Escolar Documentos
Profissional Documentos
Cultura Documentos
26TH BATCH
MANAGEMENT ADVISORY SERVICES ACCT. SAMUEL U. ITCHON, JR.
2. Ideally, the number of units that should be produced in a just-in-time manufacturing system
is equal to
a. the maximum productive capacity for the current period.
b. actual customer demand for the current period.
c. budgeted customer demand for the current period.
d. budgeted customer demand for the following period
3. The projected sales price for a new product (which is still in the development stage of the
product life cycle) is P50. The company has estimated the life-cycle cost to be P30 and the
first-year cost to be P60. On this type of product, the company requires a P12 per unit
profit. What is the target cost of the new product?
a. P60 c. P38
b. P30 d. P43
Projected sales price P50
Less required profit 12
Target cost P38
5. Ivory Company has the following expected pattern of collections on credit sales: 70 percent
collected in the month of sale, 15 percent in the month after the month of sale, and 14
percent in the second month after the month of sale. The remaining 1 percent is never
collected. At the end of May, Ivory Company has the following accounts receivable
balances:
From April sales P21,000
From May sales 48,000
Ivory's expected sales for June are P150,000. What were total sales for April?
a. P150,000 c. P 70,000
b. P 72,414 d. P140,000
A/R balance from April sales P 21,000
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The actual results for the first quarter of 2015 require the following changes in the budget
assumptions:
The budgeted production for the year is expected to increase by 5,000 units.
During the first quarter, the company has already produced 25,000 units. The
balance of production will be scheduled in equal segments over the last 3 quarters
of the budget year.
The expected finished goods inventory on January 1 dropped to only 9,000 units,
but its total value will not be revised anymore. The ending inventory value is
computed using the average manufacturing cost for the year.
A new Labor Bill passed by Congress is expected to be signed into a law by the
President. The new law will take effect beginning the last quarter of the budget
year, including a provision for an increase of 8% in wage rates.
The company uses the FIFO method in valuing its materials inventory. During the
first quarter, the company purchased 27,500 units of direct materials for
P1,760,000. The remaining direct materials requirement will be purchased evenly
for the last 9 months of the budget year. Effective July 1, 2015, the beginning of
the third quarter, direct materials cost is expected to increase by 5%. The
assumptions regarding the quantity of materials inventories at the beginning and
end of the year will remain unchanged.
The variable factory overhead of P2,009,600 includes indirect materials and factory
supplies amounting to P889,600. It is computed at 10% of the cost of materials
used. The balance of the variable factory overhead varies directly with production.
There will be no change in the budgeted fixed factory overhead cost.
Considering the given actual data for the first quarter, as well as the changes in
assumptions and estimates in the budgeted data for the year, the company’s accountant
prepared a revised budgeted cost of goods sold statement. This revised statement should
show:
7. budgeted materials purchases of
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a. P9,696,000. c. P9,280,000.
b. P9,120,000. d. P9,440,000.
It is assumed that each unit of product requires one unit of materials. So, production is equal to
raw materials to be used.
Budgeted raw materials to be used (or production) – 140,000+ 5,000 145,000 units
Add raw materials ending inventory 18,500
Total 163,500
Less raw materials beginning inventory 16,000
Budgeted purchases 147,500
Less actual purchases, 1 st quarter 27,500
Required purchases in the remaining 3 quarters 120,000 units
Cost computation:
First quarter purchases (27,500 units) P1,760,000
Second quarter (120,000/3 or 40,000 x [P1,760,000÷27,500] or P64/unit) 2,560,000
Third and fourth quarters ([40,000/qtr. x 2] x[P64 x 105%]) 5,376,000
Total cost of budgeted purchases P9,696,000
The company uses the FIFO method of costing inventory. Thus, the ending inventory should be valued at
the new purchase price of P67.20.
