PRTC Managed by Excel Professional Services, Inc. Page 1 OPEN FIRST PREBOARD (July 30 and 31, 2016) LETTER ANSWERS MANAGEMENT ADVISORY SERVICES ADVANCE FINANCIAL ACCOUNTING and REPORTING Nos. A 8 Nos. A B Nos. a B Nos. a 8 1 c 8 36 A ee ¢ 8 36 D ° 2 8 c 7 . Be 2 9 A 37 8 c 3 c c 38 o ae 3 ¢ © 38. A c 4 B c 39 D bee i s 39 c A 5 8 c 40 B aos. 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Management Firm of Professional Review and Training Center (ee) & (zon) Manila 733-9344734-7909 * Calamba, Laguna 048) 548.3807 | SES st aries chy yates: Cebu Cy a7 as T00 toe 218 Sa (ttindanao) Cagayan de Oro City (088) 308-3073 * Davao City (082) 226-0049 ‘www.prtc.com.ph CPA REVIEW OPEN FIRST PRE-BOARD EXAMINATIONS MANAGEMENT ADVISORY SERVICES Exam Coverage [MAS Pracice Standards Management Accounting and its | Environment, Costs Concepts and | Classification, CVP Analysis, Variablefabsorption Costing | Economies, Cost Behavior, determination and prediction, | Standard Cost and Variance Analysis, | Short-term Decisions, Short-term | ie | Budget and other topics ExamCode __|MAS.OpentstPB1016_ duly 34, 2016 | [Tim 12:00 NN to 3:00PM No. of Questions |70_ - SET A |Management Advisory Services sera INSTRUCTIONS: Select the best answer for each of the following questions. Mark only one answer for each item on the answer sheet provided. Strictly NO ERASURES ALLOWED. Erasures will render your examination answer sheet INVALID, Use PENCIL NO. 2 only. GOODLUCKIG. c A. The primary purpose of management advisory services is. “a. To conduct special studies, preparation of recommendation, development plans and programs, and Fi provision of advice and assistance in their implementation. b. To provide service or fulfill some social need. ©. To improve the client's use of its capabilities and resources in order to achieve the objectives of the organization. d. To earn the best rate of return on resources entrusted to its care with safety of investment being taken into account and consistent with the firm’s social and legal responsibilities. 2. The process by which a company’s products or services are measured relative to the best possible levels of performance is known as: a. efficiency . a standard costing system b. benchmarking d. variance agalysis 3. Galaxy Company is preparing a flexible budget for the coming year and the following maximum capacity estimates for Department 05 are available: Direct labor hours 60,000 f Variable factory overhead 150,000 | fixed factory overhead 240,000 | aera Eo) TE Opa Y eunsdna tan simaticManagement Advisory Services SETA ‘Assume that Galaxy's normal capacity is 80% of maximum capacity. What would be the total factory overhead rate, J on direct labors, in a flexible budget at normal “capacity? a, P6.00 ©. P7.50 b. P6.50 J. P8.13 4. Planet Manufacturing Corporation is using the following flexible-budget formula for annual indirect labor cost: Total cost = P12,000 +P0.75 per machine hour For the month of June, the operating budget is based upon 10,000 hours of planned machine time. Indirect labor costs included in this planning budget are a. P7,500 c. P17,500 b. 8,500 d. P19,500 5S. The cost to be predicted is referred to as the: fa, independent variable c. cost driver b. dependent variable 4. regression 6. cuantsm Company wishes to determine the fixed portion of its maintenance expense (a semi-variable expense), 5 measured against direct labor hours for the first three months of the year. The inspection costs are fixed, the adjustments necessitated by errors found during inspection account for the variable portion of the maintenance costs. Information for the first quarter is as follows: Direct Labor Maintenance Hours: Costs January 34,000” —P61,000~ February 31,000” 58,500 ¥ March 34,000 61,000 Fae sore wanceiccemah ‘WAS OpentstPan0.16Management Advisory Services SETA Petre wean What is the fixed portion of Quantum Company's maintenance expense, rounded to Me nearest pesos? a. P28,330 c. P37,200 b./ P32,677 6. P40,800 A step fixed-cost function: a. is fixed over the short run but not over the long run b. is often approximated with a continuous variable-cost function c. remains the same over a parrow range of activity d. example includes setup costs Simple regression differs from multiple regression in that: a. multiple regression uses all available data to estimate the cost function, whereas simple regression only uses simple data b. simple regression is limited to the use of only the dependent variables and multiple regression can use both dependent and independent variables c. simple regression uses only one independent variable and multiple regression uses more