1.
Wilson Company prepared the following preliminary forecast concerning product G
for the next year assuming no expenditures for advertising:
Selling Price P10
Unit Sales 100,00
Variable Costs P600,000
Fixed Costs P300,000
Based on a market study in December of this year, Wilson estimated that it could
increase the unit selling price by 15% and increase the unit sales volume by 10% if
P100,000 were spend on advertising. Assuming that Wilson incorporates these
changes in its forecasts, what should be the operating income from product G?
Answer: 205,000
2. Tonykin Company is contemplating marketing a new product. Fixed costs to be
incurred are P800,00 for production of 75,000 units or less and P1,200,000 for more
than 75,000 units. The variable cost ratio is 60% for the first 75,000 units, though it
drops to 50% for units in excess of 75,000 units. If the product is expected to sell for
P25 per unit, how many units must Tonykin sell to breakeven?
Answer: 111,000
3. The owners of Bougavilla Supermarket have been looking for ways to improve
sales at the store. One of the proposal is to have a weekly raffle with a total price of
P6,000 per week. For every P20 worth of goods purchased, the customer shall
received a numbered ticket for the raffle. The variable cost to print and distribute the
tickets has been estimated at one peso (P1.00). Promotions and other fixed costs in
connection with the raffle, likewise, have been estimated at P5,000 per week. The
current weekly operating result of Bougavilla are given below:
Sales P600,000
Variable costs 450,000
Fixed costs for the week 80,000
If the raffle can increase sales to P1,000,000 per week, how much will be added to
profit?
Answer: 39,000
How much is the margin of safety (in pesos)?
Answer: 280,000
What is the sales revenue in pesos required to breakeven with the raffle?
Answer: 455,000
4. Making segments disclosures is an advantage to a company because it:
Answer: Facilitates evaluation of company management by providing data on
particular segments
5. A segment of an organization is investments center if it has;
Answer: Authority to make decisions affecting the major determinants of profit,
including the power to choose its markets and sources of supply and significant
control over the amount of invested capital.
6. Managerial accounting differs from financial accounting in that financial
accounting.
Answer: Concerned primarily with external financial reporting
7. Mr. Rey carlos, a CPA firm’s partner in-charge of quality assurance and review is
arguing with mr. Rueben Fortuna, the consulting partner regarding the question on
independence as Mr. Fortuna is presently rendering consulting services to T. Ang
and Nga Company, an audit client of the firm. Related to this issue of independence,
all of the following statement are not valid except:
Answer: The client is the ultimate decision maker and the auditor and/or consultant
should not make decisions for the client.
8. Which of the following statements is not acceptable?
Answer: A CPA shares with a new and substantial client information regarding
another client belonging to the same industry.
9. These statements relate to MAS practice standards;
Answer: 1. A practitioner is to notify the client of any reservation he has regarding
anticipated benefits
3. During the engagement, should there be significant changes between
cost and anticipated benefits, the client should be informed.
10. Which of the following will not impair the independence of a CPA in the rendition
of management services?
Answer: The CPA does not extend his services beyond the presentation of
recommendations of giving advice
11. A CPA should reject a management advisory service engagement if:
Answer: It would require him to make management decisions for an audit client.
12. Organizational planning for disposition of resources to create value for customers
and shareholders is known as:
Answer: Strategic resource management
13. Which of the following contains the best statement on how an accounting firm
should apply the concept of competence serving clients?
Answer: The firm should accept only those engagements which it is qualified to
undertake and asking personnel qualified to give effective service in solving the
particular problems involved.
14. Super Company has fixed costs of P200,000. It has two products that it can sell
Cid and Ted. Super sells these products at the rate of 2 units of Cid to 1 unit of Ted.
The contribution margin is P1 per unit of Ced and P2 per unit of Ted. How many units
of Ted should be sold to breakeven?
Answer: 50,000
15. Kern Company prepared the following tentative forecast concerning product a for
2017:
Sales P500,000
Selling price per unit 5.00
Variable costs 300,000
Fixed cost 150,000
A study made by the sales manager disclosed that the unit selling price could be
increased by 20%, with an expected volume decrease of only 10%, Assuming that
Kern incorporates these changes in its 2017 forecast, what should be the operating
income from product A?