P
Indirect materials (P9,412,800 x 10%)
941,280
Other variable P2,009,600 – P889,600 x
( ) . 1,160,000
overhead 140,000 145,000
Total variable overhead P2,101,280
Fixed 1,120,000 3,221,280
Budgeted cost of goods manufactured P13,464,000
13. A division of Lockman Corporation reported a return on investment of 20% for a recent
period. If the division's asset turnover was 5, its profit margin must have been
a. 100% c. 4%
b. 25% d. 2%
ROS x ATO = ROA
ROS x 5 = 20%
ROS = 20% ÷ 5 = 4%
14. As of the end of 2015, Ice Company had total assets of P375,000 and equity of P206,250.
For 2016, its budget for capital investment projects is P62,500. To finance a portion of the
capital budget, the company may borrow from a bank which set a condition that the loan
would be approved, provided that the 2016’s debt-to-equity ratio should be the same as the
debt-to-equity ratio in 2015.
How much debt should be incurred to satisfy the bank’s condition?
a. P28,125 c. P34,375
b. P62,500 d. P51,138
Total assets P375,000
Less equity 206,250
Debt P168,750
15. The management of Seymour Corporation asks you to prepare an analysis of the gross
profit variance based on their comparative income statements for 2015 and 2016:
2016 2015 Variance
Sales P990,000 P800,000 P190,000 F
Cost of goods sold 760,000 640,000 120,000 U
Gross profit P230,000 P160,000 P 70,000 F
The only known information given to you is that volume increased from 2015 to 2016 by
10%. The variance in gross profit due to the change in volume is
a. P80,000 favorable. c. P16,000 favorable.
b. P64,000 unfavorable. d. P70,000 favorable.
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– OR –
200B units @ 200A gross profit per unit
(P160,000 x 110%) P176,000
Less 200A gross profit 160,000
Gross profit volume variance P 16,000 F
16. Last year’s asset turnover of Johvic Company was 3.0. This year, the company’s sales
increased by 25% and average total assets decreased by 5%. What is this year’s asset
turnover?
a. 3.9 c. 3.4
b. 3.6 d. 3.1
Sales
Asset Turnover
= Average Total =3
last year
Assets
Asset Turnover
= 3 x 1.25 = 3.75 = 3.9
this year 1 x 0.95 0.95
17. During the year, Tindugan Company earned net income of P60,000. For next year, it has a
capital budget of P80,000. If the company’s plowback ratio is 30%, how much external
funding is needed for the capital investment project?
a. P80,000 c. P56,000
b. P62,000 d. P98,000
Capital budget P80,000
Fund from net income (P60,000 x 30%) 18,000
External funding needed P62,000
18. The following data are taken from the records of Belle Corporation for the year ended Dec. 31,
2015:
Net credit sales P576,000
Average materials inventory 8,000
Average finished goods inventory 12,000
Average accounts receivable 80,000
Average accounts payable 5,000
Net credit purchases 120,000
Raw materials used 96,000
Gross profit rate 25%
Number of days in a year 360 days
What is the average number of days in the company’s operating cash conversion cycle?
a. 50 days c. 105 days
b. 75 days d. 45 days
Average Age
Turnove
(360 days ÷
r
Turnover)
36
RM RM used P96,000
1 0
Inventory = = 12 times 30 days
. Ave. RM
Turnover P8,000 12
Inventory
36
3 Net Credit Sales P576,000
A/R Turnover = = 7.2 times 0 50 days
.
Ave. A/R P80,000 7.2
Net Credit 36
4 P120,000
A/P Turnover = Purchases = 24 times 0 (15) days
.
Ave. A/P P5,000 24
Average number of days in the operating cash
75 days
conversion cycle
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19. Using the data presented below, calculate the cost of sales for the Alpha Corporation for the
year just ended.
Current ratio 3.5
Acid test ratio 3.0
Current liabilities at year-end P600,000
Beginning inventory P500,000
Inventory turnover 8.0
a. P1,600,000 c. P3,200,000
b. P2,400,000 d. P6,400,000
Cost of sales = Average inventory x Inventory turnover
P500,000 + P300,000*
= x8
2
= P3,200,000
‘ Current assets
* Current ratio = Current
liabilities
Current
3.50 = assets Current assets = 2,100,000
Acid-test ratio = Quick assets
600,000
Current
liabilities
Quick
3.00 = assets Quick assets = 1,800,000
600,000
Inventory, ending 300,000
24. A small manufacturing company recently stated its sales goal for a period was P100,000. At
this level of activity, its budgeted expenses were P80,000. Its actual sales were P100,000,
but its actual expenses were P85,000. This company operated
a. effectively and efficiently. c. effectively but not efficiently.
b. neither effectively nor efficiently. d. efficiently but not effectively.
Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead
pays P45 to an external supplier for the 4,000 chips it needs each month.
25. Two possible transfer prices (for 4,000 units) are under consideration by the two divisions: P35 and
P40. Corporate profits would be ___________ if P35 is selected as the transfer price rather than P40,
and the Computer Division purchases from the Computer Chip Division instead of from the external
supplier.
a. P 20,000 larger c. P20,000 smaller
b. P100,000 larger d. the same
Purchase price P45
Less variable cost 20
Savings if acquired from within P25
x number of units 4,000
Increase in profit P100,000
26. Assume, for this question only, that the Computer Chip Division is selling all that it can
produce to external buyers for P50 per unit. How would overall corporate profits be affected
if it sells 4,000 units to the Computer Division at P45? (Assume that the Computer Division
can purchase the super chip from an outside supplier for P45.)
a. no effect c. P20,000 decrease
b. P20,000 increase d. P90,000 increase
Purchase price P45
Cost if purchased from within:
Variable cost P20
Opportunity cost 30 50
Loss per unit P 5
x number of units 4,000
Decrease in profit P20,000
27. The following information is given for the Alpha Division of Sorority Corporation.
Sales P600,000
Var. cost of goods sold 200,000
Fixed manufacturing costs 50,000
Variable selling 30,000
Fixed admin. (50% allocated) 20,000
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29. The format for internal reports in a responsibility accounting system is prescribed by:
a. Generally Accepted Accounting Principles
b. The Financial Accounting Standards Board
c. The Philippine Institute of Certified Public Accountants
d. Management
QUANTITATIVE METHODS
30. A company annually consumes 10,000 units of Part C. The carrying cost of this part is P2
per year and the ordering costs are P100. The company uses an order quantity of 500 units.
By how much could the company reduce its total costs if it purchased the economic order
quantity instead of 500 units?
a. P 500 c. P2,500
b. P2,000 d. P 0
31. In the two following constraint equations, X and Y represent two products (in units)
produced by the Uncommon Products Corporation.
32. King Corporation operates its factory 300 days per year. Its annual consumption of Material
Y is 1,200,000 gallons. It carries a 10,000 gallon safety stock of Material Y and its lead time
is 12 business days. What is the order point for Material Y?
a. 10,000 gallons c. 48,000 gallons
b. 38,000 gallons d. 58,000 gallons
Average daily usage (1,200,000 ÷ 300) 4,000
x lead time 12
Lead time usage 48,000
add safety stock 10,000
Order point 58,000
33. The school canteen can sell either halo-halo or mami (hot noodle soup) on any given day.
The contribution margin that the canteen could earn from halo-halo and mami is affected by
the weather, as follows:
CONTRIBUTION MARGIN
Item sold
Hot Weather Cold Weather
Halo-Halo P15,000 P 6,000
Mami 11,400 12,000
If the probability of hot weather on a given day at this time is 60%, which item(s) should
the company sell?
a. Halo-Halo, because this item is salable when weather is hot.
b. Mami, because it has the higher expected payoff.
c. Halo-Halo and mami, so the canteen could maximize contribution margin.
d. 60% halo-halo and 40% mami.
Based on the given data, the expected payoffs are:
Sell halo-halo (15,000 x 60%) + (6,000 x 40%) P11,400
Sell mami (11,400 x 60%) + (12,000 x 40%) 11,640
Therefore, despite the fact that the weather is hot, the canteen should sell mami because it
has the higher expected value or expected payoff.
