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1. Which of the following statement is false? a. Exceeds production quotas

a. Under both variable and absorption costing, b. Increase operating income
all variable manufacturing costs are c. Decrease inventory costs
inventoriable costs. d. Do all of the above
b. Determining the “right” level of capacity is 7. Which of the following statement is false?
one of the most strategic and difficult a. Absorption costing allocates fixed
decisions managers face. manufacturing overhead to actual units
c. Theoretical capacity is unattainable in the real produced during the period.
world. b. Nonmanufacturing costs are expensed in the
d. Under variable costing, managers can future under variable costing
c. Fixed manufacturing cost in ending inventory
increase operating income by simply
are expensed in the future under absorption
producing more inventory at the end of the
accounting period even if that inventory never
d. Operating income under absorption costing is
gets sold.
higher than operating income under variable
costing when production unit exceed sales
2. An unfavorable production-volume variance
occurs when:
a. Production exceeds the denominator level
8. Differences between absorption costing and
b. The denominator level exceeds production
variable costing are much smaller when
c. Production exceeds units sales
a. A large part of the manufacturing process is
d. Unit sales exceed production
subcontracted out
b. A just-in-time inventory strategy is
3. One possible means of determining the difference
between operating incomes for absorption costing
c. A significant portion of manufacturing costs
and variable costing is
are fixed
a. By subtracting sales of the previous period
d. Both (a) and (b) are done
from sales of this period
b. By subtracting fixed manufacturing overhead
9. All of the following are examples of drawbacks of
in beginning inventory from fixed
using absorption costing except.
manufacturing overhead in ending inventory
a. Management has the ability manipulate
c. By multiplying the number of units produced
operating income via production schedules
by the budgeted fixed manufacturing cost
rate b. Manipulation of operating income may
d. By adding fixed manufacturing costs to the ultimately increase the companys costs
production volume variance. incurred over the long run
c. Operating income solely reflects income from
4. When comparing the operating incomes between the sale of units and excludes the effects of
absorption costing and variable costing and manipulating production schedules.
beginning finished inventory exceeds ending d. Decreasing maintenance activities and
finished inventory, it may be assumed that increasing production result in increased
a. Sales increased during the period operating income
b. Variable cost per unit is less than fixed cost
per unit The following information pertains to question 10
through 13:
c. There is an unfavorable production volume
variance Kacey Corporation incurred fixed manufacturing costs
d. Variable costing operating income exceeds of P6,000 during 2006. Other information for 2006
absorption costing operating income includes:
The budgeted denominator level is 1,000 units
5. Companies have recently been able to reduce Units produced total 750 units
Units sold total 600 units
inventory levels because
Beginning inventory was zero
a. There is better sharing of information between
suppliers and manufacturers The company uses absorption costing and the fixed
b. Just-in-time production strategies are being manufacturing cost rate is based on the budgeted
implemented denominator level. Manufacturing variances are
c. Production quotas are being implemented closed to cost of goods sold.
d. Of both (a) and (b)
10. Fixed manufacturing costs expensed on the
income statement (excluding adjustments for
6. Critics of absorption costing suggest to evaluate variances) total
management on their ability to a. P3,600 c. P6,000

b. P4,800 d. Zero a. P8,200,000 c. P6,500,000

b. P2,000,000 d. 7,000,000
11. Fixed manufacturing cost included in ending
inventory total 18. The value assigned to Samar’s December 31,
a. P1,200 c. P900 2007 inventory using variable (direct) costing is
b. P1,500 d. Zero a. P2,800,000 c. P1,200,000
b. P2,000,000 d. P3,000,000
12. The production volume variance is
a. P2,000 c. 2,400 19. Samar’s 2007 income from operations using
b. P1,500 d. Zero variable (direct) costing is
a. P3,400,000 c. P2,600,000
13. Operating income using absorption costing will be b. 1,800,000 d. P1,000,000
_____________________ than operating if using
variable costing 20. During May, Roy Co. produced 10,000 units of
a. P2,400 higher c. P900 higher product X. Cost incurred by Roy during May were
b. P2,400 lower d. P3,600 lower as follows:

