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THEORY B. Statements 1, 3, and 4 only. D. All five statements.

Budgeting concepts
1. Which of the following objectives is not a primary purpose of preparing a budget? 6. These statements are proper to the budgeting process except:
A. To make sure the company expands its operations. A. It is a tool to orchestrate the various functions of operations in a business.
B. To control income and expenditure in a given period. B. It is a part of management’s responsibility to plan the use of its resources.
C. To provide a basis for comparison of actual performance C. Actual results need not be compared with plan, since the process ends after
D. To communicate the company’s plans throughout the entire business budget is approved.
organization D. The involvement of the various levels of individuals in the company is
necessary to gain its acceptance and attain its goals.
2. For better management acceptance, the flow of data to be used for budgeting
should begin with 7. In budgeting, which of the following statements is false?
A. Accounting department C. Lower levels of management A. Planning and control are the essential features of the budgeting process
B. Budget committee D. Top management B. Capital expenditures budget shows the availability of idle cash for investment
C. Budgeting provides a measuring device to which subsequent performances
3. Ineffective budgets and/or control systems are characterized by the use of
are compared and evaluated.
A. budgets for motivation.
D. Budget preparation is not the sole responsibility of any one department and is
B. budgets for coordination.
prepared by combining the efforts of many individuals
C. the budget for communication.
D. budgets as a planning tool only and disregarding them for control purposes.
Budget methodologies
4. Budget slack is a condition in which 8. A budget that includes a 12-month planning period at all times is called a
A. demand is low at various times of the year. __________ budget.
B. managers grant favored employees extra time off. A. continuous C. master
C. excess machine capacity exists in some areas of the plant. B. flexible D. pro forma
D. there is an intentional overestimate of expenses or an underestimate of
revenues. 9. Budgeting expenditures by purpose is called
A. Flexible budgeting. C. Program budgeting.
5. Which of these statements are advantages of profit planning? B. Line budgeting. D. Zero-based budgeting.
1. Develops profit-mindedness, encourages cost consciousness and resources
utilization throughout the company. 10. A budget that identifies revenues and costs with an individual controlling their
2. Provides vehicle to communicate objectives, gain support for the plan, of incurrence is
what is expected, thereby developing a sense of commitment to achieve A. Master budget C. Responsibility budget
established goals. B. Product budget D. None of the above
3. Provides yardstick to evaluate actual performance; encouraging efficiency, 11. The procedure for setting profit objectives in which management specifies a given
increasing output and reducing cost. rate of return that it seeks to realize in the long run by means of planning toward
4. Provides a sense of direction for the company and enhances coordination of that end is the:
business activity. A. a posteriori method D. pragmatic method
5. Eliminates or takes over the role of administration by providing detailed B. a priori method E. theoretical method
information that allows executives to operate toward achievement of the C. ad hoc method
organization’s objectives.
A. Statements 1, 2, 3, and 4 only. C. Statements 3, 4, and 5 only.
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12. Activity-based budgeting includes all the following steps EXCEPT 17. Considering budgeting concepts and principles, which of the following statements
A. computing the cost of performing activities. is not applicable?
B. determining a separate cost-driver rate for each department. A. The flexible budget is often used as a basis for preparing the pre-determined
C. determining demands for activities from sales and production targets. overhead rate.
D. describing the budget as costs of activities rather than costs of functions. B. A flexible budget is geared toward a range of activity rather than toward a
single level of activity.
13. Just-in-time manufacturers are more likely than conventional manufacturers to C. Although it is effective in measuring production control, a static budget is not
A. Experience cash shortages. effective in measuring cost control.
B. Prepare production budgets without a sales forecast. D. The only difference between a flexible budget and a static budget is that a
C. Budget materials purchases equal to the current month’s needs for flexible budget does not contain fixed costs.
production.
D. Budget unit production for the month at greater than budgeted unit sales for Annual profit plan & supporting schedules
the month. 18. For a company that does not have resource limitations in what sequence would
the budgets be prepared?
14. A systematized approach known as zero-based budgeting (ZBB) 1. cash budget 4. production budgets
A. Commences with the current level of spending. 2. sales budget 5. purchase budgets
B. Presents planned activities for a period of time but does not present a firm 3. inventory budgets
commitment. A. sequence 2, 3, 4,1 and 5 C. sequence 2, 4, 3, 5 and 1
C. Divides the activities of individual responsibility centers into a series of B. sequence 2, 3, 4, 5 and 1 D. sequence 4, 3, 2, 1 and 5
packages that are prioritized.
D. Classifies the budget by the prior year’s activity and estimates the benefits 19. A budget that is expressed in units of materials, number of employees, or number
arising from each activity. of man-hours or service units rather than in pesos is known as
A. Physical budget C. Progressive budget
15. This budgeting system places the burden of proof on the manager to justify B. Planning budget D. Traditional budget
authority to spend any money whether or not there was spending in the previous
period. Different ways of performing the same activity and different levels of effort 20. Which of the following is LEAST likely to be affected if unit sales for this month
for the activity is evaluated. This system is called are lower than budgeted?
A. Budgeting by alternatives. C. Scenario budgeting. A. Cash receipts for next month. C. Production for next month.
B. Budgeting by responsibility and authority. D. Zero-based budgeting. B. Inventory at the end of this month. D. Production for this month.

