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Question 1

3. A company produces a variety of bottled drinks. The company has classified its products into these three basic categories:

Sales Price Per Unit | Variable Cost Per Unit
Koke ₱1.50 ₱1.40
Epsi 1.20 1.00
Sarsee 1.00 0.40

The fixed cost of the company is ₱37,240 annually and does not change with any change in product mix or with total volume changes of less than 50%. During 2025, sales of Koke accounted for 50% of the company’s total sales in units. Sales of Epsi were four times that of Sarsee. Total sales revenue for the year was ₱500,000.

The break-even point in units of each product group for 2025, based on the actually experienced sales mix:

a. 196,000
b. Koke – 98,000, Epsi – 78,400, Sarsee – 19,600
c. Koke – 147,000, Epsi – 94,080, Sarsee – 19,600
d. Koke, 250,000, Epsi – 200,000, Sarsee – 50,000

Answer 1

B

Question 2

8. In a global economy,
   a. the trade of goods and services is focused on trade between or among countries on the same continent.
   b. the international movement of labor is prohibited except for multilingual persons.
   c. the international flows of capital and information are common.
   d. all of the above happen in a global economy.
9. Management accounting
   a. is more concerned with the future than is financial accounting.
   b. is less concerned with segments of a company than is financial accounting.
   c. is more constrained by rules and regulations than is financial accounting.
   d. all of the above are true.
10. The sum of the material price variance (calculated at point of purchase) and material quantity variance equals
    a. the total cost variance.
    c. the material yield variance.
    b. the material mix variance.
    d. no meaningful number.
11. The ethical standards established for management accountants are in the areas of
    a. competence, licensing, reporting, and education.
    b. budgeting, cost allocation, product costing, and insider trading.
    c. competence, confidentiality, integrity, and objectivity.
    d. disclosure, communication, decision making, and planning.
12. The motive for holding money to use in making planned exchanges is called the:
    a. transactions motive c. portfolio motive
    b. liquidity motive d. precautionary motive

Answer 2

8. C
   In a global economy, the defining features include:
   🌍 Trade across continents, not just within them.
   🧠 Labor mobility, though regulated, is not limited to multilingual persons.
   💸 Capital and information flow freely across borders due to globalization, technology, and financial integration.
9. A
10. D
11. C
12. A
    The transactions motive refers to the need to hold cash for everyday purchases and planned expenditures. It’s one of the classic reasons for holding money, alongside:
    Precautionary motive – for unexpected emergencies
    Portfolio motive – for investment opportunities
    Liquidity motive – a broader term often used in financial contexts, but not specific to planned exchanges
    So when you’re talking about planned exchanges, like buying inventory or paying bills, the transactions motive is the most accurate choice.

Question 3

A company has made the following information available for its production facility for June 2025. 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) ₱314,000
Material quantity variance P6,400 U
VOH spending variance ₱50 U
Actual fixed overhead ₱60,000
Actual labor cost ₱40,120
Actual labor hours 5,900

The company’s standard costs are as follows:
Direct material 20 pieces @ ₱4 per piece
Direct labor 1.5 hours @ ₱6 per hour
Variable overhead
(applied on a machine hour basis) 4.8 hours @ ₱2.50 per hour
Fixed overhead
(applied on a machine hour basis) 4.8 hours @ ₱3 per hour

.11. The materials price variance is:
a. ₱6,000 F c. ₱5,850 F
b. ₱5,970 F d. ₱6,400 U

.12. The conversion cost efficiency variance is:
a. P300 U c. P 450 U
b. ₱750 U d. ₱3,750 U

.13. The fixed overhead noncontrollable variance is:
a. ₱540 U c. ₱300 U
b. ₱150 U d. ₱840 U

.31. Which of the following statements is true?
a. The management information system is part of an organization’s accounting system.
b. The cost accounting system is part of an organization’s overall accounting system.
c. Management accounting accumulates cost information for both cost accounting and financial accounting.
d. Two primary hallmarks of cost and management accounting are standardization of procedures and use of generally accepted accounting principles.

Answer 3

11. A
12. B
13. D
14. B
    The accounting system is part of an organization’s management information system.
    Cost accounting accumulates cost information for both management accounting and financial
    accounting.
    Management accounting is not governed by the generally accepted accounting principles.

