FIN 073: Strategic Cost Management

Student Activity Sheet #10

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

FIRST PERIODICAL EXAM Materials:

Pen and non-scientific
calculator

GENERAL DIRECTIONS
READ THIS PAGE BEFORE STARTING THE ASSESSMENT

This is an 8 paged test and is composed of 1 section and has a total score of seventy (50) points. You
have 60 Minutes to finish this examination. The breakdown of the exam is as follows:

(1) Multiple-choice questions - The questions in this LEARNING OBJECTIVE:

section is with four answer choices. The test is
composed of 50 questions and is rated as 1 point each. This assessment measures the
competence of the student in terms of
All things unnecessary for the test must be put in front of the his/her application of knowledge and skills
testing area. Use BLACK or BLUE ink ballpen only. Write all your in the following topics:
answers on the designated answer sheet. Further, erasures are 1. Objectives, role and scope of
strictly NOT allowed and will invalidate your answers. Managerial Accounting.
2. Cost terms and concepts
You may NOT use smart phones or reference materials during 3. Cost Behavior
the testing session. Only the allowed calculators should be used. 4. CVP Analysis

Try to answer all questions. In general, if you have some knowledge about a question, it is better to try
to answer it. You will not be penalized for guessing.

Be sure to allocate your time carefully so you can complete the entire test within the exam session. You
may go back and review your answers at any time during the exam session.

Those who are caught cheating or doing acts not allowed during the exam shall be instructed to
surrender their test papers and shall leave the testing room immediately. Subsequently, their papers
shall be rated as ZERO.

This concludes the instruction page.

You may now begin answering.

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 FIN 073: Strategic Cost Management
Student Activity Sheet #10

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

Shade the letter of your answer on the answer sheet.

1. The professional certification developed by the IMA indicating professional competence in the
management accounting field is the:
a. CIA b. CMA c. RCA d. CPA

2. The Standards of Ethical Conduct for Management Accountants presents responsibilities of the
management accountant that encompass all of the following categories, except:
a. competence b. confidentiality c. dependability d. integrity

3. A managerial accountant who prepares clear reports and recommendations after analyzing
relevant facts is exercising which of the following standards?
a. competence b. confidentiality c. credibility d. integrity

4. The controller of a company or other organization is

a. a staff manager. c. an accountant, not a manager.
b. an operating manager. d. a natural manager.

5. Which of the following topics is of more concern to management accounting than to cost
accounting?
a. generally accepted accounting principles
b. inventory valuation
c. cost of goods sold valuation
d. impact of economic conditions on company operations

6. Which of the following is true?

I. Financial accounting is most concerned with meeting the needs of internal users.
II. Managerial accounting is highly regulated by rules and regulations.
a. I only b. II only c. I and II d. Neither I nor II

7. Which of the following is true?

I. Financial accounting is most concerned with addressing the needs of individual departments
of the firm.
II. Internal financial statements must be prepared using generally accepted accounting
principles.
a. I only b. II only c. I and II d. Neither I nor II

8. Which of the following is true?

I. Line personnel give assistance to staff employees.
II. Line managers are directly responsible for achieving organizational goals.
a. I only b. II only c. I and II d. Neither I nor II

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 FIN 073: Strategic Cost Management
Student Activity Sheet #10

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

9. Which of the following is true?

I. A variable cost remains constant on a per-unit basis as production increases.
II. Fixed cost per unit varies directly with production.
a. I only b. II only c. I and II d. Neither I nor II

10. Which of the following is true?

I. The relevant range is valid for all levels of activity.
II. An indirect cost can be easily traced to a cost object.
a. I only b. II only c. I and II d. Neither I nor II

11. Which of the following defines variable cost behavior?

Total cost reaction to increase in activity Cost per unit reaction to increase in activity
a. remains constant remains constant
b. remains constant increases
c. increases increases
d. increases remains constant

12. Which of the following would not generally be considered a fixed overhead cost?
Straight-line depreciation Factory insurance Units-of-production depreciation
a. no no no
b. yes no yes
c. yes yes no
d. no yes no

13. A(n) ________ cost increases or decreases in intervals as activity changes.

a. historical cost b. fixed cost c. step cost d. budgeted cost

14. When the number of units manufactured increases, the most significant change in unit cost will
be reflected as a(n)
a. increase in the fixed element. c. increase in the mixed element.
b. decrease in the variable element. d. decrease in the fixed element.

15. Product costs are deducted from revenue

a. as expenditures are made. c. as goods are sold.
b. when production is completed. d. to minimize taxable income.

16. Which of the following is not a product cost component?

a. rent on a factory building c. janitorial supplies used in a factory
b. indirect production labor wages d. commission on the sale of a product

17. Conversion cost does not include

a. direct labor. b. direct material. c. factory depreciation. d. supervisors'
salaries.

