MAS Module 2: MAS – 04, 05 & 06

MAS-04
14. Costs to but: 20,000 (36.36*) = 727,200 *includes 1% handling cost on purchases
Costs to make: 20,000 (33.11*) + 72,000 + 20,000 = 754,200
26. Regular sales last CM = Special order CM (30-16 X = 1,000 (23-16) X = 7,000 ÷ 14
30. The key is to compute the ‘segment margin’ by adding back to profit the allocated overhead costs
on the basis of rental income.
One Two Three Four Five
Profit (Lost) 2,000 (900) (2,530) (5,220) (2,350)
+ Allocated cost 1,600 1,936 3,755 3,005 1,704
Segment margin (+) (+) (+) (+) (-)
33. DIFFERENTIAL approach: West's segment margin: 350,000-240,000 - 80,000 = P 30,000
Present income: 100,000 - 20,000 = 80,000 Operating income: 80,000 30,000 = P 50,000
TOTAL approach: East's segment margin - allocated costs = 220,000- (120,000 + 50,000) = P
50,000
34. Segment Margins: (R) P 45,000 (1) P 40,000 (P) P 35,000
NOTE: Product 'P' shall be eliminated
39. Indifference point: 80,000+4.3 X = 110,000+ 3.5 X X = 37,500 boxes
46. Demand: (M1) 2,100 hours, (M2) 2,500 hours (since > 2,400 hours) > bottleneck, (M3) 2.10 hours

MAS-05
20. August
● CGS: 750,000 x 40% = P 300,000

● Ending inventory: 25% x (825,000 x 40%) = P 82,50O

● Beginning inventory: 25% x (750,000 x 40%o) = P 75,000

● Purchases: 300,000 + 82,500 - 75,000 = P 307,500

21. September total cash receipts
● September (cash sales): 825,000 x 20% = P 165,000

● September (collection on account): (825,000 x 80%) y 0% = P 264,000

● August (collection on account): (750,000 x 80%) x 5 % = P 342,000

MAS-065
8. If silent, the Material Price Variance (MPV) is preferably based on Material Purchase Price Variance
(MPPV) since the variance is usually computed at the date of purchase during which the entity has no
knowledge of the actual quantity to use.
MPV MPPV= AQ purchased (AP SP)
In the final analysis, however, since the production costs are based on the actual quantity of
materials used, the material price usage variance (MPUV) will be eventually closed to the costs of
goods sold.
MPUV = AQused (AP – SP) Total DM Variance
MQV = (AQused – SQ) SP
18. Flexible budget for part X usage refers to the standard cost: (3,000 x 3) x P 2.90 = P 26,100
21. LRV = AH X AR = 8,400 F = 40,000 (AR - 6.50) AR 6. 29 (AR < SR)
Payroll = Actual direct labor cost = AH x AR = 40,000 (6.29) = P 251,600
31. AFOH: _______ AFOH 122,000 = 1,000 U
BASH: 122,000 50,000 + 4 (18,000)
32. SHSR: _______ 122,000 SHSR = 500 U
35. 3 ways to compute the volume or capacity variance:
● Input-based: BASH- SHSR

● Input-based (fixed): BASH (F) - SHSR (F) = (BH - SH) FR > (300 - 360) 3 = P 180 favorable

● Output-based: (Normal Production - Actual Production) unit FFOH (Refer to MAS-03, wrap-up
item 6)
39. Output-based computation of volume variance (see no. 35):
(15,000 - 16,000) x (64,000/16,000) = P 4,000 unfavorable (AP < NP)
41. Output-based computation of volume variance (sce no. 35): 6,000 F = (39,000 NP) x (150,000/NP)
49. Spending variance: 8,000 U = AFOH BAAH = 178,500 BAAH
BAAH= 170,500 = 110,000 + 0.50 (AH) AH= 121,000
50. FOH variance: 6,000 U = AFOH - SHSR = 178,500 - SHSR
SHSR= 172,500 = SH (1.50) SH 115,000
55. In standard costing, applied FOH is the standard FOH.
⮚ If applied FOH (SFOH) >AFOH, then FOH is over-applied (favorable/credit)

⮚ If AFOH > applied FOH (SFOH), then FOH is under-applied (unfavorable/debit). 56. Labor yield
variance: (AQ -SQ) SP = (1,575 - 1,500) (20/3) = P 500
57. Labor mix variance: (Computation is based on MOV, where SQ refers to Standard Mix)
 (AQ - SQ) SP Mix Variance
Engineering: (550 - 525) 8 = 200 U
Carpentry: (650 - 525) 7 = 875 U
Masonry: (375 - 525) 5 = 750 F
1,575 1,575 P 325 U

Practice Set Answer & Solutions

1 B 11 B 21
2 A 12 D 22
3 C 13 B 23
4 B 14 C 24
5 A 15 C 25
6 C 16 D 26
7 C 17 C 27
8 B 18 B 28
9 D 19 A
10 C 20 B

1. Let X be the savings/opportunity cost:

P 25,000= [20,000 (6 + 30 + 12 + 9) + X]- 20,000 (60)
2. CM per hour (NOTE: if "units per hour" is 3 then "hours per unit" is 1/3)
● Product M: 6 *1/3 = 18 higher!

● Product R: 8 * 1/2 = 16
Based on product M: 2,000 hours x P 18 per hour = P 36,000
3. (16-8) 4,000 = (18-8) x X = 3,200
4. Shutdown point = avoidable FC ÷ unit CM= (FC shutdown cost) ÷ unit CM
= {[(230,000- 170,000) + 10% (310,000)] 2 - 14,000} (35 21)
5. Based on even averaging for the entire year: [(60,000 5,000)+ 2] x P6 x 12%
6. Cost to make= cost to buy 150,000+ 11 X = 60,000 + 12.875 X X = 48,000 units
7. Incremental fixed cost: P 31,200+ 52 weeks = P 600 per week
(25% sales x 25%) - 600 = 0 sales = P 9,600
8. Additional cost when purchased
● Blender: 20 - (6+4 + 6) = 4

● Mixer: 38-(11 +9 + 12) = 65

Additional cost per hour:
● Blender: P 4 1 hour = P4

● Mixer: P 6* 2 hours = P3
Based on the option "produce (make)":
● Blender: 20,000 units

● Mixer: (50,000 - 20,000)2 = 15,000 units

9. Plastic: (15.50 - 11) 3 = 1.50 1st vs. Metal: (17.50 13) +4.5 = 1.0 2nd
48,000 -(7,000 x 3) = 27,000 (available to metal) Metal: 27,000 4.5 = 6,000
Purchase of metals: 11,000 6,000 = 5,000 units
10.
October November December
Sales 200,000 210,000 220,500 Total
Ending 168,000 176,400 185,220 Production
Inventory 665,720
Production 218,000 218,400 229,320
11. 350,000 (18%) +350,000 (80%) 98%
12. 400,000 (80%) x 25%
13. 250,000 (18%) +300,000 (18%) + 300,000 (80%) 98% +350,000 (80%) 98%
14. [36 (97%) + 0.60] 0.475 = P 16.872 (no allowance) P 16.872 (100% - 5%) = P 17.76
15. Nyclyn: 24 0.80 x 15= P450
Salex: 19.2 0.80 x 21 = P 504
Protet: 10 x 28 = P 280
16. AFOH (V): 315,000 BAAH (V): 53,500 (6) FOH Efficiency Variance: (53,500 - 52,000)
6
17. AFOH (F): 260,000 BAAH (F): 3M ÷ 12 BASH (F): 250,000 SHSR (F): 52,000 (5)
18. AFOH (V): 250,000 BAAH (V): 80,000 (3)
19. BASH (F): 100,000 (4) SHSR (F): 38,000 (2) 4
20. Volume Variance: BASH (F)- SHSR (F) 12,000 F = 500,000 SHSR (F) SHSR (F) = 512,000
21. Fixed Rate: 108,000 27,000 P4 per hour BASH (F): 108,000 SHSR (F):
24,000 (4)
NOTE: Applied FFOH = Standard FFOH = SHSR (F) = SH X FR
22. VFOH variance = Variable spending variance + Variable efficiency variance = AFOH (V) - SHSR

(V) 80,000 90,000 10,000 F = 2,000 F + Variable efficiency variance

Variable efficiency variance: 8,000 F = hours x P 20 hours = 400 hours efficient (favorable)
23. MPV: 16,000 (2.4 2.5) = P 1,600 F
24. AQ used: 16,000 2,000 14,000 SQ: (2,700 +900) 3 = 10,800
MQV = (14,000- 10,800) 2.50 = P 8,000 U
25. LRV: 1,800 (10.25 12) = P 3,150 F
26. SH: 2,700 (0.3) + 900 (0.6) = 1,350 hours LEV: (1,800 1,350) 12 = P 5,400 U
27. AFOH (V): 11,700 BAAH (V): 10,800 Variable Spending Variance: P 900 U
28. BAAH (V): 1,800 (6) BASH (V): 1,350 (6) Variable Efficiency Variance: P 2,700 U

14. Olympics Company produces a popular signature scarf for ladies. Certain production and marketing
data are indicated below:
Cost per yard of cloth P 36.00
Allowance for rejected scar 5% of production
Yards of cloth needed per scarf 0.475 yard
Airfreight from supplier P0.60/yard
Motor freight to customers P0.90/scarf
Purchase discounts from supplier 3%
Sales discount to customers 2%
The allowance for rejected scarf is not part of the 0.475 yard of cloth per scarf. Rejects have no
market value. Materials are used at the start of production. How much is the standard cost of cloth

