SAN SEBASTIAN COLLEGE RECOLETOS DE CAVITE
MANAGEMENT ACCOUNTING FINALS
CHRISTOPHER C. LIM
MULTIPLE CHOICE QUESTIONS:
ANSWER THE FOLLOWING QUESTIONS. SELECT THE ANSWER
FROM THE GIVEN CHOICES. MAKE A SUMMARY OF YOUR
FINALS ANSWERS. SHOW ALL THE SOLUTIONS. WRITE THE
LETTER ONLY ON THE SUMMARY.
1. The operation of a responsibility accounting system
usually involves each of the following steps except:
a. Allocating common fixed costs among the
responsibility centers that benefit from these
costs.
b. The preparation of budgets for each
responsibility center.
c. Separate measurement of the performance of
each responsibility center.
d. The preparation of performance reports,
comparing the actual performance of each
responsibility center with the budgeted
amounts.
2. When an income statement is prepared by profit centers,
costs traceable directly to a cost center, such as the
Personnel Department, are:
a. Omitted from the income statement.
b. Classified as common fixed costs.
c. Allocated among the profit centers based upon
the number of employees in each department.
d. Classified as committed fixed costs and allocated
among the profit centers.
Hudson Co. manufactures a single product. Shown below are
cost and sales data for the first year of operations. During the
year, 10,000 finished units were manufactured, of which
8,000 were sold.
Sales (8,000 units at P110 per unit) P880,000
Manufacturing costs for 10,000 finished
units
    Variable 200,000
    Fixed 400,000
Selling and administrative expenses:  
    Variable (P5 per unit x 8,000 units sold) 40,000
    Fixed 240,000
The company prepares two separate sets of income
statements: one utilizing variable costing and the other
utilizing full costing.
3. Refer to the information above. The per-unit
manufacturing cost assigned to units of product is:
a. P20 under variable costing and P60 under full
costing.
b. P25 under variable costing and P75 under full
costing.
c. P30 under variable costing and P90 under full
costing.
d. P35 under variable costing and P105 under full
costing.
4. Refer to the information above. Under variable costing,
the valuations assigned to the cost of goods sold and to
the ending inventory of finished goods are:
a. Ending inventory, P60,000, and cost of goods
sold, P240,000.
b. Ending inventory, P50,000, and cost of goods
sold, P200,000.
c. Ending inventory, P40,000, and cost of goods
sold, P160,000.
d. Ending inventory, P30,000, and cost of goods
sold, P120,000.
5. Refer to the information above. Under variable costing,
Hudson Co.'s income from operations for the year is:
a. P40,000.
b. P80,000.
c. P680,000.
d. P980,000.
Division X makes and sells a single product. Presently it sells
12,000 units per year to outside customers at P24 per unit.
The annual capacity is 20,000 units and the variable cost is to
make each unit is P16. All selling expenses are fixed. Division
Y would like to buy 10,000 units a year from division X.
6. The unit price that Division X should charge Division Y,
according to the transfer pricing formula
a. P24
b. b. 21.40
c. c. P17.60
d. d. P16
A company has two divisions—The Hogan and the Jasper
Division. The Hogan Division makes and sells K7 motors which
can either e sold to outside customers or to the Jasper
Division. Next month the following results are expected to
occur at Hogan: Selling Price per K7 motor to outsider
customer P115, Unit variable production cost P75, monthly
capacity of K7 motors 3,500 units, Sales of K7 motors to
outside customers 2,100 units. Jasper would like to buy 1,200
of these motors from Hogan next month. Hogan can purchase
these motors from outside supplier at P110 each.
 SAN SEBASTIAN COLLEGE RECOLETOS DE CAVITE
MANAGEMENT ACCOUNTING FINALS
CHRISTOPHER C. LIM

7. If Hogan sells 1,200 of the motors to Jasper next month 11. If Bernard chooses to buy the new equipment, the
at a price of P110 per motor, the monthly effect on increase or decrease in total company net income over
profits of the company as a whole will be? next 5 years will be?