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 FIN 073: Strategic Cost Management
Student Activity Sheet #10

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

18. The cost estimation method that gives the most mathematically precise cost prediction equation
a. the high-low method. c. the contribution margin method.
b. the scatter-diagram method. d. regression analysis.

19. Which cost is most likely to be committed?

a. Repairs and maintenance.
b. Sum-of-the-years'-digits depreciation on the factory building.
c. Fee for a consultant on the company's long-range planning.
d. Advertising.

20. The closeness of the relationship between the cost and the activity is called
a. correlation. b. spurious. c. regression analysis. d. manufacturing overhead.

21. DJH has an average unit cost of ₱20 at 20,000 units and ₱13.75 at 40,000 units. What is the
total fixed cost?
a. ₱125,000 b. ₱250,000 c. ₱400,000 d. Cannot be determined.

22. Which of the following is true?

I. High-low, scatter diagram, and regression analysis are methods of developing formulas to
predict mixed costs.
II. As volume increases, the per-unit amount of a mixed cost increases.
a. I only b. II only c. I and II d. Neither I nor II

23. Clone Machinery had the following experience regarding power costs:
Month Machine hours Power cost
Jan. 300 P680
Feb. 600 720
Mar. 400 695
Apr. 200 640
Assume that management expects 500 machine hours in May. Using the high-low method,
calculate Clone's power cost using machine hours as the basis for prediction.
a. P 700 b. P 705 c. P 710 d. P1,320

24. The Shepherd Company’s president would like to know the estimated fixed and variable
components of a particular cost. Actual data for this cost for four recent periods appear below.
Activity Cost
Period 1 24 ₱174
Period 2 25 179
Period 3 20 165
Period 4 22 169
Using the least-squares regression method, what is the cost formula for this cost?

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 FIN 073: Strategic Cost Management
Student Activity Sheet #10

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

a. y = ₱ 0.00 + P7.55x c. y = ₱103.38 + ₱3.00x

b. y = ₱110.44 + P2.70x d. y = ₱113.35 + ₱0.89x

25. At a sales level of P300,000, Java Company's gross margin is P15,000 less than its contribution
margin, its net income is P50,000, and its selling and administrative expenses total P120,000.
At this sales level, its contribution margin would be:
a. P250,000. b. P155,000. c. P170,000. d. P185,000.

Question Nos. 26 through 28 are based on the following:

In the Omara Manufacturing Company, at an activity level of 80,000 machine hours, total overhead
costs were P223,000. Of this amount, utilities were P48,000 (all variable) and depreciation was
P60,000 (all fixed). The balance of the overhead cost consisted of maintenance cost (mixed). At
100,000 machine hours, maintenance costs were P130,000.

Assume that all of the activity levels mentioned in this problem are within the relevant range.

26. The variable cost for maintenance per machine hour is:
a. P1.30. b. P1.44. c. P0.75. d. P1.35.

27. The total fixed overhead cost for Omara is:

a. P115,000. b. P130,000. c. P 60,000. d. P 55,000.

28. If 110,000 machine hours of activity are projected for the next period, total expected overhead
cost would be:
a. P256,000. b. P263,500. c. P306,625. d. P242,500.

29. To which function of management is CVP analysis most applicable?

a. Planning b. Organizing c. Directing d. Controlling

30. Which of the following would not affect the breakeven point?
a. Number of units sold. c. Total fixed costs.
b. Variable cost per unit. d. Sales price per unit.

31. A company’s breakeven point in peso sales may be affected by equal percentage increases in
both selling price and variable cost per unit (assume all other factors are equal within the
relevant range). The equal percentage changes in selling price and variable cost per unit will
cause the breakeven point in peso sales to
a. Decrease by less than the percentage increase in selling price.
b. Decrease by more than the percentage increase in the selling price.
c. Increase by less than the percentage increase in selling price.
d. Remain unchanged.

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 FIN 073: Strategic Cost Management
Student Activity Sheet #10

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

32. If the fixed costs attendant to a product increase while variable costs and sales price remains
constant, what will happen to contribution margin (CM) and breakeven point (BEP)?
A. B. C. D.
CM Increase Decrease Unchanged Unchanged
BEP Decrease Increase Increase Unchanged

33. In a cost-volume-profit graph

a. the total revenue line crosses the horizontal axis at the breakeven point.
b. beyond the breakeven sales volume, profits are maximized at the sales volume where total
revenues equal total costs.
c. an increase in unit variable costs would decrease the slope of the total cost line.
d. an increase in the unit selling price would shift the breakeven point in units to the left.

34. If variable cost ratio increases, the

a. contribution margin percentage increases. c. break-even point in pesos increases.
b. selling price increases. d. fixed costs decrease.

35. If a company is earning a profit, its fixed costs

a. are less than total contribution margin. c. are greater than total variable costs.
b. are equal to total contribution margin. d. are constant on a per unit basis.