The following information pertains to the Brandon Direct Materials P10,000

Company Direct Labor 20,000
Variable manufacturing overhead 5,000
Selling price unit P123 Variable selling and general 3,000
Standard fixed manufacturing cost Fixed manufacturing overhead 9,000
P60 Fixed Selling and general 4,000
per unit
Variable selling and administrative Total P51,000
cost per unit
Standard Variable manufacturing Under absorption costing, Product X’s unit cost
P3 was
cost per unit
Fixed selling and administrative
a. P5.10 c. P3.80
cost b. P4.40 d. P3.50
Units produced 10,000 units
Units sold 9,600 units The following data apply to question 21 and 22:

14. What is variable costing breakeven in units? Gold Inc. planned and actually manufactured 200,000
a. 833 units c. 5,838 units units of its single product in 2006, its first year of
b. 5,556 units d. 6,000 units operations. Variable manufacturing costs were P30
per unit of product. Planned and actual fixed
15. What absorption costing breakeven in units manufacturing costs were P600,000 and selling
a. 917 units c. 5,838 units administrative costs totaled P400,000 in 2006. Gold
sold 120,000 units of production in 2006 at a selling
b. 1,000 units d. 6,000 units price of P40 per unit
16. If fixed decrease while variable cost per unit 21. Gold’s 2006 operating income using absorption
remains constant, the new variable contribution costing is
margin in relation to the old will be
a. P200,000 c. P600,000
a. Unchanged c. Lower
b. P440,000 d. P840,000
b. Higher d. Indeterminate
22. Gold’s 2006 operating income using direct costing
The following data apply to items 17 – through 20. is
Samar company began operations on January 3, 2007. a. P200,000 c. P800,000
Standard costs were established in early January b. P440,000 d. P600,000
assuming a normal production volume of 160,000
units. However, Samar produced only 140,000 units 23. The following information pertains to JC
of product and sold 100,000 units at a selling price of Corporations:
P180 per unit during 2007. Variable costs totaled
P7,000,000 of which 60 percent were manufacturing Beginning fixed manufacturing
and 40 percent were selling. Fixed costs totaled overhead inventory
P11,200,000 of which 50 percent were manufacturing Ending fixed manufacturing
and 50 percent were selling. Samar had no raw overhead in inventory
materials or work-in process inventories at December Beginning variable manufacturing
31, 2007. Actual input prices per unit of product and overhead inventory
input quantities per unit of product were equal to Ending variable manufacturing
standard overhead in inventory
Selling price per unit 123
17. Samar’s cost of good sold and standard cost for Standard fixed manufacturing costs
2007 using full absorption costing is per unit

Variable selling and administrative Katwear, Inc., is considering three countries for the
costs per unit sole manufacturing site of its new sweater –
Fixed selling and administrative Singapore, Thailand and Philippines. All sweaters are
costs to be sold to retail outlets in the Philippines at P32 per
Units produced 5,000 unit. These retail outlets add their own markup when
Units sold 4,800 selling to final customers. The three countries differ
in their fixed costs and variable costs per sweater.
What is the difference between absorption costing
operating income and variable costing operating Variable
income? Variable and
a. P750 c. P15,000 Annual Manufacturi Marketing
b. P7,500 d. P30,750 Country Fixed Cost ng costs per distribution
(In Millions) sweater costs per
24. A company has the following information for its
Singapore P6.5M P8.00 P11.00
first month of operations:
Thailand P4.5M P5.50 P11.50
Philippine P12.0M P13.00 P9.00
Raw materials used P25,000
Sales (P65 per unit) 78,000
Direct Labor 42,000
Variable factory overhead 17,000 27. If Katwear, Inc., sells 800,000 sweaters in 2006,
Fixed factory overhead Unknow what is the budgeted operating income (loss) for
n Singapore?
Variable selling & administrative 3,00 a. P3,000,000 c. P7,500,000
expenses 0 b. 3,400,000 d. P11,900,000
Fixed selling & Administrative Expenses 5,00
0 28. If Katwear, Inc., sells 800,000 sweaters in 2006,
Gross profit 30,000
what is the budgeted operating income (loss) for
Contribution Margin Unknow
Inventories: a. P16,700,000 c. P7,500,000
Raw Materials 7,000 b. P12,000,000 d. P11,900,000
WIP None
Finished Goods 1,200 units 29. If Katwear, Inc., sells 800,000 sweaters in 2006,
The total contribution margin under variable costing what is the budgeted operating income (loss) for
would be: Philippines?
a. P21,000 c. P33,000 a. P(4,000,000) c. P8,000,000
b. P7,000 d. P36,000 b. P3,200,000 d. P6,400,000

