CPAR CPA REVIEW SCHOOL OF THE PHILIPPINES Manila MANAGEMENT ADVISORY SERVICES 83" Batch Pre-Week I MAY 6, 2018 1. Yarrow Co, is considering the purchase of a new machine that costs P450,000. The new machine will generate net cash flow of P150,000 per year and net income of P100,000 per year for five years. Yarrow’s desired rate of return is 6%. The present value factor for a five-year annuity of Pi, discounted at 6%, is 4.212, The present value factor of Pl, at compound interest of 6% due in five years, is 0.7473. What is the new machine's net present value? a. P4S0,000 c. P181,800 b, P373,650 d. P110,475 2. A corporation obtains a loan of P200,000 at an annual rate of 12%. The corporation must keep a compensating balance of 20% of any amount borrowed on deposit at the bank, but peasy cose not have a cash balance account with the bank. What is the effective cost of a, 12,0% c. 15.0% b. 13.3% a. 16.0% ( 3. Accompany has the following target capital structure and costs: Proportion of Cost of capital structure capital Debt 30% 10% ‘Common stock 60% Preferred stock WM a be. LE “The company’s marginal tax rate is 30%. What is the company’s weighted capital? a, 7.84% e 10.30% b. 9.130% a. 14.20% ITEMS 4 AND 5 ARE BASED ON THE | FOLLOWING INFORMATION: ‘Assume that Straper Industries is considering investing in 2 project with the following characteristics: Initial investment 500,000 Additional investment in working capita! 10,000 Cash flows before income taxes for years 1 through 5 140,000 Yearly tax depreciation 90,000 Terminal value of investment 50,000, Cost of capitai 10% Present value of Pi received after S years discounted at 10% 9.621 Present value of an ordinary anntity of Pt for 5 years at 10% 3.791 Income tax rate ‘ 30% Investment life years ‘Assume that all cash flows come at the end of the year. 4, What is the amount of the after-tax cash flows in year 2? P 98,000 a. P140,000 a b, P125,000 a. £70,000 i 5, What Is the net present value of the Investment? > Ls a. P175,000 c 1 b. P 58,000 dP (12,340)CPAR week | ~ MAY 6, 2018 i ITEMS 6 ANi = “ ~ . 1D 7 ARE BASED ON THE FOLLOWING INFORMATION: / : an, Inc, has se; lant asona| demand for Its products and management Is considering whether Production Or seasonal production should be implemented. The firms’ short term Interest cost is 8° decision: %, and management has developed the following information to make the toma Alternative 2 - Level production Seasonal production pavnerlaleleadl 2,000,000 1,500,000 costs 6,000,000 6,050,000 0 6. i woich alternative should be accepted and how much is saved over the other alternative? 5 ative 1 with P500,000 in savings. b. Alternative 2 with P50,000 in savings. c. Alternative 2 with P10,000 in savings. d, Alternative 1 with P10,000 in savings. 7. At what rate of short-term interest rate would the two alternatives have the same cost? 5. 6% c. 10% b. 9% a, 12% 178. A company with P4.8 million in credit sales per year plans to relax its credit standards, projecting that this will increase creait sales by 720,000, TT company’s average collection customers is to be 75 days, and the payment behavior of the eng custom tex vsts are 80% of sales. The firm’s ‘cing customers is not expected to change, Variable cos ‘s a cases 2 ge a 360-day year, what is the company’s aR rn is 20% oefore taxes. Assi 3 ae from the pranned change In credit terms? a. PO “ ” cc. P144,000 . d, P120,000 re this year. The firm along 5 expected to pay a dividend of P5.00 per sha nis ny current market price of the dividend is to grow at 2 rate of 6%. If the bi? ‘at is the estimated cost of equity? share, whi stock Is 99 Pe © 14.3% ‘. 60% d. 12.0% awa 12 ARE BASED ON THE FOLLOWING INFORMATION: qrems 10 Mertin Corporation STATEMENT OF FINANCIAL POSITION December 31, 2018 (Pesos in millions) Assets ‘Current assets. P75 Plant und equipment . 250 Total assets 325 Iilebilities and shareholders’ equity ‘Current liabilities ran Long-term debt (12%) 4 Common equity. Common stock #1 par Additionai paid in capital Retained earniis Total liabilities anc sharerotaers’ equity89" Batch of Additional data aot 8 * The long-term dg a 25D per as nnaly fed at par (P,00/bond) and is curently ae CAN no issue debt at 1 '50 basis Treasury bits, one conn tee rate Treasury bis) 67%. bis: * The 'MON stock is rently selling at P32 per share «The bete na athe rently 15%, © Martin's e We for Martin is 1,25 : 55% Current net cost of debt is sth, . 7.0% ie , d. 8.5% 1 Using the ‘i om Capital Asset Pricing Model (CAPM), Martin Corporation's curent cast of common a. 8.75% b. 10.00% © 15.00% 4. 17.00% ITEMS 12 AND 13 ARE Based ON THE FOLLOWING INFORMATION: DQZ Telecom is considering a for it ic blans to uae te ca Project the coming year that will cost P50 mition, DQZ Combination of debt and equity to finance the investment * Issue P15 milion of 20-year ands at a price of 101, with von flotation cpsts of 2% oF par, ‘8% and * Use P35 million of funds generated from eamings. The equity market is expected to 3m 12%. Treasury bills are currently yielding S%. The Peta coefficient for DQZ is estimated to be 0.60. DOL is subles te mr ees comporate income tax rate of 40%, fi 12. Assume that the after-tax costs of debt is 7% and the cost of equity is 12%, Determine the weighted-average cost of capital, a. 10.50% 9.50% b. 8.50% d. 6.20% A ' j sty by . The Capital Asset Pricing Model (CAPM) computes the expected return on a secu ® adding the risk-free rate of return to the incremental yield of the expected market return that is adjusted by the company’s beta, Compute NQZ's expected rate of return. a, 9.20% ©. 7.20% b, 12.20% d. 12.00% 14 AND 15 ARE BASED ON THE FOLLOWING INFORMATION: The following information Is available for Am strong Enterprises for 2018: Net operating profit (income) after taxes fea 15,000, jation expense a5 000000 ae in net working capital Ca ear otal assets — current ables) 100,000,000 Weighted-average cost of capital added (EVA)? 44, what tthe amount of the sonore valu add (VAP a. YCPAR 89 Baton re-Weok |-MAY &. 2018 Page 4 of 8 pages b. P26,000,000 d. 36,000,000 15. What is the free cash flow for 2018? i 2. P36,000,000 © P29,000,000 b. 30,000,000 4. P26,000,000 ? 16. 4 2019 cash budget is being Prepared for the purchase of Toyi, a merchandise item, Br igeted data ure Cost of goods sold for 2019 300,000 fccounts Payable 1/1/19 20,000 inventory—1/1/19 30,000 12/31/19 42,000 purchases will be made in twelve e i spa monthly amounts and paid for in the following iran What isthe 2019 budgeted ca Payment for purchases of Toyi? 3. P295,000 ©. P306,000 >. 300,000 4. P312,000 A 77 : > Trumbuti ‘Company budgeted sales on account of P120,000 for July, S , , P211,000 for Au sales 138,000 For’ September. iuaction experience indicates that ‘60% of mye budgeted sales i big, “ollected the month after the Sale, 36% the second month, and 4% wil be would ee le. The cash from ACCOUNTS receivable that should be budgeted for September a. P169,800 b. Pi94)760 a Pioeieeo A 18. a foloning 5 a summarized income statement of Catr Co.'s profit center No. 43 for { Contribution margin 70,000 Pe expenses: Manager's salary 20,000 Facility depreciation 8.000 Corporate exense allocation 8.000 33.000 Profit center income xz 009 Which of the following amounts would most Ikely be subject to the contro! of the profit ter’s manager? ‘cen ie c. P37,000 @. P70,000 2: 0 b. Bauone od. 33,00 ; - is four meters of materia! at , 19, The standard direct materia Set ane cot Len is costing 10,080 were P2.50 per meter. During May at '¢ material price variance purchased and used to produce 1,000 units of Lem. What was th for May 2018? c. P80 unfavorable. a. P400 favorable, d. P480 unfavorable. b. P420 favorable. ; | i facture of a “one size | costing system in connection with the manuf ri LPO. Pabl ri ae a cette, zach unit oF finshed Product contains 00 yer of rect fits al 3 iterial spoilage calculat inp mae elas foe he at of the direct material is PS per yard. The ma : uring rost per unit of finished product is standard direct material cost per u pric 3 reo d. P7.50 co a new product has estimated traceable costs fi -£21. Based on potential sales ot 290 units per y it margi s? of P990,000. What is the tarqat price to alstain a 15% profit margin on sales’PAR Pre-Week | ~ MAY 6, 2018 . 83* Baten Pago Sof 18 pagan, a. 2,329 = b. P2277 ee | P1,935 22. Ajax Divisi By dey BG a carve Saiponsii produces electric motors, 20% of which are sold to dscns oe et eae ond the remainder to outside customers. Carlyle treats its allows division managers to choose their sources of sale and supply. i i eee me fectires that all interdivisional sales and purchases be recorded at the year ending Deeecarate. Ajax Division’s estimated sales and standard cost data for follovee » 2018, based on the full capacity of 100,000 units, are as — Bradley Outsi Vareble cies 900,000 P rei Filed cate (900,000) (3,600,009) Grose nein (300,000) (1,200,000) Unneet Pengeay Saha Ajax hi sin bas 2m opportunity to sell the above 20,000 units to an outside customer at a price of #75 be in during O18 on a continuing tase. Bradley can purchase ts requirements from an oi ome ch of F65 per unit. Asuning that Ax Dison ceskes to = fs ross margin, (ax take on the new customer and drop its sales to a, No, because No bea the gross margin of the corporation as a whole would decrease by b. Yes, because Ajax Division’s gross mar 7 ; gin would increase by P300,000, Soca, ae) Ge Na, because Ajax Diviston’s ron margin woud creags by PSOE, ShileeiieraSomtoios because Bradley & grass margin. would decrease by, P600,000. 23. A company has the follwing cost components for 100,000 Materials (eee 100,000 Manufacturing overhead aR, 005 Selling and administrative expens?> *0,000 > wit of product forthe year 200,000 ven Ail casts are variable except for 100,000 of manufacturing overhead and F°80,000 of Geling and administrative expenses, The total costs t© produce and sel 610,000 units for the year are: a. 540,000 < Ft b. 695,009 «650,000 np 24, The market price per share of PE Co. on Januatv by 2018 was P6O, and on December 31, \ i i the preferen 2018 was P72. Net Income for 2018 was pag,000. Dividends to ® oe Shareholders for the year totaled P12,000, ane d vidends of P2.50 per share were paid on the 6,000 ordinary shares outstanding curing the Yee" ‘The arice-earrings rato for PE Co, at year end was a. 10toi ¢ Get b. 6tol o tates ITEMS 25 AND 26 ARE BASED ON THE FOLLOWING INFORMATION: Blackall Corporation produces chemicals used in the cleaning industry. During the previous month, Biackhall incurred P300,000 of joint costs in producing 60,000 units of PRLO1 and 40,000 units of 12-02. lackhall uses the units-of-production method to allocate joint costs. Currently, AR-O1 1s sold at spit-off for P3.50 per unit. Franck Corporation bas approachec Blackhall to purchase all of the production of AR-O1 after further processing. The further provessing will cost Blackhell P90,000. eG 25, Conceming AR-01, which one af the following alternatives is most advantageous?CPAR Pro-Wisek I MAY 6, 2016 Mere a Blackhall should process further and sell to Franck f the seling ‘5 greater P3.00, which covers the Joint costs, me b, Blackhali Should continue to sell at spit-off unless Franck offers at least P4.50 per unit after further Processing, which covers Blackhall’s total costs, C4 pes should process further and sel to Franck f the seling price is greater than 4. Blackhall should process further and sell to Franck if ‘greater PS.25, which maintains the same gfoss profit — oe iad Bre Cnerating oft last manth was PS0,000, andthe inventory value is 15,000, b. The operating proft last month was 50,000, and the inventory value is P45,000, G. The cert profit last month was P125,000, and the inventory volee is Raa nop, & The operating prof last month was P200,000, an the invertor volun 30,000, Dp 27. ABC Co. has the following data: Budgeted Budgeted Level! OH Cost Poo} OH Cost for Cost Driver Cost Driver Direct materials P120,000 3,000 kilos Weight of materials Machine setup 9,750 325 repetitions Number of repetitions Machine repair time 1,045 5 units Unit of time* ions 8,100 135 inspections Number of inspections * One unit equals 15-minute intervals Requirements for Job 201: Raw materials 100 kilos Machine setup 25 repetitions Machine repair time 0.5 hour Inspections 10 inspections The total overhead cost that should be assigned to Job 201 is: a. P5,350 c. P4,750 b. 4,000 d. 5,768 A 28. Bong Company's variable costs are 75% of sales, company’s degree of operating leverage is 8. At this sales level, fixed costs equal a. P87,500 c. P50,000 b, P100,000 d. P75,000 ) 29. Given the following data, what is the Marginal propensity to consume? | Level of Level of | Disposable income Consumption 40,000 38,000 48,000 44,000 a. 1,33 c 0.95 b 146 4. 0.75 At a sales level of 400,000, theCPAR Pre-Week |- MAY 6, 2018 ITEMS 30 AND 31 ARE BASED ON THE, FOLLOWING INFORMA TION: JSR Manufacturin included in the cost per tect unavoidable fixed manufacturing factory overhead orders, even if it means purthea fe Fe ari SR has 2 policy of ig all sales is 50,000 hy nits from outside Suppliers. Total machine cay jours, machy Direct materiats P6 Direct labor 4 Manufacturing Overhead at P16/hr i6 32 . purchased from outside supplier 20 38 nual demand {units) 20,000 28,006 Ay ' > 30. If HR Manufacturing desires to follow an optimal strategy, it should produce e stor electric mixers and Purchase all other units as needed. + 20,008 blenders and 15,000 electric mixers, and purchase all other units as needed. 20,000 tenders and Purchase all other units as needed, d. 28,000 electric mixers and purchase all other units as needed. Relevant cost to mare: Beer el Materials and labor {PG + Pa) PLO (Pi1+P9) P20 Overhead (P16 ~ P10), 6 —(F32~P20*) ae Total FIG P32 aA Po 4 1 coaneptbpe ne TD Savings per hour Pa 2 “Fixed avertvead (P10 xt hr‘unit = P10; P10 x 2hreunit = P20) Biender’s savings per hour is higher than that-of Mixer. The avilable $0,000 hrs should 0¢ used to produce 20,000 units of Blenders anit 15,090 units (50,000 ~ 20,060) +2 houre] of Electric mixers. A 31. With all other things constant, if 382 Mans for an electric mixer to P6 per unit, tn compeny should a, produce 25,000 electric mixers and purchase all other units as needed. 