ARC434 - Financial Management and Advisory Services Review (Midterms)

the number of units produced was less than the number of units
1. Kaila Company’s unit cost of manufacturing and selling a given budgeted for the period
item at an activity level of
10,000 units per month are: the average wage rate paid to direct labor employees was less than
Manufacturing costs the standard rate
Direct materials P39 the standard hours allowed for the units produced were less than
Direct labor 6 actual direct labor hours used
Variable overhead 8 9The following information is for the Truth Corporation:
Fixed overhead 9
Selling expenses Product A:
Variable 30 Revenue P16.00
Fixed 11 Variable Cost P12.00
The company desires to seek an order for 5,000 units from a foreign
customer. The variable selling expenses will be reduced by 40%, but Product B:
the fixed costs for obtaining the order will be P20,000. Domestic Revenue P24.00
sales will not be affected by the order. The minimum break-even Variable Cost P16.00
price per unit to be considered on this special sale is 75
Total fixed costs P75,000
2. Davis Co., makes and sells only one product. The unit contribution
margin is $6 and the breakeven point in unit sales is 24,000. The What is the operating income, assuming actual sales total 25,000
company's fixed costs are: units, and the sales mix is three units of Product A and one unit of
(1/1 Point) Product B?
$4,000. (1/1 Point)
$14,400. 50,000
$40,000. 60,000
$144,000. 75,000
3In assessing the loan value of inventory, a banker will normally be 0
concerned about the portion of inventory that is work-in-process 10Which of the following statements is not true?
because (1/1 Point)
(1/1 Point) In the rendition of MAS, independence must be observed so as to
WIP inventory is relatively easy to sell because it does not represent maintain the essential requisites of impartiality and objectivity.
a raw material or a finished product. All provisions of the code of professional ethics are applicable to the
WIP inventory usually has the highest loan value of the different practice of MAS except those rules related to the expression of an
inventory types. opinion on financial statements.
WIP generally has the lowest marketability of the various types of MAS serves only in the areas of accounting and finance.
inventories. Before accepting an engagement, a practitioner should notify the
WIP represents a lower investment by a corporation as opposed to client of any reservations he has regarding anticipated benefits.
other types of inventories. Section
4An understanding of the underlying behavior of costs helps in all of 11Which of the following is not an area related to the performance of
the following EXCEPT: management services by independent accounting firms?
(1/1 Point) (1/1 Point)
sales volume can be better estimated Introducing new ideas, concepts, and methods to management.
costs can be better estimated as volume expands and contracts Improving existing policies, methods, and procedures.
true costs of processes can be better evaluated Performing special studies, preparing recommendations, and
process inefficiencies can be better identified and, as a result, formulating plans and programs.
improved Performing management functions and making decisions.
5In multiproduct situations, when sales mix shifts toward the product 12War, inflation, and the condition of the foreign markets are all
with the lowest contribution margin then: examples of
(1/1 Point) (1/1 Point)
total revenues will increase diversifiable risk.
breakeven quantity will decrease economic risk.
total contribution margin will increase unsystematic.
operating income will decrease nondiversifiable risk.
6The two dimensions of managerial accounting are: 13A chain of cause-and-effect relationships that appropriately link the
(1/1 Point) four balanced scorecard perspectives is:
a decision-facilitating dimension and a decision-influencing (1/1 Point)
dimension. a high return on investment causes customer loyalty that results in
a decision-facilitating dimension and a financial-influencing skilled production workers that improve process quality skilled
dimension. production workers help to produce process quality that results in
a decision-influencing dimension and a cost-minimizing dimension. customer loyalty that helps to increase return on investment
a cost-minimizing dimension and a profit-maximizing dimension. skilled production workers help to produce process quality that
7Which of the following is not a function of the treasurer? results in customer loyalty that helps to increase return on investment
(1/1 Point) customer loyalty results in a high return on investment that results in
Safeguarding assets. the ability to attract skilled production workers that improve process
Managing investments. quality
Preparing financial statements. improved process quality results in a high return on investment that
Being responsible for an entity's credit policy. causes customer loyalty that results in the ability to attract skilled
8A debit balance in a direct labor efficiency variance account production workers
indicates that: 14The following data relates to the Russell Corporation and its Toy
(1/1 Point) Division.
actual total direct labor costs incurred were less than standard direct
labor costs allowed for the units produced
Toy Division sales P 8,000,000
Toy Division operating income P 480,000
Toy Division current liabilities P 300,000
Toy Division equity P 1,000,000
Corporate target rate of return 14%
Corporate weighted average cost of capital 12%
Corporate effective tax rate 30%
Debt-to-Equity Ratio 60%
What is the Toy Division’s Economic Value Added (EVA)?
(1/1 Point)
P140,000
P196,000
P144,000
P336,000
15A company’s breakeven point in peso sales may be affected by
equal percentage increases in both selling price and variable cost per
unit (assume all other factors are equal within the relevant range).
The equal percentage changes in selling price and variable cost per
unit will cause the breakeven point in peso sales to
(1/1 Point)
Decrease by less than the percentage increase in selling price.
Decrease by more than the percentage increase in the selling price.
