=) The Review Schoo! of Accountancy FINAL PREBOARD EXAMIMATION, Monagemend Udrisorg Feurvcet Select the correct answer for each Mark only one ansuer for each item by corseaponding to the letter ef your choice on the anaver sheet STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only. 17 September 2017 00 AM - 11:00 AM of the following shading the box vided. SetB 1. In manufacturing cycle efficiency, the primary difference between throughput time and lead time is based on a. Move time b, Waiting time ©. Process tine d. Inspection tim 2. The treasurer of Cocktail Company plans to have a cash of F 91,000 on March 1, which shall increase by P 177,400 on March 31. Sales during March ate estimated at P 900,000. February sales were P 600,000, and January sales amounted to ¥ 500,000. Cash collections have be estimated as follows: + 608 of the sales for the month to be collected during the month. = 30% of the salea for the preceding month to be collected during the month. + 80% of the sales for the second preceding month to be during the month, The treasurer plans to accelerate col discount/ for prompt payment. With the discount policy, she expects collected tions by allowing 4 to coflect 708 of the current sales and will permit discount reduction on these collections. Sales of the preceding month will be Goitected to the extent of 158 with no discount alloved, and 101 of the sale the second preceding month will be collected without discolmt @llowed. This pattern of collection can be expected in qubsequent months. | During the {transitional month of March, Goliections may run somewhat higher, However, the treasurer prefeca to estinate collections un the basis of the new pattern so that the estimates will be somewsat conservative Under the how much ‘should be the budgets disbursement? a. P 580,000 b. P 592,600 c. P 671,000 i d. P 683,600 S.A firm with unlimited funds must evaluate five proj projecta are listed with their respective returns: Project Status Return (0) 1 independent 14 2 Independent. 12 3 Mutually exclusive 10 4 Mutually exclusive 15 5 Mutual ly exclusive 12 Soles their returns £ 4 e projects on the basis of Ranking of the proj asis 0} eae Sthe worst according to their acceptability to the firm woul 1 and 2 ,2 and 3By vaca rary socee ay ea RR or a, 17 September 2017 » #:00 AM to 11:00 AM Page 2 4. If a fire's payable defarral period 1s longer, then its a; Normal operating cycle is expected to be shorte b. Gash conversion cycle is also expect. 4, Dogéee of financial leverage is expect © be higher 60 million, 35 milion in cost of Invested # 40 Mojito company's earnings ace | geeds sold, and P15 million in operating expenses. It Stal and has a Weighted-average onic value added (EVA)? million in long-tem capital of 20%.” What io the P4000, 000 bP 5,000,000 6. which of the following is ye three (3 gies prescribed by strategic Cost b. Cost Leadership c: Market se ton: 3. Product differentiation 7. The Morato oducts manufactures batteries thal it sells primarily. to the -Place division £0} usion with that division's main product. In 2016, half of the batteries were s0ld © outside companiex st a price of P 2 ca The remaining batteries Went to the R-Place division. cost data for 2017 for the Morato vision are given below reduction 2 Variable manufacturing costo Fixed overhea: Selling expense (all variable) Admini stzative expenses (411 fixed) A negottated transfe: that will yield a markup Product cost (absorption cost) is set for Morato transfer price, the total divisional (bution margin P 45,000 b. P 78,000 . P 90,000 d. P 108,000 8: To find the internal rate of return a. The desired rate of return, the net cash inflows b. The projects purpose, i €. The project’s cost, its life and its annual cash di. The desired rate of return, the market rate cost of capital cost, and of a product per 360-day year rita Company needs 200 units 2 Betieserying cost ist 2 pes unit per years it takes 9 Se eeive a shipment after an order is placed, and the fim BO days’ usage in inventory a5 a safety mall fage level of inventory 100 units ag2 units 222 unitsFnk0g: curve S00 durac*oo jUPits of a new product shows total Useet Labor, ‘amd "eringe benefits) af Me total cost. o, p. © 308,009 Prductton tor next Dip qastee® Yoae for Labor-related costs 4. © 289,000 P 116,000, rhe OPFALINg Leverage Sem ® operations © 1G) ttxea £ (11) business risks Be UM) Fixed costs (12) cinancial tan + (1) variable (2) business risks (2) warsable costa (22) tinancl "Se Ap. ite eto to unten (2) __ are ated in nas been gathered for the three aepartme i a Sales econ eo F 69,000 . P $0,000 80,000 Goat of sales P 40,000 P 42,000 60,00 Operating ax : Salaries 8,000 7900 Reat 2,000 lities 1,000, 2,000 Total costs PSE,0G0 © F 54,100 F 77,000 Net income F9,000 (P 3,100) F 3,000 I£ Department B in eliminated, the space it occupies will be divided UeLlities are allocated on the dn Department equally anong Departments A and basia of floor space occupied. 