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FINAL PRE-BOARD EXAMINATION CPA Review September 16 & 17, 2023

Multiple Choice. Select the letter that corresponds to the Use the following information for the next two questions.
best answer. This examination consists of 70 items and Robertson Corporation sells a product for P18 per unit,
the exam is good for three (3) hours. Good luck! and the standard cost card for the product shows the
following costs:
1. A company would be reducing its discretionary costs if
Direct material P1
it
Direct labor 2
a. fired a production supervisor.
Overhead (80% fixed) 7
b. closed its research and development department.
Total P10
c. successfully negotiated a reduction in its factory
rent.
6. Robertson received a special order for 1,000 units of
d. reduced its direct labor costs by hiring temporary
the product. The only additional cost to Robertson
workers.
would be foreign import taxes of P1 per unit. If
Robertson is able to sell all of the current production
2. As an organization moves to decentralize its
domestically, what would be the minimum sales price
operations, an effective reporting system will have
that Robertson would consider for this special order?
____ when the organization was centralized.
a. P18.00 c. P11.00
a. about the same importance as
b. P5.40 d. P19.00
b. less importance than
c. more importance than
7. Assume that Robertson has sufficient idle capacity to
d. a level of importance that depends on
produce the 1,000 units. If Robertson wants to
organizational size.
increase its operating profit by P5,600, what would it
charge as a per-unit selling price?
3. As the economy becomes more and more depressed, a. P18.00 c. P11.00
a company's management decides to slash spending b. P10.00 d. P16.60
on research and development. What is the likely effect
of this action on net income? Net income will be
8. For the year ended December 31, Abel Co. incurred
a. higher this period and lower in future periods.
direct costs of P500,000 based on a particular course
b. higher this period and higher in future periods.
of action during the year. Had a different course of
c. lower this period and higher in future periods.
action been taken, direct costs would have been
d. lower this period and lower in future periods.
P400,000. In addition, Abel's fixed costs were
P90,000. The incremental cost was
4. A small manufacturing company recently stated its a. P 10,000 c. P100,000
sales goal for a period was P100,000. At this level of b. P 90,000 d. P190,000
activity, its budgeted expenses were P80,000. Its 9. The ability to pay bills when due and to meet
actual sales were P100,000, but its actual expenses unexpected needs for cash most closely describes
were P85,000. This company operated a. cash flow adequacy. c. liquidity.
a. effectively and efficiently. b. long-term solvency. d. profitability.
b. neither effectively nor efficiently.
c. effectively but not efficiently.
10. Which of the following is a difference between a static
d. efficiently but not effectively.
budget and a flexible budget?
a. A flexible budget includes only variable costs, a
5. During the year, a department's 3-variance overhead
static budget includes only fixed costs.
standard costing system reported unfavorable
b. A flexible budget includes all costs, a static budget
spending and volume variances. The activity level
includes only fixed costs.
selected for allocating overhead to the product was
c. A flexible budget gives different allowances for
based on 80% of practical capacity. If 100% of
different levels of activity; a static budget does
practical capacity had been selected instead, how
not.
would the reported unfavorable spending and volume
d. None of these.
variances be affected?
Spending variance Volume variance
11. Proponent, Inc. produces various types of floor rugs
a. Increased Unchanged
with many different designs. They typically produce at
b. Increased Increased
least 200 rugs with a single machine setup. A cost
c. Unchanged Increased
incurred every time an individual rug is produced is
d. Unchanged Unchanged
called a(n):
a. product-level cost. c. unit-level cost.
b. batch-level cost. d. facility-level cost.

