Answers to Multiple Choice Questions

MAS by Cabrera
Chapter 1:
1. D 11. D 21. B 31. D 41. A 51. B
2. D 12. D 22. B 32. C 42. C 52. B
3. D 13. D 23. A 33. D 43. D 53. A
4. B 14. A 24. A 34. B 44. B 54. C
5. D 15. A 25. B 35. D 45. C 55. D
6. A 16. A 26. C 36. B 46. B 56. C
7. B 17. D 27. B 37. C 47. A 57. C
8. D 18. A 28. D 38. B 48. B 58. C
9. D 19. D 29. B 39. A 49. C 59. A
10. A 20. D 30. C 40. A 50. D 60. B

Chapter 2: Chapter 3:
11. B 21. A 31. B 1. D 11. B 21. B 31. B
12. A 22. B 32. C 2. D 12. C 22. C 32. D
13. D 23. C 33. C 3. D 13. D 23. A 33. D
14. A 24. D 4. B 14. A 24. B 34. D
15. D 25. A 5. A 15. D 25. A 35. C
16. A 26. A 6. B 16. A 26. D 36. A
17. C 27. B 7. D 17. A 27. B 37. A
18. B 28. C 8. C 18. B 28. B 38. C
19. D 29. B 9. B 19. C 29. D
20. B 30. A 10. C 20. C 30. C

Chapter 4:
1. D 11. A, C, D
2. A 12. B*
3. A 13. D
4. B
5. D
6. C
7. C
8. A
9. D
10. C

* (P400,000 P160,000) P160,000 = 150%

Chapter 5:
1. A 11. C 21. B 31. C 41. C
2. C 12. A 22. D 32. D
3. D 13. C 23. A 33. C
4. B 14. B 24. C 34. A
5. A 15. D 25. A 35. A
6. D 16. B 26. C 36. C
7. C 17. A 27. D 37. A
8. D 18. C 28. A 38. A
9. A 19. A 29. D 39. C
10. B 20. C 30. A 40. C

Chapter 6:
1. D 4. D 7. C 10. B
2. C 5. B 8. B 11. A
3. D 6. D 9. A 12. D

Chapter 7:
1. B 5. A 9. A 13. A 17. A 21. C
2. B 6. B 10. A 14. D 18. B 22. A
3. C 7. B 11. D* 15. C 19. C 23. B
4. D 8. B 12. C 16. A 20. D

* Supporting computation for no. 11:

Diluted EPS for 12/31/2006 = P3,500,000 + (P800,000 x 65%)

400,000 + 25,000 + 225,000
P4,020,000
= or P6.18
650,000
 Chapter 8:
1. B 7. C 13. D 19. A 25. C
2. D 8. D 14. D 20. A* 26. B
3. B 9. C 15. B 21. B 27. B
4. A 10. C 16. A 22. B 28. A **
5. C 11. A 17. C 23. C 29. A
6. D 12. C 18. C 24. C 30. B

* Controllable costs are those costs that can be influenced by a specified manager within a given time period.
** The answer assumes absorption costing method is used.

Supporting Computations
14. P60 + P10 + P18 + P4 = P92 16. P60+P10+P18+P32=P120
15. P32 + P16 = P48 17. P4 + P16 = P20

Chapter 9:
1. A 11. C* 21. C 31. D 41. B
2. D 12. C* 22. D 32. B 42. D
3. B 13. C 23. C 33. A 43. C
4. A 14. A 24. A 34. B
5. B 15. D 25. D 35. A
6. B 16. C 26. B 36. D
7. C 17. D 27. D 37. B
8. D 18. B 28. B 38. C
9. C 19. C 29. A 39. B
10. A 20. C 30. D 40. D

* Supporting Computations:
11. (10,000 x 2) (P3,000 x 2) P5,000 = P9,000
12. [(P20 + P3 + P6) x 2,000 units] + (P10 x 1,000 units) = P68,000

Chapter 10:
1. D 6. D 11. A 16. A
2. D 7. A 12. D 17. D
3. D 8. C 13. B 18. A
4. C 9. C 14. D 19. C
5. D 10. B 15. C 20. D

Chapter 11: Chapter 12:

1. A 11. B 21. D 1. D 11. B
2. D 12. D 22. A 2. B 12. A
3. C 13. C 23. B 3. B 13. C
4. B 14. A 24. A 4. B 14. D
5. A 15. C 25. B 5. B 15. B
6. D 16. D 26. D 6. C 16. A
7. A 17. D 27. B 7. A 17. C
8. B 18. C 28. C 8. B 18. C
9. D 19. B 29. A 9. A 19. B
10. C 20. A 30. C 10. A 20. C

