Alaura, Monica Feilane B.

11/17/2022

1. Contribution margin is the excess of revenues over:

a. cost of goods sold.
b. manufacturing cost.
c. all direct costs.
d. all variable costs.

2. An example of a cost that is variable with respect to the number of units produced and
sold is:
a. insurance on the headquarters building.
b. power to run production equipment.
c. supervisory salaries.
d. depreciation of factory facilities.

3. A cost driver is:

a. the largest single category of cost in a company.
b. a fixed cost that cannot be avoided.
c. a factor that causes variations in a cost.
d. an indirect cost that is essential to the business.

4. The following data pertain to activity and costs for two recent months:

October November
Activity level in units 5,000 10,000

Variable costs ............ P10,000 ?

Fixed costs ............... 30,000 ?
Mixed costs ............... 20,000 ? _
Total costs ............... P60,000 P75,000

Assuming that these activity levels are within the relevant range, the mixed costs for
November were:
a. P40,000.
b. P35,000.
c. P25,000.
d. P20,000.

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5. The following data pertains to activity and costs for two months:

June July
Activity level in units 10,000 20,000

Variable costs ................ P20,000 P ?

Fixed costs ................... 15,000 ?
Mixed costs ................... 10,000 ? _
Total costs ................... P45,000 P70,000

Assuming that these activity levels are within the relevant range, the mixed costs for
July were:
a. P10,000.
b. P35,000.
c. P15,000.
d. P40,000.

6. At an activity level of 10,000 units, variable costs totaled P35,000 and fixed costs
totaled P20,800. If 16,000 units are produced and this activity is within the relevant
range, then:
a. total cost would equal P89,280.
b. total unit cost would equal P4.80.
c. fixed cost per unit would equal P5.58.
d. total costs would equal P55,800.

7. Anaconda Mining Company shipped 9,000 tons of copper concentrate for P450,000 in
March and 11,000 tons for P549,000 in April. Shipping costs for 12,000 tons to be
shipped in May would be expected to be:
a. P548,780.
b. P549,020.
c. P594,000.
d. P598,500.

8. An analysis of past maintenance costs indicates that maintenance cost is an average of

P0.20 per machine-hour at an activity level of 10,000 machine-hours and P0.25 per
machine-hour at an activity level of 8,000 machine-hours. Assuming that this activity
is within the relevant range, what is the total expected maintenance cost if the activity
level is 8,700 machine-hours?
a. P2,000
b. P400
c. P2,250
d. P1,740

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9. Shipping expense is P9,000 for 8,000 pounds shipped and P11,250 for 11,000 pounds
shipped. Assuming that this activity is within the relevant range, if the company ships
9,000 pounds, its expected shipping expense is closest to:
a. P10,125.
b. P8,583.
c. P9,972.
d. P9,750.

10. Average maintenance costs are P1.50 per machine-hour at an activity level of 8,000
machine-hours and P1.20 per machine-hour at an activity level of 13,000 machine-
hours. Assuming that this activity is within the relevant range, total expected
maintenance cost for a budgeted activity level of 10,000 machine-hours would be
closest to:
a. P16,128.
b. P15,000.
c. P13,440.
d. P11,433.

11. The controller of JoyCo has requested a quick estimate of the manufacturing supplies
needed for the month of July when production is expected to be 470,000 units. Below
are actual data from the prior three months of operations.

Production Manufacturing
in units supplies
March 450,000 P723,060
April 540,000 853,560
May 480,000 766,560

Using these data and the high-low method, what is the best estimate of the cost of
manufacturing supplies that would be needed for July? (Assume that this activity is
within the relevant range.)
a. P805,284
b. P1,188,756
c. P755,196
d. P752,060

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12. (Appendix) The following activity and cost data were provided by Hammer Corp.,
which would like help in estimating its future maintenance costs:

Units Maintenance Cost

3 P450
7 P530
11 P640
15 P700

Using the least-squares regression method to estimate the cost formula, the expected
total cost for an activity level of 10 units would be closest to:
a. P612.50.
b. P581.82.
c. P595.84.
d. P601.50.

13. Given the cost formula Y = P15,000 + P5X, total cost at an activity level of 8,000
units would be:
a. P23,000.
b. P15,000.
c. P55,000.
d. P40,000.

