Managerial Accounting 2(fr. cpar) 1.
Moon Company has a variable selling cost. If sales volume increases, how will the total variable cost an the variable cost per unit behave! "otal "otal #ariable riable Cost Cost #ariable riable Cost Cost per per $nit $nit A. Increase Increase B. Increase Remain constant C. Increase %ecrease %. &emain constant %ecrease
2.
A company observe a ecrease in the cost per unit. All other things being e'ual, which of the following is probably true! A. "he "he comp company any is stuy stuyin ing g a var varia iabl blee cost cost,, an an tota totall vol volum umee has has inc incre reas ase e.. . "he "he comp company any is stuy stuyin ing g a var varia iabl blee cost cost,, an an tota totall vol volum umee has has ecr ecreas ease e.. C. The compa company ny is study studyin ing g a fixed fixed cost, cost, and total total volu volume me has has inc incre rease ased. d. %. "he "he comp company any is stuy stuyin ing g a fi fie e cos cost, t, an tota totall vol volum umee has has ecre ecreas ase e..
*.
May Co. has the following bugete costs t its anticipate prouction level (epresse in hours)+ variable overhea, 1-,/ fie overhea, 20,. If May now revises its anticipate prouction slightly ownwar, it woul epect+ A. tota totall fie fie over overhea hea of 20 20, , an a lowe lowerr hour hourly ly rat ratee for for vari variab able le over overhe hea. a. B. total total fixed fixed overh overhea ead d of of P24 P24, , and and the the sam samee hou hourly rly rate rate for varia varia!le !le overhead. C. tota totall fie fie over overhea hea of 20 20, , an a high higher er hou hourl rly y rate rate for for var varia iabl blee over overhea hea. . %. total total variab variable le over overhea hea of less less than than 1-, 1-, an a lowe lowerr hourl hourly y rate rate for variab variable le overhea. 0.
A. B.
A review of atty Corporations accounting recors foun that a volume of , units, the #ariable #ariable an fie cost per unit amounte amoun te to 3 an 0, respectively. 4n the basis of this information, what amount of total cost woul atty an ticipate at a volume of 3-, units! 1,2, C. 1,5, %. 1,3, P",4,
-.
6igh, Inc., uses the high7low metho to analy8e cost behavior. "he company observe that at 12, machine hours h ours of activity, total total maintenance costs average 9 per hour. :hen activity ;umpe to 1-, machine hours, which was still within the relevant range, the average cost per machine hour totale 5.0. 4n the basis of this information, the variable cost per machine hour was+ w as+ C. 5.9 #. P4. . 5.0 %. 9.
5.
Cost behavior analysis focuses on A. how how co cost react to cha chan nges in in pr profit . how costs change over time C. ho$ ho$ cos costs ts reac reactt to to cha chang nges es in acti activi vity ty leve levell
%.
none of these
9.
"he cost estimation metho that gives the most mathematically precise cost preiction e'uation is A. the high7low metho C. the scatter7iagram metho %. regression analysis . the contribution margin metho
3.
A cost is variable if it varies with the A. number of units manufacture B. level of some activity
C. %.
number of units sol selling price of the prouct
.
Ientifying cost rivers A. is not necessary with regression analysis B. is an important part of cost management C. is the same as ientifying cost pools %. is useful only with step7variable costs.
1.
%irect costs are #. associated $ith a specific activity . usually committe C. always variable %. usually iscretionary.
11.
:hich cost is most li
12.
reaie costs are nonlinear.
1*.
Cost7volume7profit analysis is most important for the etermination of the A. #olume of operation necessary to brea<7even. B. Relationship !et$een revenues and costs at various levels of operations. C. #ariable revenues necessary to e'ual fie costs. %. =ales revenue necessary to e'ual variable costs.
10.
"he contribution margin ratio always increase when A. rea<7even point ecreases. . rea<7even point increases. C. #ariable cost as a percentage of net sales increases.
%.
'aria!le cost as a percentage of net sales decreases.
1-.
"he brea<7even point in units increases when unit costs #. Increase and sales price remains unchanged. . %ecrease an sales price remains unchange. C. &emain unchange an sales price increases. %. Increase an sales price increases.
15.
"he percentage change in earnings before interest an taes associate with the percentage change in sales volume is the egree of C. reainancial leverage %. Combine leverage
19.
