RELEVANT COSTING
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 of their relevance to managerial control.
3. The relevance of a particular cost to a decision is determined by the
a.
Size of the cost
b.
Risk level of the decision
c.
Potential effects on the decision
d.
Accuracy and verifiability of the cost
4. In a decision analysis situation,
generally NOT relevant to the decision?
a.
Incremental cost
b.
Differential cost
which
c.
d.
one
of
the
following
costs
is
Avoidable cost
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
c.
Incremental cost
d.
Relevant cost
6. An item whose entire amount is usually a differential cost
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-run 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 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, P50; Direct Labor, P500; Variable Overhead, P250; Fixed
Overhead, P400.
Pakistan Inc. has obtained Turkey with an offer to sell 10,000 units of the
component for P1,100 per unit. If Turkey accepts the proposal, P2,500,000 of the
fixed overhead will be eliminated. Should Turkey make or buy the component?
a.
Make due to savings of P 3,000,000
b.
Buy due to savings of P2,500,000
c.
Buy due to savings of P1,000,000
d.
Make due to savings of P500,000
10. Saudi Arabia Company is operating at 70% capacity. The plant manager is
considering making Part A56 now being purchased from outside suppliers for P110
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 P40 direct materials and P30 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 P30 per
unit. If Qatar accepts Bahrain’s offer, the released facilities could be used to
save P45,000 in relevant costs in the manufacture of Part H. In addition, P5 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, P10,000
c.
Buy, P35,000
b.
Manufacture, P15,000
d.
Buy, P65,000
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
P11
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 P20,000 a 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.
What is the economic advantage or disadvantage of buying the component?
a.
P 24,800 advantage
c.
P 27,000 disadvantage
c.
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
P15,000
P40,000
Variable Costs
(10,000)
(20,000)
Fixed Costs
(3,000)
(6,000)
Profit
P2,000
P14,000
Units 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 P1.25 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 P500.
b.
No, because making the blades would save Baghdad Company P1,500.
c.
Yes, because buying the blades would save Baghdad Company P2,500.
d.
No, because making the blades would save Baghdad Company P2,500.
14. Cairo Manufacturing uses 10 units of Part Number KJ45 each month in the
production of radar equipment. The unit cost to manufacture one unit of KJ45 is
presented below.
Direct materials
P1,000
Materials handling (20% of direct material
200
cost)
Direct labor
8,000
Manufacturing overhead (150% of direct labor)
12,000
Materials handling represents the direct variable costs of the Receiving
Department that are applied to direct materials and purchased components on their
cost. This is a separate charge in addition to manufacturing overhead. Cairo’s
annual manufacturing overhead budget is one-third variable and two-thirds fixed.
Egypt Suppliers, one of Cairo’s reliable vendors, has offered to supply KJ45 at a
unit price of P15,000. 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 KJ45 would:
a.
Increase by P4,800
c.
Decrease by P3,200
b.
Decrease by P6,200
d.
Increase by P1,800
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 overhead applied
20
P48
Cost to buy the part from the Syria Company
P36
If Iran buys the part from Syria Co., Iran could not use the released facilities
in another manufacturing activity. 60% of the fixed overhead applied will
continue regardless of what decision is made. 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.
P 840,000
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.
The contribution margin on the order.
b.
The sunk costs associated with the order.
c.
The variable 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 od its idle capacity, which of the following costs would be irrelevant?
a.
Materials
c.
Direct labor
b.
Depreciation
d.
Variable overhead
19. Tehran has a stall that specializes in handcrafted fruit baskets that sell
for P60 each. Daily fixed costs are P15,000 and variable costs are P30 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 P1,500 for 40 baskets. Tehran should
have:
a.
Rejected the offer since he could have lost P500.
b.
Rejected the offer since he could have lost P900.
c.
Accepted the offer since he could have P300 contribution margin.
d.
Accepted the offer since he could have P700 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 – 30%
12
Regular selling price
P52
* based on 25,000 units produced each year
A customer has offered to purchase 5,000 units at a special price of P38 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 P40,000
c.
