Professional Documents
Culture Documents
INSTRUCTIONS: Select the best answer for each of the following questions. Mark only one answer for each item on
the answer sheet provided. Strictly NO ERASURES ALLOWED. Erasures will render your examination answer sheet
INVALID. Use PENCIL NO. 2 only. GOODLUCK!
in cooperation with
1. Which among the following statements is true? Fixed selling and administrative cost 75,000
a. The analysis stage consists of planning and
scheduling actions to achieve the desired results, Which of the following statements is correct?
as well as advising and providing technical a. Lobos absorption costing income
assistance; statement would reveal a gross margin of
b. The design stage consists of evaluating and P330,000.
determining possible solution and presenting b. Lobos variable-costing income statement
findings and recommendations. would reveal a gross margin of P270,000.
c. The implementation stage consists of ascertaining c. Lobos variable costing income
the pertinent facts and circumstances, seeking and statement would reveal a contribution margin
identifying objectives and defining the problem or of P330,000.
opportunities for improvement. d. Lobos absorption-costing income
d. The design stage precedes the analysis stage. statement would reveal a contribution margin of
P330,000.
2. "Evaluating the Engagement" and "Post engagement
9. Strategy Inc. plans to market a new electronic game.
Follow-up" stages fall under;
The game would sell for P90, and Strategy expects
a. Pre-engagement Consideration;
sales to be 16,000 units. Per unit variable
b. Engagement Planning;
manufacturing cost is P52. the only other variable cost
c. Engagement Management and Execution;
is a 20% sales commission. The fixed costs associated
d. Engagement Conclusion;
with this game are P275,000.
3. A management information system should do which What is the margin of safety (in units) at the expected
of the following? sales volume?
Collect Organize data Analyze data a. 2,000 c. 3,000
data for managers for b. 2,250 d. 2,550
management
a. yes no yes 10. Leslie Clayton, president of Clayton Enterprise, has
b. yes yes no given you the following income statement for a recent
c. no no yes month
d. yes yes yes Sales P400,000
Cost of Sales 240,000
4. In the Camiling, Inc., a maintenance cost if partly fixed
Gross Profit 160,000
and partly variable in nature. At the low level of
Operating Expenses:
activity (150 direct labor hours), maintenance costs
Salaries and Commissions P71,000
total P2,100. At high level of activity (270 direct labor
Utilities 10,000
hours), maintenance costs are P3,000. Using the high-
Rent 15,000
low method, what is the variable maintenance cost per
Other 25,000 121,000
unit and the total fixed maintenance cost?
Profit P 39,000
Variable maintenance cost Fixed maintenance cost
a. P 7.50 P 975 Clayton sells one product, a stadium chair, at P25 per
b. 7.50 2,100 unit. Cost of Goods sold is variable. A 10% sales
c.. 10.00 600 commission, included in salaries and commissions, is
d. 10.00 2,100 (rpcpa) the only other variable cost. Clayton tells you that the
income statement is not helpful, for she cannot
5. In regression analysis, which of the following
determine such things as the break-even point or the
correlation coefficients represents the strongest
price that will achieve a target profit.
relationship between the independent and dependent
variable?
a. 1.03 c. -.89
The price that will give a P45,000 profit at 15,000 units
b. -.02 d. .75 (cia)
is?
6. ABC had P400,000 budgeted fixed overhead costs and a. P25.00 c. P24.00
based its standard on normal activity of 40,000 units. b. P26.00 d. P24.50
Actual fixed overhead costs were P430,000, actual
production was 36,000 units, and sales were 30,000 11. Forest city operates a municipal trash collection
units. The volume variance was service. Analyses of costs indicate that monthly fixed
a. P77,777. c. P40,000. costs are P25,000 and variable cost is about P1.25 per
b. P30,000. d. P70,000 pickup per customer. The city collects trash in the
business district 12 times a month and in the
7. Rounder Industries manufactures a single product. residential district 4 times a month. The difference in
Variable production costs are P20 and fixed production frequency results from the much larger volume of
costs are P300,000. Rounder uses a normal activity of trash in the business district. There are 200 business
20,000 units to set its standard costs. Rounder began and 1,000 residences served by trash collection.