=un Company breaie costs are 12, . "he selling price per unit is 0 C. Profit at sales of P), $ould !e P), %. Contribution margin is 1? of sales If a company is operating at a loss, A. fie costs are greater than sales. . selling price is lower than variable cost per unit. C. selling price is less than average total cost per unit. %. fie cost per unit is greater than variable cost per unit.
13.
1. As volume increases, average cost per unit A. increases . remains constant C. decreases %. increases in proportion to the change in volume. 2.
If variable cost as a percentage of sales increases, the A. contribution margin percentage increases. B. !rea*+even point in pesos increases. C. selling price increases. %. fie costs ecrease.
21.
If a company raises its target peso profit, its A. brea<7even point rises . fie cost increase C. re&uired total contri!ution margin increases %. selling price rises.
22.
=unrise Corporation woul liie costs for this prouct are 1,, for les than -, units of output an 1,-, for -, or more units of output. "he contribution margin percentage is
2?. 6ow many units of this prouct must be sol to earn a target operating income of 1 million! A. 9-0, C. 32-,-* %. 93-,*2 B. --,--4 2*.
An organi8ations sales revenue is epecte to be 92,5, a 1? increase over last year. >or the same perio, total fie costs of 22, are epecte to be the same as last year. If the number of units sol is epecte to increase by 1,1, the marginal revenue per unit will be A. 0 C. 2 %. 05 B. P
20.
@ast year, the contribution margin ratio of $puan Company was *?. "his year, fie costs are epecte to be 12,, the same as last year, an sales are forecaste at --,, a 1? increase over last year. >or the company to increase income b y 1-, in the coming year, the contribution margin ratio must be A. 2? C. 0? %. 9? B. -/
2-.
Cost7volume7profit (C#) analysis is a
25.
>or a profitable company, the amount by which sales can ecline before losses occur is
29.
Cost of capital is A. "he amount the company must pay for its plant assets. . "he iviens a company must pay on its e'uity securities. C. The cost the company must incur to o!tain its capital resources. %. "he cost the company is charge by investment ban
23. "he theory unerlying the cost of capital is primarily concerne with the cost of A. @ong7term funs an ol funs. . =hort7term funs an new funs. C. 1ong+term funds and ne$ funds. %. Any combination of ol or new, short7term or long7term funs. 2.
"he overall cost of capital is the #. Rate of return on assets that covers the costs associated $ith the funds employed. . Average rate of return a firm earns on its assets. C. Minimum rate a firm must earn on high7ris< pro;ects. %. Cost of the firms e'uity capital at which the mar
An investor uses the capital asset pricing moel (CAM) to evaluate the ris<7return relationship on a portfolio of stoc
*1.
Accoring to the capital asset pricing moel (CAM), the relevant ris< of a security is its A. Company7specific ris< . %iversifiable ris< C. ystematic ris* %. "otal ris<
*2.
A company has mae the ecision to finance net years capital pro;ects through ebt rather than aitional e'uity. "he benchmar< cost of capital for these pro;ects shoul be A. "he before7ta cost of new7ebt financing. . "he after7ta cost of new7ebt financing C. "he cost of e'uity financing %. The $eighted+average cost of capital.
**.
A capital investment ecision is essentially a ecision to+ A. change current assets for current liabilities. B. 0xchange current cash outflo$s for the promise of receiving future cash inflo$s. C. change current cash flow from operating activities for future cash inflows from investing activities. %. change current cash inflows for future cash outflows.
*0.
In aition to incremental revenues, cash inflows form capital investments can be generate from all of the following sources ecep t+ #. %e!t financing
. C. %.
=alvage value Cost savings &euction in the amount of wor
*-.
An optimal buget is etermine by the point where the marginal cost of capital is A. Minimi8e. . 'ual to the average cost of capital. C. 'ual to the rate return on total assets. %. 0&ual to the marginal rate of return on investment.
*5.
"he paybac< metho assumes that all cash inflows are reinveste to yiel return e'ual to A. "he iscount rate. . "he hurle rate. C. "he internal rate of return. %. 3ero.