CVP ANALYSIS The following information pertain to question 30

through 33:
25. To gain the benefits if business planning,
______________ must understand and support the Rin and company, a manufacturer of quality
budget. handmade bowls, has experienced growth in sales for
a. Management at all levels the past five years, however, the increased
b. Customers competition has led Mr. Rin, the president, to believe
c. Suppliers that an aggressive marketing campaign will be
d. All of the above necessary next to maintain the company’s present
26. Phoenix Products sells camping equipment. One
of the company’s products, a camp lantern, sells To prepare for next year’s marketing campaign, the
for P90 per unit. Variable expenses are P63 per company’s controller has prepared and presented Mr.
lantern, and fixed expenses associated with the Rin with the following data for the current year, 2006:
lantern total P135,000 per month.
Variable Cost per bowl
At present, the company is selling 8,000 lanterns Direct Materials P3.25
per month. The sales manager is convicted that a Direct Manufacturing labor 8.00
10% reduction in the selling price will result in a Variable overhead (manufacturing,
25% increase in the number of lanterns sold each marketing, distribution and 2.50
month. How many lanterns would have to be sold customer services)
at the new selling price to yield a minimum net Total Variable costs P13.75
operating income of P72,000 per month? Fixed Costs
a. 11,500 lanterns c. 7,500 lanterns Manufacturing P25,000
Marketing, distribution & Customer
b. 13,800 lanterns d. 15,000 lanterns P110,000
Total Fixed Costs P135,000
The following information pertains to question 27
through 29
Selling Price P25.00

Expected sales, 20,000 units P500,000 37. The degree of operating leverage at sales of 100
Income Tax rate 40% units for option 2 is
a. 2 c. 1.0
Mr. Rin has set the revenue target for 2007 at a level b. 1.5 d. 2.5
of P550,000 or (22,000 bowls). He believes as
additional marketing cost of P11,250 for advertising in
The following data apply to items 38 through 41
2007, with all other costs remaining constant, will be
necessary to attain the revenue target.
King company is retailer for video disks. The
projected after –tax net income for the current year is
30. What is the net income for 2007 if the additional P120,000 based on a sales volume of 200,000 video
P11,250 is spent and the revenue target is met? disks. King has been selling the disks at P16 each.
a. P67,600 c. P60,750 The variable costs consist of the P10 unit purchase
price of the disks and a handling cost of P2 per disk.
b. P268,750 d. 101,250 King’s annual fixed costs are P600,000 and king is
subject to a 40% income tax rate.
31. What is the break-even pint in revenue if the
Management is planning for the coming year when it
additional P11,250 target is spent for advertising
expects that the unit purchase price of the video disks
a. P13,000 c. P80,555 will increase 30 percent.
b. P325,000 d. 269,444
38. King company’s break-even point for the current
32. If the additional P11,250is sent for advertising in year in number of video disks is
2007, what is the required 2007 revenues for a. 100,000 units c. 50,000 units
2007’s net income to equal 2006’s net income?
b. 150,000 units d. 60,000 units
a. P969,450 c. P658,325
b. P525,000 d. 575,000 39. An increase of 10 percent in projected unit sales
volume for the current year would result in an
33. At a sales level of 22,000 units, what maximum increased after tax income for the current year of
amount can be spent on advertising if a 2007 net a. P80,000 c. P48,000
income of P60,000 is desired? b. P32,000 d. P12,000
a. P12,500 c. P10,000
b. P11,000 d. P11,250 40. The volume of sales in pesos that King Company
must achieve in the coming year to maintain the
The following information pertain to questions 34 same after-tax net income as projected for the
through 37: current year if unit selling price remains at P16 is
a. P12,800,000 c. P11,520,000
Rainbow rugs is holding a 2-week carpet sale at b. P14,400,000 d. P32,000,000
Juggle’s club, a local warehouse store. Rainbow rugs
plans to sell carpets for P500 each. The company will 41. In order to cover a 30 percent increase in the
purchase the carpets from a local distributor for disks purchase price for the coming year and still
Pp350 each with the privilege of returning any unsold maintain the current contribution margin ratio,
units for a full refund. Juggle’s club has offered King Company must establish a selling price per
Rainbow Rugs two payment alternatives for the use of disk for the coming year of
a. P19.60 c. P20.80
Option 1 – a fixed payment of P5,000 for the sale b. P19.00 d. P20.00
Option 2 – 10% of total revenues earned during the The following information pertains to question 42
sale period through 45:

