1.

Management accounting
a. Is governed by generally accepted accounting principles.
b. Draws from disciplines other than accounting.
c. Is geared primarily to the past rather than the future.
d. Places more emphasis on precision of data compared with financial

2. Which of the following is not a characteristic of a “Staff” authority?

a. It gives support, advise, and service to line managers.
b. It is exercised laterally or upward.
c. It has the authority to command action or give orders to subordinates.
d. None of the above

3. In financial accounting, certain rules and regulations must be followed on how financial statements must
be presented to the reader. In managerial accounting, no such restrictions generally apply because it is:
a. An entirely different field that need not observe the broad guidelines in financial accounting.
b. Designed to provide management with non-financial information for decision-making.
c. Designed to provide accounting and other financial data to assist management in making business
decisions.
d. A discipline that does not require preparation of other financial statements.
e. All of the above.

4. Which of the following is a Controller’s responsibility?

a. Tax planning and accounting c. In charge of credit and collection
b. Custodian of funds d. Arranging short-term financing

5. Controllership has attained special recognition in corporate management as business expands in

complexity and reach, and as the controller exerts influence for management to take organization’s goals.
Controllership and treasurership constitute corporate finance. These are among the controller’s
traditional functions:
1. Tax management.
2. Financial reporting and interpretation.
3. Credit management.
4. Sourcing and investing of funds.
5. Reporting to government regulatory agencies.
6. Risk management.
 7. Economic appraisal.
8. Planning for control.
a. All eight items. c. Items 1, 2, 3, 4, 5, 7, and 8 only.
b. Items 1, 2, 5, 7, and 8 only. d. 2, 3, 5, and 7, and 8 only.

6. Which of the following statements is True?

a. Adequate training and experience in both the analytical approach and process in the particular
undertaking are requisites for the CPA to be involved in a management service engagement.
b. A CPA with MBA and PhD degrees is automatically qualified to render management services.
c. Competence as a standard in the rendition of management services by a CPA may be equated to having
excellent scholarly preparation to include the usual baccalaureate degree, an MBA, and other post
graduate studies.
d. A certified public accountant by virtue of having the necessary academic preparation and by hurdling the
licensure examinations required to have a CPA license can readily render management services to the
public.

7. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs:

Unit Variable Cost Unit Fixed Cost

a. Increase Decrease
b. Remains constant Remains constant
c. Decrease Remains constant
d. Remains constant Decrease
8. The relevant range of activity refers to the
a. geographical areas where the company plans to operate.
b. activity level where all costs are curvilinear.
c. levels of activity over which the company expects to operate.
d. level of activity where all costs are constant.
9. A company has contribution margin per unit of $18 and a contribution margin ratio of 40%. What is the
unit selling price?
a. $30.00.
b. $45.00.
c. $7.20.
d. Cannot be determined.
10. A company requires $850,000 in sales to meet its target net income. Its contribution margin is 30%, and
fixed costs are $150,000. What is the target net income?
a. $255,000.
b. $195,000.
c. $350,000.
d. $105,000.
11. Reese Company requires sales of $2,000,000 to cover its fixed costs of $900,000 and to earn net income
of $400,000. What percent are variable costs of sales?
a. 20%.
b. 35%.
c. 45%.
d. 65%.
12. The following information is available for Louis Company:
Sales $600,000 Total fixed expenses $150,000
Cost of goods sold 390,000 Total variable expenses 360,000
A CVP income statement would report
a. gross profit of $210,000.
b. contribution margin of $450,000.
c. gross profit of $240,000.
d. contribution margin of $240,000.
13. Bush Electronics, Inc. had the following sales results for 2004:
TV sets CD player Radios
Peso sales component ratio 0.30 0.30 0.40
Contribution margin ratio 0.40 0.40 0.60
Bush Electronics, Inc. had fixed costs of P2,400,000.
The break-even sales in pesos for Bush Electronics, Inc. are:
TV sets CD player Radios
A. P1,800,000 P1,800,000 P3,600,000
B P1,800,000 P1,800,000 P1,600,000
C. P1,500,000 P1,500,000 P2,000,000
D. P1,531,915 P1,531,915 P2,042,553

14. Glareless Company manufactures and sells sunglasses. Price and cost data are as follows:
Selling price per pair of sunglasses P25.00
 Variable costs per pair of sunglasses:
Raw materials P11.00
Direct labor 5.00
Manufacturing overhead 2.50
Selling expenses 1.30
Total variable costs per unit P19.80
Annual fixed costs:
Manufacturing overhead P192,000
Selling and administrative 276,000
Total fixed costs P468,000
Forecasted annual sales volume (120,000 pairs) P3,000,000
Income tax rate 40%
Glareless Company estimates that its direct labor costs will increase 8 percent next year. How many units will
Glareless have to sell next year to reach breakeven?
A. 97,500 units C. 83,572 units
B. 101,740 units D. 86,250 units