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12. The relationship between payback period and IRR is
that Budgeted Actual
a. a payback period of less than one-half the life of a Units produced 40,000 38,000
project will yield an IRR lower than the target rate. Variable P4/DLH P16,400
b. the payback period is the present value factor for manufacturing
the IRR. overhead
c. a project whose payback period does not meet the Fixed manufacturing P20/DLH P88,000
company's cutoff rate for payback will not meet overhead
the company's criterion for IRR. Direct labor hours 6 4,200
d. none of the given choices. minutes/unit hours

13. All other things being equal, as cost of capital 18. What are the fixed overhead spending and volume
increases variances for the month of April?
a. more capital projects will probably be acceptable. a b c d
b. fewer capital projects will probably be acceptable. Spending P4,000 P8,000 P4,000 P8,000
c. the number of capital projects that are acceptable F U F U
will change, but the direction of the change is not Volume P4,000 P4,000 P8,000 P8,000
determinable just by knowing the direction of the F U F U
change in cost of capital.
d. the company will probably want to borrow money 19. What are the variable overhead spending and
rather than issue stock. efficiency variances for the month of April?
a b c d
14. Which of the following is NOT a defect of the payback Spending P 400 P 400 P1,200 P1,200
method? F U F U
a. It ignores cash flows because it uses net income. Efficiency P1,600 P1,600 P 800 P 800
b. It ignores profitability. U U U F
c. It ignores the present values of cash flows.
d. It ignores the pattern of cash flows beyond the 20. Glenda Company expects to generate P10 million
payback period. internally which could be available for financing part
of its P12 million capital budget for this coming year.
15. If an individual stock's beta is higher than 1.0, that Glenda’s management believes that a debt-equity
stock is: ratio of 40 percent is best for the firm. How much
a. exactly as risky as the market. should be paid in dividends if the target debt-equity
b. riskier than the market. ratio is to be maintained?
c. less risky than the market. a. P2,800,000 c. P8,571,429
d. always the most attractive to investors. b. P1,428,571 d. P4,000,000

21. GMA Company has an opportunity to acquire a new

16. Return on investment (ROI) is a term often used to
express income earned on capital invested in a
business unit. A company’s ROI would be increased if
a. Sales increased by the same peso amount as
expenses and total assets increased.
b. Sales remained the same and expenses were
reduced by the same peso amount that total asset
increased.
c. Sales decreased by the same peso amount that
expenses increased.
d. Sales and expenses increased by the same
percentage that total assets increased.
17. The cost to manufacture an unfinished unit is P40 (P30
variable and P10 fixed). The selling price per unit is
P50. The company has unused production capacity
and has determined that units could be finished and
sold for P65 with an increase in variable costs of 40%.
What is the additional net income per unit to be gained
by finishing the unit?
a. P3 c. P15
b. P10 d. P12
Use the following information for the next two questions.
Burma, Inc. analyzes manufacturing overhead in the
production of its only one product, Odds. The following set
of information applies to the month of April:
machine to replace one of its present machines. The
new machine would cost P90,000, have a 5-year life
and no estimated salvage value. Variable operating
costs would be P100,000 per year. The present
machine has a book value of P50,000 and a remaining
life of 5 years. Its disposal value now is P5,000, but
it would be zero after 5 years. Variable operating
costs would be P125,000 per year. Ignore income
taxes. Considering the 5 years in total, what would
be the difference in profit before income taxes by
acquiring the new machine as opposed to retaining the
present one?
a. P10,000 decrease c. P35,000 increase
b. P15,000 decrease d. P40,000 increase
22. Spec, Inc.’s stock is expected to generate a dividend
and terminal value one year from now of P57.00. The
stock has a beta of 1.3, the risk-free interest rate is 6
percent, and the expected return market return is 11
percent. What should the equilibrium price of Spec’s
stock in the market now?
a. P50.67 c. P53.77
b. P51.35 d. P43.84
23. Galvez Company expects next year’s after-tax income
to be P7,500,000. The firm’s debt ratio is currently 40
percent. Galvez has P6,000,000 of profitable

