ReSU — The Review School of Cccoritomey, ‘9 7359807 / 7343989 B 09104391320 / 09239124121 / 09164383834 ) resareview@hotmail.com (MANAGEMENT SERVICES A.lee Quizzer: MS - 01 COST BEHAVIOR ANALYSIS Sources: CMAICIAIRPCPAVAICPA/Various test banks. 77 Hunger Company has estimated the following cost formulas for overhead: ee coat le i Lubricants "P1500 plus P 0.50 pet machinerhaur~1g00 + (OS°*30) > 148 Uliies P 2,000 plus P 0.60 per machineshour 20a + (o.Uox 9a) ~ 2185, Depreciation _P 1,000 Maintenance | P 200 plus P0.10 permachine-hour ago + (C10n 300) #230 Machine setup P 0.30 per machine-hour Or0KeD > _ 1 Based on the cost formulas, what is the.Lotal expected overhead cost at 300 machine hours? 190 a. 4,700 6. P5,000 va b. P4.950 @. P5,180 oh Wilh long tates? ‘a. The higher is the production within the relevant range, the higher is the variable cost per unit The higher is the production within the relevant range. the higher is the fixed cost per unit The lower is the production within he relevant range, the lower is the total fixed cost 4. The lower is the production within the relevant range, the lower is the total variable cost Ai As volume insseases, ‘2. Total fixed costs remain constant and per-unit xed costs increase b, Total fixed costs remain constant and per-unit fixed costs decrease Total fixed costs remain constant and per-unit ined costs remain constant 4. Total fixed costs increase and per-unit fixed costs increase 4 Within the relevant range, the amount of yariable cost per unit 4, Differs at each production level ©. Decreases as production increases Increases as production increases 4, Remains constant at each production level A. Which of the following.best describes a fixed cost? c a. Itis constant per unit of changes in production b. It may change in lotal when such change is related to changes in production €._Itmay change in tolal when such change is unrelated io changes in production. ‘4. iKrmay change in total when such change depends upon production or within the relevant range k A What are {xed cosis that cannot be reduced or avoided within & short period of time? 2. Committed ————"e. Avoidable, b. Variable 4. Unnecessary 7 What would be an example of a discretionary fixed cost? ‘a, Depreciation on equipment - eummiaed cote. Salaries of top management b. Renton a factory building ~cusnittd coi d. Research and development 8 Which of the following best describes a step cast? ~« te atlevevt eoege, a. is partly variable and panty fixed . IWincreases proportionately with volume b._ Itremains constant in all cases d. increases abruptly outside the relevant range | A. in describing the cost formula equation Y = a + bX, which of the following statements is correct? A D ‘a. 'Y'is the independent variable b. ‘a's the variable rate ©. ‘al and '‘b’ are valid fr al ves of activity 4. In the high-tow method. ’b' equals the change in cost (Y) divided by the change in activity (X) (72. The fixed cast of a semi-variable cost is comparable to the mathematical concept of cage © Dependent varate B Sope of he line oioaaerias 14 itch of ne aldwing i 6G) method of piting a somvariebe cost? ip Aeon pon Le Roercnat 8 Method of ees! squares ireergtoyannty Page tof 4 pagesKeS - The Review School of Cecowertomen MSQ-01 COST BEHAVIOR ANALYSIS Mockingbird Company applies the high-low method of cost estimation to customer order data for the first 4 monins of 2076 Month Orders Cost (P January 1,200¢ 3.1207 4329 - 2120 _ (20 February 1,300 3,185 ue March: 1,800- 4,320" mye riGoo ‘Api = 1,700 3.895. = ¥2.00 ‘What js the estimated variable cost component per order? oe A a. P2.00 oP 248 b. P242 d P250 5, Dawn Company estimated its materials handling cost at two activity levels as follows: Kilos Handled » Cost \egoso — 1200 _ 2am Cost Lgese — Ee ee +80,000 160,000 “gous COD ~ Fons 74 60,000 432,000 Bak he What is Dawn's est for handling 75,000 kilos? BOON ANNs te = feos FC OS ee cP 187.500 Wyoees= OS = TE b. P 153,000 dP 165,000 eye 4 = 183008 p AT In March, Starbox had elecirical-eests.of P_225.00 when the {otal volume. was 4,500eups of coffee served. In April, electrical costs were P 227.50 for 4,750 cups of coffee. Using the high-low method, what is the estimated fixed cost of electricity ver year? were gy . a P 180 P25 aan i b Pao Cpe AE ee aie co xe 2 is v Night Inc. uses the nigh mathed to derive the cost formula for electrical power cost. According to 2!!°° the cost formula, thé variable cost ber unit of activity is P 3 per machine hour. Total electrical power cost at the high level of activity was P7600 and the low level of activity was P 7,300. If the high level of activity was 1,200 machine-hours, then what was the low level of the activity? cau — 4390 ‘a. 800 machine-hours ¢ 1,000.machine-hours ay 3 b. 900 machine-hours d, 1,100 machine-hours Oe & 2%: Black Company has an average unit cost of P 45 at 10,000, units and P 25 at 30,000 units. What is.the. unit variable cost? 3 ie pee er Te) 380009 - 400,000 \ b, P-15,00 944 064 = [0 1 c. P2000 / d. Anamount thal cannot be determined without more information (AF Tolal production costs of prior periods for a company are listed below. Assume that the same cost o behavior pattems can be extended linearly over the range of 3,000 to 35,000 units and that the cost driver for each product is the number of units produced. = an Production per month (units) 3,000 9,000 16000' ~ ‘35,000. “ERY <74P 3 Product X P23700 P52,680 P 86,490 P 178260 eT Oh - 0 Product ¥ 47;280 © 141,840 252,160 ‘561,600 4q us What isthe average cast nar unital a production level of 8.000 units for product X? gy a iy. a. P7.90 6. P 585 =F ’ eek ica)! >. P598 dP a8s ayame Ze 0 ayz'o , ‘When unit production decreases, the average product cost per Unit increases. This indfease in the average cost per unit is due to the evs a. Increase in the total variable costs cc. Increase in the unit variable cost eae fa iresse i the Wal eer cna Air increone in heunl Txed cost, qr p< 11S Sn ss] 3x ihite Manufacturers provided you with the following flexible budgel of factory overhead at Yhree —/ different capacity levels z Capacity Facto-y Overhead ee = TH 2de ay 60% P 98,000 - ana = 70% 406,000 6 COR aa 85% 418,000 be xO 2 Wha! willbe the lexiblo budget of factory overhead at 90% capacity? Y= Go go (xu? a. P 112,000 c. -P 130,000 oF, 4" b. P 122,000 d, P132000 a= foo coon 4.509199) j =~ Page :: of 4 pages y= 22a | ® | 3ReSU - The Review School of Cacownctamey MSQ-01 COST BEHAVIOR ANALYSIS. 20. The ajar objective of preparing a scatter diagram is to B a. Determine the relevant range Derive an equation io predict future costs Perform regression analysis on the results, Find the high and low points 10 use for the high-low method of estimating costs _}* The principal advantage of the scatter-diagram method over the high-low method of cost estimation is that the scatter-diagram method A a. Considers more than two points b. Includes cost outside the rolevant range e ©. Gives a precise mathematical fit of the points to the line J Can be used with more types of costs than the high-low method ZL Which is anv equation requited for applying least square méthod af computing fixed and variable costs? + a a Sy=abx+ box’ ©, Sysna+ bie b Sxy=na + br Zy= 90 + ett as0> 4a + 1eob) 4s _ZE Bo analysis of maintenance cos| a! four levats of plant operations is shown below! Hours Cost Hours x cost Hours Squared $x = B44 bEx* . 40 P 1,000 ‘40,000 1,600 goq ga = wo m+ CuQe 30 900 27.000 900 Taesso > 1x09 + ei00b E 60 1300 79,000 as _ 5011480 57.500 oO 180) P4.350 202,500 be 135 The company uses the ‘method of Jest siuare’ for spitiing a sémi-variable cost. "How much isthe fix cost of the maintenance? 4350 2404 (solBs) + A a P 480 © P20 fam > 40 +2420 b. P00 4 P600 — 435y-2830 = 40 = 40 PA The following cost data for differont hours of operations are made ‘available to you by Florida ‘Manufacturing Company for your analysis: ee i ‘Number of Months 10 eh Sum of Hours 350 ak Sum of Costs 1,000 Sum of Hours x Costs 30.200 (gqq « oa + 450 (9) 35, Sum of Hours Squared 14.250. Pe eget ea How much is the monthly fixed cost? : 292u0 A a P2650 Pste00 3500 = ayq 122506 8 P8500 Yecut mast sudh e 420.00 agen 22h A 26 Simple regressioh analysis involves qo Lge ‘a. One dependent variable and one independent variable beat lons=inat as0(20) b. One dependent variable and any independent variables Joop =! + 336 ¢. Many dependent variables and one independent variable d. Many dependent variables and many independent variables BZ. Wultiple regression analysis involves '@. One dependent variable and one independent variable, b. One dependent variable and many independent variable’ f c. Many dependent variables and one independent variable ” @. Many dependent variables and many independent variables Preven eee Sia icas Coun nretap en ie tie o a. Graphic method ¢, High and low point - b. Simplecegression 7 d. Multiple regression 76 Malipte regression analysis is used when Da There is more than one cost category to analyze b. All of the points on a scatter graph fall exactly on a regression line ‘cThe high-low method cannot be used because there is only orie observation 4, There is more than one activity that irives the variable component of a mixed cost 29/'In regression analysis, which of the following correlation cootiients (¢) represents the sirongest relationship between dependent and independent variables? D a -1.05 G& -0.03 a b. 1.89 4. 078 301 4 pages gS Page 3 of 4 pag coeReSU - the Review School of Geconeancy, MSQ-01 COST BEHAVIOR ANALYSIS AB. A scalter diagram thal manifests a regression line sloping down to the right would most likely show a Correlation coefficient (°) of - eager i ce 2. +095 is c. -095 b +950 | d +950 9 Mh the coefficient of correlation (r) between two variables is zer9, how might a scatter diagram of these variables appear? A ‘a. Random points b. Aleast squares line that slopes up to the right c. Aleast squares line that slopes down to the right d._Under this condition, a scatter diagram could not be plotted on a graph. 