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/ 12
CPAR
(CPA REVIEW SCHOOL OF THE PHILIPPINES
Mant
eturday, ly 27,2018
se
MANAGEMENT ADVISORY SERVICES vy 27,2018
First Pre-poaa Examination
Seta
Instructions. Choose the BEST answer for each of the folowing items. Mark only one answer
for each item on the Special Answer Sheet provided. Strictly no erasure alowed. Use Pencil No.
only.
1. The breskeven point per unit increases when unit costs
‘2. Increase and sale price remains unchanged
1. Decrease and soles price remains unchanged
Cannot be ascertained
Decrease and sales price increases
Dakdak isa well-known politcal analyst. He i the dating of the press. His attitude has left mary
‘an opponent on talk shows feeling run cver by a ten-wheeler tuck.
RPI Publishers ls negotating to publish Dakdak’s Manifesto, a new book that promises to be an
Instant best seller. The fued costs of producing and marketing the book willbe P500,000, The
variable costs of producing and markedng will be P4.00 per copy Sold. These costs are before
any payment to Dakdak. Dakdak negotiates an upfront payment of P3 milion, plus 15% royalty
rate on the net sales price of each book. The net soles price is the ited book price of P30,
‘minus the margin paid to the bookstore to sell the book. The normal Bookstore margin of 30%
ofthe lsted bookstore price i expected to apply.
How many coples must RPI Publishes sll eam a target operating income of P2 milion?
3. P397,132 252,707.58
b. 240,700 397,111.92
LTTEMS 3 AND 4 ARE BASED ON THE FOLLOWING:
Metro Rugs is holding 8 two-week carpet sale at Ukayan, 2 local warehouse store. Metro Rugs
plans to sell carpets for PS00 each. The compacy wil purchase the carpets from 2 local
Gistributor for P350 each, with the pridioge of returning any uns units for a full refund,
LUkayan has offered Metro Rugs two payment alternatives forthe use of space.
Option 1- A fed payment of PS,000 for the sale period.
Option 2 10% of total revenues camed during the sale period.
3. Assume Metro Rugs will incur no other coats. At what level of revenues will Metro Rugs be
indiferent between the two payment options?
‘2, P50,000 < P19,000
. 17,000 40
4. Ata sales level of 100 unt, the cegree of operating leverage under Option 2 is
2. 150 1.00
B. 5.00 4. 5:50
5, Which one ofthe following is coract regarding the limitations of cost behavior?
‘2. Variable costs per unt wil not change
Total fixed cost wil not change inthe long run
Actual fred cost usvally fall outside the relevant range.
4d. The relevant range cannot be changed afer being established
6. Square Fez is a distribu ass picure frames. For 2019, Square plans to purchase frames
for P30 each and sell 1 P45 each, Square’s fred costs for 2019 are expected to be
240,000. Square's only sts willbe variable costs of PBO per shipment for preparing the
Invoice and delivery docu. organizing the delvery, and folowing up for colecting accounts PAR MAKAGEMENT ApUBORY SERVICES
ftPreccan amination —
receivable. The PEO cost will be incurred each time Square ships an order|ofpkcture frames,
regardless ofthe number of frames inthe order. I
Sunoce Sue ardopates making 500 shipments In 2018, how many
Sabor se fo breaonern 20187 |
3 bo000 « om
Bion & Wave
7. Tweny Co, was analyzing variances for one of its operations. The intial budget forecast
‘production of 20,000 units during the year with @ variable manufacturing o rate of P10
[Per unit: Tweny’ produced 19,000 units during the year. Actual variable manufacturing costs
‘were P210,000. What amount would be Twenys flexible budget variance for the year?
a a rs
T eassome 7 eee |
nv nihatihtniieitionten raceme |
samemons |
= ee i |
Variable costs (96,000) (30,000)
ao
Avoidable (36,000) (22,000)
Unavoidable 18.000) (20,800)
Operating income (loss) /B.30,000 ‘(P-4.800)
Assuming the tables line is ciscontinued, and the factory space previously used to make tables is
rented fer P24,000 per year, operating income wil increase by what amount?
