MANAGEMENT ADVISORY SERVICES

1. A strategy map in the balanced scorecard framework is

a. A statement of what the strategy must achieve and what is critical to its success.
b. Key action programs required to achieve strategic objectives.
c. Diagrams of the cause-and-effect relationships between strategic objectives.
d. The level of performance or rate of improvement needed in the performance
measure.

2. Which of the following is a limitation of activity-based costing?

a. More cost pools
b. Less control over overhead costs
c. Poorer management decisions
d. Some arbitrary allocations continue

3. Which of the following factors would suggest a switch to activity-based costing?

a. Product lines similar in volume and manufacturing complexity.
b. Overhead costs constitute a significant portion of total costs.
c. The manufacturing process has been stable.
d. Production managers use data provided by the existing system.

4. An analyst covering Guilderland Mining Company common stock estimates the following
information for the next year.
Expected return on the market 12%
portfolio
Expected return on Treasury 5%
securities
Expected beta of Guilderland 2.2

Using the CAPM, the analysts estimate of next years risk premium for Guilderlands
stock is closed to
a. 7.0% c.
15.4%
b. 10.4% d.
21.4%

5. Gild Company has been offered credit terms of 3/10, net 30. Using a 365-day-year, what
is the nominal cost of not taking advantage of the discount if the firm pays on the 35 th
day after the purchase?
a. 14.2% c.
37.6%
b. 32.2% d.
45.2%

6. A bank wants to motivate its financial services agents. The current salary of the agents
is P80,000. To meet its objectives, the bank is offering the following salaries:
If revenues are < 90% of last years level P 65,000
If revenues are between 90% and 110% of last years
level P 80,000 If revenues are > 110% of last years
level P 100,000

Assuming that these 3 outcomes are equally probable, what is the expected salary for a
financial services agent?
a. P65,000 c. P81,66
7
b. P80,000 d. P83,33
3
7. A company obtaining short-term financing with trade credit will pay a higher percentage
financing cost, everything else being equal, when
a. The discount percentage is lower.
b. The items purchased have a higher price.
c. The items purchased have a lower price.
 d. The supplier offers a longer discount period.

8. The degree of operating leverage for Balloon Company is 7 and the degree of operating
leverage for Dirigible Company is 4. The two companies have identical sales levels and
net incomes. Which of the following statements is incorrect?
a. The break-even quantity for Balloon will be more than that for Dirigible.
b. The margin of safety for Balloon will be less than that for Dirigible.
c. The contribution margin for Balloon will be more than that for Dirigible.
d. A 10% reduction is sales will cause net income for Dirigible to be lower than that for
Balloon.
9. Panktual Company uses just-in-time inventory methods to manage its inventories.
Which of the following statements is incorrect concerning this company?
a. Inventory costs will fluctuate greatly from month to month because of variability in
sales.
b. The net income from the absorption costing method will be approximately equal to
the net income from the variable costing method.
c. There will typically be very low levels of inventories period to period.
d. The cost of a unit of product will be different between the variable and absorption
costing methods.

10. Giga-Stuff, Inc. has a number of divisions. One division, Khreishan, makes a component,
component X, that is used in the manufacture of DVD players. Another division,
Marshan, makes DVD players that use component X and needs 60,000 units of
component X per year. Khreishan incurs the following costs for one unit of component X:

Direct materials P0.30

Direct labor 0.15
Variable overhead 0.70
Fixed overhead 1.00
Total P2.15

Khreishan has capacity to make 400,000 units of component X per year, but due to a
soft market, only plans to produce and sell 320,000 units next year. Marshan currently
buys component X from an outside supplier for P2.50 each (the same price that
Khreshan receives).

Assume that Khreishan and Marshan have agreed on a transfer price of P2.20. What is
the total benefit for Giga-Stuff, Inc.?
a. P18,000 c.
P69,000
b. P63,000 d.
P81,000

11. A data model developed specifically for use in designing accounting information
databases is
a. REA data model
b. Data definition language
c. Entity-relationship model
d. Networked model

12. Which of the following is correct concerning the Internet?

a. All communications are processed using URL Uniform Resource Language.
b. It is composed of an international collection of networks of independently owned
computers.
c. It requires the use of viruses, which invariably escape their proper primary use and
infect user computers.
d. The operating center of the Internet is headquartered in the New York World Wide
Web Center.

