CHIANG KAI SHEK COLLEGE 2

NAME SCORE Which regression equation should be used?

A. y = 2,500 + 3.5x C. y = 4,600 + 1.3x
COURSE/YEAR B. y = 2,500 + 5.0x D. y = 4,600 + 2.6x AICPA 1192

Multiple Choice. Choose the best answer. Write your letter choice in CAPITAL LETTER in the 4. The results of regressing Y against X are as follows:
answer sheet provided above. No erasures allowed. Coefficient
Intercept 5.23
1. A company uses two major material inputs in its production. To prepare its manufacturing Slope 1.54
operations budget, the company has to project the cost changes of these material inputs. The When the value of X is 10, the estimated value of Y is
cost changes are independent of one another. The purchasing department provides the A. 6.78 C. 20.63
following probabilities associated with projected cost changes. B. 8.05 D. 53.84 CMA 0408
Cost Change Material 1 Material 2
3% increase 0.3 0.5 5. Soft, Inc. has a target total labor cost of P3,600 for the first four batches of a product. Labor is
5% increase 0.5 0.4 paid P10 an hour. If Soft expects an 80% learning curve, how many hours should the first
10% increase 0.2 0.1 batch take? (D)
A. 57.6 hours. C. 230.4 hours.
The probability that there will be a 3% increase in the cost of both Material 1 and Material 2 is
B. 140.63 hours. D. 360 hours. Bobadilla
(E)
A. 15% C. 40%
6. A manufacturing company required 800 direct labor hours to produce the first lot of four units
B. 20% D. 80% CIA 1194, 0597
of a new motor. Management believes that a 90% learning curve will be experienced over four
lots of production. How many direct labor hours will be required to manufacture the next 12
2. Ryerson Company has three sales departments, each contributing the following percentages
units?
of total sales: clothing, 50%; hardware, 30%; and household sundries about 20%. In the past,
A. 1,792 C. 2,016
the clothing, hardware, and household sundries department had error rates of about 2%, 5%
B. 1,944 D. 2,160 CMA 0408
and 2.5%. A random corporate audit has found a weekly damaged goods rate of sufficient
magnitude to alarm Ryerson’s management. The probability (rounded) that this rate occurred
7. Hovland has estimated the first batch of product will take 40 hours to complete. A 90%
in the clothing department is (M)
learning curve is expected. If labor is paid $15 per hour, the target labor cost for 4 batches of
A. 1% C. 33-1/3%
product is (E)
B. 25% D. 50% CMA 1292
A. $600. C. $2,160.
3. Sago Co. uses regression analysis to develop a model for predicting costs. Two different cost
B. $1,944 D. $2,400 D, L & H 9e
drivers (machine hours and direct materials weight) are under consideration as the
independent variable. Relevant data were run on a computer using one of the standard
8. The Webb Company's new process will be carried out in one department. The production
regression programs, with the following results:
process has an expected learning curve of 80%. The costs subject to the learning effect for the
Machine hours Direct materials weight first batch produced by the process were $10,000. Using the simplest form of the learning
Y intercept coefficient 2,500 4,600 function, the cumulative average cost after the sixteenth batch is: (E)
B coefficient 5.0 2.6 A. $3,276.80 D. $8,000.00
R2 0.70 0.50 B. $4,096.00 E. $10,000.00
C. $5,120.00 AICPA adapted

