FIN 073: Strategic Cost Management

Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

COMMON FINAL EXAM Materials:

Pen and non-scientific
calculator

GENERAL DIRECTIONS
READ THIS PAGE BEFORE STARTING THE ASSESSMENT

This is a 13 paged test and is composed of 1 section and has a total score of 70 points. You have 1
Hour to finish this examination. The breakdown of the exam is as follows:

(1) Multiple-choice questions - The questions in this LEARNING OBJECTIVE:

section is with four answer choices. The test is
composed of 70 questions and is rated as 1 point each. This assessment measures the
competence of the student in terms of
All things unnecessary for the test must be put in front of the his/her application of knowledge and skills
testing area. Use BLACK or BLUE ink ballpen only. Write all your in the following topics:
answers on the designated answer sheet. Further, erasures are 1. Objectives, role and scope of
strictly NOT allowed and will invalidate your answers. Managerial Accounting.
2. Cost terms and concepts
You may NOT use smart phones or reference materials during 3. Cost Behavior
the testing session. Only the allowed calculators should be used. 4. CVP Analysis
5. Absorption costing
Try to answer all questions. In general, if you have some 6. Activity-based costing and
knowledge about a question, it is better to try to answer it. You Management
will not be penalized for guessing. 7. Standard costing
8. Financial planning and budgets
9. Strategic cost management
Be sure to allocate your time carefully so you can complete the
entire test within the exam session. You may go back and review
your answers at any time during the exam session.

Those who are caught cheating or doing acts not allowed during the exam shall be instructed to
surrender their test papers and shall leave the testing room immediately. Subsequently, their papers
shall be rated as ZERO.

This concludes the instruction page.

You may now begin answering.

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 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

Shade the letter of your answer on the answer sheet.

1. That kind of accounting concerned with providing information to management in making

decisions about the operations of the business
a. Responsibility accounting c. Management accounting
b. Cost accounting d. Financial accounting

2. In financial accounting, certain rules and regulations must be followed on how financial
statements must be presented to the reader. In managerial accounting, no such restrictions
generally apply because it is:
a. An entirely different field that need not observe the broad guidelines in financial accounting.
b. Designed to provide management with non-financial information for decision-making.
c. Designed to provide accounting and other financial data to assist management in making
business decisions.
d. All of the above.

3. Controllership has attained special recognition in corporate management as business expand in

complexity and reach and as the controller exerts influence for to take organization’s goals.
Controllership and treasurership constitute corporate finance. These are among corporate
finance’s traditional functions.
1. Tax management 5. Reporting to government regulatory agencies
2. Finance reporting and interpretation 6. Risk management
3. Credit management 7. Economic appraisal
4. Sourcing and investing funds 8. Planning for control

Which of the following are the functions of the controller?

a. All eight items c. Items 1, 2, 3, 4, 5, 7 and 8 only
b. Items 1, 2, 5, 7 and 8 only d. Items 2, 3, 5, 7 and 8 only.

4. Staff management includes

a. manufacturing managers. c. purchasing managers.
b. human-resource managers. d. distribution managers.

5. The Standards of Ethical Conduct for Management Accountants developed by the Institute of
Management Accountants contain a policy regarding confidentiality that requires management
accountants to refrain from disclosing confidential information acquired in the course of their
work:
a. except when authorized by management.
b. in all situations.
c. except when authorized by management or unless legally obligated to do so.
d. in all cases not prohibited by law.

6. Property taxes on a company's factory building would be classified as a(n):

a. product cost. b. opportunity cost. c. period cost. d. variable cost.

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 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

7. John Johnson decided to leave his former job where he earned ₱12 per hour to go to a new job
where he will earn ₱13 per hour. In the decision process, the former wage of ₱12 per hour
would be classified as a(n):
a. sunk cost. b. direct cost. c. fixed cost. d. opportunity cost.

8. Ross Corporation shipped finished goods to a customer on credit, but the sale was not recorded
and the costs of the finished goods were incorrectly included on the period's balance sheet as
part of the finished goods inventory. Which one of the following statements is correct concerning
the effects of this error?
a. Accounts receivable was not affected, inventory was overstated, sales were understated, and
cost of goods sold was understated.
b. Accounts receivable was understated, inventory was not affected, sales were understated,
and cost of goods sold was understated.
c. Accounts receivable was understated, inventory was overstated, sales were understated, and
cost of goods sold was overstated.
d. Accounts receivable was understated, inventory was overstated, sales were understated, and
cost of goods sold was understated.

