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92 MAS First Preboard Examination - Solution

Advanced Financial Accounting and Reporting (University of San Carlos)

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CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

MANAGEMENT ADVISORY SERVICES

First Pre-board Examination Solutions
1. C
2. D
3. D
4. B [(FC+VC) / 80% / Units]; [(120K+80K)/80%]/20K units SP = P12.50

5. A Y = [(3,125 x 3) + (0.65 x 3,600); y = 11,715

6. C
7. B
8. B
9. A
BEP=FC*/UCM ** (150k/6) = 25k units
*FC is squeezed from ABEV format (3 per unit x production of 50k units) = 150k
AC net income P120,000
FC in beg. Inventory 0
FC in end. Inventory (10k units x 3) 30,000
VC net income P90,000
**UCM is squeezed from CVP Format Income Statement (NI+FC/units sales) (150+90k)/40k units = 6 per unit
10. D
11. B
NORMAL TOP-OF-THE-LINE
Direct material 50,000 60,000
Direct labor (40k x 3) 120,000 30,000 (10k x 3)
Overhead (800k/50k x 40k) 640,000 160,000 (800k/50k x 10k)
Total cost 810,000 250,000
Units produced 10,000 units 5,000 units
Unit cost P81.00 P50.00
Markup 140% 140%
Selling price P113.40 P70.00
12. B
NORMAL TOP-OF-THE-LINE
Direct material 50,000 60,000
Direct labor (40k x 3) 120,000 30,000 (10k x 3)
Overhead:
Quality control (300k/500 x 100) 60,000 240,000 (300k/500 x 400)
Machine set-ups (400k/200 x 80) 160,000 240,000 (400k/200 x 120)
Others (100k/50k x 40k) 80,000 20,000 (100k/50k x 10k)
Total cost 470,000 590,000
Units produced 10,000 units 5,000 units
Unit cost P47.00 P118.00
Mark-up 140% 140%
Selling price P65.80 P165.20
13. A
14. A FC / WAUCM (30K X 12)/30 = 12,000

15. D (FC/FC RATE)/WASP x 25%; (360k/50%-10%)/60 = 15,000 units x 25% = 3,750 units

16. A
17. A
January February March
B.I 56,000 42,000 50,400
PURCHASES (SQUEEZE) 126,000 113,400 137,200
COST OF SALES 140,000 105,000 126,000
E.I (40% M1) 42,000 50,400 61,600

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18. B
January February March
Credit Sales 200,000 150,000 180,000
40% M0 80,000 60,000 72,000
50% M1 - 100,000 75,000
Collections 80,000 160,000 147,000

19. D
20. C
21. B
22. B
23. C
(90,000* lbs. / 2) = 45,000 units
*(30,000/3**) + 80,000
**(6 per unit/ 2 lbs.)

24. B
25. B
SALES (3.2K units x P50) P160,000
COST OF SALES (3.2K x P(22+8)) (96,000)
GROSS PROFIT 64,000
OPERATING EXPENSES:
VARIABLE OPEX (3.2K x P4.5) (14,400)
FIXED OPEX (10,000)
NET INCOME BEFORE VARIANCES 39,600
VOLUME VARIANCE (40K – (8K units x P8)) (8,000)
NET INCOME P31,600
26. D
SALES (3.2K unit x P50) P160,000
VARIABLE COSTS (3.2K x P26.5) (84,800)
CONTRIBUTION MARGIN 75,200
FIXED COSTS (40K + 10K) (50,000)
NET INCOME P25,200
27. A
FIXED COST RATIO: (WACMR – OI RATIO) (50% - 10%) = 40%
TOTAL REQUIRED SALES = (600,000 / 40%) = 1,500,000
TOTAL REQUIRED UNITS = (REQUIRED SALES / WASP) (1,500,000/21.6) = 69,444 units
REQUIRED UNITS: DELUXE (69,445 units x 40%) = 27,778 units;
SUPREME (69,444 units x 60%) 41,667 units
28. A
BEP (units) = (FC/WAUCM) (600,000/10.8) = 55,556 units
BEP (units) [PESOS] DELUXE (55,556 units x 40%) = 22,222 units [P266,667];
SUPREME (55,556 units x 60%) = 33,333 units [P933,333]
29. A
January February March
B.I 45,000 37,800 50,400
PURCHASES (SQUEEZE) 62,800 75,600 67,200
COST OF SALES (70%) (70,000) (63,000) (84,000)
E.I (60% M1) 37,800 50,400 33,600

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30. A
CASH BUDGET
CASH RECEIPTS:
January February March
CREDIT SALES P100,000 P90,000 P120,000
40% M0 40,000 36,000 48,000
60% M1 40,000 60,000 54,000
CASH RECEIPTS 80,000 96,000 102,000

CASH DISBURSEMENTS:
January February March
CREDIT PURCHASES 62,800 75,600 67,200
55% M0 34,540 41,580 36,960
45% M1 40,000 28,260 34,020
DISBURSEMENT ON PURCH. 74,540 69,840 70,980
TOTAL FC (100% M0) 7,000 7,000 7,000
TOTAL DISBURSEMENTS 81,540 76,840 77,980
NET MOVEMENT IN CASH (1,540) 19,160 24,020
(BEG. BAL 35,000 33,460 52,620
END. BAL 33,460 52,620 76,640

CASH 76,640
ACCOUNTS RECEIVABLE (120,000 X 60%) 72,000
INVENTORY 33,600
PLANT, NET (50,000 – (3,000 X 3)) 41,000
TOTAL ASSETS 223,240

