FIRST EXAM

THEORIES:

1.Statement 1Managerial control and engineering control are synonymous.

Statement 2Control from the viewpoint of management accounting is defined as the

process of setting maximum limits on financial expenditures - S1-FALSE, S2-FALSE

2. among the following major parts of a project feasibility study, which grouping in
considered critical? – marketing, engineering and financial

3. management accounting includes the following process except – delegation

4. in which of the following aspects is managerial accounting similar to financial

accounting – reliance on the accounting database

5. in comparing management and financial accounting, which of the following, more

accurately describes management accounting information? - budgeted, informative,
adaptable

6. In financial statement analysis, expressing all financial statement items as a

percentage of base year amounts is called – horizontal common size analysis

7. if a company is customer- centered, its customers are defined a – anyone to the

company and those internal who rely on its product to get their job done

8. which of the following statement is correct?

9. in assessing the financial health of a firm, financial analyst uses different techniques.
One technique is the vertical common size analysis, an example of which is –

10. a position on the organization chart that is directly related to achieving the basic
objectives of an organization is called- a line position

11.the statements below about project feasibility studies are the true except: -

12. it is an approach to continuous improvement that focuses on serving customers and

uses front-line workers to identify and solve problems systematically. – total quality
management

13. process reengineering includes all of the following steps except: - elimination of
nonvalue added activities

14. dramatic improvements in communication have resulted in increasing global

competition, which has required firms to: -

SOLVING:

1.Watson Corporation computed the following items from its financial records for the
year: Price to earnings ratio = 12

Payout ratio = 0.6

 Asset turnover ratio = 0.9
What is the dividend yield on Watson's common stock? – 5.0%

2. Alumbat Corporation has $800,000 of debt outstanding, and it pays an interest rate of
10 percent annually on its bank loan. Alumbat's annual sales are $3,200,000; its
average tax rate is 40 percent; and its net profit margin on sales is 6 percent. If the
company does not maintain a TIE ratio of at least 4 times, its bank will refuse to renew
its loan, and bankruptcy will result. What is Alumbat's current TIE ratio? - 5.0

3. ETC Corporation Selected Financial DataDecember 31, 2018

Current AssetsP150,000

Current Liabilities100,000

Inventories50,000

Accounts receivable40,000

Net sales900,000

Cost of goods sold 675,000

ETC’S Current ratio – 1.5 to 1

4. ETC Corporation Selected Financial DataDecember 31, 2018

Current AssetsP150,000

Current Liabilities100,000

Inventories50,000

Accounts receivable40,000

Net sales900,000

Cost of goods sold 675,000

ETC’S inventory turnover is – 13.5 times

5. The December 31, 2018 balance sheet of trend Inc. is prepared below. These are the
only accounts in trend Inc. balance sheet. Amounts indicated by question mark can be
calculated from the additional information given.
- 138k

6. lone star plastics has the following data:

Assets: 100k

Debt ratio: 40.0%

Profit margin: 4.0%

Interest rate: 5.0%

Total assets turnover:3.0

Tax rate:25%

- 12k

SECOND EXAM

THEORIES:

1. In the development of accounting data for decision making relevant costs are –
future costs which will differ under each alternative course of action
2. The manner of determining whether favorable results of an alternative are
sufficient to justify the cost of taking that alternative – cost benefit analysis
3. The primary purpose of the statement of cash flows is to provide information –
about cash receipts and cash payments of an entity during a period
4. When a multi-product factory operates at full capacity, decisions must be made
about what products to emphasize, in making such decisions, products should be
ranked based on: - contribution margin per unit of the constraining resource
5. Which of the following would be subtracted from net income when using the
indirect method to derived net cash flows from operating activities? – increase in
accounts receivable
6. Which of the following would indicate an accurate statement of cash flows – net
cash flow is equal to the change in the cash balance
7. Which of the following costs are relevant to a make-or-buy decision? – the
amount that would be received if the production equipment were sold
8. The variable cost of a unit product made yesterday is – a sunk cost
9. The relevance of a particular cost to decision is determined by – potential effect
on the decision
10. Which of the following is not a characteristic of relevant costing information? It is
– readily quantifiable
11. In analyzing whether to build another regional service office, the salary of the
chief executive officer at the corporate headquarters is – irrelevant because it is
future cost that will not differ between the alternative under consideration
12. Hal etoesus currently works as the fry guy at burger breath drive thru is thinking
of quitting his job to attend college full time next semester. Which of the following
would be considered an opportunity cost in this decision? - hal’s lost wages at
burger breath
13. An enity shall report cash flows from operating activities using- either direct or
indirect method
14. The technical aspect of the feasibility study include the following except for –
projected sales
15. A fixed cost is relevant if it is – avoidable
16. The materials and inputs of the technical aspect provides information such as –
list of all required supplies, equipment, inventories and the necessary input for
the business to be operational
17.

