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NAQDOWN Elimination

Management Accounting and Control

Name:______________________________________
Year and Section:_____________________________
Instructions: Write the letter of your answer before each number. Use UPPERCASE letters only.
Erasures are NOT allowed.

1. Mabuhay Corp. has current assets of P180,000 and current liabilities of P360,000. Which of the
following transactions would improve Mabuhays current ratio?
a.Refinancing a P60,000 long-term mortgage with a short-term note.
b.Collecting P20,000 of short-term accounts receivable.
c.Purchasing P100,000 of merchandise inventory with a short-term accounts payable.
d.Paying P40,000 of short-term accounts payable.

2. Assume that actual sales results exceed the planned results for the second quarter. This favorable
difference is greater than the unfavorable difference reported for the first quarter sales. Which of the
following statements about the sales budget report on June 30 is true?
a.The year-to-date results will show a favorable difference.
b.The year-to-date results will show an unfavorable difference.
c.The difference for the first quarter can be ignored.
d.The sales report is not useful if it shows a favorable and unfavorable difference for the two quarters.

3. The production volume variance occurs when using the


a.Absorption costing approach because of production exceeding the sales.
b.Absorption costing approach because production differs from that used in setting the fixed overhead
rate used in applying fixed overhead to production.
c.Variable costing approach because of sales exceeding the production for the period.
d.Variable costing approach because of production exceeding the sales for the period.

4. After preliminary audit arrangements have been made, an engagement confirmation letter should be
sent to the client. This letter usually should not include
a.An estimate of the time to be spent on the audit work by audit staff and management.
b.A reference to the auditors responsibility for the detection of errors and irregularities.
c.A statement that management advisory services would be available upon request.
d.A statement that management letter will be issued outlining comments and suggestions as to any
procedures requiring the clients attention.

5 .A basic assumption of activity-based costing (ABC) is that


a.All manufacturing costs vary directly with units of production.
b.Products or services require the performance of activities, and activities consume resources.
c.Only costs that respond to unit-level drivers are product costs.
d.Only variable costs are included in activity-cost pools.

6. Which of the following is not a major function in cash management?


a.Cash flow control c. Maximizing sales
b.Cash surplus investment d. Obtaining financing services
.
7. The economic order quantity formula can be used to determine the optimum size of
a. b. c. d.
Production run Yes Yes No No
Purchase order No Yes No Yes
.
8. A company has made the decision to finance next year's capital projects through debt rather than
additional equity. The benchmark cost of capital for these projects should be
a.The before-tax cost of new-debt financing.
b.The after-tax cost of new-debt financing.
c.The cost of equity financing.
d.The weighted-average cost of capital.

9. Assume a company produces three products: A, B, and C. It can only sell up to 3,000 units of each
product. Production capacity is unlimited. The company should produce the product (or products) that has
(have) the highest
a.contribution margin per hour of machine time.
b.gross margin per unit.
c.contribution margin per unit.
d.sales price per unit.

10. A budget that includes a 12-month planning period at all times is called a __________ budget.
a. pro forma b. flexible c. master d. continuous

Instructions: Write the letter of your answer before each number. Use UPPERCASE letters only.
Provide all necessary solutions on your worksheet. Erasures are NOT allowed.
11. Each unit of product ZIM takes five direct labor hours to make. Quality standards are high and 8% of
units produced are normally rejected due to substandard quality. Next months budgets are as follows:
Beginning inventory of finished goods 3,000 units
Planned ending inventory of finished goods 7,600 units
Budgeted sales of ZIM 36,800 units
All stocks of finished goods must have successfully passed the quality control check. What is the direct
labor budget for the month?
a.198,720 hours b. 200,000 hours c. 223,500 hours d. 225,000 hours

12. 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 Arnels stall. Collectively, they offered Arnel
P1,500 for 40 baskets. Arnel should have
a.Rejected the offer since he could have lost P500.
b.Rejected the offer since he could have lost P900.
c.Accepted the offer since he could have P300 contribution margin.
d.Accepted the offer since he could have P700 contribution margin.

