TCRC-A CE The Professional CPA Review School ‘Nain: 3F C. villaroman Bidg. 873 P. Campa St, cor Espana, sampatoc, Manila a (032) 735 8901 / 735 9031 Branch: Rude Bidg. V, Lower Mabinl cor Diego Silang, Baguto City w (074)442-1440 ‘email add: erc_ace@yahoo.com MAY 2014 BATCH MANAGEMENT SERVICES FIRST PRE-BOARD EXAMINATION sET B JAN.30, 2014; 8:00AM-10:00AM INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one answer for each item by Shading the corresponding letter of your choice on the answer sheet Provided. STRICTLY NO ERASURES ALLOWED. Use Pencil No.2 only. 1. Spring Co, had two divisions, A end B. Division A created Product X, which could be sold on the outside market for P25 and used variable costs of P15. Division B could take Product X and apply additional variable costs of P40 to create Product Y, which could be sold for P100. Division B received a special order for a large amount of Product Y. If Division A were operating at full capacity, which of the following prices should Division A charge Division B for the Product X needed to fil the Special order? a PIS b. P20 c P25 2. Parcells Jets has the following balance sheet (in millions): Cash P 100 Notes payable P 100 Inventories 300 Accounts payable 200 Accounts receivable 400 Accruals 100 Total current assets P_-800 Total current abilities P 400 Net fixed assets 1,200 Long-term bonds 600 Total debt 1,000 1,000 oo Total common equity Total assets 2,000 Total liabilities and equity —_ P2,000 Parcells’ DSO (on a 365-day basis) is 40, which Is above the industry average of 30. Assume that Parcells is able to reduce its DSO to the industry average without reducing sales, and the company takes the freed-up cash and uses It to reduce its outstanding long-term bonds. If this occurs, what will be the d. 2.33 new current ratio? a. 1.25 3. Spencer Company expects to sell 60,000 units of Product 8 next year. Variable production costs are P4 per unit and variable selling costs are 10% of the selling price. Fixed costs are P115,000 per year and the company desires an after-tax profit of P30,000 next year. The company's tax rate is 40%. Based on this information, the unit selling price next year should be: P7.50 d. P1O.75 b. 1.33 © 175 a. P6725 b. 7.00 © 4. Dunford Company produces three products with the following costs and selling prices: x 2 Selling price per unit P40 P30 P35 Variable cost per unit 24 16 20 Machine hours per unit 5 7 4 If Dunford has a limit of 30,000 machine hours but no limit on units produced, then the three products should be produced in the order: a Y,Z,X b. XYZ i REY 4 2% 5. Madison Industries manufactures a single product using standard costing. Variable production costs are 26 and fixed production, costs are P250,000. Madison uses a normal activity of 12,500 units to set its . standard costs. Madison began the year with 1,000 units in inventory, produced 11,000 units, and sold 11,500 units. The standard cost of goods sold under variable costing would be a. 230,000. b. 299,000. ¢. 506,000, d. P529,000.CRE-ACE/MAS: First Pre-board Examinations (lay 2014 batch) Page? 6. Redbird Company reports the following data for 2014: Cost of goods manufactured 69,500 Direct materials used om Direct labor incurred a Work in process inventory, Jan. 1, 2014 Manufacturing overhead is 75% of the cost of direct tabor, 31, 2014? : a. P10,200 b, P12,250 cc. P13,500 ‘What le work in process inventory on Dec. d. 22,500 7. Ahospital’s records show that the cost of carrying out health checks in the last five accounting periods have been as follows: Number of Total cost Pat patients seen (Peso) 1 650 17,125 2 940 17,800 3 1260 18,650 4 990 17,980 5 1150 18,360 Using the high-low method and ignoring inflation, the estimated cost of carrying out health checks on 850 patients in perlod 6 is: a. P17,515 b, P17,570 P17,625 d. P17,680 8. Rodder, Inc. manufactures a component in a router assembly. The selling price and unit cost data for the component are as follows: Selling price pis Direct materials cost