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investment opportunities, and it wishes to maintain its Day 10, 30 percent paying on Day 20, 15 percent
existing debt ratio. According to the residual dividend paying on Day 25, and 15 percent paying on Day 30.
policy, what is the expected dividend payout ratio next Assume that the cost of funds invested in receivables
year? is 10 percent. Suppose that the firm's customers begin
a. 52.0 percent c. 48.0 percent paying later, such that the new DSO increases to 24
b. 75.0 percent d. 25.0 percent days, that the firm uses a 360-day year, and that the
firm's variable cost ratio is 80 percent. What is the
24. The Maru Company’s bonds have 5 years remaining to additional interest cost to Reston of the additional
maturity. Interest is paid annually; the bonds have a investment in A/R caused by the delay in payment by
P1,000 face value; and the coupon interest rate is 9 its customers?
percent. What is the estimated yield to maturity of the a. P19,550 c. P42,500
bonds at their current market price of P850? b. P24,438 d. P78,625
a. 13.19 percent c. 10.64 percent
b. 11.00 percent d. 10.00 percent 31. Inland Oil arranged a P10,000,000 revolving credit
agreement with a group of small banks. The firm paid
25. Elcinore Company is considering a switch to level an annual commitment fee of one-half of one percent
production. Cost efficiencies will occur under level of the unused balance of the loan commitment. On the
production and after-tax cost would decline by used portion of the loan, Inland paid 1.5 percent
P70,000 but inventory would increase from above prime for the funds actually borrowed on an
P1,000,000 to P1,800,000. Elcinore would have to annual simple interest basis. The prime rate was at 9
finance the extra inventory at a cost of 10.5 percent. percent for the year. If Inland borrowed P6,000,000
How low would interest rate need to be to make the immediately after the agreement was signed and
level production, at the least, feasible? repaid the loan at the end of one year, what was the
a. 7.00 percent c. 8.75 percent total peso cost of the loan agreement for one year?
b. 5.83 percent d. 10.00 percent a. P560,000 d. P900,000
b. P650,000 e. P675,000
26. A learning curve of 80% assumes that production unit c. P540,000
costs are reduced by 20% for each doubling of output.
What is the cost of the sixteenth unit produced as an 32. Suppose the credit terms offered to your firm by your
approximate percent of the first unit produced? suppliers are 2/10, net 30 days. Out of convenience,
a. 30 percent c. 51 percent your firm is not taking discounts, but is paying after
b. 41 percent d. 64 percent 20 days, instead of waiting until day 30. You point out
that the approximate cost of not taking the discount
27. The difference between the underwriters' buying price and paying on day 30 is around 37 percent. But since
and the offering price of the securities to the public is your firm is not taking discounts and is paying on day
called the: 20, what is the effective annual percentage cost (not
a. gross spread. approximate) of your firm's current practice, using a
b. underpricing. 360-day year?
c. new issue premium. a. 36.7% c. 43.6%
d. extortion premium. b. 105.4% d. 106.9%

28. Top Notch, Inc. is expanding and needs P5 million to Use the following information for the next two questions.
help fund this growth. Top Notch estimates they can Assume that Straper Industries is considering investing in
sell new shares of stock for P25 a share. They also a project with the following characteristics:
estimate that it will cost an additional P200,000 for Initial investment P500,000
filing and legal fees related to the stock issue. The Additional investment in working capital 10,000
underwriters have agreed to an 8 percent spread. How Cash flows before income taxes for years 140,000
many shares of stock must Top Notch sell if they are 1 through 5
going to have P5 million available for their expansion
Yearly tax depreciation 90,000
needs?
a. 226,087 shares Terminal value of investment 50,000
b. 208,696 shares Cost of capital 10%
c. 217,391 shares Present value of P1 received after 5 .621
d. 224,640 shares years discounted at 10%
Present value of an ordinary annuity of 3.791
29. Which of the following effects would a lockbox most P1 for 5 years at 10%
likely provide for receivables management? Marginal tax rate 30%
a. Minimized collection float. Investment life 5 years
b. Maximized collection float.
c. Minimized disbursement float.
Assume that all cash flows come at the end of the year.
d. Maximized disbursement float.
33. What is the amount of the after-tax cash flows in year
30. Reston Inc. has expected sales of P17,000,000. While
2?
10 percent of its customers pay cash, the remaining
a. P140,000 c. P98,000
90 percent pay on credit with 40 percent paying on
b. P125,000 d. P70,000

