REBATO, NIÑO D.

MM
ASIAN DEVELOPMENT FOUNDATION COLLEGE
TACLOBAN CITY
GRADUATE SCHOOL
MIDTERM EXAMINATION - MAC
Test 1
Indicate whether the following statements are true or false. If false, explain why.
1. Managerial accountants have a single role within an organization: collecting and reporting costs to management.
FALSE. Managerial accountants calculate product costs and are also tasked with assessing the company's
resource utilization. This leads to their active involvement as team members in critical strategic decisions,
working alongside production, marketing, and engineering personnel.
2. Financial accounting reports are general-purpose and intended for external users. TRUE
3. Managerial accounting reports are special-purpose and issued as frequently as needed. TRUE
4. Managers’ activities and responsibilities can be classified into three broad functions: cost accounting, budgeting, and
internal control. FALSE. Managers' roles can be categorized into three main functions: planning, directing, and
controlling. Planning involves setting future objectives, directing focuses on coordinating various company
activities and human resources for efficient operation, and controlling ensures that the company stays on
course.
5. Managerial accounting reports must now comply with generally accepted accounting principles (GAAP). FALSE.
Managers' tasks are divided into three main functions: planning, directing, and controlling. Planning involves
setting future objectives, directing entails coordinating various company activities and human resources for
smooth operations, while controlling ensures the company stays on course.
For number 6 to 12
Match the numbered sentences with the corresponding terms. Write the letters only.
6.__G___All activities associated with providing a product or performing a service.
7.___A__A method of allocating overhead based on each product’s use of activities in making the product.
8.__E__Systems implemented to reduce defects in finished products with the goal of achieving zero defects.
9. __B__ A performance measurement approach that uses both financial and non-financial measures, tied to company
objectives, to evaluate a company’s operation in an integrated fashion.
10.__D___Inventory system in which goods are manufactured or purchased just as they are needed for use.
11.__C___A company’s effort to employ sustainable business practices with regards to its employees, society and the
environment.
12.__F___A code of ethical standards developed to guide management to exercise correct practices.
TERMS:
a. Activity based costing
b. Balanced score card
c. Corporate social responsibility
d. Just in time inventory
e. Total Quality Management
f. Statement of Ethical Professional Practices
 g. Value Chain

TEST 2
Answer
a. ₱92,150
b. ₱25,850
c. ₱36,225
d. ₱236,000
e. ₱252,000
f. ₱241,500
g. ₱21,700
h. ₱83,300

Solutions:
a. DM = Total MANUFACTURING cOST - (DL + OH)
= ₱195,650 - (57,000 + 46,500)
= ₱195,650 - 103,500
DM = ₱92,150

b. WIP, beg = Total Cost WIP - Total MC

= ₱221,500 - 195,650
WIP, beg = ₱25,850

c. WIP, 12/31 = Total Cost WIP - COGM

= 221,500 - 185, 275
WIP, 12/31 = ₱36,225

d. TMC = DM + DL + OH
= ₱68,400 + 86,000 + 81,600
TMC = ₱236,000

e. TWIP = TMC + WIP, beg

= ₱236,000 + 16,500
TWIP = ₱252,500

f. COGM = TWIP - WIP,end

= ₱252,500 - 11,000
COGM = ₱241,500

g. Direct Labor = TMC - (DM + OH)

= ₱253,700 - (130,000 + 102,000)
 = ₱253,700 - 232,000
Direct Labor = ₱21,700

h. WIP,beg = Total Cost WIP - TMC

= ₱337,000 - 253,700
WIP,beg = ₱83,300

TEST 3
a.) Compute the break-even point in total sales pesos and in units for 2020.
Answer:
The variable costs per units:
Cost of goods sold (75% x ₱800,000 / 240,000,) ₱2.5
Selling expenses (42% x ₱280,000 / 240,000) 0.49
Administrative expenses (40% x ₱150,000 / 240,000) 0.25
Total ₱3.24

Fixed costs are:

Cost of goods sold (₱800,000 x 0.40) ₱320,000
Selling expenses (₱280,000 x 0.42) 117,600
Administrative expenses (₱150,000 x 0.75) 112,500
Total ₱550,100

The break-even points are:

X = [₱3.24 / (₱1,200,000 / 240,000)] X + ₱550,100
X = (₱3.24 / ₱5) X + ₱550,100
X = ₱0.65 X + ₱550,100
0.35 X = ₱550,100
X = ₱550,100 / ₱0.35
X = ₱1,571,714.29 or ₱1,571,714

₱5 X = ₱3.24 X + ₱550,100
₱5 X - ₱3.24 X = ₱550,100
₱1.76 X = ₱550,100
X = 312,556.82 or 312,557 units

b.) Peri has proposed a plan to get the partnership “out of the red” and improve its profitability. She feels that the quality of
the product could be substantially improved by spending P0.25 more per unit on better raw materials. The selling price per
unit could be increased to only P5.25 because of competitive pressures. Peri estimates that sales volume will increase by
25%. What effect would Peri’s plan have on the profits and the break-even point in pesos of the partnership? (Round the
contribution margin ratio to two decimal places.)
Answer
Variable unit of cost of goods sold = (₱600,000 / 240,000) = ₱2.5
₱2.5 + ₱0.25 = ₱2.75
Sales volume = 25% x 240,000 = 60,000
240,000 + 60,000 = 300,000 units
Total sales = 300,000 x ₱5.25
= ₱1,575,000

Net income computation:

Sales ₱1,575,000
Variable expenses
Cost of goods sales (300,000 x ₱2.5) ₱750,000
Selling expenses(300,000 x ₱0.49) 147,000
Administrative expenses (300,000 x ₱0.25) 75,000
Total variable expenses (972,000)
Contribution margin ₱603,000

Fixed expenses
Cost of good sales ₱320,000
Selling expenses 117,600
Administrative expenses 112,500
Total fixed expenses (550,100)
Net income ₱ 52,900

The break-even points are:

X = (₱972,000 / ₱1,575,000) X + ₱550,100
X = ₱0.62 X + ₱550,100
0.38 X = ₱550,100
X = ₱550,100 / ₱0.62
X = ₱1,447,631.58 or ₱1,447,632

c.) Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising
and promotional campaigns. He therefore proposed the following plan as an alternative to Peri’s: (1) increase variable
selling expenses to P0.59 per unit, (2) lower the selling price per unit by P0.25, and (3) increase fixed selling expenses by
$40,000. Paul quoted an old marketing research report that said that sales volume would increase by 60% if these
changes were made. What effect would Paul’s plan have on the profits and the break-even point in pesos of the
partnership?
Answer
Sales [240,000 + 60% x 240,000) = 384,000 x (₱5 - ₱0.25) ₱1,824,000
Variable expenses
Cost of good sales (384,000 x ₱2.5) ₱960,000
Selling expenses (384,000 x ₱0.59) 226,560
Administrative expenses (384,000 x ₱0.25) 96,000
Total variable expenses (1,282,560)
Contribution margin ₱ 541,440

Fixed expense
Cost of good sales ₱320,000
Selling expenses (₱117,600 x ₱40,000) 157,600
Administrative expenses 112,500
Total fixed expenses (590,100)
Net income ₱ 48,660

Sales volume = 60% x 240,000 = 144,000

= 144,000 + 240,000
= 384,000

The break-even points are:

X = (₱1,282,560 / ₱1,824,000) X + ₱590,100
X = ₱0.70 X + ₱590,100
0.30 X = ₱590,100
X = ₱590,100 / ₱0.30
X = ₱1,967,000

d.) Which plan should be accepted? Explain your answer.

Answer
Peri’s plan should be accepted. It produces a higher net income and a lower break-even point than Paul’s plan.

TEST 4

a. Compute the activity-based overhead rate for each activity cost pool.