13. A common input device is a(n)

a. Compiler c. Expert system
b. Printer d. Point-of-sale
recorder

14. Which of the following is not a widely used disaster recovery approach?
a. Hot site c. Regular
backups
b. Firewall d. Cold site

15. The network most frequently used for private operations designed to link computers
within a building in a research park is referred to as a(n)
a. Bulletin board c. Wide area
service network
 b. Local area network d. Zero base
network

16. A Utah hospital decided to streamline its surgical suite operation. In order to speed
things up, the nurses in charge studied what time patients actually spent in various
activities. They found that on average, a patient scheduled for an operation spent about
1 hours waiting, and 1.5 hours in moving from lab to x-ray to the
operating room. The average operation takes 90 minutes. What is the MCE?
a. 100% c. 50%
b. 60% d.
37.5%
17. If the operating asset turnover ratio increased by 30 percent and the margin increased
by 20 percent, the divisional ROI
a. would increase by 56 percent.
b. would decrease by 60 percent.
c. would increase by 20 percent.
d. cannot be determined.

18. During the year, Hawkins produced 10,000 units, used 20,000 direct labor hours, and
incurred variable
overhead of P90,000. Budgeted variable overhead for the year was P88,000. The hours
allowed per unit are 2.1. The standard variable overhead rate is P4.00 per direct labor
hour. The variable overhead spending
variance
is:
a. P2,00 F. c. P10,000
0 U.
b. P6,00 U. d. P2,000
0 U.

19. Assume that Sunshine Products Inc. has an agreement with Shady Finance Company to
factor its receivables. Shady charges a flat commission of 2 percent of the receivables
factored, plus 6 percent a year interest on the outstanding balance. It also deducts a
reserve of 10 percent for returned and damaged materials. Interest and
commission are paid in advance. No interest is charged on the reserve or the
commission. If the average level of outstanding receivables is P700,000, and if they are
turned over 4 times a year (hence the commission is paid 4 times a year), then what is
the effective quarterly interest rate charged by Shady for this arrangement?
a. 6.05% c.
7.52%
b. 3.83% d.
9.31%

20. Grogi Corporation uses a standard costing system. Information for the month of May is
as follows:

Actual manufacturing overhead costs (P26,000 is fixed)

P80,000
Direct labor:

Actual hours worked 12,000 hrs.

Standard hours allowed for actual production 10,000 hrs.
Average actual labor cost per hour P18

The factory overhead rate is based on a normal volume of 12,000 direct labor hours.
Standard cost data at 12,000 direct labor hours were as follows:

Variable factory overhead P48,000

Fixed factory overhead 24,000
Total factory overhead P72,000
What is the fixed overhead spending variance
for Grogi?
a. P2,000 (U) c. P4,000 (U)
b. P8,000 (U) d. P20,000 (U)

21. If actual fixed manufacturing overhead was P54,000 and there was a P1,300 unfavorable
spending variance and a P1,000 unfavorable volume variance, budgeted fixed
manufacturing overhead must have been
a. P56,300. c. P53,00
0.
b. P50,300. d. P52,70
0.
22. Perfect Builders makes all sorts of moldings. Its standard quantity of material allowed is
1 foot of wood per 1 foot of molding at a standard price of P2.00 per foot. During
August, it purchased 500,000 feet of wood at a cost of P1.90 per foot, which produced
only 499,000 feet of molding. Calculate the materials price variance and the materials
usage variance, respectively.
a. P50,000 F and P2,000 U
b. P49,900 U and P2,000 F
c. P50,000 F and P1,900 U
d. P49,900 F and P1,900 U

23. Wilmer Company produces two products: Oldies and Newbies. Budgeted sales for four
months are as follows:
 Oldies Newbi
es
May 10,000 40,000
June 20,000 70,000
July 15,000 80,000
August 30,000 90,000

Wilmer's ending inventory policy is that Oldies should have 10% of next month's sales in
ending inventory and Newbies should have 20% of next month's sales in ending
inventory. On May 1, there were 1,000 units of Oldies and 9,000 units of Newbies.
Newbies requires 4 units of component A. (Oldies does not use component A.) There
were 2,100 units of component A in inventory on May 1. Wilmer wants to have 30
percent of the following month's production needs in inventory for Component A.