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CHIANG KAI SHEK COLLEGE 2

9. BG plc has recently developed a new product. The nature of BG plc's work is repetitive, and it 13. The Teeners’ Club sells fresh hot cider at Recto football games. The frequency distribution
is usual for there to be an 80% learning effect when a new product is developed. The time of the demand for cups of hot cider per game is presented below:
taken for the first unit was 22 minutes. Assuming that an 80% learning effect applies, the time Unit sales volume Probability
to be taken for the fourth unit is nearest to (D) 10,000 0.10
A 9.91 minutes. D 15.45 minutes. 20,000 0.15
B 9.97 minutes. E 17.60 minutes. 30,000 0.15
C 14.08 minutes. CIMA 0503 40,000 0.40
50,000 0.20
10. Moss Point Manufacturing recently completed and sold an order of 50 units that had costs as The hot cider is sold for P35.00 a cup and the cost per cup is P20.00. Any unsold hot cider
shown in the below. is discarded because it will spoil before the next game.
Direct materials $1,500 What is the estimated demand for hot cider at the next football game if a deterministic
Direct labor (1,000 hours X $8.50) 8,500 approach based on the most likely outcome is used?
Variable overhead (1,000 hours x $4.00) *4,000 A. 16,000 C. 40,000
Fixed overhead **1,400 B. 34,500 D. 50,000 Bobadilla
$15,400
* Applied on the basis of direct labor hours. 14. Pongo Company’s managers are attempting to value a piece of land that they own. One
** Applied at the rate of 10% of variable cost. potential occurrence is that the old road that borders the land gets paved. Another possibility
The company has now been requested to prepare a bid for 350 units of the same product. is that the road does not get paved. A third outcome is that the road might be destroyed and
If an 80% learning curve is applicable, Moss Point’s total cost on this order would be estimated completed replaced by a new road. Based on the following future states of nature, their
at (D) probabilities, and subsequent values of the land, what is the expected value of the land?
A. $26,400 C. $37,950 Future States of Nature (SN) Probability
B. $31,790 D. $54,120 CMA, Adapted SN 1: Current road gets paved 0.5
SN 2: Road does not get paved 0.4
11. Under frost-free conditions, Cal Cultivators expects its strawberry crop to have a $60,000 SN 3: Current road destroyed and replaced with new road 0.1
market value. An unprotected crop subject to frost has an expected market value of $40,000. Estimate of land value under each possible future state of nature: (E)
If Cal protects the strawberries against frost, then the market value of the crop is still expected Value if SN 1 $200,000
to be $60,000 under frost-free conditions and $90,000 if there is a frost. What must be the Value if SN 2 $100,000
probability of a frost-free condition for Cal to be indifferent to spending $10,000 for frost Value if SN 3 $550,000
protection? A. $133,333 C. $225,000
A. 0.200 C. 0.750 B. $195,000 D. $283,333 Gleim
B. 0.667 D. 0.800
12. Kane Corp. estimates that it would incur a $100,000 cost to prepare a bid proposal. Kane The next two questions are based on the following information. Gleim
estimates also that there would be an 80% chance of being awarded the contract if the bid is Poppin' Corn Co. has gross profits of $50 for each box of popcorn it sells. Poppin' Corn also has a
low enough to result in a net profit of $250,000. What is the expected value of the payoff? $20 holding fee for each box of popcorn it does not sell, and a $25 loss of goodwill for every box of
A. $0 C. $180,000 popcorn it is unable to provide to its customers. Managers are expecting to produce 1,000 boxes
B. $150,000 D. $220,000 AICPA 0592 next month.

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CHIANG KAI SHEK COLLEGE 2

15. What is Poppin' Corn's expected net profit if demand is predicted to be 950 boxes? Which item below would be part of a linear programming formulation of this problem?
A. $45,000 C. $46,500 A. Maximize: Contribution < 4A + 5B. C. Subject to: 2.5A + 4B < 60.
B. $46,250 D. $47,500 B. Subject to: A = 0. D. Subject to: 4A + 5B = 130. CIA 1191

16. What is Poppin' Corn's expected net profit if demand is predicted to be 1,100 boxes? 20. ABC Craft Co. is evaluating the profitability of a new product. If the product becomes
A. 47,000 C. 48,000 successful the present value of future cash flow (excluding investment) is estimated to be
B. 47,500 D. 50,000 P3,000,000. If the product is not successful the present value of the condition is estimated at
P500,000. The required investment is P1,500,000.
17. Schippi Inc. is developing a new type of watch. The optimistic time to complete the project is 7 What are the probabilities that would have to be assigned to the successful and not successful
weeks, the most likely time is 13 weeks, and the pessimistic time is 16 weeks. Using PERT, to be indifferent between the two actions – invest and do not invest? (M)
how long is the expected duration of this activity? RPCPA 1085 A. B. C. D.
A. 6 weeks. C. 12.5 weeks. Successful 40% 45% 50% 60%
B. 7 weeks. D. 13 weeks. Gleim Not successful 60% 55% 50% 40%

18. California Building Corporation uses the critical path method to monitor construction jobs. The
company is currently 2 weeks behind schedule on Job#181, which is subject to a $10,500-per-
week completion penalty. Path A-B-C-F-G-H-I has a normal completion time of 20 weeks, and Answer Sheet
critical path A-D-E-F-G-H-I has a normal completion time of 22 weeks. The following activities
1. A 6. A 11. D 16. B
can be crashed.
Activities Cost to Crash – 1Week Cost to Crash – 2 Weeks 2. C 7. B 12. C 17. C
BC $ 8,000 $15,000
DE 10,000 19,600
3. B 8. B 13. C 18. D
EF 8,800 19,500 4. C 9. B 14. B 19. C
California Building desires to reduce the normal completion time of Job#181 and, at the same
time report the highest possible income for the year. California Building should crash (M) 5. B 10. D 15. C 20. A
A. Activity BC 2 weeks.
B. Activity EF 2 weeks.
C. Activity BC 1 week and activity EF 1 week.
D. Activity DE 1 week and activity EF 1 week. CMA 1288

19. The data below were gathered on two different machine centers and two products.
Product Hours per Unit
A B Hours Available
Machine Center 1 2.5 4 60
Machine Center 2 6 3 70
Contribution per unit $4 $5

Quiz No. Page 3 of 3