MULTIPLE CHOICE

1. Bi Corporation, which sells a single product, provided the following data from its income statements for the
calendar years, 2006 and 2005: 2006
Sales (150,000 units) P750,000
Cost of goods sold 525,000
Gross profit P225,000
2005 (Base year)
Sales (180,000 units) P720,000
Cost of goods sold 575,000
Gross profit P145,000
In an analysis of variation in gross profit between the two years, what would be the effects of changes in sales
price an sales volume?
Sales price Sales volume
A. P 150,000 favorable P 120,00 unfavorable
B. P 150,000 unfavorable P 120,000 favorable
C. P 180,000 favorable P 150,000 unfavorable
D. P 180,000 unfavorable P 150,000 favorable

2. The gross profit of MJP Company for each of the years ended December 31, 2005 and 2006, was as follows:
2005 2006

Sales P792,000 P800,000

Cost of goods sold 464,000 480,000
Gross profit P328,000 P320,000
Assuming that selling prices were 10% lower during 2005, what would be the amount of decrease in gross profit
due to the change in selling price?
A. P 8,000 C. P79,200
B. P72,000 D. P88,000 (aicpa)

3. From the records of Frank Co. the following were taken:

Quantity Sales Costs of Sales
Product Budget Actual Budget Actual Budget Actual
Green 45,000 45,800 450,000 458,000 270,000 274,800
Ann 30,000 26,700 180,000 186,900 108,000 96,120 Co
5,000 9,300 25,000 55,800 15,000 27,900
80,000 81,800 655,000 700,700 393,000 398,820
Determine the sales price (SP), sales volume (SV), cost price (CP) and cost volume (CV) variances:
a. SP is P9,700 favorable; SV is P36,000 favorable;
CP is P5,820 favorable; and CV is P0 unfavorable
b. SP is P5,820 favorable; SV is P0 favorable;
CP is P36,700 favorable; and CV is P9,000 favorable
c. SP is P36,000 favorable; SV is P9,700 unfavorable;
CP is P0; and CV is P5,820 unfavorable
d. SP is P36,700 favorable; SV is P5,820 favorable;
CP is P0 unfavorable; and CV is P900,000 favorable (rpcpa)
 lOMoAR cPSD| 44565992

4. Mel, Inc., has a practical production capacity of two million units, the current year’s budget was based on the
production and sales of 1.4 million units during the current year. Actual statistics came out to be: production of
1.44 million units and sales of 1.2 million. Selling price is at P20 each and the contribution margin ratio is 30%.
The peso value that best quantifies the marketing division’s failure to achieve budgeted performance for the
current year is
A. P4,800,000 unfavorable. C. P1,440,000 unfavorable.
B. P4,000,000 unfavorable. D. P1,200,000 unfavorable.

5. In gross profit analysis, if the cost variance is zero, such variance indicates that;
A. Manufacturing management was unable to keep production costs at budgeted costs.
B. Manufacturing management was able to control production cost below budgeted costs.
C. Manufacturing management was able to control production cost at budgeted costs.
D. Manufacturing management was not able to control production at budgeted costs but purchasing was able
to keep at budgeted price.

6. The differences between the master budget amounts and the amounts in the flexible budget are due to
A. Activity level variances. C. Favorable variances
B. Gaps in affectivity. D. Unfavorable variances

7. The controller of Lan Corporation found a P250,000 favorable flexible budget revenue variance. The variance
was calculated by comparing the actual results with
the flexible budget. This variance can be wholly explained by A. The total flexible
budget variance.
B. The total static budget variance.
C. Changes in unit selling prices.
D. Changes in the number of units sold.

