MANAGEMENT ADVISORY SERVICES BATCH 92

FIRST PREBOARD Page 1 of 12

CPAR
CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

MANAGEMENT ADVISORY SERVICES JULY 29, 2022

First Pre-board Examination 08:00 AM to 11:00 AM

Instructions: Choose the BEST answer for each of the following items.
1. In relation to Activity-based Costing (ABC), which of the following statements is incorrect?
A. ABC involves two stage allocation process.
B. Implementation of ABC might be costly.
C. ABC assumes that products consume resources.
D. None from the choices is incorrect.
2. In relation to high-low method, which of the following is correct?
A. High-low has no major weaknesses.
B. High-low method gives a reasonable cost estimation and helpful in detecting outliers.
C. In applying high-low method, complex mathematical calculations is required.
D. None from the choices
3. Which of the following pertains or describes absorption costing?
A. It ignores volume variance.
B. Income fluctuates with sales.
C. It does not follow the costing required under PFRS.
D. It usually has a higher inventory value than variable costing.
4. For the upcoming year, SABER CORP. developed the following results based on 20,000 units of
sales volume:
Sales 300,000
Variable cost 120,000
Contribution margin 180,000
Fixed costs 80,000
Income before tax 100,000
Tax expense 30,000
Net income 70,000
If the company wants a before-tax return on sales of 20% based on its expected sales volume,
what price must it charge?
A. P15.00 C. P16.25
B. P12.50 D. P10.00
5. ZILONG CORP has developed the following results in connection to its use of regression analysis
for its monthly energy cost estimation using machine hours as cost driver:
Intercept 3,125
Correlation coefficient .850
Regression coefficient .650
Number of observations 40
Standard error of the estimate 100
If on the first quarter of the next year the company used 3,600 machine hours, what is the
expected energy cost?
A. P11,715 C. P5,465
B. P12,435 D. P6,185
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6. All of the following would be considered staff functions excluding