86, Resquared (¢)is a measure of D a. The fixed cost component b. The variable cost per unit of activity The spuriaus relationship between cost and activity d. How well the regression line accounts for the changes in the dependent variable 7A Ar cnstnucing a scatior chart the inna aur of Madagascar Company provided you wih he following information > Independent variable: 1,000,000 yr ot bx » Slope of the line: 0.25 e > Y-axis intercept: 7,500 y> eu + oar (00,0) Based on the above data, what is the estimated cost? {= 253,200 ] a. P250,500 MT 000,000 4 b. P 257,500 dP 1,007,500 ‘A management accountan| performs a linear regression of maintenance cost vs. production using a ‘computer spreadsheet. The regression output shows an “intercept” value of P 322,897 How should the accountant interpret this information? A a. Yhas a value of P 322,897 when X equals zero “ b. Xhas a value of P:322.897 when Y equals zero c. The residual error of the regression is P 322,897 4. Maintenance cost has an average value of P 322,897 1, 2 Jckrono Company sos reresson analy to develop model er prelcing overhead cots. Two different cost drivers (machine hours and direct materials weight) are under consideration as the independent varabe. Relevant data were run on m computer ving ore ofthe sandr euesson programs whe foowng esis Coefficient Coefficient Machine hours Direct materials weight Y-intercept 2,500 1. Yintercept B 4 50° 8 F070 = 050, What regression equation should be used? 500 + 5 0X ¢ 2,500 + 3.5X 4 (900 + 2.6x (600 + 13x Be yezrmoesx\ 26. The saistician of Madame Q has developed the following cost-prediction equation, using observations from 12,000 to 30,000 machine hours: cosy instead + Y= P 236837 + 3.7625X she costs fost comsidered i cor pstongn oF Resquared = 0.81 A cere inthe ntermeteor ot Cost ~ bared = Standard error = P 24:63 7 MES NE CONTE in oe Gort with coc Geter Several ‘ular’ are notin tlerable is Y = total maintenance cost Xcmachine hours Compute the estimated maintenance cost at 20,000 machine hours. c a. P 236837 c P312,087 b, 252,790 dP 336,450 > Zhu sar + 3-4026 (ov) = #31208 Page 4 of 4 pagesReSt ~ The Review School of Gecounkamey ‘@ 7359807 / 7343989 @ 09104391320 / 09259124121 / 09164383834 & resareview@3hotmail.com MANAGEMENT SERVICES ‘A Lee * E, Arafias Quizzer: MS - 02 COST-VOLUME-PROFIT ANALYSIS f Sources: CMAICIAIRPGPAVAICPA/Various test banks 77 Which cost is,not Sublracted ftom selling pre to calculate contribution margin per wait? D a. Variatle manufacturing overhead Direct labor b. Variable selling expenses d. Fixed manufacturing overhead % Which of the following would decrease (rib contribution margin the most? sus. a A a. A 15% decrease in selling price © A 15% decrease in variable expenses NC zg b. A15%increase in variable expenses dA 15% increase in fixed expenses. A 7 8. 40. Company sels its on product for P 60 per unit and incurs the following variable costs per ui Oe Direct material : PAB ai Direct labor 12) Perire a3 Manufacturing overhead ay, eceaee . Total variable manufacturing overhead "P35. 40-6 Ne ast Selling expenses joie Total variable costs P40 get OA, 4Jo's annual fixed costs are’P 880,000. If pnme costs increased by 20% and all other values: remained 144/¢o the.same, what would be Jo Company's contribution margin ratio {to the nearest whole percentage)? _ 49 ¢ a 75% : c. 24% f b 30% 4. 20% ‘ ae AC Bool. Company plans to market anew product. Based on ils market studies, Abst estimates that t can sell 5,500 units in 2015. The selling price will be P 2 per unit. Variable cost is estimated to be 40% of the selling price. Fixed cost is estimated to be P 6,000. What is the break-ever point? B ‘a. 3,750 units & 8,500 units er = GOOO os 5000 unis @ 7enumis, OCU yan Sout on cng ee for 2016 based on a gales forecast of P 6,000,000; Anne, inc. prepared the — » following estimated data ___. Gost and Expenses rect materials x ya VE 3561. direct labor +.400'900 Gre \ Gr “11M 1 Factory overhead 600,000 900,000 355 At Selling expenses 240,000 366,000 = »5t —pdministraive expenses _60,000 140,000 = 4M 3,900,000 _ © 1,490,900 Wha would bathe rian oS anes ity eat aver bat? a. P.2,250,000 P-4,000,000 b. P3,500,000 ¢. P5,300,000 (BC The mostiikelystrategy \overce the brenkaven point would be fo Ger = FO © a, Increase both the fixed:cost and the contribution margin oh Decrease both the fixed costs and the contribution margin * 5 Decrease the fixed costs and increase the contribution margin 4d, _ Increase the fixed costs and decrease the coninbution margin % J For the period just ended, Loma Company generated the following operating results in percentages Revenues 100% Gost of sales Variable 50% Fixed 10% Total 60% Gross profit “40° Operating expenses Variable Fixed = Total | Net operating income 5% Total sales amounted to P.3.milion. How much was tho break-even sales? 2. P 1,875,000 ¢. P'2,850,000 b. P2/500,000 d. P3.750,000 Page 1 of 6 page:ReSQ - the Review School of lccor taney MSQ-02 COST-VOLUME-PROFIT ANALYSIS Once the breakeven point has been reached, operating income will jncrease by the 8 ‘a. Gross margin per unit for each additional unit sold . Contribution margin per unit for each additional unil sokd ©. Fixed costs per unit for each additional unit sold |S) ato"? 4... Variable costs per unit for each additional unit sold ree 9. The following data refer to cost-volume-profi relationship of Albert Co peta r C= 1088 Break-even point in unils 1,000 om ow. Variable cost per unit P1250 = 3590 Total fixed cost P 75,000 cm How much wil be contd 6 operating income bythe 003° ant sa? repens = ce PRR 2) Sie ae Pp 3 - b. P3256 5 Zero AH +: _ 2 ste folowing wu se a env pn a share? Picosoas Ge apne cacored Ber ey sated Racy Niel wslcien Geeta Bee pr eeaacnal uiptom rinipea ies Ve A company manutactures @ single product Fsimated cost data regarding this product and other information for the product and the company are as follows Sales price per unit P40 Total variable production cost per unit 22 Sales commission (on sales) per unit 58% Fixed costs and expenses ‘Manufacturing overhead P5598,720\ 44) 9. at ; General snd adinitrave pavseas> 12°! 200/[0 = S#3200 wis Effective income tax rate 40% = ‘What number‘ofunits must the company sell in the coming year in order fo reach i's breakeven point? ce a. 388,800 units 583,200 units b, 518,400 units d. 972,000 units othe present | brsakven sale of Bong ‘Company is P 550,000 per year. It is computed. that if the fixed cost will go Up by P 60,000; the sales required 1o break-even will also increase to P 700,000, without any change in the selling price per unit and on the variable expenses. How much is the tolal fixed cost before the increase of P.60,0007 a 200,000 c P.280,000 z ss ‘b. P 220,000 4 P330,000 JP. One of the major assumptions Jimiting the reliability of breakeven analysis is that c 2 Efficiency and productivity wil continually increas e b. Total variable costs will emain unchanged over the relevant range ¢, Total fixed costs will remain unchanged over the relevant range 4. The cost of production factors varies with changes in technology 14. How much wil income change company makes an advertising campaign given the following data” St of advertising campaign P 25,000 S ta Increase in sales 60,000 ie 422 Variable expense as a percentage of sales 42% ohne 8 a. P 200 increase © P5000 increase oy ag od a8 b. P9,800 increase dP 25,200 increase ORAS TAS By 46. Sherlyn Company is planning to sell 200,000 units of Product F. The fixed cost is P 400,000 Zany Variable cost Is 60% of the selling price, In order to realize a profit of P 100,000, what should be the selling price per unit? Ne a obs os oan Pars a peo) Ste HERE HEIR Sa r8 om acm b. Paty a P625 = Pc2s af. 16. Dalen Company prepared the following preliminary forecast concerning Product for 2016: ms Selling price per unit P10 WS Unit sales 10,000 1\u% Variable costs 600,000 Fixed costs 300,000, Based on a market study, Dalen estimates that it could increase the unit selling price by 15% and increase the unit sales volume by 10% if P 100,000 was spent in advertising, Assuming that Dalen incorporates ifese changes in its 2016 forecast, wha should be the operating income for Product 2”? c a P175,000 © P-205,000 ®. 190,000 , ad P-365,000 Su Iks Ros 600 Mu 6 WW She Page 2 of 6 pages Once eae . fe fou 909 5 Wood (W5-6) - (200200 + 1o9,c0 ) ‘ INEs aa GOS 956 - 400 6D 205,09,. \s F GWE ROs Peet ae Beare Sap cia ances ROS - the Review School of Cccowmtomey ved bem COST-VOLUME-PROFIT ANALYSIS hs b 17. August Company sells Product Rhey for ® 5 per unit. ‘The fixed cost is P 210,000 and the variable cost is 60% of the selling price. What amount of sales is needed to realize a profit of 10% of sales? a. P 700,000 c P-472,500 « b P525,000 gd, P 420,000 ‘Alice Corp. aims to. eam a 25% retum on its P 500,000 investment in equipment used in the ‘manufacture of Product Y. Based on ebtimated sales of 10,000 units of Product Y next year, the cost per unit were estimated as follows, Vatiable manufacturing cost P25. Sooky eg 2= j25 000 Fixed selling and administrative cost 10 GE Fixed manufacturing cost sets oe cask = 10% Fax Whal shouldbe the price of Product ¥? eit, AS ek Che RAO © P5250 eae b. P50.00 d. P 55.00 propt 2s% 16. Torty Company has fixed costs of P 100,000 and breakeven sales of P 800,000. What is its projecter projectert_ jrofit at Pt 38? (Hint: compute the constant contribution margin ratio) 10K — ook A @ F50.000 \arhy a2 = |SOCMe, 200,000 OPS Alaa b. P-150,000 \eeow dP 400,000 joan] eae > RE? commission of 10%. Fixed manufacturing cost Totals P 1,000,000 per month, while fixed selling and administrative cost equals P 420,000. The income tax rate is 30%. What will be the cequiced sales to achieve an after-tax profit of P 123,200? Foe? 420,000 + ps1, a 19,950 units © 15,640 units Ton b. 18,750 units 11,400 units aie (=a040) FZ. Heth Electronics Company is developing new product, surge protectors for high-voltage eldeiieat flows, The cost information fr this produc! is as follows Unit Direct materials 3.25 Direct labor P4.00 Distribution PO.75 The company will also be absorbing P 120,000 of additional fixed cos's associated with this new product. A corporate fixed charge of P 20,000 currently absorbed by other products will be allocated to this new product. Heth Electronics’ effective income tax rate is 40%, How many surge protectors (rounded to nearest hundred) must Heth Electronics sella a selling price of P 14 per unl to incronee after-tax income by P 30,000? (Hint: consider (Sohvarldletel fred cnet) nor + seit % D ‘a, 10,700 units ©. 20,000%units = 29.523 un b,. 12,100 units d. 28,300 units “i oa. 32: company has just completed the final development of its only product, general recombinant bacteria, which can be programmed to kill most insects before dying themselves. The product has taker 3 years ‘and P 6,000,000 to develop. The following costs are expected to be incurred on a monthly basis for hs ‘normal production level of 1,000,000 pounds of the new product FES die eos oR 1,000,000 ibs. Direct materials 300,000 young ayn Direct labor 1,250,000 HEE Variable factory overhead “450,000 > Fixed factory overhead 2,000,000 = sm Variable selling, general and administrative expenses Fixed selling, general and administrative expenses. 300. oD Total P'6,400,000 {It sales price per pound is P 5.90, the sales needed to earn P 3,000,000 profit in the first year would be ¢ a. 13,017,000 pounds rare 000,000 pounds” b, 14,000,060 pounds 4. 