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EASY ROUND

Question 1
Which of the following is not a function of financial management?
A. Financing.
B. Risk-management.
C. Internal control.
D. Capital budgeting.

Question 2
When production levels are expected to increase within a relevant range, and a flexible budget is
used, what effect would be anticipated with respect to each of the following costs?
Fixed costs per unit Variable costs per unit
A. Decrease Decrease
B. No change No change
C. No change Decrease
D. Decrease No change

Question 3
At the breakeven point, the contribution margin equals total
A. Variable costs.
B. Sales revenues.
C. Selling and administrative costs.
D. Fixed costs.

Question 4
The master budget
A. Shows forecasted and actual results.
B. Reflects controllable costs only.
C. Can be used to determine manufacturing cost variances.
D. Contains the operating budget.

Question 5
Which of the following statement is false with regard to a project feasibility study,?
A. It is based on available information and opinions of the party involved in the preparation of the
study.
B. The study is primarily a forecast which always tallies with actual events.
C. The characteristics of a good feasibility study are comprehensiveness, objectivity and simplicity.
D. One of the parties interest in feasibility studies is the stockholder.

Question 6
Short-term interest rates are
A. Usually lower than long-term rates.
B. Usually higher than long-term rates.
C. Lower than long-term rates during periods of high inflation only
D. Not significantly related to long-term rates.

Question 7
Which of the following factors generally does not impact management's capital structure strategy?
A. Business risk.
B. Tax position.
C. Management aggressiveness.
D. Expected return on assets.
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Question 8
Which of the following methods explicitly recognizes a firm's risk when determining the estimated
cost of equity?
A. Capital asset pricing model.
B. Dividend-yield-plus-growth model.
C. Bond-yield-plus model.
D. Return on equity.

Question 9
A soft drink producer acquiring a bottle manufacturer is an example of a
A. Horizontal merger.
B. Vertical merger.
C. Congeneric merger.
D. Conglomerate merger.

Question 10
Which of the following actions is likely to reduce the length of a firm's cash conversion cycle?
A. Adopting a new inventory system that reduces the inventory conversion period.
B. Adopting a new inventory system that increases the inventory conversion period.
C. Increasing the average days sales outstanding on its accounts receivable.
D. Reducing the amount of time the firm takes to pay its suppliers.
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AVERAGE ROUND

Question 1
Eagle Sporting Goods has P5 million in inventory and P2 million in accounts receivable. Its average
daily sales are P100,000. The firm's payables deferral period is 30 days. What is the length of the
firm's cash conversion period?
A. 100 days.
B. 60 days.
C. 50 days.
D. 40 days.

Question 2
If a firm borrows P500,000 at 10% and is required to maintain P50,000 as a minimum compensating
balance at bank, what is the effective interest rate on the loan?
A. 10.0%
B. 11.1%
C. 9.1%
D. 12.2%

Question 3
For one product that a firm produces, the manufacturing cycle efficiency is 20 percent. If the total
production time is 12 hours, what is the total manufacturing time?
A. 15.0 hours
B. 60.0 hours
C. 12.0 hours
D. 2.4 hours

Question 4
In its first year of operations, Magna Manufacturers had the following costs when it produced
100,000 and sold 80,000 units of its only product:
Manufacturing costs Fixed P180,000
Variable 160,000
Selling and admin, costs Fixed 90,000
Variable 40,000
How much lower would Magna's net income be if it used variable costing instead of full absorption
costing?
A. P36,000
B. P54,000
C. P68,000
D. P94,000

Question 5
At its present level of operations, a small manufacturing firm has total variable costs equal to 75
percent of sales and total fixed costs equal to 15 percent of sales. Based on variable costing, if sales
change by P1.00, income will change by
A. P0.25.
B. P0.10.
C. P0.75.
D. can't be determined from the information given.
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Question 6
The following is available for Cara Corp. for 2015:
Sales P2,000,000
Average invested capital 500,000
Net income 300,000
Required rate of return 18%
What is the residual income for Cara Corp.?
A. P0
B. P200,000
C. P210,000
D. P246,000

Question 7
In connection with a standard cost system being developed Flint Co., the following information is
being considered with regard to standard hours allowed for output of one unit of product:
Hours
Average historical performance for the past 1.85
three years
Production level to satisfy average
consumer demand
over a seasonal time span 1.60
Engineering estimates based on attainable 1.50
performance
Engineering estimates based on ideal 1.25
performance
To measure controllable production inefficiencies, what is best basis for Flint to use in establishing
standard hours allowed?
A. 1.25
B. 1.50
C. 1.60
D. 1.85

Question 8
Baby Frames, Inc. evaluates manufacturing overhead in its factory by using variance analysis. The
following information applies to the month of May:
Actual Budgeted
Number of frames manufactured 19,000 20,000
Variable overhead costs P4,100 P2 per direct labor hour
Fixed overhead costs P22,000 P20,000
Direct labor hours 2,100 0.1 hour per frame

What is the fixed overhead spending variance?

