©) The Review School of Accountancy ‘Board Examination 08 February 2014 Monogement Services INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one answer for each item by shading the box corresponding to the letter of your choice on the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only. SetB Items 1 and 2 are based on the following information | Heart Company provided that following information regarding its biggest branch in suburb Manila: Operating assets, January 1 P 180,000 Operating assets, December 31 P 300,000 Operating liabilities, January 1 P 75,000 Operating liabilities, December 31 P 125,000 Sales P 500,000 Cost of capital 20% A+ Assuming that the branch’s profit margin is 12%, what is the ‘return on investment? a. 20.008 b. 25.008 c. 33.338 d. 40.008 Assuming a target residual income of P 24,000, how much should be the expenses of the branch for the year? a. P 476,000 b. P 452,000 c. P 428,000 a, Cannot be determined from the given information Variable costing treats a. All variable expenses as product costs b. All variable expenses as period costs c. All fixed expenses as product costs dj All fixed expenses as period costs The following data pertains to Brain Company: Total cost Sales (40,000 units) P'1,000,000 Raw materials 260,000 Direct labor 280,000 Factory overhead Variable 80,000 a Fixed 360,000 Selling and general expenses variable 120,000 3 Fixed 225,000 Assuming that Brain sells 80,000 units, what is the maximum that can be paid for an advertising campaign while still breaking even? a. P 135,000 b. P 535,000 ©. P 695,000 . a. P 1,015,000sisg] tSt Pre-Boara Examination (May 2014 Batch) ; 7 si reomary 2014 » 8:00 90 (0 10:00 AM Page 2 eet enti | ee If DOTC expects that an increase in the LRT/MRT fare will raise mass transportation revenues for the government, it must think that the demand for LRT/MRT is Elastic ~ Inelastic ec. Unit elastic d. Perfectly elastic items 6 and 7 are based on the folloi information Liver Corporation has the following sales budget for six months of 2014: duly PB 200,000 August 210,000 September 220,000 October 230,000 November 240,000 December 250,000 Historically, the cash collection on sales has been as follows: * 65% of sales collected in the month following the sale * 25% of sales collected in the second month following sale * 8% of sales collected in the third month following sale, and * 2% of sales is uncollectibie A -6. Determine the total cash collections in the fourth quarter in 2014, a. P 663,900 b. P 603,900 c. P 578,600 d. P 363,000 © -7- what is the projected year-end balance of accounts receivable assuming uncollectible balance is written off immediately? a. P 101,700 b. P 111,500 ce. P 342,600 d. P 352,200 Standard cost variances are not closed to ai Direct materials inventory b. Work-in-process inventory ‘ ¢. Finished goods inventory d. Cost of goods sold B 9% Spleen company with P 210,000 of fixed cost has the following data: Product X Product _¥ onit sales price P10 eS unit variable costs Pa P4 Assume that 3 units of X are sold for each unit of ¥. How much is the contribution margin of product X at its breakeven point? a. P 900,000 b. P 180,000 > c} PB 120,000 a. P 90,000 G@, 10-Determine the false statement about an accounting information system (ars). a. AIS fe often referred to as a transaction processing system b. AIS supports day-to-day operations by collecting and sorting -_ data about an organization’s transactions ©, AIS is best suited to solve problems where there is great uncertainty and ill-defined reporting problems AIS produces information made available to various levels of management for use in planning and controlling operationsave sere nen AuUU Page 3 EE Bn. h 2. Ba C14. D 15. Ih macroeconomics, the narrow definition of money supply “M” consists only of a. Current and demand deposits b. Currency, demand deposits, other checkable deposits, and travelers’ checks ¢. Currency, demand deposits, and small time deposits @. Currency, demand deposits, small time deposits and Money Market Mutual Fund balances Pancreas Company has 3,200 machine hours of infinite labor hours available for manufacturin the following characteristics: plant capacity and g two products with Product S Product 1 Selling price P 200 P 165 Cost: Direct materials P 80 P40 Direct labor* 40 35 variable overhead** 15 30 Fixed overhead** 10 20 Operating expenses (variable) 49 20 Total P 185 P 145 Net income : P 1s P 20 * applied on the basis of labor hours. ** applied on the basis of machine hours Assuming that there is no market