9. Aable Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is
₱45,000 and if direct materials are ₱53,000, the manufacturing overhead is:
a. ₱11,250 b. ₱13,250 c. ₱180,000 d. ₱24,500

10. Within the relevant range, the difference between variable costs and fixed costs is:
a. variable costs per unit fluctuate and fixed cost per unit remains constant.
b. variable cost per unit is constant and fixed cost per unit fluctuates.
c. both total variable cost and total fixed cost are constant.
d. both total variable cost and total fixed cost fluctuate.

11. The following data have been collected for four different cost items.
Cost Item Cost at 100 units Cost at 140 units
W ₱8,000 ₱10,560
X ₱5,000 ₱5,000
Y ₱6,500 ₱9,100
Z ₱6,700 ₱8,580

Which of the following classifications of these cost items by cost behavior is correct?
Cost W Cost X Cost Y Cost Z
a. variable fixed mixed variable
b. mixed fixed variable mixed
c. variable fixed variable variable
d. mixed fixed mixed mixed

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 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

Use the following to answer the next 2 questions:

The management of the Medulla Fitness Club believes that the attendance by its members is an
appropriate activity measure for total operating cost Shown below are attendance figures and total
operating costs for the past six months:
Members Operating Attendance Cost
Jan 150,000 ₱786,000
Feb 130,000 ₱735,000
Mar 160,000 ₱792,000
Apr 120,000 ₱706,000
May 170,000 ₱799,000
Jun 190,000 ₱874,000

12. If Medulla expects to have 180,000 members attend the club in July, what will the estimated
total operating cost be using the high-low method?
a. ₱836,500 b. ₱837,000 c. ₱850,000 d. ₱852,000

13. What is Medulla's dependent variable?

a. the month c. the total operating cost
b. the members' attendance d. the relevant range

14. Tomas Ocampo has just been appointed chairperson of the Accountancy Department of ADEB
College. In reviewing the department’s cost records, Tomas has found the following total cost
associated with MAS Part 2 subject over the last several terms:
Semester/Term Number of Subjects Offered Total Cost
AY2004, First Semester 4 P10,000
AY2004, Second 6 14,000
Semester
AY2004, Summer 2 7,000
AY2005, First Semester 5 13,000
AY2005, Second 3 9,500
Semester
Tomas knows that there are some variable costs, such as amounts paid to student assistants,
associated with the course. He would like to have variable and fixed cost components separated
for planning purposes.
Using the least-squares method, what is the variable cost per section of MAS?
a. P1,750 b. P1,500 c. P1,200 d. P 900

15. R-squared is a measure of

a. the spurious relationship between cost and activity
b. the fixed cost component
c. the variable cost per unit of activity
d. how well the regression line accounts for the changes in the dependent variable

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 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

16. The correlation coefficient that indicates the weakest linear association between two variables
is:
a. -0.73 b. -0.110 c. 0.100 d. 0.35

17. If a company decreases its total fixed expenses while increasing the variable expense per unit,
the total expense line relative to its previous position on a cost-volume-profit graph will:
a. shift upward and have a steeper slope. c. shift downward and have a steeper slope.
b. shift upward and have a flatter slope. d. shift downward and have a flatter slope.

18. Barney, Inc., is subject to a 40% income tax rate. The following data pertain to the period just
ended when the company produced and sold 45,000 units:
Sales revenue ₱1,350,000
Variable costs 810,000
Fixed costs 432,000
How many units must Barney sell to earn an after-tax profit of ₱180,000?
a. 1,530,000. b. 1,830,000. c. 51,000. d. 61,000.

19. Mrs. Granberry is going to sell Christmas tree lights for ₱20 a box. The lights cost Marsha ₱5 a
unit and any unsold lights can be returned for a full refund. She is planning to rent a booth at
the upcoming Happy Holidays Convention, which offers three options:
1. paying a fixed fee of ₱1,500, or
2. paying a ₱500 fee plus 10% of revenues made at the convention, or
3. paying 25% of revenues made at the convention.

