Compre Exam
Compre Exam
Compre Exam
AC 515-MANAGERIAL ACCOUNTING I
Comprehensive Examination
2
8.
9.
10. The following statements refer to competence of CPAs in management advisory services,
except
a. In concept, it refers to the technical qualification of the practitioner and his ability to
supervise and evaluate the quality of work of his staff assigned to the engagement to
be responsible for the successful completion of the project.
b. It is acquired by education, self-study, attendance to professional development courses,
actual experience in MS work, and research.
c. It is the ability to identify clients needs, use analytical approach and process, apply
technical knowledge, communicate recommendations and assist in implementation.
d. It must be retained in the rendition of MAS work and it can be impaired if the CPA
performs decision-making for the client or acts as employee of the client.
11. Which of the following statements is (are) not correct?
I. Cost behavior refers to the methods used to estimate costs for use in managerial
decision making.
II. Fixed cost per unit varies with changes in the level of activity.
III. The range of activity over which changes in cost are of interest to management is called
the relevant range.
IV. If yearly insurance premiums are increased, this change in fixed costs will result in an
increase in the break-even point.
3
a.
b.
c.
d.
e.
I only
I & IV only
IV only
All the statements are correct
All the statements are incorrect
12.
Which of the graphs in Figure 20-1 illustrates the behavior of a total variable cost?
a. Graph 2
b. Graph 3
c. Graph 4
d. Graph 1
13. Which of the following is an example of a cost that varies in total as the number of units
produced changes?
a. Salary of a production supervisor
b. Direct materials cost
c. Property taxes on factory buildings
d. Straight-line depreciation on factory equipment
14. Knowing how costs behave is useful to management for all the following reasons except for
a. predicting customer demand.
b. predicting profits as sales and production volumes change.
c. estimating costs.
d. changing an existing product production.
15.
16.
4
d. Ratio analysis facilitates comparisons by standardizing numbers.
e. All of the statements above are correct.
17.
Other things held constant, which of the following will not affect the current ratio, assuming
an initial current ratio greater than 1.0?
a. Fixed assets are sold for cash.
b. Long-term debt is issued to pay off current liabilities.
c. Accounts receivable are collected.
d. Cash is used to pay off accounts payable.
e. A bank loan is obtained, and the proceeds are credited to the firms checking account.
18.
19.It is defined as the potential use of fixed financial costs to magnify the effects of changes in
EBIT on the firm's EPS. What is it?
a. Operating Leverage
b. Financial Leverage
c. Total Leverage
d. Economic Leverage
e. Optimal Capital Structure
20. Return on investment (ROI) is equal to the margin multiplied by:
A. sales.
B. turnover.
C. average operating assets.
D. residual income.
21. Which of the following will not result in an increase in return on investment (ROI), assuming
other factors remain the same?
A. A reduction in expenses.
B. An increase in net operating income.
C. An increase in operating assets.
D. An increase in sales.
22. A company that has a profit can increase its return on investment by:
A. increasing sales revenue and operating expenses by the same dollar amount.
B. increasing average operating assets and operating expenses by the same dollar amount.
C. increasing sales revenue and operating expenses by the same percentage.
D. decreasing average operating assets and sales by the same percentage.
23. Delmar Corporation is considering the use of residual income as a measure of the
performance of its divisions. What major disadvantage of this method should the company
consider before deciding to institute it?
A. this method does not take into account differences in the size of divisions.
B. investments may be adopted that will decrease the overall return on investment.
C. the minimum required rate of return may eliminate desirable investments.
D. residual income does not measure how effectively the division manager controls costs.
24. The concept of economic value added (EVA) is most similar to:
A. residual income.
B. transfer pricing.
C. segment reporting.
D. return on investment.
5
25. A segment of a business responsible for both revenues and expenses would be called:
A. a cost center.
B. an investment center.
C. a profit center.
D. residual income.
Loren Company's single product has a selling price of P15 per unit. Last year the company
reported total variable expenses of P180,000, fixed expenses of P90,000, and a net income
of P30,000. A study by the sales manager discloses that a 15% increase in the selling price
would reduce unit sales by 10%. If her proposal is adopted, net income would: (indicate
whether increase/decrease):
8.
