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# ACPACI ELIMINATIONS- MANAGEMENT ADVISORY SERVICES

1. ABC Company is planning its annual Riverboat Extravaganza. The Extravaganza committee has
assembled the following expected costs for the event:
Dinner per person
P70
Programs and souvenir per person
30
Orchestra
15,000
7,000
Riverboat rental
48,000
Floor show and strolling entertainment
10,000
The committee members would like to charge P300 per person for the evenings activities. Assume
that only 250 persons are expected to attend the extravaganza, what ticket price must be charged to
breakeven?
A. P420
B. P320
C. P390
D. P350
2. The following revenues and cost budget for two products DEF, Inc. sells are made available:
Plastic Things
Glass Things
Sales Price
P 50.00
P 75.00
Direct Materials
(10.00)
(15.00)
Direct Labor
(15.00)
(25.00)
(15.00)
(20.00)
Net Income per Unit
P 10.00
P 15.00
Budgeted Unit Sales
150,000
300,000
The budgeted units sales equal the current unit demand, and total fixed overhead for the year is
budgeted at P4,875,000. Assume that the company plans to maintain the same proportional mix. In
numerical calculations, the company rounds to the neared centavos and unit.
The total number of units Thing Inc. needs to produce and sell to breakeven is
A. 102,632 units.
B. 153,947 units.
.
C. 171,958 units.
D. 418,455 units
Data regarding 2015 operations for an enterprise that had no beginning or ending inventories are as
follows:
Sales (150,000 units)
Variable costs:
Direct materials
Direct labor
Selling expenses
Fixed costs:
Selling expenses
Income tax rate

P9,000,000
P1,800,000
720,000
1,080,000
450,000
P 600,000
567,840
352,800
40%

The enterprise estimates that next year direct materials costs will increase by 10% and direct labor costs
will increase by P0.60 per unit to P5.40 per unit. In addition, fixed selling expenses will increase by
P29,520. All other costs will be incurred at the same rates or amounts as the current year.
3. What peso sales volume, to the nearest peso, would be required in 2016 to earn the same net
income as in 2015?
A. P6,938,031
B. P8,736,000
C. P9,576,000
D. P10,374,000
4. The following are details of the monthly unit cost to manufacture and sell a particular product for
GHI Company:
Manufacturing Costs:
Direct materials
P3.00
Direct labor
4.00
Variable indirect
2.00
Fixed indirect
1.50
Marketing Costs:
Variable
2.00
Fixed
1.00
GHI must decide to continue making the product or buy it from an outside supplier. The supplier
has offered to make the product at the same level of quality that the company can make it. Fixed
marketing costs would be unaffected, but variable marketing costs would be reduced by 25% if the
company were to accept the proposal. What is the maximum amount per unit that Grace can pay
the suppliers without decreasing its operating income?
A. P9.50
B. P10.50

C. P9.00
D. P11.00

5. JKL, Inc. plans to replace one of its machines with a new efficient one. The old machine has a net
book value of P120,000 with remaining economic life of 4 years. This old machine can be sold
for P80,000. If the new machine were acquired, the cash operating expenses will be reduced from
P240,000 to P160,000 for each of the four years, the expected economic life of the new machine.
The new machine will cost JKL a cash payment to the dealer of P300,000. The company is
subject to 32 percent tax and for this kind of investment, a marginal cost of capital of 9 percent.
The net present value to be provided by the replacement of the old machine is: (Please use a PV
factor with 5 decimal places)
A. P28,493
C. P46,794
B. P15,693
D. P59,594
MNO Companys records for the year ended December 31 show that no finished goods inventory
existed at January 1, and no work was in process at the beginning and end of the year.
Net sales
P1,400,000
Cost of goods manufactured: Variable
P630,000
Fixed
P315,000
Operating expenses:
Variable
P98,000
Fixed
P140,000
Units manufactured
70,000
Units sold
60,000

6.
A.
B.
C.
D.

Under the variable-costing method, MNOs operating income for the year is
P217,000
P307,000
P352,000
P762,000

7.
A.
B.
C.
D.

What is MNOs finished goods inventory cost at December 31 under the variable-costing method?
P90,000
P104,000
P105,000
P135,000

8. REB Service Co. is a computer service center. For the month of May 2014, REB had the
following statistics:
Sales
P450,000
Operating income
25,000
Net profit after taxes
8,000
Total assets
500,000
Shareholders equity
200,000
Cost of capital
6%
Based on the above information, which one of the following statements is correct? REB has a:
A. ROI of 4%
B. Residual income of P(5,000)
C. ROI of 1.6%
D. Residual income of P(22,000)
9. The PQR of RST Company makes and sells only one product. Annual data on the PQR Division's
single product follow:
Unit selling price
P50
Unit variable cost
P30
Total fixed costs
P200,000
Average operating assets
P750,000
Minimum required rate of return
12%
If Axle sells 16,000 units per year, the return on investment should be:
A. 12%.
B. 15%.
C. 16%.
D. 18%.
10. STU Company has two divisions, Ma and Pa. Information for each division is as follows:
Ma

