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46. If the raffle can increase sales by 50% per week, profit will 6. If projected sales is guaranteed at 6,000 units of either model and the company made the
A. decrease by P25,000 C. increase by P25,000 right decision as to which model to produce, the margin of safety from the chosen model
B. remain unchanged D. increase by P155,000 would be
A. P4,992,000 C. P14,682,353
47. If the company’s objective in conducting the weekly raffle is to double its present profit, how B. P6,864,000 D. P17,160,000
much sales must be generated to attain this profit objective?
A. P1,625,000 C. P2,000,000 7. If Bisikleta desires to earn profit of 25% of sales, which model should the company produce?
B. P1,683,333 D. P2,525,000 A. Either model since they are both profitable.
B. Pambundok Bike because its peso profit is higher than that of Pangkarera’s if the desired
The next five questions are based on the following information. profit rate is 25%.
Bisikleta Corporation has just increased its manufacturing capacity to enable it to introduce new C. Pangkarera Bike because its peso profit is higher than that of Pambundok’s if the desired
models of bicycles which it could not produce in the past due to capacity constraints. For the profit ratio is 25%.
coming period, Bisikleta is planning to start the production of a new model, which could either be D. Pambundok only. At the desired profit ratio of 25%, the required sales of Pangkarera
the Pambundok Bike or Pangkarera Bike. would exceed the maximum expected sales level.
A recently concluded feasibility study on the two models showed the following results:
Pambundok Bike Pangkarera Bike Variable Costing & Absorption Costing
Selling price P 4,400 P 4,000 49. Product costs or inventoriable costs
Variable costs 2,640 2,640 A. are treated as assets before the products are sold.
Fixed costs 3,696,000 3,168,000 B. include only the prime costs of producing a product.
Projected sales per year Between 4,500 to 6,500 of either model C. include only the conversion costs of producing the product.
D. are charged to expense when products become part of the finished goods inventory.
3. What is the peso break-even point of each model of bike?
A. B. C. D. 19. In a recent period, Tine Co. incurred P20,000 of fixed manufacturing overhead and deducted
Pambundok Bike P2,100 P1,478,400 P9,240,000 P9,278,824 P30,000 of fixed manufacturing overhead. Tine Co. must be using
Pangkarera Bike P2,329 P1,077,120 P9,317,647 P9,278,824 A. absorption costing. C. standard costing.
B. direct costing. D. variable costing.
4. The total peso sales at which Bisikleta would make the same profit or loss regardless of the
bike model it decided to produce is 13. You obtain the following information regarding fixed products costs from a manufacturing firm
A. P4,200 C. P8,800,000 for fiscal year 2016:
B. P176,000 D. P17,600000 Fixed costs in the beginning inventory P 16,000
Fixed costs incurred this period 100,000
Which of the following statements is not true?
A. Using variable costing, this firm will deduct no more than P16,000 for fixed production 4. Operating income under variable costing amounts to
costs. A. P79,500 C. P99,000
B. The amount of fixed production costs that this firm could deduct using variable costing in B. P86,500 D. P157,500
2016 is P100,000.
C. The maximum amount of fixed production costs that this firm could deduct using The next three questions are based on the following information.
absorption costing in 2016 is P116,000. Annabelle Corporation manufactures a propeller. Shown below is Annabelle’s cost structure:
D. If this firm produced substantially more units than it sold in 2016, variable costing will Variable cost per propellerTotal fixed costs for the year
probably yield a lower income than absorption costing. Manufacturing cost P114 P810,000
Selling and administrative P20 P243,000
8. A company that produces a single product has a net operating income of P85,500 using In its first year of operations, Annabelle produced 60,000 propellers but only sold 54,000.
variable costing and a net operating income of P90,000 using absorption costing. Total fixed
manufacturing overhead was P150,000, and production was 100,000 units. Between the 9. What is the total cost that would be assigned to Annabelle’s finished goods inventory at the
beginning and the end of the year, the inventory level end of the first year of operations under the variable costing method?
A. decreased by 4,500 units. C. increased by 3,000 units. A. P684,000 C. P804,000
B. decreased by 3,000 units D. increased by 4,500 units. B. P765,000 D. P912,000
The next two questions are based on the following information. 10. At what amount will Annabelle report its cost of goods sold for this first year for external
The management of Sisa Company uses the following projected unit costs for the one product it reporting purposes?
manufactures. A. P6,156,000 C. P6,966,000
Prime cost P49 B. P6,885,000 D. P8,208,000
Variable indirect manufacturing cost 6
Fixed factory overhead cost (based on 10,000 units per month) 5 11. Which costing method (variable or absorption) will generate a higher net operating income in
Variable selling and administrative cost 4 Annabelle’s first year of operations and by how much?