Increase by P50,000
b.
Decrease by P10,000
d.
Decrease by P70,000
21. Istanbul Company budgets sales of 400,000 calculators of P40 per unit for
2020. Variable manufacturing costs were budgeted at P16 per unit and fixed
manufacturing costs at P10 per unit. A special order offering to buy 40,000
calculators for P23 each was received by Istanbul in March 2020. 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 P3 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.
P120,000 decrease
c.
P40,000 decrease
b.
P160,000 increase
d.
P280,000 increase
22. Abu Company sells Product B at a selling price of P21 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
P15.00
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
P3 per unit for shipping. Abu has sufficient existing capacity to manufacture the
additional units. In 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
P150
Direct materials
P20
Direct labor
15
Variable manufacturing overhead
12
Fixed manufacturing overhead
30
Shipping and handling
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 would be displayed by the special order is P10,000. 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
24. Dhabi Company’s regular selling price for its product is P10 per unit.
Variable costs are P6 per unit. Fixed costs total P1 per unit based on 100,000
units and remain constant within the relevant range of 50,000 units to a total
capacity of 200,000 units. After sales of 80,000 units were projected for 2020, a
special order was received for an additional 10,000 units. To increase its
operating income by a total of P10,000, what price per unit should Dhabi charge
for this special order?
a.
P 7.00
c.
P 10.00
b.
P 8.00
d.
P 11.00
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
26. Iraq Inc. sells a product for P30. Variable cost is P16. Iraq could accept a
special order for 1,000 units at P23. 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
b.
All fixed costs of the branch
c.
All direct costs of the branch
d.
All indirect costs of the branch
28. Lebanon Co. plans to discontinue a division with a P20,000 contribution
margin. Overhead allocated to the division is P50,000, of which P5,000 cannot be
eliminated. What is the effect on Lebanon’s pretax income by this plan?
a.
P5,000 decrease
c.
P25,000 increase
b.
P20,000 decrease
d.
P30,000 increase
29. Baghdad Company produces and sells 8,000 units of Product X each year. Each
unit of Product X sells for P10 and has a contribution margin of P6. It is
estimated that if Product X is discontinued, P50,000 of the P60,000 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 P2,000 per year
c.
Increase by P38,000 per year
b.
Decrease by P2,000 per year
d.
Decrease by P38,000 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
P12,100
P23,470
P18,780
P10,650
Expenses
8,000
13,000
23,000
24,000
13,000
Profit
P2,000
(P900)
(P2,530)
(P5,220)
(P2,350)
Included in the expenses is P12,000 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.
Responses 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
P720,000
P350,000
Variable costs
370,000
240,000
Traceable fixed costs
130,000
80,000
Allocated common corporate costs
120,000
50,000
Operating income (loss)
P100,000
(P20,000)
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 should not be avoided. The total
common corporate costs would not be unaffected by this decision. Given these
data, the elimination of the West Division would result in an overall company
operating income of:
a.
P 120,000
c.
P 80,000
b.
P 100,000
d.
P 50,000
34. Arabia Company produces and sells three products as follows:
Products
R
I
P
Sales
P200,000 P150,000 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 ÷ Contribution margin ratio
c.
Differential fixed costs ÷ Contribution margin ratio
d.
(Avoidable fixed costs + Additional costs) ÷ Contribution margin
36. The income statement of product Pabigat, one of the products being sold by
Palugi Company is reproduced below:
Sales
P80,000
Costs and expenses
92,000
Net loss
(P12,000)
P37,600 of the costs and expenses above are fixed, of which P21,600 is
unavoidable regardless of whether the product will be dropped or not. What is the
product elimination point?
a.
P 16,000
c.
P 54,400
b.
P 50,000
d.
P 70,400
37. Temple Corporation contemplates the temporary shutdown of its plant
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 a company
a.
Earns the same profit under different operating schemes
b.
c.
d.