Increase by less than the percentage increase in selling price.
Remain unchanged.
16In determining the need for system changes, several types of
feasibility studies can be made. The most commonly recognized
feasibility studies are
(1/1 Point)
legal, environmental, and economic
environmental, operational, and economic
technical, economic, legal, and practical
technical, operational, and economic
17Which of the following best describes the impact of an increase in
fixed cost?
(1/1 Point)
The increase in fixed cost will result in an increase in selling more
units.
The increase in fixed cost will cause an increase in variable cost.
The increase in fixed cost causes net income to decrease and the
break-even point to decrease
The increase in fixed cost causes net income to decrease and the
break-even point to increase
18Mr. Kevin Durant, a CPA firm’s partner-in-charge of quality
assurance and review is arguing with Mr. LeBron James, the
consulting partner regarding the question of independence as Mr.
LeBron James is presently rendering consulting services to Bas and
Ket Co., an audit client of the firm. Related to this issue of
independence, all of the following statements are not valid except
(1/1 Point)
Independence is never sacrificed for as long as the
auditor/consultant is correct in his decisions for the client.
A CPA who renders both audit and consulting services to a client by
virtue of his competence/expertise and extensive knowledge of the
client’s business is in the best position to render decisions for the
client and should do so.
The client is the ultimate decision maker and the auditor and/or
consultant should not make decisions for the client.
It is us up to professional judgment and discretion of the auditor/
consultant to render decisions for the client for as long as his
professional fees are commensurate to the benefit that the client will
derive from the engagement.
19If a firm's net income (loss) does not change as its volume
changes, the firm('s)
(1/1 Point)
must be in the service industry.
must have no fixed costs.
sales price must equal P0.
sales price must equal its variable costs.
20Sensitivity analysis is useful in decision making when:
(1/1 Point)
there is a degree of uncertainty about the relevant data.
there is an opportunity cost included in the analysis.
sunk cost is included in the analysis.
the analysis is subject to a review by the management.
Section
21A firm has just ended its calendar year making a sale in the
amount of P200,000 of merchandise purchased during the year at a
total cost of P150,500. Although the firm paid in full for the
merchandise during the year, it has yet to collect at year end from the
customer. The possible problem this firm may face is
(1/1 Point)
low profitability
lack of cash flow
inability to receive credit
high leverage
22Curry Corporation shipped finished goods to a customer on credit,
but the sale was not recorded, and the costs of the finished goods
were incorrectly included on the period's balance sheet as part of the
finished goods inventory. Which one of the following statements is
correct concerning the effects of this error?
(1/1 Point)
Accounts receivable was not affected, inventory was overstated,
sales were understated, and cost of goods sold was understated.
Accounts receivable was understated, inventory was not affected,
sales were understated, and cost of goods sold was understat-ed.
Accounts receivable was understated, inventory was overstated,
sales were understated, and cost of goods sold was overstated.
Accounts receivable was understated, inventory was overstated,
sales were understated, and cost of goods sold was understated.
23Harden Co. uses regression analysis to develop a model for
predicting overhead costs. Two different cost drivers (machine hours
and direct materials weight) are under consideration as the
independent variable. Relevant data were run on a computer using
one of the standard regression programs, with the following results:
Coefficient
Machine hours Direct
materials weight
Y intercept 2,500
4,600
B 5.00
2.60
R2 0.70
0.50
What regression equation should be used?
(1/1 Point)
Y = 2,500 + 3.5X
Y = 2,500 + 5.0X
Y = 4,600 +1.3X
Y = 4,600 + 2.6X
24Weaknesses of the high-low method include all of the following
except
(1/1 Point)
Weaknesses of the high-low method include all of the following
except
the high and low activity levels may not be representative.
only two observations are used to develop the cost function.
the method does not detect if the cost behavior is nonlinear.
25Ignoring cost and other effects on the firm, which of the following
measures would tend to reduce the cash conversion cycle?
(1/1 Point)
Maintain the level of receivables as sales decrease.
Buy more raw materials to take advantage of price breaks.
Take discounts when offered.
Forgo discounts that are currently being taken.
26The scatter diagram method of cost estimation
(1/1 Point)
requires the use of judgment
uses the least-squares method
is influenced by extreme observations
is superior to other methods in its ability to distinguish between
discretionary and committed fixed costs
27For cost control purposes, fixed costs are classified as
(1/1 Point)
product or period costs.
discretionary or committed.
direct or common.
sunk or avoidable 40% X’s, 60% Y’s
28Mills Corporation began its operations on September 1 of the 34A firm operated at 80% of capacity for the past year, during which
current year. Budgeted sales for the first three months of business fixed costs were $210,000, variable costs were 65% of sales, and
are $250,000, $320,000, and $410,000, respectively, for September, sales were $1,000,000. Operating profit was
October, and November. The company expects to sell 20% of its (1/1 Point)
merchandise for cash. Of sales on account, 70% are expected to be $140,000
collected in the month of the sale, 30% in the month following the $150,000
sale. The cash collections in October are: $310,000
(1/1 Point) $200,000
$320,000 35Which of the following is not one of the risks involved in virtual
$243,000 currencies?
