Tibok Manufacturing sells medical supplies, including stethoscopes.  At

September 30, the company had 1,000 stethoscopes in inventory.  The
company’s policy is to maintain an inventory equal to 8% of next month’s
sales.  The company expects the following sales activity for the fourth quarter
of the year:
October                              11,000 stethoscopes
November                           15,000 stethoscopes
December                            14,000 stethoscopes
                In addition, January sales for the following year are projected to be 16,000
stethoscopes.  What is the total required production for the fourth quarter?

b.  39,000 stethoscopes

, Not Selected

d.  41,280 stethoscopes

, Not Selected
Correct answer:

a.  40,280 stethoscopes

c.  39,720 stethoscopes

, Not Selected
Results for item 2.
2
1 / 1 point
San Pascual Company normally produces and sells 30,000 units of E14 each
month.  E14 is a small electrical relay used in the automotive industry as a component
part in various products.  The selling price is P22 per unit, variable costs are P14 per
unit, fixed manufacturing overhead costs total P150,000 per month, and fixed selling
costs total P30,000 per month.
 
Employment-contract strikes in the companies that purchase the bulk of the E14 have
caused San Pascual’s sales to temporarily drop to only 9,000 units per month.  San
Pascual estimates that the strikes will last for about two months, after which time sales
of E14 should return to normal.  Due to the current low level of sales, however, San
Pascual Company is thinking about closing down its own plant during the two months
that the strikes are on.  If San Pascual Company does close down its plant, it is
estimated that fixed manufacturing overhead costs can be reduced to P105,000 per
month and that fixed selling costs can be reduced by 10%.  Start-up costs at the end of
the shutdown period would total P8,000.  Since San Pascual Company uses just-in-
time production method, no inventories are on hand.
 
At what level of unit sales for the two-month period should San Pascual Company be
indifferent between temporarily closing the plant or keeping it open?

d.  8,000
, Not Selected

b.  24,125
, Not Selected

c.  10,000
, Not Selected
Correct answer:

a.  11,000
Results for item 3.
3
1 / 1 point
Dela Rosa Fabricators, Inc. estimates that 60,000 special components will be used in
the manufacture of a specialty steel window for the whole next year.  Its supplier
quoted a price of P60 per component.  Dela Rosa prefers to purchase 5,000 units per
month, but its supplier could not guarantee this delivery schedule.  In order to ensure
availability of these components, Dela Rosa is considering the purchase of all the
60,000 units at the beginning of the year.  Assuming Dela Rosa can invest cash at 8%,
the company’s opportunity cost of purchasing all the 60,000 units at the beginning of
the year is

c.  P 144,000
, Not Selected

d.  P 264,000
, Not Selected

b.  P 150,000
, Not Selected
Correct answer:

a.  P 132,000
Results for item 4.
4
1 / 1 point
Century Company is preparing its cash budget for the month ending November
30.  The following information pertains to Century’s past collection experience from
its credit sales:
                                Current month’s sales                                                     12%
                                Prior month’s sales                                                          75%
                                Sales two months prior to current month                           6%
                                Sales three months prior to current month                        4%
                                Cash discounts (2/30, net/90)                                            2%
                                Doubtful accounts                                                              1%
                                Credit sales:
                                                November – estimated                                 P2,000,000
                                                October                                                           1,800,000
                                                September                                                      1,600,000
                                                August                                                             1,900,000
How much is the estimated credit to Accounts Receivable as a result of collections
expected during November?

