Professional Documents
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1. The time interval between the instant at which an instruction control unit initiates a call for
data and the instant at which delivery of the data is completed is
a. Access time c. Compliance time
b. Idle time d. Throughput time
2. In computer operations, data is encoded before processing can be done by the computer.
These statements refer to batch processing, except
a. The processing of data collected in advance so that each accumulation is processed
in the same run.
b. The technique of executing a set of computer programs such that each completed
before the next program of the set is started.
c. The processing of related transactions that have been grouped together.
d. The method of using the computer system that allows a number of users to execute
programs currently and to interact with the programs during execution.
3. In computer data processing systems, these are the basic elements and components,
except:
a. Input/output devices c. Graphics card and adaptor
b. Central processing unit d. Software, procedures and personnel
4. You are working with a task force which has been mandated to develop an integrated
information system. The objective is to be able to harness computer power to make
information available to the right person in the company at the right time at the most cost
efficient manner. Your present assignment is to determine the proper grouping of the
applications. What applications are not appropriately grouped?
a. Sales, accounts receivable, salesmans commission, cash receipts, marketing
equipment modules
b. Production planning and scheduling, raw materials inventory and container
management, purchasing, sales forecasting modules
c. Bank reconciliation, accounts payable, disbursements, fixed assets, general ledger
and payroll modules
d. Personnel information system, finished goods inventory, general ledger, non-trade
receivables modules
5. The advent of computers has far reaching impact on the accountancy profession.
Whenever considered, computerization demands extreme care to avoid the horror stories
that may have experienced. Among the critical areas for careful study is systems design.
Which of the following is not related to system design?
a. It considers unnecessary emphasis on accuracy of certain types of economic data
where the cost to generate exceeds the benefits produced.
b. If there is too much breaking down of job functions, there will be time consuming
rereading of data that must be understood before it can be processed.
c. It is a symbolic presentation of the decision making process showing alternative
solutions to a problem and the possible consequences.
d. If identical information should be shown on different documents, it must be
captured only once and recorded simultaneously.
7. The technology that permits a computer in one company to interface with another
computer in another company, an application example of which is computerized billings
and payments among companies is
a. Transfer system method c. Electronic data interchange
b. Integrated information systems d. Local area network
8. The general ledger system is considered the hub of all the systems because
a. All the other systems capture their data through the general ledge system
b. The general ledger system is the central system that provides all the vital reports to
management and other interested parties
c. All the other systems use the same documents and forms as the general ledger
system
d. All the other systems product output that becomes inputs to the general ledger
system
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11. A function-based information system is designed for the exclusive support of a specific
application area and its database and procedures are often independent of other systems.
Hence, certain data for an accounting system for instance, would be duplicated in an
inventory system. Data redundancy in such case is expensive. The information system
which shares a common database, minimizes data redundancy and enhances
interdepartmental activity coordination is
a. Communications connectivity c. Wide area networking
b. Time-sharing system d. Integrated information system
12. Hankies Unlimited has a signature scarf for ladies that are very popular. Certain production
and marketing data are indicated below:
Cost per yard of cloth Php 36.00
Allowance for rejected scarf 5% of production
Yards of cloth needed per scarf 0.475 yards
Airfreight from supplier Php 0.60/yard
Motor freight to customers Php 0.90/yard
Purchase discount from supplier 3%
Sales discounts given to customers 2%
The allowance for rejected scarf is not part of the 0.475 yard of cloth per scarf. Rejects
have no market value. Materials are used at the start of production.