Direct tabor cost Variable overhead cost Fixed manufacturing overhead cost Fixed selling and administration cost : The enemy tacelved a special one-time order for 1,000 components. Rodder has an altemative use of production capacity for the 1,000 components that would produce a contribution margin of P5,000. What amount is the lowest unit price Rodder should accept for the component? a. PO b. P12 © P14 d. P24 BNuew 9. Aceramies manufacturer sold cups last year for P7.50 each. Variable costs of manufacturing were P2.25 per unit. The company needed to sell 20,000 cups to break even. Net income was P5,040. This year, the company expects the following changes: sales price per cup to be P9.00; variable manufacturing costs to increase 33.3%; fixed costs to increase 10%; and the income tax rate to remain at 40%. Sales in the coming year are expected to exceed last year’s Sales by 1,000 units. How many units does the company expect to sell this year? a. 21,000 b. 21,600 c. 21,969 d, 22,600 10, Lone Star Plastics has the following data: Assets 100,000 Profit margin 6.0% Tax rate 40% Debt ratio 40.0% Interest rate 8.0% Total assets turnover 3.0 What is Lone Star’s EBIT? a, P3,200 b. 18,000 c. P30,000 d. P33,200 11, Which of the following statements are true? a. The main role of the management accountant Is to produce financial statements b. Management accountants a/nays work within the finance function + Management accountants a/ivays work in partnership with business managers d, None of the above BIZT mSPage3 CRC-ACEMAS: First Pre-board Examinations (May 2014 batel) manufactures a single product. Variable production costs are P20 and fixed Production costs are P300,000. Rounder uses a normal activity of 20,000 units to set its standard costs. Rounder began the year with no Inventory, produced 22,000 units, and sold 21,000 units. The standard ‘Cost of goods sold under absorption costing would be a. P400,000, b. P420,000. ¢. P735,000, . None of the above 13. A Certified Public Accountant's sco except: 2. Change management engagement b. Computerization engagements 7 Audit engagements 4. Re-engineering engagement 14. Harrison Company reports the following cost information for Aucu: Cost of goods manufactured 135,800 12, Rounder Industries pe of management services Is broad and covers all of the following Finished goods inventory, Aug. 1 30,200 Finished goods inventory, Aug. 31 35,300 Work in process inventory, Aug. 1 22,500 38,500 Work in process inventory, Aug. 31 25,300 Direct materials used Direct labor incurred in August amounted to 150% of manufacturing overhead in August. ‘What is the amount of direct labor incurred by Harrison Company in August? a. P131,800 b. P61,944 cc. P4Y,556 d. P63,900 15. Which of the following statements Is not acceptable? @. ACPA represents 3 major players in the industry in rationaliz ng the industry’s incentives before the government public hearings. 5. ACPA shares with a new and substantial client information regarding another client belonging to the same industry. c. ACPA provides consulting services to an existing audit client. d. ACPA offers and provides consulting services to 2 major competing clients, 16, Meacham Company has traditionally made a subcomponent of its major product. Annual production of 20,000 subcomponents resulted in the following per unit costs: Direct materials P10.00 Direct labor 9.00 Variable overhead 7.50 Fixed overhead 5.00 P31.50 Meacham has received an offer from an outside supplier who is willing to provide 20,000 units of this subcomponent each year at a price of P28 per subcomponent, Meachain knows the facilities could be rented to another company for P75,000 per year if the subcomponent were purchased from the outside supplier. If Meacham decides to purchase the subcomponent from the outside supplier, how much higher or lower will net income be than If Meacham continued to make the subcomponent? a. P45,000 higher P30,000 lower 6. 