REVIEWER NI SAMSAM
STRATEGIC BUSINESS ANALYSIS(ACC223) REVIEWER 8) In process reengineering, two objectives are to simplify and to eliminate
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THEORY: OVERVIEWOFMANAGERIAL ACCOUNTING,
CONTEMPORARYBUSINESSTECHNIQUES,
PROJECTFEASIBILITYSTUDY
1)To distinguish between management accounting and financial accounting
the following statements correct, except Management accounting in view of
its various integrated recipients should have a separate date recording and
retrieval system from financial accounting
2) Which of the following is a Controller's responsibility?Tax planning and
accounting
3) You were newly appointed as controller of C2X Corporation. Among the
jobs your department would do include the following: Tax accounting,
managerial accounting, internal auditing, general accounting
4) Controllership has attained special recognition in corporate management
as business expands in complexity and reach, and as the controller exerts
influence for management to take t organization's goals Controllership and
treasurership constitute corporate finance. These are among the
controller's traditional functions:
1taxmanagement2financialreportingandinterpretation5reportingtogovernme
ntregulatoryagencies7economicappraisal8planningforcontrol
Items 1, 2, 5, 7, 8
5) As business increase in complexity, the function of controllership has
attained top level recognition in the corporate area. Many areas related to
finance and accounting have been identified with controllership. One area
that becomes controversial when included under the controller and viewed
that such violates basic internal control is Internal Auditing
6) Controllers are ordinarily concerned with Preparation of tax returns
7) It is an approach to continuous Improvement that focuses on serving
customers and use front-line workers to identify and solve problems
systematically. Total Quality Management
Non-value-added activities
9) Which of the following is among the benefits of adopting a just-in-time
system? Maximization of standard delivery quality.
10) Integrity is an ethical requirement for all management accountants.
One aspect of integrity requires Avoidance of actual or apparent conflicts
of interest and advise all appropriate parties of any potential conflict.
11) 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
12) If a management accountant has a problem in resolving an ethical
conflict, the first action that should normally be taken is to Discuss the
problem with his/her immediate superior.
13) Management accounting a. Is governed by generally accepted
accounting principles Draws from disciplines other than accounting Is
geared primarily to the past rather than the future.
14) Which of the following characteristics does not relate to management
accounting? It is subject to restrictions imposed by GAAP.
15) Management accounting is an integral part of the management
process. As such, It provides essential information for the following
objectives, except. Maintaining the current level of resources utilization as
well as internal and external communities
16) ln which of the following aspects is managerial accounting similar to
financial accounting Reliance on the accounting database
17) ln comparing management and financial accounting, which of the
following more accurately describes management accounting information?
Budgeted, informative, adaptable
18) Statement 1: Managerial control and engineering control are
synonymous.

Statement 2: Control from the viewpoint of management accounting is
defined as the process of setting maximum limits on financial
expenditures. S1-False S2-True
19) All of the following are examples of total quality management practice,
except. Separating the sales and service functions.
20) Process Reengineering includes all of the following steps, except.
elimination of all constraints.
21) In the competitive global marketplace common to most industries which
of the following is often a critical success factor? The ability to be faster
than your competitors
22) Management accounting includes the following process, except
Delegation
23) A position on the organization chart that is directly related to achieving
the basic objectives of an organization is called A line position
THEORY: FINANCIAL STATEMENT ANALYSIS
24) An investor has been given several financial ratios for an enterprise but
none of the financial reports. Which combination of ratios can be used to
derive return on equity? Net profit margin, total assets turnover, and equity
multiplier.
25) Trend analysis allows a firm to compare its performance to:
other time periods within the firm
26) Vertical analysis is a technique that expresses each item in
as a percent of a base amount.
27) The use of alternative accounting methods:
may be a problem in ratio analysis even if disclosed.
28) Horizontal analysis is a technique for evaluating a series of financial
statement data over a period of time
REVIEWER NI SAMSAM
to determine the amount and/or percentage increase or decrease that has
taken place.
29) The Technical Aspect of the Feasibility Study include the following
except for - Projected Sales
30) North Bank is analyzing Belle Corp.'s financial statements for a
possible extension of credit. Belle's quick ratio is significantly better than
the industry average. Which of the following factors should North consider
as possible limitation of using this ratio when evaluating Belle's
creditworthiness?
Fluctuating market prices of short-term investments may adversely affect
the ratio.
31) Suppose you are comparing two firms in the steel industry. One firm is
large and the other is small. Which type of numbers would be most
meaningful for statement analysis?
Relative numbers would be most meaningful for both the large and small
firm, especially for inter firm comparisons.
32) A company's current ratio is 2.2 to 1 and the quick ratio is 1.0 to 1 at
the beginning of the year. At the end of the year, the company has a current
ratio of 2.5 to 1 and a quick ratio of 0.8 to 0.1 Which of the following could
help explain the divergence in the ratios from the beginning to the end of
the year? An increase in inventory levels during the year.
33) You observe that a firm's profit margin and debt ratio are below the
industry average, while its return on equity exceeds the industry average.
What can you conclude?
Total assets turnover is above the industry average.
34) The company issued new ordinary shares in a three-for- one share
split. Identify the statements that indicate the correct effect(s) of this
transaction. It reduced equity per share of ordinary share.
THEORY: RELEVANT COSTING
35) Hal Etoesus currently works as the fry guy at Burger Breath Drive Thru
but is thinking of quitting his job to attend college full time next semester.

