University of San Jose-Recoletos

MANAGEMENT SERVICES
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 techniue 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.
!. In computer data processing systems, these are the basic elements and components, except"
a. Input#output devices c. $raphics card and adaptor
b. Central processing unit d. %oftware, procedures and personnel
&. 'ou are wor(ing with a tas( force which has been mandated to develop an integrated information
system. The ob)ective is to be able to harness computer power to ma(e information available to the
right person in the company at the right time at the most cost efficient manner. 'our present
assignment is to determine the proper grouping of the applications. *hat applications are not
appropriately grouped+
a. %ales, accounts receivable, salesman,s commission, cash receipts, mar(eting euipment
modules
b. -roduction planning and scheduling, raw materials inventory and container management,
purchasing, sales forecasting modules
c. .an( reconciliation, accounts payable, disbursements, fixed assets, general ledger and payroll
modules
d. -ersonnel information system, finished goods inventory, general ledger, non/trade receivables
modules
0. The advent of computers has far reaching impact on the accountancy profession. *henever
considered, computeri1ation demands extreme care to avoid the 2horror stories3 that may have
experienced. Among the critical areas for careful study is systems design. *hich 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 brea(ing down of )ob 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 ma(ing process showing alternative solutions to a
problem and the possible conseuences.
d. If identical information should be shown on different documents, it must be captured only once
and recorded simultaneously.
4. There are different levels of business application systems in computeri1ed operations. In many cases,
the applications involve the integration of the transaction level of processing with such business
functions as production, mar(eting, human relations and finance to provide the different level of people
with the reuired information for planning and control. This level is called
a. Transaction level c. 5ecision support system level
b. 6anagement information system level d. 7ffice automation system level
8. The technology that permits a computer in one company to interface with another computer in another
company, an application example of which is computeri1ed billings and payments among companies is
a. Transfer system method c. 9lectronic data interchange
b. Integrated information systems d. :ocal area networ(
;. The general ledger system is considered the 2hub3 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
<. 7ne of the most useful applications of computer technology is computeri1ed budgeting. These are
some of its benefits except
a. %ignificant reduction in time reuired in preparation and assembly is achieved through the use
of modeling techniues
b. There is no need to be precise in understanding the discipline and relationships in the
organi1ation and its accounting system
c. -lanning assumptions can be changed with cost and profit implications estimated before
commitments are made
d. -lans can be continuously updated and planning hori1ons can be extended way beyond current
period.
1=. 5ecision support systems in a computeri1ed environment have certain desirable characteristics except
a. >lexible enough to accommodate a variety of management styles
b. %upports decision/ma(ers at all levels but is most effective at the tactical and strategic levels
c. 9xecuted according to pre/established production schedule
d. Is capable of interfacing with corporate database
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. ?ence, certain data for an
accounting system for instance, would be duplicated in an inventory system. 5ata redundancy in such
case is expensive. The information system which shares a common database, minimi1es data
redundancy and enhances interdepartmental activity coordination is
a. Communications connectivity c. *ide area networ(ing
b. Time/sharing system d. Integrated information system
12. ?an(ies @nlimited has a signature scarf for ladies that are very popular. Certain production and
mar(eting data are indicated below"
Cost per yard of cloth -hp !4.==
Allowance for re)ected scarf 0A of production
'ards of cloth needed per scarf =.&80 yards
Airfreight from supplier -hp =.4=#yard
6otor freight to customers -hp =.<=#yard
-urchase discount from supplier !A
%ales discounts given to customers 2A
The allowance for re)ected scarf is not part of the =.&80 yard of cloth per scarf. Be)ects have no mar(et
value. 6aterials are used at the start of production.
Calculate the standard cost of cloth per scarf that ?an(ies @nlimited should use in its cost sheets.
a. -hp 14.;8 b. -hp 18.84 c. -hp 1;.21 d. -hp 18.!=
1!. .oomie Co. uses the wor(ing capital basis of preparing if >unds >low %tatement. The following data
are presented for the year )ust ended"
5epreciation expense -hp &;,0==
Amorti1ation of patents 12,===
Cash dividends declared 28,===
Cash dividends paid !&,===
.onds payable issued <=,===
%ale of common stoc( 180,===
Amorti1ation of bond discount 1,0==
$ain on sale of euipment <,0==
*or(ing capital provided by operations 121,===
-urchase of land !1=,===
5ecrease in deferred income taxes 1;,===
Calculate the net income or loss for the period from the above data.
a. -hp 4;,0== b. -hp ;4,0== c. -hp 11!,0== d. -hp !01,0==
1&. .ing and :ynn,s %tore is on the cash basis of preparing funds statement. These data are available"
5ecrease in wor(ing capital -hp 0=,===
5epreciation 1!,===
Increase in cash 20,===
Bepairs and maintenance 1<,0==
Total uses of cash &0&,===
Calculate the total sources of cash of .ing and :ynn,s %tore.