d.  P 1,802,000
, Not Selected

a.  P 1,730,200
, Not Selected

b.  P 1,757,200
, Not Selected
Correct answer:

c.  P 1,762,000
Results for item 5.
5
1 / 1 point
Woodsman Inc. produces a variety of wood finishing products including gallons of
varnish that it manufactures and packages under its own name.  The company has
computed the required production of gallons of varnish it will need for the first three
months of 2019 as follows:
                                January                                300,000 gallons
                                February                              340,000 gallons
                                March                                   400,000 gallons
Each gallon of varnish requires 10 ounces of a special chemical.  This chemical costs
P0.25 per ounce.  The company has determined that it needs 20 percent of next
month’s raw material needs on hand at the end of each month.  The cost of the direct
material that should be purchased in February is:
Correct answer:

b.  P 880,000

d.  P 850,000
, Not Selected

a.  P 920,000
, Not Selected

c.  P 950,000
, Not Selected
Results for item 6.
6
1 / 1 point
Selling and administrative expenses are billed and paid the month after they
occur.  Selling and administrative expenses have both a fixed and a variable
component.  The fixed component is a constant P4,700 a month.  The variable
component equals 5 percent of revenues.  Given revenues of P300,000 for January,
P350,000 for February, and P400,000 for March, what would be the budgeted selling
and administrative expenses that would be paid in March?
Correct answer:

b.  P22,200

d.  P 19,700
, Not Selected

a.  P 4,700
, Not Selected

c.  P 13,200
, Not Selected
Results for item 7.
7
1 / 1 point
For the past 12 years, the JLO Company has produced the small electric motors that
fit into its main product line of dental drilling equipment.  As materials costs have
steadily increased, the controller of the JLO Company is reviewing the decision to
continue to make the small motors and has identified the following facts:
1.)  The equipment which is used to manufacture the electric motors has a book value
of P1,500,000.
2.)  The space being occupied now by the electric motor manufacturing department
could be used to eliminate the need for storage space which is presently being rented.
3.)  Comparable units can be purchased from an outside supplier for P597.50.
4.)  Four of the people who work in the electric motor manufacturing department
would be terminated and given eight weeks of separation pay.
5.) A P750,000 unsecured note is still outstanding on the equipment that is being used
in the manufacturing process.
Which of the items above are relevant to the decision that the controller has to make?
Correct answer:

d.  2, 3, and 4

c.  1, 3, 4, and 5
, Not Selected

b.  1, 3, and 4
, Not Selected

a.  1, 2, 4, and 5
, Not Selected
Results for item 8.
8
1 / 1 point
A company owns equipment that is used to manufacture important parts for its
production process.  The company plans to sell the equipment for P10,000 and to
select one of the following alternatives:
                                (1) acquire new equipment for P80,000
                                (2) purchase the important parts from an outside company at P4
per part.
The company should quantitatively analyze the alternatives by comparing the cost of
manufacture the parts
Correct answer:

d.  To the cost of buying the parts.

a.  Plus P80,000 to the cost of buying the parts less P10,000.
, Not Selected

c.  Less P10,000 to the cost of buying the parts.

, Not Selected

b.  To the cost of buying the parts less P10,000.

, Not Selected
Results for item 9.
9
1 / 1 point
Blade Division of Dana Company produces hardened steel blades.  One-third of the
Blades Division’s output is sold to the Lawn Products Division of Dana; the
remainder is sold to outside customers.  The Blade Division’s estimated sales and
standard costs data for the fiscal year ending June 30 are as follows:
                                                                Lawn Products                  Outsiders
                Sales                                      P15,000                                P40,000
                Variable costs                         (10,000)                               (20,000)
                Fixed costs                             (  3,000)                               (16,000)
                Gross margin                          P 2,000                                  P14,000
                Unit sales                              10,000                                    20,000
The Lawn Products Division has an opportunity to purchase 10,000 identical quality
blades from an outside supplier at a cost of P1.25 per unit on a continuing
basis.  Assume that the Blade Division cannot sell any additional products to outside
customers.  Should Dana allow its Lawn Products Division to purchase the blades
from the outside supplier, and why?

c.  Yes,  because buying the blades would save Dana Company P2,500.
, Not Selected

a.  Yes, because buying the blades would save Dana Company P500.
, Not Selected
Correct answer:

d.  No, because making the blades would save Dana Company P2,500.

