MAS Test bank

1. A primary objective in measuring productivity is to improve operations either by

using fewer inputs to produce the same output, or to produce:

a. more effectively
b. more outputs with the same inputs
c. with fewer constraints
d. more outputs with more inputs

2. Which of the following assesses the productivity efficiency for all inputs combined in
order to value change in productivity?

a. partial productivity measurement

b. profit-linked productivity measurement
c. profile productivity measurement
d. total productivity measurement

3. Changes in the productivity of different types of resources are NOT always:

a. measurable and observable

b. in the same direction or at an equal pace
c. unique and differentiated
d. simultaneous and positive

4. How can productivity be improved?

a. using less input to produce the same output

b. using the same input to produce more output
c. improve input trade-off efficiency by using a less costly mix of inputs
d. all of the above

5. Characteristics of total quality management include:

a. focusing on customer satisfaction

b. striving on continuous improvement
c. involvement of the entire work force
d. All of the above are characteristics of TQM

6. Worker training is a(n)

a. appraisal cost.
b. internal failure cost.
c. external failure cost.
d. prevention cost.

7. The quality costs that are incurred to determine whether particular units of product
meet quality standards are

a. appraisal costs.
b. internal failure costs.
 c. external failure costs.
d. prevention costs.

8. The benefits of a successful Just-In-Time system include all of the following except:

a. funds tied up in inventories are released for use elsewhere.

b. inventory buffers are increased.
c. throughput time is reduced.
d. defect rates are decreased.

9. The optimal level in the optimal cost management system is when

a. measurement costs are greater than error costs

b. measurement costs are less than error costs
c. the total of measurement costs and error costs are minimized
d. both b and c

10. The economic order quantity is the order quantity that results in

a. the minimum total annual inventory costs.

b. no inventory shortages.
c. the maximum total annual inventory costs.
d. minimum ordering costs.

11. Working capital management involves investment and financing decisions related to:

a. plant and equipment and current liabilities.

b. current assets and capital structure.
c. current assets and current liabilities.
d. sales and credit.

12. As a company becomes more conservative with respect to working capital policy, it
would tend to have a(n)

a. Increase in the ratio of current liabilities to noncurrent liabilities.

b. Increase in the operating cycle.
c. Decrease in the operating cycle.
d. Increase in the ratio of current assets to current liabilities.

13. Which of the following would increase risk?

a. Raise the level of working capital.

b. Decrease the amount of inventory by formulating an effective inventory policy.
c. Increase the amount of short-term borrowing.
d. Increase the amount of equity financing.

14. The longer the firm's accounts payable period, the:

a. longer the firm's cash conversion cycle is.

b. shorter the firm's inventory period is.
 c. more the delay in the accounts receivable period.
d. less the firm must invest in working capital.

15. With credit terms of 3/8, n/30, what is the customer’s payment decision date?

a. Three days after the invoice is received.

b. The 8th day is the customer’s decision date.
c. Anytime during the period, 8th to the 30th.
d. The 30th day is the primary decision date.

16. Luke Company has an inventory conversion period of 60 days, a receivables

conversion period of 45 days, and a payments cycle of 30 days. What is the length of
the firm’s cash conversion cycle?

a. 90 days
b. 54 days
c. 75 days
d. 105 days

17. Simile Inc. has a total annual cash requirement of P9,075,000 which are to be paid
uniformly. Simile has the opportunity to invest the money at 24% per annum. The
company spends, on the average, P40 for every cash conversion to marketable
securities. What is the optimal cash conversion size?

a. P60,000
b. P45,000
c. P55,000
d. P72,500

18. Hyperbole Corporation estimates its total annual cash disbursements of P3,251,250
which are to be paid uniformly. Hyperbole has the opportunity to invest the money at
9% per annum. The company spends, on the average, P25 for every cash conversion
to marketable securities and vice versa. What is the opportunity cost of keeping cash
in the bank account?

a. P3,825.00
b. P4,190.00
c. P1,912.50
d. P 188.55

19. Narra Company is considering a switch to level production. Cost efficiencies will
occur under level production and after-tax cost would decline by P70,000 but
inventory would increase from P1,000,000 to P1,800,000. Narra would have to
finance the extra inventory at a cost of 10.5 percent.
What is the maximum interest rate that makes level production feasible?

a. 7.00 percent
b. 8.75 percent
c. 5.83 percent
d. 10.00 percent
20. Bruell Company is considering to replace its old equipment with a new one. The old
equipment had a net book value of P100,000, 4 remaining useful life with P25,000
depreciation each year. The old equipment can be sold at P80,000. The new
equipment costs P160,000, have a 4-year life. Cash savings on operating expenses
before 40% taxes amount to P50,000 per year. What is the amount of investment in
the new equipment?

a. P160,000
b. P 80,000
c. P 72,000
d. P 68,000

21. A piece of labor saving equipment that Marubeni Electronics Company could use to
reduce costs in one of its plants in Angeles City has just come onto the market.
Relevant data relating to the equipment follow:
Purchase cost of the equipment P432,000
Annual cost savings that will be provided by the equipment 90,000
Life of the equipment 12 years
What is the simple rate of return to be provided by the equipment?

a. Between 15% and 18%.

b. 20.83%.
c. 25.00%.
d. 12.50%.

22. Consider a project that requires cash outflow of P50,000 with a life of eight years and
a salvage value of P5,000. Annual before-tax cash inflow amounts to P10,000
assuming a tax rate of 30% and a required rate of return of 8%. Salvage value is
ignored in computing depreciation. The project has a payback period of

a. 5.0 years
b. 6.0 years
c. 5.6 years
d. 6.6 years

23. Under a standard cost system, the materials quantity variance was recorded at P1,970
unfavorable, the materials price variance was recorded at P3,740 favorable, and the
Goods in Process was debited for P51,690. Ninety-six thousand units were completed.
What was the per unit price of the actual materials used?

a. P0.52 each
b. P0.54 each
c. P0.53 each
d. P0.51 each

24. Simbad Company’s operations for the month just ended originally set up a 60,000
direct labor hour level, with budgeted direct labor of P960,000 and budgeted variable
overhead of P240,000. The actual results revealed that direct labor incurred amounted
to P1,148,000 and that the unfavorable variable overhead variance was P40,000.
Labor trouble caused an unfavorable labor efficiency variance of P120,000, and new
 employees hired at higher rates resulted in an actual average wage rate of P16.40 per
hour. The total number of standard direct labor hours allowed for the actual units
produced is

a. P52,500
b. P62,500
c. P77,500
d. P70,000

25. Product costing in a manufacturing firm is the process of:

a. accumulating the company's period costs.

b. allocating costs among the firm's departments.
c. placing a value on the company's fixed assets.
d. assigning costs to the firm's inventory.