14. Given the cost formula Y = P12,000 + P6X, total cost at an activity level of 8,000
units would be:
a. P20,000.
b. P60,000.
c. P12,000.
d. P48,000.

15. Reddy Company has the following cost formulas for overhead:

Cost Cost Formula

Indirect materials P2,000 plus P0.40 per machine hour
Maintenance P1,500 plus P0.60 per machine hour
Machine setup P0.30 per machine hour
Utilities P200 plus P0.10 per machine hour
Depreciation P800

Based on these cost formulas, the total overhead cost at 600 machine hours is
expected to be:
a. P4,500.
b. P5,200.
c. P5,620.
d. P5,340.

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16. Given the cost formula Y = P17,500 + P4X, at what level of activity will total cost be
P42,500?
a. 10,625 units.
b. 4,375 units.
c. 6,250 units.
d. 5,250 units.

17. The following data pertains to activity and utility costs for two recent years:

Year 2 Year 1
Activity level in units 12,000 8,000
Utilities cost P15,000 P12,000

Using the high-low method, the cost formula for utilities is:
a. P1.50 per unit.
b. P8,000 plus P0.50 per unit.
c. P1.25 per unit.
d. P6,000 plus P0.75 per unit.

18. The following data pertains to activity and utility costs for two recent years:

Year 2 Year 1
Activity level in units 10,000 6,000
Utilities cost observed P12,000 P9,000

Using the high-low method, the cost formula for utilities is:
a. P1.50 per unit.
b. P1.20 per unit.
c. P3,000 plus P3.00 per unit.
d. P4,500 plus P0.75 per unit.

19. At an activity level of 6,000 units the cost for maintenance is P7,200 and at 10,000
units the cost for maintenance is P11,600. Using the high-low method, the cost
formula for maintenance is:
a. P1.20 per unit.
b. P1.16 per unit.
c. P1,200 plus P1.10 per unit.
d. P600 plus P1.10 per unit.

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20. Bell Company has provided the following data for maintenance costs:

April May
Machine hours incurred 12,000 16,000
Maintenance cost incurred P24,000 P26,000

Using the high-low method, the cost formula for maintenance cost would be:
a. P2.00 per machine hour.
b. P1.625 per machine hour.
c. P18,000 plus P0.50 per machine hour.
d. P24,000 plus P0.50 per machine hour.

21. Buckeye Company has provided the following data for maintenance cost:

Prior Year Current Year

Machine hours ..... 12,500 15,000
Maintenance cost .. P27,000 P31,000

The best estimate of the cost formula for maintenance would be:
a. P21,625 per year plus P0.625 per machine hour.
b. P7,000 per year plus P0.625 per machine hour.
c. P7,000 per year plus P1.60 per machine hour.
d. P27,000 per year plus P1.60 per machine hour.

22. Selected information about Buehler Corporation's operations at high and at low levels
of activity follow:

Level of Activity
Low High
Number of units produced ............ 25,000 30,000
Total manufacturing costs ........... P575,000 P680,000
Direct material cost per unit ....... P5 P5
Direct labor cost per unit .......... P6 P6

Using the high-low method, what is the cost formula for manufacturing overhead?
a. P50,000 per period plus P10 per unit
b. P50,000 per period plus P21 per unit
c. P50,000 per period plus P22 per unit
d. P347,000 per period plus P0.10 per unit

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 23. At a sales level of P300,000, James Company's gross margin is P15,000 less than its
contribution margin, its net income is P50,000, and its selling and administrative
expenses total P120,000. At this sales level, its contribution margin would be:
a. P250,000.
b. P155,000.
c. P170,000.
d. P185,000.

24. (Appendix) Your boss would like you to estimate the fixed and variable components
of a particular cost. Actual data for this cost for four recent periods appear below.

Activity Cost
Period 1 24 P174
Period 2 25 179
Period 3 20 165
Period 4 22 169

Using the least-squares regression method, what is the cost formula for this cost?
a. Y = P 0.00 + P7.55X
b. Y = P110.44 + P2.70X
c. Y = P103.38 + P3.00X
d. Y = P113.35 + P0.89X

Reference: 5-1
Rymore Company would like to classify the following costs according to their cost behavior:

July August
Sales in units.. 1,500 1,600

Cost A ......... P35,000 P36,000

Cost B ......... 16,000 16,000
Cost C ......... 67,500 72,000

25. Which of the following classifications best describes the behavior of Cost A?
a. Mixed.
b. Variable.
c. Fixed
d. none of the above.