Earns no profit
Earns its target profit
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 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
P80,000
P110,000
Popcorn cost per box
1.30
1.30
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 id irrelevant?
a.
Joint product 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
The following information is available:
Units
Sales Price
Cost to Process
(Split-Off)
A 10,000
P35
P60,000
B 20,000
P40
20,000
C 30,000
P20
90,000
Which products should be processed further?
a.
A only
b.
b.
A and B
c.
a joint process costing P100,000.
Further
Sales Price
(After Further)
P40
P45
P25
B and C
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 a shot-run focus. In making such decisions, managers should select the
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
P30 100% P20 100% P15 100%
Variable costs per unit
18
60%
15
75%
6
40%
Contribution
margin
per P12 40%
P5
25%
P9
60%
unit
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 of Product C. In
which order should it produce its products?
a.
C, A, B
b.
A, C, B
c.
B, C, A
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 is limited to a maximum of
3,000 machine hours per month:
Product A Product B Product C Product D
Selling price per unit
P15
P18
P20
P25
Variable cost per unit
P7
P11
P10
P16
Unit produced per machine
3
4
2
3
hour
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 machines hours that it can use for
manufacturing two products, X and Y. Each product has a selling price of P 160
per unit but product X has 40% contribution margin and product Y has 70%
contribution margin. One unit of Y takes twice as many machine hours to make as a
unit of X. Assuming unlimited demand, which product(s)should the limited machine
hours used for?
a.
X
c.
Either X and Y
b.
Both X and Y
d.
Y
46. Sudan Company ha three products: A, B and C. Three machines are used to
produce the products. The contribution margins, sales demands, and time on each
machine (in minutes) are as follows:
Demand
CM
Time on M1
Time on M2
Time on M3
A
100
P30
10 mins
15 mins
12 mins
B
80
P20
10 mins
5 mins
8 mins
C
60
P30
5 mins
10 mins
5 mins
Assuming that there are 2,400 minutes available in each machine, which machine is
the bottleneck?
a.
Machine 1
c.
Machine 3
b.
Machine 2
d.
No bottleneck operation
47. Assuming the same data in No. 45, 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, 80 of B, and 60 of C
d.
90 of 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
BUDGETING
1. Which of 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 check-up 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
b.
Means to use all the firm’s resources
c.
Means to check managerial discretion
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 the separate operational and financial budget
schedules of the organization
b.
The booklet containing budget guidelines, policies and forms to use in
the budgeting process
c.
The current budget updated for operations for part of the current year
d.
A budget for a non-profit entity after it is approved by the
appropriate
body.
4. The sales budget is classified as
a.
A financial budget
b.
A flexible budget
c.
d.
An operating budget
A program budget
5. Using the concept of ‘expected value’ in sales forecasting means that the
sales forecast to be used is
a.
Developed using the indicator method
b.
The sum of the sales expected by individual
c.
Based on expected selling prices of the products
d.
Based on probabilities
6. Ohio Company
probabilities.
developed
the
following
Sales Forecast
P600,000
P650,000
P700,000
P800,000
What is the expected value of sales?
a.
P 650,000
b.
P 670,000
sales
forecasts
and
associated
Probability
10%
50%
35%
5%
c.
d.
P 667,500
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. Which of the following equations can be used to budget purchases? (BI =
Beginning inventory, EI = ending inventory desired, CGS = Budgeted cost of goods
sold)
a.
Budgeted purchases = CGS + BI – EI
b.
Budgeted purchases = CGS + BI
c.
Budgeted purchases = CGS + EI + BI
d.
Budgeted purchases = CGS + EI – BI
9. Colorado Company desires an ending inventory of P 60,000. It expects sales of
P120,000 and has a beginning inventory of P 40,000. Cost of sales is 60% of
sales. Budgeted purchases are
a.
P 60,000
c.
P 92,000
b.
P 72,000
d.
P 132,000
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
b.
Raw materials purchases budget
c.
Schedule of cash receipts and disbursements
d.
