STRATEGIC BUSINESS ANALYSIS DEPARTMENTAL EXAMINATIONName: _____________________________ May 20, 2023 /

8:00–10:00AM

Direction: Read each question carefully. Choose the best answer among the choices presented. Final
answersaretobeplaced in the answer sheet through shading. Strictly no erasures on the final answers. You may use this
questionnaireasyour working paper.
1. Management accounting is considered successful when it
a. Helps creditors evaluate the company’s performance. c. Is accurate.
b. Helps managers improve their decisions. d. Is relevant and reported annually. 2. Management accounting
a. Focuses on estimating revenues, costs, and other measures to forecast activities and their results. b. Provides
information about the company as a whole.
c. Reports information that has occurred in the past that is verifiable and reliable. d. Provides information that
is generally available only on a quarterly or annual basis. 3. All of the cost categories listed below are usually found in a
company’s accounting records, except for: a. Sunk Costs. c. Opportunity Costs b. Inventoriable Costs. d. Marketing
Costs 4. Multiple regression analysis is used when:
a. There is more than one cost category to analyze.
b. There is more than one activity that drives the variable component of a mixed cost. c. The high-low
method cannot be used because there is only one observation.
d. All of the points on a scatter graph fall exactly on a regression line.
For Numbers 5 and 6:
Phoenix Manufacturing currently produces 1,000 pencils per month. The following per unit data applyforsalesto regular
customers:
Direct Materials P30
Direct Manufacturing Labor 5
Variable Manufacturing Overhead 10
Fixed Manufacturing Overhead 40
Total Manufacturing Costs P85
5. The plant has a capacity for 2,000 pencils and is considering expanding production to 1,500 pencils. Whatisthetotal
cost of producing 1,500 pencils?
a. P 85,000 c. P107,500 b. P170,000 d. P102,500 6. What is the per unit cost of when producing
1,500 pencils?
a. P71.67 c. P107.50
b. P85.00 d. P170.00
7. Which of the following would decrease the unit contribution margin the most? a. A 15% decrease in selling price. c. A
15% decrease in variable expenses. b. A 15% increase in variable expenses. d. A 15% decrease in fixed expenses. For Numbers
8 to 10:
Jheng Company has the following revenue and cost budgets for the two products it sells: Plastic
Glass
Frames
Frames
Sales Price P10.00 P15.00
Direct Materials 2.00 3.00
Direct Labor 3.00 5.00
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 Fixed Overhead 3.00 4.00
Net Income per unit P2.00 P3.00

Budgeted Unit Sales 100,000 300,000

The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgetedatP975,000.
Assume that the company plans to maintain the same proportional mix. In numerical calculations,Jheng rounds to the
nearest centavos and unit.
8. The total number of units Jheng needs to produce and sell to break even is: a. 150,000 units c.
177,273 units
b. 354,545 units d. 300,000 units
9. The total number of units needed to break even if the budgeted direct labor costs are P2 for plasticframesinstead of P3
is
a. 154,028 units c. 156,000 units
b. 144,444 units d. 146,177 units
10. The total number of units needed to break even if sales are budgeted at 150,000 units of plastic framesand300,000
units of glass frames with all other costs remaining constant is:
a. 171,958 units c. 418,455 units
b. 153,947 units d. 365,168 units
11. Net income computed using variable costing would exceed net income computed using absorptioncostingif:a.
Units sold exceed units produced. c. Units sold equal units produced. b. Units sold are less than units produced. d. The
unit fixed cost is zero. For Numbers 12 and 13
Magic Company manufactures a single product. The following data pertain to the company’s
operationslastyear:Selling price per unit P24.00
Variable costs per unit
Production 8.00
Selling and Administrative 2.00
Fixed costs in total:
Production P48,000
Selling and Administrative 36,000
At the beginning of the year, there were no units in inventory. A total of 12,000 units were producedduringtheyear,
and 10,000 units were sold.
12. Under absorption costing, the unit product cost is:
a. P 8.00 c. P12.00
b. P10.00 d. P15.00
13. The net income under variable costing would be:
a. P64,000 c. P56,000
b. P60,000 d. P52,000
14. The cash budget is prepared
a. Before all period budgets are prepared.
b. After all, the forecasted income statement but before the forecasted statement of financial position. c. As the last
step in the master budget.
d. Only if the company has doubts about the debt-paying ability.
15. A flexible budget is
a. Appropriate for control of factory overhead but not for control of direct materials and direct labor. b.
Appropriate for control of direct materials and direct labor but not for control of factory overhead. c. Not
appropriate when costs and expenses are affected by the fluctuations in volume limits.
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 d. Appropriate for any level of activity.
16. When using a flexible budget, what will occur to fixed costs (on a per unit basis) as production increaseswithinthe
relevant range?
a. Fixed costs per unit will decrease. c. Fixed costs per unit will increase. b. Fixed costs per unit will remain
unchanged. d. Fixed costs are not considered. For Numbers 17 to 19:
The Dilly Company marks up all merchandise at 25% of gross purchases. All purchases are madeonanaccountwith
terms of 1/10, net 60. Purchase discounts which are recorded as miscellaneous income, arealwaystaken.Normally,
60% of each month’s purchases are paid for in the month of purchase while the other 40%arepaidduring the first 10
days of the first month after purchase. Inventories of merchandise at the endof eachmonthare kept at 30% of the
next month’s projected cost of goods sold.