A. P1,000 favorable.
B. P1,000 unfavorable.
C. P2,000 favorable.
D. P2,000 unfavorable.
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Question 9
Rolling Wheels purchases bicycle components in the month prior to assembling them into bicycles.
Assembly is scheduled one month prior to budgeted sales. Rolling pays 75% of component costs in
the month of purchase and 25% of the costs in the following month. Component cost included in
budgeted cost of sales are
April May June July August
P5,000 P6,000 P7,000 P8,000 P8,000

What is Rolling's budgeted cash payment for components in May?

A. P5,750
B. P6,750
C. P7,750
D. P8,000

Question 10
Mien Co. is budgeting sales of 53,000 units of product Nous for October 2015. The manufacture of
one unit of Nous requires four kilos of chemical Loire. During October 2015, Mien plans to reduce the
inventory of Loire by 50,000 kilos and increase the finished goods inventory of Nous by 6,000 units.
There is no Nous work in process inventory. How many kilos of Loire is Mien budgeting to purchase in
October 2015?
A. 138,000
B. 162,000
C. 186,000
D. 238,000
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DIFFICULT ROUND

Question 1
Antlers, Inc. produces a single product that sells for P150 per unit. The product is processed through
the Cutting and Finishing departments. Additional data for these departments are follows:
Cutting Finishing
Annual capacity (36,000 direct labor hours
available in each department) 180,000 units 135,000 units
Current production rate (annualized) 108,000 units 108,000 units
Fixed manufacturing overhead P1,296,000 P1,944,000
Fixed selling and administrative expense P864,000 P1,296,000
Direct materials cost per unit. P45 P15

The current production rate is the budgeted rate for the entire year. Direct labor employees earn P20
per hour and the company has a “no layoff” policy in effect. What is the amount of the throughput
contribution per unit as computed using the theory of constraints?
A. P90.00
B. P76.67
C. P46.67
D. P26.67

Question 2
Hoger Corporation accumulated the following cost information for its two products, A and B:
A B Total
Production volume 2,000 1,000
Total direct man labor hrs. 5,000 20,000 25,000
Setup cost per batch P 1,000 P 2,000
Batch size 100 50
Total setup costs incurred P20,000 P40,000 P60,000
DMLH per unit 2 1

A traditional costing system would allocate setup costs on the basis of DMLH. An ABC system would
trace costs by spreading the costs per batch over the units in a batch. What is the setup cost per unit
of product A under each costing system?
Traditional ABC
A. P 4.80 P10.00
B. P 2.40 P10.00
C. P40.00 P200.00
D. P 4.80 P20.00

Question 3
The following is a summarized income statement of Carr Co.'s profit center No. 43 for March 2016:
Contribution margin P 70,000
Period expenses:
Manager's salary P20,000
Facility depreciation 8,000
Corporate expense allocation 5.000 33,000
Profit center income P37,000
Which of the following amounts would most likely be subject to the control of the profit center's
manager?
A. P70,000
B. P50,000
C. P37,000
D. P33,000
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Question 4
The following direct manufacturing labor information pertains to the manufacture of product Glu:
Time required to make one unit 2 DLH
Number of direct workers 50
Number of productive hours per week, per worker 40
Weekly wages per worker P500
Workers' benefits treated as direct
manufacturing labor costs 20% of wages

What is the standard direct manufacturing labor cost per unit of product Glu?
A. P30
B. P24
C. P15
D. P12

Question 5
Tam Co. is negotiating for the purchase of equipment that would cost P100,000, with the expectation
that P20,000 per year could be saved in after-tax cash costs if the equipment were acquired. The
equipment's estimated useful life in years, with no residual value, and it would be depreciated by the
straight-line method. Tam's predetermined minimum desired rate of return is 12%. The present value
of an annuity of 1 at 12% for ten periods is 5.65. The present value of 1 due in ten periods at 12% is
.322. Accrual accounting rate of return based on the initial investment is
A. 30%
B. 20%
C. 12%
D. 10%

Question 6
Bennet Inc. uses the net present value method to evaluate capital projects. Bennet’s require rate of
returnsis 10%. Bennet’s is considering two mutually exclusive projects for its manufacturing
business. Both projects require an initial outlay of P120,000 and are expected to have a useful life of
four years. The projected after-tax cash flows associated with these projects are as follows:
Year Project X Project Y
1 P40,000 P10,000
2 40,000 20,000
3 40,000 60,000
4 40,000 80,000
Total P160,000 P170,000

Assuming adequate funds are available, which of the blowing project options would you recommend
that Bennet's management undertake?
A. Project X only.
B. Project Y only.
C. Projects X and Y.
D. Neither project.
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Question 7
The Dawson Corporation projects the following for the year 2016:
Earnings before interest and taxes P35 million
Interest expense 5 million
Preferred stock dividends 4 million
Common stock dividend payout ratio 30%
Common shares outstanding 2 million
Effective corporate income tax rate 40%

The expected common stock dividend per share for i Corporation for 2016 is
A. P2.34
B. P2.70
C. P3.90
D. P2.10

Question 8
The network below describes the interrelationships of several activities necessary to complete a
project. The arrows represent the activities. The numbers between the arrows indicate the number
of months to complete each activity.