Which of the following would be considered an opportunity cost in this
decision? Hal's lost wages at Burger Breath
36) Among the costs relevant to a make-or-buy decision include variable
manufacturing costs as well as Avoidable fixed costs.
37) The manner of determining whether favorable results of an alternative
are sufficient to justify the cost of taking that alternative
Cost benefit Analysis
38) The variable cost of a unit of product made yesterday is A sunk cost
39) The relevance of a particular cost to a decision is determined by
Potential effect on the decision
40) 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 Contribution margin per hour of machine time
41) In the development of accounting data for decision-making, relevant
costs are Future costs which will differ under each alternative course of
action.
42) A fixed cost is relevant if it is Avoidable
PROBLEM: FINANCIAL STATEMENT ANALYSIS
43) Beatnik Company has a current ratio of 2.5 and a quick ratio of 2.0. If
the firm experienced P2 million in sales and sustains an inventory turnover
of 8.0, what are the firm's current assets? 1,250,000
44) A firm has a debt/equity ratio of 50 percent. Currently, it has interest
expense of P500,000 on P5,000,000 of total debt outstanding. Its tax rate
is 40 percent. If the firm's ROA is 6 percent, by how many percentage
points is the firm's ROE greater than its ROA? 3.0%
45) Manufacturer's Inc. estimates that its interest charges for this year will
be P700 and its net income will be P3,000. Assuming its average tax rate is
REVIEWER NI SAMSAM
30 percent, what is the company's estimated times interest earned ratio?
7.12
46) You are requested to reconstruct the accounts of Angela Trading for
analysis. The following data were made available to you:
Gross margin for 2021 P472,500
Ending balance of merchandise inventory P300,000
Total shareholders' equity as of December 31, 2021 P750,000
Gross margin ratio 35%
Debt to equity ratio 0.8:1
Times interest earned 10
Quick ratio 18%
Ratio of operating expenses to sales 1.2:1
Long-term liabilities consisted of bonds payable with interest rate of 20%
Based on the above information, Total current assets would amount to
882,300
47) JC goods Inc. has a total assets turnover of 0.30 and a profit margin of
10 %. The president is unhappy with the current return on assets; and he
thinks it could be doubled. This could be accomplished (1) by increasing
the profit margin to 15% and (2) by increasing the total assets turnover.
What new assets turnover, along with the 15% profit margin, is required to
double the return on assets? 0.40
48) Recto Co. has a price earnings ratio of 7.5, earnings per share of
P2.20, and a payout ratio of 75%. The dividend yield is 10.0%
Selected information from the accounting records of the Blackwood Co. is
as follows:
Net A/R at December 31, 2016 P 950,000
Net A/R at December 31, 2017 P1,000,000
Accounts receivable turnover 5 to 1
Inventories at December 31, 2016 P1,100,000
Inventories at December 31, 2017 P1,200,000
Inventory turnover 4 to 1
What was the gross margin for 2017? 275,000