36. A very high degree of operating leverage (DOL) indicates that a firm:
a. has high fixed costs. c. has high variable costs.
b. has a high net income. d. is operating close to its breakeven point.

37. On January 1, 2020, Incremental Company increased its direct labor wage rates. All other
budgeted costs and revenues were unchanged. How did this increase affect Incremental
Company’s budgeted break-even point and budgeted margin of safety?
A. B. C. D.
Budgeted Break-even Point Increase Increase Decrease Decrease
Expected Margin of Safety Increase Decrease Decrease Increase

38. Carribean Company produces a product that sells for P60. The variable manufacturing costs are
P30 per unit. The fixed manufacturing cost is P10 per unit based on the current level of activity,
and fixed selling and administrative costs are P8 per unit. A selling commission of 10% of the
selling price is paid on each unit sold.
The contribution margin per unit is:
a. P24. b. P36. c. P30. d. P54.

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 FIN 073: Strategic Cost Management
Student Activity Sheet #10

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

39. An organization's break-even point is 4,000 units at a sales price of P50 per unit, variable cost
of P30 per unit, and total fixed costs of P80,000. If the company sells 500 additional units, by
how much will its profit increase?
a. P25,000 b. P15,000 c. P10,000 d. P12,000

40. Consider the following:

Fixed expenses P78,000
Unit contribution margin 12
Target operating profit 42,000
How many unit sales are required to earn the target operating profit?
a. 15,000 units b. 10,000 units c. 12,800 units d. 20,000 units

41. The following is the Lux Corporation's contribution format income statement for last month:
Sales P2,000,000
Less variable expenses 1,400,000
Contribution margin 600,000
Less fixed expenses 360,000
Net income P 240,000
The company has no beginning or ending inventories. A total of 40,000 units were produced
and sold last month. What is the company's degree of operating leverage?
a. 0.12 b. 0.40 c. 2.50 d. 3.30

42. Galactica Company has fixed costs of P100,000 and breakeven sales of P800,000. Based on
this relationship, what is its projected profit at P1,200,000 sales?
a. P 50,000 b. P200,000 c. P150,000 d. P400,000

43. Seal Yard Ornaments sells lawn ornaments for P15 each. Seal's contribution margin ratio is
40%. Fixed costs are P32,000. Should fixed costs increase 30%, how many additional units will
Seal have to produce and sell in order to generate the same net profit as under the current
conditions?
a. 1,600. b. 5,333. c. 6,933. d. 1,067.

44. Almos Corporation produces a product that sells for P10 per unit. The variable cost per unit is
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 cost per unit remain unchanged. If the selling price were reduced to P9 per unit,
the company’s profit would have been
a. P3,000. b. P4,000. c. P5,000. d. P6,000.

45. A firm has fixed costs of P200,000 and variable cost per unit of P6. It plans to sell 40,000 units
in the coming year. If the firm pays income taxes on its income at a rate of 40%, what sales
price must the firm use to obtain an after-tax profit of P24,000?
a. P11.60 b. P12.00 c. P11.36 d. P12.50

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 FIN 073: Strategic Cost Management
Student Activity Sheet #10

Name: _________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________ Date: ________________

46. The Mandarin Company's product mix includes P720,000 in sale of X and P640,000 in sale of
Y. X's contribution margin is 60% and Y's is 40% of sales. Fixed costs amount to P505,881. Y's
sale at breakeven point should amount to
a. P640,000 b. P720,000 c. P529,490 d. P470,590

47. Alonzo Corporation had sales of P120,000 for the month of May. It has a margin of safety ratio
of 25 percent, and an after-tax return on sales of 6 percent. The company assumes its sales
being constant every month. If the tax rate is 40 percent, how much is the annual fixed cost?
a. P 36,000 b. P432,000 c. P 90,000 d. P360,000

48. Food Factory, Inc. sells loose biscuits for P5 per unit. The fixed costs are P210,000 and the
variable costs are 45% of the selling price. What would be the amount of sales if Food Factory,
Inc. were to realize a profit of 15% of sales?
a. P700,000 b. P472,500 c. P525,000 d. P420,000

49. Marsman Company had a margin of safety ratio of 20%, variable costs of 60% of sales, fixed
costs of P240,000, a break-even point of P600,000, and an operating income of P60,000 for the
current year. What are the current year's sales?
a. P 500,000 b. P 600,000 c. P 750,000 d. P 900,000

50. Solar Company sells two products, Biggs and Boggs. Last year, Solar Company sold 12,000
units of Biggs and 24,000 units of Boggs.

Related data for last year are:

Product Unit Selling Price Unit Variable Cost Unit Contribution Margin
Biggs P120 P80 P40
Boggs 80 60 20

Assuming that last year’s fixed costs totalled P910,000, what was Solar Company’s composite
break-even point?
a. 34,125 b. 27,302 c. 11,375 d. 9,101

- End -

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