than one independent variable d. simple regression uses only one dependent variable and multiple regression uses more than one dependent variable Which of the following statements relating to assumptions about estimating linear cost functions is FALSE? a. Variations in a single cost driver explain variations in total costs. b. A cost object is anything for which a separate measurement of costs is desired. c. A linear function approximates cost behavior within the relevant range of the cost driver. d. A high correlation between two variables ensures that a cause-and-effect relationship existsManagement Advisory Services SETA 10. Apo Company's variable costing income statement for August appears below: Sales (P15 per unit) 600,000 Less variable costs: Variable cost of goods sold: Beginning inventory P 72,000 Add variable cost of goods manufactured 315,000 Goods available for sale 387,000 Less ending inventory 27,000 Variable cost of goods sold 360,000 Variable selling expenses 80,000 Total variable costs 440,000 Contribution margin 160,000 Fixed costs: : Fixed manufacturing P 105,000 Fixed selling and administrative 35,000 Total fixed costs 140,000 ‘Net income 20,000 ‘The company produces-35,000_units each month. Variable production costs per unit and total fixed costs have remained constant aver the past several months. Using the absorption costing method, the peso value of the company’s inventory on August 31 and the absorption income, respectively, would be Inventory "Absorption Value Income a. 27,000 —P35,000 b. 27/000 5,000 c. P36,000 P5000 d. 36,000 —P35,000 © V6. The number of units produced or the number of units sold 7 describes: a. cost behavior. cc. sales mix b. activity level. d. contribution margin. Foxe 37H Raeaiecemab ‘HAS. OpenistManagement Aavisoy Services SETA ¥2. Marston Enterprises sells three products: Xx, Y, and Z Product X is the company's most profitable product whereas Z is the least profitable. Which of the following events will definitely decrease the firm's overall breakeven point for the upcoming accounting period? a. a decrease in 2's selling price. b. an increase in anticipated sales of product X relative to sales of Product ¥ and Z. c._ an increase in Product X's raw material cost. 4G. the installation of new computer-controlled machinery and subsequent layoff of assembly-line workers. 13. In the cost/volume/profit (CVP) model, the behavior of total revenues and total cost: a. increase and decrease proportionately to changes in activity level. b. increase and decrease inversely to changes in activity level remain constant within a limited range of output. d. increase at an approximately linear rate within a relevant range of activity 34. Alpine Company wants to earn a 6% return on sales after axes. The company's effective income tax rate is 40%, and its contribution margin is 30%. If Alpine has fixed costs of 240,000, the amount of sales required to earn the desired rate of return is: be a. P400,000 c. P1,000,000 b. 1,200,000 d. P375,000 Pope TE Was: OpenstrB TO.Management Advisory Services SETA Questions 15 through 17 information. De! Sol Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Del Sol’s planned and actual operations for the 2016 calendar year are presented below. Planned Actual Activity Activity e based on the following Beginning finished goods inventory in units 35,009 35,000 Sales in units 140,000 125,000 Production in units 140,000 130,000 The planned per unit cost figures shown in the next schedule were based on the estimated praduction_and_sale_of 140,000 units in_2016. Del Sol uses a predetermined manufacturing overhead rate for applying manufacturing overhead to its product. Thus, a combined manufacturing overhead rate of P9.00 er unit was employed for absorption.costing. purposes in 2016. Any over- or under-applied manufacturing overhead is closed to the cost of goods sold account at the end of the reporting year. Planned Cost Incurred Per Unit Total Costs Direct materials P12.00 1,680,000 1,560,000 Direct labor 9.00 1,260,000 1,170,000 Variable manufacturing 4.00 560,000 520,000 overhead Fixed manufacturing 5.00 700,000 715,000 ‘overhead Variable selling 8.00 1,120,000 1,000,000 expenses Fixed selling expenses 7.00 980,000 980,000 Variable administrative 2.00 280,000 250,000 ‘expenses Fixed administrative 3.00 420,000 425,000 expenses Total 50.00 7,000,000 6,620,000 Papo WAS. OpenisiP6i0.16Management Advisory Services SETA The 2016 beginning finished goods inventory for absorption costing purposes was valued at the 2015 planned unit manufacturing cost, which was the same as the 2016 planned Unit manufacturing cost. There are _no__work-in-process inventories at either the beginning or the end of the year. ‘The planned and actual unit selling price for 2016 was P70.00 per Unit. 35. Del Sol Corporation's total_fixed_cos the absorption costing Bases were a. 2,095,000 . 