b.  No, because making the blades would save Dana Company P1,500.
, Not Selected
Results for item 10.
10
1 / 1 point
Sunshine Company mines three products.  Gold Ore sells for P1,000,000 per ton,
variable costs are P600,000 per ton, and fixed mining costs are P6,000,000.  The
segment margin for 2019 was P1,200,000.  The management of Sunshine Company
was considering dropping the mining of Gold Ore.  Only one-half of the fixed
expenses are direct and would be eliminated if the segment was dropped.  If Gold Ore
were dropped, net income for Sunshine Company would:

c.  decrease by P2,000,000
, Not Selected

a.  increase by P2,000,000

, Not Selected
Correct answer:

d.  decrease by P1,200,000

b.  increase by P1,200,000
, Not Selected
Results for item 11.
11
1 / 1 point
    A company pays for 25 percent of its purchases by credit terms n/60, 40 percent
of its purchases by credit terms n/30, and the remaining 35 percent by a two-
month advance payment.  The sources for June’s cash payments schedule for
direct materials would not include which of the following?

c.  May’s direct materials purchases budget

, Not Selected

b.  August’s direct materials purchases budget

, Not Selected

d.  April’s direct materials purchases budget

, Not Selected
Correct answer:

a.  June’s direct materials purchases budget

Results for item 12.
12
1 / 1 point
   Mountaineer Products manufactures two types of tents:  single-wall and
double-wall.  Selected data related to each type of tent is as follows:
                              Single-
wall          Double-wall
 
                                Sales
price                                                           P250                      P375
                                Direct materials                                                        
25                           50
                                Direct labor                                                               
20                          40
                                Variable overhead                                                    
10                           15
                                Machine hours                                                           
2                             3
Total fixed overhead is P150,000.  Most of the manufacturing process is done on
specialized machines.  For the upcoming year, there is a maximum of 9,000 machine
hours available.  Management believes there is sufficient demand for 3,000 single-
wall and 4,000 double-wall tents each year.  In order to to maximize profits, how may
of each type of tent should be produced?

b.  Single-wall : 0             Double-wall : 3,000

, Not Selected
Correct answer:

a.   Single-wall : 3,000           Double-wall : 1,000

c.  Single-wall : 1,800    Double-wall : 1,800

, Not Selected

d.  Single-wall : 1,500    Double-wall : 4,000

, Not Selected
Results for item 13.
13
1 / 1 point
    Blooming Products Inc.  sells flower bulbs to local nurseries.  Each bag of bulbs
sells for P2.  The company’s accountant has prepared the following sales
forecast (in bags) for the fourth quarter of 2019:
October                               5,000 bags
November                           9,000 bags
December                           8,000 bags
 
                Historically, the cash collection of sales has been as follows:  50 percent in
the month of sale, 40 percent in the month following the sale, and 10 percent in the
second month following the sale.  Cash receipts for December are expected to be:

c.  P 8,000
, Not Selected

d.  P 8,100
, Not Selected
Correct answer:

b.  P16,200

a.  P13,800
, Not Selected
Results for item 14.
14
1 / 1 point
In December 2019, Green Inc. was formed as a corporation.  The company plans to
start its operations in early of January 2020.  They have the following purchases
budgeted for the first quarter of 2020:
                                January                                P 600,000
                                February                                 500,000
                                March                                      300,000
Green has worked out agreements with its various suppliers to pay for one-fourth of a
month’s purchases each month, beginning in the month of purchase, until the
purchases are paid in full.  No purchases were made prior to January.  What are total
cash disbursements expected for the first quarter of 2020?

c.  P 625,000
, Not Selected

d.  P 350,000
, Not Selected

a.  P 425,000
, Not Selected
Correct answer:
b.  P 775,000
Results for item 15.
15
1 / 1 point
    Tilton Food Warehouse Club sells food and other items in buld to its
members.  Tilton is very selective in the products is sells because of limited
shelf space.  It has been asked by a canned vegetables manufacturer to
consider adding three of its canned food items.  The following information
is availble regarding each of the possible canned food items:
                             Item 1                   Item
2                   Item 3
                                                Sales price                           P 3.50                    P
4.50                    P 7.00
                                                Cost to purchase                     
1.25                        2.00                       3.00
                                                Units per foot of shelf
                                                                   Space                       
3                             2                              1
                Assuming that there is unlimited demand for all items, if Tilton has 15 feet
of shelf space available, which of the following statements is true if
                they wish to maximize profits?

c.  Tilton should sell only Item 3.

