1. The statements below about project feasibility studies are true C.

It is important for government

except agencies in order to determine
entitlement to government
incentives.
2. Ohio Corporation recently implemented a just-in-time (JIT) A. is consistent with both JIT and
production system along with a series of continuous improvement continuous improvement
programs. If the firm is now considering adopting a total quality
management (TQM) program, it would like find that TQM:
3. Which of the following is not an objective of managerial C. Maximizing profits and minimizing
accounting? costs
4. In comparing management and financial accounting, which of the Budgeted, Informative, Adaptable
following more accurately described management accounting
information?
5. Controllers are ordinarily concerned with B. Preparation of Tax Returns
6. Which of the following employees at Starbucks would likely be E. Both the company’s lead, in-house
considered as holding a staff position? attorney and chief financial officer
7. Which of the following choices correctly depicts whether Bank of C. YES, YES, YES
America, Microsoft and Florida State University would have a need
for managerial accounting?

8. Dramatic improvements in communication have resulted in Develop cost management systems

increasing global competition, which has required firms to: to help firms to be more competitive.

9. The role of managerial accounting information is assisting B. Attention-directing role

management is a(an):
10. The main objective of feasibility study is To assess if it is possible to meet the
requirements specified subject to
constraints of budget, human
resources and hardware
11. In the competitive global marketplace common to most industries, The ability to be faster than your
which of the following if often a critical success factors competitors.

12. Which of the following is not an element of competency? D. to refrain from engaging in an
activity that would discredit the
accounting performance
13. Managerial accountants: C. are found throughout an
organization and work on cross-
functional teams
14. Management accounting includes the following process, except Delegation
15. Among the following major parts of a project feasibility study, Marketing, Engineering or Technical
which grouping is considered critical? and Financial
16. Who required Feasibility Study? Developer, Investors, Banker,
Planning Authorities
17. Which of the following statements about the ethical climate of D. The Robinson-Patman Act
business is false? strives…
18. A feasibility study is carried out Before the final requirements
specifications are drawn up
19. Which of the following is not an activity covered by feasibility Activity based accounting of the
study? endeavor leading to a conclusion
20. Process Reengineering includes all of the following steps except Elimination of all constraints
21. Which of the following statements abut managerial accounting is C. An increasing number of
false? organizations are segregating
managerial accountants in separate
managerial-accounting departments
22. In which of the following aspects is managerial accounting similar Reliance on the accounting database
to financial accounting?
23. The two dimensions of managerial accounting are: A. A decision-facilitating dimensions
and a decision-influencing
dimension
24. The activities performed by a manufacturing organization could D. Pre-production, production-
be categorized as pre-production (such as research and related, and post-production
development and product design), production-related, and post- activities.
production (such as marketing and customer service). Which
activities should the firm focus on if management understands the
value chain concept and desires to meet organizational goals?
25. Why Feasibility Study is prepared? Achieved maximum profit
26. If a company is customer-centered , its customers are defined as Anyone external to the company and
those internal who rely on its
product to get their job done
27. All of the following are examples of total quality management Separating the sales and service
practice except: functions
28. A position on the organization chart that is directly related to A line position
achieving the basic objectives of an organization is called
29. Which of the following business models considers financial, B. Balanced Scorecard
customer, internal operating and other measures in the evaluation
of performance?
30. Statement 1: Managerial control and engineering control are S1: False, S2: False
synonymous
Statement 2: Control from the viewpoint of management
accounting is defined as the process of setting maximum limits on
financial expenditures
2nd exam
1. The use of alternative accounting methods may be a problem in ratio analysis
even if disclosed.
2. Suppose you are comparing two firms in the steel industry. One firm is Relative numbers would be most
large and the other is small. Which type of numbers would be most meaningful for both the large and
meaningful for statement analysis? small firm, especially for interfirm
comparisons.
3. Vertical analysis is a technique that expresses each item in a financial In terms of a percent of a base
statement. amount
4. horizontal analysis is a technique for evaluating a series of To determine the amount and or
financial statement data over aperiod of time percentage increase or decrease
that has takenplace
5. Trend analysis allows firm to compare its performance to: other time periods within the firm.
6. Art Company 2021 4,700,000
Operating cost = 2,350,000
Cash bal. 01-01-2021 = 1,500,000
Cash dividends= 3,500,000
Unpaid dividends = 1,400,000
• Sold machinery = 1,750,000; replacement cost = 2,600,000
• Taken out Notes payable = 4,200,000 ;
Repaid at the end of year = 1,500,000(300k int.)
• Bonds payable 2,500,000 to ordinary shares = 2,000,000
Net cash used for financing?
7. A company started a business on January 1, 2020. At the end of Net income = Sales -COGS-
2021, the financial statements showed the following amounts: Expenses
Sales 180,000 =180,000-112,000-40,000
COGS 112,00 =28,000
Expenses 40,000
=28,000+4,000-18,000+8,000
Accrued wages payable 4,000
=22.000
A/R 18,000
A/P 8,000
Operating activities?
8. Manufactures inc. estimates that its interest charges for this year Tax charge = 3,000 * (30%/1-30%)
will be 700 and its net income will be 3,000. Ave. tax rate=30% = 1,285.71
 Time interest earned? TIE = 3,000 +700+1285.71 / 700
=7.12