70% of the salari would be eliminated; the other 30 % would be 3 Department A and ¢. If Department B is eliminated, a. Decreased by # 4,520 b, Decreased by P 1,520 ©. Increased by P 1,180 d. Increased by P 1,520 b % aqua: 19, ahe percentage of cash to total assets is an example of a. Vertical analysis b. Solvency analysis c. Liquidity analysis d. Horizontal analysis Gurrent Liabilities Long-term debt Preferred stock Connon stock equity TOTAL Martini compan and 14%, respectivel jos, The after-tax weighted average cost of B, 500,000 1,500,000 ty and preferred stock t 3 Gost of conmon ‘he company’s before-50s-tax coms a. 16.246 b, 14.708 e. 14.508 @, 12.208MANAGEMENT ADvisony seavices LSepcemoer SLI SOOM ST Oe ccd Page 4 15: Olrect costing has advantages ave following ts MO amseg these Advantages? a. Romyais of prot tobility af products, terri : segments of @ business si ee ae Determining cont-volume-protit relat factors of selling price, sales ais, and salen voluse s+ Consistency with income Computation ox purroaes Gi, Ministcing ithe etvects of the ayeitrary sliccstion ot cixed Ae 16. dose Jose Guerve Company has P 300,000 cash, P 2,000,00 and the following ratios: “ De Total assets turnover feciter ccs yitiercurnsves ite Poor ati 2s Gross profit mapoin an return'on equity A a. P 120,000 k Bp aebcoo0 &. & 930,000 a) $4,200,000 17:16 a firm's payable deferral period is longer, then tts ‘a. Normal operating cycle in expected to be shorter Bb) cash conversion cycle is also expected to be longer a. Znvestment in working capital is expected to be lowdr 's expected to be higher Degree of financial leverage 46. Which of the following credit terms results in the highest effective annual cost if the discount is not taken’ a. 2/20, n/40 b. 1/10, 2/30 €. 2/15, n/25 d. 3/30, n/60 FO) which of the following woutd cause the break-even point to change? ‘a. Sales increased b. Total production decreased otal variable costa increased 45 production d. Fixed costs increased owing to addition to physical plant Pe lentesce divects= of Etna conte COPEsTY, Eo cestment ‘budget constraint of P'S milo” hore are five proie from which company can choose fron, Each, roles jes entirety (ice. each project fe oo y ies Gal outlay Profitebility Indes 20.¥ou are the Project initia ee P 900,000 2 B P 600,000 : ¢ p 900,000 D Pp 600,000 e p 2,400,000 1s undertake? se all profitability s would You oe te craven since sil Prof show fe groater Ebel 1.0 gyects B,C and P jects B and 0 jects B and ©of fs MORE Felevane de SPEOEAGEE Ge he cagtes cet teh teech, oandaj mucuid es) sensed b, SoBtrollabiiity Woidabi lity Linearity ausality a 2 7 Rum Company manufactures and sell ingle product. ad sells a single product: Tey 201 2017 wate gates ( 26 per unit) 10,000 15,000 Matectieenees 4,000’ pounds 4, 000 pounds eter ty a t's poe pound 10 per pound Bees 2,000 hours 2,500 hours labor cost $20 hour P25 per hour How did the operational p one 5 ae Oat Oe eee hone eect Tabor chang: a. Increased by 208 b. Increased by 10% &. Decreased by 108 4. Decreased by 20% 24.A temporary working capital typically supports a. Seasonal peaks b. Company's need for cash ©. Settlement of long-term debt d. ‘Aequisition of capital equipment nthy, 24.Given the following information for Gin Company, which has implemented an annual 50-workweek progran Economic order quantity 6,000 unite Average investment in inventory per U 5.00 Carrying costs per year 40% Transaction costs per placement P 100 Normal lead tine 26 days Maximum lead time what is the company’s opt a. 27,692 units be 28/800 units e. 34,615 unit a. 36,000 units mum reorder point? 