26. Which of the following statements is true?

a. Service firms have little need for determining the cost of their services.
b. The concept of product costing is relevant only for manufacturing firms.
c. The cost of year-end inventory appears on the balance sheet as an expense.
d. Service companies use cost information for planning and control purposes.

27. Which of the following manufacturers would most likely use job-order costing?

a. Chemical manufacturers.
b. Microchip processors.
c. Custom-furniture manufacturers.
d. Gasoline refiners.

28. A custom-home builder would likely utilize:

a. job-order costing.
b. process costing.
c. mass customization.
d. process budgeting.

29. Which of the following types of companies would most likely use process costing?

a. Aircraft manufacturers.
b. Textile manufacturers.
c. Textbook publishers.
d. Custom-machining firms.
30. A manufacturing firm produces goods in accordance with customer specifications,
commencing production upon receipt of a purchase order. To accumulate the cost of
each order, the company would use a:

a. job-cost record.
b. cost allocation matrix.
c. production log.
d. overhead sheet.

31. A typical job-cost record would provide information about all of the following items
related to an order except:

a. the cost of direct materials used.

b. administrative costs.
c. direct labor costs incurred.
d. applied manufacturing overhead.

32. Which of the following statements about material requisitions is false?

a. Material requisitions are often computerized.

b. Material requisitions are a common example of source documents.
c. Material requisitions contain information that is useful to the cost accounting
department.
d. Material requisitions authorize the transfer of materials from the production floor
to the raw materials warehouse.

33. Pruitt Company has developed an integrated system that coordinates the flow of all
goods, services, and information into and out of the organization, working with raw
material vendors as well as customers to improve service and reduce costs. The firm
is said to be using:

a. participative management.
b. top-down management.
c. strategic cost management.
d. supply chain management.

34. The assignment of direct labor cost to individual jobs is based on:

a. an estimate of the total time spent on the job.

b. actual total payroll cost divided equally among all jobs in process.
c. estimated total payroll cost divided equally among all jobs in process.
d. the actual time spent on each job multiplied by the wage rate.

35. The total production cost of a job is composed of:

a. direct material and direct labor.

 b. direct material, direct labor, manufacturing overhead, and outlays for selling costs.
c. direct material, direct labor, and applied manufacturing overhead.
d. direct material, direct labor, and actual manufacturing overhead.

36. Manufacturing overhead:

a. includes direct materials, indirect materials, indirect labor, and factory

depreciation.
b. includes all selling costs.
c. should not be assigned to individual jobs because it bears no obvious relationship
to them.
d. is a pool of indirect production costs that must somehow be attached to each unit
manufactured.

37. As production takes place, all manufacturing costs are added to the:

a. Work-in-Process Inventory account.

b. Manufacturing-Overhead Inventory account.
c. Cost-of-Goods-Sold account.
d. Finished-Goods Inventory account.

38. Which of the following statements regarding work in process is not correct?

a. Work in process is partially completed inventory.

b. Work-in-Process Inventory is debited to record direct material used and direct
labor incurred.
c. Work-in-Process Inventory appears on the year-end balance sheet.
d. Work-in-Process Inventory is credited when goods are sold.

39. Which of the following statements about manufacturing cost flows is false?

a. Direct materials, direct labor, and manufacturing overhead are entered in the Work-
in-Process Inventory account.
b. The cost of units sold during the period will typically appear on the income
statement.
c. When a company sells goods that cost $54,000 for $60,000, the firm will enter
$6,000 in an account entitled Profit on Sale.
d. Units are normally transferred from Work-in-Process Inventory to Finished-Goods
Inventory.

40. Which of the following statements about materials is false?

a. Acquisitions of materials are normally charged to the Purchases account.

b. The use of direct materials gives rise to a debit to Work-in-Process Inventory.
 c. The use of indirect materials gives rise to a debit to Manufacturing Overhead.
d. The use of indirect materials gives rise to a credit to Manufacturing Supplies
Inventory.

41. Longview Corporation recently used $72,000 of direct materials and $3,000 of
indirect materials in production activities. The journal entries reflecting these
transactions would include:

a. a debit to Raw-Material Inventory for $72,000.

b. a debit to Manufacturing Overhead for $3,000.
c. a credit to Manufacturing Overhead for $3,000.
d. a debit to Work-in-Process Inventory for $75,000.

42. A review of a company's Work-in-Process Inventory account found a debit for

materials of $67,000. If all procedures were performed in the correct manner, this
means that the firm:

a. also recorded a credit to Raw-Material Inventory.

b. also recorded a credit to Manufacturing Supplies Inventory.
c. was accounting for the usage of indirect materials.
d. was accounting for the usage of direct materials by also crediting the Raw-Material
Inventory account.

43. Oregon Manufacturing incurred $106,000 of direct labor and $11,000 of indirect
labor. The proper journal entry to record these events would include a debit to Work
in Process for:

a. $0 because Work in Process should be credited.

b. $0 because Work in Process is not affected.
c. $106,000.
d. $117,000.

44. Electricity costs that were incurred by a company's production processes should be
debited to:

a. Utilities Expense.
b. Accounts Payable.
c. Cash.
d. Manufacturing Overhead.

45. The journal entry needed to record $5,000 of advertising for Westwood
Manufacturing would include:

a. a debit to Advertising Expense.

b. a credit to Advertising Expense.
c. a debit to Manufacturing Overhead.
 d. a credit to Manufacturing Overhead.

46. Regency Company incurred $90,000 of depreciation for the year. Eighty percent
relates to the firm's production facilities, and 20% relates to sales and administrative
offices. If all items are handled in the proper manner, a review of the company's
accounting records should reveal a:

a. debit to Depreciation Expense for $90,000.

b. debit to Manufacturing Overhead for $90,000.
c. debit to Manufacturing Overhead for $72,000.
d. debit to Work-in-Process Inventory for $18,000.

47. The process of assigning overhead costs to the jobs that are worked on is commonly
called:

a. service department cost allocation.

b. overhead application.
c. transfer costing.
d. overhead cost apportionment.

