Multiple Choice: Shade the box corresponding to your answer on

the answer sheet.

1. Which of the following is not classifiable as a

management advisory service by CPA’s
a. Production design
b. Project feasibility
c. Make or buy analysis
d. Assistance in budgeting

2. It consists of the sum total of the methods and the

procedures employed in the accumulation and in the organization
of its financial data for an enterprise. It is designed by the
accountant to fit the peculiar needs of the particular business
unit
a. Accounting process
b. Accounting cycle
c. Accounting system
d. Auditing

3. Which of the following is not a controllership function,

as distinguished from a “treasury function”
a. Reporting and interpreting
b. Credit and collection
c. Protection of assets
d. Government reporting

4. In comparing financial and management accounting, which

of the following more accurately describes management accounting
information?
a. Historical, precise, useful
b. Required, estimated, internal
c. Budgeted, informative, adaptable
d. Comparable, verifiable, monetary

5. Which of the following statements about management or

financial accounting is false?
a. Financial accounting must follow GAAP
b. Management accounting is not subject to regulatory
reporting standards
c. Both management and financial accounting are subject to
mandatory record keeping requirements
d. Management accounting should be flexible

6. The primary purpose of MAS is

a. To conduct special studies, preparation of
recommendation, development of plans and programs, and provision
of advice and assistance on their implementation.
b. To provide service or to fulfill some social need
c. To improve the client’s use of its capabilities and
resources in order to achieve the objectives of the organization
d. To earn the beast rate of return on resources entrusted
to its care with safety of investment being taken into account
and consistent with the firm’s social and legal responsibilities.
 7. In the installation of an accounting system, the
following are all essential components, except
a. Accounting policies and procedures on handling
transactions and book of entries
b. Business forms, book of accounts, and chart of accounts.
c. Policies and procedures for purchase, handling of
inventories and control of manufacturing costs.
d. Procedures and strategies in marketing the products.

8. A long-term plan that fulfills the goals and objectives

of an organization is known as a (n)
a. Management style
b. Strategy
c. Mission statement
d. Operational mission

9. A systematic gathering and analysis of data concerning a

proposed project and the formulation of conclusions there from
for the purpose of determining whether or not it is viable and if
so, its degree of profitability.
a. Return on investment study
b. Long range planning
c. Information flow analysis
d. Feasibility study

10. Which of the following major aspects of the project

feasibility study is usually the most important?
a. Marketing, engineering or technical and financial
b. Financial, management and economic benefits
c. Financial, marketing and management
d. Financial, marketing and economic benefits

11. Dexter Co. has a debt ratio of 0.50, a total assets

turnover of 0.25, and a profit margin of 10%. The president is
unhappy with the current return on equity, and he thinks it could
be doubled. This could be accomplished (1) by increasing the
profit margin to 14% and (2) by increasing debt utilization.
Total assets turnover will not change. What new debt ratio, along
with the 14% profit margin, is required to double the return on
equity?
a. 0.75 b. 0.70 c. 0.65 d. 0.55

12. Jones Inc. has a total asset turnover of 0.30 and a

profit margin of 10%. The president is unhappy with the current
return on assets; and he thinks it could be doubled. This could
be accomplished by (1) increasing the profit margin to 15% and
(2) increasing the total assets turnover. What new asset turnover
ratio, along with the 15% profit margin, is required to double
the return on assets?
a. 35% b. 45% c. 40% d. 50%

13. Buttercup Co. sells on terms 3/10 net 30 days. Gross

sales for the year are P2,400,000 and the collections department
estimates that 30% of the customers pay on the tenth day and take
discounts; 40% pay on the thirtieth day; and the remaining 30%
pay, on the average, 40 days after the purchase. Assuming 360
days per year, what is the average collection period?
a. 40 days b. 15 days c. 20 days d. 27 days

14. Veronica Co., whose gross sales amounted to P1,200,000

sold on terms of 3/10, net 30. The collections manager estimated
that 30 percent of the customers pay on the tenth day and take
discounts; 40 percent on the thirtieth day; and the remaining 30
percent pay, on the average, 40 days after the purchase. If
management would toughen on its collection policy and require
that all non-discount customers pay on the thirtieth day, how
much would be the receivables balance?
a. P60,000 b. P80,000 c. P70,000 d. zero

15. Selected information for the PRINCE COMPANY is as

follows:
Cost of goods P5,400,000
Average inventory 1,800,000
Net sales 7,200,000
Average receivables 960,000
Net income 720,000
Assuming a business year consisting of 360 days, what was
the average number of days in the operating cycle for 20x5?
a. 72 b. 84 c. 144 d. 168

16. KING COMPANY had net income of P5,300,000 and earnings

per share on common stock of P2.50. Included the net income was
P500,000 of bond interest expense related to its long-term debt.
The income tax rate was 50%. Dividends from preferred stock was
P300,000. The dividend-payout ratio on common stock was 40%.

