MIDTERM EXAM_BSA

1. Gordon Company began its operations on January 1, 2008, and produces a single product that
sells for P10 per unit. Gordon uses an actual cost system. In 2008, 100,000 units were
produced and 80,000 units were sold. There was no work-in-process inventory at December
31, 2008. Manufacturing costs and selling and administrative expenses for 2008 were as
follows:
Fixed Costs Variable Costs
Raw material - P2.00 per unit produced
Direct labor - 1.25 per unit produced
Factory overhead P120,000 0.75 per unit produced
Selling and administrative 70,000 1.00 per unit sold

What would be Gordon’s operating income for 2008 under the variable (direct) costing
method?
a. P114,000 c. P234,000
b. P210,000 d. P330,000
2. What would be Gordon’s finished goods inventory at December 31, 2008, under the
absorption costing method?
a. P80,000 c. P110,000
b. P104,000 d. P124,000
3. During October 2008, Gable, Inc. produced 10,000 units of Product F with costs as follows:
Direct materials P40,000
Direct labor 22,000
Variable overhead 13,000
Fixed overhead 10,000
What is Gable’s unit cost of Product F for October 2008 calculated on the direct costing basis?
a. P6.20 c. P7.50
b. P7.20 d. P8.50
4. Selected data concerning the operations of Kern Company for the year ended December 31,
2008, is available as follows:
Units produced 10,000
Units sold 9,000
Direct materials used P40,000
Direct labor incurred 20,000
Fixed factory overhead 25,000
Variable factory overhead 12,000
Fixed selling and adm. Expense 30,000
Variable selling and adm. Exp. 4,500
Finished goods inventory, beg. None
There were no work in process inventory at the beginning and end of 2008.
What would be Kern’s finished goods inventory cost at December 31, 2008 under the variable
costing?
a. P7,200 c. P8,000
b. P7,650 d. P9,700
5. Which costing method, absorption or variable, would show higher operating income and by
what amount?
Costing Method Amount
 a. Absorption Costing P2,500
b. Variable Costing P2,500
c. Absorption Costing P5,500
d. Variable Costing P5,500
6. Information from Peter Company’s records for the year ended December 31, 2008 is available
as follows:
Units sold 60,000
Units manufactured 70,000
Net Sales P1,400,000
Cost of goods manufactured
Variable 630,000
Fixed 315,000
Operating expenses
Variable P98,000
Fixed 140,000
Finished goods inventory, beg. None
What would be Peter’s finished goods inventory cost at December 31, 2008, under the variable
(direct) costing system?
a. P90,000 c. P105,000
b. P104,000 d. P135,000
7. Under the absorption costing method, Peter’s operating income for 2008 would be
a. P217,000 c. P352,000
b. P307,000 d. P374,500
8. Indiana Company began operations on January 2008, and produces a single product that sells
for P9 per unit. Indiana uses an actual cost system. 100,000 units were produced and 90,000
units were sold in 2008. There was no work-in-process inventory at December 31, 2008.
Manufacturing costs and selling and administrative expenses for 2008 were as follows:
Fixed Costs Variable Costs
Direct Materials - P1.75 per unit produced
Direct Labor - 1.25 per unit produced
Factory Overhead P100,000 0.50 per unit produced
Selling and Administrative P70,000 0.60 per unit sold
What would be Indiana’s operating income for 2008 using the direct costing method?
a. P181,000 c. P281,000
b. P271,000 d. P371,000
9. JV Company began its operations on January 1, 2008 and produces a single product that sells
for P7 per unit. Standard capacity is 100,000 units per year. 100,000 units were produced and
