the following except

1 Which of the following statements is false?

A. At zero production level, fixed costs is also A. the mathematical calculations are relatively
zero. complex.
B. At zero production level, fixed costs are B. the high and low activity levels may not be
positive. representative.
C. At zero production level, variable costs are C. only two observations are used to develop
usually zero. the cost function.
D. At zero production level, total costs equal D. the method does not detect if the cost
total fixed costs. behavior is nonlinear.
2. NTQ, Inc.’s net sales in 1996 were 15% below the 7. Matias Corporation wishes to market a new
1995 level. NTQ’s semi-variable costs would product for P12.00 a unit. Fixed costs to manufacture
A. Increase in total and increase as a this product are P800,000 for less than 500,000 units
percentage of net sales. and P1,200,000 for 500,000 or more units.
B. Increase in total, but decrease as a Contribution margin is 20%. How many units must be
percentage of net sales. sold to realize a net income from this product of
C. Decrease in total, but increase as a P500,000?
percentage of net sales. A. 433,333 C. 666,667
D. Decrease in total and decrease as a B. 500,000 D. 708,333
percentage of net sales. 8. Singsing, Inc. manufactures and sells key
3. If the coefficient of correlation between two rings embossed with college names and slogans.
variables is zero, how might a scatter diagram of Last year, the key rings sold for P75 each, and the
these variables appear? variable costs to manufacture them were P22.50 per
A. Random points. unit. The company needed to sell 20,000 key rings to
B. A least squares line that slopes up to the break-even. The net income last year was P50,400.
right. The company expects the following for the coming
C. A least squares line that slopes down to the year:
right.  The selling price of the key rings will be P90.
D. Under this condition a scatter diagram could  Variable manufacturing costs per unit will
not be plotted on a graph. increase by one-third.
4. The relevant range is  Fixed costs will increase by 10%.
A. a relatively wide range of sales where all  The income tax rate will remain unchanged.
costs remain the same For the company to break-even the coming year, the
B. a relatively wide range of sales where total company should sell
variable costs remain the same A. 2,600 units. C. 21,250 units.
C. a relatively narrow range of production where B. 19,250 units. D. 21,600 units.
total variable costs remain the same 9. Wheels Corp. employs 45 sales personnel to
D. a relatively wide span of production where market its sedan cars. The average car sells for
total fixed costs are expected to remain the P690,000 and a 6% commission is paid to the sales
same person. It is considering changing the scheme to a
5. Saints Co. sells three chemicals: Simpol, Plutex, commission arrangement that would pay each person
and Coplex. Simpol is the most profitable product a package of P30,000 plus a commission of 2% of the
while Coplex is the least profitable. Which one of sales made by the person. The amount of total
the following events will definitely decrease the monthly car sales at which Wheels Corp. would be
firm’s overall B.E.P. for the upcoming accounting indifferent (answer may be rounded off) as to which
period? plan to select is
A. A decrease in Coplex’s selling price. A. P22,500,000 C. P36,500,000
B. An increase in Simpol raw materials cost. B. P33,750,000 D. P45,000,000
C. An increase in the overall market of Plutex. 10. A company manufactures a single product for
D. An increase in anticipated sales of Simpol its customers by contracting in advance of production.
relative to the sales of Plutex and Coplex. Thus, the company produces only units that will be
6. Weaknesses of the high-low method include all of
sold by the end of each period. For the last period, earned, operating profits must
the following data were available: A. Increase under the variable costing method.
Sales $40,000 B. Decrease under the variable costing method.
Direct materials 9,050 C. Increase under the absorption costing
Direct labor 6,050 method.
Rent (9/10 factory, 1/10 office) 3,000 D. Decrease under the absorption costing
Depreciation on factory equipment 2,000 method.
Supervision (2/3 factory, 1/3 office) 1,500 15. Both Company Y and Company Z produce
Salespeople’s salaries 1,300 similar products that need negligible
Insurance (2/3 factory, 1/3 office) 1,200 distribution costs. Their assets operation and
Office supplies 750 accounting are very similar in all respects
Advertising 700 except that Company Y uses direct costing
Depreciation on office equipment 500 and Company Z uses absorption costing.