48. Which of the following is the correct method to calculate a predetermined overhead
rate?

a. Budgeted overhead cost ÷ budgeted amount of cost driver.

b. Budgeted amount of cost driver ÷ budgeted overhead cost.
c. Actual overhead cost ÷ budgeted amount of cost driver.
d. Actual overhead cost ÷ actual amount of cost driver.

49. Metro Corporation uses a predetermined overhead rate of $20 per machine hour. In
deriving this figure, the company's accountant used:

a. a denominator of budgeted machine hours for the current accounting period.

b. a denominator of actual machine hours for the current accounting period.
c. a denominator of actual machine hours for the previous accounting period.
d. a numerator of budgeted machine hours for the current accounting period.

50. Horton Company applies overhead based on direct labor hours. At the beginning of
20x1, the company estimated that manufacturing overhead would be $500,000, and
direct labor hours would be 10,000. Actual overhead by the conclusion of 20x1
amounted to $400,000. On the basis of this information, Horton's 20x1 predetermined
overhead rate is:

a. $0.025 per direct labor hour.

b. $40 per direct labor hour.
c. $50 per direct labor hour.
d. none of the above.
51. Dale Company, which applies overhead at the rate of 190% of direct labor cost, began
work on job no. 101 during June. The job was completed in July and sold during
August, having accumulated direct material and labor charges of $27,000 and
$15,000, respectively. On the basis of this information, the total overhead applied to
job no. 101 amounted to:

a. $0.
b. $28,500.
c. $70,500.
d. $79,800.

52. Huxtable charges manufacturing overhead to products by using a predetermined

application rate, computed on the basis of machine hours. The following data pertain
to the current year:
Budgeted manufacturing overhead: $480,000
Actual manufacturing overhead: $440,000
Budgeted machine hours: 20,000
Actual machine hours: 16,000
Overhead applied to production totaled:

a. $352,000.
b. $384,000.
c. $550,000.
d. $600,000.

53. Treetops worked on four jobs during its first year of operation: nos. 401, 402, 403,
and 404. Nos. 401 and 402 were completed by year-end, and no. 401 was sold at a
profit of 40% of cost. A review of job no. 403's cost record revealed direct material
charges of $20,000 and total manufacturing costs of $25,000. If Treetops applies
overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have
been:

a. $0.
b. $3,000.
c. $3,333.
d. $5,000.

54. The left side of the Manufacturing Overhead account is used to accumulate:

a. actual manufacturing overhead costs incurred throughout the accounting period.

b. overhead applied to Work-in-Process Inventory.
c. underapplied overhead.
d. predetermined overhead.

55. Throughout the accounting period, the credit side of the Manufacturing Overhead
 account is used to accumulate:

a. actual manufacturing overhead costs.

b. overhead applied to Work-in-Process Inventory.
c. overapplied overhead.
d. underapplied overhead.

56. An accountant recently debited Work-in-Process Inventory and credited

Manufacturing Overhead. The accountant was:

a. applying a predetermined overhead amount to production.

b. recognizing receipt of the factory utilities bill.
c. recording a year-end adjustment for an insignificant amount of underapplied
overhead.
d. recognizing actual overhead incurred during the period.

57. The final step in recognizing the completion of production requires a company to:

a. debit Finished-Goods Inventory and credit Work-in-Process Inventory.

b. debit Work-in-Process Inventory and credit Finished-Goods Inventory.
c. add direct labor to Work-in-Process Inventory.
d. add direct materials, direct labor, and manufacturing overhead to Work-in-
Process Inventory.

58. If a company sells goods that cost $70,000 for $82,000, the firm will:

a. reduce Finished-Goods Inventory by $70,000.

b. reduce Finished-Goods Inventory by $82,000.
c. report sales revenue on the balance sheet of $82,000.
d. reduce Cost of Goods Sold by $70,000.

59. Selto Manufacturing recently sold goods that cost $35,000 for $45,000 cash. The
journal entries to record this transaction would include:

a. a debit to Sales Revenue for $45,000.

b. a credit to Profit on Sale for $10,000.
c. a debit to Finished-Goods Inventory for $35,000.
d. a credit to Sales Revenue for $45,000.

60. A computer manufacturer recently shipped several laptops to a customer (cost:

$25,000) and billed the customer $30,000. Which of the following options correctly
expresses the accounts that are debited and credited to record this transaction?

a. Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales

Revenue, Cost of Goods Sold.
b. Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue,
Finished-Goods Inventory.
 c. Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable,
Finished-Goods Inventory.
d. Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts
Receivable, Cost of Goods Sold.

61. Barney Company applies manufacturing overhead by using a predetermined rate of

200% of direct labor cost. The data that follow pertain to job no. 764:

Direct material cost $55,000

Direct labor cost 40,000

If Barney adds a 40% mark-up on total cost to generate a profit, which of the
following choices depicts a portion of the accounting needed to record the sale of job
no. 764?

Account Debited Amount

a. Cost of Goods Sold $175,000
b. Cost of Goods Sold $245,000
c. Finished-Goods Inventory $175,000
d. Finished Goods Inventory $245,000

62. Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct
professional labor hours. Overhead was estimated to be $150,000, direct professional
labor hours were estimated to be 15,000, and direct professional labor cost was
projected to be $225,000. During the year, Media incurred actual overhead costs of
$146,000, actual direct professional labor hours of 14,500, and actual direct labor cost
of $222,000. By year-end, the firm's overhead was:

a. $1,000 underapplied.
b. $1,000 overapplied.
c. $4,000 underapplied.
d. $4,000 overapplied.

63. Maher, Inc., applies manufacturing overhead at the rate of $60 per machine hour.
Budgeted machine hours for the current period were anticipated to be 80,000;
however, a lengthy strike resulted in actual machine hours being worked of only
65,000. Budgeted and actual manufacturing overhead figures for the year were
$4,800,000 and $4,180,000, respectively. On the basis of this information, the
company's year-end overhead was:

a. overapplied by $280,000.
b. underapplied by $280,000.
c. overapplied by $620,000.
d. underapplied by $620,000.

64. Sanger Corporation debited Cost of Goods Sold and credited Manufacturing
Overhead at year-end. On the basis of this information, one can conclude that:
 a. budgeted overhead exceeded actual overhead.
b. budgeted overhead exceeded applied overhead.
c. budgeted overhead was less than applied overhead.
d. actual overhead exceeded applied overhead.

