MANAGEMENT ADVISORY SERVICES First Pre-boatd Examination CPAR : CPA REVIEW SCHOOL, OF THE PHILIPPINES JOANNA Manila Saturday, February 12, 2011 400 pra to 3.09 pra Seta Instructions: Choose the BEST answer for each of the following items.. Mark only.one answer for each item on the Special Answer Sheet provided. Strictly no erasure allowed, Use Pencil No. 1 only. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 1 to 5: A company produces a product with the following standard costs Materials - 2 pieces @ P5 per piece PLO Labor - 4 hours @ P8 per hour 32 Variable overhead - 4 hours @ P6 par hour 24 Fixed overhead® - 4 hours @ P4 per hour -16 Total standard manufacturing cost per unit bez *pased on 3 capacity fevet of 5,000 units Ifa flexible budget for 4,500 units, 5,000 units, and 5,500 units is prepared for a certain month, the budgeted costs are 4500 units § S.000units 5.800 units . a 369,000 P410,000 451,000 ic SES b. 297,000 330,000 363,000 s ie 377,000 410,000 443,000 ary d. 0 440,000 Q ‘Assume that X is the number of units to be produced and TBC is the total budgeted cost, the flexible budget formula that the company may use te compute total budgeted cast for any value of X within the relevant range is a. TBC = 82x. c. TBC = 80,000. b. TBC = 66x. d. TBC = 66x + 86,000. ‘Assume that during the month, the company actually produced 4,800-units anc incurred actual total manufacturing costs of P400,000, Row fiiuch Ts the flexible byidget for the actual production? 7 ‘a, 400,000 ~ cc P393,800 b. P386,800/ d. P316,800 i How much is the total standard cost that should have ‘veen incurred for the actual production of 4,800 units? ; a. P396,800 P393,600-” Z b. 400,000 d. 316,800 How much is'the total standard cost variance? = a. P3,200 unfavorable ¢c. 10,000 favorable b, P6,400 unfavorable“ d, 3,200 unfavorable Ethical challenges for management accountants inciude: 3. whether to aczept gifts from suppliers, knowing it is an effort to indirectly influence decisions b. whether to report unfavorable department information that tnay result in unfavorable consequenices for a friend ©. whether to file a tax return this year G. Both a and b are correct Which of the following does NOT affect the direct/indivect classification of @ cost? a. the level of budgeted profit for the next yearMANAGEMENT ADVISORY SERNICES 2 vag cPAR Fist Prevoard Examination —Febeusy 12,2001 eriality of the cost in question ' Information about the cost b. the mat ¢. available technology to-gathe: d._ the design of the operation 8, Rover Company sels only two products, Product A and Product B. Product A Product 8 | Total Selling price Pag PSO Variable cost per unit p24 P40 Total fixed costs : F840,000 Ws Rover sells tivo units'of Product A for each unit it sells of Product B. Rover faces a tax rate of 30%. Rover desires a net after-tax income of P73,500. The breakeven point in units 1 would be: ‘ | a, 21,750 units of Product A and 43,500 units of Product 8 al b. 22,500 units of Product’A and 45,000 units of product B c. 43,500 units of Product A and 21,750 units of Product & d. 45,000 units of Product A and 22,500 units of Product 8 9. Cost behavior refers to: . how costs react to a change in the level of activity “ b. whether a cost is incurred in a manufacturing, merchandising, or service company ¢. classifying costs as either inventoriable ot period costs G. whether a particular expense has been ethically incurred 10. Management accounting is considered successful when it: a. helps: creditors evaluate the company's performance | +b. helps managers improve their decisions 7 c. is accurate 4. is relevant and reported annually 11. When 10,000 units are produced, fixed costs are P14 per unit. ‘Therefore, when 20,000 nits are produced fixed costs will: ss /'a. increase to P28 per unit » G decrease to P? per unit b. remain at P14 per unit s a. total P280,000 12, BLOF’ Manufacturing produces @ unique vaive, and has the capacity to produc: -) valves annually. Currently BLOF produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of tots! manufacturing costs and unit manufacturing costs given this change? 