$303,200 (1/1 Point)
$380,000 Prices change quickly
29The following data relate to Department no. 2 of Young Electronic payments
Corporation: Virtual currency holdings are not insured
Potential for unlawful use
Segment contribution margin 36Based on normal capacity operations, Sta. Ana Company employs
P1,480,000 25 workers in its Refining Department, working 8 hours a day, 20
Profit margin controllable by the segment manager days per month at a wage rate of P6 per hour. At normal capacity,
1,230,000 production in the department is 5,000 units per month. Indirect
Segment profit margin materials average P0.25 per direct labor hour; indirect labor cost is
1,110,000 12½% of direct labor cost; and other overhead are P0.15 per direct
labor hour.
On the basis of this information, fixed costs traceable to Department
no. 2 but controllable by others are: The flexible budget at the normal capacity activity level follows:
(1/1 Point)
1,120,000 Direct materials P4,000
120,000 Direct labor 24,000
1,250,000 Fixed factory overhead 1,200
370,000 Indirect materials 1,000
30The primary reason that managers impose a minimum cash Indirect labor 3,000
balance in the cash budget is Other overhead 600
(1/1 Point)
because management needs discretionary cash for unforeseen Total P33,800
business opportunities.
managers lack discipline to control their spending.
Cost per unit P 6.76
that it protects the organization from the uncertainty of the budgeting
process.
The cost per unit at 60% capacity is
that it makes the financial statements look more appealing to
(1/1 Point)
creditors.
P6.00
Section
P6.50
31
P6.82
(0/1 Point)
P6.92
37Lillard sells a single product for $50. Variable costs are 60% of the
90
selling price, and the company has fixed costs that amount to
97.50
$400,000. Current sales total 16,000 units. Each unit that the
112.50
company sells will:
133.33
(1/1 Point)
32
increase overall profitability by $20.
(1/1 Point)
increase overall profitability by $30.
increase overall profitability by $50.
P12,100
decrease overall profitability by $5.
P14,900
38Butler Corporation's purchasing manager obtained a special price
P48,000
on an aluminum alloy from a new supplier, resulting in a direct-
P127,900
material price variance of P9,500F. The alloy produced more waste
33Embiid Co. sells two products, X and Y. Last year Embiid sold
than normal, as evidenced by a direct-material quantity variance of
14,000 units of X’s and 21,000 units of Y’s. Related data are:
P2,000U, and was also difficult to use. This slowed worker
efficiency, generating a P2,500U labor efficiency variance. To help
Unit Selling Price Unit Variable remedy the situation, the production manager used senior line
Unit contribution employees, which gave rise to a P900U labor rate variance. If
Product Price overall product quality did not suffer, what variance amount is best
Cost Margin used in judging the appropriateness of the purchasing manager's
X $110 $70 decision to acquire substandard material?
$40 (1/1 Point)
Y $ 70 $50 P4,100F
$20 P5,000F
P7,000F
P7,500F
39Tatum’s budget for the upcoming year revealed the following
What was Embiid Co.’s sales mix last year? figures:
(0/1 Point)
58% X’s, 42% Y’s Sales revenue $840,000
60% X’s, 40% Y’s Contribution margin 504,000
30% X’s, 70% Y’s Net income 54,000
 Variable manufacturing overhead P 9,000 F P30,000 U
If the company's break-even sales total $750,000, Tatum’s safety (B)
margin would be: Fixed manufacturing overhead P20,000 U (A)
(1/1 Point) P80,000 U
$(90,000).
$90,000. In a 2-variance analysis the flexible-budget variance and the
$246,000. production-volume variance should be ________, respectively.
$336,000. (1/1 Point)
40Booker sells a single product at $20 per unit. The firm's most P11,000 U; P110,000 U
recent income statement revealed unit sales of 100,000, variable P41,000 U; P80,000 U
costs of $800,000, and fixed costs of $400,000. If a $4 drop in selling P21,000 U; P100,000 U
price will boost unit sales volume by 20%, the company will P121,000 U; Zero
experience: 46Beal Company manufactures a cleaning solvent. The company
(1/1 Point) employs both skilled and unskilled workers. To produce one 55-
no change in profit because a 20% drop in sales price is balanced by gallon drum of solvent requires Materials A and B as well as skilled
a 20% increase in volume. labor and unskilled labor. The standard and actual material and labor
an $80,000 drop in profitability. information is presented below:
a $240,000 drop in profitability.
a $400,000 drop in profitability. Standard:
Section Material A: 30.25 gallons @ P1.25 per gallon
41What factor, related to manufacturing costs, causes the difference Material B: 24.75 gallons @ P2.00 per gallon
in net earnings computed using absorption costing and net earnings
computed using variable costing? Skilled Labor: 4 hours @ P12 per hour
(0/1 Point) Unskilled Labor: 2 hours @ P 7 per hour
Absorption costing considers all costs in the determination of net
earnings, whereas variable costing considers fixed costs to be period Actual:
costs. Material A: 10,716 gallons purchased and used @ P1.50 per gallon
Absorption costing allocates fixed overhead costs between cost of Material B: 17,484 gallons purchased and used @ P1.90 per gallon
goods sold and inventories, and variable costing considers all fixed
costs to be period costs. Skilled labor hours: 1,950 @ P11.90 per hour
Absorption costing "inventories" all direct costs, but variable costing Unskilled labor hours: 1,300 @ P7.15 per hour
considers direct costs to be period costs.
