CVP Analysis

1. Pirindot Corp had the following economic information for the year 2017:
Sales (50,000 units @ P20) P1,000,000
Variable manufacturing costs 400,000
Fixed costs 250,000
Income tax rate 40 percent
Pirindot Corp. budgets its 2018 sales at 60,000 units or P1,200,000. The company anticipates an increased competition; hence, an additional
P75,000 advertising costs is budgeted in order to maintain its sales target for 2018. What is the amount of peso sales needed for 2018 in order
to equal the after-tax income in 2017?
A. P1,125,000 B.P1,325,000B. C.P1,187,500 D. P1,387,500

2 , Fashion Goddess Inc. had the following sales results for 2017:
Denim Tank Tops Statement Shirts
Peso sales component ratio 0.30 0.30 0.40
Contribution margin ratio 0.40 0.40 0.60
Fashion Goddess, Inc had fixed costs of P2,400,000.
The break-even sales in pesos for Fashion Goddess, Inc.are:
Denim Tank Tops Statement Shirts
A. P1,800,000 P1,800,000 P3,600,000
B. P1,800,000 P1,800,000 P1,600,000
C. P1,500,000 P1,500,000 P2,000,000
D. P1,531,915 P1,531,915 P2,042,553 .

3. Finger Ringer, Inc. manufactures and sells key rings embossed with college names and slogans. Last year, the key rings sold for P75 each,
and the variable costs to manufacture them were P22.50 per unit. The company needed to sell 20,000 key rings to break-even. The net
income last year was P50,400. The company expects the following for the coming year:
 The selling price of the key rings will be P90.
 Variable manufacturing costs per unit will increase by one-third.
 Fixed costs will increase by 10%.
 The income tax rate will remain unchanged.
For the company to break-even the coming year, the company should sell
A. 2,600 units. C. 21,250 units.
B. 19,250 units. D. 21,600 units.

VARIABLE/ ABSORPTION COSTING

The next four items are based on the following information:
Casquijo Corporation provides the following information for the month of February based on the production of
20,000 units:
Direct materials P 50,000
Direct labor 30,000
Variable factory overhead costs 20,000
Fixed factory overhead costs 25,000
Variable selling and administrative expenses 40,000
Fixed selling and administrative expenses 15,000
4.Under full costing, what is the costs of goods manufactured if work-in-process inventory increased by P 15,000?
A. P140,000 B. P85,000 C. P115,000 D.P110,000
5.What selling price will earn a gross profit of P 2.50 per unit under absorption costing?
A. P10.50 B. P8.55 C. P3.75 D. P8.75
6. What is the unit product cost under variable costing?
A. P8.00 B. P7.00 C. P5.00 D. P6.25
7. How many units were sold if variable costing profit is higher than absorption costing profit by P 2,500?
A. P22,000 B. P18,000 C. P18,889 D. P21,111

