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597 views14 pagesMas PDF
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/ 14
CPAR
CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
MANAGEMENT ADVISORY SERVICES ‘Saturday, July 28,2018
First Pre-board Examination 4:30 pm to 4:30 pm
Set A
Instructions. Choose the BEST answer for each of the following items. Mark only one answer
for each item on the Special Answer Sheet provided, Strictly no erasure allowed. Use Pencil No.
Loniy.
A. All of the folowing are compiementary goods except
x a. Margarine and butter ¢. Toothbrush and toothpaste
b. Pen and paper d. Razors and razor blades
Items 2 and 3 are based on the following information:
Keren Panday wents to establish an environmental testing company that would specialize in
evaluating the quality of water found in rivers and streams. However, Panday has
discaverad that she needs either certification or approval from five separate local and state
agencies before she can commence business. Also, the necessary equipment to begin would
cost several million dollars. Nevertheless, Panday believes that if she is able to obtain capital
Tesources, she can gain market share from the two major competitors.
2, The large capital outlay necessary for the equipmentiis an example of a(n)
a. Entry barrier. ¢, Created barrier,
b. Minimum efficient scale. d.) Production possibility boundary.
3. ‘The market structure Karen Panday is attempting to enter Is best described as
a. A natural monopoly. <. Anoligopoly
b. Acartel. 4, Monopolistic competition
4. Sam Company has fixed costs of P280,000. It produces two products, R and M. Product R
has @ variable cost percentage equal to 60% of its P10 per unit selling price. Product M has
2 variable cost percentage equal to 70% of its P30 selling price. For the pest several years,
sales of Product R averaged 66 2/3% of the sales nf Product M. The ratio is not expected
to change.
How many units of Product M will Sam sell at the break-even point? 5
a. 40,000 units ¢. 16,520 units x
b. 16,000 units dy 24,000 units Ve ee
ITEMS 5 10 7 ARE BASED ON THE FOLLOWING:
Mr. Aldito Antonio is considering investing in @ vending machine operation involving 50
vending machines located in various malls around the city. The machine manufacturer
reports that similar vending machine routes have produced a sales volume ranging from 500
‘to 1,000 units per machine per month. The following information is made avallable to Mr.
Antonio in evaluating the possible profitability of the operation,
a. An investment of 25,000 will be required, P7,000 for merchandise and P18,000
for the 50 machines, i}
b. The machines have a service life of five years and no salvage value at the end of
that period. Depreciation will be computed on the straight line basis.
c. The merchandise (candies) retalls for an average of P0.15 per unit and will cost
Antonio an average of PO.06 per unit,
d, Ovmers of the building in which the machines are located are paid @ commission of
0.03 per unit of candy sold.
One man will be hired to service the machines. He will be paid P700 per month.
Other expenses are estimated at P200 per month. These expenses do not vary
with the number of units sold,
=o MANAGEMENT ADVISORY SERVICES ‘Saturday, July 28, 2018
First Preboard Examination Page 2of 12
© 5. The estimated break-even point in units per month is
a, 75,000 _ 20,000
b, 10,000 d, 240,000
6. What sales volume per mont will be necessary to produce a retum of 12% before taxes on
Antonio's investment during his first year of operations?
a. 70,000 < 24,167
b. 9,667 d., 125,000
_-7 Iintonio is considering offering the building owners a flat rental of P15 per machine per
month in lieu of the commission of F0.03 per unit sold. What effect would this change in
‘commission have on his monthly break-even volume in terms of units?
a, Break-even point will increase by 1,667 units,
®, Break-even point will decrease by 1,667 units.
¢, Break-even point will not change.
d, Cannot be determined from the given information
8.“An MS client asked for intemal contro! system evaluation. During eveluation, the
practitioner suggests that certain changes are necessary in hardiing some accounts. The
dient agrees. However, he (the client) reouests that his former consultant supervise the
installation,
‘The practitioner knows that such former consultant lacks sufficient experience to provide
the necessary technical direction and supervision, In this case, the practitioner should
a. tell the cient everything he knows about the former consultant so he could be
prevented frorn supervising the instaltation.
b. prevent the former corgultent to supervise the installation, but he should not tell the
dient anything about his (former consultant's) capabilities.
