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OVERVIEW Management Advisory Services 1. The following following characterize management advisory services services except A. involve involve decisio decision n for the future future B. broader broader in scope scope and varied varied in nature nature C. utilize more junior staff than senior members members of the the firm D. relate to specific specific problems where expert help help is required required 2. Which Which of the following following is not classifiab classifiable le as a managemen managementt advisory advisory service by CPA?
fixed costs costs for P50,000 P50,000 units. variable cost per unit of output? A. P1.60 Sign B. P1up .67 to vote on this title
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How much is C. P3.00 D. P5.00
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COST-VOLUME-PROFIT COST-VOLUME-PROFIT ANALYSIS Breakeven Point 5. Scrambled Scrambled Brain Brain Compan Company y has fixed fixed costs of of P90,000 P90,000.. At a sales volume of P300,000, return on sales is 10%; at a P500,000 volume, return on sales is 22%. What is the break-even volume? volume? A. P1 P120,000 C. P2 P225,000* B. P2 P200,000 D. P4 P450,000 6. Bush Electronics, Electronics, Inc. had the following following sales sales results for 2004: 2004:
pairs) Income tax rate Glareless Company estimates that its direct labo Sign up to vote on How thismany title units will Glarele 8 percent next year. Glarele year to reach breakeven? Not useful C. 83,572 u A. Useful 97,500 units B. 101, 101,74 740 0 units units D. 86,2 86,250 50 uni
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8. Madel Company Company manufactu manufactures res a single single electronic electronic product called called Walastik. Walastik sells for P900 P900 per unit. In 2000, 2000, the following following variable costs were incurred to produce each Walastik device. Direct labor P180 Direct materials 240 Factory overhead 105 Selling costs 75 Total variable costs P600 Madel is subject to 40 percent income tax rate, and annual fixed
P39,000. P39,000. Six-Two’s gross margin on sales is 25 estimates that 60 percent of its Sunday sales to not ope made on other days days if the stores were Sign upvolume to voteofon this sales title that would be ne one-day Sunday to attain the same weekly operating income as Useful Not useful week is A. P6,000 C. P7,500 B. P5,000 D. P4,500
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11.Gorilla 11.Gorilla,, Co. provides provides two products, products, M and W. M accounts accounts for 60 percent of total sales, variable cost as a percentage of selling price are 60% for M and 85% for W. Total fixed costs are P225,000. If fixed costs will increase by 30 percent, what amount of peso sales would be necessary to generate an operating profit of P48,000? A. P1,350,000 C. P1,135,000 B. P4 P486,425 D. P9 P910,000 12.Mount Park, Inc. had the following economic information for the year
If Larz wishes to maintain the same contribution implementing the changes, what selling price must it charge next year to cover the increased m Sign A. P2up 7.00to vote on this title C. P32.50 B. P25.00 D. P28.33
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Point of Indifference 14.Ravine Ski Company recently expanded its manufacturing capacity to allow it to produce up to 15,000 pairs of cross-country skis of either the mountai mountainee neerin ring g model model or the touring touring model. model. The sales sales department assures management that it can sell between 9,000 and 13,000 pairs pairs (units) of either product this year. Because the models are very similar, Ravine Ski will produce only one of the two models. The information below was was compiled by the accounting accounting department. Mountaineering Touring
A. 7,365 B. 4,092
C. 10,380 D. 12,275
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16.BM Motors, Inc. employs 40 sales personnel to market its line of luxury automobiles. The average car sells for P1,200,000 P1,200,000 and a 6% commission is paid to the salesperson. BM Motors is considering considering a change change to a commis commissio sion n arrang arrangeme ement nt that that would would pay each each salesperson a salary of P24,000 P24,000 per month plus a commission of 2% of the sales made by that salesperson. The amount of total car sales at which BM Motors would be indifferent as to which plan to select is A. P22,500,000 C. P24,000,000
18.If fixed costs increase while variable cost per uni the contribution margin will be A. lower C. unchang Sign B. hi higup herto vote on this title D. un unpredic
Useful Notcompetitors useful rs within the sam 19.Firm D and Firm S are competito produces its product product using large amounts of direc replaced direct labor with with investment in machi for both firms are fifteen percent less than in the statement regarding projected profits is true?