8. Actual and budgeted information about the sales of a product are presented below for June:
Actual Budget
Units 8,000 10,000
Sales revenue P92,000 P105,000
The sales price variance for June was:
A. P8,000 F C. P10,000 UF
B. P10,000 F D. P10,500 UF

Questions 9 through 11 are based on the following information. The exhibit below reflects a summary of
performance for a single item of a retail store’s inventory for the month ended April 30, 2006.
Flexible Static

Actual Budget Flexible (Master)

Results Variations Budget Budget

Sales (units) 11,000 - 11,000 12,000

Revenue (sales) P208,000 P12,000 U P220,000 P240,000

Variable costs 121,000 11,000 U 110,000 120,000

CM 87,000 23,000 U 110,000 120,000

Fixed costs 72,000 - 72,000 72,000

Operating income P 15,000 P23,000 U P 38,000 P 48,000

9. The sales volume variance is
A. P10,000 F C. P11,000 F

B. P10,000 U D. P12,000 U

10. The sales price variance is:

A. P12,000 U C. P23,000 U
B. P13,000 U D. P12,000 F

11. The variable cost price variance is:

A. P11,000 U C. P23,000 U
B. P12,000 U D. P13,000 U

Questions 12 through 16 are based on the following information. Melanie Fashions sells a line of women’s dresses.
Melanie’s performance report for November is shown below. The company uses a flexible budget to analyze its
performance and to measure the effect on operating income of the various factors affecting the difference between
budgeted and actual operating income.
Actual Budget
Dresses sold 5,000 6,000
Sales P 235,000 P 300,000
Variable costs (145,000) (180,000)
Contribution margin 90,000 120,000
Fixed costs ( 84,000) ( 80,000)
Operating income P 6,000 P 40,000

12. The effect of the sales quantity variance on the contribution margin for November is
A. P30,000 U C. P20,000 U
B. P18,000 U D. P15,000 U

13. The sales price variance for November is

A. P30,000 U C. P20,000 U
B. P18,000 U D. P15,000 U

14. The variable cost flexible budget variance for November is

A. P5,000 F C. P4,000 F
B. P5,000 U C. P4,000 U

15. The fixed cost variance for November is

A. P5,000 F C. P4,000 F
B. P5,000 U D. P4,000 U

16. What additional information is needed for Melanie to calculate the peso impact of a change in market share on
operating income for November?
A. Melanie’s budgeted market share and the budgeted total market size.
B. Melanie’s budgeted market share, the budgeted total market size, and average market selling price.
C. Melanie’s budgeted market share and the actual total market size.
D. Melanie’s actual market share and the actual total market size.

Questions 17 and 18 are based on the following information. Franklin, Inc., manufactures and sells boxes of pocket
protectors. The static master budget and the actual results for May 2006 appear below:
 lOMoAR cPSD| 44565992

Actual Static Budget

Unit sales 12,000 10,000
Sales P132,000 P100,000
Variable costs of sales 70,800 60,000
CM 61,200 40,000
Fixed costs 32,000 30,000
Operating income P 29,200 P 10,000

17. The operating income for Franklin using a flexible budget for May 2006 is
A. P12,000 C. P30,000
B. P19,200 D. P18,000

18. Which one of the following statements concerning Franklin’s actual results for May 2006 is correct?
a. The flexible budget variance is P8,000 favorable.
b. The sales price variance is P32,000 favorable.
c. The sales volume variance is P8,000 favorable.
d. The fixed costs flexible budget variance is P4,000 favorable.

Sales variances
19. The sales volume variance equals
A. A flexible budget amount minus a static budget amount.
B. Actual operating income minus flexible budget operating income.
C. Actual unit price minus budgeted unit price, times the actual units produced.
D. Budgeted unit price times the difference between actual inputs and budgeted inputs for the actual activity
level achieved. (ing)
20. In analyzing company operations, the controller of the FM Corporation found a P250,000 favorable flexible
budget revenue variance. The variance was calculated by comparing the actual results with the flexible budget.
This variance can be wholly explained by
A. The total flexible budget variance.
B. The total static budget variance.
C. Changes in unit selling prices.
D. Changes in the number of units sold. (cma)