per Scarf that Olympics Co. should use in its cost sheets?
a. P 16.87 C. P 17.76
b. P 17.30 d. P 18.21
15. Rafa Company is a chemical manufacturer that supplies industrial users. The company plans to
introduce a new chemical solution and needs to develop a standard product cost for this new
solution. The chemical solution is made by combining a chemical compound (Nycyn) and a solution
(Salex), boiling mixture; adding a second compound (Protet), and bottling the resulting solution in
20-liter containers. The initial mix, which is 20 liters in volume, consists of 24 kilograms of Nyciyn
and 19.2 liters of20% reduction in volume occurs during the boiling process. The solution is then
cooled slightly before 10 kilograms of Protet are added; the addition of Protet does not affect the
total liquid volume. The purchase prices of the raw materials used in the manufacture of this new
chemical solution are:
Nyclyn P15.00 per kilogram
Saiex P21.00 per liter
Protet P28.00 per kilogram
What is the total standard materials cost of 20 liters of the product?
a. P 834.56 c. P 1,234.00
b. P 1,043.20 d. P 1,304.00
Items 16 and 17 are based on the following information
RN Company employs standard costing for product cost. The standard cost of its product is as
follows:
Raw materials P 14.50
Direct labor (2 DLH x P11) 16.00
Manufacturing overhead (2 DLH X P1116.00 22.00 22.00
The manufacturing overhead rate is based upon format activity level of 600,000 direct labor hours.
RN planned to produce 25,000 units each month during the year. The budgeted annual factory
overhead is
Variable P 3,600,000
Fixed 3,000,000
During November, RN produced 26,000 units used 53,500 direct labor hours at a cost of
P 433,350. Actual manufacturing overhead for the month was P 260,000 fixed and P 315,000 variable.
The total manufacturing Variable Fixed overhead applied during November was P 527,000.
16. The variable manufacturing overhead variances for November are
Spending Efficiency Spending Efficiency
a. P 9,000 U P 3,000 U c. P 4,000 U P 1,000 F
b. P 9,000 F P 12,000 U d. P 6,000 F P 9,000 U
17. The Fixed manufacturing overhead variances 10 November are
Spending Volume Spending Volume
a. P 10,000 F P 10,000 F c. P 10,000 U P 10,000 F
b. P 6,000 F P 3,000 U d. P 4,000 U P 22,000 F
Items 18 and 19 are based on the following information
Nadal Company's monthly normal volume of 50,000 units requires 100,000 direct labor hours.
Nadal's standard cost system contains the following overhead costs. Variable: P6 per unit, Fixed: P
8 per unit. The following information pertains to the month of March
Unit production: 38,000
Direct labor hours worked: 80,000
Actual overhead incurred:
Variable: P 250,000
Fixed: P 384,000
18. For March, what was the unfavorable variable overhead spending variance?
a. P 6,000 C. P 12,000
b. P 10,000 d. P 22,000
19. For March, what was the fixed overhead volume vanar ce?
a. P 96,000 unfavorable C. P 80,000 unfavorable
b. P 96,000 favorable d. P 80,000 favorable
20. Fred manufacturing overhead was budgeted at P 500,000 and 25,000 direct labor hours were
budgeted. If fixed overhead volume variance was P 12,000 favorable and the fixed overhead
spending variance was P 16 unfavorable, what must be the fixed manufacturing overhead applied?
a. P 516,000 C. P 504,000
b. P 512,000 d. P 496,000
21. Everest Company uses a standard cost system in which t applies manufacturing overhead to units
of product on the basis of direct labor hours. The information below is taken from the company's
flexible budget for manufacturing overhead:
Percentage of capacity 70% 80% 90%
Direct labor hours 21,000 24,000 27,000
Variable overhead P 42,000 P 48,000 P 54,000
Fixed overhead 108,000 108,000 108,000
Total overhead P 150,000 P 150,000 P 150,000
During the year, the company operated at 80%% of capacity, but applied manufacturing overhead
to products based on 90%. What were the (1) applied fixed overhead and (2) fixed overhead
volume variance for the year?
a. (1) P 108,000 (2) P 6,000 U c. (1)P 108,000 (2) P 6,000DF
b. (1) P 96,000 (2) P 12,000 U d. (1) P 96,000 (2) P12,000 F
22. Tiny Tykes Corporation has the following activity relating to its fixed and variable overhead for the
month of July
Actual costs
Fixed overhead P 120,000
Variable Overhead 80,000
Flexible budget
(Standards input allowed for actual output achieved x budgeted rate)
Variable overhead 90,000
Applied
(Standards input allowed for actual output achieved x budgeted rate)
Fixed overhead 125,000
Variable overhead spending variance P 2,000
Production volume variance P 5,000

If the budgeted rate for applying variable manufacturing overhead was P 20 per direct labor hour,
how efficient or inefficient was Tiny Tykes Corporation in terms of using direct labor hours as an
activity base?
a. 100 hours inefficient c. 400 hours inefficient
b. 100 hours efficient d. 400 hours efficient
Items 23 to 28 are based on the following information
“What’s going on in that lab?” asked Derek Warren, chief administrator for Cottonwood Hospital,
as he studied the prior month's reports. “Every month the lab teeters between a profit and a loss.
Are we going to nave to increase our lab fees again?” We can’t replied Lois Anderson, the
Controller. “We’re getting lots or complaints about the last increase, particularly from the insurance
companies and governmental health units. They’re now paying only about 80% of what we bill. I'm
beginning to think the problem is on the cost side.”
To determine if lab costs are in line with other hospitals, Mr. Warren has asked you to evaluate the
costs tor the past month. Mr. Anderson has provided you with the following information.
⮚ Two basic types or tests are performed in the lab-smears and blood tests.

⮚ During the past month, 2,700 smears and 900 blood tests were performed in the lab.
 ⮚ Small glass plates are used in both types of tests. During the past month, the hospital purchased
16,000 plates at a cost of P 38,400. This cost is net of a 4%% quantity discount. A total of 2,000
of these plates were still on hand unused at the end of the month, there were no plates on hand
at the beginning of the month. During the past month, 1,800 labor hours, costing P 18,450, were
used in performing smears and blood tests.
⮚ Variable overhead cost last month in the lab for utilities and supplies totaled P11,700 Cottonwood
Hospital has never used standard costs. By searching industry literature, however, you have
determined the following nationwide averages for hospital labs:
⮚ Plates: Three plates are required per lab test. These plates cost P 2.50 each and are disposed of
after the test is completed.
⮚ Labor: Each smear should require 0.3 hours to complete, and each blood test should require 0.6
hours to complete. The average cost of this lab time is P 12 per hour.
⮚ Overhead: Overhead cost is based on direct labor-hours. The average hourly rate of variable
overhead is P 6. C.400 hours inefficient d. 400 hours efficient
23. What is the materials price variance for the plates purchased last month?
a. P 11,400 U c. P 1,600 U
b. P 11,400 F d. P 1,600 F
24. What is the materials quantity variance for the plates used last month?
a. P 7,680 U c. P 8,000 U
b. P 7,680 F d. P 8,000 F
25. What is the labor rate variance?
a. P 2,250 U c. P 3,150 F
b. P 2,250 F d. P 3,150 U
26. What is the labor efficiency variance?
a. P 5,400 U c. P 4,612.50
b. P 5,400 F U d. P 4,612.50 F
27. What is the variable overhead spending variance?
a. P 900 U c. P 1,800 U
b. P 900 F d. P1,800 F
28. What is the variable overhead efficiency variance?
a. P 2,700 U c. P 900 U
b. P 2,700 F d. P 900 F
PRACTICE SET (28 MCQs)
1. The Moon Company manufactures Part 498 for use n its production cycle. The costs per unit for
20,000 units of Part 498 are as follows:
Direct materials P6 Variable overhead P 12
Direct labor 30 Fixe zd overhead applied 16
The Sun Company has offered to sell 20,000 units of Part 498 to Moon for P 60 per unit. Moon will
make the decision to buy the part from Sun if there is a savings of P 25,000 for Moon. If Moon
accepts Sun's offer, P 9 per unit of the fixed overhead applied would totally be eliminated
Furthermore, Moon has determined that the released facilities could be used to save relevant costs
in the manufacture of another Part 575. In order to have a savings of P 25,000, the amount of
relevant costs that would be saved by using the released facilities to manufacture Part 575 would
have to be:
a. P 80,000 c. P 125,000
b. P 85,000 d. P 140,000
2. Top Company has 2,000 hours available to manufacture product M and R. Pertinent data are given
below:
Product M Product R
Selling price per unit P 50 P 75
Variable cost per unit
Direct material P 26 P 38
Direct labor 10 18
Factory overhead 8 11
Units produced per hour 3 2
How much is the maximum contribution margin possible given the scarce resources?
a. P 36,000 c. P 8,000
b. P 32,000 d. P 4,000
3. Company currently sells 10,000 units of product M for P 18.00 each. Variable costs are P 8.00 and
traceable (avoidable) fixed costs are P 4,000 A discount store has offered P 16.00 for 4,000 units of
product M. The manager believes that they accept the special order, they will lose some sales at the
regular price. Determine he number of units Rock could lose before the order became unprofitable.
a. 2,000 units c. 3,200 units
b. 2,667 units d. 5,000 units
4. Bunny Company manufactures fast- bonding glues in its Bicol plant. The company normally
produces and sells 0,000 gallons of the glue each month. This glue, which is known as JNR-103, is
used in the wood industry in the manufacture of plywood. The selling price of JNR- 103 is P35 per
gallon; variable expenses are P 21 per gallon, fixed manufacturing overhead costs in the plant total
P 230,000 per month, and the taxed selling costs total P 310,000 per month. Strikes in the mills that
purchase the bulk or JNR-103 glue have caused Bunny Company sales to temporary drop to only
11,000 gallons per month. Bunny Company's management estimates that the strikes will last for
 about two months, after which sales of lNR-103 should return to normal. Due to the current low level
of sales, however, Bunny Company's management is thinking about closing down the Bicol plant
during those two months he strikes are on. If Bunny Company closes down the Bicol plant, it is
estimated that fixed manufacturing Overhead costs can be reduced to P 170,000 per month and that
fixed selling costs can be reduced by 10%. Start up costs at the end of the shutdown period would
total P 14,000. Since Bunny Company uses JIT (just-in-time) production methods, no inventories are
on hand. At what level of sales in (gallons) for the two-month period would Bunny Company be
indifferent between closing the plant and keeping it open?
a. 3,000 C. 8,500
b. 12,000 d. 6,000
5. Mags Company estimates that 60,000 special zippers will be used in the manufacture of industrial
bags during the next year. Flat Company has quoted a price of P 6 per zipper. Mags would prefer to
purchase 5,000 units per month but flat is unable to guarantee this delivery schedule. In order to
ensure the availability of these zippers, Mags considers purchasing all 50,000 units at the start of
the year. Assuming that Mags can invest cash at rate of 12 percent, what is the company's
opportunity cost of purchasing the 60,000 units at the beginning of the year?
a. P 19, 800 c. P 39,600
b. P 21,600 d. P 43,200
6. Jars Industries is a multi-product company that currently manufactures 30,000 units of Part QS42
each month for use in production. The facilities now being used to produce Part QS42 have fixed
monthly cost of P 150,000 and a capacity to produce 84,000 units per month If Jars were to buy Part
QS42 from an outside supplier, the facilities would be idle, but its fixed costs would continue at 40
percent of their present amount. The variable production costs of Part Q542 are P11 per unit. If Jars
is able to obtain Part QS42 from an outside supplier at a unit purchase price of P 12.875, what is the
monthly Usage at which Jars will be indifferent between purchasing and making Part QS42?
a. 19,000 units c. 48,000 units
b. 32,000 units d. 80,000 units
7. Big Company is a grocery store that is currently open only Monday through Saturday. Big Company is
considering opening Sundays. The annual incremental costs of Sunday openings are P 31,200. Big's
gross margin on sales is 25% estimates that 75% of its Sunday sales to customers would be made on
other days if the store were not open on Sundays. What is the one-day volume of Sunday sales that
would be necessary for Big to attain the same weekly operating as the current six-day week?
a. P 2,400 c. P 9,600
b. P 3,200 d. P 9,984