2,120,000 b. 2,055,000 d. P2,030,000 Del Sol Corporation's actual_manufacturing contribution ‘margin for 2016 calculated on the variable costing basis was 3, P4,375,000 ¢, 4,935,000 b. P4,910,000 4. P5,625,000. s expensed in 2016 on 17. The amount of profit for 2016 for Del Sol Corporation calculated on the absorption costing basis was a. P2,255,000 ‘c. P2,330,000 b. 2,280,000 d. 2,295,000 18. Argus Company, a manufacturer of lamps, budgeted sales of 400,000 lamps’ at P20 per unit for the year. Variable manufacturing costs were budgeted at P8 per unit, and fixed manufacturing costs at P 5 per unit. A special order offering to buy 40,000 lamps for P11.50 each was received by Argus in April. Argus has sufficient plant capacity to manufacture the additional quantity of lamps; however, the production would have to be done by the present work force on an overtime basis at an estimated additional cost of 1.50 per lamp. Argus will not incur any selling expenses as a result of the special order. Argus Company would have a unit relevant cost of a. P 8.00 <. P9.50 b. P13.00 6. P14.50 \ ‘Tape Bor wenenciecom.oh WAS. OpanisiP6i0.16Cc Management Advisory Services SETA 19. Jupiter Company manufactures Part Rock for use in its production cycle. The costs per unit for 10,000 units of part Rock are as follows: Direct materials P3 Direct labor 15 Variable overhead 6 Fixed overhead _8 B32 Mercury Company has offered to sell Jupiter 10,000 units of Part Rock for P30 per unit. If Jupiter accepts Mercury's offer, the released facilities could be used to save P45,000 in relevant costs in the manufacture of Part Rock. In addition, PS per unit of the fixed overhead applied to Part Rock would be totally eliminated. What alternative is more desirable and by what amount? ‘Alternative Amount a, Manufacture 10,000 b. Manufacture 15,000 c. Buy 35,000 d. Buy 65,000 |. 0 Pluto Company plans to discontinue a department that has @ contribution margin of P24,000 and P48,000 in fixed costs. Of the fixed costs, 21,000 can be avoided. The effect of this discontinuance on Pluto's overall net operating income would be a(an) a. decrease of 3,000 c. decrease of P24,000 b. increase of P3,000 d. increase of P24,000 21. Venus Company employs a standard absorption system for product costing. The standard cost of its product is as follows: Direct materials 14.50 Direct labor (2 direct labor hours at P8) 16.00 Manufacturing overhead (2 DLH at P11) 22.00 7 WAS. OpentwPOi0-16 rnManagement Advisory Services SETA The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Venus planned to produce 25,000 units each—month during the year. The budgeted annual manufacturing overhead is: Variable 3,600,000 Fixed 3,000,000 During November, Venus produced 26,000 units. Venus used 53,500 direct labor hours in November at a cost of P433,350. ‘Actual manufacturing overhead for the month was P250,000 fixed and P325,000 variable. ‘The manufacturing overhead volume variance for November is a. P12,000 favorable . P3,000 favorable b. P10,000 favorable d. P9,000 favorable 22. Fiesta Company's unit cost of manufacturing and selling a given item at an activity level of 10,000 units per month are: Manufacturing costs Direct materials P39 Direct labor 6 Variable overhead 8 Fixed overhead 9 Selling expenses Variable 30 Fixed il ‘The company desires to seek an order for 5,000 units from a foreign customer. The variable selling expenses will be reduced by 40%, but the fixed costs for obtaining the order will be P20,000. | Domestic sales will not be affected by the order. ‘The minimum break-even price per unit to be considered on this special sale is a. P71 c. P69 b. P75 d. P84 Tage Te 8———— rcomm HAS. OpenttPai0-16Management Advisory Services SETA 23. Green Company's unit cost of manufacturing and selling a Given item at an activity level of 10,000 units per month are: Manufacturing costs Direct materials P24 Direct labor 8 Variable overhead 5 Fixed overhead 6 Selling expenses Variable u Fixed 8 The company has an inventory of 3,000 of this item left over from last year's model. These must be sold through regular channels at reduced prices. The inventory will be valueless unless sold this way. What unit cost is relevant for establishing the minimum selling price of these 3,000 units? a. PIL c. Pas. b. P37 d. P62 24, American Coat Company estimates that 60,000 special Zippers will be used in the manufacture of