3. Total manufacturing costs will increase and unit manufacturing costs will stay the same.» i b. Total manufacturing costs will increase and unit,manufacturing costs wil ds c. Total’ manufacturing costs will stay the same and unit manufacturing cost the same, d. Total manufacturing costs will stay the same and unit manufacturing co : decrease. 2,0 13, Management accounting: a. focuses on estimating future revenues, costs, and othen measures to activities and their results ~ provides information about the company a5 & whole c. reports information that has occurred in the past that is verifiable and rela’! d. provides information that is generally available only on a quarterly or anaual 34. In the cost classification system used by manufacturing firms, tata! manufacturing costs would include all of the following EXCEeran INAWAGEMENT ADUISORY SERVICES | Fist Petcare Examen Faby 12,2014 Pay Sf pages ) i Asdtree materials costs and conversion costs ' b. direct materials costs, direct manufacturing.labor costs, and manufacturing overhead costs |» G indirect materials costs, indirect manufacturing labor. costs, and manufacturing overhead costs + d. prime costs and.manufacturing overhead costs 15. Which of the following items is NOT an assumation of CVP analysis? a. Total costs can be divided into a fixed component and a component that is variable with’ respect to the level of output. When graphed, total costs curve upward/ Theiurit-selling price is known and constant. ‘All revenues and costs can be added and compared without taking into account the time value of money, ans 16. Matulunging Kamay Is @ nonprofit organization that supplies electric fans during the summer for individuals in need. Fixed costs are P200,000. The fans cost 20.00 each. The organization has a budgeted appropriation of P480,000. How many peopie can receive a fan-daring the summer? : a. 12,000 people c. 24,000 people *b. 14,000 people d. 34,000 people Which of the following cost(s) @re"inventoried |when using variable costing? 3./ direct manufacturing costs<——--_—>"c. fixed manufacturing costs b. variable marketing costs +d. Both a and b are correct. \_ ‘THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 18 THROUGH 21: Metro University is planning to hold a fundraising banquet at one of the focal country clubs. It has two options:for the banquet: Fa art OPTION 1: Quezon City Country Club sai Se @. Fixed rental cobt of P1,000 ve b. P12 per person for food _ a ne OPTION.2: Makati Country Club Cig) i a. Fixed rental cost of P3;000 i 7 \ b. Acaterer who charges P8.00 per person far food : Metro University has budgeted P1,800 for administrative and marketing expenses. It plans to hire a band which wil! cost another P800. Tickets are expected to be P30 per person. Local business supporters will donate any other items required for the event, 18, Which option provides the least amount of risk? a. Optionone ¢. Both options provide.the same amount of risk. b. Option two d. Neither option has risks. 19. Which option ‘has the lowest breakeven point? . | a. Option one. c. Both options'have the same breakeven point. | b. Option two d. ‘The lowest breakeven point cannot be deterrnined. j 20. Which option provides the greatest degree of operating leverage if 600 people attend? a. Option one b. ‘Option two lew c. Both options provide equal degrees of operating leverage. (nn d. Operating leverage is indeterminable. 7au. 23. 24, THE "AR Fist Preboard Exarination ~ February 12, 2011 MANAGEMENT ADVISORY SERVICES Spe How many persons should attend to. make Metro University indifferent between Options One and!Two? 2. 600 500. b, 200 d. 255 na cue. During @ typical month, the stand reports a : of PO. Spikey Company currently sells bei profit of P9,000 with sales of 50,000, fixed costs of P21,000, and variabl per banana cue. “ts Newt year, the company plans to start selling kamote cus for P3 per unit. Kaur vi have a variable cost of P0.72 and new equipment and personnel to produce ee! will increase monthly fi 15 by P8,808. initial sales of kamove cue should vote 8,04 units, Most of the kamote cue sales ane anticipated to come from current banana cus, purchasers, therefore, manthly sales-of banana cue are expectd to decline to P20,000, “= “After the.fitst year of kemate-cue Sales; the company president believes that banana cus sales will increase to P33,750 a month and kamote cue sales will increase to 7,500 units a month. 