SOLVING:

1. Julius International produces weekly 15,000 units of Product JI and 30,000 units
of JII for which P800,000 common variable costs are incurred. These two
products can be sold as is or processed further. Further processing of either
product does not delay the production of subsequent batches of the joint
products. Below are some information:
JI JII
Unit selling price without further processing P24 P18
Unit selling price with further processing P30 P22
Total separate weekly variable costs of further processing P100,000 P90,000

To maximize Julius manufacturing contribution margin, the total separate variable

costs of further processing that should be incurred each week are – 90,000

2. Bear valley produces three products: A, B AND C. one machine is used to

produce the

There are 24000 minutes available on the machine during the week. How many
units should be produced and sold to maximize the weekly contribution? – A 50
units; B 80 units ; C 150 units
3. . Narciso Corporation is preparing a bid for a special order that would require 880
liters of material R19S. The company already has 280 liters of this raw material in
stock that originally cost $6.10 per liter. Material R19S is used in the company's
main product and is replenished on a periodic basis. The resale value of the
existing stock of the material is $5.45 per liter. New stocks of the material can be
readily purchased for $6.20 per liter. What is the relevant cost of the 880 liters of
the raw material when deciding how much to bid on the special order? – 5, 456

4. Kirklin Co. is a manufacturer operating at 95% of capacity. Kirklin has been

offered a new order at $7.25 per unit requiring 15% of capacity. No other use of
the 5% current idle capacity can be found. However, if the order were accepted,
the subcontracting for the required 10% additional capacity would cost $7.50 per
unit. The variable cost of production for Kirklin on a per-unit basis follows:
Materials $3.50
Labor 1.50
Variable overhead 1.50
$6.50
In applying the contribution margin approach to evaluating whether to accept the
new order, assuming subcontracting, what is the average variable cost per unit?
– 7.17

5. The following information relates to next year's projected operating results of the
Aluminum Division of Wroclaw Corporation:
Contribution margin...................... $1,500,000
Fixed expenses.............................. 1,700,000
Net operating loss.......................... (200,000)
If Aluminum Division is dropped, $1,000,000 of the above fixed expenses would
be eliminated. What will be the effect on Wroclaw's profit next year if Aluminum
Division is dropped instead of kept as a division of Wroclaw? – 500,000 decrease

6. Chow Inc. has its own cafeteria with the following annual costs
Food P 400,000
Labor 300,000
Overhead 440,000
Capital P1,140,000
The overhead is 40% fixed. Of the fixed overhead, P100,000 is the salary of the
cafeteria supervisor. The remainder of the fixed overhead has been allocated
from total company overhead. Assuming the cafeteria supervisor will remain and
that Chow will continue to pay said salary, the maximum cost Chow will be willing
to pay an outsider firm to service the cafeteria is – 964,000
7. Listed below are a company’s monthly unit costs to manufacture and market a
particular product.
Unit Costs Variable Cost Fixed Costs
Direct materials $2.00
Direct labor 2.40
Indirect Manufacturing 1.60 $1.00
Marketing 2.50 1.50
The company must decide to continue making the product or buy it from an
outside supplier. The supplier has offered to make the product at the same level
of quality that the company can make it. Fixed marketing costs would be
unaffected, but variable marketing costs would be reduced by 30% if the
company were to accept the proposal. What is the maximum amount per unit that
the company can pay the supplier without decreasing its operating income? -
6.75

8. Tagaytay Open-Air Flea Market is along the highway leading to Taal Vista Lodge.
Arnel has a stall which specializes in hand-crafted fruit baskets that sell for P60
each. Daily fixed costs are P15,000 and variable costs are P30 per basket. An
average of 750 baskets are sold each day. Arnel has a capacity of 800 baskets
per day. By closing time, yesterday, a bus load of teachers who attended a
seminar at the Development Academy of the Philippines stopped by Arnel’s stall.
Collectively, they offered Arnel P1,500 for 40 baskets. Arnel should have –
accepted the offer since he could have P300 contribution margin
9. Data covering QMB Corporations two product lines are as follows:
Product W Product Z
Sales P36,000 P25,200
Income before income tax 15,936 (8,388)
Sales price per unit 30.00 14.00
Variable cost per unit 8.50 15.00
The total unit sold of W was 1,200 and that of Z was 1,800 units. If Product Z is
discontinued and this results in a 400 units decrease in sales of Product W, the
total effect on income will be – 6,800 decrease

