MANAGEMENT ACCOUNTING

BS Accountancy, SY 2019-2020
5th Year, 1st Semester
PRELIMINARY EXAMINATION

Student Name: ________________________________________________________________________

Date: ___________________________________________________________________________________
Instructions: Encircle the letter of the correct answer. Please avoid erasures.

1. If a firm’s net income (loss) does not change as its volume changes, the firm(’s)
a. must be in the service industry
b. must have no fixed costs
c. sales price must equal P0.00
d. sales price must equal its variable costs

2. In cost accounting, the term “relevant range” refers to the range over which the
a. Relevant costs are incurred
b. Cost relationships are valid
c. Costs may fluctuate
d. Production may vary

3. Indirect labor may be defined as labor which does not directly affect the construction or the composition of the
finished product. This term includes wages paid to
a. Supervisor in a factory
b. Factory stores clerk and timekeeper in a factory
c. Factory crane operator
d. All of these

4. What are prime costs?

a. The first costs incurred on a job
b. Indispensable as distinguished from avoidable costs
c. Direct materials and direct labor
d. Cost incurred on joint products before the split-point

5. Direct labor and factory overhead can be combined into a classification called
a. Conversion cost
b. Prime costs
c. Manufacturing cost
d. Cost of goods manufactured

6. The fixed portion of the semivariable cost of electricity for a manufacturing plant is
a. Factory overhead cost and period cost
b. Factory overhead cost and product cost
c. Indirect labor and product cost
d. Irrelevant cost

7. Which one of the following would be considered a user of management accounting information?
a. Creditors
b. Controller
c. Suppliers
d. Stockholders

8. Which of the following would be considered an external user of the firm’s accounting information
a. President
b. Controller
c. Stockholder
d. Sales Manager
9. Planning involves all of the following except for
a. Implementing the decisions
b. Predicting results under various alternatives
c. Selecting organization’s goals
d. Communicating goals to the organization

10. The planning process and the control process are linked by
a. Budgets
b. Marketing
c. Feedback
d. Predictions

11. A term descriptive of managerial accounting.

a. Historical financial statements
b. Generally accepted accounting principles
c. Discretionary
d. Regulatory

12. The distinction between direct and indirect costs depends on whether a cost
a. Is controllable or non-controllable
b. Is variable or fixed
c. Can be conveniently and physically traced to a cost object under consideration
d. Will increase with changes in levels of activity

13. 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 costs data to the management accountant
d. Any activity that causes costs to be incurred

14. As projected net income increases, the

a. Degree of operating leverage declines
b. Margin of safety stays constant
c. Break-even point goes down
d. Contribution margin goes up

15. Which of the following best describes the difference between financial and managerial accounting?
a. Managerial accounting provides information to support decisions, while financial accounting does not
b. Managerial accounting is not restricted to GAAP, while financial accounting is restricted to GAAP
c. Managerial accounting does not result in financial reports, while financial accounting does result in financial
reports
d. Managerial accounting is concerned solely with the future and does not record events from the past, while
financial accounting records only events from past transactions

16. Which of the following statements is true?

a. To perform CVP analysis, a company must be able to separate costs into fixed and variable components
b. It is assumed in CVP analysis that the unit selling price, unit variable costs, and unit fixed costs are known and
constant
c. Breakeven point is not a good planning tool since the goal of business is to make a profit
d. An increase in the tax rate will increase the breakeven point

17. Costs that cannot be changed by any decision made now or in the future are
a. Fixed costs
b. Indirect costs
c. Avoidable costs
d. Sunk costs
18. Which of the following costs always differ among future alternatives?
a. Fixed costs
b. Historical costs
c. Relevant costs
d. Variable costs

19. Certified Management Accountants are required to adhere to the following ethical standards, except:
a. Competence
b. Integrity
c. Ingenuity
d. Objectivity

20. There are four broad classes of activities in the value chain. Research and development would be in which class?
a. Activities relating to getting ready to make the product
b. Activities related to making the product
c. Activities related to dealing with customers
d. Other activities that support the first three activities

21. __________________ is the acquisition, coordination, and assembly of resources to produce a product or deliver a service.
a. Research and development
b. Customer services
c. Production
d. Marketing

22. Goal congruence means

a. An employee has set high goals for him/herself
b. An employee has set low goals for him/herself
c. An employee’s goals are aligned with those of the organization
d. An employee will never attain his or her goals

23. A production system in which units are produced and materials are purchased only as needed to meet actual
customer demand is called
a. Total Quality Management
b. Just-in-time
c. Process reengineering
d. Benchmarking

24. Which statement is true?

a. All variable costs are direct costs
b. Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs
c. All fixed costs are indirect costs
d. All direct costs are variable costs

25. In the preparation of the schedule of Cost of Goods Manufactured, the accountant incorrectly included as part of
manufacturing overhead the rental expense on the firm’s retail facilities. This inclusion would
a. Overstate period expenses on the income statement
b. Overstate the cost of goods sold on the income statement
c. Understate the cost of goods manufactured
d. Have no effect on the cost of goods manufactured