What were the dividends on the common stock?

a. P1,800,000 b. P1,900,000 c. P2,000,000 d. P2,120,000

17. Judith Co. has an inventory conversion period of 60

days, a receivable conversion period of 35 days, and a payment
cycle of 26 days. If its sales for the period just ended amounted
to P972,000, what is investment in accounts receivable? (Assume
360 days in year)
a. P85,200 b. P72,450 c. P94,500 d. P79,600

18. The corporation exercise control over an affiliate in

which it holds a 40% common stock interest. If its affiliate
completed a fiscal year profitably but paid no dividends, how
would this affect the investor corporation?
a. Result in an increase current ratio
b. Result in increased earnings per share
c. Increase several turn-over ratios
d. Decrease book value per share

19. Roswell Co. generated the following results for the

period just ended:
Sales P1.0 million
Net income 0.1 million
Capital investment 0.5 million
To arrive at the return on investment, the following should
be used.
a. ROI=(5/10) X (10/1)c. ROI=(5/10) X (1/10)
b. ROI=(10/5) X (10/1)d. ROI=(10/5) X (1/10)

20. Brain Co. has stockholders’ equity equal to 60% of total

liabilities and stockholders’ equity of P120 million. If the
return on total assets invested registers 9%, what is the return
on stockholders’ equity?
a. 10% b. 6% c. 15% d. 12%

The estimated operating income of Blue Co. for the

production of plastic bags for the year ended December 31 is
arrived as follows:
Sales P 11,250.00
Cost of Sales
Direct Materials P 1,685.00

Direct Labor 1,575.00

Variable factory overhead 1,125.00

Fixed factory overhead 562.00 4,947.00

Gross income from sales 6,303.00
Selling and administrative
expenses
Variable expenses P 2,365.00

Fixed expenses 1,538.00 3,903.00

Net operating income P 2,400.00

21. How much sales would be necessary in order to break-

even?
a. P3,500 b. P6,750 c. P4,500 d. P5,250

Presented below are the results of operations of the Acute Co.:

Sales (150,000) units) P 600,000.00
Cost of goods sold:
Fixed P 150,000.00

Variable 300,000.00 450,000.00

Gross profit 150,000.00
Selling and administrative:
Fixed P 39,000.00

Variable 45,000.00 84,000.00

Income before taxes P 66,000.00

The company is concerned about the expected increase in

fixed manufacturing cost by 50% if it will buy new equipment with
a higher production capacity. However, further study shows that
with the expected increase in production, sales volume will be
expected to increase by 40% while variable-manufacturing costs
will decrease from P2 to P1.50 per unit. The total fixed selling
and administrative expenses and the variable selling and
administrative expenses will remain the same. The company has
been operating at full capacity. If the company will buy the new
equipment,

22. What would be the break-even point in terms of units?

a. 120,000 b. 66,000 c. 176,000 d. 105,600

Dave Co. is expecting an increase of fixed costs by P78,750

upon moving their place of business to the downtown area.
Likewise it is anticipating that the selling price per unit and
the variable expenses will not change. At present, the sales
volume necessary to break-even is P750,000 but with the expected
increase in fixed costs, the sales volume necessary to break-even
would go up to P975,000. Based on this projections

23. What is the profit volume ratio of Dave Co.?

a. 35% b. 40% c. 45% d. 65%

The following information pertains to Zoe Co.’s cost-volume-

profit relationships:
Breakeven point in units sold 1,000
 Variable cost per unit P500
Total fixed costs P150,000

24. How much will be contributed to profit by the 1,001 unit

sold?
a. P650 b. P500 c. P150 d. P300

Saber Co. produces two products, Cole and Cane that account
for 40% and 60% of the total sales peso of Saber, respectively.
Variable costs as a percentage of sales pesos are 75% for Cole
and 60% for Cane. Total fixed costs are P300,000. There are no
other costs.