Chapter 13:
1. B 6. B 11. B 16. D 21. A 26. A
2. B 7. D 12. A 17. D 22. D 27. B
3. B 8. B 13. A 18. D 23. C 28. C
4. C 9. A 14. C 19. C 24. B 29. B
5. C 10. D 15. D 20. D 25. C 30. A

Chapter 14: Chapter 15:

1. C 11. E 21. C 31. B 1. B 11. C 21. C
2. D 12. D 22. B 32. D 2. B 12. B 22. C
3. A 13. C 23. A 33. D 3. C 13. C 23. D
4. A 14. C 24. D 34. D 4. E 14. B 24. C
5. C 15. B 25. B 35. C 5. C 15. D 25. C
6. A 16. C 26. A 36. D 6. C 16. C 26. C
7. D 17. B 27. A 37. B 7. D 17. A 27. D
8. A 18. A 28. B 38. D 8. C 18. B 28. A
9. C 19. B 29. D 39. B 9. A 19. E 29. C
10. A 20. A 30. A 40. D 10. D 20. B 30. D
Chapter 15:
Supporting computations:
Questions 16 to 20:
January February
Cost of sales P1,400,000 P1,640,000
Add: Desired Minimum Inventory 492,000 456,000
Total 1,892,000 2,096,000
Less: Beginning Inventory (1,400,000 x 0.3) (17) 420,000 492,000
Gross Purchases (16) 1,472,000 1,604,000
Less: Cash discount 14,720 16,040
Net cost of purchases P1,457,280 P1,587,960

Payments of Purchases
60% - month of purchase P874,368 P 952,776
40% - following month 582,912
Total (18) P1,535,688

(19) February
Cash
Gross Discount Net
Current months sales (with
discount) 35% P595,000 P11,900 P583,100
Current months sales (without
discount) 15% 255,000 0 255,000
Previous months sales (with
discount) 4.5% 67,500 1,350 66,150
Previous months sales (without
discount) 40.5% 607,500 607,500
P1,525,000 P13,250 P1,511,750

(20)Total Collections in February P1,511,750

Add: Cash sales 350,000
Total P1,861,750
(21)Estimated cash receipts
Collections from customers P1,350,000
Proceeds from issuance of common stock 500,000
Proceeds from short-term borrowing 100,000
Total P1,950,000
Less: Estimated cash disbursements
For cost and expenses P1,200,000
For income taxes 90,000
Purchase of fixed asset 400,000
Payment on short-term borrowings 50,000
Total 1,740,000
Cash balance, Dec. 31 P 210,000

(22)Net income P120,000

Add: Depreciation 65,000
Working capital provided from operations P185,000
Add: Increase in income taxes payable P 80,000
Increase in provision for doubtful
accounts receivable 45,000 125,000
Total P310,000
Less: Increase in accounts receivable P 35,000
Decrease in accounts payable 25,000 60,000
Increase in cash P250,000

(23)Cash Receipts for February 2005

From February sales (60% x 110,000) P 66,000
From January sales 38,000
Total P104,000

(24)Pro-forma Income Statement, February 2005

Sales P110,000
Cost of sales (75%) 82,500
Gross profit P 27,500
Less: Operating expenses 16,500
 Depreciation 5,000
Bad debts 2,200 23,700
Net operating income P 3,800

(25)Accounts Payable on February 28, 2005 will be the unpaid purchases in February - (75% x P120,000) = P90,000.

Questions 26 to 29:

Net sales P2,000,000

Less: Cost of sales
Finished goods inventory, Jan. 1 P 350,000
Add: Cost of goods manufactured (Sch. I) 1,350,000 *
Total available for sale P1,700,000
Less: Finished goods inventory, Dec. 31 400,000 1,300,000 (26)
Gross Profit P 700,000
Less: Operating and financial expenses
Selling P 300,000
Administrative 180,000
Finance 20,000 500,000
Net income before taxes P 200,000

* Determined by working back from net income to sales.

