NAME: __________________________________________________ DATE: _________________

WRITE YOUR FINAL ANSWERS IN CAPITAL LETTERS ONLY. NO ERASURES.

The cost of goods sold section of Dale Corporation’s operating budget for 2020 is presented below:

Materials:
Inventory, Jan 1 (16,000 units) P 960,000
Purchases 9,120,000
Available for use 10,080,000
Inventory, Dec 31 (18,500 units) 1,184,000 8,896,000
Labor 784,000
Factory Overhead:
Variable 2,009,600
Fixed 1,120,000 3,129,600
Cost of goods manufactured 12,809,600
(140,000 units)
Add finished goods inventory, 744,000
Jan 1 (9,300 units)
Cost of goods available for sale 13,553,600
Less Finished goods inventory, 301,600
Dec 31 (3,300 units)
Budgeted Cost of goods sold P 13,255,000

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The actual results for the first quarter of 2020 require the following changes in the budget assumptions:
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 The budgeted production for the year is expected to increase by 5,000 units. During the first
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quarter, the company has already produces 25,000 units. The balance of production will be
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scheduled in equal segments over the last 3 quarters of the budget year.
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 The expected finished goods inventory on Jan 1 dropped to only 9,000 units but its total value
will not revised anymore. The ending inventory value is computed using average manufacturing
cost for the year.
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 A new Labor bill passed by Congress is expected to be signed into a low by the president. The
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new law will take effect beginning the last quarter of the budget year, including a provision for
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an increase of 8% in wage rates.

 The company uses FIFO method in valuing its materials inventory. During the first quarter, the
company purchased 27,500 units of direct materials for P 1,760,000. The remaining direct
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materials requirement will be purchased evenly for the last 9 months of the budget year.
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Effective July 1, 2020 the beginning of the third quarter, direct materials cost is expected to
increase by 5%. The assumptions regarding the quantity of materials inventories at the beginning
and end of the year will remain unchanged
 The variable FOH of P 2,009,600 includes indirect materials and factory supplies amounting to
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889,600. It is computed at 10% of the cost of materials used. The balance of VFOH varies directly
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with production.
 There will be no change in budgeted FFOH.

Considering the given actual data for the first quarter, as well as, the changes in assumptions and
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estimates in budgeted data for the year, the company’s accountant prepared a revised budgeted cost of
goods sold statement. This revised statement should show:

1. Budgeted materials purchase of

a. 9,696,000
b. 9,120,000
c. 9,280,000
d. 9,440,000

2. Budgeted cost of materials inventory at December 31, 2020 of

a. 1,024,000
b. 1,243,200
c. 1,184,000
d. 1,216,100

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 3. Budgeted direct labor cost of
a. 846,720
b. 784,000
c. 876,960
d. 829,920

4. Budgeted cost of goods manufactured of

a. 12,809,600
b. 13,464,000
c. 14,208,000
d. 12,344,000

5. Budgeted cost of goods sold of

a. 13,901,578
b. 13,252,000
c. 13,553,600
d. 14,208,000

6. The budget element(s) included in the financial budget process are the following, except the
a. Budgeted balance sheet
b. Capital budget

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c. Cash budget and budgeted statement of cash flows
d. Budget variance
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7. The starting point in preparing a comprehensive budget is
a. The cash budget o.
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b. The budgeted income statement

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c. The sales forecast

d. The production budget
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8. When developing a budget, an external factor to consider in planning process is

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a. The activities of competitors

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b. Development of new product

c. Implementation of employees’ retirement plan
d. Change in management
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9. In the budgeting process, the budget based not in the existing system, but in changes or
improvements that are to be made. It assumes the continuous improvement of products and
processes.
a. Zenkai Budgeting
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b. Kaizen Budgeting
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c. Keizan Budgeting
d. Zankei Budgeting

10. Which of the following cannot be used to improve estimates of sales volume for a master
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budget?
a. Management analysis and opinions
b. Statistical analysis including regression analysis and economic studies
c. Estimation from previous sales volume and market history
d. None of the above

11. The difference between the actual time used and the amount of time should have been used for
production, multiplied by the standard labor rate per time is called
a. Efficiency variance
b. Price variance
c. Spending variance
d. Rate variance

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 12. For the recent month, the accountant’s standard cist variance analysis report showed a
significant amount of unfavourable materials efficiency (quantity and usage) variance that
warrants an investigation. The investigation of this variance should begin with the
a. Personnel manager
b. Purchasing manager only
c. Production manager only
d. Production manager or purchasing manager

13. In a standard costing system, actual costs are compared with standard costs. The difference or
variance is determined and responsibility for such variance is assigned or identified to a
particular person or department in order to
a. Determine who is at fault and render the appropriate punishment
b. Be able to set the correct selling price of the product
c. Use the knowledge about the variances to promote learning and continuous
improvement in the manufacturing operations
d. Trace the variances to the proper inventory accounts so that they may be valued at
actual costs