29s The monthly breakeven sales during the first year of kamote cue sales, assuming & constant sales mix of ighotdod and 2 units of kamote cue, are . a, 5,400 bananz cue and 10,800 units of kamote cue ° b. 16,200 banana cue and 21,600 units of kamote cue c. 31,250 banana cue and 5,000 units of kamote cue d. 21,875 banana cue and 3,863 units of kamote.cue We Th 2eilbeiee Activity-based costing (ABC) can eliminate cost distortions because ABC: . b. beable to set the correct selling price of the product. use the knowledge about the variances to promote learning @ continueuscraR MANAGEMENT ADVISORY SERVICES Fs Prenoard Exarinalin ~ February 12:20 47. 48. 50, d. trace the variances to the proper inventory accounts so that they may be valued at actual costs. S For January, the’esst components of a picture frarye include P0.35 for the glass, P.68 for the wooden frame, and P0.80 for assembly. The assembly desk and tools cost P#00 41,000 frames are expected to be produced in the coming year. What cost function best represents these casts? “a. y= 1.80 + 400X c y= 2.20 + 1,000K b. y= 400 +1.80X d. y= 1.00 + 400X An Enterprise Resource Planning System can best be described as: a. a collection of programs that use @ variety of unconnected databases b. a'single database that collects data and feeds it into applications that support each of the company's business activities, ‘such as purchases, production, distribution, and sales . ca database that Is primarily used by a purchasing department’ to determine: the correct amount of a particular supply item to purchase d. a sophisticated ‘means of linking two.or more companies to facilitate thelr planning processes In economics, it refers to a rise in the general level of prices of goods and services in an economy over a pariod of time. a. Inflation . Deflation b. Recession d. Depression SMI. Company manufactures three sizes of kitchen appliances: small, medium, and large. Product information is provided below. ‘Small Laras Unit selling price P1s0: P5CO Unit costs: Variable manufacturing (60) (120) (200) Fixed manufacturing (40) (50) (120) Variable selling and administrative (30) (30) (30) Unit profit P20 bso 150 Demand in units 100 120 00 Machine-hours per unit wv . 40 100 , ‘ 27 ‘The maximum machine-hours available are 6,000 per week. How many of each product should be produced per month using the short-run pr maximizing strategy? ‘Smal! Mediura Large a 0 120 2 b 100 0 40 e 100 200 9 a. 100 20 40 7CPAR CPA Review School of the Philippines MANAGEMENT ADVISORY SERVICES FEBRUARY 2011 First Pre-bourd| Examination = SOLUTIONS, 69" Bates @) 1, Bungee Proieon nuns 500 ‘in 00; Variable cost nOHs2s26 = 68) xunis P27 PIO PES Fixes vend (PIB 00D unite). _—BD Torbudgewdmigcos = a * cenominalor level Banana cue Kamat cue 1M 8,000 + P2000), 4. Var, cost 600 unis x PS) Vevible cast Fas cost = Var east per unit armbar of units Budgeted cost or actual production 4. Act proaucton ‘eM par uni gP30,009~ 91280) 3S eran (PALO GUE .60} oe sna os ee in den 5. Actua costs Less stances ost 26. Inepecton = 20-- x 17500= —P 2a60 asec ~unavoreble : 8. Fed cost Sepervsion= 5 | 1 | | \2. ‘cucent Werkers 5 Hours weed 2.100 Total hours 70.500 xc Rate por hour p_ 800 Tota cost peo 28, Special price ese var. cost (Pa0 + P20 + PS « PIS) CC per unit mbar of uits Increase in poft 40, Fixed overhead in beinsng inventory Less fed vrhead in ends eventery Diflereroe in newer 41, Avoid coss to make Materials Labor Variable overhead Fixed overieas (P20.000x 19%) Total avoidable coat tome Cost to buy (1,000 P85) Decrease in income 42, Avoitebe coat: * unis dare Maximum acceptable pice 44, Sales 300,000, Less aveidante ets Materials 150.000, aban 60,000 Guerhead (P100,000 x Ture) _ Togo _ 280,009 conrouion Eon ‘The produc continues 20,000 ts comorate pois, therfore, oping his product vl cesease operating Income by P2000, # Sail Med Largs Sating pee piso P29) PSO Less cet 1 her nt mo + haus pe uit 2 ike bor 0 Protrank tas on Ci pera * 8 @ val s.000 ‘Hours: io aoa x20 2,000 Beis fe 00 ~~ hour per unit, Large: 1 nis f Large tobe reciced =a Bestproduct combination $00 unis cl St ant 0 uns of Large