70,000 higher : d. P70,000 lower 17. The fixed overhead rate for product ¥ Is P2.50 per direct labor hour, Each unit of ¥ requires 3 direct labor hours. Inventory of product Y at the beginning of the month was 200 units and at the end of the month was 250 units. What Is the difference in the profits reported for the month using absorption costing compared with variable costing? a. The absorption costing profit would be P375 less b, The absorption costing profit would be P125 greater ¢. The absorption costing profit would be P 375 greater d. The absorption costing profit would be P 1,875 greaterCRC-ACE/MAS: First Pre-hoard Examinations (May 2014 batch) Page 4 18. Brewster Co. has the following financial information: Fixed costs 20,000 Variable costs 60% Sales price P50 ‘What amount of sales is required for Brewster to achieve @ 15% return on sales? a. P33,333 b. P50,000 c. P30,000 d. 133,333 19. The following extract Is taken from the overhead budget of X: Budgeted activity 50% 75% Budgeted overhead P100,000 __P112,500 ‘The overhead budget for an activity level of 80% would be a, P115,000 b. 120,000 c. P136,000 d. P160,000 20.W Ltd makes leather purses. It has drawn up the following bucget for its next financial period: Selling price per unit P11.60 Variable production cost per unit P 3.40 Sales commission 5% of selling price Fixed production costs P 430,500 Fixed selling and administration costs P 198,150 Sales 90,000 units The margin of safety represents a. 5.6% of budgeted sales ¢. 11.6% of budgeted sales b. 8.3% of budgeted sales d. 14.8% of budgeted sales 21, The budgeted income for RST Ltd, for next year Is: Sales ~ 100,000 units @ P20 2,000,000 Variable manufacturing costs 800,000 Fixed manufacturing costs 300,000 Sales commissions ~ P1.50 per unit 150,000 Fixed selling and administration expenses 350,000 1,600,000 P 400,000 Operating income Assume a regular customer has requested RST Ltd. to provide a quote for a special order of 8,000 units, RST Ltd. has sufficient capacity to fill the order and would be required to pay only P6,000 in sales commissions. If RST Ltd, would like the special order to make a contribution to operating income of 28,000, the sales price per unit that should be quoted to the customer for the special order ist a. P1225 b. P20.00 c. PLS.75 4, P15.25 22. Which of the following is NOT an objective of management accounting? a. To provide information to business managers to assist them in planning for and controlling their business b. To provide information to shareholders to assist them with their investment decisions c. To assist business managers with respect to providing a return to the owners of the business d. None of the above 23. A company has provided the following data: Sales 3,000 units Sales price P70 per unit Variable cost P50 per unit Fixed cost 25,000 If the peso contribution margin per unit Is Increased by 10%, total fixed cost is decreased by 20%, and all other factors remain the same, net income will: a. increase by P61,000 b. increase by P20,000 . increase by P3,500 d. increase by P11,000Page S ‘CRC-ACEAMAS: First Pre-board Examinations (May 2014 batch) 24. Rol’s Boutique currently has total assets of P3 milion in operation. Over this year, its performance Fielded a basic earning power (BEP) of 25 percent and a retum on assets (ROA) of 12 percent. The p firm's eamings are subject to a 35 percent tax rate. On the basis of this information, what is the frmn’s times interest earned (TIE) ratio? a. 1.84 b. 1.92 c 2.83 25, Which ONE of the following statements is true? a. The total variable cost varies with a measure of activity. b. A variable cost is an unavoidable co: ©. Avariable cost is not relevant for decision-making. 4. A-variable cost becomes fixed In the fong run, . 