A. Vice president for finance C. Vice president for marketing
B. Controller D. Executive vice president
7. If an income statement was prepared for internal purposes:
I. Gross margin should be a required line item of profit or loss.
II. Fixed selling and administrative expenses would be used in the computation of operating
income but not in the computation of the contribution margin.
A. I only C. Both I and II
B. II only D. Neither I nor II
8. Which of the following is included within budget variance?
I. Volume variance III. Direct labor rate variance
II. Spending variance
A. I and II D. I, II and III
B. II and III E. Answer not given
C. I and III
9. On January 1, 2018, LAYLA CORP. started its operations to produce and sell a single product called
BAZOOKA. During its first year of operations, no variances were incurred and there were no fixed
selling or administrative expenses and production totaled 50,000 units. In using absorption costing,
the company earned a net income of P120,000 with an ending inventory of 10,000 units. If LAYLA
had used variable costing, its net income would have been P90,000. What is LAYLA’s monthly
breakeven point?
A. 25,000 units C. 31,250 units
B. 20,000 units D. 32,000 units
10. Which of the following does not describe standard costs?
A. Predetermined C. Control purposes
B. Performance indicator D. Suitable for certain businesses only
ITEMS 11 AND 12 ARE BASED ON THE FOLLOWING INFORMATION:
HAYABUSA INC. produces two types of samurai swords, NORMAL AND TOP-OF-THE-LINE types.
Currently, overhead are allocated to the two products on a single cost pool on the basis of direct
labor hours. Reports about competitors’ products show signs of poor cost data. With these,
HAYABUSA’s management is considering to switch to activity-based costing. ABC revealed that
there are 3 significant cost pools for overhead and they are as follows:
Cost Pool Amount Appropriate cost driver
Quality control P300,000 Number of inspections
Machine set-ups 400,000 Number of set-ups
Others 100,000 Direct labor hours
Information about HAYABUSA’s two products are as follows:
NORMAL TOP-OF-THE-LINE
Production 10,000 units 5,000 units
Direct labor hours 40,000 hrs. 10,000 hrs.
Direct labor cost per hour 3 3
Direct material cost 50,000 60,000
Set-ups 80 120
Inspections 100 400
HAYABUSA determines selling prices by adding 40% to a product's total cost.
11. What are the selling prices of NORMAL and TOP-OF-THE-LINE products, respectively under the
existing system?
A. P81.00;P50.00 C. P64.00;P32.00
B. P113.40;P70.00 D. P89.60;P44.80
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12. What are the selling prices of NORMAL and TOP-OF-THE-LINE products, respectively under the
ABC system?
A. P30.00;P100.00 C. P42.00;P140.00
B. P65.80;P165.20 D. Answer not given
13. As a business owner you have determined that the demand for your product is inelastic. Based
upon this assessment you understand that
A. Increasing the price of your product will increase total revenue.
B. Decreasing the price of your product will increase total revenue.
C. Increasing the price of your product will have no effect on total revenue.
D. Increasing the price of your product will increase competition.
ITEMS 14 AND 15 ARE BASED ON THE FOLLOWING INFORMATION:
LANCELOT COMPANY produces and sells two products, FAR and MAS. It sells the two products in
the ratio of 2 FAR to 6 MAS. Other information for the two products are as follows:
FAR MAS
Selling price P90 P50
Variable cost 60 20
Unit contribution margin 30 30
The company’s total monthly fixed costs is P30,000
14. What is LANCELOT’s break-even point in units for the upcoming year?
A. 12,000 units C. 1,000 units
B. 10,000 units D. 250 units
15. If LANCELOT is planning to earn next year a before tax rate of return of 10%, how many units of
FAR must it sell?
A. 15,000 units C. 312 units
B. 2,308 units D. 3,750 units
16. Which of the following will decrease break-even point?
I. Increase in margin of safety
II. Change from automated to manual manufacturing.
A. I only C. Both I and II
B. II only D. Neither I nor II
ITEMS 17 AND 18 ARE BASED ON THE FOLLOWING INFORMATION:
For the first four months of the year 2019, LAPU-LAPU INC. has the following sales forecasts:
January 200,000
February 150,000
March 180,000
April 220,000
LAPU-LAPU’s gross profit rate is 30% and maintains an inventory level of 40% of the next month’s
sales requirements. LAPU-LAPU collects 40% of its sales in the month of sale, 50% in the following
month and 10% are considered uncollectible
17. What is the total amount of purchases for the first quarter of 2019?
A. P376,600 C. 538,000
B. P379,000 D. None from the choices
18. What are the cash collections for the month of March, 2019?
A. P 80,000 C. P160,000
B. P147,000 D. P 72,000
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19. Which of the following is a product cost?