31. B
32. B
33. C
34. C
Vc/unit: [(10,000 – 8,000) ÷ (4,000 – 2,000)] = 1.00
Total QUARTERLY fixed costs = P6,000
Total MONTHLY fixed costs (6,000 ÷ 3) = P2,000
35. B Total cost: (P6,000 x 4) + (10,000 x 1.00) = P34,000

36. D
36,000 = 4a + 11,500b
106,500,000 = 11,500a + 35,250,000b
103,500,000 = 11,500a + 33,062,500b
3,000,000 = 2,187,500b
b = 1.37
a = P5,061.25

37. A CMR = Increase in fixed costs ÷ increase in BEP (P50,000 ÷ P200,000) = 25%; Thus, VCR is 75%.

38. B
Contribution margin [(P70 – 30) x 10,000 units 400,000
Fixed costs 120,000
Operating income 280,000
Tax (30%) 84,000
Net income 196,000
39. D
Contribution margin [(P70 – 30) x 15,500 units (squeeze) 620,000
Fixed costs 120,000
Operating income 500,000
Tax (30%) 150,000
Net income 350,000
40. B
41. C
42. D

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43. A
Absorption Variable
Sales (17,500 x P400) P7,000,000 P7,000,000
Less CGS/VC:
CGS (17,500 x P170);
VC(17,500 x P115) P2,975,000 P2,012,500
Var. S & A (17,500 x P45) - 787,500
Total CGS/VC P2,975,000 P2,800,000
GP/CM P4,025,000 P4,200,000
Less OE/Fixed Costs:
Var. S & A P 787,500 -
Fixed S & A 2,330,000 P2,330,000
Fixed manufacturing
overhead - 1,100,000
Total OE/Fixed costs P3,117,500 P3,430,000
INCOME P 907,500 P 770,000
44. B
Standard rate [(P4,500 ÷ (8,000 hrs. – 7,500 hrs.)] = P9.00 per hour
DL rate variance [(P67,000 – (8,000 x 9.00)] = P5,000 favorable
45. A
x + 0.60x = P200,000 (x is the prime cost A.K.A. the combined material and labor cost).
x = P125,000; Direct labor cost is (P125,000 – P50,000) = P75,000.

46. B [(48,363) - (28,200 gallons x 1.5875)] = 3,596 UF

47. A [(28,200 gallons x 1.5875) – (43,656)] = 1,111 UF

48. C [(32,500) – (3,250 hours x 10.33)] = 1,083 F

49. A [(3,250 hours x 10.33) – (31,000)] = 2,583 UF

50. B
[P108,500 – (17,200 hours x 6)] = P5,300 UF
*6 is the standard VOH rate and computed as P135,000 x 80% divided by the denominator activity expressed
in hours (9,000 units x 2 standard hours per unit)
51. C
52. C
53. B
54. C
55. D The activity is outside relevant range, thus the cost formula is not valid.

56. D
Absorption costing net income [(P90,000 + (5,000 units x 2)] P100,000
Fixed costs in beginning inventory -
Fixed costs in ending inventory (2,500 units x 2) (5,000)
Variable costing net income P95,000
57. A
Fixed FOH P100,000
Variable office expense (25,000 units x 4) 100,000
Fixed selling expense 40,000
Total period costs (variable costing) P240,000

58. A
Direct labor (30,000 units x 5) P150,000
Variable FOH (30,000 units x 2) 60,000
Fixed FOH 100,000
Variable office expense (25,000 units x 4) 100,000
Fixed selling expense 40,000
Total period costs (variable costing) P450,000
59. B
Fixed FOH (100,000 x 25,000 units ÷ 30,000 units) P83,333
Fixed selling expense 40,000
Total fixed cost expensed in income statement P123,333

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60. B [(540,000 + 150,000) ÷ 75%] ÷ 45,000 units = 20.44

61. C
62. C
Income before tax (P75,000 ÷ 60%) P125,000
Total fixed costs 250,000
Total contribution margin 375,000
Unit sales ÷ 125,000
Unit contribution margin P3.00
Target unit variable cost (P6.00 – P3.00) P3.00

63. C
Break-even point in peso sales P65,875
Break-even point in units ÷ 15,500
Selling price P4.25
Unit contribution margin (P47,275 ÷ 15,500 units) (3.05)
Variable cost per unit P1.20
64. B
Cash sales – September (P800,000 x 30%) P240,000
Collections from sales on account:
From the month of July (P600,000 x 70% x 25%) 105,000
From the month of August (P650,000 x 70% x 50%) 227,500
From the month of September (P800,000 x 70% x 20%) 112,000
Total cash receipts P684,500

65. A [P314,000 – (80,000 x P4)] = P6,000 favorable

66. B
Conversion cost efficiency variance is the combined amount of variable overhead and labor efficiency variance.
Variable overhead efficiency variance [(18,900 x P2.50) – (18,720 X P2.50)] P450 unfavorable
Labor efficiency variance [(5,900 x P6) – (3,900 units x 1.50 x P6)] P300 unfavorable
Conversion cost efficiency variance P750 unfavorable
67. D
Fixed overhead non-controllable variance pertains to volume variance
[(19,000 hours x P3) – (3,900 units x 4.8 hours per unit x P3)] = P840 unfavorable

68. C
69. B
70. A [(2 feet per unit ÷ 80%) x P3 per foot] = P7.50 per unit

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