65. Howard Manufacturing's overhead at year-end was underapplied by $5,800, a small

amount given the firm's size. The year-end journal entry to record this amount would
include:

a. a debit to Cost of Goods Sold.

b. a debit to Manufacturing Overhead.
c. a debit to Work-in-Process Inventory.
d. a credit to Cost of Goods Sold.

66. Fog Company, which uses labor hours to apply overhead to manufacturing, may have
increased amounts of underapplied overhead at month-end if:

a. suppliers of direct materials have an across-the-board price increase.

b. an accountant failed to record the period's charges for plant maintenance and
security.
c. employees are hit hard with a widespread outbreak of the flu.
d. direct laborers are granted a wage increase.

67. The estimates used to calculate the predetermined overhead rate will virtually always:

a. result in a year-end balance of zero in the Manufacturing Overhead account.

b. result in overapplied overhead that is closed to Cost of Goods Sold if it is
immaterial in amount.
c. result in underapplied overhead that is closed to Cost of Goods Sold if it is
immaterial in amount.
d. result in either underapplied or overapplied overhead that is closed to Cost of
Goods Sold if it is immaterial in amount.

68. Under- or overapplied manufacturing overhead at year-end is most commonly:

a. charged or credited to Work-in-Process Inventory.

b. charged or credited to Cost of Goods Sold.
c. charged or credited to a special loss account.
d. prorated among Work-in-Process Inventory, Finished-Goods Inventory, and
Cost of Goods Sold.

69. When underapplied or overapplied manufacturing overhead is prorated, amounts can

be assigned to which of the following accounts?

a. Raw-Material Inventory, Manufacturing Overhead, and Direct Labor.

 b. Cost of Goods Sold, Work-in-Process Inventory, and Finished-Goods
Inventory.
c. Work-in-Process Inventory, Raw-Material Inventory, and Cost of Goods Sold.
d. Raw-Material Inventory, Finished-Goods Inventory, and Cost of Goods Sold.

70. Which of the following statement(s) is (are) correct regarding overhead application?

I. Actual overhead rates result in more accurate but less timely information.
II. Predetermined overhead rates result in less accurate but more timely
information.
III. Predetermined overhead rates tend to smooth product costs over time

a. III only.
b. I and II.
c. I and III.
d. I, II, and III.

71. The term "normal costing" refers to the use of:

a. job-costing systems.
b. computerized accounting systems.
c. targeted overhead rates.
d. predetermined overhead rates.

72. Which of the following statements about the use of direct labor as a cost driver is
false?

a. Direct labor is the most commonly used cost driver when calculating a
predetermined overhead rate.
b. Direct labor is gaining in importance in many manufacturing applications with
respect to being a significant cost driver.
c. Direct labor is an inappropriate cost driver to use if a company is highly
automated.
d. If direct labor is a good cost driver, increases in direct labor are matched with
increases in manufacturing overhead.

73. If the amount of effort and attention to products varies substantially throughout a
firm's various manufacturing operations, the firm might consider the use of:

a. a plant-wide overhead rate.

b. departmental overhead rates.
c. actual overhead rates instead of predetermined overhead rates.
d. direct labor hours to determine the overhead rate.
74. In the two-stage cost allocation process, costs are assigned:

a. from jobs, to service departments, to production departments.

b. from service departments, to jobs, to production departments.
c. from service departments, to production departments, to jobs.
d. from production departments, to jobs, to service departments.

75. Which of the following entities would not likely be a user of job-costing systems?

a. Custom-furniture manufacturers.
b. Repair shops.
c. Hospitals.
d. None of the above, as all are likely users.

76. Managerial accounting differs from financial accounting, in that financial accounting
is
a. More oriented toward the future
b. Primarily concerned with external financial reporting
c. Related to nonquantitative information
d. Heavily involved with decision analysis

77. What cost relationship are linear, total variable prime cost will vary in proportion to
changes in

a. Direct labor hours

b. Production volume
c. Total material cost
d. Total overhead cost

78. All of the following are benefits of decentralization, other than:

a. Creates greater responsiveness to local needs

b. Decrease management and worker morale
c. Leads to quicker decision making
d. Sharpens the focus of the manager

79. Which of the ff is one of the four perspective of a balanced scorecard?

a. Innovation
b. JIT
c. Benchmarking
d. Activity based costing

80. Which of the following performances, measures nonfinancial?

 a. Percentage of detective products
b. Return of investments
c. Gross profit margin
d. Economic value added

81. Cost that cannot be changed by any decision made now or in the future are:

a. Fixed cost
b. Avoidable cost
c. Sunk cost
d. Indirect cost

82. An accounting system that collects financial and operating data on the basis of
underlying nature and element of the cost drivers

a. Activity-based costing
b. Target costing
c. Cycle time costing
d. Variable costing

83. The primary reason for adapting total quality management is to achieve:

a. Reduced delivery time

b. Reduced delivery charges
c. Greater employee participation
d. Greater customer satisfaction

84. The of the following is not the good effect of total quality management:

a. Reduced delivery time

b. Laid off of employees
c. Reduced delivery charges
d. Greater customer satisfaction

85. Which of the following is true regarding relevant ranges?

a. Total variable cost will not change

b. Total fixed cost will not change
c. Actual fixed cost usually fall outside the relevant change
d. Variable cost will be changed

86. Cost-volume-profit relationships that are curvilinear maybe analyzed linearly by

considering only:

a. Fixed and semi variable cost

b. Relevant fixed cost
c. Relevant variable cost
d. Relevant range of volume
87. When an organization is operating above the breakeven point, the degree or amount
that revenues may decline before losses are incurred is the

a. Residual income
b. Marginal rate of return
c. Margin of safety
d. Target rate of return

88. Which of the following techniques would be best for evaluating the management
performance of a department that is operated as a cost center?

a. Return on investment
b. Return on assets ratio
c. Return on investment ratio
d. Variance analysis

89. Using the balanced scorecard, an organization evaluates managerial performance

based on

a. Single ultimate measure of operating results, such as residual income

b. Multiple financial and nonfinancial measures
c. Multiple nonfinancial measures only
d. Multiple financial measures only

90. The four categories of costs associated with product quality costs are:

a. External failure, internal failure, prevention and carrying

b. External failure, internal failure, prevention and appraisal
c. External failure, internal failure, training and appraisal
d. Warranty, External failure, internal failure, prevention

91. Sensitivity analysis I linear programming is used to:

a. Test the accuracy of the parameters

b. Develop objective function coefficient
c. Develop the technological matrix
d. Determine how optimal solution will react

92. Company manufactured 700 units of Product A, a new product during the year,
Product A’s variable and fixed manufacturing costs are, P6 and P2, respectively. The
inventory of product A on Dec31 consisted of 100 units. There was no inventory on
January 1. What would be the change in the peso amount of inventory on Dec 31, if
variable costing were used?

a. P800 decrease
b. P200 decrease
c. P0
d. P200 increase
 Mac’s Company, photo finishing division LR, incurred the ff costs and expenses
during the year just ended
Variable Fixed
Direct materials 200,000
Direct labor 150,000
FO 70,000 42,000
S and A 30,000 48,000
Totals P450,000 P90,000

During the year, LR produced 300,000 units of industrial photo prints which were
sold for P2 each. Mac’s investment in LR was P580,000 and 700,000 at Jan1 and
Dec 31 respectively,
Mac’s normally imputes interest on investments at 15% of average invested capital.