the year with no inventory, produced 22,000 units, and
The city manager would like to break even or show a
sold 21,000 units. The standard cost of goods sold
small profit on trash collection. She believes it is fair to
under variable costing would be
charge businesses three times as much service. What
a. P735,000. c. 420,000.
monthly prices would make the operation break even?
b. P400,000. d. some other number.
a. P61.87 c. P67.81
8. The following data relate to Lobo Corporation for b. P68.17 d. P61.78
in cooperation with
NATIONAL FEDERATION OF JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS
Cash Sales Credit Sales 20. When managers attempt to cause actual results to
January P70,000 P340,000 conform to planned results, this is known as
February 50,000 190,000 a. efficiency. c. conformity.
March 40,000 135,000 b. effectiveness. d. goal congruence.
April 35,000 120,000
May 45,000 160,000 Questions 21 through 22 are based on the following
June 40,000 140,000 information: Office Products Inc. manufactures and sells
various high-tech office automation products. Two
The company is in the process of preparing a cash divisions of Office Products Inc. are the Computer Chip
budget and must determine the expected cash Division and the Computer Division. The Computer Chip
collections by month. To this end, the following Division manufactures one product, a "super chip," that
information has been assembled: can be used by both the Computer Division and other
Collections on sales: 60% in month of sale external customers. The following information is available
30% in month following sale on this month's operations in the Computer Chip Division:
10% in second month following sale Selling price per chip P50
The accounts receivable balance on January 1 of the Variable costs per chip P20
current year was P70,000, of which P50,000 Fixed production costs P60,000
represents uncollected December sales and P20,000 Fixed SG&A costs P90,000
represents uncollected November sales. Monthly capacity 10,000 chips
15. The total cash collected by LaGrange Company during External sales 6,000 chips
January would be: Internal sales 0 chips
in cooperation with
NATIONAL FEDERATION OF JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS
Presently, the Computer Division purchases no chips from measures in an automated environment. Labor is
the Computer Chips Division, but instead pays P45 to an insignificant in terms of the total cost of production and
external supplier for the 4,000 chips it needs each month. tends to be fixed. Materials quality are considered more
important than minimizing material cost, and customer
21. Assume that next month's costs and levels of satisfaction is the number one priority. As a result, delivery
operations in the Computer and Computer Chip performance measures have been chosen to evaluate
Divisions are similar to this month. What is the performance. The following information is considered
minimum of the transfer price range for a possible typical of the time involved to complete orders:
transfer of the super chip from one division to the
other? Wait time
a. P50 c. P20 from order being placed to start
b. P45 d. P35 of production 10.0 days
22. Assume that next month's costs and levels of from start of production
operations in the Computer and Computer Chip to completion 5.0 days
Divisions are similar to this month. What is the Inspection time 1.5 days
maximum of the transfer price range for a possible Process time 3.0 days
transfer of the chip from one division to the other? Move time 2.5 days
a. P50 c. P35
b. P45 d. P30 26. What is the manufacturing cycle efficiency for this
order?
23. Black Oak Company makes and sells oak boxes for a a. 25.0% c. 37.5%
price of P60 each. Unit costs based on anticipated b. 13.6% d. 69.2%
monthly sales of 1,000 boxes are as follows:
Direct material cost P15 27. Which of the following would be a reasonable basis for
Direct labor cost 12 assigning the materials handling costs to the units
Variable manufacturing overhead 3 produced in an activity-based costing (ABC) system?
Variable selling overhead 5 a. Number of production runs per year.