26. Snyder Co. manufactures fans with direct material costs of P10 per unit and direct labor of P7 per unit. A local carrier charges Snyder PS per unit to make deliveries, Sales commissions are pald at 10% of the seling price. Fans are sold for P100 each. Indirect factory costs and administrative costs are P6,800 and £37,200 per month, respectively. How many fans must Snyder produce to break even? a 1375 b. 648, C564 d. 530 27, Ruth Company currently has P1,000,000 in accounts receivable. Its days sales outstanding (DSO) is 50 days. The company wants to reduce its DSO to the Industry average of 32 days by pressuring more of its customers to pay their bills on time. ‘The company’s CFO estimates that if this policy is adepted the ercent. Assuming that te company adopts this change and lays and does lose 10 percent of its sales, what will be the level of accounts receivable following the change? Assume a 365-day year, a, P576,000 ¢. P750,000 b, P633,333 , P990,000 28. Fixed costs are conventionally deemed to be: a. Constant per unit of output . Constant in total when production volume changes ¢. Outside the contro! of management d. Those unaffected by inflation 29. Day Mail Order Co. applied the high-low method of cost estimation to customer order data for the frst four months of 2009. What is the estimated variable order filing cost component per order? d. 3,82 Month Orders Cost January 1,200 P 3,120 February. 1,300 3,185 March 1,800 4,320 April 1,700 3,895 6,000 P14,520 a. 2.00 b, F242 . P2.48 4. P2.50 30. Black Co.'s breakeven point was P780,000. Variable expenses averaged 60% of sales, and the margin of safety was P130,000. What was Black's contribution margin? a. P364,000 . P546,000 ©. P910,000 d. P1,300,000 31. Selected Information concerning the operations of a company for the year ended December 31 is as lows: Units produced ~ 20,000 Units sold 18,000 Direct materials used, 80,000 Direct labor Incurred 40,000 Fixed factory overhead 50,000 Variable factory overhead 24,000 Fixed selling and administrative expenses: 60,000 Variable selling and administrative expenses: P9,000 Sizer npCRC-ACEMAS: First Pre-board Examinations (May 2014 batch) Page 6 ‘Work-in-process inventories at the beginning and end of the year were zero, What wes the company’s finished goods inventory cost at December 31 under the variable (direct) costing method? a. P23,900 b, PI9,400 ¢. 27,000 d. 14,400 32. Which ONE of the following costs would NOT be classified as @ production overhead cost In a food Processing company? a. The cost of renting the factory building b. The cost of ingredients ¢. The salary of the factory manager 4d. The depreciation of equipment located in the materials store 33. A company produces and sells two products. The first product accounts for 75% of unit sales and the ‘second product accounts for the remaining 25% of unit sales. The first product has a selling price of P10 per unit, varlable costs of P6 per unit, and allocated fixed costs of P100,000. The second product has @ selling price of P25 per unit, variable costs of P13 per unit, and allocated fixed costs of P212,000. At the break-even point, what number of units of the first product will have been sold? a. 52,000 b. 39,000 ©. 25,000 d. 14,625 34, Wren Co. manufactures and sells two products with selling prices and variable costs as follows: A B Selling price P18.00 22.00 Variable costs 12.00 14.00 Wren's total annual fixed costs are P38,400. Wren selis four units of A for every unit of B. If operating income last year was P28,800, what was the number of units Wren sold? a. 5,486 b. 6,000 cc. 9,600 4, 10,500 35. Prime cost is: a. all costs incurred in manufacturing a product. b. the total of direct costs, c._ the material cost of a product. , the cost of operating a department. 36. The following information is available on Crain Co.'s two product lines: Chairs Tables Sales P180,000 48,000 Variable costs (96,000) (30,000) Contribution margin 84,000 18,000 Fixed costs: Avoidable (36,000) (12,000) Unavoidable (28,000) * (10,800) Operating income (loss) P30,000 __(P4,800) ‘Assuming the tables line is discontinued, and the factory space previously used to make tables is rented for P24,000 per year, operating income will increase by what amount? a. 13,200 c. P24,000 b. P18,000 d, P2§,800 37. York Company had P200,000 income using absorption costing. York has no variable manufacturing costs. Beginning inventory was P15,000 and ending inventory was P22,000. Income under variable costing would have been a. P178,000. cc. 200,000. b. P 193,000, d. 207,000. 