5 b, produce 20,000 blenders and 15,000 electric rixers, and purchase all other units a: ng is able to reduce the direct materials produce 20,000 blenders and purchase ail other units as needed. & ¢. purchase all units as needed. Bender Blectric mixer ant cost to make: arias and labor (76 + Pa) PLO (P6+PS) pis Overhead (P16 - PL0*) _6& (P32~ P20") a Total By a Purchase price 2 * Savings if made Pa . * ‘Hours per unit (P36: P15) i (P32+P16) ze, Savings per hour B4 sived overhead (PLO x 1 hafurit = P10; PLO x 2hesfunit = P20) should be used to der. The available $0,000 fs STOUT is purchase all the other dat of savings per hour is higher than that ¢ once 25/000 ats of Mixers (50,000 ns + 2 hrs/unit) and required.89" Bato ie a ‘Pre Wieek | WAY 6, 2018. — "°MS 32 AND 33 ARE BASED ON THE FOLLOWING INFORMATION: market. Part A Divéslon 1. of Bing Corporation sells 80,000 units of Part A to the outside Sus fo Pa, ma «yl ot f Pi, and od cost er unt oF PS, Dion 1 Pas & capacity to produce 100,000 units per period. Division 2 currently purchases 1,000 of Part A from Division 1 for P20. Division 2 has been approached by an outside supplier wing to supply the part for P18. 32. What Is the effect on Bing’s overall profit if Division 1 refuses the outside price and Division 2 decides to buy outside? | a. no change ‘c. P40,000 decrease in Bing’s profit b. P70,000 decrease in Bing’s profit 4. P20,000 increase in Bing's profit Pp 33. What Is the effect on Bing’s overall profit if Division 1 accepts the outside price and Division 2 continues to buy inside? a. no chande c, P40,000 decrease in Bing’s profit b. P70,000 decrease in Bing’s profit d. P20,000 increase in Bing’s profit 34. Listed below are selected line ttems from the Cost of Quality Report for Watsup Products for last month, Rework P 725 Equipment maintenance 1,154 Product: testing 786 Product repair 695, What Is Watsup’s total prevention and a | cost For last mi erin al pr a enpraisal art for at month? b. Pi,154 4. P2665 fi 35. Donnie Auto has developed the following production plan: January 10,000 February 3,000 March 9,000 April 12,000 Each unit contains 3 kilograms of direct materials. The desired direct materials ending inventory each manth is 120% of the next month's production, plus 500 kilograms. (The beginning inventory meets this requirement.) Donni ie has developed the following direct. labor standards for production of these units, Department 1 Department 2 Hours per unit 2.0 Os Hourly rate P7.25 P12.00 Donnie Auto's total budgeted direct labor pasos for February usage should be a. P164,000. c. P184,500. b. P174,250. d. P221,400. ITEMS 36 } 40 ARE BASED ON THE FOLLOWING INFORMATION: Gangmanh Company manufactures a fine cf products distributed nationally through wholesalers. Presented below are planned manufacturing data for the year and actual data for October of the current year. The company applies cverhead based on planned machine hours using @ predeterinined annual rate. }CPAR {Week |= MAY 6, 201% Pa Planning Data Faxed factory Annual October ie overhead 1,200,000 100,000 Direct labor hours 24001 220,000 Machine hours ont 4,000 240,000 22,000 ae ‘abor hours (actual) 4,200 rect labor mie om based on output) 4,000 Machine a8 hours (plan based on output) 21,000 par overheat 101,200 D Factory overhead 214,000 36. The i i 2 eee mined overhead application rate for Gangman Company is by Passo . Pi0,00 o i d. PU5.00 7. Te Pa aTOUNE of evetheadappted to production for October was b. P315,000 @ Pa , 1. 300,000 } 38. we sya t ‘Over-or underapplied variable ee atin for October was: x “ underapplied 'b. P20,000 underappiied 4. P6,000 underapptied a - 5 < Rano eng tee erento b. 6,000 favorabie 4. P6,900 unfavorable iJ 40. The fixed overhead volume variance for October was a. P1,200 unfavorable . rr b. 5,000 unfavorable “ Pounce ITEMS 41 AND 42 ARE BASED ON THE FOLLOWING INFORMATION: Natuto Company uses 2 learning curve ot 80% for al new products it develops. A trial run of 500 units of a new product shows total labor-related costs (direct, indirect tabor, and fringe benefits) of P120,000. Management wants to Produce 1,500 units of the new product during the next year. f 41. The expected labor-related costs for the year to produce the 1,500 units is a. P188,000 c. 7186,000 b. P202,000 + 208,000 id 42. The unit cost of production for next year for labor-related costs is a. P1S5.25 m b. P125.33 d. 165.00 C+ 43. The budget for Edwin Auto Repair Shop for the year is as follows: Direct labor per hour rg Total labor hours i008 Overhead costs: Materials handing and storage, Other (rent, utilities, depreciation, insurance) Direct materials cost P10,000 120,000 P5OO.000CPAR Pre-Week | -| MAY 8. 2018, ome Page 10 of 18 pages Edwin allocates materials handlin ' 19 and storage costs per peso of direct materials cost. er ee 's allocated based on total labor hours, In addition, Edwin adds a charge trucks to Edn fo ae engine overhaul eee seve oor nour ine overhaul. If th Pelee e overhaul requires labor hours and should Edwit a. PLieo In charge ese ih these repair services? b. P1256 d, P1472 TEAS 44 TO 48 ARE BASED ON THE FOLLOWING INFORMATION: ‘The following information pertains to a product for a ten-week budget period: Sales price P11 per unit Materials. P3 per unit Manufacturing conversions costs: Fixed P210,000 Variable 2 per unit . Selling and administrative costs: Fixed 45,000 Variable Pi per unit Beginning accounts payable for materials 40,000 Manufacturing and sales of 70,000 units are expected to occur evenly over the period. Materials are paid for in the week following use. There are no beginning inventories. ‘ 44, What amount should be budgeted for cash payments to material suppliers during the ~ period? a. P189,000 c, 229,000 b. P 40,000 gd. P250,000 A 45. Using variable costing, what is the budgeted income for the period? a, P 95,000 c. P420,000 b. P350,000 d. 210,000 A 46, Using absorption costing, what is the budgeted income for the period? a. P95,000 c. P420,000 b. P350,000 d. P210,000 1D 47. Actual results are as budgeted, except that only 60,000 of the 70,000 units produced were sold, Using absorption costing, what Is the difference between the reported income and the budgeted net Income? a. P50,000 c. P110,000 b. P30,000 d. P 20,000 48. If a special order for 4,000 units would cause a loss of 1,000 regular sales, what minimum amount of revenue must be generated from the special order so that net income is not reduced? (Ali cost retationships remair, unchanged.) a. P 5,000 c P24,000 b. P29,000 d. 20,000 ITEMS 49 To 53 ARE BASED ON THE FOLLOWING INFORMATION: i The Misthree Company makes 27,000 units of a certain component each year for use on its production line, The cost per unit of the component at this level of activity is as follows: Direct materials P 4.20 Direct laba~ 12.00 Variable factory overhead 5.80 7 Fixed factury overhead 6.50being used to produce the will net income be fo make the components, how much higher a. 94,500 20 f the components are purchased forthe ous eos OM b. Pet, 000 higher 6. Pizvoo se being used to make Supper Unncrt f P4800 per year the component ware nacre en 2 much higher or lower would net in Stpsoeh rom te oti ; Income be than if the component were purchased from @. P29,700 lower . P21,500 lower @ bieage eon A Si. Suppose the conditions are the Pp ‘same as in Item 50, at what price per unit outside ‘supplier would Misthree be economicaly, ndiforens toa aes OY he companent or buying fam cts? “ b. P22.50 “foe b SB Assume that if the component is purchased from the outside supplier, P35, 100 of annual i avoided and: acti to make, annual net income due to accepting @. P18,900 decrease \ b. P18,900 increase ©. P21,490 decrease : 4. P21,400 increase 53. Suppose the conditions are the same as in Item 43 and the number of units of this component used each year can change. What would be the quantity of units of this component used per year that would make Misthree evonomically indifferent between making or buying the component? a. 21,600 units © 28,500 units b. 27,000 units 2. 33,300 unies 54, A company with P4.8 million ini credit sales per year plans to relax its credit standards, Projecting that this will increase credit saizs by P729,000. The company’s average collection period for new custorers is expected to be 75 days, and the payment behavior of the existing customers is not expected to change. Variable coste are 80% of sales. The firm’s opportinity cost is 20% before taxes. Assuming 2 360-day year, what is the company’s benefit (loss) from the planned change in credit termns? a. PO ¢. P144,000 b. P 28,800 ©. P120,006 ITEMS 55 TO 58 ARE BASED ON THE FOLLOWING INFORMATION: CapB Co. Is considering a project that would have a ten-year life and would require a P 1,000,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide annual income of P200,000, computed as follows: Sales 2,000,000 Variable costs 1,400,000 Contribution margin 600,000 Fixed costs 400,000 Income P_200,000Batch a 120618 Al of the above The depreciate: 020 for deprecation ofp 4 100,000 per year, represent cash flows. ‘4 Fetus 1296, OPENS I included in the Heed ers The Carper er aa Hs, 35. wie Mists the jet et present value? ob ©. 1,300,000 ‘ 695,000 @. P "700,000 % pat the project's Internal rate of retum? 2 c. 27.3% b. 23.78% d. 12.5% fi 37. ‘What is the project's payback period? a. 3,33 years c. 4.33 years b. 2.75 years d. 3 years 0 ‘S8. What is the project's simple rate of return? a, 15.0% c 18.0% b. 17.5% d. 20% 7) 59, The following information relates to Snowball Corporation: Sales at the break-even point 312,500 Total fixed expenses 250,000 Net operating income P150,000 What is Snowoall’s margin of safety? ~ : . P200,000 ns b. P187,500 d. P212,500 60. Jacob Corporation is a wholesaler that sells a single product. Management has provided the following cast data for two levels of monthly sales volume. The company selis the product for P103.40 per unit, Saies volume (units) 5,000 6,000 Cost of sales P315,500 —-P378,600 Selling, general, and administrative costs P162,500 P177,600 The best estimate of the total contribution rnargin when 5,300 units are sold is: a. P 56,710 cP 41,340 b. P133,560 d. P213,590 THEORIES 1. Limitations of an actwvity based costing system include which of the following? 2. Contro! of overhead costs is enhanced, 5. Activity-based costing systems are less reliable, G The expense of obtaining cost data is relatively high. d. It eliminates arbitrary assignment of overhead costs. 2. Which of the following is limita Fitabtiy i lon of the arofitability index? a. It uses free cash flows, . Ly zmores the time value of money. «ICI inconsistent with ¢) goal cf shareholder wealth: maximizati C u reholdes maximization, d. It requires detailed long-term forecasts of th project's cash flows. ia P1000 Bond sells for P1,125, which of the foliowing statements are correct?CPAR Pre-Week I MAY 6, 2018 fawn 89 Batch 58 pegen i Te Market rate of interest is greater than the coupon rate on the bond, u Coupon rate on the bond is greater than the market rate of i : The coupon rate and the market rate are equal, nes Nv. The ae sells at a premium, ‘ ~The fi &. tay. Sells at a discount. b. Land. 6 tan, 4. All of the following capital ‘ basis for the cakaton wuane en analysis techniques use cash flows as the primary @. Net present value, b. Payback period « Discounted payback period. . 2 4. Accounting rate of return, ~ 5. The discot discount rate (hurdle rate of return) must be determined in advance for the @. Payback period method. c. Net al ‘me method. . Net present value method. le-adjusted im method. —_d,_ Internal rate of return method. Py 6. The internal rate of return is the @. Rate of interest that equates the Rate St intrest present value of cash outflows and the present value b. Minimum acceptable rate of return for a proposed i ” investment. <. Risk-adjusted rate of return, ee d. Required rate of return, C7. To assist in an Investment decision, Gift Co, selected the most ikely sales volume from si le outcomes. Which of the folowing attrttes would.that selected sales a. The midpoint of the range. c. The greatest probability. b. The median. d. The expected value. 1) 8, The length of time between the acquisition of inventory and payment for it is called the a. Operating cycle. ¢. Accounts receivable period. b. Inventory conversion period. d. Accounts payable deferral period. (9 If everything else remains constant end @ firm increases its cash conversion cycle, its profitability will likely a. Increase. c. Decrease. b. Increase if earnings are positive 4. Not be affected, 1) 40, As a consequence of finding a move cenendacle supplier, Dee. Co. reduced its safety stock of raw materials by 80%. What is the effect of this safety stock reduction on Dee's economic order quantity? a. 80% decrease. c. 20% increase, b, 64% decrease. a, No effect, [2 14. The amount of inventory that a compar:y would tend to hold in stock would increase as the a. Sales level falls to a permanently lower level. b. Cost of carrying inventory decreases c. Variability of sales decreases. d. Cost of running out of stock dacreases. A i : jing. manufacturing inventories, such 2s 12. An appropriate technique for piarining and controlling manuf a raw materials, components, and subassemblies, whose demand depends on the level production, is | a. Materials requirements planning. ¢ Capital budgeting. b, Regression analysis. d, Linear programming.PAR Prewwems-mue zs fo at i> A compensating batance a . Compensstes a fnanclinsttution for servos rendered by providing with depots ». 1s used to compensate for possible losses on a marketable securities Isa level of inventory held to acvart portfotio. jations Ir 3 ¢. 15 an amount poid by conpersste for wa In usage rate and led te. £14. Ai of the foltoning i ae o = tip rere ‘debt financing except - use of debt will assist in lowering the firm’s cost of capital. c In periods of Inflation, debt is paid back with pesos that are worth less than the ones 36. The acquisition of debt decreases stockholders’ risk. 0 15. Which of the following is not a measure of asset utilization? Cc 6. what Siancteh analysis techrique wouid Imply benchmarking wth other £75? 2. Horizontal c. Cross-sectional analysis. tb. Vertical analysts. d, Ratio analysis. 