Absorption costing "inventories" all fixed costs for the period in During the current month Beal Company manufactured 500 55-gallon
ending finished goods inventory, but variable costing expenses all drums. What is the total material yield variance?
fixed costs. (1/1 Point)
42The most likely strategy to reduce the breakeven point would be to P1,111 U
(1/1 Point) P1,111 F
Increase both the fixed costs and the contribution margin. P2,670 U
Decrease both the fixed cost and the contribution margin. P2,670 F
Increase the fixed costs and decrease the contribution margin. 47Drape Corp. would like to market a new product at a selling price
Decrease the fixed costs and increase the contribution margin. of P15 per unit. Fixed costs for this product are P1,000,000 for less
43Which of the following is an incorrect statement? than 500,000 units of output and P1,500,000 for 500,000 or more
(1/1 Point) units of output. The contribution margin percentage is 35%. How
The contribution income statement that is prepared for internal users many units of this product must be sold to earn a target operating
is better than the traditional income statement as a management tool income of P1 million?
to predict the results of increases or decreases in sales volume, (1/1 Point)
variable costs, and fixed costs. 366,667
The greater the proportion of fixed costs in a firm's cost structure, the 380,952
smaller will be the impact on profit from a given percentage change 476,190
in sales revenue. 256,410
In an economic recession, the highly automated company with high 48Management scrutinizes variances because
fixed costs will be less able to adapt to lower consumer demand than (1/1 Point)
will a firm with a more labor-intensive able to adapt to lower Management desires to detect such variances to be able to plan for
consumer demand than will a firm with a more labor-intensive promotions.
A major difference between income statements prepared under the Management needs to determine the benefits foregone by such
traditional format and those prepared under the contribution format is variances.
that expenses under the traditional format are shown by function, It is desirable under conventional knowledge on good management.
while the expenses shown under the contribution format are shown Management recognizes the need to know why variances happen to
by function and cost behavior. be able to make corrective actions and fairly reward good per-
44Giannis stores are open for 15 hours a day (from 6:00 a.m. to 9:00 formers.
p.m.). It sells packaged meals at a price of P40 per meal. Variable 49As of January 1 of the current year, the Beasley Company had
cost per meal is P30 while total fixed costs for operation of all the accounts receivables of $50,000. The sales for January, February,
stores amounted to 200,000 monthly. It is thinking to reduce its store and March were as follows: $120,000, $140,000 and $150,000. 20%
hours to only 12 hours a day as this would reduce fixed costs (utilities of each month’s sales are for cash. Of the remaining 80% (the credit
and wages) by P60,000 a month. It is expected that the reduced sales), 60% are collected in the month of sale, with remaining 40%
store hours would result in loss of 1,500 packed meals monthly collected in the following month. What is the total cash collected
sales. The reduction in store hours would result in (both from accounts receivable and for cash sales) in the month of
(1/1 Point) February?
No change in monthly operating income. (1/1 Point)
A prospective decrease in monthly operating income. $129,600
A prospective increase in monthly operating income of P45,000. $62,400
A prospective increase in monthly operating income of P60,000. $133,600
45Variances Spending Production- $91,200
Efficiency Volume 50Simmons Company recently completed 10,600 units of its single
product, consuming 32,000 labor hours that cost the firm P480,000.
According to manufacturing specifications, each unit should have P1,500,000
required 3 hours of labor time at P15.40 per hour. Based on this P2,000,000
information, determine Simmons’ labor rate variance and labor P720,000
efficiency variance. P1,200,000
(1/1 Point) 56Trae Corporation incurred fixed manufacturing costs of P7,200
Rate: P12,720F Efficiency: P3,000F during 2021. Other information for 2021 includes:
Rate: P12,720F Efficiency: P3,000U
Rate: P12,800F Efficiency: P3,080F The budgeted denominator level is 1,600 units.
Rate: P12,800F Efficiency: P3,080U Units produced total 2,000 units.
Section Units sold total 1,900 units.
51A debit balance in a direct labor efficiency variance account Beginning inventory was zero.
indicates that:
(0/1 Point) The fixed manufacturing cost rate is based on the budgeted
actual total direct labor costs incurred were less than standard direct denominator level.
labor costs allowed for the units produced Manufacturing variances are closed to cost of goods sold. Under
the number of units produced was less than the number of units variable costing, the fixed manufacturing costs expensed on the
budgeted for the period income statement (excluding adjustments for variances) total:
the average wage rate paid to direct labor employees was less than (1/1 Point)
the standard rate P8,550
the standard hours allowed for the units produced were less than P7,200
actual direct labor hours used P9,000
52The following information is available for Morant manufacturing P0
Company when it produced 2,100 units in the month of February: 57BM Motors, Inc. employs 40 sales personnel to market its line of
economy automobiles. The average car sells for P1,200,000 and a
Standard 6% commission is paid to the salesperson. BM Motors is considering
Material: 2 pounds per unit @ 4.00 per pound a change to a commission arrangement that would pay each
Labor: 3 hours per unit salesperson a salary of P24,000 per month plus a commission of 2%
Variable overhead: P15 per hour of the sales made by that salesperson. The amount of total car sales
at which the two expense structures would be indifferent is
Actual (0/1 Point)
Material: 4,500 pounds purchased @ P17,100 P22,500,000
Labor: 6,400 direct labor hours P24,000,000
P30,000,000
What is the materials purchase price variance? P12,000,000
(0/1 Point) 58N&R Company transfers a product from division N to division R.