14. Which if the following does not describe practical standards?

a. Currently attainable standards
b. Can be used for product costing and cash budgeting

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c. Performance that is reasonably expected to be achieved with an allowance for normal

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spoilage, waste and downtime

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d. Negate the need to adjust standards if working conditions change
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15. Which of the following statements is correct?
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a. A standard cost system can never be used in both the job order and process costing
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systems
b. A standard cost system can be used in both the job order and but not in process costing
systems
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c. A standard cost system can never be used either the job order or process costing
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systems
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d. A standard cost system can never be used in process costing systems but not in job order
costing system.
ed d
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Alago and Company, CPAs prepare income tax returns (ITR) for individual taxpayers. The company uses
the weighted-average method and actual costs for financial reporting purposes. However, the internal
reporting, Alago uses the FIFO method and a standard cost system. The standards, based on equivalent
performance, have been established as follows:
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Standard time Rate per hour Cost per ITR

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per ITR
Labor cost 5 hours P 100 P 500
Overhead 5 hours 50 250
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For March 2020, budgeted overhead is P 245,000.

Additional information for March performance:

In-process data:
ITRs in process, March 1 (25% complete) 100
ITRs started in March 800
ITRs in process, March 31 (80% complete) 200

Actual costs:
ITRs in process, March 1: Labor P 30,000
Overhead 12,500
Labor, month of March 4,000 hours 344,960
Overhead, month of March 224,860

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 16. The equivalent units of performance for labor and overhead using the weighted-average method
is
a. 860
b. 835
c. 740
d. 700

17. The actual costs per equivalent unit are

Labor Overhead
a. P 401 P 262
b. 436 276
c. 417 264
d. 538 339

18. The actual cost of ITRs in process at March 31 is

a. 42,500
b. 53,400
c. 113,920
d. 142,400

19. How much the standard cost per ITR?

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a. 150
b. 750
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c. 712
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d. 765
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20. The equivalent units for current production under FIFO method is
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a. 885
b. 600
c. 860
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d. 835
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21. What was the labor rate variance in March?

a. 72,540 F
b. 85,040 F
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c. 17,500 F
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d. 55,040 F

22. How much was the labor time variance in March?

a. 72,540 F
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b. 85,040 F
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c. 17,500 F
d. 55,040 F

23. What was the total FOH cost variance?

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a. 36,250 UF
b. 16,110 UF
c. 20,140 F
d. 7,640 F

24. What was the total overhead budget variance?

a. 36,250 UF
b. 16,110 UF
c. 20,140 F
d. 7,640 F

25. What was the company’s volume variance in units?

a. 180 under
b. 80 under

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 c. 280 under
d. 145 under

26. The basic purpose of responsibility accounting is

a. Motivation
b. Variance analysis
c. Authority
d. Budgeting

27. The format for internal reports in responsibility accounting system prescribed by
a. Management
b. The PICPA
c. GAAP
d. The BOA

28. In responsibility accounting system, managerial performance should be evaluated on the basis of
those factors controllable and capable of being significantly influenced by the manager. In a
manufacturing firm, which of the following items is least likely to appear in a performance report
from a manager of one of the firm’s production departments?
a. Materials
b. Labor

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c. Depreciation of administrative building

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d. Repairs and Maintenance

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29. The performance of an investment center should be evaluated based in
a. Amount of investment o.
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b. Return on investment
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c. Residual value of investment

d. Average investment
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30. A service center is a segment of an organization which has the

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a. Responsibility of rendering services to outside customers

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b. Authority to provide specialized support or service to other units within the organization
c. Responsibility to incur manufacturing costs to produce the company’s products.
d. Authority to make decision concerning revenues and costs
ed d

The ladies’ belt division of Leather Goods Corp. is classified as an investment center for the month of
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November, it had the following operating statistics:

Sales 675,000
Cost of goods sold 400,000
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Operating expenses 237,500

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Total Assets 750,000

Weighted-average cost of 4%
capital
Leather Goods Corp.’s average stockholders’ equity is P 300,000. It is subject to an income tax rate of
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40%.

31. What is the Ladies’ belt division’s return on investment

a. 4%
b. 5%
c. 7.5%
d. 3%

32. Ladies’ belt division’s residual income amounts to

a. 30,000
b. 7,500
c. 25,000
d. (7,500)

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 33. The following year-end data pertain to Adan corporation:

Earnings before interest and 800,000

taxes
Current Assets 800,000
Non-current assets 3,200,000
Current Liabilities 400,000
Non-current liabilities 1,000,000
Adan Corporation pays an income tax rate of 30%. Its weighted-average cost of capital is 10%.
What is Adan Corporation’s EVA?

a. 200,000
b. 160,000
c. 440,000
d. 400,000

Division one of Lorivi Company is currently operating at 70% of capacity. It produces a single product and
sells all its production to outside customers for P 70 per unit. VC is P 30 per unit and FC is P20 per unit at
the current production level.