Interest on loan 300 A. Co. Z would report a higher net income than
The gross profit margin percentage (rounded) was Co. Y for the years in which production
A. 34% C. 44% equals sales
B. 41% D. 46% B. Co. Y would report a higher inventory value
11. The change in period-to-period operating than Co. Z for the years in which production
income when using variable costing can be explained exceeds sales
by the change in the C. Co. Z would report a higher inventory value
A. Unit sales level multiplied by the unit than Co. Y for the years in which production
sales price. exceeds sales
B. Unit sales level multiplied by a D. Co. Y would report a higher inventory value
constant unit contribution margin. than Co. Z for the years in which production
C. Finished goods inventory level exceeds the normal or practical capacity
multiplied by the unit sales price. Questions 16 through 18 are based on the following
12. To apply direct costing method it is information.
necessary that you know The following information is available for X Co. for its
A. Variable and fixed cost related to first year of operations:
production Sales in units 5,000
B. Controllable and uncontrollable cost Production in units 8,000
of production
C. Contribution margin and break even
point in production Manufacturing costs:
D. Standard production rate and times Direct labor $3 per unit
of production elements Direct material 5 per unit
13. Jansen, Inc. pays bonuses to its managers Variable overhead 1 per unit
based on operating income. The company uses Fixed overhead $100,000
absorption costing, and overhead is applied on the Net income (absorption method) $30,000
basis of direct labor hours. To increase bonuses, Sales price per unit $40
Jansen’s managers may do all of the following except
A. Produce those products requiring 16. What would X Co. have reported as its
the most direct labor. income before income taxes if it had used variable
B. Defer expenses such as costing?
maintenance to a future period. A. ($30,000) C. $30,000
C. Decrease production of those items B. ($7,500) D. $67,500
requiring the most direct labor.
D. Increase production schedules 17. What was the total amount of SG&A expense
independent of customer demands incurred by X Co.?
14. If unit costs remain unchanged and sales volume A. $6,000 C. $36,000
and sales price per unit both increase from the B. $30,000 D. $62,500
preceding period when operating profits were
18. Based on variable costing, what would X Co.
show as the value of its ending inventory?
A. $24,000 C. $64,500
B. $27,000 D. $120,000
18. Traditional overhead allocations result in
which of the following situations?
A. The resulting allocations cannot be used for
financial reports.
B. Overhead costs are assigned as period costs
to manufacturing operations.
C. Low-volume products are assigned too much,
and high-volume products are assigned too
little overhead.
D. High-volume products are assigned too much
overhead, and low-volume products are
assigned too little overhead.
19. Which of the following is NOT a sign of poor cost
data?
A. The company seems to have a highly
profitably niche all to itself.
B. Customers don’t balk at price increases for
low-volume products.
C. Competitors’ prices for low-volume products
appear much too high.
D. Competitors’ prices for high-volume products
appear much too high.
20. Activity-based costing and generally accepted
accounting principles differ in that ABC
A. does not define product costs in the same
manner as GAAP.
B. cannot be used to compute an income
statement, but GAAP can.
C. information is useful only to managers, while
GAAP information is useful to all
organizational stakeholders.
D. is concerned only with costs generated from
automated processes, but GAAP is
concerned with costs generated from both
manual and automated processes.
21. If activity-based costing is implemented in an
organization without any other changes being
effected, total overhead costs will
A. remain constant and simply be spread over
products differently.
B. be reduced because of the elimination of
non-value-added activities.
C. be reduced because organizational costs will
not be assigned to products or services.
D. be increased because of the need for
additional people to gather information on
cost drivers and cost pools.
22. All of the following are nonunit-based activity
drivers EXCEPT
A. number of direct labor hours C. number of
material moves
B. number of inspections D. number of setups
23. The primary difference between a fixed (static)
budget and a variable (flexible) budget is that a
fixed budget:
A. includes only fixed costs; while variable
budget includes only variable costs
B. cannot be changed after the period begins;
while a variable budget can be changed after
the period begins
C. is concerned only with future acquisitions of
fixed assets; while a variable budget is
concerned with expenses that vary with sales
D. is a plan for a single level of sales (or other
measure of activity); while a variable budget
consists of several plans, one for each of
several levels of sales (or other measure of
activity)
24. Which of the following term is best identified
with a system of standard cost?