37. Which: following quality tools is another term for continuous improvement? ae pied of constraints. ¢. Six-sigma. oun de. Keizer. d, Lean manufacturing. "PL $0. tn considering cost of quality methodology, gialty circles are associated with a. Prevention. cc. Internal failure. b. Appraisal. 6. External failure. Pk to. the cst of quality, bch ofthe fling san example ofan Nrtrma fate"? ost vmapecting products on the production line by quality Inspectors, 2 hor cost of product designers whase task fs to design components that will not break under extreme temperature conditions. <. Cost of reworking defective parts detected by the quality assurance group. 4. Cost of parts returned by customers. > 20, In the cost of quality, which of the following Is an example of a “prevention cost”? Gost of inspecting products on the production line by quality inspectors, b. Labor cost of product designers whose task is to design components that will not break under extreme temperature conditions. ¢. Cost of reworking defective parts detected by the quality assurance group. 4. Cost of parts returned by customers. 21. Management of organizations that engage in business process management view business processes as @. Requirements for good control over the organization. & Systems that provide information for good management. a Strategic assets that must be understood, managed and improved. . Mechanisms that keep empleyees from shirking. Is oor a ey of constraints, an operation or resource where the work performed san or exceeds the available is referred to aS 6 A aeate ack. c. Customer-response time. . d. Manufacturing lead time.meets managem, boA diagram illustrating cause onde ey ome achieve strategic objectives anes, Perform ‘Measurement and Management framework. 5 Co.'s a . ee 0. ay te Production system, costs pr setup were ce administrative costs thor se NeMY levels, Bek found that there were Wren eo oP ‘The result was an In Mien tad a el per ver wi we to ie On Belk’s economic lot si brant ona Mat Were thet ofthese Lot size Toone Serevent cos? ~ a * Increy b. Increase Decreise n Increase Increase ous 5 p weet 2 again ge ZBSWINCAFEF Ie folowing is true about activty-hased ‘costing? oe 2. It should not be used with process or job costing, b. It can be used only with process costing c. It can be used only with job costing. d, Tt.can be used with either process or job costing, 5 th 27.1n an activity-based costing system, what should be used to assign a department's manufacturing overhead costs to products produced in varying lot sizes? a. A single cause-and-effect relationship, b. Multiple cause-and-effect relationships. c. Relative net sales values of the products, d. A product's ability to bear cost allocations. 28, Which of the following may be used to estimate how inventory warehouse costs are affected by both the number of shipments and the weight of materials handled? a. Economic order quantity analysis, . Correlation analysis. b. Probability analysis. d, Multiple regression analysis, & 29. The most likely strategy to reduce the breakeven point, would be to a. Increase both the fixed costs and the ccntribution margin. b. Decrease both the fixed costs and the contribution margin. ©. Decrease the fixed costs and increase the contribution margin. d. Increase the fixed costs and decrease the contribution margin. 30. The basic difference between @ master budget and a flexible budget is that a master budget is a. Only used before and during the budget period and a flexible budget Is only used after the budget period. a b. For an Ponte production facility and a flexible budget is applicable to single departments only.CPAR 5 bach Page 16 ot 18 pope Pre‘Week | - MAY 6, 2018 c Based on one specific level Of production and a flexible budget can be prepared for any production level within a relevar , nt range. 4. Based on a fixed standard and a flexble budget alows management lettuce in meeting goals. o 31, Controllable revenue wot Prom ud be included in performance report for @ 2 No No * No Yes & Yes No rn dq, Yes Yes 32. Which of the following is used to describe the practice of adding resources to shorten selected activity time on the critical path of a project? a Making adjustments. c. Slack time. . Project crashing. d. Reengineering. A 33. A technique that'is often used in project’ management to identify tasks where attention should be focused because they are the most critical is referred to as ‘ax “ ABC Analysis. . Work breakdown analysis. d, Tasking. st. Milestone analysis. Dx, Systematic evaluation of the trade-offs between product functionality and product cost while stil satisfying customer needs is the definition of @. Activity-besed management. c. Total quality management. d. Value engineering. b. Theory of constraints. (0 35. Which of the following statements regarding transfer pricing is false? When idie capacity exists, there Is no opportunity cost to producing intermediate products for another division. b. Market-based transfer prices should be reduced by any costs avoided by selling internally rather than externally. No contribution margin is generat te based transfer prices are used. 4. The goal of transfer pricing is to provi maximize the profits of their divisions. ted by the transferring division when variable cost- ide segment managers with incentive to 36. Another name for return on investment is the: c. residual income internal rate of return a. net present value b. accounting rate of return 4. 37. A transfer-pricing method leads to goal congruence when managers: a, always act in their own best interest b. act in their own best Interest and the decision is in the long-term best interest of the manager's subunit . act in their own best interest and the decision is in the long-term best interest of the company d. act in their own best interest and the decision is in the short-term best interest of the company ih 38. The minimum tiansfer price equals: a. opportunity costs less the additional outlay costs b. opportunity costs times 125% plus the additicnal outlay costs ¢c. opportunity costs divided by the additional outlay costs d, incremental costs plus opportunity costsPAR Fre Wen MA 8, 2000, a. Retum on Investment and residual income, (AQT. translates an pr Organization’s missi lon and strategy into performance measures that provide the framework for implementing its strategy, &, Productivi ‘ Prohat a tt Cost leadership d. The balanced scorecard f 41. Three major Influences on pricing decisions are: t competition, costs, and customers, : ° oe \, demand, and production efficiency ae us improvement, Customer satisfaction, and si ph » Variable costs, fixed costs, and mixed costs “py fr aa, Relevant Costs In a make-or-buy decision of a part include: 2. setup rane nead for the manufacture of the product using the outsourcad part Sarently used manufacturing tapacity that has alternatice uecs &, Srmual plant insurance costs that will remain the same "Corporate office costs that wil be allocated ctferently P43. Which of the followin ig best describes: whether oF updating existing ¢ b, to improve a company's use of its < abilities and resources, the prima Which Is to achieve the objectives of the organization Peston Purpose © fo work as a measuring device to which subsequent performances are compared and evaluated. d. to introduce new ideas, concepts, and methods to management, L ‘44. Which of the following Is incorrect? When a firm purchases goods or services on credit from a supplier, it automatically a obtains short-term financing. b. Trade credit usually bears no interest, so it is costless. ©. Accruals or accrued expenses is a form of spontaneous financing which represents liabilities for services that have been provided to the company but have not been paid for. d. Pledging of receivables is an example of secured short-term credit. C 45, A manager would like to see a decreasing trend in all of the following operating measures except: a. Customer complaints as a percentage of units sold. b. Scrap as a percentage of total cost. c. Setup time. d. Manufacturing cycle efficiency. ance? Which of the fallowing would produce a labor rate variance? ‘a. Poor quality materials causing breakage and work interruptions. ‘i ° b. Use of persons with high hourly wage rates in tasks that call for low hourly wag rates. ; ; Excessive number of hours worked in completing a job. G fs d. An unfavorable variable overhead spending variance.hy CPAR Pre-Week | ~ MAY 6, 2014: 83% Batch Page 18 of 18 pages 7, Management accounting: a focuses on estimating future revenues, costs, and other measures to forecast activities and their results b. provides information about the company as a whole . reports information that has occurred in the past that is verflable and reliable d._ provides information that is generally available only on a quarterly or annual basis 48. Management accounting is considered successful when It: 3. helps creditors evaluate the company’s performance b. helps managers improve their decisions cc. Is accurate d. is relevant and reported annually 49, Ethical challenges for management accountants include: a. whether t accept gifts from suppliers, knowing it is an effort to indirectly influence decisions rable b. whether to report unfavorable department information that may result in unfav consequences for a friend c. whether to file a tax return this year d. -Both a and b are correct. 50. Which of the Following does NOT affect the direct/indirect classification of @ cost? a. the level of budgeted profit for the next year b. the materiality of the cost in question available technology to gather information about the cost 4. the design of the operation ~The Gra -Ura CPA REVIEW SCHOOL OF THE PHILIPPINES manne MAY 7, 2018 MANAGEMENT ADVISORY SERVICES . PREWEEK Il 500,000, of which ‘ operating five sales offices last year were Fo%r f . * days V Cais a st Jayson V. has determined that total cans are Sa eovanead by the numberof sales ofces perted, Las ya's cos ané number © eres ‘Sees can be used as the bases for predicting ‘annual costs. What wou! costs for the coming year if Jayson v, were to eT a, P700,000 & Las 'b. P672,000 d, PS {TEMS 2 AND 3 ARE BASED ON THE FOLLOWING: i He Castelo, Villasin and Barrera is a large, local accounting firm lected ie rand Teel, one of the Firm’s founders, appreciates the success he fm mas eV ‘warts to give something back to her community. She betes that 2 mecpeneve warms ating services circ could provide basic accounting services aeeeted in the province. She wants to price the services at cost rate the since the clinic is brand new, it has no experience to go On. Belle decided beg pers oe aire for two months before determining how much to charge per hour on, an orgie basis. AS a temporary measure, the dinic adopted an hourly charge of P50, hai amount charged by Castelo, Villasin and Barrers for professional services. “The accounting services cinic opened on January 1. During arentys the clinic had 120 hhours of professional service. During February, the activity was 150 hours. Costs for these two level of activity usage are as follows: Professional hours 120_hours 1s hours: Solariest ‘Senior accountant 2,500 are Office assistant 1,200 1, * Internet and software subscriptions 700 Ey Consulting by senior partner 1,200 1,50 Depreciation (equipment) 2,400 2,400 Supplies 905 1,100 Administration 500 500 Rent (offices) 2,000 2,000 Utilities ___332 388 Total PALZ37. pizais iv) 2. The clinic’s monthly fixed costs amount to: 2. P8,600 cP 425 b. P9,025 d. P12,189 4 3. Apple Baby, the chief paraprofessional of the cfinic, has estimated that the clinic will average 140 professional hours per month. if the clinic is to be operated as a nonprofit organization, how much will it need to charge per professional hour? a. P97.81 c. P8277 b. P87.06 a, 922,60 ih 4. HSR Computer System designs and develops specialized software for companies and use a normal costing system. The following data are available for 2018:MANAGEMENT ADVISORY SERVICES CPAR PREWEE = MAY 7. 2018 89° BATCH Page 2 ot — sage Budgeted. Overhead 600,000 Machine hours 24,000 Direct labor hours 75,000 Units produced nits produc 100, Overhead pécs's00 Prime costs 900,000, Machine hours 25,050 Direct labor hours 75,700 Overhead is applied on the basis of direct labor hours. oc ove [28,007 What is the unit cost for the year? 3. P15.03 PIB b. 15.06 &. ps0 5. Hazelnut Company uses activity-based costin a 19. The company produces two products: coats oa aia The aul production and sales volume of coats is 8,000 units and of i Units. There are three activity cost pools with the followin d activities and estimated total costs: pes see Activity Estimated Expected Expected -Cost Poo! Cost ‘Activity Activity Goats, Hats Total ‘Activity 1 P20,000 100 400 500 rote sone empty Bm" == P37/900°"~ B00 200 1,000 3,000 3800 yoox td Activity 3 91,200 _ 800, Using ABC, the cost per unit of coats Is approximately: c. P 6.60 — a. P2.40 b, P3,90 d. 10.59 to assign hospital indirect sed costing lowing activities and 6. Nanaymers Hospital plans to use the activity-ba costs to the care of patients, The hospital has Identified the fol activity rates for the hospital indirect costs: Activity. Activity Rate Room and meals P150 per day Radiology P95 per image Pharmacy P28 per physician order Chemistry fab P85 per test P550 per operating room hour Operating room ‘The records of two representative patients were analyzed, using the actiity rates. The activity Information associated with the two patients are as follows: Patient 1 Patient 2 Number of days 7 Number of images 4 Number of physician orders 5 Number of tests 6 Number of operating room hours 45 Determine the activity cost associated with Patient 2. } a. PL,388 c. P1,816 bP 908 d, P4555CPAR PREWEEK I“ MAY 7.2018 63° saToH MANAGEMENT ADVISORY SERVICES 3 of 32, 7. Remar Leather Works, which coat : manuf Dartments. The Assembly Department manufactures various leather products, such as Department mactinesy ae ‘eather. ‘The tanning process requires littie In the way of labor or 7 ibs the tree ge space and process time. Due to the different Production appiietion ma lepartments, the company uses three different cost drivers for the inufacturing overhead, ‘The cost drivers and overhead rates are as follows: Tanning Department Sdarctean \eather P Jeseintly Department — Machine time 8 es moc nour idle Department ——_Direct-labor time 4 per direct labor hour ‘The company’s deluxe saddle and a i iccessory set consists of handmad Rass: a belt, and a vest, all coordinated to match. The entire set seg ‘to suse. Depa recather from the Tanning Department, 3. machine hours in the Assembiy artment, and 40 directabor hours in the Saddle Department. The company is Processing Job No. 20 consisting of 20 deluxe saddle and accessory sets, How much is the applied manufacturing overhead in the Assembly Department for Job No. a. P3,200 b. P 540 é ree08 desired by management. The company projects its income tax rate at 40 percent. Whet is the maximum amount that Harry can expend for variable costs per unit and stil meet its profit objective if the sales price per unit ls estimated at PB? ais ceo yr ¥St,o0o a. P3.37 c. P3.00 neeee WN cee b. P3.59 d. P3.70 : 0 9. For its most recent fiscal year, a firm reported that its contribution margin was equal to 40 > percent of sales and that its net income amounted to 10 percent of sales. If its fixed casts for the year were P60,000, how much was the margin of safety? a. P150,000 , 650,000 b. P200,000 a. P 50,000 fp 102. Sam Company manufactures a single prodvct. in the prior year, the company Wad sales of ¥ P90,000, variable costs of PS0,CO0, ard fixed costs of P30,000. Sam expects its cost structure and sales price per unit to remain the same in the current year, however ‘total sales are expected to increase by 20 percent. If the current year projections are realized, net income should exceed the prior year’s nat income by: a. 100 percent. c, 20 percent. b. 80 percent. 