Quiz 001 MANAGEMENT ACCOUNTING

1. Cost behavior refers to

a. how cost react to a change in the level of activity
b. whether a cost is incurred in a manufacturing, merchandising, or service company
c. classifying costs as either inventoriable or period costs
d. whether a particular expense has been ethically incurred
2. An understanding of the underlying behavior of costs helps in all of the following EXCEPT
a. costs can be better estimated as volume expands and contracts
b. true costs can be better evaluated
c. process inefficiencies can be better identified and as a result improved
d. sales volume can be better estimated
3. Fixed costs depend on
a. the amount of resources used
b. the amount of resources acquired
c. the volume of production
d. the volume of sales
4. Which of the following is a fixed cost in an automobile manufacturing plant?
a. Administrative salaries
b. Electricity used by assembly-line machines
c. Sale commissions
d. Windows for each car produced
5. If each furnace required a hose that costs P20 and 2,000 furnaces are produced for the month, the
total cost for hoses is
a. considered to be a direct fixed cost
b. considered to be a direct variable cost
c. considered to be an indirect fixed cost
d. considered to be an indirect variable cost
6. Which of the following statements is FALSE?
a. There is a cause-and-effect relationship between the cost driver and the level of activity
b. Fixed costs have cost driver over the short run
c. Over the long run all costs have cost drivers
d. Volume of production is a cost driver of direct manufacturing costs
7. Within the relevant range, if there is a change in the level of the cost driver then
a. total fixed costs and total variable costs will change
b. total fixed costs and total variable costs will remain the same
c. total fixed costs will remain the same and total variable costs will change
d. total fixed costs will change and total variable costs will remain the same
8. Within the relevant range, if there is a change in the level of the cost driver then
a. fixed and variable costs per unit will change
b. fixed and variable costs per unit will remain the same
c. fixed costs per unit will remain the same and variable costs per unit will change
d. fixed costs per unit will change and variable costs per unit will remain the same
9. When 10,000 units are produced, fixed costs are P14 per unit. Therefore, when 20,000 units are
produced, fixed costs
a. will increase to P28 per unit
b. will remain at P14 per unit
c. will decrease to P7 per unit
d. will total P280,000
10. When 10,000 units are produced, variable costs are P6 per unit. Therefore, when 20,000 units are
produced
a. variable costs will total P120,000
 b. variable costs will total P60,000
c. variable unit costs will increase to P12 per unit
d. variable unit costs will decrease to P3 per unit
11. Kirsten Manufacturing provided the following information for last month.
Sales P10,000
Variable Costs 3,000
Fixed Costs 5,000
Operating Income P 2,000
If sales double next month, what is the projected operating income?
a. P4,000
b. P7,000
c. P9,000
d. P12,000
12. Gametoy Manufacturing currently produces 1,000 toys per month. The following per unit data apply
for sales to regular customers:
Direct materials P20
Direct Manufacturing Labor 3
Variable manufacturing overhead 10
Fixed manufacturing overhead 10
Total Manufacturing costs P39
The plant has capacity for 3,000 toys and is considering expanding production to 2,000 toys. The is the
total cost of producing 2,000 toys?
a. P39,000
b. P78,000
c. P68,000
d. P62,000

The following information applies to questions 13 and 14.

Phoenix Manufacturing currently produces 1,000 pencils per month. The following per unit data apply for
sales to regular customers:
Direct materials P30
Direct manufacturing labor 5
Variable manufacturing overhead 10
Fixed manufacturing overhead 40
Total manufacturing costs P85
13. The plant has capacity for 2,000 pencils and is considering expanding production to 1,500 pencils.
What is the total cost of producing 1,500 pencils?
a. P85,000
b. P170,000
c. P107,500
d. P102,500
14. What is the per unit cost of when producing 1,500 pencils?
a. P71.67
b. P107.50
c. P85.00
d. P170.00
15. In describing the cost formula equation, Y = a +Bx, which of the following is correct?
a. “Y” is the independent variable
b. “a” is the variable rate
a. “a” and “b” are valid for all levels of activity
d. in the high-low method, “b” equals the change in cost divided by the change in
activity.
16. The contribution approach to the income statement:
a. organizes cost on functional basis
b. provides owners with with more cash flows
c. is particularly helpful to the managers in planning and administrative expenses are
deducted.
17. Which of the following is unlikely to be classified as a fixed cost with respect to the numbers of units
produced and sold?
a. Property taxes on a headquarters building
b. Legal department salaries
c. Cost of leasing the company’s mainframe computer
d. Production Salaries
18. Multiple regression analysis is used when:
a. there is more than one cost category to analyze
b. there is more than one activity that drives the variable component of mixed cost.
c. the high-low method cannot be used because there is only one observation.
d. all of the points on a scattergraph fall exactly on a regression line.
19. Utility cost at Service, Inc. are a mixture of fixed and variable components. Records indicate that utility
costs are an average of P0.40 per hour at an activity level of 9,000 machine hours and P0.25 per hour at
an activity level of 18,000 machine per hours. What is the expected total utility cost if the company works
13,000 machine hours?
a. P4,225
b. P5,200
c. P4,000
d. P3,250
20. Clerical costs in the building department of Craig Company are a mixture of variable and fixed
components. Records indicate that average unit processing costs are P0.50 per account processed at an
activity level of 32,000 accounts. When only 22,000 accounts are processed, the total cost of processing
is P12,500. Given these data, at a budgeted level of 25,000 accounts:
a. processing costs are expected to total P8,750.
b. fixed processing costs are expected to be P10,400.
c. the variable processing costs are expected to be P0.35 per account processed.
d. processing costs are expected to total P14,975.
21. Shipping costs at Junk Food Imports is a mixed cost with variable and fixed components. Past records
indicate total shipping cost was P18,000 for 16,000 pounds shipped and P22,500 for 22,000 pounds
shipped. If the company plans to ship 18,000 pounds next month, the expected shipping cost is:
a. P18,500 c. P19,500
b. P20,400 d. P24,000
22. Erg Manufacturing Company has developed the following overhead cost formulas:
Cost Formula
Depreciation P500
Set up P400 plus P0.20 per machine-hour
Lubrication P50 plus P0.25 per machine-hour
Utilities P0.40 per machine-hour
Based on these formulas, the total overhead cost expected if 200 machine hours are worked is:
a. P620 c. P170
b. P900 d. P1,120