Division two which currently buys the same product from an outside supplier for P 65 per unit, would
like to buy the product from Division one.

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Division one will use one-half of its idle capacity if it decides to provide the requirements of division two.

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34. What is the minimum price that division one should charge division two for this product?
a. 70
b. 30 o.
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c. 50
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d. 65

35. What is the maximum price that division two will be willing to pay for the product if it will
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purchased internally?
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a. 70
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b. 30
c. 50
d. 65
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36. Exogenous variables or input variables are

a. The means of measuring the results of a decision after the fact
b. Important to the decision-making process but are outside the control of decision maker
c. Are under the decision maker’s control
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d. Are limitations that must be considered as part of the decision process

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37. It is a mathematical method for making decisions about the likelihood of future events, such as
sales and profits, in the face of uncertainty
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a. Learning curves
b. Probability distribution theory
c. Queuing theory
d. Gantt charting

38. Probability analysis or risk analysis is

a. Incompatible with sensitivity analysis
b. An extension of sensitivity analysis
c. Used only for situations involving three or fewer possible outcomes
d. Used only when the sum of probabilities is greater than one

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 39. Which of the following is correct?
a. A project feasibility study looks into the viability of proposed undertakings, but does not
concern itself with tax implications.
b. The calculations of reasonable probabilities about the future, based on the analysis of all
the latest relevant information by tested and logically sound statistical and econometric
techniques and applied in terms of an executive’s personal judgement and knowledge of
his business is known as project feasibility study.
c. Depreciation is a systematic and rational allocation of cost of asset spread over a period
of time. To the financial manager, it is not a source of fund; to the accountant, however,
it is considered a source of fund in the sense that it does not require cash outlay and, as
such, retains the portion of funds generated through revenue inside the firm.
d. A project feasibility study assists in minimizing the risk of failure of business ventures.
Thus, wastage of valuable resources is reduced, thereby accelerating economic growth.

40. Which of the following is not considered a limitation in preparing project feasibility studies?
a. Unavailability of the required and necessary information
b. Incompetence or inexperience of the one making judgement resulting in erroneous
conclusions and ineffective recommendations
c. BOTH A & B
d. None of the above

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41. In Business Process Reengineering (BPR), the main objectives are to simplify and to probably
eliminate
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a. Value-added activities
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b. Non-value added activities
c. Constraint o.
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d. Non-constraint
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42. A conventional manufacturer is more likely than a just-in-time manufacturer to

a. Have a short production cycle
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b. Produce goods un small batches

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c. Hold large inventories to serve as buffers

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d. Receive more frequent deliveries of materials

43. Zero-based budgeting (ZBB) is budgeting process

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a. In which the budget is largely based on expenditures of the previous year.

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b. That presents planned activities for a period of time, but does not present a firm
commitment
c. Where the budget variance is always equal to zero
d. That divides the activities of individual responsibility centers into a series of packages
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that are prioritized after being evaluated from a cost-benefit perspective

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44. When developing a budget, an external factor to consider in the planning process is
a. The activities of competitors
b. Development of new product
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c. The implementation of employee’s retirement plan

d. A change in management

45. Following are parts of operating budget, except

a. Sales budget
b. Materials cost budget
c. Capital budget
d. Production budget

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 The following information was gathered by the Budget Committee Chairman of Gigette Corporation:

Gigette Corporation produces and sells only one product. The selling price during the budget period is
expected to be the prevailing price of P7.50 per unit. The company expects to sell 112,500 units of the
product during the period. The desired finished goods inventory at the end of the period is 75,000 units,
while the expected beginning inventory is 62,500 units.

Direct labor is P 4.50 per hour. Each product required 30 minutes to complete.

Factory overhead is applied to production on the basis of direct labor hours. Variable factory overhead
cost at the planned level of operations is budgeted at P49,800; fixed budgeted overhead is budgeted at
P149,400.

Each unit of product requires 1.5kgs of raw materials. Only one kind of raw material is used and it is
expected to cost P 0.30 per kilo. The desired ending inventory or raw materials is 12,000 kgs; the
expected beginning inventory is 9,500 kgs.

Variable selling and administrative costs will amount to P 1.50 per unit of product sold.

46. Budgeted production is

a. 112,500
b. 125,000
c. 100,000
d. 187,500

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47. Budgeted materials purchases for the period is

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a. 56,250
b. 190,000
o.
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c. 57,000
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d. 55,500

48. Budgeted direct labor cost is

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a. 1,125,000
b. 16,875,000
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c. 562,500
d. 281,250

49. Budgeted cost of goods sold on an absorption costing basis is

ed d

a. 483,030
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b. 536,700
c. 524,200
d. 483.705
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50. Budgeted income before tax is

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a. 360,720
b. 843,750
c. 173,220
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d. 191,970

Prepared by:

Ms. Marie Kristine Joy C. Sangalang, CPA

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