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Taccaban, Karen Joy R.

Managerial Accounting Mid -term Examination

Answer the following questions.

1. Peter and Senen Co. sell the same product in a competitive industry. Thus, the selling price of the product for
each company is the same. Other data about the two companies are as follows:

Peter Senen
Fixed Costs P50,000 P70,000
Contribution margin ratio 40% 52%

What are the companies’ break event points?

Data for questions No. 2 through 13

Ethel Corp. produces and sells a single product. The selling price is P25a and the variable cost is P15 per unit. The
corporation’s fixed costs is P100,000 per month. Average monthly sales are 11,000 units.

2. What is the corporation’s contribution margin per unit and as a percent of sales (CMR)?

3. What is the corporation’s break- even point?

4. If the corporation desires to earn profit of P20, 000 before tax, it must generate sales of how much?
5. If the corporation pays corporate income tax at the rate of 30%, and it desires to earn after-tax profit of P21,
000, it must generate sales of how much?
6. How much sales in pesos must be generated to earn profit that is 8% of such sales?
7. How many units must be sold to earn profit of P2 per unit?
8. With average monthly sales of 11,000 units, what is the corporation’s margin of safety?
9. What is the Corporation Margin of safety ratio and the break-even sales ratio?
10. At the present average monthly sales level of 11,000 units, the corporation’s operating leverage factor is what?
11. If fixed costs will increase by P20, 000, the Break-even point in units will increase (decrease) by how much?
12. If variable costs per unit will go up by P5, the peso breakeven sales will increase (decrease) to?
13. If selling price will increase to P30, the break -even point in units will increase (decrease) by how much?
14. If sales increase from P800,000 to P900,000, and if the degree of operating leverage is 5, one could expect profit
to increase by how many percent?
15. A company has an operating leverage factor of 4. When its sales increased to P500,000, its profit before tax
increased by 100%.Its variable cost ratio is 40%. How much is the company’s fixed costs?

Data for questions No. 16 through 24

JYD Corporation uses an absorption costing system for internal reporting purposes. At present, however, it is
considering to use the variable costing system.
Following are some data regarding JYD Corporation’s budgeted and actual operations for the calendar year 2018.

Costs Budgeted Actual

Materials P25,200 P23,400
Labor 18,480 17,160
Taccaban, Karen Joy R.
Variable Factory Overhead 8,400 7,800
Fixed Factory Overhead 10,640 10,000
Variable Selling Expenses 16,800 15,000
Fixed Selling Expenses 14,700 14,700
Variable Administrative Expenses 4,200 3,750
Fixed Administrative Expenses 6,300 6,375
Total P104,720 P98,185

Budgeted Actual
(Units) (Units)
Finished goods inventory beginning 280 280
Production 1,120 1,040
Sales 1,120 1,000

The budgeted costs were computed based on the budgeted production and sales of 1,120 units, the company’s
normal capacity level. The Corporation uses a predetermined factory overhead rate for applying manufacturing
overhead costs to its product. The denominator level used in developing the predetermined rate is the firm’s normal
capacity. Any over or under applied factory overhead cost is closed to cost of goods sold at the end of the year.

There is no work in process inventories at either the beginning or end of the year. The actual selling price was the
same as the amount planned, P130 per unit.

The previous year’s planned per unit manufacturing costs were the same as the current planned unit manufacturing
cost. The beginning inventory of finished goods for absorption costing purposes was valued at such per- unit
manufacturing cost.

16. What is the standard product costs per unit under Absorption Costing and Variable Costing?
17. What are the manufacturing cost variances for Variable Manufacturing Cost and Fixed Manufacturing cost?
18. What is the Corporation’s operating income (loss) under both the absorption and variable costing methods?
19. What were the values of the company’s actual ending finished goods inventory under the absorption and
variable costing methods?
20. What were the Corporation’s total fixed costs expensed this year on both absorption and variable costing
21. What was the Corporation’s actual manufacturing contribution margin for the year calculated on the variable
costing basis?
22. What was the Corporation’s actual contribution margin for the year calculated on the variable costing method?
23. What were the total variable costs expensed currently by the corporation under the absorption and variable
costing bases?
24. The difference between the Corporations’ operating income calculated on the absorption costing basis and that
on the variable costing basis was how much?
Taccaban, Karen Joy R.

