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MASTERS TECHNOLOGICAL INSTITUTE OF MINDANAO

Acctg 321 – Management Accounting Part 1


Long Quiz

1. On January 1, 2018, AAA Corporation a. No fixed factory overhead is


increased its direct labor wage rates. All charged to production.
other budgeted costs and revenues b. It is also known as direct costing.
were unchanged. How did this increase c. The term used to designate the
affect AAA Corporation’s budgeted difference between sales and cost
breakeven point and budgeted margin of goods sold is the “manufacturing
of safety? margin”.
Budgeted Budgeted d. Over-applied factory overhead is
Breakeven Point Margin of Safety reflected in the income statement as
a. Increase Increase a reduction in cost of goods sold.
b. Increase Decrease
c. Decrease Decrease 6. The most likely strategy to reduce the
d. Decrease Increase breakeven point, would be able to:
a. Increase the fixed costs and
2. A company’s breakeven point in sales decrease the contribution margin.
pesos may be affected by equal b. Decrease the fixed costs and
percentage increases in both selling increase the contribution margin.
price and variable cost per unit (assume c. Increase both the fixed costs and
all other factors are equal within the the contribution margin.
relevant range). The equal percentage d. Decrease both the fixed costs and
changes in selling price and variable the contribution margin.
cost per unit will cause the breakeven
point in sales pesos to: 7. Which of the following assumptions is
a. Decrease by less than the inherent to C-V-P analysis?
percentage increase in selling price. a. In manufacturing firms, the
b. Decrease by more than the beginning and ending inventory
percentage increase in the selling levels are the same.
price. b. In a multi-product organization, the
c. Remain the same. sales mix varies over time.
d. Increase by more than the c. The behavior of total revenue is
percentage increase in selling price. curvilinear.
d. The relevant range is not a
3. For a profitable company, the amount consideration.
by which sales can decline before losses
occur is known as the: 8. Unabsorbed fixed overhead costs in an
a. Sales volume variance absorption costing system are:
b. Hurdle rate a. Fixed factory costs not allocated to
c. Variable sales ratio units produced.
d. Margin of safety b. Variable overhead costs not
allocated to units produced.
4. Which of the following is a true c. Excess variable overhead costs.
statement about sales mix? d. Costs that should be controlled.
a. Profits may decline with an increase
in total peso of sales if the sales mix 9. Fixed costs are ignored in allocating
shifts to sell more of the high scare resources because:
contribution margin product. a. They are sunk.
b. Profits may decline with an increase b. They are unaffected by the
in total peso of sales if the sales mix allocation of scare resources.
shifts to sell more of the lower c. There are no fixed costs associated
contribution margin product. with scare resources.
c. Profits will remain constant with an d. Fixed costs only apply to long run
increase in total peso of sales if the decisions.
total sales in units remain constant.
d. Profits will remains constant with a 10. Which of the following is incorrect?
decrease in total peso of sales if the a. In variable costing income
sales mix also remains constant. statement variable selling and
administrative expenses are used
5. Which of the following is true about both in the computation of
absorption costing?
contribution margin and operating There were no beginning or ending
income. inventories. The most likely explanation
b. When using a variable costing of the net income increase is that,
system, the contribution margin compared to budget, actual:
discloses the excess of revenue over a. Manufacturing fixed costs had
variable costs. increased.
c. In an income statement prepared as b. Selling and administrative fixed
an internal report using the variable expenses had decreased.
costing method, fixed overhead is c. Sales prices and variable costs had
used in the computation of increased proportionately.
operating income and contribution d. Sales prices had declined
margin. proportionately less than the
d. Using absorption costing, fixed variable costs.
manufacturing overhead costs are
best described as indirect product 16. Which of the following statements
cost. regarding absorption and variable
costing is correct?
11. Calculating income under variable a. Absorption costing results in higher
costing does NOT require knowing: income when finished goods
a. Unit sales inventory increases.
b. Unit variable manufacturing costs b. Variable manufacturing costs are
c. Selling price lower under absorption costing.
d. Unit production c. Overhead costs are treated in the
same manner under both variable
12. Absorption costing differs from variable and absorption costing methods.
costing in that: d. Profits are always the same under
a. Standards can be used with the two costing methods.
absorption costing, but not with
variable costing. 17. Under variable costing, all fixed costs
b. Production influences income under are expensed during the current period
absorption costing, but not under because:
variable costing. a. Fixed costs are usually immaterial in
c. Absorption costing inventories are amount.
more correctly valued. b. Fixed costs are non-controllable
d. Companies using absorption costing costs.
have lower fixed costs. c. Fixed costs are incurred whether or
not there is production, so it is not
13. The variable cost of a unit of product proper to allocate these costs to
made yesterday is: production and defer a current cost
a. An incremental cost. of doing business.
b. An opportunity cost. d. Allocation of fixed costs is usually
c. A differential cost. done arbitrarily and could lead to
d. A sunk cost. erroneous decision by management.