Which of the following statements is false?

a. Her decision will determine the risk she faces.
b. Contribution margin will vary depending upon the option chosen.
c. One of the options will allow Marsha to break even, even if she doesn't sell any lights.
d. Operating income will be the greatest for Option 3.

20. During the month of June, Armani Corporation produced 12,000 units and sold them for P20 per
unit. Total fixed costs for the period were P154,000, and the operating profit was P26,000. The
variable cost per unit for June was
a. P4.50 b. P5.00 c. P6.00 d. P7.17

21. In the middle of the year, the price of Lake Corporation's major raw material increased by 8%.
How would this increase affect the company's break-even point and margin of safety?
Break-even point Margin of safety
a. Increase Increase
b. Increase Decrease
c. Decrease Decrease
d. Decrease Increase

22. In a company with low operating leverage:

a. fixed costs are high and variable costs are low

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 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

b. large changes in sales volume result in small changes in net income

c. there is a higher possibility of net loss than a higher-leveraged firm
d. less risk is assumed than in a highly leveraged firm

23. The following information relates to Zinc Corporation for last year:
Sales ........................................................... ₱500,000
Net operating income ................................ ₱25,000
Degree of operating leverage .................... 5

Sales at Zinc are expected to be ₱600,000 next year. Assuming no change in cost structure,
this means that net operating income for next year should be:
a. ₱30,000 b. ₱45,000 c. ₱50,000 d. ₱125,000

24. The Alpine Company’s year-end income statement is as follows:

Sales (20,000 units) P360,000
Variable costs 220,000
Contribution margin P140,000
Fixed costs 105,000
Net income P 35,000

Alpine’s management is unhappy with the results and plans to make some changes for next
year. If management implements a new marketing program, fixed costs are expected to
increase by P19,200 and variable costs to increase by P1 per unit. Unit sales are expected to
increase by 15 percent. What is the effect on income if the foregoing changes are
implemented?
a. decrease of P21,200 c. increase of P 1,800
b. increase of P13,800 d. increase of P14,800

25. Birney Company has prepared the following budget data:

Sales .............................................................. 150,000 units
Selling price .................................................. ₱25 per unit
Variable expenses ......................................... ₱15 per unit
Fixed manufacturing expenses ..................... ₱800,000
Fixed selling and admin. expenses ............... ₱700,000

An advertising agency claims that an aggressive advertising campaign would enable the
company to increase its sales by 20%. What is the maximum amount that the company can pay
for advertising and obtain a net operating income of ₱200,000?
a. ₱100,000 b. ₱200,000 c. ₱300,000 d. ₱550,000

26. The following information is for Barnett Corporation:

Product X: Revenue ₱10.00 Product Y: Revenue ₱15.00
Variable Cost ₱2.50 Variable Cost ₱5.00

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 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

What is the breakeven point assuming the total fixed costs are ₱50,000 and sales mix consists
of two units of Product X and one unit of Product Y?
a. 1,000 units of Y and 2,000 units of X c. 2,012.5 units of Y and 4,025 units of X
b. 1,012.5 units of Y and 2,025 units of X d. 2,000 units of Y and 4,000 units of X

27. Which of the following is true?

I. In absorption costing, all nonmanufacturing costs are subtracted from gross margin.
II. The gross-margin format of the income statement highlights the lump sum of fixed
manufacturing costs.
a. I only b. II only c. I and II d. Neither I nor II

28. A basic tenet of direct costing is that period costs should be currently expensed. What is the
rationale behind this procedure?
a. Period costs are uncontrollable and should not be charged to a specific product.
b. Period costs are generally immaterial in amount and the cost of assigning the amounts to
specific products would outweigh the benefits.
c. Allocation of period costs is arbitrary at best and could lead to erroneous decisions by
management.
d. Because period costs will occur whether or not production occurs, it is improper to allocate
these costs to production and defer a current cost of doing business.

29. Which of the following is an argument against the use of direct (variable) costing?
a. Absorption costing overstates the balance sheet value of inventories.
b. Variable factory overhead is a period cost.
c. Fixed factory overhead is difficult to allocate properly.
d. Fixed factory overhead is necessary for the production of a product.