8. Dairy Manufacturing has assembled the following data pertaining to two popular products.
Blender Electric Mixer
Direct materials P6 P 11
Direct labor 4 9
Factory overhead @ P 16 per hour 16 32
Cost if purchased outside 20 38
Annual demand 32 20 28,000 20,000 28,000
Past experience has shown that the fixed manufacturing overhead included in the cost per machine
hour averages P 10. Dairy has a policy of filling all sales orders, even if it means purchasing units
from outside suppliers. If 50,000 machine hours are available, and Dairy Manufacturing desires to
follow an optimal strategy, it should
a. produce 25,000 electric mixers, and purchase all other units as needed
b. produce 20,000 blenders and 15,000 electric mixers, and purchase all other units as
needed
c. produce 20,000 blenders and purchase all other units as needed
d. produce 28,000 electric mixers and purchase al other units as needed
9. Scar Company has been producing two types of bearings, Plastic and Metal, for its own use in the
production of main products. The data regarding these two bearings follow:
Plastic Metal
Machine hours required per unit 3.0 4.5
Standard cost per unit
Prime costs P 8.00 P 9.00
Variable Overhead 3.00 4.00
Fixed overhead* 4.50 6.75
Total P15.50 P19.75
* Variable manufacturing overhead is applied on the basis of direct labor hours.
** Fixed manufacturing overhead is applied on the basis of machine hours.
Scars annual requirement for these bearings is 7,000 units of Plastic and 11,000 units of Metal.
Recently, Scars management decided to devote additional machine hours to other product lines
resulting in only 48,000 machine hours per year that can be dedicated to the production or the
bearings. An outside company has offered to Sell Scar the annual supply of the bearings at prices of
P 15.50 (Plastic) and P 17.50 (Metal). Scar wants to schedule the otherwise idle 48,000 machine
hours to produce bearings so that the company can minimize fS costs (maximize its net benefits).
Scar Company will maximize its net benefits by
a. Purchasing 7,000 units of Plastic and manufacturing the remaining bearings.
b. Purchasing 11,000 units of Metal and manufacturing 7,000 units of Plastic
c. Purchasing 6,000 units of Plastic and manufacturing the remaining bearings.
d. Purchasing 5,000 units of Metal and manufacturing the remaining bearings.
10. England Corporation plans to sell 200,000 units of exotic products in October and anticipate a
growth in sales of 5 percent per month. The target-ending inventory in units or the product is 80% of
the next month's estimated sales. There are 150,000 units in inventory as of the end of September.
What would be the production requirement in units of exotic products for the quarter ending
December 31?
a. 675,925 c. 665,720
b. 670,560 d. 656,900
, Items 11 to 13 are based on the following information
The Wimby Corporation, a retailer, had sales that are all made on credit. Sales are billed twice
monthly, on the 10 of the month for the last half of the prior month's sales, and on the 20 of the
month for the first half of the current month's sales. The terms of all sales are 2/10, net 30. Based
upon past experience, the collection of accounts receivable (AR) IS as follow:
Within the discount period 80%
On the 30th day 18%
Uncollectible 2%
Wimby’s average markup on its products is 20% of the sales price. All sales purchases occur
uniformly throughout the month Wimby's average markup on its products throughout the month. The
sales value of shipments for May and forecasts for the next four months follow:
May (actual) P 500,000
June 600,000
July 700,000
August 700,000
September 400,000
Wimby purchases merchandise for resale to meet the current month's demand and to maintain
desired monthly ending inventory of 25% of the next month's sales. All purchases are on credit with
terms of net/30. Wimby pays June July August September for 50% of a month's purchases in the
month of purchase and 50% In the month following the purchase.
11. How much cash can Wimby plan to collect in September from sales made in August?
a. P 280,000 c. P 343,000
b. P 337,400 d. P 400,400
12. The budgeted peso value of Wimby's inventory on August 31 will be
a. P 112,000 c. P 100,000
b. P 110,000 d. P 80,000
13. How much cash can Wimby plan to collect from accounts receivable collections during July?
a. P 574,000 c. P 619,000
b. P 608,600 d. P 662,600

51. Information on Lee Company's manufactur.ng overhead costs for last period is given below:
Actual direct labor hours worked 40,000 hours
Standard hours allowed for actual production 38,000 hours
Denominator hour used in computing the predetermined overhead rate 35,000 hours
Predetermined overhead rate P4 per hour
Actual overhead costs incurred P1 150,000
Lee Company uses a standard cost system and applies manufacturing overhead cost to units of
product on the basis of direct labor hours. Given these data, the overhead cost for the period would
be:
a. P 2,000 over-applied c. P 10,000 over-applied
b. P 8,000 under-applied d. P10,000 under-applied
52. Lum Company has a P 20,000 unfavorable fixed overhead budget variance, P 12,000 unfavorable
variable overhead spending variance, and a P 4,000 favorable volume variance. What was the total
overhead?
a. P 28,000 over-applied c. P 36,000 over-applied
b. P 28,000 under-applied d. P 36,000 under-applied
53. Lo Company had a P 18,000 favorable volume variance, a P 15,000 unfavorable variable overhead
spending variance, and P 12,000 total over-applied overhead. The fixed overhead budget variance
was
a. P9,000 favorable c. P9,000 unfavorable
b. P16,000 unfavorable d. P 16,000 favorable A
54. The efficiency variance for either labor or materials can be divided into
a. pending variance and yield variance C. Volume variance and mix
variance
b. Yield variance and price variance d. Yield variance and mix variance
55. The labor mix and labor yield variances together equal the Labor efficiency variance d. Idle labor
time variance
a. Total labor variance
b. Labor rate variance
Items 56 and 57 are based on the following information
Lam Company's standard direct labor rates in effect for the fiscal year ending June 30 and
standard hours allowed for the output in April are:
Standard DL Rate per Hour Standard DL Hours Allowed for Output
Engineering P8.00 500
Carpentry 7.00 500
Mason 5.00 500
 The wage rates for each labor class increased on January 1 under the terms of a new union
contract. The actual direct labor hours (DLH) and the actual direct labor rates for April were as
follows:
Actual Rate Actual DLH
Engineering P8.50 550
Carpentry 7.50 650
Mason 5.40 375
56. How much is the labor yield variance?
a. P 500 c. P 820
b. P 320 57 d. P 515
57. How much is the labor mix variance?
a. P 50 c. P 66.67
b. P 325 d. P 500
58. A standard costing system is most often used by a firm in conjunction with
a. Management by objectives c. Participative management
programs
b. Target (hurdle) rates ot return d. Flexible budgets
59. A difference between standard costs used for cost control and budgeted costs
a. Can exist because standard costs must be determined after the budget is completed.
b. Can exist because standard costs represent what costs should be, whereas budgeted costs
represent expected actual costs.
c. Can exist because standard costs are historical, whereas standard costs are based on
engineering B studies.
d. Cannot exist because they should be the same amounts.
60. Setting standards
a. Has important behavioral implications
b. Is largely a matter of calculating rates and quantities
c. Should be done to make them as tight as possible
d. Is done only for manufacturing activities
61. A major drawback to setting standards based on historical results is that such standards
a. Can perpetuate inefficiencies
b. Are harder to compute than are engineered standards
c. Are usually too hard to meet because of inflation
d. Are usually not well received by workers

61. Each finished unit of Product Lui contains 60 pounds of raw material, The manufacturing process
must provide for a 20% waste allowance. cash discounts. The raw material can be purchased for a
cost or P 2.50 a pound under terms of 2/10, n/30 allowance. The company takes all cash discounts.
What is the standard direct material cost of each unit of product Lui?
a. P 180.00 c.P183.75
b. P 187.50 d. P 176,1
62. The following direct labor information pertains to the manufacture or product Lu
Time required to make one unit 2 labor hours
Number of direct workers 50
Number of productive hours per week, per worker 40
Weekly wages per worker P 500
Workers' benefit treated as direct labor costs 20% of wages
What is the standard direct labor cost per unit of product Lu?
a. P 30 c. P 15
b. P 24 d. P 12
63. A standard costing system may be used in
a. Process costing but not job-order costing
b. Job-order costing but not process costing
c. Either job-order Costing or process costing
d. Neither process Costing nor job-order costing
64. Which one of the following management practices involves concentrating on areas that deserve
attention and placing less attention on areas operating as expected?
a. Management by objectives c. Benchmarking
b. Responsibility accounting d. Management by exception
65. Which of the following is best identified with a system of standard costing?
a. Variable costing C. Contribution margin approach
b. Management by exception d. Standardized accounting system
66. ‘Management by exception/ in relation to standard costing, means
a. Only large favorable variance need to be investigated
b. Only large unfavorable variance need to be investigated
c. Only large variances, favorable or unfavorable, need to be investigated
d. Only small variances need to be investigated
67. How should a variance that is significant in amount be treated at the end of an accounting period?
a. Reported as a deferred charge or credit \
b. Allocated among work-in-process inventory, finished goods inventory, and cost of
goods sold
c. Charged or credited to cost of goods manufactured
 d. Allocated among cost of goods manufactured, finished goods inventory, and cost of
goods sold
68. What is the normal year-end treatment of immaterial variances recognized in a standard cost
system?
a. Allocated among cost of goods manufactured and ending work in process inventory
b. Reclassified to deferred charges until all related production is sold
c. Closed to cost of goods sold in the period in which they arose
d. Capitalized as cost of ending finished goods inventory
69. Standard costing will produce the same results as actual costing when variances are distributed to
a. CG5 c. Income Summary
b. CGS and inventories d. WIP and finished goods inventory
70. The sum of material price variance and material use variance always equals the difference between
a. Actual and standard material purchases
b. Actual material purchases and standard material use
c. Standard material purchases and standard material use
d. Actual cost of material use and standard cost of materials allowed for production
71. Which of the following is NOT a quantity variance?
a. Material use variance c. Fixed overhead budget variance
b. Labor efficiency variance d. Variable overhead efficiency variance
72. Which variance CANNOT arise under a standard variable costing system?
a. Variable overhead budget variance
b. Variable overhead efficiency variance
c. Fixed overhead budget variance
d. Fixed overhead volume variance
73. Which item is NOT used to compute the fixed overhead volume variance?
a. Standard fixed cost per unit c. Actual fixed overhead
b. Budgeted fixed overhead d. Actual quantity produced
74. Which variance is LEAST likely affected by hiring workers with less skill than those already
working? a. Labor rate variance c. Material price variance
b. Material use variance d. Variable overhead efficiency variance
75. Which variance is MOST likely affected by buying a more expensive material that produces less
waste and is easier to handle?
a. Labor rate variance c. Fixed overhead budget variance
b. Direct labor efficiency variance d. Variable overhead spending variance

