1.

Elah Andal Companys operations for July disclosed the following data relating to direct
labor:
Actual cost P 10,000
Rate Variance (favorable) 1,000
Efficiency Variance (unfavorable) 1,500
Standard cost P 9,500
If the contracted labor rate is P5.50, then what is the actual labor rate?
a. P6.00
b. P5.00
c. P4.50
d. P4.00

2. In microeconomics, what will affect the demand of a product rather that its supply?
a. Increasing labor productivity
b. Increasing costs of materials
c. Increasing average household income
d. Increasing market price of the product

3. Which of these correlation coefficients represents the weakest relationship between two
variables?
a. + 0.50
b. 0.80
c. 0.05
d. + 1.05

4. An investment centers return on sales is 20% when its return on investment (ROI) is 25%.
What is the centers investment turnover?
a. 0.05
b. 0.45
c. 0.80
d. 1.25
Items related to 5 to 7 are based on the following information
Mich Barraca Company uses a standard costing system in the manufacture of its single
product. The 35,000 units of raw material in inventory were purchased for P105,000 and two units
of raw material are required to produce one unit of final product. In November, the company
produced 12,000 units of product. The standard allowed for material was P60,000 and there was an
unfavorable quantity variance of P2,500.
5. What is Mich Barracas standard price for one unit of material?
a. P2.00
 b. P2.50
c. P3.00
d. P5.00

6. How many units were used to produce November output?

a. 12,000 units
b. 12,500 units
c. 23,000 units
d. 25,000 units

7. What was the materials price variance for the units used in November?
a. P12,500 unfavorable
b. P11,000 unfavorable
c. P 3,500 unfavorable
d. P 2,500 unfavorable

8. When there is no excess capacity, the minimum acceptable transfer price must cover
a. Opportunity costs only
b. Variable and fixed manufacturing costs
c. Variable costs associated with the transfer
d. Variable manufacturing costs plus contribution margin foregone on lost regular units

9. Under the master budget, which of the following shall be classified as a financial budget?
a. Sales budget
b. Capital budget
c. Materials budget
d. Production budget

10. The following cost data for different hours of operations are made available to you by Lourd
Austeros Manufacturing Company for your analysis:

Number of Months 10
Sum of Hours 350
Sum of Costs 1,000
Sum of Hours x Costs 39,200
Sum of Hours Squared 14,250
Using the least-square method, what is the value of the slope of the cost line?
a. P 2.10 per hour
b. P 26.50 per month
c. P 26.50 per hour
d. P 735.00 for 10 months
 11. Under the three-variance method for analyzing factory overhead, budget or spending
variance is computed by subtracting from actual factory overhead costs incurred the
a. Budget allowance based on actual hours
b. Budget allowance based on normal hours
c. Budget allowance based on standard hours
d. Budget allowance based on budgeted hours

12. Daren Soberano Company produces two products, A and B. Relevant data follow:

Product A Product B
Direct materials P 28 P 25
Direct labor 3 2
Variable overhead 6 4
Variable selling expenses 4 2
Fixed costs P 50,000
Production/sales (units) 2,000 1,000

The company allocates fixed costs based on the direct labor cost. What should be the selling
price of Product B if the markup based on full cost is 30%?
a. P 59.00
b. P 59.15
c. P 60.00
d. P 63.15
Items 13 and 14 are based on the following information
Steph Curry Company has the following historical pattern on its credit sales:
70% collected in the month of sale
15% collected in the first month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
The sales on open account have been budgeted for the last six months of 2016 are shown
below:
July P 60,000
August 70,000
September 80,000
October 90,000
November 100,000
 December 85,000
13. Determine the projected cash collections in the month of October from third quarter sales.
a. P 21,400
b. P 43,000
c. P 84,400
d. P 89,100

14. Determine the projected net accounts receivable balance as of January 1, 2017.
a. P 42,250
b. P 44,100
c. P 44,750
d. P 45,000
Items 15 to 17 are based on the following information
Draymond Green, Inc. evaluates manufacturing overhead in its factory by using variance
analysis. The January information shows the following:
Actual Budget
Number of frames manufactured 19,000 20,000
Variable overhead costs P 4,100 P 2 per hour
Fixed overhead costs P 22,000 P 20,000
Direct labor hours 2,100 0.1 hour per frame
Labor payroll P 10,500 P 4.50 per hour