Pa

P20,000

P65,000

P50,000

P300,000

15%

18%

## Operating income margin

10%

20%

Weighted-average cost of
capital

12%

12%

## What is the Economic Value Added for Ma and Pa, respectively?

A. P20,000, P36,000

C. P12,500; P11,000

B. P14,000; P29,000

D. P20,000; P29,000

11. WMX Company established a standard cost for raw materials at P25 per unit. During the period
just ended, a total of 10,000 units were purchased of which 50% was at P24.70 each, 20% was at
P24.90 each, and the balance was at P25.60 each. The raw materials cost variance is a favorable
(an unfavorable)
A. P100
C. P(100)
B. P900
D. P(900)
12. The cost accountant for CBA Company has just informed you that the companys material
quantity variance was exactly equal to the companys material price variance for the year. The
company had expected to produce 450 units of its product. However, because of a slump in the
economy, it was only able to justify the production of 400 units. Other cost information relating to
the companys raw materials activity is shown below:
Standard price per ton of material
Actual tons purchased during the period
Actual tons used in production during the period
Actual cost of material purchased during the period
Number of pounds in 1 ton

P 50
10
8
P600
2,000

The standard quantity of materials allowed for the number of units produced by CBA totalled
A. 6.4 tons.
C. 8.4 tons.
B. 8.0 tons.
D. 6.0 tons
13. The following is a standard cost variance analysis report on direct labor cost for a division of a
manufacturing company.
Job
Actual Hours at
Actual Hours at
Standard Hours at
Actual Wages
Standard Wages
Standard Wages
213
P3,243
P3,700
P3,100
215
15,345
15,675
15,000
217
6,754
7,000
6,600
219
19,788
18,755
19,250
221
3,370
3,470
2,650
Totals
P48,500
P48,600
P46,600
What is the total flexible budget direct labor variance for the division?
A. P1,000 unfavorable.
.
B. P1,900 unfavorable.
C. P1,900 favorable
D. P2,000 unfavorable.
14. The EFT Corporation makes a variety of leather goods. It uses standard costs and a flexible
budget to aid planning and control. Budgeted variable overhead at a 45,000 direct labor hour level

is P27,000. During April material purchases were P241,900. Actual direct-labor costs incurred
were P140,700. The direct-labor usage variance was P5,100 unfavorable. The actual average
wage rate was P0.20 lower than the average standard wage rate. The company uses a variable
overhead rate of 20% of standard direct-labor cost for flexible budgeting purposes. Actual
variable overhead for the month was P30,750.
What were the standard hours allowed during the month of April?
A. 50,250
C. 48,550
B. 58,625
D. 37,520
Use the following information for the next three questions:
A companys standard direct labor rates in effect for the fiscal year ending June 30 and standard hours
allowed for the output in April are
Standard DL
Standard DLH
Rate per Hour
Allowed for Output
Labor class III
P8.00
500
Labor class II
7.00
500
Labor class I
5.00
500
The wage rates for each labor class increased on January 1, under the terms of a new union contract. The
standard wage rates were not revised.
The actual direct labor hours (DLH) and the actual direct labor rates for April were as follows:
Labor class III
Labor class II
Labor class I

Actual Rate
P8.50
7.50
5.40

Actual DLH
550
650
375

## 15. What is the labor yield variance (rounded)?

A. P500
C. P820
B. P320
D. P515
16. What is the labor mix variance (rounded)?
A. P50.00
C. P66.67
B. P320.00
D. P500.00
17.
A.
B.
C.
D.

The labor mix and labor yield variances together equal the
Total labor variance.
Labor rate variance.
Labor efficiency variance.
Sum of the labor efficiency and overhead efficiency variances.

18. SMO Ltd. Manufactures a single product for which the costs and selling prices are:
Variable production costs
P 50 per unit
Selling price
P125 per unit
P200,000 per quarter
P80,000 per quarter
Normal capacity
20,000 units per quarter

