Easy

1. Mass customization can be achieved through the use of

a. Activity-based costing. c. Flexible manufacturing systems.
b. just-in-time inventory. d. all of the above.

2. Process value analysis is a key component of activity-based management that links product
costing and
a. Reduction of the number of cost pools.
b. Continuous improvement.
c. Accumulation of heterogeneous cost pools.
d. Overhead rates based on broad averages.

3. BSP Company earned P 100,000 on sales of P 1,000,000. It earned P 130,000 on sales of P

1,100,000. Total fixed costs are
a. P 0 b. P 200,000 c. P 420,000 d. P 900,000

4. The expected value of perfect information is the

a. Difference between the expected profit under certainty and the expected monetary value
of the best act under uncertainty.
b. Difference between the expected profit under certainty and the expected opportunity loss
c. Sum of the conditional profit (loss) for the best event of each act times the probability of each
events occurring
d. Same as the expected profit under certainty

5. All of these factors are used in credit policy administration, except:

a. Credit standards c. Terms of trade
b. Peso amount of receivables d. Collection policy

6. All of the following items are included in discounted cash flow analysis except
a. Future operating cash savings.
b. The future asset depreciation expense.
c. The current asset disposal price.
d. The tax effects of future asset depreciation.

7. What is the study of the need for activities and whether they are operating efficiently called?
a. Direct and indirect cost management
b. Activity-based management
c. Variable and fixed cost management
d. Total quality management

8. The cost to repair a unit of product that fails after it is sold is a(n)
a. appraisal cost.
b. external failure cost.
c. internal failure cost.
d. prevention cost.
 9. Genco manufactures two versions of a product. Production and cost information show the
following:
Model A Model B
Units produced 200 400
Material moves (total) 20 80
Direct labor hours per unit 1 2

Material handling costs total $200,000. Under ABC, the material handling costs allocated to
each unit of Model A would be:
a. $10
b. $200
c. $333
d. Some other number

10. An imposed budget

a. is the same as a static budget.
b. can lead to poor performance.
c. is best for planning purposes.
d. eliminates the need for a sales forecast.

Average
1. The following items are used in tracing costs in an ABC system. In which order are they used?
(1) cost object (2) cost driver (3) activity driver (4) cost pool
a. 1, 2, 3, 4 b. 2, 3, 4, 1 c. 2, 4, 3, 1 d. 4, 3, 1, 2

2. A beverage stand can sell either softdrinks or coffee on any given day. If the stand sells softdrinks
and the weather is hot; it will make P2,500; if the weather is cold, the profit will be P1,000. If the
stand sells coffee and the weather is hot, it will make P1,900; if the weather is cold, the profit will
be P2,000. The probability of cold weather on a given day at this time is 60%. The expected payoff
if the vendor has perfect information is:
a. P3,900 b. P1,360 c. P2,200 d. P1,960

3. As a company becomes more conservative with respect to working capital policy, it would tend to
have a(n)
a. Increase in the operating cycle.
b. Decrease in the operating cycle.
c. Increase in the ratio of current assets to current liabilities.
d. Increase in the ratio of current liabilities to noncurrent liabilities.

4. The Spades Company has an inventory conversion period of 75 days, a receivables conversion
period of 38 days, and a payable payment period of 30 days. What is the length of the firm’s cash
conversion cycle?
a. 83 days b. 113 days c. 67 days d. 45 days

5. Simile Inc. has a total annual cash requirement of P 9,075,000 which is to be paid uniformly. Simile
has the opportunity to invest the money at 24% per annum. The company spends, on the average,
P40 for every cash conversion to marketable securities. What is the optimal cash conversion size?
a. P55,000 b. P60,000 c. P45,000 d. P75,500

6. P Company budgets on an annual basis for its fiscal year. The following beginning and ending
inventory levels (in units) are planned for the next year:
Beginning Ending
Raw Materials 40,000 50,000
 Finished goods 80,000 50,000
Three pounds of materials are needed to produce each unit of finished product. If P Company plans to sell
480,000 units during next year, the number of units it would have to manufacture during the year would be
a. 440,000 units b. 480,000 units c. 510,000 units d. 450,000 units

7. Backflushing, or backflush costing

a. requires significantly less recordkeeping than other methods.
b. can be used by any company.
c. ignores inventories.
d. does not distinguish between materials and conversion costs.

8. The type of data processing in which remote terminals provide direct access to the computer is
a. On-line processing c. Batch processing
b. Remote processing d. Central processing

9. Sequential access means that

a. Data are stored on magnetic tape.
b. The address of the location of data is found through the use of either an algorithm or an
index.
c. Each record can be accessed in the same amount of time.
d. To read record 500, records 1 through 499 must be read first.

10. The role of an information system steering committee should be to

a. initiate all computer applications, set computer applications priorities, control access to the
computer room, and keep the computer file library.
b. prepare control totals, maintain systems documentation, and perform follow-up on errors.
c. assign duties to systems personnel, prepare and monitor systems implementation plans, and
prepare flowcharts of systems applications.
d. decide on specific information needs, prepare detailed plans for systems evaluations,
set priorities for writing programs, and decide which equipment will be purchased.