16. In zero-based budgeting, which of the following statements are True? 21. If a company has a policy of maintaining an inventory of finished goods at a
1. All activities in the company are organized into break-up units called specified percentage of the next month's budgeted sales, budgeted production for
packages. January will exceed budgeted sales for January when budgeted
2. All costs have to be justified every budgeting period. A. January sales exceed budgeted February sales.
3. The process is not time consuming since justification of costs can be done as B. February sales exceed budgeted January sales.
a routine matter. C. January sales exceed budgeted December sales.
A. Statement 1 only. C. Statement 2 and 3 only. D. December sales exceed budgeted January sales.
B. Statements 1 and 2 only. D. All three statements.
22. A company that maintains a raw material inventory, which is based on the

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following month's production needs, will purchase less material than it uses in a B. Cash balance will increase. D. The company will show a profit.
month where
A. sales exceed production. 28. The cash budget for 20x2 would be affected in some way by all of the following
B. production exceeds sales. EXCEPT
C. planned production exceeds the next month's planned production. A. The sales forecast for the first month in 20x3.
D. planned production is less than the next month's planned production. B. A cash dividend declared in 20x1 for payment in 20x2.
C. A cash dividend declared in 20x2 for payment in 20x3.
23. Which of the following is most likely to result if X’s managers decide to reduce D. Interest expense on loans taken out and repaid during 20x2.
inventory to alleviate a cash deficiency shown in its initial cash budget?
A. A lowering of X’s credit rating. 29. Net cash inflow is given too much emphasis by managers today, for they know
B. A decrease in X’s budgeted purchases. that cash is the common cause of business failures. Net cash inflow is equal to
C. A decrease in X’s cost-of-sales percentage. A. Cash balance at the beginning + cash receipts – cash disbursements
D. A longer collection period for X’s credit sales. B. Cash received during the period minus cash disbursements during the period
C. Cash balance at the end of last month + cash from all sources of revenue –
24. A company has prepared a cash budget for January through June of 20x3. Which revenue payments
of the following, discovered in February 20x3, is LEAST likely to require revising D. Cash sales and collections of accounts receivable minus revenue and capital
the cash budget? expenditures
A. February sales are lower than budgeted.
B. The company changed inventory methods from LIFO to FIFO.
C. The interest rate on short-term borrowing is higher than budgeted. 30. Information not shown in the cash budget but needed in the preparation of the
D. The company increased from 10% to 20% the down payment it requires from statement of operations for the period
customers. A. Dividends C. Sales
25. Which of the following is not a functional budget? B. Inventory levels D. Tax Payments
A. Cash budget C. Purchasing budget
B. Direct labor cost D. Research and development budget 31. A financing gap occurs when
A. Required assets exceed available equities.
26. By the end of this year you expect to have a cash balance of P500,000. Which of B. Budgeted cash receipts are less than budgeted cash disbursements.
these transactions/indicators (not considered in your estimate) will reduce this C. The budgeted cash balance goes below the minimum required balance.
balance? D. Any of the above occurs.
A. A modification on credit terms to customers will reduce credit sales.
B. The ratio of current trade receivables to total receivables will decrease. 32. Which of the following statements about budgeted financial statements is
C. A dialogue with key suppliers will allow discounts on extended payment incorrect?
terms. A. The budgeted income statement is developed from the budgeted for the
D. A new machine will be bought with proceeds from a bank loan that will carry current year.
a 17% interest per annum and monthly payments over 2 years. B. The budgeted balance sheet is developed entirely from the budgets for the
current year.
27. If cash receipts from customers are greater than sales, which of the following is C. Once established, the budgeted income statement provides the basis for
most likely to be true? evaluating company performance.
A. Accounts receivable will decrease. C. Outstanding debt will decrease. D. Cost of goods sold is determined by multiplying the budgeted unit sales by