a. -hp &82,0== b. -hp &<2,=== c. -hp &8<.=== d. -hp &48,===
10. As you are doing an analysis of the cash flow, you found these data belonging to the .lue %(y Co."
Taxes payable" .eginning of year -hp 4,===
Taxes payable" 9nd of year &,===
Interest expense 0=,===
$eneral and administrative expense 100,840
Tax expense per income statement 2=,===
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 -hp 22,===
d. Tax expense must have been inaccurate
14. >rom the records of $reen Ann Co. the following were ta(en"
2
Cuantity %ales Cost of %ales
-roduct .udget Actual .udget Actual .udget Actual
$reen &0,=== &0,;== &0=,=== &0;,=== 28=,=== 28&,;==
Ann !=,=== 24,8== 1;=,=== 1;4,<== 1=;,=== <4,12=
Co. 0,=== <,!== 20,=== 00,;== 10,=== 28,<==
Total ;=,=== ;1,;== 400,=== 8==,8== !<!,=== !<;,;2=
5etermine the sales price D%-E, sales volume D%FE, cost price DC-E and cost volume DCFE variances"
a. %- is -hp <,8== favorableG %F is -hp !4,=== favorableG
C- is -hp 0,;2= favorableG and CF is -hp = unfavorable
b. %- is -hp 0,;2= favorableG %F is -hp = favorableG
C- is -hp !4,8== favorableG and CF is -hp <,=== favorable
c. %- is -hp !4,=== favorableG %F is -hp <,8== favorableG
C- is -hp =G and CF is -hp 0,;2= unfavorable
d. %- is -hp !4,8== favorableG %F is -hp 0,;2= favorableG
C- is -hp = unfavorableG and CF is -hp <==,=== favorable
18. >or the doughnuts of 6c5onut Co., the -urchasing 6anager decided to buy 40,=== bags of flour with a
uality rating two grades below that which the company normally purchased. This purchase covered
about <=A of the flour reuirement for the period. As to the material variances, what will be the li(ely
effect+
a. @nfavorable price variance, favorable usage variance
b. >avorable price variance, unfavorable usage variance
c. Ho effect on price variance, unfavorable price variance
d. >avorable price variance, favorable usage variance
1;. The Table Top 6odel Corp. produces three products, 2Tic3, 2Tac3, and 2Toc3. The owner desires to
reduce production load to only one product line due to prolonged absence of the production manager.
5epreciation expense amounts to -hp 4==,=== annually. 7ther fixed operating expenses amount to
-hp 44=,=== per year. The sales and variable cost data of the three products are D===,s omittedE"
Tic Tac Toc
%ales D-hpE 4,=== 0,!== 1=,;==
Fariable Costs D-hpE !,<== 1,8== ;,<==
*hich product must be retained and what is the opportunity cost of selecting such product line+
a. Betain product 2Tac3G opportunity cost is -hp &.4 million
b. Betain product 2Tac3G opportunity cost is -hp !.1& million
c. Betain product 2Tic3, opportunity cost is -hp &.=& million
e. Betain product 2Toc3G opportunity cost is -hp &.;& million
1<. Bed Hose Co. ma(es hoses for its sprayers. @nit costs applicable to these hoses are"
5irect materials -hp !0.==
5irect labor -hp 2=.==
$eneral and administrative cost -hp 14.==
>ixed manufacturing overhead -hp 21.==
Fariable manufacturing overhead -hp <.==
0,=== hoses are reuired for the year. The space that is used for the hoses production can be used as
warehouse and will save rental cost of -hp &;,=== per year. The hoses can be bought for -hp 8=.== a
piece.
%hould Bed Hose Co. buy or ma(e the hoses+ *hy+
a. .uy, because there will be savings of -hp !.4= per hose
b. 6a(e, there will be a savings of -hp 4.== per hose
c. 6a(e, because there will be savings of -hp 0.&= per hose
d. .uy, because there will be savings of -hp !1.== per hose
2=. These data pertain to .elle Corp.,s -roduct I"
5irect labor -hp !2.20
5irect materials 22.0=
>ixed manufacturing overhead 0.0=
Fariable manufacturing overhead 4.==
Fariable selling expenses 0.80
>ixed selling expenses 1=.;=
Fariable distributions expenses &.20
>ixed distribution expenses 12.1=
Total unit cost -hp <<.10
@nit selling price -hp 1!&.==
%ince the plant has excess capacity, production has developed -roduct ' with the same cost structure
as -roduct I. 6ar(eting believes this new product can be sold for -hp ;=.== per unit. It will be logical
for .elle Corp. to this in the short run"
a. 5o not mar(et -roduct ' because the company will lose
b. 6ar(et -roduct ' if the price can be increased to at least -hp <<.10
3
c. -roduce -roduct ' and mar(et at -hp ;=.==
d. -roduce -roduct ' and mar(et at -hp ;=.== if the fixed selling and administrative expenses can
be eliminated
21. Coco Co. owns a large processing line which segregates coconuts into its components upon contact
with the brea(er of the machine. -resently, it sells the coconut meat, )uice, shell and hus( to various
manufacturers. A feasibility study is being made to process its components into 2bu(o pies3 for the
meat, 2bu(o )uice3 for the )uice, flower pots for the shells and fuel briuettes for the hus(. At the
segregation point, you gathered the following data per unit"
6eat Juice %hell ?us(
%elling price D-hpE &.== 2.== 1.== 1.==
Allocated )oint cost =.1! =.=4 =.=! =.=!