93. Assume that net operating income was P60,000 and that average investment capital
was P600,000. For the year ended Dec 31, LR’s residual income/loss was?

a. 150,000
b. 60,000
c. (30,000)
d. 30,000

94. For the year ended Dec 31, Lr’s return on average investments was:

a. 10%
b. 15%
c. 20%
d. 25%

95. For the year ended Dec 31, LR’s contribution margin was

a. 150,000
b. 250,000
c. 75,000
d. 125,000

96. How many industrial photo print units did LR have to sell during the year to
breakeven?

a. 60,000
b. 80,000
c. 160,000
d. 180,000

97. Assume the VC per unit was P1.50. Based on Lr’s financial data and estimated
production of 350,000 units of industrial photo prints for the ff year. Lr’s estimated
 TC and expenses for the following year will be

a. 650,000
b. 630,000
c. 620,000
d. 615,000

98. All of the following are complementary goods except from?

a. Pen and paper

b. Toothpaste and toothbrush
c. Sugar and coffee
d. Toothpaste and salt

99. It refers to the practice of hiring an outside company to handle All or part of its data
processing

a. Make or Buy analysis

b. Consultancy
c. Outsourcing
d. Technology transfer

100. Product costs or inventoriable costs

a. Include only the conversions costs

b. Treated as assets before the products were sold
c. Are charged to expenses when products became part of the FGI.
d. Considered expenses

101. Companies that use a process-cost accounting system would:

a. establish a separate Work-in-Process Inventory account for each manufacturing

department.
b. establish a separate Finished-Goods Inventory account for each manufacturing
department.
c. pass completed production directly to Cost of Goods Sold.
d. charge goods produced with actual overhead amounts rather than applied overhead
amounts.

102. Which of the following statements is false?

a. In job-order costing, costs are accumulated by job order.

b. In process costing, costs are accumulated by department.
c. In process costing, the cost per unit in a department is found by spreading the
period's manufacturing costs over the production activity.
d. In process costing, the total cost of each unit is found by dividing the total factory
costs by the number of units completed.
103.  In a process-costing system, manufacturing costs are accumulated by:
  
a. batch and time period.
b. department.
c. department and time period.
d. department or process, and time period.

104. Morrison, Inc., which uses a process-cost accounting system, passes completed
production from Department A to Department B for further manufacturing. The journal
entry to record completed production in Department A requires:

a. a debit to Work-in-Process Inventory and a credit to Finished-Goods Inventory.

b. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory.
c. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory:
Department A.
d. a debit to Work-in-Process Inventory: Department A and a credit to Work-in-
Process Inventory: Department B.

105. Which of the following data are needed to calculate total equivalent units under the
weighted-average method?

a. Work-to-date on ending work in process, units started during the period.

b. Units completed during the period, work-to-date on ending work in process.
c. Work to complete beginning work in process, work-to-date on ending work in
process.
d. Work to complete beginning work in process, units completed, work done on ending
work in process.

106. When calculating unit costs under the weighted-average process-costing method, the
unit cost is based on:

a. only the current period's manufacturing costs.

b. only costs in the period's beginning work-in-process inventory.
c. a summation of the costs in the beginning work-in-process inventory plus costs
incurred in the current period.
d. only costs incurred in previous accounting periods.

107. When computing the conversion cost per equivalent unit under the weighted-average
method of process costing, all of the following information would be needed except:

a. the number of units completed during the current accounting period.

b. the conversion work performed during the current period on the ending work-in-
process inventory.
c. the conversion work performed during the current period on the beginning
work-in-process inventory.
d. the conversion cost in the beginning work-in-process inventory.
108. Equivalent-unit calculations are necessary to allocate manufacturing costs between:
 a. units completed and ending work in process.
b. beginning work in process and units completed.
c. units sold and ending work in process.
d. cost of goods manufactured and beginning work in process.

109. When determining the cost of a manufactured good under an operation-costing

system, a company would:

a. trace direct-material cost and actual conversion cost to each product produced.
b. trace direct-material cost to each product produced and use a predetermined
application rate for conversion cost.
c. trace actual conversion cost to each product produced and use a predetermined
application rate for direct material.
d. use a predetermined application rate for both direct-material cost and
conversion cost.

110. The first processing department in a sequence of three production departments must
account for which of the following costs?

a. Direct material costs only.

b. Conversion and transferred-in costs.
c. Direct material and conversion costs.
d. Direct material, conversion, and transferred-in costs.

111. Greene, Inc., which uses a process-costing system, transfers completed production
from Department no. 1 to Department no. 2 for further work. Which of the following
best describes the account that would be debited to record this transfer?

a. Cost of Goods Transferred.

b. Finished-Goods Inventory: Department no. 1.
c. Finished-Goods Inventory: Department no. 2.
d. Work-in-Process Inventory: Department no. 2.

112. Barnes, Inc., which uses a process-costing system, transfers completed production
from Department no. 1 to Department no. 2 for further work. Which of the following
best describes the account that would be credited to record this transfer?

a. Cost of Goods Transferred.

b. Finished-Goods Inventory: Department no. 1.
c. Finished-Goods Inventory: Department no. 2.
d. Work-in-Process Inventory: Department no. 1.

113. Hamilton, which uses a process-costing system, had a balance in its Work-in-Process
account of $68,000 on January 1. The account was charged with direct materials, direct
labor, and manufacturing overhead of $450,000 throughout the year. If a review of the
accounting records determined that $86,000 of goods were still in production at year-
 end, Hamilton should make a journal entry on December 31 that includes:

a. a debit to Cost of Goods Sold for $432,000.

b. a credit to Finished-Goods Inventory for $432,000.
c. a credit to Work-in-Process Inventory for $432,000.
d. a debit to Finished-Goods Inventory for $86,000.