Terms for sales on account are 2/10, net 30. Cash sales are not subject to discounts. Fifty percent ofeachmonth’s sales
on account are collected during the month of sale. 45% are collected in the succeedingmonthandthe remainder is
usually uncollectible. Seventy percent of the collections in the month of salearesubjecttodiscount while 10% of the
collections in the succeeding month are subject to discount. Projectedsalesdataforselected months follow:
Sales on
Cash
Account
Sales
Gross
December P1,900,000 P400,000
January 1,500,000 250,000
February 1,700,000 350,000
March 1,600,000 300,000
17. Projected inventory at the end of December is:
a. P420,000 c. P552,000 e. Noneof theAboveb. P441,600 d. P393,750
18. Projected payments to suppliers during February are:
a. P1,551,200 c. P1,528,560 e. Noneof theAboveb. P1,535,688 d. P1,509,552
19. Projected total collections from customers during February are:
a. P1,875,000 c. P1,511,750 e. Noneof theAboveb. P1,861,750 d. P1,188,100
20. Which department is customarily held responsible for an unfavorable materials usage variance? a. Quality Control. c.
Engineering b. Purchasing d. Production.
21. How should a usage variance that is significant in amount be treated at the end of an accounting period?a. Reported
as a deferred charge or credit.
b. Allocated among work-in-process inventory, finished goods inventory and cost of goods sold. c. When
material is purchased.
d. When purchase order is originated.
For Numbers 22 to 23:
A4 Labs, Inc. makes a single product which has the following standards:
Direct Materials: 2.5 ounces at P20 per ounce
Direct Labor: 1.4 hours at P12.50 per hour
Variable Manufacturing Overhead: 1.4 hours at ?