Calculate the standard cost of cloth per scarf that Hankies Unlimited should use in its cost
sheets.
a. Php 16.87 b. Php 17.76 c. Php 18.21 d. Php 17.30
13. Boomie Co. uses the working capital basis of preparing if Funds Flow Statement. The
following data are presented for the year just ended:
Depreciation expense Php 48,500
Amortization of patents 12,000
Cash dividends declared 27,000
Cash dividends paid 34,000
Bonds payable issued 90,000
Sale of common stock 175,000
Amortization of bond discount 1,500
Gain on sale of equipment 9,500
Working capital provided by operations 121,000
Purchase of land 310,000
Decrease in deferred income taxes 18,000
Calculate the net income or loss for the period from the above data.
a. Php 68,500 b. Php 86,500 c. Php 113,500 d. Php
351,500
14. Bing and Lynns Store is on the cash basis of preparing funds statement. These data are
available:
Decrease in working capital Php 50,000
Depreciation 13,000
Increase in cash 25,000
Repairs and maintenance 19,500
Total uses of cash 454,000
Calculate the total sources of cash of Bing and Lynns Store.
a. Php 472,500 b. Php 492,000 c. Php 479.000 d. Php
467,000
15. As you are doing an analysis of the cash flow, you found these data belonging to the Blue
Sky Co.:
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Taxes payable: Beginning of year Php 6,000
Taxes payable: End of year 4,000
Interest expense 50,000
General and administrative expense 155,765
Tax expense per income statement 20,000
a. The deferred tax account must have a debit balance
b. The general and administrative expenses must be understated
c. Cash used to pay taxes must have been Php 22,000
d. Tax expense must have been inaccurate
16. From the records of Green Ann Co. the following were taken:
17. For the doughnuts of McDonut Co., the Purchasing Manager decided to buy 65,000 bags of
flour with a quality rating two grades below that which the company normally purchased.
This purchase covered about 90% of the flour requirement for the period. As to the
material variances, what will be the likely effect?
a. Unfavorable price variance, favorable usage variance
b. Favorable price variance, unfavorable usage variance
c. No effect on price variance, unfavorable price variance
d. Favorable price variance, favorable usage variance
18. The Table Top Model Corp. produces three products, Tic, Tac, and Toc. The owner
desires to reduce production load to only one product line due to prolonged absence of the
production manager. Depreciation expense amounts to Php 600,000 annually. Other fixed
operating expenses amount to Php 660,000 per year. The sales and variable cost data of
the three products are (000s omitted):
Tic Tac Toc
Sales (Php) 6,000 5,300 10,800
Variable Costs (Php) 3,900 1,700 8,900
Which product must be retained and what is the opportunity cost of selecting such product
line?
a. Retain product Tac; opportunity cost is Php 4.6 million
b. Retain product Tac; opportunity cost is Php 3.14 million
c. Retain product Tic opportunity cost is Php 4.04 million
e. Retain product Toc; opportunity cost is Php 4.84 million
19. Red Nose Co. makes hoses for its sprayers. Unit costs applicable to these hoses are:
Direct materials Php 35.00
Direct labor Php 20.00
General and administrative cost Php 16.00
Fixed manufacturing overhead Php 21.00
Variable manufacturing overhead Php 9.00
5,000 hoses are required for the year. The space that is used for the hoses production can
be used as warehouse and will save rental cost of Php 48,000 per year. The hoses can be
bought for Php 70.00 a piece.
Should Red Nose Co. buy or make the hoses? Why?
a. Buy, because there will be savings of Php 3.60 per hose
b. Make, there will be a savings of Php 6.00 per hose
c. Make, because there will be savings of Php 5.40 per hose
d. Buy, because there will be savings of Php 31.00 per hose
21. Coco Co. owns a large processing line which segregates coconuts into its components
upon contact with the breaker of the machine. Presently, it sells the coconut meat, juice,
shell and husk to various manufacturers. A feasibility study is being made to process its
components into buko pies for the meat, buko juice for the juice, flower pots for the
shells and fuel briquettes for the husk. At the segregation point, you gathered the
following data per unit:
Meat Juice Shell Husk
The study shows that after further application of additional manufacturing process, the
following is projected:
Meat Juice Shell Husk
Fixed cost of the plant amounts to Php 500,000. Interest rate is 12%
Which product should go through the additional manufacturing process?