¢. should encourage the former consultant to ettend 2 seminar/ workshop to learn the
basics of engagement supervision,
d)) cecline the engagement if the client insists that the former consultant supervise the
instatiation, an¢ the necessary technical conipetence would not be provided even
through other means.
9,AN financial accounting, certain sules and reoulations niust be followed on how financial
statements inust be presented to readers. In managerial accounting, no such restrictions
generally apply because it is
a. an entirely different fieki that reed not observe the broad guidelines in financial
accounting.
b. designed to provide management with non-fiencta information for decision-making.
€2) designed to provide accounting and other Fnencial data to assist management in
—" making business decisions,
d. adiscipline that does not require preparation of financial staternents.
10. An-activity that adds costs to the product or service, but does not make such product or
service more veluubie to customers is called
(2) non-alue edding activity. 6 costly activity,
D. value-adding activity. 4, valuable activity.
11, Product costs or inventorlable costs
a) are charged to expense when products become part of the finished goods inventory.
B. Include only the prime costs of producing 4 product.
Cc. are treated as assors before tiie products are sold.
. include only the conversion costs of producing th
products,
12, For decision-making ourpeses, relevant costs are
a, variable past costs. MANAGEMENT ADVISORY SERVICES ‘Saturday, July 26, 2018
Firet Pro-board Examination Page 3 of 12
, all fixed and variable costs.
¢ anticipated future costs that will differ among various alternatives.
costs incurred within the relevant range of production.
ITEMS 13 to 15 ARE BASED ON THE FOLLOWING INFORMATION:
‘AS part of a cost study, the cast accountant of Shinly Corporation has recorded the cost of
‘operations at seven different levels of materials usage. The records show the following:
Kilos of Materials Costs of ic
80 P 800
60 480
20. 320 =
120 1,200 =
140 1/280 4
40 480
100 4,040 +
‘Sum of the kilos (2x) 560 ;
‘Sum of the costs (Zy) 5,600 »
‘Sum of the kilos multiplied by the costs (Zy)P545,600 \we
Sum of the Kilos squared (3x?) 56,000
13: Using the high and low points method, the cost formula may be expressed as: ?
“a. Total cost = 320 + 16x €. ) Total cost = 160 + 8x
b. Total cost = 103 + 8.71x . Total cost = 206 + 10x
14, Under the method of least squares, the cost formula is expressed as:
a, Total cost = 320+ 16« ¢.. Total cost = 160 + 8x =
b. Total cost = 103 + &.71x @. Total cost = 206 + 10x) °°
15. The projected cost of operations for 90 kilos af materials is
2, 886,90 if the high-low points method is used.
b,. P880.00 if the method of least squares is used. $
¢.) P886.90 if the method of least squares is used.
~d. P8B0.00 regardless of the method used,
16:In ABC system, costs are grouped in cost pools and then allocated by a common allocation
~~ base, which ordinarily is the cost’s cost driver. Such allocation base is the common
denominator for systematically correlating indirect costs and a cost object.
In @ homogeneous cast pool, the allocation base should
2, be a non-financial measure so that the allocation may be more objective.
b. be a financial measure so that the allocation may be more objective.
() have @ cause-and-effect relationship with the cost items in the cost pool,
G. assign the costs in the pool uniformly to cost objects even if the cost objects do not
Use resources Uniformly,
17<1n cost behavior analysis, the linearity assumption states that
2. in all cases, there is a strict linear relationship between the cost and cost driver.
b, within the relevant range, there is a strict relationship between the cost end the cost
driver. ‘
c. within the relevant range, there is a strict linear relationship between the cost and cost
driver.
. within the relevant range, all costs are fixed and may be crawn graphically as straight
lines. MANAGEMENT ADVISORY SERVICES
First Pre-board Examination
‘Saturday, July 28, 2018
Pago 4 of 12
\18. The owner of Kuykuy Company is concerned about Increased flxed manufacturing costs.
Last year, the fixed manufacturing costs were P600,000. This year, the fixed manufacturing
costs Increased by P150,000. The fixed selling and administrative costs of P540,000 were
the same for both years. The company operated in both years with an average contribution
margin ratio of 30 percent. It earned profit before income taxes of P910,000 last year.
