CPAR CPA Review School of the Philippines MANAGEMENT ADVISORY SERVICES APRIL 2016 Final Pre-board Examination - SOLUTIONS GUIDE, 79* Batch 8. Target Cost = Estimated Selling Price - Acceptable Profit Margin = P50 ~ P12 = P38 a. coa= N@U. 000160) /2 E0Q = 1,000 units: At present, 20 orders are placed for a total annual cost of P2,000. If the EOQ Is used, 10 orders will be placed at a cost of P1,000 Because an average of an additional 250 units wil be on hand, carrying costs will increase by P500. The net difference is a savings of P500. 14, Order point = (Daily use x Lead time) + Safety Stock = (4,000 * 12) + 10,000 = $8,000 13 Profit lost by selling defective units not reworked (250x ) 3,750 Rework cost (750 x P10) 7,500 Cost of processing customer returns (150 x P15) 2.250 Total failure costs 43,500 Prevention costs 10,000 ‘Appraisal costs 5,000 Total quality costs P2650 18. Use PV of Annuity for 6 years and 18% 45,000 * 3.4976 = P157,392 19. Cash inflow after tax but before amortization (P7,500 x 60%) P4500 ‘Tax savings due to lease amortization (P5,000 x 40%). 2,000 Total cash inflow P6500 XPVF —174 Present value Bi1.310 20. P10,000 x 2.2832 = P22,832 24. (5,000 x 0.9081) + (P10,000 x 0.8264) + (P15,000 x 0.7513) - 20,000 = 4,079 23. P30,000 - (P20,000 x 0.9524) = P10,952 + 0.9070 = B12.075 24. Amount paid to the factor [(P 100,000 x 80%) x 10%) P 8,000 Fees on all receivables purchased (P100,000 x 2%) x 12 24,000 Total cost 32,000 Less savings in collection cost 18,000 Net cost P14,000 ++ Proceeds from factoring (P100,000 x 80%) 80,000 Interest cost ALSO% 25. Incremental CM (P720,000 x 20%) P144,000 Less Interest opportunity cost {P720,000 +360) x 75 x 80% x 20% 24,000 Benefit from planned change in credit terms 120.000 26. (2.11/28.12) + 5% = 14.1%MANAGEMENT ADVISORY SERVICES APRIL 2016 Final Pre-board Examination ~ SOLUTIONS GUIDE, 79 Batch 27, (99% X 60% x 25) + (12% x 3/6) = 9.36% 28. "2,000,000 ~ (20,000,000 x'8%) = P400.000 20. INTEREST RATE SPREAD = ROI - Required Rate of Retum or cost of capital. (P2,000,000/P20,000,000) ~ 8% = 25% 30, After tax net income (P31,250,000 x 80%) 25,000,000 Less cost of invested capital (P80,000,000 x 10%) 8,000,000 Economic’value added” P17.000,000 31. After tax net income 25,000,000 Depreciation expense 9,099,000 Change in net working capital (6,000,000) Capital expenditures 18,000,000) Free cash flow 21,000,000 32. Selling price P150 Less Materials cost (P45 + P15) 60 Throughput contribution per unit. P90 34. TRADITIONAL: Set up cost per hour (P60,000 + 25,000 hours) P2.40 x Hours per unit —2 Set up cost per unit PA80 ABC System: Set up cost per batch P1,000 ~ units per batch —100 Set up cost per unit 10.00 35. Change in inventory (100,000 - 80,000) 000 x Fixed overhead cost per unit (P180,000/100,000) P_1.80 Difference in income 136,000 36. August cost of goods sold (P750,000 x 40%) 300,000 ‘Add ending inventory (P825,000 x 40% x 25%) 82.500 Total 382,500 Less beginning inventory (P300,000 x 25%) 15,000 Budgeted purchases 307.500 37." September cash sales (P825,000 x 20%) 165,000 Collection of accounts receivable: From Sep: credit sales (PB25,000 x 80% x 40%) , w 264,000 From Aug. credit sales (P750,000 x 80% x 57%) 342,000 606,000 Total cash receipts , 771.900 39. Costof goods sold 300,000 ‘Add ending inventory ' 42,000 Total 342,000MANAGEMENT ADVISORY SERVICES Final Pre-board Examination - SOLUTIONS GUIDE, 40. a 42, 47. 