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Contribution margin P140,000 Fixed costs 105,000 Net income P 35,000 Management is unhappy with the results and plans to make some changes for next year. If management implements implements a new marketing program, program, fixed costs are expected to increase increase by P19,20 P19,200 0 and variable costs to increase by P1 per unit. unit. Unit sales are expected to increase by 15 percent. percent. What is the effect on income income if the foregoing changes are implemented? f f
If net income after taxes is to remain the sam candy increases but no increase in the sales p sell? many boxes of candy must Candyman Sign A. 48 48up 0,00to 0 vote on this title C. 27,600 B. 40 400,000 D. 29,300
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Margin of Safety 24.Claremont Company had is a manufacturer of it line. It had sales of P400,000 P400,000 for 2002 with a c ratio of 20 perc Its margin of safety ratio wa
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Degree of Operating Leverage 26.A very high operating leverage indicates that a firm A. has high fixed costs B. has a high high net income income C. has high high variab variable le costs costs D. is operating close to its breakeven breakeven point 27.The Didang Company has an operating leverage of 2. Sales for 2001 are P2,000,000 P2,000,000 with a contribution margin margin of P1,000,000. P1,000,000. Sales are expected to be P3,000,000 P3,000,000 in 20 Net income for 2002 can be
Repairs and maintenance General administrative services Rent Sign title Billinup gs ato nd vote collecon tionthis s Bad debt expense Not useful OtUseful her
5,
40, 47, 18, P262, The only personnel directly employed by the Pediatr supervisi supervising ng nurses, nurses, nurses, and aides. The hos
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29.The contribution margin per patient day is A. P49.92 C. P50.00 B. P52.50 D. P52.00 30.How many patient days are necessary to cover fixed costs for bed capacity and for supervisory nurses? A. 9,500 C. 12,500 B. 11,500 D. 10,500 31.The number of patient days needed to cover total costs is
Casserole has noticed that expenses for utilities and rather constant. Ms. Casserole Casserole increased her busi d since 1 and 2001. 2001. Profits have more than doubled double Sign to votewhy on this title does not up understand profits have increased faste A projected income statement for the year ended D Useful Not useful prepared by the accountant, is shown below:
Sales Cost of food sold Wages & fringe benefits:
P28,
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VARIABLE COSTING VS. ABSORPTION COSTING Absorption Costing 38.When a firm prepares financial reports by using absorption costing, it may find that A. profits will will always increase with with increase in sales. B. profits will will always decrease with with decreases in sales. C. profit profit may decrease decrease with with incre increase ased d sales sales even if there there is no change in selling price and costs. D. decreased output and and constant sales result in increased increased profit.
Trinkets estimates estimates its sales for the coming year The expected cost of goods sold for the coming ye A. P1,265,000 C. P1,115,0 Sign on this title D. P 700,0 B. P1up ,565to ,00vote 0
Useful Not useful(nonstandard) abso 42.Nirvana Co. employs a normal The information below is from the financial reco for the year. Total manufacturing manufacturing costs were P2,500,0 P2,500,000. 00. •
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43.Black Forest, Inc. Inc. began operations on January 3. Standard costs were established established in early January assuming assuming a normal normal productio production n volume volume of 160,00 160,000 0 units. However, However, Black Forest Forest produced produced only 140,000 units of product and sold 100,000 units at a selling price of P180 per unit during the year. Variable costs totaled P7,000,0 P7,000,000, 00, of which 60% were manufacturing manufacturing and 40% were selling. selling. Fixed costs totaled P11,200,000, P11,200,000, of which 50% were manufacturing and 50% were selling. Black Forest had no raw materials materials or work-in-process work-in-process inventories at December December 31. Actual input prices and quantities per unit of product were equal to standard.
Variable overhead Fixed Variable selling and adm. Sign on Fixed up sellito ng vote and ad m.this
title
Usefulare closed Not Variances to useful cost of sales monthly monthly
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How much are the net income under absorption costing and variable costing methods? A. B. C. D. Absorption P144,000 P143,000 144,000 142,000 Variable 143,000 144,000 142,000 144,000 45.Lord Industries manufactures a single single product. Variable production production costs are P10 and fixed production costs are P75,000. Lord uses a normal activity of 10,000 units to set its standard costs. Lord began
A. A flexible budget budget includes includes only variable variable cos includes only fixed costs. a static B. A flexible budget includes all costs, Sign upcosts. to vote on this title fixed C. A flexible budget gives different allowances allowances fo Useful useful activity, a static Not budget does not. D. There is no difference between the two.