I. Normal amount of losses in raw materials.
II. Storage cost of part-finished goods.
III. Cost of international travel freely given to the plant controller.
A. I and II D. I, II and III
B. II and III E. Answer not given
C. I and III
20. Which of the following properly shows responsibility for variances?
Material Price Variance Efficiency Variance
A. Production Production
B. Procurement Procurement
C. Procurement Production
D. None Production
21. In standard setting of direct labor, which of the following is considered in setting standard hours
per unit?
A. Evaporation rate C. Overtime and other excess payment
B. Rejection rate D. Freight cost
22. A company using very tight standards in a standard cost system should expect that
A. No incentive bonus will be paid
B. Most variances will be unfavorable
C. Employees will be strongly motivated to attain the standard
D. Costs will be controlled better than if lower standards were used
23. The bill of materials of LEOMORD CORP. requires 2 pounds of direct materials for each unit
produced by the company. Other information relating to the direct materials of LEOMORD is as
follows:
Materials purchased (@ 3.50) 100,000 lbs.
Materials used by production 80,000 lbs.
Direct material standard cost 6 per unit
Usage variance 30,000 favorable
During the current year, how many units were produced by LEOMORD CORP.?
A. 42,500 units C. 45,000 units
B. 37,500 units D. 35,000 units
24. Which of the following pertains primarily to financial accounting rather than managerial
accounting?
I. Detailed reports rather than aggregated.
II. External focused reporting than internally focused.
A. I only C. Both I and II
B. II only D. Neither I nor II
ITEMS 25 AND 26 ARE BASED ON THE FOLLOWING INFORMATION:
TIDE HUNTER CORP. is engaged in producing and selling a top-of-the line pencil holder with a
selling price of P50.00 per unit. For its first month of operations, 4,000 units were produced and
3,200 units were sold. Actual fixed costs are the same as the amount budgeted for the month.
TIDE HUNTER uses a normal activity of 5,000 units. Other information for the month includes:
Variable cost per unit Fixed costs in total
Production costs P22 P40,000 per month
Selling expenses P4.5
Administrative expenses P10,000 per month
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25. What is the net income for the current month under absorption costing?
A. 29,800 C. 33,200
B. 31,600 D. 39,600
26. What is the net income for the current month under variable costing?
A. 26,800 C. 23,400
B. 33,200 D. 25,200
ITEMS 27 AND 28 ARE BASED ON THE FOLLOWING INFORMATION:
MORPHLING CORP. is engaged in producing and selling 2 types of furniture, DELUXE and
SUPREME. The two products are sold in a ratio of 2 units of DELUXE to 3 units of
SUPREME. Data concerning these products are as follows:
DELUXE SUPREME
Selling Price P12 P28
Unit Variable Cost 3 16
MORPHLING CORP. has a total fixed cost of P600,000 per year and faces a tax rate of
30%.
27. Compute the volume of sales in units of DELUXE if the company plans to earn 10 percent on sales
revenue in before-tax income.
A. 27,778 units C. 50,000 units
B. 41,667 units D. 32,143 units
28. Compute the necessary peso sales of SUPREME to breakeven.
A. P933,333 C. P480,000
B. P266,667 D. P720,000
ITEMS 29 AND 30 ARE BASED ON THE FOLLOWING INFORMATION:
PUDGE CORP. made the following sales forecasts for the first quarter of year 2019:
January P100,000
February 90,000
March 120,000
April 80,000
PUDGE has a gross profit rate of 30% and applied constantly to all of its sales.
PUDGE’s balance sheet as of the end of 2018 is as follows:
Assets Equities
Cash P 35,000 Accounts payable P 40,000
Receivables 40,000
Inventory 45,000 Stockholders’ equity 130,000
Plant, net 50,000
Total P 170,000 Total P 170,000
Additional information:
 PUDGE maintains inventory at 60% of the coming month’s budgeted sales requirements.
 PUDGE collects 40% of its sales in the month of sale, 60% in the following month.
 PUDGE pays for its purchases 55% in the month of purchase, 45% in the following month.
 The company has a total monthly fixed costs of P10,000, P3,000 of which is the depreciation
of the company’s plant. All cash fixed costs are paid in the month they are incurred.
29. How much is the total purchases of the first quarter of 2019?
A. P205,600 C. P62,800
B. P188,400 D. P67,200
30. How much is the total asset of the company as of the end of the first quarter of 2019?
A. P223,240 C. P256,890
B. P170,000 D. P190,340
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31. Which of the following items is NOT an assumption of CVP analysis?