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the budgeted total unit production cost. Two parts units are needed for each product unit. Aside from the new products, there
is also a replacement parts market. Over the past three years, the company has sold
Comprehensive the following number of replacement parts:
33. On budgeting, all of the following are not valid, except 1982 300,000
A. A sales budget and a sales forecast are the same thing. 1983 330,000
B. Responsibility budget identifies revenue and costs with the individual 1984 363,000
responsible for their incurrence. This trend is expected to continue. The parts are sold for P4 per piece in the new
C. The primary purpose of the cash budget is to show the expected cash products market and P4.50 in the replacement parts market.
balance at the end of the budget period.
D. The best way to establish budget figures is to use last year’s actual cost and 2. The estimated number of parts to be sold by Sta. Barbara in 1985 is
activity data as this year’s budget estimates. A. 2,399,300 C. 4,399,300
B. 4,000,000 D. 4,435,600
34. Which of the following statements is True?
A. Budget data are generally prepared by top management and distributed 3. The amount of expected revenue based on the estimated number of parts to be
downward in an organization. sold in 1985 is
B. The budget committee is responsible for preparing detailed budget figures in A. P9,796,850 C. P17,597,200
an organization. B. P16,000,000 D. P17,796,850
C. The primary purpose of the cash budget is to show the expected cash
balance at the end of the budget period. Production budget
D. Under zero-based budgeting, a manager is required to start at zero budget 4. Beatless Corp, plans to sell 200,000 units of Let-It-Be product in July and
levels each period, as if the programs involved were being initiated for the anticipate a growth in sales of 5% per month. The target ending inventory in units
first time. of the product is 80% of the next month’s estimated sales. There are 150,000
units in inventory as of the end of June. The production requirement in units of
PROBLEMS Let-It-Be for the quarter ending September 30 would be
Sales budget A. 665,720 C. 675,925
1. Budgeted sales for the first six months of 2001 for Henry Corp. are listed below: B. 670,560 D. 691,525
Jan Feb Mar Apr May June
UNITS 6,000 7,000 8,000 7,000 5,000 4,00 5. Each unit of product ZIM takes five direct labor hours to make. Quality standards
: 0 are high and 8% of units produced are normally rejected due to substandard
Henry Corp. has a policy of maintaining an inventory of finished goods equal to 40 quality. Next month’s budgets are as follows:
percent of the next month's budgeted sales. If Henry Corp. plans to produce Beginning inventory of finished goods 3,000 units
6,000 units in June, what are budgeted sales for July? Planned ending inventory of finished goods 7,600 units
A. 1,000 units C. 8,000 units Budgeted sales of ZIM 36,800 units
B. 3,600 units D. 9,000 units All stocks of finished goods must have successfully passed the quality control
check. What is the direct labor budget for the month?
Questions 5 and 6 are based on the following information. A. 198,720 hours C. 223,500 hours
Sta. Barbara is one of the manufacturers of a part used in the production of a popular B. 200,000 hours D. 225,000 hours
consumer product. Sales of the consumer product in 1985 are estimated at 5,000,000
units. Sta. Barbara regularly supplies 40% of the parts used in the new products. 6. Tropical Manufacturing Corporation is using the following flexible-budget formula

