COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

MANAGEMENT ADVISORY SERVICES I

PRE-FINAL EXAM
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INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one answer for each item, if you
marked twice then your answer is automatically void. Answer this question properly. Don’t play your test paper because the
latter did not do you anything wrong.
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1. LY & Company completed its first year of 5. During the year 2013, Good Health Corporation
operations during which time the following manufactured 70,000 units of product A, a new
information were generated: product. Only 65,000 units were sold during the
Total units produced 100,000 year. There was no beginning inventory.
Total units sold 80,000 at 100 per unit Manufacturing cost per unit was P20.00 variable and
Work in process ending inventory cost P50.00 fixed. What would be the effect in net income
Fixed cost Factory Overhead P 1.2 million if absorption costing is used instead of variable
Selling and administrative P 0.7 million costing?
Per unit variable cost a. Profit is P 100,000 lower
Raw materials P 20.00 b. Profit is P250,000 higher
Direct labor 12.50 c. Profit is P 250,000 lower
Factory Overhead 7.50 d. None of the above.
Selling and administrative 10.00
If the company used the variable (direct) costing 6. Calculating income under variable costing does
method, the operating income would be? NOT require knowing
a. P 3,040,000 b. P 4,000,000 a. Unit sales
c. P 2,100,000 d. P 2,480,000 b. unit production
c. Selling price
2. CERTS for life, Inc., manufactures a single d. unit variable manufacturing costs.
product for which the costs and selling prices are:
Variable production costs P 50 per unit 7. Vladen Inc. reported the following data for 2016:
Selling price P 125 per unit Actual hours 120,000
Fixed production overhead P 200,000 per quarter Denominator hours 150,000
Fixed selling and administrative overhead - P Standard hours allowed for output 140,000
80,000 per quarter Fixed predetermined overhead rate P 6 per
hour
Normal capacity is 20,000 units per quarter. Variable predetermined Over Head rate P 4 per
Production in the first quarter was 19,000 units and hour
sales volume was 16,000 units. No opening Vladen Inc. 2016 volume variance:
inventory for the quarter. The absorption costing a. No volume variance
profit for the quarter was? b. P 60,000 favorable
a. P 920,000 b. P 960,000 c. P 60,000 which is neither favorable nor
c. P 950,000 d. P 970,000 underapplied
d. P 60,000 underapplied
Questions 3 and 4 are based on the following
information: The following operating data are 8. Eastern Co. has total budgeted fixed costs of
available from the records of Sheena Company for P150,000. Actual production of 39,000 units resulted
the month of January 2016: in a P 6,000 favorable volume variance. What
Sales (P70 per unit) P 210,000 normal capacity was used to determine the fixed
Direct materials 59,200 overhead rate?
Direct labor 48,000 a. P 40,560 b. P 37,500
Manufacturing overhead: c. P 33,000 d. P0.00
Fixed 36,080
Variable 24,000 9. The term "relevant range" as used in cost
Marketing and general expenses: accounting means the range over which:
Fixed 11,000 a. relevant costs are incurred
Variable 5% of sales b. cost relationships are valid
Production in units 3,200 units c. costs may fluctuate
Beginning inventory none d. sales volume fluctuates

3. The ending finished goods inventory under absorption 11. Within a relevant range, the amount of fixed cost
costing would be: per unit:
a. P 14,280 b. P 12,096 a. differs at each production level on a per-unit basis
c. P 16,968 d. P 16,072 b. remains constant in total
c. decreases as production increases on a
4. The net income for the month under the variable per-unit basis
costing method would be: d. increases as production decreases on a
a. P 32,420 b. P 23,320 per-unit basis
c. P 25,500 d. P 22,420 e. all of the above

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12. The following relationships pertain to a year's Use the following to answer questions 18-21
budgeted activity for Buckeye Company: Gasson Company is a merchandising firm. Next
month the company expects to sell 800 units. The
High Low following data describe the company's revenue and
Direct Labor Hours 400,000 300,000 cost structure:
Total costs P154,000 P129,000 Selling price per unit 40
Sales commission 5%
What are the budgeted fixed costs for the year? Purchase price (cost) per unit 18
a. .25 b. 25,000 Advertising expense 4,000 per month
c. 54,000 d. 75,000 4,500 per month
Administrative expense plus 15% of sales
13. Direct materials and direct labor are considered
to be: Assume that all activity mentioned in this problem is
a. selling expenses within the relevant range.
b. prime costs
c. administrative expenses 18. The expected gross margin next month is:
d. conversion costs a. 17,600 b. 11,200
e. factory overhead c. 14,400 d. 16,000

14. Pitino Company has a beginning inventory of 19. The expected total administrative expense next month
direct materials on March 1 of 30,000 and an ending is:
inventory on March 31 of 36,000. The following a. 4,800 b. 13,300
additional manufacturing cost data were available for c. 9,300 d. 14,900
the month of March:
Direct materials purchased 84,000 20.The expected contribution margin next month is:
Direct labor 60,000 a. 17,600 b. 11,200
Factory overhead 80,000 c. 14,400 d. 16,000

21. The expected net operating income next month is?

During March, conversion cost added to production
a. 7,500 b. 5,100
was:
c. 2,700 d. 11,200
a. 80,000 b. 144,000
c. 140,000 d. 138,000
22. In its first year of operations, Bronfren
Corporation produced 800,000 sets and sold
15. The tax requirement that certain purchasing and
780,000 sets of artificial tan lines. What would have
storage costs be allocated to inventory is known as:
happened to net operating income in this first year
a. backflush costing
under the following costing methods if Bronfren had
b. postdeduction
produced 20,000 fewer sets? (Assume that Bronfren
c. just-in-time
has both variable and fixed production costs.)
d. super absorption
Variable costing Absorption costing
e. none of the above
a Increase Increase
b Decrease Increase
16. Ziffel Company had the following account
c Decrease Decrease
balances and results from operations for the month
d No effect Decrease
of July: direct materials consumed, 10,400; direct
labor, 8,000; factory overhead, 8,800; July 1, work in
23. Fleet Corporation produces a single product. The
process inventory, 2,400; July 31, work in process
company manufactured 700 units last year. The
inventory, 1,800; finished goods inventory, July 1,
ending inventory consisted of 100 units. There was
1,200; finished goods inventory, July 31, 1,000. The
no beginning inventory. Variable manufacturing costs
total manufacturing cost for the month of July was:
were 6.00 per unit and fixed manufacturing costs
a. 27,800 b. 28,000
were 2.00 per unit. What would be the change in the
c. 18,400 d. 27,200
amount of ending inventory if variable costing was
used instead of absorption costing?
17. Iacono Corporation is a wholesaler that sells a
a. 800 decrease b. 200 decrease
single product. Management has provided the
c. 0 d. 200 increase
following cost data for two levels of monthly sales
volume. The company sells the product for 127.20
24. When sales are constant, but the production level
per unit.
fluctuates, net operating income determined by the
variable costing method will:
Sales volume (units) 5,000 6,000
a. fluctuate in direct proportion to changes in
Cost of sales 419,000 502,800
production.
Selling and administrative 186,500 202,200
b. remain constant.
costs
c. fluctuate inversely with changes in production.
The best estimate of the total contribution margin d. be greater than net operating income under
when 5,300 units are sold is: absorption costing.
a. 230,020 b. 51,410
c. 146,810 d. 32,330 25. BONUS, if your answer in No. 1, 10 and 24 are
correct.

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