I. All revenues and costs can be added and compared without taking into account the
time value of money.
II. When graphed, total costs curve upward.
A. I only C. Both I and II
B. II only D. Neither I nor II
32. Why do businesses hire management consultants?
S1: Management consultants are considered to be independent and objective to the dilemma
faced by the organization which makes their decision for the company much more reliable
and dependable.
S2: Due to cost-benefit consideration. The services rendered by consultants are temporary and
their professional fees may become less costly for the company than hiring new managers
and employees that are paid on a regular basis.
S3: An experienced management consultant possesses special knowledge, skills and a variety of
personal attributes that make him the most desirable candidate to undertake the
engagement involving his area of expertise. Thus, the rendition of MAS is limited only to
CPAs since they have an extensive business knowledge.
A. S1 and S2 C. S2 and S3 only
B. S2 only D. S1 only
33. In relation to cost behaviour analysis and correlation analysis, which of the statements below is
incorrect?
S1: When r is negative, there is an inverse relationship between x and y.
S2: As compared to high-low method, least-square method incorporates all data in the
computation and not just 2 points eliminating the risk of choosing non-representative data.
S3: High Low Method assumes a linear relationship between cost and activity which uses
complex analysis of cost behaviour.
A. S1 and S2 C. S2 and S3 only
B. S2 only D. S3 only
ITEMS 34 AND 36 ARE BASED ON THE FOLLOWING INFORMATION:
RAIGOR INCORPORATED provided the following data in relation to its utility costs for the four
quarters of the current year 2020:
Quarters Machine Hours Units of Production Utility Costs
First 5,000 3,000 11,000
Second 3,500 2,500 7,000
Third 3,000 2,000 8,000
Fourth 4,000 4,000 10,000
The company conducted a correlation analysis and determined that the coefficient of correlation on
the relationship of machine hours and units of production to utility costs is 0.80 and -0.85,
respectively.
34. Using high-low method, what are the estimated monthly fixed costs?
A. P6,000 C. P2,000
B. P3,500 D. P3,000
35. Using high-low method, what is the total estimated annual utility cost if the next year’s estimates
for units of production are 10,000 units while for machine hours are 15,000 hours?
A. P16,000 C. P26,000
B. P34,000 D. P36,500
36. Using least-square method, what is the cost equation for utility costs? (Round-off the amounts in
two decimal places)
A. y = 6,000.00 + 1.00x C. y = 4,078.50 + 1.67x
B. y = 3,500.00 + 1.50x D. y = 5,061.25 + 1.37x
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37. GREECE is currently operating at its break-even point of P400,000 this year. The accountant
provided the following information to be used for the next year cost and volume analysis:
• An increase of fixed cost by P50,000 will result to an increase of break-even point to
P600,000.
• There is no plan to change the selling price next year as well as its variable cost per unit.
What is GREECE’s variable cost percentage next year?
A. 75% C. 25%
B. 67% D. 33% KGAUCP 2020
ITEMS 38 AND 39 ARE BASED ON THE FOLLOWING INFORMATION:
SPAIN MANUFACTURING CORP. produces a single product called SBJ. Data relating to the
production and sale of SBJ during the current year follows:
Selling price P70
Variable cost per unit 40
Net income P94,500
No. of SBJs sold 7,500 units
Break-even point 3,000 units
Next year, SPAIN will replace a portion of its variable labor with an automated machining process.
This would result in a P10 decrease in variable cost per unit, but an increase to P120,000 in fixed
costs. Selling price would be the same. The company is planning to sell 10,000 units of SBJ next
year.
38. What is SPAIN’s net income next year?
A. P280,000 C. P190,000
B. P196,000 D. P480,000
39. If the company wants a net income of P350,000, how many units of SBJ should it sell?
A. 11,750 units C. 12,250 units
B. 14,000 units D. 15,500 units
40. X and Y are substitute products. If the price of product Y increases, the immediate impact on
product X is
A. Price will increase.
B. Quantity demanded will increase.
C. Quantity supplied will increase.
D. Price, quantity demanded and supply will increase.
41. Which of these best describes the implication of human’s ability to understand digital technology?
A. The gap between a company’s actual delivery value and what is possible to do with
technology is narrowing.
B. Humans best see and understand linear developments, which helps companies linearly grow
and adopt new technologies.
C. Humans tend to have difficulty understanding exponential growth, which causes companies
to underestimate digital trends.
D. Incumbents are usually better able to see and act on ways to use technology to solve
customer needs.