49) The December 31, 2021, balance sheet of Trend Inc., is prepared
below. These are the only accounts in Trend Inc. Balance Sheet. Amounts
indicated by question mark (?) can be calculated from the additional
information given;
Additional Information: Current Ratio (at year end) 1.5 to 1
Total liabilities divided by total equity 0.8
Inventory turnover based on sales and ending inventory 15 times
Inventory turnover based on cost of goods sold and ending inventory 10.5
times
Gross margin for 2013 P315,000
REVIEWER NI SAMSAM
PROBLEM: RELEVANT COSTING
52) Narciso Corporation is preparing a bid for a special order that would
require 880 liters of material R19S. The company already has 280 liters of
this raw material in stock that originally cost $6.20 per liter. Material R19S
is used in the company's main product and is replenished on a periodic
basis. The resale value of the existing stock of the material is $5.45 per
liter. New stocks of the material can be readily purchased for $6.20 per liter.
What is the relevant cost of the 880 liters of the raw material when deciding
how much to bid on the special order? P5,456

What was Trend's December 31, 2021, balance in trade accounts payable? 53) Chow Inc. has its own cafeteria with the following annual costs
67,000 Food P 400,000
Labor 300,000
50) Kansas Office Supply had P24,000,000 in sales last year. The Overhead 440,000
company's net income was P400,000, its total assets turnover was 6.0, and Capital P1,140,000 T
the company's ROE was 12.5 percent. The company is financed entirely
with debt and common equity. What is the company's debt ratio? 0.20 The overhead is 40% fixed. Of the fixed overhead, P100,000 is the salary
of the cafeteria supervisor. The remainder of the fixed overhead has been
The following data were obtained from the records of Salacot Company: allocated from total company overhead. Assuming the cafeteria supervisor
Current ratio (at year end) 1.5 to 1 will remain and that Chow will continue to pay said salary, the maximum
Inventory turnover based on sales and ending inventory 15 times cost Chow will be willing to pay an outsider firm to service the cafeteria is
Inventory turnover based on cost of goods sold and ending inventory 10.5
times P964,000
Gross margin for 2021 P360,000
54) Julius International produces weekly 15,000 units of Product JI and
What was Salacot Company's December 31, 2021, balance in the 30,000 units of JII for whichP800,000 common variable costs are incurred.
Inventory account? 80,000 These two products can be sold as is or processed further. Further
processing of either product does not delay the production of subsequent
51) The current assets of Mayon Enterprise consistsof cash, accounts batches of the joint products. Below are some information:
receivable, and inventory. The following information is available:
Credit sales 75% of total sales JI JII
Inventory turnover 5 times SP per unit without P 24 P18
Working capital P1,120,000 further processing
Current ratio 2.00 to 1 SP per unit with 30 22
Quick ratio 1.25 to 1 further processing
Average Collection period 42 days Total separate weekly P100K P90K
Working days 360 variable costs of
further processing
The estimated inventory amount is: P840,000
 REVIEWER NI SAMSAM
To maximize Julius' manufacturing contribution margin, the total separate In applying the contribution margin approach to evaluating whether to
variable costs of further processing that should be incurred each week accept the new order, assuming subcontracting, What is the average
area. P90,000 variable cost per unit? 7.17

55) Data covering QMB Corporation's two product lines are as follows: 58) Listed below are a company's monthly unit costs to manufacture and
market a particular product.
Product W Product Z
Sales P 36,000 P 25,200 Unit Costs Variable Costs Fixed Costs
Income before income 15,936 (8,388) Direct Materials P 2.00 -
tax Direct Labor 2.40 -
Sales price per unit 30 14 Indirect Manufacturing 1.60 P1.0
Variable cost per unit 8.5 15 Marketing 2.50 1.5
The company must decide to continue making the product or buy it from an
outside supplier. The supplier has offered to make the product at the same
The total units sold of "W" was 1,200 and that "Z" was 1,800 units. If level of quality that the company can make it. Fixed marketing costs would
product "Z" is discontinued and this results in a 400 units decrease in sales be unaffected, but variable marketing costs would be reduced by 30% if the
of product "W", the total effect on income will be? 6,800 decrease company were to accept the proposal. What is the maximum amount per
unit that the company can pay the supplier without decreasing its operating
56) Tagaytay Open-Air Flea Market is along the highway leading to Taal income? P6.75
Vista Lodge. Arnel has a stall which specializes in handcrafted fruit baskets
that sell for P60 each. Daily fixed costs are P15,000 and variable costs are 59) Division A of Decision Experts Corporation is being evaluated for
P30 per basket. An average of 750 baskets are sold each day. Arnel has a elimination. It has contribution to overhead of P400,000. It receives an
capacity of 800 baskets per day. By closing time, yesterday, a bus load of allocated overhead of P1 million, 10% of which cannot be eliminated. The
teachers who attended a seminar at the Development Academy of the elimination of Division A would affect pre tax income by
Philippines stopped by Arnel's stall. Collectively, they offered Arnel P1,500
for 40 baskets. Arnel should have 500,000 increase