men's jackets during the next year. Reese Zipper Company has quoted a price of P6 per zipper. American would prefer to purchase 5,000 units per month, but Reese is unable to guarantee this delivery schedule. In order to ensure availability of these zippers, American is considering the purchase of all 60,000 units at the beginning of the year. Assuming American can Invest cash at eight percent, the company's opportunity cost of purchasing the 60,000 units at the beginning of the year is? a. P19,800 c. P39,600 b. P21,600 d. 43,200 ‘ove i725 aie ticcamah—_—~~WAS Open TsiPB 10.16Management Advisory Services SETA 25. Information on Uranus’ direct material costs for May is as follows: Actual quantity of direct materials purchased 30,000 Ibs. arid used ‘Actual cost of direct materials 84,000 Unfavorable direct materials usage variance P 3,000 Standard quantity of direct materials allowed for May production 29,000 Ibs For the month of May, Uranus’ direct materials price variance was: a. P2,800 favorable ¢. 6,000 unfavorable b. 2,800 unfavorable d. P6000 favorable 26. Baltimore, Inc. analyzes manufacturing overhead in the production of its only one product, Blu. The following set of information applies to the month of May, 2003 Budgeted Actual Units produced 40,000 38,000 Variable manufacturing overhead P4/DLH —P16,400 Fixed manufacturing overhead P20/DLH _P88,000 Direct labor hours Gminutes/unit 4,200hours How much was the variable overhead spending variance? a. P40 Favorable ‘c. P1,200 Favorable b. P40 Unfavorable d. P1,200 Unfavorable 27.Joker Company employs a standard absorption system for product costing. The standard cost of its product is as follows: Direct materials 14.50 Direct labor (2 direct jabor hours at P8) 16.00 Manufacturing overhead ( 2 DLH at P11) 22.00 The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Joker planned to Pope Tar HAS. OpenisiPoTOTeManagement Advisory Services SETA produce 25,000 units each month during the year. The budgeted annual manufacturing overhead is Variable 'P3,600,000 Fixed 3,000,000 During November, Joker produced 26,000 units. Joker used 53,500 direct labor hours in November at a cost of P433,350. Actual manufacturing overhead for the month was P250,000 fixed and P325,000 variable. The manufacturing overhead controllable variance for November is a. P13,000 unfavorable c. P3,000 favorable b, P10,000 favorable d. P4,000 favorable ® _26A method of budgeting in which the cost of each program must be justified every year is called ‘a. Operational budgeting —_—_c. Continuous budgeting b. Zero-based budgeting _—_d._ Responsibility accounting 29:To measure controllable production inefficiencies, which of the following is the best basis for a company to use in establishing the standard hours allowed for the output of one Unit of product? ‘Average historical performance for the last several years, Engineering estimates based on ideal performance. Engineering estimates based on attainable performance. The hours per unit that would be required for the present workforce to satisfy expected demand over the long run. 30. Which of the following statements concerning practical standards is incorrect? ‘a. Practical standards can be used for product costing and cash budgeting. b. Practical standards can be attained by the average worker. Jape ofa remem HAS. OpeniePBIOTSCc Management Advisory Services SETA When practical standards are used, there is no reason to adjust standards if an old machine is replaced by a newer, faster machine. d. Under practical standards, large variances are less likely than under ideal standards. Af Budget slack is @ condition in which a. Demand is low at various times of the year b. Excess machine capacity exists in some areas of the plant c. There is an intentional overestimate of expenses or an underestimate of revenues d, Managers grant favored employees extra time-off 36. The following items are the same for the flexible budget and 7 the master budget EXCEPT the same: a. variable cost per unit. units sold b. total fixed costs 4, sales price per unit 33. The flexible-budget variance for direct cost inputs can be further subdivided into a ‘a. static-budget variance and a sales-volume variance b. sales-volume variance and an efficiency variance price variance and an efficiency variance d,_ static-budget variance and a price variance 34. Ideal standards: ss 7°” a. assume peak operating conditions b._allow for normat machine breakdowns c. greatly improve employee motivation and d. All of these answers are correct... 