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Quiz1 - SET A
Quiz1 - SET A
3. If production is less than sales (in units), then absorption costing net income will generally be
a. Greater than variable costing net income.
b. Less than variable costing net income.
c. Equal to variable costing net income.
d. Less than expected.
5. The inventory costing method that treats direct manufacturing costs and indirect manufacturing costs, both
variable and fixed, as inventoriable costs is called
a. Variable costing
b. Absorption costing
c. Conversion costing
d. Perpetual costing
6. It involves a systematic examination of the relationships among costs, cost driver and profit
a. Financial statement analysis
b. Cost-Value-Profit analysis
c. Cost-benefit analysis
d. Profit planning
7. CVP analysis may be used by managers in planning and decision-making, which may involve the following,
except
a. Choosing the type of product to produce and sell.
b. Choosing the pricing policy to follow.
c. Choosing the type of productive facilities to acquire.
d. Choosing the analytical technique to use.
12. Under variable costing, all fixed costs are expensed during the current period because
a. Fixed costs are usually immaterial in amount
b. Fixed costs are non-controllable costs.
c. Fixed costs are incurred whether or not there is production, so it is not proper to allocate these costs
to production and defer a current cost of doing business
d. Allocation of fixed costs is usually done arbitrarily and could lead to erroneous decision by management.
14. A company prepares income statement using both absorption and variable costing methods. At the end of the
period, a comparison of actual and budgeted results revealed that the actual net income was substantially above the
budgeted net income, although actual sales, gross margin, and contribution margin approximated the budgeted figures.
There was no beginning or ending inventories during the period. The most likely explanation of the increase in net
income is that, compared to budget, actual
a. Selling price was higher
b. Variable costs were lower
c. Fixed selling and administrative costs were lower
d. Fixed factory overhead costs were lower
15. Income under absorption costing may differ from income under variable costing. The difference in income
between the two costing methods is equal to the change in the quantity of all units
a. Produced multiplied by the variable manufacturing cost per unit’
b. Sold multiplied by the fixed factory overhead cost per unit
c. In inventory multiplied by the fixed factory overhead cost per unit
d. Sold multiplied by the selling price per unit
ITEMS 16 TO 20 ARE BASED ON THE FOLLOWING INFORMATION:
During January 200A, Sanji, Inc. produced 1,000 units of Product A with costs as follows:
Materials P 6,000
Labor 3,300
Variable factory overhead 2,500
Fixed factory overhead 1,500
Total manufacturing costs P13,300
16. What amount should be considered product cost for external reporting purposes?
a. P13.30 b. P18.30 c. P11.80 d. P14.80
17. What is the product cost per unit under variable costing?
a. P13.30 b. P18.30 c. P11.80 d. P14.80
18. What is the variable cost per unit for purposes of computing the contribution margin?
a. P13.30 b. P18.30 c. P11.80 d. P14.80
19. Under absorption costing, income for January 200A was
a. P8,200 b. P5,200 c. P6,700 d. P1,700
20. What would be if variable costing were used?
a. Equal to income under absorption costing because that should always be the case
b. Equal to income under absorption costing because the total fixed overhead costs expensed under both
methods are the same
c. An amount greater than that under absorption costing because production is equal to sales
d. An amount less than that under absorption costing because there is no change in inventory
21.Chopper Company produces and sells a single product. The costs and selling prices on a per-unit basis are as follows:
The above per-unit figures are computed based on the company’ s normal capacity of 20,000 units.
22.A product has a selling price of P20 and unit variable cost of P14. The effect of a P2 per unit increase in variable cost
is to increase the break-even level capacity by
a. 33. 1/3% c. P2 per unit
b. 50% d. 66.67%
23. The American Institute of Management Accountants came up with the Standards of Ethical Conduct for
Management Accountants awhich have four sections namely
a. Competence, confidentiality, integrity and objectivity.
b. Competence, security, integrity and objectivity.
c. Competence, confidentiality, integrity and maturity.
d. Competition, confidentiality, integrity and objectivity.
24. Financial and managerial accounting differ in a number of ways. In contrast to financial accounting, managerial
accounting
a. Focuses on providing data for external users.
b. Emphasizes relevance and flexibility rather than precision.
c. Is mandatory
d. Is governed by Generally Accepted Accounting Principles.
25. Provisions in this section of Ethical Standards for Management Accountants require management accountants to
devel0p their knowledge and skills and to do their tasks in accordance with relevant laws, regulations, and standards.
a. Competence c. Integrity
b. Confidentiality d. Objectivity
26. Management may use CVP analysis to determine the relative profitability of a product by
a. Determining the unit contribution margin and the projected profits at various levels of production.
b. Controlling the physical production of the products.
c. Assigning costs to a product in such a way that the contribution margin is maximized.
d. Keeping all costs to an absolute minimum.
27. Cost-volume-profit relationships that are curvilinear may be analyzed linearly by considering only
a. A relevant range of activity
b. The variable costs
c. The fixed costs
d. The relevant costs
30. The assumptions under which CVP analysis operates primarily hinge on certainty. However, when uncertainty
enters the situation, the results may not be so clear. In this case, the MAS consultant should
a. Use a sample from the entire population of data to generate a decision model and make the decision for
management.
b. Do nothing. It is not the MAS consultant’s responsibility to be concerned with the uncertainty of the results
and/or assumptions.