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for annual indirect labor cost: Total cost = P12,000 + P0.75 per machine hour. 9. Mien Co. is budgeting sales of 53,000 units of product Nous for October 2000.
For the month of June, the operating budgets are based upon 10,000 hours of The manufacture of one unit of Nous requires 4 kilos of chemical Loire. During
planned machine time. Indirect labor costs included in this planning budget are October 1998, Mine plans to reduce the inventory of Loire by 50,000 kilos and
A. P7,500 C. P17,500 increase the finished goods inventory of Nous by 6,000 units. There is no Nous
B. P8,500 D. P19,500 work in process inventory. How many kilos of Loire is Mien budgeting to
purchase in October 2000?
Questions 7 and 8 are based on the following information. A. 138,000 C. 186,000
The budget committee of Ferbel Company is preparing its manufacturing budget for B. 162,000 D. 238,000
the year 1983. Initial estimates indicate an annual sales forecast of 40,000 units. The
company shall also need 10,000 units for stock. Economic lot purchases of 1,750 10. Next month’s budgeted sales for TEMP is 18,000 units. Each unit of product
kilos of material A at P8 per kilo and 1,000 liters of material B at P15 per liter are TEMP uses 6 kilograms of raw materials. The production and inventory budgets
required to produce the 50,000 units. for June 1992 are as follows:
Budgeted factory overhead expenses for this production are: Opening Inventory Planned Ending
Fixed factory overhead Inventory
Supervision P4,000 Raw materials 21,000 kgs. 24,400 kgs.
Depreciation P2,300 Finished goods 15,000 units 11,400 units
Insurance P 500 During the production process, it is usually found that 10% of production units are
Variable factory overhead scrapped as defective and this loss occurs after the raw materials have been
Indirect labor P0.50 per direct labor placed in process.
hour What will the raw material purchases be in June?
Indirect supplies P0.008 per unit A. 89,800 kgs. C. 98,440 kgs.
General factory P0.10 per direct labor B. 96,000 kgs. D. 99,400 kgs.
hour
Labor hours and rates for the two operations are 11. GLORIA CORP. has the following budget estimates for its second year of
Operation 1 4,000 hours at P5.00 per operations:
hour Projected sales – P3,500,000
Operation 2 2,000 hours at P4.50 per Projected net income before tax – 12% of sales
hour Estimated selling and administrative expenses – 25% of sales
Direct labor and factory overhead are budgeted at 70% of the total manufacturing
7. Based on the above information, the budgeted total manufacturing costs for cost.
Ferbel Company for the year 1983 would be Inventories are estimated as follows:
A. P51,040 C. P68,800 Raw materials Goods in process Finished
B. P60,800 D. P76,560 goods
Beginnin P220,000 P250,000 P350,000
8. The factory overhead rate based on direct labor hours would be g
A. P0.67 per direct labor hour C. P2.16 per direct labor hour Ending 270,000 300,000 420,000
B. P1.80 per direct labor hour D. P2.70 per direct labor hour The estimated purchases of raw materials would be
A. P697,000 C. P747,500
Raw materials purchases budget B. P732,500 D. P967,500