a. Coconut meat only because it will give incremental profit of Php 4.20 per coconut
b. All products because all will give additional profits
c. Coconut meat only because it will give total profits of Php 12.08 per coconut
d. None because all will incur losses
22. Ham and Sam Co. has an offer for a special order of 100,000 units at a unit price of Php
6.00. Presented are these data:
23. The Mark X Corp. contemplates the temporary shutdown of its plant facilities in a
provincial area which is economically depressed due to natural disasters. Below are certain
manufacturing and selling expenses
1. Depreciation 5. Sales commissions
Property taxes 6. Delivery expenses
Interest expense 7. Security of premises
4. Insurance of facilities
Which of the following expenses will continue during the shutdown period?
a. All expenses in the list c. Items 1, 2 and 3 only
b. All except items 5 and 6 d. Items 1, 2, 3, 4, 6 and 7 only
24. Linear programming models are mathematical techniques in which an objective function is
maximized or minimized subject to constraints. These constraints must be fully specified
before a linear programming problem can be solved, and generally described as
a. Cost b. Resources c. Inefficiencies d. Dependent
variables
25. Which of the following statements is the least pertinent to the Program Evaluation Review
Technique (PERT)?
a. It is a system, which uses network analysis and critical path methods.
b. It is more useful for analyzing the interrelationships of time and activities to
discover potential bottlenecks.
c. It involves measuring progress in relation to schedule, evaluating changes to
schedule, forecasting future progress and predicting and controlling costs.
d. Time is a primary consideration and this technique is particularly suited for
problems, which involve the combination of resources that maximize profits or
minimize costs.
26. The Sales Director of Can Can Co. suggests that certain credit terms be modified. He
estimates the following effects:
Sales will increase by at least 20%
Accounts receivable turnover will be reduced to 8 times from the present turnover of 10
times
Bad debts, now at 1% of sales will increase to 1.5% of sales, before the proposed
change is at Php 900,000. Variable cost ratio is 55% and desired rate of return is 20%.
Fixed expenses amount to Php 150,000
27. The China Tee Store sells 100,000 tea bags a year. Additional data are presented below:
1. Selling price per bag: Php 2.50
2. Purchase cost per bag: Php 1.50
3. Ordering cost: Php 5.40 an order
4. Carrying cost: 20% of unit cost
5. Number of days the company operates in a year: 250
6. Average lead time on purchases: 6 days
What is the reorder point if the company will keep a 10-day safety stock of inventory?
a. 2,400 bags b. 5,400 bags c. 6,400 bags d. 8,800 bags
28. A soft drinks distributor which buys in a pre-sell basis is discussing with the route salesman
on the proper cases to be ordered and the frequency of call. From the route book and other
records, the following are available: prior years purchases, 50,000 cases; carrying cost per
case of inventory, Php 1.20; distributors discount, 1 case for every 10 cases bought; cost
of placing an order, Php 3.00; weekly demand is approximately 962 cases. Safety stock
required is 140 cases. No change in demand is expected this year. (Use 365-day, 52-week
year).
Determine the economic order quantity (EOQ), and the reorder point assuming a two day
lead time.
a. EOQ is 481 cases; reorder point is 500 cases
b. EOQ is 500 cases; reorder point is 414 cases
c. EOQ is 962 cases; reorder point is 275 cases
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d. EOQ is 250 cases; reorder point is 280 cases
30. What is the effect of changes in cash inflows, investment cost and cash outflows on
profitability (present value) index (PI)?
a. PI will increase with an increase in cash inflows, a decrease in investment cost, or a
decrease in cash outflows.
b. PI will increase with an increase in cash outflows, an increase in investment cost, or
an increase in cash outflows.
c. PI will decrease with an increase in cash inflows, a decrease in investment cost, or a
decrease in cash outflows.
d. PI will decrease with an increase in cash outflows, an increase in investment cost, or
an increase in cash inflows.