Setting Standards 48.Which of the following statements about the selec
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What is the total manufactur manufacturing ing overhead application application rate if the Releva Relevant nt Compan Company y has to operat operate e at 80 percent percent of the stated stated capacity? A. P24.00 C. P24.60 B. P27. P27.00 00 D. P21. P21.60 60
Raw Materials Variances 51.Derby Co. uses a standard costing system in connection with the manufactu manufacture re of a line of T-shirts. T-shirts. Each unit of finished finished product product contains 2 yards yards of direct material 0 percent direct
B. 1,066
D. 1,100
Direct Labor Variance Sign up voteunfavorable on this title 55.Anne hadto a P750 direct labor rate va favorable efficiency efficiency variance. Anne paid P7, Useful Not usefuldirect labor wage r labor. What was the standard A. P8.94 C. P7.94 B. P8.00 D. P7.80
56.The flexible budget for the month of May 2002 w
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Two-Way Overhead Variances 57.Karla Company uses an annual cost formula for overhead of P72,000 + P1.60 for each direct direct labor hour worked. For the upcoming month month Karla plans plans to manufactu manufacture re 96,000 96,000 units. Each unit requires requires five minutes of direct labor. Karla’s budgeted overhead overhead for the month is A. P1 P12,800 C. P84,800 B. P1 P18,800 D. P774,000 58.If actual overhead overhead is P14,00 P14,000, 0, overhead overhead applied applied is P13,40 P13,400, 0, and overhead budgeted for the standard hours allowed is P15,600, then
The budget (controllable) (controllable) variance variance for June June is A. P1,000 favorable C. P6,000 f B. P1,000 P1,000 unfavorab unfavorable le D. P6,000 P6,000 unfa
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61.South Company has total budgeted fixed costs Useful of 19,500 Notunits useful production resulted in a P3,000 variance. What normal capacity was used to d overhead rate? A. 16,500 C. 20,313
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64.The amount of overhead volume variance for Lucky Company is A. P250 unfavorable C. P750 Unfavorable B. P500 unfavorable D. P375 Unfavorable the preceding preceding data for Luck
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Normal activity in direct labor hours 60,000 In March, Lucky Company produced 2,450 units with actual direct labor hours used of 5,050. 5,050. Actual overhead costs for for the month amounted to P37,245 (Fixed overhead is as budgeted.)
65.Usi
Mas
any, the
ollable ollable
68.The Virgin Island Company has standard variable c Materials, 3 pounds at P4.00 per p ound Sign Laup bor,to 2 hvote ours Pon 10.this 00 petitle r hour Variable overhead, P7.50 per labor hour Useful Not useful Total During September, Virgin Island produced 6,000 labor hours at a total wage of P113,870 and in variable overhead. The variable overhead varian
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Questions 71 thru 73 are based on the following information. The Lustre Company Company produces its only product, product, Kool Chewing Chewing Gum. The standard overhead cost for one pack of the product follows: Fixed overhead (1.50 hours at P18.00) P27.00 Variable overhead (1.50 hours at P10.00) 15.00 Total application application rate P42.00 Lustre uses expected volume volume of 20,000 units. During the year, Lustre used 31,500 direct labor hours for the production of 20,000 units. Actual
73.The overhead efficiency variance is A. P22,500 Favorable C. P22,500 B. P15,000 Favorable D. P15,000
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Gross Profit Variance Analysis Useful Not 74.Vicki 74.Vicki Division Division operates opera tes useful as a revenue revenue center product. Data for May 2000 are as follows: Actua Sales in units 10,000