What is the budgeted amount of component A to be purchased in May?

a. 288,000 c.
264,300
b. 180,000 d.
64,500

24. Cohlmia Company makes all its sales on account. Cohlmia's accounts receivable
payment experience is as follows:
Percent paid in the month of sale 20%
Percent paid in the month after 75%
the sale
Percent paid in the second month after the
sale
2%
Cohlmia provided information on sales as
follows:
September P100,000
October P120,000
November P200,000
December (expected) P250,000

What are the expected cash receipts for the month of November?
a. P200,000 c.
P190,000
b. P 40,000 d.
P132,000

25. Capitan Company produces a line of salsas. Capitan's estimated production of jars of
salsa for the third quarter of the year is as follows:
July 80,000
August 90,000
September 70,000

Each jar requires 1/4 pound of peppers. Capitan prefers to buy the freshest peppers, so
it has a policy to have just 5% of the following month's production needs in ending
inventory. On July 1, the company had 1,200 pounds of peppers in inventory. Capitan
pays P0.40 per pound of peppers. It buys all peppers on account and typically pays 50%
of a month's purchases in that month, and the remaining 50% the following month.

How many pounds of peppers will be purchased during the month of August?
a. 23,375 c.
19,925
b. 22,250 d.
21,950

26. Shape Company, an importer and retailer of Polish pottery and kitchenware, prepares a
monthly master budget. Data for the July master budget are given below:
The June 30th balance sheet follows:
Cash P 25,000 Accounts P 45,000
payable
Accounts 110,000 Capital 300,000
receivable stock
Inventory 54,000 Retained 94,000
earnings
Building and
equipment 250,000
(net)
 Actual sales for June and budgeted sales for July, August, and September are given
below:
June P137,500
July 360,000
August 400,000
September 320,000
Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in
the month following the sale. There are no bad debts.

The gross margin percentage is 40 percent of sales. The desired ending inventory is
equal to 25 percent of the following month's sales. One fourth of the purchases are paid
for in the month of purchase and the others are purchased on account and paid in full
the following month.

The monthly cash operating expenses are P43,000, and the monthly depreciation
expenses are P7,000.

What is the balance of the accounts receivable at the end of July?

a. P110,000 c. P360,0
00
b. P288,000 d. P398,0
00

27. Which of the following is a characteristic of environmental scorecards?

a. They are comparable.
b. They are efficient.
c. They promote good corporate citizenship.
d. They are required for firms with high environmental risks.

28. Activity-based costing (ABC) classifies costs in a hierarchy with 4 levels. Costs related to
engineering changes should be classified as which of the following?
a. Batch-level costs
b. Product-sustaining level costs
c. Unit-level costs
d. Facility-sustaining level costs

29. Which category of costs of environmental work would include using non-toxic
alternatives for chemicals used in a manufacturing process?
a. Appraisal costs c. Internal failure costs
b. External failure d. Prevention costs
costs
30. Which of the following represents the flow of services and information from the initiating
moment to the final
customer?
a. Customer chain c. Supply chain
b. Demand chain d. Value chain
31. The best model for choosing the best of several competing projects is

a. net present value. c. payback period.

b. internal rate of d.accounting rate of return.
return.

32. All of the following relate to the balanced scorecard's learning and growth perspective
EXCEPT:
a. How do we achieve greater employee satisfaction?
b. What new products do we create?
c. How do we provide information systems with updated technology?
d. How will we motivate and empower our employees?

33. A component of the average payment period is

a. the time from the purchase of raw materials until the firm places the payment in the
mail.
b. the time it takes after the firm places its payment in the mail until the supplier has
withdrawn funds from the firms account.
c. both a and b
d. either a or b
34. Elegance Bath Products, Inc. (EBP) makes a variety of ceramic sinks and tubs. EBP has
just developed a line of sinks and tubs made from a mixture of glass and ceramic. The
sinks sell for P150 each and have variable costs of P80. The tubs sell for P600 and have
variable cost of P450. The glass and ceramic sinks and tubs require the use of
specialized molding equipment. The specialized molding equipment has 4,050 hours of
capacity per year. A sink uses an average of 2 hours of specialized molding equipment
time; a tub uses an average of 5 hours of specialized molding equipment time.