4.50 percent. A, B, and C. ‘The company sells three (3) units of C for each Unit of C, Total fixed costs amount to 760,000. Product 8's is 150% of A’s, and Product C's product must be sold to break-even? 11. Jet, Inc. sells three products, unit of A and two (2) units of B for each Product A’s contribution margin per unit is P2, is twice as much as B's. How many units of each Product A Product B Product C a. 2,000 12,600 6,000 b, 20,000 120,000 60,000 c 29,231 58,462 $7,692 | KONG 414 546 207,273[h ° 14. If the sales required in Item #13 is realized, the company will 15. Yamyam Company AGEMENT ADVISORY SERVICES. MANAG _Pogn ot Sz eget — EEK N-MAY 7.2018 FP BATCH __ “TEMS 12 to 14 ARE BASED ON THE FOLLOWING INFORMATION: using cost-volume-profit anal ‘A company is making plans for next year, ysis as its planning tool. Next year’s sales data about its product are as follows: Selling price 60.00 Variable manufacturing costs per unit 22.50 Variable selling and administrative costs 4,50 sag operating costs (60% Is manufacturing cost) P148,500 Income tax rate 32% 12, How much should sales be next year if the company wants 1 ea! profit after tax of 22,440, the same amount that It earned last year? a. P310,800 ¢. P330,000 b. P397,500 6. P222,000 13. Assume that the company’s management learned that 2 ot technology that will increase the quality of Its product Is available. If Implemented, its projections for next year will be changed: 1. The selling price of the product will increase to P75 per unit. 2) Fixed manufacturing costs will increase by 20%. 3° Additional advertising costs will be Incurred t promote the higher-quality product. This will increase fixed non-ranufacturng. cost by 10%. 4 The improved product will require a new material that will increase direct angterials “gst by, pre-tax profit of 10% on sales? a. P366,130 b. P358,875 c. P253,324 d. 353,897 have an operating leverage factor of a. 8.53. c. 17.24%. b. 5.80. d. 5.50. is considering introducing @ new product that will require a P250,000 vestmi ital. The necessary funds would be raised ‘through a bank loan at en Invested of en, The fixed operating ‘costs associated with the product would be d riable cost ratio would be 58%. Assuming a selling price of P15 per letermine the (rounded to the nearest whole unit) Yamyem would wt oe sell to generate earnings before Interest and taxes (EBIT) of 32% of the amount, invested in the new product. ; 95,318 units ¢. 32,143 units 2 35,575 units 6. 23,276 unitsPREWEEKI|-MAY 7, 2018 89! BATCH Page 5 of 32 pages ITEMS 16 AND 17 ARE BASED ON THE FOLLOWING INFORMATION: Total Cost Unt Cost Sales (40,000 units) P 1,000,000 P25 Raw materials 160,000 4 Direct labor 280,000 7 Factory overhead: Variable 80,000 2 Fired 360,000 ‘Selling and general expenses: Variable. 120,000 3 Fixed 225,000 } 36. How many units does the company need to produce and sell to make a before-tax profit he OF 10% of sales? a. 65,000 units. ¢. 90,000 units. b. 36,562 units. d, 29,250 units. {X17 Assuming that the company sells 80,000 units, what is the maximum that can be paid for an advertising campaign while still breaking even? a, P. 135,000 c. P'535,000 b. P4,025,000 d. P 695,000 /, 18, The following Information relates to Hera Corporation for last year: U Sales 500,000 Net operating income 25,000 Degree of operating leverage 2 8 Sales at Hera are expectad to be P600,000 next year. Assuming no change in cost structure, this means that net operating income for next year should be: 2. 30,000 c. P50,000 b. P45,000 d. P125,000 19. Fei Company uses a standard costing sysiin in the production of its only product. The 84,000 units of raw materials invarito fed for P126,000 and 4 units of raw materials are required to produce ore unit of final oroduct. In October, the company produced 14,400 units of prodvct, ‘The steniaral cnst allowed for materials was P72,000, and there was an unfavorable usage vnvtarice of P2.000. The materials price variance for the Units usec. in Getober was a. P15,000 unfavorable. <. P3,900 unfavorable. b. P15,000 favorable. a, 93,020 favorable. 20, Mark Company manufactures one produc: with a standard direct manufacturing \abor cost of four hours at P12.00 per hour. Uerirg June, 1,000 units were produced using 4,100 hours at P12.20 per hour. The unfavorabie direct labor efficiency variance was: a, P820 c. P1,200 b. P400 a. P1,220 28. Marco Co. manufactures one produ & standard direct manufacturing labor cost of four hours at P12.00 per hour. During June, 1,000 units were produced using 4,100 hours, at P12.20 per hour. The unfavorable direct ‘2bor efficiency variance was a. P1,220 c F820 b, P1,200 dP 400=MAY 7, 2018 83 BATCH MANAGEMENT ADVISORY SERVICES. Page 6 of 32 pages 29. Init first year of “460 Operations, Nasty Cc ‘ 100,000 units and 016 80,000 units of nes iid had the following costs when it produced ing costs: 180,000 Variable 160,000 Selling and administrative costs: Fixed 90,000 Varlable 40,000 How much higher would Nasty’s net income be if it used full absorption costing instead of variable costing? a. P94,000 ¢, 36,000 b. P68,000 a, 54,000 it jined on 30. At the end of Jorge Co.'s first year of operations, 1,000 units of inventory realy 1M) hand. Variable and fixed manufacturing costs per unit were P90 and P20, respectively. If ~ Jorge uses absorption costing rather then variable (direct) costing, the result would Be @ higher pretax income of a. PO c. P70,000 b. P20,000 d, P90,000 31. Dolly Company has 3 aivisions: R, S, and T. Division R's income statement shows the « following for the year ended December 31: Sales 1,000,000 Cost of goods sold Gross profit P 200,000 Selling expenses 100,000 Administrative expenses (350,000) Net loss P.4450.000) Cost of goods sold is 75 percent variable and 25 percent fixed. Of the fixed costs, 60 percent are avoidable if the division is clased. AN of the selling expenses relate to the division and would be eliminated if Division R were eliminated. Of the administrative expenses, 90 percent are applied from corporate costs. If Division R were eliminated, Dolly's income would 3. increase by P150,000. c. decrease by P:155,000. b. decrease by P 75,000. d, decrease by P215,000. ATEMS 32 TO 35 ARE BASED ON THE FOLLOWING: Siena Hair Care Company produces shampoo with conditioner. This Is the company’s 'Y Product, which it selis under the name “Zalucki." The manufacturing cost date for Zalucki are as follows: Materials: Cuantty raquired Current market price Chem 1 per 1,000-m1 bot per mi Chem 2 4m PO.54 Chem 3 3mi 0.36 2m 0.20 Direct labor: 2 hou * Irs per bottle @ i" Factory overhead. le @ P3 per hour Variable overhead , ~ P2,00 per direct labor hour Fixed overhead = 4.00 ee direct labor hour Clever Company, owner and operator of a chain of hotuis, asked ATHENA Hair Care Company to submit a bid tor 500 boxes of Zai:cki, Each 00x will contain 24 bottles. PerPAR PREWEEK It - MAY 7, 2018 83" BATCH MANAGEMENT mason saan tae Specifications, its order should be diferent in chemical composition from the specications can be a ding to ATHENA Companys production manager, Clever’s specifications can be met if an additonal chemical, Chem 4 would be used. ATHENA oe ti ’as 60,000 ml of this chemical. Chem 4 was used by the company in one of its Is that it decided to eliminate, The remaining inventory of Chem 4 was not sold or discarded because it does not deteriorate and the company has adequate space for its storage. ATHENA Company can sell Chem 4 at the prevailing market price of PO.40 per ml less PO.10/ml sing and handing costs. Clever’ order woud requ 5 ml of Chem 4 per ‘The company has a stock of Chem 5. This was used by ATHENA Hair Care for its manufacture of another product that is no longer being produced. Chem. 5, which cannat be used in Zalucki, can be substituted for Chem 1 on a one-for-one basis without affecting the quality of the Clever order. There is no problem about the supply of Chem 1. At pereeins Me ‘company has 20,000 ml of Chem 5 in its inventory, which has a salvage value ‘The production of the Clever’s order would require the same direct labor hours per bottie as in the regular Zalucki. However, at present, the company has only 20,000 direct labor hours available. The Clever order can be produced if the workers would work overtime, although an overtime premium of 30% of the regular rate should be paid. ATHENA Hair Care Company's policy is to price new products at 130% of full manufacturing cost. 32. TEATHENA. ‘one-time order of 500 boxes of the an me tera et pc 7 a, P73,944, c, P68,880, b, P61,620. d. P56,880. ‘The special order is for $00 boxes of 24 bottles ec) or 2 total of 12,000 bottles. Materials costs will be: Chem 1; Total required - 12,000 battles « 4 ml 48,000 mi Avallable Chem 5 that can be substituted for Chem 1, 20,000 mi salvage value... * P 6,000 Balance of Chem 1 recuired (48,000 mi ~ 20,000 mi x PO.54 15,120 Chem 2: 12.000 bottles x 3 mi x P0386 12,960 Chem 312,000 bottles x 2 ml x PU:20 4,800 Chem 4 12,000 battles x 5 ml x (P9.49 ~ P.10)" 18,000 Total materials cost 55,880 * The relevant cost of existing stocks is equal to her salvage value that will nol be realized if the stocks are used in the Clever order. 33. If ATHENA Hair Care Company bids this morth for the special one-time order of 500 boxes of the product, the special order’s total relevant conversion cost. will be a, 123,600. ¢, P120,000. b. P219,600, d. P2i6,000. Labor: Total required time ~ 12,006 bottles x 2 hows 24,000 hows Labor cost at regular rate (24,000 hours x P3; P72,000 Overtime premium (24,000 ~ 20,000) x P3 x 20's _-3800 Total labor cost P75,600 Factory overhead - variable (24,000 hours x P2) 48,000 Total relevant conversion costCPAR MANAGEMENT ADVIGORY SERVICES PREWEEK I! WAY 7, 2018 83" BATCH 8 of 32, ‘The overtime premium is part of labor cost, not of overhead cost, because the pore cost, overtine work is attributable to @ ‘The total fixed factory overhead is assumed to remain constant whether or not the onder is ‘sccepted, hence, irelevant. ca 34. If the company’s policy is to price new products at 130% of full manufacturing cost, what ls the bid price per unit for this one-time special order of Clever Company? 2. P19.55 c. P29.95 b. P 6.91 d. 23.80 Materials cost (from item #82) P 56,860 Variable conversion cost (trom ltem #33) 423,600 Fixed factory overhead (24,000 hours x PA) 98,000 Fal menuteckng cost 7276 480 + Num itles ordered (500 boxes x 24) 12.000 Full cost per bottle d P 23.04 30% Bid price per unit E7995 35. What wil be the total variable manufacturing costs for the subsequent, recurring 500-box orders? a. 180,480 cc. P287,280 b. P373,464 d. P191,280 Materials: Chom 1 — 12,006 bottles x 4 ml « P0.54 25,920 Chem 2 42,000 bottles x 3 mi x PO.36 12,960 ‘Chem 3. 12,000 botties x 2 mi x PO.20 4,800 Chem 4 — 12,000 bottles x 5 mlx P0.40 24,000 67,680 Variable conversion cost (from {tem #33) 123,600 P191.280, Total vanable manufacturing costs For subsequent orders, the company will have to buy all the required materials because by this time, the inventory of Chem 4 and Chem 5 would have been fully utilized in the first order. ITEMS 36 and 37 ARE BASED ON THE FOLLOWING INFORMATION: Venus Corporaton produces wood glue that is used by furniture manufacturers. The company normatly produces and sells 10,000 gallons of the glue each month. White Glue is sold for P280 per gallon, variable costs is P168 per gallon, fixed factory overhead cost totais P460,000 per month, and the fixed selling costs totais P620,000 per month. Labor strikes in the furniture manufacturers that buy the bulk of White Glue have caused the monthly sales of Venus Corporation to temporarily decrease to only 15% of its normal monthly volume. Venus Corporation’s management expects that the strikes will last for about 2/ months, after which. sales of White Glue should return to normal. However, due to the dramatic drop in the sales level, Venus Corporation’s management Is considering to close dawn its plant duri"ig the two-month period that the strikes are on. If Venus Corporation will temporarily shut down its operations, It is expected that the fixed factory overhead costs cam be reduced to P349,000 per month and that the fixed selling costs can be reduced by P62,C00 per month, Start-up costs at the end of the shut-down period would total P56,C00. Venus Corperation uses the JIT system, so no inventories are ‘on hand.CPAR MANAGEMENT ADVISORY SERVICES PREWEEK I! - MAY 7, 2018 83° BATCH _Page 9 of S2pages 36. tf is down point in units is . SeONe c. 3,250.00. 