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P126.00. 75% of total sales are on credit. 1.5% of net sales is provided
Operating expenses budget for doubtful accounts.
12. Cook Co.’s total costs of operating five sales offices last year were $500,000, of 2. Sales discounts are given to various customers at different rates and net
which $70,000 represented fixed costs. Cook has determined that total costs are to gross ratio is at 93%
significantly influenced by the number of sales offices operated. Last year’s costs 3. Mark-up on merchandise is at 45% of invoice cost. Beginning inventory
and number of sales offices can be used as the bases for predicting annual costs. is P80,900 and is expected to be reduced by P15,000 at the end of the
What would be the budgeted cost for the coming year if Cook were to operate period.
seven sales offices? 4. Selling and administrative expenses is expected to be 15% of gross
A. $586,000 C. $672,000 sales.
B. $602,000 D. $700,000 5. Depreciation is computed at P500,000.
13. Karmel, Inc. pays out sales commissions to its sales team in the month the The projected operating income for the year is
company receives cash for payment. These commissions equal 5% of total A. P173,802 C. P252,741
(monthly) cash inflows as a result of sales. Karmel has budgeted sales of B. P252,341 D. P296,841
$300,000 for August, $400,000 for September, and $200,000 for October.
Approximately, half of all sales are on credit, and the other half are all cash sales. Cash budget
Experience indicates that 70% of the budgeted credit sales will be collected in the 16. Pera Inc. prepared the following sales budget
month following the sale, 20% the month after that, and 10% of the sales will be Month Cash Sales Credit Sales
uncollectible. Based on this information, what should be the total amount of sales February P 80,000 P 340,000
commissions paid out by Karmel in the month of October? March 100,000 400,000
A. $8,500 C. $17,000 April 90,000 370,000
B. $13,500 D. $22,000 May 120,000 460,000
June 110,000 380,000
14. Budji Corp. is preparing its budget for 19B. For 19A, the following were reported: Collections are 40% in the month of sale, 45% in the month following the sale,
Sales (100,000 units) P1,000,000 and 10% two months following the sale. The remaining 5% is expected to be
Cost of Goods Sold 600,000 uncollectible. The company’s total budgeted collection from April to June
Gross Profit P 400,000 amounts to
Operating Expenses (including depreciation of 240,000 A. P1,090,250 C. P1,397,500
P40,000) B. P1,325,500 D. P1,468,500
Net Income P 160,000
Selling prices will increase by 10% and sales volume in units will decrease by 5%. 17. The following historical pattern on its credit sales of Rainy Co. was presented:
The cost of goods sold as a percent of sales will increase to 62%. Other than 70% collection during the month of sale.
depreciation, all operating costs are variable. Budji will budget a net income for 15% in the first month after sale.
19B of 10% in the second month after sale.
A. P167,100 C. P168,000 4% in the third month after sale.
B. P167,500 D. P176,000 1% uncollectible.
The sales on account of the last six months of the year were reported as follows:
15. It is budgeting time for Del Co. The following assumptions were agreed upon for July P120,000
the next year after a strategic planning session which covered a five-year horizon August 140,000
1. Sales is estimated to be at 70,000 units at its national selling price of September 160,000