Fixed selling and administrative cost 2.80 A. absorption by P81,000 C. variable by P81,000
The projected sales price is P80 per unit. The fixed costs remain fixed within the relevant range of B. absorption by P108,000 D. variable by P108,000
4,000 to 16,000 units of production and sales. All variances are charged to Cost of Goods Sold
each month. Standard Costing & Variance Analysis
42. Variance analysis should be used
Management has projected the following unit data for June: A. to understand why variances arise.
Beginning inventory 2,000 B. to encourage employees to focus on meeting standards.
Product 9,000 C. as the only source of information for performance evaluation.
Available 11,000 D. to administer appropriate disciplinary action to employees that do not meet standards.
Sales 7,500
Ending inventory 3,500 42. Variance analysis should be used
A. to understand why variances arise.
3. Operating income under absorption costing amounts to B. to encourage employees to focus on meeting standards.
A. P87,000 C. P94,000 C. as the only source of information for performance evaluation.
B. P92,000 D. P99,000 D. to administer appropriate disciplinary action to employees that do not meet standards.
68. The materials mix variance for a product is P450 unfavorable and the materials yield variance overhead expense was P56,000, and output was 6,000 units. In August, output was 9,000 units,
is P150 unfavorable. This means that and actual overhead expense was P71,000.
A. the materials price variance is P600 unfavorable.
B. the materials quantity variance if P600 unfavorable. 1. The budgeted factory overhead for 9,000 units is
C. the total materials cost variance is definitely P600 unfavorable. A. P36,000 C. P71,000
D. the materials price variance is also unfavorable, but the amount cannot be determined B. P68,000 D. P72,000
from the given information.
2. The applied factory overhead in August is
The next two questions are based on the following information. A. P36,000 C. P71,000
Dirt Free manufactures a cleaning solvent. The company employs both skilled and unskilled B. P68,000 D. P72,000
workers. Skilled workers class C are paid P12 per hour, while unskilled workers class D are paid
P7 per hour. To produce one 55-gallon drum of solvent requires 4 hours of skilled labor and 2 The next two questions are based on the following information.
hours of unskilled labor. The solvent requires 2 different materials: A and B. the standard and The Kadoc Company has a standard costing system in which variable manufacturing overhead is
actual material information is given below: assigned to production on the basis of machine hours. The following data are available for July:
Standard: Actual variable manufacturing overhead cost incurred P22,620
Material A: 30.25 gallons @ P1.25 per gallon Actual machine hours worked 1,600
Material B: 24.75 gallons @ P2.00 per gallon Variable overhead spending variance P3,420 unfavorable
Actual: Total variable overhead variance P4,620 unfavorable
Material A: 10,716 gallons purchased and used @ P1.50 per gallon
Material B: 17.484 gallons purchased and used @ P1.90 per gallon 12. The variable overhead efficiency variance for July is
Skilled labor hours: 1,950 @ P11.90 per hour A. P1,200 unfavorable C. P8,040 favorable
Unskilled labor hours: 1,300 @ P7.15 per hour B. P1,200 favorable D. P8,040 unfavorable
During the current month Dirt Free manufactured 500 55-gallon drums. (Round all answers to the
nearest whole peso.) 13. The standard number of machine hours allowed for July production is
A. 1,500 hours C. 1,700 hours
9. What is the mix variance? B. 1,600 hours D. 2,270 hours
A. B. C. D.
Materials P3,596 F P3,596 U P4,864 F P4,864 U The next three questions are based on the following information.
Labor P1,083 U P1,083 F P2,588 U P2,588 F The Hawaii Co. has made the following information available for its production facility for June
2016. Fixed overhead was estimated at 19,000 machine hours for the production cycle. Actual
10. What is the yield variance? machine hours for the period were 18,900, which generated 3,900 units.
A. B. C. D. Material purchased (80,000 pieces) P314,000
Materials P1,111 U P1,111 F P2,670 U P2,670 F Material quantity variance P6,400 U
Labor P2,583 U P2,583 F P1,138 F P1,138 U Machine hours used 18,900 hours
VOH spending variance P50 U
The next two questions are based on the following information. Actual fixed overhead P60,000
In June, the volume variance of Joni Company was zero, and the budget variance was PP6,000 Actual labor cost P40,120
unfavorable. In July, the volume variance was P8,000 unfavorable, but the budget variance was Actual labor hours 5,900
zero. In June, actual overhead expense was P70,000 for an output of 8,000 units. July’2 actual Hawaii’s standard costs are as follows:
Direct material 20 pieces @ P4 per piece 14. Ebony Company has the following expected pattern of collections on credit sales: 70%
Direct labor 1.5 hours @ P6 per hour collected in the month of sale, 15% in the month after the month of sale, and 14% in the
Variable overhead (applied on a machine hour basis) 4.8 hours @ P2.50 per hour second month after the month of sale. The remaining 1% is never collected. At the end of
Fixed overhead (applied on a machine hour basis) 4.8 hours @ P3 per hour May, Ebony Company has the following accounts receivable balances:
From April sales P21,000
15. The materials price variance is From May sales 48,000
A. P5,850 F C. P6,000 F Ebony’s expected sales for June are P150,000. What were total sales for April?
B. P5,970 F D. P6,400 U A. P70,000 C. P140,000
B. P72,414 D. P150,000
16. The conversion cost efficiency variance is
A. P300 U C. P750 U 15. Yamyam Co. is budgeting sales of 53,000 units of product Blowf for October 2016. The
B. P450 U D. P3,750 U manufacture of one unit of Blowf requires four kilos of chemical XYZ. During October 2016,
Yamyam plans to reduce the inventory of XYZ by 50,000 kilos and increase the finished
17. The fixed overhead noncontrollable variance is goods inventory of Blowf by 6,000 units. There is no Blowf work in process inventory. How
A. P150 U C. P540 U many kilos of XYZ is Yamyam budgeting to purchase in October 2016?
B. P300 U D. P840 U A. 138,000 C. 186,000
B. 162,000 D. 238,000
Flexible Budget & Variance Analysis
43. Because of the impact of fixed costs in most businesses, standard costing system is usually 16. George, Inc. began operations on January 1 of the current year with a P12,000 cash balance.
not effective unless the company also has a flexible budgeting system. In flexible budgeting, Forty percent of sales are collected in the month of sale; 60% are collected in the month
A. standard costs are never used. following the sale. Similarly, 20% of purchases are paid in the month of purchase, and 80%
B. standard costs are used to prepare budgets for multiple activity levels. are paid in the month following purchase. The following data apply to January and February:
C. a budget for an expected activity level is prepared showing variable and fixed costs January February
separately. Sales P35,000 P55,000
D. variable costs and fixed costs show the same behavior as budgets for different activity Purchases 30,000 40,000
levels are prepared. Operating expenses 7,000 9,000
If operating expenses are paid in the month incurred and include monthly depreciation
Comprehensive Budgeting charges of P2,500, determine the change in Wolfe’s cash balance during February.
38. The budgeting technique that focuses on different phases of a product such as planning and A. P2,000 increase C. P5,000 increase.
concept design, testing, manufacturing, and distribution and customer service is known as B. P4,500 increase. D. P7,500 increase
A. base budgeting. C. integrative budgeting.
B. comprehensive budgeting. D. life-cycle budgeting The next two questions are based on the following information.
Kason, Inc., expects to sell 20,000 pool cues for P24.00 each. Direct materials costs are P4.00,
15. Proficient Corporation has a sales goal of P500,000 for the coming year. Based on this level direct manufacturing labor is P8.00, and manufacturing overhead is P1.60 per pool cue. The
of activity, Proficient budgets its total expenses at P450,000 Actual sales are P480,000 and following expected beginning and desired ending inventory levels apply to 2017:
actual costs are P460,000. Proficient Corporation’s operations were Beginning inventory Ending inventory
A. effective but not efficient. C. both efficient and effective. Direct materials 24,000 units 24,000 units
B. efficient but not effective. D. neither efficient nor effective. Work-in-process inventory 0 units 0 units
Finished goods inventory 2,000 units 2,500 units
What is the amount of economic value added (EVA) for the division?
17. How many pool cues need to be produced in 2017? A. P5,000,000 C. P25,000,000
A. 22,500 cues C. 20,500 cues B. P13,000,000 D. P30,000,000
B. 22,000 cues D. 19,500 cues
12. In a decentralized company in which divisions may buy goods from one another, the transfer
18. What are the 2017 budgeted costs for direct materials, direct manufacturing labor and pricing system should be designed primarily to
manufacturing overhead, respectively? A. increase the consolidated value of inventory
A. P0; P192,000; P38,400 C. P82,000; P164,000; P32,800 B. allow division managers to buy from outsiders.
B. P78,000; P156,000; P31,200 D. P160,000; P80,000; P32,000 C. minimize the degree of autonomy of division managers.
D. aid in the appraisal and motivation of managerial performance.
Performance Management & Measurement
19. A management decision may be beneficial for a given profit center, but not for the entire 53. A company has two divisions, A and B; each are operated as a profit center. A charges B
company. From the overall company viewpoint, this decision would lead to P35 per unit for each unit transferred to B. Other data follows:
A. centralization. C. maximization. A’s variable cost per unit P30
B. goal congruence. D. suboptimization. A’s fixed costs P10,000
A’s annual sales to B 5,000 units
39. Bisikleta Company has two product lines – The Whole Bike Line and the Replacement Parts A’s annual sales to outsiders 50,000
Line. The company’s customer support department entertains customer inquiries and A is planning to raise its transfer price to P50 per unit. Division B can purchase units at the
complaints through telephone calls. Last month, the department handled 5,000 calls and P40 each from outsiders, but doing so would idle A’s facilities now committed to producing
incurred costs of P175,000. If 3,440 of these calls were for the company’s Whole Bike Line, units for B. Division A cannot increase its sales to outsiders. From the perspective of the
costs allocated to the Replacement Parts line were company as a whole, from whom should Division B acquire the units, assuming B’s market is
A. P35 C. P124,250 unaffected?
B. P50,750 D. P175,000 A. outsider vendors
B. Division A, but only at the variable cost per unit.
45. A company’s rate of return on investment (ROI) is equal to the C. Division A, in spite of the increased transfer price.