86. d. 1,100.00. Fixed costs under continued operations (for 2 months): Factory overhead (P460,000 x 2 months) " P 920,000 Selig ns 200002 nts) 1,240,000 Less shutdown costs: mee Factory overhead (P340,000 x 2 months). P 6 Y 320,000 ait cod OPER. - P2032 ane) 4,116,000 up 56,000 _1,852,000 ‘Divide by CM per unit (280 ~ P4168) Pm8000 Pita Shutdown point in units 2.280 unis 37. At the sales level of only 15% of the normal volur continu A ‘operating or shut down temporarily for two months? me, sould the compeny ° ‘a, Continue, because the expected sales 's above the shutdown: point. b. Shut down, because the expected sales is above the shutdown point, cc. Continue, so that the shutdown costs may be avolded. d. Shut down, because the shutdown costs Is less than the contribution margin under continued operations. Company produces two products: Pat and Chin. The projected income for the ‘year, segmented by product iine, follow: Nagiage te oa Sate a gon 600 “pa Beh 00 | Less variable expenses 109,000 500,000 600,000 200,000 2,000,000 2,200,000 28,000, 38. Splkey coming Contribution margin Less direct fixed expenses 1,500,000 _1,528,000 Product margin Pazzo00 Bs0g.900 P 672,000 Less common fixed cost — 100,009 P_872,900 Operating income The selling prices are P30 for Pat and PSO for Chin. reased advertising. The extra of the potential purchasers of and sales Spikey company can Increase the sales of Pat with inc advertising would cost an additional P245,000, and some Chin would switch to Pat, In total, sales of Pat would increase by 25,000 units, of Chin would decrease by 5,000 units. This strategy woula ‘a. increase Spikey's total sales by P750,000. E decrease Spikey’s total contribution margin by P300,000. .. increase Spikey’s total income dy P55,000. d. not affect Spikey's total fixed cascs. ITEMS 39 AND 40 ARE BASED ON THE FOLLOWING INFORMATION: Demigod Corporation, @ manufacturer of light bulos, budgeted sales of 500,000 units of fight bulbs at P100 per unit for the yar 015, Varlable manufacturing costs was budgeted at P40 per unit and fixed manufacturing costs at P25 per unit. 50,009 units of light bulbs for P58 each was received by A special order offering to buy e Demigod Corporation in March 2015 Demigad Corp. has sufficient plant capacity to produce the additional units of light bulbs, However, overtime work has to be done at an additional cost of P8 per unit. No seilirg, expenses would be incurred for this special order.1 GAR mana 10.082 pages " SPREWEEX (b— MAY.7, 201883" BATCH age Yoo ‘Should Demigod Corporation accept the special order, assuming that It would not affect regular sales? a. Yes, because operating income would increase to P500,000. b. Yes, because operating income would Increase by P500,000. ¢, No, because the special price of P58 is much lower than the regular price of P100. d. No, because the special price of P58 is fower than the full cost of P65. 40. Assume that the available (excess) capacity for the special order Is only 30,000 units, and at if the 50,000 units being ordered is accepted, Demigod Corporation would reduce its sales to the regular customers, Should the corporation accept the order? Yes, because operating income would increase by P500,000. b. Yes, because operating income would increase by P2,500,000. C. No, because operating income would decrease by P700,000. d. No, because operating income would decrease by 2,100,000. 41. Chiron Corporation produces three joint products, x, ¥, and Z, form one input. The Products can be sold at the split-off point or processed further. The joint production costs for the month, allocated among the products based on the relative physical volume of output, are as follows: Materials 150,000 Labor 30,000 Factory overhead 20,000 Total joint costs £200,000 Additional information about the three products are given in the following tabulation: Procuction UNIT SALES PRICE ‘Additonal inUnits At Spi-off Processed Further Procassing Cost Product X 5,000 P80 P100 pis Product Y 3,000 45 60 20 Product Z 2,000 60 75 10 How much is the total gross profit if the company took the most profitable action with respect to each of the three products? a. P690,009 cc, P535,000 b. 430,000 d, 430,000 Product Y should be sold at ihe split-off point, while Products X and Z should be processed further: x Zz Units sales price if procassed further Pt00 P60 P75 Unit sales price at spli-off 80 45 80 Increasa in sales value processed further =P 20. P15 PIS Less additonal processing cast 15 20 10 Profit loss) if processed further Bs e5) BS The most profitable acton isto sell Product et the spl-off point and process futher Products X and Z. Total gross profit is computed as follows. Sales! — Product X (5,000 units x P100) PS§00,000 | Y (3,000 units x P 45) 135,000 | Z (2,000 units x P 75) 450,000 ' P735,000 Less ¢osts: Additional processing cost: Product X (5,000 units x P15) P 75,000 i 2 (2,000 units x P10) 20,000 Joint product costs 200,000 295,000 Gross profit: (P785,000 ~ 295,000) P499,000CPAR PREWEEK Ii MAY 7, 2058 83° BATCH MANAGEMENT ADVISORY thofse ITEMS 42 and 43 ARE BASED ON THE FOLLOWING INFORMATION: Grover Corporation Produces cellular phone Gi which It also rovers, Each Grover requires a keypad PS. ‘manufactures at a cast of P20 er unit, inclusive of fixed overhead cost of Grover Corporation nj has offered to sel) be rented to another company. () 42 If Grover Corp. outsources the keypads but does not rent the unused facity, it would @. save P4 per unit. ¢, lose P4 per unit. b. save P2 per unit. d. lose P7 per unit. 4 py 43. If the keypads were purchased and the facility rented, how much must the annual rent on the facility be if Grover Corporation wishes to reaitze annual savings of P80,000? a, P270,000 cc. P280,000 b. 430,000 d. 380,000 ‘Tanya Corporation issued preferred stocks for P120 per share. The Issue price is P20 More than the stock’s par value. The company incurred underwriting fees of P10 per share. The stocks will earn annual dividends of P12 per share. If the tax rate is 30%, the Sost.of capital (preferred stocks) is fe PIR nae fee IME eigen 45. At the beginning of the year, Memark Corporation purchased a new equipment for 360,000, The machine has an estimated useful life of four (4) years with no salvage value. It is expected to produce cash flows from aperations, net of income taxes of 32%, as follows: Year 1 2 3 4 5 Memark Corporation uses the sum-uf-the-years-digits method (SYD) in computing depreciation of its depreciable assets. Using SYD, the new equipment will be depreciated as follows: Year1 — (P380,000 x 4/0) 144,000 2 (P360,000 x 3/10) 408,000 3° (P360,000 x 2/10) 72,000 4 (P360,000 x 1/19) 36,000 The company's cost of capital is 10%. The present vaiue factors at 10% are as follows: End of Year t 909 2 ORG 3 0751 4 9,683 Total, 4 years Lize Jf Memark Corporation used the straight-line method of depreciation instead of the SYD method, the net present value provided by the equipment would increase (decrease) by: a. P13,464 c. (P4,308.48) b. (P13,464) d. 4,308.48 'eeds 50,000 units of this keypad annually. A supplier, Keypad Corp., decides to tay on See Corp. its keypad requirements at P24 per unit. If Grover sctinaee di 'e keypads, P2 per unit of the fixed overhead based on the annual could be eliminated, and the facility previously used to produce the keypad couldMANAGEMENT ADVISORY SERVICES: Page 12 of 32 pages ‘Depreciation expense, as a tax shield, provides tax savings. The ee ‘i me ab 080 0.909 (41,886.72 | Ye) PiBow xcs ‘a4se0 0826 «© 28,548.56 2 is { 3 x 23,040 0751 47:303.04 | 4 38,000 x32%= 11.520 0883 «= _ 7,868.18 Total prebent value of tax savings, sv method 95,604.48 PV of tax savings, straight-line meth {P559000 yeas = POON 3% 3.170 91,296.00 Decrease in net present value 4308.45 fis is i . Harry Is Hi ovns a computer reselling business and is expanding his business. “ presented with aaa propo, Proposal P1, such that the estimated investment fo the expansion project is P85,000 and It Is expected to produce cash is afer tes Mf 25,000 for each of the next 6 years. An alternate proposal, Proposal ell investment of P32,000 and after-tax cash flows of 10,000 for each of | ‘The present value factors for an annuity of Pi for 1 to 6 years are as follows: [5 [3.793 4 Us tas . ‘The cost of capital that would make Harry Indifferent between these two proposals lies between a. 10% and 12% c. 16% and 18% d. 18% and 20% b. 14% and 16% Harold Co. is considering an investment in a capital project. The sole outlay will be P716,417,90 at the outset of the project and the annual net after-tax cash inflow will be 216,309,75 for 6 years. The present value factors at Harold's 8% cost of capital are: 47. ir Pv-Factors 1 0,926 | 2 0.857 | 3 0,794 | 4 0.735 5 0.681 | 6 0.830 What is the break-even time (BET)? a. 3.35 years c. 5,00 years b 4.00 years d. 6.00 years / Break-even' time the cumulative prevent value of cash inflows equals the cost of investment i Cashinfows = x PYF = py if 216,309.75 0,926 200,302. 302.83 | ; 216,309.75 0.857 185,377.46 iF 216,309.75 0.794 171,748.94 {3 216,309.75 0.735 158,987.67 ih 216,309.75 0.681 147,306.94 f ; Total PV of cash inflows, first 4 years > P716.417.90 (Break even time = 4 yearspF CRAR ‘PREWEEK l— MAY 7, 1018 69 BATCH satabsetill ames pages: 4. 48. The Q see tan ang frm Of M and Associates will use o dividend valuation model to * me he L&L Corporation, Dividends (D) at the end of the current year 20, Growth rate (g) Is 9% and the discount rate (K) Is 13%? ‘Wat auld be the rice of the stock to the pubic? beste c. P30.00 d. P29.00 48. BSR Co, Aq ‘hes an Opportunity to purchase a new conveyor Jine for P250,000, They can borrow 200,000, paying P50,000 down with annual payments for five years and an interest of 15%, ‘They also have an opportunity to lease the line for P65,000 a year, The Present value of an annuity of Pi for five years at 9% and 15% are 3.8897 and 3,3522, fespectively, At the end of five years, the estimated sblvage value is P40,000, If owned, ‘the cost of maintenance is expected to be P10,000 per year, Assume straight-line depreciation, a 40% tax rate, a cost of debt of 15%, and a cost of capita! of 9%. ‘What is the present value of the after-tax cost of leasing for the five-year period? a. P1S1,698 c Pi4a.000 b. P 98,698 3. P165,800 50. For the next two years, a lease is estimated to have an operating net cash Inflow of 3 7,500 per annum, before adjusting for P5,000 per annum tax basis lease amortization, and @ 40% tax rate. The present value of an ordinary annulty of P1 per year at 10% for ‘wo years is 1.74, What is the lease’s after-tax present value using & 10% discount factor? a. P2610 P9570 b. P 4,350 4, PIL310 ITEMS 51 AND 52 ARE BASED OW THE FOLLOWING INFORMATION: A firm, with en 18% cost of capital, 6 considering the following projects (on January 1, 2018): Peajest A Project Cash outflow, January 1, 2015 3,500,000 — P4,000,000 ‘Cash inflow, December 31, 2027 7,400,000 9,950,000 Project internal rate of return 15% r Present Value of P1 Due at Erd of “N” Periods 1H 14% 18% bh 2% ae 0.8355 0. 1 94573 05188 0.4823 0.4230 05674 C5164 0567204781 94371 04019 OBA 05086 04557 04373 Gat 0.5704 0300 0.7754 51. Using the net present value method, Profect A’: net present value is ee 2. P 316,920 ¢. (265,460) b. PO . P(316,920) amos 52. Project B's internal rate of return is closest to a. 15% c. 20% b. 18% a. 22% 53 Hazel, Inc. plans to sell 80,000 bags of potato chips in June, and each of these bags requires five potatoes. Pertinent data includes:CPAR MANAGEMENT ADVISORY SERVICES: PRENEEK MAY 7, 2018 69° GATOH Page 14 of 32 pegs Baas of potato chips __ Potatoes Actual June 1 inventory 15,000 bags 27,000 potatoes Desired June 30 inventory 18,000 bags 23,000 potatoes What number of units of raw material should Hazel plan to purchase? a. 381,000 c. 411,000 b. 389,000 d, 419,000 Potato chips inventory ~ June 30 00 Add expected sales 80,000 Available for sale 98,000 Less Potato chips inventory ~ June 1 46,000 Budgeted production r x potatoes required per unit - kilos x5 Production needs 495,000 ‘Add Potatoes invertory ~ June 30 73,000 Total available for use $38,000 Less potatoes inventory ~ June 1 27,000 Budgeted purchases 1.900 [) 54: After careful planning, Change Style, Inc. has decided to switch to a just-in-time inventory system effective on July 1 of the current year. As of July 1, the corporation has 70 units of product in inventory. It has 1,000 labor hours available for the month of July. These hours could produce 250 units of product. Customer demand for July is 200 units. If just- in-time principles are correctly followed, how many units should Change Style Inc. plan to produce in July? a Bagi sem a ge ted Beet on te / 55, The projected sales price for a new product (which is still in the development stage of the product life cycle) is P50. The company has estimated the life-cycle cost to be P30 and the first-year cost to be P60. On this type of product, the company requires a P12 per unit profit. What is the target cost of the new product? a. P60 c. P38 b. P30 a. PAB ITEMS 56 to 60 ARE BASED ON THE FOLLOWING INFORMATION: The cost of goods sold section of Dale Corporation's operating budget for 2018 is presented below: Materials: Inventory, January 1 (16,000 units) P 960,000 Purchases 9.120.000 Available for use P10,080,000 Inventory, December 31 (18,500 units) 1.184,000 ——-P._8,896,000 Labor 784,000 Factory overhead: Variable P 2,009,600 Fixed —1120,000 __ 3,129,600 Cost of goods manufactured (140,000 units) P 12,809,600 Add finished goods inventory, Jenuary 1 (9,300 units) __ 7 Cost of goods availabie for sale P13,553,600 Less finished goods inventory, December 31 (2,300 units) _ Budgeted cost of goods sold P13.255,000 ‘The actual resu'ts for the firsc quarter of Z018 require the following changes in the budget assumptions: . * The budgeted production for the year is expected to increase by 5,000 units. During the first quarter, the corapany has already produced 25,000 units. TheCPAR PREWEEK \I- MAY 7, 2018 83 BATCH ws Page per pages balance of production will be of the budset vent scheduled in equal segments over the last 3 quarters * The expected fini ished goods inventory on January 1 dropped to onh it ft ly 9,000 units, but its total Value will not be revised anymore. The ending inventory value is Computed using the average manufacturing cost for the year. * Anew Labor Bill passed by Congress is expected to be si : igned into a law by the President. The new law will take effect beginning the last quarter of the raset Year, including a provision for an increase of 8% in wage rates. 