1. Genco Company has a 30% contribution margin percentage and fixed costs of P30,000.

To earn a 10% return on

sales, Genco must have sales of
a. P150,000 b. P100,000 c. P90,000 d. P40,000

2. Machine A has fixed costs of P450,000 and a variable cost of P20. Machine B has fixed costs of P600,000 and a
variable cost of P14. What is the indifference point in units?
a. 22,500 b. 25,000 c. 42,858 d. 54,000.

3. Mayo Enterprises has fixed costs of 120,000. At a sales volume of P400,000, return on sales is 10%; at a P600,000
volume, return on sales is 20%. What is the break-even volume?
a. P160,000 b. P210,000 c. P300,000 d. P350,000

4. DSP Company earned P100,000 of P1,000,000. It is earned P130,000 on sales of P1,100,000. Total fixed costs are
a. P200,000 b. P200,000 c. P420,000 d. P900,000

5. Cork Company breaks even at P300,000 sales and earns P40,000 at P4000,000 sales. Which of the following is true?
a. Fixed costs are P120,000.
b. Profit at sales of P500,000 would be P50,000.
c. The selling price per unit is P4
d. Contribution margin is 10% of sales.

6. 126. Last year, Brown Manufacturing had a contribution margin ratio of 40%. This year, fixed expenses are expected
to remain at P50,000 and sales are expected to remain at P50,000 and sales are expected to increase by 90,000:
What should the contribution margin ratio be this year if the company wishes to increase net income by P31,500?
a. 78.75% b. 40.00% c. 35.00% d. 55.56%

7. The manager of Lucky eleven Store reviewed the following data:

Fruits Meat Canned Products
Contribution margin ratio 40% 50% 40%

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Sales mix in pesos 20% 30% 50%

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Fixed costs, P1,290,000 per month.

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The breakeven sales for each month is
a. P1,677,000 b. P3,000,000
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8. Birdie Company is planning its advertising campaign for next year and has prepared the following budget data
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based on a zero advertising expenditure:

Normal plant capacity 200,000 units
Sales 150,000 units
Selling price P25 per unit
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Variable manufacturing costs P15 per unit

Fixed manufacturing costs P800,00
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Fixed selling and adm costs P700,00

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An advertising agency claims that an aggressive advertising campaign would enable to increase its unit sales by 20%.
What is the maximum amount that Birdie can pay for advertising and obtain an operating profit of P200,000?
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a. P100,000 b. P200,000 c. P300,000 d. P550,000

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9. The Eagle Company has provided information concerning its projections for the coming year as follows:
Net Sales P10,000,000
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Fixed manufacturing costs P 1,000.000

Ernie projects variable manufacturing costs of 60% of net sales. Assuming no change in inventory, what will the
projected cost of goods sold be?
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a. P5,000,000 b. P6,000,000 c. P7,000,000 d. P8,000,000

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10. Claremont Company had a manufacturer of its only one product line. It had sales of P400,000 for 2010 with a
contribution margin ratio of 20 percent. Its margin of safety ratio was 10 percent.
What are the company’s fixed costs?
a. P72,000 b. P80,000 c. P288,000 d. P320,000
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11. Firms with a high degree of operating leverage.

a. will have a more significant shift in income as sales changes
b. have lower fixed costs.
c. have low contribution margin ratios
d. are less dependent on volume to add profits

12. Gabgalang Company uses a monthly cost formula for overhead of P50,000 + P30,00 for each direct labor hour
worked. For the coming year, Gabgalang’s plans to manufacture 200,000 units. Each unit requires five minutes of
direct labor. Gabgalang’s total budgeted overhead for the coming year is
a. P550,000 b. P1,200,000 c. P1,100,000 d. P650,000
13. The following information has been extracted from Bautista & Magsombol Company’s financial records for its first
year of operations.
Units produced 10,000
Units sold 7,000
Variable costs per unit
Direct materials P8
Direct labor 9
Factory overhead 3
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Fixed costs:
Manufacturing overhead P70,000
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 Selling 30,000

Based on absorption costing, Bautista & Magsombol’s income in its first year of operations will be
a. P21,000 higher than it would be under variable costing
b. P70,000 higher than it would be under variable costing
c. P30,000 higher than it would be under variable costing
d. Higher than it would be under variable costing, but the exact difference canot be determinable from this
information

14. Dela has computed the following unit costs for the year just ended:
Variable manufacturing cost P85
Fixed selling and administrative cost 20
Which of the following choices correctly depicts the per unit cost of inventory under variable costing and absorption
costing?
a. Variable, P85; absorption, P105.
b. Variable, P85; absorption, P116.
c. Variable, P103; absorption, P105.
d. Variable, P103; absorption, P106.