26. In CVP analysis, once the breakeven point is reached, the 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

27. The margin of safety is

a. The contribution margin rate
b. The difference between budgeted contribution margin and breakeven contribution margin
c. The difference between budgeted sales and breakeven sales
d. The difference between the breakeven point in sales an cash flow breakeven
28. Which of the following would decrease the contribution margin the most?
a. A 15% decrease in selling price
b. A 15% increase in variable expenses
c. A 15% decrease in variable expenses
d. A 15% decrease in fixed expenses

29. How may the following be used in calculating the breakeven point in units?
a. Fixed cost = denominator; CM per unit = numerator
b. Fixed cost = denominator; CM per unit = not used
c. Fixed cost = numerator; CM per unit = not used
d. Fixed cost = numerator; CM per unit = denominator

30. Within the relevant range, the amount of variable cost per unit
a. Varies at each production level
b. Remains constant at each production level
c. Increases as production increases
d. Decreases as production decreases

31. If total fixed cost increases, while total variable cost and sales remain constant, what will happen to the Contribution
Margin and Breakeven Point?
a. CM = increase; BEP = decrease
b. CM = decrease; BEP = increase
c. CM = unchanged; BEP = increase
d. CM = unchanged; BEP = unchanged

32. A report that measures financial and non-financial performance for various organization units in a single report is
called a(n):
a. Balanced scorecard
b. Financial report scorecard
c. Imbalanced scorecard
d. Unbalanced scorecard

33. Cost behavior refers to

a. How costs react to a change in the level of activity
b. Whether a cost is incurred in a manufacturing, merchandising, or service company
c. Classifying costs as either inventoriable or period costs
d. Whether a particular expense has been ethically incurred

34. Within the relevant range, if there is a change in the level of the cost driver then
a. Total fixed costs and total variable costs will change
b. Total fixed costs and total variable costs will remain the same
c. Total fixed costs will remain the same and total variable costs will change
d. Total fixed costs will change and total variable costs will remain the same

35. The sequence of activities that creates a good or service is:

a. An organization
b. A value chain
c. A customer chain
d. An information system

36. Management accounting

a. Focuses on estimating future revenues, costs and other measures to forecast activities and their results
b. Provides information about the company as a whole
c. Reports information that has occurred in the past that is verifiable and reliable
d. Provides information that is generally available only on a quarterly or annual basis

37. Which of the following types of information are used in management accounting?
a. Financial information
b. Nonfinancial information
c. Information focused on the long term
d. All of the above
 38. Ethical challenges for management accountants do not include
a. Whether to accept gifts from suppliers, knowing it is an effort to indirectly influence decisions
b. Whether to report unfavorable department information that may result in unfavorable consequences for a
friend
c. Whether to file a tax return this year
d. None of the above

39. If a financial manager/management accountant has a problem identifying unethical behavior or resolving an ethical
conflict, the first action (s)he should normally take is to
a. Consult the board of directors
b. Discuss the problem with his/her immediate superior
c. Notify the appropriate law enforcement
d. Resign from the company

40. Corporate social responsibility is

a. Effectively enforced through the controls envisioned by classical economics
b. The obligation to shareholders to earn profit
c. The duty to embrace service to the public interest
d. The obligation to serve long-term, organizational interests

ITEMS 41 TO 42 ARE BASED ON THE FOLLOWING INFORMATION:

The owners of Kelsey’s Daily Mart have been looking for ways to improve sales at the store. CURRENTLY, the weekly operating
results are as follows:

• Sales = P1,000,000
• Total Variable Costs = P700,000
• Total Fixed Costs = P120,000

One of the proposals to increase sales is to have a weekly raffle with a total prize of P10,000 per week. For every P50 worth of
goods purchased, the customer shall receive 1 ticket for the raffle. The variable cost to print and distribute the tickets has been
estimated at five pesos (P5.00) per ticket. Promotions and other fixed costs (aside from the total prize) in connection with the
raffle, likewise, have been estimated at P15,000 per week.

41. What is the sales revenue required to breakeven WITHOUT THE RAFFLE?
a. P180,000
b. P171,428
c. P300,000
d. P400,000
42. What is the sales revenue required to breakeven WITH THE RAFFLE?
a. P725,000
b. P483,333
c. P675,000
d. P580,000

43. Frank’s total costs of operating five (5) sales offices last year were P500,000, of which P70,000 represented fixed
costs. What would be the budgeted costs for the coming year if Frank were to operate seven (7) sales offices?
a. P700,000
b. P672,000
c. P614,000
d. P586,000
44. Harry Manufacturing incurs annual fixed costs of P250,000 in producing and selling a single product. Estimated unit
sales are 125,000. An after-tax income of P75,000 is desired by management. The company projects income tax rate at
40 percent. What is the maximum amount that Harry can expend for variable costs per unit and still meet its profit
objective if the sales price per unit is estimated at P6?
a. P3.37
b. P3.59
c. P3.00
d. P3.70

45. For its most recent fiscal year, a firm reported that its contribution margin was equal to 40% of sales and that its net
income amount to 10% of sales. If its fixe costs for the year were P60,000, how much was the margin of safety?
a. P150,000
b. P200,000
c. P600,000
d. P50,000