Hard
1. Palm Company’s budgeted sales of the coming year are P 40,500,000 of which 80% are expected
to be credit sales at terms of n/30. Palm estimates that a proposed relaxation of credit standards
will increase credit sales by 20% and increase the average collection period from 30 days to 40
days. Based on a 360-day year, the proposed relaxation of credit to standards will result in an
expected increase in the average accounts receivable balance of
a. P540,000 b. P900,000 c.P2,700,000 d. P1,620,000

2. Direct, step-down, and reciprocal are names for

e. the allocation methods most likely to produce goal congruence.
f. transfer-pricing methods.
g. methods for allocating costs of service departments to operating departments.
h. alternative organizational structures.

3. Zebra Corporation has the following activities: creating bills of materials (BOM), studying
manufacturing capabilities, improving manufacturing processes, training employees, and designing
tooling. The general ledger accounts reveal the following expenditures for manufacturing
engineering:
Salaries $150,000
Equipment 80,000
Supplies 20,000
Total $250,000
 The equipment is used for two activities: improving processes and designing tooling. Thirty-five
percent of the equipment’s time is used for improving processes and sixty-five percent is used for
designing tools. The salaries are for two engineers. One is paid $100,000, while the other earns
$50,000. The $100,000 engineer spends 40% of his time training employees in new processes and
60% of his time on improving processes. The remaining engineer spends equal time on all
activities. Supplies are consumed in the following proportions:
Creating BOMs 25%
Studying capabilities 10%
Improving processes 20%
Training employees 25%
Designing tooling 20%
What is the cost assigned to the creating BOMs activity?
a. $62,500 b. $15,000 c. $87,500 d. $250,000

4. F Glass Works uses a standard cost system in which manufacturing overhead is applied to units of
product on the basis of direct labor-hours. Each unit requires two standard hours of labor for
completion. The denominator activity for the year was based on budgeted production of 200,000
units. Total overhead was budgeted at P900,000 for the year, and the fixed overhead rate was P3.00
per unit. The actual data pertaining to the manufacturing overhead for the year are presented below:
Actual production 198,000 units
Actual DLH 440,000
Actual variable overhead P352,000
Actual fixed overhead P575,000
The standard hours allowed for actual production for the year total
a. 247,500 b. 396,000 c. 400,000 d. 495,000

5. Which of the following will not impair the independence of a CPA in the rendition of Management
Services?
a. The CPA performs decision-making services for his client.
b. The CPA performs services wherein he is in effect, acting as an employee of the client.
c. The CPA loses his objectivity and acts in a manner as if he is advocating for the interest of his
client.
d. The CPA does not extend his services beyond the presentation of recommendations or
giving of advice.

6. For an automated system to provide for continuity and effective control over the proposed data
processing activities, the systems development process should be performed in a certain order.
Which of the following sequences lists the computer systems development phases in the order in
which they should be performed?
a. implementation planning development user specifications, system planning, and programming.
b. development of user specifications, development of technical specifications,
implementations, planning, and programming.
c. Training of user department personnel, implementation planning, and system testing.
d. Implementation planning, programming, conversion, and systems testing.

7. In capital budgeting decisions, the following items are considered among others:
1. Cash outflow tor the investment.
2. Increase in working capital requirements.
3. Profit on sale of old asset
4. Loss on write-off of old asset.
For which of the above items would taxes be relevant?
a. Items 1 and 3 only. b. Items 3 and 4 only. c. All items. d. Items 1,3 and 4 only
 8. Your company is purchasing a transport equipment as part of its territorial expansion strategy. The
technical services department indicated that this equipment needs overhauling in year 4 or year 5
of its useful life. The overhauling cost will be expected during the year the overhauling is done.
The finance officer insists that the overhauling be done in year 4, not in year 5. The most likely
reason is
a. There is lower tax rate in year 5. c. The time value of money is considered
b. There is higher tax rate in year 5 d. Due statements A and C above

9. The ABC Company is expected to have a constant annual growth rate of 5 percent. It has a price
per share of P32 and pays an expected dividend of P2.40. Its competitor, the DEF Company is
expected to have a growth rate of 10%, has a. price per share of P72, and pays an expected
P4.80/share dividend. The required rates of return on equity for the two companies are:
A B C D
ABC 13.8% 9.6% 12.5% 16.2%
DEF 15.4% 8.6% 16.7% 18.2%

10. Stock J has a beta of 1.2 and an expected return of 15.6%, and stock K has a beta of 0.8 and an
expected return of 12.4%. What must be the expected return on the market and the risk-free rate of
return, to be consistent with the capital asset pricing model?
A. Market is 14%; risk-free is 6% C. Market is 14%; risk-free is 4%.
B. Market is 12.4%; risk-free is 0% D. Market is 14%; risk-free is 1.6%.

Clincher
1. For investments that have only costs (no revenues or cost savings), an appropriate decision rule is to
accept the project that has the
a. longest payback period.
b. lowest present value of cash outflows.
c. higher present value of future cash outflows.
d. lowest internal rate of return.

2. Prescott Corporation has computed the following unit costs for the year just ended:

Direct material used $18

Direct labor 27
Variable manufacturing overhead 30
Fixed manufacturing overhead 32
Variable selling and administrative cost 9
Fixed selling and administrative cost 17

Under absorption costing, each unit of the company's inventory would be carried at:
A. $75.
B. $107.
C. $116.
D. $133.
E. some other amount.