Assume Rainbow Rugs will incur no other costs Western Travel Agency specializes in flights between
34. The break-even point in units for option 1 is Manila and London. It books passengers on
a. 43 carpets c. 34 Carpets Northwestern Airlines at P90,000 per round-trip ticket.
Until last month, Northwestern paid western a
b. 45 carpets d. 37 carpets commission of 10% of the ticket price paid by each
passenger. At this commission was Western’s only
35. The break-even point in units for option 2 is source of revenues. Western’s fixed costs are
a. 20 c. 15 P1,400,000 per month (for salaries, rent and so on)
b. 30 d. 0 and its variable costs are P2,000 per ticket purchased
for a passenger. This P2,000 includes a P1,500 per
36. The degree of operating leverage at sales of 100 ticket delivery to Federal Express. (To keep the
units for option 1 is analysis simple, we assume each round trip ticket
purchased is delivered in a separate package. Thus,
a. 2 c. 1.0
the P1,500 delivery fee applies to each ticket.)
b. 1.5 d. 2.5
Northwestern airlines has just announced a revised
payment schedule for travel agents. It will now pay

travel agents a 10% commission per ticket up to a 46. What is Ally Corporation’s break-even revenues
maximum of P5,000. Anyt ticket costing more than for 2006?
P50,000 generates only a P5,000 commission a. P5,000,000 c. P3,500,000
regardless of the ticket price.
b. P4,900,000 d. 5,400,000
42. Under the old 10% commission structure, how
many round-trip tickets must western sell each 47. What is Ally Corporation’s breakeven revenues if
month to break even? variable costs are 52% of revenues?
a. 200 tickets c. 300 tickets a. P4,500,000 c. P5,000,000
b. 150 tickets d. 175 tickets b. P4,900,000 d. P5,400,000