A. investment capital divided by the capital employed turnover rate. D. Division A, but only until fixed costs are covered, then should purchase from outside
B. investment capital multiplied by the capital employed turnover rate. vendors.
C. percentage of profit on sales divided by the capital employed turnover rate.
D. percentage of profit on sales multiplied by the capital employed turnover rate. 42. It describes how an organization matches its own capabilities with the opportunities in the
market place to accomplish its overall objectives.
19. The following information is available for the Wholesale Products Division of Seth A. Customer perspective. C. Planning.
Corporation: B. Learning & growth perspective. D. Strategy.
Operating profit before interest and taxes P30,000,000
Depreciation expense 10,000,000 The next two questions are based on the following information.
Change in working capital 5,000,000 The following data pertain to operations at Ambilis Incorporated:
Capital expenditures 4,000,000 Throughput time 4 hours
Invested capital (total assets – current liabilities) 50,000,000 Delivery cycle time 8 hours
Weighted-average cost of capital 10% Process time 1 hour
Tax rate 40% Queue time 2 hours
C. Clean and ship to outlet center, P57,000.
61. The combined inspection and move time for this operation would be D. Neither alternative is desirable, as both produce a loss for the firm.
A. 1 hour
B. 2 hours 20. Naval Corporation has P200,000 of joint processing costs and is studying whether to process
C. 4 hours J and K beyond the split-off point. Information about J and K follows:
D. cannot be determined from information provided Product J Product K
Tons produced 25,000 15,000
62. The manufacturing cycle efficiency (MCE) for this operation would be Separable variable processing costs beyond split-off P64,000 P100,000
A. 50% C. 25% Selling price per ton at split-off 15 52
B. 75% D. 12% Selling price per ton after additional processing 21 58
If Naval desires to maximize total company income, what should the firm do with regard to
Business Process Improvement Products J and K?
38. It integrates Activity-Based Costing (ABC) with other concepts such as Total Quality Product J Product K
Management (TQM) and target costing to produce a management system that strives for A. Sell at split off Sell at split off
excellence through cost reduction, continuous process improvement, and productivity gains. B. Sell at split off Process beyond split off
A. Activity-Based Management. C. Management Services. C. Process beyond split off Sell at split off
B. Cost Management System. D. Value-Based Management. D. Process beyond split off Process beyond split off
40. It is a comprehensive understanding of how an organization generates its output. It involves 21. Kyle Enterprises, which has three departments, recently reported the following results:
the determination of which activities are value-adding or non-value adding and how the latter A B C
may be reduced or eliminated. It is a key component of ABC Management that links product Sales revenue P12,000 P 48,000 P 40,000
costing and continuous improvement. Less: operating costs 11,400 59,800 50,500
A. ABC system. C. JIT system. Operating income (loss) P 600 P(11,800) P(10,500)
B. Backflush costing. D. Process value analysis. The company incurred variable operating costs as well as p25,000 of fixed operating costs.
The P25,000 amount was allocated to A, B, and C on the basis of sales revenue and is
Relevant Costing included in the cost figures noted above. Which department(s), if any, should be closed if
50. For decision-making purposes, relevant costs are none of the fixed operating costs can be avoided?
A. variable past costs. A. Department A C. Department C
B. all fixed and variable costs. B. Department B D. Department B and C
C. costs incurred within the relevant range of production.
D. anticipated future costs that will differ among various alternatives. 22. Al Pines is studying whether to outsource its Human Resources (H/R) activities. Salaries
professionals who earn P390,000 would be terminated; in contrast, administrative assistants
18. Arthur, Inc. has P125,000 of inventory that suffered minor smoke damage from a fire in the who earn P120,000 would be transferred elsewhere in the organization. Miscellaneous
warehouse. The company can sell the goods “as is” for P45,000; alternatively, the goods can departmental overhead (e.g., supplies, copy charges, overnight delivery) is expected to
be cleaned and shipped to the firm’s outlet center at a cost of P23,000. There the goods decrease by P30,000, and P25,000 of corporate overhead, previously allocated to Human
could be sold for P80,000. What alternative is more desirable and what is the relevant cost Resources, would be picked up by other departments. If Al Pines can secure needed H/R
for that alternative? services locally for P410,000, how much would the company benefit by outsourcing?