114. Unit costs in a process-costing system are derived by using:

a. in-process units.
b. completed units.
c. physical units.
d. equivalent units.

115. Barnett Corporation had 6,500 units of work in process on April 1. During April,
19,100 units were completed and as of April 30, 5,100 units remained in production.
How many units were started during April?

a. 11,600.
b. 17,700.
c. 20,500.
d. 30,700

116. XYZ Co., had 3,000 units of work in process on April 1 that were 60% complete.
During April, 10,000 units were completed and as of April 30, 4,000 units that were
40% complete remained in production. How many units were started during April?

a. 8,600.
b. 9,800.
c. 11,000.
d. 12,200.

117. Ohio, Inc., which uses a process-cost accounting system, began operations on January
1 of the current year. The company incurs conversion cost evenly throughout
manufacturing. If Ohio started work on 3,000 units during the period and these units
were 70% of the way through manufacturing, it would be correct to say that the
company has:

a. 3,000 physical units in production.

b. 2,100 completed units.
c. 900 in-process units.
d. 900 equivalent units of production.

118. Kentucky Corporation uses a process-cost accounting system. The company adds
direct materials at the start of its production process; conversion cost, on the other hand,
is incurred evenly throughout manufacturing. The firm has no beginning work-in-
process inventory; its ending work in process is 40% complete. Which of the following
sets of percentages would be used to calculate the correct number of equivalent units in
 the ending work-in-process inventory?

a. Materials, 40%; conversion cost, 40%.

b. Materials, 40%; conversion cost, 100%.
c. Materials, 100%; conversion cost, 40%.
d. Materials, 100%; conversion cost, 60%.

119. Agora Company uses a process-cost system for its single product. Material A is added
at the beginning of the process; in contrast, material B is added when the units are 75%
complete. The firm's ending work-in-process inventory consists of 6,000 units that are
80% complete. Which of the following correctly expresses the equivalent units of
production with respect to materials A and B in the ending work-in-process inventory?

a. A, 4,800; B, 4,800.
b. A, 6,000; B, 0.
c. A, 6,000; B, 4,800.
d. A, 6,000; B, 6,000.

For 120-121

Hampton Textile Co., manufactures a variety of fabrics. All materials are introduced at
the beginning of production; conversion cost is incurred evenly through manufacturing.
The Weaving Department had 2,000 units of work in process on April 1 that were 30%
complete as to conversion costs. During April, 9,000 units were completed and on April
30, 4,000 units remained in production, 40% complete with respect to conversion costs.

120. The equivalent units of direct materials for April total:

a. 9,000.
b. 13,000.
c. 13,600.
d. 14,400.

121. The equivalent units of conversion for April total:

a. 9,000.
b. 10,600.
c. 11,200.
d. 12,000.

122. Columbia Corporation adds all materials at the beginning of production and incurs
conversion cost evenly throughout manufacturing. The company completed 50,000
units during the year and had 15,000 units in process at December 31, 30% complete
with respect to conversion cost Equivalent units for the year total:

a. materials, 50,000; conversion, 50,000.

b. materials, 50,000; conversion, 4,500.
 c. materials, 54,500; conversion, 54,500.
d. materials, 65,000; conversion, 54,500.

123. Gorski began operations on January 1 of the current year. The company uses a
process-costing system, and conversion cost is incurred evenly throughout
manufacturing. By January 31, the firm had completed 56,000 units. Which of the
following statements could be true about the ending work-in-process inventory if
equivalent units for conversion cost totaled 59,000 units?

a. There is no ending work-in-process inventory.

b. The ending work-in-process inventory totaled 3,000 physical units.
c. The ending work-in-process inventory of 10,000 physical units was 30%
complete.
d. The ending work-in-process inventory of 20,000 physical units was 85%
complete.

124. Majestic, which uses a process-costing system, adds material at the beginning of
production and incurs conversion cost evenly throughout manufacturing. The following
selected information was taken from the company's accounting records:
Total equivalent units of materials: 5,000
Total equivalent units of conversion: 4,400
Units started and completed during the period: 3,500

On the basis of this information, the ending work-in-process inventory's stage of

completion is:

a. 40%.
b. 60%.
c. 70%.
d. 80%.

125. Corruption, Inc., overstated the percentage of work completed with respect to
conversion cost on the ending work-in-process inventory. What is the effect of this
overstatement on conversion-cost equivalent units and physical units manufactured,
respectively?

a. Overstated, overstated.
b. Overstated, understated.
c. Overstated, none.
d. None, overstated.

126. Which of the following is a key document in a typical process-costing system?

a. Departmental production report.

b. Master schedule.
c. Production budget.
d. Sequential product report.
127. Operation costing

a. tends to parallel job-order costing with respect to the treatment of conversion

cost.
b. tends to parallel process costing with respect to the treatment of conversion cost.
c. tends to parallel process costing with respect to the treatment of direct materials.
d. would likely be used by a manufacturing plant that produces one model of a
single product.

128. Which of the following is not classifiable as a management advisory service by CPA? 

a. Systems design. 
b. Project feasibility study. 
c. Make or buy analysis. 
d. Assistance in budget preparation

129. The primary purpose of management advisory services is: 

a. To conduct special studies, preparation of recommendations, development of

plans and programs, and provision of advice and assistance in their
implementation. 
b. To provide services or to fulfil some social need. 
c. To improve the client’s use of its capabilities and resources to achieve the
objectives of the organization.
d. To earn the best 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.

130. A cost system that first traces costs to activities and then traces cost from activities to
products

a. Job order cost system. 

b. Process cost system. 
c. Activity-based cost system. 
d. Flexible cost system. 

131. The payback method assumes that all cash inflows are reinvested to yield a return
equal to 

a. Zero 
b. the Discount Rate 
c. The Time-Adjusted-Rate-of-Return 
d. The Cost-of-Capital 

132. Why do the NPV method and the IRR method sometimes produce different rankings
of mutually exclusive investment projects?
 a. The NPV method does not assume reinvestment of cash flows while the IRR
method assumes the cash flows will be reinvested at the internal rate of return. 
b. The NPV method assumes a reinvestment rate equal to the discount rate while
the IRR method assumes a reinvestment rate equal to the internal rate of return. 
c. The IRR method does not assume reinvestment of the cash flows while the NPV
assumes the reinvestment rate is equal to the discount rate. 
d. The NPV method assumes a reinvestment rate equal to the bank loan interest
rate while the IRR method assumes a reinvestment rate equal to the discount
rate.

