DR. GLORIA LACSON FOUNDATION COLLEGES INC.

MANAGEMENT ADVISORY SERVICES Name: ___________________________________________ Block: _____________ Score: ________

INSTRUCTION: Write the letter which corresponds to your answer beside the corresponding number. Erasures are not allowed. Use black pens only. If caught cheating, a deduction of 10% to the total score obtained will be given without notice. 1. A product cost is a. cost associated with manufacturing other than direct labor and direct material costs b. manufacturing cost incurred to produce units of output c. cost direct labor and all factory overhead cost d. cost related to marketing and shipping activities 2. The salary a person could be earning by working rather than attending college is an example of a. opportunity cost b. sunk cost c. out of pocket cost d. period cost 3. In a manufacturing company, what replaces purchases to arrive at cost of goods sold? a. Finished Goods b. Work in Process c. Cost of Goods Manufactured d. Manufacturing Costs 4. Prime Cost and Conversion cost share what common element of product cost? a. Direct Labor b. Fixed Overhead c. Direct Materials d. Variable Overhead 5. The term committed cost refers to a. Costs that fluctuate in total in response to small changes in the rate of utilization and capacity b. Cost amortization that were capitalized in previous periods c. Costs that are likely to respond to the amount of attention devoted to them by a specified manager 6. Common costs are incurred a. By every department in an organization b. To produce two or more inseparable products c. Routinary in the industry in which the company operates d. To produce common products beyond their split off point. 7. All of the following are assumptions underlying the validity of linear regression output except a. errors normally distributed and their mean is zero b. certainty c. variance of the errors is constant d. independent variables are not correlated to each to other 8. The following, except one, are methods of segregating fixed and variable cost a. breakeven method b. regression method c. high low method d. scattergraph method 9. If there is a strong statistical relationship between two variables, which of the following equation bet represents the strongest correlation relationship? a. -9.00 c. -0.93 b. 0.87 d. 9.00 10. In the standard regression equation Y = a + bx, the letter b is best described as a(n) a. independent variable

b. constant coefficient c. dependent variable d. variable coefficient 11. as a. b. c. d. 12. a. b. c. d. 13. a. b. c. d. 14. a. b. c. d. In the standard regression equation Y = a + bx, the letter x is best described a(n) independent variable constant coefficient dependent variable variable coefficient The cost function obtained by least squares method is linear must be tested for minima and maxima is parabolic does not require any form Inventory under variable costing includes Direct Materials, Direct Labor Direct Materials, Direct Labor, Variable Factory Overhead Prime Cost and Conversion Cost Direct Materials, Direct Labor, Factory Overhead A favorable volume variance means that cost control was probably good absorption costing net income is less than variable costing actual output was less than the level used to set the standard fixed cost actual output was more than the level used to set the standard fixed cost

15. Absorption costing differs from variable costing net income in all of the following except a. treatment of fixed factory overhead b. treatment of variable production cost c. acceptability in external reporting d. arrangement of the income statement 16. a. b. c. d. Which of the following is not an argument against the use of variable costing? it understates the balance sheet value of inventories fixed factory overhead is necessary for the production of a product variable factory overhead is a period cost variable costing only focuses on the short term decision making in product cost under both absorption and

17. A cost that would be included variable costing would be a. Plant Manager Salaries b. Equipment Depreciation c. Direct Labor d. Variable Selling Expenses 18. a. b. c. d. 19. a. b. c. d.

At breakeven point, fixed cost is always less than contribution margin equal to contribution margin more than variable cost more than the contribution margin The term relevant range as used in cost accounting means the range by which cost may fluctuate cost relationships are valid production may vary relevant cost are incurred

20. When a company has exceeded breakeven point, the degree or amount that revenues may decline before incurring loss is the a. residual income rate b. breakeven point c. margin of safety d. rate of return 21. The percentage change in earnings before interest and taxes associated with percentage change in revenue is a. operating leverage b. financial leverage

c. breakeven leverage d. combined leverage 22. a. b. c. d. Contribution margin ratio always increases when breakeven point increases breakeven point decreases variable cost as a percentage of net sales decreases variable cost as a percentage of net sales increase