15. Gorilla, Co. provides two products, M and W. M accounts for 60 percent of total sales, variable cost as a
percentage of selling price are 60% for M and 85% for W. Total fixed costs are P225,000. If fixed costs will
increase by 30 percent, what amount of peso sales would be necessary to generate an operating profit of
P48,000?
A. P1,350,000 C. P1,135,000
B. P486,425 D. P910,000
16. BM Motors, Inc. employs 40 sales personnel to market its line of luxury automobiles. The average car sells for
P1,200,000 and a 6% commission is paid to the salesperson. BM Motors is considering a change to a
commission arrangement that would pay each salesperson a salary of P24,000 per month plus a commission of
2% of the sales made by that salesperson.

The amount of total car sales at which BM Motors would be indifferent as to which plan to select is
A. P22,500,000 C. P24,000,000

B. P30,000,000 D. P12,000,000

17. If fixed costs increase while variable cost per unit remains constant, the contribution margin will be

A. lower C. unchanged

B. higher D. unpredictable
18. Firm D and Firm S are competitors within the same industry. Firm D produces its product using large amounts of
direct labor. Firm S has replaced direct labor with investment in machinery. Projected sales for both firms are
fifteen percent less than in the prior year. Which statement regarding projected profits is true?
A. Firm D will lose more profit than Firm S.

B. Firm S will lose more profit than Firm D.

C. Firm D and Firm S will lose the same amount of profit.

D. Neither Firm D nor Firm S will lose profit.

19. 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 company’s fixed
costs?
A. P72,000 C. P288,000

B. P80,000 D. P320,000

20. 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?

A. P250,000 C. P500,000

B. 200 percent D. 40 percent

25. The Bush Company has provided information concerning its projections for the coming year as follows:

Net sales P10,000,000

Fixed manufacturing costs P 1,000,000

Bush projects variable manufacturing costs of 60% of net sales. Assuming no change in inventory, what will the
projected cost of goods sold be?

A. P5,000,000 C. P7,000,000
B. P6,000,000 D. P8,000,000
26. Colger Company manufactures a single product using standard costing. Variable production costs are P12 and
fixed production costs are P125,000. Colger uses a normal activity of 12,500 units to set its standard costs.
Colger began the year with 1,000 units in inventory, produced 11,000 units, and sold 11,500 units. The standard
costs of goods sold under absorption costing would be
A. P115,000 C. P242,000
B. P132,000 D. P253,000
27. . The Trinkets Company estimated the following data for the coming year:

Fixed manufacturing costs P565,000

 Variable production costs per peso of sales

Materials P0.125

Direct labor 0.150

Variable overhead 0.075

Variable selling costs per peso of sales 0.150

Trinkets estimates its sales for the coming year to be P2,000,000.

The expected cost of goods sold for the coming year is

A. P1,265,000 C. P1,115,000

B. P1,565,000 D. P 700,000

28. . Simple Corp. produces a single product. The following cost structure applied to their first year of operations,
2000:
Variable Costs per Unit Annual Fixed Costs
SG&A P2.00 P14,000
Production 4.00 P20,000
Assume that during 2000 Simple Corp. manufactured 5,000 units and sold 3,800. There was no beginning or
ending work-in-process inventory. How much larger or smaller would Simple Corp.’s income be if it uses
absorption rather than variable costing?
A. The absorption costing income would be P6,000 larger
B. The absorption costing income would be P6,000 smaller
C. The absorption costing income would be P4,800 larger
D. The absorption costing income would be P4,000 smaller
29. 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. P80,000 C. P240,000

B. P90,000 D. P600,000

30. 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.

31. A company observed a decrease in the cost per unit. All other things being equal, which of the
following is probably true?

A. The company is studying a variable cost, and total volume has increased.

B. The company is studying a variable cost, and total volume has decreased.

C. The company is studying a fixed cost, and total volume has increased.

D. The company is studying a fixed cost, and total volume has decreased

32. Moon Company has a variable selling cost. If sales volume increases, how will the total variable cost
and the variable cost per unit behave?