Goodman Company has sales of 3,000 units at P80 per unit. Variable costs are 35% of the
sales price. If total fixed costs are P66,000, the degree of operating leverage is:
9.
Hello Garci Company sells 50,000 units of yo a top-of-the-line garden srinkle. These were
taken from the companys records:
Accounts receivable P129,000.
Days of sales outstanding 15 days.
Contribution margin ratio 49%.
Profit for the period was P485,000.
The ending receivables balance is the average balance during the year. Assume a 360-day
year. All sales are on credit. Determine the companys breakeven revenue.
6
10. Two products are manufactured by Bye- Bye, Products Alis and Tsupi which accounts for 70%
and 30% of the total sales of the company. Variable costs, as a percentage of sales, are
60% and 80% respectively. Total fixed costs amount to P170,000. There are no other costs
involved, how much is the peso sales of each product line at break-even point
Alis
Tsupi
Alis
Tsupi
a. 350,000
150,000
c. 332,500
142,500
b. 297,500
127,500
d. 275,000
250,000
11.
Selected data from Sheridan Corporations year-end financial statements are presented
below. The difference between average and ending inventory is immaterial.
15. At the end of the year just completed, Orem Company's current liabilities totaled P75,000,
and its long-term liabilities totaled P225,000. Working capital at year-end was P100,000. If
the company's debt-to-equity ratio is 0.30 to 1, total long-term assets must equal:
16.Starrs Company has current assets of P300,000 and current liabilities of P200,000. Which of
the following transactions would increase its working capital?
a. Prepayment of P50,000 of next years rent.
b. Refinancing P50,000 of short-term debt with long-term debt.
c. Acquisition of land valued at P50,000 by issuing new common stock.
d. Purchase of P50,000 of marketable securities for cash.
17.Selected year-end data for the Brayer Company are presented below:
Current liabilities ........ P600,000
Acid-test ratio ............ 2.5 to 1
Current ratio .............. 3.0 to 1
Cost of goods sold ......... P500,000
The company has no prepaid expenses and inventories remained unchanged during the year.
Based on these data, the company's inventory turnover ratio for the year was closest to:
18.Ben Company has the following data for the year just ended:
Cash .................................. ?
Accounts Receivable ..... P28,000
Inventory ....................... P35,000
Current ratio ................... 2.4 to 1
Acid test ratio ................. 1.6 to 1
7
Ben Company's current liabilities were:
19.Marcy Corporation's current ratio is currently 1.75 to 1. The firms current ratio cannot fall
below 1.5 to 1 without violating agreements with its bondholders. If current liabilities are
presently P250 million, the maximum new short-term debt that can be issued to finance an
equivalent amount of inventory expansion is:
20.PFM Company has sales of P210,000, interest expense of P8,000, a tax rate of 30%, and a net
profit after tax of P35,000. PFM Company's times interest earned ratio is:
Items 21 and 22 are based on the following information from Pedro Company's records for the
year ended December 31, 200A:
Net sales
P1,400,000 Units manufactured
70,000
Cost of goods manufactured:
Units sold
60,000
Variable
P 630,000 Finished goods inventory, Jan. l none
Fixed
P 315,000
Operating expenses:
Variable
P 98,000
Fixed
P 140,000
21. What would be Pedro's finished goods inventory at December 31, 200A under the variable
costing method?
22. Under the absorption costing method, Pedro's operating income for 200A would be
23. During January, 2000, Gabby Inc. produced 10,000 units of Product F with costs as follows:
Direct Materials
P40,000
Direct Labor 22,000
Variable Overhead 13,000
Fixed Overhead
10,000
What is Gabby's unit cost of Product F for January, 2000 calculated on the direct costing
method?
Items 24 and 25 are based on the following data:
Bates Company incurred the following costs:
Direct Materials & Direct labor P600,000
Variable factory overhead
80,000
Straight-line depreciation:
Production Machinery
70,000
Factory building
50,000
24.Under absorption costing, the inventoriable costs are
25.Under variable costing, the inventoriable costs are
26. Moon Company's 1999 manufacturing costs were as follows:
Direct materials and direct labor
P
500,000
Depreciation of manufacturing equipment
70,000
Depreciation of factory building
40,000
Janitor's wages for cleaning factory premises 15,000
How much of these costs should be inventoried for external reporting purposes?