14. Why is income statement under variable 18. Which of the following statements about
costing diverse? a make or buy decision analysis is not
a. It uses terminologies that are difficult correct?
to understand. a. Available resources should be used
b. Income may still increase though unit as efficiently as possible before
sales decrease. outsourcing.
c. Income is rarely affected by the b. The analysis should involve available
number of units produced. costs only.
d. It considers cost variances as c. If the total relevant cost of
adjustment to cost of goods sold. production is less than the cost to
buy the item, it should be produced
15. A manufacturing company prepares in house.
income statements using both d. The decision depends on whether
absorption and variable costing the company is operating at or
methods. At the end of the period, below the normal capacity.
actual sales revenue, total gross profit,
and total contribution margin 19. All of the following are relevant to a
approximated budgeted figures, decision to accept or reject an order,
whereas net income was substantially except:
greater than the budgeted amount. a. Differential costs
b. Out of pocket costs volume, return on sales is 20%. What is
c. Replacement costs the breakeven volume?
d. Sunk costs a. P225,000
b. P240,000
20. When a multiproduct plant operates at c. P258,000
full capacity, quite often decisions must d. P301,000
be made as to which products to
emphasize. These decisions are 24. In 2017, DEF Company had a net loss of
frequently made with a short run focus. P8,000. The company sells one product
In making such decisions, managers with a selling price of P80 and a variable
should select products with the: cost per unit of P60. In 2018, the
a. Highest sales price per unit company would like to earn a before
b. Highest individual unit contribution tax profit of P40,000. How many
margin additional units must the company sell in
c. Highest sales volume potential 2018 than it sold in 2017? Assume that
d. Highest contribution margin per unit the tax rate is 40 percent.
of the constraining resource a. 1,600 units
b. 2,400 units
21. Product A has a selling price of P80 per c. 2,000 units
unit, a contribution margin ration of 50%, d. 3,400 units
and requires 4 machine hours to
produce. Product B has a selling price of 25. The November contribution format
P120 per unit, a contribution margin income statement of SF Co. appears
ratio of 40%, and requires 5 machine below.
hours to produce. If the company has
limited machine hours available, then it Sales P564,400
should produce and sell: Variable expenses 312,800
a. Product B since it has the higher Contribution margin 251,600
contribution margin per unit. Fixed expenses 193,800
b. Product A since it requires fewer Net operating income P 57,800
machine hours per unit than does
Product B. The degree of operating leverage is closest
to:
c. Product B since it has higher a. 0.45
contribution margin per machine b. 0.10
hour. c. 4.35
d. Product A since it has higher d. 0.23
contribution margin per machine
hour. 26. The management is considering
installing a new, automated
22. The Mark X Corp. contemplates the manufacturing process that will increase
temporary shutdown of its plant facilities fixed costs by P50, 000 and reduce
in a provincial area which are variable manufacturing costs by P3.50
economically depressed due to natural per unit. The management sets a target
disasters. Below re certain profit of P70,000 before and after the
manufacturing and selling expenses: acquisition of the automated machine.
i. Depreciation After the installation of the automated
ii. Property tax machine, what will be the change in
iii. Interest expense the units required to achieve the target
iv. Insurance of facilitie profit?
v. Sales commission a. 6,600 unit increase
vi. Delivery expenses b. 5,600 unit decrease
vii. Security of premises c. 4,000 unit decrease
d. 4,400 unit decrease
Which of the following expenses will
continue during the shutdown period? 27. STU Corp. would like to market a new
a. All expenses in the list product at a selling price of P15 per unit.
b. All except items v and vi Fixed costs for this product are
c. Items i,ii, and iii only P1,000,000 for less than 500,000 units of
d. Items i,ii,iii,iv,vi and vii only output and P1,500,000 for 500,000 or
more units of output. The contribution
23. ABC Company has fixed costs of margin percentage is 35%. How many
P90,300. At a sales volume of P360,000, units of this product must be sold to earn
return on sales is 10%; at a P600,00
an after tax income of P600,000? b. P0.50
Assume a 40 percent tax rate. c. P1.00
a. 366,667 d. P1.50
b. 476,190
c. 256,410 31. PQR Company has the following
d. 380,952 operating data for its manufacturing