BUDGETING
8. Albatross Company started its commercial operations on September 30 of the current year. Projected manufacturing costs for the
first three months of operations are P1,568,000, P1,952,000, and P2,176,000, respectively. Depreciation, insurance, and property taxes
represent P288,000 of the estimated manufacturing costs. Insurance was paid on September 30, and property taxes will be paid in July
next year. Seventy-five percent of the remainder of the manufacturing costs are expected to be paid in the month in which they are
incurred, with the balance to be paid in the following month. The cash payments for manufacturing costs in the month of November are:
A.P1,568,000 B.P1,664,000 C.P1,952,000 D. P1,856,000
9. Lorie Company plans to sell 400,000 units of finished product in July an anticipates a growth rate in sales of 5% per month. The
desired monthly ending inventory in units of finished product is 80% of the next month’s estimated sales. There are 300,000 finished units
in the inventory on June 30. Each unit of finished product requires four pounds of direct materials at a cost of P2.50 per pound. There are
800,000 pounds of direct materials in the inventory on June 30. How many units should be produced for the three-month period ending
September 30?
A. 1,260,000 B.1,331,440 C.1,328,000 D. 1,424,050
10. Grant Company estimates its sales at 60,000 units in the first quarter and that sales will increase by 6,000 units each quarter over the year.
It has, and desires, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit
customers pay within the quarter. The remainder is received in the quarter following sale. What is the budgeted cash collections for the third
quarter?
A. P2,052,000 B. P1,017,000 C. P1,476,000 D. P1,773,000
11. Apple Shoe Shop is preparing its cash budget for the month of May. Apple pays 60% of purchases in the month of purchase and the
remainder the next month. Operational information follows:
Beginning inventory, May 1 P 20,000
Estimated May cost of goods sold 100,000
Estimated May ending inventory 35,000
April purchases 90,000
What are Apple’s estimated cash payments for shoes in May?
a. P 115,000 b. P 105,000 c. P 87,000 d. P 70,000
RELEVANT COSTING
12. Relay Corporation manufactures batons. Relay can manufacture 300,000 batons a year at a variable cost of P750,000 and a fixed cost of
P450,000. Based on Relay’s predictions, 240,000 batons will be sold at the regular price of P5.00 each. In addition, a special order was placed
for 60,000 batons to be sold at a 40 percent discount off the regular price. The unit relevant cost per unit for Relay’s decision is
A. P3.00 B. P4.00 C. 1.50 D. P2.50
13. Stine Company incurs the following costs in producing 50,000 units of product:
Direct materials P100,000
Direct labor 50,000
Variable manufacturing overhead 100,000
Fixed manufacturing overhead 300,000
An outside supplier has offered to supply the 50,000 units at P7.00 each. All of Stine's related variable costs, but only P200,000 of the fixed
costs would be eliminated if the offer is accepted. Acceptance will result in a
A. savings of P200,000. b. loss of P100,000. c. savings of P100,000. d. loss of P200,000.
14. Part BX is a component that Motors and Engines Co. uses in the assembly of motors. The cost to produce one BX is presented below:
Direct materials P 4,000
Materials handling (20% of direct materials) 800
Direct labor 32,000
Overhead (150% of direct labor) 48,000
Total manufacturing costs P84,800
Materials handling which is not included in manufacturing overhead, represents the direct variable costs of the receiving department that
are applied to direct materials and purchased components on the basis of their cost.
The company’s annual overhead budget is one-third variable and two-thirds fixed. Pre-casts Co., offers to supply BX at a unit price of
P60,000. Should the company buy or manufacture?
A. Buy, due to advantage of P12,800 per unit.
B. Buy, due to advantage of P24,800 per product.
C. Manufacture, due to advantage of P7,200 per unit.
D. Manufacture, due to advantage of P19,200 per unit.
15. Kirklin Co. is a manufacturer operating at 95% of capacity. Kirklin has been offered a new order at P7.25 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 P7.50 per unit. The variable cost of production for Kirklin on a per-unit basis follows:
Materials P3.50
Labor 1.50
Variable overhead 1.50
P6.50
In applying the contribution margin approach to evaluating whether to accept the new order, assuming subcontracting, what is the average
variable cost per unit?
A. P6.83 C. P7.17
B. P7.00 D. P7.25
16. Hacienda Luciana produces pesticides that is intended only for rats. The company normally produces and sells 10,000 packs of the
pesticide each month. "X" pesticide is sold for P280 per pack with variable cost of P168 per pack, fixed factory overhead cost of P460,000
per month and fixed selling cost of P620,000 per month.
60% of the local farmers used their products and are happy that they have fruitful harvest with the occurence of rat attacks are reduced
to zero. However, the local residents together with concerned environmental organizations petitioned to boycott the product because of its
harmful effects to human, animals and plants. With that, monthly sales of Hacienda Luciana have dwindled to only 15% of its normal
monthly volume. Hacienda Luciana's management expects that the boycotting of their products will only be temporary and they will seek
remedies to enlighten the public of their products and it would take two months to resume to its normal state. However, due to the dramatic
drop in the sales level, Hacienda Luciana's management is contemplating to shutdown its plants during the two-month period that the boycott
is on.
If Hacienda Luciana will temporarily shutdown its operations, it is expected that the fixed factory overhead costs can be decreased to
P340,000 per month and that the fixed selling costs can be reduced by P62,000 monthly. On its resumption of operations, it would incur
P56,000. Hacienda Luciana uses Just-in-Time system. The shutdown point in units is
A. P1,100 B. P9,642.86 C. P3,250 D.2,750