A. Sell “as is,” P125,000 A. P10,000 C. P130,000
B. Clean and ship to outlet center, P23,000. B. P35,000 D. P155,000
40. Leo Corporation will evaluate a potential investment in an advanced manufacturing system by
Product Pricing use of the net present value (NPV) method. Which of the following system benefits is least
23. The projected sales price for a new product (which is still in the development stage of the likely to be omitted from the NPV analysis?
product life cycle) is P100. The company has estimated the life-cycle cost to be P60 and the A. Improved product quality.
first-year cost to be P120. On this type of product, the company requires a P24 per unit B. Savings in operating costs.
profit. What is the target cost of the new product? C. Shorter manufacturing cycle time.
A. P60 C. P120 D. Greater flexibility in the production process.
B. P76 D. P842
25. Anja Company can acquire a P700,000 machine that now will benefit the firm over the next 5
Capital Budgeting years. A newly hired staff assistant correctly computed the net present value to be P134,020
17. The City of Malabon is about to replace an old fire truck with a new vehicle in an effort to save by using a 10% hurdle rate. On the basis of this information, the machine was expected to
maintenance and other operating costs. Which of the following items, all related to the product annual cash operating savings of approximately
transaction, would not be considered in the decision? A. P166,804 C. P268,605
A. purchase price of the old vehicle. B. P220,000 D. P834,020
B. future depreciation on the new vehicle.
C. proceeds from disposal of the old vehicle. 26. Pugol Company is considering an investment in a machine that would reduce annual labor
D. savings in operating costs as a result of the new vehicle. costs by P30,000. The machine has an expected life of 10 years with no salvage value. The
machine would be depreciated according to the straight-line method over its useful life. The
13. When a profitable corporation sells an asset at a loss, the after-tax cash flows on the sale will company’s marginal tax rate is 30 percent.
A. exceed the pre-tax cash flow on the sale. Assume that the company will invest in the machine if it generates an internal rate of return of
B. increase the corporation’s overall tax liability. 16 percent. What is the maximum amount the company can pay for the machine and still
C. be less than the pre-tax cash flow on the sale. meet the internal rate of return criterion?
D. be the same as the pre-tax cash flow on the sale. A. P118,700 C. P187,500
B. P144,990 D. P210,000
24. Marisol Company is considering a P600,000 investment in new equipment that is anticipated
to produce the following data over a five-year life Financial Statement Analysis
Year Cash Inflows Cash Outflows Depreciation 23. Mansho Co. is applying for a loan in which the bank requires a quick ratio of at least 1.
1 P350,000 P130,000 P120,000 Mansho’s quick ratio is 0.8. Which of the following actions would increase Mansho’s quick
2 450,000 190,000 120,000 ratio?
3 450,000 170,000 120,000 A. Selling obsolete inventory at a loss.
4 340,000 150,000 120,000 B. Paying an existing accounts payable
5 300,000 130,000 120,000 C. Purchasing inventory through the issuance of a long-term note.
Ignoring income taxes and assuming that cash flows occur evenly throughout a year, the D. Implementing stronger procedures to collect accounts receivable at a faster rate.
equipment’s approximate payback period is
A. 1 year, 7 months. C. 2 years, 5 months. 27. The Ning Company has the following characteristics:
B. 2 years, 1 month. D. over 5 years. Sales P1,000
Total assets P1,000
Total debt/Total assets 35.00%
Basic earning power (BEP) ratio 20.00%
Tax rate 40.00% B. portfolio motive. D. transactions motive.
Interest rate on total debt 4.57%
What is Ning’s ROE? 33. When the interest rate is extremely high,
A. 11.04% C. 16.99% A. the supply of money will be relatively small.
B. 12.31% D. 28.31% B. the opportunity cost of holding money is low.
C. the opportunity cost of holding money is high.
28. Diliman Technologies has the following relationships: D. there is no cost to holding money because its purchasing power remains constant.
Annual sales P1,200,000
Current liabilities P 375,000 31. The Muebles company produces a specialty wood furniture product, and has the following
Days sales outstanding (DSO) (365-day year) 40.00 information available concerning its inventory items:
Inventory turnover ratio 4.80 Relevant ordering costs per purchase order P300
Current ratio 1.20 Relevant carrying costs per year:
The Company’s current assets consist of cash, inventories, and accounts receivable. How Required annual return on investment 10%
much cash does Diliman have on its balance sheet? Required other costs per year P2.80
A. P8,333 C. P125,000 Annual demand is 20,000 packages per year. The purchase price per package is P32.
B. P68,493 D. P200,000 What are the relevant total cost at the economic order quantity?
A. P1,414.21 C. P8,465.28
Gross Profit Variation Analysis B. P4,242.65 D. P9,000
29. The management of Ivory Corporation asks you to prepare an analysis of the gross profit
variance based on their comparative income statements for 2015 and 2016: 32. The following information applies to Labs, Inc., which supplies microscopes to laboratories
2016 2015 Variance throughout the country. Labs, Inc. purchases the microscopes from a manufacturer which
Sales P990,000 P800,000 P190,000 F has a reputation for very high quality in its manufacturing operation.