‘2. P13,200 c P24,000
. 18,000 é. P28,800
‘2. Gol Co, manufactures and sails two products with selling prioes and variable costs as flows:
A 3
Selling price P1600 = P22.00
Variable costs 32.00 34.00
Gols total annual fixed costs are P36,400. Gol sells four units of A for every unit of B, If
‘operating income last year was P28,800, what was the number of units Gol sold?
"5,485 9600
b. 6,000, d. 30,500
410. A ceramics manufacturer sold cups last year for P7.50 each, Variable costs of man
Were P2.25 per unt. The company needled to sell 20,000 cups to break even. Net income Was
5,090. This year, the company expects the price per cup to be P9.00; variable manufacturing
‘costs to increase 33.3%; and fixed costs to increase 10%6. How many cups (founded) does the
‘company need to sell this year to breakeven?
partgity 19,250
>. 17,500 6. 25,667
111. Cassie Do’ Note Inc. is deciding whether to purchase an automated machine to manufacture one
Cf ts products. Expected net cash from this decision depend on several factor’,
interactions among those factors, and the probabilties associated with differen levels of those
factors, The method that the company should use to evaluate the distribution of net cash flows
from this decision and changes in net fash flows resuting from changes in levels of various
factors is
'2. Simulation and sensitivity analyse. }
Cost volume profit analysis
Differential analysis
PERT ran ‘MANAOEMENT ADVISORY SERVICES.
Ft rete Gxranapon = 27,2018 Page So 12 ae
12. A basic tent of variable costing is that period costs should be currently expensed. What is the
rationale behind this procedure?
'2. Period costs are uncontrclable and should not be charged to a speatic product.
1. Period costs are generally immaterial in amount and the cost of assigning the amounts to
specific products would outweigh the benefits
© Allocation of period costs 1s arbitrary at best and could lead to erroneous decision by
management
4d. Because period costs will occur whether production occurs, it is improper to allocate these
‘costs to production and defer a current cost of doing business.
13, The controller of Hay! Company prepared the following income statements:
January — February
Sales 20,000 450,000
Cost of sales 226.000 _735,000
Gross margin P194,000 245,000
Seling and administrative expenses _105,000 108,000
Income before taxes Beso “biozo09
1 Fay! Company produoss a sale produc, how much peso sales should it generate to break
a. P271,667 < P407,500
b. P228,260 cannot be determined from given
information
TEMS 14 TO 16 ARE BASED ON THE FOLLOWING:
‘The Haveall Co. has made the folowing information avaiable forts production facility for June
2019. Fixed overhead was estimated at 19,000 machine hours forthe production cycle. Actual
‘machine hours forthe period were 18,500, which generated 3,900 units.
Material purchased (80,000 pieces) 314,000,
Material quantity variance P6400 0
Machine hours used (18,900 hours)
VOH spending variance P50 u
‘Actual fixed overhead 60,000
‘Achua labor cost 40,120
‘Actua labor hours 5,900
Hawai’ standard costs are as follows:
Direct material 20 pieces @ PA pe piece
Direc labor 1.5 hours @ PS per hour
Variable overhead
(epplied on a machine hour basis) 4.8 hours @ P2.50 per hour
Feed overhead
(epplied on a machine hour basis) 4.8 hours @ P3 per hour
14, The materials purchase price variance Is:
2. P6000 F P5850 F
b. P5,970F P6400 U
15, The conversion cost efficiency variance is:
2. P3000 cP 450U
P7s0U 4. P3,7500. crar (MANAGEMENT ADVISORY SERVICES
rat Prencet Eeairaon 927,21 Page to wpe
16, The feed overhead noncontrllable variance is
2. P5a0U c P300 U
b. PISOU 4. PewU
17, Atkinson Landscaping apples variable overhead based on direct labor hours. At the beginning of
the current year, Atkinson had estimated the folowing:
Estimated variable overhead 36,000
Estimated unts of production 10,000 units
‘Standard direct labor hours per unit 25 hous
During the year, 11,000 units were produced using a total of 27,200 direct labor hours and
‘2ctual variable overhead costs were PSO,000.
