PHILIPPINE CHRISTIAN UNIVERSITY – DASMARINAS CITY, CAVITE

COST ACCOUNTING 1
1ST LONG QUIZ

___1. Maggi House makes handmade furniture. Although the company is very
successful, it is
unable to hire enough skilled workers to meet the demand for many of its products. The
company will be most profitable if it produces those products with the highest:
a. contribution margin per direct labor hour.
b. contribution rate.
c. sales per unit.
d. contribution margin per unit.

___2. A 45% contribution rate means that:

a. the company should contribute 45% of its operating income to qualified charities for
maximum tax benefits.
b. 55% of the company’s revenue is consumed by fixed and variable costs.
c. the company’s revenue has increased by 45% during the current accounting period.
d. 45% of the company’s revenue is available to cover fixed costs and to contribute toward
operating income.

___3. In the area of CVP analysis, the contribution margin rate shows how much each peso of
of the sales contributes to:
a. covering the fixed costs of the business and providing operating income.
b. fixed expenses and variable expenses.
c. variable expenses and interest charges.
d. variable expenses when production is at normal capacity.

___4. A semivariable cost:

a. increases and decreases directly and proportionately with changes in volume.
b. changes in response to a change in volume, but not proportionately.
c. increases if volume increases but remains constant if volume decreases.
d. changes inversely in response to a change in volume.

___5. Which of the following is an example of a fixed cost for an airline?

a. Depreciation on the corporate headquarters.
b. Fuel costs.
c. Income taxes expenses.
d. Passengers’ meals

___6. The break-even point in a CVP graph is always found:

a. at 50% of full capacity.
b. at the sales volume resulting in the lowest average unit cost.
c. at the volume at which total revenue equals total variable costs.
d. at the volume at which total revenue equals total fixed costs plus total
variable costs.

___7. A 45% contribution rate means that:

a. The company should contribute 45% of its operating income to qualified
charities for maximum tax benefits.
b. 55% of the company’s revenue is consumed by fixed and variable costs
c. The company’s revenue has increased by 45% during the current accounting
period.

d. 45% of the company’s revenue is available to cover fixed costs and to

contribute toward operating income.

____8. In the area of cost volume profit analysis, the contribution rate show how
much each peso of sales contributions to:
 a. Covering the fixed cost of the business and providing operating income.
b. Fixed expenses and variable expenses.
c. Variable expenses and interest charges.
d. Variable expenses when production is at normal capacity.

____9. In comparison to selling a product with a low contribution rate, selling a

product with a high contribution rate always:

a. Requires lower sales volume to cover a given level of fixed costs.

b. Results in a greater margin of safety.
c. Results in higher operating income.
d. Results in a higher contribution margin per unit sold.

___10. Contribution margin means

a. What remains from total sales after deducting fixed expenses
b. What remains after deducting cost of goods sold to cover fixed and variable
expenses
c. The sum of cost of goods sold and variable expenses.
d. What remains from total sales after deducting all variable expenses.

___11. Which costs will change with a decrease in volume?

a. Total fixed cost and total variable cost
b. Unit fixed cost and total variable cost
c. Unit variable cost and unit fixed cost
d. Unit fixed cost and total fixed cost.

___12. When production levels are expected to decline within a relevant range, what
effects would be anticipated with respect to each of the following?

Fixed costs per unit Variable costs per unit

a. Increase Increase
b. Increase No change
c. No change No change
d. No change Increase

___13. Within a relevant range, the amount of variable cost per unit
a. Differs at each production level.
b. Remains constant at each production level.
c. Increases as production increases.
d. Decreases as production increases.

___14. 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.

____15. A “sunk cost” is

a. a cost that may be saved by not adopting an alternative.
b. a cost that may be shifted to the future with little or no effect on current operations.
c. a cost that cannot be avoided because it has already been incurred.
d. a cost that does not entail any peso outlay but is relevant to the decision making
process.
____16. The term “differential” cost refers to
a. the difference in total costs that results from selecting one alternative instead of
another.
b. the profit forgone by selecting one alternative instead of another.
c. a cost that does not entail any peso outlay but is relevant to the decision making
process.
d. a cost that continues to be incurred even though there is no activity.
____17. The term “standard costs “ refers to
a. manufacturing costs incurred to produce units of output.
b. all costs associated with manufacturing other than direct labor costs and raw material
costs and raw material costs.
c. costs the are predetermined and should be attained.
d. the sum of raw material costs and direct labor costs.