38. Victoria Enterprises has P1.6 million of accounts receivable on its balance sheet. The company’s DSO is 40 (based on a 365-day year), its current assets are P2.5 million, and its current ratio is 1.5. The company plans to reduce its DSO from 40 to the industry average of 30 without causing a decline in sales. The resulting decrease in accounts receivable will free up cash that will be used to reduce current liabilities. If the company succeeds in its plan, what will Victoria's new current ratio be? a, 1.97 b. 1.26 c. 0.72 d. 1.66 SIT39. An increase in production levels within a relevant range most likely would result in: a. Increasing the total cost. b. Increasing the variable cost per unit. ©. Decreasing the total fixed cost. 4. Decreasing the variable cost per unit. 40. Roland & Company has a new management team that has. developed an operating plan to improve upon last year’s ROE. The new plan would place the debt ratio at 55 percent, which will result in interest charges of P7,000 per year. EBIT is Projected to be P25,000 on sales of P270,000, it expects to have a total assets turnover ratio of 3.0, and the average tax rate will be 40 percent. What does Roland & Company expect its return on equity to be following the changes? a. 17.65% b, 21.82% © 26.57% 4. 44.44% 41, The Merriam Company has determined that its return on equity is 15 percent. Management is interested in the various components that went into this @2lculation. You are given the following information: total debt/total assets = 0.35 and total assets turnover = 2.8, What is the profit margin? a. 3.48% b. 5.42% 42. Which of the following ratios would most likel a. Return on total assets, b. Sales to cash. c. 6.96% d. 2.45% ly be used by management to evaluate short-term liquidity? ¢. Accounts receivable turnover, d. Acid test ratio, 43. ZK has been asked to quote a price for a special job that must be completed within one week. he Job requires a total of 100 skilled labor hours and 50 unskilled labor hours. The current employees are paid a guaranteed minimum wage of P52: 5 for skilled workers and P280 for unskilled workers for a 35-hour week, Currently, skilled labor has spare capacity amounting to 75 labor hours each week and unskilled labor has spare capacity amounting to 100 labor hours each week. Additional skilled workers and unskilled workers can be employed and paid by the hour at rates based on the wages patd to the Current workers. The materials required for the job are currently held in inventory at a book value of 5,000. The materials are regularly used by ZK and the current replacement cost for the materia. P4,500. The total scrap value of the materials is P1,000, What is the total relevant cost to ZK on this Job? a. P 5,875 b. P4875 44, Robinson Company has provided the followin c P6400 d. P 6,900 ig informati + Raw materials inventory increased P15,000, + Sales were P500,000, * The gross profit ratio was 52.2%. Work in process inventory decreased P29,000, Finished goods inventory decreased P47,000. How much was Robinson's cost of goods manufactured? a. P268,000 b. P192,000 c. P286,000 d. P239,000 45. Which of the following ratios would be used to evaluate a company's proftabilty? a. Current ratio, b. Inventory turnover ratio, 46. Samuels Equipment has P10 million in sales, ‘The company is 100 percent equity financed. a. Pt,500,000 b. P2,857,143 : c. Debt to total assets ratio, d, Gross margin ratio, Its ROE Is 15 percent and its total assets turnover Is 3.5x. ‘What Is the company’s net income? cP 428,571 d. P2,333,333 SzrT bmCRC-ACEMMAS: First Pre-board Examinations (Muy 2014 bateh) Page 8 47. If, Just prior to a period of rising prices, a company changed its Inventory measurement method from FIFO to