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Return on Investment 77.If 77.If the invest investmen mentt turnov turnover er decrea decreased sed by 10 percen percentt and ROS decreased by 30 percent, the ROI would A. increase by 30% C. decrease by 37% B. decrease by 10% D. decrease by 33.3% 78.Return on investment (ROI) is a term often used to express income earned earned on capital invested invested in a business business unit. unit. A company’s company’s ROI would be increased if sales
What is the minimum price that Jar could accep still maintain its expected residual income? A. P5.00 C. P4.75 Sign B. P5up .60 to vote on this title D. P9.00
Useful Not useful Income Return on Investment & Residual 81.Scotch Co. has the following results for the year: Sales Variable expenses i d
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82.The following information relates to two projects of Rica Corporation. Project A Project B Operating income P2,500,000 P600,000 Residual income P 500,000 P200,000 ROI 10% 12% Retu Return rn on resi residu dual al 2% 4% investment A bonus bonus of P50,00 P50,000 0 will be paid to the manager whose whose project project contri contribut buted ed most to the overall overall perform performanc ance e of the firm. firm. The
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RELEVANT COSTING Basic Concepts 85.The 85.The potent potential ial benefi benefitt that that may be obtain obtained ed from from follow following ing an alternative course of action is called A. opportunity be benefit C. relevant co cost B. opportunity cost D. sunk cost 86.Opportunity costs: A. Are treated as period costs under variable costing. costing. Have already been incurred as a result of past action
off (all variable) Selling price/lb after further processing The cost of the joint process process is P85,000. P85,000. Sign upcurrently to votesells Ottawa son ells this bothtitle products at the sp makes decisions which maximizes profit, Ottawa’s Not useful by Useful A. P1 P16,000 C. P5 P50,000 B. P4,000 D. P10,000
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Obsolete Inventories 89.The cost to manufacture an unfinished unit is P40 (P30 variable and P10 fixed). fixed). The selling selling price price per per unit is P50. P50. The company company has has unused production capacity and has determined that units could be finished and sold for P65 with an increase in variable costs of 40%. What is the additional net income per unit to be gained by finishing the unit? A. P3 C. P15 B. P10 D. P12
B. 20,000 20,000 blenders blenders and 15,000 15,000 electric mixer other units as needed units a C. 20,000 blenders and purchase all other Sign up toelectric vote on thisand title D. 28,000 mixers purchase all other other u
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ABC Electroni Electronics cs has has the following following standard standard costs costs and other other data: data: Part Beta Part Zet a Direct materials P 4.00 P80.00 Direct labor 10.00 47.00 Factory overhead 40.00 20.00 Unit standard cost P54.00 P147.00 Units needed per year 6,000 8,000 Machine hours per unit 4 2 Unit cost if purchased P50 P150.00
The sales manager has had a P160,000 P160,000 increase in th for advertising and wants to apply the money to t for one an product. The products are not substitutes substitutes up tocustomers. vote on this title theSign company’s The manager may devote the entire P160,000 P160,000 to Useful for either XY-7 or BD-4.Not useful 93.The minimum increase in peso sales of either XY to offset the increased advertising is A. B.
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94.Suppose Brynles has only 100,000 machine hours that can be made available available to produce produce additional additional units units of XY-7 and BD-4. BD-4. If the potential increase in sales units for either product resulting from advertising is far in excess of this production capacity, which product should should be advert advertis ised ed and what what is the estim estimate ated d increa increase se in contribution margin earned? A. Product Product XY-7 should be produced, produced, yielding yielding a contributio contribution n margin of P75,000. B. Product Product XY-7 should be produced, produced, yielding yielding a contributio contribution n margin of P133,333.