ACTIVITY OVERHEAD EXPECTED USE OF ACTIVITY BASED

COST DRIVERS
(divided by)

Market Analysis ₱1,050,000 15,000 ₱70 per hour

Product Design ₱2,350,000 25,00 ₱940 per design

Product Development ₱3,600,000 90 ₱40,000 per product

Prototype Testing ₱1,400,000 500 ₱2,800 per test

b. How much cost would be charged to an in-house manufacturing department that consumed 1,800 hours of market
analysis time, was provided 280 designs relating to 10 products, and requested 92 engineering tests?
 ACTIVITY Cost Driver Activity Based Cost
Overhead Rate
(multiple by)

Market Analysis 1,800 ₱70 ₱126,000

Product Design 280 ₱940 ₱263,200

Product Development 10 ₱40,000 ₱400,000

Prototype Testing 92 ₱2,800 ₱257,600

Total Cost Charged for an In – House ₱1,046,800

c. How much cost would serve as the basis for pricing an R&D bid with an outside company on a contract that would
consume 800 hours of analysis time, require 178 designs relating to 3 products, and result in 70 engineering tests?

ACTIVITY Cost Driver Activity Based Cost

Overhead Rate
(multiple by)

Market Analysis 800 ₱70 ₱56,000

Product Design 178 ₱940 ₱167,320

Product Development 3 ₱40,000 ₱120,000

Prototype Testing 70 ₱2,800 ₱196,000

Total Cost Charged for pricing an R&D ₱539,320

d. What is the benefit to Ideal Manufacturing of applying activity-based costing to its R&D activity for both in-house and
outside charging purposes?

Better cost allocation could be done after using activity-based costing, and the R&D cost related to in-house
production is identified. While the cost related to R&D services provided to outsiders could be determined and the same
could be charged.

TEST 5

Test 5 Note: No 1 and 2 are related data.

1. Billing Company produces and sells a single product. Expected sales for the next four months are given below:

Sales in Units:

April 10,000
 May 12,000

June 15,000

July 9,000

August 10,000

The company needs a production budget for the second quarter. Experience indicates that end of the month inventories
should equal 10 percent of the following month’s sales in units At the end of March, 1000 units were on hand. Prepare the
production budget for the second quarter.

SOLUTION:

APRIL MAY JUNE JULY

Budgeted units sales 10,000 12,000 15,000 37,000

Add: desire Ending inventory 1,200 1,500 900 900

Total needs 11,200 13,500 15,900 37,900

Less: Beginning Inventory 1,000 1,200 1,500 1,000

Require production 10,200 12,300 14,400 36,900

2. Continuing the problem of Billing company…

Each unit of product uses 5 ounces of raw materials. At the end of March, 11,250 ounces of materials were on hand. The
company wants to maintain an inventory of materials equal to 5 percent of the following month’s production needs.
Prepare the Materials Purchase Budget.

APRIL MAY JUNE JULY

Required production (units) 10,000 12,000 15,000 9,000
Raw material needs per units (ounces) *5 *5 *5 *5

rProduction needs (ounces) 50,000 -> 60,000 -> 75,000 -> 185,000
Add: Desired ending inventory (ounces) 11,750 11,850 12,000 11,700

Total needs 61,750 71,850 87,000 196,700

Less: Beg. Inventory 11,250 11,250 12,000 11,250
Raw material to be purchase 50,500 60,600 75,000 185,450
TEST 6

March April Two Months

Opening Cash Balance ₱ 10,000 5,000 10,000

Cash Collections 150,000 185,000 335,000

Total Cash Available 160,000 190,000 350,000

Cash Payments

Inventory Purchases 90,000 82,000 72,000

Selling and Administrative Expenses 70,000 65,000 135,000

Equipment Purchases 15,000 6,000 21,000

Dividend Payments 5,000 0 5,000

Total Cash Payments 180,000 153,000 333,000

Cash Surplus/Deficit -20,000 37,000 12,000

Borrowings/Repayments 25,000 -25,500 -500

Closing Cash Balance ₱ 5,000 11,500 11,500