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40. During December the capital budget indicates a
34. What is the net present value of the investment? P280,000 purchase of equipment. Also, the beginning
a. P175,000 c. P 1,135 December cash balance is budgeted to be P40,000.
b. P 58,000 d. P (12,340) The company wants to maintain a minimum cash
balance of P20,000. What is the minimum cash loan
35. Associated Supply, Inc. is considering introducing a that must be planned to be borrowed from the bank
new product that will require a P250,000 investment during December?
of capital. The necessary funds would be raised a. 91,540 c. 151,540
through a bank loan at an interest rate of 8%. The b. 111,540 d. 280,000
fixed operating costs associated with the product
would be P122,500 while the contribution margin 41. What is the budgeted Net Income for the Month of
percentage would be 42%. Assuming a selling price of December?
P15 per unit, determine the number of units (rounded a. 53,120 c. 117,160
to the nearest whole unit) Associated would have to b. 117,720 d. 107,160
sell to generate earnings before interest and taxes
(EBIT) of 32% of the amount of capital invested in the 42. Henderson Chemical Company has P5 million in sales.
new product. Its ROE is 10 percent and its total assets turnover is
a. 35,318 units. c. 25,575 units. 2.5´. The company is 60 percent equity financed.
b. 32,143 units. d. 23,276 units. What is the company’s net income?
a. P95,750 c. P105,300
36. To determine the inventory reorder point, calculations b. P110,250 d. P120,000
normally include the
a. Ordering cost. 43. Lombardi Trucking Company has the following data:
b. Carrying cost.
c. Average daily usage. Assets P10,000 Profit margin 3%
d. Economic order quantity. Debt ratio 60% Interest rate 10%
Tax rate 40% Total asset turnover 2.0
37. As a consequence of finding a more dependable
supplier. Dee Co. reduced its safety stock of raw What is Lombardi's TIE ratio?
materials by 80%. What is the effect of this safety a. 0.95 c. 2.10
stock reduction on Dee's economic order quantity? b. 1.75 d. 2.67
a. 80% decrease. c. 20% increase.
b. 64% decrease. d. No effect. 44. A project costing P1,800,000 is expected to produce
the following annual cash flows (after tax) and salvage
Use the following information for the next four questions. value:
Budgeted Net cash inflow Salvage value
Sales: Year 1 P500,000 P800,000
September October November December January 2 500,000 600,000
P280,000 P300,000 P320,000 P360,000 P200,000 3 600,000 500,000
4 800,000 400,000
Planning Assumptions: 5 700,000 300,000

25% of all Sales are cash. Accounts receivable are What is the bailout period for the project?
collected 60% in the month of sale, 30% in the next a. 3.25 years. c. 2.73 years
month, and with the final 10% in the third month. Cost of b. 2.5 years. d. 2.4 years.
Goods sold is 40% of Sales. Inventory is purchased in the
month prior to the sale, 70% is paid in the month of 45. Standards, which are difficult to achieve due to
acquisition and 30% is paid the next month. reasons beyond the individual performing the task,
Operating Expenses: are the result of firm using which of the following
Salaries 60,000 methods to establish standards?
Depreciation 10,000 a. Ideal Standards c. Practical Standards
Rent 20,000 b. Lax Standards d. Employee Standards
Utilities 6,000
Other 5,000 46. You have P2,000 invested in a bank account that pays
Commissions 2% of prior month’s sales. a 4 percent nominal annual interest with daily
Supplies 1% current month Cost of Goods sold. compounding. How much money will you have in the
38. What is the 12/31 budgeted Accounts Receivable? account at the end of July (in 132 days)? (Assume
a. P360,000 c. P132,000 there are 365 days in each year.)
b. P176,000 d. P144,000 a. P2,029.14 d. P2,023.44
b. P2,028.93 e. P2,023.99
39. What is the budgeted balance for Accounts Payable at c. P2,040.00
12/31 for Inventory purchases?
a. P 24,000 c. P 80,000
b. P 67,200 d. P144,000