LIFO, the effect in the next period would be to t . Increase both the current ratio and inventory turn-over b. Decrease both the current ratio and inventory turn-over c. Increase the current ratio and decrease inventory turn-over d. Decrease the current ratio and increase Inventory turh-over i , TWO 48. Sago Co. uses regression analysis to develop 2 model for predicting overhead cos. Two tere rivers (machine hours and dlrect materials weight) are under consideration as the indepense Variable, Relevant data were run on a computer using one of the standard regr the following results: Machine hours Y Intercept 2,500 b 5.0 R2 1 Direct materials weight Y Intercept 4,600 b 26 R2 50 What regression equation should be used? a, ¥ = 2,500 + 5.0X c. Y= 4,600 + Fas b, Y= 2,500 + 3.5X d. Y= 4,600 + 1. 49. The most likely strategy to reduce the breakeven point would be to a. Increase both the fixed costs and the contribution margin. b. Decrease both the fixed costs and the contribution margin. c. Decrease the fixed costs and increase the contribution margi d._ Increase the fixed costs and decrease the contribution margi 50. Pinecrest Co. had variable costs of 25% of sales, and fixed costs of P30,000, Pinecrest's break-even int in sales pesos was 2. 25,000 40,000 - b. 30,000 d. P120,000 51. A company has Income after tax of P5.4 million, interest expense of P1 million for the year, depreciation expense of P1 million, and @ 40% tax rate, What is the company's times-interest-earned ratio? a 54 b. 64 7.4 d. 10.0 ‘52. Which of the fotlowing statements is correct regarding the difference between the absorption costing and variable costing methods? a b. c. When production equais sales, absorption costing income is greater than variable costing income, When production equals sales, absorption costing income is less than variable costing income, When production is greater than sales, absorption costing income is greater than variable costing Income. 4. “Wihen produetion is less than sales, absorption costing incomne is greater than variable costing income. 53. A company increased the selting price for its product from P1.00 to P1.10 a unit when total fixed expenses decreased from P400,000 to P380,000 and variable expense per unit remained unchanged. How would these changes affect the breakeven point? a. The break-even point in units would inerease b. The break-even point in units would decrease ©, The break-even point in units would remain unchanged d. The effect cannot be determined from the information given SIEr mm2 ERC-ACEMAS: First Pre-bourd Examinstions (May 2014 batch) Paged 54. To measure Inventory management performance a company monitors its Inventory turnover ratio, Listed below are ‘Selected data from the company's accounting records; Current year Prior year Annual sales 2,525,000 2,125,000 Gross profit percent 40% 35% Beginning finished goods Inventory for the current year was 15% of the prior-year's annual sales volume at Cost, and ending finished goods inventory was 22% of the current-year's annual sales volume at cost. + mas the company’s inventory tumover at the end of the curent period? a. 4.55 b 6.21 6.51 4. 6.81 55.A company that produces 10,000 units has fixed costs of 300,000, variable costs of P50 per unit, and a ‘Sales price of P85 per unit. After learning that Its Veriable cost, wit increase by 20%, the company is. Seasidering an increase in production to 12,000 units, Which of the following statements Is correct Tegarding the company's next steps? - If production is increased to 12,000 units, profits wil increase by P50,000. b. If production is increased to 12,000 units, profits will increase by P100,000. § If Production remains at 10,000 units, profits will Cecresce by 50,000. 