, Not Selected

b.  Tilton should sell only Item 2.

, Not Selected
Correct answer:

a.  Tilton should sell only Item 1.

d.  Tilton should sell an equal amount of each item.

, Not Selected
Results for item 16.
16
1 / 1 point
Smile Company is estimating the following sales:
                July                                        P45,000
                August                                   P50,000
                September                             P65,000
                October                                  P80,000
                November                              P75,000
                December                              P60,000
Sales at Smile are normally collected as follows:  10% in the month of sale; 60% in
the month following the sale; and the remaining 30% in the second month following
the sale.  In Smile’s budgeted balance sheet at December 31, at what amount will
accounts receivable be shown?
Correct answer:

b.  P76,500

c.  P120,500
, Not Selected

a.  P49,500
, Not Selected

d.  P135,500
, Not Selected
Results for item 17.
17
1 / 1 point
Fantastic Futon manufactures futons.  The estimated number of futon sales for the
first three months of 2020 are as follows:
                      January                                       40,000
                     February                                      50,000
                     March                                           60,000
Finished goods inventory at the end of 2019 was 12,000 units.  On average, 25
percent of the futons are produced during the month before they are sold, which
normally accounts for the ending balance in finished goods inventory.  The
planned selling price is P150 per unit.
 
Fantastic Futon buys direct materials for the futons in cloth rolls priced at P80
each.  Each roll provides direct material for 40 futons.  There was one roll in
the direct materials inventory at the beginning of January, and the company
expects to have four rolls in inventory at the end of the month.  Assuming the
production budget calls for 60,000 units to be produced in January, what would
be the amount of cloth rolls direct materials purchase budget for that month?

b.   P120,000
, Not Selected
 a.       P119,760
, Not Selected

c.    P114,000
, Not Selected
Correct answer:

                       d.  P120,240
Results for item 18.
18
1 / 1 point
     Rider Manufacturing Inc.  manufactures electric scooters.  The company
currently makes all of  the electronic components for the scooter
itself.  When 6,000 motors are manufactured each year, the motor costs per
unit are as follows:
Direct materials                                P 3,000
Direct labor                                          4,000
Variable overhead                                5,000
Fixed overhead                                    8,000
           Amber Inc, has offered to sell Rider, 6,000 motors for P15,000 per unit.  If
Rider accepts the offer, 60% of the fixed overhead currently allocated to the motors
could be avoided. If Rider accepts the offer to purchase 6,000 motors from Amber, net
income will:
 
Correct answer:

d.  Increase by P10,800,000

a.  Decrease by P1,200,000

, Not Selected

c.  Decrease by P18,000,000

, Not Selected

b.  Increase by P30,000,000

, Not Selected
Results for item 19.
19
1 / 1 point
Martha Company will open a new store on January 1.  Based on experience from its
other retail outlets, Martha is making the following sales projections:
                                                                                                Cash
Sales                           Credit Sales
                                January                                                    P
600,000                             P 400,000
                                February                                                      
300,000                                500,000
                                March                                                          
400,000                                600,000
                                April                                                             
400,000                                800,000
Martha estimate that 70% of the credit sales will be collected in the month following
the month of sale, with the balance collected in the second month following the
sale.  Based on these data, the balance in accounts receivable on January 31 will be
increased by:
Correct answer:

a.  P 400,000

d.  P 580,000
, Not Selected

b.  P 280,000
, Not Selected

c.  P 120,000
, Not Selected
Results for item 20.
20
1 / 1 point
        Mario Simon, a local craftsman, normally sells his handcrafted wooden

birdhouses for P88.  Simon has the capacity to produce as many as 50

birdhouses a week.  In a normal week, Simon makes 20 birdhouses with the
following costs per unit:
Direct materials                                P50.00
Direct labor                                         P200.00
Variable overhead                           P 40.00
Fixed overhead                                 P20.00
Simon has received a special order from a local plant nursery for 25
birdhouses.  The nursery wishes to have the birdhouses engraved with
 their own logo, therefore, the order would required the rental of a special
engraving tool at  a cost of P2,000.  Simon requires a minimum P5,000
profit on any special order.  The minimum price per birdhouse that
Simon should charge the nursery is:

a.  P370
, Not Selected

d.  P650
, Not Selected
Correct answer:

c.  P570

b.  P470
, Not Selected
Results for item 21.
21
1 / 1 point
May Company goes through two departments in the production process.  Each unit
requires two direct labor hours in Department A and one hour in Department
B.  Labor cost is P8 per hour in Department A and P10 per hour in Department B.
 
The labor capacity for a normal eight-hour shift for a month is 50,000 direct labor
hours each for both Departments A and B.  Overtime is paid at time and a half.  What
would be the budgeted labor cost for January, assuming a budgeted production of
30,000 units?
Correct answer:

b.  P 820,000

d.  P 420,000
, Not Selected

c.  P 780,000
, Not Selected

a.  P 900,000
, Not Selected
Results for item 22.
22
1 / 1 point
     XYZ Company expects to sell 51,000 units of its product in the coming
year.  Each unit sells for P45.  Sales brochures and supplies for the year are
expected to cost P7,000.  Three sales representatives cover the Southeast
region.  Each one’s base salary is P25,000 and each earns a sales commission
of 5 percent of the selling price of the units he or she sells.  The sales
representatives supply their own transportation; they are reimbursed for travel
at a rate of P0.40 per mile.  The company estimates that the sales
representatives will drive a total of P75,000 miles next year.  From the
information provided, calculate XYZ Company’s budgeted selling expenses for
the year.

d.  P114,750
, Not Selected
Correct answer:

a.  P226,750

c.  P176,750
, Not Selected

b.  P151,750
, Not Selected
Results for item 23.
23
1 / 1 point
The following information pertains to Del Rio Company:
                                                Month                  Sales                      Purchases
                                                January                P30,000                P16,000
                                                February              P40,000                P20,000
                                                March                   P50,000                P28,000
Cash is collected from customers in the following manner:
                Month of sale                                    30%
                Month following the sale                   70%
40% of purchases are paid for in cash in the month of purchase, and the balance is
paid the following month.  Labor costs are 20% of sales.  Other operating costs are
P15,000 per month (including P4,000 of depreciation). Both of these are paid in the
month incurred.  The cash balance on March 1 is P4,000.  A minimum cash balance of
P3,000 is required at the end of the month.  Money can be borrowed in multiples of
P1,000.  What is the ending cash balance?
Correct answer:

b.  P 3,800

d.  P 3,000
, Not Selected

c.  P 3,200
, Not Selected

a.  (P25,000)
, Not Selected
Results for item 24.
24
1 / 1 point
      Vela Enterprises Inc. would like to prepare a summary cash budget for
March.  The following information is available:
1.       The cash balance at March 1 was estimated to be P3,000.
2.       March sales, all on account, were estimated to be P50,000.  Sales are
collected over a two-month period with 65 percent collected in the month of
sale and the remainder in the subsequent month.  February sales on account
were P60,000.
3.       Inventory purchases are expected to be P20,000 in March.  The company
pays for one-half of inventory purchases in the month of purchase and the
remainder in the subsequent month.  February’s purchases were P18,000.
4.       Cash disbursements for sellinf and administrative expenses are expected to
be P4,000.
5.       Loans and interest payments for March are expected to be P25,000.
What is the cash balance at the end of March expected to be?