32. Payback period (PP), profitability (present value) index (PI), and simple accounting rate
of return (SARR) are some of the capital budgeting techniques. What is the effect of an
increase in the cost of capital on these techniques?
a. PP will increase, PI will decrease, and SARR will increase
b. PP will have no change, PI will decrease, and SARR will have no change
c. PP will have no change, PI will increase, and SARR will decrease
d. PP will decrease, PI will have no change, and SARR will have no change
33. In capital budgeting decisions, the following items are considered, among others:
1. Cash outflow of the investment
2. Increase in working capital requirements
3. Profit on sale of old asset
4. Loss on write-off of old asset
34. The following data pertain to Sunlight Corp. whose management is planning to purchase
an automated tanning equipment:
1. Economic life of equipment: 8 years
2. Disposal value after 8 years: nil
3. Estimated net annual cash inflows for each of the 8 years: Php 81,000
4. Time-adjusted internal rate of return: 14%
5. Cost of capital of Sunlight Corp.: 16%
6. The table of present values of Php1 received annually for 8 years has these factors; at
14% = 4.639, at 16% = 4.344
7. Depreciation is approximately Php 46,970 annually
Find the required increase in annual cash inflows in order to have the time-adjusted rate of
return approximately equal the cost of capital.
a. Php 5,501 b. Php 6,501 c. Php 4,344 d. Php 5,871
37. The payback reciprocal is an estimate of the internal rate of return. The Bravo inc. is
considering the acquisition of merchandise picking system to improve customer service.
Annual cash returns on investment cost of Php 1.2 million are Php 220,000. Useful
life is estimated at 8 years. The companys cost of capital is 14% and income tax rate is
35%.
38. Mr. Val Yu is an entrepreneur who is contemplating to buy a machine to increase the
capacity of his manufacturing operations. He consults you for advise on the alternatives
of leasing or buying the equipment. If purchased, the straight line depreciation expense
will be Php 18,700 annually over its life of 5 years. The annual lease payments will
amount to Php 29,000 payable at the end of each of the 5 years. Cost of money is 18%.
Tax rate is 35%. There is no salvage value. Present value of Php1 received annually for 5
years at 18% is 3.127. Present value of Php1 due in 5 years at 18% is 0.437.
What will you recommend and why?
a. Lease the machine because leasing saves Php 2,817
b. Lease the machine because leasing saves Php 27,138
c. Buy the machine because depreciation saves Php 10,300 each year
d. Lease the machine because outlay is less by Php 51,500
The following financial statements pertain to Blue Grass Corp. for the year 1993 (000s omitted):
BALANCE SHEET
1993
ASSETS
Actual Plan Year Ago
Cash and marketable securities P18,704 P12,500 P10,547
Trade receivables 46,759 52,500 44,298
Non-trade receivables 16,366 20,000 16,876
Inventories 23,379 15,000 12,657
Prepaid Assets 14,027 22,500 18,985
LIABILITIES
Accounts Payable and
accrued expenses P39,745 P53,805 P48,839
Loans payable 88,842 80,500 70,600
Total Liabilities 128,587 134,305 119,439
STOCKHOLDERS EQUITY
Capital stock 79,490 79,490 79,490
Retained Earnings 25,717 36,205 12,015
Total Stockholders equity P105,207 115,695 91,505
Total liabilities and s/e P233,794 P250,000 P210,944
INCOME STATEMENT
Volume 28721 29,623 29882
Revenue P300,566 P310,000 P271,930
Discounts 18,936 18,600 16,316
Net revenue 281,630 291,400 255,614
Direct cost of sales (140,815) (145,700) (127,807)
Manufacturing expenses (14,081) (15,500) (13,596)
Gross profit 126,734 130,200 114,211
Operating expenses
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Distribution 28,163 21,700 19,035
Selling 39,428 34,100 29,912
Marketing 14,082 15,500 13,595
General and administrative 5,633 9,300 8,159
Total 87,306 80,600 70,702
Net operating profit 39,428 49,600 43,509
Interest expense (15,547) (14,088) (13,414)
Other income (expense) (2,816) 1,688 (2,719)
Profit before tax 21,065 37,200 27,376
Income tax 7,363 13,010 9,572
Profit after tax P13,702 P24,190 P17,804
For amounts and volume, 000s are omitted; ratios, percentages and other indicators, as is
39. The revenue in 1993, versus 1992, decreased due to
a. increase in prices, in general, due to inflationary forces.
b. decrease in volume of 1,161 units.
c. decrease in selling price amounting to 15% compared with 1992.
d. decrease in volume, after increase in selling price of 15%.