-rofit !.;8 1.<& =.<8 =.<8
The study shows that after further application of additional manufacturing process, the following is
pro)ected"
6eat Juice %hell ?us(
%elling price D-hpE 12.== &.== 2.== 2.==
Additional processing
cost !.;= 2.<= 1.<0 1.<0
>ixed cost of the plant amounts to -hp 0==,===. Interest rate is 12A
*hich product should go through the additional manufacturing process+
a. Coconut meat only because it will give incremental profit of -hp &.2= per coconut
b. All products because all will give additional profits
c. Coconut meat only because it will give total profits of -hp 12.=; per coconut
d. Hone because all will incur losses
22. ?am and %am Co. has an offer for a special order of 1==,=== units at a unit price of -hp 4.==.
-resented are these data"
1. -resent production at ;0A capacity, &0=,=== units
2. >ixed factory overhead is -hp 1,20=,=== at 1==A capacity
!. Fariable direct costs per unit are" 6aterials, -hp 1.;=G :abor, -hp 1.&=
&. Fariable factory overhead per unit, -hp =.0=
0. Fariable mar(eting expense per unit, -hp =.0=
4. >ixed general and administrative expense, -hp ;==,===
8. Additional lease cost for additional euipment reuired for the special order, -hp 1=,===
The accountant estimated that the order will result as follows"
Bevenue -hp 4==,===
5ifferential cost of goods sold
5irect materials -hp 1;=,===
5irect labor 1&=,===
Fariable factory overhead 0=,===
>ixed factory overhead 20=,=== 42=,===
D2=,===E
Fariable mar(eting expenses 0=,===
:oss on this order D8=,===E
The calculation has these problems"
a. >ixed factory overhead has been overapplied
b. >ixed general and administrative expenses and incremental lease cost have been ignored
c. :ease cost has been ignored and fixed factory overhead has been overapplied
d. >ixed factory overhead has been allocated and additional lease cost has been ignored
2!. The 6ar( I Corp. contemplates the temporary shutdown of its plant facilities in a provincial area which
is economically depressed due to natural disasters. .elow are certain manufacturing and selling expenses
1. 5epreciation 0. %ales commissions
2. -roperty taxes 4. 5elivery expenses
!. Interest expense 8. %ecurity of premises
&. Insurance of facilities
*hich of the following expenses will continue during the shutdown period+
a. All expenses in the list c. Items 1, 2 and ! only
b. All except items 0 and 4 d. Items 1, 2, !, &, 4 and 8 only
2&. :inear programming models are mathematical techniues in which an ob)ective function is maximi1ed or
minimi1ed sub)ect to constraints. These constraints must be fully specified before a linear programming
problem can be solved, and generally described as
a. Cost b. Besources c. Inefficiencies d. 5ependent variables
4
20. *hich of the following statements is the least pertinent to the -rogram 9valuation Beview Techniue
D-9BTE+
a. It is a system, which uses networ( analysis and critical path methods.
b. It is more useful for analy1ing the interrelationships of time and activities to discover potential
bottlenec(s.
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 techniue is particularly suited for problems, which
involve the combination of resources that maximi1e profits or minimi1e costs.
24. The %ales 5irector of Can Can Co. suggests that certain credit terms be modified. ?e estimates the
following effects"
%ales will increase by at least 2=A
Accounts receivable turnover will be reduced to ; times from the present turnover of 1= times
.ad debts, now at 1A of sales will increase to 1.0A of sales, before the proposed change is at -hp
<==,===. Fariable cost ratio is 00A and desired rate of return is 2=A. >ixed expenses amount to
-hp 10=,===
%hould the company allow revision of its credit terms+
a. 'es, because income will increase by -hp 4&,;==
b. 'es, because losses will be reduced by -hp 8;,;==
c. Ho, because income will be reduced by -hp 1!,===
d. Ho, because losses will be increased by -hp 2;,===
28. The China Tee %tore sells 1==,=== tea bags a year. Additional data are presented below"
1. %elling price per bag" -hp 2.0=
2. -urchase cost per bag" -hp 1.0=
!. 7rdering cost" -hp 0.&= an order
&. Carrying cost" 2=A of unit cost
0. Humber of days the company operates in a year" 20=
4. Average lead time on purchases" 4 days
*hat is the reorder point if the company will (eep a 1=/day safety stoc( of inventory+
a. 2,&== bags b. 0,&== bags c. 4,&== bags d. ;,;== bags
2;. A soft drin(s distributor which buys in a pre/sell basis is discussing with the route salesman on the
proper cases to be ordered and the freuency of call. >rom the route boo( and other records, the following
are available" prior year,s purchases, 0=,=== casesG carrying cost per case of inventory, -hp 1.2=G
distributor,s discount, 1 case for every 1= cases boughtG cost of placing an order, -hp !.==G wee(ly
demand is approximately <42 cases. %afety stoc( reuired is 1&= cases. Ho change in demand is
expected this year. D@se !40/day, 02/wee( yearE.