133. The least risky strategy for converting from a manual to a computerized accounts
receivable system would be a 

a. Direct conversion
b. Parallel conversion 
c. Pilot Conversion
d. Data based conversion

134. The batch processing of business transactions can be the appropriate mode when 

a. the sequence of master file records is not relevant 

b. timeliness is a major issue 
c. a single handling of the data is desired 
d. economy of scale can be gained because of high volumes of transactions

135. An integrated set of computer programs that facilitates the creation, manipulation, and
querying of integrated files is called a(n) 

a. Compiler 
b. Operating system 
c. Assembly language 
d. Database management system 

136. Opportunity costs: 

a. Are treated as period costs under variable costing. 

b. Have already been incurred as a result of past action. 
c. Are benefits that could have been obtained by following another course of
action.
d. Do not vary among alternative courses of action. 

137. Return on investment (ROI) is a term often used to express income earned on capital
invested in a business unit. A company’s ROI would be increased if 

a. Sales increased by the same peso amount as expenses and total assets
increased. 
 b. Sales remained the same and expenses were reduced by the same peso amount
that total asset increased.
c. Sales decreased by the same peso amount that expenses increased.
d. Sales and expenses increased by the same percentage that total assets
increased. 

138. The ratio that measures a firm’s ability to generate earnings is 

a. Times interest earned. 

b. Sales to working capital. 
c. Days’ sales in receivables.
d. Operating asset turnover. 

139. When a firm prepares financial reports by using absorption costing, it may find that 

a. Profits will always increase with increase in sales. 

b. Profits will always decrease with decreases in sales. 
c. Profit may decrease with increased sales even if there is no change in selling
price and costs. 
d. Decreased output and constant sales result in increased profit. 

140. The Liberal Marketing 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 breakeven is P750,000 but with the expected increase in fixed
costs, the sales volume necessary to breakeven would go up to P975,000. Based on
these projections, what were the total fixed costs before the increase of P78,750?

a. P341,250
b. P183,750 
c. P262,500
d. P300,000

141. Bacolod Corporation had sales of P120,000 for the month of May. It has a margin of
safety ratio of 25 percent, and after-tax return on sales of 6 percent. The company
assumes its sales constant every month. If the tax rate is 40 percent, how much is the
annual fixed costs? 

a. P36,000
b. P432,000 
c. P90,000
d. P360,000 

142. At 40,000 units of sales, Luna Corporation had an operating loss of P3.00 per unit.
When sales were 70,000 units, the company had a profit of P1.20 per unit. The number
of units to breakeven is 

a. P 35,000
b. P52,500 
 c. P45,000
d. P57,647

143. Drive Me, Inc. has a total of 2,000 rooms in its nationwide chain of hotels. On the
average, 70 percent of the rooms are occupied each day. The company’s operating costs
are P21 per occupied room per day at this occupancy level, assuming a 30-day month.
This P21 figure contains both variable and fixed cost elements. During October, the
occupancy dropped to only 45 percent. A total of P792,000 in operating cost was
incurred during the month. 

What would be the expected operating costs, assuming that the occupancy rate
increases to 60 percent during November? 

a. P1,056,000
b. P846,000 
c. P 756,000
d. P829,500

144. The cost to manufacture an unfinished unit is P40 (P30 variable and P10 fixed). The
selling price per unit is P50. The company has unused production capacity and has
determined that units could be finished and sold for P65 with an increase in variable
costs of 40%. What is the additional net income per unit to be gained by finishing the
unit? 

a. P3
b. P15 
c. P10
d. P12

145. William Furniture Company uses about 200,000 yards of a particular fabric each year.
The fabric costs P2.50 per yard. The current policy is to order the fabric four times a
year. Incremental ordering costs are about P200 per order, and incremental carrying
costs are about P0.75 per yard, much of which represents the opportunity cost of the
funds tied up in inventory. How much total annual costs are associated with the current
inventory policy?

a. P19,550
b. P38,300 
c. P18,750
d. P62,500

146. Tamaraw Company is negotiating to purchase equipment that would cost P200,000,
with the expectation that P40,000 per year could be saved in after-tax cash costs if the
equipment were acquired. The equipment’s estimated useful life is 10 years, with no
salvage value, and would be depreciated by the straight-line method. Tamaraw’s
minimum desired rate of return is 12 percent. Present value of an annuity of 1 at 12
percent for 10 periods is 5.65. Present value of 1 due in 10 periods at 12 percent is
0.322. 

The average accrual accounting rate of return during the first year of asset’s use is 
 a. 20.0 percent
b. 10.0 percent 
c. 10.5percent
d. 40.0 percent

147. Glenda Company expects to generate P10 million internally which could be available
for financing part of its P12 million capital budget for this coming year. Glenda’s
management believes that a debt-equity ratio of 40 percent is best for the firm. How
much should be paid in dividends if the target debt-equity ratio is to be maintained? 

a. P2,800,000
b. P8,571,429 
c. P1,428,571
d. P4,000,000

148. GMA Company has an opportunity to acquire a new machine to replace one of its
present machines. The new machine would cost P90,000, have a 5- year life and no
estimated salvage value. Variable operating costs would be P100,000 per year. The
present machine has a book value of P50,000 and a remaining life of 5 years. Its
disposal value now is P5,000, but it would be zero after 5 years. Variable operating
costs would be P125,000 per year. Ignore income taxes. Considering the 5 years in
total, what would be the difference in profit before income taxes by acquiring the new
machine as opposed to retaining the present one? 

a. P10,000 decrease
b. P35,000 increase 
c. P15,000 decrease
d. P40,000increase

149. Information on Divine’s direct material costs for May is as follows: 

Actual quantity of direct materials purchased and used 30,000
lbs. 
Actual cost of direct materials P84,000 
Unfavorable direct materials usage variance P 3,000
 Standard quantity of direct materials allowed for May production 29,000 lbs 

For the month of May, Divine’s direct materials price variance was: 

a. P2,800 favorable
b. P6,000 unfavorable 
c. P2,800 unfavorable
d. P6,000favorable