ABC COSTING
Use the following information to answer questions
Kingfisher Plaids Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year.
Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity
Ordering and Receiving Orders P 120,000 500 orders
Machine Setup Setups 297,000 450 setups
Machining Machine hours 1,500,000 125,000 MH
Assembly Parts 1,200,000 1,000,000 parts
Inspection Inspections 300,000 500 inspections
17. If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is
A. P9.60. B. P12.00. C. P15.00. D. P34.17.
18. If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is
A. P1.20 per direct labor hour B. P240 per order. C. P0.12 per part. D. P6,834 per order.
19. Bed and Butter Inc. manufactures mattresses for the hotel industry. It has two products, Downy and Firmantel, and total overhead is
P790,000. The company plans to manufacture 400 Downy mattresses and 100 Firmantel mattresses his year. In manufacturing the mattresses,
the company must perform 600 material moves for the Downy and 400 for the Firmantel; it processes 900 purchase orders for the Downy and
700 for the Firmantel; and the company’s employees work 1,400 direct labor hours on the Downy product and 3,400 on the Firmantel. Bed
and Butter’s total material handling costs are P500,000 and its total processing costs are P290,000. Using ABC, how much overhead would be
assigned to the Downy product?
A. P395,000 b. P463,125 c. P326,875 d. P559,583
20. Faleeda Company uses an activity-based costing system with three activity cost pools. The company has provided the following data
concerning its costs and its activity based costing system:
Costs:
Manufacturing overhead P600,000
Selling and admin. expenses P220,000
Total P820,000
Distribution of resource consumption:
Activity Cost Pools
Order Size Customer Support Other Total
Manufacturing overhead 15% 75% 10% 100%
Selling and admin. Expenses 60% 20% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the
first-stage allocation of costs to the activity cost pools.
How much cost, in total, would be allocated in the first-stage allocation to the Customer Support activity cost pool?
A. P164,000 C. P494,000 B. P389,500 D. P 615,000
Capital Budgeting
21. The McNally Co. is considering an investment in a project that generates a profitability index of 1.3. The present value of the cash inflows
on the project is P44,000. What is the net present value of this project?
A. P10,154 C. P33,846
B. P13,200 D. P57,200
22. You have deposited P7,620 in a special account that has a guaranteed interest rate of 19% per year. If you are willing to completely
exhaust the account, what is the maximum amount that you could withdraw at the end of each of the next 7 years? Select the amount below
that is closest to your answer.
A. P1,295 B. P2,056 C. $2,219 D. P1,089
(Ignore income taxes in this problem.) Hosquini Centrum, Inc., has an antiquated high-capacity printer that needs to be upgraded. The system
either can be overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives:

Overhaul Present Purchase New

System System
Purchase cost when new.............................. P300,000 P400,000
Accumulated depreciation............................ P220,000 —
Overhaul costs needed now.......................... P250,000 —
Annual cash operating costs......................... P120,000 P90,000
Salvage value now....................................... P90,000 —
Salvage value in ten years............................ P30,000 P80,000
Working capital required.............................. — P50,000

The company uses a 10% discount rate and the total-cost approach to capital budgeting analysis. The working capital required under the new
system would be released for use elsewhere at the conclusion of the project. Both alternatives are expected to have a useful life of ten years.

23. The net present value of the overhaul alternative (rounded to the nearest hundred dollars) is:
A. P(750,300) B. P(725,800) C. P(975,800) D. P(987,400)
24. The net present value of the new system alternative (rounded to the nearest hundred dollars) is:
A. P(862,900) B. P(552,900) C. P(758,400) D) P(987,400)
25. Consider a project that requires cash outflow of P50,000 with a life of eight years and a salvage value of P5,000. Annual before-tax cash
inflow amounts to P10,000 assuming a tax rate of 30% and a required rate of return of 8%. Salvage value is ignored in computing
depreciation. The project has a payback period of
A. 5.0 years C. 6.0 years
B. 5.6 years D. 6.6 years
FINANCIAL STATEMENT ANALYSIS
26. Brava Company reported the following on its income statement:
Income before taxes P400,000
Income tax expense 100,000
Net income P300,000
An analysis of the income statement revealed that interest expense was P100,000. Brava Company’s times interest earned (TIE) was
A. 5 times C. 3.5 times
B. 4 times D. 3 times

27. Kansas Office Supply had $24,000,000 in sales last year. The company’s net income was $400,000, its total assets turnover was 6.0, and
the company’s ROE was 15 percent. The company is financed entirely with debt and common equity. What is the company’s debt ratio?
A. 0.20 C. 0.33
B. 0.30 D. 0.60
28. A fire has destroyed many of the financial records of R. Son & Co. You are assigned to put together a financial report. You have found
the return on equity to be 12% and the debt ratio was 0.40. What was the return on assets?
A. 5.35% C. 7.20%
B. 6.60% D. 8.40%