Fixed costs 2 b. Amount of time required to produce one unit.
c. Number of components per completed unit
A chain store has offered to buy 100 boxes per month d. Amount of overhead applied to each completed
at P58 each. To accept this special order, Black Oak unit.
will have to restrict its sales to regular customers to Questions 28 and 29 are based on the following
only 900 boxes per monthly because its production information. Believing that its traditional cost system may
capacity cannot be expanded in the short run. be providing misleading information, an organization is
However, no variable selling expenses will be incurred considering an activity-based costing (ABC) approach. It
for this special order. If Black Oak accepts the chain now employs a full cost system and has been applying its
store's offer, its profit will manufacturing overhead on the basis of machine hours.
a. increase by P300. c. decrease by P200. The organization plans on using 50,000 direct labor hours
b. increase by P500. d. decrease by P500. and 30,000 machine hours in the coming year. The
following data show the manufacturing overhead that is
24. Two months ago, Victory purchased 4,500 pounds of budgeted.
Hydrol, paying P15,300. The market for this product
has been very strong since the acquisition, with the Budgeted Budgeted
market price jumping to P4.05 per pound. (Victory can Activity Cost Driver Activity Cost
buy or sell Hydrol at this price.) The company Material No. of parts 6,000,000 P 720,000
handling handled
recently received a special-order inquiry, one that
Setup costs No. of setups 750 315,000
would require the use of 4,200 pounds of Hydrol.
Machining Machine hours 30,000 540,000
Which of the following is (are) relevant in deciding costs
whether to accept the special order? Quality control No. of batches 500 225,000
a. The 300-pound remaining inventory of Hydrol. Total manufacturing overhead cost P1,800,000
b. The P4.05 market price. Cost, sales, and production data for one of the
c. The P3.40 purchase price. organizations products for the coming year are as
d. 4,500 pounds of Hydrol. follows:
Prime costs:
25. Torrey Pines is studying whether to outsource its Direct material cost per unit P4.40
Human Resources (H/R) activities. Salaried Direct labor cost per unit, .05 DLH @
professionals who earn P390,000 would be terminated; P15/DLH 0.75
in contrast, administrative assistants who earn
Total prime cost P5.15
P120,000 would be transferred elsewhere in the
organization. Miscellaneous departmental overhead
(e.g., supplies, copy charges, overnight delivery) is Sales and production data
expected to decrease by P30,000, and P25,000 of Expected sales 20,000 units
corporate overhead, previously allocated to Human Batch size 5,000 units
Resources, would be picked up by other departments. Setups 2 per batch
If Torrey Pines can secure needed H/R services locally Total parts per finished unit 5 parts
for P410,000, how much would the company benefit by Machine hours required 80 MH per batch
outsourcing? 28. If the organization uses the traditional full cost system,
a. P10,000. c. P130,000. the cost per unit for this product for the coming year
b. P35,000. d. P155,000. will be
a. P5.39 c. P6.11
Yahoo Corporation is a highly automated manufacturing b. P5.44 d. P6.30
firm. The Vice-President of Finance, Mike, has decided that
traditional standards are inappropriate for performance
in cooperation with
NATIONAL FEDERATION OF JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS
Cash P 100,000 P 110,000 48. The number of production runs of computer chairs that
Accounts payable 400,000 470,000 would minimize the sum of carrying and set-up costs
Accounts receivable 560,000 690,000 for the coming year is
Inventory 350,000 380,000 a. 1 c. 4
Marketable securities 200,000 200,000 b. 2 d. 5
Fixed assets 2,500,000 3,500,000
Net income 500,000 650,000 49. A highly risk-averse investor is considering the addition
The impact of the plant expansion on Finan's working of an asset to a 10-stock portfolio. The two securities
capital would be under consideration both have an expected return, k ,
a. A decrease of P100,000. equal to 15 percent. However, the distribution of
b. A decrease of P950,000. possible returns associated with Asset A has a
c. An increase of P100,000. standard deviation of 12 percent, while Asset Bs
d. An increase of P950,000 standard deviation is 8 percent. Both assets are
43. As a company becomes more conservative in its correlated with the market with r equal to 0.75. Which
working capital policy, it would tend to have a(n) asset should the risk-averse investor add to his/her
a. Decrease in its acid-test ratio. portfolio?
b. Increase in the ratio of current liabilities to a. Asset A.
noncurrent liabilities. b. Asset B.
c. Increase in the ratio of current assets to units c. Both A and B.
of output. d. Neither A nor B.
d. Increase in funds invested in common stock and a e. Cannot tell without more information.
