Ateneo de Zamboanga University

School of Management and Accountancy

Cost Management 1 (COSMAN 1)
Long Quiz #1: Introduction to COSMAN and Cost Behavior Analysis

NAME: _________________________________________________________________ DATE: _________________ SCORE: ________________

SECTION:____ INSTRUCTIONS: Shade the circle corresponding to your final answer for each item using a blue
or black pen. Choose the BEST ANSWER. For problems, PRESENT YOUR SOLUTIONS NEATLY on a separate
sheet of paper. ERASURES AND/OR ALTERATIONS ON YOUR SHADINGS WILL INVALIDATE YOUR ANSWER.
Test I. Theories Test II. Problems

TEST I – THEORIES (1 pt. each, 10 pts)

1. Which of the following is a characteristic of financial accounting?
a. not mandatory
b. must follow GAAP
c. emphasis on relevance of data, rather than precision
d. both A and C above
2. Which of the following persons would occupy a line position in a department store?
a. Sales manager
b. Manager, advertising department
c. Manager, personnel department
d. Manager, finance department

3. Which of the following statements is (are) true regarding financial and managerial accounting?
I. Both are mandatory
II. Both rely on the same underlying financial data
III. Both emphasize the segments of an organization
IV. Both are geared to the future, rather than to the past
A. I, II, III, and IV
B. Only II, III, and IV
C. Only II and III
D. Only II

4. Most tools and techniques in financial management are based on the following fundamental
theories or principles, except:
a. Time value of money is considered
b. Ethical behavior is always relevant
c. Accrual basis is preferred over cash basis
d. Trade-off between risks and returns shall be taken into account

5. In Clothing companies such as ZARA, H&M, Penshoppe, Uniqlo, and Levi’s, each of the following
would be considered a staff function EXCEPT the:
a. Vice-president of finance
 b. Vice-president of corporate planning
c. Vice-president of research and development
d. Vice president of marketing

6. Which of the following examples correctly correlates a unit of activity and a variable cost at a
coffee shop chain?
a. Number of employees and power usage
b. Number of tables and pounds of coffee
c. Number of coffee makers and employees
d. Number of customers and disposable cups

7. Which of the following best describes fixed cost?

a. It may change in total when such change is unrelated to changes in production.
b. It may change in total when such change is related to changes in production.
c. It is constant per unit of change in production.
d. It may change in total when such change depends on production within the relevant
range.

8. Which of the following corresponds to (1) line of VISUAL FIT method and (2) line of BEST FIT
method?
a. (1) High-Low method (2) Scattergraph method
b. (1) Scattergraph method (2) Least-Squares regression method
c. (1) High-Low method (2) Least-Squares regression method
d. (1) Least-Squares regression method (2) Scattergraph method

9. If coefficient of correlation (r) between two variables is zero, how might a scatter diagram of
these variables appear?
a. Random points
b. A least squares line that slopes up to the right
c. A least squares line that slopes down to the right
d. Under this condition, a scatter diagram could not be plotted on a graph.

10. Bobita Company uses regression analysis to develop a model for predicting overhead costs. Two
different cost drivers (machine hours and direct materials weight) are under consideration as the
independent variable. Relevant data ere run on a computer using on of the standard regression
programs, with the following results:

Coefficient Coefficient
MACHINE HOURS DIRECT MATERIALS WEIGHT
Y-intercept 2,500 Y-intercept 4,600
B 5.0 B 2.5
r2 0.70 r2 0.50

What regression equation should be used?

a. Y= 2500 + 5X
b. Y= 2500 + 3.5X
c. Y= 4600 + 2.6X
d. Y = 4600 + 1.3X

TEST II – PROBLEMS (2 pts. each, 30 pts)

Questions 1 to 3 are based on the following:

At an activity level of 80,000 machine hours, Bakit Siya At Hindi Ako Company’s total overhead
costs were P 223,800. Of this amount, utilities were P 48,000 (all variable) and depreciation was P
60,000 (all fixed). The balance of overhead cost consisted of maintenance cost (mixed). At 100,000
machine hours, maintenance cost were P 130,000.