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October 180,000 inventory will be increased in December in anticipation of higher sales volume for
November 200,000 Christmas. The increase will be about P100,000. Amounts payable to trade
December 170,000 creditors will also increase by P25,000. Estimate of payment to be made during
The total cash collections during the fourth calendar quarter from sales made on the month of December for merchandise is
account during the fourth calendar quarter would be A. P100,000 C. P250,000
A. P345,000 C. P502,800 B. P150,000 D. P300,000
B. P460,000 D. P550,000
22. JLT Corporation expects to sell 150,000 units during the first quarter of 1998, with
18. MNO Corporation has a P35,000 balance of account receivable at the beginning an ending inventory for the quarter of 20,000 units. Variable manufacturing costs
of its budget period. It has budgeted P160,000 credit sales and expects to collect are budgeted at P50 per unit, with 70% of total variable manufacturing costs
70% of these during the budget period. requiring cash payments during the quarter. Fixed manufacturing costs are
What is the ending balance of accounts receivable assuming that all but 10% of budgeted at P120,000 per quarter, 40% of which are expected to require cash
the beginning balance is collected during the budget period. payment during the quarter.
A. $3,560 C. P71,500 In the cash budget, payments for manufacturing costs during the quarter will total
B. P51,500 D. P143,500 A. P5,298,000 C. P5,998,000
B. P5,950,000 D. P8,500,000
19. In preparing its cash budget for July, 19x7, Art Company made the following
projections 23. Harrison Company has budgeted its operations for August. No change in the
Sales P1,500,000 inventory level during the month is planned. Selected data based on estimated
Gross Profit 25% amounts are as follows:
Decrease in inventories P 70,000 Net loss $(120,000)
Decrease in accounts payable for inventories 120,000 Increase in accounts payable 48,000
For July, 19X7, what were the estimated cash disbursement for inventories? Depreciation expense 42,000
A. P 935,000. C. P1,055,000. Decrease in gross amounts of trade account receivables 72,000
B. P1,050,000. D. P1,175,000. Purchase of equipment on 90-day credit terms 18,000
Provision for estimated warranty liability 12,000
20. The January 1983 budget of Balagtas Company is being prepared by the budget What is the expected change in the cash position during August?
officer of the company. In the preparation of the cash budget the estimates for A. $18,000 decrease. C. $36,000 increase.
the month of January, 1983 include the following: B. $30,000 decrease. D. $54,000 increase.
Sales P937,500
Gross profit (based on sales) 25% 24. The following information was extracted from the May Cash Budget of Hair Stars,
Increase in inventories P75,000 a groom pad for men and women:
Decrease in trade accounts payable P30,000 Budget of Hair Stars, a groom pad for men and women:
The estimated cash disbursements for inventories in January, 1983 is Excess of cash available over disbursements P 800
A. P598,125 C. P748,125 Cash balance, May 1 10,100
B. P733,125 D. P808,125 Total cash disbursement for May 32,500
The business can only borrow money in round figures of P1,000 amounts. If the
21. Sta. Elena Merchandising Company plans to sell in December 15,000 units of its business is required to maintain a minimum cash balance of P10,000, how much
product at a unit price of P20. The estimated gross profit is 25% of sales. The money should be borrowed in May?

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A. P9,200 C. P22,000 Second Quarter Sales Data: Pesos Units

B. P10,000 D. P23,000 April P 530,000 10,600
May 550,000 11,000
25. Digna Company had the following transactions in 19x7, their first year of June 570,000 11,400
operations
Sales (90% collected in 1997) P1,500,000
Bad debts write-offs 60,000 Projected sales for the next four Pesos Units
Disbursements for cost and expenses 1,200,000 months
Disbursement for income taxes 90,000 July 540,000 10,800
Purchase of fixed assets 400,000 August 550,000 11,000
Depreciation of fixed assets 80,000 September 560,000 11,200
Proceeds from issuance of common stock 500,000 October 580,000 11,600
Proceeds from short-term borrowings 100,000 All sales are on charge basis and billed at the end of the month. A 5% discount is
Payments on short-term borrowings 50,000 given on collections within the 15 days from billing date. Sales collections are
What is the cash balance at December 31, 19x7? generally made as follows:
A. P150,000. C. P210,000. 70% within the month following the billing date with 40% of this being collected
B. P170,000 D. P280,000. within the discount period.
27% on the second month following the billing date.
26. In preparing its budget for July, 1997, Joy Company has the following accounts 3% considered uncollectible
receivable information available: Merchandise purchases are generally paid as follows:
Accounts receivable at June 30, 19x7 P350,00 50% within the month they are incurred.
0 50% after the month they are incurred
Estimated credit sales for July P400,00 Ending inventory in units (cost per unit is P40) is 30% higher than the following
0 month’s sales in units. Operating expenses are on cash basis and are estimated to be
Estimated collections in July for credit sales in July and P320,00 15% of the current month’s sales including monthly depreciation of P10,000.
prior months 0 As of June 30, 1988, Accounts Receivable balance was P630,000 and Merchandise
Estimated write-offs in July for uncollectible credit sales P Inventory was P565,000.
16,000
Estimated provision for doubtful accounts for credit sales in P 27. The budgeted cash collections for the month of July would be
July 12,000 A. P391,020 C. P547,500
What is the projected balance of accounts receivable at July 31, 19x7? B. P539,520 D. P556,020
A. P402,000. C. P426,000.
B. P414,000. D. P430,000. 28. The budgeted cash payments of the month of September would be
A. P459,600 C. P518,000
Comprehensive B. P468,800 D. P533,600
Questions 27 thru 30 are based on the following information.
For purposes of preparing the cash projections and other budget estimates for the 29. The projected net income for September would be
third quarter of 1988, the following information is presented to you by the management A. P28,000 C. P112,000
of Virgo Corporation: B. P38,000 D. P122,200