4. If production remains at 10,000 units, profits wil decrecoc by P100,000. Peete es ats 003"e Of Directors is unhappy with the current return on equity (ROE), and they think it fould be doubled. This could be accomplished (1) by Increasing the profit margin to 12 percent and (2) by increasing debt utlization. Total assets turnover will not change. What new debt ratio, along with the new 12 percent profit margin, would be required to doubie the Rok? - 60% a. 55% b. c. 65% d. 70% 57. The following information was obtained from Sizzler Company: Advertising costs: P 7,900 Indirect labor: P 9,000 Direct Labor: 31,000 Indirect materials: P 7,200 Direct material: 47,000 Factory utilities: . P 3,000 Factory supplies: P 700 Factory janitorial costs: P 1,900 Manufacturing equipment. depreciation: P 1,600 Delivery vehicle depreciation: P "790 Administrative wages and salaries: P19,000 How much were Sizzler’s period costs? 3. P27,690 . 19,790 b. P7,900 1. P19,000 58. In an income statement prepared using the variable costing method, fixed factory overhead would a. Not be used, b. Be used in the computation of the contribution-margin, © Be used in the computation of operating income but nat In the computation of the contribution margin. d. Be treated the same as variable factory overhead. 59. For decision-making purposes, which of the following are relevant costs? a. Avoidable cost Opportunity cost b. Future cost “ 4d, All of the above 50. Savard Corporation purchases raw materials totaling P100,000. The company pald P 232,000 in salaries of which P 7,000 is considered as Indirect and P 75,000 are sales commission. Total factory overhead Epon’ ted to F 225,000. Raw materials, work in process and finished goods Inventory increesed byP 000, P 20,000 and P 40,000, respectively. How much was Savare's cost of goods manafatrocy @. P450,000 ©. P457,000 b. P490,000 d. P497,000 sSsET m+ 61. Ltd provides plumbing services. Due to a shortage of skied labor next period the company is unable ‘commence all the plumbing jobs for which customers have accepted estimates. When deciding which Plumbing jobs should be commenced, the jobs should be ranked according to the: 3. Contribution to be eamed from each job. b. Profit to be earned from each job. ©. Contribution to be earned per hour of skilled labor on each Job. 4. Profit to be earned per hour of skilled labor on each job. 62. A ceramics manufacturer sold cups last year for P7.50 each. Variable costs of manufacturing were P2.25 per unit. The company needed to sell 20,000 cups to break even. Net income was P5,040. This year, the company expects the price per cup to be P9.00; variable manufacturing costs to increase 33.3%; and fixed costs to increase 10%. How many cups (rounded) does the company need to sel this year to break even? a. 17,114 b. 17,500 c, 19,250 d. 25,667 63. The regression analysis results for ABC Co. Is shown as y = 90x + 45. The standard error (Sb) is 30 and coefficient of determination (r2) is 0.81. The budget calls for production of 100 units. What is ABC's estimate of total costs? a, P3,090 b. P4,590 cc. P9,030 d. P9,045 64. Kansas Office Supply had P24,000,000 in sates last year. The company’s net income was P400,000, its total assets turnover was 6.0, and the company’s ROE was 15 percent. The company Is financed entirely with debt and common equity. What is the company’s debt ratio? a. 0.20 b. 0.30 c. 0.33 d, 0.60 65..A company is offered a one-time special order for its product and has the capacity to take this order without tosing current business. Variable costs per unit and fixed costs in total will be the same. The {gross profit for the special order will be 10%, which is 15% less than the usual gross profit. What impact will this order have on total fixed costs and operating income? a. Total fixed costs increase, and operating income increases, b. Total fixed costs do not change, and operating income increases. ¢. Total fixed costs do not change, and operating income does not change. d, Totel fixed costs increase, and operating income decreases. 