28. Information on Caterpillar Company's overhead costs is as follows:

Standard applied overhead
Budgeted overhead based on standard direct-labor hours allowed P83,000
Budgeted overhead based on actual direct-labor hours allowed
Actual overhead P 80,000 P84,000 P 86,000
What was the total overhead variance?
a. P 2,000 unfavorable c. P4,000 favorable
b. P 3,000 favorable d. P6,000 unfavorable
29. Yeast Company has a standard absorption and flexible budgeting system and uses a two-way
analysis for overt variances. Selected data for the February production activity is as follows:
Actual factory overhead incurred P 230,000
Budgeted fixed factory overhead costs P 64,000
Variable factory overhead rate per direct-labor hour P 5.00
Standard direct-labor hours 32,000
Actual direct-labor hours 33,000
What is the budget (controllable) variance for February?
a. 1,000 favorable b. C. 6,000 favorable
b.1,000 unfavorable d. 6,000 unfavorable
30. Information on Mold Company's overhead costs for the January production activity is as follows:
Budgeted fixed overhead P 75,000
Standard fixed overhead rate per direct-labor hour P 3.00
Standard variable overhead rate per direct-labor hour P 6.00
Standard direct-labor hours allowed for actual production 24,000
Actual total overhead incurred P 220,000
Mold has a standard absorption and flexible budget system and uses the two-variance method (two-
way analysis) for overhead variances. What is the volume (denominator) variance for January?
a. P 3,000 unfavorable c. P4,000 unfavorable
b. P 3,000 favorable d. P4,000 favorable
Items 31 and 32 are based on the following information
Ant Company's budgeted fixed factory overhead cost is P 50,000 per month plus a variable
factory over rate of P4 per direct labor hour. The standard direct labor hours allowed for October
production was 18,000 analysis of the factory overhead indicates that in October, Ant had an
unfavorable budget (controllable) variances P 1,000 and an unfavorable volume variance of P 500.
Ant uses a two-way analysis of overhead variance.
31. What is the actual factory overhead measured in Octoier?
a. P 121,000 c. P122,300
 b. P 122,000 d. P123,000
32. What is the applied (standard) factory overhead in October?
a. P 121,500 c.P122,500
b.P122,000 d. P 123,000
33. The following information is available from the Honey Company:
Actual factory overhead P 15,000
Fixed overhead expenses, actual P 7,200
Fixed overhead expenses, budgeted P 7,000
Actual hours 3,500
Standard hours 3,800
Variable overhead rate per direct labor hour P 2.50
Assuming that Honey uses a three-way analysis of overhead variance, what is the spending
variance? a. P 750 favorable c. P 550 favorable
b. P 750 unfavorable d. P 1,500 unfavorable
34. Queen Company has standard variable costs as follows:
Materials, 3 pounds at P 4.00 per pound P 12.00
Labor, 2 hours at 10.00 per hour P 20.00
Variable Overhead, P 7.50 per labor hour P 15.00
During September, Queen produced 6,000 units using 11,560 labor hours at a total wage of P
113,870 and incurring P 88,600 in variable overhead. What is variable overhead efficiency variance?
a. P 4.400 U c. P 1,900 U
b. P 3,300 F d. P 1 400 F
35. Bee Company uses a standard cost system In which it applies manufacturing overhead to units
of product on the basis of direct labor hours. The information below pertains to a recent month's
activity:
Denominator (normal) activity300 hour on 300 hours
Actual activity 350 hours
Standard hours allowed for output 360 hours
Predetermined overhead rate (P ? variable + P 3 fixed) P5 per hour
What would be the volume variance?
a. P 300 favorable c. P 150 favorable
b. P 180 favorable d. P 120 favorable
36. One way of analyzing the variable factory overhead variance is breaking it down into
a. Spending and efficiency variances c. Efficiency and volume
b. Spending and rate variances variance d. spending and capacity variances

37. One way of analyzing the fixed factory overhead variance is breaking t down into
a. Spending and volume variance c. Efficiency and volume variances
b. Spending and budget variances d. Efficiency and capacity variances.
38. What is the factory overhead variance hat serves as a measure or capacity utilization?
a. The overhead spending variance c. The overhead budget variance
b. The overhead efficiency variance d. The overhead volume variance
39. Maggot Company has total budgeted fixed overhead costs of P 01,000. Actual production was 15.0
normal capacity is 16,000 units. What was the volume variance?
a. P 4,000 favorable c.P4,267 unfavorable
b. P 4,267 favorable d. P4,000 unfavorable D
40. An unfavorable volume variance signifies that
a. Cost control was poor
b. Sales were less than budgeted
c. Production was less than sales
d. Production was less than the level used to set the fixed overhead application rate
41. Mosquito has budgeted fixed overhead of P 150,000. Actual production of 39,000 units resulted in a
P 6,000 favorable volume variance. What normal capacity was used to compute fixed overhead
rate?
a. 35, 000 c. 40,560
b. 37, 000 d. due to lack of information
42. The production volume variance is due to
a. Inefficient or efficient use of direct labor hours
b. Efficient or inefficient use of variable overhead
c. Difference on panned level of the base used for overhead allocation and actual level
achieved
d. Excessive application of direct labor hours over the standard amounts for output
level actually achieved
Items 43 to 48 are based on the following information
Dee Company produces a single product. The standard cost card for the product follows:
Direct materials (4 yards P5 per yard) P 20
Direct labor (1.5 hours P 10 per hour) P 15
Variable manufacturing overhead (1.5 hours @ P 4 per hour) P6
During a recent period, the company produced 1,200 units of product Various costs associated with
the production these units are given below:
Direct materials purchased (6,000 yards) P 28,500
 Direct materials used in production 5,000 yards
Direct labor cost incurred (2,100 hours) P 17,850
Variable manufacturing overhead cost incurred P 10,080
The company records all variances at the earliest possible point in time. Variable manufacturing
overhead costs are applied to products on the basis of direct labor hours.
43. What is the materials price variance for the period?
a. P 1,250 favorable c. P 1,250 unfavorable
b. P 1,500 favorable d. P 1,500 unfavorable
44. What is the materials quantity variance for the period
a. P 950 unfavorable c. P 5,000 favorable
b. P 1,000 unfavorable d. P 5,000 favorable
45. What is the labor rate variance for the period
a. P 2,700 favorable c. P 3,150 favorable
b. P 2,700 unfavorable d. P 3,150 unfavorable
46. What is the labor efficiency variance for the period?
a. P3,000 unfavorable c. P 2,550 unfavorable
b. P 3,000 favorable d. P 2,550 favorable
47. What is the variable overhead spending variance for the period?
a. P1,440 favorable c. P1,680 favorable
b. P1,440 unfavorable d. P1,680 unfavorable
48. What is the variable overhead efficiency variance for the period?
a. P1,200 unfavorable c. P1,440 unfavorable
b. P1,200 favorable d. P1,440 favorable
Items 49 and 50 are based on the following information:
The following information relates to a given department of if Company for the first quarter of 2018:
Actual total overhead (fixed plus variable) P 178,500
Budget formula P110,000 plus P 0.50 per hour
Total overhead application rate P1.50 per hour
Spending variance (from three-way analysis) P8,000 unfavorable
Volume variance (from two-way analysis) P 5,000 favorable
Over-all factory overhead variance P 6,000 unfavorable
49. What were the actual hours worked in this department during the quarter?
a. 110,000 c. 137,000
b. 121,000 d. 153,000
50. What were the standard hours allowed for good output in this department?
a. 105,000 c. 110,000
b. 106,667 d. 115,000

6. The materials cost variance is composed of

a. Quantity and efficiency variances c. Price and mix variances
b. Quantity and price variances d. Mix and yield variances
7. What is the variation in the use of materials at actual prices and use of materials at standard prices
a. Materials price variance c. Materials mix variance
b. Materials usage variance d. Materials yield variance
Ant Company installed solar panels on 20 Type- houses. The standard material cost for Type-C
house is P1,250 based on 1,000 units at a cost of P 1.25 each. During April, Ant Company in stalls
solar panels on residential houses, using 22,000 units of materials at a cost of P 1.20 per unit, and a
total cost of P 26,400 Type-C house variance. What is Ant Company's materials spending (price)
variance?
a. Pl,000 favorable c.P1,400 unfavorable
b. P1,100 favorable d. P2,500 unfavorable B C.
9. Information on Beatle Company's direct materials cost is as follows:
Actual direct materials costs 20,000
Actual units of direct materials used 40,000
Standard price per unit of direct materials P 2.10
Direct material quantity variance, favorable P 3,000
What was Beatie's materials price variance?
a. P1,000 favorable c. P 2,000 favorable
b. P1,000 unfavorable d. P 2,000 unfavorable
10. Information on Termites Company's direct-immaterial costs is as follows:
Standard unit price P 3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450
Materials purchase price variance, favorable P 240
What was the actual purchase price per unit, rounded to the nearest centavo?
a. P3.06 c. P3.45
b. P 3.11 d. P 3.75 .
11. If a company follows the practice of isolating variance at the earliest point in time, What would be
the appropriate time to isolate and recognized direct material price variance?
a. When material is issued to the requesting department or divISiOn
b. When material is purchased
c. When material is used in production
d. When purchase order is originated
12. A credit balance in the materials price variance indicates that
a. Actual price exceeds standard price c..Actual quantity exceeds standard quantity
b. Standard price exceeds actual price d. Standard quantity exceeds actual quantity
13. Roach Company manufactures tables with glass tops. The standard material cost for the glass
used per table is P 7.80 based on six square-feet of vinyl at a cost of P 1.30 per square-foot. A
production run of 1,000 tables in 2015 resulted to usage of 6,400 square-feet of vinyl at a cost of P
1.20 per square-foot, a total of P 7,680. What was the materials usage variance resulting from the
above production run?
a. P120 favorable c. P520 unfavorable
b. P480 unfavorable d. P640 favorable
14. The Centipede Company uses standard costing The following data are available for October:
23,500 pounds P2 per pound P1,000 unfavorable Actual quantity of direct materials used Standard
price of direct materials Material quantity variance What is the standard quantity of materials allowed
for October production?
a. 23,000 pounds c. 24,500 pounds
b. 24,000 pounds d. 25,000 pounds
15. A company uses a standard costs system to account for its only product. The materials standard
per unit was 4 pounds at P 5.10 per pound. Operating data for April were as follows.
Materials used 7,800 lbs.
Cost of materials used P 40,950
Number of finished unit 2,000
What was the materials usage variance for April?
a. P1,020 favorable c. P1,170 unfavorable
b. P1,050 favorable d. P1,200 unfavorable
Items 16 to 18 are based on the following information
A manufacturer of radios purchases components from subcontractors for assembly into
complete radios. Each radio requires three units each of Part X, which has a standard cost of P 2.90
per unit. During June, the company had the following experience with respect to Part X.
Purchases (P 36,000) 12,000 units
Consumed in manufacturing 10,000 units
Radios manufactured 3,000 units
16. During June, the company incurred a materials purchase price variance of
a. P 900 unfavorable c. P 1,200 unfavorable
b. P 900 favorable d. P1,200 favorable