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B. P33,200 D. P83,000
30. The balance of accounts receivable at the end of July, assuming that no
uncollectible accounts are written off for July would be 34. Variable overhead cost per direct labor hour is
A. P613,980 C. P630,480 A. P1.60 C. P4.80
B. P622,500 D. P645,660 B. P1.80 D. P6.40

Questions 31 thru 38 are based on the following information. 35. Fixed overhead cost per direct labor hour is
The following information has been gathered by the Budget Director of the Kareton A. P1.60 C. P4.80
Company, another outfit managed by the Masugid Company. The firm manufactures B. P1.80 D. P6.40
and sells only one product. The selling price during the coming month is expected to
be the prevailing price of P5 per unit. Expected sales during the month is a total of 36. Budgeted contribution margin is
75,000 units of finished goods. Finished goods expected to be on hand at the end of A. P1.80 C. P3.40
the month total 50,000 units. Finished goods expected to be on hand at the beginning B. P2.58 D. P5.00
of he month total 42,000 units.
Direct labor cost is P3.00 per hour. One-fourth an hour of direct labor is required to 37. Budgeted cost of goods sold (full cost) is
manufacture each unit of finished product. A. P76,500 C. P196,500
Factory overhead is applied to work-in-process on the basis of direct labor hours. B. P96,500 D. P304,000
Variable factory expenses at the planned level of operations is expected to amount to
P33,200; fixed overhead is expected to amount to P99,600. 38. Net profit before tax is
The raw materials expected to be on hand at the beginning of the month total 5,000 A. P53,000 C. P178,500
gallons. Only one kind of raw material is used to produce the finished goods. One B. P103,500 D. P249,500
and one-half gallons of raw material are needed to manufacture each unit of finished
product. Raw materials are expected to cost P0.18 per gallon during the coming Theory Problems
month, its prevailing cost. Raw materials expected to be on hand at the end of the 1. A 21. B 1. D 21. D
month total 8,000 gallons. 2. C 22. C 2. C 22. C
Variable administrative and selling expenses is P1.00 per unit. 3. D 23. B 3. D 23. D
In assisting the company to formulate the budget, you determined the following budget 4. D 24. B 4. A 24. B
parameters. 5. A 25. A 5. D 25. C
6. C 26. D 6. B 26. B
31. Budgeted cost of raw materials to be used in production is 7. B 27. A 7. C 27. B
A. P8,910 C. P22,410 8. A 28. C 8. B 28. D
B. P14,940 D. P124,500 9. C 29. B 9. C 29. A
10. C 30. B 10. D 30. C
32. Budgeted raw materials purchases cost is
11. B 31. A 11. C 31. C
A. P22,410 C. P23,760
12. B 32. B 12. C 32. B
B. P22,950 D. P124,500
13. C 33. B 13. B 33. C
33. Budgeted direct labor is 14. C 34. D 14. A 34. A
A. P20,750 C. P62,250 15. D 15. A 35. C
16. B 16. D 36. B
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MANAGEMENT ADVISORY SERVICES HILARIO TAN

17. D 17. B 37. C

18. B 18. B 38. B
19. A 19. D
20. D 20. D

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