5etermine the economic order uantity D97CE, and the reorder point assuming a two day lead time.
a. 97C is &;1 casesG reorder point is 0== cases
b. 97C is 0== casesG reorder point is &1& cases
c. 97C is <42 casesG reorder point is 280 cases
d. 97C is 20= casesG reorder point is 2;= cases
2<. The underlying philosophy of 2)ust/in/time3 inventory system is
a. That the status of uantities on hand must be periodically reviewed where high value or critical
items are examined more freuently than low/cost or non/critical items
b. It is a uest towards continuous improvement in the environmental conditions that necessitate
inventories
c. That the uantities of most stoc( items are sub)ect to definable limits
d. That it is impractical to give eual attention to all stoc( items, hence the need to classify and
ran( them according to their cost significance
!=. *hat is the effect of changes in cash inflows, investment cost and cash outflows on profitability
Dpresent valueE index D-IE+
a. -I will increase with an increase in cash inflows, a decrease in investment cost, or a decrease in
cash outflows.
b. -I will increase with an increase in cash outflows, an increase in investment cost, or an increase
in cash outflows.
c. -I will decrease with an increase in cash inflows, a decrease in investment cost, or a decrease
in cash outflows.
d. -I will decrease with an increase in cash outflows, an increase in investment cost, or an
increase in cash inflows.
!1. 'our company is purchasing a transportation euipment as part of its territorial expansion strategy.
The technical services department indicated that this euipment needs overhauling in year & and year
0 of its useful life. The overhauling cost will be expected during the year the overhauling is done. The
>inance 7fficer insists that the overhauling be done in year &, not in year 0. The most li(ely reason is"
a. There is lower tax rate in year 0 c. The time value of money is considered
b. There is higher tax rate in year 0d. 5ue statements A and C above
5
!2. -aybac( period D--E, profitability Dpresent valueE index D-IE, and simple accounting rate of return
D%ABBE are some of the capital budgeting techniues. *hat is the effect of an increase in the cost of
capital on these techniues+
a. -- will increase, -I will decrease, and %ABB will increase
b. -- will have no change, -I will decrease, and %ABB will have no change
c. -- will have no change, -I will increase, and %ABB will decrease
d. -- will decrease, -I will have no change, and %ABB will have no change
!!. In capital budgeting decisions, the following items are considered, among others"
1. Cash outflow of the investment
2. Increase in wor(ing capital reuirements
!. -rofit on sale of old asset
&. :oss on write/off of old asset
>or which of the above items would taxes be relevant+
a. Items 1 and ! only c. All items
b. Items ! and & only d. Items 1, ! and & only
!&. The following data pertain to %unlight Corp. whose management is planning to purchase an automated
tanning euipment"
1. 9conomic life of euipment" ; years
2. 5isposal value after ; years" nil
!. 9stimated net annual cash inflows for each of the ; years" -hp ;1,===
&. Time/ad)usted internal rate of return" 1&A
0. Cost of capital of %unlight Corp." 14A
4. The table of present values of -hp1 received annually for ; years has these factorsG at 1&A K
&.4!<, at 14A K &.!&&
8. 5epreciation is approximately -hp &4,<8= annually
>ind the reuired increase in annual cash inflows in order to have the time/ad)usted rate of return
approximately eual the cost of capital.
a. -hp 0,0=1 b. -hp 4,0=1 c. -hp &,!&& d. -hp 0,;81
!0. $iven these data"
Het after tax inflows are" -hp 2&,=== for year 1, -hp !=,=== for year 2, -hp !4,=== for year !, and
-hp !=,=== for year &
Initial investment outlay is -hp 4=,===
Cost of capital is 1;A
5etermine the paybac( period for this investment.
a. 2.0 years b. 2.18 years c. !.== years d. !.18 years
!4. It is the start of the year and %t. Trope1 Co. plans to replace its old sing/along euipment. These
information are available"
7ld Hew
9uipment cost D-hpE 8=,=== 12=,===
Current salvage value 1=,===
%alvage value, end of useful life 2,=== 14,===
Annual operating costs 04,=== !;,===
Accumulated depreciation 00,!==
9stimated useful life 1= years 1= years
The company,s income tax rate is !0A and its cost of capital is 12A. *hat is the present value of all the
relevant cash flows at time 1ero+
a. D-hp 0&,===E b. DD-hp 11=,===E c. D-hp 12=,===E d. D-hp 12&,8==E
!8. The paybac( reciprocal is an estimate of the internal rate of return. The .ravo inc. is considering
the acuisition of merchandise pic(ing system to improve customer service. Annual cash returns on
investment cost of -hp 1.2 million are -hp 22=,===. @seful life is estimated at ; years. The company,s
cost of capital is 1&A and income tax rate is !0A.
Calculate .ravo Inc.,s paybac( reciprocal for this investment"
a. 2=.0A b. 1;.!A c. 11.<A d. 22.2A
!;. 6r. Fal 'u is an entrepreneur who is contemplating to buy a machine to increase the capacity of his
manufacturing operations. ?e consults you for advise on the alternatives of leasing or buying the
euipment. If purchased, the straight line depreciation expense will be -hp 1;,8== annually over its life of
0 years. The annual lease payments will amount to -hp 2<,=== payable at the end of each of the 0 years.
Cost of money is 1;A. Tax rate is !0A. There is no salvage value. -resent value of -hp1 received
annually for 0 years at 1;A is !.128. -resent value of -hp1 due in 0 years at 1;A is =.&!8.