✅ Question 31: Which of the following statements is true?
Let’s evaluate each choice:

a. The management information system is part of an organization’s accounting system. ❌ Incorrect. MIS is broader and encompasses accounting systems, not the other way around.

b. The cost accounting system is part of an organization’s overall accounting system. ✅ Correct. Cost accounting is a subset of the overall accounting system, focused on tracking, analyzing, and controlling costs.

c. Management accounting accumulates cost information for both cost accounting and financial accounting. ❌ Not entirely accurate. Management accounting uses cost data but doesn’t accumulate it for financial accounting purposes.

d. Two primary hallmarks of cost and management accounting are standardization of procedures and use of generally accepted accounting principles. ❌ Incorrect. Unlike financial accounting, cost and management accounting are not bound by GAAP and are more flexible.

Question 4

16. Cost-volume-profit analysis is a technique available to management to understand better the interrelationships of several factors that affect a firm’s profit. As with many such techniques, the accountant oversimplifies the real world by making assumptions. Which of the following is not a major assumption underlying CVP analysis?
    a. All costs incurred by a firm can be separated into their fixed and variable components.
    b. The product’s selling price per unit is constant at all volume levels.
    c. Operating efficiency and employee productivity are constant at all volume levels.
    d. For multi-product situations, the sales mix can vary at all volume levels.
17. As projected net income increases the
    a. degree of operating leverage declines.
    b. margin of safety stays constant.
    c. break-even point goes down.
    d. contribution margin ratio goes up.

USE THE FOLLOWING INFORMATION FOR QUESTIONS 21 and 22.
Below is an income statement for a company for 2025:
Sales ₱400,000
Variable costs (125,000 )
Contribution margin ₱275,000
Fixed costs (200,000 )
Profit before taxes ₱ 75,000

21. Which of the following statements is correct?
    a. The company’s degree of operating leverage is 5.33
    b. Based on the cost and revenue structure on the income statement, the company’s break-even point for 2025 in pesos is ₱200,000
    c. The company’s margin of safety for 2025 is 109,091 units
    d. The company’s 2025 profit volume ratio 68.75%.
22. Assuming that the fixed costs are expected to remain at ₱200,000 for 2026 and the sales price per unit and variable costs per unit are also expected to remain constant, how much profit before taxes will be earned if the company anticipates 2026 sales rising to 130 percent of the 2025 level?
    a. ₱97,500
    b. ₱195,000
    c. ₱157,500
    d. A prediction cannot be made from the information given.

Answer 4

16. D
17. A
18. D
19. C

Question 5

.25. A company incurs annual fixed costs of ₱250,000 in producing and selling a product. Estimated unit sales for 2026 are 125,000. An after-tax income of ₱75,000 is desired by management. The company projects its income tax rate at 40 percent. What is the maximum amount that the company can expend for variable costs per unit and still meet its profit objective if the sales price per unit is estimated at ₱7?
a. ₱4.37 c. ₱4.00
b. ₱4.59 d. ₱4.70

.27. Correlation is a term frequently used in conjunction with regression analysis and is measured by the value of the coefficient of correlation r. The value of r
a. is always positive.
b. is always negative.
c. is a measure of the relative relationship between two variables.
d. ranges in size from negative one to zero.

.28. When the interest rate is extremely high,
a. there is no cost to holding money because its purchasing power remains constant.
b. the supply of money will be relatively small.
c. the opportunity cost of holding money is high.
d. the opportunity cost of holding money is low.

.29. It is the practice of helping organizations to improve their performance, primarily through the analysis of existing organizational problems and development of plans for improvement.
a. Accounting c. Total Quality Management
b. Management Consulting d. Auditing

.30. Which of the following is not a characteristic of MAS?
a. In MAS engagements, the nature of work involved requires a lesser need for junior assistance.
b. A wider variety of assignments are encountered in MAS than in audit engagements.
c. MAS engagements are recurring.
d. In MAS, actions to be taken are identified, the benefits of which will be received in the future.

Answer 5

.25. C
.27. C
.28. C
The opportunity cost of holding money refers to the potential earnings you forgo by keeping your money in cash rather than investing it in interest-bearing assets.
📉 Why It Matters:
Money held in cash earns no interest, so you’re missing out on returns you could have earned from:
- Savings accounts
- Bonds
- Stocks
- Other investments

.29. B
.30. C
Management Advisory Services (MAS) are typically non-recurring and project-based. They are designed to solve specific problems or improve certain aspects of an organization. Unlike audit engagements, which are often periodic and recurring (e.g., annual audits), MAS engagements are usually one-time consultative efforts.
Here’s a breakdown of the choices:
a. True — MAS often requires senior-level expertise, with less reliance on junior staff.
b. True — MAS covers a broader range of assignments than audit.
. Audit Engagements MAS Engagements
Scope Financial statements Strategic, operational, financial
c. ❌ Not true — MAS engagements are not recurring by nature.
d. True — MAS identifies future-oriented actions and benefits.