Production budget
11. South Dakota Company budgets sales of 22,OOO 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?
a.
37,000 units
c.
26,000 units
b.
30,000 units
d.
14,000 units
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 3,000 units plus 30%
of the next month's sales. On June 30, this requirement was met. Based on these
data, how many units of Product A must be produced during the month of July?
a.
28,800
c.
24,000
b.
22,200
d.
25,800
13. Florida 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 requires 2 pounds of materials.
The production budget is, in units: May, 1,000; June, 1,200; July, 1,300; August,
1,600. What would be the raw material purchases in June?
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 A1 for 2020. The
manufacture of one unit of A1 requires 4 kilos of chemical Z5. During 2020, New
Jersey plans to reduce the inventory of Z5 by 50,000 kilos and increase the
finished goods inventory of A1 by 6,000 units. There is no work-in-process
inventory. How many kilos of Z5 is New Jersey budgeting to purchase in 2020?
a.
138,000
c.
186,000
b.
162,000
d.
238,000
15. Washington Company has the following 2020 budget data:
Beginning finished goods inventory
Sales
Ending finished goods inventory
Direct materials
Direct labor
Variable factory overhead
Fixed factory overhead
What are the 2020 total budgeted production costs?
a.
P 2,100,000
c.
P 2,240,000
b.
P 2,180,000
d.
P 2,320,000
40,000 units
70,000 units
30,000 units
P10 per unit
P20 per unit
P5 per unit
P80,000
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
40
units
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-inprocess
b.
Materials used, direct labor, overhead applied, and work-in-process
inventories 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 following month. April purchases are projected to be P80,000;
May purchases will be P120,000. What will be the cash payments on account for
May?
a.
P 36,000
c.
P 84,000
c.
P 54,000
d.
P 92,000
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
P1,680,000
Desired decrease in inventories
70,000
Desired
decrease
in
accounts
150,00
payable
All of the accounts payables are for inventory purchases and all inventories are
purchased on account. What are 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
P775,000
August
750,000
September
825,000
October
800,000
November
850,000
December
900,000
Types of Sales
Cash sales
Credit sales
20%
80%
Collection pattern for credit sales
In the month of sale
40%
In the first month following the
57%
sale
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 P80,000 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 September would be
a.
P 757,700
c.
P 793,800
b.
P 771,000
d.
P 856,500
22. Alaska Company has budgeted sales on account of P120,000 for July, P 211,000
for August, and P198,000 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.
P 169,800
c.
P 197,880
b.
P 194,760
d.
P 198,600
23. Alabama Consortium is constructing a corporate planning model. 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 Sn 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
b.
0.42 Sn+1 + 0.21 Sn+2 + 0.056 Sn+3
c.
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
b.
Operating supplies
c.
d.
Extinguishment of debt
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
P200,000
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
P12,000
Estimated write-offs in May for uncollectible credit sales
8,000
Estimated provision for bad debts in May for credit sales in May
7,000
What are the estimated cash receipts from accounts receivable collections in May?
a.
P 142,000
c.
P 150,000
b.
P 149,000
d.
P 157,000
26. Which one of the following budgets is the last item 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.
That enough cash is on hand at all times to satisfy maximum cash
requirements
b.
Sufficient liquidity without an excess amount of idle cash
c.
That cash dividends can be paid every quarter
d.
That sufficient cash is available to pay salaries, even if it means
borrowing the money.
28. The cash budget for 2020 would be affected in some way by all of the
following, except:
a.
A cash dividend declared in 2020 for payment in 2021.
b.
A cash dividend declared in 2021 for payment in 2022.
c.
Interest expense on loans taken out and repaid during 2021.
d.
The sales forecast for the first month in 2022.
29. A company has prepared a cash budget for January through June of 2020. Which
of the following, discovered in February 2020, is LEAST likely to require
revising the cash budget?
a.
February sales are lower than expected.
b.
The interest rate on short-term borrowing is higher than budgeted.
c.