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 26. Which of the following classifications best describes the behavior of Cost B?
a. Mixed.
b. Variable.
c. Fixed.
d. none of the above.

27. Which of the following classifications best describes the behavior of Cost C?
a. Mixed.
b. Variable.
c. Fixed.
d. none of the above.

Reference: 5-2
Comparative income statements for Boggs Sports Equipment Company for the last two months are
presented below:

July August
Sales in Units ............. 11,000 10,000

Sales Revenue .............. P165,000 P150,000

Less Cost of Goods Sold .... 72,600 66,000
Gross Margin ............... 92,400 84,000
Less Operating Expenses:
Rent ..................... 12,000 12,000
Sales Commissions ........ 13,200 12,000
Maintenance Expenses ..... 13,500 13,000
Clerical Expense ......... 16,000 15,000
Total Operating Expenses ... 54,700 52,000
Net income ................. P 37,700 P 32,000

All of the company's costs are either fixed, variable, or a mixture of the two (i.e., mixed). Assume that
the relevant range includes all of the activity levels mentioned in this problem.

28. Which of the operating expenses of the company is variable?

a. Rent.
b. Sales Commissions.
c. Maintenance Expense.
d. Clerical Expense.

29. The total monthly fixed cost for Boggs Sporting Equipment Company is:
a. P12,000.
b. P22,500.
c. P25,000.
d. P40,000.

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 30. If sales are projected to be 8,000 units in September, total expected operating
expenses would be:
a. P49,300.
b. P41,600.
c. P44,750.
d. P46,600.

Reference: 5-3
Gasson Company is a merchandising firm. Next month the company expects to sell 800 units. The
following data describe the company's revenue and cost structure:

Selling price per unit ....... P40

Sales commission ............. 5%
Purchase price (cost) per unit P18
Advertising expense .......... P4,000 per month
Administrative expense ....... P4,500 per month plus 15% of sales

Assume that all activity mentioned in this problem is within the relevant range.

31. The expected gross margin next month is:

a. P17,600.
b. P11,200.
c. P14,400.
d. P16,000.

32. The expected total administrative expense next month is:

a. P 4,800.
b. P13,300.
c. P 9,300.
d. P14,900.

33. The expected contribution margin next month is:

a. P17,600.
b. P11,200.
c. P14,400.
d. P16,000.

34. The expected net income next month is:

a. P 7,500.
b. P 5,100.
c. P 2,700.
d. P11,200.

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Reference: 5-4
In the O'Donnell Manufacturing Company, at an activity level of 80,000 machine hours, total overhead
costs were P223,000. Of this amount, utilities were P48,000 (all variable) and depreciation was P60,000
(all fixed). The balance of the overhead cost consisted of maintenance cost (mixed). At 100,000
machine hours, maintenance costs were P130,000.
Assume that all of the activity levels mentioned in this problem are within the relevant range.

35. The variable cost for maintenance per machine hour is:
a. P1.30.
b. P1.44.
c. P0.75.
d. P1.35.

36. The total fixed overhead cost for O'Donnell is:

a. P115,000.
b. P130,000.
c. P 60,000.
d. P 55,000.

37. If 110,000 machine hours of activity are projected for next period, total expected
overhead cost would be:
a. P256,000
b. P263,500.
c. P306,625.
d. P242,500.

Reference: 5-5
Maxwell Company has a total expense per unit of P2.00 per unit at the 16,000 level of activity and total
expense per unit of P1.95 at the 21,000 unit level of activity.

38. The best estimate of the variable cost per unit for Maxwell Company is:
a. P0.56.
b. P1.79.
c. P2.00.
d. P1.95.

39. The best estimate of the total fixed cost per period for Maxwell Company is:
a. P40,950.
b. P32,000.
c. P3,360.
d. P29,190.

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40. The best estimate of the total expected costs at the 19,000 level of activity for
Maxwell Company is:
a. P37,050.
b. P38,000.
c. P37,370.
d. P39,830.

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