40. Days sales outstanding compared with plan and year ago has (use a 360-day year, consider
ending trade receivables as the average balance, and round off to 2 decimal places):
a. improved versus year ago and deteriorated versus plan.
b. deteriorated versus year ago and deteriorated versus plan.
c. deteriorated versus year ago and improved versus plan.
d. improved versus year ago and improved versus plan.
41. Based on the number of days sales in inventories, the company holds inventories for the
following number of days before they are sold (use a 360-day year, consider ending
inventories as the average balance, and round off 2 decimal places):
a. 89.66 days in 1993, 55.59 days per plan, and 53.48 days in 1992.
b. 59.77 days in 1993, 37.06 days per plan, and 35.65 days in 1992.
c. 90.9 days in 1993, 56.37 days per plan, and 54.22 days in 1992.
d. 60.6 days in 1993, 37.58 days per plan, and 36.15 days in 1992.
43. Chow Foods operates a cafeteria for its employees. The operations of the cafeteria requires
fixed costs of P470,000 per month and variable costs of 40% of sales. Cafeteria sales are
currently averaging P1,200,000 per month. The company has the opportunity to replace the
cafeteria with vending machines. Gross customer spending at the vending machines is
estimated to be 40% greater than the current sales because the vending machines are
available at all hours. By replacing the cafeteria with vending machines, the company would
receive 16% of the gross customer spending and avoid cafeteria costs. A decision to replace
the cafeteria with vending machines will result in a monthly increase (decrease) in operating
income of
a. P182,000. b. P258,800. c. P(588,000). d. P18,800.
44. Julius International produces weekly 15,000 units of Product JI and 30,000 units of JII for which
P800,000 common variable costs are incurred. These two products can be sold as is or
processed further. Further processing of either product does not delay the production of
subsequent batches of the joint products. Below are some information:
JI JII
Unit selling price without further processing P24 P18
Unit selling price with further processing 30 22
Total separate weekly variable costs of further
Processing P100,000 P90,000
To maximize Julius manufacturing contribution margin, the total separate variable costs of
further processing that should be incurred each week are
a. P95,000. b. P90,000. c. P100,000. d. P190,000.
45. S Kent Co. has a limited number of machine hours that it can use for manufacturing two
products, A and B. each product has a selling price of P160 per unit but product A has 40%
contribution margin and product B has a 70% contribution margin. One unit of B takes twice as
many machine hours to make as a unit of A. Assume either product can be sold in whatever
quantity is produced, which product or products should the limited number of machine hours
be used for?
a. A. b. Both and B. c. Either A or B. d. B.
46. Pixie Co. produces Component 6417 for use in one of its electronic gadgets. Normal annual
production for the item is 100,000 units. The cost per 100 unit lot of the part are as follows:
Direct materials P520
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Direct labor 200
Manufacturing Overhead:
Variable 240
Fixed 320
Total Manufacturing Cost per 100 units P1,280
Bobbie Inc. has offered to sell Pixie all 100,000 units it will need during the coming year for
P1,200 per 100 units. If Pixie accepts the offer from Bobbie, the facilities used to manufacture
Component 6417 could be used in the production of Component 8275. This change would
save Pixie P180,000 in relevant costs. In addition, a P200,000 cost item included in fixed
overhead is specifically related to Part 6417 and would be eliminated. Pixie should
a. buy component 6417 because of P300,000 savings.
b. buy component 6417 because of P140,000 savings.
c. continue producing Component 6417 because of P40,000 savings.
d. continue producing Component 6417 because of P60,000 savings.
47. Phil-Fuji Co. manufacturers two types of electronic components, both of which must pass
through the Assembly and Finishing Departments. The following constraints apply:
Unit Selling Contribution Margin Hours Required Per unit
Product Price per Component Assembly
Finishing
Component 818 P120 P30 3 4
Component 810 P180 P45 4 6
Demand for Component 818 far exceeds the companys capacity, but the company can only
sell 60 units of component 810 each week. Workers in the Assembly department work a total
of 200 hours per week, and workers in the Finishing department work a total of 250 hours per
week. The company wants to know how many units of each component to produce to
maximize profit. If X represents the number of units of Component 818 and Y represents the
number of units of Component 810, the objective function would be
a. maximize 120X + 180Y. c. minimize 90X + 135Y.
b. maximize 30X + 45Y. d. minimize 30X + 45Y.