9. Recto Co. PER = (market price per share /

Price earnings ratio=7.5 earnings per share ) 100
Earnings per share = 2.2 7.5 = (x/2.2) 100
Payout ratio = 75% Market price per share = 1,650
Dividend yield?
Payout ratio = (div. per
share/earning per share)100
75% = (x / 2.2) *100
div. per share = 165

div. yield = (165/1,650 )*100

= 10%

10. Blackwood Co. Receivable turnover = Sales/ave.

Net A/R 2016 = 950,000 receivables
Net A/R 2017 = 1,000,000 5 = x/(950,000+1,000,000)
A/R turnover = 5 to 1 2
Sales = 4,875,000
Inventory 2016 = 1,100,000
Inventory turnover = COGS / Ave.
Inventory 2017 = 1,200,000 inventory
Inventory turnover = 4 to 1 4 = cogs / (1,100,000 +1,200,000)
2
Gross margin =? COGS = 4,600,000

Gross margin = 4,875,000 –

4,600,000
=275,000

11. Trend INC. dec. 31,2021 Current assets = 432,000 – 294,000

Assets: = 238,000
Cash = 25,000
A/R = ? Current ratio = current
assets/current liabilities
Inventory = ?
1.5 = 238,000 / x
PPE = 294,000
Current liabilities = 92,000
Total = 432,000
Accounts payable
Liabilities and equity: = 92,000 – 25,000
A/P = ? =67,000
Income tax payable =25,000
Long -term debt = ?
Ordinary share = 300,000
Retained earnings = ?
TOTAL = 432,000

Current ratio = 1.5

Total liabilities / equity = 0.8
Inv. Turnover based on sales and end inv. = 15
Inv. Turnover based on COGS and end inv. = 10.5
Gross margin = 315,000

Trade accounts payable?

12. Angela trading Sales = 100% = 1,350,000
Gross margin = 472,500 COGS = 65% = 877,500
Inventory = 300,000 GM = 35% = 472,500
Equity = 750,000 Exp. 18% = 243,000
EBIT = 17% = 229,500
Gross margin ratio = 35%
Debt to equity ratio = .8
Times earned ratio
 Times interest earned = 10 10 = 229,500/annual int. charge
Quick ratio = 1.2 Int. charge = 22,950
Operating exp to sales = 18%
Bons payable with interest rate of 20% B/P = 22,950 / 20% = 114,750

Debt to equity ratio =

Current asset?
0.8 = x / 750,000
Total lia. = 600,000
Current = 600,000 – 114,750
= 485,250