25,600,000 pounds 23. Julie Company, which is subject 9 40% tax, had the following operating data for the period just ended: Selling price per unit P60 Variable cost per unit P22 Fixed costs P 504,000 Management plans to improve the quality of its only product by way of implementing the following (1) Replacing a component that costs P 3,50 with a higher-grade unit that costs P 50, and (2) Acquiring a P 180,000 packaging machine. Julie will depreciate the machine over a 10-year period with no estimated salvage value by the straight-line method of deprectation. I the company wants to eamn after-tax of P 172,800 in the coming year, how many units must be sold? © a. 10,300 units, 22,500 unis, b, 21.316 units d 27,000units’ So4R ¥ 2 VKK 415. . é 3b Page 3 of 6 pages wai oy eee - 2 @ReSQ - The eis School of Cccoun taney MSQ-02 ‘COST-VOLUME-PROFIT ANALYSIS PA. Delphi Company has developed a new project that will be marketed for the first time during the next fiscal year. Although the Marketing Department estimates thal 35,000 units could.be sold at P 36 pec "unit, Delphi's management has allocated only enough manufactiring capacity to produce a maximum of 25,000 units of the new product annually. The fixed costs associated with the new product are budgeted at P_450,000for the year, which include’ P 60,000 for depreciation on new manufacturing ‘equipment. Delphiis subject 16 a 40% income-tax-rate. Dalia associated with each unit of product are presented below 460/08 + 125 ogo Variable Costs oe Direct material P7.00 Sane Direct labor SOS weit et Manufacturing overhead 400 it ASE AS Tolal variable manufacturing cost P 14.50 “EN Selling expenses 1.50 , Total variable cost P4600 Ask jose 99 Delphi Company's management’has stipulated that i will not approve the continued marifacture of the new product after the next fiscal year unless the afler-tax profit is-at-leastP_75,000 the first year. ‘The unit selling price-to achieve this target profit must be al least Vee D a> P 34.60 & P3700 rare fe b. P3660 4. P3900 Foun rH LE OP EB] 25. Cost-volume-profit relationships that are curvilinear may be analyzed linearly by considering only ~ 1.5\“ Da. Fiked and semrvariable costs. -c. Relevant variable costs en b. Relevant fixed costs d. Relevant range of volume 26. Dan, nc. planning to produce (wo products, A and B. Dan is planning to sel 100,000 units ofA al P 4 tun and 260,000 unis of B ai P'3.a uni. Variable cost s-70% of sales for A and BO% of sales for. In order to realize atola profit of P 160,000, what must the total fixed costbe? © A ‘a, P80,000 cc. P 240,000 ¢ ane ors b. P-90,000 d.P600,000 ve (awe) aya) 21, The following data pertain tothe two products manufactured by Glory, Ine: (xy oue Dole = ‘a4 Per Unit Hiei ROS m= Products “Selling Price Variable Gost’ = ES (rl P.280 P 140 oF ae B P 1,000 P 400 Fixed cost lalals 600,000 annually. The expected sales mix in units is 60% for Product A.and 40% for Product B. How many units of the two products togelher must Glory sell to break-even? A Tot} c a. 857 © 2,000 1S ee eee Ve ban d 2.459 ve Cite) Cau Gag w wo Soy 28. A company sells two products, X and Y_ The sales mix consists of a composite unit of two units of X for ‘every five units of ¥ (2:5). Fixed costs are P 49,500. The unit contribution margins for X and ¥ are, respectively, P 2.50 and P 1.20 Considering the company as a whole, what is the number of composite units to break even? A a. 4,500 ©. 9900 b. 8.250 31,500 NOTE: Usual mistake is letler D. The requirement is to compute “the number of composite units to break-even" so 31,500 units should be divided by 7 units since “a composite unit is composed of two Units of X for every five units of ¥ (2:5).” Consider the following > The number of composite units to break-even: 4,500 units The number of units to break-even: 31,500 units 29. Assuming same data in No. 28, if the company had a profit of P 22,000, the unit sales must have been 8 ‘a. Product X: 5,000; Product Y: 12,500. Product X: 23,800; Product Y: 59,500 b. Product X: 13,000; Product ¥:32,500 d._ Product X: 28 600; Product ¥: 71,500 £30. Kris Company sells Products S, T and D. Kris sells three units.of S for each uni of D and two units of T for each unit of S. The contribution margins are P 1 per unit of S, P 1.50 per unit of T, and P 3 per unit of. Fixed costs are P 600,000. How many units of S would Kris sell al the break-even point? t r 40,000 units ©. 240,000 units ies b, 120,000 units 4. 400,000 units HS gt 31. There are so many assumptions inherent in CVP analysis. Which of the following Is not one of these assumptions? She Cost and revenues are predictable and are linear over the relevant range = oD a. . Variable costs fluctuate proportionately wih volume G. Changes in the beginning and ending inventory are insignificant in amount Aer d. Sales mix will change as fixed costs increase beyond the relevant range Page 4 of 6 pages: @)RSM - The Review School of Gccowm Fancy MSQ-02 COST-VOLUME-PROFIT ANALYSIS 3% be sles mix shits owar higher contibulen magn produ, the breakeven point a. Decreases Remains constant b increases 4 faze 43, Employee, Inc. had the following sales results for 2016: TWsets CDplayer Radios Peso sales componentratio 030 030 040 Contribution margin ratio 040 040 060 Employee, Inc had fixed costs of P 2,400,000. The break even sales in pesos for Employee, Ino. are: Tvsels CDpplayer Radios TVsels CDplayer Radios ie a PSM P18M P36M c P15M PISM — P2M b P18M P18M P16M d, P1,531,915 P1,531,915 P2,042,553 36 For a profitable company, the amount by which sales can decline before losses occur is known as the ‘a. Sales volume variance ©. Variable sales ratio b. Hurdle rate 4 Margin of safety Pb. The margin of safety is @ Key concept of CVP analysis, The margin of safely is ' Ba. The contribution margin rate <1 The difference between budgeted sales and breakeven sales Vc gut c. The difference between the breakeven point in sales and cash flow breakeven cet oa OY The difference between budgeted contribution margin and breakeven contribution margin Fc. SOK Pio 336. Irish Company has sales of P 100,000, fixed costs of P 50,000, and:a profit of P 10,000. What is Irish Company's margin of safety? = Sols BES oer, SHH 8 a. P 10,000 ©. P99,333 We aden Cesena ee ee b. P 16,667 é P83,333 : Seas = py 1d), Comins istics Mistgniln comer We hare cet PF ‘4. Low fixed cost, low unit variable cost c. Low fixed cost, high unt variable cost b. High fixed cost, low unt variable cost d._High fixed cost, high unit variable cost 38, Vivian Corporation selis sets of encyclopedias. Vivian sold 4,000 sets last year at P 250 a set. If the variable cost per set was P 175, and the fixed costs for Vivian were P 100,000, whal is the Vivian's degree of operating leverage (DOL)? rs a. 0.67 oS b. 0.75 4. 3.0 38. Ubi Company's variable costs are 75% of sales. Al a sales level of P 400,000, the company's degree of operating leverage is 8, At this level, fixed cosis equal A a. P 87,500 ¢ P50,000 p b. P 100,000 d. 75,000 (90. The percentage change in earings before interests and taxes associated with the percentage: change in sales volume is the degre’ of A Operating leverage © Breakeven leverage b. Financial leverage 4. Combined leverage as A higher degree of operating leverage compared with industry average implies that the firm “a. Has higher variable costs b. Has profits that are more sensilive to changes in ©. 1s more profitable 4. Is less risky 42. Tiray Company's variable costs are 70% of sales. Ai a P 300,000 sales level, the degree of operating leverage is 10. If sales increase by P 60,000, what wil be the, degree of operating leverage? D a. 12 «6 ot cM [ECT soK | 46 b. 10 a4 a5 i et og & Hedin gostvolume profi enalyas,ssnatuly snares lopesrt > Dele Determines the most profitable mix of products to be sold Ye te 1. lows the decialn maker usa probabiios nthe evan of decision alertives ¢. Is done through various possible scenarios and computes the impact on profil of various ET \T * Gow predictions of future events bl 4. Js limited because in cost-volume-profit analysis, costs are not separated into fixed and pea qo¥ - a\e Variable components = gue AS. The indiference point is the level of volume at which a company aes ° a. Earns no profit eae b. _Eams its target profit loess ave ¢ Eams large amount of profit fe (Ow, De 4d. Earns the same profit under different operating schemes ee aaa Page 5 of 6 pages Gy 7 ee)ReSU - the Review School of Cccommtoncy, MSQ-02 COST-VOLUME-PROFIT ANALYSIS 44. Machine XX has fixed costs of P 225,000 and a variable cost of P20. Machine YY has fixed costs of P 300,000 and a variable cost of P 14. What is the indifference point in units? B a. 11,250 21,429 b. 12,500 d. Gannot be determined from given information A point of indifference is reached when 8 a. The savings in fixed cost is equal to the decrease in variable cost b. The savings in variable cost is equal fo the increase in fixed cost ©. The savings in fixed cost is more than the increase in variable cost 4d. The Savings in variable cost is less than the increase in fixed cost 48. Bona Motors, Inc. employs 40 sales personnel to market its line of economy automobiles. The average car sells for P 1,200,000 and a 6% commission is paid to the salesperson. Bona Motors is considering a change 10 a commission arrangement that would pay each salesperson a salary of P 24,000 per ‘month plus a commission of 2% of the sales made by that salesperson, What is the amount of total car sales at which Bona Motors would be indifferent as to which plan to select? B a. P-30,000,000 cP 22,500,000 bP 24,000,000 4. P 12,000,000 LUTION 6% commission: 1.2M (6%) =72,000 vs. _2% commission: 1.2M (2%) = 24,000 72,000 X = 24,000 X + 24,000.(40) X= 960,000 + 48,000 = 20 units Indifference Point: 20 units x P 1,200,000 per unit 47. Jon Corporation submitted to you the following condensed income statement Sales (80% capacity) 300,000 Variable costs P 180,000 Fixed costs 82,500 _ 262,500 Net income P.37,500 ‘What is the break-even point as a percentage of capacity? B a. 45% c. 67.85 b. 55% d. 68.75% SOLUTION 100% capacity: 300,000 +80% = P 375,000. VCR: 180,000 + 300,000 = 60% (CMR = 40%) Breakeven sales: 82,500 + 40% = P 206,250 > based on 100% capacity: 206,250 = 375,000 48. Contribution margin ratio multiplied by the margin of safety ratia equals D a. Variable cost ratio ¢. Break even sales ratio b. Fixed cost ratio 4. Net profit ratio 49. The following is Tams Company's cost behavior: 5,000 units oF less, Fixed costs P 35,000, a Contribution margin ratio. 