The minimum break-even price per unit to special sale is A. P71 C. P69 Sign B. P7up 5 to vote on this title D. P84
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Make or Buy 97.For the past 12 years, the Blue Company has produced the small electric motors that fit into its main product line of dental drilling equipment. As material costs have have steadily increased, the the controller of the Blue Company is reviewing the decision to continue to make the small motors and has identified the following facts: 1. The equipment equipment used to manufactu manufacture re the electric motors motors has a book value of P150,000. 2. The space now occupie occupied d by the electric electric motor manufact manufacturin uring g department could be used to eliminate the need for
production. The facilities now being being used to prod a fixed monthly costs of P150,000 and a capacity Part MR2 units per per month. If Elly were to buy Sign up on title suppli supplier, er, to thevote facili facilitie ties sthis would wou ld be idle, idle, but continue continue at 40 percent of their present present amo Useful costs of Not useful production Part MR24 are P11 per unit. If Elly Industries Industries is able to obtain Part MR24 MR24 ea realize realize a net benefit by purchasin purchasing g Part MR2 supplier only if the supplier’s unit price is less than
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100. 100. Below Below are a company’s company’s monthly monthly unit unit costs to manufact manufacture ure and market a particular product. Manufacturing Costs: Direct materials P2.00 Direct labor 2.40 Variable indirect 1.60 Fixed indirect 1.00 Marketing Costs: Variable 3.00 Fixed 1.50
102. 102. The Rural Cooper Cooperativ ative, e, Inc. produce produces s 1,00 month. The total manufacturing costs costs of the part Direct materials Sign on this title Dirup ect to labvote or Variable overhead Useful Fixed overhead Not useful Total manufacturing manufacturing cost An outside supplier supplier has offered to supply the par is estimated that 20% of the fixed overhead ass
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The company’s fixed costs totaled P40,000, of which P8,000 can be avoided if Item 38B is dropped and P25,000 can be avoided if Item 40F is dropped. Product margin for Item 40F is A. P3,200 C. P(2,000) B. P7,000 D. P10,000
Shut Down Point 105. 105. Bulusan Bulusan Company Company normally normally produces produces and sells sells 30,000 30,000 units units of E14 each each month. month. E14 E14 is a small electr electric ical al relay relay used in the automotive indus rt in various products The
A. offset the loan against against any investment investment in inve required by the project investmen B. show the loan loan as an increase in the Sign up title C. show sho w to thevote loanon as this a cash cas h outflow outflow in the s project’s life D. Useful ignore ignore the the loan loan Not useful
107. 107. When When compar compared ed Net Presen Presentt Value Value metho Return in terms of reinvestment of cash flows, NP What are the reinvestment rate for each method?
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of return on the initial investment is expected to be 12%. How much will the new machine cost? A. P3 P300,000 C. P6 P660,000 B. P5 P550,000 D. P7 P792,000 110. 110. Green Meadows Meadows Foundati Foundation on (GMF), (GMF), a tax-exemp tax-exemptt organization, organization, invested P200,000 P200,000 in a five-year project at the beginning of the year. GMF estimates that the annual cash savings from this project will amount to P65,000. P65,000. Tax and book depreciation on the project will will be 0 per year for five years. On investments of this type, GM
5
700,000
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What is the bailout period for the project? A. 3. 3.25 yrs. C. 2. 2.73 yrs B. 2.5 yrs D. 2.4 yrs.
Net Present Value 113. 113. Panama Panama Insuran Insurance ce Compan Company’ y’s s manage managemen mentt is consid consideri ering ng an advertisi advertising ng program program that would require require an initial initial expenditur expenditure e of P165,500 P165,500 and bring in additional sales sales over the next five years. The cost of advertisin advertising g is immediate immediately ly recognized recognized as expense. expense. The jected jected additi additi l sal in is with with
Second year Third year Fourth year Sign Fifup th yto earvote
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The present value of 1 for 5 periods at 12 percent is 3.60478. 3.60478. The present values of 1 at 12 percent at end of each period are: End of: Period Period 1 – 0.8928, 0.8928, Period Period 2 - 0.7971 0.79719, 9, Period Period 3 0.71178, Period 4 - 0.63552, Period 5 - 0.56743 Had Roxas used straight-line method of depreciation, what is the differ differenc ence e in net present present value value provid provided ed by the machine machine at a discount rate of 12 percent? A. Increase of P9,750 C. Decrease of P24,376 B. Decrease of P9,750 D. Increase of P24,376
periods is 0.56743; present value of annuity o 3.60478. is sound Suppose the 20,000 estimated volume Sign to vote thisprice title(rounded to near doubt.up What is theon selling earn a 12 percent internal rate of return? Not useful C. P70.00 A. Useful P81.00 B. P85.00 D. P90.00
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118. 118. Payb Paybac ack k Comp Compan any y is cons consid ider erin ing g the the purc purcha hase se of a copi copier er machine machine for P42,825. P42,825. The copier machine machine will be expected expected to be economically productive productive for 4 years. The salvage value at the end of 4 years is negligible. The machine is expected to provide 15 percent internal rate of return. The company is subject to 40 percent income income tax rate. The present value of an ordinary annuity of 1 for 4 periods is 2.85498. In order to realize the IRR of 15 percent, how much is the estimated before-tax cash inflow to be provided by the machine?