A. Contribution approach.
B. Management by exception.
C. Marginal costing.
D. Standard accounting system.
25. A company using very tight standards in a
standard cost system should expect that
A. No incentive bonus will be paid
B. Most variances will be unfavorable
C. Employees will be strongly motivated to
attain the standard
D. Costs will be controlled better than if lower
standards were used
26. For the doughnuts of McDonut Co. the
Purchasing Manager decided to buy 65,000 bags
of flour with a quality rating two grades below that
which the company normally purchased. This
purchase covered about 90% of the flour
requirement for the period. As to the material
variances, what will be the likely effect?
A. B. C. D.
Price Favorabl Favorable Unfavorabl No effect
varian e e
ce
Usage Favorabl Unfavorable Favorable Unfavorabl
varian e e
ce
27. The journal entry to record the direct materials
quantity variance may be recorded
A. Only when direct materials are purchased
 B. When inventory is taken at the end of the savings on this design work?
year. A. $300,000 savings. C. $500,000 savings.
C. Only when direct materials are issued to B. $500,000 overrun. D. $700,000 overrun.
production
D. Either (A) or (C)
28. Hankies Unlimited has a signature scarf for ladies 31. An effective management by objectives (MBO)
that is very popular. Certain production and marketing program can increase organizational
data are indicated below: effectiveness. Which of the following contributes
Cost per yard of cloth P36.00 to an effective MBO program?
Allowance for rejected scarf 5% of production A. Emphasis on "should do" rather than "must
Yards of cloth needed per scarf0.475 yard do" objectives.
Airfreight from supplier P0.60/yard B. Objectives that are quantified, clearly
Motor freight to customers P0.90 /scarf measurable, and state target dates for
Purchase discounts from supplier 3% completion.
Sales discount to customers 2% C. Managers who hold their subordinates strictly
The allowance for rejected scarf is not part of the 0.475 accountable for achieving their objectives
yard of cloth per scarf. Rejects have no market value. precisely as they have been written.
Materials are used at the start of production. D. All of the answers are correct.
Calculate the standard cost of cloth per scarf that Hankies 32. All of the following are elements of responsibility
Unlimited should use in its cost sheets. accounting except
A. P16.87 C. P17.76 A. Control reports.
B. P17.30 D. P18.21 B. Chart of accounts classification.
29. To improve productivity, ST. MICHAEL Corp. C. Responsibility center definition.
instituted a bonus plan where employees are paid D. Planning systems and systemic approaches.
75% of the time saved when production performance 33. Among the management accounting concepts is
exceeds the standard level of production. The controllability which means (3)
company computes the bonus on the basis of four- A. Accounting information must be of such
week periods. The standard production is set at 3 quality that confidence can be placed in it.
units per hour. Each employee works 37 hours per B. Management accounting must ensure that
week, and the wage rate is P24 per hour. Below are flexibility is maintained in assembling and
data for one 4-week period: interpreting information.
Weekly Production (Units) C. It is necessary at all times to identify the
Employe 1st 2nd responsibilities and key result areas of the
e individuals within the organization.
ALAN 107 100 D. Management accounting identified elements
JOEL 104 110 or activities which management can or
ROMY 108 112 cannot influence, and seeks to arrest risks
TONY 123 120 and sensitivity factors.
34. In a decentralized company in which divisions
The employee who had the inconsistent performance may buy goods from one another, the transfer-
(sometimes performing below standard) but got a pricing system should be designed primarily to
bonus is A. Increase in the consolidated value of
A. Alan = P36 bonus. C. Romy = inventory.
P126 bonus. B. Allow division managers to buy from
B. Joel = P54 bonus. D. Tony = outsiders.
P252 bonus. C. Minimize the degree of autonomy of division
30. A defense contractor for a government space managers.
project has incurred $2,500,000 in actual design D. Aid in the appraisal and motivation of
costs to date for a guidance system whose total managerial performance.
budgeted design cost is $3,000,000. If the design 35. Division P of Turbo Corporation has the capacity
phase of the project is 60% complete, what is the for making 75,000 wheel sets per year and
amount of the contractor's current overrun or regularly sells 60,000 each year on the outside
 market. The regular sales price is $100 per wheel false?