Assume that EBP can sell as many as 1,000 sinks and 500 tubs per year. How many tubs
should EBP produce?
a. 1,000 c.
410
b. 500 d.
675

35. Autry Company manufactures veterinary products. One joint process involves refining a
chemical (dactylyte) into two chemical, dac and tyl. One batch of 5,000 gallons of
dactylyte can be converted to 2,000 gallons of dac and 3,000 gallons of tyl at a total
joint processing cost of P12,000. At the split off point, dac can be sold for P3 per gallon
and tyl can be sold for P4 per gallon. Autry has just learned of a new process to convert
dac into prodac. The new process costs P4,000 and yields 1,700 gallons of prodac for
every 2,000 gallons of dac. Prodac sells for P5 per gallon.

Should Autry process dac further?

a. No, income will be P1,500 lower
b. No, income will be P5,000 lower
c. Yes, income will be P1,500 higher
d. Yes, income will be P5,000 higher

36. Aerotoy Company makes toy airplanes. One plane is an excellent replica of a 737; it sells
for P5. Vacation Airlines wants to purchase 12,000 planes at P1.75 each to give to
children flying unaccompanied. Costs per plane are as follows:

Direct materials P1.00

Direct labor 0.50
Variable overhead 0.10
Fixed overhead 0.90

No variable marketing costs would be incurred. The company is operating significantly

below the maximum productive capacity. No fixed costs are avoidable. However,
Vacation Airlines wants its own logo and colors on the planes. The cost of the decals is
P0.01 per plane and a special machine costing P1,500 would be required to affix the
decals. After the order is complete, the machine would be scrapped. Should the special
order be accepted?
a. Yes, income will increase by P300
b. No, income will decrease by P180
c. No, income will decrease by P1,500
d. Yes, income will increase by P180

37. Foster Industries manufactures 20,000 components per year. The manufacturing cost of
the components was determined as follows:

Direct materials P150,000

Direct labor 240,000
Inspecting products 60,000
Providing power 30,000
Providing supervision 40,000
Setting up equipment 60,000
Moving materials 20,000
Total P600,000

If the component is not produced by Foster, inspection of products and provision of

power costs will only be 10% of the production costs; moving materials costs and setting
up equipment costs will only be 50% of the production costs; and supervision costs will
amount to only 40% of the production amount. An outside supplier has offered to sell
the component for P25.50.
 What is the effect on income if Foster Industries purchases the component from the
outside supplier?
a. P25,000 increase c. P90,000 decrease
b. P45,000 increase d. P90,000 increase

38. The operations of Smits Corporation are divided into the Childs Division and the Jackson
Division. Projections for the next year are as follows:

Childs Jackso
n
Divisio Divisio Total
n n
Sales P250,000 P180,0 P430,000
00
Variable costs 90,000 100,00 190,000
0
Contribution margin P160,000 P P240,000
80,000
Direct fixed costs 75,000 62,500 137,500
Segment margin P P P102,500
85,000 17,500
Allocated common
costs
35,000 27,500 62,500
Operating income P 50,000 P(10,00 P 40,000
(loss) 0)
Operating income for Smits Corporation as a whole if the Jackson Division were
dropped would be
a. P22,500. c. P50,00
0.
b. P40,000. d. P60,00
0.

39. Moore Company's net income last year was P56,000 and cash dividends declared and
paid to the company stockholders was P31,000. Changes in selected balance sheet
accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable P (8,000)
Inventory (6,000)
Prepaid expenses 12,000
Credit balances:

Accumulated 23,000
Depreciation
Accounts payable (10,000)
Accrued liabilities 7,000
Taxes payable 5,000
Bonds payable 40,000

Based solely on this information, the net cash flows from operating activities under the
indirect method on the statement of cash flows would be:
a. P79,000. c. P29,00
0.
b. P102,000. d. P83,00
0.

40. Presented below are selected data from the financial statements of Bruce Corp. for 2011
and 2010.
2011 2010
Net income P110,000 P123,000
Cash dividends paid on P 42,000 P 38,000
common stock
Market price per share of
common stock at the end P16.00 P13.00
of
the year
Earnings per share P 0.84 P 0.74
Shares of common stock 140,000 100,000
outstanding

The dividend payout ratio for 2011 is

a. 38.2% c.
2.8%
b. 5.0% d.
50.0%
41. If a company has an acid-test ratio of 1.2:1, what respective effects will the borrowing of
cash by short-term debt and collection of accounts receivable have on the ratio?
Short-term Collection
of
Borrowing Receivab
le
a. Increase No effect
b. Increase Increase
c. Decreas No
e effect
d. Decreas Decreas
e e