17. During June, the company incurred a materials efficiency variance of

a. P2,900 unfavorable c. P8,700 unfavorable
b. P8,700 favorable d. P2,900 favorable
18. What is the amount that will be shown on a flexible budget for Part X Usage during the month of
June?
a. P 26,100 c. P29,000
b. P 27,000 d. P 36,000
19. The following data relate to direct labor costs for the current period:
Standard costs 10,000 hours at P 20
Actual costs 9,800 hours at P 19.50
What was the direct labor efficiency variance?
a. P3,600 favorable c. P4,000 favorable
b. P 3,600 unfavorable d. P4,000 unfavorable
20. Amoeba Corporation's direct labor information for product C for the month of October Is as follows:
Standard rate P6.10 per hour
Actual rate paid P 6.00 per hour
Standard hours allowed for actual production 1,500 hours
Labor efficiency variance P 600 unfavorable
What is the actual hours worked?
a. 1,400 c. 1,598
b. 1,402 d. 1,600
21. Worm Corporation's direct labor costs for the month of March were as follows:
Standard direct labor hours 42,000
Actual direct labor hours 40,000
Direct labor rate variance, favorable P 8,400
Standard direct labor rate per hour P 6.50
What was Worm's direct labor payroll for the month of March?
a. P 243,000 c. P 251,600
b. P 244,000 d. P 260,000
22. Leech Company's operations for April disclosed the following data relating to direct labor:
Actual cost P 10,000
Rate variance (favorable) 1,000
Efficiency variance (unfavorable) 500
Standard cost P 9,500
Actual direct labor hours for April amounted to 2,000. What was the standard direct labor hourly
rate?
a. P5.50 c. P4.75
b. P5.00 d.P 4.5 23.
23. The following is a standard cost variance analysis report on direct labor for a manufacturing
company:
Actual Hours at Actual Hours at Standard Hours at
Job Actual Wages Standard Wages Standard Wages
213 P3,243 P 3,700 P3,100
215 P 15,345 P 15,675 P15,000
Protex P 6,754 P 7,000 P 6,600
Benz P 19,788 P 18,755 P 19,250
CT-40 P 3,370 P 3,470 P2,650
Total P48,500 P 48,600 P 46,600
What is the total (flexible budget) direct labor variance for the division ?
a. P 100 favorable c. P1,900 favorable
b. P 1,900 unfavorable d. P 2,000 unfavorable
24,. In determining the standard factory overhead rate, which level of capacity is used?
a. Maximum capacity c. Normal capacity
b. Practical capacity d. Expected actual capacity
25. Which level of capacity if used would result into the lowest fixed overhead application rate?
a. Theoretical capacity c. Normal capacity
b. Practical capacity d. Expected actual capacity
26. The flexible budget of Spider Company is summarized below:
Percent of normal Operating capacity 80% 90% 100% 110%
Variable overhead 50,000 P 73,000 P21,000 P23,000 P25,000 P27,0000
Fixed overhead 50,000 50,000 50,000 50,000
Total factory overhead P71,000 P73,000 P75,000 P77,000
100,000 of units of product are produced when the company operates at its normal capacity. The
standard labor Ume per unit is 15 minutes. Actual production for the year was 90,000 units of
product in 44,000 hours. What is the standard variable factory overhead rate per hour?
a. 1.00 c.4.00
b. 5.00 d. 1.25 d.
NOTE Based on 100% operating capacityY, the variable rate is: P 25,000+ 25,000 hours= P 1
Feexible budget formula: FOH= 50,000+ 1 X, where X Is based on the number of hours
27. Using data in No. 26, what is the budgetary factory overhead adjusted to standard hours?
a. 22,000 c. 72,500
b. 50,000 d. 75,000

26. Which one of the following budgets is the last tem to be prepared under a normal budget
preparation process?
a. Direct labor budget c. Cash budget
b. Cost of goods sold budget d. Manufacturing overhead budget
27. The cash budget should help to ensure
a. hat enough cash is on hand at all times to satisfy maximum cash requirements
b. Sufficient liquidity without an excess amount or kale casn
c. That cash dividends can be paid every quarter
d. That sufficient cash is available to pay salaries, even it it means borrowing the money
28. The cash budget for 2019 would be affected if some way by all of the following, except
a. A cash dividend declared in 20l8 for payment in 2019.
b. A cash dividend declared in 2019 Tor payment in 2020.
c. Interest expense on loans taken out and repaid during 2019.
d. The sales forecast for the first month in 2020.
29. A company has prepared a cash budget for January through June of 2018. Which of the following,
discovered in February 2018, is LEAST Iikely to require revising the cash budget?
a. February sales are lower than budgeted.
b. The interest rate on short-term borrowing is higher than budgeted.
c. The company increased from 10%% to 20% the down payment it requires from customers.
d. The company changed inventory methods from LIFO to FIFO.
30. The last pro forma statement prepared under a typical budgeting process is the
a. Income statement c. Statement of cash flows
b. Statement of cost of goods sold 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 activities, EXCEPT:
a. Collection or a loan from subsidiary c. Sale of plant assets
b. Purchase of a patent from an inventor d. Dividends received on stock investment
32. 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 financing activities, EXCEPT:
a. The conversion of the company's own preferred stock into common stock
b. The declaration and payment of a cash dividend on the company's own common stock
c. The repayment of principal on a mortgage
d. The sale of the company's own preferred stock for cash
33. North Carolina projects the following activities related to its financial operations:
a. Issuance of share's of company's own common stock: P 170,000
b. Dividends to be paid to the company s own shareholders: P.7,000
 c. Dividends to be received from investrnents in other companies' shares: P 4,000 O
d. Interest to be paid on the company's own bonds: P 11,000
e. Repayment of principal on the company’s Own bonds: P 40,000
f. Proceeds from sale of the company's used equipment: P 23,000
In cash financial budget, the net cash used by financing activities should be projected to be
a. P375,000 c.P112,000
b. P 123,000 d. P19,000
34. The budget that describes the long-term position, goals, and objectives of an entity is the
a. Capital budget C. Cash management budget
b. Operating budget d. Strategic budget
35. Which one of the following best describes the role or top management in the budgeting process?
Top management
a. Should be involved only in the approval process
b. Lacks the detailed knowledge of the dally involvement
c. Needs to be involved, including using the budget process to communicate goals
d. Needs to separate the budgeting process and business planning process into two separate
processes
36. The budgeting process should be one that motivates managers and employees to work toward
organizational goals. Which one of the following is LEAST likely to motivate managers?
a. Participation by subordinates in the budgetary process
b. Having top management set budget levels
c. Use of management by exception
d. Holding subordinates accountable for the items they control
37. Comparing actual results with a budget based on achieved (actual) volume is possible with the use
of a
a. Monthly budget c. Rolling budget
b. Master budget d. Flexible budget
38. Which one of the following budgeting methodologies would be most appropriate for a firm facing a
significant level of uncertainty in unit sales volumes next year?
a. Static budgeting c. Top-down budgeting
b. Flexible budgeting d. Life-cycle budgeting
39. A flexible budget is
a. One that can be changed whenever a manager so desires.
b. Adjusted to reflect expected costs at the actual level of activity
c. One that uses the formula 'total cost = cost per unit x units produced d
d. The same as a continuous budget.

40. Which of the following is a difference between a static budget and a flexible budget?
a. A flexible budget includes only variable costs; a static budget includes only fixed costs.
b. A flexible budget includes all costs; a static budget includes only fixed costs.
c. A flexible budget gives allowances for different levels of activity while a static budget does
not.
d. None of the above.
41. A Company has developed the budget formula below for estimating Shipments have historically
averaged 12 pounds per shipment.
Shipping costs = P 18,000+ (P 0.60 x pounds shipped)
The plan and actual activity regarding orders and shipments for the month are given in the following
schedule:
Plan Actual
Sales orders 800 780
Shipments 800 820
Units shipped 8,000 9,000
Sales shipped P 120,000 P144,000
Total pounds 9,600 12,500
The actual shipping costs for the month amounted to P 21,000. What should be the appropriate
monthly flexible budget allowance for shipping costs for the purpose of performance evaluation
a. P 18,000 c. P23,760
b. P 18,492 d. P 25,500
NOTE: Flexible budget allowance is usually adjusted based on actual data?
42. The difference between the actual amounts and the flexible budget amounts for the actual output
achieved is the
a. Production volume variance c. Sales volume variance
b. Flexible budget variance d. Standard cost variance
43. Kaizen budgeting refers to the budgeting process where
a. The budget is based on only one level of activity
b. T he budget is based on many levels of activity so that the budget may be adjusted activity
c. The budget is based not on the existing system, but on changes or improvements that are
to be made.
d. The products revenues and expenses are estimated over its entire life-cycle (i.e., from
R&D phase w customer support phase)
 Note: Choice ‘a’ refers to fixed budget. Choice 'b' refers to flexible budget. Choice 'd' refers to
Life-cycle budget.
44. The budget method that maintains a constant twelve month planning horizon by adding a new
month on the end as the current month is completed is called
a. An operating budget c. A continuous budget
b. A capital budget d. A master budget
45. A Company that uses zero-based budgeting has
a. An expense budget of zero.
b. Zero as the starting point of budgeting the coming year's expenses
c. A zero variance between budgeted and actual performance.
d. An assumed sales level of zero.

