UNIVERSIDAD DE MANILA

MIDTERM EXAM – BSA 23

2nd Semester, 2021-2022

NOTE: TYPE YOUR ANSWER ON THE ANSWER SHEET PROVIDED. FOLLOW STRICTLY SUBMISSION TIME.
YOUR SUBMISSION IS BEING MONITORED.

TEST I – TRUE OR FALSE ON THE OFFICIAL ANSWER SHEET MARK LETTER A IF THE ANSWER IS TRUE OR B IF
THE ANSWER IS FALSE.
1. Cost of goods sold refers to the products brought to completion, whether they were started before or
during the current accounting period.
2. Gross Margin will always be greater than contribution margin.
3. The margin of safety tells a company how far sales can drop before it will be operating at a loss.
4. If a company's breakeven revenue is $1,000 and its budgeted revenue is $1,250, then its margin of
safety percentage is 25%.
5. A profit-volume graph shows the impact on operating income from changes in the output level.
6. Under both variable and absorption costing, all variable manufacturing costs are inventoriable
costs.
7. The breakeven point is the minimum number of units a company must sell to earn a net profit.
8. Gray Company sells two products, X and Y. For the coming year, Gray predicts the sale of 5,000 units of X
and 10,000 units of Y. The contribution margins of the two products are $2 and $3, respectively. The
weighted-average contribution margin would be $2.67.
9. The breakeven points are the same under both variable costing and absorption costing.
10. The difference between absorption costing and variable costing is the treatment of fixed manufacturing
overhead.

TEST II – MULTIPLE CHOICE – TYPE THE LETTER THAT ANSWERS THE QUESTION OR COMPLETES THE
SENTENCE.

THEORY

11. ________ are the acquisition costs of all materials that eventually become part of the cost object
and can be traced to the cost object.
A) Direct manufacturing labor costs
B) Direct material costs
C) Indirect manufacturing costs
D) Manufacturing overhead costs

12. Finished goods inventory would normally include:

A) direct materials in stock and awaiting use in the manufacturing process
B) goods partially worked on but not yet fully completed
C) goods fully completed but not yet sold
D) products in their original form intended to be sold without changing their basic form

13. When 10,000 units are produced, variable costs are $6 per unit. Therefore, when 20,000 units are
produced:
A) variable costs will total $120,000
B) variable costs will total $60,000
C) variable unit costs will increase to $12 per unit
D) variable unit costs will decrease to $3 per unit
14. If unit outputs exceed the breakeven point:
A) there is a loss
B) total sales revenue exceeds total costs
C) there is a profit
D) Both total sales revenue exceeds total costs and there is a profit.

15. At the break-even point,

a. sales equal total variable costs.
b. contribution margin equals total variable costs.
c. contribution margin equals total fixed costs.
d. sales equal total fixed costs.

16. A normal costing system uses the following _____.

a. actual direct material, actual direct labor, and actual overhead
b. actual direct material, actual direct labor, and applied overhead
c. actual direct material, applied direct labor, and actual overhead
d. applied direct material, applied direct labor, and actual overhead

17. _____ is not an alternative term for absorption costing.

a. Direct costing
b. Full costing
c. Traditional approach
d. Functional approach

18. The term "prime cost" refers to

a. all manufacturing costs incurred to produce units of output.
b. all manufacturing costs other than direct labor and raw material costs.
c. raw material purchased and direct labor costs.
d. the raw material used and direct labor costs.

19. The formula to compute cost of goods manufactured is

a. beginning Work in Process Inventory plus purchases of raw material minus ending
Work in Process Inventory.
b. beginning Work in Process Inventory plus direct labor plus direct material used plus
overhead incurred minus ending Work in Process Inventory.
c. direct material used plus direct labor plus overhead incurred.
d. direct material used plus direct labor plus overhead incurred plus beginning Work in Process
Inventory.

20. The formula for a mixed cost is

a. total cost = total variable cost fixed rate x amount of output)
b. total cost = total fixed cost + (variable rate  amount of output)
c. total cost = variable rate  amount of output
d. none of these are correct
 PROBLEM – 2 POINTS EACH

Kym Manufacturing provided the following information for last month:

Sales $12,000
Variable costs 4,000
Fixed costs 1,000
Operating income $7,000

21. If sales double next month, what is the projected operating income?
A) $14,000
B) $15,000
C) $18,000
D) $19,000

22. A company desires to sell a sufficient quantity of products to earn a profit of $300,000. If the unit
sales price is $20, unit variable cost is $12, and total fixed costs are $600,000, how many units
must be sold to earn net income of $300,000?
a. 168,750 units
b. 112,500 units
c. 90,000 units
d. 67,500 units

Tire and Spoke Manufacturing currently produces 1,000 bicycles per month. The following per unit
data apply for sales to regular customers:

Direct materials $50

Direct manufacturing labor 5
Variable manufacturing overhead 14
Fixed manufacturing overhead 10
Total manufacturing costs $79