Cost of goods sold 760,000 640,000 120,000 U Annual demand (weekly demand = 1/52 of annual demand) 20,800 units
Gross profit P230,000 P160,000 P 70,000 F Orders per year 20
The only known information given to you is that volume increased from 2015 to 2016 by 10%. Lead time in days 15
The variance in gross profit due to change in volume is Cost of placing an order P100
A. P16,000 favorable C. P80,000 favorable. What is the reorder point?
B. P70,000 favorable D. P65,000 unfavorable. A. 857 units C. 1,560 units
B. 1,040 units D. 2,080 units
Working Capital Management
30. Eagle Sporting Goods has P2.5 million in inventory and P2 million in accounts receivable. Its Capital Structure & Cost of Capital
average daily sales are P100,000. The firm’s payables deferral period is 30 days and 22. Which of the following is an advantage of equity financing in comparison to debt financing?
average daily cost of sales are P50,000. What is the length of the firm’s cash conversion A. Issuance costs are greater than in debt.
period? B. Ownership is given up with respect to the issuance of common stock
A. 40 days C. 60 days C. Dividends are not tax deductible by the corporation whereas interest is tax deductible.
B. 50 days D. 100 days D. The company has no firm obligation to pay dividends to common shareholders.
20. The motive for holding money to use in making planned exchanges is called the
A. liquidity motive. C. precautionary motive.
33. A company recently issued 9% preferred stock. The preferred stock sold for P40 a share with In the first year of operations, the company is expected to have sales revenues of P500,000, cost
a par of P20. The cost of issuing the stock was P5 a share. What is the company’s cost of of sales of P200,000, and general and administrative expenses of P100,000. The tax rate is 30%,
preferred stock? and there are no other items on the income statement. All earnings are paid out as dividends at
A. 4.5% C. P9.0% year-end.
B. 5.1% D. 10.3%
36. If the cost of equity were 12%, then the weighted-average cost of capital under Arrangement
The next two questions are based on the following information. #1, to the nearest full percentage point, would be
The following information is available for Kacandida, Inc.: A. 8% C. 11%
Balance Sheet B. 10% D. 12%
Current assets P 500,000
Property, plant & equipment 4,000,000 37. Which of the following statements comparing the two financing arrangements is true?
Total assets P4,500,000 A. The company will have higher interest expense under Arrangement #1.
B. The company will have higher expected tax expense under Arrangement #1.
Current liabilities P 30,000 C. The company will have a higher expected gross margin under Arrangement #1.
Long-term debt 2,500,000 D. The company will have a higher degree of operating leverage under Arrangement #2.
Common stock 200,000
Retained earnings 1,770,000 Activity-Based Costing
Total liabilities and stockholders’ equity P4,500,000 33. The term cost driver refers to
A. any activity that causes costs to be incurred.
Cost of debt before tax 7% B. any activity that can be used to predict cost changes.
Cost of equity 12% C. the attempt to control expenditures at a reasonable level.
Tax rate 25% D. the person who gathers and transfers cost data to the management accountant.
34. What is Kacandida’s weighted-average cost of capital? 35. Of the following, which is the best reason for using activity-based costing?
A. 6.10% C. 8.75% A. To keep better track of overhead costs.
B. 8.22% D. 9.50% B. To better assign overhead costs to products.
C. To assign indirect service overhead costs to direct overhead cost pools.
35. What is Kacandida’s debt-to-equity ratio? D. To more accurately assign overhead costs to cost pools so that these costs are better
A. 0.56 C. 1.28 controlled.
B. 1.20 D. 2.10
65. Which of the following is a sign that an ABC system may be useful?
The next two questions are based on the following information. A. There are small amounts of indirect costs.
A new company requires P1 million of financing and is considering two arrangements as shown in B. Products a company is less suited to produce and sell show small profits.
the table below. C. Operation staff agrees with accountants about the costs of manufacturing and marketing
Amount of Amount of Before-tax products and services.
Arrangement equity raised debt financing cost of debt D. Products make diverse demands on resources because of differences in volume,
#1 P700,000 P300,000 8% per annum process steps, batch size, or complexity.
#2 P300,000 P700,000 10% per annum
37. Pancho Potters manufactures two sizes of ceramic paperweights, regular and jumbo. The
following information applies to their expectations for the planning period: The next two questions are based on the following information.