7 ae company uses the FIFO method in valuing its materials inventory. During the Quarter, the company purchased 27,500 units of direct materials for P1,760,000. ‘The remaining direct materials requirement will be purchased evenly for the last 9 Months of the budget year. Effective July 1, 2018, the beginning of the third quarter, direct materials cost is expected to increase by 5%. ‘The assumptions Tegarding the quantity of materials inventories at the beginnit will remain unchanged. Desining and en ote Yar © The Variable factory overhead of P2,009,600 includes indirect materials and factory supplies amounting to P889,600. It is computed at 10% of the cost of materials used. The balance of the variable factory overhead varies directly with production, * There will be no change in the budgeted fixed factory overhead cost. Considering the given actual data for the first quarter, as well as the changes in assumptions and estimates in the budgeted data for the year, the company’s accountant Brepared a revised budgeted cost of goods sold statement. This revised statement should show: at aa, st s budgeted materials purchases of a. P9,696,000. c. P9,280,000. b. P9,120,000, d. 29,440,000. Itis assumed that each unit of product requires one unit of materials. So, production is ‘equal to raw materials to be used Budgeted raw materials to be used (or production) (140,000s 5,001) 145,000 units ‘Add raw meterials ending inventory 18,509 Total 182,509 Less raw materials beginning inventory 56.0¢0 Budgeted purchases 147,500 Less actual purchases, 1* quarter 27 500 Required purchases in the remaining 3 quarters 120.000 units Cost computation: First quarter purchases (27,500 units) 4,760,000 Second quarter (120,000/3 or 46,0 Third and fourth quarters ([40,000:qt. Total cost of budgeted purchases {Pt,760,C00+27,500]or Péd/unt) 2.560,000 » 105%) 5,376,000 9,696,000 57. budgeted cost of materials inventory at Decernber 31, 2018 of a. P1,024,000, c. Pl,184,000. b. P1,243,200. d. Pt,216,100, Materials inventory, December 31, 2018 18,500 x Purchase price (P64 x 1.05) 67.20 Cost of materials inventory, December 31, 2018 PL243.200 The company uses the FIFO method of costing inventory Thus, tne ending inventory should be valued at the new purchase price of 67.20.MAWAGEMENT ADVISORY SERVICES = MAY 7, 2018 6 BATCH. 38.038, “8, the budgeted direct labor cost of a. 846,720. c. P876,960. ‘b. P784,000. d, 829,920. CCriginal labor cost per unit (P784,000 + 140,000 units) 2560 Labor cost per unit effactve on the beginning ofthe 4* quater (P5.60 x 108%) P6048 ‘Busigeted labor cost First to third quarters (25,000 + 40,000 + 40,000) x P5.60) 588,000 Fourth quarter (40,000 x P6048) 241,920 ‘Total budgeted labor cost Bg79.920 59. the budgeted cost of goods manufactured of 8, P12,809,600. c, 14,208,000. b. P13,464,000, d. P12,344,000. Motil 960.000 Frogs 00 1283.20 94t2800 529,900 att 200 ——— x 145,000 } 1.160.000 Tags soe overhead 2,101,280 20.000 _ 3,221,280 Budigeted cost of gouds manufactured 60, the budgeted cost of goods sold of a, P13,901,578, ¢. P13,553,600. b, P13,252,000. d. 14,208,000. Gost of goods manufactured (from item #59) 13,464,000 ‘Add finished goods inventory, January 1 744,000 Total cost of goods avaiable for sale P74 208,000 Less finished goods inventory December 31 (3,300 units x [P 13,464,000 ~ 145,000)) 306,422 Budgeted cost of goods sold PAZOL578 C) 61. Nico Company budgeted sales on account of P120,000 for July, P211,000 for August, and 198,000 for September. Collection experiance indicates that 6096 of the budgeted sales wil be gollected the month after the sale, 36% ‘the second month, and 4% will be collectible. The cash from accounts receivable that should be budgeted for September would a. P169,800 c. P197,880 b. P194,760 d. P198,600 62. Dionysius Company plans to seli 24,000 units of Product A during July and 30,000 units during August. Sales of Product A during June were 25,000 units. Past experience has shown that end-of-month inventory should equal 3,000 units plus 30% of the next month's sales. On June 30 this requirement was met, Based on these data, how many units of Product A must be produced during the rnonth of July? a. 28, c. 24,00C b. 22,209 a. 23,200PAR PREWEEK ll MAY 7, 2018 83° BATCH MANAGEMENT ADVISORY SERVICES 17.6632 63. A divisi q e ge Lockman Corporation reported a return on investment of 20% for a recent period. ision's asset turnover was 5, its profit margin must have been a, 100% c. 4% b. 25% d. 2% i. 64. A firm has dally receipts of 100,000. A bank has offered to reduce the collection time on the firm's deposits by two dal ys for a monthly fee of P500. If money market rates are gee to average 6% during the year, the net annual benefit from having this service a. PO c. P6,000 b. P3,000 d. P12,000 65. Leo 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 ral 35th day after the purchase? a, 14.2% b. 32.2% a Wh 66, If a firm borrows P500,000 at 10% 0 i and is required to maintain P50,000 as a minimum Conia ae balance at the bank, what is the effective interest rate on the loan? ™ 1. 10 c. 91% b. 11.1% d. 12.2% ITEMS 67 AND 68 ARE BASED ON THE FOLLOWING INFORMATION: The foliowing is available for Piper Corp. for 2018: 2,000,000 Average invested capital 500,000 Net income 300,000 Required rate of return 18% i 67. What is the return on investment at Piper Corp.? a. 60% 18% b, 33% d. 15% 68. What is the residual income for Piper Corp.? a. PO . P210,000 b. P200,000 d. P246,000 69. The following data pertain to operations at Juno Incorporated: Throughput time 4 hours Delivery cycle time 8 hours Process time 1 hour Queue time 2 hours The manufacturing cycle efficiency (MCE) for this operation would be: c. 25% a. 50% b. 75% 0. 12% ( ) 70. Dannychay Corporation operates its factory 300 days per year. Its annual consumption of Material Y is 1,200,000 gallons. It carries a 10,000 gallon safety stock of Material Y and its ead time is 12 business days. What is the order point for Material Y? ‘a. 10,000 gallons ¢. 48,000 gallons 'b. 38,000 gallons d, 58,000 gallonsCPAR ‘PREWEEK R~MAY 7, 2018 8Y°'GATCH 18.032, n. The school canteen can sell either halo-halo or mam/ (hot noodle soup) on any given day. ‘The contribution margin that the canteen could earn from Aalovhalo and mam/is affected bby the weather, as follows: | CONTRIBUTION MARGIN bani Hot Weather | Cold Weather TaloRalo 15,000 P 6,000 (Mami 11,400 12,000} If the probability of hot weather on a given day at this time is 60%, which item(s) should the company sell? 2. Halo-Halo, because this item is salable when weather is hot. b. Mam}, because it has the higher expected payoff. ©. Halo-Halo and mam, so the canteen could maximize contribution margin. d. 60% halo-halo and 40% mami. Based on the gwen data, the expected payofis are: Sell hao-hato (15,000 x 60%) + (6,000 x 40%) 11,400 ‘Sell mami (11,400 x 60%) + (12,000 x 40%) 11,640 Therefore despite the fact that the weather is hot, the canteen should sell mami 72. Ht, Montalbo owns a piece of land that is adjacent to a big area of a vacant lot owned by the city government. Recently, H. Montalbo heard that the city government has plans about the vacant lot. He inquired about such plans and he was given the following, including each plan’s probability of occurrence: Plan A — Lease the lot to a businessman who will construct a mall on the lot 60% 30% B ~ Construct a theme park on the vacant lot C — Construct a butiding that will house some of the city government's offices 10% H, Montalbo knows that the value of his land, which he acquired ten years ago at a cost of only P500 per square meter, will increase depending on which plan would materialize. His estimates are as follows: Plan A — P5,000 per square meter B~ 2,000 C~- 1,000 What Is the expected value of the land? a. P5,000 c. P2,667 b. P3,000 d. P3,700 Plan A 5,000 x 60% 3,000 B 2,000 x 30% 600 c 4,000 x 10% 400 Expected value 3,200 per square meter 73. Bahalana Company produces and seils Procuct Z. Each unit of Product Z contributes P5 to the recovery of fixed costs and generation of profit, Total fixed costs amounts to 200,000 per period. Sellit:g price of Product Z is P20 per unit. For the coming period, the company believes that there is a 70% chance that the sales of Product Z will be 80,000 units, and a 30% chance that sales will equal 10,000 units. The expected profit from Product 7 for the coming period is: a P 95,000 c. P 80,000 b. P250,000 d. P295,000CPAR MANAGEMENT ADVISORY PREWEEX it - MAY 7, 2018 89” BATCH Page 19 of 32 pages ‘Expected value of sales volume: 80,000 x 70% $6,000 10,000 x 30% 3.000 59,000 XCM per unit 5 Hae a 295,000 |Loss xed costs 200,000 Expected prot P95.000 74. The Rodlayug Company has decided to introduce a new product. The company estimates that there Is a 30% probability that the product will contribute P700,000 to profits, a 30% probability that it will contribute P200,000, and a 40% probability that the contribution will ‘be a negative P400,000. The expected contribution of the new product is @, 500,000 ¢. P166,667 . P110,000 d. 380,000 700,000 x 30% P 210,000 200,000 x 30% 60,000 (400,000; x 20% (160,000) Expected contribution e-110.000 (8 75. Mere Company can acquire 2 700,000 machine now that will bene the firm over the Next 5 years. A newly hired staff assistant correctly computed the net present value to be 134,020 by using a 10% hurdle rate. On the basis of this information, the machine was expected to produce annual cash operating savings of approximately: a. P166,804, ._ P268,505, ad © Ou PBHA,O20, ‘ - Pugol Company is considenng an investment in 2 machine that would reduce annual labor costs by P30,000, The machine has an expected life of 10 years with no salvage value. The machine would be depreciated according to the straight-line method over its useful life. The company’s marginal tax rate is 30 percent, 76, Assume that the company will invest in the machine if it generates an internal rate of retum of 16 percent. What Is the maximum amount the company can pay for the machine and still meet the Internal rate of return criterion? a. P118,709 cc. P187,500 b. P210,000 d. P144,990 {130,000 x 70%) + (X40 x 30%) x 4.893 = x (24,000 + 0,03X) x4.833 = X 401,493 + 0.14499X = X 104,493 ~ 0.855X X= 148.705 77. Joel Company is considering a P600,000 irvestment In new equipment that is anticipated to produce the following data aver a five-year life: Sear Gash Inflows Cash Outflows Depreciation 1 350,000 P130,000 120,000 2 450,000 190,000 420,000 3 450,000 170,000 120,000 4 340,000 150,000 120,000 5 300,000 136,000 420,000 Ignoring income taxes and assuming that cash flows occur evenly throughout a year, the equipment's approximate payback pericd is: a. 1 year, 7 months. c 2 years, 5 months, b. 2 years, 1 month. d, over 5 years,ae WANN A feveecncuhirama artearon ete a ‘Netoash inflows: . Year 4 Pan = Poa oe Year2 1000 — * Years pas000- PEO) 20,000 First two years: P@00,000~ (P220,000 + P280,000) = P120,000 ‘Third year 120,000 + 280,000 = 0.43 year ‘4Zmonths x 0.43 = 5.16 months Payback petid is 2 years and 5 months THEORIES pO 1, _ Ifa firm's net income (loss) does not change as Its volume changes, the firm('s) a. must be in the service Industry, c. sales price must equal PO. b. must have no fixed costs. . sales price must equal its variable 2. If activity-based costing is implemented in an organization without any other changes being effected, total overhead costs will a. be reduced because of the elimination of non-value-added activities. . be reduced because organizational costs will not be assigned to products or services. ©: be increased because of the need for additional people to gather information on cost drivers and cast pools. 4. remain constant and simply be spread over products differently. 3. In an activity-based costing system, aimee cost reduction is accomplished by identifying and All cost drivers Non-vaiue-adding activities a, No No b, Yes Yes « No Yes 4. Yes No 4. As projected net income increases the @. degree of operating leverage declines, ¢. break-even point goes down. 5. margin of safety stays constant. 4. contribution margin ratio goes up. 5. Variance analysis would be appropriate to measure performance in a. profit centers ¢. cost centers b. investment centers d. all of the above 6. In connection with a standard cost system heing developed by Jupiter Co., the fallowing information is being considered with regard to standard hours allowed for output of one unit of pi foduct: Average historical performence for the past three years 1.85 Proauction level to satisty average consumer demand over a seasonal tirne span 1.60 Engineering estimates based on attainable performance 1.50 Engineering estimates based on ideal performance 1.25 To measure controllable production inefficiencies, what Is the best basis for Jupiter to use in estabilshing standard hours allowed? a. 1.25 ¢ 1,60 b. 1.50 d. 1.85) CRAR PREWEEX \i-MAY 7.2018 83 BATCH 7. Octavio Co. had an unfavorable materials usage variance of P900. ‘What amounts ofthis variance should be charged to each department? MANAGEMENT ADVISORY 24 of 32 Warehousing Manufacturing a PO PO. P900 b PO 900 PO G 300 300 P300 qd. 900 PO PO What is the rationale behind this a Period costs are uncontrollable and should nat be charged to a specific product, b. Period costs are generally Immaterial In amount and the cost of assigning the ‘Amounts to specific products would outweigh the benefits. ©. Allocation Of period costs is arbitrary at best and could lead to erroneous decision by ment. manages 4. Because period costs will occur whether production occurs, these costs to production and defer a ‘current cost of doing 7% The following information regarding fixed production costs from a manufacturing firm is available for the current year: 8. A basic tenet of variable costing is that period costs should be currently expensed. Procedure? it is Improper to allocate business, ¢ Fixed costs in the beginning inventory 16,000 Fixed costs incurred this period 100,000 Which of the following statements is nat true? a. The maximum amount of fixed production costs absorption costs in the current vear is P116,000. b. The maximum difference between this firm's the current year income based on absorption costing and its income based on variable costing is P16,000. Using variable costing, this frm will deduct no more than P16,000 for fixed production costs. If this tirm produced substantially more units variable costing wili probably yield a lower incom that this firm could deduct using « a. than it sold in the current year, ie than absorption costing 10. Absorption costing differs from variable costing in all of the following except a. treatment of fixed manufacturing overhead. b. treatment of variable production costs. ¢. acceptability for external reporting. d. arrangement of the income statement 11. If a firm produces more units than it sells, absorption costing, relative to variable costing, it resutt in o higher income and assets. ©. lower income but higher assets. b. higher income but lower assets. 