Mcq Module 2

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