a. P42,000 decrease a. P5,000 increase
b. P42,000 increase (110*1200)-(75*1200) b. P19,000 decrease
c. P4,000 decrease
c. P48,000 increase d. P71,000 decrease
d. P48,000 decrease 12. At what price for the new equipment would Bernard be
indifferent between keeping the existing equipment or
8. Suppose sales of K7 motors to outside customers is purchasing the new equipment?
expected to be 2,840 units next month while all other a. P150,000
conditions remains the same. If Hogan sells 1,200 motors b. P160,000
to Jasper next month at a price of P110 per motor, the c. P170,000
monthly effect on profits of the company as whole will d. P135,000
be?
a. P42,000 decrease The Rogers Company makes 27,000 units of a certain
b. P42,000 increase component each year for use on its own production line. The
c. P21,600 decrease cost per unit for the component at this level of activity is as
d. P20,400 increase 42k-((115-75)*540) follows:
A company has only two divisions: P and R. Division P has a Direct materials P4.20
capacity for making 75,000 wheel sets per year and regularly Direct labor 12.00
sells 60,000 each year to outside market. The regular sales VFOH 5.80
price is P100 per wheel set, and the unit variable production Fixed FOH 6.50
cost is P65. Division R currently buys 30,000 wheel sets (of Rogers has received an offer from an outside supplier who is
the kind made by P) yearly from outside supplier at a price of willing to provide 27,000 units of this component each year at
P90 per wheel set. a price of P25 per component.
9. If R were to buy the 30,000 wheel sets it needs annually 13. Assume that there is no other use for the facilities now
from Division P at P87 per wheel set, the change in being used to produce the component. If Rogers
annual net operating income, for the company as a Company continues to make the component how much
whole, compared to what it is currently, would be higher or lower will net income be than if the
a. P600,000 components are purchased from the outside supplier?
b. P225,000 ((87-82.5)+3)*30k a. P94,500 lower
c. P750,000 b. P81,000 higher
d. P135,000 c. P237,600 higher
d. P124,000 lower
The Bernard Company has a piece of equipment with an 14. Suppose the conditions are the same as in question 13,
original cost of P126.000. it is now December 31 and this At what price per unit charged by the outside supplier
equipment has accumulated depreciation of P90,000 and would Rogers be indifferent between making the
salvage value of P15,000. Bernard is now pondering the component or buying it from the outsider?
possibility of buying a new piece of equipment to replace the a. P24.40
existing equipment. This new machine would cost P154,000 b. P22.50
and have not salvage value at the end of its useful life of 5 c. P25.00
years. The annual operating cost of the new equipment is d. P19.60
P18,000. Alternatively, Bernard can continue using the 15. Assume that if the component is produced from the
existing equipment for the next 5 years at an annual outside supplier, P35,100 of annual fixed factory
operating cost of P45,000, the old equipment will have no overhead would be avoided and the facilities now being
salvage value at the end of 5 years. used to make the component could be rented to another
10. How much is considered sunk cost? company for P64,800 per year. If Rogers chooses to buy
a. P90,000 the components from the outside supplier under these
b. P126,000 circumstances, then the change in annual net income
c. Zero due to accepting the offer is?
d. P36,000 a. P18,900 decrease
b. P18,900 increase
c. 21,400 decrease
 SAN SEBASTIAN COLLEGE RECOLETOS DE CAVITE
MANAGEMENT ACCOUNTING FINALS
CHRISTOPHER C. LIM

d. 21,400 increase
16. Suppose the conditions are the same as in question #15 21. Using the information from question 18 the labour
and the number of units of this component used each efficiency variance is:
year can change. What would be the quantity of units of a. P760 favorable
this component used per year that would be the quantity b. P800 adverse (1840-(900*2))*20
of units of this component used per year that would c. P760 adverse
make Rogers indifferent between making or buying the d. P800 favorable
component?