‘Atkinson's variable overhead efficiency variance forthe year was:
2. P 62F cP SBF
4,000 U dP 15u
18, Which ofthe folowing is not kal to affect the supply of a particular good?
‘2. Changes in government subsidies
3. Changes in technology
‘© Changes in consumer income
6. Changes in production costs
(QUESTION NOS. 19 AND 20 ARE BASED ON THE FOLLOWING DATA:
‘Armstrong Products applies fixed overhead at a race of P3 per direct labor hour. Each unit produced
is expected to take 2 direct labor hours. Armstrong expected production in the current yaar to be
30,000 units but 9,000 nts were actualy produced. Actual direct labor hours were 19,000 and
‘ctual fixed overhead costs were P62,000.
19, Armstrong's fired overhead spending variance is:
18,000 F . P8,000U
b. P2,000 F 6. P2000 U
20, Armstrong's fred overhead volume variance I:
a. 2,000 ‘c. P6,000
, 8,000 apo
‘THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 21 to 24:
‘A company produces a product with the following standard costs:
Materials - 2 pieces @ PS per piece P10
Labor - 4 hours @ PB per hour 2
Variable overhead - 4 hours @ PS per hour 24
Fxed overhead® - 4 hours @ P4 per hour als
Total standard manufacturing cast per unit Baz
‘based on 2 capacity level of 5,000 units
21. Assume that X is the number of units to be produced and TBC is the total budgeted cost,
the flexible budget formula that the compagy may use to compute total budgeted cost for
any value of X within the relevant range Is
2 TEC = 82x, & TBC = 80,000,
b. TBC = 66x. . TBC = 66x + 80,000, cra MANAGEMENT ADVISORY SERVICES.
ratPrteand Exarsaion uy 27,2018 age 12 age
22. Assume that during the month, the company actually produced 4,800 uhits and incurred
actual total manufacturing costs of P400,000, how much isthe flexible budget for the actual
‘production? 1
400,000 393,600
396,800 4. P316,800 ‘
23.How much is the total standard cost that should have been incurred for the actual
production of 4,800 units?
a. P396,800 cc. 393,600
409,000 ‘6. 316,800
24. How much isthe total standard cost variance?
‘2. P3,200 unfavorable c. P10,000 favorable
'b. P6,400 unfavorable <6. 83,200 unfavorable |
25. In March direct labor was 60%: peraent of conversion cost. If the manufacturing overhead cost
for the month was P38,000 and the direct materials cost was P32,000, the direct labor cost was:
a. P21,333 c P25,333
b. 48,000 d.57;000
26. Iking Company produces a single product. During March, the company had net operating income
under absorption costing that was P3,500 lower than under variable costing. The company sold
7,000 units in March, and its variabie costs were P7 per unit, of which P3 was variable seling
‘expence. If Fixed manufacturing overhead was P2 per unit under absorption costing, then how
‘many units de the company produce during March?