43. Under the old 10% commission structure, how 48. What is Ally Corporation’s operating income for
many round-trip tickets must western sell each 2006 if variable costs had been 52% of revenues?
month to earn an operating income P700,000? a. P240,000 c. P180,000
a. 150 tickets c. 450 tickets b. P200,000 d. P260,000
b. 467 tickets d. 450 tickets
49. Distribution costs are
a. Manufacturing costs incurred to produced
44. Under the new system where Western would units of output
receive only P5,000 on the P90,000 ticket, how
b. All costs associated with manufacturing other
many round trip tickets must western sell each
than direct labor costs and raw material costs.
month to break-even?
c. Cost associated with marketing, shipping,
a. 365 tickets c. 328 tickets warehousing, and billing activities
b. 467 tickets d. 450 tickets d. The sum of direct labor costs and all factory
overhead costs
45. Under the new system where Western would
received only P5,000 on the P9,000 ticket, how Use the following information to answer questions 50
many round trip tickets must Western sell each and 51:
month to earn an operating income of P70,000?
a. 350 tickets c. 700 tickets Month Meals served Utilities costs
b. 525 tickets d. 650 tickets December 55 P401.00
January 30 P360.00
February 25 P347.50
The following information pertains to question 46
March 40 P385.50
through 48.
April 60 P414.00
Ally Corporation produces a model plastic casing,
50. Using the method of least squares, the variable
ET501, for desktop computers. Summary data from
rate for utilities costs per meal served is
its 2006 income statement are as follows:
Revenues P5,000,000 a. P2.00 c. P3.00
Variable Costs 3,000,000 b. P1.90 d. P1.80
Fixed Costs 2,160,000
Operating Income P(160,000) 51. Using the method of least squares, the fixed cost
Jane Woo, Ally’s president, is very concerned about a. P306 c. P303
Ally Corporation’s poor profitability. She asks Mack b. P300 d. P331
Lee, production manager, and Leland Bing, Controller,
to see if there are ways to reduce costs.
52. In describing the equation y=a+bx, which of the
following statements is correct?
After two weeks, Mack returns with a proposal to
a. “x” is the dependent variable
reduce variable costs to 52% of revenues by reducing
b. “a” is the fixed component
the costs Ally currently incurs for safe disposal of
c. In the high-low method, “b” equals change in
wasted plastic. Leland is concerned that this would
activity divided by change in cost
expose the company to potential environment
d. As “x” increases “y” decreases
liabilities. He tells Mack, “we would need to estimate
some of these potential environment costs andinclude
53. Which of the following statements is true when
them in our analysis.” “You can’t do that,” Mack
referring to fixed costs?
replies. “We are not violating any laws. There is
a. Committed fixed costs arise from the annual
some possibility that we have incur environmental
decisions by management
costs in the future, but if we bring it up now, this
b. As volume increases, unit fixed cost and total
proposal will not go through because our senior
fixed cost will change
management always assumes these costs to be larger
c. Fixed costs increase in total throughout the
than they turn out to be. The market is very tough,
relevant range
and we are in danger of shutting down the company.
d. Discretionary fixed costs can often be reduced
We don’t want all our colleagues to lose their jobs.
to zero for short periods of time without
The only reason our competitors are making money is
seriously impairing the long-run goals of the
because they are doing exactly what I am proposing.”

and as result expects a decrease in sales volume of

54. An analysis of clerical costs in the billing 10%. All other operating are expected to remain
department of Craig Company indicates that total constant. Assume that COGS is a variable and that
unit (variable and fixed) processing costs will be operating expenses are fixed cost
P0.50 per account processed at an activity level of
32,000 accounts. When only 22,000 accounts are 4. What is budgeted sales for 2007?
processed, the total cost of processing is P12,500. a. P582,400 c. P504,000
Given these data, at a budgeted level of 25,000 b. P524,000 d. P560,000
a. Processing costs will be P10,400
5. What is budgeted cost of goods sold for 2007?
b. Fixed processing costs be 10,400
c. The variable processing costs will equal 0.35 a. P189,000 c. 218,400
per account processed b. P196,560 d. 210,000
d. Processing costs will total P14,975
6. Should Rainee increase the selling price in 2007?
SHORT – TERM BUDGETING a. Yes, because sales revenue is increased for
The following data apply to items 55 through 57 2007
b. Yes, because operating income is increased
The following information pertains to Cookie for 2007
Company: c. No because sales volume decreases for 2007
d. No, because gross margin decreases for 2007
Month Sales Purchases
January P30,000 P16,000 7. The black company manufactures and sells a
February P40,000 P20,000 specialty perfume. The company budgets a
March P50,000 P28,000 margin of safety of 20 percent for 2006. Fixed
costs are budgeted at P270,000 annually.
• Cash is collected from customers in the following Variable costs are P6.60 per ounce. If the sales
manner: price per ounce is P12, the budgeted level of sales
Month of Sale 30% revenue ofr 2006 is
Month following the sale 70%
• 40% of purchases are paid for in cash in the
a. P589,330 c. P480,000
month of purchase, and the balance are paid in b. P720,000 d. P750,000
the month incurred
• The cash balance on March 1 is P4,000. A 8. Which one of the following will not affect the
minimum cash balance of P3,000 is required at budgeting of order-getting costs?
the end of the month. Money can be borrowed in a. Market research and tests
multiples of P1,000. b. Location of distribution warehouse
c. Policies and actions of competitors
1. How much cash will be paid to suppliers in March? d. Sales promotion policies
a. P23,300 c. P44,000
b. P28,000 d. None of the
9. A budget system referred to as the program
planning and budgeting system, (PPBS)”
a. Drops the current month or quarter and adds
a future month a future quarter as the current
2. How much cash will be disbursed in total in
month or quarter is computed
b. Consolidates the plans of the separate
a. P21,000 c. P44,200 requests into one overall plan
b. P25,000 d. P48,200 c. Divides the activities of individual
responsibility centers into a series of
3. What is the ending cash balance for March? packages which are ranked ordinally
a. P(25,000) c. P3,200 d. Classifies budget request by activity and
b. P3,000 d. P3,800 estimates the benefits arising from each
The following information applies to questions 58
through 60 The following data apply to items 64 to 65