limit, could be attained under the scenario? a. P 96,000 b. P 80,000 c. P 72,000 ad. P 64,000 what is ‘the maximum CM that Items 13 to on the following information Lungs Company incurred the following factory overhead costs for the second quarter of the year: tory Overhead April Pa, 200 May P 3,600 June P 4,860 Using high-low method, how much is the variable factory overhead costs if Lungs had 160 machine hours? a. P 4,400 wb. P 3,200 “c. P 2,800 d. P 1,200 Using high-low method, how much is the fixed factory overhead cost for the second quarter? a. P 1,200 b. P 2,400 £. P 3,600 4. P 4,800 Which of the following equations shall be used under least-squares method? a. 12,600 = 3 a + 69,300 b b. 1,926,000 = 3 a + 69,300 b ¢. 1,890,000 = 450 a + 69,300 b d. 4,926,000 = 450 a + 69,300 b’ b D MANAGEMENT SERVICES ESM) First Pre-Board Examination (May 2014 Batch) 8 February 2014 © 8:00 AM to 10:00 AM - Page 4 Items 16 to 19 are based he following information “Kidney Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings) over the existing machine. Information on each machine follows: Qld machine New machine Original cost P 9,000 P 20,000 Accumulated depreciation 5,000 0 Annual cash operating costs 9,000 4,000 Current salvage value 2,000 Salvage value in 10 years 500. . 1,000 Remaining life 10 yrs. 10 yrs. 16..The P 4,000 of annual operating costs that are common to both the old and the new machine are an example of a(n) a, Sunk cost ) Irrelevant cost ¢. Opportunity cost d. Future avoidable cost 9,000 cost of the original machine represents a(n) Sunk cost Opportunity cost Future relevant cost Historical relevant cost -18.The P 20,000 cost of the new machine represents a(n} a. Sunk cost b. Opportunity cost ¢. Future relevant cost d. Future irrelevant cost 39. The estimated P 500 salvage value of the existing machine in 10 years represents a(n) a. Sunk cost b. Opportunity cost of selling the existing machine now ©. Opportunity cost of keeping the existing machine for 10 years d. Opportunity cost. of Keeping the existing machine and buying the new machine 120. Bladder Company manufactures and sells native bracelets to assorted prints. Data for the previous year were as follow: Selling price per piece P 8.00 variable cost per piece P 2.00 CH Number of bracelets to breakeven 25,000 Net post-tax income P 5,850 For the coming year, the company estimates that the selling price will be P 9.50 per piece, variable cost to manufacture will increase by 25%, and fixed costs will increase by 20%. Income tax rate of 35% remains constant. How many units are required to maintain the same income as last year? a. 26,000 units bL 27,000 units €. 28,333 units d. 29,666 units 21.Contribution margin ratio x (sales - breakeven sales} a. No meaningful amount b, Variable costs c. Fixed costs éd. ProfitsO GE IE age 5: £228 a0 bas Antormation 1g information is available for Ana Manuf: r Company when it produced 2,100 units in the month o: ne pany whe € Februar, Material 2 pounds per unit @ P 4.00 per K ound Labor 3 hours per’ unit: r Ps Variable overhead P 15 per hour ACTUAL Material 4,500 pounds purchased @ P 17,100 Labor 6,400 direct labor hours A .22.wnat is tne materials purchase price variance? @ P 900 favorable + P 900 unfavorable c. P 840 favorable d. P 840 unfavorable A 23-Assuming that raw materials inventory increased by $00 pounds in February, then what is the actual cost of materials used? (as P 15,200 ‘Bb. P 15,960 c. P 16,000 a. P 18,000 B .24.Assuming that raw materials inventory increased by 400 pounds in February, What is the materials usage variance? a. P 380 favorable P 400 favorable ¢. P 1,140 unfavorable P 1,200 unfavorable PD .25. How aid the company factory workers perform in February? a. P 100 efficient b. P 100 inefficient ¢, 100 hours efficient d) 100 hours inefficient A 726. Assuming that the February payroll amounted to P 76,800 and that the labor rate. variance is P 12,800 unfavorable, then what is the standard labor rate? a+ P10 per hour b. P 12 per hour c. P14 per hour d. Cannot be determined from the given information D 27. assuming that the overhead cost is applied on the basis of labor hours, what is the variable overhead efficiency variance? a. P 1,000 favorable b. P 1,000 unfavorabte c. P 1,500 favorable (@. P 1,500 unfavorable 0 28, Assuming that the actual factory overhead costs incurred amounted to P 150,000 and 35% of which is fixed, then what is the variable overhead controllable variance? a. P 1,500 favorable b. P 1,500 unfavorable + 2 3,000 favorable 4) P 3,000 unfavorable