Accepted the offer since he could have P300 contribution margin. 60) The following information relates to next year's projected operating
results of the Aluminum Division of Wroclaw Corporation:
57) Kirklin Co. is a manufacturer operating at 95% of capacity. Kirklin has Contribution margin 1,500,000
been offered a new order at $7.25 per unit requiring 15% of capacity. No Fixed expenses 1,700,000
other use of the 5% current idle capacity can be found. However, if the Net operating loss (200,000)
order were accepted, the subcontracting for the required 10% additional If Aluminum Division is dropped, 1,000,000 of the above fixed expenses
capacity would cost $7.50 per unit. The variable cost of production for would be eliminated. What will be the effect on Wroclaw's profit next year if
Kirklin on a per-unit basis follows: Aluminum Division is dropped instead of kept as a division of Wroclaw?
Materials $3.50
Labor 1.50 500,000 decrease
Variable overhead 1.50
Total of $6.50 61) Jordan Company budgeted sales of 400,000 calculators at $40 per unit
last year. Variable manufacturing costs were budgeted at $16 per unit, and
fixed manufacturing costs at $10 per unit. A special order for 40,000

calculators at $23 each was received by Jordan in March. Jordan has
sufficient plant capacity to manufacture the additional quantity without
incurring any additional fixed manufacturing costs; however, the production
would have to be done on an overtime basis at an estimated additional cost
of $3 per calculator. Acceptance of the special order would not affect
Jordan's normal sales and no selling expenses would be incurred. What
would be the effect on net operating income if the special order were
accepted? 160,000 increase
#wapananggawas
THEORY: OVERVIEWOFMANAGERIAL ACCOUNTING,
CONTEMPORARYBUSINESSTECHNIQUES,
PROJECTFEASIBILITYSTUDY
1) The statements below about project feasibility studies are true except.
Since the data and required is a basic step in its preparation, all the
necessary and required information will always be available.
2) Ohio Corporation recently implemented a just-in-time (JIT) production
system along with a series of continuous improvement programs. If the firm
is now considering adopting a total quality management (TQM) program, it
would like find that TQM:
is consistent with both JIT and continuous improvement.
3) Which of the following employees at Starbucks would likely be
considered as holding a staff position?
Both the company's lead, in-house attorney and the chief financial officer.
4) Which of the following choices correctly depicts whether Bank of
America, Microsoft and Florida State University would have a need for
managerial accounting?
Yes, Yes, Yes
5) Dramatic improvements in communication have resulted in increasing
global competition, which has required firms to:
Develop cost management systems to help firms to be more competitive.
REVIEWER NI SAMSAM
6) The role of managerial accounting information is assisting management
is a(an): attention-directing role
7) The main objective of feasibility study is
to assess if it is possible to meet the requirements specified subject to
constraints of budget, human resource and hardware
8) Which of the following is not an element of competency?
to refrain from engaging in an activity that would discredit the accounting
profession.
9) Managerial accountants:
are found throughout an organization and work on cross-functional teams.
10) Among the following major parts of a project feasibility study, which
grouping is considered critical?
Marketing, engineering or technical and financial
11) Who required Feasibility Study?
Developer, investor, banker, and planning authorities
12) Which of the following statements about the ethical climate of business
is false?
The Robinson-Patman Act strives to improve the overall quality of
corporate reporting.
13) A feasibility study is carried out
before the final requirements specifications are drawn up
14) Which of the following statements about managerial accounting is
false?
An increasing number of organizations are segregating managerial
accountants in separate managerial-accounting departments.
15) The two dimensions of managerial accounting are:

a decision-facilitating dimension and a decision-influencing dimension.
16) The activities performed by a manufacturing organization could be
categorized as pre-production (such as research and development and
product design), production-related, and post-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?
Pre-production, production-related, and post-production activities.
17) Why Feasibility Study is prepared?
Achieved maximum profit help project managers determine the viability of a
project or business venture by identifying the factors that can lead to its
success.
18) Which of the following business models considers financial, customer,
internal operating and other measures in the evaluation of performance?
balanced scorecard
19) The materials and inputs of the technical aspect provides information
such as
list of all required supplies, equipment, inventories and the necessary input
for the business to be operational
THEORY: FINANCIAL STATEMENT ANALYSIS
20) Which of the following would indicate an accurate Statement of Cash
Flows? Net cash flow is equal to the change in the cash balance
21) Which of the following would be subtracted from net income when
using the indirect method to derived net cash flows from operating
activities? Increase in accounts receivable
22) The primary purpose of the statement of cash flows is to provide
information
about the cash receipts and cash payments of an entity during a period.
THEORY: RELEVANT COSTING
REVIEWER NI SAMSAM
23) Which of the following costs are relevant to a make-or-buy decision?
The amount that would be received if the production equipment were sold
24) Which of the following is not a characteristic of relevant costing
information? Readily quantifiable
25) In analyzing whether to build another regional service office, the salary
of the chief executive officer at the corporate headquarters is
irrelevant because it is future cost that will not differ between the alternative
under consideration
26) Statement 1: The book value of an old machine is always considered 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's degree of vertical
integration. True; True
27) Statement 1: Lumber produced in a lumber mill results in several
different products being produced from each log such products are called
joint products
Statement 2: Payment of overtime to a worker in order to relax a production
constraint could increase the profits of a company True; True
28) Statement 1: Joint processing after the split-off point is profitable if 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 True; False
29) Statement 1: In a special order situation that involves using existing 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 True; False
30) Statement 1: In a plant operating at capacity, every machine and
person in the plant would be working at the maximum possible rate
Statement 2: In a sell or person further decision, an avoidable fixed
 REVIEWER NI SAMSAM
production cost incurred after the split-off point is relevant to the decision. Additional cost of making Y, given the cost of making X, and additional
False; False revenue from Y.

31) Statement 1: When a company has a productive constraint, the product 39) The term relevant cost applies to all of the following decision situations
with the highest contribution margin per unit of the constrained resource except the Determination of product price.
should be given highest priority
Statement 2: A product that does not cover its allocated share of general PROBLEMS: FINANCIAL STATEMENT ANALYSIS
corporate administrative expenses should be dropped. True; False
40) ETC Corporation Selected Financial Data December 31, 2021:
32) Idle capacity in the interim (normally temporary) will generate short- Current Assets P 150,000
term benefit in accepting sales at price that Current Liabilities 100,000
Inventories 50,000
Result in less than normal contribution margin Accounts Receivable 40,000
Net Sales 900,000
33) A product should be dropped if Cost of Goods Sold 675,000
ETC's current ratio is: 1.5 to 1
Dropping it will increase the total profit of the company.
41) A company started business on January 1, 2020. At the end of 2021,
34) Which of the following is NOT relevant in a make-or-buy decision about the financial statements showed the following amounts: Net cash inflows
a part the entity uses in some of its products? from operating activities were:
The outside supplier's per-unit variable cost to make the part Sales P180,000
35) When only differential manufacturing costs are taken into account for Cost of Goods Sold 112,000
special- order pricing, an essential assumption is that Expenses 40,000
Accrued wages payable 4,000
Acceptance of the order will not affect regular sales Accounts receivable 18,000
Accounts payable 8,000
36) A manager is attempting to determine whether a segment of the
business should be eliminated. The focus of attention for this decision 22,000
should be on Sales minus total variable expenses and avoidable fixed
expenses of the segment 42) Part Optical completed the following transactions:

37) If a firm is at full capacity, the maximum special order price must cover • Acquired land for P3,000,000
Variable cost and incremental fixed costs associated with the special order • Purchased office building for P2,000,000
plus foregone contribution margin on regular units not produced • Sold one factory equipment for P3.500,000.

