Junior Philippine Institute of Accountants

Philippine School of Business Administration Manila

General Evaluation-Midterms

Accounting 11
MAS I

1. Since Anytime Pizza is open 24 hours a day, its pizza
oven is constantly on and is, therefore, always using
natural gas. However, when there is no pizza in the
oven, the oven automatically lowers its flame and
reduces its natural gas usage by 70%. The cost of
natural gas would best be described as a:
A) fixed cost.
B) mixed cost.
C) step-variable cost.
D) true variable cost.
2. Within the relevant range, variable costs can be
expected to:
A) vary in total in direct proportion to changes in the
activity level.
B) remain constant in total as the activity level changes.
C) increase on a per unit basis as the activity level
increases.
D) increase on a per unit basis as the activity level
decreases.
E) none of these.
3. Which of the following is correct? The break-even
point occurs on the CVP graph where:
A) total profit equals total expenses.
B) total contribution margin equals total fixed expenses.
C) total profit equals total fixed expenses.
D) total variable expenses equal total contribution
margin.
6. Under variable costing, fixed manufacturing overhead
is:
A) immediately expensed as a period cost.
B) carried in an asset account.
C) ignored.
D) carried in a liability account.
7. Which of the following is true of a company that uses
absorption costing?
A) Net operating income fluctuates directly with
changes in sales volume.
B) Unit product costs can change as a result of changes
in the number of units manufactured.
C) Fixed production and fixed selling costs are
considered to be product costs.
D) Variable selling expenses are included in product
costs.
8. Under absorption costing, fixed manufacturing
overhead costs:
A) are deferred in inventory when production exceeds
sales.
B) are always treated as period costs.
C) are released from inventory when production
exceeds sales.
D) none of these.

4. If a company decreases its total fixed expenses while 9. Which of the following costs at a manufacturing
increasing the variable expense per unit, the total company would be treated as a product cost under both
expense line relative to its previous position on a cost- absorption costing and variable costing?
volume-profit graph will:
A). shift downward and have a steeper slope. Variable overhead Variable selling
and administrative
B) shift upward and have a flatter slope. A) Yes Yes
C) shift upward and have a steeper slope D) shift
B) Yes No
downward and have a flatter slope.
C) No Yes
5. The contribution margin ratio is equal to: D) No No
A) Total manufacturing expenses/Sales.
B) (Sales - Variable expenses)/Sales. 10. Under absorption costing, product costs include:
C) 1 - (Gross Margin/Sales). Fixed factory overhead Variable factory overhead
D) 1 - (Contribution Margin/Sales). A) Yes Yes
B) No Yes
 PROBLEM 1

SomethingNew is a small one-person company that provides elaborate and imaginative wedding cakes to order for very
large wedding receptions. The owner of the company would like to understand the cost structure of the company and
has compiled the following records of activity and costs incurred. The owner believes that the number of weddings
catered is the best measure of activity.
Month Weddings Costs Incurred
January 3 $3,800
February 2 $3,600
March 6 $4,000
April 9 $4,300
May 12 $4,500
June 20 $5,200

Required: (Round off the variable cost per wedding to the nearest cent and the total fixed cost to the nearest dollar.)

A. Using the high-low method, estimate the

1. variable cost per wedding:_____________________
2. the total fixed cost per month:__________________
3. What is the cost formula?________________

PROBLEM 2

Oakford Company, which has only one product, has provided the following data concerning its most recent month of
operations:

Selling price ........................................................... $143

Units in beginning inventory ................................. 0
Units produced ...................................................... 1,200
Units sold ............................................................... 1,000
Units in ending inventory ...................................... 200
Variable costs per unit:
Direct materials .................................................. $33
Direct labor ......................................................... $52
Variable manufacturing overhead ...................... $1
Variable selling and administrative .................... $7
Fixed costs:
Fixed manufacturing overhead ........................... $38,400
Fixed selling and administrative ........................ $4,000

Required: 6. Net Operating Income:_____________

A. Prepare an income statement for the month using
the contribution format and the variable costing B. Prepare an income statement for the month using
method. Find the following: the absorption costing method. Find the following:
4. Contribution Margin:__________________ 7. Gross Margin:______________
5. Variable Selling and administrative 8. Net Operating Income:__________
Expenses:__________
 PROBLEM 3

Required:
Buentello Corporation produces and sells a single Redo the company’s contribution format income
product. The company’s contribution format income statement assuming that the company sells 1,600
statement for January appears below: units.

Sales (1,900 units)………….. P55,100 Sales (1,600 units)…………..( 9)._________

Less Variable expenses……... 22,800 Less Variable expenses……... (10).________
Contribution Margin………… 32,300 Contribution Margin………… (11)________
Less fixed expenses…………..24,900 Less fixed expenses………………….24,900
Net operating income…………..7,400 Net operating income…………..(12)_________

PROBLEM 4

Required:
13. Current ratio. __________________________
14. Acid-test (quick) ratio. ____________________
15. Accounts receivable turnover. __________________
16. Average collection period (age of receivables). _________________
17. Inventory turnover. ____________________
18. Average sale period (turnover in days). ______________________
19. Times interest earned. __________________
20. Debt-to-equity ratio.____________________