150. Data Corporation is a highly automated manufacturing firm. The vice president of
finance has decided that traditional standards are inappropriate for performance
measures in an automated environment. Labor is insignificant in terms of the total cost
of production and tends to be fixed, material quality is considered more important than
minimizing material cost, and customer satisfaction is the number one priority. As a
result, production and delivery performance measures have been chosen to evaluate
performance. The following information is considered typical of the time involved to
 complete and ship orders.
Waiting time:
From order being placed to start of production 8.0 days
From start of production to completion 7.0 days
Inspection time 1.5 days
Processing time 3.0 days
Moving time 2.5 days
The delivery cycle time is:

a. 22days
b. 11 days 
c. 14 days
d. 7 days

151. Spec, Inc.’s stock is expected to generate a dividend and terminal value one year from
now of P57.00. The stock has a beta of 1.3, the risk-free interest rate is 6 percent, and
the expected return market return is 11 percent. What should the equilibrium price of
Spec’s stock in the market now? 

a. P50.67
b. P53.77 
c. P51.35
d. P43.84

152. Tiger Company’s stock is currently selling for P60 a share. The firm is expected to
earn P5.40 per share and to pay a year-end dividend of P3.60. If investors require a 9
percent return, what rate of growth must be expected for Tiger? 

a. Zero growth
b. 40.0 percent 
c. 3.0 percent
d. 50.0 percent

153. Which method of inventory costing treats direct manufacturing costs and
manufacturing overhead costs, both variable and fixed, as inventoriable costs?

a. Direct costing
b. Variable costing
c. Absorption costing
d. Conversion costing

154. The costing method that treats all fixed costs as period costs is

a. Absorption costing
b. Job-order costing
c. Variable costing
d. Process costing

155. For P1,000 per box, Gray, Inc. produces and sells delicacies. Direct materials are
P400 per box and direct manufacturing labor averages P75 per box. Variable overhead
 is P25 per box and fixed overhead cost is P12500,000 per year. Administrative
expenses, all fixed run P4,500,000 per year, with sales commissions of P100 per box.
Production is expected to be 100,000 boxes, which is met every year. For the year just
ended, 75,000 boxes were sold. What is the inventoriable cost per box using absorption
costing?

a. P500
b. P625
c. P670
d. P770

156. Refer to No. 155, what is the inventoriable cost per box using variable costing?

a. P770
b. P670
c. P625
d. P500

157. RM Company manufactures a single product and has the following cost structure:
Variable costs per unit
Direct materials P3
Direct labor 4
Variable manufacturing overhead 1
Variable selling and administrative 2
Fixed costs per month
Fixed manufacturing overhead P100,000
Fixed selling and administrative 60,000
The company produces 20,000 units each month. The unit product cost under
absorption costing is

a. P10
b. P12
c. P13
d. P15

158. Refer to the data in No. 157, what is the unit product cost under variable costing?

a. P8
b. P10
c. P11
d. P12

159. Refer to the data in No. 157, assuming there are no beginning inventories and 20,000
units are produced and 19,000 units are sold in a month. If the unit selling price is P20,
what is the net income under absorption costing for the month?

a. P30,000
b. P35,000
c. P38,000
d. P42,000
160. Refer to data in No. 157, Refer to the data in No. 157, assuming there are no
beginning inventories and 20,000 units are produced and 19,000 units are sold in a
month. If the unit selling price is P20, what is the net income under variable costing for
the month?

a. P30,000
b. P35,000
c. P38,000
d. P42,000

161. When production exceeds sales, fixed manufacturing overhead costs

a. Are released from inventory under absorption costing

b. Are deferred in inventory under absorption costing
c. Are released from inventory under variable costing
d. Are deferred in inventory under variable costing

162. Variable costing and absorption costing will show the same incomes when there are
no

a. Beginning inventories
b. Ending inventories
c. Variable costs
d. Beginning and ending inventories

163. When sales are constant but production fluctuates

a. Net income will be erratic under variable costing

b. Absorption costing will always show a net loss
c. Variable costing will always show a positive net income
d. Net income will be erratic under absorption costing

164. Which of the following is a purpose of standard costing?

a. To simplify costing procedures and expedite cost reports

b. To replace budgets and budgeting
c. To use them as a basis for product costing for external reporting purposes
d. To eliminate under/over applied factory overhead at the end of period

165. A primary purpose of using a standard cost system is

a. To make things easier for managers in the production facility

b. To provide a distinct measure of cost control
c. To minimize the cost per unit of production
d. To minimize recording of certain recurring business transactions

166. Standard costs are least useful for

a. Measuring production efficiency

 b. Simplifying costing procedures
c. Estimating future costs
d. Determining minimum inventory levels
167. A company using very tight standards in standard cost system should expect that

a. No incentive bonus will be paid

b. Costs will be controlled better that if lower standards were used
c. Employees will be strongly motivated to attain the standards
d. Most variances will be unfavorable

168. The materials cost variance is composed of

a. Quantity and efficiency variances

b. Quantity and price variances
c. Price and mix variances
d. Mix and yield variances

169. Fly company uses a standard cost system. The standard for each finished unit of
product allows for 3 pounds of plastic at P0.72 per pound. During December, Fly
bought 4,500 pounds of plastic at P0.75 per pound, and used 4,100 pounds in the
production of 1,300 finished units of product.
What is the materials price variance for December? (Hint: Compute material purchase
price variance)

a. P123 favorable
b. P123 unfavorable
c. P135 favorable
d. P135 unfavorable

170. A credit balance in the materials price variance indicates that

a. Actual price exceeds standard price

b. Standard price exceeds actual price
c. Actual quantity exceeds standard quantity
d. Standard quantity exceeds actual quantity

For numbers 171-173

A manufacturer of radios purchases components from subcontractors for assembly

into complete ratios. Each radio requires three units each of Part X, which has a
standard cost of P2.90 per unit. During June, the company had the following
experience with respect to Part X.
Units
Purchases (P36,000) 12,000
Consumed in manufacturing 10,000
Radios manufactured 3,000

171. During June, the company incurred a materials purchase-price variance of

a. P900 unfavorable
 b. P900 favorable
c. P1,200 unfavorable
d. P1,200 favorable
172. During June, the company incurred a materials efficiency variance of

a. P2,900 unfavorable
b. P2,900 favorable
c. P8,700 unfavorable
d. P8,700 favorable

173. The amount that will be shown on a flexible budget for Part X usage during the month
of June is

a. P26,100
b. P27,000
c. P29,000
d. P36,000

174. In determining the standard factory overhead rate, which level of capacity is used?

a. Maximum capacity
b. Practical capacity
c. Normal capacity
d. Expected actual capacity

175.