The company increase 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 classify as a cash flow under investing
activities, EXCEPT:
a.
b.
c.
d.
Collection of a loan from subsidiary
Purchase of a patent from an investor
Sale of plant assets
Dividends received on stock investment
32. North Carolina projects the following activities related to its financial
operations:
a.
Issuance of shares of company’s own common stock: P170,000
b.
Dividends to be paid to the company’s own shareholders: P7,000
c.
Dividends to be received from investments in other companies’ shares:
P4,000
d.
Interest to be paid on the company’s own bonds: P11,000
e.
Repayment of principal on the company’s own bonds: P40,000
f.
Proceeds from sale of the company’s used equipment: P23,000
In cash financial budget, the net cash used by financing activities should be
projected to be
a.
P 375,000
c.
P 112,000
b.
P 123,000
d.
P 19,000
34. The budget that describe 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 of top management in the
budgeting process? Top management
a.
Should be involved only in the approval process
b.
Lacks the detailed knowledge of the daily 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 process
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 budget
c.
Top-down budgeting
b.
Flexible budget
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.
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.
fixed
c.
while
d.
A flexible budget includes all costs; a static budget includes only
costs.
A flexible budget gives allowances for different levels of activity
a static budget does not.
None of the above.
41. A company has developed the budget formula below for estimating its shipping
expenses. Shipments have historically averaged 12 pounds pe shipment.
Shipment costs = P18,000 (P0.60 x pounds shipped)
The planned 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
P120,000
P144,000
Total pounds shipped
9,600
12,500
The actual shipping costs for the month amounted to P21,000. What should be the
appropriate monthly flexible budget allowance for shipping costs for the purpose
of performance evaluation?
a.
P 18,000
c.
P 23,760
b.
P 18,492
d.
P 25,500
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.
The budget is based on many levels of activity so that the budget may
be adjusted based on actual activity
c.
The budget is based not on the existing system, but on changes or
improvements that are to be made
d.
A product’s revenues and expenses are estimated over its entire life
cycle
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 xero-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
STANDARD COSTING
1. Which of the following is a purpose of standard costing
a.
To replace the budgets and budgeting
b.
To simplify costing procedures and expedite cost reports
c.
To eliminate under/over applied factory overhead at the end of the
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
b.
Simplifying costing procedures
c.
Estimating future costs
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.
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 of lower standards were used
6. The materials cost variance is composed of
a.
Quantity and efficiency variances
b.
Quantity and price variances
c.
Price and mix 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
8. Ant Company installs solar panels on residential houses. The standard material
cost for Type-C house id P1,250 based on 1,000 units at a cost of P1.25 each.
During April, Ant Company installed solar panels on 20 Type-C houses, using
22,000 units of materials at a cost of P1.20 per unit, and a total cost of
P26,400. What is Ant Company’s materials spending (price) variance?
a.
P 1,000 favorable
c.
P 1,400 unfavorable
b.
P 1,100 favorable
d.
P 2,500 unfavorable
9. Information on Beatle Company’s direct materials cost is as follows:
Actual units of direct materials used
20,000
Actual direct materials cost
40,000
Standard price per unit of direct materials
P2.10
Direct material quantity variance, favorable
P3,000
What was Beatle’s materials price variance?
a.
P 1,000 favorable
c.
P 2,000 favorable
b.
P 1,000 unfavorable
d.
P 2,000 unfavorable
10. Information on Termites Company’s direct-material costs is as follows:
Standard unit price
P3.60
Actual quantity purchased
1,600
Standard quantity allowed for actual production
1,450
Materials purchase price variance, favorable
P240
What was the actual purchase price per unit, rounded to the nearest centavo?
a.
P 3.06
c.
P 3.45
b.
P 3.11
d.
P 3.75
11. If a company follows
in time, what would be
material price variance?
a.
When material
b.
When material
c.
When material
the practice of isolating variance at the earliest point
the appropriate time to isolate and recognize a direct
is issued to the requesting department or division
is purchased
is u=sed in production
d.