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47. Consider the following:
Sales price, per unit P18 per unit Fabrication Division
Standard absorption cost rate P12 per unit Market price of subassembly P50
Standard variable cost rate P8 per unit Variable cost of subassembly P20
Variable selling expense rate P2 per unit
Excess capacity (in units) 1,000
Fixed selling and P40,000
Assembly Division
administrative expenses
Fixed manufacturing overhead P60,000 Number of units needed 900

Last period, 13,000 units were produced. In the What is the natural bargaining range for the two
current period, 15,000 units were produced. In each divisions?
period, 13,000 units were sold. What is the difference a. Between P20 and P50
in reported income under absorption and variable b. Any amount less than P50
costing for the current period? c. Between P50 and P70
a. The variable-costing income exceeded d. P50 is the only acceptable price
absorption-costing income by P4,000.
b. The absorption-costing income exceeded Use the following information for the next two questions.
variable-costing income by P8,000. Midnight Hawk Construction manufactures and installs
c. The variable-costing income exceeded standard and custom-made cabinetry for residential
absorption-costing income by P6,000. homes. Last year, the company incurred P200,000 in
d. Net income will equal between the two methods. overhead costs. After implementing activity-based costing
(ABC), the company’s accountant identified the following
48. The sequence that reflects increasing breadth of related information:
responsibility is Activity Allocation base Proportion of
a. cost center, investment center, profit center Overhead cost
b. cost center, profit center, investment center Material delivery Number of 30%
c. profit center, cost center, investment center and handling deliveries
d. investment center, cost center, profit center Inspections Number of 25%
inspections
49. Which of the following questions would the financial Supervision Hours of 20%
perspective of the balanced scorecard attempt to supervisor
answer? time
a. How does the company continue to improve, Purchasing Number of 25%
learn, and grow? purchase
b. How do customers view the company? orders
c. Which business processes must the company
excel in? The number of activities for standard and custom-made
d. How does the company create value for its cabinets is as follows:
stakeholders? Standard Custom-
made
50. Murray Company manufactures fire hydrants in Number of deliveries 200 100
Gensan. The following information pertains to Number of inspections 600 400
operations during the month of May: Hours of supervisor time 1,800 2,200
Processing hours (average per batch) 8.0 Number of purchase 1,000 1,000
Inspection hours (average per batch) 1.5 orders
Waiting hours (average per batch) 1.5
During the past year, Midnight Hawk accepted a customer
Move time (average per batch) 1.5
order for a set of custom-made cabinets that would
Units per batch 20 units require the following:
The manufacturing cycle efficiency (MCE) is: Direct labor cost (25 hours at P15 per P 375
a. 72.7% c. 64.0% hour)
b. 36.0% d. 76.0% Direct materials (wood) (900 ft at P3.00 P2,700
per foot)
51. If the investment turnover decreased by 10% and Number of deliveries 3
ROS decreased by 30%, the ROI would Number of inspections 5
a. increase by 30%
Hours of supervisor time 5
b. decrease by 37%
Number of purchase orders 3
c. decrease by 10%
d. none of the given choices
53. How much overhead should be applied to the above
52. An appropriate transfer price between two divisions of customer order?
the Reno Corporation can be determined from the a. P4,050
following data: b. P 285
c. P3,360
d. P 975