The shortest time to complete the project is

A. 5 months.
B. 8 months.
C. 6 months.
D. 14 months.

Question 9
Sago Co. uses regression analysis to develop a model for predicting overhead costs. Two different
cost drivers (machine hours and direct materials weight) are under consideration as the independent
variable. Relevant data were run on a computer using one of the standard regression programs, with
the following results.
Coefficient
Machine hours
Y Intercept 2,500
B 5.0
R3 = .70
Direct materials weight
Y Intercept 4,600
B 2.6
2
R = .50

What regression equation should be used?

A. Y = 2,500 + 5.0X
B. Y = 2,500 + 3.5X
C. Y = 4,600 + 2.6X
D. Y = 4,600+1.3X
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Question 10
Associated Supply, Inc. is considering introducing a new product that will require a P250,000
investment of capital. The necessary funds would be raised through a bank loan at an interest rate of
8%. The fixed operating costs associated with the product would be P122,500 while the contribution
margin percentage would be 42%. Assuming a selling price of P15 per unit, determine the number of
units (rounded to the nearest whole unit) Associated would have to sell to generate earnings before
interest and taxes (EBIT) of 32% of the amount of capital invested in the new product.
A. 35,318 units.
B. 32,143 units.
C. 25,575 units.
D. 23,276 units.
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CLINCHER ROUND

Question 1
During 2015, Thor Lab supplied hospitals with a comprehensive diagnostic kit for P120. At a volume
of 80,000 kits, Thor had fixed costs of P1,000,000 and a profit before income taxes of P200,000. Due
to an adverse legal decision, Thor's 2016 liability insurance increased by P1,200,000 over 2015.
Assuming the volume and other costs are unchanged, what should the 2016 price be if Thor is to
make the same P200,000 profit before income taxes?
A. P120.00
B. P135.00
C. P150.00
D. P240.00

Question 2
Mien Co. is budgeting sales of 53,000 units of product Nous for October 2015. The manufacture of
one unit of Nous requires four kilos of chemical Loire. During October 2015, Mien plans to reduce the
inventory of Loire by 50,000 kilos and increase the finished goods inventory of Nous by 6,000 units.
There is no Nous work in process inventory. How many kilos of Loire is Mien budgeting to purchase in
October 2015?
A. 138,000
B. 162,000
C. 186,000
D. 238,000

Question 3
A flexible budget is appropriate for
Marketing Direct material usage
budget budget
A. No No
B. No Yes
C. Yes Yes
D. Yes No

Question 4
Under the 2-variance method for analyzing overhead, which of the following variances consists of
both variable and fixed overhead elements?
Controllable (budget) Volume
variance variance
A. Yes Yes
B. Yes No
C. No No
D. No Yes
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Question 5
The following information pertains to Aria Corp. and its operating segments for the year ended
December 31, 2016:
Sales' to unaffiliated customers P2,000,000
Intersegment sales of products similar to those sold
to unaffiliated customers 600,000
Interest earned on loans to other industry segments 40,000

Aria and all of its divisions are engaged solely in manufacturing operations and evaluates divisional
performance based on controllable contribution. Aria has a reportable segment if that segment's
revenue exceeds
A. P264,000
B. P260,000
C. P204,000
D. P200,000

Question 6
Which of the following statements is true for a firm that uses variable costing?
A. The cost of a unit of product changes because of changes in the number of units manufactured.
B. Profits fluctuate with sales.
C. An idle facility variation is calculated.
D. None of the above.

Question 7
Which of the following costs will vary directly with the level of production?
A. total manufacturing costs
B. total period costs
C. variable period costs
D. variable product costs

Question 8
All of the following are alternative marketable securities suitable for investment except:
A. US treasury bills.
B. Europesos.
C. Commercial paper.
D. Convertible bonds.

Question 9
Which of the following investments generally pay the highest return?
A. Money market accounts.
B. Treasury bills.
C. Treasury notes.
D. Commercial paper.

Question 10
The process of dividing all potential consumers into smaller groups of buyers with distinct needs,
characteristics, or behaviors, who might require a similar product or dervices mix, is called
A. Strategic planning.
B. Market segmentation.
C. Product positioning.
D. Objective setting.