48. Hakuna Inc. sells on terms of 3/10 net 30 days. Gross sales for the year are P2,400,000 and
the collections department estimates that 30 percent of the customers pay on the tenth day
and take discounts; 40 percent pay on the thirtieth day; and the remaining 30 percent pay, on
the average, 40 days after the purchase. Assuming 360 days per year, what is the average
collection period?
a. 40 days. b. 15 days. c. 20 days. d. 27 days.
49. Ten Qs Inc. has an inventory conversion period of 60 days, a receivable conversion period of
35 days, and a payments cycle to 26 days. If its sales for the period just ended amounted to
P972,000, what is investment in accounts receivable? (Assume 360 days in year).
a. P85,200 b. P72,450 c. P94,500 d. P79,600
50. Simba Corp., whose gross sales amounted to P1,200,000 sold on terms of 3/10, net 30. The
collections manager estimated that 30 percent of the customers pay on the tenth day and
take discounts; 40 percent on the thirteenth day; and the remaining 30 percent pay, on the
average, 40 days after the purchase. If management would toughen on its collection policy
and require that all nondiscount customers pay on the thirtieth day, how much would be the
receivables balance?
a. P60,000 b. P80,000 c. P70,000 d. Zero.
51. Bachoy & Co. buys on terms 2/10, net 30, but generally does not pay until 40 days after the
invoice date. Its purchases total P2,160,000 per year. Assuming 360 days a year, the amount
of non-free trade credit used by the company on the average each year is
a. P180,000 b. P240,000 c. P 60,000 d. P120,000
52. A capital budgeting decision model has provided the following information:
Proposal A
Investment P1,000,000
Profitability index 1.2
Net present value P 600,000
Proposal B
Investment P1,800,000
Profitability index 2.1
Net present value P 300,000
The best project is
a. Proposal A because it has the highest net present value.
b. Proposal B because it has the highest profitability index.
c. Proposal B because its profitability index is over 2.0
d d. Proposal A because it has the highest net present value even though its investment
base is
e smaller.
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53. Telephone Corp. is contemplating four projects: L, M, N, and O. The capital costs for the
initiation of each mutually-exclusive project and its estimated after-tax, net cash flow are
listed below. The companys desired after-tax opportunity costs is 12%. It has P900,000 capital
budget for the year. Idle funds cannot be reinvested at greater than 12%.
In Thousand Pesos
L M N O
Initial cost 400 470 380 420
Annual cash flows
Year 1 113 180 90 80
2 113 170 110 100
3 113 150 130 120
4 113 110 140 130
5 113 100 150 150
Net present value P7,540 P59,654 P54,666
P(15,708)
Internal rate of return 12.7% 17.6% 17.2% 10.6%
Excess present value index 1.02 1.13 1.14 0.96
The company will choose
a. Projects M, N and O. c. Projects L and N.
b. Projects M and N. d. Projects L and M.
54. The General Manager of Tela Mills Inc. is considering the purchase of some new machines. The
machines would cost P4,000,000 with an economic life of 8 years without any salvage value.
Once set up, they would generate P12,500,000 additional revenues but yearly expenses for
additional labor and materials would also increase by P11,500,000. Assume the company uses
straight-line depreciation for taxes and that the appropriate tax rate is 35%. The required
after-tax rate of return is 14%.
The following data are for an interest rate of 15% and 8 periods:
Present value of P1 0.3506
Future value of P1 2.8526
Present value of annuity of P1 4.6389
Future value of annuity of P1 13.2328
The company should
a. purchase the machines due to positive NPV of P638,900.
b. not purchase the machines due to negative NPV of P984,715.
c. not purchase the machines due to negative NPV of P172,907.50.
d. be indifferent as the option does not bring about any advantage nor disadvantage.