Use the following to answer the next 3 questions:

Variable cost per propeller Total fixed cost for the year
Manufacturing cost ..................... ₱114 ₱810,000
Selling and administrative .......... ₱20 ₱243,000

In its first year of operations, Cutterski produced 60,000 propellers but only sold 54,000.

30. What is the total cost that would be assigned to Cutterski's finished goods inventory at the end
of the first year of operations under the variable costing method?
a. ₱765,000 b. ₱684,000 c. ₱804,000 d. ₱912,000

31. At what amount will Cutterski report its cost of goods sold for this first year for external reporting
purposes?
a. ₱6,156,000 b. ₱6,885,000 c. ₱6,966,000 d. ₱8,208,000

32. Which costing method (variable or absorption) will generate a higher net operating income in
Cutterski's first year of operations and by how much?

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 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

a. variable by ₱81,000 c. absorption by ₱81,000

b. variable by ₱108,000 d. absorption by ₱108,000

33. Variable costing net income is

a. higher than absorption net income when more units are sold than produced
b. lower than absorption net income when more units are produced than sold
c. the same as absorption net income when all units produced are sold
d. all of the above

Use the following to answer the next 2 questions:

The following information is available for Ford Company for its first year of operations:
Sales in units 5,000
Production in units 8,000
Manufacturing costs:
Direct labor ₱3 per unit
Direct material 5 per unit
Variable overhead 1 per unit
Fixed overhead ₱100,000
Net income (absorption method) ₱30,000
Sales price per unit ₱40

34. What was the total amount of Selling and Administrative expense incurred by Ford Company?
a. ₱92,500 b. ₱62,500 c. ₱55,000 d. ₱25,000

35. If Ford Company were using variable costing, what would it show as the value of ending
inventory?
a. ₱120,000 b. ₱64,500 c. ₱27,000 d. ₱24,000

36. A company had income of P50,000 using direct costing for a given period. Beginning and
ending inventories for that period were 13,000 units and 18,000 units, respectively. Ignoring
income taxes, if the fixed overhead application rate were P2.00 per unit, what would the income
have been using absorption costing?
a. P40,000 b. P50,000 c. P60,000 b. P70,000

37. Uniformly assigning the costs of resources to cost objects when those resources are actually
used in a non-uniform way is called
a. overcosting. c. peanut-butter costing.
b. undercosting. d. department costing.

38. In activity-based costing, cost reduction efforts are directed at specific

a. cost categories. b. cost pools. c. processes. d. cost drivers.

39. An objective of activity-based management is to

a. eliminate the majority of centralized activities in an organization.

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 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

b. reduce or eliminate non-value-added activities incurred to make a product or provide a

service.
c. institute responsibility accounting systems in decentralized organizations.
d. all of the above

40. Symptoms of an outdated cost system include all of the following, except
a. product costs change because of changes in financial reporting.
b. products that are difficult to produce show little profit.
c. competitors’ prices appear unrealistically low.
d. the company has a highly profitable niche all to itself.

41. In Activity-based Costing, which of the following would be considered a value-added activity?
a. Repair of machines. c. Bookkeeping.
b. Engineering designs. d. Storage of inventory.

42. What is the normal effect on the numbers of cost pools and allocation bases when an activity-
based cost (ABC) system replaces a traditional cost system?
a. b. c. d.
Cost Pools No effect Increase No effect Increase
Allocation Bases No effect No effect Increase Increase

Use the following to answer the next 4 questions:

Acton Company has two products: A and B. The annual production and sales of Product A is 800
units and of Product B is 500 units. The company has traditionally used direct labor-hours as the basis
for applying all manufacturing overhead to products. Product A requires 0.3 direct labor hours per unit
and Product B requires 0.2 direct labor hours per unit. The total estimated overhead for next period is
₱92,023.
The company is considering switching to an activity-based costing system for the purpose of
computing unit product costs for external reports. The new activity-based costing system would have
three overhead activity cost pools--Activity 1, Activity 2, and General Factory--with estimated overhead
costs and expected activity as follows:

Estimated Expected Activity

Activity Cost Pool Overhead Costs Product A Product B Total
Activity 1 ₱14,487 500 600 1,100
Activity 2 ₱64,800 2,500 500 3,000
General Factory ₱12,736 240 100 340
Total ₱92,023

43. The predetermined overhead rate under the traditional costing system is closest to:
a. ₱37.46. b. ₱21.60. c. ₱13.17. d. ₱270.66.