4 iower income and assets. 12. How will a favorable volume variance affect net income under each of the following methods? Absorption a. reduce b. reduce increase c. increase no effect d. increase reduce 13. . Which of the following is an advantage of using variable costing? | a. Variable costing complies with Generally Accepted Accounting Principles, b. Variable costing complies with the National Internal Revenue Code.PAR MANAGEMENT. ‘SERVICES PREWEEK i — MAY 7.2018 83"° BATCH aed Page 2 of pages . Variable costing is most relevant to lon i ig-run strat i d. Variable costing makes cost-volume-profit rest nae easily apparent. sk Sop cd omitos makes bite-size siomai. Which of the following could be a constraint at Siomitos? OQ 1” a. The slomal steamer .. The workers who mix the ingredients c. The workers whe prepare the slamal for steamit d. Any of the above could be the constant nN 15. ne opportunity cast of mi factory with excess 1 aking a component part in a capacity for which there is no alternative use a “ a, the total manufacturing cost of the component. b. the total variable cost of the component. c. the fixed manufacturing cost of the component. d. zero, Y 16. The "i . process of chaasing among competing alternatives is called a. controlling . decision making b. planning d._ performance evaluation a 17. All other factors equal, a large number Is preferred to @ smaller number for all capital project evaluation measures except a, net present value, c. internal rate of return. b. payback period. d._ profitability index. “ 18; The return paid for the use of borrowed capital Is referred to as a 2,,.62sb dividends. . <. Interest. . “Stock dividends. 4. Principal payment. C49. The capital budgeting technique known as payback period uses Depreciation expense Time value of money a. Yes Yes b. Yes No G No No d, No Yes units that should be produced in @ just-in-time manufacturing 6 20. Ideally, the number of system is equal to ‘a. the maximum productive capacity for the current period. actual customer demand for the current period. ¢. budgeted customer demand for the current period. &. bucigeted customer demand for the following period tion’s budget the future of the organization. ahead and try to see ether to make and carry out the The preparation of an organiza! ent team work tog 21. a. forces management to jnok b. requires that the entire managem yearly plan. c. makes performance review possible at all levels of management. d. all of the above, finance temporary assets with short-term debt? and liabilities reduces risk. 22. Why would a firm generally choose to nelly been more stable than long-term interest a. Matching the maturities of assets b. Short-term interest rates have traaiticy / rates. ¢. A firm that borrows heavily tong tern is more apt to be unable to repay the debt . than a firm that borrows heavily shart tem. {y CPAR PREWEEK MAY 7, 2018 8 BaToH Seema re 23 of 32. Financing requirements remain constant, ITEMS 23 THROUGH 27 ARE BASED ON TH FooWaNe turonNrion: Jason : any @ manufacturer of industriel products and em eporting purposes. These ‘ during the Year. Asume that ola uc es eSent Several of Jason's transactions tra Profits duri : ‘ ing the year and a credit balance throughout the year in its retained earnings ue 2. Payment of a trade’ account payable of P64,500 would . ‘Increase the current ratio but the quick ratio would not be affected. . Increase the quick ratio but the Current ratio would not be affected, c. Increase both the Current and quick ratios, : d. Decrease both the Current and quick ratios, aN 24, The purchase of raw materials for P85,000 on open account would a. Increase the current ratio. ©. Increase net I working capital. b. Decrease the current ratio, d. Decrease net wo Captal, 0 25. The collection of a current accourts receivable of 29,000 would 2. Increase the currant ratio. b. Decrease the current ratio and the quick ratio. Increase the quick ratio. d. Not affect the current or quick ratios. 26. Obsolete inventory of 125,000 was written off during the year, This transaction a. Decreased the quick ratio. c. Increased net working capital, b, Increased the quick ratio. ¢. Decreased the current ratio, / 27, The Issuance of new shares in a five-far-one split of common stock a. Decreases the book valli per shere of common stock, b. Increases the book value per a Increases total shareholders’ equity d. Decreases total shareholders’ equity. 28. Which of the following Is necessary for any valid performance measurement? * a. Tt must be part of the financial accaurting system in use. b. It must be quantifiable. c. Goal congruence must be promotes by its use. d. Tt must be financial in nature p %. “S Lance ances between budgeted and actual revenues and expenses. b. can be used at multiple organizetional ievels by redefining the categories and i mu measurements. al c. is most concerned with organ.zational Rnanclal d. all of the above solvency and business processes. a) . Productivity is measured by the , * . tota! quantity of output generated riod, b,. vrantity of good output generated fru nil if ring a « era ‘of good output generates from the quantity ‘of good input used during time period. yrom a iirmited amount of input during a time m a specific amount of input during & timeTAK Pn 4 32 pages a total quantity of input used to generate total quantity of output for a time period. 34. A small manufacturi period ing company recently stated its sales At this level of activity, Its budgeted expenses were Poca. fe ential sees a 100,000, but Its actual expenses were P85,000. This company operated C. effectively but not efficiently. ‘ effectively and efficiently ). Neither effectively nor efficiently, d, efficiently but not effectively. £ 32, The format for internal reports in a responsiblity accounting system is prescribed by: ‘a. Generally Accepted Accounting Principles b. The Financial Accounting Standards Board c. The Philippine Institute of Certified Public Accountants d. Management 0 33. In the balanced scorecard framework, @ survey of employee satisfaction is a potential measure in which of the Four perspectives? a. Financial, c._ Internal business processes. b. Customer. G. Learning and growth. of return on investment (ROI) is equal to the a. Percentage of profit on sales divided by the capital employed turnover rate. b. Percentage of profit on sales multiplied by the capital employed turnover rate. c. Iavestment capital divided by the capital employed turnover rate. y the capital employed turnover rate. d, Investment capital multiplied b A 35. The primary reason for adopting Total Quality Management (TQM) Is to achieve a. Greater customer satisfaction. c. Reduced delivery charges. b. Reduced delivery tme. d. Greater employee ir 36. SPQR, Inc. has two divisions: the Handles Division which manufactures SPQR handles, and the Assembly Division which assembles various parts to produce SPQRs, the main product of SPQR, Inc. The Handles Division currently has excess capacity of 1,500 units. It produces handles at variable cost of P70. The handles can be sold in the outside market for P100. produces. It can buy requires 1,400 handles for the SPQRS that it ide suppliers at P200 or it can just buy them from the Handles ps | 34, A company’s rate The Assembly Division such handles from outsi Division. ining range for the two divisions regarding the transfer price of What is the natural bargai c. Any amount less than P100 handles? ‘a, Between P70 and PLOG d. P70 is the only acceptable price. b. Between P100 and P170 37. Ina PERT network, the critical path is the path that a. hag the most number of activities. b. requires the longest time to complete. ¢. requires the shortest time to compiete. d. has the most slack. education, experience, technical ability, and temperament to identifying, defining, and solving 38. A person who Is qualified by planning, direction, control, and advise or assist businessmen 9n @ professional basis in specific management problems involving the organization, operation of a firm is called a a. Management Consuitant. c. Accounting Technician. b Certified Public Accountant. d. Management Accountant.“1. As 2 consutant the CPAMAS practioner should &. condluct his engagement as fh exercise administra pe isa member ofthe cents organization. Implementation © COTO! over the cen’ staff to avo unnecessary delays ©. encourage dependence of cent ‘esponsibility in implementing ‘on the consultant's staff so as to pinpoint clear 4G, Not take responsibility. for engagements. systems, making decisions and policy judgments in MAS Re aA. i A. ‘Wie of he felling statements is correct? ic Is confined of ; , Services ily to such areas as financial accounting, auditing, and tax b. Beca juse the MAS practitioner must be independent, he must not allow the client to : participate in any phase of his engagement. BS eee i. ane oe sees accounting services, CPAs in the MS bound by the rules of professional ethics in. the practice a Some Ss we : . CPAS provide management s adi ‘ee mandated by the Accountancy ‘ogo areal the eine contrite “ag lar f ac 1 I 42, “The basic prinaples of accounting Information system inch athe flowing, except a. flowibie structure. Se ae ay b. cost awareness. <. Ueno f 43. Which of the following statements is false? 3. Management accountng is on integral pat of the controller's meeps part of the controller's function in an b. The Standard of Ethical Conduct for Management Aé i related to competence, confidentaiky, integaty, and objectaty NTT SONEEPS Modern cost accounting plays @ role in planning new prod operational procedures, and controlling cos’ ° eR Sactss. alan d. The CCO (Chief Operating Officer) is primarily responsible for management accounting and financial accounting. A 44, Management accounting is considered successft when it a. helps managers improve their decisions c. is relevant. b. is in accordance with GAAP. d. is accurate. 1745. Which of the following descriptions refers to wranagement accounting information? a. It is prepared for shareholders. b. It is reliable and verifiable. c. Itis prepared in accordance with GAAP. d. It provides reasonable and timely est'mates p? 46, Which of the following is a not a cheracteristic of management accounting? a. Interna! focus u b. Broad-based and multidisciplinary d, Historical orientation ¢. Subjective information may be usedCPAR PRONEER- Way 208 FTC mene ee 0 47. & major accounting contribution to the managerial decision-making process in evaluating Possible courses of action is to @. decide which actions the management should consider. b. determine the amount of money that should be spent on a project. assign responsibilty for the decision. 4. provide relevant revenue and cost data about each course of action. 48. Gross domestic product (GDP) is the a pal amount of expenditures for consumer goods and investment for a period of re . total purchases by consumers, businesses, government, and foreign entities © value of all final goods and services produced by the country by both domestic and foreign-owned sources, 4. value of all goods and services produced by the country by domestic firms, exchiding ‘those produced by foreign-owned companies. A #8. sett economy trecomes moneiane more depieiacs « company's mandnenent decides to slash spending on research and development, What is the likely effect of this action on net income? Net income will be 2. higher this period and lower in future periods. 5. higher this period and higher in future periods. ‘lower this period and higher in future periods. d. lower this period and lower |n future periods. p 50. Inflation can have positive and negative effects on an economy. Positive effects of Inflation include ‘a. loss in stability in the real value of money and other monetary items over time. b. uncertainty about future inflation may discourage investment and saving. c._ shortages of goods if consumers begin hoarding in anticipation of price increases in ‘the future. . mitigation of economic recessions and debt relief by reducing the real level of debt. f\ 51. The local video store's business increased by 12% after the movie theater raised its prices from P300 to P400, Thus, relative to movie theater admissions, videos are a. substitute goods cc. complementary goods b. superior goods d, public goods 52. In national income terms, aggregate demand is the a, demand for money by a community in 2 period of full employm32° nt. b. total expenditure on capital doods by entrepreneurs during a period of full employment. ¢. demand that is needed if the country’s economy is to operate at optimum level and the level of investment is to be raised. d. total expenditures on consumer goods and investment, induding government and foreign expencitures, during a given period, S 53. A city ordinance that freezes rent prices may cause é demand curve for rental space to fall. ES td aoe sunve for rental space to rise. r lantity demanded of rental space exceed the &® J pace exca quantity supplied, 7 © duantity supplied of rental space exceed the quantity spot + Ifa group of consumers Would be ISU decide to boycott a particular product, the expected result 3. An in i DA Actress in the product Price to make up lost revenue. ©. An incre, p the demand for the Product, " . Product supply because of increased availability,PAR y PREWEEK lI - MAY 7, 2018 63° BATCH " ext 27 ota d. That demand for the Product would become Completely inelastic, 55. Itisa i tdi of enon ahora OR orci viable, and if so, its degree of profi OF elemiing whether oF nt te 1. igeting i tren c. Viable Costing ibility Study d. Profit Planning 56. A significant cust of is quality that is not recorded in the acco records e Sane cost for a Customer complaint center. seta se . reworking products to bring ther i €. pportunity costs of forgone fue aa, ve to specication d, appraisal cost for product equipment, (5? In macroeconomic terms, ‘aggregate demand is the e Dents for money by the community in a period of full emplayment. J fe on capital i wal coped pital goods by entrepreneurs during a period of full c. Demand that is needed if a country’s economy is to operate at optimum level and the level of investment Is to be ith : 4. Total expenditures on consumer goods and investment, including government and foreign expenditures, during a given period. U 58. In a decentralized company in which divisions may buy goods from one another, the transfer pricing system should be designed primarily to 4-2) cingrease the consolidated value.of inventorys: = 228-0. b. allow division managers te buy from outsiders. ¢. minimize the degree of autoriomy of division managers. d. aid in the appraisal end motivation of maragerial performance. 