Question 6

ITEMS 35 to 38 ARE BASED ON THE FOLLOWING INFORMATION:
The owners of a grocery store have been looking for ways to improve sales at the store. One of the proposals is to have a weekly raffle with a total prize of ₱10,000 per week. For every ₱50 worth of goods purchased, the customer shall receive a numbered ticket for the raffle. The variable cost to print and distribute the tickets has been estimated at five pesos (₱5.00). Promotions and other fixed costs in connection with the raffle, likewise, have been estimated at ₱15,000 per week. The current weekly operating results of the store are given below:

Sales ₱1,000,000 
Variable costs 700,000 
Fixed cost for the week 120,000 

35. What is the sales revenue required to break-even without the raffle?
    a. ₱180,000 c. ₱300,000
    b. ₱171,428 d. ₱400,000
36. What is the sales revenue required to break-even with the raffle?
    a. ₱725,000 c. ₱675,000
    b. ₱483,333 d. ₱580,000
37. If the raffle can increase sales by 50% per week, profit will
    a. increase by ₱155,000. c. decrease by ₱25,000.
    b. increase by ₱25,000. d. remain unchanged.
38. If the company’s objective in conducting the weekly raffle is to double its present profit, how much sales must be generated to attain this profit objective?
    a. ₱2,525,000 c. ₱2,000,000
    b. ₱1,625,000 d. ₱1,683,333
39. Which of the following statements is not correct?
    a. All other factors remaining constant, a 10% decrease in the selling price of a given product will have the same effect on profit as a 10% increase in the unit variable cost of such product.
    b. Other things as they are, a ₱10,000 decrease in fixed costs will increase operating profit by the same amount.
    c. A change in the amount of fixed costs will not affect the ratio of variable costs to sales.
    d. A change in fixed costs has no effect on the contribution margin.

Answer 6

35. D
36. A
37. C
38. A
39. A

Question 7

51 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

52 A company 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. ₱11,715 c. ₱5,465
b. ₱12,435 d. ₱6,185

ITEMS 54 and 55 are BASED on the FOLLOWING:
A company produces and sells two products, Product A and Product B. It sells the two products in the ratio of 2 units of Product A to 6 units of Product B. Other information for the two products are as follows:
. Product A Product B
Selling price ₱90 ₱50
Variable cost 60 20
CM per unit ₱30 ₱30
The company’s total monthly fixed costs is ₱30,000.

54 What is the company’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

55 If the company is planning to earn next year a before tax rate of return of 10%, how many units of Product A must it sell?
a. 15,000 units c. 312 units
b. 2,308 units d. 3,750 units

Answer 7

51 D
52 A
54 A
55 D

Question 8

56. 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
57. 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 c. I and III
    b. II and III d. I, II and III

Answer 8

56. A
57. D

Question 9

44 A company uses a standard cost system. The standard for each finished unit of product allows for three kilos of plastic at ₱0.72 per kilo. During July, the company bought 4,500 kilos of plastic at ₱0.75 per kilo and used 4,100 kilos in the production of 1,300 finished units of product. What is the materials purchase price variance for the month of July?
a. ₱135 unfavorable c. ₱117 unfavorable
b. ₱150 unfavorable d. ₱123 unfavorable

45 A company uses a standard cost system. The standard for each finished unit of product allows for three kilos of plastic at ₱0.75 per kilo. During July, the company bought 4,500 kilos of plastic at ₱0.72 per kilo and used 4,100 kilos in the production of 1,300 finished units of product. What is the materials usage price variance for the month of July?
a. ₱135 unfavorable c. ₱117 unfavorable
b. ₱150 unfavorable d. ₱123 favorable

46 Which of the following would lead to a favorable variable manufacturing overhead spending variance?
a. Less maintenance was required than expected.
b. Too much indirect labor was used.
c. Employees used too much electricity during production.
d. Excess supplies were used.

48 The purpose of identifying manufacturing variances and assigning their responsibility to a person/department should be to:
a. pinpoint fault for operating problems in the organization.
b. determine the proper cost of the products produced so that selling prices can be adjusted accordingly.
c. use the knowledge about the variances to promote continuous improvement in the manufacturing operations.
d. trace the variances to finished goods so that the inventory can be properly valued at year end.

50 The inventory control supervisor of a corporation reported that a large quantity of a part purchased for a special order that was never completed remains in stock. The order was not completed because the customer defaulted on the order. The part is not used in any of the corporation’s regular products. After consulting with the corporation’s engineers, the vice president of production approved the substitution of the purchased part for a regular part in a new product. The corporation’s engineers indicated that the purchased part could be substituted providing it was modified. The units manufactured using the substituted part required additional direct labor hours resulting in an unfavorable direct labor efficiency variance in the Production Department. The unfavorable direct labor efficiency variance resulting from the substitution of the purchased part in inventory would best be assigned to the:
a. inventory supervisor. c. vice president of production.
b. production manager. d. engineering manager.