80,000 units were sold in 2008. Manufacturing costs and selling and administrative expenses
were as follows:
Fixed Costs Variable Costs
Direct Materials - P1.50 per unit produced
Direct Labor - 1.00 per unit produced
Factory Overhead P150,000 0.50 per unit produced
Selling and Administrative P80,000 0.50 per unit sold
There were no variances from the standard variable costs. Any under or over-applied
overhead is written off directly at year-end as an adjustment to the cost of goods sold.
In presenting inventory on the balance sheet at December 31, 2008, the unit cost under absorption
costing is
a. P2.50 c. P3.50
b. P3.00 d. P4.50
10. What is the net income for 2008 under direct costing?
a. P50,000 c. P90,000
b. P80,000 d. P120,000
11. Lima Company produced 100,000 units of Product Zee during the month of June. Costs
incurred during June were as follows:
Direct materials used P100,000
Direct labor employed 80,000
Variable mfg. overhead 40,000
Fixed mfg. overhead 50,000
Variable selling and general 12,000
Fixed selling and general 45,000
What was Product Zee’s unit cost under absorption costing?
a. P3.27 c. P2.20
b. P2.70 d. P1.80
12. What was Product Zee’s unit cost under variable costing?
a. P2.82 c. P2.32
b. P2.70 d. P2.20
13. Of the 6,000 units produced by the Sta. Teresa Company during September, 5,000 units were
sold at P45 per unit. Production costs during the month were:
Materials P40,000
Direct labor 50,000
Factory overhead:
Variable P36,000
Fixed 30,000
General and administrative expenses, all fixed, totalled P60,000.
The operating income for September under absorption costing is
a. P25,000 c. P35,000
b. P30,000 d. P26,000
14. The operating income for September under variable costing is
a. P25,000 c. P35,000
b. P30,000 d. P26,000
15. The following information is available for Keller Corporation’s new product line:
Selling price per unit P15
Variable manufacturing cost per unit of production 8
Total annual fixed manufacturing costs 25,000
Variable administrative costs per unit of production 3
Total annual fixed selling and administrative expenses 15,000
There was no inventory at the beginning of the year. During the year, 12,500 units were
produced and 10,000 units were sold.
The ending inventory, assuming Keller uses direct costing would be
a. P25,000 c. P27,500
b. P32,500 d. P20,000
16. The ending inventory, assuming Keller uses full (absorption) costing would be
 a. P32,500 c. P20,000
b. P27,500 d. P25,000
17. The total variable costs charged to expense for the year, assuming that Keller uses direct
costing would be
a. P110,000 c. P117,500
b. P100,000 d. P80,000
18. The total fixed costs charged against the current year’s operations assuming that Keller uses
absorption costing is
a. P35,000 c. P25,000
b. P40,000 d. P15,000
19. The Globe Company produced 100,000 units of product and sold 75,000 units at P3.00 per
unit in 2008. Variable unit costs are: Manufacturing – P1.60; selling – P0.15. Fixed costs for
2008 include P30,000 of fixed manufacturing costs and P41,250 of fixed selling and
administrative expenses.
a. P22,500 c. P27,500
b. P25,000 d. P30,000
20. What would be the net income for 2008, using the variable costing?
a. P22,500 c. P25,000
b. P30,000 d. P17,500
21. During October 2008, Adam Company had sales of P5,000, 000, variable costs of P3,000,000
and fixed costs amounting to P1,500,000 for Product M. Assume that cost behaviour and unit
selling price unchanged during November, 2008. In order for Adam to realize operating
income of P300,000 from Product M for November, sales would have to be
a. P3,750,000 c. P4,500,000
b. P4,050,000 d. P4,800,000