P900 favorable Variable cost of this product is anticipated to be P40 a unit and total
P900 unfavorable fixed costs amount to P8,000. A total of 100 units are anticipated to
P840 favorable be produced. Actual cost, however, amounts to P50 for variable
P840 unfavorable costs. Fixed costs were same as budget. However, actual output was
53Care Company sold 100,000 units of its product at P20 per unit. twice as many.
Variable costs are P14 per unit, consisting of manufacturing costs of
P11 and selling costs of P3. Fixed costs, which are incurred The transfer price based on budgeted full cost plus 30% markup
uniformly throughout the year, amount to P792,000 (manufacturing amounts to
costs of P500,000 and selling costs of P292,000). There were no (1/1 Point)
beginning or ending inventories. 117
140
If labor costs are 50% of variable costs and 20% of fixed costs, a 150
10% increase in wages and salaries would increase the number of 156
units required to breakeven to: 59Aging Company plans to discontinue a segment with a P32,000
(1/1 Point) segment margin. Common expenses allocated to the segment
152,423 amounted to P45,000 of which P20,000 cannot be eliminated if the
143,875 segment were closed. The effect of closing down the segment on
54,955 Aging Company’ before tax profit would be
58,235 (1/1 Point)
54Paul Company had a P2,000 favorable volume variance, a P7,000 P12,000 decrease
unfavorable variable overhead variance, and P3,000 total P12,000 increase
underapplied overhead. The fixed overhead budget variance was P7,000 decrease
(0/1 Point) P7,000 increase
P1,000 favorable 60Net income determined using full absorption costing can be
P8,000 favorable reconciled to net income determined using variable costing by the
P2,000 favorable following computations, except:
P8,000 unfavorable (0/1 Point)
55Mitchell Company produces wood statues. Management has Computing the difference between fixed manufacturing overhead
provided the following information: costs deferred in or released from inventories.
Getting the difference in production and sales multiplied by the
Actual sales 80,000 statues standard fixed overhead rate.
Budgeted production 100,000 statues Determining the difference between the gross margin (absorption
Selling price P 20.00 per statue costing method) and contribution margin (variable costing meth-od).
Direct material costs P 5.00 per statue Fixed overhead charged under full costing and the fixed overhead
Variable manufacturing costs P 1.50 per statue charged using the marginal costing systems.
Variable administrative costs P 2.50 per statue Section
Fixed manufacturing overhead P 2.00 per statue 61The marginal costing convention of profit is more relevant to
decision making than the absorption costing convention because:
What is the total throughput contribution? (1/1 Point)
(0/1 Point)
So long as stock levels are rising, marginal costing gives a more 68This budgeting system places the burden of proof on the manager
conservative impression of profit than does absorption costing. to justify authority to spend any money whether or not there was
When stock levels are falling, the profit disclosed by marginal costing spending in the previous period. Different ways of performing the
is less influenced by costs from the previous period than is the case same activity and different levels of effort for the activity is evaluated.
with absorption costing. This system is called
Marginal costing provides a version of profit that relates only to those (1/1 Point)
costs the level of which are influenced by the matters being decided Budgeting by alternatives.
upon. Budgeting by responsibility and authority.
Marginal costing provides a valuation of stock that conforms with Scenario budgeting.
current accounting standards relevant to the preparation of pub- Zero-based budgeting.
lished accounts. 69Just-in-time manufacturers are more likely than conventional
62If a firm is at full capacity, the minimum special order price must manufacturers to
cover (1/1 Point)
(1/1 Point) Experience cash shortages.
variable costs associated with the special order. Prepare production budgets without a sales forecast.
variable costs associated with the special order. Budget materials purchases equal to the current month’s needs for
variable and incremental fixed costs associated with the special production.
order. Budget unit production for the month at greater than budgeted unit
variable costs and incremental fixed costs associated with the special sales for the month.
order plus foregone contribution margin on regular units not 70Bryant Co. is budgeting sales of 53,000 units of product Nous for
produced. October 2021. The manufacture of one unit of Nous requires 4 kilos
63Carmelo’s Chocolate had planned to sell their chocolate covered of chemical Loire. During October 2020, Bryant Co plans to reduce
strawberries for $3.00 each. Due to various factors the actual price the inventory of Loire by 50,000 kilos and increase the finished goods
was $2.75. Carmelo was able to sell 1,000 more strawberries than inventory of Nous by 6,000 units. There is no Nous work in process
anticipated to 4,000. What is the a) quantity factor and b) the price inventory. How many kilos of Loire is Bryant Co budgeting to
factor for sales? purchase in October 2021?