When purchased order is originated
12. A credit balance in the materials price variance indicates that
a.
Actual price exceeds standard price
b.
Standard price exceeds actual price
c.
Actual quantity exceeds standard quantity
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 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.
P 120 favorable
c.
P 520 unfavorable
b.
P 480 unfavorable
d.
P 640 favorable
14. The Centipede Company uses standard costing. The following data are available
for October:
Actual quantity of direct materials
23,500 pounds
used
Standard price of direct materials
P2 per pound
Material quantity variance
P1,000 unfavorable
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 P5.10 per pound. Operating data for
April were as follows:
Materials used
7,800 lbs.
Cost of materials used
P40,950
Number of finished units
2,000
What was the material usage variance for April?
a.
P 1,020 favorable
c.
P 1,170 unfavorable
b.
P 1,050 favorable
d.
P 1,200 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 P2.90 per unit. During June, the company had the following
experience with respect to Part X.
Purchases (P36,000)
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.
P 1,200 favorable
17. During June, the company incurred a materials efficiency variance of
a.
P 2,900 unfavorable
c.
P 8,700 unfavorable
b.
P 2,900 favorable
d.
P 8,700 favorable
18. What is
usage during
a.
P
b.
P
the amount that will be shown on a flexible budget for the Part X
the month of June?
26,100
c.
P 29,000
27,000
d.
P 36,000
19. The following data relate to direct labor costs for the current period:
Standard costs
10,000 hours P20
Actual costs
9,800 hours at P19.50
What was the direct labor efficiency variance?
a.
P 3,600 favorable
c.
P 4,000 favorable
b.
P 3,600 unfavorable
d.
P 4,000 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
P6.00 per hour
Standard hours allowed for actual production
1,500 hours
Labor efficiency variance
P600 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
P8,400
Standard direct labor rate per hour
P6.50
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
P10,000
Rate variance (favorable)
1,000
Efficiency variance (unfavorable)
1,500
Standard cost
P9,500
Actual direct labor hours for April amounted to 2,000. What was the standard
direct labor hourly rate?
a.
P 5.50
c.
P 4.75
b.
P 5.00
d.
P 4.50
23. The following is a standard cost variance analysis report in direct labor for
a manufacturing company:
Job
Actual Hours at
Actual Hours at
Standard Hours at
Actual Wages
Standard Wages
Standard Wages
213
P3,243
P3,700
P3,100
215
P15,345
P15,675
P15,000
Protex
P6,754
P7,000
P6,600
Benz
P19,788
P18,755
P19,250
CT-40
P3,370
P3,470
P2,650
Total
P48,500
P48,600
P46,600
What is the total (flexible budget) direct labor variance for the division?
a.
P 100 favorable
c.
P 1,900 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 for Spider Company is summarized below:
Percentage of normal operating capacity
80%
90%
100%
110%
Variable overhead
P21,000
P23,000 P25,000 P27,000
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 operated at its normal
capacity. The standard labor time 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.
1.25
d.
5.00
27. Using data in No. 26, what is the budgetary factory overhead adjusted to
standard hours?
a.
22,500
c.
72,500
b.
50,000
d.
75,000
28. Information on Caterpillar Company’s overhead cost is as follows:
Standard applied overhead
Budgeted overhead based on standard direct-labor hours
allowed
Budgeted overhead based on actual direct-labor hours allowed
Actual overhead
What was the total overhead variance?
a.
P 2,000 unfavorable
c.
P 4,000 favorable
b.
P 3,000 favorable
d.
P 6,000 unfavorable
P80,000
P83,000
P84,000
P86,000
29. Yeast Company has a standard absorption and flexible budgeting system and
uses a two-way analysis for overhead variances. Selected data for the February
production activity is as follows:
Actual factory overhead incurred
P230,000
Budgeted fixed factory overhead costs
P64,000
Variable factory overhead rate per direct-labor hour
P5.00
Standard direct-labor hours
32,000
Actual direct-labor hours
33,000
What is the budget (controllable) variance for February?
a.
