UST - SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS ACADEMICS AND COMPETITIONS COMMITTEE [CA51014] - Quiz No. 2 Handout AY 2024-2025 – First Semester
I. THEORIES
1. Variable costing is unacceptable for:
a. managerial accounting. b. financial accounting. c. transfer pricing. d. reporting by product lines for internal purposes.
2. A criticism of variable costing for managerial accounting purposes is that it
a. is not acceptable for product line segmented reporting.
b. does not reflect cost-volume-profit relationships. c. overstates inventories. d. might encourage managers to emphasize the short term at the expense of the long term.
3. A predetermined overhead rate for fixed costs is unlike a standard fixed cost per unit in that a predetermined overhead rate is
a. based on an input factor like direct labor hours and a standard cost per unit is based on a unit of output. b. based on practical capacity and a standard fixed cost can be based on any level of activity. c. used with variable costing while a standard fixed cost is used with absorption costing. d. likely to be higher than a standard fixed cost per unit.
4. Absorption costing and variable costing differ in that
a. income is lower under variable costing.
b. variable costing treats selling costs as period costs. c. variable costing treats all variable costs as product costs. d. inventory cost is higher under absorption costing.
5. Which costs are treated differently under absorption costing and variable costing?
a. Variable manufacturing costs.
b. Fixed manufacturing costs.
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UST - SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS ACADEMICS AND COMPETITIONS COMMITTEE [CA51014] - Quiz No. 2 Handout AY 2024-2025 – First Semester
c. Variable selling and administrative expenses.
d. Fixed selling and administrative expenses.
6. All of the following are expensed under variable costing except:
a. Fixed Manufacturing Overhead.
b. Variable selling and administrative costs. c. Variable manufacturing Overhead. d. Fixed manufacturing head.
7. All of the following are inventoried under absorption costing except:
a. Sales Commission b. Utility cost consumed in manufacturing c. Raw materials in production d. Factory Lubricants
8. Under variable costing, fixed manufacturing overhead is:
a. Treated in the same manner as variable manufacturing overhead.
b. Applied directly to Finished-Goods Inventory. c. Expensed immediately when incurred. d. Never expensed.
9. Dreams Co. incurred $20,000 of fixed manufacturing overhead and deducted
$30,000 of fixed manufacturing overhead. Dreams Co. must be using:
a. Absorption Costing b. Standard Costing c. Variable Costing d. Direct Costing
10. Which of the following methods defines product cost as the unit-level cost incurred each time a unit is manufactured?
a. Absorption Costing b. Throughput Costing c. Variable Costing d. Direct Costing
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UST - SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS ACADEMICS AND COMPETITIONS COMMITTEE [CA51014] - Quiz No. 2 Handout AY 2024-2025 – First Semester
11. Statement 1: A difference in cost between two alternatives between one course of action and another is an opportunity cost. Statement 2: All future costs are relevant costs.
a. Statement 1 is true b. Statement 2 is true c. Both statements are true d. Neither statement is true
12. Statement 1: A common cost is one that is incurred for the benefit of more than one cost objective. Statement 2: Relevant costs are future costs that will differ across the alternative courses of action.
a. Statement 1 is true b. Statement 2 is true c. Both statements are true d. Neither statement is true
13. Statement 1: Relevant range refers to activity levels within which the firm is expected to operate. Statement 2: A sunk cost has relevance to a decision while an opportunity cost does not.
a. Statement 1 is true b. Statement 2 is true c. Both statements are true d. Neither statement is true
14. Statement 1: Postponable costs are also called avoidable costs.
Statement 2: Semi-variable costs or mixed costs contain both variable and fixed elements.
a. Statement 1 is true b. Statement 2 is true c. Both statements are true d. Neither statement is true
15. Statement 1: The first step in the managerial decision-making process is to
identify the decision problem.
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UST - SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS ACADEMICS AND COMPETITIONS COMMITTEE [CA51014] - Quiz No. 2 Handout AY 2024-2025 – First Semester
Statement 2: The final step in the decision-making process is to make the
decision.
a. Statement 1 is true b. Statement 2 is true c. Both statements are true d. Neither statement is true
16. Which of the following steps in the management decision-making process
does not generally involve the managerial accountant?
a. Prepare internal reports that review results of decisions
b. Determine possible courses of action c. Make the appropriate decision based on relevant data d. None of these
17. Opportunity cost is usually
a. a sunk cost. b. a standard cost c. included as part of cost of goods sold d. a potential benefit
18. Buff Corp. is considering replacing an old machine with a new machine. Which of the following items is relevant to Buff's decision? (Ignore income tax considerations.)