38) There is a market for both product X and product Y. Which of the The accumulated depreciation on the warehouse is P1,700,000 and the
following costs and revenues would be most relevant in deciding whether original cost was P5,700,000. Net cash used for investing activities was:
to sell product X or process it further to make product Y? 1,500,000
 REVIEWER NI SAMSAM
43) Art Company has determined its net cash provided for 2021 operating PROBLEMS: RELEVANT COSTING
activities as P2350,000. The cash balance on January 1, 2021, was
P1.500.000. During 2021, the company had the following investing and 46) Bear valley produces three products: A, B AND C. one machine is used
financing activities. Cash dividends of P3500,000 were declared and paid to produce the
An additional P1400.000 of cash dividends were declared but remained
unpaid at the end of the year. Demand CM Time on
machine
• Machinery with a book value of P1,75a,000 was sold for that amount. A 100 25 10
Additional machinery of P2.600.000 was acquired for cash to replace the B 80 18 5
one sold C 150 30 10
• Notes payable of P4200.000 was taken out of the local bank early in the
year. By the end of the year, PL500.,000 of this amount including interest of
P300.000 had been repaid There are 24000 minutes available on the machine during the week. How
• Bonds payable with a book value of P2500,000 was converted into many units should be produced and sold to maximize the weekly
ordinary share having par value of P2.000,000 contribution? A 50; B 80; C 150

-How much is the cash balance on December 31, 2021? 2,500,000 47) Jane Corporation produces wood glue that is used by furniture
manufacturers. The company normally produces and sells 10,000 gallons
-How much should be reported as net cash used in financing activities in of the glue each month. White Glue is sold for P280 per gallon, variable
the 2021 cash flow statement? 500,000 costs is P168 per gallon, fixed factory overhead cost totals P460,000 per
month, and the fixed selling costs totals P620,000 per month.
44) Alumbat Corporation has $800,000 of debt outstanding, and it pays an
interest rate of 10 percent annually on its bank loan. Alumbat's annual Jane Corporation uses the JIT system, so no inventories are on hand.
sales are $3,200,000; its average tax rate is 40 percent; and its net profit Continue, because the expected sales is above the shutdown point
margin on sales is 6 percent. If the company does not maintain a TIE ratio
of at least 4 times, its bank will refuse to renew its loan, and bankruptcy will The shutdown point in unit is 2,750.00 (308,000/112)
result. What is Alumbat's current TIE ratio? 5.0
48) Panghulo Company manufactures part H for use in its production cycle.
45) Lone star plastics has the following data: The cost per unit for3,000 units of Part N, Direct labor P50, Fixed overhead
P30, Direct materials P10, Variable overhead P20. Quebadia Company has
Assets: P100,000 offered to sell Panghulo 3,000 units of part H for P100 per unit. If Panghulo
Debt ratio: 40.0% accepts Quebada's offer, the released facilities could be used to save
Profit margin: 6.0% P70,000 in relevant costs in its manufacture of Part I. In addition, P15 per
Interest rate: 8.0% unit of fixed overhead applied to Part H would be totally eliminated. The
Total assets turnover: 3.0 alternative that is more desirable and the corresponding net cost savings is
Tax rate: 40%
Buy: 55,000
What is lone star’s EBIT? P33,200
49) Grr company produces and sells products. The sales and variable cost
data of the three products are (000)`s omitted.
 REVIEWER NI SAMSAM
EO EC EQ Direct materials P 4,000
Sales 6,600 5,300 10,800 Materials handling (20% of direct materials) 800
Variable Cost 3,800 3,700 6,900 Direct labor 32,000
The owner desires to reduce production load to only one product lien due Overhead (150% of direct labor) 48,000
to the prolonged absence of the production manager. Depreciation Total manufacturing costs 84,800
expense amounts to P600,000 annually. Other fixed operating expenses Materials handling which is not included in manufacturing overhead,
amount to P660,000 per year. Which product must be retained and what is represents the direct variable costs of the receiving department that are
the opportunity cost of selecting such product line? 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-
Retain product "EQ"; opportunity cost is 4.40 million thirds fixed. Pre- casts Co., offers to supply BX at a unit price of P60,000.
Should the company buy or manufacture?
50) Picnic items Inc. manufactures coolers of 10,000 units that contain a
freezable ice bag. For an annual volume of 10,000 units, fixed Manufacture, due to advantage of P19,200 per unit.
manufacturing costs of P500,000 are incurred. Variable costs per unit
amount are direct materials-P80; direct labor P15, and variable factory 53) Clay Company expects to incur the following costs at the planned
overhead P20Bags Corp. offered to supply the assembled ice bag for P40 production level of 10,000 units:
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 Direct materials P 100,000
for the freezable bag will cost Picnic P20 if it will produce it. Considering Direct labor 120,000
Bags Corp. offer, Picnic should Variable Overhead 60,000
Fixed overhead 30,000
Produce the freezable ice bag due to P25,000 advantage The selling price is P50 per unit. The company currently operates at full
capacity of 10,000 units. Capacity can be increasedto 13,000 units by
51) Chow Foods receives a one-time special order for 5,000 units of Kleen. operating overtime. Variable costs increase by P14 per unit for overtime
Acceptance of this order will not affect the regular sales of 80,000 units. production. Fixed overhead costs remain unchanged when overtime
The cost to manufacture one unit of this particular product is: operations occur. PQR Company has received a special order from a
wholesaler who has offered to buy 2,000 units at P45 each.
Variable Cost per unit Fixed Costs per year
Direct Materials 1.50 - What is the incremental cost associated with this special order? 84,000
Direct Labor 2.50 -
Overhead 0.80 100,000 54) A company produces and sells three products:
Selling and 3.0 50,000
C J D
Administrative
Sales P 200,000 P 150,000 P 125,000
Variable selling costs for each of these 5,000 units will be $1.00. What is
Separable(product) 60,000 35,000 40,000
the differential cost to ABC Company of accepting this special order?
fixed costs
29,000
Allocated fixed 35,000 40,000 25,000
52) Part BX is a component that Motors and Engines Co. uses in the costs
assembly of motors. The cost to produce one BX is presented below: Variable Costs 95,000 75,000 40,000