25. The break-even point in sales pesos for the company is

a. P882,352.94 c. P529,411.76
b. P362,941.17 d. P300,000.00

26. The current break-even sales of Dream Co. is P700,000

per year. It is computed that if fixed expenses will increase by
P80,000, the sales revenue required to break-even will also
increase to P900,000 without any change on the variable expenses
and selling price per unit. Before the increase of P80,000, the
total fixed expenses of Dream Co. is

a. P160,000 b. P220,000 c. P280,000 d. P360,000

The following information pertains to the two types of products

manufactured by Key Co.
Selling Price Variable Cost
Product Y P120 P70
Product Z 500 200

27. Fixed costs total P300,000 annually. The expected mix in

units is 60% for Product Y and 40% for product Z. How much is
Key’s breakeven sales in pesos?
a. P522,000 b. P420,000 c. P475,000 d. P544,000

28. Helen Co. sells Product E for P5 per unit. The fixed
costs are P210,000 and the variable costs are 60% of the selling
price. What would be the amount of sales if Helen is to realize a
profit of 10% of sales?
a. P700,000 b. P525,000 c. P472,500 d. P420,000

29. The Cole Co. is planning to produce two products, Alt

and Tude. Cole is planning to sell 100,000 units of Alt at P4 a
unit and 200,000 units of Tude at P3 per unit. Variable costs are
70% of sales for Alt and 80% of sales for Tude. In order to
realize a total profit of P160,000. Total fixed costs must be?
a. P100,000 b. P120,000 c. P80,000 d. P90,000
30. Doe Co. has fixed costs of P100,000 and breakeven sales
of P800,000. What is the projected profit at P1,200,000 sales?
a. P50,000 b. P150,000 c. P200,000 d. P400,000

With a production of 200,000 units of Product A during the

month of June, Mort Co. has incurred costs as follows:
Direct materials used P 200,000.00
Direct labor used 135,000.00
Manufacturing
overhead
Variable 75,000.00
Fixed 90,000.00
Selling and
administrative
Variable 30,000.00
Fixed 85,000.00
Total P 615,000.00

31. Under absorption costing, the unit cost of Product A was

a. P2.20 b. P2.50 c. P3.15 d. P2.05

The following operating data are available from the records

of Bone Co. for the month of January
Sales (P70 per unit) P 210,000.00
Direct materials 59,200.00
Direct labor 48,000.00
Manufacturing overhead
Fixed 36,080.00
Variable 24,000.00
Selling and administrative
Fixed 21,000.00
Variable-5% of sales
Production in units 3,280 units
Beginning inventory none

32. The net income for the month under variable costing
method would be
a. P19,420 b. P25,500 c. P23,320 d. P22,420

The books of Marie Co. showed the following figures relating to

Product X:
Beginning and Ending WIP and Fin. Goods None
No. of units produced 40,000 units
No. of units sold at P15.00 32,500 units
Direct materials cost P 177,500.00
Direct labor cost 85,000.00
Fixed overhead 110,000.00
Variable overhead 61,500.00
Fixed administrative 30,000.00
Ending WIP None

33. Which costing method would show a higher operating

income for the year, and by how much?
a. Variable by P20,625 c. Absorption by P26,250
b. Variable by P26,250 d. Absorption by P20,625

Sales and costs data for Dawson Co.’s new product are as follows:
Sales (P22.50 per unit) P 225,000.00
Variable manufacturing cost per unit of
product P 12.00
Variable administrative cost per unit of
product 4.50
Annual fixed costs
Manufacturing P 37,500.00
Administrative and marketing P 22,500.00

There was no inventory at the beginning of the year. Normal

capacity of the plant is 12,500 units. During the year 12,500
units were manufactured.
 34. The total variable cost charged to expense for the year
under the direct costing method shall be
a. P165,000 b. P176,250 c. P206,250 d. P228,750

35. The following information is available for Allan Co.’s

product line: Selling price per unit, P15; Variable manufacturing
costs per unit of product,P8; Total annual fixed manufacturing
costs, P25,000; Variable administrative cost per unit of product,
P3. Total annual fixed selling and administrative expenses,
P15,000. There was no inventory at the beginning of the year.
During the year 12,500 units were produced and 10,000 units were
sold. The total fixed cost charged against the current year’s
operations, assuming Allan uses absorption costing is
a. P35,000 b. P40,000 c. P25,000 d. P15,000