Quick ratio
1.2 = current assets / 485,250
Current assets = 582,300
13. Salacot company Gross margin / 15 – 10.5
Current ratio = 1.5 360,000 / 4.5
Inventory turnover based on sales and end inv. = 15 =80,000
Inventory turnover based on COGS and end inv. = 10.5
Gross margin = 360,000

End Inventory?
14. Kansas Office Supply ROE = net margin ratio x turnover
Sales= 24,000,000 ratio x asset ratio
Net income = 400,000 12.5 = (400,000/24,000,000) x 6 x
Asset turnover= 6 asset ratio
Asset ratio = 1.25
ROE = 12.5
Debt ratio?
Asset = debt+equity (1=1)
1 = (debt/asset) / (equity/asset)
1 = debt ratio / (1/asset ratio)
Debt ratio = 1-1/asset ratio
= 1-(1/1.25)
Debt ratio = 20%
15. Beatnik company Inv. Turnover=
Current ratio = 2.5 8 = 2,000,000 / inventory
Quick ratio = 2 Inv = 250,000
Sales = 2,000,000
Inventory ratio
Inv. Turnover= 8
2.5 – 2 = 0.5
Current asset?
Current liabilities = 250,000 x 2 =
500,000
Since current ratio is 2.5

Current ratio=
2.5 = Current asset / 250,000
Current asset = 1,250,000
16. A firm has a debt/equity ratio of 50 percent . Debt/ equity ratio=
Interest expense = 500,000 0.5 = 5,000,000 / equity ratio
On total debt outstanding = 5,000,000 Equity ratio = 10,000,0000
Tax rate = 40 percent
Assets = L + E
ROA = 6 percent
= 5,000,000 + 10,000,000
ROE = how high compared to roa?
Assets = 15,000,000

ROA =
.06 = net income / total assets
Net income = 900,000

ROE = 900,000 / 10,000,000

ROE = 9%
 Roe - ROA =
9% -6% = 3%
17. Goods, Inc. has a total assets turnover of 0.30 and a profit margin of Since A = L+ E (1= 0.5+0.5) assume
10%.The president is unhappy witht the current return on assets, and he
thinks it could be doubled. This could be accomplished (1)by increasing Equity ratio = asset/equity
= 1/ 0.5 = 2
the profit margin to 15% and (2)by increasing total assets turn-over.What
new asset turnover ratio, along with the 15% profit margin, is required ROE = profit margin * turnover
to double the return on assets? ratio * equity ratio
= 10% * 30% *2
= 6%

Since doubled so,

12% = 15% * turnover ratio * 2
Turnover ratio = 40%

18. ETC corporation Current assets / current liabilities

Current assets 150,000 = 150,000 /100,000
Current liabilities 100,000 1.5 to 1
Inventories 50,000
A/R 40,000
Net sales 900,000
COGS 675,000

Current ratio
19. The technical aspect of the feasibility study include the following except: Projected sales
20. The materials ad inputs of the technical aspect provide information such List of all required supplies,
as equipment, inventories, and
necessary input for the business to
be operational
21. Which of the following would be subtracted from net income when using Increase in A/R
the indirect method to derived net cash flows from operating activities.

22. The company issued new ordinary shares in a three-for-one share split. It reduced equity per share of
Identify the statements that indicate the correct effect of this transaction ordinary share
23. You observe that a firm’s profit margin and debt ratio are below the Total assets turnover is above the
industry average, while its return on equity exceeds the industry average. industry average
What can you conclude?
24. Part optical
• Acquired land = 3,000,000
• Purchased office building = 2,000,000
• Sold one factory equipment = 1,500,000
• Accu. Dep’n warehouse = 1,700,000
• Warehouse orig. cost = 5,700,000
Net cash for investing activities?
25. The primary purpose of the statement of cash flows is to provide provide information about the
information cash receipts and cash
payments during a period.
26. Which of the following would indicate an accurate Statement of cash Net cash flow is equal to the
flows? change in the cash balance
27. A company’s current ratio is 2.2 to 1 and the quick ratio is 1.0 to 1 at the An increase in inventory levels
beginning of the year. during the year
End of the year, CR = 2.5 to 1; QR = .8 to 1
28. Suppose you are comparing two firms in the steel industry. One firm is Relative numbers would be most
large and the other is small. Which type of numbers would be most meaningful for both the large and
meaningful for statement analysis? small firm, especially for interfirm
comparisons.
29.
30.
3rd exam
1. Julius International produces weekly 15,000 units of Product JI and JI
20,000 units of JII for whichP800,000 common variable costs are 32 – 24 = 8 * 15,000 units = 120,000 –
incurred. These two products can be sold as is or processed further. 100,000 = 20,000 process further
Further processing of either product does not delay the production of
subsequent batches of the joint products .Below are some JII 22-18 = 4 * 20,000 = 80,000 –
information: 90,000 = (10,000) sell now