The company lost its lease and must move to a smaller facility. As a result,
total allocated fixed costs will be reduced by 40%. However, one of its
products must be discontinued in order tor the company to fit in the new
facility. Because the company's objective is to maximize profits, What is its
expected net profit after the appropr1ate product has been discontinued?
P 25,000
55) The Garey Company has 3,000 circuit boards (all alike) which are out
of date and are carried in inventory at a total cost of P 216,000. The circuit
boards can be reworked and upgraded at a total cost of P 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 Garey chooses to upgrade the
circuit boards rather than sell them to the outside buyer, the opportunity
cost to Garey is P1,000
56) Great Electronics is operating at 70% capacity. The plant manager is
considering making component 501 now being purchased for P110 each, a
price that is projected to increase in the near future. The plant has the
equipment and labor force required to manufacture the component. The
design engineer estimates that each component requires P40 of direct
materials and P30 of direct labor. The plant overhead is 200% of direct
labor peso cost, and 40% of the overhead is fixed cost. a decision to
manufacture component 501 will result in a gain or (loss) for each
component of P4
THEORY: CAPITAL BUDGETING
57) The payback method assumes that all cash inflows are reinvested to
yield a return equal to ZERO
58) In capital expenditure decisions, the following are relevant in estimating
operatingcosts except: HISTORICAL COST
59) A weakness of the internal rate of return method for screening
investments projects is that it
implicitly assumes that the company is able to reinvest cash inflows from
the project at the internal rate of return
REVIEWER NI SAMSAM
60) Which of the following statements about cash flow determination for
capital budgeting purpose is incorrect?
depreciation is relevant because it affects net income
61) To approximate annual cash inflow, depreciation is added back to net
income because it is not an outflow of cash
62) The following items are included in the computation of the net cost of
investment except the book value of the old asset to be replaced
63) What is true of the net present value method of determining the
acceptability of an investment
the initial cost of the investment is subtracted from the presentvalue of net
cash flows
64) The primary capital budgeting method that uses discounted cash flow
techniques is the net present value method
65) In capital budgeting decisions, the following items are considered
among others;
1.cash outflow for the investment
2.increase in working capital requirements
3.profit on sale of old asset
4. loss on write-off of old asset
For which of the above items would taxes be relevant? Items 3 and 4 only
66) Capital budgeting techniques are least likely to be used in evaluating –
the adoption of the ABC system in allocating costs to product line
67) Which of the following best identifies the reason for using probabilities
in capital budgeting is --uncertainty
The following statements refer to the accounting rate of return ARR
1.The ARR is based on the accrual basis, not cash basis
2.The ARR does not consider the time value of money
3.The profitability of the project is considered
From the above statements, which are considered limitations of the ARR
concept? –statements 1 and 2 only