How much would sales revenue have to increase this year for the comparly to eam the
same profit as it did last year? TOs x
2. P150,000 co) P5,533,333.33 ys rats >
b, 500,000 “a. P2,200,000.00 7
19. Blow Co.’s 2018 fixed manufacturing ovethead costs totaled P50,000, and variable selling
costs totaled P40,000. Under absorption costing, how should these costs be classified?
Period costs Product costs
a. PO 90,000
(b,) —P-40,000 50,000
© 50,000 40,000,
é.——_P30,000 Po
20.At the end of Vicky's first year of operations, 1,000 units of, inventory remained on hand.
Variable and fixed manufacturing costs per unit vere P90 and P20 respectively.
Based on these data, which of the following is correct?
’,..Income figures under both the absorption and variable costing methods are the same.
b. IF Vicky Uses absorption costing rather than varlable costing, the result would be 2
higher pretax income by P20,000.
If Vicky Uses absorption costing rather than variable costing, the result would be @
lower pretax income by P20,090.
d. If Vicky uses absorption costing rather than variable costing, the result would be @
higher pretax income by P90,000.
+» 21. Apple Co. has fixed costs of P200,000 and breakeven sales of P1,600,000. What is the
projected profit at P2,400,000 sales? x 2
GL i cc, P800,000 cr
'b. P300,000 d. P100,000 Biv
22. Historical experience, engineering studies, and input from operating personnel are’ three =
potential sources for quantitative standards. Although historical experience may provide an
initial guideline for setting standards, it should be used with caution because
a. most companies have very poor records.
,) ideal standards are better than historical standards.
, they may not be achievable by operating personnel.
d, they may perpetuate operating inefficiencies.
ITEMS 23 TO 25 ARE BASED ON THE FOLLOWING:
PSs hy WG
“The following information is avaliable for Athena Co. for its first year of operations:
Sales In units 5,000
Production in units 8,000 D oof
Manufacturing costs: 4 at aa
Prime cost PS per unit / ; =
Variable overhead Lper unit ¢* 5
Fixed overhead 100,000
Net income (absorption method) 30,000
‘Sales price per unit P40 MANAGEMENT ADVISORY SERVICES. Saturday, July 28, 2018
First Pre-board Sxamination Page § of 12
ITEMS 30 TO 34 ARE BASED ON THE FOLLOWING:
Vhong, Inc. evaluates manufacturing overhead in its factory by using variance analysis. The
following information applies to the month of July:
ACTUAL BUDGETED
Number of units produced 19,000 20,000
_. Variable overhead costs 4,100 P2 per direct labor hour
Fixed overhead costs 22,000 20,000 :
Direct labor hours 2,100 0.1 hour per unit) rev
~ 30, The controllable Variance amounts to
@. P2,500 unfavorable ¢. P2,300 unfavorable
b. P1,000 unfavorable d,_ P2,000 unfavorable, 0
311, Using the three-way variance analysis, the spencing variance amounts to
2, P100 favorable c. P2,000 unfavorable
b, P1,900 unfavorable d. P2,100 unfavorable
efficiency variance amounts to
Gat Pa00 unfavorable © P40 favorable r
b, P1,900 unfavorable d. P1,000 unfavorable
33. The non-controllable variance is
/ 2. P2,300 unfavorable c. P2,000 unfavorable
b. P40 unfavorable @} 1,000 unfavorable
34. The fixed overhead efficiency variance Ist
a, P400 unfavoral P409 favorable
b, PP2,000 unfavorsble ao
p 35. The Accessores Department shows sales of P35,000. Variahle casts are_P30,000 and
allocated navoiede fied costs are 9,000, leavirg 2 F4,000 lass, Based| on this
information and all other things ecu:
a. the department cor es P35,000 to tera! profits. vs
b. dropping tie departient will reduce total camoanyy profits by P5,C00,
Ge the department shouki be closed.