46. Sam Company manufactures a single product. In the prior year, the company had sales of P90,000, variable costs of
P50,000, and fixed costs of P30,000. Sam expects its cost structure and sales price per unit to remain the same in the
current year, however total sales are expected to increase by 20%. If the current year projections are realized, net
income should exceed the prior year’s net income by
a. 100%
b. 80%
c. 20%
d. 50%

47. Antiporda, Inc. sells three products, A, B and C. The company sells three (3) units of C for each unit of A and two (2)
units of B for each unit of C. Total fixed costs amount to P760,000. Product A’s contribution margin per unit is P2,
Product B’s is 150% of A’s, and Product C’s twice as much as B’s. How many units of each product must be sold to
breakeven?
a. A = 2,000; B = 12,000; C = 6,000
b. A = 20,000; B = 120,000; C = 60,000
c. A = 29,231; B = 58,462; C = 87,692
d. A = 69,091; B = 414,546; C = 207,273

48. When 10,000 units are produced, fixed costs are P14 per unit. Therefore, when 20,000 units are produced, fixed costs
will:
a. Increase to P28 per unit
b. Remain at P14 per unit
c. Decrease to P7 per unit
d. Total P280,000

49. Wheels manufacturing currently produces 1,000 tires per month. The following per unit data apply for sales to regular
customers:
o Direct materials = P20
o Direct manufacturing labor = P3
o Variable manufacturing overhead = P6
o Fixed manufacturing overhead = P10
TOTAL MANUFACTURING COSTS PER UNIT = P39

The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of
producing 2,000 tires?
a. P39,000
b. P78,000
c. P68,000
d. P62,000

50. If the breakeven point is 100 units, each unit sells for P30, and fixed costs are P1,000, then on a graph the:
a. Total revenue line and the total cost line will intersect at P3,000 of revenue
b. Total cost line will be zero at zero units sold
c. Revenue line will start at P1,000
d. All of these answers are correct
 51. The Yamyam Company has assembled the following data pertaining to certain costs that cannot be easily identified as
either fixed or variable.

Cost Hours
24,900 5,250
24,000 5,500
36,400 7,500
44,160 9,750
45,000 9,500
Using the high-low method, what is the cost function?
a. y = 43,191 + 0.19x
b. y = 4,875 + 5.25x
c. y = 41,900 + 0.23x
d. y = 2,430 + 4.28x

52. Marissa Company is planning to sell 100,000 units of Product Y at P12 a unit. The fixed cost is P280,000. In order to
realize a profit of P200,000, what would the variable cost be?
a. P480,000
b. P720,000
c. P300,000
d. P220,000

53. Bibot Company has projected cost of goods sold of P4,000,000. Including fixed cost of P800,000. Variable cost is
expected to be 75% of net sales. What will be the projected net sales?
a. P4,266,667
b. P4,800,000
c. P3,333,333
d. P4,400,000

54. The Little Star Company is planning to sell 200,000 units of Product M. The fixed cost is P400,000 and the variable
cost is 60% of the selling price. In order to realize a profit of P100,000, the selling price per unit would have to be
a. P3.75
b. P4.17
c. P6.00
d. P6.25

ITEMS 55 TO 56 ARE BASED ON THE FOLLOWING INFORMATION

Bruto, Inc. produces only two product, Popeye and Olive. These account for 60% and 40% of the total sales in pesos of Bruto,
respectively. Variable costs (as a percentage of sales) in pesos are 60% for Popeye and 85% for Olive. Total fixed cost is
P150,000. There are no other costs.

55. What is Bruto’s breakeven point in sales (in pesos)?

a. P150,000
b. P214,286
c. P300,000
d. P500,000
56. Assuming that the total fixed cost of Bruto increases by 30%, what amount of sales in pesos would be necessary to
generate a net income of P9,000?
a. P204,000
b. P434,000
c. P650,000
d. P680,000
 57. Information concerning Siko Corporation’s Product X is as follows:
o Sales = P300,000
o Variable costs = P240,000
o Fixed costs = P40,000

Assuming that Siko increases sales of Product X by 20%. What should the net income from Product X be?
a. P20,000
b. P24,000
c. P32,000
d. P80,000

58. Neth and Company has sales P400,000 with variable cost of P300,000, fixed cost of P120,000, and an operating loss of
P20,000. By how much would Neth need to increase its sales in order to achieve a target operating income of 10% of
sales?
a. P400,000
b. P462,000
c. P500,000
d. P800,000

59. The following data refer to cost-volume-profit relationship of K Co.

o Breakeven point in units = 1,000
o Variable cost per unit = P250
o Total fixed cost = P75,000

How much will be contributed to operating income by the 1001st unit sold?
a. P250
b. P325
c. P75
d. Zero

60. PUBS Company is planning to sell 200,000 units of Product B. The fixed cost is P400,000 and the variable cost is 60%
of the selling price. In order to realize a profit of P100,000, the selling price per unit would have to be
a. P3.75
b. P4.17
c. P5.00
d. P6.25

“Nothing really worth having comes quickly and easily. If it

did, I doubt that we would ever grow.”