22. Wilson Company prepared the following preliminary forecast concerning product G for 2008
assuming no expenditure for advertising:
Selling price per unit P10.00
Unit sales 100,000
Variable costs P600,000
Fixed costs P300,000
Based on a market study in December, 2007. Wilson estimated that it could increase the unit
selling price by 15% and increase the unit sales by 10% if P100,000 were spent on advertising.
Assuming that Wilson incorporates these changes in its 2008 forecast, what should be the operating
income from product G?
a. P175,000 c. P205,000
b. P190,000 d. P365,000

23. Singer, Inc. sells product R for P5 per unit. The fixed costs amount to P210,000 and the
variable costs are 60% of the selling price. What would be the amount of sales if Singer is to
realize a profit of 10% of sales?
a. P700,000 c. P472,500
b. P525,000 d. P420,000
24. Lindsay Corporation reported the following results from sales of 5,000 units of product A for
the month of September 2008.
 Sales P200,000
Variable costs 120,000
Fixed costs 60,000
Operating income 20,000
Assume that Lindsay increases the selling price of product A by 10% on October 1, 2008.
How many units of product A would have to be sold in October 2008 in order to generate an operating
income of P20,000?
a. 4,000 c. 4,500
b. 4,300 d. 5,000
25. Warfield Company is planning to sell 100,00 units of Product T for P2 a unit. The fixed costs
amounts to P280,000. In order to realize a profit of P200,000, what would be the variable
costs?
a. P480,000 c. P900,000
b. P720,000 d. P920,000
26. Thomas Company sells products X, Y, and Z. Thomas sells three units of X for each unit of Z,
and two units of Y for each unit of X. The contribution margins are P1.00 per unit of X, P1.50
per unit of Y, and P3.00 per unit of Z. Fixed costs are P600,000. How many units of X would
Thomas sell at the break-even point?
a. 40,000 c. 360,000
b. 120,000 d. 400,000
27. Anthony Company has projected cost of goods sold of P4,000,000, including fixed costs of
P800,000. Variable costs are expected to be 75% of net sales. What will be the projected net
sales?
a. P4,266,667 c. P5,333,333
b. P4,800,000 d. P6,400,000
28. Day Company is a medium sized manufacture of lamps. During 2008, a new line called
“Twilight” was made available to Day’s customers. The break-even point for sales of Twilight
is P400,000 with a contribution margin of 40%. Assuming that the operating profit for the
Twilight line for 2008 amounted to P200,000, total sales for 2008 amounted to
a. P600,000 c. P900,000
b. P840,000 d. P950,000
29. The Insulation Corporation sells two products, Dee and Wee. Insulation sells these products at
a rate of 2 units of Dee to 3 units of Wee. The contribution margin is P4 per unit of Dee and
P2 per unit for Wee. Insulation’s fixed costs are P420,000. What would be the total units sold
at the break-even point?
a. 140,000 c. 168,000
b. 150,000 d. 180,000
30. The Ship Company is planning to produce two products. Alt and Tude. Ship is planning to
sell 100,000 units of Alt at P4 a unit and 200,000 units of Tude at P3 a unit. Variable costs are
70% of sales for At and 80% of sales for Tude. In order to realized a total profit of P160,000,
total fixed costs would be
a. P80,000 c. P420,000
b. P90,000 d. P600,000
31. The Seahawk Company is planning to sell 200,000 units of Product B. The fixed costs are
P400,000 and the variable costs are 69% of the selling price. In order to realized a profit of
P100,000, the selling price per unit would have to be
a. P3.75 c. P5.00
 b. P4.17 d. P6.25
32. Taylor, Inc. produces only two products, Acdom and Belnom. These account for 60% and
40% if the total sales pesos of Taylor, respectively. Variable costs (as a percentage of sales
pesos) are 60% for Acdom and 85% for Belnom. Total fixed costs amount to P150,000.
There are no other costs.
What is Taylor’s break-even point in pesos?
a. P150,000 c. P300,000
b. P214,286 d. P500,000
33. Assuming that the total fixed costs of Taylor increase by 30%, what amount of sales pesos
would be necessary to generate a net income of P9,000?
a. P204,000 c. P659,000
b. P464,000 d P680,000
34. Tice Company is a medium-sized manufacturer of lamps. During the year a new called
“Horolin” was introduced. The break-even point for sales of Horolin is P200,000 with a
contribution margin of 40%. Assuming that profit for the Horolin line during the year
amounted to P100,000, total sales during the year would have amounted to
a. P300,000 c. P450,000
b. P420,000 d. P475,000
35. Information concerning Label Company’s Product A is as follows:
Sales P300,000
Variable costs 240,000
Fixed costs 40,000
36. Dallas Company wishes to market a new product for P1.50 a unit. Fixed costs to manufacture
this product are P100,000, for less than 500,000 units and P150,000 for 500,000 units or more.
The contribution margin is 20%. How many units must be sold to realized net income from
this product of P100,000?
a. 333,333 c. 666,667
b. 500,000 d. 833,333
37. Jarvis Companay has fixed cost of P200,000. It has two products that it can sell, Tetra and
Min. Jarvis sells these products at the rate of two units of Tetra to one unit of Min. The
contribution margin is P1 per unit of Tetra and P2 per unit of Min. How many units of Min
would be sold at the break-even point?
a. 44,444 c. 88,888
b. 50,000 d. 100,000
38. The Oliver Company plans to market a new product. Based on its market studies, Oliver
estimates that it can sell 5,500 units in 2008. The selling price will be P2.00 per unit. Variable
costs are estimated to be 40% of the selling price. Fixed costs are estimated to be P6,000.
What is the break-even point?
a. 3.750 units c. 5,500 units
b. 5,000 units d. 7,500 units
39. The Breiden Company sells rodaks for P6.00 per unit. Variable costs are 2.00 per unit. Fixed
costs are P37,500. How many rodaks must be sold to realized a profit before income taxes of
15% of sales?
a. 9,375 units c. 11,029 units
b. 9,740 units d. 12,097 units
40. At break-even point of 400 units sold, the variable costs were P400 and the fixed costs were
P200. What will the 401st unit sold contribute to profit before income taxes?
 a. P0.00 c. P1.00
b. P0.50 d. P1.50
41. Oxford Company had sales amounting to P3,000,000, variable costs amounting to P1,800,000
and fixed costs amounting to P800,000 for product Brum, What would be the amount of sales
pesos at the break-even point?
a. P2,000,000 c. P2,600,000
b. P2,400,000 d. P2,760,000
42. The following data pertains to Nova Company’s cost volume profit relationships:
Break-even point in units 1,000
Total fixed costs P150,000
Variable costs per unit P500
How much will be contributed to profit before income taxes by the 1001st unit sold?
a. P650 c. P150
b. P500 d. None
43. Klein Company sells on product for P80. The variable costs are P16 per unit. Fixed costs are
P240,000. How much sales revenue will Klein realized at the break even point?
a. P3,750 c. P300,000
b. P240,000 d. P1,200,000