decrease in funds invested in marketable
securities. 50. Lieber Technologies is considering two potential
44. On an average day, a company writes checks totaling projects, X and Y. In assessing the projects risk,
P1,500. These checks take 7 days to clear. The the company has estimated the beta of each project
company receives checks totaling P1,800. These and has also conducted a simulation analysis. Their
checks take 4 days to clear. The cost of debt is 9%.
efforts have produced the following numbers:
What is the firm's availability float? Project X Project Y
a. P10,500 c. P1,800 Expected NPV P350,000 P350,000
b. P7,200 d. None of the above Standard deviation (NPV) P100,000 P150,000
Estimated project beta 1.4 0.8
45. Suppose that the interest rate on Treasury bills is 6%, Estimated correlation of Cash flows are not Cash flows are
and every sale of bills costs P60. You pay out cash at projects cash flows with the highly correlated highly
a rate of P800,000 a year. According to Baumol's cash flows of the companys with the cash flows correlated with
model of cash balances, how many times a year should existing projects. of the existing the cash flows
you sell bills? projects of the existing
a. 20 c. 50 projects.
b. 35 d. 15
Which of the following statements is most correct?
46. A firm that often factors its accounts receivable has an a. Project X has a higher level of stand-alone risk
agreement with its finance company that requires the relative to Project Y.
firm to maintain a 6% reserve and charges 1% b. Project X has a higher level of corporate risk
commission on the amount of receivables. The net relative to Project Y.
proceeds would be further reduced by an annual c. Project X has a higher level of market risk relative
interest charge of 10% on the monies advanced. to Project Y.
Assuming a 360-day year, what amount of cash d. Statements b and c are correct.
(rounded to the nearest peso) will the firm receive e. All of the statements above are correct.
from the finance company at the time a P100,000
account that is due in 90 days is turned over to the 51. The Altman Company has a debt ratio of 33.33
finance company? percent, and it needs to raise P100,000 to expand.
a. P93,000 c. P83,700 Management feels that an optimal debt ratio would be
b. P90,000 d. P90,675 16.67 percent. Sales are currently P750,000, and the
total assets turnover is 7.5. How should the expansion
47. The calculation of the EOQ considers be financed so as to produce the desired debt ratio?
a. The purchasing mangers salary a. 100% equity
b. A corporate charge for advertising expenses b. 100% debt
c. The shipping costs to deliver the product to the c. 20 percent debt, 80 percent equity
customer. d. 40 percent debt, 60 percent equity
d. Capital costs e. 50 percent debt, 50 percent equity
Ryan manufactures a line of office computer chairs. 52. The following information applies to Lott Enterprises:
The annual demand for the chairs is estimated to be
5,000 units. The annual cost to hold one unit of Operating Share
inventory a year is P10, and the cost to initiate a income (EBIT) P300,000 outstanding 120,000
Debt P100,000 EPS P1.45
production run is P1,000. there are computer chair on
Interest exp. P10,000 Stock price P17.40
hand, and Ryan has scheduled four equal production Tax rate 40%
runs of computer chairs for the coming year, the first
of which is to be run immediately. Ryan has 250 The company is considering a recapitalization where it
business days a year, sales occur uniformly throughout would issue P348,000 worth of new debt and use the
the year, and production start-up is within one day. proceeds to buy back P348,000 worth of common
Ryan uses the economic order quantity model. stock. The buyback will be undertaken at the pre-
recapitalization share price (P17.40). The
recapitalization is not expected to have an effect on
in cooperation with
NATIONAL FEDERATION OF JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS
56. Under then income approach, gross domestic product 62. Which of the following statements are true regarding
(GDP) is measured as financial and managerial accounting?
a. Depreciation charges and indirect business taxes + I. Both are mandatory.