____18. The term “conversion costs” refers to

a. manufacturing costs incurred to produce units of output.
b. all costs associated with manufacturing other than direct labor costs and raw material
costs.
c. costs which are associated with marketing, shipping, warehousing, and billing activities.
d. the sum of direct labor costs and all factory overhead costs.

____19. The term “prime costs” refers to

a. manufacturing costs incurred to produce units of output.
b. all costs associated with manufacturing other than direct labor costs and raw materials
costs.
c. costs which are predetermined and should be attained.
d. the sum of raw material costs and direct labor costs.

____20. The term “discretionary costs” refers to those

a. costs which management decides to incur in the current period to enable the company
to achieve objectives other than the filing of orders placed by customers.
b. costs which are likely to respond to the amount of attention devoted to them by a
specified manager.
c. costs which are governed mainly by past decision that established the present levels
of operating and organizational capacity and which only change slowly in response to
small changes in capacity.
d. amortization of costs which were capitalized in previous periods.

_____21. Duterti Food Imports determines that its shipping expense is Php 18,000 for
16,000 pounds shipped and Php 22,500 form 22,000 pounds shipped. If the
company shipped 18,000 pounds during the current month, projected shipping
cost should be

a. Php 18,500 c. Php 19,500

b. Php 20,400 d. Php 24,000

Casco, 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 Php 26,020 21,000
October Php 24,600 18,500
November Php 22,300 15,000
December Php 25,100 19,000

____22. Assuming Cosco Company uses the high-low method of analysis, the fixed cost of
Maintenance would be estimated to be:
a. 14,500 c. 13,000
b. 5,020 d. 12,320

____23. Assuming Cosco Company uses the high-low method of analysis, if machine hours are
budgeted to be 20,000 hours then the budgeted total maintenance costs would be
expected to be:
a. 25,400 c. 23,700
b. 25,560 d. 24,720

____24. 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 160 617
February 130 553
March 180 596
April 190 623
May 110 532

Using the high-low method of analysis, the estimated variable cost per labor hour for
maintenance is closest to:
a. Php 0.83 c. Php 1.30
b. Php 1.84 d. Php 1.14

____25. The Variable Cost of Goods Sold in the Marin Company totaled Php 325,000.
Fixed selling and administrative expenses totaled Php 115,000 and variable selling
and administrative expenses were Php 210,000. If Marin Company’s contribution
margin totaled Php 590,000, then sales must have been
a. Php 1,125,000 c. Php 650,000
b. Php 1,030,000 d. Php 915,000

Havana Village Assoc is planning another Riverboat Extravaganza. The Extravaganza

Committee has assembled the following expected costs for the event:

Dinner (per person) ………………..…………………………………………….Php 7

Favors and program (per person) …………………………………………………3
Band ……………………………………………………………………………………1,500
Tickets and advertising ……………………………………………………………..700
Riverboat rental ………………………………………………………………………4,800
Floorshow and strolling entertainers ……………………………………….1,000

The committee members would like to charge Php 30 per person for the evening’s
activities.

____26. The break-even point for the Extravaganza (in terms of the number of persons that
must attend) is
a. 300 persons.
b. 350 persons.
c. 450 persons.
d. 400 persons.

____27. Assume that only 250 persons attended the Extravaganza last year. If the same number
attend this year, what price per ticket must be charged to break even?
a. 45
b. 40
c. 43.50
d. 42
Hoopie Company sells a single product. The company’s sales and expenses for a recent
month follow:
Total Per Unit
Sales 600,000 40
Less variable expenses 420,000 28
Contribution Margin 180,000 12
Less fixed expenses 150,000
Net operating income Php 30,000

___28. What is the monthly break-even point in units sold?

a. 12,000 units
b. 12,500 units
c. 15,200 units
d. 11,000 units

___29. How many units would have to be sold each month to earn a minimum target profit of
 Php 18,000.
a. 14,500
b. 12,000
c. 14,000
d. 14,700

____30. What is the company’s margin of safety in percentage terms?

a. 15%
b. 20%
c. 25%
d. 16.7%

“The fear of the Lord is the beginning of wisdom, and knowledge of the Holy One is
understanding.” (Proverbs 9:10)