B

MANAGEMENT ACCOUNTING

NAME1

LONG TEST 08/19/14

NAME2

PART 1 - MULTIPLE CHOICES: Write only the LETTER of the correct answer. (1-POINT EACH)
1 . If a firm uses variable costing, fixed manufacturing overhead will be included
a. only on the balance sheet.
b. only on the income statement.
c. on both the balance sheet and income statement.
d. on neither the balance sheet nor income statement.
2 . A firm presently has total sales of P100,000. If its sales rise, its
a. net income based on variable costing will go up more than its net
income based on absorption costing.
b. net income based on absorption costing will go up more than its net
income based on variable costing.
c. fixed costs will also rise.
d. per unit variable costs will rise.
3 . The term cost driver refers to
a. any activity that can be used to predict cost changes.
b. the attempt to control expenditures at a reasonable level.
c. the person who gathers and transfers cost data to the management
accountant.
d. any activity that causes costs to be incurred.
4 . Consider the equation X = Sales - [(CM/Sales) * (Sales)]. What is X?
a. net income
b. fixed costs
c. contribution margin
d. variable costs
5 . Which of the following statements is true for a firm that uses
variable (direct) costing?
a. The cost of a unit of product changes because of changes in the
number of units manufactured.
b. Profits fluctuate with sales
c. An idle facility variation is calculated
d. Product costs include direct (variable) administrative costs.
6 . The use of variable costing requires knowing
a. the contribution margin and break-even point for each product.
b. the variable and fixed components of production cost.
c. controllable and noncontrollable components of all costs.
d. the number of units of each product produced during the period.
7 . Advocates of variable costing for internal reporting purposes do NOT rely on which of the ff.
points?
a. The matching concept.
b. Price-volume relationships.
c. Absorption costing does not include selling and administrative expenses as part of
inventoriable cost.
d. Production influences income under absorption costing.
8 . If selling price, per-unit variable cost, and total fixed costs are constant,
a. the break-even point in units remains constant.
b. profit per unit remains constant for all levels of volume within the relevant range.
c. total variable costs equal total fixed costs.
d. total contribution margin equals total fixed costs.
9 . Introducing income taxes into cost-volume-profit analysis
a. raises the break-even point.
b. lowers the break-even point.
c. increases unit sales needed to earn a particular target profit.
d. decreases the contribution margin percentage.
10 . If a company is earning a profit, its fixed costs
a. are less than total contribution margin.
b. are equal to total contribution margin.
c. are greater than total variable costs.
d. can be greater than or less than total contribution margin.
11 . Per-unit variable cost
a. remains constant within the relevant range.
b. increases as volume increases within the relevant range.
c. decreases as volume increases within the relevant range.
d. decreases if volume increases beyond the relevant range.
12 . An increase in the income tax rate
a. raises the break-even point.
b. lowers the break-even point.

c. decreases sales required to earn a particular after-tax profit.

d. increases sales required to earn a particular after-tax profit.

PART 2 - PROBLEM SOLVING: Solve the following independent problems. (2-POINT EACH)
33,333

30.00

16,250.00

300,000.00

0.25

48.30%

1 . Jaime has sales of P200,000, fixed costs of P100,000, and a profit of P20,000. What is
Jaime's margin of safety in Pesos?
2 . George Company desires a profit of P120,000 and expects to sell 20,000 units. Variable cost
per unit is P15 and total fixed costs are P160,000. Compute for the Selling Price.
3 . Selling price is P100, unit variable cost is P68, and fixed costs are P400,000. Unit sales
required to earn a P120,000 profit are?
4 . Fap Enterprises has fixed costs of P120,000. At a sales of P400,000, return on
sales is 10%; at a P600,000 sales, return on sales is 20%. What is the break-even
sales?
5 . At its present level of operations, a small manufacturing firm has total variable costs equal to
75% of sales and total fixed costs equal to 15% of sales. Based on variable costing,
if sales change by P1.00, income will be decreased by how much?
6 . Luffy Inc. sells three products with the following results:
X
Y
Z
Sales
P 10,000.00 20,000.00 30,000.00
VC
P 4,000.00 12,000.00 15,000.00
What is the weighted average contribution margin percentage?