(dy) the department sould be kepy only unit voluma can be increased enough to”
increase soles by P4,000,
36, Jesse Company has 200
Was R10 per unit. They
of an obsolete component. The variable cost to produce them
now be sold for Pi,75 euch ane it would cost P7.60 to make
them now. If the units could be used to miake a product for 2 spacial order, their relevant
costs: -
a. P75. c. P10.00. lo
BoP 7.60. Gi some otner number.
32 DSP Company earned P100,000 sn sales ef 1,000,000. It earned P130,000 on sales of
~~ PAd00,000, Coniriuien margit as a parcentage of sls is comers Ut
) 30%. ©. 70%. ve
B40, 9, 90%,
38. In a global economy, a
a, the trade of goods and services Is facussd on trade belwean or among countries on
the same continent.
the international moveiient of labor 's probibited except for muitilinguel persons,
the internistional flows of cepitel and informaton ere common
all of the ebove hagpen in 2 global economy.
abs MANAGENENT ADVISORY SERVICES Solurday, July 28, 2018
Firat Pre-boars Examination Page 6 of 12
23. What would Athena Co. have reported as its income before income taxes if It had used
Variable costirig? ~~
30,000 c. P67,500
2) (P7,500) , can’t be determined from the given
information
24, What was the total emount of SG&A expense incurred by Athena X Co.?
2. P30,000 c. P6,000
by 62,500 d. can’t be determined from the given
information
25. Based on variable costing, what would Athena Co. show as the value of its ending
inventory?
a. P120,000 c. P27,000
b.)P 64,500 d. P24,000
26. Using regression analysis, Nasty Company graphed the following relationship of its cheapest
product line's sales with its customer's Income levels:
Sales
Pesos
Income levels increasing
| If there is a strong statistical relationship between the sales and customers’ income levels,
which of ‘the following numbers best represents the correlation coeffident for this
relationship?
a. +0.93 .) = 0.93 \
b, -9.00 d. +9.00 3.2
at P2.50 per meter. During June, 2018, 4,200 meters of materials costing P10,080 were
purchased and used to produce 1,000 units of the product. What was the materials price
27. The standard.direct materials cost to produce a unit of a product is four meters of materials
variance for June, 2018? g mo UM
@, P480 unfavorable c. PaOO favorable :
b, P80 unfavorable d.» 420 favorable
28. Ohjo company iises a standard costing system in connection with the manufacture of a “one
size fits all” product made of rubber. Each unit of finished product contains two feet of
direct material. However, a 20% direct material spoilage calculated on input quantities
occurs during the manufacturing process. The cost of the direct material is P3 per foot. The
standard direct materials cost per unit of finished product is: pm- 14+
a. P7.50 Ga, P7.20
b. 6.00 (4) P4.80
29:Tanya Company manufactures one product with a standard direct manufacturing labor cost
of four hours at P12.00 per hour. During June, 1,000 units were produced using 4,100
at P12.20 per hour. The unfavoreble direct iabor efficiency variance was: :
a, PB20 ¢.P1,200 .
b. P400 d. P1,220 Uhe “ew MANAGEMENT ADVISORY SERVICES Saturday, July 28, 2018
First Pre-beard Examination Page 7 of 12
391 If activity-based costing is implemented in an organization without any other changes being
effactad, total overhead costs will
a. be reduced because of the elimination of non-value-added activities.
b. be reduced because organizational costs will not be assigned to products or services.
. be increased because of the need for additional people to gather information on cost
drivers and cost pools.
4, remain constant and simply be spread over products differently.
USE THE FOLLOWING TO ANSWER QUESTIONS 40 AND 41:
Belle Corporation manufactures a variety of products. In the past, Belle has been using a
traditional costing system in which the predatermined overhead rate was 150% of direct
labor cost. Selling prices had been set by multiplying total product cost by 200%, Sensing
‘that this system was distorting costs and selling prices, Balle has decided to switch to an
activity-based costing system for manufacturing overhead costs using three activity cost
pools. Selling prices are stil to be set at 200% of unit product cost under the new system.
Information on these cost pools for next year are as follows:
Activity Cost Poot Estimated Activity Estimated Overhead Cost
Machine Setups 400 Number of setups 150,000 390
Quality Control 1,500 Number of inspections 180,000 7)
Other Overhead 30,000 Machine hours 480,000 te
Information (on a per unit basis) related to three populer products at Belle are as follows:
a liege Model #58
Direct material cost
Direct labor cost ato
Number of setups 2.
