ACC 311 Managerial Accounting 1

SAT 9am – 12nn

PRELIM/ADVISORY EXAM James Madison M. Gabayan, CPA

Name: ____________________________________________ Date: __________________

Course/Year: _______________________________________
I. Multiple Choice. For items 1 to 10, encircle the letter of the BEST answer. (20 points)

1. Statement 1: While focusing on assisting managers, the management accountant must remember that all financial
results are reported exclusively for internal users only.
Statement 2: Management accountants focus on the costs of quality which come in two forms: voluntary costs and
opportunity costs.
a. Statement 1 is true; Statement 2 is true
b. Statement 1 is true; Statement 2 is false
c. Statement 1 is false; Statement 2 is true
d. Statement 1 is false; Statement 2 is false
e. None of the above

2. This type of organization provides services to customers rather than just manufacture products. Which one is it?
a. Service Organization
b. Manufacturing Organization
c. Nonprofit Organization
d. Either a or b
e. Both b and c

3. Statement 1: In all cases, when Contribution Margin equals Fixed Costs, break-even point is achieved.
Statement 2: In all cases, when Variable Cost exceeds Fixed Costs, a profit is achieved.
a. Statement 1 is true; Statement 2 is true
b. Statement 1 is true; Statement 2 is false
c. Statement 1 is false; Statement 2 is true
d. Statement 1 is false; Statement 2 is false
e. None of the above

4. The following are the three (3) traditional groupings of product costs, which one is not?
a. Direct Material Cost
b. Direct Labor Cost
c. Factory Overhead Cost
d. Prime Cost
e. None of the above

5. This type of cost changes in total in direct proportion to changes in activity or output whereby, a decrease in activity
brings a proportional decrease in its total amount and vice versa.
a. Variable Cost
b. Fixed Cost
c. Sunk Cost
d. Opportunity Cost
e. None of the above

6. ABCDE Corp. developed the following equation to predict certain components of its budget for the coming period:
Total Costs = Php 50,000 + (P20 x no. units of product Z sold). The Php20 would approximate the
a. Variable cost per unit of product Z
b. Total Cost per unit of product Z
c. Fixed Cost per unit of product Z
d. The coefficient of determination
e. None of the above

7. The term “relevant range” as used in management and cost accounting means the range over which
a. Relevant costs are incurred
b. Cost relationships are valid
c. Total cost remain unchanged
d. Production may vary
e. None of the above

8. Cost-volume-profit (CVP) analysis allows management to determine the relative profitability of a product by
a. Highlighting potential bottlenecks in the production process
b. Keeping fixed costs to an absolute minimum
c. Determining the contribution margin per unit and the projected profits at various levels of production
d. Assigning cost to a product in a manner that maximizes the contribution margin
e. None of the above

9. At the break-even point, the contribution margin equals total

a. Variable Costs
b. Sales Revenues
c. Selling and Administrative Costs
d. Fixed Costs
e. None of the above
 ACC 311 Managerial Accounting 2
SAT 9am – 12nn
PRELIM/ADVISORY EXAM James Madison M. Gabayan, CPA

10. Cost-volume-profit analysis is a key factor in many decisions, including choice of product lines, pricing of products,
marketing strategy, and use of productive facilities. A calculation used in a CVP analysis is the breakeven point. Once
the breakeven 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. Variable cost per unit for each additional unit sold
d. Sales price per unit for each additional unit sold
e. None of the above

II. Problem Solving: Give what is required for each problem. Show your solutions. (30 points)

Problem 1 – The following relationships pertain to a year’s budgeted activity for EW Company:
High Low
Direct Labor Hours 400,000 300,000
Total Costs Php 175,000 Php 150,000

11. What is the budgeted Fixed Cost for the year?

12. What is the Variable Cost per Direct Labor Hour?

Problem 2 – FIRE Company estimated its material handling costs at two activity levels as follows:
Kilos Handled Cost
80,000 Php 160,000
60,000 Php 132,000

13. What is the Cost Function for FIRE Company’s material handling cost?

14. What is FIRE Company’s estimated cost for handling 75,000 kilos?

Problem 3 – OINK Corporation has a Contribution Margin Percentage of 26%. It aims to have a Net Income before Tax of
Php 320,000 with Sales of Php 2,000,000.

15. What is the total Fixed Cost?

16. What is the total Variable Cost?

Problem 4 – The data below pertain to a company:

Total Cost Unit Cost
Sales (40,000 units) Php 1,000,000 Php 25
Raw Materials 160,000 4
Direct Labor 280,000 7
Factory Overhead:
Variable 80,000 2
Fixed 360,000
Selling and General Expenses:
Variable 120,000 3
Fixed 225,000

17. What is the Total Variable Cost?

18. What is the Contribution Margin?

 ACC 311 Managerial Accounting 3
SAT 9am – 12nn
PRELIM/ADVISORY EXAM James Madison M. Gabayan, CPA

19. What is the Total Fixed Cost?

20. What is the Net Income before Tax (NIBT)?

21. What is the Breakeven Sales in units?

22. How many units does the company need to produce and sell to have a Net Income before Tax (NIBT) of 10% of sales?

23. Assuming that the company sells 80,000 units, what is the maximum that can be paid for an advertising campaign
(additional Fixed Cost) and still breakeven?

Problem 5 – Last year, the Contribution Margin ratio of BARSINDER Industries was 30%. This year, Fixed Costs are
expected to be Php 120,000, the same as last year, and revenues are forecasted, at Php 550,000, a 10% increase over last year.
For the company to increase Net Income before Tax by Php 15,000 in the coming year,

24. What must be the contribution margin ratio for the coming year?

25. What was the Net Income before Tax last year?

III. Bonus (5 points)

CHERRY Co. is concerned about its operating performance in 2009, as summarized below:

Sales/Revenues (Php 12.50 per unit) Php 300,000

Variable Costs 180,000
Operating Loss (40,000)

How many additional units should have been sold in order for the company to breakeven in 2009?