Questions 23 and 24 refer to the following:

Cosco, Inc. has accumulated the following data for the cost of maintenance on its machinery for the last
four months:
Month Maintenance cost Machine hours
September P26,020 21,000
 October P24,600 18,500
November P22,300 15,000
December P25,100 19,000
23. Assuming Cosco Company uses the high-low method of analysis, the fixed cost of maintenance
would be estimated to be:
a. P14,500 c. P13,000
b. P5,020 d. P12,320
24. Assuming Cosco Company uses the high-low method of analysis, the machine hours are budgeted to
be 20,000 hours then the budgeted total maintenance cost would be expected to be:
a. P25,400 c. P23,700
b. P25,560 d. P24,720
25. Donner Company would like to estimate the variable and fixed components of its maintenance costs
and has compiled the following data for the last five months of operations.
Labor Hours Maintenance Cost
January 160 P617
February 130 P553
March 180 P596
April 190 P623
May 110 P532
Using The high-low method of analysis, the estimated variable cost per labor hour for maintenance is
closet to:
a. P0.83 c. P1.30
b. P1.84 d. P1.14
Questions 26 through 30 refer to the following:
Smore Company is accumulating data to be used in preparing its annual profit plan for the coming year.
The cost behavior pattern of the maintenance costs must be determined. The accounting staff has
suggested hours and costs. Data regarding the maintenance hours and costs for the last year and the
results of the regression analysis follows:
Hours Activity Maintenance Costs
January 480 P4,200
February 320 3,000
March 400 3,600
April 300 2,820
May 500 4,350
June 310 2,960
July 320 3,030
August 520 4,470
September 490 4,260
October 470 4,050
November 350 3,300
December 340 3,160
Sum 4,800 P43,200
Average 400 3,600
Average cost per hour (43,200/4,800) = P9.00
a (intercept) 684.65
b coefficient 7.2884
Standard error of the estimate 34.469
R-squared 0.99724
t-value for b 60.105

26. If Amore Company uses the high-low method of analysis, the equation for the relationship between
hours of activity and maintenance cost would be:
 a. y=400+9.0x
b. y=570+7.5x
c. y=3,600+400x
d. y=570+9.0x
e. None of the above
27. Based on the data derived from the regression analysis, 420 maintenance hours in a month would
mean the maintenance costs would be budgeted at
a. P3,780
b. P3,461
c. P3,797
d. P3,746
e. None of the above
28. The coefficient of determination for Amore’s regression equation for the maintenance activities is
a. 34.469/49.515
b. 0.99724
c. square root of 0.99724
d. (0.99724)2
e. None of the above
29. The percent of the total variance that can be explained by the regression equation is
a. 99.724%
b. 69.613%
c. 80.982%
d. 99.862%
e. None of the above
30. At 400 hours of activity, Amore management can be approximately two-thirds confident that the
maintenance costs will be in the range of
a. P3,550.50 – P3,649.53
b. P3,551.37 – P3,648.51
c. P3,586.18 – P3,613.93
d. P3,565.54 – P3,634.47
e. None of the Above
31. The average labor cost per unit for the first batch produced by a new process is P120. The cumulative
average labor cost after the second batch is P72 per product. Using a batch size of 100 and assuming the
learning curve continues, the total labor cost of four batches will be
a. P4,320
b. P10,368
c. P2,592
d. P17,280
32. A particular manufacturing job is subject to an estimated 80% learning curve. The first unit required 50
labor hours to complete. What is the cumulative average time per unit after eight units are completed?
a. 20.0 hours
b. 25.6 hours
c. 32.0 hours
d. 40.0 hours
33. A particular manufacturing job is subject to an estimated 80% learning curve. The first unit required 50
labor hours to complete. If the learning curve is based on a cumulative average time per unit assumption,
what is the time required to complete the second unit?
a. 30.0 hours
b. 40.0 hours
c. 45.0 hours
d. 50.0 hours
34. A learning curve of 80% assumes direct labor costs are reduced by 20% for each doubling output.
What is the cost of the sixteenth unit produced as an approximate percentage of the first unit produced?
a. 32%
b. 40%
c. 51%
d. 64%
35. A regression equation
a. estimates the dependent variable
b. encompasses factors outside the relevant range
c. is based on objective and constraint functions
d. estimates the independent variable