Data for Questions 25 through 35

Petesy Corporation is preparing its Master Budget for 2019. Budget information is as follows:

Sales Production Cost Operating Expenses

2019 1 Quarter P280,000 P192,000 P64,000
2nd Quarter 320,000 200,000 68,000
3rd Quarter 360,000 224,000 72,000
4th Quarter 352,000 200,000 76,000
2020 1st Quarter 320,000 224,000 72,000

The budgeted Finished Goods Inventories are:

2018 March 31 P56,000
June 30 52,000
September 30 60,000
December 31 48,000

The company uses the JIT system on its purchase of materials. It buys materials on cash basis.
Included in the production cost each quarter is P44, 000 in depreciation. The operating expenses include
depreciation of P12,000 per quarter. All production costs and operating expenses, with the exemption of
depreciation are to be paid during the quarter of incurrence.
Collections on sales are planned at 60% during the quarter of sales, the balance during the quarter following the
sale. Dividends of P20,000 is to be paid in June and again in December if covered by sufficient profits. No dividends
will be paid if the net profit is less than P120,000.
Income Tax is equal to 32 of the quarter’s income before tax and is paid in the following quarter.
The Statement of Financial Position as of December 31, 2018 is as follows:

Petesy Corporation
Statement of Financial Position
December 31, 2018
Assets Equities
Cash P76,000 Income tax payable P 12,000
Accounts Receivable 120,000
Inventory 44,000 Share Capital 640,000
Plant and Equipment 580,000 Retained Earnings 168,000
Total 820,000 Total P820,000

25. How much was the actual sales during the last quarter of 2018?
Answer: 300,000
26. What is the total budgeted cost of goods sold for the year 2019?
Answer: 816,000
Solution: 192,000+200,000+224,000+200,000 = 816,000

27. How much dividends will be paid in 2019?

Answer: 0
Taccaban, Karen Joy R.
28. What is the total budgeted cash disbursements for production costs and operating expenses for the year 2019?
Answer: 872,000
Solution: 200,000+212,000+240,000+220,000 = 872,000

29. What is the budgeted cash balance on December 31, 2019?

Answer: 455,200
30. What is the expected balance of accounts receivable as of December 31, 2019?
Answer: 140,800

31. What is the budgeted balance of raw materials inventory as of December 31, 2019?
Answer: 48,000
32. What is the expected balance of Income tax payable as of December 31, 2019?
Answer: 20,480
33. What is the budgeted balance of Retained Earnings as of December 31, 2019?
Answer: 277,600
34. What is the expected balance of the plant and equipment account as of December 31, 2019?
Answer: 356,000
35. If a budgeted statement of financial position as at December 31, 2019 is to be prepared, total assets will be how
Answer: 938,080

Data for Questions 36 through 38

The accountant of JYD Corporation prepared the following cost analysis report on direct labor costs for the jobs
completed during the previous months:

Job Actual Hrs. at Actual Rates Actual Hrs. at Standard Rates Standard Hrs. at Standard Rates
105 P2,270 P2,590 P2,170
110 10,740 10,970 10,500
117 4,730 4,900 4,620
120 13,850 13,600 13,480
Total P31,590 P32,060 P30,770

36. What is the total direct labor variance for the jobs completed?
37. What is the labor rate variance?
38. What is the labor efficiency variance?

Data for Questions 39 through

The following information pertains to Peter Senen Company’s production on a one unit of Product A:
Quantity Price Cost per Unit
Materials-standard 7.5 kgs P0.30/kg P2.25/unit
Labor –standard .6 hr. 10.00/hr. 6.00/unit

During the period, the company produced 15,000 units of Product A. It purchased 140,000 kgs. of materials at P0.25 per
kilo. It incurred direct labor cost of P90,780 at P10.20 per labor hour used. At the end of the period, the company’s
Taccaban, Karen Joy R.
inventory of materials increased by 25,000 kgs. The company recognizes the material price variance when materials are

39. How much was the company’s material price variance?

40. What was the company’s materials quantity variance?

End of the Examination. Good Luck!