38° Tyoleally, menagers have the LEAST control over: the direct material price variance the direct material efficiency variance machine maintenance the scheduling of production soe Ta of 8 ween HAS. OpenisPBi0.6Management Advisory Services, SETA 36. The Baco Company produces three products with the following costs and selling prices: A 8B oc Selling price per unit Pie P21 P2t Variable cost per unit 2 iM 4B Contribution margin per unit = «Ph 9 -PIO PB Direct labor hours per unit 1 15 2 Machine hours per unit 452 25 In what order should the three products be produced if either the direct labor-hours or the machine hours are the company’s production constraint? Direct labor hours Machine hours a A,B,C BCA b. BCA BGA c B.CA ACB ABC A,C,B 1) 3%. The ratio of fixed costs to the unit contribution margin determines: a. operating income. c. sales revenues. b. profit margin. d. break-even point. 38(The inventory control supervisor at Wilson Manufacturing >” Corporation reported that a large quantity of a part purchased for a special order that was never completed remains in stock, The order was not completed because the customer defaulted on the order. The part is not used in any of Wilson's regular products. After consulting with Wilson's engineers, the vice president of production approved the substitution of the purchased part for @ regular part in a new product. Wilson's engineers indicated that the purchased part could be substituted providing it was modified. The units manufactured Using the substituted part required additional direct labor hours resulting in an unfavorable direct labor efficiency variance In the Production Department. The unfavorable direct labor efficiency variance resulting from the substitution foe oe waninertecom.o HAS. OpenistPai0.16 ep pena aieManagement Advisory Services SETA of the purchased part in inventory would best be assigned to. the: a. Sales manager. b. Engineering manager. . Production manager. 4. Vice president of production. 36. Comparing actual results with a budget based on achieving volume is possible with the use of a. Step budget. cc. Rolling budget. b. Master budget. d. Flexible budget. 40. Many firms have made significant strides in reducing their 7 inventories. Which of the following would be least likely to encourage managers to reduce inventory? Using variable costing. Using absorption costing Using throughput costing, Instituting charge against the budget for managers based on the size of the inventory. Clark Industries accepted a contract to provide 30,000 units of Product A and 20,000 units of Product B. Clark's staff developed the following information with regard to meeting this contract. Product A Product B Total Selling price P75 P125, Variable cost P30 Pas, Fixed OH 1,600,000 MH required 3 5 MH available 160,000 Cost if outsourced Pas; P60 WAS: OpentstPBT016Management Advisory Services SETA 42. Clark's operations manager has identified the following alternatives. Which alternative should be recommended to Clark's management? a, Make 30,000 units of Product A, utilize the remaining capacity to make Product B, and outsource the remainder. b. Rent additional capacity of 30,000 machine hours which will increase fixed costs by P150,000. c. Make 20,000 units of Product A, utilize the remaining capacity to make Product B, and outsource the remainder. d. Make 25,000 units of Product A, utilize the remaining capacity to make Product B, and outsource the remainder. ‘The Furniture Company currently has three divisions: Maple, Oak, and Cherry. The oak furniture line does not seem to be Going well and the president of the company is considering dropping this line. If it is dropped, the revenues associated with the Oak Division will be lost and the related variable costs saved. Also, 50% of the fixed costs allocated to the oak furniture line would be eliminated. The income statements, by divisions, are as follows. Maple Oak Cherry Sales 55,000 P85,000 P100,000 Variable costs 40,000 72,000 __82,000 Contribution margin 15,000 13,000 18,000 Fixed costs 10,000 14,000 __40,200 Operating profit (loss) B_S,000 P(1,000) P_7,800 Which one of the following options should be recommended to the president of the company? a. Discontinue the Oak Division which would result in a 1,000 increase in operating profits. b. Continue operating the Oak Division as discontinuance would result in 2 total operating loss of P1,200. c. Continue operating the Oak Division as discontinuance would result in a P6,000 decline in operating profits. 