Number of inspections 1
Number of machine hours 4 x
40. Under the tracitional system, what would be the seling price of one unit of Model
#362
a, P2,536 (c) P4,080
b. P2,712 d. P5,506
41. Under the ectivity-based costing system, what would be the selling price of one unit of
Model #367
a. P2,536
b. P2,712
Dey
42, If a firm produces more units than it sells, absorption costing, relative to variable costing,
vill result in ai
(a) higher income and assets. . lower income but higher assets.
“b. higher income but lower assets. d. lower income and assets.
a
b. reduce _ increase
G. Increase no effect
d,> increase reduce
44:Cost behavior refers to:
‘a. how costs react to a change in the level of activity MANAGENENT ADVISORY SERVICES Saturday, July 28, 2018
First Pre-board Examination Page 8 of 12
b, whether a cost is incurred in a manufacturing, merchandising, or service company
¢. classifying costs as either inventoriable or period costs
d. Whether a particular expense has been ethically incurred
ITEMS 45 AND 46 ARE BASED ON THE FOLLOWING:
Kodak Associates produced 12,000 cameras during 2018 although expected. production was
‘only, 10,500 cameras. The company’s fixed overhead rate is P6 per camera. Absorption
‘Costing operating income for the year is P18,000 based on sales of 11,000 units.
45. The production volume variance is: A ono 66002
a. P9,000 unfavorable 9,000 favorable ine :
b; 6,000 favorable d. P3,000 unfavorable 2 | aya
46. The variable costing operating income is A
a, P24,000 c P-9,000
b, P16,000 4.12000 =, 7
S Nd
47. Which of the following quantitative methods will separate @ seri-variable cost into its fixed
and variable coinponents with the highest degree of precision?
@. High-low method c. Least squares method
b, Simplex method d.) Scattergraph diagram method
48. Water is suppiied by BAYNILAD to Eastern Metro Manila by pumping water from the
Novaliches Water Treatment Plant to a storage tark at the highest elevation in the area,
from which it then flows to the customers by gravity. The water administrator notes that
the costs to pump water vary to some extert by the number of cubic meters pumped, but
fixed. costs are also included in ¢rese pumping costs. A record of cubic meters consumed
er month and total pumping costs consumed per montir is as follaws:
‘Cubic Meters: Cubic Meters
Consumed in Consumed Purping
(000) t (000) Cost
4,760 P29,100 4.860 29,700.
4,900 30,800 35,800 )
2,150 34,000 — 31,800
2,050 32.800 25,51
In addition to pumping costs, P1.10 ger cubic meter in variable cost and P75,0
‘gots are incurred to sunply water to residents, BAYNILAD
cubic meter consuined. 4
At what level of water consuinption would BAYNILAD break-even? v st
a 21,508 & 23,220 ae
¢ >) 23,143 a. 67,385
49.1n January, Awo Equipment Company of Cavit2 purchased 50,000 carts at 2 total cost of
600,000, During the monty, 46,000 parts having a standard unit cost of P14 were used in
Production. The raaterials usage variance for the month wes unfavorable by P33,000.
According to the standards, 5 arts should be used for each unit of product.
How many units of product Were produced in January? Ah
a. 8,600 Units 10,000 units Thee
B)-9,200 units d. 4,000 units
50. In 2019, Gemiel Manufacturing Company plans to operate at normal capacity and
4 Manufacture 400,000 units of product, as in 2018. Sales for 2019 have been estimated at
350,000/cinits, with total revenue at 37,500,000. The cost of the 20,000 units in the MANAGEMENT ADVISORY SERVICES, Saturday, July 28, 2018
First Pre-board Examination Page $ of 12
finished goods inventory on January 1, 2019, was P600,000, Induded in this amount was
400,000 in fixed manufacturing overhead. No changes in fixed manufacturing costs are
expected in 2019, and the variable cost per unit of product will also remain unchanged.
Which of the following statements Is incorrect?