13. In 19x5, MPX Corporations net income was P800,000 and in 19x6 it was P200,000. What
percentage increase in net income must MPX achieve in 19x7 to offset the 19x6 decline in net income?
a.60% b. 600% c. 400% d. 300%

14. Simba Corp., whose gross sales amounted to P1,200,000 sold on terms of 3/10, net 30. The
collections manager estimated that 30% of the customers pay on the 10th day and take discounts; 40% on
the 30th day; and the remaining 30% pay, on the average, 40 days after the purchase. If management
would toughen on its collection policy and require that all non-discount customers pay on the 30th day,
how much would be the receivables balance?
a.P60,000 b. P80,000 c. P70,000 d. Zero

15. Sta. Elena Company manufactures mens caps. The projected income statement for the year before
any special order is as follows:
Amount Per Unit
Sales P 400,000 P 20
Cost of goods sold 320,000 16
Gross margin P 80,000 P 4
Selling expenses 30,000 3
Operating income P 50,000 P 1
Fixed costs included in above projected income statement are P80,000 in cost of goods sold and P9,000 in
selling expenses.A special order offering to buy 2,000 caps for P17 each was made to Sta. Elena. No
additional selling expenses will be incurred if the special order is accepted. Sta. Elena has the capacity to
manufacture 2,000 more caps. As a result of the special order, the operating income would increase by
a.P34,000 b. P24,000 c. P10,000 d. P0

16. The Katangalan Company makes toys Y and Z each of which needs two processes, cutting and
sanding. The contribution margin is P3.00 for product Y and P4.00 for product Z. The table below
shows the maximum number of units (constraints) of each product that may be processed in the two
departments.
Maximum Capacities (in Product Units)
Product Cutting Sanding
Y 30 40
Z 30 20
Considering the constraint on processing, which combination of product Y and Z maximizes the total
contribution margin?
a. b. c. d.
Product Y 20 units 30 units 40 units 0 units
Product Z 10 units 0 units 0 units 20 units

17. JKL Company has a standard of 15 parts of component X costing P1.50 each. JKL purchased 14,910
units of component X for P22,145. JKL generated a P220 favorable price variance and a P3,735
favorable quantity variance. If there were no changes in the component inventory, how many units of
finished product were produced?
a.994 units. b. 1,090 units. c. 1,000 units d. 1,160 units

18. ALPHA Co. uses a standard cost system. Direct materials statistics for the month of May, 19x7 are
summarize below:
Standard unit price P90.00
Actual units purchased 40,000
Standard units allowed for actual production 36,250
Materials price variance- favorable P6,000
What was the actual purchase price per unit?
a.P75.00 b. P85.89 c. P88.50 d. P89.85

19. JLT Corporation expects to sell 150,000 units during the first quarter of 1998, with an ending
inventory for the quarter of 20,000 units. Variable manufacturing costs are budgeted at P50 per unit, with
70% of total variable manufacturing costs requiring cash payments during the quarter. Fixed
manufacturing costs are budgeted at P120,000 per quarter, 40% of which are expected to require cash
payment during the quarter.
In the cash budget, payments for manufacturing costs during the quarter will total
a.P8,500,000 b. P5,950,000 c. P5,998,000 d. P5,298,000

20. Colt, Inc. is planning to use retained earnings to finance anticipated capital expenditures. The beta
coefficient for Colt's stock is 1.15, the risk-free rate of interest is 8.5%, and the market return is estimated
at 12.4%. If a new issue of common stock were used in this model, the flotation costs would be 7%. By
using the Capital Asset Pricing Model (CAPM) equation [R = RF + (RM - RF)], the cost of using
retained earnings to finance the capital expenditures is
a. 13.21% b. 12.99% c. 12.40% d. 14.26%