121. 121. The NPV and IRR methods methods give A. the same decision decision (accept or reject) for an exclusi B. the same choice choice from among among mutually Sign up to rankings votengs onofthis title with C. different ranki projects with unequal D. the same rankings rankings of projects with with different re
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122. 122. In choosi choosing ng from from among among mutual mutually ly exclus exclusive ive investm investment ents s the manager should normally select the one with t he highest A. NP NPV C. pa payback reciprocal B. IIR RR D. book rate of return 123. 123. Why do the NPV NPV method method and the IRR method method sometim sometimes es produce produce different rankings of mutually exclusive investment projects? A. The NPV method method does not assume reinvest reinvestment ment of cash flows flows while the IRR method assumes the cash flows will be reinvested at the internal rate of return.
Inte Intern rnal al rate rate of 11% 13% return select du Which project(s) should Investors, Inc. Sign up toeach votebudgeted on this amount title of funds? year under No Budget P600,000Available Useful RestrictionNot useful Funds A. Projects 2,3, & 4 Projects 3 & 4 B. Projects 1, 2, & 3 Projects 2, 3 & 4 C. Projects 1, 3, & 4 Projects 2 & 3
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Comprehensive 125. 125. Which Which of the following following combin combination ations s is possible? possible? Profitability Index NPV IRR A. greater than 1 positive equals cost of capital B. greater than 1 negative less than cost of capital C. less than 1 negative less than cost of capital* D. less than 1 positive less than cost of
Estim Estimate ated d collec collectio tions ns in May for credit credit sal Esti Estima mate ted d col colle lect ctio ions ns in May May for for cre credi ditt sale sale sales p Estimated collections in May for credit SignEstimated up to vote on this titlefor uncollectibl write-offs in May Estimated provision for bad debts in May for c
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What are the estimated estimated cash receipts receipts from collections in May? A. P1 P142,000 C. P1 P150,000
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129. 129. At the beginni beginning ng of the curren currentt month, month, Rose had had P100, P100,000 000.. Cash disbur disbursem sement ents s were were P2,60 P2,600, 0,00 000 0 and cash cash collec collectio tions ns were were P2,850,000. P2,850,000. Rose invests all excess cash cash in a money market fund and has a line of credit to cover cash deficiencies. If Rose wishes to start the next month with P150,000, Rose must A. invest P200,000 C. invest P350,000 B. borrow P400,000 D. do nothing
FINANCIAL STATEMENT ANALYSIS Horizontal Analysis
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its dividends increased increased by 15% in 2003. 2003. Taylo ratio for 2003 was A. 75.0% C. 47.9% Sign B. 52up .3%to vote on this title D. 41.7%
Not 134. 134. Useful Glo expects expects sales for for useful 2002 to be P2,000 P2,000,00 ,00 on sales sales of 10%. 10%. The divide dividend nd payout payout rate i stockh stockhold olders ers’’ equity equity was was P850 P850,0 ,000 00 and projected to be P300,000 at the end of 2002.
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What are the total equities available if the ratio of long-term debt to stockholders’ equity is 60%? A. P1,788,000 C. P2,046,000 B. P1,980,000 D. P8 P 858,000 135. 135. The followi following ng were reflecte reflected d from from the records records of War War Freak Freak Company: Earnings before interest and taxes P1,250,000 Interest expense 250,000 f d di id d
Return on equity (ROE) The Bryan Company’s Company’s debt ratio is A. 40% C. 60% Sign B. 35up % to vote on this title D. 65%
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The following following data were obtained obtained from the records of Trend, Inc.: Current ratio (at year end) 1.5 to 1 Inventory turnover based on sales and ending inventory15 times Inventory Inventory turnover turnover based on cost of goods goods sold and ending inventory 10.5 times Gross margin for 2002 P315,000 What was Trend, Inc.’s December 31, 2002 balance in the Inventory account? A. P1 P138,000 C. P1 P140,000
Ratio Working Capital
None
Increase
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D
141. 141. The days’ salessales-inin-rec receiv eivabl able e ratio ratio will Useful Not useful company A. uses a natural business year for its accounting B. uses a calendar year year for its accounting period C. uses average receivable in the ratio ratio calculat
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WORKING CAPITAL MANAGEMENT Working Capital Policy 142. 142. As a compan company y becom becomes es more conserv conservati ative ve with respect respect to working capital policy, it would tend to have a(n) A. increase in the ratio of current current liabilities liabilities to noncurrent noncurrent liabilities. liabilities. B. decrease decrease in the the operating operating cycle. cycle. C. decrease decrease in the the operating operating cycle. cycle. D. increase in the ratio of current assets to noncurrent liabilities.* liabilities.* any foll
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and aggre ive financi financing ng polic
in its
B. Yes; the benefits benefits of the lock-box lock-box system system excee C. No; the benefit benefit is only only P10,000 P10,000.. D. No; the firm would would lose P5,000 P5,000 per year if the s
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Receivables Management 146. 146. It is held that that the level level of accounts accounts receivab receivable le that a firm has has or holds reflects both the volume of a firm’s sales on account and a firm’s firm’s credit policies. policies. Which Which one of the following following items items is not considered as part of a firm’s “credit policy”? A. The maximum maximum risk group group to which which credit should should be extended. B. The extent extent (in terms of money) money) to which a firm will will go to collect collect an account. C. The length of time for which credit is extended. The size of the discount that will be offered.