68) The capital budget is a (an) plan the assesses the firm’s expenditure
for long live assets
PROBLEM: CAPITAL BUDGETING
69) Kipling Company has invested in a project that has an eight-year life. It
is expected that the annual cash inflow from the project will be P20,000.
Assuming that the project has an internal rate of return of 12%, how much
was the initial investment in the project if the present value of annuity of 1
for 8 periods is 4.968 and the present value of 1 is 0.404?
The payback period for the project’s IRR of 12% is 4.968. Therefore, the
initial investment is equal to the product of the annual cash flow and the
payback period.
REVIEWER NI SAMSAM
74) The Mejicano Company is planning to purchase a piece of equipment
that will reduce annual cash expenses over its 5-year useful…What is the
profitability index for this investment? 1.034
75) The habagat inc.is planning to spend 600,000 for a machine that it will
depreciate on a straight-line basis over a ten-year period with no terminal…
10%
76) Mario Hernandez plans to buy a haymaker. It cost 175,000 and is
expected to last for five years. He presently hires 6 workers at 10,000 per
month… NPV is P28,436
77) Tabucol aggregates, inc plans to replace one of its machines with new
efficient one. The old machine has a net book value of 120,000... 15,693

Initial Investment = 20,000 x 4.968 = P 99,360 78) A new machine is expected to produce the following after-tax cash
inflow over a period of 5 years:
70) DR Inc. is considering replacing an old press that cost P800,000 six
years ago with a new one that would cost P2,250,000. Shipping and After--tax cash inflows
installation would cost an additional P200,000. The old press has a
book…DR’s net initial investment for analyzing the acquisition of the new YEAR PER YEAR CUMULATIVE
press assuming a 35% income tax rate would be P2,425,000 1 P16,000 P16,000
2 12,000 28,000
71) The Super Carry, a domestic shipping line has recently commissioned 3 20,000 48,000
a new passenger ship, the SC-20. The new ship can carry up to 2,000 4 8,000 56,000
passengers. It was purchased by Super Carry at a cost of P300,000,000. 5 6,000 62,000
Its estimated…What is the annual net cash inflow from operating SC-20? If the machine will cost 40,000, its payback period is 2.60 years
P43,680,000
How many years can Super Carry recover the initial cost of investment in 79) Fermin Printers, Inc. is planning to replace its present printing
SC-20? 6.87 years equipment with a more efficient unit. The new equipment will cost
What is the expected accounting rate of return based on initial investment P400,000, with a five-year useful life, no salvage value. The old unit…
in SC-20? 5.89% What is the net cost of investment in the new equipment for decision-
making purposes? P232,000
72) Last year, the sales at Jersey Company were $200,000 and were all
cash sales. The tax-deductible expenses at Jersey were $125,000 and The increase in annual net income as a result of acquiring the new
were all cash expenses. The tax rate was 30%. What was the after-tax net equipment is P69,700
cash inflow at Jersey last year from these operations? 52,500
What is the expected increase in annual net cash inflows if the new
73) Friendly Corporation’s Project Sky has a net investment of P1.2 million. equipment is acquired? P87,200
The present value of all future net cash inflows is P2.4 million. The
company’s tax rate is 40%. The profitability index is 2.00
REVIEWER NI SAMSAM
REVIEWER NI SAMSAM