operations:
28. The management of MNO Company Unit selling price P250
has performed cost studies and has Unit variable cost P100
projected the following annual costs on Total fixed costs P840,000
60,000 units of production and sales:
% of Variable The company’s decision to increase the wages
Total Portion of of hourly workers will increase the unit variable
Annual Cost Total Annual Cost cost by 10 percent. Increases in the salaries of
Direct Material 600,000 100 % factory supervisors and property taxes for the
Direct Labor 720,000 80 % factory will increase total fixed costs by 4
Mfg. Overhead 400,000 50 % percent. If sales price is held constant, the next
Selling Costs 192,500 25 % year’s breakeven point for PQR Company will
be:
What selling price will yield a 15 percent profit a. Increased by 640 units.
from sales of 60,000 units? b. Increased by 400 units.
a. P41.67 c. Decreased by 640 units.
b. P37.50 d. Decreased by 400 units.
c. P27.30
d. P35.42 32. The following information was extracted
from the first year of absorption based
29. AM Co. has two segments: Audio and accounting records of SA Co.
Video. Sales for the Audio segment
were P500,000 and variable costs were Total fixed costs incurred P100,000
40% of sales. The Video segment also Total variable costs incurred 50,000
had sales of P500,000 but variable costs Total period costs incurred 70,000
were 60% of sales. Fixed costs directly Total variable period costs incurred 30,000
traceable to the Audio and Video Units produced 20,000
segments were P150,000 and P120,000 Units sold 12,000
respectively. Common fixed costs of Unit sales price P12
P200,000 were arbitrarily allocated
equally to each segment. What was the Based on variable costing, if SA Co. had sold
segment margin of the Video Segment? 12,001 units instead of 12,000, its income before
a. (P20,000) taxes would have been:
b. P200,000 a. P9.50 higher
c. P150,000 b. P8.50 higher
d. P80,000 c. P11.00 higher
d. P8.33 higher
30. The following economic data were
provided by the corporate planning 33. The production manager of Rafa Corp.
staff of GHI, Inc.: is declining on what to do with P5,000
units of scrap output. The company
Sales volume 30,000 units spent P12,500 in producing these items.
Sales price per unit P 30 Two options are available:
Unit variable costs: i. Sell the product as a scrap per se
Variable manufacturing P13 at P0.88 each;
Other variable costs 8 ii. Rework the units at a cost of
Unit variable costs P 21 P6,250 and then sell it for P22.50
Unit contribution margin P 9 per unit.
Fixed costs:
Manufacturing P 150,000 The net advantage or disadvantage to the
Other fixed costs 50,000 company if proposal B is followed is:
Total fixed costs P 200,000 a. P6,250 advantage
b. P1,850 advantage
At a breakeven point of 400 units sold, the c. P4,400 disadvantage
variable costs were P400 and the fixed costs d. P6,250 disadvantage
were P200. What will the 401st unit sold
contribute to profit before income taxes?
a. P0
34. The following data pertain to both absorption and variable costing
Company’s production and sales methods are:
activities for the month of November: Absorption Costing Variable Costing
Production 9,000u a. P1,350 P2,025
Sales 7,000u b. 2,535 1,560
Std. variable manufacturing costs P20/u c. 2,025 1,350
Std. fixed manufacturing costs P25/u d. 1,560 2,535
Selling and admin. expense (all fixed) P80,000
37. XYZ Corporation’s operating income
Normal capacity is 10,000u per month. There figures during the year under both
was no inventory at the beginning of absorption and variable costing
November. The product sells for P75/u. All costs methods are:
were incurred as expected. Of the standard Absorption Costing Variable Costing
variable manufacturing cost of P20, P12 is for a. P5,280 P4,605
materials. Income under throughput costing is: b. 11,430 8,850
a. P105,000 c. 8,850 11,430
b. P 80,000 d. 4,605 5,280
c. P 55,000
d. P 15,000 38. Gata, Inc. plans to discontinue a
department with a P48,000 contribution
35. A company produces a single product. to overhead, and allocated overhead
Production is done only when orders are of P96,000, of which P42,000 cannot be
received from customers. Thus, no eliminated. What would be the effect of
inventory is kept at the end of the this discontinuance on Gata’s pretax
period. For the last period, the following profit?
data were available: a. P48,000 increase
b. P48,000 decrease
Sales P 32,000 c. P6,000 increase
Materials 7,240 d. P6,000 decrease
Labor 4,840
Rent (90% factory, 10% office) 2,400 39. Consider the FM Company’s segment
Depreciation (80% factory, 20% office) 2,000 analysis:
Supervision (2/3 factory, 1/3 office) 1,200
Salesmen’s salaries and commission 1,040 Division Division Total