25. An anventory management. tool: a. ABC system b. Gantt chart ¢, Baumol model d. ‘bu Pont technique that total asset Brandy's pro-forma balance sheet shows Siccesse by f 200,000 white retaining a debt-equity ratio of indy? = @. pebl RUSE increase by P 100,000 b, vebt must increase by P 125,000 Equity must increase by P 375,000 Mity must increase by the full amount of P 990,000 ) ithe effective rate: of @ 12¥ discounted lean) 0: 200, 000, de 90 days, with 10t compensating balance?MANAGEMENT ADVISORY SERVICES Final Preboard Examinations (Gctober 2017 tatch) 117 September 2017 » 8:00 AM to 11:00 Ait Page 6 26. One that {s NOT descriptive of Management Advisory Services (MAS) 4, MAS engagements are broad in scopo and varied in nature bl MAS ia repetitive as far as the sane client is concerned €. MAS involves problem-solving affecting the future operations of the cllent 4. MAS pinpoints actions to be taken, the benefits of which will be received in the future 29. The following information were furnished by a prospective investor relating to a capital project wherein he is interested to invest: Net invoice cost of new equipment P 150,000 Working capital required to support project 100, 000 Incidental costs for freight and installation 50, 000 Estimated proceeds from sale of old equipment 20, 000 Loas on sale of old equipment being replaced 30, 000, Estimated cost of repair of old machine 25,000 Gost of training operators of new machine 15, 000 Annual ineremental cash income before tax 80, 000 Estimated life of new equipment 5 years Income tax rate 408 How much {e the net capital outlay or net amount of Anvestment for decision-making purposes? a. 230,000 b. F 260,000 - i ® 270, 000 P 276,000 @ 30.Whieh of the following transactions would be most detrimental to a firm’s current ratio, which is currently at 4.07 = a. Buy raw mate on credit b. Settle accounts payable with cash ©. Selling marketable securities at cost a. Pay off & portion of long-term debt with cash y handzade pipes, has ve years aitacrest river. comprny, @manvrocturer of aux experienced « steady grovth in its sales for the past f Increased coupetition, tewever, has ied the’ president, J believe that an aggtessive advertising campaign will be neces next year to maintain the company’s present grouth. To prepare next year’s advertising campaign, the company's accountant presents the following data for the current year, 2017: Variable ‘costs (pex pipe! Direct labor Direct materials Variable overhead fotal variable costs Fixed! cos! Manufacturing Selling Administrative Total fixed costs sales price per pipe Expected sales, 2017 Mohn has & 531cs ae a oop is desired, what is the maximum amount patetax income of F MO ' ing at a sales level of 22,000 pipes? ‘ean be spent on aavertiai B 12,500 D., to (20,000 pipFinishin, Shippin, Re-engincori Resvazen Pa ee poe ech COMPAnY Urns out 200 portable fans a day at a cost of P 250 Flem an f9F Materials and variable conversion cost. tt takes the inte Ciavec noe means lati caiocneany Maeeaale usual al credit terms extended es GenatagTectE terms extended to {ts custonors is 20 days, and the £128 11y pays its supplies in 20 days. Assuming the foregoing cles are constant, what anoun' Working capital must Bacardi mninces mount of working capital 9p9, 000 P 1,400,000 P 1,800,900 B 2,400, 000 34. Which group of ratios primarily measures risks? aA. Liquidity, activity and debe b. Activity, debr and profitabitity | Liquidity, profitability and debt |. Activity, Liquidity and common e mity 35, Rloody Mary Company {s attempting to select the best group Independent projects competing for the firm's fixed capital budget of 310,000,000. Any unused portion of this budget will earn less than its 200 cost of capital. A sumaxy of key data about the proposed projects, follow: Project initial investment IRR PV of inflows at 208 B B 3,000,000 aie P 3,080,000 B P 9,000,000 258 P 9,320,000 c P 1,000,000 248 P 1,060, 000 . # 7,000,000 238 B 7,350, 000 nt? Which projects should the rirm imptem a. Projects B and C f b. Projects ¢ and 2 €. Projects A and D d. Projects A, 8, Cand 0 Bei fonic Company has annial sales of P 2,500,000 (bad debts are 3 Gales). The credit and collection manager is considering institutin 4 stricter collection policy where bad debts would be reduced to 1.9% lof the total sales, and the average collection period (i-e., days cies outstanding) vould fall from 45 dayo to 30 days. However, Gales woula also fali by an estimated P 300,000 annually. Varieble Diccsts are 75% of sales and the cost of carrying receivables is 10%. i Uissvaing that the tex rate is 40%, what would be the decrease Gavestment in receivables if the change were made? tof LEAST importance fort ital budgeting ... terest Earned ratio financial leverage of capital« 2017 Baten) Nis 17 September 2017 18100 AM tive Aa page B aB.Which of the following are acceptable criturie sor determining the average cost of capital (WACC)? \d historical costs