MAS-06: STANDARD COSTING (75 MCQS)

1. Which of the following is a purpose of standard costing?
a. To replace budgets and budgeting T
b. To simplify costing procedures and expedite cost reports
c. To eliminate under/over applied factory overhead at the end of period
d. To use them as a basis for product costing for external reporting purposes
2. A primary purpose of using a standard cost system is
a. To minimize the cost per unit of production
b. To provide a distinct measure of cost control
c. To make things easier for managers in the production facility
d. To minimize recording of certain recurring business transactions
3. Standard costs are LEAST useful for
a. Measuring production efficiency c. Estimating future costs
b. Simplifying costing procedures d. Determining minimum inventory levels
4. Which of the following is true concerning standard costs?
a. If properly used, standards can help motivate employees.
b. Standard costs are difficult to use with a process-costing system.
c. Standard costs are estimates of costs attainable only under the most ideal conditions, but
rarely practicable.
d. Unfavorable variances, when material in amount, should be investigated, but favorable
variances need not be investigated. b. d.
5. A company using very tight standards in standard cost system should expect that
a. No incentive bonus will be paid
b. Most variances will be unfavorable
c. Employees will be strongly motivated to attain the standards
d. Costs will be controlled better that if lower standards were used

8. Which of the following equations can bo used to budget purchases? (BI = Beginning inventory, El =
Ending Inventory desired, CGS Budgeted cost of goods sold)
a. Budgeted purchases CGS B1 - EI c.Budgeted purchases=CGS +EI + BI
b. Budgeted purchases CGS + B d. Budgeted purchasesC6S + El - BI
9.Colorado Company desires an ending inventory of P 60,000. It expects sales of P 120,000 and has a
beginning inventory of P 40,000. Cost of sales is 606 of sales. Budgeted purchases are
a. P 60,000 c. P92,000
b. P 72,000 d. P132,000
10. Individual budget schedules are prepared to develop an annual comprehensive or master budget.
The budget schedule that would provide the necessary input data for the direct labor budget would
be the
a. Sales forecast c. Schedule of cash receipts and disbursements
b. Raw materials purchases budget d. Production budget
11. South Dakota Company budgets 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 month's sales needs. What is the budgeted production
for January?
à. 37,000 units c.26,000 units
b. 30,000 units d. 14,000 unites
12. New Mexico Company plans to sell 24,000 units of Product A in July and 30,000 units in August.
Sales of Product A during June were 25,000 units. Past experience has shown that end-of-month
inventory must equal 5,000 units plus s0o 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?
a. 28, 800 c. 24,0009
b. 22,200 d. 25,800
13. FIorida keeps its inventory of finished goods at 75% of the coming month's budgeted sales and
inventory of raw materials at 50% of the coming month's budgeted production needs. Each unit of
product requires2 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?
a. 1,525 pounds c. 2,800 pounds
b. 2,500 pounds d. 3,050 pounds
14. New Jersey Co. is budgeting sales of 53,000 units of product Al for 2019. The manufacture of one
unit of A1 requires 4 kilos of chemical Z5. During 2019, New Jersey plans to reduce the inventory of
 Z5 by 50,000 kilo5 and increase the finished goods inventory of Al by 6,000 units. There is no work-
in-process inventory. How many kilos of 25 is New Jersey budgeting to purchase in 2019?
a. 138,000 c. 186,000
b. 162,000 d. 238,000
15. Washington Company has the following 2019 budget data:
Beginning finished goods inventory 40,000 units
Sales 70,000 units
Ending finished goods inventory 30,000 units
Direct materials P 10 per unit
Direct labor P 20 per unit
Variable factory overhead P 5 per unit
Fixed factory overhead P 80,000
What are the 2019 total budgeted production costs?
a. P2, 100,000 c. P2,240,000
b. P2,180,000 d. P 2,320,000
16. Montana Company's budget contains the following information:
Units
Beginning finished goods inventory 85
Beginning work-in process in equivalent units 10
Desired ending finished goods inventory 100
Desired ending work-in-process in equivalent units 40
Projected sales 1,800
How many equivalent units should Montana plan to produce?
a. 1565 c. 1815
b. 1800 d. 1845
17. The information contained in a cost of goods manufactured budget most directly relates to the
a. Materials used, direct labor, overhead applied, and ending work-in-process
b. Materials used, direct labor, overhead applied, and work-in-process inventions budgets
c. Materials used, direct labor, overhead applied, and work-in-process inventories, and
finished goods inventories budgets
d. Materials used, direct labor, overhead applied, and finished goods inventories budgets.
18. Maine Co. makes payments for purchases 30% during the month of purchase and the remainder
the followed month. April purchases are projected to be P 80,000; May purchases will be P 120,000.
What will be the c payments on account for May?
a. P 36,000 c. P 84,000
b. P54,000 d. P92,000

19. Nebraska Company, a merchandising firm, is preparing its master budget and has gathered the
following data to help budget cash disbursements
Budgeted data:
Cost of goods sold P 1,680,000
Desired decrease in inventor 70,000
Desired decrease in accounts payable 150,000

All of the accounts payables are for inventory purchases and all inventories are purchased on
account. What the estimated cash disbursements for inventories for the budget period?
a. P 1,460,000 c. P 1,900,000
b. P 1,600,000 d. P 1,760,000
Items 20 and 21 are based on the following information
Operational budgets 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 projected collection patterns are shown
below:
Forecasted sales
July P 775,000
August 750,000
September 825,000
October 800,000
November 850,000
December 900,000

Types of sales
Cash sale 20%
Credit sales 80%

Collection Pattern for Credit Sales

In the first month of sale 40%
In the first month following the sale 57%
Uncollectible 3%
The cost of merchandise averages 40% of its selling price. The company's policy is to maintain an
inventory equal to 25% of the next month's forecasted sales. The inventory balance at cost is P
80,000 as of June 30.
20. The budgeted cost of the company's purchases for the month of August would be
a. P 302,500 c. P 307.500
b. P 305,000 d. P 318,750
21. The company's total cash receipts from sales and collections on account that would be budgeted
for the month of ember would be
a. P 757,500 c. P 793,800
b. P 771,000 d. P 856,500
22. Alaska Company has budgeted sales on account of P 120,000 for July, P 211,000 for August, and
P 198,000 for September. Collection experience indicates that 60%% of the budgeted sales will be
collected the month after the sale, 36% the second month, and 4% will be uncollectible. what would
be the cash from accounts receivable that should be budgeted for September?
a. P169,800 c. P 197,880
b. P194,760 d. P 198,600
23. Alabama Consortium is constructing a corporate planning mode. Cash sales are 30%% of the
company's sales, with the remainder subject to the following collection pattern:
One month after sale 60%
Two months after sale 30%
Three months after sale 8%
Uncollectible 2%
If S, is defined as total sales in month n, which one of the following expressions correctly describes
Alabama's Collection on account in any given month?
a. 0.6 Sn-1 + 0.3 Sn-2 + 0.08 Sn-3 C. 0.42 Sn-1 + 0.21 Sn-2 + 0.056 Sn-3
b. 0.42 Sn+1 + 0.21 Sn+2 + 0.056 Sn+3 d. 0.6 Sn-1 + 0.3 Sn-2 + 0.08 Sn-3 0.02 S
24. The cash receipts budget includes
a. Funded depreciation c. Extinguishment of debt
b. Operating supplies d. Loan proceeds
25. The Pennsylvania Company is preparing its cash budget for the month of May. The following
information is available concerning its accounts receivable:
Estimated credit sales for May P 200,000
Actual credit sales for April 150,000
Estimated collections in May for credit sales in May 20%
Estimated collections in May for credit sales in April 70%
Estimated collections in May for credit sales prior to April P 12,000
Estimated write-offs in May for uncollectible credit sales 8,000
Estimated provision for bad debts in May for redit sales in May 7,000
What are the estimated cash receipts from accounts receivable collections in May?
a. P142,000 c. P 150,000
b. P149,000 d. P 157,000

36. The income statement of product Pabigat, one of the product being sold by Palugi Company,
is reproduced below:
Sales P 80,000
Cost and expenses 92,000
Net loss (P 12,000)
P 37,600 of the costs and expenses above are fixed, of which P 21,600 is unavoidable regardless of
whether the product will be dropped or not. What is the product elimination point?
37. Temple Corporation contemplates the temporary shutdown of its plants facilities in a provincial area
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 expenses
4) Insurance of facilities
Which of the above expenses will be considered in the computation of shutdown costs?
a. All expenses in the list c. Items 1, 2 and 3 only
b. All except items 5& 7 d. All except item 5
38. The indifference point is the level of volume at which company
a. Earns the same profit under different operating schemes
b. Earns no profit
c. Earns its target profit
d. Any of the above
39. Bible Production, Inc. owns and operates a chain of movie theaters. The theaters in the chain vary
from low volume, small town to high volume, big city/downtown theaters. Management is
considering installing machines that will make popcorn on the premises. This proposed feature
would be properly advertised and is intended to increase patronage at the company's theaters.
These machines are available in two different sizes with the following details:
Economy poppers Regular poppers
Annual capacity 50,000 boxes 120,000 boxes
Costs:
Annual machine rental P 80,000 P 110,000
Popcorn costs per box 1.30 1.40
Cost of each box 0.80 0.80
Other variable costs per box 2.20 1.40
What level of output at which the Economy and Regular Poppers would earn the same profit (loss)?
 a. 50,000 boxes c. 37,500 boxes
b. 65,000 boxes d. 40,000 boxes
40. in a sell or process decision, which of the following is irrelevant?
a. Joint production costs
b. Additional cost to process further the product
c. Additional revenue to process further the product
d. Avoidable fixed production cost incurred after split-off
41. Desert Company produces three products from a oint process costing P 100,000. The following
information is available
Units Sales Price (After Further) Cost to Process Further Sales Price (After-further)
A 10,000 P 35 P 60,000 P 40
B 20,000 P 40 20,000 P 45
C 30,000 P 20 90,000 P 25
Which products should be processed further?
a. A Only c. B and C
b. A and B d. A, B and C
42. When a multiproduct plant operates at full capacity, quite often decisions must be made as to which
products to emphasize. These decisions are frequently made with à short-run focus. In making such
decisions, managers should select products with the
a. Highest sales price per unit
b. Highest sales volume potential
c. Highest individual unit contribution margin
d. Highest contribution margin per unit of the constraining resource
43. Somalia Company produces three products, with costs and selling prices as shown below:
A B C
Selling price per unit P 30 100% P 20 100% P 15 100%
Variable costs per unit 18 60% 15 75% 6 40%
Contribution margin per unit P 12 40% P 5 25% P 9 60%
A particular machine is a bottleneck. On that machine, 3 machine hours are required to produce
each unit of Product A, 1 hour is required to produce each unit of Product B, and 2 hours are
required to produce each unit or Product C. In which order should it produce its products?
a. C, A, B c. B, C, A
b. A, C, B d. The order of production doesn’t matter