42. A firm expects to pay dividends at the end of each of the next four years of P2.00,
P1.50, P2.50, and P3.50. If growth is then expected to level off at 8 percent, and if you
require a 14 percent rate of return, how much should you be willing to pay for this
stock?
a. P67.81 c.
P31.00
b. P58.15 d.
P43.97

43. Helton Company has the following information for the current year:
Beginning fixed manufacturing
overhead
in inventory P95,000
Fixed manufacturing overhead in production
375,000
Ending fixed manufacturing
overhead in
inventory 25,000
Beginni variable manufacturing
ng overhead
in inventory P10,000
Variable manufacturin overhead in
g
production 50,000
Ending variable manufacturing
overhead
in inventory 15,000

What is the difference between operating incomes under absorption costing and
variable costing?
a. P70,000 c.
P40,000
b. P50,000 d.
P5,000

44. Grant's Kitchens is approached by Ms. Tammy Wang, a new customer, to fulfill a large
one-time-only special order for a product similar to one offered to regular customers.
The following per unit data apply for sales to regular customers:

Direct materials P 455

Direct labor 300
Variable manufacturing 45
support
Fixed manufacturing 100
support
Total manufacturing costs 900
Markup (60%) 540
Targeted selling price P1440
 Grant's Kitchens has excess capacity. Ms. Wang wants the cabinets in cherry rather than
oak, so direct material costs will increase by P30 per unit.

For Grant's Kitchens, what is the minimum acceptable price of this one-time-only special
order?
a. P830 c. P
785
b. P930 d.
1,440

45. Cochran Corporation has a plant capacity of 100,000 units per month. Unit costs at
capacity are:

Direct materials P4.00

Direct labor 6.00
Variable overhead 3.00
Fixed overhead 1.00
Marketing fixed 7.00
Marketing/distribution, 3.60
variable
 Current monthly sales are 95,000 units at P30.00 each. Suzie, Inc., has contacted
Cochran Corporation about purchasing 2,000 units at P24.00 each. Current sales would
not be affected by the one-time-only special order. What is Cochran's change in
operating profits if the one-time-only special order is accepted?
a. P14,800 increase c. P22,000 increase
b. P17,200 increase d. P33,200 increase

Question number 46 and 48 are based on the following:

Konrade's Engine Company manufactures part TE456 used in several of its engine models.
Monthly production costs for 1,000 units are as follows:

Direct materials P 40,000

Direct labor 10,000
Variable overhead costs 30,000
Fixed overhead costs 20,000
Total costs P100,000

It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be
incurred if the company purchases TE456 from the outside supplier. Konrade's Engine
Company has the option of purchasing the part from an outside supplier at P85 per unit.

46. If Konrade's Engine Company accepts the offer from the outside supplier, the monthly
avoidable costs (costs that will no longer be incurred) total:
a. P 82,000 c.
P50,000
b. P98,000 d. P100,000

47. If Konrade's Engine Company purchases 1,000 TE456 parts from the outside supplier per
month, then its monthly operating income will:
a. increase by c. decrease by
P2,000 P3,000
b. increase by d. decrease by
P80,000 P85,000

48. The maximum price that Konrade's Engine Company should be willing to pay the outside
supplier is:
a. P80 per TE456 part
b. P82 per TE456 part
c. P98 per TE456 part
d. P100 per TE456 part

49. Denly Company has three products, A, B, and C. The following information is available:
Product A Product B Product
C
Sales P60,000 P90,000 P24,000
Variable costs 36,000 48,000 15,000
Contribution
margin 24,000 42,000 9,000
Fixed costs:
Avoidable 9,000 18,000 6,000
Unavoidable 6,000 9,000 5,400
Operating
income
P 9,000 P15,000 P (2,400)

Assuming Product C is discontinued and the space formerly used to produce Product C is
rented for P12,000 per year, operating income will:
a. increase by c. increase by
P6,600 P12,000
b. increase by d. increase by
P9,000 P14,400
50. Shimon Corporation manufactures industrial-sized water coolers and uses budgeted
machine-hours to allocate variable manufacturing overhead. The following information
pertains to the company's manufacturing overhead data:
 Budgeted output units 15,000 units
Budgeted machine-hours 5,000 hours
Budgeted variable manufacturing
overhead costs for 5,000 units P161,250
Actual output units produced 22,000 units
Actual machine-hours used 7,200 hours
Actual variable manufacturing
overhead costs P242,000
What is the flexible-budget variance for variable manufacturing overhead?
a. P5,500 favorable c. P4,300 favorable
b. P5,500 unfavorable d. P4,300 unfavorable