23. The plant has capacity for 3,000 bicycles and is considering expanding production to 2,000
bicycles. What is the per unit cost of producing 2,000 bicycles?
A) $79 per unit
B) $158 per unit
C) $74 per unit
D) $134 per unit

24. When fixed costs are $40,000 and variable costs are 20% of the selling price, then breakeven sales
are:
A) $40,000
B) $50,000
C) $200,000
D) indeterminable
25. During the current period, 20,000 units were produced and 17,000 units were sold. Fixed
manufacturing costs incurred amounted to $40,000. An absorption costing income statement
would report fixed manufacturing:
a) manufacturing overhead of $34,000 as a deduction from sales revenue to obtain gross profit
b) manufacturing overhead of $40,000 as a deduction from sales revenue to obtain gross profit
c) costs of $34,000 as a deduction from gross profit to obtain operating income
d) costs of $40,000 as a deduction from sales revenue to obtain contribution margin

The following information is for the Jeffries Corporation:

Product A: Revenue $16.00

Variable Cost $12.00

Product B: Revenue $24.00

Variable Cost $16.00

Total fixed costs $75,000

26. What is the breakeven point, assuming the sales mix consists of three units of Product A and one
unit of Product B?
A) 10,000 units of A and 5,000 units of B
B) 11,250 units of A and 3,750 units of B
C) 12,000 units of A and 4,000 units of B
D) 4,000 units of A and 12,000 units of B

27. The following monthly data are available for Lumberyard Company. which produces only one
product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $84,000;
Actual sales for the month of June, 4,000 units. How much is the margin of safety for the company
for June?
a. $84,000
b. $42,000
c. $126,000
d. $1,000

Taran Company incurred the following costs for the months of January and February.

Type of Cost January February

Insurance $ 5,000 $ 5,000
Utilities 4,000 5,000
Depreciation 3,500 3,500
Materials 10,000 20,000

28. Assume that output was 5,000 units in January and 10,000 units in February, utility cost is a mixed cost,
and the fixed cost of utilities was $3,000. What was the variable rate per unit of output for utilities cost?
a. $.60
b. $.40
c. $.20
d. $.30
29. Steelman Company manufacturers desks. The beginning balance of Raw Material Inventory was $4,500;
raw material purchases of $29,600 were made during the month. At month end, $7,700 of raw material was
on hand. Raw material used during the month was
a. $26,400.
b. $34,100.
c. $37,300.
d. $29,600.

30. Morris Company manufacturers computer stands. What is the beginning balance of Finished Goods
Inventory if Cost of Goods Sold is $107,000; the ending balance of Finished Goods Inventory is $20,000;
and Cost of Goods Manufactured is $50,000 less than Cost of Goods Sold?
a. $70,000
b. $77,000
c. $157,000
d. $127,000
Kory's Auto produces and sells an auto part for $60.00 per unit. In 2011, 100,000 parts were produced and
75,000 units were sold. Other information for the year includes:

Direct materials $24.00 per unit

Direct manufacturing labor $ 4.50 per unit
Variable manufacturing costs $ 1.50 per unit
Sales commissions $ 6.00 per part
Fixed manufacturing costs $750,000 per year
Administrative expenses, all fixed $270,000 per year

31. What is the inventoriable cost per unit using variable costing?
A) $28.50
B) $30.00
C) $36.00
D) $43.50

32. What is the inventoriable cost per unit using absorption costing?
A) $30.00
B) $36.00
C) $37.50
D) $43.50

Dr. Charles Hunter, MD, performs a certain outpatient procedure for $1,000. His fixed costs are
$20,000, while his variable costs are $500 per procedure. Dr. Hunter currently plans to perform 200
procedures this month.

33. What is the margin of safety assuming 100 procedures are budgeted?
A) $40,000 or 40 times
B) $50,000 or 50 times
C) $60,000 or 60 times
D) $100,000 or 100 times
 Assuming a constant mix of 3 units of Small for every 1 unit of Large.
Small Large Total
Sales $20 $30
VC 14 18
Total fixed costs $48,000

34. The breakeven point in units would be:

A) 4,800 units of Small and 1,600 units of Large
B) 1,200 units of Small and 400 units of Large
C) 1,600 units of Small and 4,800 units of Large
D) 400 units of Small and 1,200 units of Large

Ivana’s Decorating produces and sells a mantel clock for $80 per unit. In 2011, 50,000 clocks were produced
and 40,000 were sold. Other information for the year includes:

Direct materials $30.00 per unit

Direct manufacturing labor $ 2.00 per unit
Variable manufacturing costs $ 3.00 per unit
Sales commissions $ 5.00 per part
Fixed manufacturing costs $25.00 per unit
Administrative expenses, all fixed $15.00 per unit

35. What is the inventoriable cost per unit using variable costing?
A) $32
B) $35
C) $40
D) $60

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