annually. annually. Variable Variable costs costs are 60 percent of sal carrying receivables receivables is 12 percent. Assume a tax and 360 days per year. Sign to vote on increment this mental titleal investmen What up would be the incre investmen change were made? Useful Not useful C. P( A. P( P (16,667) P (48,611 B. P( P (27,167) D. P( P(45,833
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Inventory Management 150. 150. Which Which of the following following items items is irrelevant irrelevant for a company company that is attempting to minimize the cost of the stockout? A. Cos t o f p la la ci ci ng ng a n o rd rd er er C. S to to ra ra ge ge c os ost of in in ve ve nt nt or or y B. Contr Contribu ibutio tion n marg margin in on lost lost sale sales s D. Size Size of of the the safe safety ty stock stock 151. 151. When a specifie specified d level of safety safety stock stock is carried carried for an item in inventory, the average inventory level for that item A. decreased by the amount amount of the safety stock. stock. is one-half the level level of the safety stock
The product is restocked at the start of each da desires a 90% service level in satisfying sales d stock balance for each day should be Sign A. 24up 5 to vote on this title C. 315 B. 300 D. 220
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154. 154. Each Each stockou stockoutt of a product product sold by AFM Co occurrence. The company’s carrying carrying cost per un per year, and the company orders 1,500 units of year at a cost of 0 per order. The probab
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157. 157. The Dean Dean Company Company has an outstan outstandin ding g 1 year year bank loan of P800,0 P800,000 00 at a stated interest interest rate of 8%. In addition, addition, Dean is required to maintain a 20% compensating balance in its checking account. Assuming Dean would would normally maintain maintain a zero balance in its checking account, the effective interest rate on the loan is A. 8.0% C. 11.11% B. 10.0% D. 6.4%
COST OF CAPITAL Cost of Debt 158. 158. The Maru Compan Company’s y’s bonds bonds have 5 years re Sign upistopaid vote on thisthe title Interest annually; bonds have a P1,0 the coupon interest rate is 9 percent. Useful Notyield useful What is the estimated to maturity of the bo market price of P850? A. 10.64 percent C. 11.76 pe B. 11.00 percent (?) D. 10.00 pe
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162. 162. Galvez Galvez Compan Company y expect expects s next next year’s year’s after-t after-tax ax income income to be P7,500,000. The firm’s debt ratio is current ly 40 40 percent . Galvez has P6,000,000 of profitable investment opportunities, and it wishes to maintain its existing existing debt ratio. According to the residual residual dividend policy, what is the expected dividend payout ratio next year? A. 52.0 percent C. 48.0 percent B. 75.0 percent D. 25.0 percent Glenda C
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0 million million internally internally which which
166. A beverage stand can sell either soft drinks drinks or day. If the stand sells soft drinks and the weathe Sign up on this titlethe profit will be P P2,500; P2,500 ; ifto thevote weather is cold, sells coffee and the weather is hot, it will make P1 Useful Not is cold, the profit will be useful P2,000.The probability o given day at this time is 60%. The expected payoff for either selling coffee expected payoff if the vendor has perfect informa
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ACTIVITY-BASED COSTING 168. 168. A cost system system that that first traces traces costs costs to activities activities and and then traces traces cost from activities to products A. Job or order co cost sy system. C. Act iv ivity-based co cost sy system. B. Process cost system. D. Flexible cost system. 169. 169. The last last step in activityactivity-based based costing costing is to to A. identify identify the major activitie activities s that pertain to the manufacture manufacture of specific products allocate manufacturing manufacturing overhead overhead costs to activity cost cost pools
172. 172. A company company that uses activityactivity-based based costing costing t costs A. will usually usually have more than one variable over Sign to vote on this title itsup standard costs B. cannot compute compute variable overhead efficiency efficiency v Not useful C. Useful will have less information inform ation about about the profita profit products D. all of of the abov above e
Cla ify the follow following ing as volume volume (unit) (unit)
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Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500. Using activity-based costing and the appropriate activity drivers, t he total cost of the potential job would be A. P2,400 C. P7,400 B. P3,600 D. P7,750