15. What is the overhead controllable variance?

a. P 2,100 favorable
b. P 2,300 favorable
c. P 2,100 unfavorable
d. P 2,300 unfavorable

16. What is the variable overhead spending variance?

a. P 100 credit
b. P 300 credit
c. P 100 debit
d. P 300 debit

17. What is the fixed overhead volume variance?

a. P 1,000 over-applied
b. P 1,000 under-applied
c. P 3,000 over-applied
d. P 3,000 under-applied

18. When both the selling price and the variable cost per unit are increased by P5.
a. The break-even point remains the same
 b. More units need to be sold to break-even
c. Fewer units need to be sold to break-even
d. The contribution margin also increases by P5

19. For the period just ended, Klay Thompson Company generated the following operating
results in percentages:

Revenues 100%
Cost of sales:
Variable 50%
Fixed 10% 60%
Gross profit ( P 1.2M ) 40%
Operating expenses:
Variable 20%
Fixed 15% 35%
Net operating income 5%
What is the degree of operating leverage?
a. 8.0 times
b. 6.0 times
c. 5.0 times
d. 2.6 times

20. Which sequence reflects decreasing level of responsibility?

a. Profit center, investment center, revenue center
b. Revenue center, profit center, investment center
c. Investment center, profit center, revenue center
d. Investment center, revenue center, profit center

21. The contribution margin ratio always increases when the

a. Breakeven point increases
b. Breakeven point decreases
c. Variable costs as a percentage of net sales increase
d. Variable costs as a percentage of net sales decrease

22. Mau and Kath Company plans to replace an old machine with a new one. For capital
budgeting purposes, which of the following shall be considered in the calculation of initial
cost of net investment?
a. Cost of the old machine and salvage value of the new machine
b. Cost of the new machine and salvage value of the old machine
c. Cost and salvage value of the old machine
d. Cost and salvage value of the new machine
 23. Benjamin Punongbayan Company is preparing its cash budget for November. Benjamin
expects 50% of the credit sales to be paid in the month of sale, 30% in the month following
the sale, and the remainder paid two months after the month of sale. Benjamin expects the
following cash sales and credit sales:

Cash Sales Credit

November P 17,000 P 100,000
October ??? P 90,000
September P 15,000 P 80,000
August P 18,000 P 95,000

Assuming no bad debts and a projected total cash inflow of P107,000 in October, what is
Benjamins expected October cash sales?
a. P20,000
b. P19,000
c. P16,000
d. P14,000

24. James Araullo Companys present current ratio is 4 times. What transaction will most likely
cause the current ratio of the company to increase?
a. Purchase of inventory on credit
b. Collection of trade receivables
c. Payment of current tax obligations
d. Borrowing of cash based on a 6-month loan
Items 25 to 26 are based on the following information
The manufacturing capacity of Carlo Magsumbol Companys facilities is 30,000 units of
product a year. A summary of operating results for Year 1 is as follows:
Sales ( P50 per unit) P 900,000
Variable manufacturing and selling costs ( 495,000 )
Contribution margin 405,000
Fixed costs ( 247,500 )
Operating income P 157,500
25. What is Carlo Magsumbols margin of safety in Year 1?
a. 11,000 units
b. 9,000 units
c. 7,000 units
d. 5,000 units

26. Assuming a tax rate of 25%, how many more units shall be sold in Year 2 to earn an after-
tax profit of P236,250?
 a. 25,000 units
b. 21,500 units
c. 7,000 units
d. 3,500 units

27. What is characteristic of a period of rising inflation?

a. Increases purchasing power of money
b. Increases the price level and decreases the purchasing power of money
c. Increases the price level, which benefits anyone who is owed a specific amount of money
d. Benefits anyone who is owed a specific amount of money and harms anyone who owes
specific amount

28. At 40% capacity, overhead cost of Joseph Rally Chavez Company is P1,450; at 75% capacity,
overhead cost is P2,150. Determine the variable overhead cost at 80% capacity.
a. P 20
b. P 650
c. P 1,600
d. P 2,250

29. Why is equity capital generally more expensive than debt financing?
a. Interest on bonds is a legal obligation
b. Dividends fluctuate more than interest rates
c. Investors expect to be paid more for exposure to higher risk
d. Investors have a greater demand for equity investments than for debt investments