24 18 Thus, 100,000
32 22
100,000 90,000
2. Chow Foods TMC = DM + DL +OH
Special Order = 5,000 units = 1.5+2.5+1.8 = 5.8
Regular sales not affected = 80,000 units =5.8 + variable selling cost
Cost to manufacture: per unit: = 5.8+1 = 6.8

Variable cost fixed cost (per year) DC = 6.8 * 5,000 = 34,000

DM 1.50
DL 2.5 =
OH 1.8 100,000
Selling administrative 3.00 50,000

Variable selling cost of 5,000 units 1.00

Differential cost?
3. Table Top Model Corp. C E B
Canon Epson brother 200,000 150,000 125,000
Sales 200,000 150,000 125,000 (100,000) (75,000) (50,000)
Separable fixed cost 60,000 40,000 40,000 (60,000) (40,000) (40,000)
Allocated fixed cost 35,000 40,000 25,000 40,000 35,000 35,000(dis)
Variable cost 100,000 75,000 5o,000 (35,000 25,000) = 60,000
5,000 10,000 = 15,000
Total allocated fixed cost reduced by 40% . expected net profit after
product discontinuation?

4. Statement 1: In a factory operating at capacity, every machine and False ; true

person should be working at the maximum possible rate.

Statement 2: An avoidable fixed production cost incurred after the

split-off point in a joint process is relevant in a sell or process further
decision.

5. Telemundo ; Axes, Blade, and sword Priority: Sword – axe – blade

Time on
Demand CM machine Sword
Axe 100 25 10 150*10 = 1500 hours
Blade 80 10 5
Sword 150 30 10 2,400 – 1,500 = 900 hours left

2400 minutes available Axe

How many units should be produced? 900/10 = 90 units

Sword – 150 units

Axe – 90 units
Blade – 0

6. Panghulo Company manufactures part N Buy:

3,000 units 3,000 * 100 = 300,000 – (3000*20) =
Cost per unit: 360,000
DL – 50 FOH – 30
DM – 10 VOH – 20 Manufacture:
 TMC = 50 + 10+20+30 = 110
Quebadia Company offer: 110*3,000 = 330,000
3,000 units for 100 per unit
P20 per unit FOH Manufacture, 30,000 savings

Alternative that is more desirable?

Net cost saving?