48. 49, 50, 51 53 Less beginning inventory Purchases ‘Cash payment for 2017 purchases (P312,000 x 11/12) ‘Add payment of Accounts Payable, January 4 2017 budgeted cash payment for purchases intemal cost (Floor) [P45,000 + (250 x P48)] + 1,250 Outside purchase price (Ceiling) [P70,000 + 1,250] Contribution margin of Segment B [P15,000 ~ (P8,500 + P3,000)} Less eliminable fixed cost of goods sold Decrease in profit f Segment B is eliminated Variable cost per unit [(P178,260 - 23,700) + (35,000 ~ 3,000)] x number of units Total variable cost Add fixed cost [P23,700 ~ (3,000 x P4.83)] Total cost ++ number of units Average cost per unit Special price Less relevant cost Contribution margin per unit x numberof units (200 x 2) Increase in profit Total budgeted factory overhead + Total budgeted time (200,000 x 2 hours) Standard overhead rate Less standard fixed overhead rate Standard variable overhead rate x actual time ‘Actual time at standard variable rate Less standard variable overhead (198,000 x 2 x P0.75) Variable overhead efficiency variance Sales, Year 2 x % of working capital [(15% + 10% + 20%) ~ 30%] Working capital for Year 2 2 bees P1430 Is 7 50 400 B 900,000 2.25 1.50 075 425,00 318,750 297,000 : bb P.8.250 Absorption income (higher than variable income because inventory increased) Less difference in income: ‘Increase in inventory (7,000 ~ 5,000) x Fixed overhead cost per unit (P600,000'300,000) Variable costing income 6,000 x 15% = P900 1,000,000 x 126/120 x 1.05 = P1.102,500 2,000 APRIL 2016 79% BatchMANAGEMENT ADVISORY SERVICES APRIL 2016 Final Pre-board Examination - SOLUTIONS GUIDE, 79% Batch 57. PA0-+P20+ P35 +P15 +PA5 + PIS = BI70 58. P2565 ~ (P40 + P20 + P35 + P15) = P145 59. PAO +P20+P35 + P15 = P110 60. P180~(P40 + P20 + P35 + P15) =P70; 1,000 x P70 = 70,000 increase 63. 90/150 = 0.60 65. CMR = 30/120 = 25%6; Sales = (30,000 + 12,000) + 25% = 168,000 66. (a) (b) (a)x(b) Output ‘Average Cost Tota Cost 1 P8000 P 80,000 2 (P80,000 x 80) 64,000 128,000 : 4 (P64,000 x80) 51,200 204,800 8 (P51,200 x80) 40,960 327,680 Materials and components 25,000 _ ‘Average direct labor and variable overhead 40,960” Total variable cost 65,960 Desired contribution margin 15,000 Required price 80.950 68. A.5% inflation rate would impact salary and health care costs but would not impact depreciation expense (based On historical cost) and would not impact interest expense (fixed based on arnortization schedule), Salaries expense P250,900 x 1.05 262,500 Health costs 100,000 x 1.05 405,000 Depreciation expense £5,000 x 1,00 Interest expense on 10-year fixed-rate notes 37,750 x 1.00 Totai Budget END.INSTRUCTIONS TO EXAMINEE COLLEGE OF ACCOUNTANCY SUBJECT Mes Name: fey ben eadecam 0 »@0000 + Q2OQO00O0 «~QOQOOO 2@Q000 2Q008O 7OO000 x @@QOO0O »@@000 = @OOO0O *" @OO000 2 @@000 3» @OOO0O0 *~@OO00 = @OOO00 % @OO0O #,@OO0O 2@vGOO0O #OOOO0O #@OQ000 «®O000 6@O8OO ~OQOOOO «@O8OO *«OQOOOO *@O0@O0O «~OOOO0O 2@O20OO »@OOOO *@OO000 %@Q000 r@@QOOO *OOOOO r@Q@OOO »OOOOO n@OOOO *OOOOO *@OQ0OO® «~Q®OOOO *»@OOOO 260000 »~@GOOOD + OQOOOO ~OOOOO QOQO9OO00O ©O©0O0OOO000 ©OEOOOOOOO QOCOOOOOOO QO9QOOOO0090 QG9EOOOOO09O