*9. "he bailout paybac< perio is A. "he paybac< perio use by firms with government insure loans. B. The length of time for pay!ac* using cash flo$s plus the salvage value to recover the original investment. C. (A) an () %. Bone of the above. *3. An avantage of the net present value metho over the internal rate of return moel in iscounte cash flow analysis is that the net present value metho A. Computes a esire rate of return for capital pro;ects. B. Can !e used $hen there is no constant rate of return re&uired for each year of the proect. C. $ses a iscount rate that e'uates the iscounte cash inflows with the outflows. %. $ses iscounte cash flows whereas the internal rate return moel oes not. *.
"he relationship between paybac< perio an I&& is that A. A paybac< perio less than one7half the life of a pro;ect. B. The pay!ac* period is the present value factor for the IRR. C. A pro;ect whose paybac< perio oes not meet the companys cutoff rate for paybac< will not meet the companys criterion for I&&. %. Bone of the above.
0.
Cost of capital is A. "he amount the company must pay for the plant assets. . "he iviens a company must pay on its e'uity securities. C. The cost the company must incur to o!tain its capital resources. %. "he cost the company is charge by investment ban
01.
"he techni'ue most concerne with li'uiity is
#. . C. %.
Pay!ac* B# I&& oo< rate of return
02.
If the I&& on an investment is 8ero, A. Its B# is positive B. Its annual cash flo$s e&ual its re&uired investment. C. Its generally a wise investment. %. Its cash flows ecrease over its life.
0*.
low Company investe 13, in a new machine. "he machine will generate cash flows before taes at year7en of ,, 3, , 9, for the net three years. "he company uses a 1- percent cost of capital. :hat is the net present value of purchasing the machine! A. 2-,325 . ,2* C 5, %. P4,55
00.
'uipment will be purchase at cost of 2-,. It will have no salvage value. "he cash flows are epecte to be+ *9,, 03,, 5-,, 91,, 9*,, an -*, over the life of the e'uipment. :hat is the paybac< perio! A. *.0* years B. 4.4 years C. -.2- years %. 5. years
0-.
An asset was purchase for 55,. "he asset is epecte to last for 5 years an will have a salvage value of 15,. "he company epects the income before ta to be 9,2 an the ta rate of the company is *?. :hat is the average return on investment (accounting rate of return)! A. 19.5? . 9.5? C. 1.? %. "2.-/
05.
Mayen investe 1,-*,3** in a 97year pro;ect that generates *-, per year. :hat is the Internal &ate of &eturn associate with this pro;ect! A. 15? . -? C. /
%.
9?
09. am Co. is reviewing the following ata relating to an energy saving investment proposal+ Cost -, &esiual value at the en of - years 1, resent value of an annuity of at 12? for - years *.5 resent value of 1 ue in - years at 12? .-9 :hat woul be the annual savings neee to ma
*.0-? 2.0? "-./ 1-.03?
0.
:in Company purchase a new machine on Danuary 1 of this year for , , with an estimate useful life of - years an a salvage value of 1, . "he machine will be epreciate using the straight7line metho. "he machine is epecte to prouce cash flow from operations, net of income taes, of *5, a year in each of the net - years. "he new machines salvage value is 2, in years 1 an 2, an 1-, in years * an 0. :hat will be the bailout perio (roune) for the new machine! A. 1.0 years. . 2.2 years. C. ".6 years. %. *.0 years.
-.
A new machine that costs 192,1 is epecte to save annual cash operating costs of 0, over each of the net nine years. "he machines rate of return is+ A. Approimately 10? B. #pproximately "/ C. Approimately 15? %. Approimately 2?
-1.
Matthew Company ha bugete -, units of output using -, units of raw materials at a total material cost of 1,. Actual output was -, un its of prouct,
re'uiring 0-, units of raw materials at a co st of 2.1 per unit. "he irect material price variance was #. . C. %.
-2.
$sing the same information in Bo. 10 , the material usage variance was #. . C. %.
-*.
P4,) unfavora!le -, favorable -, unfavorable 1, favorable
P", favora!le 1,- unfavorable 1,- favorable 0,- unfavorable
%uring March, Eoly Companys irect material costs for the manufacture of rouct " were as follows+ Actual unit purchase price =tanar 'uantity allowe for actual prouction Fuantity purchase an use for actual prouction =tanar unit price
5.- 2,1 2,* 5.2-
Eolys material usage variance for March was #. . C. %.
-0.