d.  P 26,500
, Not Selected
Correct answer:

a.  P8,500

c.  P(3,500)
, Not Selected

b.  P3,500
, Not Selected
Results for item 25.
25
1 / 1 point
The Healthcare Division of Piedmont Insurance employs three claims processors who
are capable of processing 5,000 claims each.  The division currently processes 12,000
claims.  The manager has recently been approached by two sister divisions.  Auto
Division would like the Health Care Division to process approximately 2,000 claims. 
Property Division would like the Health Division to process approximately 5,000
claims.  The Health Care Division would be compensated by Auto Division or
Property Division for processing these claims.  Assume that these are mutually
exclusive alternatives.  Claims processor salary cost is relevant for 
Correct answer:

b.  Property Division alternative only

a.  Auto Division alternative only

, Not Selected

c.  both Auto Division and Property Division alternatives

, Not Selected

d.  neither Auto Division nor Property Division alternatives

, Not Selected
Results for item 26.
26
1 / 1 point
Knox Company uses 10,000 units of a part in its production process.  The costs to
make a part are:  direct materials, P12; direct labor, P25; variable overhead, P13; and
applied fixed overhead, P30.  Knox has received a quote of P55 from a potential
supplier for this part.  If Knox buys the part, 70 percent of the applied fixed overhead
would continue.  Know Company would be better off by
Correct answer:

c.  P40,000 to buy the part.

d.  P160,000 to manufacture the part.

, Not Selected

b.  P150,000 to buy the part.

, Not Selected

a.  P50,000 to manufacture the part.

, Not Selected
Results for item 27.
27
1 / 1 point
Wind Retail Company was recently created with a beginning cash balance of
P12,000.  The owner expects the following for the first month og operations:
                Cash sales to customers                                                P  8,000
                Sales on account to customers                                         30,000
                Cash collected from account customers                           12,000
                Cost of merchandise purchased                                        35,000
                Cash paid for merchandise purchased                              24,500
                Cost of merchandise sold                                                  26,600
                Cash paid for display cases                                                 9,600
                Selling and administrative expenses                                    4,000
The display cases above were purchased at the beginning of the month and are being
depreciated at a rate of P200 per month.  This amount is included in the selling and
administrative expenses figure above.  All other selling and administrative expenses
are paid as incurred.  Wind wants t maintain a cash balance of P10,000.  Any amount
below this can be borrowed from a local bank as needed in increments of P1,000.  All
borrowings are made at month end.  In Wind’s cash budget for this first month, how
much money will Wind need to borrow at month end?

a.  P  7,000
, Not Selected
Correct answer:

b.  P 16,000

d.  P 28,000
, Not Selected

c.  P 17,000
, Not Selected
Results for item 28.
28
1 / 1 point
The best characterization of an opportunity cost is that it is
b.  not relevant to decision making and is not usually reflected in the accounting
records.
, Not Selected

d.  not relevant to decision making and is usually reflected in the accounting records.
, Not Selected
Correct answer:

a.  relevant to decision making but is not usually reflected in the accounting records.

c.  relevant to decision making and is usually reflected in the accounting records.
, Not Selected
Results for item 29.
29
1 / 1 point
Costa Company has an opportunity to acquire a new machine to replace one of its
present machines.  The new machine would cost P90,000, have a 5-year life and no
estimated salvage value.  Variable operating costs would be P100,000 per year.  The
present machine has a book value of P50,000 and a remaining life of 5 years.  Its
disposal value now is P5,000, but it would be zero after 5 years.  Variable operating
costs would be P125,000 per year.  Ignore income taxes.  Considering the 5 years in
total, what would be the difference in profit before income taxes by acquiring the new
machine as opposed to retaining the present one?

b.  P 15,000 decrease

, Not Selected

a.  P 10,000 decrease

, Not Selected
Correct answer:

d.  P 40,000 increase

c.  P 35,000 increase

, Not Selected
Results for item 30.
30
1 / 1 point
Penduko Inc. sells and installs residential water heaters.  Its customers pay for their
water heaters over four months by paying in equal monthly installements.  Each
customer pays the first installment before water heater is installed.  The sales price of
an installed water heater is P600.  Penduko sold and installed the following number of
water heaters in the first six months of 2020:
                January                                  80 units
                February                              100 units
                March                                     70 units
                April                                         84 units
                May                                         90 units
                June                                        75 units
Cash receipts for June are expected to be:

a.  P 74,850
, Not Selected

d.  P191,400
, Not Selected
Correct answer:

c.  P  47,850

b.  P118,050