2. Gross profit undér absorption costing amounts to P7,000,000.
b, Operating income under variable costing amounts to P6,000,000.
Overhead capacity variance amounts to P1,000,000 unfavorable,
‘¢. The company’s finished goods inventory increased by 50,000 units.
51, Following are among the aclvantages claimed for standard costing except:
2, Standard costing helps establish control over costs.
by It provides information useful in budgeting,
It motivates employees to accomplish established goals.
d._ Itsoives the period cost - product cost controversy.
52. Fermin has noticed a demand for small tables for personal computers and printers. Retail
office furniture outlets are charaing from P400 to PH00 for a table. Fermin believes that he
can manufacture and sell an attractive small table that will serve the purpose for P2L0. The
costs of materials, labor, and variable overhead per table are estimated at P110. The fixed
costs consisting of rent, insurance, taxes, and depreciation are estimated at 25,000 for the
year. He already has orders for 180 tables and has established contacts that should result
In the sale of 150 additional tables.
By. how many units must Fermin exceed his break-even point if he to eam pretax
profit of P11,000? ie res
a. 360 c 110
b,, 250 4. 171 s
53. It refers to the practice of hiring an outside company to handle all or part of its data
processing. .
a., Consultancy Technology transfer
b, Outsourcing Gd. Make-or-buy analysis
54, Margin of safety
‘a, is the amount of actual or expected sales which can still be decreased without
resulting into a loss,
b. may be expressed in terms of pesos or in terms of a per unit figure.
may be increased by increesing either the expected sales or break-even sales.
d._ shows how much sales volume can be reduced without sustaining losses.
55; Peace Inn presently charges P450 per night for a room. The variable cost per room per
night has been estimated at P200, Fixed costs for the year have been estimated at
100. The Inn has the capacity to operate at 15,000 room days a year. Room days
jal to the number of rooms multiplied by number of days. With the present price
structure, the Inn has been operating at only 9,500 room days 2 year.
‘The manager believes that the Inn cannot compete on a service basis with chain motels and
Jinns and that occupancy can be increased by reducing the room rate to P300 per night.
Should the manager carry out his plan to reviuce the room rate to P300 per night?
‘a, Yes, because the decrease in room rate will increase room occupancy rate.
b.) No, because the Inn does not have the capacity to earn a profit with a rate of P200
per night even when operating at 100% capacity.
Yes, because If the firm can operate at full capacity, sales volume is greater than the
break-even point. MANAGEMENT ADVISORY SERVICES Saturday, July 28, 2018
First Pre-board Examination ‘Page 10 of 12
d. No, because the break-even point at a rate of P300 per night is lower than the Inn's
capacity level.
56/4 10% increase in sales due solely to a change in units sold
“a. will increase variable cost per unit by 10%.
).) will increase total contribution margin by the same percentage assuming variable cost
per unit remains unchanged, ~
. will Increase the contribution margin ratio by 10%.
4. will Increase profit by 10% if variable cost per unit and total fixed cost remain
unchanged.
57. Bonita Corporation produces @ product that is sold for P80 per unit. This year the variable
cost to produce and sell each unit is P60. Next year, materials and labor costs are expected
to increase, so the variable cost per unit will increase by P5. The fixed costs this year are
P285,000.and are expected to be the same next year. The president of the company is
concerned about the amount of additional sales volume required next year to eam the same
pretax profit, which averaged P12 per unit this year.
Considering the expected Increase in variable cost per unit, and assuming that the compeny
desires to eam the same profit of P12 per unit next year, the company’s sales, break-even
sales, and margin of safety wil
Sales Break-even Sales Margin of Safety
a Not change Not change Not change
b. Not change Increase Decrease
S Increase Not change Increase
a) _ Increase Increase Increase
58. Which of the following individuals would be most hurt by an unanticipated increase in
inflation?
a. A retiree living on a fixed income.
b. A borrower whose debt has a fixed interest rate,
. A union worker whose contract includes a provision for regular cost-oftiving
adjustments.
d)) A saver whose savings was placed in 2 variable rate savings account.
59, Sorbetes, Inc, produces and sells 10,000-gallons-per-month of Dear’s Sweet Ice Cream.