a. 21,600 units 22. In August actual material used amounted to 5,650 kg,
b. 27,000 units budgeted output was 1,000 units and standard material
c. 28,500 units usage was 5 kg per unit. Actual output was 1,075 units. If
d. 33,300 units the standard material cost of each product is P25 the
material efficiency variance will be:
17. The standard cost of a product is: a. P3,250 favourable
a. The planned unit cost of products produced b. P1,375 adverse (5650-(1075*5))*5
during a particular period c. P1,375 favourable
b. The average unit cost of products produced d. P3,250 adverse
during a particular period
c. The unit cost of products incurred at the start of 23. During July actual labour costs amounted to £19,800, the
a particular period standard rate of pay was £4.50 per hour and the labour
d. The average unit cost of products produced in rate variance amounted to £225 adverse. The actual
the previous period hours worked were:
a. 4,350 (19800-225/4.50)
The following information relates to product A: b. 1,012.5
Quantity Unit Price Cost per Unit c. 4,400
Material (kg) 3 P23 P69 d. 4,450
Labor (hr) 2 P20 P40
24. An adverse material usage variance together with a
Budgeted profit is 1,000 units. favourable materials price variance could suggest that:
Actual production is 900 units. a. We are paying the same for our materials but
Actual inputs were as follows: we are using more than expected
Material 2,650 kg costing P66,250 b. We are paying less for our materials than
Labor 1840 hours costing P34,960 expected but we are using more materials
c. We are using less materials than expected but in
18. The material price variance is: total we are paying more than we should
a. P5,300 favorable d. We are paying higher prices for our materials
b. P5,300 adverse ((66250/2650)-23)*2650 than expected
c. P4,150 adverse
d. P4,150 favorable 25. An adverse labour efficiency variance together with a
favourable labour rate variance may mean that:
19. Using the information from question 18 the material a. Less skilled staff are being used in production
usage variance is: b. More products are being made per hour
a. P1,250 adverse c. The business is paying a higher hourly rate than
b. P1,150 favorable (2650-(900*3))*23 the standard
c. P1,250 favorable d. Less labour hours are needed to make the same
d. P1,150 adverse amount of output

20. Using the information from question 18 the labour rate 26. The formula for calculating the variable overhead total
variance is: variance is:
a. (Standard hours less actual hours) * variable
a. P1,040 favorable overhead absorption rate
b. P1,040 adverse b. Actual overhead less (actual hours * actual
c. P1,840 favorable hours worked * variable overhead absorption
d. P1,840 adverse (34960-(1840*20)) rate)
 SAN SEBASTIAN COLLEGE RECOLETOS DE CAVITE
MANAGEMENT ACCOUNTING FINALS
CHRISTOPHER C. LIM

c. Actual variable overhead expenditure less b. P71,000

budgeted variable overhead expenditure c. P65,000
d. Actual variable overhead less (standard hours * d. P69,000 (75k-10k)+(10k*40%)
actual production * variable overhead
absorption rate)
31. All of the following are common cash outflows from
27. The formula for calculating the fixed overhead volume capital expenditure programs, except:
variance is: a. equipment installation
a. Budgeted fixed expenditure less (actual hours * b. computer programming and fine tuning
fixed overhead absorption rate) c. increased working capital requirements
b. Budgeted fixed expenditure less (actual hours * d. salvage value at the end of the project
actual production * fixed overhead absorption
rate)
c. Actual fixed overhead less (standard hours * 32. If a company uses a cost-plus approach to pricing, it will
actual production * fixed overhead absorption find:
rate) a. there are several different definitions of cost
d. Budgeted fixed expenditure less (standard hours and the higher the cost, the higher the markup
* actual production * fixed overhead percentage.
expenditure variance) b. there are several different definitions of cost
and the higher the cost, the lower the markup
28. Maxwell Company has an opportunity to acquire a new
percentage.
machine to replace one of its present machines. The
c. there is one definition of cost, and there is no
new machine would cost P90,000, have a 5-year life, and
relationship between cost and the markup
no estimated salvage value. Variable operating costs
percentage used.
would be P100,000 per year. The present machine has a
d. there is one definition of cost, and there is no
book value of P50,000 and a remaining life of 5 years. Its
markup percentage with the cost-plus approach.
disposal value now is P5,000, but it would be zero after 5
years. Variable operating costs would be P125,000 per
33. Patterson and Clay Companies both use cost-plus pricing
year. Ignore income taxes. Considering the 5 years in
formulas and arrived at a selling price of P1,000 for the
total, what would be the difference in profit before
same product. Patterson uses absorption manufacturing
income taxes by acquiring the new machine as opposed
cost as the basis for computing its dollar markup whereas
to retaining the present one?