of weights in the weight a. Market value of tho capite) structure a financing b. Market value of capital structure and and equity c. Using the aft capital structure 4. Using book values of the capital Jevel of debt and equity tacget mix of debt tax cost of debt and the market value of the structure and the prior 4 overhead ral 39.A, company Uses a budg in applying ove: diction orders on a labor cost basis for Department A and on 2 eochine hour basis for Department B. At the beginning of the year, the company made the following predictions: upset Oepartment_A Factory overhead Direct labor cost e 147,000 P 17,500 P 1,50 Machine hours 300 10,000 10,500 During the month of January, the cost record for a job order, Wo. 105 of 30 units of product), which Was processed through b shows the following: ACTOAL Department A Materials issued P30 Direct labor cost 36 Machine hours 6 ‘A applies overhead based on dizect labor peso machine hours. What Assuming that Departmer and that Department » applies overhead based is the unit cost of the job? B8.75 b. ce. 2 3 wm 40.Assume the same data in No. 39, and that at the end of the yer, actual factory overhead amounted to P 80,000 and B 69,000 in Department A and 8, respectively. Assume further that the actual direct labor cost was P 74,000 Pepartment A and actual machine hours were 9,000 in Departmé company’s overhead must a@- Over-applied by P 3,250 b. Over-applied by P 1,750 €. Under-applied by P 1,500 d. Under-applied by P 1,750 ‘an aggressive working) capital policy in On the hand, Absolut Company follows pieces of information “Kahlua Company follows Sworking capital management onsetvative financing policy. None can conclude that: @ Kahlua has less iguidity risk Rahlua has a low eurrent ratio Mahlua finances 5! iAbeciut finances sho: iva has low ratio ut has a high ratio Based on the Absolut has Liquidity rent ratio while Absolut has @ high term debt while s with 10: h short-term debt total debt whil to total de hort-term asset rt-term assets wit of short-term debt © t short-term debt ee oll un Balle Me aFinal Prebonry ¢outSo ny Semvice 17 September 26 be ations (Octobe 2017 Bata 8:00 AM to 11/00 AM Page 9 high ality fice equi ulatora that ara sold only! by ment dealers. A lage discount culators this year at an average atenent expected for the coming year following » ng wath Variable peatts at ots)? 4,800,00 roduction costs (average of P 20) 1,800,000 Contribution margin Pixed cost ee Tocome The 30, 000 706,000 260,000 _ 500,000 ie Units to be bought by the choin ace in Bunch’ Company. currently punch has the capacity to produce 0,000 units per yea » 10% decline in expected th Sales at regular prices -- some customers would recognize Store’s prodict aid make thelt purchases at the lover Pr Poles mix remains unchanged, showld Punch accept the special « A. Yen, because the company would gain P 30,000 5 because the company woutd gain P the company would gain P ause the company would Lose F riable t, the total dost Jin position on a cost-volume-profit graph: Shift upward and have ateeper slope Shift upward and have flatter slope Shift downward and have steeper slope G. Sift downward and have ale} 4 company in: per ». P 1.50 per 9 44. Scotch Company will yay a divider the next 22 months. the required rat {2 10% and the constant growth rate ia St. What is © conmon share ef Scotch Compan current macket price ‘a. 30.008 b. 26.638 : 15.008 a. 10,008 45. Dividend payout = Dividend yleid y a, Plowback ratio bi Barings per share €, Price-earnings rati @. No meaningful amount GE.Onder the Capital Asset Pricing Model (CAPM), what Tate of return of stock of Johnny Walk free rate of 7.5%, and a market risk pr a, 9.008 b. 13.508 €. 15.00% d. 15.388 ts break-even pe EA does NOT describe coupany operating at B Margin of safety ratio 1s nit Fixed cost equals unit contr ita sold ibution margin multiplied at sales evel below this point would be favorable to the compan fame) inj tae rates triggers cor Seven sales due to increased expenses ponding increase in53 An item sunacenenr sovisory stnvices retard Examinations (October 2017 Bate 17 Sephember 7087 = BOD AN IO TODA theory en Demand Demand for money decreases d. Inflation and denand for money also in Jack Daniel company 1s diss ROE) of 15%. If the profit nm: Unchanged at 84 and 1.25, debt ratio increase to achieve a 20% AoE? ©. 