23. Typically, which of the following would be considered as the most indicative of a firms short term debt paying ability? a. Working capital b. acid test c. current ratio d. cash ratio 24. Which of the following ratios would generally be used to measure a firms overall liquidity? a. Working capital b. acid test c. current ratio d. cash ratio 25. Which of the following would be the best indicative that the firm is carrying excess inventory? a. A decline in sales b. A decline in current ratio c. A stable current ratio but declining quick ratio d. A stable quick ratio but declining current ratio 26. 1. 2. 3. 4. a. b. c. d. In what order are the following budgets prepared? Budgeted Income Statement Production Budget Selling and Administrative Budget Materials Purchases Budget 3, 2, 4, 1 2, 4, 1, 3 2, 4, 3, 1 4, 2, 3, 1

27. Which one of the following is necessary if a company expects its budgets to be effective? a. It must be operating at less than capacity b. The budget must cover for 1 year c. Its organizational structure must be sound d. It must have sufficient cash for operations 28. Adriano Company uses regression analysis to develop a model for predicting overhead costs. Two different cost models are under consideration as the independent variable. Machine Hours Y intercept Coefficient 2,500 Weight (kg) Y intercept Coefficient 4,600

B 5 r2 0.90 What regression equation should be used? a. y= 2,500 + 5x b. y = 4,600 + 2.6x c. y= 2,500 + .9x d. y = 4,600 + .8x

B r2

2.6 0.80

29. Using the information in number 26, what is the predicted cost if the available information on independent variable is 2,000 (hours/weight) a. 12,500 c. 9,800 b. 4,300 d. 6,200 Use the following data for questions 25-28: The following has been extracted from Evangelistas financial records for its first year of operations: Units Produced Units Sold 10,000 7,000

Variable Cost Per Unit Direct Material P 8 Direct Labor 9 Manufacturing Overhead 3 Selling and Admin 4 Fixed Costs Manufacturing Selling and Admin 30,000

P 70,000

30. Even before computing the net income under two costing system, it can be concluded that absorption costing net income in this situation is a. greater than variable costing b. less than variable costing c. equal to variable costing d. additional data are needed 31. Based on absorption costing, the companys income operations will be a. 21,000 higher than it would be under variable costing b. 70,000 higher than it would be under variable costing c. 21,000 lower than it would be under variable costing d. will be equal under variable costing in its first year of

32. Based on absorption costing, the cost of goods manufactured for the first year would be a. 200,000 c. 300,000 b. 270,000 d. 210,000 33. Based on absorption costing, what amount of period costs will the company deduct? a. 70,000 c. 30,000 b. 79,000 d. 58,000 34. Matias Company has total budgeted fixed cost of 150,000. Actual production of 39,000 units resulted in a 6,000 favorable volume variance. What normal variance was used to determine the fixed overhead rate? a. 33,000 c. 40,560 b. 37,500 d. cannot be known Use the following data for questions 36-38: Germino Corporation is developing a new product. The cost information below relates to the product. Direct Materials Direct Labor Distribution P 3.25 P 4.00 P 0.75

The company will also be absorbing 120,000 additional fixed cost associated with this new product. A common fixed cost of 20,000 currently absorbed by other products will be allocated to the new product. 35. If the selling price is 14 per unit, the breakeven point in units (rounded to the nearest hundred) for this new product is a. 8,600 c. 15,000 b. 10,000 d. 20,000 36. If the selling price is 14 per unit and the tax rate is 40%, the number of units to be produced for this new product to earn 30,000 profit after taxes is a. 20,000 c. 25,000 b. 20,300 d. 28,333 37. In using cost volume profit analysis to calculate an expected sales level in units, which of the following should be subtracted from fixed costs in the numerator? a. predicted operating loss b. predicted operating profit c. unit contribution margin d. unit variable cost 38. Almazan Company has the following data for 2012: Revenues (12.5 per unit) 300,000

Variable Cost Operation Loss

180,000 (40,000)

How many units should have been sold in order for the company to breakeven in 2012? a. 32,000 c. 16,000 b. 24,000 d. 8,000

Questions 34 37 are based on the following situation: Lasco Company has two products: A and B. The annual production and sales of Product A is 800 units and Product B is 500 units. The company has traditionally used direct labor hours as the basis for applying all manufacturing overhead to products. Product A requires .3 DL hours per unit and Product B requires 0.2 DL hours per unit. The total estimated overhead for the next period is P 92,023. The company is considering switching to an activity based costing system for the purpose of computing unit product costs for external reports. The new activity based system would have three activity cost pools, Activity 1, Activity 2 and General Factory with estimated overhead costs and expected activity as follows Cost Pool Activity 1 Activity 2 General Factory Total Overhead Cost P 14, 487 64,800 12,376 92,023 Product A 500 2,500 400 Expected Activity Product B Total 600 1,100 500 3,000 100 340