15. Hope Company incurred the following factory overhead costs for the second quarter of the year:
Machine Hours Factory Overhead
April 150 P 4,200
May 120 P 3,600
June 100 P 4,800
Using the high-low method, how much is the fixed factory overhead cost for the second quarter?
a. P 1,200 b. P 2,400 c. 3,600 d. 4,800

16. Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual
manufacturing overhead was $415,000, and actual labor hours were 21,000. The amount credited to the
Manufacturing Overhead account would be
A. $400,000 B. $415,000 C. $420,000 D. $435,750

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17. Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual
manufacturing overhead was $215,000, and actual labor hours were 21,000. The amount debited to the Manufacturing

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Overhead account would be
A. $200,000 B. $215,000
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C. $210,000 D. $225,750

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18. Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual
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manufacturing overhead was $415,000, and actual labor hours were 21,000. Which of the following would be correct?
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A. Overhead is underapplied by $15,000 B. Overhead is underapplied by $5,000

C. Overhead is overapplied by $5,000 D. Overhead is overapplied by $15,000

19. Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual
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manufacturing overhead was $415,000, and actual labor hours were 21,000. To dispose of the balance in the
Manufacturing Overhead account, which of the following would be correct?
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A. Cost of Goods Sold would be credited for $15,000 B. Cost of Goods Sold would be credited for $5,000
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C. Cost of Goods Sold would be debited for $5,000 D. Cost of Goods Sold would be debited for $15,000

20. Amelia Company had the following information for the year:
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Amelia Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated
direct labor hours. Assume the only inventory balance is an ending Finished Goods balance of $19,000. How much
overhead was applied during the year?
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A. $245,000 B. $343,000 C. $360,000 D. $320,000

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Question number 21 through 25 are based on the following information.

Coleman Company manufactures and sells adjustable canoples that attach to motor homes and trailers. The market
covers both new units as well as replacement canoples. Coleman developed its 2012 business plan based on the
assumption that canoples would sell at a price of P800 each. The variable cost of each canopy is projected at P400,
and the annual fixed costs are budgeted at P200,000. Coleman’s after-tax profit objective is P480,000; the company’s
tax rate is 40 percent.
While Coleman’s sales usually rise during the second quarter, the May financial statements reported that sales were
not meeting expectations. For the first five months of the year, only 350 units had been sold at the established price,
with variable costs as planned. It was clear the 2012 after-tax profit projection would not be reached unless some
actions were taken. The company president assigned a management committee to analyze the situation and develop
several alternative courses of action. The following mutually exclusive alternative were presented to the president.
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Alternative 1. Reduce the sales price by P80. The sales organization forecasts that with the significantly reduced sales
price, 2,700 units can be sold during the remainder of the year. Total fixed and variable unit costs will stay as
budgeted.
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 Alternative 2. Lower variable costs per unit by P50 through the use of less expensive raw materials and slightly
modified manufacturing techniques. The sales price would also be reduced by P60, and sales of 2,200 units for the
remainder of the year are forecast.

Alternative 3. Cut fixed costs by P20,000 and lower the sales price by 5 percent. Variable costs per unit will be
unchanged. Sales of 2,000 units are expected for the remainder of the year.

21. If no changes are made to the selling price or cost structure, what is the number of units that Coleman Company
must sell in order to breakeven?
a. 400 units b. 450 units c. 500 units d. 550 units

22. If no changes are made to the selling price or cost structure, what is the number of units that Coleman Company
must sell in order to achieve its after-tax profit objectives?
a. 1,700 units b. 2,000 units c. 2,500 units d. 3,500 units

23. How much would be the after-tax profit if Coleman Company reduce the sales price by 80 in order to sell 2,700
units during the remainder of the year?
a. P321,600 b. P482,400 c. P804,000 d. P398,400

24. How much after-tax profit would Coleman Company earn if it implements Alternative 2, lowering variable cost per
unit by P50, the sales price to be reduced by 60 and selling 2,200 units for the remainder of the year?
a. P319,200 b. P394,800 c. P487,800 d. P658,000

25. How much would be the after-tax profit if the amount of fixed cost is cut by P20,000 and lower the sales price by 5
percent, selling 2,000 units for the remaining 7 months?
a. P272,000 b. P399,600 c. P403,000 d. P408,000

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