20% Selling price, P40 ire eat How many units must be sold to earn a profit of 25.000? a. 7,500 c. 12,500 b. 11,000 d. 14,000 cco xy 40 a 50. The management of Rhea Company performed cost studies ard projected the following annual cost based on 40,000 units of productions and sales: ve s ‘% of variable costs to total cosis Direct materials 100% Direct labor 75% Factory overhead 40% Selling and administrative expense 25% What unit-selling price will yield a 10% profit from sales of 40,000 units? a. P3350 ¢ P4000 b. P35.00 d P50.00 SOLUTION GUIDE Total Costs Variable Costs Direct materials P 400,000 506 Direct labor 360,000 70/008 Factory overhead 300,000 20, 200 , Selling and administrative expense _ 200,000 56, bx8.000 Total 1.260.000 eG, (c Page 6 of 6 pages aeReS0 - The Review School of lccommtanoy / 09164383834 '~ resareview@hotmail.com * E. Arafias §@ 7359807 / 7343989 8 09104391320 / 09239124121 MANAGEMENT SERVICES A Le Quizzer: MS - 03 ABSORPTION & VARIABLE COSTING Sources: CMA/CIRPCPAVAICPA/Various test banks 1. Which method of inventory costing treats direct manufacturing costs and manufacturing overhead costs, bolh variable and fixed, as inventoriable costs? ¢ a. Direct costing c. Absorption costing Variable costing d. Conversion costing 2. What is the costing Inethod that treats ail fixed costs as period costs? a. Absorption costing ©. Variable costing b._ Job-order costing 3. Process costing 9. Blackie Co's 2016 fixed manufacturing overhead costs lolaled P 100,000 and variable selling costs totaled P 80,000. Under direct (variable) costing, how should these costs be classified? Period Costs Product Cosis o a PO 180,000 6 P 80,000 P 400,000 6 ® 100,000. P 80,000 4 P 180,000 PO ems 4 and 5 are based on the following information ‘A manufacturer at the end of is fiscal year recorded the data below. Prime cost P 800,000 Variable manufacturing overhead 100,000 Fixed manufacturing overhead 460,000, Variable selling and other expenses 80,000 Fixed selling and other expense: 40,000 4. the manufacturer uses variable costing, the inventoriable costs for the fiscal year are B a. P800,000 © P-980,000 » P-900,000 dP -1,060,000 5. Using absorption (full) costing, inventoriable costs are c a. P800,000 ©. P 1,060,000 b. P900.000 & P 1,080,000 5. For P 1,000 per box, Gray, Inc produces and sells delicacies . Direct materials are P 400 per box and direct manufacturing labor averages P 75 per box, Variable overhead is P 25 per box and fixed overhead cost is P 12,500,000 per year. Administrative expenses, all fixed, run P 4,500,000 per year, with sales commissions of P 100 per box Production is expected to be 100,000 boxes, which is met every year. For the year just endea, 75,000 boxes were sold What is the Inventoriable cost per box using absorption costing? 8 a. P5900 c. P670 bh P8625 dP 770 Refer 1o No. 6, what isthe inventoriable cost per box using variable costing? P 770 © 625 b. P67 4 P50 8. Under variable costing 8 a. Net income will tend to move based on changes in levels of production b. inventory costs will always be lower than under absorption costing ‘Net income wi always be higher than under absorplion costing 9. Net income will tend to vary inversely with production ch 9 The Rainbow Company had the following costs far 2016: Raw materials 700,000 Rent for factory building 50,000, Direct labor 100,000 Rent for sales effice 30,000 Miscellaneous FOH (fixed) 80,000 Depreciation on store equipment 20,000 Depreciati 40,000 How muct of these costs should bé inventoried under absorption (A) and variable (V) costing methods? ‘i . (A) 1,020,000 (V) 880,006 © {A}976,000 (V) 800,000 b (A) 1,009,000 (v) 880,000 d. (A)'930,000 (V) 800.000 © Page 1 of 4 pagesReSUh - the Review School of Gecowedemer MSQ-03 ABSORPTION & VARIABLE COSTING 10. A company manufactures a single product for its customers by contracting in advance of production. Therefore, the-company produces only units that will be sold by the end of each period, During the last period, the following sales were made and costs incurred, Sales P 40,000 ‘Salespeople's salaries: P 1,300 Direct Materials 9,050 Insurance (2/3 factory, 1/3 office) 4,200 Direct labor 6.050 Office supplies 750 Rent (9/10 factory, 1/10 office) 3,000 Advertising 700 Depreciated on factory equipment 2,000 Depreciation of an office equipment 500 Supervisor (2/3 factory, 1/3 office) 1,200 Inlerest on loan 300 What was the gross margin percentage for the last period (rounded lo the nearest %)? - € a. 41% ©. 46% b 44% 4, 49% 41, White Company manufactures a single product and has the following cost structure, Variable costs per unit Direct materials P3 Direct labor 4 Variable manufacturing overhead 1 Variable selling and administrative expense 2 Fixed costs per month. Fixed manufacturing overhead P 100,000, Fixed selling and administrative 60,000 ‘The company produces 20,000 units each month. The unit product cost under absorption costing c a, P10 c P13 b P12 a P15, 412. Refer to the data in No. 11, what is the unit product cost under variable costing? A a PB c PM b P10 5 gee 13. Refer to the data in No. 11, assuming there are no beginning inventories and 20,000 units are produced and 19,000 units are sold in a month. if the unit selling price is P 20, whal is the net income under absorption costing for the month? B ‘a. P30,000 c. P-38,000 b. P-35,000 4. P-42,000 14. Refer to the data in No. 11 assuming there are no beginning inventories and’ 20,000 units are produced and 19,000 units are solé in a month, If the unit selling price is P 20, what is the net income under variable costing for the month? A a. P30,000 © 38,000 b. P35,000 d. P-42,000 15, Brown Company began its operations on January 1, 2016, and produces a single product that sells for P 10 per unit. Brown uses an actual (historical) cost system. In 2016, 100,000 units were produced ‘and 80,000 units were sold. There was no work-in-process inventory at December 31, 2016 ‘Manufacturing costs and selling and administrative expenses for 2016 were as follows Fixed costs Variable costs Raw materials - P 2.00 per unit produced Direct labor P 1.25 per unit produced Factory overhead P.120,000._P.0.75 per unit produced Selling and administrative 70,000 - P1.00 per unit sold What would be Brown's operating income for 2016 under variable (direct) costing method? B a. P 114,000 . P.234,000 b P210,000 d. P.330,000 lems 16 and 17 are based on the following information ‘A company manufactures and sells a single product Planned and actual production in its first year of ‘operation was 100,000 units. Planned and actual costs for that year were as follows ‘Manufacturing Non-manufacturing Variable P600,000 P 500,000 . Fixed 400.000 300,000 The company sold 86,000 units of product at a selling prige of P 30 per unit 16. Using absorption costing, the company's operating profit was 8 ‘a P 750,000 P-975,000 b, P.900,000 4 P 1,020,000 : Page 2 of 4 pages ©)Re SU - the Kerrew School of Accountancy, MSQ-03 ABSORPTION & VARIABLE COSTING 17. Using variable costing, the company’s operating profit was, 8 ‘a. P 750,000 ¢ P915,000 b, P.840,000 4, P-975,000 « {Income under absorption costing may differ front income determined under variable costing. How is this difference calculated? A @. Change ir the quantily of units in inventory times the fixed factory overhead rate per unit Number of units produced during the period times the fixed factory overhead rate per unit ©. Change in the quantity of unis in inventory times the variable manufacturing cost per unit 4. Number of units produced during ihe period times the variable manufacturing cost per unit 19. Blonde, inc. manufactured 7.000 units last year. The ending inventory consisted of 100 units. There was no beginning inventory. Variable manufactunng costs were P 6.00 per unit and fixed manufacturing costs were P 2.90 per unit. What would be the change in the peso amount of ending inventory if ‘variable costing was used instead of absorption costing? D a. P800 decrease & PO »b, P200increase dP 200 decrease 20. What bes! accounts for profit difference between absorption costing and variable costing method? D a. Difference in fixea costs incurred ©. Difference in sales revenue b. Difference in variable costs incurred difference in inventory valuation 21, During its first year of operations, a company produced 275,000 units and sold 250,000 units. The following costs Were Incurred during the year Variable costs per unit Direct materials P 15.00 Direct labor 10.00 Manutacturing overhead 1250 Selling and administrative 2.50 Total fixed cost Manulacturing overhead 2,200,000 Selling and administrative 1,375,000 What is the difference between operating profit calculated on the absorption costing basis and on the variable costing basis is inat absorption casting operating profil? A a. P 200,000 greater & P325,000 greater b. P 220,000 greater dP 62,500 less 22, When production exceeds sales, fixed manufacturing overhead costs B a. “Ate released from inventory under absorption costing ». Are deferred in inventory under absorption easting ©. Are released from inventory under varinble costing d._ Are deferred in inventory under variable costing 23. Lavender Company's income under absorption costing was P 3,600 lower than its income. under variable costing. The company sok 10,000 units during the year, and its variable costs were P 9 per Unit, P 1 of which represents the variable selling expense, f production cost was P 11 pér unit under absorption costing, then how many units did the company produce during the year? B a. 8,200 units ©. 14,200 units 8,800 units 4 11,800 units 24. Variable costing and absorption costing will show the same incomes when there are no oO a. Beginning inventories ©. Variable costs 4d. Beginning and ending inventories 25. Blue Company had P 100,000 income: using absorption costing. Blue has no variable manufacturing Costs. Beginning inventory was P 15,000 and ending inventory was P 22,000. Income under variable costing would have been 8 a. P 78,000 ¢, P 100,000 &. P93,000 4. P 107.000 26. Which one of the following statements is correct regarding absorption costing and variable costing? B a. Overhead costs are treated in the same manner under both costing methods b. Iffinished goods inventory increases. absorption costing results in higher income Variable manufacturing costs are lower under variable costing 4. Gross margins are the sarne under both costing methods Page 3 of 4 pagesRESO. the Keriew School of Cccormtonce, MSQ-03 ABSORPTION & VARIABLE COSTING 27, 28. 29. 20. at 32, 33, 36, Red Co, had the same activity in 2016 as in 2015 except that production was higher in 2016 than in 2015. Red will show her income in 2016 than in 2015 b. The same income in both years ‘c. The same income in both years under variable costing d_ The same income in both years under absorption costing Which of the following must be known in order to institute a direct (variable) costing system? ‘a, The controllable and non-controllable components of all costs related to production b. Standard production rates and times for all elements of production ©. Contribution margin and break-even point for all goods in production d. The variable and fixed components of all costs related to production ‘Absorption ¢osting and variable costing differ in that fa. Standards can be used with absorption costing, but not with variable costing, b. Absorption costing inventories are more correctly valued. . Production influences income under absorption costing, but not under variable costing, d. Companies using absorption costing have lower fixed costs. When sales are constant but production fluctuates, a. Net income willbe erratic under variable costing i b. Absorption costing will always show a net loss c. Variable costing will always show a positive netincome d. Net income will be erratic under absorption costing Which of the following statements is true for a firm that uses variable costing? ‘a. The cost of a uni of product changes because of change in number of units manufactured b. Profit fluctuates with sales ©. Anidle facility variation is calculated d. Product costs include variable administrative costs Violet Co. manufactures a single product. Unit variable production costs are P 20 and fixed production