REGIONAL MID YEAR CONVENTION

ACADEMICS ARM
MAS CUP
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EASY ROUND
1. Panghulo Company manufactures part H for use in its production cycle. The cost per
unit for 3,000 units of Part N are
Direct labor P50 Fixed overhead P30
Direct P10 Variable overhead P20
materials
Quebadia Company has offered to sell Panghulo 3,000 units of part H for P100 per unit.
If Panghulo accepts Quebadas offer, the released facilities could be used to save
P70,000 in relevant costs in its manufacture of Part I. In addition, P15 per unit of
fixed overhead applied to Part H would be totally eliminated.
The alternative that is more desirable and the corresponding net cost savings is
a. b. c. d.
Alternative Manufacture Manufacture Buy Buy
Net cost savings P10,000 P20,000 P55,000 P85,000

2. Tagaytay Open-Air Flea Market is along the highway leading to Taal Vista Lodge.
Arnel has a stall which specializes in hand-crafted fruit baskets that sell for P60
each. Daily fixed costs are P15,000 and variable costs are P30 per basket. An
average of 750 baskets are sold each day. Arnel has a capacity of 800 baskets per
day. By closing time, yesterday, a bus load of teachers who attended a seminar at
the Development Academy of the Philippines stopped by Arnels stall. Collectively,
they offered Arnel P1,500 for 40 baskets. Arnel should have
a. Rejected the offer since he could have lost P500.
b. Rejected the offer since he could have lost P900.
c. Accepted the offer since he could have P300 contribution margin.
d. Accepted the offer since he could have P700 contribution margin.

3. North Bank is analyzing Belle Corp.s financial statements for a possible extension
of credit. Belles quick ratio is significantly better than the industry average.
Which of the following factors should North consider as possible limitation of
using this ratio when evaluating Belles creditworthiness?
a. Fluctuating market prices of short-term investments may adversely affect the
ratio.
b. Increasing market prices for Belles inventory may adversely affect the
ratio.
c. Belle may need to sell its available-for-sale investments to meet its current
obligations.
d. Belle may need to liquidate its inventory to meet its long-term obligations.

4. The condensed balance sheet as of December 31, 1982 of San Matias Company is given
below. Figures shown by a question mark (?) may be computed from the additional
information given:
ASSETS LIAB. & STOCKHOLDERS EQUITY
Cash P 60,000 Accounts payable ?
Trade receivable-net ? Current notes payable 40,000
Inventory ? Long-term payable ?
Fixed assets-net 252,000 Common stock 140,000
Retained earnings ?
Total Assets P 480,000 Total L & SHE P 480,000
Additional information:
Current ratio (as of Dec. 31, 1982) 1.9 to 1
Ratio of total liabilities to total stockholders equity 1.4
Inventory turnover based on sales and ending inventory 15 times
Inventory turnover based on cost of goods sold and ending 10 times
inventory
Gross margin for 1982 P500,000
The balance of retained earnings of San Matias as of December 31, 1982 is
a. P60,000 b. P140,000 c. P200,000 d. P360,000
 5. Assume Meyer Corporation is 100 percent equity financed. Calculate the return on
equity, given the following information:
(1) Earnings before taxes = $1,500
(2) Sales = $5,000
(3) Dividend payout ratio = 60%
(4) Total assets turnover = 2.0
(5) Tax rate = 30%
a. 25% b. 30% c. 35% d. 42%

AVERAGE ROUND
1. Lombardi Trucking Company has the following data:
Assets: $10,000 Interest rate: 10.0%
Debt ratio: 60.0% Total assets turnover: 2.0
Profit 3.0% Tax rate: 40%
margin:
What is Lombardis TIE ratio?
a. 0.95 b. 1.75 c. 2.10 d. 2.67

2. The manager of the Strong Division of Powers Company expects the following results
in 2003 (pesos in millions);
Sales P49.60
Variable costs 29.76
(60%)
Contribution P19.84
margin
Fixed costs 12.00
Profit P 7.84
Investment
Plant equipment P 19.51
Working capital 14.88 P34.39
ROI
(P7.84/P34.39) 22.80%
The division has a target ROI of 30%, and the manager has asked you to determine how much
sales volume the division would need to reach. He states that the sales mix is
relatively constant so variable costs should be close to 60% of sales, fixed cost and
plant and equipment should remain constant, and working capital (cash, receivables and
inventories) should vary closely with sales in the percentage reflected above.
The peso sales that the division needs in order to reach the 30% ROI target is?
A. P19,829,032 C. P44,373,871
B. P57,590,322 D. P59,510,000

3. Valecon Co. reported the following information for the year just ended:
Segment A Segment B Segment C
Pre-tax operating $ 4,000,000 $ 2,000,000 $3,000,000
income
Current assets 4,000,000 3,000,000 4,000,000
Long-term assets 16,000,000 13,000,000 8,000,000
Current 2,000,000 1,000,000 1,500,000
liabilities
If the applicable income tax rate and after-tax weighted-average cost of capital for each
segment are 30% and 10%, respectively, the segment with the highest economic value added
(EVA) is (M)
A. Segment A. C. Segment C
B. Segment B. D. Not determinable from this information
 4. The data available for the current year are given below:
Whole Co. Division 1 Division 2