5,250 units © 6,500 units
b. 8,750 units d. 6,425 units
27. Ifthe value ofthe US dollar in foreign currency markets changes from $1 = 6 marks to $1 = 4
marks
‘a. The Garman mark has depreciated against the dollar
1. German imported products in the US will become more expensive
US tourist in Germany wil find their dollars will buy more German products
._ US exports to Germany should decrease
28. Company B produces @ single product. Last year, the company had 16,000 units in its beginning
Inventory. During the year, the company’s variable production costs were PS per unit and Its
fixed manufacturing overhsed costs were P4 per unit. The company’s net operating income for
the year was P24,000 higher under absorption costing than it was under variable costing. Gwen
these facts, the number of units inthe ending inventory must have been:
a. 22,000 unis 6,000 units
. 10,000 units 4,000 units
28, Statement 1: Total variable overhead variance is equal to controlable variance less fixed budget
variance
Statement 2: Spending variance will not change even i the basis of the budgeted level of
‘activity is changed
a Only Statement 1s true
i Only Statement 2 is true
Bott statements are false a
d. Both statements are true PAR sanacemen anvsony services
rm cows Exton 27.2019 Pape 6 2 apes
USE THE FOLLOWING TO ANSWER QUESTIONS 30 AND 31:
‘Shirts Company produces two product lines: shits and Sweatshirts. Product profitability
's analyzed as folows:
rs ‘SWEATSHIRT
Production and sales volume 60,000 units '35,000 units
Seling price 16.00 29.00
Direct material P 200 P 5.00
Direct labor P 450 P 720
Manufacturing overhead B20 23.00
Gross proft P 7.50 Pi3.80
Seling and administrative B40 2 Z00
Operating proft B50 2680
‘Shirts Company's managers have decided to revise their current assignment of overhead
costs to reflect the following ABC cost information:
‘Activity ‘Activity cost Activity-cost driver
Supervision 100,920 Direct labor hours (DLH)
Inspection 124,000 Inspections
———Aetivities demanded —_
Tse ‘SWEATSHIRTS
0.75 OuH/unit 1.2 DLH/un|
45,000 DLHs 42,000 DLHs
{60,000 inspections 17,500 inspections
30. Under the revised ABC system, total overhead costs allocated to Sweatshirts will
2. P 48,720 224,920
b. P 76,720, None of these answers are correct.
1, Using an ABC system. neat year's estimates show manufacturing overhead costs wil total
228,300 for 52,000 T-sivrs. 1° al other T-shi. costs ana sales prices remain the same,
the proftabilty that can be expected is
‘8.5.41 per t-shirt © PLL por techie.
b, PA.39 per tshirt 6. (P01) per tshirt,
32. The folowing direct manufacturing 'abor formation partains to the manufacture of Product
Time required to make one unit 2 direct labor hours
Number of direct workers 50
‘Number of procucave hours per week,
er worker 0
Weekly wages, per worker 500
Workers’ benefits treated as direct manufacturing
labor costs 20% of wages
What i the standard cirect manufacturing labor cost per unit of Product 8?
2. P30 Pm
b. PIS 4. PD
53. The use fact bates cost roma resus io
Substartialy greater une costs for low-volume products than i reported by traditional
product costing.
Substantially lower unt costs for low-volume products than is reported by peanut butter
‘costing
Decreased setup costs being charged to low-volume products
Equalizing setup costs forall product fines.
ao cra
Fest Proars Camnatn = Jy 27.2018
Page Tot
snunceMent Aovsony senviced |
34. Three major influences on pricing decisions are: '
3. competition, costs, and customers
‘8, competition, demand, and production efficiency
© continuous improvement, customer satisfaction, and supply
J. variable costs, fed costs, and mixed costs
|
i
!
35. Aldous Corporation has used a traditional cost accounting system to apply quaty control costs
Lniormly to all products ata rate of 15% of direct labor cost. Quartery dct labor cos forts
main product is P120,000. In an attempt to dstibute qualty contr! cots more equtably, |
Aldous is considering actvty-based costing (RBC). The monthly data shown below have been
‘gathered for the main product. The three aciaties are (1) incoming materia inspacton, (2) In
‘Process inspection, and (3) pret caricaton. Costs are tobe allocated to Bach activty on the
basis of cost drivers, Deais ae as follows:
‘Activity Cost Driver Cost Rate Quantity for main
1 Number of types of materials P12 par type. ‘iypes
2 Number of units 70.54 per unt 417,500 units
3 Number of orders 77 per order 30 orders
‘The monthly quaity control cost assigned to the main product using ABC is
a, 95906 higher than using the trxitional system
. 96096 lower than using the tacitiona system
‘95904 lower than using the tadtional system
«4.6096 higher than using the peanut-butter system
36. Which ofthe folowing best describes the objective ofa feasibility study?
2. to determine whether there is economic and functional justification for undertaking @ new
project or updating existing capabiiies,
'. to improve a company’s use of its capablties and resources, the primary purpose of
which isto achieve the objectives ofthe organization.
to work as @ measuring device to which subsequent performances are compared and
evaluated.