10. Jordan Company budgeted sales of 400,000 calculators at $40 per unit last year.
Variable manufacturing costs were budgeted at $16 per unit, and fixed
manufacturing costs at $10 per unit. A special order for 40,000 calculators at $23
each was received by Jordan in March. Jordan has sufficient plant capacity to
manufacture the additional quantity without incurring any additional fixed
manufacturing costs; however, the production would have to be done on an
overtime basis at an estimated additional cost of $3 per calculator. Acceptance of
the special order would not affect Jordan's normal sales and no selling expenses
 would be incurred. What would be the effect on net operating income if the
special order were accepted? – 160,000 increase

11. Part optical completed the following transactions:

Acquired land for 3M
Purchased office building for 2M
Sold one factory equipment for 3.5M
The accumulated depreciation on the warehouse is 1.7M and the original cost
was 5.7M
Net cash used for investing activities was: - 1,500,000

THIRD EXAM

THEORIES:

1. The payback method assumes that all cash inflows are reinvested to yield a
return equal to – zero
2. In capital expenditure decisions, the following are relevant in estimating operating
costs except: - historical cost
3. The profitability index-
4. A weakness of the internal rate of return method for screening investments
projects is that it – implicitly assumes that the company is able to reinvest cash
inflows from the project at the internal rate of return
5. Which of the following statements about cash flow determination for capital
budgeting purpose is incorrect – depreciation is relevant because it affects net
income
6. To approximate annual cash inflow, depreciation is – added back to net income
because it is not an outflow of cash
7. The following items are included in the computation of the net cost of investment
except – the book value of the old asset to be replaced
8. What is true of the net present value method of determining the acceptability of
an investment – the initial cost of the investment is subtracted from the present
value of net cash flows
9. The primary capital budgeting method that uses discounted cash flow techniques
is the – net present value method
10. In capital budgeting decisions, the following items are considered among others;
1.cash outflow for the investment
2.increase in working capital requirements
3.profit on sale of old asset
4. loss on write-off of old asset
For which of the above items would taxes be relevant? – items 3 and 4
only
 11. Capital budgeting techniques are least likely to be used in evaluating – the
adoption of the ABC system in allocating costs to product lines
12. Which of the following best identifies the reason for using probabilities in capital
budgeting is – uncertainty
13. The following statements refer to the accounting rate of return ARR
1. The ARR is based on the accrual basis, not cash basis
2. The ARR does not consider the time value of money
3. The profitability of the project is considered

From the above statements, which are considered limitations of the ARR
concept – statements 1 and 2 only

14. The capital budget is a (an) – plan the assesses the firm’s expenditure for long
live assets
15.

SOLVING:

1. Kipling comp. has invested in a project that has an eight-year life. It is expected
that the annual – 99, 360

2. Superstar is considering replacing an old press that cost 80,000 six years ago
with a new one that would cost 245,000 – 242,000

3. The super carry, a domestic shipping ling has recently commissioned a new
passenger ship, the SC-20. – 43,680,000

4. Last year the sales at jersey company were 200,000 and were all cash sales.
The expenses at jersey were 125,000 – 52,500

5. Friendly corp’s project sky has a net investment of 1.2 million. The net present
value of all future net cash inflows is 2.4 million. The company’s tax rate is 40%.
The profitability index is – 2.00

6. The mejicano company is planning to purchase a piece of equipment that will

reduce annual cash expenses over 5-year useful life – 1.034

7. The habagat inc.is planning to spend 600,000 for a machine that it will depreciate
on a straight-line basis over a ten-year period with no terminal – 10%
8. If the present value of a cash flow generated by an initial investment of 100,000
is 120,000, what is the NPV of the project? – 20,000

9. Mario Hernandez plans to buy a haymaker. It cost 175,000 and is expected to

last for five years. He presently hires 6 workers at 10,000 per month – NPV is
28,436

10. Tabucol aggregates, inc plans to replace one of its machines with new efficient
one. The old machine has a net book value of 120,000 – 15, 693

11. A new machine is expected to produce the following after-tax cash inflow over a
period of 5 years:

If the machine will cost 40,000, its payback period is – 2.60 years

12. Fermin printers inc is planning to replace it present printing equipment with more
efficient unit. The new equipment will cost 400,000 – 69,700

13. An investment opportunity costing 200,000 is expected to yield net cash flow of
44,000 annually for seven years. The payback period of the investment is – 4.55
years