Capacity is 12,000 gellons. A supermarket in another city has offered to buy 3,000 gallons
of ice cream for P100 per gallon. Sorbetes vould give up some regular seles to fill the new
order. Costs and revenues per unit are:
Ingredients and labor P 60
Variable overhead 20
Fixed overhead —30
Cost per gallon P10
Sales price P120
What course o1 action should be taken by Sorbetes regarding the. special order of 3,000
gallons?
‘a. Accept the special order because it will increase the company’s profit by P10,000.
b. Reject the special order because thercompany will incur loss of P30,000 from such
order.
c.) Accept the special order even if the cornpany will incur a loss because this will give the
‘company a chance to reduce its idle capacity.
d. Reject the special order because this will reduce profit from regular customers by
50,000, (MANAGEMENT ADVISORY SERVICES ‘Saturday, July 28, 2018
First Pre-board Examination ‘Page 14 of 12
60. company had @ highly labor-intensive manufacturing process. Recently it implemented
robotics and a number of other technological changes that made the process capital
intensive. This automation is expected to
a. Increase variable cost
b, Decrease total fixed cost
¢. Increase inventory valuation under absorption costing because of higher fixed costs
d.) Decrease contribution margin under variabie costing
61-A lender and a borrower signed a contract for a P2,000 loan for one year. The lender asked
the borrower to pay 3% interest. Inflation occurred and prices rose by.2%. over the next
year. The borrower repaid P1,030. What is the amount worth in real terms, after inflation?
a. P1,060.90 c. P1,019.60
b. P1,050.60 d. °P1,009.80
ITEMS 62 TO 64 ARE BASED ON THE FOLLOWING:
1) Corp. produces 50,000 units of Product Q and 6,000. units of Product 2 during period.
Jn that period, four sef-ups were required for color chenges. All units of Product Q are
black, which is the color in the process at the beginning of the period. A set-up was made
for 1,000 blue units of Product Z; 2 set-up was made for 4,500 red units of Product Z; a sei
up was made for 500 green units of Product Z. A set-up was then made to retum the
process to Its standard black coloration and the units of Product Q were run. Each set-up
costs P50.
| 62. 1f set-up cost is assigned on a volume basis for the department, what is the approximate
per-unit set-up cost for Product Z? Kerns
a. 70.010 2 P0.040 oe
b. P0.036 ‘d, PO.333 Th
163. If set-up cost is assigned on a volume for the department, what is the approximate per-unft
set-up cost for the red units of Procuct Z? = |
‘2. PO.036 . PO.250
b. P0111 d, P1125
64, Assume thet JJ Corp. has decided to allocate overhead costs using levels of cost drivers.
What would be the approximate per-unit set-up cost for the blue units of Product Z?
a. PO.04 . PO.5O
b. PO.25 d. P250
65-One major difference between financial and management accounting is that
‘a. financial accounting reports are prepared primarily for users external to the company.
b. management accounting is not under the jurisdiction of the Securities and Exchange
‘Commission.
¢, government regulations do not apply to menagement accounting.
d, all of the above are true,
66, Which of the following statements about Management Information System (MIS) Is correct?
a, It isa sub-system of the broad accounting Information system.
D) It is designed to provide information to both intemal and external users.
¢. Its for internal decision-makers only.
d, It must be a computer-based system.
67. Walton Corporation wishes to develop a single predetermined overhead rate. The company's
expected annual fixed overhead is 340,000 and its variable overhead cost per machine
hour Is P2. The company’s relevant renge Is from 200,000 to 600,000 machine hours.
Walton expects to operate at 425,000 machine hours for the coming year. The plant's MANAGEMENT ADVISORY SERVICES. Saturday, July 28, 2018
First Pre-board Examination, Page 120! 12
theoretical capacity is 850,000. The predetermined overhead rate per machine hour should
be.
2.) P2.40 ce P2,80
“i PST Q. P2.85
68. 1f 2 company has a degree of cperating leverage of 2.0 and sales increase by 25%, then
@. total variable costs will increase by 50% -~c.__ profit will increase by 20%
b. total variable costs will nat change dh prove will increase by 50%
| $8. Junie Company sells only two products, Jona and Jano,
Jona Jano Tota
Selling price 4g P50
Variable cost per unit P24 P40.