Schedule I

Raw materials used

Raw materials inventory, Jan. 1 P 250,000
Add: Purchases 491,000 (29)
Total available 741,000
Less: Raw materials inventory, Dec. 31 300,000
Raw materials used P 441,000
Direct labor 588,000
Manufacturing overhead 441,000 (28)
Total Manufacturing Cost P1,470,000 (27)
Add: Work-in-process inventory, Jan. 1 200,000
Total P1,670,000
Less: Work-in-process inventory, Dec. 31 320,000
Cost of goods manufactured P1,350,000

(30)Variable factory overhead

P150,000
P3.125
48,000
Fixed factory overhead
P240,000
5.000
48,000
Total factory overhead P8.125

Chapter 16:
1. C 11. B 21. A 31. A 41. B
2. C 12. A 22. C 32. B 42. C
3. A 13. B 23. C 33. B 43. D
4. B 14. C 24. C 34. D 44. A
5. A 15. A 25. C 35. B 45. B
6. B 16. D 26. D 36. B
7. C 17. D 27. E 37. C
8. C 18. A 28. B 38. D
9. B 19. D 29. B 39. D
10. B 20. B 30. A 40. A

Chapter 17:
6. A 6. C 31. B 41. B 46. B
7. A 7. B 32. D 42. C 47. D
8. B 8. D 33. C 43. D 48. B
9. B 9. A 34. B 44. D 49. B
10. B 10. D 35. A 45. A 50. D
 Chapter 18:
1. C 11. D 21. D 31. C
2. B 12. C 22. C 32. D
3. D 13. A 23. C 33. A
4. B 14. A 24. D 34. C
5. D 15. A 25. D 35. D
6. C 16. C 26. B 36. C
7. A 17. C 27. D 37. D
8. A 18. D 28. E 38. D
9. A 19. C 29. B
10. C 20. D 30. A

Chapter 19:
1. C 11. D 21. D 31. A
2. C 12. A 22. A 32. D
3. B 13. D 23. D 33. C
4. B 14. A 24. E 34. A
5. A 15. D 25. B 35. C
6. B 16. C 26. D
7. C 17. A 27. D
8. B 18. C 28. C
9. A 19. B 29. A
10. B 20. C 30. A

Supporting computations for nos. 16 - 29:

16. Sales [(100,000 x 90%) x (P5.00 x 120%)] P540,000

Less: Variable costs (P300,000 x 90%) 270,000
Contribution margin P270,000
Less: Fixed costs 150,000
Operating income P120,000

17. Direct materials P 4

Direct labor 5
Overhead 2
Selling cost 3
Minimum selling price per unit P14

18. Relevant cost to make (10,000 x P24) P240,000

Purchase cost P300,000
Less: Savings in manufacturing cost P45,000
Avoidable fixed overhead 50,000 95,000
Net purchase price P205,000
Difference in favor of buy alternative P 35,000

19. Increase in sales (60,000 x P3) P180,000

Less: Increase in variable cost (60,000 x P2.50) 150,000
Net increase in income P 30,000

20. R S T
Sales (10,000 x P20) P200,000 P200,000 P200,000
Less: Variable costs
R (P12 x 10,000) 120,000
S (P 8 x 10,000) 80,000
T (P 4 x 10,000) 40,000
Contribution margin P 80,000 P120,000 P160,000

21. R S T
Sales (P16 x 15,000) P240,000 P240,000 P240,000
Less: Variable costs
R (P12 x 15,000) 180,000
S (P 8 x 15,000) 120,000
T (P 4 x 15,000) 60,000
Contribution margin P 60,000 P120,000 P180,000
Less: Fixed costs 40,000 80,000 120,000
Operating income P 20,000 P 40,000 P 60,000
22. Old operating income:
Contribution margin P80,000
Less: Fixed cost 40,000
P40,000
New operating income 20,000
Difference - decrease P20,000

23. Sales P1,200,000

Less: Variable costs
Direct materials P300,000
Direct labor 400,000
Factory overhead 80,000
Marketing expenses 70,000
Administrative expenses 50,000 900,000
Contribution margin P 300,000
Less: Fixed costs
Factory overhead P 50,000
Marketing expenses 30,000
Administrative expenses 20,000
Increase in fixed costs 10,000 110,000
Profit P 190,000

24. Sales P1,200,000

Less: Variable costs
Direct materials P275,000
Direct labor 375,000
Factory overhead 80,000
Marketing expenses 70,000
Administrative expenses 50,000 850,000
Contribution margin P 350,000
Less: Fixed costs
Factory overhead P 50,000
Marketing expenses 30,000
Administrative expenses 20,000
Decrease in fixed costs
(P25,000 4) (6,250) 93,750
Profit P 256,250