44. The overhead cost per unit of Product B under the traditional costing system is closest to:
a. ₱54.13. b. ₱7.49. c. ₱4.32. d. ₱2.63.

This document is the property of PHINMA EDUCATION 9

 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

45. The predetermined overhead rate (i.e., activity rate) for Activity 1 under the activity-based
costing system is closest to:
a. ₱28.97. b. ₱13.17. c. ₱83.66. d. ₱24.15.

46. The overhead cost per unit of Product A under the activity-based costing system is closest to:
a. ₱86.97. b. ₱70.79. c. ₱81.20. d. ₱11.24.

47. Standard costs are used for all of the following, except:
a. income determination c. measuring efficiencies
b. controlling costs d. forming a basis for price setting

Use the following to answer the next 4 questions:

Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on
the basis of direct labor hours. The company uses a standard cost system and has established the
following standards for one unit of product:
Standard Quantity Standard Price or Rate Standard Cost
Direct materials .............................. 1.5 pounds ₱3.00 per pound ₱4.50
Direct labor .................................... 0.6 hours ₱6.00 per hour ₱3.60
Variable manufacturing overhead... 0.6 hours ₱1.25 per hour ₱0.75

48. The materials quantity variance for March is:

a. ₱4,500 F b. ₱10,500 F c. ₱10,500 U d. ₱4,500 U

49. The labor efficiency variance for March is:

a. ₱5,040 U b. ₱1,200 U c. ₱1,200 F d. ₱5,040 F

50. The variable overhead spending variance for March is:

a. ₱200 U b. ₱600 U c. ₱600 F d. ₱200 F

51. The variable overhead efficiency variance for March is:

a. ₱1,050 F b. ₱1,050 U c. ₱250 F d. ₱250 U

52. Which of the following statements regarding standard cost systems is true?
a. Favorable variances are not necessarily good variances.
b. Managers will investigate all variances from standard.
c. The production supervisor is generally responsible for material price variances.
d. Standard costs cannot be used for planning purposes since costs normally change in the
future.

53. If all variances for labor are calculated, which of the following cannot be determined?
a. labor rate variance c. reason for the labor variances
b. actual hours of labor used d. efficiency of the labor force

Use the following to answer the next 2 questions:

This document is the property of PHINMA EDUCATION 10

 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

Edney Company employs standard absorption system for product costing. The standard cost of its
product is as follows:
Raw materials P14.50
Direct labor (2 DLH x P8) 16.00
Manufacturing overhead (2 DLH x P11) 22.00
The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor
hours. Edney planned to produce 25,000 units each month during the year. The budgeted annual
manufacturing overhead is
Variable P3,600,000
Fixed 3,000,000
During November, Edney produced 26,000 units. Edney used 53,500 direct labor hours in
November at a cost of P433,350. Actual manufacturing overhead for the month was P260,000
fixed and P315,000 variable. The total manufacturing overhead applied during November was
P572,000.

54. The fixed manufacturing overhead spending variances for November is

a. P10,000 F b. P10,000 U c. P6,000 F d. c. P6,000 U

55. The fixed manufacturing overhead volume variances for November is

a. P10,000 F b. P10,000 U c. P6,000 F d. c. P6,000 U

56. Which of the following statements concerning ideal standards is incorrect?

a. Ideal standards generally do not provide the best motivation for workers.
b. Ideal standards do not make allowances for waste, spoilage, and machine breakdowns.
c. Ideal standards are better suited for cash budgeting than practical standards.
d. Ideal standards may be better than practical standards when managers seek continual
improvement.

57. When the actual wage rate paid to direct labor workers is less than the standard wage rate, the
journal entry would include:
a. Debit to Wages Payable; Credit to Labor Rate Variance
b. Debit to Work-In-Process; Credit to Labor Rate Variance
c. Debit to Wages Payable; Debit to Labor Rate Variance
d. Debit to Work-In-Process; Debit to Labor Rate Variance

58. A major disadvantage of static budgets is:

a. the difficulty in developing such budgets due to the high cost of gathering the necessary
information.
b. the cost behavior pattern of manufacturing overhead, which is primarily fixed.
c. that the variances between actual and budget on a static budget result from comparing actual
costs at one level of activity to budgeted costs at a different level of activity.
d. their length and complexity.