Clay uses total cost. Which of the following choices
a. P10,000 decrease
correctly denotes the company that would have (1) the
b. P15,000 decrease
higher cost basis for deriving its dollar markup and (2)
c. P35,000 increase
the higher markup percentage?
d. P40,000 increase
Cost Basis Markup Percentage
29. A machine that cost P50,000 and is fully depreciated is
a. Patterson Patterson
allowed as a P10,000 trade-in on a machine costing
b. Patterson Clay
P75,000. Assuming a 40% tax rate, the out-of-pocket
c. Clay Patterson
cost of the new machine is:
d. Clay Clay
a. P75,000
b. P71,000 (75k-(10k*40%))
34. The following costs relate to Riley Company: Variable
c. P65,000
manufacturing cost, P42; variable selling and
d. P69,000
administrative cost, P10; applied fixed manufacturing
30. A machine that cost P50,000 and is fully depreciated is
overhead, P37; and allocated fixed selling and
sold for P10,000. The P10,000 is then used as a down
administrative cost, P12. If Riley uses absorption
payment on the purchase of a new machine costing
manufacturing-cost pricing formulas, the company's
P75,000. Assuming a 40% tax rate, the out-of-pocket
markup percentage would be computed on the basis of:
cost of the new machine is:
a. P42.
a. P75,000
 SAN SEBASTIAN COLLEGE RECOLETOS DE CAVITE
MANAGEMENT ACCOUNTING FINALS
CHRISTOPHER C. LIM
b. P52.
c. P79. (42+37)
d. P101.
35. Torrey Pines is studying whether to outsource its Human
Resources (H/R) activities. Salaried professionals who
earn P390,000 would be terminated; in contrast,
administrative assistants who earn P120,000 would be
transferred elsewhere in the organization. Miscellaneous
departmental overhead (e.g., supplies, copy charges,
overnight delivery) is expected to decrease by P30,000,
and P25,000 of corporate overhead, previously allocated
to Human Resources, would be picked up by other
departments. If Torrey Pines can secure needed H/R
services locally for P410,000, how much would the
company benefit by outsourcing?
a. P10,000. (390K+30k)-410k
b. P35,000.
c. P130,000.
d. P155,000.
36. Donnelly, a division of Dakota Enterprises, currently
makes 100,000 units of a product that has created a
number of manufacturing problems. Donnelly's costs
follow.
Manufacturing costs:
Variable P420,000
Fixed 150,000
Allocated corporate administrative cost 70,000
If Donnelly were to discontinue production, fixed
manufacturing costs would be reduced by 80%. The relevant
cost of deciding whether the division should purchase the
product from an outside supplier is:
a.P420,000.
b.P490,000.
c.P540,000.
d.P570,000.
37. Maddox, a division of Stanley Enterprises, currently
performs computer services for various departments of
the firm. One of the services has created a number of
operating problems, and management is exploring
whether to outsource the service to a consultant.
Traceable variable and fixed operating costs total
P80,000 and P25,000, respectively, in addition to P18,000
of corporate administrative overhead allocated from
Stanley. If Maddox were to use the outside consultant,
fixed operating costs would be reduced by 70%. The
irrelevant costs in Maddox's outsourcing decision total:
a. P17,500.
b. P18,000.
c. P25,000.
d. P25,500. (25k*30%)+18000
38. When deciding whether to sell a product at the split-off
point or process it further, joint costs are not usually
relevant because:
a. such amounts do not help to increase sales
revenue.
b. such amounts only slightly increase a company's
sales margin.
c. such amounts are sunk and do not change with
the decision.
d. the sales revenue does not decrease to the
extent that it should, if compared with
separable processing.
39. A transfer-pricing method leads to goal congruence when
managers:
a. always act in their own best interest
b. act in their own best interest and the decision is
in the long-term best interest of the manager's
subunit
c. act in their own best interest and the decision is
in the long-term best interest of the company
d. act in their own best interest and the decision is
in the short-term best interest of the company
40. Assume 200 barrels are transferred from the Production
Division to the Refining Division for a transfer price of P6
per barrel. The Refining Division sells the 200 barrels at a
price of P40 each to customers. What is the operating
income of both divisions together?
a. P2,400
b. P2,600
c. P3,600
d. P6,800 (40K*200) – (6*200)