*hat will you recommend and why+
a. :ease the machine because leasing saves -hp 2,;18
b. :ease the machine because leasing saves -hp 28,1!;
c. .uy the machine because depreciation saves -hp 1=,!== each year
d. :ease the machine because outlay is less by -hp 01,0==
6
The following financial statements pertain to .lue $rass Corp. for the year 1<<! D===,s omittedE"
BALANCE SHEET
1<<!
A%%9T%
Actual -lan 'ear Ago
Cash and mar(etable securities -1;,8=& -12,0== -1=,0&8
Trade receivables &4,80< 02,0== &&,2<;
Hon/trade receivables 14,!44 2=,=== 14,;84
Inventories 2!,!8< 10,=== 12,408
-repaid Assets 1&,=28 22,0== 1;,<;0
Total current assets 11<,2!0 122,0== 1=!,!4!
-roperty -lant and 9uipment <0,;04 <0,=== ;=,10<
7ther assets 1;,8=! !2,0== 28,&22
Total Assets -2!!,8<& -20=,=== -21=,<&&
:IA.I:ITI9%
Accounts -ayable and
accrued expenses -!<,8&0 -0!,;=0 -&;,;!<
:oans payable ;;,;&2 ;=,0== 8=,4==
Total :iabilities 12;,0;8 1!&,!=0 11<,&!<
%T7CL?7:59B,% 9C@IT'
Capital stoc( 8<,&<= 8<,&<= 8<,&<=
Betained 9arnings 20,818 !4,2=0 12,=10
Total %toc(holder,s euity -1=0,2=8 110,4<0 <1,0=0
Total liabilities and s#e -2!!,8<& -20=,=== -21=,<&&
INCME STATEMENT
Folume 2;821 2<,42! 2<;;2
Bevenue -!==,044 -!1=,=== -281,<!=
5iscounts 1;,<!4 1;,4== 14,!14
Het revenue 2;1,4!= 2<1,&== 200,41&
5irect cost of sales D1&=,;10E D1&0,8==E D128,;=8E
6anufacturing expenses D1&,=;1E D10,0==E D1!,0<4E
$ross profit 124,8!& 1!=,2== 11&,211
7perating expenses
5istribution 2;,14! 21,8== 1<,=!0
%elling !<,&2; !&,1== 2<,<12
6ar(eting 1&,=;2 10,0== 1!,0<0
$eneral and administrative 0,4!! <,!== ;,10<
Total ;8,!=4 ;=,4== 8=,8=2
Het operating profit !<,&2; &<,4== &!,0=<
Interest expense D10,0&8E D1&,=;;E D1!,&1&E
7ther income DexpenseE D2,;14E 1,4;; D2,81<E
-rofit before tax 21,=40 !8,2== 28,!84
Income tax 8,!4! 1!,=1= <,082
-rofit after tax -1!,8=2 -2&,1<= -18,;=&
>or amounts and volume, ===,s are omittedG ratios, percentages and other indicators, as is
!<. The revenue in 1<<!, versus 1<<2, decreased due to
a. increase in prices, in general, due to inflationary forces.
b. decrease in volume of 1,141 units.
c. decrease in selling price amounting to 10A compared with 1<<2.
d. decrease in volume, after increase in selling price of 10A.
&=. 5ays, sales outstanding compared with plan and year ago has Duse a !4=/day year, consider ending trade
receivables as the average balance, and round off to 2 decimal placesE"
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.
&1. .ased on the number of days, sales in inventories, the company holds inventories for the following number
of days before they are sold Duse a !4=/day year, consider ending inventories as the average balance, and
round off 2 decimal placesE"
a. ;<.44 days in 1<<!, 00.0< days per plan, and 0!.&; days in 1<<2.
b. 0<.88 days in 1<<!, !8.=4 days per plan, and !0.40 days in 1<<2.
c. <=.< days in 1<<!, 04.!8 days per plan, and 0&.22 days in 1<<2.
d. 4=.4 days in 1<<!, !8.0; days per plan, and !4.10 days in 1<<2.
&2. There appears to be a need to drastically reduce inventories considering
a. increase in cost of sales and volume of discounts given.
b. volume of discounts given and increase in cost of sales.
c. reduction of sales volume and deteriorating days, sales in inventories.
7
d. deterioration in days, sales outstanding and volume of discounts given.
&!. Chow >oods operates a cafeteria for its employees. The operations of the cafeteria reuires fixed costs of
-&8=,=== per month and variable costs of &=A of sales. Cafeteria sales are currently averaging -1,2==,===
per month. The company has the opportunity to replace the cafeteria with vending machines. $ross
customer spending at the vending machines is estimated to be &=A greater than the current sales because
the vending machines are available at all hours. .y replacing the cafeteria with vending machines, the
company would receive 14A of the gross customer spending and avoid cafeteria costs. A decision to
replace the cafeteria with vending machines will result in a monthly increase DdecreaseE in operating income
of
a. -1;2,===. b. -20;,;==. c. -D0;;,===E. d. -1;,;==.
&&. Julius International produces wee(ly 10,=== units of -roduct JI and !=,=== units of JII for which -;==,===
common variable costs are incurred. These two products can be sold as is or processed further. >urther
processing of either product does not delay the production of subseuent batches of the )oint products.