set, and the variable production cost per unit is A. Planning and control are the essential
$65. Division Q of Turbo Corporation currently features of the budgeting process
buys 30,000 wheel sets (of the kind made by B. Capital expenditures budget shows the
Division P) yearly from an outside supplier at a availability of idle cash for investment
price of $90 per wheel set. If Division Q were to C. Budgeting provides a measuring device to
buy the 30,000 wheel sets it needs annually from which subsequent performances are
Division P at $87 per wheel set, the change in compared and evaluated.
annual net operating income for the company as D. Budget preparation is not the sole
a whole, compared to what it is currently, would responsibility of any one department and is
be: prepared by combining the efforts of many
A. $135,000. C. $600,000. individuals
B. $225,000. D. $750,000.
36. Among the costs relevant to a make-or-buy 41. This budgeting system places the burden of proof
decision include variable manufacturing costs as well on the manager to justify authority to spend any
as money whether or not there was spending in the
A. Avoidable fixed costs. C. Real estate taxes. previous period. Different ways of performing the
B. Plant depreciation. D. Unavoidable costs. same activity and different levels of effort for the
37. If a firm is at full capacity, the minimum special activity is evaluated. This system is called
order price must cover A. Budgeting by alternatives.
A. variable costs associated with the special B. Budgeting by responsibility and authority.
order C. Scenario budgeting.
B. variable and incremental fixed costs D. Zero-based budgeting.
associated with the special order 42. For a company that does not have resource
C. variable and fixed manufacturing costs limitations in what sequence would the budgets
associated with the special order be prepared?
D. variable costs and incremental fixed costs 1. cash budget 4. production budgets
associated with the special order plus 2. sales budget 5. purchase budgets
foregone contribution margin on regular units 3. inventory budgets
not produced A. sequence 2, 3, 4,1 and 5
E. both B and D. B. sequence 2, 3, 4, 5 and 1
38. An increase in direct fixed costs could reduce all C. sequence 2, 4, 3, 5 and 1
of the following except D. sequence 4, 3, 2, 1 and 5
A. corporate net income. C. product line operating
income. 43. Pera Inc. prepared the following sales budget
B. product line contribution margin. D. product line Month Cash Sales Credit
segment margin. Sales
39. Bolsa Co. estimates that 60,000 special zipper February P 80,000 P
will be used in the manufacture of industrial bags 340,000
during the next year. Sure Zipper Co. has quoted March 100,000 400,000
a price of P6 per zipper. Bolsa would prefer to April 90,000 370,000
purchase 5,000 units per month but Sure is May 120,000 460,000
unable to guarantee this delivery schedule. In June 110,000 380,000
order to ensure the availability of these zippers, Collections are 40% in the month of sale, 45% in the
Bolsa is considering the purchase of all 60,000 month following the sale, and 10% two months
units at the beginning of the year. Assuming that following the sale. The remaining 5% is expected to
Bolsa can invest cash at 12%, the company’s be uncollectible. The company’s total budgeted
opportunity cost of purchasing the 60,000 units collection from April to June amounts to
are the beginning of the year is A. P1,090,250 C. P1,397,500
A. P19,800 C. P39,600 B. P1,325,500 D. P1,468,500
B. P21,600 D. P43,200 44. How are financial ratios used in decision making?
40. In budgeting, which of the following statements is
A. They remove the uncertainty of the business A. Cost of capital. C. Time value of money.
environment. B. Different life of projects. D. Uncertainty.
B. They aren’t useful because decision making is too 51. In capital budgeting decisions, the following items
complex. are considered among others:
C. They give clear signals about the appropriate 1. Cash outflow for the investment.
action to take. 2. Increase in working capital requirements.
D. They can help identify the reasons for success and 3. Profit on sale of old asset
failure in business, but decision making requires 4. Loss on write-off of old asset.
information beyond the ratios. For which of the above items would taxes be
45. When a balance sheet amount is related to an relevant?
income statement amount in computing a ratio, A. Items 1 and 3 only. C. Items 3 and 4 only.
A. Comparisons with industry ratios are not B. Items 1, 3 and 4 only. D. All items.
meaningful.