34. Mr. Javee owns a piece of land that is adjacent to a big area of a vacant lot owned by the
city government. Recently, Mr. Javee heard that the city government has plans about the
vacant lot. He inquired about such plans and he was given the following, including each
plan’s probability of occurrence:
Probability
Plan A – Lease the lot to a businessman who will construct a mall on the lot 60%
B – Construct a theme park on the vacant lot 30%
C – Construct a building that will house some of the city government’s offices 10%
Mr. Javee knows that the value of his land, which he acquired ten years ago at a cost of
only P500 per square meter, will increase depending on which plan would materialize. His
estimates are as follows:
Plan A – P5,000 per square meter
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B – 2,000
C – 1,000
What is the expected value of the land?
a. P5,000 c. P2,667
b. P3,000 d. P3,700
Plan AP5,000 x 60% = P3,000
B 2,000 x 30% = 600
C 1,000 x 10% = 100
Expected value P3,700 per square meter
35. Bahalana Company produces and sells Product Z. Each unit of Product Z contributes P5 to
the recovery of fixed costs and generation of profit.Total fixed costs amounts to P200,000
per period. Selling price of Product Z is P20 per unit. For the coming period, the company
believes that there is a 70% chance that the sales of Product Z will be 80,000 units, and a
30% chance that sales will equal 10,000 units. The expected profit from Product Z for the
coming period is:
a. P 95,000 c. P 80,000
b. P250,000 d. P295,000
Expected value of sales volume:
80,000 x 70% 56,000
10,000 x 30% 3,000 59,000
X CM per unit 5
Total CM P295,000
Less fixed costs 200,000
Expected profit P 95,000
37. Consulting services differ fundamentally from CPA’s function of attesting to the assertions of
other parties. In a consulting service,
a. the practitioner expresses a conclusion about the reliability of a written assertion
that is the responsibility of the assertor.
b. the work is generally performed only for the use and benefit of the client.
c. the client develops findings, conclusions, and recommendations.
d. the nature and scope of work is determined solely by the consulting services
practitioner.
INFORMATION SYSTEMS/EDP
41. The basic principles of accounting information system include all the following, except
a. flexible structure. c. implementation.
b. cost awareness. d. useful output.
44. Electronic Fund Transfer (EFT) is a service provided by financial institutions worldwide that
is based on EDI Technology. EFT transaction costs are lower than for manual systems
because documents and human intervention are eliminated from the transaction process.
However, the EFT system has inherent and unique risks, one of which is
a. unauthorized access and activity.
b. inadequate disaster recovery procedures.
c. insufficient online edit checks.
d. improper change control procedures.
47. Which of the following characteristics distinguishes computer processing from manual
processing?
a. Computer processing virtually eliminates the occurrence of computational
error normally associated with manual processing.
b. Errors or fraud in computer processing will be detected soon after their occurrences.
c. The potential for systematic error is ordinarily greater in manual processing than in
computerized processing.
d. Most computer systems are designed so that transaction trails useful for audit
purposes do not exist.
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48. What type of computer system is characterized by data that are assembled from more than
one location and records that are updated immediately?
a. Microcomputer system c. Batch processing system
b. Minicomputer system d. Online real-time system
49. A major accounting contribution to the managerial decision-making process in evaluating possible
courses of action is to
a. decide which actions the management should consider.
b. determine the amount of money that should be spent on a project.
c. assign responsibility for the decision.
d. provide relevant revenue and cost data about each course of action.
ECONOMICS
51. Gross domestic product (GDP) is the
a. total amount of expenditures for consumer goods and investment for a period of time.
b. total purchases by consumers, businesses, government, and foreign entities
c. value of all final goods and services produced by the country by both domestic
and foreign-owned sources.
d. value of all goods and services produced by the country by domestic firms, excluding those
produced by foreign-owned companies.
52. As the economy becomes more and more depressed, a company's management decides to slash
spending on research and development. What is the likely effect of this action on net income? Net
income will be
a. higher this period and lower in future periods.
b. higher this period and higher in future periods.
c. lower this period and higher in future periods.
d. lower this period and lower in future periods.
53. Inflation can have positive and negative effects on an economy. Positive effects of inflation include
a. loss in stability in the real value of money and other monetary items over time.
b. uncertainty about future inflation may discourage investment and saving.
c. shortages of goods if consumers begin hoarding in anticipation of price increases in the
future.
d. mitigation of economic recessions and debt relief by reducing the real level of
debt.
54. The local video store’s business increased by 12% after the movie theater raised its prices from P300
to P400. Thus, relative to movie theater admissions, videos are
a. substitute goods c. complementary goods
b. superior goods d. public goods
- end –