7. In analyzing whether to build another regional service officer, the Irrelevant because It is future cost that
salary of the Chief Executive Officer (CEO) at the corporate will not differ between the
headquarters is alternatives under consideration
8. Jane Corporation produces wood glue that is used by furniture Shutdown cost:
manufacturers. The company normally produces and sells 10,000 Start-up cost = 56,000
gallons of the glue each month. White Glue is sold for P280 per 340,000 x 2 = 680,000
gallon, variable costs is P168 per gallon, fixed factory overhead cost (620,000 – 62,000)*2 = 1,116,000
totals P460,000 per month, and the fixed selling costs totals Total = 1,852,000
P620,000 per month.
Labor strikes in the furniture manufacturers that buy the bulk of Continue:
White Glue have caused the monthly sales of Jane Corporation to Sales (8,500 x 280)*2 = 4,760,000
temporarily decrease to only 15% of its normal monthly volume. VC = (8,500 x 168)2 = 2,856,000
Jane Corporation’s management expects that the strikes will last for CM = 1,904,000
about 2 months, after which, sales of White Glue should return to FC =( 460,000+620,000)2 = 2,160,000
normal. However, due to the dramatic drop in the sales level, Jane Net loss = (256,000)
Corporation’s management is considering to close down its plant
during the two-month period that the strikes are on. Therefore, Continue because the
If Jane Corporation will temporarily shut down its operations, it is expected sales is above the shutdown
expected that the fixed factory overhead costs can be reduced to point
P340,000 per month and that the fixed selling costs can be reduced
by P62,000 per month. Start-up costs at the end of the shut-down
period would total P56,000. Jane Corporation uses the JIT system, so
no inventories are on hand.
9. Statement 1:When a company has a production constraint, the TRUE FALSE
product with the highest contribution margin per unit of the
constrained resource should be given highest priority.
Statement 2: A product that does not cover its allocated share of
general corporate administrative expenses should be dropped.
10. Part BX is a component that Motors and Engines Co. uses in the Manufature:
assembly of motors.The cost to produce one BX is presented below: Total cost = 84,800 per unit

Direct materials = P4,000 Buy:

Materials handling (20% of direct materials) = 800 Cost = 60,000 /unit
Direct labor32,000 Materials handling = 20% * 60,000 =
Overhead (150% of direct labor) = 48,000 12,000
Total manufacturing costs = P84,800 Fixed cost = 2/3 x 48,000 = 32,000
Total cost = 104,000
Materials handling which is not included in manufacturing overhead,
represents the direct variable costs of the receiving department that = 104,000 – 84,800
are applied to direct materials and purchased components on the =19,200 advantage if manufacture
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?
11. Statement 1: Fixed costs are sunk costs and are therefore irrelevant true ; False
in decisions.
Statement 2: Future costs that do not differ between the alternatives
in a decision are avoidable costs

12. Clay Company expects to incur the following costs at the planned Variable cost:
production level of 10,000 units: DM = 100,000
DL = 120,000
Direct materials P100,000 VOH = 60,000
Direct labor 120,000 Total = 280,000
Variable overhead 60,000
Fixed overhead 30,000 Incremental cost:
 =(VC/units sold) +overtime cost* no.
The selling price is P50 per unit. The company currently operates at of special order
full capacity of 10,000 units. Capacity can be increased to 13,000 = )280,000/10,000) + 14 x 2,000
units by operating overtime. Variable costs increase by P14 per unit = 28 +14 x 2,000
for overtime production. Fixed overhead costs remain unchanged =42 x 2,000
when overtime operations occur. Clay Company has received a =84,000
special order from a wholesaler who has offered to buy 2,000 units
at P45 each.
What is the impact on Clay’s operating income if this special order is
accepted?
13. Statement 1: joint processing after the split-off point is profitable if False; false
the incremental revenue from such processing exceeds the
incremental processing costs.
Statement 2: a cost that is traceable to a segment through activity-
based costing is always an avoidable cost for decision making.
14. Garey Company has 3,000 circuit boards (all alike) which are out of Process Further:
date and are carried in inventory at a total cost of P 216,000. The Return = 110,000 – 63,000
circuit boards can be reworked and upgraded at a total cost of P =47,000
63,000 and then sold for P 110,000. As an alternative, the company
can sell these circuit boards to an outside buyer for P 48,000. If Sell = 48,000
Garey chooses to upgrade the circuit boards rather than sell them to
the outside buyer, the opportunity cost to Garey is Opportunity cost = 48,000 – 47,000
=1,000
15. Jane Corporation produces wood glue that is used by furniture Shutdown cost:
manufacturers. The company normally produces and sells 10,000 Start-up cost = 56,000
gallons of the glue each month. White Glue is sold for P280 per 340,000 x 2 = 680,000
gallon, variable costs is P168 per gallon, fixed factory overhead cost (620,000 – 62,000)*2 = 1,116,000
totals P460,000 per month, and the fixed selling costs totals Total = 1,852,000
P620,000 per month.
Labor strikes in the furniture manufacturers that buy the bulk of Continue:
White Glue have caused the monthly sales of Jane Corporation to Sales (8,500 x 280)*2 = 4,760,000
temporarily decrease to only 15% of its normal monthly volume. VC = (8,500 x 168)2 = 2,856,000
Jane Corporation’s management expects that the strikes will last for CM = 1,904,000
about 2 months, after which, sales of White Glue should return to FC =( 460,000+620,000)2 = 2,160,000
normal. However, due to the dramatic drop in the sales level, Jane Net loss = (256,000)
Corporation’s management is considering to close down its plant
during the two-month period that the strikes are on. Shutdown point = (FC – SC)/CM per
If Jane Corporation will temporarily shut down its operations, it is unit
expected that the fixed factory overhead costs can be reduced to = (2,160,000 – 1,852,000)
P340,000 per month and that the fixed selling costs can be reduced 280 – 168
by P62,000 per month. Start-up costs at the end of the shut-down =2,750 units
period would total P56,000. Jane Corporation uses the JIT system, so
no inventories are on hand.
16. A manager is attempting to determine whether a segment of the Sales minus total variable expenses
business should be eliminated. The focus of attention for this and avoidable fixed expenses of the
decision should be on segment
17. Statement 1: the book value of an old machine is always considered True; true
a sunk cost in a decision.
Statement 2: Making rather than buying a part that goes into one of
the company’s products would increase the company’ degree of
vertical integration
18. Isabelle industries, Inc., Division Expert evaluated for elimination = loss on CM – savings on fixed cost
CM = 400,000 =400,000-(1,000,000 x 90%)
OH = 1,000,000 (10% can be eliminated) = 400,000 – 900,000
Affect pre-tax income be? = 500,000 increase