Insurance (60% factory, 40% office) 960 A B Company
Office supplies 600 Sales P300,000 P200,000 P500,000
Advertising 560 VC 150,000 150,000 300,000
CM 150,000 50,000 200,000
If the company uses absorption costing, the Direct FC 50,000 30,000 80,000
cost of goods sold during the period was: SM 100,000 20,000 120,000
a. P18,640 Common FC 90,000 60,000 150,000
b. P17,216 Inc/ Loss P10,000 (P40,000) (P30,000)
c. P20,840
d. P12,080 Common costs are allocated arbitrarily based
on peso sales. If FM eliminates Segment B,
Items 36 & 37 are based on the following what is the impact on the operating loss of the
information: company?
a. The loss decreases by P40,000.
XYZ Corporation’s records for the year 2017 b. The loss increases by P20,000.
show the following data: c. The loss decreases by P20,000.
Net Sales (6,000 units) P21,000 d. The loss increases by P40,000.
Cost of goods manufacturing (7,000 units):
Variable 9,450 40. Arlene Inc. currently has annual cash
Fixed 4,725 revenues of P2,400,000 and an annual
Operating expenses: operating cost of P1,850,000 (all cash
Variable 1,470 items except depreciation of P350,000).
Fixed 2,100 The company is considering the
There was no finished goods inventory at the purchase of new machine costing
beginning of the period. Neither was there any P1,200,000 per year. The new machine
work-in process inventory at the beginning and would increase (1) revenues to
end of the year. P2,900,000; (2) operating cost to
P2,050,000; (3) depreciation to P500,000
36. XYZ Corporation’s finished goods per year. Assuming a 35% income tax
inventory costs at the end of 2017 under rate, Arlene’s annual incremental after
tax cash flows from the machine would 43. During 2017, Fitness Corp. experienced
be: the following outages:
a. P330,000 Number of Number
b. P345,000 Outages/ month of Months
c. P292,500 0 3
d. P300,000 1 2
2 4
41. Apple Company, which manufactures 3 3
sneakers, has enough idle capacity Each power outage results in out of pocket
available to accept a special order of costs of P200. For P250 per month, Fitness can
20,000 pairs of sneakers at P6 per pair. lease an auxiliary generator to provide power
The normal selling price is P10 per pair. during outages. If Fitness leases an auxiliary
Variable manufacturing costs are P7.50 generator in 2018, the estimated savings (or
per pair, and fixed manufacturing costs additional expenditure) for:
are P1.50 per pair. Apple will not incur a. P800
any selling expenses as a result of the b. P950
special order. Compute for Apple (1) c. (P600)
Unit relevant cost and (2) Effect on d. (P1,800)
operating income if the special order is
accepted without affecting normal Items 44 & 45 are based on Kingston
sales. Company, which needs 10,000 units of a
a. P5.50 and P0 certain part to be used in its production cycle.
b. P7.50 and P30,000 decrease If Kingston buys the part from Utica Company
c. P6.00 and P90,000 increase instead of making it, Kingston could not use the
d. P4.00 and P120,000 increase realized facilities in another manufacturing
activity. 60% of the fixed overhead applied will
42. Ysabelle Industries, Inc. has an continue regardless of what decision is made.
opportunity to acquire a new The following information is available:
equipment to replace one of its existing
equipment. The new equipment would Cost of Kingston to make the part:
cost P900,000 and has a five-year useful Direct material P6
life, with a zero terminal disposal price. Direct labor 24
Variable operating costs would be P1 Variable overhead 12
million per year. The present equipment Fixed overhead applied 15
has a book value of P500,000 and a Cost to buy the part: P53
remaining life of five years. Its disposal
price now is P50,000 but would be zero 44. In deciding whether to make or buy the
after five years. Variable operating costs part, Kingston’s total relevant costs to
would be P1,250,000 per year. make the part are:
Considering the five years in total, but a. P342,000
ignoring the time value of money and b. P480,000
income taxes, Ysabelle should: c. P530,000
a. Replace due to P400,000 d. P570,000
advantage.
b. Not replace due to P150,000 45. Which alternative is more desirable for
disadvantage. Kingston and by what amount?
c. Replace due to P350,000 a. Make, P50,000
advantage. b. Buy, P50,000
d. Not replace due to P100,000 c. Make, P40,000
disadvantage. d. Buy, P40,000

Name : _____________________________________ Subject & Block : __________________________

1 B 11 D 21 D 31 A 41 B
2 C 12 B 22 B 32 B 42 A
3 D 13 D 23 C 33 B 43 A
4 B 14 B 24 B 34 D 44 B
5 D 15 B 25 C 35 B 45 A
6 B 16 A 26 D 36 C 46
7 A 17 C 27 D 37 A 47
8 A 18 D 28 B 38 C 48
9 B 19 D 29 D 39 B 49
10 C 20 D 30 B 40 B 50
/mas1_longquiz/AAA

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