costs are P 150,000. Violet uses a normal activity of 10,000 units to set its standard costs. Violet began the year wilh: no inventory, produced.11,000-units, and sold 10,500 units, ‘What is the ending inventory under absorption costing? a. P 10,000 © P 17,500 b. P 15,000 6. P 20,000 ‘A company’s production facility has an ideal capacity of 12,500 units, which was used as the basis for the normal capacity of 10,000 units. The company was able to produce 11,000 units during the period. Fixed manufacturing costs were P'200,000 while variable manufacturing costs were also P 200,000. What was the volume of capacity variance for the production? ‘a P-20,000 unfavorable ¢ P.24,000 favorable b. P.20.000 favorable d.P.40,000 favorable Super variable costing treats which of the following costs as the only variable and product costs? ‘a. Ditect labor b. Direct materials ¢. Straightine depreciation of factory machine d. Supervisory salary of an assembly fine manager Super variable costing is sometimes referred to as, ‘a. Full costing ©." Indirect costing b. GAAP costing d. Throughput costing A basic tenet of direct costing is that period costs should be currently expensed. What is the basic rationale behind this procedure? a. Period costs are uncontrollable and shouki not be charged to a specific product b. Period costs are generally immaterial in amount and the cost of assigning the amount to specific products would outweigh the benefits ©. Allocation of period costs is arbitrary at best and could lead to erroneous decisions by ‘management 4. Period costs will occur whether or not production occurs and 0 it is improper to, allocate these costs to production and defer a current cost of doing businessReSU ~ the Review School of Cecourance, 8 7399807 / 7343989 8 09104391320 / 09239424121 / 09164383834 |. resareview@hotmail.com MANAGEMENT SERVICES A-lee * E. Arafias Quizzer: MS - 04 RELEVANT COSTING Sources, CMA/GINRPCPAVAICPA/Various test banks Ae into tne towing eal ab he. decision making pipes? Da Wonliyngte sone ©. Quaitfving the factors associated ith the aterhatves C._ Resching a decison 4° Reversing the dsciston it ot éconbrricaly sound A. An ctganization’s execuve commitee, meeting’to.solve an imponant problem, spent’ 30/ minutes analyzing data and debating the cause of the problem Finally, they agreed and could move on fo ihe next step. Possible steps inthe creative problem-solving process ate listed below. Which step should the committee perform next? ; c a. Select a solution. . Identity the problem Generate atlomative solutions 4. Consider the reaction of compeltors to various courses of action Z Inthe development of the accounting data for decision-making purposes. a relevant cost is defined as: B . Changes in variable cost under each altemative course of action b. Future costs which will differ under each alternative course of action c. Historical,costs which are the’ best available basis for estimating future costs d. Standard costs which are developed by time-and-motion-study techniques because of their relevance to managerial control. : © As part of the data presented in support of a proposal to nesa@se the production of clock-radios, the sales manager of Arab Electronics reported the total additio 1 required for the proposed increased production level. The inesease in total costs knowm-as B a. Controllable cost ¢._ Opportunity cost b__ Differential cost a. Qut-ofspocket cost “The relevance of a particular cost to a decision is determined by the Co a” Size atthe cost © Potential effects on thé decision b. Risk level of the decision Accuracy and venfiabity of the cost ~ BO In aadecision analysis situation, which one of the following costs is generally not relavant to the decision? Da. tneremental cost ©. Avordable cost b. Differential cost 4 Histoncal cost AF The kind of cost that can be ignored in short-tetm decision making is a(n) : a. Differential cost ©. Sunk oost b. incremental cost 4 Relevant cost 8. Anitem whose entire am ily 2 difarnatiatcost is B a Factory overhead c. Conversion cost b. Direct cost 4d. Period cost 9. Middle East Company prepared the following tentative forecast concuming Product A for 2017 Sales 500,000 Selling price per unit 5.00 Variable costs 300,000, Fixed costs P 150.000 Study made by the sales manager disclosed that the unit selling price coult! be increased by 20%, with an expected volume decrease of only 10%. Assuming Middle East incorporates these changes in its 2017 forecast, what should be the operating income: fram product A? & a P66,000 ©. 120,000 b. P 90.000 dP 145,000 387 In determining whether to manufacture a pater buy tor an outside vendor. a cost ha is reawaat to the shortqun Oselslon is Da Pie costa Variable overtead ¢) Fixed overhead that wil be avoided it the pais bought from an dutside vendor 41. Fixed overhead that wil coin even he pat a bought rom an ouside vendor Page 1 of 8 pages:BoB - The Rersew School of lccoritoney MSQ-04 RELEVANT COSTING 14 15 16 a miake-or-buy decision, the relevant costs include variable manufacturing costs a well as a, Factory management cosis —=—e._ Avoidable fixed costs. b General office costs d. Depreciation costs Turkey Technology manufactures panteular computer component. Currently, the casts per unit are as Follows: Direc} matenais, P 50: direct i@bor. P 500, vanabie overhead, P 250; fixed overhead, P 400. akistan Ino. has obtained Turkey with an offer to. sell 19,000 units of the component for P:1,100 per unit ff Turkey accepts the proposal, P 2,500,000 of the fixed overhead will be eliminated. Should Turkey make or buy.the component? a. Make'due to savings of P 3,000,000 —_¢._ Buy due to savings of P.1,000,000 b. Buy due to savings of P 2,500,000 Make due to savings of P 500,000 ‘Saudi Arabia Company js operating at 70% capacity. The plant manager is considering making Part ASB now being purchased front outside supplies for P 110 each, a price that is projected to increase in the near fulure, The-plant has the equipment and labor force required 10 manufacture Part ASB, The design engineer estimates that each part requires P 40 of direct materials and P 30 of direct labor. The plant overhead is 200% of direct labor peso cost, and.40% of the overhead is fixed cost. A decision to manufacaure Part A56 yal result iy gain dr (loss) for each component of a P26 (P20) bP t6 d Pa Qatar Compariy manutactures Past G for use in its production cycte: The costs per unit for 10,000 units for Part G are as follows: Disect matenals P3 Direct iabor 15 Variable overhead 6 Fixed overnead og Total Pao Bahrain Company has offered to seit Qatar 10.000 units of Part G for P 30 per unit. tf Qatar accepts Bahrain's offer, the released facilities could be used to save P 45,000 in relevant costs in the manufacture of Part H.’ In addition, F 5 per unit-of fixed overhead applied to Part G would be totally eliminated. What alternative is nore desirable by what amount 1s i more desirable? a. Manufacture, 10,000 © Buy, P35,000 b,. Manufacture, P 15,000 + Buy, P65,000 ‘Yemen Company manuifactures 20,000 units of certain component per year. ‘This component is used in the production of a main product. The following are the costs to rake the component pet unit: Direct materials Pit Direct tabor 4 Vanable overhead 8 Fixed overhead 9 It Yemen buys the component from outside supplier the compaty can rent out the released facilities for P.20,000 a year. The cost ot the component pat unit as quated by the supplier is P36, 60% of the fixed ovethedd applied in the manufacture of the component will continue regardless of what decision ts made. For all purchases made by the: company, Hreight and handling costs are applied ‘at 1% of the Purchase price. The direct materials cost is exclusive ot the freight and handling cost What is the economic advantage or disadvantage of buying the component? a. P 24,800 advantage . P.27,000 disedvantage b P.27,000 advantage J. P.63,000 advantage ‘The Blade Division of Baghdad Corporation produces hardened steel blades. One-third of the Blade Division's output is sold to the Lawn Products Division of Baghtlad: the remainder is. Sold to outside customers. The'Blade Division's estimated sales and cost data for the fiscal year are as follows. Lawn Products Qutsiders Sales 15,000 Variable costs (40,000) Fixed costs 8,000) income 2,000 P14.000 Unit sates 10,000 tinits 20,000 units The Lawn Products Division has gn opportunity to purchase 19,000 identical quality blades from an outside supplier at a cost of P 1.25 per unit on a continuing basis. Assume:that-the Blade Division cannot sell any additional products to outside customers. Should Baghdad allow is Lawn Products Division to purchasis the blakles from the outside supplier? a Yes, because buying the blades would save Baghdad Company P 500 b No, because making the blades would save Baghdad Company P 1,500 © Yes, because huying the blades would save Baghdad Company P 2,500 . No, because making the biades would save Baghdad Company P 2 500 Page 2 of 8 pagesReSO - the Revren' School of Cecomeitamey MsQ-04 RELEVANT COSTING 17 18 19, 21 Cairo Manufacturing uses 10 units of Part Number KJ45 each month, in the production of radar equipment The unit cost to manufacture one unit of KJ4S is presented below. Direct matenals P 1,000 Materials handling (20% of direct materia cost) 200 : Direct labor 8,000 Manufacturing overhead (150% of direct labor) 12,000 Materials handling represents the direct variable costs of the Receiving Department that are applied to direct materials. and purchased components on their cost. This is a separate charge in addition to manufacturing overhead. Cairo's annual manufacturing overhead budget is one-third variable and two= thirds fixed Egypt Suppliers, one: of Cairo's reliable vendors, has offered to supply Part K45 at a unit price of 15,000. If Cairo purchases the KJ45 units (fom Scott, the capacity Cairo used to manufacture these parts would be idle ‘Should Cairo decide to purchase the parts from Egypt, the unit cost of KJ45 would, a, Increase by P 4,800 ¢ Decrease by P 3,200 b. Decrease by P 6,200 d._ increase by P 1,800 NOTE: The relevant cost to buy must include 20% handling cost. (P 15,000 + P 3,000) (ran Company needs 20,000 of a certain part ta use in its production cycle. The following information is, available: Cost to {ran to make the part Direct materials pa Direct labor 16 Variabie overhead 18 Fixed overhead applied _10 B48 Cost to buy the part from the Syria Company P36 If iran buys the part from Syria Co. iran could not use the released facilities in another manufacturing, activity. 