Assume that all of the activity levels mentioned in this problem are within the relevant range.
1. The variable cost for maintenance cost per machine hour is
a. P 1.30 c. P 0.75
b. P 1.44 d. P 1.35

2. The total fixed overhead cost for Bakit Siya At Hindi Ako is
a. P 115,000 c. P 60,000
b. P 130,000 d. P 55,000

3. If 110,000 machine hours of activity are projected for the next period, total expected overhead
costs would be:
a. P 256,000 c. P 306,625
b. P 263,500 d. P 242,500

4. Kanal company has the following information:

Units produced and sold 15,000
Variable costs per unit P 12
Fixed manufacturing expense P 48,000
Fixed selling and P 72,000
administrative expenses
What selling price will result in operating income of P 300,000?
a. P 20
b. P 28
c. P 40
d. P 48

5. Wilfredo Gonzalez company has developed a production cost function for its lone product: Y =
20+ 5X, where X is based on the number of labor hours. Based on a relevant range of 10-20 labor
hours, what is the estimated production cost at zero (0) labor hour?
a. P 20
b. P 70
c. P 120
d. The exact amount cannot be determined without additional information

6. Bonjing Company uses high-low method to derive the cost formula for electrical power cost.
According to the cost formula, the variable cost per unit of activity is P3 per machine hour. Total
electrical power cost at the high level of activity was P 7,600 and the low level of activity was P
7,300. If the high level of activity was 1,200 machine-hours, then what was the low level of activity?
a. 800 machine hours c. 1000 machine hours
b. 900 machine hours d. 1100 machine hours

7. Lana del Rey Company has an average unit cost of P 45 at 10,000 units and P 25 at 30,000 units.
What is the unit variable cost?
a. P 10.00
b. P 15.00
c. P 20.00
d. An amount that cannot be determined without more information

8. Total production costs of prior periods for Yours Truly Company are listed below. Assume that
the same cost behavior patterns can be extended linearly over the range of 3,000 to 35,000 units
and that the cost driver for each product is the number of units produced.
Production per month 3000 9000 16000 35000
(units)
Product X P 23,700 P 52,680 P 86,490 P 178,260
Product Y P47,280 P141,840 P 252,160 P 551,600

What is the average cost per unit at a production level of 8,000 units for product X?
a. P 7.90 c. P 5.85
b. P 5.98 d. P 4.83
9. Aswang Ka Company uses an annual cost formula for overhead of P72,000 + P1.60 for each direct
labor hour worked. For the upcoming month, Aswang Ka plans to manufacture 96,000 units. Each
unit requires five minutes of direct labor. Aswang Ka’s budgeted overhead for the month is:
a. P 12,800 c. P 84,800
b. P 18,800 d. P 774,000

10. Itodo Na To Company wishes to determine the fixed portion of its maintenance expense (a
semi-variable expense), as measured against direct labor hours for the first 3 months of the year.
The inspection costs are fixed, however the adjustments necessitated by errors found during
inspection account for the variable portion of the maintenance cost. Information for the first
quarter is as follows:
Direct Labor Hours Maintenance Costs
January 34,000 61,000
February 31,000 58,500
March 34,000 61,000

What is the fixed portion of Itodo Na To :Company’s maintenance expense, rounded to the nearest
peso?
a. P 28,330 c. P 37,200
b. P 32,677 d. P 40,800

11. Mami Milker had the following equation for the month: Y = P 4,000 + P3X. Y is the cost of
worker’s compensation insurance and X is direct labor hours. According to Mami’s given equation, a
100-hour change in total direct labor hours will change the cost of workers compensation
insurance by:
a. P 4,000
b. P 300
c. P 4,300
d. P 297

Questions no. 12 to 15 are based on the following:

Bernadette Company would like to estimate the variable and fixed components of its maintenance
costs and has compiled the following data for the last five months of operations.
Labor Hours Maintenance Cost
January 160 P 617
February 130 553
March 180 596
April 190 623
May 110 532
Total 770 P 2,921

12. Using the high-low method, the estimated variable cost per labor hour for maintenance is
closest to:
a. P 0.83 c. P 1.30
b. P 1.14 d. P 1.84

13. Using the high-low method, the estimated total fixed cost per month for maintenance is closest
to:
a. P 0 c. P 440
b. P 407 d. P 470

14. Using the least-squares regression method, the estimated variable cost per labor hour for
maintenance is closest to:
a. P 1.09 c. P 1.52
b. P 1.14 d. P 1.88
15. Using the least-squares regression method, the estimated total fixed cost per month for
maintenance is closest to:
a. P 470 c. P 400
b. P 416 d. P 378

Laughter is the Best Medicine :D

Prepared by: Wilfred E. Martinez, CPA