30. Given the following standard cost data of Joseph Arlan Fajardos Company:
Actual direct labor costs P 100,000
Actual factory overhead costs 250,000
Applied factory overhead costs 275,000
Labor spending variance 25,000 favorable
Overhead spending variance 15,000 unfavorable
Labor efficiency variance 12,500 unfavorable
Overhead efficiency variance 20,000 favorable
Materials purchase price variance 7,500 favorable
What is the overhead controllable variance?
a. P5,000 favorable
b. P5,000 unfavorable
c. P25,000 favorable
d. P25,000 unfavorable

31. Emerita Mateo Corporation carries no debt in its capital structure. Its beta is 0.80. The risk-
free rate is 9 percent and the expected return on the market is 15 percent. The company has
an opportunity to invest in a project that earns 12%. Using Capital Assets Pricing Model
(CAPM), what is Tafts cost of capital?
 a. 4.8%
b. 7.2%
c. 12%
d. 13.8%

32. Boiser Company has two decentralized divisions, Tiquia and Sevilla. Tiquia Division has
always purchased certain units from Sevilla Division at P75 per unit. Because Sevilla Division
plans to raise the price to P100 per unit, Tiquia Division desires to purchase these units from
outside suppliers for P75 per unit. Sevilla Divisions costs are as follows:
Variable cost per unit P70
Annual Fixed costs P15,000
Tiquia Divisions purchase 1,000 units
If Tiquia Division buys from an outside supplier, the facilities Sevilla Division uses to
manufacture these units will remain idle. Would it be more profitable for Boiser to enforce
the P100 transfer price?
a. Yes, net advantage of the company is P 5,000
b. Yes, net advantage of the company is P 30,000
c. No, net advantage of the company is P 25,000
d. No, net advantage of the company is P 30,000

33. Siapco Company has average daily cash collections of P3 million, based on a 360-day year. A
new system is estimated to reduce the average collection period by two days without
affecting sales. The new systems annual cost is P100,000 plus 0.01% of collections. Siapco
estimates that it would earn 6% on additional funds. What is the estimated annual net benefit
from the new system?
a. P152,000
b. P180,000
c. P260,000
d. P360,000

34. Two goods, P&A Soap and Grant Thornton Soap are substitutes. What will an increase
in the price of Grant Thornton Soap cause?
a. The demand curve for P&A Soap to shift right
b. The supply curve for P&A Soap to shift right
c. The demand curve for P&A Soap to shift left
d. The supply curve for P&A Soap to shift left

35. Golden State Corporation has preferred stock with a market value of P107 per share, a face
value of P100 per share, underwriting costs of P5 per share, annual dividends of P10 and a
tax rate of 30%. What is Golden States approximate cost of capital for preferred stock?
a. 6.9%
b. 9.3%
c. 9.8%
d. 10.5%
36. Klein Company sells 500,000 bottles of condiments annually at P3 per bottle. Variable costs
are P0.60 per bottle and fixed costs are P110,000 annually. Klein has annual interest expense
of P60,000 and a 30% income tax rate. What is Kleins approximate degree of financial
leverage?
a. 1.04
b. 1.06
c. 1.08
d. 1.10

37. The residual income of a company segment is positive when

a. Sales variances are favorable
b. Costs variances are unfavorable
c. Minimum ROI is lower than the segments ROI
d. Minimum ROI is based on companys cost of capital

38. Chavez Company provides the following information based on its accounting records:

Current assets P2,000,000

Noncurrent assets 7,000,000
Current liabilities 1,000,000
Noncurrent liabilities 4,000,000
Pretax operating profit 1,500,000
Pretax cost of equity 15%
Pretax cost of debt 5%
Tax rate 40%
The carrying amounts and market values of above amounts do not differ significantly. What
is Chavezs economic value added (EVA)?
a. P 180,000
b. P 120,000
c. P 90,000
d. P 75,000

39. Ginebra Company plans to sell 80,000 bags of potato chips in June and each of these bags
requires five potatoes. Pertinent data include:

Potato Chips Potatoes

Actual June 1 Inventory 15,000 bags 27,000 potatoes
Desired June 30 Inventory 18,000 bags 23,000 potatoes

How many units of raw materials should Greece plan to purchase?

a. 381,000 potatoes
b. 389,000 potatoes
c. 411,000 potatoes
 d. 419,000 potatoes

40. Dante Dela Cruz Company sells a single product for P40 per unit, which it purchases for
P20. The salespeople receive a salary plus a commission of 5% of sales. Last year the
organizations net income (after taxes) was P100,800. The organization is subject to an
income tax rate of 30%. The fixed costs of the organization are:

