MANAGEMENT ADVISORY SERVICES

1. Which management function involve/s identifying inefficient processes and rewarding effective employees?
A. Strategic Management C. Preparation of Financial Statements
B. Planning and Decision-Making D. Management and Operational Controls

2. Which function is MOST directly related to management by objectives?

A. Control C. Reporting
B. Planning D. Decision Making
3. Jung Corporation (JC) wanted to reduce the break-even point of its company. Which of the following actions may JC
take?
A. Decrease both fixed cost and contribution margin
B. Decrease the fixed cost and increase the contribution margin
C. Increase both fixed cost and contribution margin
D. Increase the fixed cost and decrease the contribution margin
4. Which of the following statements is TRUE?
A. One way to compute the break-even point is to divide the total sales by the cost-margin ratio.
B. A high contribution margin ratio will lower profit as sales exceed the break-even point.
C. A shift in sales mix towards less profitable products will cause the overall break-even point to fall.
D. The net income will increase by the unit contribution margin for each additional unit sold once the break-even point
has been reached.
5. Which of the following standard costing variances would be least controllable by a production supervisor?
A. Overhead volume C. Labor efficiency
B. Overhead efficiency D. Material usage
6. During 20X1, a department’s 3-variance overhead standard costing system reported unfavorable spending and volume
variances. The activity level selected for allocating overhead to the product was based on 80% of practical capacity. If
100% of practical capacity had been selected instead, how would the reported unfavorable spending and volume
variances be affected?
A. Both variances will increase.
B. Both variances will remain the same.
C. The spending variance will increase while the volume variance will remain the same.
D. The spending variance will remain the same while the volume variance will increase.
7. A manufacturing company prepares income statements using both absorption and variable costing methods. At the
end of a certain period, actual sales revenues, gross profit, and contribution margin approximated budgeted figures,
whereas net income was substantially greater than the budgeted amount. There were no beginning or ending
inventories. Which of the following is the MOST possible explanation for the increase in the actual net income
compared to the budgeted amount?
A. Actual manufacturing fixed costs have increased.
B. Actual selling and administrative fixed expenses have decreased.
C. Actual sales prices and variable costs have increased proportionately.
D. Actual sales prices have declined proportionately to the variable costs.
8. A single-product company prepares income statements using both absorption and variable costing methods. The
manufacturing overhead cost applied per unit produced in 20X2 was the same as in 20X1. The 20X2 variable costing
statement reported a profit, whereas the 20X2 absorption costing statement reported a loss. Which of the following is
the MOST possible explanation for the difference in reported income?

A. The units produced in 20X2 are less than the units sold in 20X2.
B. The units produced in 20X2 are more than the units sold in 20X2.
C. The units produced in 20X2 are less than the activity level used to allocate overhead to the product.
D. The units produced in 20X2 are more than the activity level used to allocate overhead to the product.
9. Division A is considering a project that will earn a return rate greater than the imputed interest charge for invested
capital but less than the division’s historical return on invested capital. Division B is considering a project that will earn
a rate of return greater than the division’s historical return on invested capital but less than the imputed interest charge
for invested capital. If the objective is to maximize residual income, should these divisions proceed or not with their
respective projects?
A. Only Division A should proceed with its project
B. Only Division B should proceed with its project
C. Both divisions should proceed with their respective projects
D. Both divisions should not proceed with their respective projects

10. The balanced scorecard generally uses performance measures with four (4) different perspectives. Which performance
measures would be used from the internal business processes perspective?
A. Cycle time C. Employee satisfaction
B. Customer retention D. Hours of training per employee
11. Tung Corporation (TC) reduced its safety stock of raw materials by 80% because it found a more dependable supplier.
How does this safety stock reduction affect TC’s economic order quantity (EOQ)?
A. No effect C. 64% decrease
B. 20% increase D. 80% decrease
12. Which of the following factors would likely cause a firm to increase its use of debt financing, as measured by the debt-
to-total capitalization ratio?
A. Increase in economic uncertainty C. Increase in the corporate income tax rate
B. Increase in the price-earnings ratio D. Increase in the degree of operating leverage
13. Dong Company manufactures industrial products and employs a calendar year for financial reporting. Assume that the
total quick assets exceeded the total current liabilities before and after each transaction described. Assume that Dong
has positive profits during the year and a credit balance throughout the year in its retained earnings account. An
obsolete inventory of P125,000 was written off during the year. What is the effect of the write-off?
A. Increased the quick ratio C. Decreased the quick ratio
B. Increased the net working capital D. Decreased the current ratio
14. In comparing the current ratios of two (2) companies, why is it invalid to assume that the company with the higher
current ratio is better?

A. The current ratio includes assets other than cash.

B. A high current ratio may indicate inadequate inventory on hand.
C. The two (2) companies may define working capital in different terms.
D. A high current ratio may indicate inefficient use of various assets and liabilities.