Cost Pool Overhead Costs Activity-cost driver Video Corporation has two product lines: LCD televisions and projection televisions. The company
Materials handling P 45,000 90,000 orders has budgeted the following production and overhead costs for the upcoming year:
Machine maintenance 300,000 15,000 maintenance hours. LCD TVs Projection TVs
Setups 270,000 45,000 setups Units produced 1,500 2,250
Inspections 105,000 21,000 inspections Direct labor hours per unit 20 30
Total support costs P720,000 Material moves per product line 15 25
Budgeted materials handling cost P75,000
Production Estimates Total machine hours 10,000 16,000
Production units: Machine maintenance costs P180,000
Regular = 8,000,000 units
Jumbo = 16,000,000 units 6. If the company uses total direct labor hours to allocate factory overhead, the materials
Machine hours = 200,000 mh handling cost allocated to LCD TVs would be
Labor-hours = 400,000 dlh A. P23,077 C. P30,000
Pancho Potters uses an ABC system and assigns overhead costs based on the overhead B. P28,125 D. P45,000
activity information provided above.
During October, Pancho produced 700,000 regular ceramic paperweights and Pancho’s 7. If the company uses an activity-based costing (ABC) system to allocate factory overhead, the
production manager counted 2,000 orders; 1,000 maintenance hours; 2,000 setups; and machine maintenance cost allocated to projection TVs would be
2,000 inspections for the regular product line. A. P72,000 C. P110,769
For October, Pancho’s controller assigned _____ indirect costs to the regular product line. B. P108,000 D. P124,615
A. P25,000 C. P43,000
B. P34,000 D. None of these answers are correct. Cost of Quality
5. A significant cost of quality that is not recorded in the accounting records is the
8. Greenspan Company manufactures two products: digital cameras and video cameras. The A. appraisal cost for product equipment
company uses an activity-based costing system. The annual production and sales volume of B. opportunity costs of forgone future sales.
digital cameras is 10,000 units and of video camera is 8,000 units. Direct costs for the digital C. failure cost for a customer complaint center.
cameras are P122; for the video cameras, direct costs are P153. D. cost of reworking products to bring them up to specification.
For overhead costs, there are three activity cost pools with the following expected activities
and estimated total costs: 38. The company’s management accountant prepared the following Cost of Quality Report for the
Expected Expected years 2015 and 2016.
Activity Cost Pool Estimated Cost Activity Digital Activities Video Total 2015 2016
Cameras Cameras Prevention costs P 125,000 P187,500
Activity 1 P30,000 100 500 600 Appraisal costs 131,250 196,875
Activity 2 P45,000 600 300 900 Internal failure costs 118,750 71,250
Activity 3 P96,600 400 2,000 2,400 External failure costs 750,000 388,125
Using ABC, the total cost per digital camera is approximately Total P1,125,000 P843,750
A. P126.82 C. P130.55 Based on the report, which of the following statements is most likely correct?
B. P127.11 D. P131.50 A. Quality costs, such as repair or replacement or returned units, increased by 40%.
B. An increase in prevention cost was solely responsible for the decrease in quality costs. 34. In the context of a feasibility study, technical feasibility refers to whether
C. An increase in conformance costs resulted in a decrease in failure costs and a higher A. an adequate computer site exists for the proposed system.
quality product. B. a proposed system is attainable, given the existing technology.
D. Quality costs, such as cost of downtime on machinery while rework is being done, C. the proposed system will produce economic benefits exceeding its costs.
increased by 48%. D. the systems manager can coordinate and control the activities of the systems
department.
Economics
11. In a global economy, Quantitative Methods
A. the international flows of capital and information are common. 29. Which of the following is used to describe the practice of adding resources to shorten
B. the international movement of labor is prohibited except from multilingual persons. selected activity time on the critical path of a project?
C. the trade of goods and services is focused on trade between or among countries on the A. Making adjustments. C. Reengineering
same continent. B. Project crashing. D. Slack time.
D. all of the above happen in a global economy.
41. A company produces and sells bottled fruit juices. The processes involved in producing the
Information Systems product are done in the following departments:
37. Which of the following statements is true? Department Capacity per Week
A. The cost accounting system is part of an organization’s overall accounting system. Juice extraction 8,000 bottles
B. The management information system is part of an organization’s accounting system. Mixing 5,000 bottles
C. Management accounting accumulates cost information for both cost accounting and Bottling 10,000 bottles
financial accounting. Demand for the company’s product is about 6,000 bottles per week. If the company wants to
D. Two primary hallmarks of cost and management accounting are standardization of improve its contribution margin and applies the Theory of Constraints, improvement efforts
procedures and use of generally accepted accounting principles. should be focused on
A. bottling department. C. mixing department.
Project Feasibility Study B. juice extraction department. D. sales department.