59. McKenna Incorporated planned to use ₱24 of material per unit but actually used ₱25 of material
per unit, and planned to make 1,000 units but actually made 1,200 units.

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 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

The flexible-budget variance is

a. ₱1,000 F b. ₱1,000 U c. ₱1,200 F d. ₱1,200 U

60. A purchases budget is

a. not affected by the firm's policy of granting credit to customers.
b. the same thing as a production budget.
c. needed only if a firm does not pay for its merchandise in the same period as it is purchased.
d. affected by a firm's inventory policy only if the firm purchases on credit.

61. Ball Company has a policy of maintaining an inventory of finished goods equal to 30 percent of
the following month's sales. For the forthcoming month of March, Ball has budgeted the
beginning inventory at 30,000 units and the ending inventory at 33,000 units. This suggests that
a. February sales are budgeted at 10,000 units less than March sales.
b. March sales are budgeted at 10,000 units less than April sales.
c. February sales are budgeted at 3,000 units less than March sales.
d. March sales are budgeted at 3,000 units less than April sales.

62. Budgeted sales for the first six months for Porter Corp. are listed below:

JANUARY FEBRUARY MARCH APRIL MAY JUNE

UNITS: 6,000 7,000 8,000 7,000 5,000 4,000

Porter Corp. has a policy of maintaining an inventory of finished goods equal to 40 percent of
the next month's budgeted sales. If Porter Corp. plans to produce 6,000 units in June, what are
budgeted sales for July?
a. 3,600 units b. 1,000 units c. 9,000 units d. 8,000 units

63. The selling, general, and administrative expense budget is based on the ____________ budget.
a. production b. sales c. cash d. purchases

64. For the month of October, P Corp. predicts total cash collections to be ₱1 million. Also for
October, P Corp. estimates that its beginning cash balance will be ₱50,000 and that it will
borrow cash in the amount of ₱70,000. If P Corp. estimates an ending cash balance of ₱30,000
for October, what must its projected cash disbursements be?
a. ₱1,090,000 b. ₱1,120,000 c. ₱1,070,000 d. ₱1,020,000

65. Slack in operating budgets

a. results from unintentional managerial acts.
b. makes an organization more efficient and effective.
c. requires managers to work harder to achieve the budget.
d. is greater when managers are allowed to participate in the budgeting process.

This document is the property of PHINMA EDUCATION 12

 FIN 073: Strategic Cost Management
Student Activity Sheet #26

Name:________________________________________________ Class number: _______

Section: ____________ Schedule: _______________________ Date: ______________

66. Budji Corp. is preparing its budget for 19B. For 19A, the following were reported:
Sales (100,000 units) P1,000,000
Cost of Goods Sold 600,000
Gross Profit P 400,000
Operating Expenses (including depreciation of P40,000) 240,000
Net Income P 160,000
Selling prices will increase by 10% and sales volume in units will decrease by 5%. The cost of
goods sold as a percent of sales will increase to 62%. Other than depreciation, all operating costs
are variable. Budji will budget a net income for 19B of
a. P167,100 b. P167,500 c. P168,000 d. P176,000

67. Process Reengineering includes all of the following steps except:

a. constructing a diagram flowcharting the current process.
b. redesigning the process.
c. elimination of non-value-added activities.
d. elimination of all constraints.

68. The costs that follow appeared on Lexington’s quality cost report:
Warranty costs ₱19,000
Raw-materials inspection 9,000
Quality training 40,000
Customer complaints 4,100
Production stoppages from machine 7,800
breakdowns
The sum of Lexington’s prevention and external failure costs is:
a. ₱40,000. b. ₱49,000. c. ₱59,000. d. ₱63,100.

69. Process value analysis is a key component of activity-based management that links product
costing and
a. Reduction of the number of cost pools. c. Accumulation of heterogeneous cost pools.
b. Continuous improvement. d. Overhead rates based on broad averages.

70. Which of the following features is typically absent in target costing?

a. An approach that begins with the determination of a product or service's target cost.
b. An approach that begins with the determination of a product or service's target selling price.
c. A focus on the customer.
d. A focus on product design.

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