Book value of old Disposal value of new
machine machine a. Yes No
b. No Yes
c. No No
d. Yes Yes
19. In a make-or-buy decision, relevant costs include:
a. unavoidable fixed costs
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UST - SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS ACADEMICS AND COMPETITIONS COMMITTEE [CA51014] - Quiz No. 2 Handout AY 2024-2025 – First Semester
b. avoidable fixed costs
c. fixed factory overhead costs applied to products d. fixed selling and administrative expenses
20. Which of the following would be relevant in the decision to sell or throw out obsolete inventory?
Direct material cost Fixed overhead cost
assigned to the assigned to the inventory inventory a. Yes No
b. No Yes
c. No No
d. Yes Yes
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UST - SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS ACADEMICS AND COMPETITIONS COMMITTEE [CA51014] - Quiz No. 2 Handout AY 2024-2025 – First Semester
II. PROBLEMS
PROBLEM A
AMV Company has a process that results in 9,500 pounds of Product A that can be sold for P7 per pound. An alternative would be to process Product A further at a cost of P75,000 and then sell it for P14 per pound.
1. Should management sell Product A now or should Product A be processed
further and then sold? What is the effect of the action?
PROBLEM B
AMV Inc. has three product lines, one of which reflects the following results:
Sales 190,000 Less: Variable Expenses (100,000) Contribution Margin 90,000 Less: Fixed Expenses (110,000) Net Loss (20,000)
If this product line is eliminated, 75% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines.
2. If management decides to eliminate this product line, the company's net income will increase/decrease by?
PROBLEM C
For 2022, AMV Company’s net income computed by the absorption costing method was P 6,400 and its net income computed by the direct costing method was P 9,100. The company’s unit cost was P 17 under direct costing and P 20 under absorption costing.
3. If the ending inventory consisted of P 2,100 units, what must the beginning inventory in units be?
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UST - SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS ACADEMICS AND COMPETITIONS COMMITTEE [CA51014] - Quiz No. 2 Handout AY 2024-2025 – First Semester
PROBLEM D
AMV Company has a standard fixed cost of P5 per unit. At an actual production of 12,500 units an unfavorable volume variance of P25,000 resulted.
4. What were the total budgeted fixed costs?
PROBLEM E
AMVIAN Company has a standard fixed cost of P10 per unit using a normal capacity of 15,000 units. An unfavorable volume variance of P17,000 resulted.
5. What was the volume produced?
PROBLEM F
AMVIAN Co. has the following partial contribution income statement at a sales volume of 900,000 units for its single product:
Sales P 81,000,000 Less: Variable Expenses (56,700,000) Contribution Margin 10,800,000
6. AMVIAN Co.’s controller has calculated that the company’s break-even point is 25,250,000 units. What are AMVIAN Co.’s total fixed costs?
PROBLEM G
AMVIAN Company produces high-quality DVDs. Unit production costs (based on capacity production of 100,000 units per year) are as follows:
Direct Material P 50 Direct Labor 20 Overhead (20% Variable) 10 Other information: Sales Price 100 SG&A (40% Variable) 15
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UST - SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS ACADEMICS AND COMPETITIONS COMMITTEE [CA51014] - Quiz No. 2 Handout AY 2024-2025 – First Semester
7. Assuming that AMVIAN Company is producing and selling at capacity, what is the minimum selling price that the corporation would consider on a “special order” of 1,000 DVDs on which no variable period costs would be incurred?
8. Assuming that AMVIAN Company is operating at a level of 40,000 DVDs per year. What minimum price would the corporation consider on a "special order" of 1,000 DVDs to be distributed through normal channels?
PROBLEM H
AMV Company has only 25,000 hours of machine time each month to manufacture its two products. Product A has a contribution margin of $50, and Product L has a contribution margin of $64. Product A requires 5 hours of machine time, and Product L requires 8 hours of machine time.
9. If Wahda Company wants to dedicate 80 percent of its machine time to the
product that will provide the most income, the company will have a total contribution margin of?
PROBLEM I
AMV Inc. had a margin of safety ratio of 20%, variable costs of 60% of sales, fixed costs of P240,000, a breakeven point of P135,000, and an operating income of P60,000 for the current year.