(0/1 Point) (1/1 Point)
a) $3,000, b) ($1,000) 138,000
a) $3,000, b) $2,000 162,000
a) $1,000 b) $2,000 186,000
a) ($3,000) b) ($2,000) 238,000
64A manufacturing company prepares income statements using both Section
absorption and variable costing methods. At the end of a period 71Which of the following is NOT true of a good balanced scorecard?
actual sales revenues, total gross profit, and total contribution margin (1/1 Point)
approximated budgeted figures, whereas net income was It tells the story of a company's strategy by articulating a sequence of
substantially greater than the budgeted amount. There were no cause-and-effect relationships.
beginning or ending inventories. There most likely explanation of the It helps to communicate corporate strategy to all members of the
net income increase is that compared to budget, actual organization.
(1/1 Point) It identifies all measures, whether significant or small, that help to
Manufacturing fixed costs had increased implement strategy.
Selling and administrative fixed expenses had decreased It uses nonfinancial measures to serve as leading indicators of future
Sales prices and variable costs had increased proportionately financial performance.
Sales prices had declined proportionately less than variable costs. 72On budgeting, all of the following are not valid, except
65Deandre Jeans sells two lines of jeans; Simple Life and Fancy (1/1 Point)
Life. Simple Life sells for $85.00 a pair and Fancy Life sells for A sales budget and a sales forecast are the same thing.
$100.00 a pair. The company sells all of its jeans on credit and Responsibility budget identifies revenue and costs with the individual
estimates that 60% is collected in the month of the sale, 35% is responsible for their incurrence.
collected in the following month, and the rest is considered to be The primary purpose of the cash budget is to show the expected
uncollectible. The estimated sales for Simple are as follows: January cash balance at the end of the budget period.
20,000 jeans, February 27,500 jeans, and March 25,000 jeans. The The best way to establish budget figures is to use last year’s actual
estimated sales for Fancy are as follows: January 18,000 jeans, cost and activity data as this year’s budget estimates.
February 19,000, and March 20,500 jeans. What are the expected 73If cash receipts from customers are greater than sales, which of
cash receipts for the month of March? the following is most likely to be true?
(0/1 Point) (1/1 Point)
$3,988,125 Accounts receivable will decrease.
$2,505,000 Cash balance will increase.
$2,125,000 Outstanding debt will decrease.
$4,175,000 The company will show a profit.
66In contrast to the total product and variable cost concepts used in 74Anderson Publishing has two divisions which operate
setting seller's prices, the target cost approach assumes that: autonomously. Their results for June 2021 were as follows:
(1/1 Point)
a markup is added to total cost. St. Louis
selling price is set by the marketplace. Kansas City
a markup is added to variable cost. Sales P5,000,000
a markup is added to product cost. P6,000,000
67These statements are proper to the budgeting process except: Contribution margin 2,500,000
(1/1 Point) 3,000,000
It is a tool to orchestrate the various functions of operations in a Operating income 2,000,000
business. 3,500,000
It is a part of management’s responsibility to plan the use of its Investment base 6,500,000
resources. 7,500,000
Actual results need not be compared with plan since the process The company’s desired rate of return is 15%.
ends after budget is approved.
The involvement of the various levels of individuals in the company is Which division has the better (a) return on investment and (b) better
necessary to gain its acceptance and attain its goals. residual income?
(0/1 Point) Lower total variable manufacturing costs for the manufacturing
(a) Kansas City; (b) Kansas City capacity.
(a) Kansas City; (b) St. Louis Greater gross profit per hour of manufacturing capacity.
(a) St. Louis; (b) Kansas City Greater contribution margin per hour of manufacturing capacity.
(a) St. Louis, (b) St. Louis 80Magic Corporation is in the process of overhauling the
75A product mix decision involves performance evaluation system for its Los Angeles manufacturing
(1/1 Point) division, which produces and sells parts that are popular in the
Influencing the sales volume mix of the products to minimize cost. aerospace industry. Which of the following is least likely to be chosen
Influencing the sales volume mix of the products to maximize to evaluate the overall operations of the Los Angeles division?
revenue. (1/1 Point)
Producing the maximum amount of items that provide the highest Cost center.
contribution margin. Responsibility center.
Producing the maximum amount of items that carry the lowest per- Profit center.
unit cost. Investment center.
76Statement I - Economic value added (EVA) is a more appropriate Section
performance measure when there is a large difference between the 81The major pitfall in the contribution margin approach to pricing is
market value of invested capital and the book value of assets. (0/1 Point)
its failure to recognize fixed costs.
Statement II - Cultural differences between countries may make its failure to recognize fixed costs.
performance evaluation in multinational settings more difficult. its failure to recognize fixed costs.
its inability to recognize financing costs of the production in question.
Statement III - The segment margin of a profit or investment center 82Which of the following is an appropriate base to distribute the cost
includes allocated common costs. of building depreciation to responsibility centers?
(0/1 Point)
Number of employees in the responsibility centers.
Statement IV - Manipulation of segment expenses may result in the
Budgeted sales dollars of the responsibility centers.
segment margin not being an accurate performance measure.