4. Discontinue the Oak Division which would result in a 7,000 increase in operating profits. Top ora veronica NAB. OpendstPaT0.76Management Advisory Services SETA ‘43: Phillips & Company produces educational software. Its. unit ost structure, based upon an anticipated production volume of 150,000 units, is: Sales price P160 Variable costs 60 Fixed costs 59. The marketing department has estimated sales for the coming year at 175,000 units, which is within the relevant Fange of Phillip's cost structure. Phillip's break-even volume (in units) and anticipated operating income for the coming year would amount to: 96,250 units and P3,543,750 of operating b. 96,250 units and 7,875,000 of operating income. ©. 82,500 units and P7,875,000 of operating income. d. 82,500 units and P9,250,000 of operating income. ncome, 44.Cervine Corporation makes motors for various products. Operating data and unit cost information for its products are presented below. Product A Product B Annual unit capacity 10,000 20,000 Annual unit demand 10,000 20,000 Selling price P100 P80 Variable manufacturing cost 53 45 Fixed manufacturing cost 10 10 Variable selling & admin. 10 a Fixed selling & admin. 5 4 Fixed other administrative 2 aot Unit operating profit P20 P40 Cervine has 40,000 productive machine hours available. What is the maximum-total-contribution_margin that Cervine can generate in the coming year? a. P665,000 c. P980,000 b. 689,992 . P850,000 wonwariccoma WAS. OpenteePaza-16Management Advisory Services SETA > AS. All of the following statements accurately describe fixed and variable cost behavior except: ‘a. Variable costs remain constant when viewed on a per unit basis within the relevant range. b. Fixed costs remain constant when viewed on @ per unit basis within the relevant range. c. The shorter the time period, the higher the percentage of total costs that can be viewed as fixed. d. The longer the time horizon, the more costs can be variable. 95: Recent economic conditions are forcing Meg Corp to drop its price from P50 to P40 per unit, but the company expects its sales to rise from 600,000 to 750,000 units. The company's current cost of production is P38 per unit. Suppose Meg Corp would like to maintain a 16% target operating income on its ‘sales revenue, To achieve this target, the company must lower its cost of production by: a. P2.00 per unit. cc. P4.40 per unit. b. 33.60 per unit. d. P6.40 per unit. 47. Oakes Inc. manufactured 40,000 gallons of Bromate and 60,000 gallons of Calcate in a joint production process, incurring P250,000 of joint costs. Oakes allocates joint costs based on the physical volume of each product produced, Bromate and Calcate can each be sold at the split-off point in a semi-finished state or, alternatively, processed further. ‘Additional data about the two products are as follows. Bromate Calcate Sales price per gallon at split-off point P7. PIs Sales price per gallon if processed further P10 pis Variable costs if processed further 125,000 P115,000 ‘An assistant in the company's cost accounting department was overheard saying ™....that when both joint and separable costs are considered, the firm has no business processing either product beyond the split-off point. The extra revenue is Page 19Management Advisory Services SETA simply not worth the effort.” Which of the following strategies should be recommended for Oakes? a. Bromate: Sell at split-off; Calcate: Process further. b. Bromate: Process further; Calcate: Sell at split-of. c. Bromate: Process further; Calcate: Process further. 4d, Bromate: Sell at split-off; Calcate: Sell at split-off. 48, MetalCraft produces three inexpensive socket wrench sets that are popular with do-it-yourselves, Budgeted information for the upcoming year is as follows. Selling Variable Estimated Sales Model Price Cost Volume No. 19 P10 P 5.50 30,000 sets No. 45 15 P 8.00 75,000 sets No. 53 20 P 14.00 45,000 sets. Total fixed costs for the socket wrench product line is 961,000. If the company's actual experience remains consistent with the estimated sales volume percentage distribution, and the firm desires to generate total operating income of 161,200, how many Model No. 153 socket sets will MetaiCraft have to sell? eee a. 54,300 cc. 26,000 b. 155,000 d. 181,000 49. United Industries manufactures three products at its highly automated factory. The products are very popular, with demand far exceeding the company’s ability to supply the marketplace. To maximize profit, management should focus on each product's: 2. contribution margin. b. gross margin. . contribution margin per machine hour. d. contribution margin ratio. Figs W0er23 SCR —~C~*~*U AS pntManagement Agvsory Services SETA 50. A preferred stock is sold for P101 per share, has a face value ‘of P100 per share, underwriting fees of P5 per share, and annual dividends of P10 per share. If the tax rate is 40%, the cost of funds (capital) for the preferred stock ist a. 5.2%, €. 