66. Given the following information, calculate the direct materials purchased in 2014, Materials inventory, 1/1/2014 43,000 Materials inventory, 12/31/2014 24,000 ‘Work in process inventory, 1/1/14 53,000 Work in process inventory, 12/31/14 61,000 Finished goods inventory, 1/1/2014 84,000 Finished goods inventory, 12/31/2014 97,000 Cost of goods sold 395,000 Direct labor 156,000 ‘Manufacturing overhead costs 180,000 a. 67,000 b. P85,000 c. P61,000 - 4. P80,000 67. For the forthcoming year, E Company's variable costs are budgeted to be 60 percent of sales value and fixed costs are budgeted to be 10 percent of sales value. If E Company increases its selling prices by 10 percent, but if fixed costs, variable costs per unit and sales volume remain unchanged, the effect on E Company's contribution would be: a decrease of 2 per cent. an Increase of 5 per cent, ‘ an increase of 10 per cent. an increase of 25 per cent. pogo SIET isW. » - CRC-ACEMAS: First Pre-board Examinations (May 2014 batch) Page 11 68, West Coast Laser (WCL) has a production capacty limit of 4,000 faser machine hours arid 1,000 image ‘machine hours, The direct costs per hour to operate the machines are P15 and P20, respectively. Both machines are operating at 90% of capacity and all current production is sold at P1,500 per unit. Each Unit of output requires P250 of direct materials, four laser machine hours and one Image machine hour to produce. Indirect variable overhead costs are P200 per unit and indirect fixed overhead costs are 225 per unit based on full capacity. A prospective customer, Company L, has offered to buy 240 units at P1,350 per unit. If the offer is accepted, all 240 units must be delivered by the end of the year. WCL can lease machinery to accommodate the new customer's order at a cost of P70,000. By what ‘amount would WCL's income change if Company L's offer Is accepted and the machine is leased? a. P254,000 increase . b, P106,000 decrease ¢. 90,800 increase d, P126,800 Increase Items 69 and 70 are based on the following information: Selected information concerning the operations of Kern Company for the year ended December 31, 20X4, is available as follows: Units produced 10,000 Units sold 9,000 Direct materials used 40,000 Direct labor incurred 20,000 Fixed factory overhead 25,000, Variable factory overhead 12,000 Fixed selling and administrative expenses 30,000 Variable selling and administrative expenses P 4,500 Finished goods inventory, Jan. 1, 20X4 None There were no work-in-process inventories at the beginning and end of 20X4. 69. What would be Kern's finished goods inventory cost at December 31, 20X4, under the variable (Girect) cost method? a. P7,200, b. P7,650. c. 8,000. d, P9,700, 70. Which costing method, absorption or variable costing, would show a higher operating income for 20X4 and by what amount? a. Absorption costing by P2,500 b. Variable costing by P2,500 . Absorption costing by P5,500 d. Variable costing by P5,500 END OF EXAMINATIONS SE=Tao 28 yall ae je ao gm of @ ve ae ae) ge as ge 50 ae as ye aa as asi) gs @& ae ves ye 2% ge af ys yal ge 94 fa 94 934 YS va vs gel ys 3% vs 9% 3% as ax os | as ysl os ax as ys 98 as yx av aw as weil as ar ae as en] an ax ye ae a6 ox] gs oa as qs g@ as ag | ge yt ae az ae as gz 23 aU a6 ov as ge ae as av as ye gos | go ae 3% 2% gs gm a6 8% ae asl ye aa qe as vy ae ve ve get a7 ya ae ae over ve oF vo gall 94 ga 4 28 24 qo 93a yr oval) a» aa ax 3% wer a» ys a6 9s) ar ve ve 3% OS a» gst gy oa] oa” @» au oa ya ge oa" ae gs] oo ye au 2% vo ao oe ve oval ae gz au ae ya aw 52 e® ove} ae on a” ay at ve oan aw 3% an a” Zaff vo ye ae val] ye Je ao ae ge es) ve 2] 96 36 ae asi] ve ve as 3» ge ati g« ae] a ae a® ve | ge age 98 Se ae ail o¢ oe] gs ae ge 34] ae ae 6 ae 9% asl ax d°]| ve 9% ax g9 || 99 ax a9 ae as as os) ws asf o% 99 ve ws || a9 gs a5 gu ye ane ove we or] on a ae oye 24 ge ar ac as ae off ve ac} a# 968 a 3¢ |} ae ge DF ae azo gt az ge ge ae 38 ae at 390 ge OF qu yt voy wii ge or} ge ae 9" aril on at 1 wv iy. iva [vor g@las SWXa CuvOEaud LSuld HOLVE Pb02 AV wor oovelgare™DD pre pes vet tee Coco) & fap one “Buty o601 209 ween M01 'A “BNIB PNY EYER 1605 SEZ / 1068 SEZ (CO) B erie Soxeduns ‘euede9 00 25 RUD “A £18 “SHG VEOH JE UH