1,000 favorable
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
P75,000
Standard fixed overhead rate per direct-labor hour
P3.00
Standard variable overhead rate per direct-labor hour
P6.00
Standard
direct-labor
hours
allowed
for
actual
24,000
production
Actual total overhead incurred
P220,000
Mold has a standard absorption and flexible budget system and uses the twovariance method (two-way analysis) for overhead variances. What is the volume
(denominator) variance for January?
a.
P 3,000 unfavorable
c.
P 4,000 unfavorable
b.
P 3,000 favorable
d.
P 4,000 favorable
Items 31 and 32 are based on the following information
Ant Company’s budgeted fixed factory overhead cost is P50,000 per month plus a
variable factory overhead rate of P4 per direct labor hour. The standard direct
labor hours allowed for October production was 18,000. An analysis of the factory
overhead indicates that in October, Ant had an unfavorable budget (controllable)
variance of P1,000 and an unfavorable volume variance of P500. Ant uses a two-way
analysis of overhead variance.
31. What is the actual factory overhead measured in October?
a.
P 121,000
c.
P 122,300
b.
P 122,000
d.
P 123,000
32. What is the applied (standard) factory overhead in October?
a.
P 121,500
c.
P 122,500
b.
P 122,000
d.
P 123,000
33. The following information is available from the Honey Company:
Actual factory overhead
P15,000
Fixed overhead expenses, actual
P7,200
Fixed overhead expenses, budgeted
P7,000
Actual hours
3,500
Standard hours
3,800
Variable overhead rate per direct labor hour
P2.50
Assuming that Honey uses a three-way analysis of overhead variance, what is the
spending variance?
a.
b.
P 750 favorable
P 750 unfavorable
c.
d.
P 550 favorable
P 1,500 unfavorable
34. Queen Company has standard variable costs as follows:
Materials, 3 pounds at P4.00 per pound
P12.00
Labor, 2 hours at P10.00 per hour
P20.00
Variable overhead, P7.50 per labor hour
P15.00
During September, Queen produced 6,000 units using 11,560 labor hours at a total
wage of P113,870 and incurring P88,600 in variable overhead. What is the 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 activity)
300 hours
Actual activity
350 hours
Standard hours allowed for output
360 hours
Predetermined overhead rate (P2 variable + P3 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
b.
Spending and rate variances
c.
Efficiency and volume variances
d.
Spending and capacity variances
37. One way of t analyzing the fixed factory overhead variance is breaking it
down into
a.
Spending and efficiency variances
b.
Spending and budget variances
c.
Efficiency and volume variances
d.
Spending and capacity variances
38. What is the factory overhead variance that serves as a measure of capacity
utilization?
a.
The overhead spending variance
b.
The overhead efficiency variance
c.
The overhead budget variance
d.
The overhead volume variance
39. Maggot Company as total budgeted fixed overhead costs of P64,000. Actual
production was 15,000 units; normal capacity is 16,000 units. What was the volume
variance?
a.
P 4,000 favorable
c.
P 4,267 unfavorable
b.
P 4,267 favorable
d.
P 4,000 unfavorable
40. An unfavorable 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 P150,000. Actual production of 39,000
units resulted in a P6,000 favorable volume variance. What normal capacity was
used to compute fixed overhead rate?
a.
33,000
b.
37,500
c.
40,560
d.
Undetermined 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 from planned 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)
P20
Direct labor (1.5 hours @ P10 per hour)
P15
Variable manufacturing overhead (1.5 hours @ P4 per
P6
hour)
During a recent period, the company produced 1,200 units of product. Various
costs associated with the production of these units are given below:
Direct materials purchased (6,000 yards)
P28,500
Direct materials used in production
5,000 yards
Direct labor cost incurred (2,100 hours)
P17,850
Variable manufacturing overhead cost incurred
P10,080
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 1,50 unfavorable
44. What is the materials quantity variance for the period?
a.