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54. What is the total product (manufacturing) cost for the 61. The following summations are available:
above customer order? Sum of hours 860
a. P4,050 c. P3,360 Sum of costs 4,120
b. P 285 d. P 975 Sum of hours x cost 890,000
Sum of hours squared 187,000
55. Ryerson Company has three sales departments, each Number of months analyzed 4
contributing the following percentages of total sales: Using the “least squares method” for splitting a
clothing, 50%; hardware, 30%; and household semi-variable cost, what is the variable rate per
sundries about 20%. In the past, the clothing, hour?
hardware, and household sundries department had Variable rate per hour Fixed cost
error rates of about 2%, 5% and 2.5%. A random a. P3 P500
corporate audit has found a weekly damaged goods b. P2 P600
rate of sufficient magnitude to alarm Ryerson’s c. P2 P500
management. The probability (rounded) that this rate d. P4 P600
occurred in the clothing department is
a. 50% c. 25% 62. Central Winery manufactured two products, A and B.
b. 1% d. 33-1/3% Estimated demand for product A was 10,000 bottles
and for product B was 30,000 bottles. The estimated
56. Soft, Inc. has a target total labor cost of P3,600 for sales price per bottle for A was P6.00 and for B was
the first four batches of a product. Labor is paid P10 P8.00. Actual demand for product A was 8,000 bottles
an hour. If Soft expects an 80% learning curve, how and for product B was 33,000 bottles. The actual price
many hours should the first batch take? per bottle for A was P6.20 and for B was P7.70. What
a. 360 hours. c. 57.6 hours. amount would be the total selling price variance for
b. 140.63 hours. d. 230.4 hours. Central Winery?
a. P3,700 unfavorable. c. P3,700 favorable.
Use the following information for the next two questions. b. P8,300 unfavorable. d. P14,100 favorable.
The following are the times required for various sequences
of activities (paths through the network) shown in a PERT 63. The Glass Shop, a manufacturer of large windows, is
diagram. experiencing a bottleneck in its plant. Setup time at
Path Time in Days one of its workstations has been identified as the
A-B-C 27 culprit. A manager has proposed a plan to reduce
A-D-E-C 33 setup time at a cost of P72,000. The change will result
A-F-C 34 in 8,000 additional windows. The selling price per
A-F-G-C 36 window is P18, direct labor costs are P3 per window,
and the cost of direct materials is P5 per window.
57. Which is the critical path? Assume all units produced can be sold. The change
a. A-B-C c. A-F-C will result in an increase in the throughput contribution
b. A-D-E-C d. A-F-G-C of:
a. P104,000 c. P32,000
58. How much slack time is there in path A-D-E-C? b. P80,000 d. P8,000
a. 1 day c. 6 days.
b. 3 days d. 33 days. 64. Clearer Paint Company has plants in 3 major cities.
Sales for last year were P100 million, and the balance
59. In comparing management accounting with financial sheet at year-end is similar in percentage of sales to
accounting, which of the following statements is true? that of previous years (and this will continue in the
a. Both use historical costs as their primary unit of future). All assets (including fixed assets) and current
measurement. liabilities will vary directly with sales. Clearer Paint is
b. Both depend on the double-entry system of already using assets at full capacity.
accounting. Balance Sheet
c. Both require adherence to GAAP. (in million pesos)
d. Financial accounting reports are more objective, Assets Liabilities &
whereas management accounting reports are Stockholders’ Equity
more subjective. Accounts
Current payable &
60. A company using regression analysis to correlate assets P50 accruals P25
income to a variety of sales indicators found that the Notes payable
relationship between the number of sales managers in – long-term 30
a territory and net income for the territory had a Fixed assets 40 Common Stock 15
correlation coefficient of -1. Which is the best Retained
description of this situation? Earnings 20
a. More sales managers should be hired Total 90 Total 90
b. Imperfect negative correlation Clearer Paint has an after- tax profit margin of 5%,
c. Perfect inverse correlation and a dividend payout ratio of 30%. If sales grow by
d. There is no correlation at all
10% next year, the required new financing to finance
the expansion is