Advertising P 124,000
Rent 60,000
Salaries 180,000
Other fixed costs 32,000
Total P 396,000
The organization is considering changing the compensation plan for sales personnel. If the
organization increases the commission to 10% of sales and reduces salaries by P80,000, what
peso sales volume must the organization have in order to earn the same net income as last
year?
a. P1,042,000
b. P1,100,000
c. P1,150,000
d. P1,630,000

41. Dividend yield is 12% while price-earnings ratio is set 5 times. Determine the retention or
plowback ratio.
a. 2.4%
b. 40.0%
c. 41.7%
d. 58.3%

42. An individual receives income of P3,000 per month and spends P2,500. An increase in
income of P500 per month occurs, an individual spends P2,800. What is the marginal
propensity to save (MPS)?
a. 20%
b. 40%
c. 60%
d. 80%

43. Baby Valix Corporation plans to tighten its credit policy. Below is the summary of changes:

Old Policy New Policy

Average number of days collection 75 50
Ratio of credit sales to total sales 70% 60%
 Projected sales for the coming year are P50 million and it is estimated that the companys
credit sales to be 5% less if the new policy is implemented. Assuming a 360-day year, what is
the effect of the new policy on accounts receivable?
a. P3,333,333 decrease
b. P3,817,445 decrease
c. P6,500,000 decrease
d. P3,871,454 decrease

44. Rodiel Ferrer sells to retail stores on credit terms of 2/10, n/30. Daily sales average 150
units at a price of P300 each. Assuming that all sales are on credit and 60% of its customers
take the discount and pay on day 10 while the rest of the customers pay on day 30, what is
the amount of Rodiel Ferrers accounts receivable?
a. P1,350,000
b. P990,000
c. P900,000
d. P810,000

45. Which variance is LEAST likely affected by hiring workers with less skill than those already
working?
a. Labor rate variance
b. Materials use variance
c. Material price variance
d. Variable overhead efficiency variance

46. Misstatements in a batch computer system caused by incorrect programs may not be
detected immediately because
a. Errors in some transaction may cause rejection of other transactions in the batch
b. The identification of errors in input data typically is not part of the program
c. There are time delays in processing transactions in a batch system
d. The processing of transactions in a batch system is not uniform
Items 47 to 48 are based on the following information
Franz Pulido Inc. provides the following information for the month of February based on
the production of 20,000 units:
Direct materials 50,000
Direct labor 30,000
Variable factory overhead costs 20,000
Fixed factory overhead costs 25,000
Variable selling and administrative expense 40,000
Fixed selling and administrative expense 15,000

47. If the present sales is P 75,000 (5,000 units), what is the required increase in units sales to
break-even for the month?
a. 15,000 units
 b. 20,000 units
c. None, since the company is currently earning profit
d. None, since the company is currently at its break-even point

48. How many units were sold if variable costing profit is higher than absorption costing profit
by P 2,500?
a. 18,000 units
b. 18,889 units
c. 21,111 units
d. 22,000 units

49. A company that adopts a JIT production system shall expect

a. Breakeven point to be higher that shutdown point
b. Income under absorption and variable costing to be equal
c. Most production costs to be irrelevant in decision making
d. Standard cost variances to be mostly material and unfavorable

50. Jessie Mendiola Company makes 70,000 units per year of a part it uses in the products it
manufactures. The unit product cost of this part is computed as follows:
Direct materials P 17.80
Direct labor 19.00
Variable manufacturing overhead 1.00
Fixed manufacturing overhead 17.10
Unit product cost P 54.90

An outside supplier has offered to sell the parts for P48.50 per unit. If Jessie Company
accepts this offer, the facilities now being used to make the part could be used to make
another product that is expected to contribute an additional margin of P273,000 per year.

If the parts were purchased from the outside supplier, all of the variable cost of the part
would be avoided. However, P8.20 of the fixed manufacturing overhead cost being applied
to the part would continue even if the part were purchased from the outside supplier. This
fixed manufacturing overhead cost would be applied to the companys remaining products.

From the given data, which of the following is a correct conclusion?

a. The total relevant unit cost to make the part is P46.70
b. The total relevant unit cost to buy the part is P44.60
c. The net advantage of making the part is P1.80 per unit
d. The net disadvantage of making the part is P147,000

We have to have the mentality that we have to work for everything were going to get
-Stephen Curry