P",2) unfavora!le 1,2- favorable 1,* unfavorable 1,* favorable
Information on Gim Companys irect material costs is as follows+ =tanar unit price Actual 'uantity purchase =tanar 'uantity allowe for actual prouction Materials purchase price variance H favorable
*.5 1,5 1,0- 20
:hat was the actual purchase price per unit, roune to the nearest centavo! A. *.5 . *.11 C. P-.4) %. *.9--.
Information on Mar< Companys irect labor costs for the month of Danuary is as follows+
Actual irect labor hours =tanar irect labor hours "otal irect labor hours %irect labor efficiency variance H favorable
*0,- *-, 201,- *,2
:hat is Mar<s irect labor rate variance! A. 19,2- unfavorable B. P2,5 unfavora!le C. 21, unfavorable %. 21, favorable -5.
"he irect labor stanars for proucing a unit of a prouct are two hours at 1 per hour. ugete prouction was 1, units. Actual prouction was units an irect labor cost was 1, for 2, irect labor hours. "he irect labor efficiency variance was A. 1, favorable . 1, unfavorable C. 2, favorable %. P2, unfavora!le
-9.
ia Company uses a stanar cost system. "he following information pertains to irect labor for prouct for the month of 4ctober+ =tanar hours allowe for actual prouction Actual rate pai per hour =tanar rate per hour @abor efficiency variance
2, 3.0 3. 1,5 $
:hat were the actual hours wor
ron8e Companys recors for April isclose the following ata relating to irect labor+ Actual cost &ate variance fficiency variance =tanar cost
1, 1, favorable 1,- unfavorable ,-
Actual irect labor hours for April amounte to 2,. ron8es stanar irect labor rate per hour was #. P).) . -.
C. %.
0.90.-
-.
6appy Manufacturing Co. has an epecte prouction level of 19-, prouct units for 2. >ie factory overhea is 0-, an the company applies factory overhea on the basis of epecte prouction level at the rate of -.2 per unit. "he variable overhea cost per unit is A. 2.-9 B. P2.C. 2.* %. *.2
5.
Morris Co. normally uses 0, irect labor hours for manufacturing 12, units f prouct. "hree units are prouce in one hour, an the irect labor rate is 1- per hour. At normal capacity of 0, hours, the factory overhea is estimate as follows+ >ie overhea #ariable overhea "otal overhea
1, 12, 22,
If *, irect labor hours are use, total factory overhea costs woul amount to+ A. 15-, B. P"6, C. 1-, %. 22, 51.
"he following irect manufacturing labor information pertains to the manufacture of prouct + "ime re'uire to ma
2 irect labor hours - 0 - 2? of wages
:hat is the stanar irect manufacturing labor cost per unit of prouct ! #. P- . 20 C. %. 52.
112
=unrise, Inc. uses a stanar cost system. 4verhea cost information for rouction for the month of 4ctober is as follows+ "otal actual overhea incurre >ie overhea bugete
12,5 *,*
5*.
"otal stanar overhea rate per %@6 0 #ariable overhea rate per %@6 * =tanar hours allowe for actual prouction *,- :hat is the overall or net overhea variance! A. 1,2 favorable . 1,2 unfavorable C. P",4 favora!le % 1,0 unfavorable aul Company uses a fleible buget system an prepare the following information for the year+ ercent of capacity %irect labor hours #ariable factory overhea >ie factory overhea "otal factory overhea rate per %@6
3? 20, 03, 13, 5.-
? 29, -0, 13, 5.
aul operate at 3? of capacity uring the year, but applie factory overhea base on the ? capacity level. Assuming that actual factory overhea was e'ual to the bugete amount for the attaine capacity, what is the amount of overhea variance for the yea r! A. 5, overabsorbe . 5, unerabsorbe C. 12, overabsorbe %. P"2, undera!sor!ed 50.
%oris rocessing applie factory overhea base on machine hours at the following rates per machine hour+ Miing, 9.9-/ :ashing, 1-.1/ an, ac
5-.
"he following were among the @ay Cos 2 costs+ Bormal spoilage >reight out cess of actual manufacturing costs over stanar cost =tanar manufacturing costs Actual prime manufacturing costs @ays 2 actual manufacturing overhea was+
-, 1, 2, 1, 3,
#. . C. %.
55.
ey Inc. has maintenance shop where repairs to its motor vehicles are one. %uring last months labor stri
59.