3. It is a systematic gathering and analysis of data concerning a proposed project and the
formulation of conclusion therefore for the purpose of determining whether or not the project 39. A learning curve of 70% assumes that direct labor costs are reduced by 30% for each
is viable, and if so, its degree of profitability. doubling of output. What is the cost of the 8th unit produced as an approximate percentage
A. Budgeting. C. Profit planning. of the first unit produced?
B. Feasibility study. D. Viable costing. A. 0.343% C. 34.30%
B. 30% B. 70%
41. Which of the following best describes the objective of a feasibility study?
A. To introduce new ideas, concepts, and methods to management. Economics
B. To work as a measuring device to which subsequent performances are compared and 1. As a business owner you have determined that the demand for your product is inelastic.
evaluated. Based upon this assessment, you understand that
C. To determine whether there is economic and functional justification for undertaking a A. increasing the price of your product will increase competition.
new project or updating existing capabilities. B. increasing the price of your product will increase total revenue.
D. To improve a company’s use of its capabilities and resources, the primary purpose of C. decreasing the price of your product will increase total revenue.
which is to achieve the objectives of the organization. D. increasing the price of your product will have no effect on total revenue.
9. In macroeconomic terms, aggregate demand is the
A. demand for money by the community in a period of full employment. Variable costs 15,840,000 15,840,000
B. total expenditure on capital goods by entrepreneurs during a period of full employment. Contribution margin P10,560,000 P 8,160,000
C. demand that is needed if a country’s economy is to operate at optimum level and the Fixed costs 3,696,000 3,168,000
level of investment is to be raised. Operating income P6,864,000 P4,992,000
D. total expenditures on consumer goods and investment, including government and foreign
expenditures, during a given period. 6. Answer is D. Pambundok should be chosen because it is more profitable at the sales level of
P6,000 units. Its margin of safety would be:
40. When the level of disposable income is P40,000, the level of consumption is P38,000. When Margin of safety 65% (6,864,000 ÷10,560,000)
the level of disposable income increases to P48,000, the level of consumption increase by Sales 26,400,000
P6,000. What is the marginal propensity to consume? Margin of safety in pesos 17,160,000
A. 0.75 C. 1.16
B. 0.95 D. 1.33 7. Answer is (D)
Pambundok Pangkarera
Quantity 5,600 8,800
1. Answer is (D). Sales 24,640,000 35,200,000
Fixed costs P585,000 Variable costs
÷ FC per unit 6.50 (P9.00 – P2.50) Contribution margin 40% 34%
Number of units sold 90,000 Fixed costs 15% 3,696,000 9% 3,168,000
Operating income 25% 25%
2. Answer is (A) Accordingly, the projected sales per year is between 4,500 units and 6,500 units of either
Contribution margin P720,000 (80,000 x P9) model. If the desired profit rate is 25%, the company has to sell 5,600 units of Pambundok
Less present fixed costs 585,000 (P360,000 + 225,000) Bike, which is within the projected sales range. Pangkarera, however, requires sales of 8,800
Maximum advertising expense P135,000 units, a figure that is not within the relevant range. Hence, the company will be obliged to sell
Pambundok.
3. Answer is (C).
Pambundok Pangkarera 8. Answer is (C).
Fixed costs P3,696,000 P3,168,000 Absorption costing income P90,000
÷ CM ratio 40% 34% Variable costing income 85,500
Breakeven point P9,240,000 P9,317,647 Difference in income P 4,500
Fixed overhead cost per unit ÷ 1.50
4. Answer is (C). Increase in inventory 3,000
Difference in fixed costs 528,000 (3,696,000 – 3,168,000)
Difference in CM ratio ÷ 6% (40% - 34%) 9. Answer is (A).
Point of indifference P8,800,000 Ending inventory 6,000 (60,000 – 54,000)
Variable product cost per unit x P114
5. Answer is (D). Cost of ending inventory 684,000
Pambundok Pangkarera
Sales P26,400,000 P24,000,000 10. Answer is (B)
Units sold 54,000 17. Answer is (C). 20,000 + 2,500 – 2000 = 20,500 cues
Product cost, absorption costing 127.50 (114 + 810,000/60,000)
Cost of goods sold P6,885,000 18. Answer is (C). 20,500 x P4 = P82,000; 20,500 x P8 =P164,000; 20,500 x P1.60 = P32,800
38. Answer is (C). An increase in conformance costs (prevention and appraisal) resulted in a
higher quality product and a decrease in non-conformance costs or failure costs.
2015 2016 Peso Change % Change
Prevention costs P 125,000 P187,500 P62,500 50%
Appraisal costs 131,250 196,875 65,625 50%
Internal failure costs 118,750 71,250 (47,500) (40%)
External failure costs 750,000 388,125 (361,875) (48%)
Total P1,125,000 P843,750 (P281,250) (25%)
Cost of repairs or replacement of returned units are external failure costs, which
decreased by 48%.
Costs of downtime on machinery while rework is being done are internal failure costs,
which decreased by 40%
The increase in prevention cost was not solely responsible for the decrease in quality
costs. The other conformance costs, i.e., the appraisal costs, likewise increased, which
also contributed to the decrease in total quality costs.