Budgeted sales dollars of the responsibility centers.
(0/1 Point)
Budgeted net income of the responsibility centers.
Only Statements I and II are true.
83Which transfer price is ideal for the company when the selling
Only Statement III is not true.
division is at capacity?
Only Statements I and III are not true.
(0/1 Point)
All statements are true.
Market price
77Thompson Corporation operates two stores: A and B. The
Incremental cost
following information relates to store A:
Actual variable cost plus a percentage profit
Budgeted full cost
Sales revenue
84The balanced scorecard has been adopted by many corporations.
P900,000
Which of the following best describes the balanced scorecard?
Variable operating expenses
(0/1 Point)
400,000
A strategy that meets management’s objectives.
Fixed expenses:
A diagram illustrating cause and effect relationships.
Traceable to A and controllable by A
A table of key actions to achieve strategic objectives.
275,000
A strategic performance measurement and management framework.
Traceable to A and controllable by others
85Which of the following best describes a value chain in the
120,000
balanced scorecard framework?
(1/1 Point)
A's segment profit margin is:
The cause-and-effect linkages.
(1/1 Point)
The baseline level of performance.
P105,000.
The sequence of business processes in which usefulness is added to
P225,000.
products or services.
P380,000.
The chain of financial and nonfinancial measures.
P500,000.
86An appropriate transfer price between two divisions of the Reno
78The following is a summarized income statement of Shaquille
Corporation can be determined from the following data:
Co.’s profit center No. 43 for March 2021:
Fabrication Division
Contribution margin $70,000 Market price of subassembly P50
Period expenses: Variable cost of subassembly P20
Manager’s salary $20,000 Excess capacity (in units) 1,000
Facility depreciation 8,000
Corporate expense allocation 5,000 33,000 Assembling Division
Profit center income $37,000 Number of units needed 900

Which of the following amounts would most likely be subject to the
control of the profit center’s manager?
(0/1 Point)
$70,000
$5,000
$37,000
$33,000
79Uranus Company has 2 products that use the same manufacturing
facilities and cannot be subcontracted. Each product has sufficient
orders to utilize the entire manufacturing capacity. For short-run profit
maximization, Uranus should manufacture the product with the
(1/1 Point)
Lower total manufacturing costs for the manufacturing capacity.
What is the natural bargaining range for the two divisions?
(0/1 Point)
Between P20 and P50
Between P50 and P70
Any amount less than P50
P50 is the only acceptable price
87N&R Company transfers a product from division N to division R.
Variable cost of this product is anticipated to be P40 a unit and total
fixed costs amount to P8,000. A total of 100 units are anticipated to
be produced. Actual cost, however, amounts to P50 for variable
costs. Fixed costs were same as budget. However, actual output was
twice as many.
The transfer price based on actual variable costs plus 130% markup
amounts to Manufacturing Costs:
(1/1 Point) Direct materials P2.00
65 Direct labor 2.40
52 Variable indirect 1.60
115 Fixed indirect 1.00
92
88Uranus Company has 2 products that use the same manufacturing Marketing Costs:
facilities and cannot be subcontracted. Each product has sufficient Variable 2.50
orders to utilize the entire manufacturing capacity. For short-run profit Fixed 1.50
maximization, Uranus should manufacture the product with the
(1/1 Point) The company must decide to continue making the product or buy it
Lower total manufacturing costs for the manufacturing capacity. from an outside supplier. The supplier has offered to make the
Lower total variable manufacturing costs for the manufacturing product at a level of quality that the company prescribes. Fixed
capacity. marketing costs would be unaffected, but variable marketing costs
Lower total variable manufacturing costs for the manufacturing would continue at 30% if the company were to accept the proposal.
capacity.
Greater contribution margin per hour of manufacturing capacity. What is the maximum amount per unit that the company can pay the
89Duncan Corporation manufactures water toys. It plans to grow by supplier without decreasing its operating income?
producing high-quality water toys at a low cost that are delivered in a (0/1 Point)
timely manner. There are a number of other manufacturers who 8.50
produce similar water toys. Duncan believes that continuously 7.75
improving its manufacturing processes and having satisfied 5.25
employees are critical to implementing its strategy. To further 6.75
company strategy, measures on the balanced scorecard would 94Luzon Fabricators, Inc. estimates that 60,000 special components
MOST likely include: will be used in the manufacture of a specialty steel window for the
(1/1 Point) whole next year. Its supplier quoted a price of P60 per component.
number of process improvements Luzon prefers to purchase 5,000 units per month, but its supplier
first to market could not guarantee this delivery schedule. In order to ensure
longer cycle times availability of these components, Luzon is considering the purchase
number of new products of all the 60,000 units at the beginning of the year. Assuming Luzon
90A chain of cause-and-effect relationships that appropriately link the can invest cash at 8%, the company’s opportunity cost of purchasing
four balanced scorecard perspectives is: all the 60,000 units at the beginning of the year is
(0/1 Point) (0/1 Point)
a high return on investment causes customer loyalty that results in 132,000
skilled production workers that improve process quality. 264,000
skilled production workers help to produce process quality that 150,000
results in customer loyalty that helps to increase return on invest- 144,000
ment. 95For May 2021, Young Company has budgeted its cash receipts at
customer loyalty results in a high return on investment that results in P125, 000 and its cash disbursements at P138, 000. The company’s
the ability to attract skilled production workers that improve process cash balance on May 1 is P17, 000. If the desired May 31 cash
quality. balance is P20,000, then how much cash must the company borrow
improved process quality results in a high return on investment that during the month (before considering any interest payments)?