59. When a profitable corporation sells an asset at a loss, the after-tax cash flow on the sale will a. exceed the pre-tax cash flow on the sale b. be less than the pre-tax cash ficw on tha sale, , be the same as the pre-tax cash flow an the sale. d. increase the corporation's overali tax liabiity. fire truck with 2 new vehicle in an effort to A 60. The City of Malabon is about to replace an old lowing items, ail related to save maintenance and other operating costs. Which of the fol the transaction, would not be considered in the decision? a. Purchase price of the cid vehicle. b. Savings in operating costs as a result of the new vehicle, ©. Proceeds from disposal of the cld vehicle. d. Future depreciation on the new vehicle. 61, A management decision may be beneficial for 2 given profit center, but not for the entire company. From the overall company viewport, this decision would lead to a. goal congruence c. suboptimization b. centralization d. maximization 0 62. Which of the following is an advantage of equity financing in comparison to debt financing? a. Issuance costs are greater than for debt. b. Ownership is given up with respect to the issuance of common stock. ic tee c. Dividends are not tax deductible by the corporation whereas interest. deductible. 4. The company has no firm abligation t pay dividends to common shareholders.CPAR . PREWEEK Il -MAY 7, 2018 89° BATCH ” fi 63. Mansho Co. is ay : 2 of 32 lying for a loan in which Mansho’s ss the bank rate? SNK rato is 0.8. Which ofthe folowing requires a quick ratio of at feast I, Purchasing in - Inilemertng ston sph he suance of 8 long-term note. a b. stronger a Paying an existing account payabie, Coe aecoutsreceable ata ater rate. * Selig obsolete inventory at a ess. Which of the followi ing Is used to describe the ~lected activity time on é e the practice of adding resources to shorten a. Mal et {he crtal path ofa project? - Project crashing, C. Slack time, 4. Reengineering, We tem Cost driver refers to any activity that can be used b. the attempt to control Ls &_ the person who gathe Of the following, which is the 2 \e best reason for using activity a. to keep better track of overhead costs, 9 “TMtY-based costing? b. to more accurately assi osts are better r 1 over t tp mov ly assign overhead costs to cost pools so that these costs a G9 Detter assign overhead costs to products ign indirect service overhead p ass overhead costs to direct overhead cost pools 67. Which of the following statements represents a. similarty between financial and managerial accounting? @. Both are useful in providing information for extemal users. b. Both are governed by GAAP. ¢. Both rely heavily on published financial statements. 4. Both draw upon data from an organization's accounting system. A) 68. Leo Corporation will evaluate a potential Investment in an advanced manufacturing system by use of the net-present-value (NPV) method. Which of the following system benefits Is least likely to be omitted from the NPV analysis? a. Savings in operating costs. b. Greater flexibility in the production process. c. Improved product quality d. Shorter manufacturing cycle time. 69. A company produces and selis bottled fruit juices. The processes involved in producing the product are done in the following departments: Qepartment Juice extraction 8,000 bottles Mixing 5,000 bottles i Botting 10,000 bottles i Demand|for the company’s product is about 6,000 bottles per week. If the eo wants \o improve its contribution margin and aj , improvement efforts should be focused on a. extraction department. c. bottling department. b. mixing department. d. sales department. plies the Theory of i ities in the ig 70. It describes how an organization matches ‘ts own capabilities with the opportunit marketplace to accomplish its overall objectives. a. Planning «Learning and growth perspective \ b. 4, Customer perspectivePAR PREWEEK II MAY 7.2018 83° ago MANAGEMENT ADVISORY SERVICES 71. Which of the following 20 of 32, 1. MAS relates tothe futame are) true? usualy fa Scope covered by MAS, a wider variety of assignments are - MAS engagements Tequire highly qualified staff. a. All the statements are true, b. Only three statements a re true. ©. Only two statements are true, 4. Only one statement is true, %) 7 Reompany’s rate of retum on % 73. Management accounting and cost accounting 2. ate required for recordkeeping as are financial accounting and tax b. provide cost information about products a foes os i internal decision making. , om sree wel seme ¢. require an entirely separate group of accounts than financial accountin p 4. focus solely on the determination cf costs to produce @ product or prowde a service. 2 74. Which of the following is a sign that an ABC system may be ieetul? There are small amounts of indirect costs, b. Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity. c. Products a company is less suited to produce and sel! show small profits. d. Operations staff agrees with accountants about the costs of manufacturing and marketing products and services. 2 75. Which of the following is not en objective of managerial accounting? . Providing information for decision making and planning. b, Maximizing profits and minimizing costs, c. Assisting in directing and controlling operations. d. Measuring the performance of mariagers and subunits. Fi 76. Which of the following terms refers to @ pe-formance measurement that is calculated as an investment center's after-tax operating incame minus the product of its total assets multiplied by the company’s weighted average cost of capital (WACC)? a. Economic value added < Net realizabie value b. Return on investment d. Profitability index 1) 77, an auto parts store must maintain inventory of a wide variety of parts to satisfy its diverse customer base, As a result, the store's inventory has a high risk of obsolescence, Which of the following features would be most desirabls to the store's creditors during a financial review of the auto parts store? a. a high quick ratio b. a high debt ratio c. a high number of days sales outstancing in ending trade receivables d. a low inventory tumover ratio. 78. Which of the following changes would cause a company’s break-even point in sales to increase? a. The company’s contribution margin rate increases. b, The company’s variable cost per urit decreases.A 22, 83. 86. a, MASAQBMENT ADVISORY SERVICES ‘Beste ne c. The company’s total fixed costs Increases, a ‘The company’s stling price per unt incraages. ‘Which of the following costs is deducted from revenues of a manufacturing comparty in ‘order to determine gross margin but not deducted from revenues to determine ‘contribution margin? a, Fixed manufacturing b. Variable manufacturing ¢. Fixed selling and administrative 4. Variabie selling and administrative ‘Tn the cost of quality, liability claims are examples of a. Prevention costs ¢. Internal failure costs b. Appraisal costs 4, External falure costs ‘The economic order quantity for inventory is higher for an organization that has a, lower annual unit sales. b. higher fixed inventory ordering costs. ©. higher annual carrying costs as a percentage of inventory value. @. a higher purchase price per unit of inventory. Which of the following is not an important aspect of supply chain management? a. Information technolagy ©. Customer relations b. Accurate forecasts d, Communications It is a tool to achieve large, quick gains in effectiveness or efficiency through redesigning the execution of specific business functions. tt Is a method of examining processes to Identify and then eliminate, reduce, or replace functions and processes that add litte Customer value to products or services. It Is designed to bring radical changes to an organization's operations. a. Process Identification C. Business Process Reengineering b. Downsizing d. Enterprise Resource Planning System Ongeing efforts to reduce costs, increase product quality, and/or improve production process once manufacturing has Begun Is known 8s 2. cost management ¢. target costing b. kaizen costing di. ife-cycle costing [6 85. Productivity is measured by the a. total quantity of output generated from a limited amount of input during a time period. b. quantity of good output generated from a specific amount of input during @ time period. ©. quantity of good output generated from the quantity of good input used during & time period. di. total quantity of input used to generate total quantty of output fora time period. / of the following best describes tactical profit plans? oe wn etaled, short rm, broad responsibillties, qualitative. . Broad, short term, responsibilities at ail levels, é Detailed, short term, responsibilities at ail levels, quantitative quantitative. d. Broad, long term, broad responsibilities, qualitative. 87. A consultant recommends a com eason 1: Cash needs may fluctu Reasot z Opportunity for buying at a Ciscount may apy pany hold funds for the following two reasons: J ly throughout the year. jate substantially thr ar during the yea".R PayeK.—-MAY 7, 2018 69 BATCH MANAGEMENT ADVISORY SERVICES Pago 31 of 32 pogee as The h balances used to address the reasons given above are correctly classified as Reason 1 Reason 2 a : pealae nae Speculative balances é pela NCES. Precautionary balances ‘ ve ionary balances Speculative balances |. Precautionary balances Precautionary balances <4 88, The contribution incom i Fier ae ie statement differs fram the traditional income statement in which @. The traditional income statement i . co ; nt separates costs into fixed and variable . The traditional income statement subtracts all variabl aac racts ail variable casts from sales to obtain the G Cost-volume-profit relationships can be analyzed more easily from the contribution income statement. ‘d. The contribution income statement separates costs Into product and period categories. 1) 86. When using 2 graphical solution to a linear programming problem, the optimal solution will ie in an area commonly known as the: ‘a. region of maximization. cc. objective region b. feasible region. d. constraint region. (O90: Costs that cannot be changed: by any;deriston made now or In the future are: a. fixed costs oe avoidable costs }. indirect costs G, sunk costs A 91, Which of the following statements does nat apply to decision tree analysis? ‘a. The stim of the probabilities of the events is less ‘than one (1). b, All of the events are mutually exclusive. ¢. Allof the events are included in the decision d, The branches emanate from a node trom left to right. f\ 92. Which of the fotiowing performance measures |s nonfinancial? ‘a. Percentage of defective produ ¢. Gross profit margin. b. Return on investment. d. Econamic value-added. prises, the controller is responsible for directing the budgeting process. In ‘controller has significant influence with executive management as ‘individual Ets Jrtment budgets are rmocified and spproved. For the current year, the controller was depermental in the approval of a particular line manager's budget vathout modification , rervtnough significant reductions were made to the Budgets submitted by other line cvetygers. AS a token of appreciation, the line manager has gen the controller a gift rrarpate for 2 popular local restaurans. Tn considering whether of not to accept the Cetipcate, the controller should refer to which section of IMA Statement of Ethical 93. At Key Enter this role, the Professional Practice? a, Competence c, Integrity b. Confidentiality d. Credibility e of the four persveciives of a balanced scorecard? c. Benchmarking. a. Just in time. x b. Innovation. d. Activity-based costing. 94. Which of the following Is on re benefits ct decentralization EXCEPT that it: responsiveness to ocal needs rf morale (2 95. Allof the following a a. creates greater b. decreases management and woikelCPAR PREWEDC -MAY?. 2018 89 naTOY MANAGEMENT ADVISORY SERVICES ls Page 32 of2 pages A 100. Which of the following statements regarding standard cost systems 98. 99. ©. leads to quicker decision mi vakin d. sharpens the focus of manger gb curve js a function: 1. that measures the decline in Jabor-hours per unit due to workers becoming better at a job 5 that increases at a greater ate as workers become ore eri wth he tasks where unit costs increase sc d, that is linear pone Incase Budgeting provides all of the following EXCEPT: a. a means to communicate the organization's short-term goais to Its members 'b. support for the management functions of planning and coordination ¢. a means to anticipate problems ._an ethical framework for decision making ‘When cost relationships are linear, total variable prime costs wil! vary In proportion to changes in a. direct labor hours. ¢. total overhead cost. b. total material cost. d. production volume. Standard costs conditions. 2. are estimates of costs attainable only under the most ideal b. are difficult to use with a process costing system. c._ can, if properly used, help motivate employees: 4G. require that signficent unfavorable variances be investigated, but do not require that significant favorable variances be investigated. is true? ‘a. Favorable variances are not necessarily good variances. b. Managers will investigate all variances fram standard. The production supervisor is generally responsible for material price variances, Standard costs cannot be used far planning purposes since costs normally change in the future. -end-