Production in first quarter was 19,000 units and sales volume was 16,000 units. No opening inventory
for the quarter.
The absorption costing profit for the quarter was
A. P920,000
C. P960,000
B. P950,000
D.P970,000
`
19. The MME Corporation has to replace its completely damaged boiler machine with a new one. The
old machine has a net book value of P100,000 with zero market value; therefore it will give a tax
shield, based on 35% tax rate if replaced, by P35,000. The company has a 10 percent cost of
capital. Understandably, the new machine, through a uniform decrease in cash operating costs,
will give a positive net present value, because this machine will provide an internal rate of return
of 12 percent.
If the machine were to be depreciated using straight-line method for 6 years without any salvage
value, the estimated profitability index is:
A.
1.20
B.
1.06
C.
1.07
D.
Cannot be determined from the information
20. SPR Company has just finished reviewing the results of its operations for the current period. The
companys chief accountant told management that the total overhead spending variance was
unfavorable by P1,000. However, the variable overhead portion of this variance was favorable by
P200. The companys volume variance, according to the accountant, was favorable by P300.
During the period Medouville applied P1,800 of fixed overhead to production. The adjustment at
the end of the period to allocate under-or-overapplied overhead included a debit of P200 to the
Meldouvilles overhead efficiency variance for the period was
A. P500 favorable.
C. P1,500 favorable.
B. P1,100 favorable.
D. P500 unfavorable
21. MQR, Inc. makes a line of bathroom accessories. Because of a decline in sales, the company has
10,000 machine hours of idle capacity available each year. This idle capacity could be used by the
company to make, rather than buy, one of the components used in its production process. Hadley
needs 5,000 units of this component each year. At present, the component is being purchased from
an outside supplier at P7.50 per unit. Variable production cost for the component would be P4.10
per unit, and additional supervisory costs would be P18,000 per year. Already existing fixed costs
that would be allocated to this part amount to P300,000 per year.
What would the annual cost of additional supervision have to be in order for MQR to be
economically indifferent between making or buying the component? (Assume all other conditions
stay the same.)
A. P20,000.
C. P18,000.
B. P19,000.
D. P17,000.
22. The production manager of HGE is at a loss on what to do with 10,000 units of defective product
on stocks which cost the company P25,000 to produce. Two proposals submitted for his
consideration are as follows:
1) Sell the product as a scrap for 1.75 per unit or
2) Rework the units at a cost of P12,500 and then sell the product for P5.00 per unit.

The net advantage or disadvantage to the company if proposal No. 2 (rework the units) is followed is
23. When comparing NPV and IRR, which is not true?
A. With NPV, the discount rate can be adjusted to take into account increased risk and the uncertainty
of cash flows
B. With IRR, cash flows can be adjusted to account for risk
C. NPV can be used to compare investments of various size or magnitude
D. Both NPV and IRR can be used for screening decisions
24. MOM has a break-even point of 200,000 units and earns a P100,000 profit at sales of 250,000
units. Which of the following is true?
A. Fixed costs are P100,000.
B. Total contributions margin at 200,000 units is P400,000.
C. Profit at sales of 300,000 units is P120,000.
D. Selling price per units is P2.
25. The Health Care Division of SSW Inc. 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 Care
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
A.
B.
C.
D.

## Auto Division alternative only

Property Division alternative only
both Auto Division and Property Division alternatives
neither Auto Division nor Property Division alternatives

26. 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?
A. 1, 2, 4, and 5
B. 1, 3, and 4
C. 1, 3, 4, and 5

D. 2, 3, and 4
27. The following historical pattern on its credit sales of Rainy Co. was presented:
70% collection during the month of sale.
15% in the first month after sale.
10% in the second month after sale.
4% in the third month after sale.
1% uncollectible.
The sales on account of the last six months of the year were reported as follows:
July
P120,000
August
140,000
September
160,000
October
180,000
November
200,000
December
170,000
The total cash collections during the fourth calendar quarter from sales made on account during the
fourth calendar quarter would be
A. P345,000
B. P550,000
C. P502,800
D. P460,000
28. ZYX Corporation has P200,000 of joint processing costs and is studying whether to process J and
K beyond the split-off point. Information about J and K follows.

Tons produced
Separable variable processing costs beyond split-off
Selling price per ton at split-off
Selling price per ton after additional processing

Product J
25,000
P64,000
15
21

Product K
15,000
P100,000
52
58

If India desires to maximize total company income, what should the firm do with regard to
Products J and K?
Product J
Product K
A. Sell at split-off
Sell at split-off
B. Sell at split-off
Process beyond split-off
C. Process beyond split-off
Sell at split-off
D. Process beyond split-off
Process beyond split-off
29. BDC Manufacturing has 31,000 labor hours available for producing M and N. Consider the
following information:
Required labor time per unit (hours)
Maximum demand (units)
Contribution margin per unit
Contribution margin per labor hour

Product M
2
6,500
P5.00
P2.50

Product N
3
8,000
P5.70
P1.90

If BDC follows proper managerial accounting practices in terms of setting a production schedule,
how much contribution margin would the company expect to generate?
A. P31,450.
B. P63,100.

C. P66,700.
D. P78,100.
30. Why do NPV method and the IRR method sometimes give different rankings of mutually
exclusive investment projects?
A. The NPV method does not assume reinvestment of cash flows while the IRR method assumes
the cash flows will be reinvested at the internal rate of return.
B. The NPV method assumes a reinvestment rate equal to the discount rate while the IRR method
assumes a reinvestment rate equal to the internal rate of return.
C. The IRR method does not assume reinvestment of the cash flows while the NPV assumes the
reinvestment rate is equal to the discount rate.
D. The NPV method assumes a reinvestment rate equal to the bank loan interest rate while the IRR
method assumes a reinvestment rate equal to the discount rate.