42. In relation to comprehensive budgeting, which of the following statements is incorrect?

A. The budget committee DO NOT PREPARE and DEVELOP BUDGETS. They only approve it
because the preparation of budgets rests with individual managers.
B. Rolling budget is a budget that is revised on a regular (continuous) basis.
C. The information on budgeted balance sheet does not contain information for the current
budget only but rather it has cumulative information like a usual balance sheet of a set of
financial statements.
D. None from the statements is incorrect.
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43. SAN JOSE CORP. manufactures a professional grade vacuum cleaner and began operations in
2020. For 2020, SAN JOSE budgeted to produce and sell 20,000 units. Actual data for 2020 are
given as follows:
Selling price P 400
Units produced 20,000
Units sold 17,500
Variable costs per unit:
Direct materials P30
Direct labor 25
Variable manufacturing overhead 60
Variable selling and administrative 45
Fixed costs:
Fixed manufacturing overhead P1,100,000
Fixed selling and administrative 2,330,000
What is the net operating income for the month under absorption costing?
A. P907,500 C. P557,500
B. P770,000 D. P877,500
44. WASHINGTON CORP. uses a standard-costing system in the production of its product. The
standard cost card shows that the standard hours required to produce one unit is 0.75 hours per
unit. During the month of August, WASHINGTON produced 10,000 units by using 8,000 direct
labor hours resulting to an unfavourable efficiency variance of P4,500. The payroll for the month of
August is P67,000. What is the direct labor rate variance for the month of August?
A. P5,000 UF C. P2,000 UF
B. P5,000 F D. P2,000 F
45. The following costs were presented by HUSKAR CORP. in relation to its production process for the
current year:
Direct material cost P50,000
Total manufacturing cost 200,000
The factory overhead cost is 60% of the prime cost and 50% of the conversion cost. How much is
direct labor cost?
A. P75,000 C. P125,000
B. P100,000 D. P60,000
ITEMS 46 AND 49 ARE BASED ON THE FOLLOWING INFORMATION:
LOS ANGELES CORP. manufactures a cleaning solvent. The company employs both skilled and
unskilled workers. Skilled workers class C are paid P12 per hour, while unskilled workers class D are
paid P7 per hour. To produce one 55-gallon drum of solvent requires 4 hours of skilled labor and 2
hours of unskilled labor. The solvent requires 2 different materials: A and B. The standard and
actual material information is given below:
Standard:
Material A: 30.25 gallons @ P1.25 per gallon
Material B: 24.75 gallons @ P2.00 per gallon

Actual:
Material A: 10,716 gallons purchased and used @ P1.50 per gallon
Material B: 17,484 gallons purchased and used @ P1.90 per gallon
Skilled labor hours: 1,950 @ P11.90 per hour
Unskilled labor hours: 1,300 @ P7.15 per hour
During the current month LOS ANGELES CORP. manufactured 500 55-gallon drums. (Round all
answers to the nearest whole dollar.)
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46. What is the total material mix variance?