Variable mfg. cost of goods sold $ 400,000 $ 220,000 $ 80,000

Unallocated costs (e.g., presidents 100,000 - -

salary)
Fixed costs controllable by Div.
Managers (e.g., advertising, engg 90,000 50,000 40,000
supervision costs)
Net revenue 1,000,000 600,000 400,000

Variable selling and administrative 130,000 70,000 60,000

costs
Fixed costs controllable by others
(e.g., depreciation, insurance) 120,000 70,000 50,000

Using the information presented above, the contribution by Division 1 was (M)
a. $190,000 c. $310,000
b. $260,000 d. $380,000

5. If the actual labor rate exceeds the standard labor rate and the actual labor hours
exceed the number of hours allowed, the labor rate variance and labor efficiency
variance will be
A. B. C. D.
Labor Rate Variance Favorable Favorable Unfavorable Unfavorable
Labor Efficiency Variance Favorable Unfavorable Favorable Unfavorable

DIFFICULT ROUND
1. Premised on past experience, Mayo Corp. adopted the following budgeted formula for
estimating shipping expenses. The companys shipments average 12 kilos per
shipment.
Shipping costs = P8,000 + (0.25 x kgs. shipped)
Planned Actual
Sales order 800 780
Shipments 800 820
Units shipped 8,000 9,000
Sales 240,000 288,000
Total kilograms shipped 9,600 12,300
The actual shipping costs for the month amounted to P10,500. The appropriate monthly
flexible budget allowance for shipping costs for purposes of performance evaluation would
be
A. P10,250 B. P11,075 C. P10,340 D. P10,400

2. Patridge Company uses a standard cost system in which it applies manufacturing

overhead to units of product on the basis of direct labor hours. The information
below is taken from the company's flexible budget for manufacturing overhead:
Percent of capacity 70% 80% 90%
Direct labor hours 21,000 24,000 27,000
Variable overhead $ 42,000 $ 48,000 $ 54,000
Fixed overhead 108,000 108,000 108,000
Total overhead $150,000 $156,000 $162,000
During the year, the company operated at exactly 80% of capacity, but applied
manufacturing overhead to products based on the 90% level. The company's fixed overhead
volume variance for the year was:
A. $6,000 U. B. $6,000 F. C. $12,000 U D. $12,000 F.
 3. Wasting Resource Co. has annual credit sales of P4 million. Its average collection
period is 40 days and bad debts are 5% of sales. The credit and collection manager
is considering instituting a stricter collection policy, whereby bad debts would be
reduced to 2% of total sales, and the average collection period would fall to 30
days. However, sales would also fall by an estimated P500,000 annually. Variable
costs are 60% of sales and the cost of carrying receivables is 12%. Assuming a tax
rate of 35% and 360 days a year, the incremental change in the profitability of the
company if stricter policy would be implemented would be
a. Zero as the positive and negative effects offset each other.
b. A reduction in net income by P70,000.
c. A reduction in net income by P38,350.
d. A reduction in net income by P35,400.

4. Harrison Company has budgeted its operations for August. No change in the inventory
level during the month is planned. Selected data based on estimated amounts are as
follows:
Net loss $(120,000)
Increase in accounts payable 48,000
Depreciation expense 42,000
Decrease in gross amounts of trade account 72,000
receivables
Purchase of equipment on 90-day credit terms 18,000
Provision for estimated warranty liability 12,000
What is the expected change in the cash position during August?
A. $18,000 decrease. C. $36,000 increase.
B. $30,000 decrease. D. $54,000 increase.

5. ALF Co. is an assisted-living facility that provides services in the form of

residential space, meals, and other occupant assistance (OOA) to its occupants.
ALF currently uses a traditional cost account system that defines the service
provided as assisted living, with service output measured in terms of occupant
days. Each occupant is charged a daily rate equal to ALFs annual cost of
providing residential space, meals and OOA divided by total occupant days.
However, an activity-based costing (ABC) analysis has revealed that occupants use
of OOA varies substantially. This analysis determined that occupants could be
grouped into three categories (low, moderate, and high usage of OOA) and that the
activity driver of OOA is nursing hours. The driver of the other activities is
occupant days. The following quantitative information was also provided:
Occupant category Annual Occupant Days Annual Nursing Hours
Low Usage 36,000 90,000
Medium Usage 18,000 90,000
High Usage 6,000 120,000
60,000 300,000
The total annual cost of OOA was $7.5 million, and the total annual cost of providing
residential space and meals was $7.2 million. Accordingly, the ABC analysis indicates
that the daily costing rate should be
a. $182.50 for occupants in the low-usage category.
b. $145.00 for occupants in the medium-usage category.
c. $245.00 for occupants in the high-usage category.
d. $620.00 for all occupants.