causes customer loyalty that results in the ability to attract skilled (0/1 Point)
production workers. 4,000
Section 8,000
91Kareem, Inc. has P125,000 of inventory that suffered minor smoke 12,000
damage from a fire in the warehouse. The company can sell the 16,000
goods “as is” for P45,000; alternatively, the goods can be cleaned 96Brook Company manufacturers part no. 007 for use in its
and shipped to the firm’s outlet center at a cost of P23,000. There the production cycle. The costs per unit for a 5,000-unit quantity follows:
goods could be sold for P80,000. What alternative is more desirable
and what is the relevant cost for that alternative? Direct materials P 2
(1/1 Point) Direct labor 12
Sell “as is,” P125,000. Variable overhead 5
Clean and ship to outlet center, P23,000. Fixed overhead applied 7
Clean and ship to outlet center, P57,000. Total P26
Neither alternative is desirable, as both produce a loss for the firm.
92Middleton Industries is a multi-product company that currently
manufactures 30,000 units of Part QS42 each month for use in the
production of its main product. The facilities now being used to
produce Part QS42 have fixed monthly cost of P150,000 and a Adebayo Company offered to sell Brook 5,000 units of part no. 007
capacity to produce 84,000 units per month. If Middleton were to buy for P27 per unit. If Brook accepts the offer, some of the facilities
Part QS42 from an outside supplier, the facilities would be idle, but presently used to manufacture part 007 can be used to help with the
60 percent of its fixed costs would not continue. The variable manufacture of part no. 123, and P3 per unit of the fixed overhead
production costs of Part QS42 are P11 per unit. If Middleton applied to part no. 007 would be totally eliminated. By what amount
Industries is able to obtain Part QS42 from an outside supplier at a would net relevant costs be increased or decreased if Brook accepts
unit purchase price of P12.875, the monthly usage at which it will be Adebayo’s offer?
indifferent between purchasing and making Part QS42 is (1/1 Point)
(0/1 Point) P5,000 increase.
30,000 units P15,000 decrease.
32,000 units P20,000 decrease.
80,000 units P35,000 decrease.
48,000 units 97Alfaro's Manufacturing Company can make 100 units of a
93The following are a company’s monthly unit costs to manufacture necessary component part with the
and market a particular product. following costs:
Direct Materials P80,000
Direct Labor 13,000
Variable Overhead 40,000
Fixed Overhead 27,000

If Alfaro's Manufacturing Company can purchase the component

externally for P145,000 and
only P4,000 of the fixed costs can be avoided, what is the correct
“make or buy” decision?
(0/1 Point)
Make and save P8,000
Buy and save P8,000
Make and save P20,000
Buy and save P20,000
98The Health Care Division of Paul Insurance employs three claims
processors capable of processing 5,000 claims each. The division
currently processes 12,000 claims. The manager has recently been
approached by two sister divisions. Auto Division would like the
Health Care Division to process approximately 2,000 claims.
Property Division would like the Health Care Division to process
approximately 5,000 claims. The Health Care Division would be
compensated by Auto Division or Property Division for processing
these claims. Assume that these are mutually exclusive alternatives.
Claims processor salary cost is relevant for
(0/1 Point)
Auto Division alternative only
Property Division alternative only
both Auto Division and Property Division alternatives
neither Auto Division nor Property Division alternatives
99How does a company determine whether to sell a product “as is”
or process it further?
(1/1 Point)
If the costs to process further exceed the costs of current production,
the product should be sold ‘as is.”
If the costs to process further exceed the costs of current production,
the product should be processed further.
If the increase in revenue from selling the product after further
processing is greater than the additional costs incurred in further
processing, the company should opt for further processing.
If the revenues generated by processing the product further exceed
the revenues from selling the product “as is,” the company should
process further.
100Jordan Company manufactures Part No. 498 for use in its
production cycle. The cost per unit if 20,000 units of Part No. 498 are
manufactured are as follows:

Direct materials P6
Direct labor 30
Variable overhead 12
Fixed overhead applied 16
Total unit cost P64

The Reeves Company has offered to sell 20,000 units of part No.
498 to Rainbow for P60 per unit. Rainbow will make the decision to
buy the part from Reeves if there is a savings of P25,000 for
Rainbow. If Rainbow accepts Reeves’s offer, P9 per unit of the fixed
overhead applied would be totally eliminated. Furthermore, Rainbow
has determined that the released facilities could be used to save
relevant costs in the manufacture of part No. 575. In order to have a
savings of P25,000, the amount of the relevant costs that would be
saved by using the released facilities in the manufacture of Part No.
575 would have to be
(0/1 Point)
80,000
85,000
125,000
140,000