.elow are some information"
JI JII
Unit selling price without further processing P24 P18
Unit selling price with further processing 30 22
Total separate weekly variale costs of further
Processing P100!000 P"0!000
To maximi1e Julius, manufacturing contribution margin, the total separate variable costs of further
processing that should be incurred each wee( are
a. -<0,===. b. -<=,===. c. -1==,===. d. -1<=,===.
&0. % Lent Co. has a limited number of machine hours that it can use for manufacturing two products, A and ..
each product has a selling price of -14= per unit but product A has &=A contribution margin and product .
has a 8=A contribution margin. 7ne unit of . ta(es twice as many machine hours to ma(e as a unit of A.
Assume either product can be sold in whatever uantity is produced, which product or products should the
limited number of machine hours be used for+
a. A. b. .oth and .. c. 9ither A or .. d. ..
&4. -ixie Co. produces Component 4&18 for use in one of its electronic gadgets. Hormal annual production for
the item is 1==,=== units. The cost per 1== unit lot of the part are as follows"
5irect materials -02=
5irect labor 2==
6anufacturing 7verhead"
Fariable 2&=
>ixed !2=
Total 6anufacturing Cost per 1== units -1,2;=
.obbie Inc. has offered to sell -ixie all 1==,=== units it will need during the coming year for -1,2== per 1==
units. If -ixie accepts the offer from .obbie, the facilities used to manufacture Component 4&18 could be
used in the production of Component ;280. This change would save -ixie -1;=,=== in relevant costs. In
addition, a -2==,=== cost item included in fixed overhead is specifically related to -art 4&18 and would be
eliminated. -ixie should
a. buy component 4&18 because of -!==,=== savings.
b. buy component 4&18 because of -1&=,=== savings.
c. continue producing Component 4&18 because of -&=,=== savings.
d. continue producing Component 4&18 because of -4=,=== savings.
&8. -hil/>u)i Co. manufacturers two types of electronic components, both of which must pass through the
Assembly and >inishing 5epartments. The following constraints apply"
@nit %elling Contribution 6argin ?ours Beuired -er unit
-roduct -rice per Component Assembly >inishing
Component ;1; -12= -!= ! &
Component ;1= -1;= -&0 & 4
5emand for Component ;1; far exceeds the company,s capacity, but the company can only sell 4= units of
component ;1= each wee(. *or(ers in the Assembly department wor( a total of 2== hours per wee(, and
wor(ers in the >inishing department wor( a total of 20= hours per wee(. The company wants to (now how
many units of each component to produce to maximi1e profit. If I represents the number of units of
Component ;1; and ' represents the number of units of Component ;1=, the ob)ective function would be
a. maximi1e 12=I M 1;='. c. minimi1e <=I M 1!0'.
b. maximi1e !=I M &0'. d. minimi1e !=I M &0'.
&;. ?a(una Inc. sells on terms of !#1= net != days. $ross sales for the year are -2,&==,=== and the collections
department estimates that != percent of the customers pay on the tenth day and ta(e discountsG &= percent
pay on the thirtieth dayG and the remaining != percent pay, on the average, &= days after the purchase.
Assuming !4= days per year, what is the average collection period+
a. &= days. b. 10 days. c. 2= days. d. 28 days.
&<. Ten C,s Inc. has an inventory conversion period of 4= days, a receivable conversion period of !0 days, and
a payments cycle to 24 days. If its sales for the period )ust ended amounted to -<82,===, what is
investment in accounts receivable+ DAssume !4= days in yearE.
a. -;0,2== b. -82,&0= c. -<&,0== d. -8<,4==
8
0=. %imba Corp., whose gross sales amounted to -1,2==,=== sold on terms of !#1=, net !=. The collections
manager estimated that != percent of the customers pay on the tenth day and ta(e discountsG &= percent
on the thirteenth dayG and the remaining != percent pay, on the average, &= days after the purchase. If
management would toughen on its collection policy and reuire that all nondiscount customers pay on the
thirtieth day, how much would be the receivables balance+
a. -4=,=== b. -;=,=== c. -8=,=== d. Nero.
01. .achoy O Co. buys on terms 2#1=, net !=, but generally does not pay until &= days after the invoice date. Its
purchases total -2,14=,=== per year. Assuming !4= days a year, the amount of 2non/free, trade credit used
by the company on the average each year is
a. -1;=,=== b. -2&=,=== c. - 4=,=== d. -12=,===
02. A capital budgeting decision model has provided the following information"
-roposal A
Investment -1,===,===
-rofitability index 1.2
Het present value - 4==,===
-roposal .
Investment -1,;==,===
-rofitability index 2.1
Het present value - !==,===
The best pro)ect is
a. -roposal A because it has the highest net present value.
b. -roposal . because it has the highest profitability index.
c. -roposal . because its profitability index is over 2.=
d d. -roposal A because it has the highest net present value even though its investment base is
e smaller.
0!. Telephone Corp. is contemplating four pro)ects" :, 6, H, and 7. The capital costs for the initiation of each
mutually/exclusive pro)ect and its estimated after/tax, net cash flow are listed below. The company,s desired
after/tax opportunity costs is 12A. It has -<==,=== capital budget for the year. Idle funds cannot be
reinvested at greater than 12A.