60% of the-fixed overhead applied will continue regardless of what decision is made {n deciding whether to make or buy the part, what are the otal relevant costs to make the part? ‘a. P $60,000 cc. P720,000 b. P640,000 dP 840,000 Emirates, inc. has been manufacturing 5,000 units of Part 12345 which is used to manufacture of ane of its products. At this level of production, the cost per unit of manufacturing Part 12345 is as follows Direct materials P2 Direct labor 8 Variable overhead 4 Fixed overhead applied = _8 Total P20 Jordan Company has offered to sell Emirates 5,000 units of Part 12345 for P 19 a unit. Emirates has determined that it could use the facilities presently used to manufacture Part 12345 and generate an operating profit of P 4,000. Emirates has also determined that two thirds of the fixed overhead applied will continue even if Part 12345 is purchased from Jordan, To determine whether to accept Jordan's offer, the net relevant manufacturing costs to Emirates are: a P79,000 ¢ P-90,000 b. P80,000 d P-95,000 All ofthe following costs are relevant to a decision to accept or reject an order. except — a. Differential costs © Avoidable cost b, Out-of-pocket costs 4. Histonical cost The acceptance of a special order will improve overall net operating income so fong as the revenue from the special order exceeds A i a. The contnbution margin ri the order b. The sunk costs associated with the order ©. The variable costs associated with the order 4. The incrementar costs associated with the order Tehran has a stall that specializes in handcrafted fruit baskets that sell tor P 60 each. Daily fixed costs are P 15,000 and variable costs are P 30 per basket An average of 750 baskets js sold each day Tehran has a capacity of 800 baskets. By closing time yesterday. a tourist bus stopped by Tehran's stall. Collectively, the passengers offered Tehran P 1,500 far 49 baskets. Tehran should have ‘a. Rejected the offer since he could have lost P. $00 b. Rejected the offer since he could have fost P 900 © Accepted the offer since he could have P 300 contribution margin 4. Accepted the offer since he could-have P 700 contribution margin Page 3 of € pages iReSh. The Rerroww Schoot of locewAomeg MSQ-04 RELEVANT COSTING 23. Given the following target selling price fora unit of product Direct materials P16 Direct labor fr Overtiead (20% vanabley 15" st of manufacture Desired markup ~ 30% Reguiar selling price * based on 25,000 units produced each year A foreign disthbutor has offered to purchase 5,000 units at a special price of P 38 per unit. The company is selling only 20,000 units per year through regular channels and so it has idle capacity. Variable selling costs associated wit the special order would be P 2 per unit. If the special order is ‘accepted, what will be the effect on the company's overall net income? a. Ineredise by P.40,000 Increase by P 50,000 b. Decrease by P 10,000 4. Decrease by P 70,000 In considering a special order situation that will enable a company to make use of its idle capacity, Which of the following costs would be irrelevaat? 8 a. Materials ¢, Direct latior b. Depreciation d. Vanable overhead 25. tstanbul Company budgets sales of 400,000 calculators at P 40 per unit for 2016. Variable manufacturing costs were budgeted at P 16 per unit and fixed manufacturing costs at P 10 per unit. A ‘special order offering to buy 40,000 calculators (or P 23 each was received by Istanbul in March 2018. Istanbul has sufficient plant capacity 10 manufacture the additional quantity: however, the production would have to be done on an overtime basis at an estimated additional cost of P 3 per calculator. Acceptance of the special offer would not affect Istanbul's normal sales and no selling expense would te incurred. What would be the effect on operating profit if the special order were accepted? 8 4. P 120,000 decrease ¢. P.40,000 decrease b. P-180,000 increase 0, P-280,000 increase 26. Abu Company sells Product B al a selling price of P 21 per unit. Abu’s cost per unit based on the full capacity of 200,000 units Is as follows Direct materials P 400 Direct labor 5.00 Overhead (2/3 fixed) 6,00 5,00 A special order offering to buy 20,000 units was received irom a foreign distributor. The only selling Cost that would be incurred for this order would be P 3 per unit for shipping. Abu has sufficient existing capacity to manufacture the additional unis. in negotiating the price for the special order, Abu should consider thal the minimum selling price per unit should be: . A a, Pid ©. P16 a . b PIs d Pia 27.,Mumbai Co. is a manufacturer of industrial components. One of their products that is used as a subcomponent in manufacturing is KB-96. This product las the following financial structure per unit Selling price P1580 Direct materiais P20 Direct labor 45 Variable manufactunng overhead 2 Fixed manufacturing overhead 36 Shipping and handing, a Fixed selling and administrative 10 Total costs. P90 ‘Mumbai Company has received a special, one-time, orter for 1000 KB-96 parts. Assume that Mumba\ {8 operating at full capacity and that the contribution magia of the output that would be displaced by the Special order is P 10,000. The minimum price that is acceptable, using the original data, for this one- time special order is in excess of A a Peo c Par b. Pro dP 100 28. Dhabi Company's regular selling price for its product is P 10 per unit. Variable costs are P 6 per unit Fixed costs total P 1 per unit based on 100,000 units and remain constant within the relevant range of 50,000 units to a total capacity af 200,000 nits. Atter sales of 80,000 units were projected for 2016, a Special order was receiyed for an additional 10,000 units, To increase its operating income by a total of P 10,000, what price per init should Dhabi charge for this special order? A a PT.00 ©, P-10,00 b, P8500 d, P1400 Page 4 of 8 payesReSU - The Review Sebivol of AccounTorey MSQ-04 | RELEVANT COSTING Go. operates at full capacity. The minimum selling price to be set for a special order must cover ¢ a. Fixed cost b. Variable cost ©. Variable cost plus foregone contribution margin an lost regular sales, 4d. Fixed Cost plus foregone contnbution margin on lost requiar sales . cost is P 16. Iraq could accept a special orter for cepted the order, how many units could it lose at the regular price before © 20. 1raq. Company sells a product for P'30. Variable 4,000 units at P 23. if feaq at the decision became unwise? REP 20 2 2 o00 Baath te a -b $00 “a0 Ga7g 7 18D = 29M G09 One 27 In deciding whether or not to eliminate a branch oF division, which of the following 1s considered ann c a, All variable costs of the branch © Ail direct costs of the branch 'b° All fixed costs of the branch d- Allindirect costs of the branch 82 Lebanen Co. plans to discontinue a division with a P 20,000 contribution niargin. Overhead allocated to a the division is P 50,000, of which P 5,000 cannot be eliminated. What is the effect of this discontinuance ‘on Lebanon's pretax income? &, P 5,000 decrease ©, P 25,000 increase eee Fe (45.0) b. P.20,000 decrease d. 30,000 increase ‘eetael 33, Baghdad Company produces and sets 8,000 units of Product X each year. Each unit of Product X sells for P 19 and has a contribution margin of P 6. It is estimated that if Product X is discontinued, P 50,000 of the P 6,000 in fixed costs charged to Product:X could be'eliminated. ‘These data indicate that if Product X is discontinued, overall company. operating income stiould A a, Inorease by P 2,000 per ye: ¢. Increase by P 38,000 per year. , b. Decrease by P'2,000 per year Decrease by,P 38,000 per year 34, Arab Home, tne. manages tive income statements for each un » ONE TWO) “THREE FOUR | FIVE i Rent income P 10,000 12,109 P 23,470. P1878) P 10,650 Expenses _3.000 13.000 __26,000 E Profit P2000 (P96) (P2530 Included in the expenses is P 12,000 ot corporate overhead allocated to the towntiouses based on rental income. The townhouse unit(s) thal the corapany should consider selling is (are): c a. Two, Three, Four and Five ¢. Four and Five b. Three, Four and Five d. Four 36-'n analyzing whether to build another regional service attce, tha Salary of the Chief Executive Officer (CEO) at the corporate headquarters is © “a. Relevant because salaries bre abvoys rolevani b. Relevant because this will probably change if the regional service office is built © Irrelevant because it is a future cost that will notaier between the altematives under consideration 4. Ielevant sinoe.avother imputed cost forthe sare wil be considored 36. Aocated common fixed costs A” a. Can make a product ine appear to be unprottabie bs Are always incremental costs & Are always relevarit in decision involving dropping a product line 4. Reponses a, band ¢ are all correct 37. The Uganda Company has two divisions -- East and West. ‘The divisions have the following revenues and expenses: ale townnouses in Damaseus. Shown below are the summary East ‘Wes Sales 720,000 350,000 Variable costs 370,000 240,000 ‘Traceable fixed costs 130,000 80,000 ‘Operating income (loss) £100,000. (P.20,000) The management at Uganda is pondering the elimination of the West division since it’has shown an operating 10s for the past several years. If the West division were eliminated, ts traceable fixed costs could be avoided. The total common comporate costs woulld be unaffected by this decision, Given these. data, the elimination of the West Division would resull in anvoverall company operating income of ° ® P 120,000. . P80,000 b 100,000 a. P50,000 Page 5 of 8 pages . Allocated common Corporate costs 120.000 + _50,000ReSU- the Remew School of Cccowmtamey MsQ-04 RELEVANT COSTING R ‘ re (C38. Atabia Company produces sind setis three products as follows Siiee pine 5 P ; ce saaman@na aaa oe es Sales 200,000 | P 150,000 P125,000cM jo5 3S Se Separable (product) fixe! costs 60,000 35,000 -40,000¢¢¢ cogs 2S HO. Allocated fixed costs 36,000 40,000 25,000 4 a P 16,000 ©. P 54.400 a bP 50,000 d. P 70,400 = 41, Temple Corporation contemplates the temporary shutdown of its plant facilities in a provincial are which are economically depressed due to natural disasters. Below are certain manufacturing and selling expenses: 1) Depreciation 5) Sales commissions 2) Property tax 6) Security of premises 3). Interest expense 7) Delivery experises 4). Insurance of facilities : ‘Which of the above expenses will be considered in the computation of shutdown costs? 8 a. All expenses in the list ©. ltems 1, 2 and 3 only b. Allexcept items 5 & 7 d. Allexcept tem 5 42, The inaitference pgint is the level of volume at which a company A a. Ears the same protit under different operating schemes b. Eams no profit = c. Ears its target pratt d. Any of the above 43. Bible Production, Inc. owns and operates a chain of movie theaters. The theaters in the chain vary from low volume, small town fo high volume, big cityidowntown theaters. Management is considering installing machines that wall make popcorn on the premises. This proposed feature would be properly advertised and is intended to increase patronage at the company theaters. These machines are available in two different sizes with the following details: = Economy poppers Regular poppers ‘Anowal capacity {50,000 boxes 120,000 boxes Costs Annual machine rental 80,000 P 110,000 Popeorn cost per box 130 1.30 Cost of each box 0.80 0.80 ‘ Other variable costs per box 2.20 140 ‘What level of output at which the Economy and Regular Poppers would eam the same profit (loss)? c ‘a, 50,000 boxes ©. 