B. The balance sheet amount should be Problem 52 and 53 are based on the following
converted to an average for the year. information.
C. The income statement amount should be Daneche’s, a tax-exempt entity, plans to purchase a
converted to an average for the year. new machine which they project to depreciate over a
D. The ratio loses its historical perspective ten-year period without salvage value. The new
because a beginning-of-the-year amount is machine will cost P200,000 and is expected to
combined with an end-of-the-year amount. generate cash savings of P60,000 per year in
Questions 46 thru 49 are based on the following operating costs. Daneche's cost of capital is 12%.
information. For ten periods at 12%, the present value of P1 is
You are requested to reconstruct the accounts of P0.3220, while the present value of an ordinary
Angela Trading for analysis. The following data were annuity of P1 is P5.650.
made available to you: 52. What is the net present value of the proposed
Gross margin for 19x8 investment, assuming Daneche uses a 12% discount
Ending balance of merchandise inventory rate?
A. P69,980 C. P185,640
Total stockholders’ equity as of December 31, B. P139,000 D. None of the above.
19x8 53. With the company’s initial investment on the
Gross margin ratio new machine, the accounting rate of return is
Debt to equity ratio A. 15% C. 25%
Times interest earned B. 20% D. None of the above.
Quick ratio 54. The Nativity Corporation has the following
Ratio of operating expenses to sales investment opportunities:
Long-term liabilities consisted of bonds payable Proposa Profitability Index Initial
with interest rate of 20% l Cash
Based on the above information, Outlay
46. What was the operating income for 19x8? 1 1.15 P200,000
A. P205,550 C. P229,500 2 1.13 125,000
B. P243,500 D. P472,500 3 1.11 175,000
47. How much was the bonds payable? 4 1.08 150,000
A. P114,750 C. P370,500 The firm has a budget constraint of P300,000.
B. P200,750 D. P400,000 What proposal(s) should be accepted?
48. Total current assets would amount to A. Proposal 4 because it has the
A. P580,000 C. P780,000 lowest profitability index.
B. P630,825 D. P930,825 B. Proposal 1 because it has the
49. Total current liabilities would amount to highest profitability index.
A. P485,250 C. P600,000 C. Proposals 1 and 2 because their
B. P550,000 D. P714,750 total net present values are the highest
50. Which of the following best identifies the among all possible proposal combinations.
reason for using probabilities in capital budgeting is
 D. Proposals 2 and 3 because their that maximize profits or minimize costs.
total net present values are the highest 60. The calculation of reasonable probabilities
among all possible proposal combinations. about the future, based on the analysis of all the latest
55. Cost of capital is relevant information by tested and logically sound
A. The amount the company must pay for its statistical and economic techniques, and applied in
plant assets. terms of an executive’s personal judgement and
B. The dividends a company must pay on its knowledge of his business is
equity securities. A. Budgeting
C. The cost the company must incur to obtain its B. Business forecasting
capital resources. C. Planning and control
D. The cost the company is charged by D. Project feasibility studies
investment bankers who handle the issuance
of equity or long-term debt securities.
56. The pre-tax cost of capital is higher than the after-
tax cost of capital because
A. interest expense is deductible for tax
purposes.
B. the cost of capital is a deductible expense for
tax purposes.
C. principal payments on debt are deductible for
tax purposes.
D. dividend payments to stockholders are
deductible for tax purposes.
57. The market value of a firm’s outstanding common
shares will be higher, everything else equal, if
A. Investors expect lower dividend growth.
B. Investors have a lower required return on
equity.
C. Investors have longer expected holding
periods.
D. Investors have shorter expected holding
periods.
58. A quantitative technique used for selecting
the combination of resources that maximize profits or
minimize costs is
A. Curvilenear analysis C. Linear programming
B. Dynamic programming D. Queuing theory
59. Which of the following statements is the least
pertinent to the Project Evaluation Review
Technique (PERT)
A. It is a system, which uses network analysis
and critical path methods.
B. It is more useful for analyzing the
interrelationships of time and activities to
discover potential bottlenecks.
C. It involves measuring progress in relation to
schedule, evaluating changes to schedule,
forecasting future progress and predicting
and controlling costs.
D. Time is a primary consideration and this
technique is particularly suite for problems,
which involve the combination of resources