Total Variable Cost Variable Cost per Unit

A. Increase Increase

B. Increase Remain constant

C. Increase Decrease

D. Remain constant Decrease

33. . Cost-volume-profit analysis is most important for the determination of the

A. Volume of operation necessary to break-even.

B. Relationship between revenues and costs at various levels of operations.

C. Variable revenues necessary to equal fixed costs.

D. Sales revenue necessary to equal variable costs.

34. The contribution margin ratio always increase when

A. Break-even point decreases.

B. Break-even point increases.

C. Variable cost as a percentage of net sales increases.

D. Variable cost as a percentage of net sales decreases.

35. The percentage change in earnings before interest and taxes associated with the percentage
change in sales volume is the degree of

A. Operating leverage C. Breakeven leverage

 B. Financial leverage D. Combined leverage

36. The break-even point in units increases when unit costs

A. Increase and sales price remains unchanged.

B. Decrease and sales price remains unchanged.

C. Remain unchanged and sales price increases.

D. Increase and sales price increases.

37. If variable cost as a percentage of sales increases, the

A. contribution margin percentage increases.

B. break-even point in pesos increases.

C. selling price increases.

D. fixed costs decrease.

38. Cost-volume-profit (CVP) analysis is a key factor in many decisions, including choice of product lines,
pricing of products, marketing strategy, and utilization of productive facilities. A calculation used
in a CVP analysis is the break-even point. Once the break-even point has been reached,
operating income will increase by the:

A. gross margin per unit for each additional unit sold.

B. contribution margin per unit for each additional unit sold.

C. fixed costs per unit for each additional unit sold.

D. variable costs per unit for each additional unit sold.

E. sales price per unit for each additional sold.

39. Reese Company requires sales of $2,000,000 to cover its fixed costs of $900,000 and to earn net
income of $400,000. What percent are variable costs of sales?

a. 20%.

b. 35%.

c. 45%.

d. 65%.
40. A company requires $850,000 in sales to meet its target net income. Its contribution margin is 30%,
and fixed costs are $150,000. What is the target net income?

a. $255,000.

b. $195,000.

c. $350,000.

d. $105,000.

41. The following information pertains to Nove Company’s CVP relationships:

Break-even point in units sold 1000
Variable costs per unit P500
Total fixed costs P150,000
How much will be contributed to profit before income taxes by the 1,001st units sold?

a. P650
b. P500
c. P150
d. P0

42. Last year, the contribution margn ratio of Lamesa Company was 30%. This year fixed costs are
expected to be P120,000, the same as last year and revenues are forecasted at P550,000, a 10% increase
over last year. For the company to increase operating income by P15,000 in the coming year, the
contribution margin ratio must be

a. 20%
b. 30%
c. 40%
d. 70%

43.A company desires to sell a sufficient quantity of products to earn a profit of $80,000. If the unit sales
price is $20, unit variable cost is $12, and total fixed costs are $160,000, how many units must
be sold to earn net income of $80,000?

a. 45,000 units

b. 30,000 units

c. 24,000 units

d. 18,000 units

44.A CVP graph does not include a

 a. variable cost line.

b. fixed cost line.

c. sales line.

d. total cost line.

45. Mount Park, Inc. had the following economic information for the year 2002:

Sales(50,000 units @ P20) P1,000,000

Variable manufacturing costs 400,000

Fixed costs 250,000

Income tax rate 40 percent

Mount Park budgets its 2003 sales at 60,000 units or P1,200,000. The company anticipates increased
competition; hence, an additional P75,000 advertising costs is budgeted in order to maintain its sales target for
2003.

What is the amount of peso sales needed for 2003 in order to equal the after-tax income in 2002?
A. P1,125,000 C. P1,187,500

B. P1,325,000 D. P1,387,500

46. Glow Co. wants to sell a product at a gross margin of 20%. The cost of the product is P2.00. The selling price
should be

A. P1.60 C. P2.40

B. P2.10 D. P2.50

47. 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
A. P3,000 C. P5,000

B. P4,000 D. P6,000

47. Which one of the following is not an assumption of CVP analysis?

a. All units produced are sold.

b. All costs are variable costs.

 c. Sales mix remains constant.

d. The behavior of costs and revenues are linear within the relevant range.

48. The CVP income statement

a. is distributed internally and externally.

b. classifies cost by functions.

c. discloses contribution margin in the body of the statement.

d. will reflect a different net income than the traditional income statement.

49. If more units are produced than are sold during a period, variable costing income

a. will be greater than absorption costing income.

b. will be less than absorption costing income.

c. will be the same as absorption costing income.

d. may be either greater or less than absorption costing income.

50. Under variable costing, fixed manufacturing costs are

a. charged to the product.

b. not reported in the income statement.

c. considered to be a period cost.

d. reported on the balance sheet as a prepayment.