37,500 boxes b 85.000 boxes d. 40,000 boxes A In a sell of process decision, which of the following is relevant? A a, Joint production costs re b. Additional cost to process further the product ¢. Additional revenue to process turther the product 4. Avoidable fixed production cost incurred after split-off Page 6 of 8 pages SsReene cast A 40-a5 =S ¥ \0,000 TE CODNE: Coe @ 8 (918) dala put © 45-4025 ¥20,E0= 1001000" 25090 © 9 ef fi SO - the Keven Schock of lacountnune MSQ-04 rece VANT COSTING ¢ © 25-20 = 5 € 2000= |eg000NC 99000 = 40,000 45 Desert Company. produces 1 nformation is available: Units, Sales Price (6 @ products 10m @ joint process costing P 100,000. The following ~ P'Occg, WOM — Cost to Process Eurther Sales Price (After Furthen A 19.000 60.000 P40 8 20,900 20,000 P45 © 30,000 P20 90,000 ul P25 Which products shou be processed further? cer 1G RENEE 7 C a. “Aonly Ln process eAN" IF 55S b AandB 4, A Bande 36. When a quultiproduct plant operates at Yuli capacity, quite often decisions must be made as to which products 1a emphasize. These decisions are Irequently made with a short-run focus. In making such decisions, managers should select products with the D a. Highest sales price per unit b. * Highest sales volume potential Highest individual unit contribution margin Highest contribution margimper unit of the const ing resource Somalia Company produces three prodiicts. with costs and selling prices as shown below: Selling price per unit P30 100% P20. 100% P15 100% Variable costs per nit 18.80% 18 _ 75% _8 |_40% Contribution margin perunit. P42 40% * PBS . 25% 50% A particular machine is a bottlevieck On that machine, 3 machine hours are required to produce each init of Product A, 1 hour is required to, produce each unit of Product B, and 2 hours are required to Produce each unit of Product Cin which order should it produce its products? C a CAB © BCA bACB 4. The order of production doesn't matter 48, Data regarding four different products manufactured by an organization are presented below. Direct material and direct labor are readily avalatie from the, respective resource markets, However. the . manufacturer is limited to 3 maximum of 3.000 machine hours per month Produ 8 Product © Producti)" «? ‘Selting price per unit PAs Pie P20 P25 4 Variable cost per unt PT Pit P10 P16 Units produced per machine hour 3 4 2 3 What iste product that isthe mast profable forthe manufacturer in this situation? B a. Product A Product C b Product B a. Product D 49. Sudan Company has three products: A B and C. Three machines are used to produce the products ‘The contribution margins, sales demands, and time on each machine (in minutes) are as follows Demand CM TimeonMi Timeon M2 2.00 M3. Mt M2. os A 100° P30. 0 mins mins f2mins A I@IFIK = I> B= po 8 8 = P20 10 mins 5 mins Smins 9 © wes = 400 L = G4o C60. P30 Smins 40 mins Smins € @ S79q% 600 ¢ = gq) Assuming that there are 2,400 minutes available in each machine, which machine is the bottleneck? a. Machine 1 & Machine 3 iv b. Machine 2 4. No bottleneck operation 2 Sea NOTE: Botloneck’ I a constraint in a acity. department, ar resource whose capacty is less than ihe demand placed upon i "Theory of Constraints ls sherciermeporoach to managing botlenecks as t attempts to remove the influence of butlenccks on the production process, oo Ea) A 50 2 <26 dmdag 50. Assuming the same data in No. 42, how many uns of, 8, C should be produced dunn ie week? | 4G 93 0f A, 60 of 8, and 90 of C © G00fA, 6008, and900fC B 202 ¢ * i b. 93 ofA, 80 of 8, and 60 of C S @0OfA 60 ofB. and 9001 cc 39 2 19> 3Oun |co 51, Food Co. has a limited number of machine hours that it can/use for manufacturing two products, X and “Cow Y. Each product has a selling price of P 160 per unit bul product X fas 40% contribution margin and 240% Product ¥ has 70% contnbution margin. One unt of Y takes twice a8 many machine hours to make as a as unit of X. Assuming unlimited demand, which product(s) should the limited machine hours be used for? (7 A ie: . BitherX and Y b. Both x and ¥ a ¥ 52. A company has an inveniory of 1,000 parts that have been junked. The inventory costs P 100,000. The parts can either be (a) re-machined at 2 total cast of P 30,000 and then sold for P 35,000 or (b) Sorapped for P 2,000.” Which of these amounts may be considered as relevant? c a. P 100,000, P 35,000. P 30,000, 2,000 ¢» P'38,000, P 30,000, P.2,000 b. P 100,000, P 35,000, P 30.000, 4, P2000 Page 7 of 8 pagesROSU - the Review School of lccomfamey MSQ-04 RELEVANT COSTING 51. Which of the following is a short-term approach to managing bottlenecks as it altempts ta remove the influence of bottlenecks an the production process? A a, Theory of constraints ©. Rationalization Reengineering Benchmarking 52. Product pricing is a function of the following factors, except. Da Canstimer demand The sellers cost structure 'b. Competitive factors, d. The buyer's profit objective PS tis the expected market price for a product or service, colisidering the consumers’ perception of value and the Competitors” responses, 8 ‘a. Transfer price © Cost-based price b. Target price 4d. Selling price 54, The concept of target pricing is ernployed when: D a. A pice is pro-set by market conditions b. A.company wishes to meet marketing goats A.company wishes to Set price in order to capture a predetermined market price 4. Allof the above (88. A manufacturing fim intentionally priced its product below cost to eliminate competition. It has a reasonable prospect of recovernng the resulting loss thraugh higher prices once competition. fs eliminated of thraugh a greater share in the market. The manufacturing fim has-engaged in B a. Price discrimination © Collusive pricing b. Predatory pricing 4. Black market pricing 56. When a finn charges differeit prices (o different customers for the same product, iis engaged in A a Price discrimination ©. Collusive pricing b. Predatory pricing 4. Differential pricing In a local city, the sale of sugar is controlted by only three sellers. Recently, the three sellers agreed to limit the supply of sugar and charged a very high price per kilo, The three sellers practiced ce ‘2. Price discrimination ©. Gollusive pricing b.. Predatory pricing d. Differential pricing ‘58. Based on sales of 500 units per year, a new product has estimated traceable costs of P 990,000, What 's the target price to obtain a 15% profit margin on sales? A a. P2329 © P1980 b. P2207 d. P 1,935 SOLUTION: Sales ~ costs = profit 500 SP ~ 990,000 = 15% (500 SP) 59, Famine Co. signed a government construction contract providing for a formula price of actual cost plus 10%. In addition, Famine was to receive one-half of any savings resulting from the formula price being less than the target price of P 2,200,000. Famine's actual costs incurred were P 1,920,000. How much should Famine receive from the contract? * c a. 2,080,000 ©. P2,156,000 b. 2,112,000 4. P 2,200,000 SOLUTION: Formula price: 102Mx1.1=P2112M Contract: 2112 M+ 50% (22M~2112M) 60. The budget for Arc Auto Repair Shop forthe year is as follows: Direct labor per hour P30 Total labor hours 10,000 Overhead costs Materials nandling and storage P 40,000 Other(rent, utilities, depreciation, insurance) P 120,000 Direct materials cost P 500.000 Are allocates materials handling and storage costs per peso of direct materials cost. Other averhead is allocated based on total labor hours. in addition, Arc adds a charge of P 8 per labor hour to cover profit margin. Crescent Co. has brought one of its trucks to Are for an engine overhaul If the overhaul requires, 12 labor hours and P 800 for parts, what price shauld Arc charge Crescent for these repair services? c a’ P1160 © .P 1416 bP 1,256 4. P1472 SOLUTION: 41) Direct materiais: P-800 4) Overhead. P144 © 12 hrs x P 12h : 2) Handling costs: P48 © 800 (10,000/500,0¢0) *FOH rate: P 120,000 + 10,000 hrs 3) Direct labor P 360 € 12h xP 3dhir 6) Target proft margin: P96 © 12 hrs xP 8 Selling Price: 800 + 16 + 360 + 144 + 96 Page 8 of 8 pages feRSA — The Reseen thool of Occorwtloneg §@ 7359807 / 7343989 8 09104391320 / 09239124121 / 09164383834 ” resareview@hotmall.com MANAGEMENT SERVICES A, Lee * E. Arafias D A A Quizzer: MS - 05 BUDGETING Sources: CMA/CIAIRPGPAVAICPA/Various iest banks. 11 Which ofthe Vollowing is OT an advantage of Budgeting? aH cues marci alae thal Se ae lMTacitales control by permiting comparisons of budgeted and actual resuts . facilitates performance evaluation by comparing budgets with actual results, 4. provides a check-up device thal allows managers to Keep close tabs.on their subordinates, “Budgets are a necessary component of financial decision making because they provide a (r) 2 Elficen ellocaion f resources C. Means lo check maneparal dacfolior Means to use allihe fms resources Automatic coective mechanism for errors 26 (nan organization that plans by using comprehensive budgeting, the master budgat is 4 A compilation of all the separale operational and financial budget schedules of the ‘organization b. The booklet containing budget guidelines, policies and forms to use in the budgeting process ¢. The current budget updated for operations for part of tie current year 4. A budget fora non-profit enbty ater itis approved by the appropriate authoritative body NOTE: Letter b’ deserines a budget manual HP ha ste sudo Sassi a. Afinancial budget © Anoperating budget b. Aflexible budget 4. Aprogram budget 9 Using the concept of ‘expected value’ in sales forecasting means thal the sales forecast to be used is, a. Developed using the indicator method b. The sum of the sales expected by individual ©. Based on expected selling prices of the products d, Based on probabilities _B: Ohio Company developed the following sales forecasts and associated probabilities, ‘ales Forecast Probabilily 600,000 10%: = G@.000 650,000 50% = s2¢,000 q P 700,000 35% 2 Zye,003 800,000 8% 7 “4o,006— What is the expected value ol-salas? C90. a. P-650,000 &. P667,500 6. P670,000 4. P 800/000 “ Which of the following is included in a ims financial budget? ‘a. Budgeted income staternent ©. Production schedule b. Capital budget 4d. Cost of goods sold budget BF Which of the following equations can be used 10, budget purchases? (BI = Beginning inventory, ending inventory desired, CGS = Budgeted cost of goods sold) D ‘a, Budgeted purchases =CGS+Bi-E] c_ Budgeted purchases = CGS + Ei + BI b. Budgeted purchases = CGS + BI J. Budgeted purchases = CGS + El — D> Cilorado Company desies an ending inventory of P 60,000. It expects sales of P 120,000 and has a 10,000. Cost of sales is 60% of sales. Budgeted purchases.are '20 0x gdle 32,000 c c. P92,000 GOON) 4. P 132,000 (40000) wal comprehensive or master budget. The 92,000 _A®. Individual budget schedules are prepared to develop an a budget schedule that would provide the necessary inaul data for the.ditect labor budget would be the == D a. Sales forecast c. Schedule of cash receipis and disbursements b. Raw materials purchases budget 4. Production budget 11, South Dakota Company budgels sales of 22,000 units for January, 30,000 for February. The budgeted beginning inventory for January 1 was 7,000 units South Dakota desires an ending inventory equal to “one-half of the following moni s sales needs. What is the budgeted production for January2. 