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a. P4,850,000 c. P2,650,000 a. 5,600 jars c. 7,000 jars
b. P3,000,000 d. P5,000,000 b. 4,667 jars d. 8,000 jars

65. A hospital records the number of floral deliveries its
patients receive each day. For a one-week period, the
records show the following deliveries.
Day Number Deliveries
1 15
2 27
3 26
4 24
5 18
6 21
7 26
Using exponential smoothing with a smoothing
constant of 0.4 to forecast the number of deliveries,
calculate the forecast of deliveries in the third day.
Assume the forecast for day 1 are 15 deliveries.
a. 19.8 c. 26.4
b. 22.2 d. 26.6
66. Tomas Corporation produces skincare products for
men and women. An incredibly smooth moisturizing
cream has come to the market that the company is
anxious to produce and sell. Enough capacity exists in
the company’s plant to produce 40,000 units of the
cream each month. Variable costs to manufacture and
sell one unit would be P3.50, and fixed costs
associated with the cream would total P340,000 per
month. The company’s Marketing Department
predicts that demand for the new cream will exceed
the 40,000 units that the company is able to produce.
Additional manufacturing space can be rented from
another company at a fixed cost of P14,000 per
month. Variable costs in the rented facility would total
P4.00 per unit, due to somewhat less efficient
operations than in the main plant. The new cream will
sell for P12.00 per unit. The monthly break-even point
for the new cream in units is:
a. 41,750 d. 43,111
b. 41,647 e. 44,250
c. 40,000
68. Catfur Company has fixed costs of P300,000. It
produces two products, X and Y. Product X has a
variable cost percentage equal to 60% of its P10 per
unit selling price. Product Y has a variable cost
percentage equal to 70% of its P30 selling price. For
the past several years, unit sales of Product X have
averaged 66-2/3% of the unit sales of Product Y. That
ratio is not expected to change. How many units of
Product Y will Catfur sell at the breakeven point?
a. 17,647 units. c. 23,377 units
b. 20,454 units d. 25,714 units
69. The benefits of a successful Just-In-Time system
include all of the following except:
a. funds tied up in inventories are released for use
elsewhere.
b. inventory buffers are increased.
c. throughput time is reduced.
d. defect rates are decreased.
70. Franklin Electronics currently sells a camera for P240.
An aggressive competitor has announced plans for a
similar product that will be sold for P205. Franklin's
marketing department believes that if the price is
dropped to meet competition, unit sales will increase
by 10%. The current cost to manufacture and
distribute the camera is P175, and Franklin has a profit
goal of 20% of sales. If Franklin meets competitive
selling prices, what is the company's target cost?
a. P41. c. P164.
b. P48. d. P175.
End of Examination
Thank you for participating in Team PRTC
Nationwide Open Final Pre-Board Examination.

67. The Proway Corporation produces a variety of cleaning

compounds and solutions for both industrial and
household use. While most of its products are
processed independently, a few are related. “Sprit
357” is a coarse cleaning powder with many industrial
uses. It costs P16 a pound to make and has a selling
price of P20 a pound. A small portion of the annual
production of this product is retained for further
processing in the Mixing Department where it is
combined with several other ingredients to form a
paste which is marketed as a silver polish selling for
P40 a jar. This further processing requires ¼ pound
of Sprit 357 per jar. Other ingredients, labor, and
variable overhead associated with this further
processing cost P25 per jar. Variable selling costs
amount to P3.00 per jar. If the decision were made
to cease production of the silver polish, P56,000 of
fixed Mixing Department costs could be avoided.
Assume that the demand for Sprit 357 is unlimited.
The minimum number of jars of silver polish that
would have to be sold to justify further processing of
Sprit 357 is

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