Rainee enterprises reports the year-end information Berol company plans to sell 200,000 units of finished
from 2006 as follows: products in July of 2006 and anticipates a growth rate
in sales of five percent per month. The desired
Sales (70,000 units) P560,000 monthly ending inventory in units of finished products
Cost of Goods sold 210,000 is 80% of the next month’s estimated sales. There
Gross Margin 350,000 are 150,000 finished units in the inventory on June 30,
Operating expenses 200,000 2006.
Operating Income P150,000
Each unit of finished product requires four pounds of
Rainee is developing the 2007 budget. In 2007 the direct material at a cost of P1.20 per pound. There
company would like to increase selling prices by 4% are 800,000 pounds of direct materials in the
inventory on June 30, 2006.

10. Berol’s production requirement in units of finished Esplanade Company has the following historical
product for the three-month period ending pattern on tis credit sales.
September 30, 2006, is
a. 712,025 units c. 664,000 units 60% collected in month of sale
b. 630,000 units d. 665,720 units 30% collected in the first month after sale
7% collected in the second month after
11. Without prejudice to your answer for item 29,
2.5% collected in the third month after sale
assume Berol plans to produce 600,000 units of
0.5% uncollectible
finished product in the three-month period ending
September 30, 2006, and have direct materials
The sales on open account have been budgeted for
inventory on hand at the end of the three month
the last six (6) months of 2006 as shown below
period equal to 25% of the use in that period. The
estimated cost of the direct materials purchases
July P60,000
for the three month period ending September 30,
August P70,000
2006, is
September P80,000
a. P2,200,000 c. P2,640,000 October P90,000
b. P2,400,000 d. P2,880,000 November P100,000
December P85,000
12. The two most appropriate factors for budgeting
manufacturing overhead expenses would be 16. The estimated total cash collections during
a. Management judgment and sales pesos October 2006 from accounts receivable would be
b. Sales volume and production volume a. P63,000 c. P89,100
c. Machine hours and production volume
d. Management judgment and production
b. P84,400 d. P21,400
17. The estimated total cash collections during the
fourth calendar quarter from sales made on open
13. Of the following items, the one item that would
account during the fourth calendar quarter would
not be considered in evaluating the adequacy of
the budgeted annual operating income for a
company is a. P172,500 c. P228,300
a. Return on investment b. 275,000 d. P251,400
b. Long-range profit objectives
c. Industry average for earnings on sales 18. If the volume of output of a factory for the month
d. Internal rate of return of June is 50,000 units although the budgeted
output was 40,000 units:
14. Which one of the following sequences for a. Comparison of budgeted results and actual
performance reports can be best be used in the results will be misleading unless the company
management control process as a uses a flexible budget
communications tool? b. Actual fixed costs per unit may be expected to
a. Plan approval, feedforward, feedback, exceed budgeted levels
corrective action c. Actual cost per unit will be higher than
b. Plan approval, feedforward, corrective action, standard costs per unit
d. Approximately 25% above budgeted levels.
c. Feedforward, plan approval, feedback 19. A flexible budget is one that:
corrective action a. Is revised monthly in the light of changing
d. Feedforward, plan approval, corrective action, business conditions
feedback b. Is a compromise plan reflecting diverse views
of various supervisors
15. Simson company’s master budget shows straight c. Contains estimated cost data for several
line depreciation on factory equipment of different levels of activity
P258,000 the master budget was prepared at an d. Separates factory overhead between the
annual production volume of 103,200 units of variable and fixed portions.
products. This production volume is expected to
occur uniformly throughout the year. During 20. The Mahar Company uses a “Just In Time” (JIT)
September, Simson produced 8,170 units for inventory system in maintaining its direct
product, and the accounts reflected actual materials inventory of tebs. Under its JIT system,
depreciation on factory machinery of P20,500. the company keeps a zero inventory level of tebs.
Simson controls manufacturing costs with a Five tebs are needed to complete one unit of
flexible budget. The flexible budget amount for finished product. The budgeted production of
depreciation on factory machinery for September finished product is 2,450 units for the month of
would be February. Give these data, the budgeted
a. P19,475 c. P20,500 purchases of TEBS in February is
b. P20,425 d. P21,500 a. 490 c. 12,250
b. 2,450 d. 15,175
Following data apply to items 70 and 71.