87 a. 37,000 units ©. 26,000 units Eiaaere b. 30,000 units 4. 14,000 units 42000 ; Igsoed Seve EA Daye 1.01 6 pages (C5009) tmveny- 29) Jpoasunits —KeSU - the Review School of Cecourtoncy MSQ-05 BUDGETING J® New Mexico Company plans to sell 24,000 units of Product A inGulpand 30,000.units inAugus'. Sales of Product A during(Juse were 25,000-unds. Pasi experience has shown that end-of-monih inventory must equal 2,009 units plus 30% of the next month's sales. On June 30, this requirement was met Based on these data, how many units of Product A must be produced during the month of. July? fc a, 28,800 © 24,000 es rg Sees (aan nH) (16200) ». 22,200 4. 25,800 oct Rip FU pasty (aur te) Row hed goods at_75% ol the comifg month's budgeted sales and Florida keeps its inventory of fini inventory of raw-materials. at 50% oF the coming months budgeted production needs. Each unit of product requires 2 pounds of materials. The production budget is, in units: May, 1,000; June, 1,200; July, 1,300; August 1,600. What would be the raw material purchases in June? 21,625 pounds © 2,800 pounds b. 2/500 pountis 4. 3,050 pounds Ja New Jersey Go. 1s budgeting saie’ of 53,000 units of product A\.for 2016, The manufacture of one urtt of At requires 4 klos of chemical 25, During 2018, New Jersey plans to reduce the inventory of Z5 by 50,000 kilos and increase the finished goods inveniory of AT by 6,000 units. There Is no work process inventory. How many kilos of 26 is New Jersey budgeting fo purchase in 2016? 2. 198,000 EAROw, pe pelens 8 482.000 ; 238,000 Cake “244 00 GoW xd 6 Washington Company has the following 2016 budgat data / Beginning finished goods inventory 40,000 units, Tee Sales 70,000 units —= Ending finished gobds inventory 30,000 units Direct materials P 10 per unit Direct labor P20 per unit Variable factory overhead P'5 per unit Fixed factory overhead 80,000 What are the 2015 lotal budgeted coduction costs? B a. 2,100,000 © P2,240,000 b P2.180,000 dP2.320.000 Montana Company's budget contains the following information Unit Beginning finished goods inventory (a5) Beginning work-in-process in equivalent units (40) _Besirad ending finished goods inventory 100 Desired ending work-in-process in equivalent units 40 Projected satos 1.800 How many-squivaléntupits should Montara plan to progiuce? oe . a 1565 ne peas b 1800, 4 77 The information contained in a cost of goods manufactured budget most directly relates to the 8 a. Malerials used, direct labor, overhead applied, and ending work-in-process b, Materials used. direct labor, overhead applied. and work-in-process inventories budgets .” Materials used, direct labor, overhioad applied, and work-in-process inventories, and finished ‘goods inventories budgets 5 4. Materials used, direct labor, overhead applied, and finished goods inventories budgets Maine Co. makes payments for purchases 30% during the month of purchase and the remainder the following month. Apni purchases are projected to be P 80,000; May purchases will be P 120,000. What 5 mMesiiegetcmemeris onsectumttog May? AW ehces Gaay! Sauce b.P 54,000 a. 92,000 ey, 120.2% % $4) = gu000 e qL.00y 19. Nebraska Company, a merchandising firm, is preparing its master budget and has gathered the 7 following data to help budget cash disbursements. Budgeted data. Gost of goods sold P 1,680,000 Desired decrease in inventories 70,000 Desired decrease in accounts payable 150,000 Ail of the accounts payables are for inventory purctiases and all inventories are purchased on account ‘What are the estimated cash disbursements for inventories for the budget period? Dw. P%,460,000 ¢ P1;900,000 b. _P 1,600,000 4. P4,760,000 (UEd000 (Ae;20u) sur ove Page 2 of 6 pages ouow &)ReSU - the Remon School of Cecourtoney MSQ-05 BUDGETING items 20 and 21 ae based onthe folowing formation : Operational budgels are used for planning and controlling its business activities. Data regarding a ‘company’s sales for the last 6 months of the year and its projecied collection patterns are shown below: Forecasted sales July P 775,000 § August 750,000 Septemoer 825,000 October ‘800,000 November ‘850,000 December 900,000 Types of sales + Cash sales, 20% Credit sales 80% i Collection Pattern for Credit Sales In the month of sale 40% In the first month following the sale 57% Uncollectibie 3%, The cost of merchandise averages 40% of its selling price. The company's policy is fo maintain an inventory ‘equal 10.25% of the next month's forecasted sales. The inventory balance at cost is P 80,000 as of June 30. qscowx4iz= 300,000 20. THe budgeted cost of the company’s purchases for the month of August would be a, 302,500 ©, 307,500 Goa PECAN AL = 200 ESP | b. P-305,000 d. 318,750 Fong Heo ats (NF soo) 21. Tne company's oil cash acento sales ae catectons on account hal wold be budgeted or he ‘month of September would be Sef ae Ba, P 757.500 A « prssa00% at ST = gazian b. P771,000 3 P'856,500 9 AO cd a ema 22. Alaska Company has budueted sales on account of & 120.000 tor Qu, P211.000 for ust and 2 — -P198.000 for Septembyr. Collection experience indicates that 60% of the budgeted sales will be a. °™ collected the mont sr the sale, 36% the second month, and 4% will be uncollectible. What would be = the cash from accounls receivable (ha! should be budgeted for Seplemher? Sy ey th A&P 168,800 197,880 -) wh oth ot pee b. P 194,760 dé. P 198,600 ees 9h SERS 1Ah 6, : ae. 23, Alabama Consortiim i constructing a corporate planning model, Gash sales are 30% of the company’s [e480 Sales, wilh he remainder subject. tothe fllowing collection pattern se + One month after sale GO% Two months aftersale 30% Three months after sale 8% Uncollectibie 2 If Sis defined as total sales in month 'n,’ which one of the following expressions correctly describes ‘Alabama's collecdon.nn-ancountn any given month? c A 0685; 40.38 «140.08 Ss © 042841 40.218 ,2 4005685 B. 042 Sma + 0.21 87 + 9.056 S nin 0 06S, +0.3S 2+ 0.08Sq3-0.028 24. The cash receipts budget inchides D ‘a. Funded depreciation ©. Exlinguishment of debt b. Operating supplies d Loan proceeds 25. Which one of the following schedules would be the last em to be prepared in the normal budget preparation process? c a, Direct labor budget © Cash budget b. Gost of goods sold budget d. Manufacturing overhead budget 26. The Pennsylvania Company is preparing its cash budgel for the month of May. The following information is available concerning ils accounts receivable Estimated credit sales for May P 200,000 ¥ #02 = 46/000 Actual credi sales for April 180,000 x722 ~ 196 0% Estimated collections in May for credit sales in May 20% Estimated collections in May for credit sales in Apri 70% ' Estimated collections in May for credit sales prior to Apri 12,000 Estimated write-offs in May for uncollectible credit sales 8,000 - Estimiated provision for bad debls in May for credit sales in Moy 7-000 What are the estimated cash receipts rom accounts receivable collections in May” i 0 a. P 142,000 P 150,000 b. P 149,000 P 157,000 Page 301 @ pages ©KeSA- the Review School of Cccowetame MSQ-05 BUDGETING d 27. The cash budget should help to ensure ‘ 8 That enough cash is on hand at all limes to satisty maximum cash requirements, ‘Sufficient quiaty without an excess amount of idle cash & That cash dividends cen be paid every quarter d. That sufficient cash is available to pay salaries, even if means borrowing the money 28. The cash budge! ot 2016 would be affected in seme way by all of he following, except. B a. Acash dividend declared in 2018 for payment in 2076 ‘A cash dividend declared in 2016 for payment in 2017 © interest expense on loans taken out and repaid during 2016. The Sales forecast for the first month in 2017, A company has prepared a cash budget for January through June of 2016. Which of the following, discovered in February 2016, is LEAST likely lo require revising the cash budget? o a. February sales are lower than budgeted, bo. The Interest rate on short-term borrowing is higher than budgeted ¢. The company increased fram 10% to 20% the down payment it requires from customers. . The company changed inventory methods from LIFO to FIFO 30. Pro forma financial statements are pari of the budgeting process Normally, the’ last pro: forma stalemenl prepared is the 6 . Income statement © Statement of cash flows b. Statement of cost of goods sald d Statement of manufacturing costs 31, In the preparation of a cash budget with clear-cut information on sources and uses of funds, all of the following would classified as a cash flow under investing actwvities, EXCEPT: 2 a Collection of a loan from subsidiary ©. Sale of plant assets b. Purchase of a patent from an inventor ' d, Dividends received on stock investment 32, In the preperation of a cash budget with clear-cut iniormation on sources and uses of funds, all of the following would classified as a cash flow under financing activities, EXCEPT. A ‘a. The conversion of the company's own preferred stock info common stock 5. ‘The deciaration and payment of a cash dividend on the company's own common stock cc. The repayment of principal on a morgage. d._ The sale of the company’s own preferred stock for cash 33) North Carolina projects the following activities related toils financial operations: Issuance of share's of company’s awn common stock: F 170,000 + Dividends to be paid to the company's own shareholders: P 7.000 ~ Dividends to be received from investments in other companies’ shares: P 4,000 Interest fo be paid on the company's own bonds: F 11,000 Repayment of principal on the company's own bonds: P 10,000~ Proceeds trom sale of the company’s used equipment: P 23,000 |n cash financial budget, the nei cash used by financing activilies siould be projected to be >paoce 8 ‘a. P:975,000 © 112,000 BW 9.080 40005 = Its 0e b. 123,000 @. P19,000 Re S 34. The budget that descrives the long-term positon, goals, and objectives of an entity is the D ‘a, Capital budget Cash management budget b, Operating budget 4 Strategic budget 35, Which one of the following best describes 'ths role of top management in the budgeting process? Top management ao ‘Shouid be involved only ip the approval process Lacks the detailed knowledge of the daily involvement Needs to be involved, including using ihe budget process to communicate goals Needs to separate the budgeting process and the business planning process into. wo Separate processes ence 36. The budgeting process should be one thal motivates managers and employees to work toward ‘organizational goals. Which one of the following is LEAST likely to motivate managers? 8 a. “Participation by subordinates in the budgetary process b. Having top management set budget levels ©. Use of management by excoption Holding subordinates accountable for the items: th 37. Comparing actual results with a budget based on achieved (actval) volume is possible with the use of a y contro} D a. Monthly budget © Roling budget b. Master budget d. Flexible budget Page 4 of 6 pages