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 Variable manufacturing overhead is assigned on the basis of direct labor hours. The following dataareavailablefor
October:
∙ 3,750 units of the compound were produced during the month.
∙ There was no beginning direct materials inventory.
∙ The ending direct materials inventory was 2,000 ounces.
∙ Direct materials purchased: 12,000 ounces for P225,000.
∙ Direct labor hours worked: 5,600 hours at a cost of P67,200.
∙ Variable manufacturing overhead costs incurred amounted to P18,200.
∙ Variable manufacturing overhead applied to products: P18,375.
22. The variable overhead spending variance for October is:
a. P1,400 favorable c. P3,750 favorable b. P1,900 unfavorable d. P4,375 unfavorable 23. The variable
overhead efficiency variance for October is:
a. P1,400 favorable c. P1,225 unfavorable b. P1,225 favorable d. P2,700 favorable For Numbers 24 and 25:
From the accounting records of Sta. Barbara Company, the following data on costs for the quarter
thatendedSeptember 30, 2022, were determined:
Variable Costs Fixed Costs
Direct Materials P300,000
Direct Labor 400,000
Factory Overhead 80,000 50,000
Marketing Expenses 70,000 30,000
Administrative Expenses 50,000 20,000
Sales for the quarter totaled P1,200,000. The company is considering two alternative proposals thatwouldchange
certain cost items. Proposal A would increase fixed costs by P10,000 with sales andvariablecostsremaining the same.
Proposal B would involve acquiring modern equipment at an annual increaseof fixedcostsof P25,000, with the expectation
of saving the same amount in each of direct materials and direct labor costs.24. If Proposal A is adopted, the company’s
profit would be:
a. P110,000 c. P175,000 e. None of the Above b. P120,000 d. P190,000
25. If Proposal B is adopted, the company’s profit would be:
a. P110,000 c. P175,000 e. None of the Above b. P120,000 d. P190,000
26. Relic Corporation manufactures batons. Relic can manufacture 300,000 batons a year at a variablecostofP750,000 and
a fixed cost of P450,000. Based on Relic’s predictions, 240,000 batons will be soldat theregularprice of P5.00 each. In
addition, a special order was placed for 60,000 batons to be sold at a 40%discountofftheregular price. By what
amount would income before taxes be increased or decreased as a result of thespecialorder?
a. P60,000 decrease c. P 36,000 increase b. P30,000 increase d. P180,000 increase 27. In a sell or process
further decision, consider the following costs:
i. A variable production cost incurred prior to split-off.
ii. A variable production cost incurred after split-off.
iii. An avoidable fixed production cost incurred after split-off.
Which of the above costs is (are) not relevant in a decision regarding whether the product
shouldbeprocessedfurther?
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a. Only I c. Only I and II b. Only III d. Only I and III 28. Which of the following costs are always irrelevant in decision-making?
 a. Avoidable costs c. Opportunity costs b. Sunk costs d. Fixed costs
29. Which one of the following statements about the payback method of investment analysis is correct?Thepayback
method
a. Does not consider the time value of money.
b. Considers cash flows after the payback has been reached.
c. Uses discounted cash flow techniques.
d. Generally leads to the same decision as other methods for long term projects. 30. Harry, Inc. has purchased a
new fleet of trucks to deliver its merchandise. The trucks have a useful lifeof 8yearsand cost a total of P500,000. Harry
expects its net increase in after tax cash flow to be P150,000inYear1,P175,000 in Year 2, P125,000 in Year 3, and P100,000
in each of the remaining years. What is thepaybackreciprocal for the fleet of trucks?
a. 29% c. 24% b. 25% d. 20% 31. Which of the following is generally excluded in estimating the weighted average
cost of capital? a. Short-term debt c. Preferred Share b. Long-term debt d. Ordinary Equity 32. Which of a firm’s sources
of new capital has the highest after-tax cost?
a. Preferred Share c. Ordinary equity share b. Debt d. Retained earnings 33. Which of the following
statements is false?
a. The IRR is the discount rate that equates the present value of a project’s expected cashinflowswithitsnet
present value.
b. The IRR is the discount rate that makes the net present value of a project equal to zero. c. The IRR is the
maximum discount rate that will give a non-negative net present value. d. Consider an investment opportunity
that costs P10,000 and promises to pay a singlelumpsumof
P13,000 three years from now. In this situation, invested capital will increase over thelifeoftheinvestment.
34. Which of the following statements is true?
a. The payback method of project evaluation considers all the relevant cash flows fromaprojectbutneglects
the consideration of risk and time value of money.
b. The payback period of a project is a measure of the project’s liquidity.
c. The average rate of return (ARR) method of project evaluation considers all the relevant cashflowsfroma
project but neglects the consideration of risk and time value of money.
d. Using a discount rate of 12%, the present value of a project’s expected future cash flows is P1,000. Thenet investment
cash outlay is P1,100. The IRR of this project is greater than 12%. A firm’s new financing will be in proportion to the
market value of its current financing, shown below: Carrying
Amount
Long-term debt P7,000,000
Preference Shares (100,000 shares) 1,000,000
Ordinary Shares (200,000 shares) 7,000,000
The firm’s bonds are currently selling at 80% of par, generating a current market yield of 9%, andthecorporation has a
40% tax rate. The preference share is selling at its par value and pays a 6%dividend. The
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ordinary share has a current market value of P40 and is expected to pay a P1.20 per share dividendthisfiscalyear. Dividend growth
is expected to be 10% per year, and the flotation costs are negligible.
35. The firm’s weighted average cost of capital is (round calculations to tenths of a percent) a. 13.0% c. 9.6% b.
8.3% d. 9.0%
36. In developing a weighted marginal cost of capital schedule, the levels at which a specific cost of capital
increasesare called
a. Flotation costs c. Break points
b. Market value weights d. Target weights 37. Consider an investment project that has a net investment cash
outflow of P1,500 and expectedannual cashinflows of P150 to be received at the ends of the next 10 years. Along with the
final P150 annual payment, theinvestment will also repay the P1,500 principal. The IRR of this investment is:
 a. Negative c. Between Zero and 10%. b. Zero d. 10% The following information pertains to the records of
ABC Corporation:
Sales (75,000 units) P750,000
Variable Costs 225,000
Contribution Margin P525,000
Fixed Manufacturing Costs 187,500
Operating Income P337,500
Interest 75,000
Earnings before taxes P262,500
Taxes at 31% 81,375
Net Income P181,125

Shares Outstanding 15,000

38. The Degree of Operating Leverage is:
a. 1.43x c. 3.33x
b. 1.56x d. 2.22x
39. All of the following are functions of the financial manager except
a. Analyzing and planning the company’s performance.
b. Anticipating the company’s financial needs.
c. Assigning the market price of the company’s stock.
d. Allocating funds to the most profitable asset.
40. What is the accounting standard number for insurance contracts – initial version? a. PFRS 7 c. PFRS 4
b. PFRS 17 d. PFRS 14

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