27.Cost data for a special product manufactured by Nini, Inc. are given below:
Selling price per unit
P60.00
Unit costs:
Direct materials
P 12.00
Direct labor
10.00
Order cost per unit:
Variable
Fixed
Manufacturing
P5.00
P12.00
Distribution
9.00
7.00
Nini, Inc. sells, on the average, 300,000 units a year. Using the direct costing method, the unit
cost of the special product for inventory purposes is
(28-29)On December 31, 2006, Masters Inc. had outstanding 180,000 shares of common stock.
Net income for 2006 was P285,000. Outstanding options (granted July 1, 2006) to purchase
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15,000 shares of common stock at P20 per share had not
During 2006, market prices for the common stock were:
July 1, 2006 ....................................
December 31, 2006 ...............................
Average market ..................................
300,000 shares
100,000 shares
P100,000
P200,000
60,000 shares
P25
P35
P40
The net income for 2006 is P2,300,000. The company's tax rate is 30 percent. No conversions or
options were exercised during 2006.
(30) Compute basic earnings per share.
(31) Compute diluted earnings per share.
32-33.At December 31, 2005, Rollins Inc. had 400,000 shares of common stock outstanding. The
company also had 40,000 shares of P7 convertible preferred stock. Each share is
convertible into 4 shares of common stock. (Dividends were declared and paid.)
Transactions during
2006:
July 1, 2006
Sold 200,000 shares
July 8, 2006
Declared 100% stock dividend
September 1, 2006
Sold 120,000 shares
October 1, 2006
Purchased 60,000 shares to be held in
Treasury
Rollins Inc. reported a loss of P670,700 for
2006
(32) Compute diluted earnings (loss) per share.
(33) Compute basic earnings (loss) per share.
34. & 35.The income date of Penny Corp. for the years 2009 and 2010 are as follows:
2010
2009
Difference
Net sales
P6,900
P5,100
P1,800
Cost of goods sold
3,795
3,060
735
---------------Gross profit
P3,105
P2,040
P1,065
======
======
======
If the sales price in 2010 are approximately 20% higher than those of 2009, the increase of
P1,800,000 in net income is accounted for as follows:
Increase (Decrease)
----------------------------34.) Sales Price
35.)Sales Volume
---------------------Items 36 through 38 based on the following information:
9
Brown company is a manufacturer of three consumer products, X, Y, and Z. Sales and other
information related to the said products are shown below:
2009
Units
Unit Price Total Sales Cost of Sales
-------- -------------------------------Product X
15,000
P 10
P 150,000
P 120,000
Product Y
20,000
8
160,000
140,000
Product Z
5,000
6
30,000
22,500
2010
Units
Unit Price Total Sales Cost of Sales
--------------------------------------Product X
20,000
P 12
P 240,000
P 180,000
Product Y
20,000
9
180,000
150,000
Product Z
4,000
5
20,000
16,000
Based on the above information, an analysis of the gross profit would show the following
changes:
36.
The sales price factor shows a variance of
37.
The cost price factor shows a variance of
38.
The quantity factor show a variance of
39. On January 2, 19C, the Mannix Corporation mortgaged on its properties as collateral for a
P1,000,000, 12%, five-year loan. The mortgage note payable was interest bearing, and the
interest rate was realistic. During 19C, the GPL increased evenly, resulting in a 5% rise for the
year. In preparing an HC/CP balance sheet at the end of 19C, at what amount should Mannix
report the five year mortgage note?
40. The HC balance sheet of the Rhuda Company showed the original cost of depreciable assets
as P5,000,000 at December 31, 19A, and P6,000,000 at December 31, 19B. These assets
costs are being depreciated on a straight line basis over a 10-year period with no residual
value. Acquisitions of P1,000,000 were made on January 1, 19B. A full year's depreciation
was taken in the year of acquisition. Rhuda presents HC/CP financial statements as
supplemental information to their HC financial statements.
The December 31, 19A
depreciable assets balance (before accumulated depreciation) restated to reflect December
31, 19B, purchasing power was P5,800,000. What amount of depreciation expense should be
shown in the HC/CP income statement for 19B if the GPL index was 100 at December 31, 19A,
and 110 at December 31, 19B?