51. Kellar Corporation manufactured 1,500 chairs during June. The following variable
overhead data pertain to June:
Budgeted variable overhead cost P
per unit 12.00
Actual variable
manufacturing
overhead cost P16,800
Flexible-budget amount for
variable
manufacturing P18,000
overhead
Variable manufacturing overhead
efficiency
variance unfavorable P360
What is the variable overhead spending
variance?
a. P840 unfavorable c. P1,200
unfavorable
b. P1,200 favorable d. P1,560 favorable

52. Jenny's Corporation manufactured 25,000 grooming kits for horses during March. The
fixed-overhead cost-allocation rate is P20.00 per machine-hour. The following fixed
overhead data pertain to March:
Production 25,000 24,000 units
units
Machine-hours 6,100 hours 6,000 hours
Fixed
overhead
costs for P123,000 P120,000
March

What is the fixed overhead production-

volume variance? a. P1,000 unfavorable c.
P3,000 unfavorable
b. P2,000 favorable d. P5,000 favorable

53. Springfield Corporation, whose tax rate is 40%, has two sources of funds: long-term debt
with a market value of P8,000,000 and an interest rate of 8%, and equity capital with a
market value of P12,000,000 and a cost of equity of 12%. Springfield has two operating
divisions, the Blue division and the Gold division, with the following financial measures
for the current year:
Current Operating
Total Assets Liabilities Income
Blue Div. P9,500,000 P2,800,000 P1,055,000
Gold Div. P11,000,000 P2,200,000 P1,200,00
0

What is Economic Value Added (EVA) for the Blue Division?

a. -P233,400 c.
P188,600
 b. P21,960 d. P433,960

54. Ruth Cleaning Products manufactures home cleaning products. The company has two
divisions, Bleach and Cleanser. Because of different accounting methods and inflation
rates, the company is considering multiple evaluation measures. The following
information is provided for 20X5:
ASSETS INCOME
Current Current
Book value Book value
value value
Bleach P225,00 P300,000 P150,00 P155,00
0 0 0
Cleanse P450,00 P250,000 P100,00 P105,00
r 0 0 0
 The company is currently using a 15% required rate of return.

What are Bleach's and Cleanser's residual incomes based on book values, respectively?

a. P116,250; c. P67,500;
P32,500 P110,000
b. P110,000; d. P37,500;
P67,500 P116,250

55. Hawkeye Cleaners has been considering the purchase of an industrial dry-cleaning
machine. The existing machine is operable for three more years and will have a zero
disposal price. If the machine is disposed now, it may be sold for P60,000. The new
machine will cost P200,000 and an additional cash investment in working capital of
P60,000 will be required. The new machine will reduce the average amount of time
required to wash clothing and will decrease labor costs. The investment is expected to
net P50,000 in additional cash inflows during the year of acquisition and P150,000 each
additional year of use. The new machine has a three-year life, and zero disposal value.
These cash flows will generally occur throughout the year and are recognized at the end
of each year. Income taxes are not considered in this problem. The working capital
investment will not be recovered at the end of the asset's life.

What is the net present value of the investment, assuming the required rate of return is
10%? Would the company want to purchase the new machine?
a. P82,000; yes c. P(50,000);
yes
b. P50,000; no d. P(82,000);
no

56. The Zeron Corporation recently purchased a new machine for its factory operations at a
cost of P921,250. The investment is expected to generate P250,000 in annual cash flows
for a period of six years. The required rate of return is 14%. The old machine has a
remaining life of six years. The new machine is expected to have zero
value at the end of the six-year period. The disposal value of the old machine at the
time of replacement is zero. What is the internal rate of return?
a. 15% c.
17%
b. 16% d.
18%

57. Lobster Liquidators will make P500,000 if the fishing season weather is good, P200,000
if the weather is fair, and would actually lose P50,000 if the weather is poor during the
season. If the weather service gives a 40% probability of good weather, a 25%
probability of fair weather, and a 35% probability of poor weather, what is
the expected monetary value for Lobster Liquidators?
a. P500,000 c. P267,5
00
b. P232,500 d. P200,0
00

58. In national income terms, aggregate demand is the

a. Demand for money by the community in a period of full employment.
b. Total expenditure on capital goods by entrepreneurs during a period of full
employment
c. Demand that is needed if a countrys economy is to operate at optimum level and
the level of investment is to be raised.
d. Total expenditure on consumer goods and investment, including government and
foreign expenditure, during a given period.