Answer: 120,000
16. Yakal Company shows the following budgeted data for the year 2017:
Estimated Sales 18,000 units
Estimated Costs: Amount per unit
Direct Labor P54,000 P3.00
Materials 8,100 .45
Fixed Overhead 13,500 .75
Administrative expense 16,200 .90
Total 91,800 5.10
Selling expenses are expected to be 20% of sales and profit before tax is to amount
to P1.50 per unit.
In order to attain the company’s goal, the selling price per unit must be?
Answer: 8.25
17. Division A of Daku corporation likes to purchase product ACE-23 from Division B
of the Corporation. Division A is currently purchasing 20,000 units of ACE-23 from an
outside at a unit cost of P50, less a 5% quantity discount. Other relevant information
are provided below:
Unit sales price on the intermediate market P50
Unit variable cost 24
Fixed costs per unit (based on capacity) 12
Normal capacity 70,000 units
Suppose Division A can purchase the 20,000 material ACE-23 from new supplier for
P44, net of discount.
If division B had excess capacity, what is the internal transfer price?
Answer: 24
If division B had no excess capacity, what is the internal transfer price?
Answer: 50
18. In each of the cases below, assume that Division Hard has a product that can be
sold to Division soft for use in it’s production process.
Division Hard: Case 1 Case 2
Capacity in units
120,000 150,000
Units Sold to intermediate market
120,000 110,000
Unit sales price to customers
P60 P40
Unit Variable Cost
40 20
Fixed cost per unit
8 6
Division Soft
# of units needed for production
40,000 40,000
Purchase price from outside suppliers
P57 P39
In case #2; How much is benefit of company (Goal Congruence) if internal transfer
takes place
Answer: 760,000
Assume in case #1 the P2 unit of variable selling costs can be avoided on intra-
company sales:
In case #1; Will any transfer be made between two divisions?
Answer: No
Assume in case #1 the P2 unit of variable selling costs can be avoided on intra-
company sales:
In Case #1; What price should be charge by Division Hard to Division Soft?
Answer: 58
Assume in case #1 the P2 unit of variable selling costs can be avoided on intra-
company sales:
In case #2; Will any transfer be made between two divisions?
Answer: Yes
19. You are evaluating the performance of Department X of B Corporation for the
year 2019. You are given the following facts:
Sales during the year amounted to P880,000 at 12% margin.
Return on investment was 20%
Minimum required rate of return was 15%
How much is the invested capital?
Answer: 528,000
How much is the residual income?
Answer: 26,400
20. The following information pertains to Q Company’s Gold Division for the current
year;
Sales P310,000
Variable cost 250,000
Traceable fixed costs 50,000
Average invested capital 40,000
Imputed interest rate 10%
Compute the residual income
Answer: 6,000
Compute the ROI (return of Investment)
Answer 25%
21. Listed below is selected financial information for W division of H company for last
year:
Account Amount (Thousands)
Average working capital P725
General and administrative expenses 75
Net sales 4,000
Average plant and equipment 1,775
Cost of goods sold 3,525
H Company treats the W division as an investment center for performance
measurement, what is the before tax return on investment (ROI) for last year?
Answer: 16%
22. JW is the general manager of the Industrial Product Division, and his
performance is measured using the residual income method. JW is reviewing the
following forecasted information for his division for next year.
Category Amount (in thousands)
Working Capital P1,800
Revenue 30,000
Plant and equipment 17,200
If the imputed charge is 15% and JW wants to achieve a residual income target of
P2,000,000, what will costs have to be in order to achieve the target?
Answer: 25,150,000
23. B division of C company sells 80,000 units of parts Z to the outside market. Part
Z sells for P10.00 has a variable cost of P5.50 and a fixed cost per unit of P2.50. B
has a capacity to produce 100,000 units per period. M division currently purchases
10,000 units of part Z from B division for P10.00. The M division has been
approached by an outside supplier who is willing to supply the former part Z for
P9.00. How much is the decrease of company’s profit if M division accept the offer of
outside supplier?
Answer: 35,000
24. P division makes and sells a single product. Presently it sells 12,000 units per
year to outside customers at P24 per unit. The annual capacity is 20,000 units and
the variable cost to make each unit is P16. All selling expenses are fixed. L division
would like to buy 10,000 units a year from P division. How much the minimum selling
price that P division should charge L division?
Answer 17.60
