

82. What is the primary focus when making nonroutine operating

decisions?
a. Long-term stability
b. Profitability
c. Qualitative Variables
d. Standard Operating Policies

83. It is any transactions entered into by the parent company with any of
its relate entities or
entered into by any two or more of its related parties
a. Transfer Price
b. Goal Congruence
c. Related Party Transaction
d. Suboptimization

84. As the internal transfer price is increased,

a. Overall corporate profits increase
b. Profits in the buying division increase
c. Profits in the selling division increase
d. Profits in the selling division and the overall corporation increase

85. This is a traditional and simple technique of setting a sales price. You
only have to
determine the costs of producing a product and operating a business, then
add your
desired profit and you will arrive at a sales price.
a. Materials-based pricing
b. Transfer pricing
c. Cost-based pricing
d. Time pricing

86. When transferring products between divisions in a competitive

economy, a large,
diversified corporation should base transfer prices on what?, to minimize
waste and
maximize efficiency.
a. Production Cost
b. Variable Cost
c. Market Price
d. Fixed Cost

87. It is set by the management in the corporate headquarters

a. Cost based transfer pricing
b. Arbitrary transfer pricing
c. Transfer prices
d. Dual pricing

88. This variance is sometimes called the final sales volume variance.
a. Sales yield variance
b. Sales price variance
c. Sales mix variance
d. Cost price variance
89. In deciding whether to accept or reject a special sales order, what is
the primary factor to
consider?
a. Incremental cost
b. Incremental sales
c. Incremental profit (loss)
d. None of the above

90. Actual and budgeted information about the sales of a product are
presented below for
June:
The sales price variance for June was
a. P8,000 F
b. P10,000 F
c. P10,000 UF
d. P105,000 UF

91. Deals with how to analyze the profit variance that constitutes the
difference between
actual gross profit and the base data gross profit.
a. Budgeted gross profit
b. Gross profit variance analysis
c. Standard gross profit
d. Previous year gross profit

92. What type of decisions are not covered by standard operating policies
(SOPs) and are
primarily driven by profitability?
a. Routine operating decisions
b. Strategic decisions
c. Nonroutine operating decisions
d. Long-term stability decisions

93. It is a fundamental economic concept that helps us understand how

consumers respond
to price changes.
a. Elasticity of demand
b. Pricing Model
c. Demand Elasticity
d. Target Pricing

94. This applies when the transacting divisions are addressed or located in
different
countries of operations and the objectives of the holding company govern
to minimize
costs and maximize profit.
a. Multinational transfer pricing
b. Related-party transaction
c. Negotiated transfer price
d. Cost-based transfer price

95. It is a decision that is unusual, complex, and typically requires a

significant degree of
judgment.
a. Strategy Decision
b. Tactical Decision
c. Non-routine Decision
d. Operational Decision

96. When the managers of subunits throughout an organization have a

common set of
objectives.
a. Market Price
b. Cost Based Transfer Price
c. Goal Congruence and Sub-optimization
d. Transfer Prices

97. This applies when the transacting divisions are addressed or located in
different
countries of operation.
a. International Transfer Pricing
b. National Transfer Pricing
c. Multinational Transfer Pricing
d. Organizational Transfer Pricing

98. These decisions are regularly made to impact medium-term

organizational activities and
are concerned with customer’s satisfaction.
a. Strategic decisions
b. Tactical decisions
c. Operational decisions
d. Management decisions
99. It is an artificial price used to record interdivisional transactions of
goods or services and
correspondingly evaluate divisional performance in line with the overall
objectives of the
enterprise.
a. Transfer Prices
b. Market Price
c. Cost-based Transfer Price
d. Negotiated Transfer Price

100. It pertains to the period where the product is conceptualized,

designed,
approved, and the prototype made and readied for commercial
production.
a. Manufacturing cycle time
b. Partial Productivity rate
c. Product development time
d. Breakeven time