59. During the recessionary phase of a business cycle.

a. The purchasing power of money is likely to decline rapidly.
b. The natural rate of unemployment will increase dramatically.
c. Potential national income will exceed actual national income.
d. Actual national income will exceed potential national income.
60. The most effective fiscal policy program to help reduce demand pull inflation would be
to
 a. Decrease the rate of growth of the money supply.
b. Increase both taxes and government spending
c. Decrease taxes and increase government spending
d. Increase taxes and decrease government spending

61. Other things remaining constant, an increase in income will normally:

a. increase the demand for money.
b. decrease the demand for money.
c. lead to an decline in the money supply.
d. lead to an increase in the money supply.
62. On an absorption-costing basis, the unfavorable production volume variance for fixed
factory overhead was P13,650, and P52,000 units were produced and sold at an average
selling price of P20 per unit. The standard contribution margin was P5 per unit.
Budgeted and actual fixed costs were the same for both manufacturing
(P122,850) and nonmanufacturing (P80,000). The total of price, spending, and efficiency
variances was P36,000, unfavorable. On an absorption-costing basis, fixed factory
overhead had been applied on the basis
of the expected volume in the master budge
t.
The amount of profit under variable costing
is:
a. P57,150 c. P14,850
b. P21,150 d. P 7,500

63. Assume that operating income for 2011 was P600,000 under variable costing and
P800,000 under absorption costing. The end-of-year cost of the inventory under
standard variable costing was P60,000. The beginning-of year cost of the inventory
under standard absorption costing was P25,000 higher than the cost of the beginning-of-
year inventory under standard variable costing.

What is the end-of-year cost of inventory under standard absorption costing?

a. P165,000 c.
P285,000
b. P225,000 d.
P310,000

64. JetSky Airways has three divisions, the Western Division, the Eastern Division, and the
Northern Division. The manager of the Western Division had wanted to purchase
replacement airplanes for the division. However, he decided against it because,
although revenues would increase and the new planes would be less expensive
to operate, the initial cost of the planes was quite large. The Western Division is most
probably accounted for as a(n)
a. cost center. c. profit center.
b. investment d. revenue
center. center.

65. Which budget should be used to determine managerial efficiency and effectiveness,
respectively?
Effectiveness Efficien
cy
a. Flexible Static
b. Static Flexibl
e
c. Flexible Flexibl
e
d. Static Static
66. Field trials and quality engineering are
examples of ____. a. prevention costs c.
failure costs
b. appraisal costs d. quality costs

Question number 67 through 70 are based on the following:

PRTC Construction Center is a retail hardware store. Information about the stores
operations follow:
November 2011 sales amounted to P400,000.
Sales are budgeted at P440,000 for December 2011 and P400,000 for January 2012.
Collections are expected to be 60 percent in the month of sale and 38 percent in the
month following the sale. Two percent of sales are expected to be uncollectible . Bad
debts expense is recognized monthly.
The stores gross margin is 25 percent of its sales revenue.
A total of 80 percent of the merchandise for resale is purchased in the month prior to
the month of sale, and 20 percent is purchased in the month of sale. Payment for
merchandise is made in the month following the purchase.
Other monthly expenses paid in cash amount to P45,200.
Annual depreciation is P432,000.
The companys balance sheet as of November 30, 2011, is as follows:
Assets
Cash P 44,000
Accts receivable (net of
P7,000 allow for uncoll 152,00
accts) 0
Inventory 280,00
0
Total assets P2,200,000
Liabilities & Equity
Accounts payable P 324,00
0
Common stock 1,590,000
Retained earnings 286,00
0
 Total liab. & P2,200,000
equity
67. How much are expected cash collections for the month of December
2011?
a. P407,200 c. P424,800
b. P416,000 d. P431,200
68. The amount of budgeted income (loss) before income taxes for
December 31, 2011 is
a. P20,000 c. P(367,200)
b. P28,800 d. P(376,000)
69. The balance in accounts payable as of December 31, 2011 is

a. P240,000 c. P408,000
b. P306,000 d. P300,000
70. The amount of inventory as of December 31, 2011 is

a. P240,000 c. P320,000
b. P 66,000 d. P300,000