A. P3,596 F C. P4,864 F
B. P3,596 U D. P4,864 U
47. What is the total material yield variance?
A. P1,111 U C. P2,670 U
B. P1,111 F D. P2,670 F
48. What is the labor mix variance?
A. P1,083 U C. P1,083 F
B. P2,588 U D. P2,588 F
49. What is the labor yield variance?
A. P2,583 U C. P1,138 F
B. P2,583 F D. P1,138 U
50. SANAOL CORP. uses a standard cost system in which it applies manufacturing overhead on the
basis of direct labor-hours. Two direct labor-hours are required for each unit produced. The
denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at P135,000
for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period
resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was P108,500
and fixed manufacturing overhead cost was P28,000. The variable overhead spending variance for
the period was:
A. P1,200 unfavorable. C. P6,300 unfavorable.
B. P5,300 unfavorable. D. P6,500 unfavorable.
51. Which of the following choices properly classifies cost under variable and absorption costing for a
certain company that manufactures toothpaste?
Variable Costing Absorption Costing
A. Indirect labor Period Cost Period Cost
B. Depreciation of delivery truck Period Cost Product Cost
C. Depreciation of plant equipment
(Output method) Product Cost Product Cost
D. Depreciation of office equipment
(Straight-line method) Period Cost Product Cost
52. If the material quantity variance has a debit variance, which of the following is the most likely
explanation?
A. There is an increase in the market price of the raw materials.
B. There factory workers hired are more experienced than expected.
C. The amount of spoilage exceeded tolerable level.
D. The employees hired has a rate which is higher than the average rate.
53. Which of the following choices correctly shows the correct information for the two items under
consideration?
Function of Treasurer Line Position
A. Risk Management Vice President for Finance
B. Approval of check disbursements Sales Agent of SM Development Corp.
C. Tax compliance Vice President for Operations
D. Protection of Assets New cashier on Ace Hardware store
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54. In relation to cost behaviour analysis and correlation analysis, which of the statements below is
incorrect?
S1: When r is negative, there is an inverse relationship between x and y.
S2: As compared to high-low method, least-square method incorporates all data in the
computation and not just 2 points eliminating the risk of choosing non-representative data.
S3: High Low Method assumes a linear relationship between cost and activity which uses
complex analysis of cost behaviour.
A. S1 and S2 C. S2 and S3 only
B. S2 only D. S3 only
55. RAYLAI CORP. is a chemical manufacturer. The company believes that its inspection cost is a
mixed cost. The following data are provided to you to be helpful on your cost estimation for the
next year. The validity of cost relationship obtained is from a range of 10,000 units to 30,000 units.
Units of Production Inspection Costs
January 30,000 120,000
February 25,000 160,000
March 15,000 40,000
April 30,000 150,000
May 10,000 70,000
June 10,000 60,000
Using high-low method, what is the total inspection costs assuming for the coming year, the
company are expecting to produce 40,000 units?
A. P195,000 C. P210,000
B. P150,000 D. None of the above
56. KALIBO CORP. is famous for its non-washable T-shirt and uses absorption costing system. During
the current year, KALIBO produced 20,000 units and sold 17,500 units. Budgeted fixed overhead is
P30,000 based on a normal level of activity of 15,000 units. During the current year, KALIBO
reported an operating income before variances of P90,000. If KALIBO used variable costing, its net
income would be
A. P85,000 C. P80,000
B. P75,000 D. P95,000
ITEMS 57 AND 59 ARE BASED ON THE FOLLOWING INFORMATION:
BENGUET CORP. provided the following information in relation to its operating activities which
started only this year.
Units sold @ P20 per unit 25,000
Units produced during the period 30,000
Unit Variable Cost Fixed Cost
Direct materials P8.00
Direct labor 5.00
Factory overhead 2.00 P100,000.00
Office expense 4.00
Selling expense P40,000.00
57. What is the total period cost under variable costing?
A. P240,000 C. P260,000
B. P140,000 D. P160,000
58. What is the total period cost under throughput costing?
A. P450,000 C. P415,000
B. P470,000 D. P400,000
59. What is the total amount of fixed cost presented in the income statement under absorption
costing?
A. P 40,000 C. P140,000
B. P123,333 D. P120,000
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60. The company expected to sell 45,000 units next year with the following results:
Sales P900,000
Variable costs 540,000
Contribution margin 360,000
Fixed costs 150,000
Income before taxes 210,000
Income taxes 84,000
Net income P126,000
If the company wants an after-tax return on sales of 15% on its expected volume of 45,000 units,
what price must it charge?
A. 19.96 C. 20.22
B. 20.44 D. 22.22
61. In relation to variable and absorption costing, which of the following statements is correct?
A. Fixed overhead volume and spending variance do not exist under variable costing.
B. Even if sales are constant but production is fluctuating, net income under variable costing
also fluctuates.
C. Variable costing income statement classifies cost that is useful for CVP analysis while
absorption costing income statements classifies cost in accordance with PFRS.
D. Both A and C.
62. IRELAND COMPANY incurs annual fixed costs of P 250,000 in producing and selling a single
product. Estimated unit sales are 125,000. An after-tax income of P 75,000 is desired by
management. The company projects its income tax rate at 40 percent. What is the maximum
amount that IRELAND can-expend for variable costs per unit and still meet its profit objective. If
the sales price per unit is estimated at P6?
A. P 3.37 C. P 3.00
B. P 3.59 D. P 3.70
63. NETHERLANDS CORP. manufactures and sells dolls. The following information relates to the
operating results for the last quarter:
Stuff toys sold 19,375
Break-even point in number of toys 15,500
Break-even point in peso sales P65,875
Total fixed costs P47,275
What was NETHERLANDS variable cost per doll?
A. P4.25 C. P1.20
B. P3.05 D. P0.96
64. Data regarding CLEFAIRY CORP.'s forecasted dollar sales for the last seven months of the year and
CLEFAIRY's projected collection patterns are shown next.
Forecasted Sales
June 700,000
July 600,000
August 650,000
September 800,000
October 850,000
November 900,000
December 840,000

