1

1. It is the process of conducting a research on the organization and its working environment
a. Strategic analysis
b. Strategic thinking
c. Strategic management
d. Strategic planning

2. Which among the following tools and framework is not under the category of internal/ external strategic analysis?
a. Strategy map
b. Value chain analysis
c. Scenario planning
d. SWOT analysis

3. In this tool/ framework, the company creates an entirely new uncontested market space
a. Creating shared value
b. Reverse innovation
c. Blue ocean strategy
d. Gap analysis

4. The strategy (or tactics) relate to how a given end is to be attained

a. True
b. False

5. Strategic planning represents an effort to realize the fruits of strategic thinking

a. True
b. False

6. Cost-volume-profit analysis is most essential in the determination of the

a. Production level that is equal to sales
b. Volume of operations in order to break even
c. Variable costs necessary to equal fixed costs
d. Relationship between revenues and costs at various levels of operations

7. An increase in the income tax rate

a. Raises the break-even point
b. Lowers the break-even point
c. Increases sales required to earn a particular after-tax profit
d. Decreases sales required to earn a particular after-tax profit

8. A % change in pre-tax profit can be quickly computed by multiplying a % change in peso sales by the
a. Sales mix
b. Margin of safety
c. Indifference point
d. Degree of operating leverage

9. If the sales mix shifts toward higher contribution margin products, the break-even point
a. Decreases
b. Increases
c. Remains constant
d. Is zero

10. Operating leverage is greatest in companies that have

a. Low fixed cost, low unit variable cost
b. High fixed cost, low unit variable cost
c. Low fixed cost, high unit variable cost
d. High fixed cost, high unit variable cost
 2
11. In 2016, Adriel, Inc. increases its direct manufacturing labor wage rates. Assuming all other factors being the same,
how did this increase affect Adriel’s budgeted breakeven point and budgeted margin of safety?
a. Budgeted breakeven point (increase); budgeted margin of safety (increase)
b. Budgeted breakeven point (increase); budgeted margin of safety (decrease)
c. Budgeted breakeven point (decrease); budgeted margin of safety (decrease)
d. Budgeted breakeven point (decrease); budgeted margin of safety (increase)

12. Operating leverage = Contribution Margin/ Profit. Assuming a product has sales well above its breakeven point sales,
we could say that:
a. Operating leverage is greater than one (1)
b. Fixed costs are low
c. Fixed costs are high
d. Variable costs are low

13. A P 2 increase in a product’s variable cost per unit accompanied by a P 2 increase in its selling price per unit will
a. Decrease the degree of operating leverage
b. Result in a decrease in the contribution margin
c. Have no effect on the break-even volume
d. Have no effect on the contribution margin ratio

14. Sensitivity analysis, when used in cost-volume profit analysis,

a. Is done through various possible scenarios and computes the impact on profit of various predictions of
future events
b. Is done through various possible scenarios and determines the effect of the cost accounting systems used in each
scenario
c. Allows the decision-maker to introduce probabilities in the evaluation of decision alternatives
d. Allows managers to study how total fixed costs vary with cost drivers

15. MNO’s income declined by 300% when sales declined from P 10 M to P 8 M. What was the operating leverage?
a. 2.7
b. 12
c. 15
d. 30

DOL = % change in EBIT

% change in Sales

DOL = 300%__
2M/10M

DOL = 300%
20%

DOL = 15

16. At 40,000 units of sales, Rock Corporation had an operating loss of P 3.00 per unit. When sales were 70,000 units, the
company had a profit of P 1.20 per unit. What is the number of units to breakeven?
a. 35,000
b. 45,000
c. 52,500
d. 57,647

Let
x – contribution margin
y – total fixed cost

At 40,000 units
40,000 x – y = (40,000)(-3.0)
 3
40,000 x – y = (120,000)

At 70,000 units
70,000 x – y = (70,000 x 1.20)
70,000 x – y = 84,000

Substitution
40,000 x + 120,000 = y

Substituting the value of y to the 2nd equation

70,000 x – (40,000 x + 120,000) = 84,000
70,000 x – 40,000 x - 120,000 = 84,000
30,000 x = 120,000 + 84,000
30,000 x = 204,000
30,000
x = 6.80

40,000 (6.80) + 120,000 = y

272,000 + 120,000 = y
392,000 = y

To get the breakeven

BEP (units) = Total Fixed Cost/ CM per unit

BEP (units) = 392,000/ 6.80
BEP (units) = 57,647

17. Paris Company produces and sells only two products, Yang and Yin. 6 units of Yang are sold for every 4 units of Yin.
Variable costs as a percentage of sales in pesos are 60% for Yang and 85% for Yin. Total fixed cost is P 150,000.
Assuming that the total fixed cost of Paris Company is expected to increase by 30% next period, what amount of
Yang sales in pesos would be necessary to break-even?
a. P 260,000
b. P 390,000
c. P 408,000
d. P 650,000

Sales mix CMR Average CMR

Yang – 6 40% 24%
Yin – 4 15% 6%_
6:4 30%

Composite BEP (pesos) = (150,000 x 130%)

30%
Composite BEP (pesos) = 195,000
30%
Composite BEP (pesos) = 650,000

Yang sales in pesos necessary to break-even = 650,000 * 6/10

= 390,000

18. Andy Company is expecting an increase of fixed costs by P 78,750 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 scenario, the sales volume necessary to breakeven is P 750,000 but with the expected increase in fixed costs,
the sales volume necessary to breakeven would go up to P 975,000. Based on these projections, what would be the
total fixed costs after the increase of P 78,750?
a. P 341,250
b. P 262,500
c. P 183,750
d. P 300,000
 4
Let x = TFC
y = CMR

BEP (pesos) = TFC

CMR

750,000 = x
y
With the increase of 78,750 in fixed cost
BEP (pesos) = x + 78,750
y
975,000 = x + 78,750
y

Substitution
(1st) 750,000 y = x
(2nd) 975,000 y = x + 78,750
975,000 y = 750,000 y + 78,750
975,000 – 750,000 y = 78,750
225,000 y = 78,750
225,000
y = 35%

750,000 (35%) = x

262,500 = x

TFC after the increase of 78,750

= 262,500 + 78,750

= 341,250

19. Terry Company has fixed costs of P 100,000 and break even sales of P 800,000. What is its projected profit at P
1,200,000 sales? P 50,000

BEP sales = 800,000 = 100,000

CMU

800,000 CMU = 100,000

CMU = 12.50%

At 1,200,000 sales
CMU = (12.50 x 1,200,000) 150,000
TFC 100,000
Projected profit 50,000

20. Product X sells at P 25 per unit and has related variable costs of P 20 per unit. The fixed costs of producing Product X
are P 40,000 per month. How many units of product X must be sold each month to earn a monthly operating income
of P 80,000? 24,000

Target sales in units = TFC + Desired Profit

CMU
= 40,000 + 80,000
5
= 120,000
5
= 24,000 units