Total fixed casts 840,000
Junie sells two units of Jona for each unit it sells of Jano. Junie faces a tax rate of 30%.
Junie desires a net after-téx income of P73,500. The number of units that must be sold to
> earn the desired income:
3. 21,750 units of Jona and 43,500 units of Jano
b. 22,500 units of Jona and 45,000 units of Jano
(G 43,500 units of Jona and 21,750 units of Jano\,
"d, 45,000 units of Jona and 22,500 units of. Jana
1 - 69
1) 70. Mickey is planning to operate a water-refiling station, She is considering two altematives
on how to purify water that she will sel. Alterative 1, called Auto Fil is highly automated,
Jt will use en expensive machine mat sucks water from the sea, purifies the water, and
bottled purified water comes cut, Auto Fill’ casts ere P9,000 per month plus P2 per bottle
of purified water, ae
ce 2nd manually filtered using old
Alternative 2 is calied Sinale Water. Ruimvater is col
socks. Sinela Vacer’s costs are P2,009 per month plus P4
‘The cast pet bottie et the incifference point will be:
a. 1,500 = oP
b. P5.33 4.
The Gus CPAR
CPA Review School of the Philippines
|
MANAGEMENT ADVISORY SERVICES JULY 2018
Fist Pre-board Examination - SOLUTIONS Batch 84
4 Contsoution margin per uit (10 x 40%) P4.00 — (P30x30%) P00 |
x Sales micratio 40% 80%
Composite contribution margin Pi.60 P5.40 = 700
280,000
Sreak-2ven point = = 40.000 composite units
P70
Break-even point, Product M = 40,000 x 60% = 26.000 units
"Sales mixratoc R= %oiM
5. BEP = P1,200 + 0.06 = 20,000 units
Red ens: Desrecton(P18,000- 5 yin) + 200
Sars i
Stns me
Tel eo cost zim
gloat roas
Vera oi (0.06 + oy 78
CM/unit ? Pong
8. Desired return (625,000 x 12%) + 12 mos P aso
Fixed costs, 1.200
Total Biso
+ CM/u —0.06
Required sales per month with 12%. ROL 24.187 units
7. New BEP = (1,200 + {15x 50]) + (0,15 ~ 0.05) = 21,667
Old BEP 20,000
Increase In BEP —Lssz
13. HIGH~Low. +21, CMR= 200,000 603,000 = 12.5%
VGing = (P 1,280 — F320} + (140 2)-8 C= P2,400,000 » 12.5%, ‘300,000
Feo =P1260- (1430) «109 Filooe 20000
‘14. LAST SQUARES: Profi ‘Bx00.009
13, Atsnton came rma
us AASTYEAR THIG YEAR GI. inne (8,000-5,000) x (P1006) 31.500
Fee Ng Pam 759000 arabe coshg came Bra)
Fase — S000 40.800 +24, Sales (5,000 x Pag) 200,000
Toad Pr1ooo — Bzsoon
‘Sales (1,140 + 940/309, P6813,333 ‘Less cast of goods sold (6,000 «P21.60) ae
Grasp st
Se (120 «400 prams
ee ces Lose rot 000
Selig gen. aan expanses p ga.s09
[Sie ee. MAS FIRST PREBOARD SOLUTIONS
BATCH 84 —- JULY 2018
25, Ending inventory —units (8,000 §.0%0) p00
rodect ost pat uit 1) pe
Costof ending inven eztaa
21. cual price (P10,080 + 4,200) 2.40,
Sida pice 0
Diference in prices favorable 0.10
X edu quanti phased 4210
Price valence fevorabie ead
2. Slancard ay. port (2 = 80%) 250
Standard price £3.00
‘Siandard oe pari ea
2, Aatuatine hows 40
Lass standard sme (1,000.4) 4000
Dil eno inne —unlaoretle 00
stare rae por haut ee
Etiseny vaterce-evarrbie Ee)
on, 30-34:
calves verted
‘Achua te x6. vr rte (2,100 072)
Spending variance —aversble
‘tus mo xe. va rai (2,100.