In Thousand -esos
: 6 H 7
Initial cost &== &8= !;= &2=
Annual cash flows
'ear 1 11! 1;= <= ;=
2 11! 18= 11= 1==
! 11! 10= 1!= 12=
& 11! 11= 1&= 1!=
0 11! 1== 10= 10=
Het present value -8,0&= -0<,40& -0&,444
-D10,8=;E
Internal rate of return 12.8A 18.4A 18.2A 1=.4A
9xcess present value index 1.=2 1.1! 1.1& =.<4
The company will choose
a. -ro)ects 6, H and 7. c. -ro)ects : and H.
b. -ro)ects 6 and H. d. -ro)ects : and 6.
0&. The $eneral 6anager of Tela 6ills Inc. is considering the purchase of some new machines. The machines
would cost -&,===,=== with an economic life of ; years without any salvage value. 7nce set up, they would
generate -12,0==,=== additional revenues but yearly expenses for additional labor and materials would
also increase by -11,0==,===. Assume the company uses straight/line depreciation for taxes and that the
appropriate tax rate is !0A. The reuired after/tax rate of return is 1&A.
The following data are for an interest rate of 10A and ; periods"
-resent value of -1 =.!0=4
>uture value of -1 2.;024
-resent value of annuity of -1 &.4!;<
>uture value of annuity of -1 1!.2!2;
The company should
a. purchase the machines due to positive H-F of -4!;,<==.
b. not purchase the machines due to negative H-F of -<;&,810.
c. not purchase the machines due to negative H-F of -182,<=8.0=.
d. be indifferent as the option does not bring about any advantage nor disadvantage.
00. Ha(innat Corporation,s 7utlet Ho. 0 reported the following results of operations for the period )ust ended"
%ales 2,0==,===
:ess" Fariable expenses 1,===,===
Contribution margin 1,0==,===
:ess" >ixed expenses
%alaries and wages -80=,===
Insurance on inventories 0=,===
5epreciation on euipment !20,===
Advertising 0==,=== 1,420,===
Het income DlossE D-120,===E
9
The management is contemplating the dropping of 7utlet Ho. 0 due to the unfavorable operational results.
If this would happen, one employee will have to be retained with an annual salary of -10=,===. The
euipment has no resale value. 7utlet Ho. 0 should
a. not be dropped due to foregone overall income of -!0=,===.
b. be dropped due to foregone overall income of -!20,===.
c. not be dropped due to foregone overall income of -20,===.
d. be dropped due to overall operational loss of -20,===.
04. %ari/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 !=A of gross sales. This will
cause the company,s brea(/even profit to
a. decrease. b. change by 10A. c. increase. d. not change.
08. :' O Company completed its first year of operations during which time the following information were
generated"
Total units produced 1==,===
Total units sold ;=,=== at -1== per unit
*or( in process ending inventory
Costs"
>ixed costs
>actory overhead -1.2 million
%elling and administrative -=.8 million
-er unit variable costs
Baw materials -2=.==
5irect labor 12.0=
>actory overhead 8.0=
%elling and administrative 1=.==
If the company used the variable DdirectE costing method, the operating income would be
a. -2,1==,===. b. -&,===,=== c. -2,&;=,===. d. -!,=&=,===.
0;. The following information were made available for >uturistic, Inc."
June !=, cash balance, -<==,===
5ividends paid in July -2&=,===
Cash expenditures in July for operating expenses, -8!4,===
5epreciation expense in July, -<=,===
Cash collections in July, -1,8;=,===
6erchandise purchases paid in cash in July, -1,12&,===
-urchased euipment for cash in July, -!0=,===
It was the company,s policy to (eep a minimum cash balance of -2==,===. The company
a. had to borrow -2==,===.
b. did not borrow since its ending balance amounted to -2==,===.
c. did not borrow since its ending balance amounted to -2!=,===.
d. had to borrow -4=,===.
0<. The following historical pattern on its credit sales of Bainy Co. was presented"
8=A collection during the month of sale
10A in the first month after sale
1=A in the second month after sales
&A in the third month after sale
1A uncollectible
The sales on account of the last six months of the year were reported as follows"
July -12=,===
August 1&=,===
%eptember 14=,===
7ctober 1;=,===
Hovember 2==,===
5ecember 18=,===
The total cash collections during the fourth calendar uarter from sales made on account during the fourth
calendar uarter would be
a. -!&0,===. b. -00=,===. c. -0=2,;==. d. -&4=,===.
4=. >O%, Inc. has an annual capacity of 2,;== units of output. Its predicted operations for the year as follows"
%ales 2,=== units at -84= each -1,02=,===
6anufacturing costs" Fariable -0== per unit
>ixed -!4=,===
6ar(eting and administrative costs"
Fariable Dsales and commissionsE -12= per unit
>ixed -&=,===
Assume there would be no effect on regular sales at regular prices and that the usual sales commission will
be reduced to half. %hould the company accept at one/time/only special order for 4== units at a selling price
of -4&= each+
a. 'es, due to incremental income of -&;,===.
b. 9ither on would do as the net effect would be the same.
c. 'es, due to incremental income of -!=,===.
d. Ho, due to the resulting loss of -!8,81&.