Types of Sales
Cash sales 30%
Credit sales 70%
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Collection pattern on credit sales (5% determined to be uncollectable)

During the month of sale 20%
During the first month following the sale 50%
During the second month following the sale 25%
CLEFAIRY's budgeted cash receipts from sales and collections on account for September are:
A. P 635,000 C. P 807,000
B. P 684,500 D. P 827,000
ITEMS 65 AND 67 ARE BASED ON THE FOLLOWING INFORMATION:
COLORADO CORP. has made the following information available for its production facility for June
2020. Fixed overhead was estimated at 19,000 machine hours for the production cycle. Actual
machine hours for the period were 18,900, which generated 3,900 units.
Material purchased (80,000 pieces) P314,000
Material quantity variance P6,400 U
Machine hours used (18,900 hours)
VOH spending variance P50 U
Actual fixed overhead P60,000
Actual labor cost P40,120
Actual labor hours 5,900
COLORADO’s standard costs are as follows:
Direct material 20 pieces @ P4 per piece
Direct labor 1.5 hours @ P6 per hour
Variable overhead (applied on a machine hour basis) 4.8 hours @ P2.50 per hour
Fixed overhead (applied on a machine hour basis) 4.8 hours @ P3 per hour
65. The materials purchase price variance is:
A. P6,000 F C. P5,850 F
B. P5,970 F D. P6,400 U
66. The conversion cost efficiency variance is:
A. P300 U C. P 450 U
B. P750 U D. P3,750 U
67. The fixed overhead noncontrollable variance is:
A. P540 U C. P300 U
B. P150 U D. P840 U
68. Which of the following is included in a company-prepared cash budget?
(1) Income tax payments (3) Dividend income receipt
(2) Stock dividends settlement
A. 1 and 2 C. 1 and 3
B. 2 and 3 D. 1, 2 and 3
69. One of the purposes of standard costs is to
A. Minimize the use of budgets.
B. Control costs and motivate and measure efficiencies.
C. Avoid reliance upon actual costs.
D. Eliminate accounting for over- or under-applied overhead at the end of the period.
70. TENNESSEE INC. uses a standard costing system in connection with the manufacture of a lone size
fit all product made of rubber. Each unit of finished product contains two feet of direct material,
However, a 20% direct material spoilage calculated on input quantities occurs during the
manufacturing process. The cost of the direct material is P 3 per foot. The standard direct
materials cost per unit of finished product is:
A. P 7.50 C. P 7.20
B. P 6.00 D. P 4.80
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