QUALITY COST 175. 175. The cost of statis statistic tical al quality quality control control in a produc productt qualit quality y cost cost system is
B. increase the secondary secondary storage capacity. C. obtain software software that will facilitate facilitate data retrieva the data D. integrate the accounting accounting system into
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180. 180. A syst system em with with seve severa rall comp comput uter ers s that that Useful Not useful communic comm unicatio ation n and data transmiss transmission ion purpo each computer to process its own data is a A. dist distri ribu bute ted d data data proc proces essi sing ng netw networ ork k C. network li d k l id
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182. 182. An integrat integrated ed set of comput computer er programs programs that facilit facilitate ates s the creation, manipulation, and querying of integrated files is called a(n) A. translator C. operating system B. database database manageme management nt system system D. flat file system system 183. 183. A. B. C.
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Turnar Turnaroun ound d docum document ents s generally circulate only only within the computer center. can be read and processed only by the computer. are generated by by the computer and eventually return to it. are only used internally internally in an organization. organization.
101. A 111. A 121. A 102. A 112. B 122. A 103. B 113. A 123. B title 104Sign . B up to1vote 14. B on this12 4. A 105. A 115. D 125. C Useful 116. D Not useful 106. D 126. B 107. B 117. B 127. C 108. B 118. A 128. D 109. A 119. A 129. A
131. 132. 133. 134. 135. 136. 137. 138. 139.
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1. Standa Standard rd cost cost can, if properly used, help motivate employees 2. A compan company y would would most most likely likely have an unfavo unfavorab rable le labor labor rate variance and a favorable labor efficiency if the if the mix of workers used in the production process was more experienced than the normal mix h
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TRUE STATEMENTS
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expected annual capacity level has traditionally been used to
11.When using one of the discounted cash flow meth desirability of a capital budgeting project, the m the project under consideration is not an importan
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12.In capital budgeting, a firm’s cost of capital is freq Useful Not useful discount rate
13. The net present value method assumes that all c immediately reinvested at the discount rate
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21.As the marginal tax rate goes up, the benefit from the depreciation tax shield increases
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22.Fixed cost is relevant if it is avoidable 23.When a scarce resource, such as space, exists in an organization, the criterion that should be used to determine production is contribution margin per unit of scarce resource 24.A cost driver is defined as a causal factor that increases the total cost
32. The fixed overhead variance variance would be the sam capacity or denominator used.
Signfixed up to vote on this title 33.The overhead volume variance is the least for control purposes. purposes. However, However, it is the most Useful plant utilization. Not useful evaluating
34.Fixed overhead costs are mostly incurred to prov produce and are best controlled on a total basis a originally negotiated.
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42.At breakeven point the contribution contribution margin equals fixed costs. costs. After the level level of volume volume exceed exceeds s the breake breakeven ven point, point, the total total contribution margin exceeds the total fixed costs.
52.Fixed costs are ignored in allocating scarce reso are unaffected by the allocation of scarce resourc
43.As projected net income increases the degree of operating leverage declines.
Usefulplanning Not useful by top managem 54.Strategic as assumed establishing long-term plans.
44.A managerial preference for a very low degree of operating leverage might indicate that a decrease in sales volume is expected.
Sign upprogramming to vote on model this title 53.A linear must have only one o
55.The master budget is a static budget because it is level of production and sales.
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63. A cost classified according to its activity-related activity-related behavior is a fixed cost. 64. 64. The distin distincti ction on betwee between n direct direct and indire indirect ct costs costs depend depends s on whether a cost can be conveniently and physically traced to a cost object under consideration. consideration. 65. An accounting system that focuses on transactions transactions is a traditional accounting system.
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