101. It is a measure of output (finished goods) over process input (e.g.,

materials,
labor hours).
a. Manufacturing Cycle time
b. Partial Productivity Rate
c. Balanced scorecard
d. Product Development time

102. Any transaction entered into by the parent company with any of its
related
entities or entered into by any two or more of its related parties.
a. Related Party
b. Related-party transaction
c. Transfer Pricing Transaction
d. Subsidiary Transaction

103. This issue of transfer pricing arises when an independent unit sells to
or buys
from another independent unit within the same business conglomerate.
a. Issue of Transfer Pricing
b. Issue of Buying Division
c. Issue of Interdependence
d. Issue of Parent Company

104. There would be that are expected to be derived from a reduced

operating
expenses of maintaining the new asset compared with that of the old
asset.
a. Savings
b. Income
c. Both “a” and “b”
d. None of the above

105. This pricing model is applied when a company wants to enter market
where entry
is relatively easy due to minimal amount of investment needed and most
applicable in a
buyers market where the behavior of the market is significantly
influenced by buyers
than by sellers.
a. Penetration Pricing
b. Predatory Pricing
c. Skimming Pricing
d. Price Tag

106. In this model, the company looks at the market, determines the
prevailing market
price, establishes its desired profit, then computes the should be amount
of cost to be
incurred in producing and selling a product.
a. Product Bundling
b. Target Pricing
c. Penetration Pricing
d. Life cycle based pricing

107. This product pricing model based its prices on government

regulations or implied
agreements among key players in the market.
a. Premium Pricing
b. Controlled-market-based pricing
c. Target Pricing
d. Skimming Pricing

108. It is calculated as Sales Revenue-Variable Costs

a. Contribution Margin
b. Sales Variance
c. Quantity Variance
d. Net Sales

109. What does the Sales Quantity Variance measure in the context of
gross profit
variance analysis?
a. Difference between actual and standard unit sales prices
b. Difference between actual and standard quantity sold
c. Difference between actual and standard cost of goods sold
d. Difference between actual and standard gross profit

110. This is based on the principle of scarcity of resources and human

rationality
based on the universal laws of supply and demand.
a. Traditional Pricing Model
b. Economist's Model
c. Target Pricing
d. Predatory Pricing

111. The following are elements or factors needed in getting the sales
price variance
except:
a. Unit sale price
b. Quantity sold this year
c. Unit cost price this year
d. None of the above

112. This factor is not directly controlled by managers but is influenced

by market
forces such as general financial and economic conditions, technological
developments,
and competition.
a. Sales price
b. Changes in customer’s needs
c. Number of units sold
d. Cost

113. A manager should always reject a special order if:

a. There is available excess capacity.
b. The special order price is less than the variable costs of the order.
c. The special order price is less than the regular sales price.
d. The special order will require variable non-manufacturing expenses.

114. These are costs for subsequent processing such as cost of further
processing,
upgrading cost, or cost of additional processing.
a. Unit Variable Costs
b. Sunk Costs
c. Total Joint Costs
d. Incremental Costs

115. Which of the following is an example of Indifference point

computations?
a. Break Even point
b. Shut up point
c. Economic under quality
d. External Pay

116. It is an important part of the economics transaction.

a. Shutdown
b. Pricing
c. Continue Operations
d. Outsourcing

117. There are months in a year where businesses in a given economy

experience
slowdowns caused by seasonal, cyclical, or random variations of the
place where the
business operates.
a. True
b. False

118. If continuing the operations will result to sales less than the shut
down point, it is
better to continue operating and be spared of more losses from
discontinuing operations.
a. True
b. False

119. The following are subject to scarcity, except:

a. Money
b. Supply of materials
c. Technology
d. None of the above.

120. Tiya Company plans to discontinue a division with a P 500,000

contribution to
overhead. Overhead allocated to the division is P 300,000, of which P
150,000 cannot
be eliminated. Should Tiya Company discontinue the division? Compute
the controllable
segment Margin.
a. Continue, 150 000
b. Continue, 300 000
c. Continue, 350 000
d. Drop, (350 000)