55. Nakinnat Corporations Outlet No. 5 reported the following results of operations for the period
just ended:
Sales 2,500,000
Less: Variable expenses 1,000,000
Contribution margin 1,500,000
Less: Fixed expenses
Salaries and wages P750,000
Insurance on inventories 50,000
Depreciation on equipment 325,000
Advertising 500,000 1,625,000
Net income (loss) (P125,000)
The management is contemplating the dropping of Outlet No. 5 due to the unfavorable
operational results. If this would happen, one employee will have to be retained with an
annual salary of P150,000. The equipment has no resale value. Outlet No. 5 should
a. not be dropped due to foregone overall income of P350,000.
b. be dropped due to foregone overall income of P325,000.
c. not be dropped due to foregone overall income of P25,000.
d. be dropped due to overall operational loss of P25,000.
56. Sari-sari Corporation is a multiple-product firm. In their review of operations, they decided to
shift the sales mix from less profitable products to more profitable products, accounting for
30% of gross sales. This will cause the companys break-even profit to
a. decrease. b. change by 15%. c. increase. d. not change.
57. LY & Company completed its first year of operations during which time the following
information were generated:
Total units produced 100,000
Total units sold 80,000 at P100 per unit
Work in process ending inventory
Costs:
Fixed costs
Factory overhead P1.2 million
Selling and administrative P0.7 million
Per unit variable costs
Raw materials P20.00
Direct labor 12.50
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Factory overhead 7.50
Selling and administrative 10.00
If the company used the variable (direct) costing method, the operating income would be
a. P2,100,000. b. P4,000,000 c. P2,480,000. d.
P3,040,000.
58. The following information were made available for Futuristic, Inc.:
June 30, cash balance, P900,000
Dividends paid in July P240,000
Cash expenditures in July for operating expenses, P736,000
Depreciation expense in July, P90,000
Cash collections in July, P1,780,000
Merchandise purchases paid in cash in July, P1,124,000
Purchased equipment for cash in July, P350,000
It was the companys policy to keep a minimum cash balance of P200,000. The company
a. had to borrow P200,000.
b. did not borrow since its ending balance amounted to P200,000.
c. did not borrow since its ending balance amounted to P230,000.
d. had to borrow P60,000.
59. The following historical pattern on its credit sales of Rainy Co. was presented:
70% collection during the month of sale
15% in the first month after sale
10% in the second month after sales
4% in the third month after sale
1% uncollectible
The sales on account of the last six months of the year were reported as follows:
July P120,000
August 140,000
September 160,000
October 180,000
November 200,000
December 170,000
The total cash collections during the fourth calendar quarter from sales made on account
during the fourth calendar quarter would be
a. P345,000. b. P550,000. c. P502,800. d. P460,000.
60. F&S, Inc. has an annual capacity of 2,800 units of output. Its predicted operations for the year
as follows:
Sales 2,000 units at P760 each P1,520,000
Manufacturing costs: Variable P500 per unit
Fixed P360,000
Marketing and administrative costs:
Variable (sales and commissions) P120 per unit
Fixed P40,000
Assume there would be no effect on regular sales at regular prices and that the usual sales
commission will be reduced to half. Should the company accept at one-time-only special order
for 600 units at a selling price of P640 each?
a. Yes, due to incremental income of P48,000.
b. Either on would do as the net effect would be the same.
c. Yes, due to incremental income of P30,000.
d. No, due to the resulting loss of P37,714.
61. The official terms of purchases of U Tang & Co. are 2/10, net 30 but generally the company
does not pay until 40 days after the invoice date. Its purchases total P3,600,000 per year.
Assuming 360 days a year, the approximate cost of the non-free trade credit amounts to
a. 18.36%. b. 24.50%. c. 21.90%. d. 19.40%.
62. Nore Milling Co. has a plant capacity of 40,000 units per month. Unit costs at capacity are:
Direct materials P100
Direct labor 150
Variable overhead 75
Fixed overhead 75
Marketing fixed costs 175
Marketing variable costs 90
Present monthly sales are 39,000 units at P630 each. Josh Corporation contacted Nore about
purchasing 40,000 units at P600 each. The present sales would not be affected by the special
order. Nore should
a. Accept the special order due to P185,000 incremental income.
b. Accept the special order due to P110,000 incremental income.
c. Accept the special order due to P215,000 incremental income.
d. Accept the special order due to P10,000 incremental income.