P 950 unfavorable
c.
P 5,000 unfavorable
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.
P 3,000 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.
P 1,440 favorable
c.
P 1,680 favorable
b.
P 1,440 unfavorable
d.
P 1,680 unfavorable
48. What is the variable overhead efficiency variance for the period?
a.
P 1,200 unfavorable
c.
P 1,440 unfavorable
b.
P 1,200 favorable
d.
P 1,440 favorable
Items 49 and 50 are based on the following information:
The following information relates to a given department of Li Company for the
first quarter of 2020:
Actual total overhead
P178,500
Budgeted formula
P110,000 plus P0.50 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
P5,000 favorable
Over-all factory overhead variance
P6,000 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
51. Information on Lee Company’s manufacturing 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 hours used in computing the
35,000 hours
predetermined overhead rate
Predetermined overhead rate
P4 per hour
Actual overhead costs incurred
P150,000
Lee Company uses a standard cost system and applies manufacturing overhead costs
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.
P 10,000 under-applied
52. Lim Company has a P20,000 unfavorable fixed overhead budget variance, a
P12,000 unfavorable variable overhead spending variance, and a P4,000 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 P18,000 favorable volume variance, a P15,000 unfavorable
variable overhead spending variance, and a P12,000 total over-applied overhead.
The fixed overhead budget variance was
a.
P 9,000 favorable
c.
P 9,000 unfavorable
b.
P 16,000 unfavorable
d.
P 16,000 favorable
54. The efficiency variance for either labor or materials can be divided into
a.
Spending variance and yield variance
b.
Yield variance and price variance
c.
Volume variance and mix variance
d.
Yield variance and mix variance
55. The labor mix and labor yield variances together equal the
a.
Total labor variance
c.
Labor efficiency variance
b.
Labor rate variance
d.
Idle labor time 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
Masonry
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
Masonry
5.40
375
56. How much is the labor yield variance?
a.
P 500
c.
P 720
b.
P 320
d.
P 515
57. How much is the labor mix variance?
a.
P 50
b.
P 325
c.
d.
P 66.67
P 500
58. A standard costing system is most often used by firm in conjunction with
a.
Management by objectives
c.
Participative
management
programs
b.
Target (hurdle)rates of return
d.
Flexible budgets
59. A difference between standards 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 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 products of raw material. The
manufacturing process must provide for a 20% waste allowance. The raw material
can be purchased for a cost of P2.50 a pound under terms of 2/10, n/30. The
company takes all cash discounts. What is the standard direct material cost of
each unit of product Lui?
a.
P 180.00
c.
P 183.75
b.
P 187.50
d.
P 176.40
62. The following direct labor information pertains to the manufacture of Product
Lui:
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
P500
Workers’ benefit treated as direct labor costs
20% of wages
What is the standard direct labor cost per unit of Product Lui?
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 of 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
a.
Only
b.
Only
c.
Only
investigated
d.
Only
by exception,’ in relation to standard costing, means
large favorable variance need to be investigated
large unfavorable variance need to be investigated
large
variances,
favorable
or
unfavorable,
need
small variances need to be investigated
to
be
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 good 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 good 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
variances are distributed to
a.
CGS
b.
CGS and inventories
c.
Income summary
d.
WIP and finished goods inventory
results
as
actual
costing
when
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 standards material use
c.
Standard material purchases and standard material use
d.
Actual cost of material use and standard material use
71. Which of the following is NOT a quantity variance?
a.
Materials use variance
b.
Labor efficiency variance
c.
Fixed overhead budget 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
b.
Budgeted fixed overhead
c.
Actual fixed overhead
d.
Actual quantity produced
74. Which
than those
a.
b.
c.
d.
variance is LEAST likely affected by hiring workers with less skill
already working?
Labor rate variance
Materials use variance
Material price variance
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
b.
Direct labor efficiency variance
c.
Fixed overhead budget variance
d.
Variable overhead spending variance