31. It is the level of output or sales at which total revenues equal total costs, that is, the point at which operating
income is zero.
a. Indifference point c. Sangley point
b. Break-even point d. Order point
32. A calculation used in CVP analysis is the break-even point. At this point, total revenue equals total costs. Beyond
the break-even point, operating income will increase by the
a. Variable cost per unit for each additional unit
b. Selling price per unit for each additional unit
c. Contribution margin per unit for each additional unit
d. Gross profit per unit for each additional unit
33. One of the major assumptions limiting the reliability of break-even analysis is that
a. Unit variable costs and total fixed costs will vary directly with the change in units sold.
b. There is a relevant range in which the various relationships are true for a given period of time.
c. Productive efficiency will increase as more units are produced.
d. Changes in inventory are significant in amount.
34. The type of costing system that will provide the best information for CVP and BE analysis if inventories are
expected to change is
a. Process costing c. Absorption (full) costing
b. Job-order costing d. Variable (direct) costing
36. Which of the following statements regarding absorption and variable costing is correct?
a. Absorption costing results in higher income when finished goods inventory increases.
b. Variable manufacturing costs are lower under absorption costing.
c. Overhead costs are treated in the same manner under both variable and absorption costing methods.
d. Profits are always the same under the two costing methods.
37. Which of the following cost items is not correctly accounted for as a product cost under absorption and variable
costing?
PRODUCT COST UNDER
ABSORPTION VARIABLE
a. Shipping cost No No
b. Straight-line depreciation
of factory equipment Yes Yes
c. Factory supplies Yes Yes
d. Direct materials Yes Yes
38. Which of the following must be known about a production process to intitute a variable costing system?
a. The direct and indirect costs related to production
b. Standard quatities and prices for all production inputs
c. The variable and fixed components of manufacturing costs
d. The capacity level or denominator level to be used in allocating fixed overhead costs
39. What costs are treated as product cost under variable costing?
a. All variable costs c. all manufacturing costs
b. All direct costs only d. only variable production costs
40. Which of the following would most likely decrease the product cost per unit under variable costing?
a. A decrease in the commission paid to salesman for each unit sold
b. An increase in the number of units sold
c. A decrease in the remaining useful life of a factory equipment depreciated using the straight line
method
d. An increase in the remaining useful life of a factory equipment depreciated on the units-of- production
method
41 If sales increase from P800,000 to P900,000, and if the degree of operating leverage is 5, one would expect
profit to increase by
a. 62.5% b. 12.5% c. 5.0% d. 2.5%
The CEO of Robin, Inc. has asked you to participate in a project study that will launch a new product called “Liha”. The
projected income statement for the following period, without the new product, appears as follows:
The following information were made available by a team composed of marketing, production, finance, legal, human
relations, and other key member of management.
a. Based on the market research conducted, the optimum introductory price for “Liha” is P60 per unit and about
50,000 units can be sold at this price in the coming period.
b. Liha’s non-fixed product cost will have the same rate of variability to net sales as the old products.
c. Production of Liha will require new equipment and additional manpower, hence, fixed manufacturing overhead
is expected to increase in 20%.
d. The same selling and delivery facilities will be used. Thus, this expenses will increase only by 4%.
e. Distribution costs will remain unchanged because the new product will not require new investments on fleet
and distribution centers.
f. Liha should enter the market with a big bang. This will require heave spending in marketing, although it will be
limited to 10% of the new sales from Liha.
g. The new product will require additional general and administrative costs of P1M.
h. Analysis of cash flows shows favorable results.
42. Based on the given data,
a. Liha will yield incremental after tax profit of P1,200,000
b. If the Liha project is implemented, projected income of Skin Care, Inc. will increase to P816,000.
c. The project is expected to earn after tax profit of 2.8% of its own net sales.
d. Liha’s contribution margin will be P12,000,000.
43. If selling and delivery expenses do not vary with sales, the break-even sales for Liha (in 000’s) is
a. P26,000 c. P 19,500
b. P30,000 d. P544,500
44. If the company’s minimum acceptable rate of return on sales for new projects is 5%, the Liha project would be
implemented of the number of units to be sold is at least
a. 500,000 c. 800,000
b. 520,000 d. 600,000
45. If the maximum number of units in Liha’s relevant range is 800,000, this new product’s projected profit before
tax with sales of 600,000 units is
a. P 9,979,200 c. P36,000,000
b. P3,000,000 d.P10,800,000
46 . Nami Corporation’s 200A manufacturing costs were as follows:
Prime costs P560,000
Variable manufacturing overhead costs 80,000
Straight-line depreciation of factory building
And equipment 60,000
Factory supervisor’s salary (P8,000 per month) 96,000
Other fixed factory overhead 40,000
What amount should be considered product cost for external reporting purposes?
a. P680,000 b. P196,000 c. P640,000 d. P836,000
How much of these costs should be inventoried for external reporting purposes?
a. P512,000 b. P400,000 c. P547,000 d. P412,000
"No matter how hard or impossible it is, never lose sight of your goal." – Monkey D. Luffy
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