25. Direct materials (P2 x 5,000) P10,000

Direct labor (P8 x 5,000) 40,000
Variable overhead (P4 x 5,000) 20,000
Total variable costs P70,000
Add: Avoidable fixed overhead 10,000
Total P80,000

26. Avoidable fixed overhead P 4

Direct materials 4
Direct labor 16
Variable overhead 18
Total P42
Multiplied by: Number of units to be produced 20,000
Total relevant costs to make the part P840,000
27. Purchase cost (P1.25 x 10,000) P12,500
Variable costs to make 10,000
Savings of making the blade P 2,500

28. Selling price per unit P17

Less: Variable costs of goods sold per unit
([P320,000 - P80,000] 20,000 units) 12
Contribution margin per unit P 5
Multiplied by units to be sold under Special Order 2,000
Increase in operating income P10,000

29. Budgeted operating income:

Contribution margin (P2,000,000 x 30%) P600,000
Less fixed costs 400,000
Net operating income P200,000
Operating income under the proposal:
 Sales P2,000,000
Less Variable costs
([70% x P2,000,000] x 80%) 1,120,000
Contribution margin P 880,000
Less fixed costs 520,000 360,000
Increase in budgeted operating profit P160,000

Chapter 20:
1. D 11. D 21. C 31. D
2. C 12. D 22. B 32. C
3. B 13. D 23. C 33. C
4. B 14. C 24. D 34. D
5. A 15. C 25. C 35. D
6. C 16. D 26. C 36. B
7. D 17. D 27. D 37. B
8. B 18. B 28. B 38. B
9. B 19. A 29. D 39. D
10. A 20. A 30. A 40. B

Chapter 21: Chapter 22:

1. B 6. A 11. A 1. A 6. A 11. D
2. C 7. C 12. B 2. B 7. B 12. D
3. B 8. B 3. C 8. D 13. B
4. B 9. D 4. D 9. A 14. C
5. B 10. C 5. D 10. C 15. A

Chapter 23:
6. D 11. C
7. D 12. D
8. C 13. C
9. A 14. D
10. A 15. A

Chapter 24:
1. A 11. B 21. C 31. A
2. B 12. D 22. D 32. A
3. C 13. C 23. C 33. B
4. C 14. A 24. A 34. A
5. D 15. C 25. C 35. C
6. B 16. C 26. D 36. B
7. A 17. A 27. A 37. D
8. C 18. C 28. C
9. B 19. B 29. D
10. A 20. A 30. D

Chapter 25:
1. A 11. A 21. A
2. C 12. B 22. D
3. B 13. A 23. C
4. D 14. B 24. D
5. A 15. C
6. C 16. D
7. C 17. B
8. B 18. C
9. C 19. A
10. D 20. D
Supporting Computations:
Operational partial productivity
2005 2006
Input Partial Input Partial
Resource Productivit Resource Productivit
Output Used y Output Used y
X-45 60,000 75,000 = 0.8 64,000 89,600 = 0.7143

Direct
labor 60,000 10,000 = 6.0 64,000 10,847 = 5.9002

Financial partial productivity

 2005 2006
Cost of Cost of
Input Partial Input Partial
Units of Resource Productivit Units of Resource Productivit
Output Used y Output Used y
X-45 60,000 P540,000 = 0.1111 64,000 P609,280 = 0.1050

Direct
labor 60,000 300,000 = 0.2 64,000 P347,104 = 0.1844
Total productivity in units
2005 2006
(a) Total units manufactured 60,000 64,000
(b) Total variable manufacturing costs
incurred P840,000 P956,384
(c) Total productivity (a) (b) 0.071429 (5) 0.066919
(d) Decrease in productivity 0.071429 0.066919 = 0.00451 (6)

Total productivity in sales pesos

2005 2006
(a) Total sales P1,500,000 P1,600,000
(b) Total variable manufacturing costs
incurred P840,000 P956,384
(c) Total productivity (a) (b) P1.7857 (5) P1.6730
(d) Decrease in productivity P1.7857 P1.6730 = P0.1127 (6)
(7) Operational partial productivity:
Actual Production 9,500
Operational Partial Productivity = = = 1.06
Actual Input 8,950

(8) Financial partial productivity:

2005 2006
(1) Output 400,000 486,000
(2) Direct materials:
Quantity 160 180
Unit cost x P3,375 x P3,125
Total direct materials cost P540,000 P562,500
(3) DM financial partial productivity
(1) (2) 0.7407 0.864
(4) Direct labor:
Hour spent 10,000 13,500
Hourly wage x P26 x P25
Total direct labor cost P260,000 P337,500
(5) DL financial partial productivity
(1) (4) 1.5385 1.44