a. P2,400 U. c. P2,520 U.
21. Which of the following is not true about a self- b. P2,400 d. P2,520F
imposed budget?
a. It contains its own unique system of control in 82. If the standard hours allowed are less than the
that if people can’t meet budget standard hours at normal capacity, the volume
specifications, they have only themselves to variance
blame a. Cannot be calculated
b. An individual is more apt to work at fulfilling a b. Will be favorable
budget he has set himself c. Will be unfavorable
c. The person in direct contract with an activity d. Will be greater than the controllable variance
is in the best position to make budget
estimates. Timothy Company has the following information
d. The views of persons below middle available for October when 3,500 units were produced
management on budget matters are not (round answers to the nearest pesos).
considered by top management
22. Which of the following factors is not considered in Material 3.5 pounds per unit @ P4.50
making a sales forecast? per pound
a. Market Share Labor 5.0 hours per unit @ P10.25 per hour
b. General economic conditions Actual:
c. Advertising and product promotion Material purchased 12,300 pounds @ P4.25
d. Availability of clerical staff for credit and Materials used 11,750 pounds
collections 17,300 direct hours @ P10.20 per hour
83. Refer to Timothy Company, what is the labor rate
a. P875 F c. P865 U
23. A managerial accountant b. 865 F d. 875 U
1. does not participate in the standard setting
84. Refer to Timothy Company, what is the labor rate
2. provides knowledge of cost behaviours in the efficiency variance
standard setting process
3. provides input of historical costs to the a. P2,050 F c. P2,040 U
standard setting process b. P2,050 U d. P2,040 F
a. 1 c. 3
85. Refer to Timothy Company, what is the material
b. 2 d. 2 and 3
price variance (based on quantity purchased)?
78. The cost of freight in a. P3,075 U c. P2,938 F
a. Is to be included in the standard cost of direct b. P2,938 U d. 3,075 F
b. Is considered a selling expense 86. Refer to Timothy Company, What is the material
c. Should have a separate standard apart from quantity variance?
direct materials a. P2,250 F c. P225 F
d. Should not be included in a standard cost b. P2,938 U d. P2,475 U
87. Refer to Timothy Company, Assume that the
Use the following information for questions 79-81 company computes the materials price variance
on the basis of material issued to production.
Bridgeware Company has a materials price standard What is the total material variance?
of P6.00 per pound. Company has a materials price
standard of P6.00 per pound. Two thousand pounds
a. P2,850 U c. P5,188 F
of materials were purchased at P6.60 a pound. The b. P5,188 U d. P2,850 F
actual quantity of materials used was 2,000 pounds,
although the standard quantity allowed for the output Spots Inc. uses a standard cost system for its
was 1,800 pounds. production process. Spots applies overhead based on
direct labor hours. The following information is
available for July.
79. Bridgeware Company’s materials price variance is
a. P120 U c. P1,080 U Standard:
b. P1,200 F. d. 1,320 U Direct labor hours per unit
80. Bridgeware Company’s materials quantity Variable overhead per hou r
variance is P2.50
a. P1,200 U c. 1,320 F. Fixed overhead per hour (based on 11,990 DLHS)
b. P1,200 F d. P1,320 U.
81. Bridgeware company’s total materials variance is Units produced 4,400