10
41. The official terms of purchases of @ Tang O Co. are 2#1=, net != but generally the company does not pay
until &= days after the invoice date. Its purchases total -!,4==,=== per year. Assuming !4= days a year, the
approximate cost of the 2non/free3 trade credit amounts to
a. 1;.!4A. b. 2&.0=A. c. 21.<=A. d. 1<.&=A.
42. Hore 6illing Co. has a plant capacity of &=,=== units per month. @nit costs at capacity are"
5irect materials -1==
5irect labor 10=
Fariable overhead 80
>ixed overhead 80
6ar(eting fixed costs 180
6ar(eting variable costs <=
-resent monthly sales are !<,=== units at -4!= each. Josh Corporation contacted Hore about purchasing
&=,=== units at -4== each. The present sales would not be affected by the special order. Hore should
a. Accept the special order due to -1;0,=== incremental income.
b. Accept the special order due to -11=,=== incremental income.
c. Accept the special order due to -210,=== incremental income.
d. Accept the special order due to -1=,=== incremental income.
4!. 5T9% Company,s budgeted sales and budgeted cost of sales for the coming year are -1&.& million and -<
million respectively. %hort/term interest rates are expected to average 10A. 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. -4=,=== b. -48,0== c. -<=,=== d. -!8,0==
4&. -remised on past experience 6ayo Corp. adopted the following budgeted formula for estimating shipping
expenses. The company,s shipments averaged 12 (ilos per shipment D%hipping costs K -;,=== M D-=.20 x
Lgs. shippedE
-ertinent data for the current month are given below"
-lanned Actual
%ales order ;== 8;=
%hipments ;== ;2=
@nits shipped ;,=== <,===
%ales 2&=,=== 2;;,===
Total pounds shipped <,4== 12,!==
The actual shipping costs for the month amounted to -1=,0==. The appropriate monthly flexible budget
allowance for shipping costs for purposes of performance evaluation would be
a. -1=,20= b. -11,=80 c. -1=,!&= d. -1=,&==
40. Casablanca Inc. has a practical production capacity of two million units. The current year,s budget was
based on the production and sales of 1.& million units during the current year. Actual statistics came out to
be production of 1.&& million units and sales of 1.2 million units. %elling price is at -2= each and the
contribution margin ratio is !=A. The peso value that best uantifies the mar(eting division,s failure to
achieved budgeted performance for the year is
a. -&,;==,=== unfavorable c. -1,&&=,=== unfavorable
b. -&,===,=== unfavorable d. -1,2==,=== unfavorable
44. 9ach stoc(out of -roduct AI sold by Axiom Inc. costs -;8,0== per occurrence. The carrying cost per unit of
inventory is -20= per year, and the company orders 1,0== units of product 2& times a year at a cost of
-0,=== per order. The probability of stoc(out at various levels of safety stoc( is
@nits of safety stoc( -robability of stoc(out
= .0=
f 1== .!=
2== .1&
g !== .=0
&== .=1
The optimal safety stoc( level for the company is
a. = units b. 1== units c. 2== units d. !== units
48. 'ou )ust passed the C-A licensure examination and too( your oath. As you started your practice, Lon >use
Inc. came you for help in establishing a minimum desired rate of return to be used in the evaluation of a
capital pro)ect with a five year life. The following data were provided"
Inflation rate for the past 0 years 1!A
9xpected inflation rate for the next 0 years <A
2Bis(/free3 element 0A
2Bis(3 premium demanded for the pro)ect 8A
'ou will advice the client to consider a minimum desired rate of return of
a. 2=A b. 21A c. 14A d. 20A
4;. Arlene Inc. currently has annual cash revenues of -2,&==,=== and annual operating cost of -1,;0=,=== Dall
cash items except depreciation of -!0=,===E. The company is considering the purchase of a new machine
costing -1,2==,=== per year. The new machine would increase depreciation to -0==,=== per year.
Assuming a !0A income tax rate, Arlene,s annual incremental after/tax cash flows from the machine would
be
11
a. -!!=,=== b. -!&0,=== c. -2<2,0== d. -!==,===
4<. :a(as 9ngines Co. manufactures engines for the military euipment on a cost/plus basis. The cost a
particular machine the company manufactures is shown below"
5irect materials -&==,===
5irect labor !==,===
7verhead"
%upervisor,s salary &=,===
>ringe benefits on direct labor !=,===
5epreciation 2&,===
Bent 22,===
Total -;14,===
If the production of this engine were discontinued the production capacity would idle, and the supervisor will
be laid off. %hould there be a next contract for this engine, the company should bid a minimum price of
a. -;14,=== b. -8==,=== c. -8!=,=== d. -88=,===
8=. ?igh Class Townhouse, Inc. manages five upscale townhouse in 6a(ati, 7rtigas and $reenhills area.
%hown below are the summary income statements for each complex.
In Thousand -esos
7ne Two Three >our >ive
Bent income 1=,=== 12,1== 2!,&8= 1;,8;= 1=,40=
9xpenses ;,=== 1!,=== 24,=== 2&,=== 1!,===
-rofit 2,=== D <==E D2,0!=E D0,22=E D2,!0=E
Included in the expenses is -12,===,=== of corporate overhead allocated to the townhouse based on rental
income. The complex that the company should consider selling is DareE
a. Three, >our and >ive c. Two, Three, >our and >ive
b. >our and >ive d. >our
EN!
12