(9) Total productivity:

2005 2006
(1) Output 400,000 486,000
Total cost:
Direct materials P540,000 P562,500
cost
Direct labor cost 260,000 337,500
(2) Total cost P800,000 P900,000
(3) Total productivity (1) (2) 0.5 0.54

Market Share

Firm Total Market Market Share

Actual 100,000 / 2,000,000 = 5%
Budget 90,000 / 1,500,000 = 6%

1. Market size variance: (2,000,000 1,500,000) x 0.06 x P8 = P240,000 F (10)

2. Market share variance: (5% - 6%) x 2,000,000 x P8 = P160,000 U (11)
3. Sales quantity variance: (100,000 90,000) x P8 = P 80,000 F (12)
 (13)
Product A Product B Total
Budgeted sales unit 30,000 60,000 90,000
Budgeted contribution margin per
unit x P4.00 x P10.00
Budgeted total contribution margin P120,000 P600,000 P720,000
Budgeted average contribution
margin per unit P8.00

(14)
Product A Product B Total
Actual units sold 35,000 65,000
Budgets sales unit 30,000 60,000
Differences in sales units 5,000 5,000
Budgeted contribution margin per
unit x P4.00 x P10.00
Sales volume contribution margin
variance P20,000 F P50,000 F P70,000 F

Sales mixes:
Budgeted Actual
Unit % Unit %
Product A 30,000 1/3 35,000 35
Product B 60,000 2/3 65,000 65
TOTAL 90,000 100 100,000 100

(15)Sales mix contribution margin variance:

Product A: (0.35 1/3) x 100,000 x P4 = P 6,667 F
Product B: (0.65 2/3) x 100,000 x P10 = 16,667 U
Total sales mix contribution margin variance P10,000 U

(16)Sales quantity contribution margin variance:

Product A: (100,000 90,000) x 1/3 x P4 = P13,333 F
Product B: (100,000 90,000) x 2/3 x P10 = 66,667 F
Total sales quantity contribution margin variance P80,000 F

(17)Weighted average budget contribution margin per unit:

P8.00 (calculated in no. 13)
Market size contribution margin variance:
(2,000,000 1,500,000) x 90,000 / 1,500,000 x P8 = P240,000 F

(18)Market share contribution margin variance:

(100,000 / 2,000,000 90,000 / 1,500,000) x 2,000,000 x P8 =
P160,000 U

(19)Flexible budget contribution margin variance:

Flexible
Budget
Total Contribution margin Contribution
Actual Operating Flexible Budget Margin
Result Variance
Product A 35,000 x P3 = 35,000 x P4 = P 35,000 U
P105,000 P140,000
Product B 65,000 x P12 = 65,000 x P10 = P130,000 F
P780,000 P650,000
TOTAL P885,000 P790,000 P 95,000 F

(20)Total contribution margin price variance (given) P50,000 F

Sales price variance:
Product A: (P12 P10) x 35,000 = P70,000 F
Product B: (P24 P25) x 65,000 = P65,000 U
Total sales price variance 5,000 F
Total variable cost price variance P45,000 F

(21)Total flexible budget contribution margin variance P95,000 F

Total contribution margin price variance (given) 50,000 F
Total variance cost efficiency variance P45,000 F
(22)Sales mix ratio:
Actual Budget
Quantity Ratio Quantity Ratio
R66 1,000 0.50 1,200 0.75
R100 1,000 0.50 400 0.25
TOTAL 2,000 1.00 1,600 1.00

R66 sales quantity variance: (2,000 1,600) x 0.75 x P10 = P3,000 F

(23)R100 sales mix variance: (0.5 0.25) x 2,000 x P70 = P35,000 F

(24)Total sales volume variance:

R66: (1,000 1,200) x P10 = P 2,000 U

R100: (1,000 400) x P70 = 42,000 F
Total P40,000 F

Chapter 26: Chapter 27:

1. C 11. C 21. C 1. C 11. C
2. A 12. B 22. D 2. B 12. A
3. D 13. D 23. B 3. C 13. C
4. C 14. B 24. D 4. D 14. B
5. B 15. A 5. D 15. C
6. D 16. D 6. A 16. D
7. D 17. C 7. C 17. D
8. A 18. B 8. C 18. D
9. D 19. B 9. D 19. A
10. B 20. B 10. D 20. A