41.
Cinderella Company provides the folowing liability accounts at the end of 2000, among
others:
Advances from customers
50,000
Accrued losses on purchase commitments
100,000
Capital lease liability
400,000
Accrued retirement benefits cost
200,000
Under cosntant peso accounting, Cinderall should report monetary liabilities of:
42.
Hazel Company began operations on January 1, 2000. Information about the company's
inventory during 2000 appears below.
Units
Unit Cost
------- --------Inventory - January 1
3,000
100
Purchases
9,000
120
Sales
8,000
Inventory - December 31
4,000
The general price level index during 2000 was:
January 1
90
Average for 2000
120
December 31
135
Under constant peso accounting, what is the cost of goods sold assuming the FIFO cost
flow is used?
43.
Aga Corporation's property, plant and equipment at December 31, 2013 are:
Date
Percent
Historical
General
Acquired
Depreciated
Cost
Price Index
------------------------------------2011
30
3,000,000
100
2012
20
2,000,000
125
10
2013
10
1,000,000
150
--------6,000,000
=========
Depreciation is calculated at 10% straight line. A full year's depreciation is charged in the
year of acquisition. There were no disposals in 2013.
What amount of depreciation would be included in the 2013 income statement adjusted
for general inflation or constant peso?
44-45.The company purchased land costing P100,000 on January 1, 2000. The current cost of
the land was P150,000 on December 31, 2000, and P250,000 on December 31, 2001. The
company sold the land on December 31, 2002 for P450,000 when the current cost was
P400,000.
44. What is the unrealized holding gain that should be reported in 2001?
45. What is the unrealized holding gain that should be reported in 2002?
46-47.On January 1, 2000, Digital Company acquired inventory for P200,000. The inventory
consisted of 10,000 identical units. The current cost of the inventory was P300,000 on July
1, 2000 when the company sold three-fourths of the inventory for P280,000. On
December 31, 2000, the current cost of the inventory was P75,000.
46. What is the Cost of Goods Sold?
47. What is the realized holding gain/loss for the year?
48-50.Progress Inc. adopted a current cost system in its first year of operation. At the start of
the first year, 2002, the company purchased P168,000 of inventory. At the end of the
year, it had an inventory of P100,800 on a historical cost basis and P164,500 on a current
cost basis. At the time the inventory was sold, the current cost of the inventory was
P107,800. Sales for the year were P182,000. Ignore all tax effects and assume that there
was no inflation during 2002. Other expenses were P8,400 on both historical cost and
current cost bases.
48. Compute for realized holding gain/loss.
49. Compute forun realized holding gain/loss.
50. Compute for net income. (ignore tax)
BONUS ROUND
51. Johnson Company operates two plants, Plant A and Plant B. Johnson Company reported for
the year just ended a contribution margin of P50,000 for Plant A. Plant B had sales of P200,000
and a contribution margin ratio of 30%. Net operating income for the company was P20,000 and
traceable fixed costs for the two plants totaled P50,000. Johnson Company's common fixed costs
for last year were:
52. Verkamp Corporation has two divisions: the YDI Division and the QCC Division. The
corporation's net operating income is P31,800. The YDI Division's divisional segment margin is
P111,800 and the QCC Division's divisional segment margin is P152,800. What is the amount of
the common fixed expense not traceable to the individual divisions?
53. Kaighn Corporation has two divisions: the West Division and the East Division. The
corporation's net operating income is P18,500. The West Division's divisional segment margin is
P27,700 and the East Division's divisional segment margin is P49,400. What is the amount of the
common fixed expense not traceable to the individual divisions?
54. Anspach Corporation has two divisions: the Governmental Products Division and the
Consumer Products Division. The Governmental Products Division's divisional segment margin is
P11,800 and the Consumer Products Division's divisional segment margin is P155,500. The total
amount of common fixed expenses not traceable to the individual divisions is P142,200. What is
the company's net operating income?
55-58. Deano Products is a division of a major corporation. The following data are for the last
year of operations:
11
55.
56.
57.
58.
The
The
The
The
division's
division's
division's
division's