500000

193,000.00

8800

7 . The Didang Company has an operating leverage of 2. Sales for 2013 are P2,000,000 with a
contribution margin of P1,000,000. Sales are expected to be P3,000,000 in 2014.
Net income for 2014 can be expected to increase by what amount over 2001?
8 . YYY Company had P200,000 income using absorption costing. YYY has no variable mfg. costs.
Beg. inventory was P15,000 and ending inventory was P22,000. Income under variable costing
would have been?
9 . Babe Company produces a single product. Last year, Babe's net operating income under
absorption costing was P3,600 lower than under variable costing. The company sold
10,000 units during the year, and its variable costs were P9 per unit, of which P1 was
variable selling expense. If production cost was P11 per unit under absoprtion costing,
then how many units did the company produce during the year?

25556

1900000

20%

80000

3000

30%

0.25

7 .

225000

8 .

72000

9 .

432000

10 .

500000

11

If the following data are estimated for next year, what unit sales would be needed to earn P 150,000
after taxes?
Forecast sales (P 30 per unit) P 600,000
Variable costs 240,000
Manufacturing fixed costs 90,000
Administrative fixed costs 120,000
Assumed tax rate 40%
A firm estimates that it will sell 100,000 units of its sole product in the coming period. It
projects the sales price at $40 per unit, the CM ratio at 60 percent, and profit at
$500,000. What is the firm budgeting for fixed costs in the coming period?
Sombrero Company manufactures a western-style hat that sells for $10 per unit. This is
its sole product and it has projected the break-even point at 50,000 units in the coming
period. If fixed costs are projected at $100,000, what is the projected contribution
margin ratio?
The Ship Company is planning to produce two products, Alt and
Tude. Ship is planning to sell 100,000 units of Alt at P4 a unit and
200,000 units of Tude at P3 a unit. Variable costs are 70% of sales
for Alt and 80% of sales for Tude. In order to realize a total profit of
P160,000, what must the total fixed costs be?
A manufacturer produces a product that sells for P10 per unit.
Variable costs per unit are P6 and total fixed costs are P12,000. At
this selling price, the company earns a profit equal to 10% of total
peso sales. By reducing its selling price to P9 per unit, the
manufacturer can increase its unit sales volume by 25%. Assume
that there are no taxes and that total fixed costs and variable costs
per unit remain unchanged. If the selling price were reduced to P9
per unit, the profit would be
Last year, the marginal contribution rate of Lamesa Company was
30%. This year, fixed costs are expected to be P120,000, the same
as last year, and sales are forecasted at P550,000 a 10% increase
over last year. For the company to increase income by P15,000 in
the coming year, the marginal contribution margin rate must be
At its present level of operations, a small manufacturing firm has
total variable costs equal to 75% of sales and total fixed costs equal
to 15% of sales. Based on variable costing, if sales change by
P1.00, income will be decreased by how much?
Scrambled Brain Company has fixed costs of P90,000. At a sales
volume of P300,000, return on sales is 10%; at a P500,000 volume,
return on sales is 22%. What is the break-even volume?
Claremont Company had is a manufacturer of its only one product
line. It had sales of P400,000 for 2002 with a contribution margin
ratio of 20 percent. Its margin of safety ratio was 10 percent. What
are the companys fixed costs?
Lemery Corporation had sales of P120,000 for the month of May. It
has a margin of safety ratio of 25 percent, and after-tax return on
sales of 6 percent. The company assumes its sales constant every
month. If the tax rate is 40 percent, how much is the monthly fixed
costs?
The Didang Company has an operating leverage of 2. Sales for
2001 are P2,000,000 with a contribution margin of P1,000,000.

Sales are expected to be P3,000,000 in 2002. Net income for 2002

can be expected to increase by what amount over 2001?

uld be needed to earn P 150,000

he coming period. It
and profit at

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2000

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24.75
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