158 508, of the following is NOT conside riance? a. overhead ty variance sapac b: Overhead effic Fixed overhead budget variance i chivas company = P 30,000,000 dividend payout ratio. Chivas financing will expe ny uses 4 break point Com here be ‘a. P 18,000,000 b. P 20,000,000 e. P 30/000,000 d. P 45,000,000 whose entire amount is usuall a. Direct cost b. Period cost 4 Conversion cost Factory overhead John Ls consider: 4 new computer-operated lathe. the computer-operated lathe follow: Eexpectively, Variable overhead spending variance which 4s ‘no. preferred in chi 4 proposal to sell information on th intied with last policies, Remaining useful ite What is the pre-tax pi a. 1.87 years b. 2.00 years 3.29 years d. 3.53 years edule t i. The budget sc fhe direct labo! Sales budget Product ion budget Raw materials pu Schedule of cash rece3| pts r budget would be! yases bud coat P 100,000 Accumilated depreciation 60,000 Salvage value now 20,000 Salvage value in ¢ years 0 Annual depreciation 10,000 Annual cash operating costs 200, 000 ayback period foi 4 years, a differential cost an existing lathe and p © che your's by how much must ly the stock Page 10 aura on equity remained the tot able overhea: existing ————<«<— ath andinformat score. ton base 4 business encity does Anctude dopartus has two service departents and tyo producin a the Building and Grounds service departnent or departments on tho banis of square footage eae he depuztmants in the company apd the amount , h dapartment are presented below Producing Department A 2 : Producing Department & 30,000 sq. Budgeted costs in the Buliding and Grounds department total P 34,00¢ or the year Assuming the step method ia used and hiding and Ground: > the Cafeteria would be: a PO Di P 4,69 = 8 4,800 4. -P 5,56 Sj. In present value problema, un! J otherwise, flows are assumed to be a. At the end of ¢ fod bs At the beginning of the period c. In the middle of a tine period d. Spread out evenly over at period 58. Under standard co! (debited) to Work-In-Process Iavento S regate labor paytol b. ual labor hours at standard rates €: Standard lebor hours at actual rat @) “Standard labor hours at standard rotes ing, the amount of direct labor 59. product price i= expected inerense by 5% Glasticity of demand of the product is sa product's demand is said to be (1) a 7 expected to decrease by (11) ‘a. (1) price-elastic (11) Tov b. (1) price~elastic (31) €- U) price-inelastle (71) 10% d. (I) price-inelastic (11) 2.5 60.A company practicing Ju: r (orn) for th manufacture of its lone product @ Even point to be higher than the non-JIT B. Standard cost variances to be mostly favorable €! Most production costs to be ire feion-making i. Absorption costing ard variable costing income to be equal elevant in Hong-term goal of financial managene Be Avoid risk | Maxinize profits UHaximize shareholders’ won: Hsxinize the booksagen aomsony emits GS) fitness (ron nz ba) 17 September 2017 # 8:00 AM to 11:00 AM Page 12 b igher salen growth rates the four y for next overhead catego b3.Mocktails Manufacturing has four categord categories and expected overhead coats for each year are listed below. Maintenance P 200,000 Material handling 32,000 setups. 100,000 Inspector 120,000 determined overhead rate, applied using a pF Labor hours. 50,000 direc Ked to getting this Bids are based on ful. currently, overhead is based on budgeted direct budgeted for fext year. The company hes been 2 for a proposed job. |The plait manager feels ¢ feud reauit in new business in future years manufacturing cost plus 20% Estinates for the proposed job are 4s follo pirect materials ® 6,000 Direct labor (2,000 hours) —P 10,000 Sumber of material moves 12 Number 10 Number 2 Number 500 tn [tue Gave; toll mendtacturing) coat bar | peep calculated by Beet pp esuchead (using &) volume pared) cost Grits Labor a heard of a new way of applying overhead the plant manager ha: that uses cost pools and cost drive Machine hours 20,000 Material move 7,600 setups 2,800 Quality inspections 4,000 oie puen fs the bid (peice “sesunlng ACL ty Based co used? a. P 21,820 b, P 25,040 ie, p28, 944 Pp 30,048 spies of total quality js Not among the princiP 1 qua be customex-orsented ero defects pb. strive for 4 : he first time Be po it right © st tse guild teamwork and one ends to nininizeHeaacemenr 4 @ C2017 8 iors (Orin SOO AMD U1 OMISORY Semvices 2017 batch) 00 AM Additional information he ney technoloqy ia exp ‘000 ome other pe P 6 How much is the Be # 15,000 17,500 3 other pes how eng 12 L.s years 1 year and 20 months Some other and Between 40% ragiaterea tine ot gat lige of 1 * tax rate waa alceady logy: é ite of 10 year ted to have ® tu present val