19. If a firm Is at full capacity, the minimum special order price must Variable costs and incremental fixed
cover costs associated with the special order
plus foregone contribution margin on
regular units not produced.
20. Great Electronics is operating at 70% capacity. The plant manager is Cost to make:
considering making component 501 now being purchased for P110 DM = 40
 each, a price that is projected to increase in the near future. The DL= 30
plant has the equipment and labor force required to manufacture OH = 30 x 200% x 60% = 36
the component. The design engineer estimates that each Total = 106,000
component requires P40 ofdirect materials and P30 of direct labor.
The plant overhead is 200% of direct labor pesocost, and 40% of the To buy:
overhead is fixed cost. a decision to manufacture component 501will Total cost = 110,000
result in a gain or (loss) for each component
Gain = 110,000 – 106,000
=4
21. Which of the following is NOT relevant in a make-or buy decision The outsider supplier’s per unit
about a part in the entity uses in some of its procedures. variable cost to make another part
22. Statement 1: In a special order situation that involves using existing True ; false
idle capacity, opportunity costs are zero
Statement 2: In a decision to drop a product, the product should be
charged for rent in proportion to the space it occupies even if the
space has no alternative use and the rental payment is unavoidable
23. Picnic Items, Inc. manufactures coolers of 10,000 units that contain a Produce the freezable bag due to
freezable ice bag. For an annual volume of 10,000 units, fixed 25,000 advantage
manufacturing costs of P500,000 are incurred. Variable costs per
unit amount are direct materials P80; direct labor P15, and variable
factory overhead P20
Bags Corp. offered to supply the assembled ice bag for P40 with a
minimum order of 5,000 units. If Picnic accepts the offer, it will be
able to reduce variable labor and overhead by 50%. The direct
materials for the freezable bag will cost Picnic P20 if it will produce
it. Considering Bags Corp. offer, Picnic should
24. Statement 1: Lumber produced in a lumber mill…joint products True; true
Statement 2: Payment of overtime to a worker in order to relax a
production constraint could increase the profits of a company
25. A product should be dropped if Dropping it will increase the profit of
the company.
26. There is a market for both product X and product Y. Which of the C. Additional cost of making Y, given
following costs and revenues would be most relevant in deciding the cost of making X, and additional
whether to sell product X or process it further to make product Y? revenue from Y.