29. Millennium Hover Corporation’s stockholders’ equity at December 31, 2007 consists of the following:
6% cumulative preferred stock, P100 par, liquidating value
was P110 per share; issued and outstanding 50,000 shares P5,000,000
Common stock, par, P5 per share; issued and
outstanding, 400,000 shares 2,000,000
Retained earnings 1,000,000
Total P8,000,000
Dividends on preferred stock have been paid through 2006.
At December 31, 2007, Millennium Hover Corporation’s book value per share was
A. P5.50 C. P6.75
B. P6.25 D. P7.50

30. Selected information from the accounting records of Petals Company is as follows:
Net sales for 2007 P900,000
 Cost of goods sold for 2007 600,000
Inventory at December 31, 2006 180,000
Inventory at December 31, 2007 156,000
Petals’ inventory turnover for 2007 is
A. 5.77 times C. 3.67 times
B. 3.85 times D. 3.57 times
QUANTITATIVE TECHNIQUES

31. A construction company has just completed a bridge over the Visayan area. This the first bridge the company ever built and it required
100 weeks to complete. Now having hired a bridge construction crew with some experience, the company would like to continue building
bridges. Because of the investment in heavy machinery needed continuously by this crew, the company believes it would have to bring the
average construction time to less than one year (52 weeks) per bridge to earn a sufficient return on investment. The average construction time
will follow an 80% learning curve. To bring the average construction time (over all bridges constructed) below one year per bridge, the crew
would have to build approximately
A. 2 additional bridges. C. 3 additional bridges.
B. 7 additional bridges. D. 8 additional bridges.
32. Phil-Fuji Co. manufactures two types of electronic components, both of which must pass through the Assembly and Finishing
Departments. The following constraints apply:
Unit Contribution Hrs Required per unit
Product Selling Price Margin per Unit Assembly Finishing
Component 818 P120 P30 3 4
Component 810 P180 P45 4 6
Demand for Component 818 far exceeds the company’s capacity, but the company can only sell 60 units of component 810 each week.
Workers in the Assembly department work a total of 200 hours per week, and workers in the Finishing department work a total of 250
hours per week. The company wants to know how many units of each component to produce to maximize profit. If X represents the
number of units of Component 818 and Y represents the number of units of Component 810, the objective function would be
A. Maximize 30X + 45Y C. Minimize 30X + 45Y
B. Maximize 120X + 180Y D. Minimize 90X + 135Y
Questions 33 and 34 are based on the following information.
D Company has available production capacity of 180,000 hours. This can be used to produce 3 products in any combination. Total fixed cost
is P180,000, other facts are:
PRODUCTS
X Y Z
Selling price P 8 P 23 P 5
Variable cost 7 12 2
No. of hours per unit 1 hr. 10 hrs. 2 hrs.
Market limits 5,000 50,000

33. The best possible combination of product is:

A. B. C. D.
Product X 4,000 30,000 30,000 80,000
Product Y 4,000 3,000 5,000 0
Product Z 50,000 50,000 50,000 50,000

34. The net profit associated with the best combination of products is:
A. P33,000 C. P54,000
B. P50,000 D. P55,000
STANDARD COSTING
The Murray Company makes and sells a single product. The company recorded the following activity and cost data for May:
Number of units completed 45,000 units
Standard direct labor-hours allowed per unit of product 1.5 DLHS
Budgeted direct labor-hours (denominator activity) 72,000 DLHS
Actual fixed overhead costs incurred P66,000
Volume variance P4,275 U
The fixed portion of the predetermined overhead rate is $0.95 per direct labor-hour.

35.The fixed overhead budget variance for May was:

A. P2,400 F. C. P6,000 F.
 B. P2,400 U. D. P6,000 U.

36. The amount of fixed manufacturing overhead cost applied to work in process during May was:
A. P42,750. C. P62,700.
B. P61,725. D. P64,125.
37. The amount of fixed overhead contained in the company's overhead flexible budget for May was:
A. P64,125. C. P68,400.
B. P67,500. D. P70,275.