Wages + Rents + Interest + Profits - Net American II. Both rely on the same underlying financial data.
income earned abroad III. Both emphasize the segments of an
b. Wages + Rents + Interest + Profits organization, rather than just looking at the
c. Depreciation charges and indirect business organization as a whole.
taxes + Wages + Rents - Interest + Profits IV. Both are geared to the future, rather than to the
d. Wages + Rents + Interest - Profits + Net American past.
income earned abroad a. I, II, III, and IV c. Only II and III
b. Only II, III and IV d. Only II
57. During the necessionary phase of a business cycle.
a. The purchasing power of money is likely to decline 63. Most managers evaluate decision alternatives based on
rapidly how
b. The natural rate of unemployment will increase a. much the decision will increase or decrease
dramatically organizational profits.
c. Potential national income will exceed actual b. the outcomes may affect selected performance
national income measurement and reward criteria.
d. Actual national income will exceed potential c. much the outcome will reduce the organization's
national income cost of capital.
d. easily the decision impacts can be quantified in the
58. A consumer has the following consumption patterns organization's cost management system.
at different income levels:
Level of Income Consumption
in cooperation with
NATIONAL FEDERATION OF JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS
64. ___________ refers to avoiding competition in making simple, we assume each round-trip ticket purchased is
a product distinct from that of competitors by adding delivered in a separate package. Thus, the P1,500 delivery
value or features for which consumers are willing to fee applies to each ticket.)
pay more.
a. Kaizen c. Confrontation Northwestern Airlines has just announced a revised
b. Differentiation d. Cost leadership payment schedule for travel agents. It will now pay travel
agents a 10% commission per ticket up to a maximum of
65. A sunk cost is P5,000. Any ticket costing more than P50,000 generates
a. The difference in total costs that results from only a P5,000 commission, regardless of the ticket price.
selecting one choice instead of another. 67. Under the old 10% commission structure, how many
b. A cost that may be shifted to the future with little round-trip tickets must EFem sell each month to
or no effect on current operations. break-even?
c. A cost that cannot be avoided because it has a. 200 tickets c. 300 tickets
already been incurred. b. 150 tickets d. 175 tickets
d. A cost that does not entail any peso outlay but
which is relevant to the decision-making process. 68. Under the old 10% commission structure, how many
e. A cost that continues to be incurred even round-trip tickets must EFem sell each month to earn
though there is no activity. an operating income of P700,000?
a. 150 tickets c. 450 tickets
66. Simple regression differs from multiple regression in b. 300 tickets d. 500 tickets
that
a. Multiple regression uses all available data 69. Under the new system where Western would received
to estimate the cost function whereas simple only P5,000 on the P9,000 ticket, how many round-trip
regression only uses simple data. tickets must EFem sell each month to earn an
b. Simple regression uses only one operating income of P70,000?
dependent variable and multiple regression a. 350 tickets c. 700 tickets
uses more than one dependent variable. b. 525 tickets d. 650 tickets
c. Simple regression is limited to the use of
70. The Bandeiras Company, a merchandising firm, has
only the independent variables and multiple
budgeted its activity for December according to the
regression can use both dependent and
following information:
independent variables.
I. Sales at P550,000, all for cash.
d. Simple regression uses only one independent
II. Merchandise inventory on November 30 was
variable and multiple regression uses more than
P300,000.
one independent variable. (rpcpa)
III. Budgeted depreciation for December is P35,000.
IV. The cash balance at December 1 was P25,000.
The following information pertains to questions 67
V. Selling and administrative expenses are
through 69:
budgeted at P60,000 for December and are paid
Efem Travel Agency specializes in flights between Manila
in cash.
and London. It books passengers on Northwertern Airlines
VI. The planned merchandise inventory on
at P90,000 per round-trip ticket. Until last month,
December 31 is P270,000.
Northwertern paid Efem a commission of 10% of the ticket
VII. The invoice cost for merchandise purchases
price paid by each passenger. At this commission was
represents 75% of the sales price. All purchases
Efems only source of revenues. Efems fixed costs are
are paid for in cash.
P1,400,000 per month (for salaries, rent and so on) and its
variable costs are P2,000 per ticket purchased for a The budgeted cash receipts for December are:
passenger. This P2,000 includes a P1,500 per ticket a. P412,500 c. P585,000
delivery fee paid to Federal Express. (To keep the analysis b. P137,500 d. P550,000
end of examination
Thank you
for participating in the NFJPIA-PRTC Mock CPA Board Examinations!
in cooperation with