A. Total cost of making X and the revenue from sale of X and Y.

B. Total cost of making Y and the revenue from sale of Y.
C. Additional cost of making Y, given the cost of making X, and
additional revenue from Y.
D. Additional cost of making X, given the cost of making Y, and
additional revenue from Y.
27. Idle capacity in the interim (normally temporary) will generate short- Result in less than normal
term benefit in accepting sales at price that contribution margin.

a. Positively motivate employees.

b. Result in less than normal contribution margin.
c. Increase total fixed costs.
d. Reduce the overall operating income to sales ratio.
28. A company produces and sells three products. The sales and variable Contribution margin:
cost data of the three products are (000s omitted). EO EC EQ
EO EC EQ 6,600 5,300 10,800
Sales P6,600 P5,300 P10,800 3,900 3,700 8,900
Variable costs 3,900 3,700 8,900 2,700 1,600 1,900

The owner desires to reduce production load to only one product Opportunity cost = 1,600+1,900 =
line due to prolonged absence of the production manager. 3,500
Depreciation expense amounts to P600,000 annually. Other fixed
operating expenses amount to P660,000 per year. Therefore, retain EO, opportunity cost
Which product must be retained and what is the opportunity cost of = 3,500
selecting such product line?
29. Data covering QMB Corporations two product lines are as follows: 6,800 decrease

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
30.

Hatchet Company is considering replacing a machine with a book value 150000

of P400,000, a remaining useful life of 5 years, and annual straight-line
depreciation of P80,000. The existing machine has a current market
value of P400,000. The replacement machine would cost P550,000,
have a 5-year life, and save P75,000 per year in cash operating costs. If
the replacement machine would be depreciated using the straight-line
method and the tax rate is 40%, what would be the net investment
required to replace the existing machine?
The Phenom Corporation has an annual cash inflow from operations =50,000 x 5 years = 250,000 x 60% =
from its investment in a capital asset of P50,000 for five years. The 150,000
corporation's income tax rate is 40%. Calculate the five years total after-
tax cash inflow from operations
The Habagat Inc. is planning to spend P600,000 for a machine that it Dep’n = 600,000 /10
will depreciate on a straight-line basis over a ten-year period with no =60,000
terminal disposal price. The machine will generate cash flow from ARR = 120,000 – 60,000
operations of P120,000 a year. Ignoring income taxes, what is the 600,000
accounting rate of return on the net initial investment? =10%
The net initial investment for a piece of construction equipment is Payback Period:
P1,000,000. Annual cash inflows are expected to increase by P200,000 =investment / inflows
per year. The equipment has an 8-year useful life. What is the payback = 1,000,000 / 200,000
period? =5 years
If a machine costs P5,000 and will generate annual cash inflows of Payback Period:
P1,000 for the next 8 years. =5,000/1,000 = 5 years
What is the payback reciprocal?
Payback reciprocal:
=1/5years
=20%
The manufacture of folic acid is a competitive business. A new plant costs Yes
P100,000 and lasts for three years. The cash flow from the plant is as
follows: Year 1: P43,300, Year 2: P43,300 and Year 3 = P58,300. If the CA year 1= 100,000 – 80,000 = 20,000
salvage value of the plant at the end of year 1 is P80,000, would you scrap Inflow year 1 = 43,300
the plant at the end of year 1? Assume there is no tax.
Gain = 43,300 – 20,000 = 23,300
Capital budgeting is the process Of making capital expenditure
decisions
The normal methods of analyzing investments Require forecasts of cash flows
expected from the project
Which of the following is not a typical cash inflow in capital investment Additional working capital
decisions?
The proper treatment of an investment in receivables and inventory is to Add it to the investment in fixed
assets and add the present value of
the recovery to the present valiue of
the annual cash flows