10%. b. 6.2%. d. 10.4%. SX. Which of the following statements best describes how a Ee corporation determines its cost of capital? ‘a. The cost is derived only from permanent investments by shareholders. b. The cost is a function of the issuance of interest-bearing instruments. ‘The cost is derived from determining the cost of each component in a firm's capital structure. 6. The cost is a function of temporary (short-term) sources of financing 6. 54. a common-size statement is helpful: 2. for determining the next investment the company should make b. for considering whether to buy or sell assets. G._ in comparing companies of different sizes. 4. for figuring out how assets are allocated. v not _a shortcoming of the _53: Which one of the following i payback method? a, Itignores the time value of money. b. It offers no consideration of cash flows beyond the expiration of the payback period. c._ It offers no indication of a project's liquidity. d. It encourages establishing a short payback period, C_- 54: Hobart Corporation evaluates capital projects using a variety of performance screens; including 2 hurdle rate_of 16%, payback period of 3 years or less, nd an accounting rate of return of 20% of more. Management is completing review of & project on the basis of the following projections. Faye 7h of 28 eco. HAS OpenistPai0.36Management Advisory Services Capital investment 200,000 Annual cash flows P 74,000 Straight-line depreciation 5 years Terminal value 20,000 ‘The projected internal rate of return (IRR) is 20%. Which one of the following alternatives reflects the appropriate conclusions for the indicated evaluative measures? IRR ~ Reject; Payback — Reject. IRR ~ Accept; Payback ~ Reject. IRR ~ Accept; Payback ~ Accept. IRR ~ Reject; Payback ~ Accept. 55. The cost-plus pricing approach is generally in what formula? 2. Unit cost / selling price = markup percentage b. Unit cost x (1 + markup % on unit cost) = selling price. ©. Variable cost + fixed cost + contribution margin — selling price. 4. Cost base + gross margin = selling price. 56. Silica Company has a current ratio of 2 to 1. This ratio would ‘gerease ‘The company wrote off an uncollectible accounts. . i The company purchased faventory on open accour. c. The company sold merchandise on open account that earned a normal gross margin. d. Apreviously declared stock dividend was distributed. 57. A measure of the company’s long-term debt paying ability is: a. Return on assets b. Times interest earned c. Dividend payout ratio d. Length of the operating cycle ‘tome os WAS. OpentstPBI0.26Management Advisory Services SETA 98. The Income Statement of Horizon Corporation for the year ended December 31, 2016 is reproduced below, Sales (40,000 boxes at P12.50) 500,000 Cost of goods sold (40,000 boxes at P8) 320,000 Gross profit 180,000 Selling & administrative expenses 80,000 Net income 200.000 Variable selling and administrative expense are P0.90 per box sold. The company produced 50,000 boxes during the year. Variable manufacturing costs are P5.25 per box produced and fixed manufacturing costs are P137,500 a year, What would be the difference in_profit if the company had used {hstead the variable costing method? a. 27,500 cc. P45,375 b. P34,375 4. P72,500 56. The following summations are available: ‘Sum of hours 860 ‘Sum of costs 4,120 ‘Sum of hours x cost 890,000 ‘Sum of hours squared 187,000 Number of months analyzed 4 Using the “least-squares method” for splitting a semi-variable cost, what is the variable rate per hour? jable rate per hour Fixed cost a P3 500 b, 2 600 c. 2 500 d, 4 600 Pope 232sManagement Advisory Services SETA 60: Mover Company produces a specialty item. Management has provided the following information Actual sales 60,000 units Budgeted production 50,000 units Selling price 40.00 per unit Direct material costs 10.00 per unit Variable manufacturing overhead 3.00 per unit Variable administrative costs 5.00 per unit Fixed manufacturing overhead P4.00 per unit What is the cost per statue if throughput costing is used? a, P22 c. PIS b. P19 4. P10 61/The purchasing manager at Cara Company knows the amount of raw materials required for each unit of the single product the company manufactures. Which of the following statements best describes the information the purchasing manager will require to estimate the quantity of raw materials to purchase? a. The amount of raw materials on hand at the beginning of the period and the minimum quantity of raw materials management wishes to have in inventory at the end of the period b. The amount of raw materials on hand at