44. Underwood Company has a contribution margin of 80%. Variable costs are P4 per unit. At
break-even point, sales are P500,000. How many units will Underwood Company sell to have
a P64,000 profit before taxes?
a. 11,250 c. 30,000
b. 24,000 d. 36,250
45. Mosley Company sells one product for P90 per unit. Variable costs are P30 per unit. The
marketing manager has proposed a new advertising campaign that would increase fixed costs
by P360,000. How many additional units must Mosley sell to pay for the advertising
campaign?
a. 3,000 c. 6,000
b. 4,000 d. 12,000
46. In a decision-making case, which of the following costs is generally not relevant to the
decision?
a. Avoidable cost c. Opportunity cost
b. Historical cost d. Differential cost
47. In a decision-making case, which of the following costs is not likely to contain a relevant cost
component?
a. Labor cost
b. Selling cost
c. Depreciation cost of an existing asset
d. Factory overhead cost
48. Opportunity cost is an important concept in decision-making. This may be described as
a. The difference in total costs between two choices.
b. The contribution to income that is forgone by not using limited resources in its best
alternative use.
c. A cost that may arise in the future.
d. A cost that has already been incurred.
49. Which of the following must be considered in determining the relevance of a particular cost to
a decision?
a. Verifiability and accuracy of the cost
b. Potential effect of the cost on the decision
c. Amount of cost
d. Riskiness of the decision
50. Which of the following statements about relevant or differential cost analysis is correct?
a. All variable costs are relevant.
b. All fixed costs are irrelevant.
c. All variable and fixed costs to be incurred are considered as they change with each
decision alternative.
d. All future costs are relevant.
51. Alex Company is a manufacturer of electronic switches. One of their products, “Sensory
Switch”, is used as a component of most electrical appliances.
Sensory Switch has the following financial data per unit:
Selling P180
Variable costs:
Materials P24
Labor 18
Factory overhead 15
Shipping and handling 3 P60

Fixed costs: Factory overhead P36

Selling and admin. 14 50
Total P110

During the month, Alex has received a special, one-time order for 1,500 units of Sensory
Switch.
52. Assuming that company has excess capacity that is enough to produce this special order
without affecting sales to regular customers, and the company wants to improve its
profitability, the price that is acceptable for this special, one-time order is in excess of
a. P180 c. P60
b. P110 d. P50
53. Assume that Alex is operating at full capacity and that it does not want to incur a loss from this
order, the minimum acceptable price is
a. P180 c. P60
b. P110 d. P50
54. Assume that the excess capacity available for the special order is only 1,000 units, so that if
the order were accepted, Alex would have to reduce sales to regular customers. What is the
minimum price for this special order?
a. P180 c. P60
b. P110 d. P100
55. Arian Corporation manufactures a component part with the following standard costs:
Direct materials P6
Direct labor 15
Factory overhead 60
Standard cost per unit P81
 Factory overhead is applied at P2 per standard direct labor hour. Thirty percent (30%) of the
applied FOH cost is fixed and is not affected by any make-or-buy decision.
The component part can be purchased from outside suppliers at P73 per unit.
In the decision to “make or buy”, what is the total relevant unit manufacturing cost?
a. P81 c. P73
b. P63 d. P391

Prepared by:

MARILOU D. DOMINGO