39. The predetermined overhead rate under the traditional costing is closest to: a. 37.46 b. 21.60 c. 13.17 d. 270.66 40. The overhead cost per unit for Product B under the traditional costing is closest to: a. 54.13 b. 7.49 c. 4.32 d. 2.63 41. The overhead cost per unit for Activity 1 under the activity based costing is closest to: a. 28.97 b. 13.17 c. 83.86 d. 24.15 42. The overhead cost per unit of Product 1 under the activity based costing is closest to: a. 86.97 b. 70.79 c. 81.20 d. 11.24 43. Pabulayan Company manufactures a particular computer equipment. Currently, the cost per unit are as follows: Direct Materials Direct Labor Variable Overhead Fixed Overhead Total P 50 500 250 400 1,200

Dizon Company has contacted Pabulayan with an offer to sell 10,000 units at P 1,100 per unit. If Pabulayan accepts the proposal, 2,500,000 of the fixed overhead will be eliminated. What should Pabulayan Company do? a. Make, savings of 3,000,000 b. Buy, savings of 2,500,000 44. c. Buy, savings of 1,000,000 d. Make, savings of 500,000

The firm has the following data for 2012. P 310,150 340,469 2,103,696 8,690,150 c. 59.1 d. 58.1

Inventories, Beginning Inventories, End Cost of Goods Sold Net Sales The number of days sale in inventory is a. 65.8 b. 60.8

45.

The following data were available for 2012 341,169 376,526 2,000,326 3,007,124 1,000,120 93,247 c. 7.5 d. 7.7

Inventories, Beginning Inventories, End Cost of Goods Sold, 2012 Net Sales, 2012 Cost of Goods Sold, 2011 Net Sales, 2011 The inventory turnover for 2012 is a. 5.6 46. b. 15.6

The following data were gathered from the annual report of Desk Products 30 10,000 50,000 140,000 c. 14 d. 13.75

Market Price Per Share Number of Common Shares Preferred Stock, 5 %, P 100 par Common Equity (Retained Earnings) Book value per share is a. 30 b. 15

47. Sombrero is planning to sell 600 straw hats. Each hat requires pound straw and hour of direct labor. Straw costs P 0.20 per pound and employees of the company are paid P 22 per hour. Sombrero has 80 pounds of straw and 40 hats in beginning inventory and wants to have 50 pounds of straw and 60 hats in ending inventory. How many units should Sombrero produce in April? a. 600 b. 620 c. 580 d. 630 48. Kawazaki Inc. has budgeted direct materials purchases of 150,000 in March and 240,000 in April. Past experience indicates that the company pays 70% of its purchases in the month of purchase and the remaining 30% in the next month. Other costs are all paid during the month. During April, the following costs were budgeted Wages Purchase of Office Equipment Selling and Administrative Expenses Depreciation Expense 75,000 36,000 24,000 18,000

How much is the budgeted cash disbursements for April? a. 324,000 b. 213,000 c. 348,000 d. 366,000

49. Harry Company makes and sells a single product. It takes 30 ounces of plastics to make one product. Budgeted production for the next three months is as follows: August 90,000 units, September 75,000 units, October 65,000 units. The company wants to maintain monthly ending inventories of plastic equal to ten percent of the following production needs. On August 31, 195,000 ounces of plastics were on hand, the cost of plastic is 0.30 per ounce. How much is the ending inventory of plastic to be reported on the companys balance sheet at September 30? a. 5,850 b. 6,750 c. 7,500 d. none 50. Agdao is planning to sell 220 boxes of bricks and plans to produce 200 boxes during May. Each brick requires 20 pounds of brick mix and hour of direct labor. Brick Mix costs P 5 per 100 pounds and employees of the company are paid P 12 per hour. Overhead is applied at 120% of direct labor costs. Agdao has 600 pounds of brick mix in the beginning inventory and wants to have 800 pounds of brick mix in ending inventory. What is the total amount to be budgeted for manufacturing overhead for the month? a. 1,440 b. 2,880 c. 2,400 d. 1,200