The following operating data are available from the records

of Eve Co. for the month of February
Sales (P70 per unit) P 210,000.00
Direct materials 59,200.00
Direct labor 48,000.00
Manufacturing
overhead
Fixed 36,080.00
Variable 24,000.00
Selling and
administrative
Fixed 21,000.00
Variable-5% of sales
Production in units 3,280 units
Beginning inventory none

36. Under the absorption costing, the ending finished goods

inventory would amount to:
a. P12,096 b. P14,280 c. P16,072 d. P16,968

37. Loner Co. manufactures a single product. Variable

production costs are P10 and fixed production costs are P75,000.
Loner uses a normal activity of 10,000 units to set standard
costs. Loner began the year with no inventory, produced 11,000
units, and sold 10,500 units. The standard cost of goods sold
under variable costing would be
a. P100,000 b. P105,000 c. P183,750 d. P95,000

38. A company had income of P50,000 using direct costing for

a given period. Beginning and ending inventories for that period
were 13,000 units and 18,000 units, respectively. Ignoring income
taxes, if the fixed overhead application rate were P2.00 per
unit, what would the income have been using absorption costing?
a. P86,000 b. P40,000 c. P50,000 d. P60,000

A company has the following cost data:

Fixed manufacturing cost P 2,000.00
Fixed selling, general, and
administrative costs P 1,000.00
Variable selling costs per unit sold P 1.00
Variable manufacturing cost per unit P 2.00
Beginning inventory none
Production 100 units
Sales - at P40 per unit 90 units
 39. Variable and absorption costing net incomes are
Variable Absorption
a. P320 P520
b. P520 P520
c. P530 P330
d. P330 P530

40. Boner Co. manufactures a single product. Variable

production costs are P10 and fixed production costs are P75,000.
Boner uses a normal activity of 10,000 units to set standard
costs. Boner began the year with no inventory, produced 11,000
units, and sold 10,500 units. The standard cost of goods sold
under absorption costing would be
a. P100,000 b. P105,000 c. P183,750 d. P95,000

41. Oslo Company has a 55% tax rate, incurs fixed expenses
of P100,000, and reports after-tax net profit of P90,000 for its
only product that has a 20% CM ratio. Oslo Company's reported
sales volume is
a. P1,500,000 b. P950,000 c. P500,000 d. P1,000,000

Use the following information for questions 42 to 45.

You are requested to reconstruct the accounts of Angela Trading
for analysis. The following data were available to you:
Gross margin amounted to P472,500.
Ending balance of merchandise inventory was P300,000.
Long-term liabilities consisted of bonds payable with
interest rate of 20%
Total stockholders’ equity as of December 31 was P750,000.
Gross margin ratio, 35%
Debt to equity ratio, 0.8:1
Times interest earned, 10 times
Quick ratio, 1.3:1
Ratio of operating expenses to sales, 18%

42. What was the operating income?

a. P472,500 b. P243,000 c. P206,550 d. P229,500
43. How much was the bonds payable?
a. P400,000 b. P200,750 c. P114,750 d. P370,500
44. Total current liabilities would amount to?
a. P600,000 b. P714,750 c. P485,250 d. P550,000
45. Total current assets would amount to?
a. P630,825 b. P780,000 c. P580,000 d. P930,825
Use the following to answer questions 46-48:
Pricher Corporation's income statement for last year appears
below:

Sales P2,000,000
Cost of goods sold:
Direct materials P500,000
Direct labor (variable) 150,000
Variable manufacturing overhead 50,000
Fixed manufacturing overhead  600,000  1,300,000
Gross margin 700,000
Selling and administrative expenses:
Variable 100,000
Fixed  300,000    400,000
Net operating income P 300,000

46. The break-even point last year was:

A) P1,500,000 B) P2,571,429 C) P1,250,000 D) P900,000

47. The degree of operating leverage last year was:

 A) 0.33 B) 2.33 C)4.00 D)3.33

48. If fixed selling and administrative expenses increase

by P60,000 and sales remain at the P2,000,000 level, what is the
margin of safety in sales pesos:
A) P300,000 B)P200,000 C)P500,000 D) P400,000

Use the following to answer questions 49-50:

Highjinks Inc. has provided the following budgeted data:

Sales 20,000 units

Selling price P100 per unit
Variable expense P70 per unit
Fixed expense P450,000

49. What is the company's margin of safety as a percentage

of sales?
A) 50% B) 25% C) 75% D) 100%

50. How many units would the company have to sell in order
to have a net operating income equal to 5% of total sales pesos?
A) 18,000 units
B) 20,000 units
C) 15,333 units
D) 14,286 units

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