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Multiple-Choice Questions

Items 1 to 20 (theory): 20 items @ 3 points each = 60 points

Items 21 to 30 (problem): 10 items @ 4 points each = 40 points
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1. All else constant, if the selling price

increases,

Total variable costs will be higher than expected

Total contribution margin will be lower than expected

Per-unit contribution margin will be higher than expected

Contribution margin percentage will be lower than expected

2. “Budgets” and “performance reports”

respectively correspond to these management functions.

Planning and controlling

 Planning and organizing

Controlling and planning

Organizing and controlling

3. Which of the following is true regarding

the regression equation Y = a + bX?

“b” represents fixed cost per unit

“X” represents the dependent variable

“a” represents the amount of Y when X = 0

“b” represents the amount of Y when X = 0

4. The distinction between absorption costing

and variable costing is most important for which type of industry?

Manufacturing

Marketing

Retail

Service

5. Which financial
executive is primarily responsible for both management and financial
accounting? *

Treasurer

Controller

Chief financial officer

Auditor

6. The annual insurance premium

for a factory building would be a:

Fixed cost, period cost, and indirect cost in relation to units of

product.

Fixed cost, product cost, and direct cost in relation to units of

product.

Variable cost, product cost, direct cost in relation to units of

product.

Fixed cost, product cost, indirect cost in relation to units of

product.

7. The cost function derived by the simple

least-squares method is

Linear
 Curvilinear

Parabolic

Derived from the maximum and minimum points

8. Profit
maximization as the goal of the firm is not ideal because
*

Profits are accounting measures of cash.

Profit maximization does not consider risk.

Cash flows are more representative of financial strength.

Profits today are less desirable than profits earned in future

years.

9. Simple regression provides the means to

evaluate a line of regression that is fitted to a plot of data and
represents

The way costs change in respect to the independent variable.

The way costs change in respect to the dependent variable.

The variability of expense with dollars of operations.

The variability of expense with dollars of production.

10. Management accounting:

Provides information about the company as a whole

Reports information that has occurred in the past that is

verifiable and reliable

Provides information that is generally available only on a

quarterly or annual basis

Focuses on estimating future revenues, costs, and other

measures to forecast activities and their results

11. Which correlation coefficient indicates

the strongest direct linear
association between two variables?

-0.99

-0.02

0.88

1.02

12. The long-run objective of financial

management is to:

*
 Maximize market share

Maximize earnings per share

Maximize return on investment

Maximize the value of the firm’s common stock

13. If Company A has a higher

degree of operating leverage than Company B, then

Company A is less risky

Company B is less profitable

Company A has higher fixed operating expenses

Company A’s profits are more sensitive to percentage changes in

sales

14. When monthly production volume is constant

and sales volume is less than production, profit determined with
variable
costing procedures will:

Always be greater than profit determined using absorption

costing

Always be less than profit determined using absorption costing

be equal to profit determined using absorption costing

 be equal to contribution margin per unit times units sold

15. A firm in which of the following

industries is most likely to use a market-based as opposed to a cost-
based
approach to pricing decisions?

Competitive market players with similar products

Competitive market players with dissimilar products

Non-competitive market players with similar products

Non-competitive market players with dissimilar products

16. A profitable company’s margin of safety

decreases following a

Decrease in unit sales

Decrease in fixed costs

Increase in selling price

Decrease in variable costs

17. Which
of the following statements is true for a company that uses variable
costing?
*

Income is greatest in periods when production is highest

Net operating income moves in the same direction as sales

Both variable selling costs & variable production costs are

included in the unit product cost

The unit product cost changes because of changes in the

number of units manufactured

18. Management
is considering replacing an existing fixed salary plan to sales
commission
compensation plan. If the change is
adopted, the company’s

Profit must decrease

Breakeven point must decrease

Margin of safety must increase

Operating leverage must decrease

19. How will a

favorable volume variance affect profit under I) direct costing & II) full
costing?

I) no effect II) increase

 I) no effect II) decrease

I) increase II) no effect

I) decrease II) no effect

20. Nayeon
Company sells three chemicals: Petrol, Septine and Tridol. Petrol is
the company’s most profitable
product while Tridol is the least profitable.
Which one of the following events will definitely decrease the firm’s
overall breakeven point for the upcoming accounting period?

A decrease in Tridol’s selling price

An increase in the overall market for Septine

Installation of new machinery and subsequent layoff of workers

An increase in anticipated sales of Petrol relative to sales of

Septine and Tridol

21. When 20,000 units are

produced, fixed costs are P 16 per unit.
Therefore, when 40,000 units are produced, fixed costs will:

Increase to P 32 per unit

Decrease to P 8 per unit

Remain at P 16 per unit

 Total P 640,000

22. Jihyo,
Inc. sells a single product at P 20 per unit. The firm's most recent
income statement
revealed unit sales of 100,000, variable costs of P 800,000, and
fixed
costs of P 400,000. If a P 4 drop
in selling price will boost unit sales volume by 20%, what will the
company experience?
*

P 80,000 drop in profitability

P 240,000 drop in profitability

P 400,000 drop in profitability

No change in profit because a 20% drop in sales price is

balanced by a 20% increase in volume

23. Sana
Company uses a quarterly cost formula for overhead of P 18,000 + P
1.60 for
each direct labor hour worked. For the
upcoming month, Sana plans to manufacture 96,000 units. Each unit
required five minutes of direct
labor. What is Sana’s budgeted overhead
for the upcoming month?

P 14,300
 P 18,800

P 30,800

P 171,600

24. The
ending inventory under variable costing would be:
*

P 20,000

P 25,000

P 27,500

P 32,500

25. The
total fixed costs charged against the first year of operations under
full
costing would be:
*

P 15,000

P 25,000

P 35,000
 P 40,000

26. Mina
Company has a monthly target operating income of P 30,000.
Variable expenses are 40% of sales and
monthly fixed expenses are P 7,500.
Assuming that Mina Company reaches its target, by what
percentage
will its operating income fall if sales volume declines by 12%?
*

Decline by 10%

Decline by 15%

Decline by 11%

Decline by 16%

27. Tzuyu
Company produces and sells only two products, Tai and Wan. 15
units of Tai
are sold for every 10 units of Wan.
Variable costs as a percentage of sales in pesos are 60% for Tai
and
85% for Wan. Total fixed cost is P
150,000. If the total fixed cost
increases by 30% next period, what amount of product Tai sales
would be
necessary to break-even?
*

P 111,429

P 260,000
 P 390,000

P 650,000

28. What
is the number of T-shirts Dahyun must sell to break even in the
coming
year?
*

17,500

19,250

20,000

22,000

29. If Dahyun Corporation wishes to earn P

22,500 in post-tax income for the coming year, the company’s sales
volume in
pesos must be

P 207,000
 P 213,750

P 229,500

P 257,625

30. How
much lower would Chaeyoung’s profit be if it used variable costing
instead of
GAAP costing?

P 36,000

P 54,000

P 68,000

P 94,000

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