44. Data regarding four different products manufactured by an organization are presented below, Direct
material and direct labor are readily available from the respective resource markets. However, the
manufacturer limited to a maximum of 3,000 machine hours per month:
Product A Product B Product C Product D
Selling price per unit P 15 P 18 P 20 P 25
Variable costs per unit P7 P 11 P 10 P 16
Units produced per machine hour 3 4 2 3
What is the product that is the most profitable for the manufacturer in this situation?
a. Product A C. Product C
b. Product B d. Product D
45. Food Co. has a limited number of machine hours that it can use for manufacturing two products X
ad Y. Each s d eling9 price of P 160 per unit but product X has 40% contribution margin and product
Y has 709% contribution margin. One unit of Y takes twice as many machine hour to make as a unit
of X . Assuming unlimited demand, which product(s) should the limited machine hours be used for?
a. X c. Either X and Y
b. Both X and Y d. Y
46. Sudan Company has three products: A, B and C Three machines are used to produce the product.
The contribution margins, sales demands, and time on each machine (in minutes) are as follows:
Demand CM Time on M1 Time on M2 Time on M3
A 100 P 30 10 mins 15 mins 12 mins
B 80 P 20 10 mins 5 mins 8 mins
A 60 P 30 5 mins 10 mins 5 mins

Assuming that there ore 2,100 minutes available in each machine, which machine is the bottleneck?
a. Machine 1 c. Machine 3
b. Machine 2 d. No bottleneck operation
NOTE: ’Bottleneck ‘ is a constraint in a facility or resource whose capacity is less than the demand
place upon it.
47. Assuming the sane data in No, 10, how many units of A, B, C should be produced during the
week?
a, 93 of A, 60 of B, and 90 of C c. 60 of A, 60 of B, and 90 of C
b. 93 of A, B0 of B, and 60 of C d. 90 A, 60 of B, and 90 of C
48, Which of the following is a short term approach to managing bottlenecks as it attempts to remove
the influence of bottlenecks on the production process?
a. Theory of constraints c. Rationalization
 b. Reengineering d. Benchmarking

MAS 05 BUDGETING (45 MCQs)

1. Which of the following is NOT an advantage of budgeting?
a. It requires managers to state their objectives
b. It facilitates control by permitting comparisons of budgeted and actual results
c. It facilitates performance evaluation by comparing budgets with actual results
d. It provides a checkup device that allows managers to keep close tabs on their subordinates
2. Budgets are a necessary component of financial decision making because they provide a (n)
a. efficient allocation of resources c. Means to check managerial discretion
b. Means to used al the firm's resources d. Automatic corrective mechanism for errors
3. In an organization that plans by using comprehensive budgeting, the master budget is
a. A compilation of all he separate operational and financial budget schedules or the
organization
b. The booklet containing budget guidelines, policies and form to use la the budgeting process
c. The current budget updated for operation for part or the current year
d. A budget for a non-profit entity after it s approved by the appropriate authoritative body
4. The sales budget is classified as
a. A financial budget c. An operating budget
b. A flexible budget d. A program budget
5. Using the concept of 'expected value' in sales forecasting means that the sales forecast to be used
a. Developed using the indicator method c. Based on expected selling prices of the products
b. The sum of he sales expected by individual d. Based on probabilities
6. Ohio Company developed the following sales forecasting and associated probabilities
Sales Forecast Probability
P 600,000 10%
P 650,000 50%
P 700,000 35%
P 800,000 5%
What is the expected value of sales?
a. P 650,000 c. P 667,500
a. P 670,000 c. P 800,000
7. Which of the following is included in a firm’s financial budget?
a. Budgeted income statement c. Production schedule
b. Capital budget d. Cost of goods sold budget

8. Tehran has a stall that specializes in handcrafted fruit baskets that sell for P 60 each. Daily fixed
costs are P 15,000 and variable costs are P 30 per basket. An average of 750 baskets is 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 for 40 baskets. Tehran should
have
a. Rejected the offer since he could have lost P S500
b. Rejected the offer since he could have lost P 900
C. Accepted the offer since he could have P 300 contribution margin
d. Accepted the offer since he could nave P 700 contribution margin
20. Given the following target selling price for a unit of product.
Direct materials P18
Direct labor 7
Overhead (20% variable) 15*
Cost of manufacture 40
Desired markup 12
Regular selling price P 50
* based on 25,000 units produced each year
A Customer 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 so it has idle capacity. Variable selling costs associated with the
special order would be P2 per unit. If the special order is accepted, what will be the effect on the
company's overall net income?
a. Increase by P 40,000 c. Increase by P 50,000
b. Decrease by P 10,000 d. Decrease by P 70,000
2. Istanbul Company budgets sales of 400,000 calculators at P 40 per unit for 2018. 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 for P 23 each was received by Istanbul in March
2018. Istanbul has sufficient plant capacity to manufacture the additional quantity; however, the
production shall be done on an overtime basis at an additional cost of P 3 per calculator.
Acceptance of the special offer would' not affect Istanbul's normal sales and no selling expense
would be incurred. What would be the effect on operating profit if the special order were accepted?
a. P 120,000 decrease c. P40,000 decrease
b.. P 160,000 increase d. P 280,000 increase
22. Abu Company sells Product B at a selling price f P 21 per unit. Abu's cost per unit based on the full
capacity of 200,000 units is as follows:
Direct materials P4.00
 Direct labor 5.00
Overhead (2/3 fixed 6.00
15.00
A special order offering to buy 20,000 units was received from 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 units. n negotiating the price for the special order,
Abu should consider that the minimum selling price per unit should be:
a. P 14 c. P 16
b. P 15 d. P 18
23. Mumbai Co. is a manufacturer of industrial components. One of their products used as a
subcomponent in manufacturing is KB-96. This product has the following financial structure per unit
Selling price P 150

Direct materials P 20
Direct labor 15
Variable manufacturing overhead 12
Fixed manufacturing overhead 30
Shipping and handing 3
Fixed selling and administrative 10
Total costs P90
Mumbai has received a special, one-time, order for 1,000 KB-96 parts. Assume that Mumbai is
operating at full capacity and that the contribution margin 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. P 60 c. P 87
b. P 70 d. P 100
2. Dhabi Company s regular selling price for its product is P 10 per unit. Variable costs are P 6 per unit.
Fixed costs total per unit based on 100,000 units and remain constant within the relevant range of
50,000 units to tote capacity of 200,000 units. After sales of 80,000 units were projected for 2019, a
special order was received for an additional 100,000 units. To increase its operating income by a
total of P 10,000, what price per unit should Dhabi Charge Tor this special order?
a. P 7.00 c. P 10.00
b. P 8.00 d. P11.00
25. Delhi Co. operates at full capacity. The minimum selling price to be set for a special order must
cover
a. Fixed cost
b. Variable cost
c. Variable cost plus foregone contribution margin on lost regular sales
d. Fixed cost plus foregone contribution margin on lost regular sales
20. Iraq, Inc. sells a product for P 30. Variable cost Is P 16. Iraq could accept a special order for 1,000
units at. If Iraq accepted the order, how many units could it lose at the regular price before the
decision became unwise?
a. 1,000 c. 200
b. 500 d. 0
27. In deciding whether or not to eliminate a branch or division, which of the following is considered
relevant?
a. All variable costs of the branch c. All direct costs of the branch
b. All fixed costs of the branch d. All indirect costs of the branch
28. Lebanon Co. plans to discontinue a division with a P 20,000 contribution margin. Overhead
allocated to the division is P 50,000, of which P5,000 cannot be eliminated. What is the effect on
Lebanon’s pretax income by this plan .
a. P 5,000 decrease c. P 25,000 increase
b. P 20,000 decrease d. P 30,000 increase
29. Baghdad Company produces and sells 8,000 units of Product X each year. Each unit of Product X
sells for P 10 and has a contribution margin of P 6. °It is estimated that if Product X Is discontinued,
P 50,000 or the P 60,000 in fixed costs charged to Product X could be eliminated. These data
indicate that if Product X Is discontinued, overall company operating income should
a. Increase by P 2,000 per year c. Increase by P 38,000 per year
b. Decrease by P 2,000 per year d. Decrease by P 38,000 per year
30. Arab Home, Inc. manages five upscale townhouses in Damascus. Shown below are the summary
income statements for each unit
ONE TWO THREE FOUR FIVE
Rent Income P10,000 P 12,100 P 23,470 P 18, 780 P 10,650
Expenses 8,000 13,000 26,000 26,000 13,000
Profit P 2,000 (P 9,000 ) (P 2,530) (P 5,220) (P 2,350)
Included in the expenses is P 12,000 of corporate overhead allocated to the townhouses based on
rental income. The townhouse unit(s) that the company should consider selling Is (are):
a. Two, Three, Four and Five c. Four and Five
b. Three, Four and Five d. Four
31. Allocated common fixed costs
a. Can make a product line appear to be unprofitable
b. Are always incremental costs
c. Are always relevant in decision involving dropping a product line
d. Reponses a, b and c are all correct
32. In analyzing whether to build another regional service office, the salary of the Chief Executive
Officer (CEO) at the corporate headquarters is:
a. Relevant because salaries are always relevant
b. Relevant because this will probably change if the regional service office is built
c. Irrelevant because it is a future cost that will not differ between the alternatives
under consideration
d. Irrelevant since another imputed cost for the same will be considered
33. The Uganda Company has two divisions- East and west. The divisions have the following revenues
and expenses:
East West
Sales P 720,000 P 350,000
Variable costs 370,000 240,000
Traceable fixed costs 130,000 80,000
Allocated common corporate costs 120,000 50,000
Operating income (loss) P 100,000 (P 20,000)
The management at Uganda is pondering the elimination of the West division since it has shown an
operating loss for the past several years. If the West division were eliminated, its traceable fixed
costs could be avoided. The total common corporate costs would be unaffected by this decision.
Given these data, the elimination of the West Division would result in an overall company operating
income of:
a. P120,000 c. P80,000
b. P 100,000 d. P 50,000
34. Arabia Company produces and sells three products as follows:
Products
A1 B2 C3
Sales P 200,000 P 150,000 P125,000
Separable (product) fixed costs 60,000 35,000 40,000
Allocated fixed costs 35,000 40,000 25,000
Variable costs 95,000 75,000 50,000
The company lost its lease and must move to a smaller facility. As a result, total allocated fixed
costs will be reduced by 40%. However, one of its products must be discontinued in order for the
company to fit in the new facility. Since the company's objective is to maximize profits, what is the
expected net profit after the appropriate product has been discontinued?
a. P 10,000 c. P 20,000
b. P 15,000 d. P 25,000
35. How is the shutdown point (in units) computed?
a. (Avoidable fixed costs - Additional costs) + Contribution margin ratio
b. Avoidable fixed costs + Unit contribution margin
c. Differential fixed costs + Contribution margin ratio
d. (Avoidable fixed costs + Additional costs) + Unit contribution margin

MAS Module No. 2

MAS- 04, 05, 06 Multiple-Choice Questions (MCQs)
Sources: CMA/CIA/RPCPAJA/CPA/Various test banks

MAS-04: RELEVANT COSTING (48 MCQS)