Answer 9

44. A
45. D
46. A
47. C
48. C
    🔍 Explanation:
    The inventory control supervisor simply reported the unused part.
    The engineering manager confirmed the part could be used with modification.
    The production manager executed the manufacturing process.
    But the vice president of production made the decision to approve the substitution, knowing it would require additional labor.
    Since the variance arose from a strategic decision rather than an operational error, responsibility lies with the decision-maker — the VP of production.

Question 10

60 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

ITEMS 61 AND 62 ARE BASED ON THE FOLLOWING:
Metro Rugs is holding a two-week carpet sale at Ukayan, a local warehouse store. Metro Rugs plans to sell carpets for ₱500 each. The company will purchase the carpets from a local distributor for ₱350 each, with the privilege of returning any unsold units for a full refund. Ukayan has offered Metro Rugs two payment alternatives for the use of space.

Option 1 - A fixed payment of ₱5,000 for the sale period.
Option 2 - 10% of total revenues earned during the sale period.

61 Assume Metro Rugs will incur no other costs. At what level of revenues will Metro Rugs be indifferent between the two payment options?
a. ₱50,000 c. ₱10,000
b. ₱17,000 d. 0

62 At a sales level of 100 units, the degree of operating leverage under Option 2 is
a. 1.50 c. 1.00
b. 5.00 d. 5.50

63 Which one of the following is correct regarding the limitations of cost behavior?
a. Variable costs per unit will not change
b. Total fixed costs will not change in the long run
c. Actual fixed cost usually fall outside the relevant range
d. The relevant range cannot be changed after being established

64 A company was analyzing variances for one of its operations. The initial budget forecast was a production of 20,000 units during the year with a variable manufacturing overhead rate of ₱10 per unit. The company produced 19,000 units during the year. Actual variable manufacturing costs were ₱210,000. What amount would be the company’s flexible budget variance for the year?
a. ₱10,000 favorable. c. ₱10,000 unfavorable.
b. ₱20,000 favorable. d. ₱20,000 unfavorable.

Answer 10

60 B
While this is a commonly cited benefit of hiring consultants, the statement implies that consultants make decisions for the company, which is misleading. Consultants advise, but management retains decision-making authority.

61 A
62 C
63 A
64 D

Question 11

65. A company manufactures and sells two products with selling prices and variable costs as follows:
    . Product A B
    Selling price ₱18.00 ₱22.00
    Variable costs 12.00 14.00
    The company’s total annual fixed costs are ₱38,400. The company sells four units of A for every unit of B. If operating income last year was ₱28,800, what was the number of units that the company sold?
    a. 5,486 c. 9,600
    b. 6,000 d. 10,500
66. A company applies variable overhead based on direct labor hours. At the beginning of the current year, the company had estimated the following:

Estimated variable overhead ₱56,000
Estimated units of production 10,000 units
Standard direct labor hours per unit 2.5 hours

During the year, 11,000 units were produced using a total of 27,200 direct labor hours and actual variable overhead costs were ₱60,000.
The company’s variable overhead efficiency variance for the year was:
a. ₱ 672 F c. ₱ 928 F
b. ₱4,000 U d. ₱ 145 U

67. Which of the following is not likely to affect the supply of a particular good?
    a. Changes in government subsidies
    b. Changes in technology
    c. Changes in consumer income
    d. Changes in production costs
68. In July, direct labor was 60% percent of conversion cost. If the manufacturing overhead cost for the month was ₱38,000 and the direct materials cost was ₱32,000, the direct labor cost was:
    a. ₱21,333 c. ₱25,333
    b. ₱48,000 d. ₱57,000
69. Three major influences on pricing decisions are:
    a. competition, costs, and customers
    b. competition, demand, and production efficiency
    c. continuous improvement, customer satisfaction, and supply
    d. variable costs, fixed costs, and mixed costs

Answer 11

65. D
66. A
67. C
68. D
69. A
    🏆 Competition: What are your rivals charging? Pricing too high might lose you customers, while pricing too low could spark a price war or devalue your brand.
    📊 Costs: You need to cover variable and fixed costs and still make a profit. This sets your floor price — the minimum you can charge without losing money.
    🧍 Customers: Their perceived value, willingness to pay, and price sensitivity determine how much they’re willing to shell out. This sets your ceiling price.
    Together, these three form the core of most pricing strategies — whether you’re using cost-plus, value-based, or competitive pricing models.