St. Vincent de Ferrer College of Camarin, Inc.

SVFC Compound,
San Vicente Ferrer St., Area D, Brgy. 178, Camarin, Caloocan City
Telephone Number: 668-25-75; Email address: st.vincentdeferrercollegeofccc@yahoo.com
Website: www.stvfc.com

Midterm Examination
Accounting 13 - Management Accounting 2

Name: ______________________________________ Year: ______________________

Date:______________________

I - Multiple Choices

The following information pertains to questions 1 through 5:

The Daily Company marks up all merchandise at 25% of gross purchase. All purchases are made
on account with terms of 1/10, net/60. Purchase discounts which are recorded as miscellaneous
income, are always taken. Normally, 60% of each month’s purchases are paid for in the month of
purchase while the other 40% are paid during the first 10 days of the first month after purchase.
Inventories of merchandise at the end of each month are kept at 30% of the next month’s
projected cost of goods sold.

Terms for sales on account are 2/10, net/30. Cash sales are not subject to discount. Fifty percent
of each month’s sales on account are collected during the month of sale, 45% are collected in the
succeeding month and the remainders are usually uncollectible. Seventy percent of the collections
in the month of sale are subject to discount while100% of the collections in the succeeding month
are subject to discount.

Projected sales data for selected months follow”

Sales on Account Gross Cash Sales
December P1, 900, 000 P400, 000
January 1, 500, 000 250, 000
February 1, 700, 000 350, 000
March 1, 600,000 300, 000

1. Projected gross purchases for January are

a. P1, 400, 000

b. P1, 470, 000
c. P1, 472, 000
d. P1, 248, 000
e. None of the above

2. Projected inventory at the end of December is

a. P420, 000
b. P441, 600
 c. P393, 750
d. P552, 000
e. None of the above

3. Projected payments to suppliers during February are

a. P1, 551. 200

b. P1, 535, 688
 c. P1, 528, 560
d. P1, 509, 552
e. None of the above

4. Projected sales discounts to be taken by customers making remittances during February

are

a. P5, 250
b. P15, 925
c. P30, 000
d. P11, 900
e. None of the above

5. Projected total collections from customers during February are

a. P 1, 875, 000
b. P1, 861, 750
c. P1,511, 750
d. P1, 188, 100
e. None of the above

6. Davis Corporation expects the following transactions in 2013. Their first year of
operations:

Sales (90% collectible in 2013) ....................................... P 1, 500, 000

Bad debt write-offs .......................................................... 60, 000
Disbursements of costs and expenses .............................. 1, 200, 000
Disbursements for income taxes ...................................... 90, 000
Purchases of fixed assets ................................................. 400, 000
Proceeds from issuance of ordinary shares...................... 580, 000
Proceeds from short-term borrowings ............................. 100, 000
Payments on short-term borrowings ................................ 50, 000
Depreciation on fixed assets ............................................ 80,000

What is the cash balance at December 31, 2013?

a. P150, 000
b. P170, 000
c. P210, 000
d. P280, 000

7. David Company has budgeted its activity for April 2013. Selected data from estimated
amounts are as follows:

Ne P120, 000
t
income
Increase in gross amount
 of trade accounts receivable
during month 35, 000
Decrease in accounts payable
during month 25, 000
Depreciation expense 65, 000
Provisions for income taxes 80, 000
Provision for doubtful accounts
receivable 45, 000

On the basis of the above data, David budgeted a cash increase for the month in the
amount of

a. P90, 000
b. P195, 000
c. P250, 000
d. P300, 000

8. Reliance Company budgets sales at P2, 000, 000 and expects a net income before tax of
10% of the sales.

Expenses are estimated as follows:

Selling 15% of sales

Administrative 9% of sales
Finance 1% of sales

Labor is expected to be 40% of the total manufacturing cost, Factory overhead is to be

applied at 75% of direct labor cost.
Inventories are to be as follows:
January 1 December
Materials 250, 000 300, 000
Work in process 200, 000 320, 000
Finished goods 350, 000 400, 000

Cost of goods sold will be:

a. P 500, 000
b. P 700, 000
c. P 1, 300, 000
d. P 2, 000, 000
e. None of the above

9. Refer to Question No. 8. Total manufacturing cost will be:

a. P 741, 000
b. P 882, 000
c. P 1, 029, 000
 d. p 1, 470, 000
e. None of the above

10. Refer to Question No. 8. Factory overhead will amount t:

a. P441, 000
b. P 491, 000
c. P 588, 000
d. P 1, 029, 000
e. None of the above

11. Refer to Question No. 8. Materials purchases will be:

a. P250, 000
b. P300, 000
c. P491, 000
d. P741, 000
e. None of the above

12. The first step involved in preparing a master budget is

a. Preparing a forecast income statement

b. Preparing a general operating budget
c. Preparing a forecasted statement of financial position
d. Preparing detailed period budgets

13. Which of the following components of the master budget must be prepared before the
others?

a. Direct labor peso budget

b. Cost of goods sold forecast
c. Production budget
d. Raw materials purchase budget

14. Which of the following factors are not important to consider in making a sales forecast?

a. Past sales volume

b. Distribution costs involved
c. Conditions within the industry
d. Plant capacity
e. None of the above

15. The period budget should begin with a forecast of

a. overhead production
b. sales
c. direct labor
 16. The basic difference between a master budget and a flexible budget is:

a. Flexible budget considers only variable but a master budget is based on a fixed
standard
b. Flexible budget allows management latitude in meeting goals whereas a master
budget is based on a fixed standard.
c. Master budget is based on one specific level of production and a flexible budget can
be prepared for any production level within a relevant range
d. Master budget is for an entire production facility but a flexible budget is applicable
to a single department only.

17. A flexible budget is

a. Appropriate for control of factory overhead but not for control of direct
materials and direct labor
b. Appropriate for control of direct materials and direct labor but not forcontrol of
factory overhead
c. Not appropriate when costs and expenses are affected by the fluctuations in
volume limits
d. Appropriate for any level of activity

18. The purpose of a flexible budget is to

a. Allow management some latitude in meeting goals

b. Eliminate cyclical fluctuations in production reports by ignoring variable costs
c. Compare actual and budgeted results at virtually any level of production
d. Reduce the total time in preparing the annual budget

19. A budget that identifies revenues and costs with an individual controlling their
incurrence is:

a. Budgetary control
b. Master budget
c. Product budget
d. Responsibility budget
e. None of the above

20. In preparing quarterly budget estimates, who should be responsible for the
cash budget?

a. Sales manager
b. Production manager
c. Finance manager
d. General manager
II Answer the following questions
1. “As a practical matter, planning and control mean exactly the same thing.” Do you agree?
Explain.

2. Explain briefly how a budget can be used in costing products.

3. How can a labor hour budget be translated into a labor cost budget?

4. What is a rolling, continuous, or progressive budget?

5. Explain how a comparison of actual results with a budget can be applied in the control of
operations.