1. Which of the following is NOT part of the decision making process?
a. Identifying the problem
b. Quantifying the factors associated with the alternatives
c. Reaching a decision
d. Reversing the decision if not economically sound
2. In the development of the accounting data for decision-making purposes, a relevant cost is defined
as:
a. Changes in variable cost under each alternative 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 ot their
relevance to managerial control.
3. The relevance of a particular cost to a decision is determined by the
a. Size of the cost c. Potential effects on the decision
b. Risk level of the decision d. Accuracy and verifiability of the cost
4. In a decision analysis situation, which one of the following costs is generally NOT relevant to the
decision?
a. Incremental cost c. Avoidable cost
b. Differential cost d. Historical cost
5. The kind of cost that can be ignored in short-term decision making is a(n)
a. Differential cost c. Sunk cost
b. Incremental cost d. Relevant cost
6. An item whose entire amount is usually a differential cost is
a. Factory overhead c. Conversion cost
b. Direct cost d. Period cost
7. In determining whether to manufacture a part or buy it from an outside vendor, a cost that is
irrelevant to the Short Fur decision is
a. Prime costs
 b. Variable overhead
c. Fixed overhead that will be avoided if the part is bought from an outside vendor
d. Fixed Overhead that will continue even if the part is bought from an outside vendor
8. In a make-or-buy decision, the relevant costs include variable manufacturing costs as well as
a. Factory management costs c. Avoidable fixed costs
b. General office costs d. Depreciation costs
9. Turkey Technology manufactures a particular computer component. Currently, the costs per unit are
as follows:
Direct materials, P 50; direct labor, P 500; variable overhead, P 250; fixed overhead, P 400.
Pakistan Inc. has obtained Turkey with an offer to sell 10,000 units of the component for P 1,100 per
unit. If 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 c. Buy due to savings of P 1,000,000
b. Buy due to savings of P 2,500,000 d. Make due to savings of P 500,000
10. Saudi Arabia Company is operating at 70% capacity. The plant manager is considering making Part
A56 now being purchased from outside suppliers for P 110 each, a price that is projected to
increase in the near future. The plant has the equipment and labor force required to manufacture
Part A56. 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 manufacture Part A56 will result in a gain or (loss) for each Component of:
a. P 26 c. (P 20)
b. P 16 d. P 4
11. Qatar Company produces Part G. The costs per unit for 10,000 units for Part G are as follows:
Direct materials P3
Direct labor 15
Variable overhead 6
Fixed overhead 8
Total P32
Bahrain Company has offered to sell Qatar 10,000 units of Part G for P 30 per unit. If 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, P 5 per unit of fixed overhead applied to Part G would be totally
eliminated. What alternative is more desirable and by what amount is it more desirable?
a. Manufacture, P 10,000 c. Buy, P 35,000
B. Manufacture, P 15,000 d. Buy, P 65,000
12. Yemen Company manufactures 20,000 units of a certain component per year. This component is
used in the production of a main product. The following are the costs to make the component per
unit:

Direct materials P 11
Direct labor 14
Variable overhead 8
Fixed overhead 9
If Yemen buys the component from outside supplier the company can rent out the released facilities
for P 20,000 year. The cost of the component per unit as quoted by the supplier is P36. 60% of the
fixed overhead applied in the manufacture of the component will continue regardless of what
decision is made. For ALL purchases made by the company, freight and handling costs are applied
at 1% of the purchase price. The direct materials cost is exclusive of the freight and handling cost.
Fixed overhead What is the economic advantage or disadvantage of buying the component?
(NOTE: e relevant cost to buy must include 1% handling cost based on the purchase price)
a. P 24,800 advantage c. P 27,000 disadvantage
b. P 27,000 advantage. d. P 63,000 advantage
13. 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 Baghdad; 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 Outsiders
Sales P 15,000 P 40,000
Variable costs (10,000) (20,000)
Fixed costs (3,000) (6,000)
Profit P 2,000 P 14,000
Unit sales 10,000 units 20,000 units
The Lawn Products Division has an opportunity to purchase 10,000 identical quality blades from an
outside Supplier at a cost of P 1.25 per unit. Assume that the Blade Division cannot sell any
additional products to outside customers should Baghdad allow its Lawn Products Division to
purchase the blades 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
c. Yes, because buying the blades would save Baghdad Company P 2,500
d. No, because making the blades would save Baghdad Company P 2,500
14. Cairo Manufacturing uses 10 units of Part Number KJ45 each month in the production of radar
equipment. ne unit cost to manufacture one unit of KJ45 is presented below.
Direct material P1 ,000
 Materials handling (20%.ofdicect.material cost) 200
Direct labor 3,000
Manufacturing overhead (150%% of direct labor) 12,000
Materials handling represents the direct variable costs of the Receivin9 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 K345 at
a unit price of P 15,000. If Cairo purchases the KJ45 units from 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 R345 would:
a. Increase by P 4,800 c. Decrease by P 3,
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) 200
15. Iran Company needs 20,000 of a certain part to use in its production cycle. The following
information is available:
Cost to Iran to make the part:
Direct materials P4
Direct labor 16
Variable overhead 18
Fixed ovehead applied 10
P 48
Cost to buy the part from the Syria Company P 36
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. In deciding whether to make or buy the part, what are the total relevant costs to make the
part?
a. P 560,000 c. P 720,000
b. P 640,000 d. P840,000
16. All of the following costs are relevant to a decision to accept or reject an order, EXCEPT
a. Differential costs c. Avoidable cost
b. Out-of-pocket costs d. Historical cost
17. Accepting a special order will improve overall net operating income so long as revenue from the
order exceeds a
a. The contribution margin on the order c. The variable costs associated with the order
b. The sunk costs associated with the order d. The incremental costs associated with the order
18. 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 irrelevant?
a. Materials c. Direct labor
b. Depreciation d. Variable overhead

Practice Set Answer & Solutions

1 D Growth rate: (4.28- 4)÷ 4= 7% Cost of new equity: [5.24 (1.07) 98]+ 7%
2 B Price=4.25 ÷ (18% - 8%)= P 42.50 [4.25(42.50 1.25)] + 8%
3 A Dividend: 4 (60%o) 1.075= 2.58 (2.58 ÷ Price) + 7.5% = 14% Price= P 39.69
4 C YTM: [80 (50 10)] [(1,000+ 1,050)21=7.31% After-tax cost of debt: 7.31% (1-0.4)
5 B K 6%% + 1.3 (11%-6%)=12.5% Po 57 112.5%= P 50.67
6 A 3/50 +9% = 15% 15% = 7% + β (10%-7%) β= 2. 67
7 B Year 1 ending bal.: 200,000 20,000= 180,000 Net income: net cash flow depreciation
ARR: (40,000-20,000)+ [(200,000+ 180,000)÷2] (ARR is based on 1st year of asset's use)
8 C 2,000 + 2,000 (x) = 7596 x=2.798 IRR= 16%
Year Sum-of-the-years Straight-line Difference PV factors
1 40,000 25,000 15,000 0.870
9 C 2 30,000 25,000 5,000 0.756 P 4,960
3 20,000 25,000 (15,000) 0.658
4 10,000 25,000 (15,000) 0.572
Increase in NPV (tax shield): 4,960 x 40% =P 1,984
Net income: (1.5 M ÷ 3.60478) - (1.5 M5) = 116,114.16
10 C Contribution margin: (116,114.16 ÷ 60%) + (300,000+ 20,000) = 513,523.60
SP = CM/u + VC/u = (513,523.60 ÷ 20,000) + 60= P 85 (approximate)
11 B [60,000 (98%)] ÷ (100%- 9%) = P 64,615
12 B Trial and error: NPV is the same for both projects at @ 12.64%
Project AM: 12,000 (4.038)- 48,000= P 455 Project PM: 15,200 (5.505)- 83,225 = P 455
13 D Cash Conversion: 300/10 + 25- 300/20 = 40 days Minimum cash: 1.125M/300x 40 days
14 D (72%0-18%) x - (5M + x) 10% (40%)=0 x = 400,000 New sales: 5M+ 400,000 5.4M
Decline in sales: 500,000 x 40% = P 200,000 (-)
15 C Decline in bad debts: (4M x 5%) - (3.5M x 2%)= P 130,000 (+)
Decline in AR: [(4M x 40/360)- (3.5M x 30/360)] x 60% x 12% = P 11,000 (+)
Reduction in income: (130,000 + 11,000 - 200,000) x 65%% =P 38,350
16 B Temporary financing requirement: Total Assets - 350,000
Monthly Average = 290,000/12
 17 B Aggressive: 350,000 x 10%, 24,167 x 8%; Conservative: 400,000x 10%
18 D Dividend: 800,000-60% (1.2M) = 80,000 Payout: 80,000 ÷ 800,000 10%
19 C CGS= 288 M x 62.5% = 180 M Savings: [(180 M/8)- (180 M/10)1 6%
20 B RoE(common): 12.5%=(x-16.000) ÷ (2.000,000 - 200,000) x=P 241,000
21 A Forecasted retained earnings: 4,200,000 + (20,000,000 x 4%) 60%
22 C 15.9M (35%) = 5,565,000 (+)* (50.6M-48.3M) (18%) (65%) 269,100 (+)
15.9M (2%) = 318,000 (-) 60% (111.4M) 2% = 1,336,800 (-)
OLD: RoA = 0.25 (10%) = 2.5% RoE = 2.5% ÷ 0.50= 5%
23 C NEW: RoA = 0.25 (14%) = 3.5% RoE = 3.5% ÷ equity ratio = 5% (2)
Equity ratio = 35% - Debt ratio= 65%
24 C EPS: 7.5 M/2.5 M=3 600,000 (3) ÷ [600,000 (20) x 95%- 200,000] = 16.07%
25 A Dividend payout ratio= 2 ÷ EPS 40% EPS = P 5= 1.2M /x x= 240,000 shares
26 C Economic Value Added (EVA) = 800,000 (100%-25%) - 10.5%* (800,000 + 3.2 M -400,000)
*WACC= 6% (25%) +12% (75%)_
27 D Budgeted unit SP: 125% x [(2 M+3 M+ 1.2 M + 1 M)+ 200,000]

MAS - 10 page 7, item 12

(NOTE: Some amounts and percentages are rounded-off)
Project Annual Cash Flow Investment Cost of Capital IRR NPV
1 P 45,000 P 188,640 14% (1) 20% (2) P 46,080
2 P 75,000 (3) P 337,050 12% 18% (4) P 86,700
3 (5) P 62,073 P 300,000 (6)10% 16% P 81,000
4 (7) P 100,000 P 450,000 14% (8) 18% P 115,000

MAS quizzes (Batch 36)

● MAS Quiz 4 Coverage: MAS – 10, 11 & 12 (problems only)

● MAS Quiz 5 Coverage: MAS – 1 to 12, A to F (theories only)

● Please see posted announcements for respective dates of the quizzes in all sessions.