the beginning of the period, the minimum quantity of raw materials management wishes to have in inventory at the end of the period, and the estimated quantity of product the company expects to sell in the period c. The amount of raw materials on hand at the beginning of the period, the minimum quantity of raw materials management wishes to have in inventory at the end of the period, and the estimated quantity of product the company expects to produce in the periodManagement Advisory Services SETA d. The amount of raw materials required to meet the estimated quantity of product the company expects to produce in the period 62. Which of the following statements is incorrect for a manufacturing firm? ‘a. Inventoriable costs consist only of prime costs. b. Inventoriable costs consist. of prime ‘costs and manufacturing overhead costs. c. Inventoriable costs include both vai and fixed manufacturing costs. d. Inventoriable costs will never include any period costs. ble manufacturing Items 63 and 64 are based on the following information: Operational budgets are used by a retail company for planning ‘and controlling its business activities. Data regarding the company's monthly sales for the last 6 months of the year and its projected collection patterns are shown below. ‘The cost of merchandise averages 40% of its selling price. The company’s policy is to maintain an inventory equal to. 25% of the. next_month's forecasted sales. The inventory balance at cost is 80,000 as of June 30. Forecasted Sales July 775,000 ‘August 750,000 September 825,000 October 800,000 November 850,000 December ‘900,000 Types of Sales ‘Cash sales 20% Credit sales 80% as: OpentstraTe TeManagement Advisory Services SETA Collection Pattern for Gredit Sales Month of sale 40% First month following the sales 57% Uncollectible 3% 63. The budgeted cost of the company's purchases for the month of August would be a. P302,500 cc, P307,500 b. P305,000 4. P308,750 64 The company's total cash receipts from sales and collections fon account that would be budgeted for the month of September would be a P757,500 c. P793,800 b. P771,000 d. P856,500 65. A soft drink producer acquiring a bottle manufacturer is an example of 2 a. Horizontal merger. . Congeneric merger, b. Vertical merger. 4, Conglomerate merger. 86. In microeconomics, the distinguishing characteristic of the Jong run on the supply side is that: a. Only supply factors determine price and output b. Only demand factors determine price and output. ¢. Firms are not allowed to enter or exit the industry. d. All inputs are variable. 67. A movie theater increases ticket prices for the matinee shows by 10% and the quantity of tickets demanded decreases by 5% then the demand for matinee movie tickets is a. Inelastic. b. Elastic. ©. Unitary. 4d. Not related to the change in price. HAS: OpentstPBIO.I6Management Advisory Services SETA 68. The Lunar Company has the following historical pattern on its 7 credit sales. 70 percent collected in month of sale 15 percent collected in the first month after sale 10 percent collected in the second month after sale 4 percent collected in the third month after sale 1 percent uncollectible ‘The sales on open account have been budgeted for the last six months of 2016 are shown below: july P 60,000 ‘August 70,000 September 80,000 October 90,000 November 100,000 December 185,000 The estimated total cash collections during the fourth calendar quarter from sales made on open account during the fourth calendar quarter would be 8, P172,500 ¢. 230,000 b. P265,400 d. P251,400 69.Selected data from Mars Company's year-end financial statements are presented below. The difference between average and ending inventory is immaterial: Current ratio 2.0 Acid-test ratio 1.5 Current liabilities 120,000 Inventory turnover 8 times Gross profit margin 40% Mars’ sales for the year was: a. P800,000 . P1,200,000 b. P480,000 d. P 240,000 Tapa ~~ waewcnctecomah MAS. Opentstr70.46Management Advisory Services SETA 76.1f sales exceed production, one would expect net income under the variable costing method to be: a. the same as the net income under the absorption costing method. b. greater than the net income under the absorption costing method. differing in as much as the difference between sales and production d. less than the net income under the absorption costing method. YOU CAN DO WHAT YOU WANT WHEN YOU WANT TO PLEASE GOD. It is GOD who works in you both to will and to do for HIS good pleasure. Philippians 2:13 end of examination - Please submit your answer sheet Keep the questionnaire. Thank you for taking the PRTC Open Pre-Board Examinations! © WAS. OpentsPBIOIS