Direct Labor hours 8,800 b. A cost Center d. A profit center

Variable overhead P29,950
Fixed Overhead P42,300 99. A regional Manager of a restaurant chain in
charge in finding additional locations expansions
88. Refer to spots, Inc . using the four-variance is most likely responsible for:
approach, what is the variable overhead spending a. A revenue Center
variance? b. An investment center
a. P7,950 U c. P7,975 U c. A cost Center
b. P25 F d. P10,590 U d. A profit Center

89. Refer to Spots Inc. using the four -variance 100.A manager of a revenue center is responsible for
approach, what is the variable overhead efficiency all of the following except
variance? a. Service Quality and units sold
a. P15,900 U c. P2,200 F b. The acquisition costs of the product or service
b. P9,570 U d. P2,200 U c. Price, product mix, and promotional activities
d. Sales and marketing costs
90. Refer to Spots, Inc., using the four variance
approach, what is the fixed overhead spending 101.A manager of a profit center is responsible for all
variance of the following except
a. P15,900 U c. P6,930 U a. Sales revenue
b. P6,330 U d. P935 F b. The cost of merchandise purchase for resale
c. Expanding into new geographic areas
91. Refer to Spots, Inc., using the four-variance d. Selling and marketing costs
approach, what is the volume variance?
a. P6,6930 U c. P0 102.A controlled cost is any cost that can be
__________ by a responsibility center manager
b. P13,260 U d. P14,280 U
a. Controlled c. Segregated
92. Refer to Spots, Inc., using the three-variance b. Influenced d. Exluded
approach, what is the spending variance?
a. P23,850 U c. P14,280F 103.Responsibility Accounting
a. Emphasizes controllability
b. P23,850 F d. P14,280 U
b. Focuses on whom should be asked about the
93. Refer to Spots, Inc., using three-variance
approach, what is the efficiency variance?
c. Attemps to assign blame for problems to a
a. P11,770F c. P7,975 U
specific manager
b. P2,200 F d. P5,775 U d. Does all of the above

94. Refer to Spots, Inc., using the three-variance 104.Last year a company had stockholder’s equity of
approach, what is the volume variance?
P160,000, net operating income of P16,000 and
a. P13,260 c. P6,930 U sales of P100,000. The turnover last year was 0.5.
b. P2,640 F d. P0 The return on investment (ROI) last year was
a. 10% c. 8%
95. Refer to Spots, Inc. using the two-variance b. 9% d. 7%
approach, what is the controllable variance?
105.Last year a company had sales of P400,00, a
a. P21,650 U c. P5,775 U turnover of 2.4 and a return on investment of
b. P16,480 U d. P12,080 U 36%. The companys operating income for the
year was
96. Refer to Spots, Inc., using two-variance approach a. P144,000 c. P80,000
what is the non-controllable variance? b. P120,000 d. P60,000
a. P26,040 F c. P6,930 U
b. P0 d. P13,260 U The following information is for questions 106 and 107

97. Refer to Spots, Inc., using one-variance approach, The Hola Division of the Ho Company reported the
what is the total variance? following data for the last year
a. P19,010 U c. P12,705 U
b. P6,305 U d. P4,730 U Sales P800,000
Operating Expenses P650,000
Taxes Expense P30,000
98. A maintenance manager is most likely responsible Shareholder’s equity P200,000
for Average Operating Assets P600,000
Minimum required rate of return 12%
a. A revenue Center c. An
Investment Center

106.The residual income for the Hola Division last

year was
a. P126,000 c. P78,000
b. P46,000 d. P22,000

107.The return on investment last year for the Hola

Division was
a. 75% c. 35%
b. 25% d. 12%