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63. DTES Companys budgeted sales and budgeted cost of sales for the coming year are P14.4
million and P9 million respectively. Short-term interest rates are expected to average 15%. If
the company can increase inventory turnover from its present levels of nine times a year to a
level of twelve times a year, its cost savings in the coming year would be
a. P60,000 b. P67,500 c. P90,000 d. P37,500
64. Premised on past experience Mayo Corp. adopted the following budgeted formula for
estimating shipping expenses. The companys shipments averaged 12 kilos per shipment
(Shipping costs = P8,000 + (P0.25 x Kgs. shipped)
Pertinent data for the current month are given below:
Planned Actual
Sales order 800 780
Shipments 800 820
Units shipped 8,000 9,000
Sales 240,000 288,000
Total pounds 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
65. Casablanca Inc. has a practical production capacity of two million units. The current years
budget was based on the production and sales of 1.4 million units during the current year.
Actual statistics came out to be production of 1.44 million units and sales of 1.2 million units.
Selling price is at P20 each and the contribution margin ratio is 30%. The peso value that best
quantifies the marketing divisions failure to achieved budgeted performance for the year is
a. P4,800,000 unfavorable c. P1,440,000 unfavorable
b. P4,000,000 unfavorable d. P1,200,000 unfavorable
66. Each stockout of Product AX sold by Axiom Inc. costs P87,500 per occurrence. The carrying
cost per unit of inventory is P250 per year, and the company orders 1,500 units of product 24
times a year at a cost of P5,000 per order. The probability of stockout at various levels of
safety stock is
Units of safety stock Probability of stockout
0 .50
f 100 .30
200 .14
g 300 .05
400 .01
The optimal safety stock level for the company is
a. 0 units b. 100 units c. 200 units d. 300 units
67. You just passed the CPA licensure examination and took your oath. As you started your
practice, Kon Fuse Inc. came you for help in establishing a minimum desired rate of return to
be used in the evaluation of a capital project with a five year life. The following data were
provided:
Inflation rate for the past 5 years 13%
Expected inflation rate for the next 5 years 9%
Risk-free element 5%
Risk premium demanded for the project 7%
You will advice the client to consider a minimum desired rate of return of
a. 20% b. 21% c. 16% d. 25%
68. Arlene Inc. currently has annual cash revenues of P2,400,000 and annual operating cost of
P1,850,000 (all cash items except depreciation of P350,000). The company is considering the
purchase of a new machine costing P1,200,000 per year. The new machine would increase
depreciation to P500,000 per year. Assuming a 35% income tax rate, Arlenes annual
incremental after-tax cash flows from the machine would be
a. P330,000 b. P345,000 c. P292,500 d. P300,000
69. Lakas Engines Co. manufactures engines for the military equipment on a cost-plus basis. The
cost a particular machine the company manufactures is shown below:
Direct materials P400,000
Direct labor 300,000
Overhead:
Supervisors salary 40,000
Fringe benefits on direct labor 30,000
Depreciation 24,000
Rent 22,000
Total P816,000
If the production of this engine were discontinued the production capacity would idle, and the
supervisor will be laid off. Should there be a next contract for this engine, the company should
bid a minimum price of
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a. P816,000 b. P700,000 c. P730,000 d. P770,000
70. High Class Townhouse, Inc. manages five upscale townhouse in Makati, Ortigas and Greenhills
area. Shown below are the summary income statements for each complex.
In Thousand Pesos
One Two Three Four Five
Rent income 10,000 12,100 23,470 18,780 10,650
Expenses 8,000 13,000 26,000 24,000 13,000
Profit 2,000 ( 900) (2,530) (5,220)
(2,350)
Included in the expenses is P12,000,000 of corporate overhead allocated to the townhouse
based on rental income. The complex that the company should consider selling is (are)
a. Three, Four and Five c. Two, Three, Four and Five
b. Four and Five d. Four
END