38. The following information is available from the Tyro Company:

Actual factory overhead P15,000
Fixed overhead expenses, actual P 7,200
Fixed overhead expenses, budgeted P 7,000
Actual hours 3,500
Standard hours 3,800
Variable overhead rate per DLH P 2.50
Assuming that Tyro uses a three-way analysis of overhead variances, what is the spending variance?
A. P 750 F C. P 950 F
B. P 750 U D. P1,500 U

39. Liftanol Corp. had an P18,000 unfavorable volume variance, a P25,000 unfavorable variable overhead spending variance, and P2,000
total under applied overhead. The fixed overhead budget variance is:
A. P41,000 favorable C. P45,000 favorable
B. P41,000 Unfavorable D. P45,000 Unfavorable
RESPONSIBILITY ACCOUNTING AND TRANSFER PRICING
40. The First Division of Furrow Company produces Part 1 that is used by OQS’s as a key part in their products. Costs and sales data of Part
1 are as follows:
Selling price per unit P100
Variable cost per unit 60
Fixed cost per unit (Based on 40,000 units capacity per annum) 24
Furrow Company’s Second Division is introducing a new product that will use Part 1. An outside supplier has quoted Second Division a
price of P96 per unit. This represents the usual P100 price less a quantity discount due to the large number of Second Division’s requirement.
If the Second Division would buy 15,000 units of Part 1 from the First Division, the effect on the corporate profits would be
A. Reduce by P60,000. C. Increase by P240,000.
B. Increase by P210,000. D. Increase by P1,500,000.

41.Meridith Dachshund is the general manager of the Pencil Lane Division, and her performance is measured using
the residual income method. Dachshund is reviewing the following forecasted information for the division for next
year.
Category Amount (thousands)
Working capital P 1,800
Revenue 30,000
Plant and equipment 17,200
If the imputed interest charge is 15% and Dachshund wants to achieve a residual income target of P2,000,000, what will costs have to be in
order to achieve the target?
A. P9,000,000 C. P25,150,000
B. P10,800,000 D. P25,690,000

42. Rampardos Company has two divisions, O and E. During the year just ended, Division O had a segment margin of P9,000 and variable
costs equal to 70% of sales. Traceable fixed costs for Division E were P19,000. Rampardos Company as a whole had a contribution margin of
40%, a segment margin of P25,000, and sales of P200,000. Given this data, the sales for Division E for last year were:
A. P50,000. C. P116,667.
B. P87,500. D. P150,000.

ECONOMICS
Questions 43 through 45 are based on the following information. The financial transactions for a country with
values stated in billions of pesos appear below; (cma)
Gross domestic product (GDP) P 4,000

Transfer payments 500

Corporate income taxes 50

Social security contributions 200

Indirect business taxes 210

Personal taxes 250

Undistributed corporate profits 25

Depreciation 500

Net income earned abroad for the country 0

1. Net domestic product is

A. P 3,500 C. P 3,290
B. P 3,450 D. P 3,475

2. National income is
A. P 3,500 C. P 3,515
B. P 3,290 D. P 3,265

3. Personal income is
A. P 3,500 C. P 3,265
B. P 3,290 D. P 3,515
46.An economy produces capital goods and consumer goods. This economy is operating at a
point on its production possibility frontier associated with a large amount of capital goods
and a small amount of consumer goods. This is most likely to be a
A.ʺpoorʺ country because such a nation has difficulty devoting many resources to the production of consumer goods.
B. ʺrichʺ country because such a nation can afford to sacrifice.
C. country with a free market.
D. country with a command economy.

47. The main decision for a profit maximizing perfectly competitive firm is NOT what _________ but what __________.
A. Price to charge; total cost to achieve
B. Level of output to produce; price to charge
C. Level of output to produce; total revenue to achieve
D. Price to charge; level of outputs to produce

48. If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is
A. Price inelastic B. Price elastic C. Unit price elastic d. Income inelastic
Use the following information to answer questions 49 and 50.
Suppose that at a price of P30 per month, there are 30,000 subscribers to a cable television in Sitio Pakpakan. If Sitio Pakpakan Cablevision
raises its price to P40 per month, the number of subscribers will fall to 20,000.

49. At which of the following prices does Sitio Pakpakan Cablevision earn the greatest total revenue?
A. P30 per month
B. Free subscription
C. P40 per month
D. Either P30 or P40 because the price elasticity is 1.0
50. Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable television in Sitio Pakpakan?
A. 0.66 b. 0.75 c. 1.0 d. 1.4