P 4, 0-, --, 12,
29.2 P2. *.2*1.0
per hour per hour per hour per hour
Information on %owntown Companys irect labor costs for May is as follow+ =tanar irect labor rate Actual irect labor rate =tanar irect labor hours Actual irect labor hours %irect labor rate variance H favorable
5. -.3 2, 21, 0,2
:hat is %owntowns total irect labor payroll for Ma y! A. 115, . 119,5 C. 12, %. P"2", 53.
Information on :eng Companys irect labor costs is as follows+ =tanar irect labor hours =tanar irect labor rate Actual irect labor rate %irect labor usage (efficiency) variance H unfavorable :hat were the actual hours wor
1, *.9*.- 0,2
5.
$sing the following information+ Actual irect labor hours use $nits prouce =tanar labor hours per unit prouce ugete variable overhea per stanar irect labor hour Actual variable overhea incurre
0,9 1,- * 2 ,-
"he variable overhea efficiency variance is A. 0 favorable . * favorable C. 1 unfavorable %. P4 unfavora!le 9.
$sing the same information in Bo. 25, the variable overhea spening variance is A. 0 favorable . 0 unfavorable C. 1 favorable %. P" unfavora!le
91.
$sing the information presente below, the total overhea spening variance. ugete fie overhea =tanar variable overhea (2 %@6 at 2 per %@6) Actual fie overhea Actual variable overhea ugete volume (-, units 2 %@6) Actual irect labor hours (%@6) $nits prouce
1, 0 per unit 1,* 1,- 1, %@6 ,- 0,-
"he total overhea spening variance is A. - unfavorable B. P unfavora!le C. 1, unfavorable %. 1,* unfavorable 92.
ay Company uses a stanar costing system in connection with the manufacture of a Jone7si8e fits allK article of clothing. ach unit of finishe p rouct contains 2 yars of irect material. 6owever, a 2? irect material spoilage calculate on input 'ua ntities occurs uring the manufacturing process. "he cost of the irect material is * per yar. "he stanar irect material cost per unit of finishe prouct is+ A. 0.3 . 5. C. 9.2 %. P5.)
9*.
%agupan Company ha total unerapplie overhea of 1-,. Aitional ata+ #ariable 4verhea+ Applie base on stanar %@6 allowe ugete base on stanar %@6 >ie 4verhea+ Applie base on stanar %@6 allowe ugete base on stanar %@6
02, *3, *, 29,
:hat is the actual total overhea! A -, . -9, C. 3, %. P5, 90.
alvan Company uses a stanar cot accounting system. "he following overhea costs an prouction ata are available for August+ =tanar fie overhea rate per %@6 =tanar variable overhea rate per %@6 ugete monthly %@6 Actual %@6 wor
1 0 0, *,- *, 2,
"he applie factory overhea for August shoul be #. P"6), . 19, C. 19,- %. 1,- 9-.
Ilocos Company has a stanar absorption an fleible bugeting system an uses a two7 way analysis of overhea variances. =electe ata for the >ebruary prouction activity are+ ugete fie factory overhea costs Actual factory overhea incurre #ariable factory overhea rate per %@6 =tanar %@6 Actual %@6
"he buget(controllable) variance for >ebruary is A. 1, favorable . 1, unfavorable
50, 2*, *2, *2,
C. %. 95.
5, favorable P, unfavora!le
@ingayen Corporations master buget calls for the prouction of -, units of prouct monthly. "he master buget inclues inirect labor of 100, annually. @ingayen consiers inirect labor to be a variable cost. %uring the moth of April, 0,- units of prouct were prouce, an inirect labor costs of 1,1 were incurre. A performance report utili8ing fleible bugeting woul report a buget variance for inirect labor of A. 1, unfavorable B. P 5 favora!le C. 1, favorable %. 9 unfavorable
99.
Information on :oo Companys overhea costs for the Danuary prouction activity is as follows+ ugete fie overhea =tanar fie overhea rate per %@6 =tanar variable overhea rate per %@6 =tanar %@6 allowe for actual prouction Actual total overhea incurre
9-, * 5 20, 22,
:oo Company has a stanar absorption an fleible bugeting system, an uses the two7variance metho (two7way analysis ) for overhea variances. "he volume (enominator) variance for Danuary is #. P-, unfavora!le . *, favorable C. 0, unfavorable %. 0, favorable