15. Which of the following is an advantage of the accounting rate of return method of evaluating investment returns?
A. It considers depreciation.
B. It considers the risk of investment.
C. It considers the time value of money.
D. It corresponds to the measure that is often used in evaluating performance.
16. An organization uses capital budgeting techniques to compare two (2) independent projects. It could accept one (1),
both, or neither of the projects. Which of the following statements is TRUE about the use of net present value (NPV)
and internal rate of return (IRR) methods in evaluating two (2) projects?

A. NPV and IRR criteria will always lead to the same accept or reject decision for two (2) independent projects.
B. If the NPV criterion leads to accepting the first project, the IRR criterion will never lead to accepting the first project.
C. If the first project’s IRR is higher than the organization’s cost of capital, the first project will be accepted, but the
second project will not.
D. If the NPV criterion leads to accepting or rejecting the first project, one cannot predict whether the IRR criterion will
accept or reject the first project.
17. Which yield curve is often a sign that the economy may soon stagnate?
A. Flat C. Inverted
B. Upward D. Vertical
18. Doy Corporation (DC) acquires an interest in a foreign company that supplies parts or raw materials required to
produce a product sold by DC. This is an example of:
A. Vertical Foreign Direct Investment C. Conglomerate Foreign Direct Investment
B. Horizontal Foreign Direct Investment D. Backward and Forward Direct Investment
19. What eventually happens as a firm produces more and more outputs with a fixed production capacity (fixed cost)?
A. Average fixed costs increase. C. Marginal productivity of inputs increases.
B. The Law of Diminishing Returns sets in. D. Efficiency increases, and marginal costs decline.

20. When consumer income decreased, the consumption of luncheon meat fell, and peanut butter consumption increased.
With everything else equal, which of the following is TRUE?
A. Luncheon meat is an inferior good. C. Luncheon meat and peanut butter are complements.
B. Peanut butter is an inferior good. D. Luncheon meat and peanut butter are substitute goods.
21. Suppose the equilibrium wage for low-skilled workers in Cebu is P300.00 an hour. If the government increases the
minimum wage to P350.00 an hour, what would be the effect on the market for low-skilled labor?
A. An excess supply of labor would result. C. The supply of labor would increase.
B. An excess demand for labor would result. D. The demand for labor would decrease.
22. Sam Batumbakal Merchandising is a major car parts supplier in a local town. As the company became well-known, it
started increasing the price of its best-selling car parts from P5,000 to P5,500. As a result, the quantity of their product
sold fell from 700 to 500. What is the demand elasticity of the given product?
A. Elastic C. Inelastic
B. Unitary D. Perfectly elastic
500−700
Change∈Quality= X 100=8.33333
500+700
( )
2
5,500−5,000
Change∈ Price= X 100=2.38095
5,500+5,000
( )
2
8.3333
=3.50
2.3095

23. Cool Cola and Sparkle are substitute soft drinks. Which of the following would occur if Cool Cola’s price increases?
A. Sparkle’s supply will decrease, and the supply curve will shift left.
 B. Cool Cola’s supply will decrease, and the supply curve will shift left.
C. The demand for Sparkle will increase, and the demand curve will shift right.
D. The demand curve for Cool Cola will decrease, and the demand curve will shift left.
24. Which one of the following statements about supply and demand is TRUE?
A. If demand increases and supply decreases, the equilibrium price will fall.
B. If demand increases and supply increases, the equilibrium quantity will fall.
C. If demand increases and supply decreases, the equilibrium price will increase.
D. If demand remains constant and supply increases, the equilibrium price will increase.

25. Which of the following situations would there be inelastic demand?

A. A 5% price increase results in a 3% decrease in the quantity demanded.
B. A 4% price increase results in a 6% decrease in the quantity demanded.
C. A 4% price increase results in a 4% decrease in the quantity demanded.
D. A 3% price decrease results in a 5% increase in the quantity demanded.
26. A plastic manufacturer sold mugs last year for P7.50 each. Variable costs of manufacturing were P2.25 per unit. The
company needed to sell 20,000 cups to break even. Net income was P5,040. This year, the company expects the price
per cup to be P9.00; variable manufacturing costs will increase by 33.3%, and fixed costs will increase by 10%. How
many mugs (rounded) does the company need to sell this year to break even?
A. 17,111 C. 19,250
B. 17,500 D. 25,667
Last Year Current Year
Selling price ₱ 7.50 ₱9
Less: Variable cost ( 2.25) ( 3)
( 2.25 x 33.3 %) + 2.25
Contribution margin ₱ 5.25 ₱6
Fixed cost 105,000 115,500
( 20,000 X 5.25)
( 105,000 X 1.10)
Divide by: CM 5.25 6
BEP Units ₱ 20,000 ₱ 19,250

27. At the start of its fiscal year, Hyung Corporation (HC) anticipated producing 300,000 units. The annual budgeted
manufacturing overhead was P150,000 for variable costs and P600,000 for fixed costs. In April, when there was a
beginning inventory for finished goods of 5,000 units, the company showed an income of P40,000 using absorption
costing. That same month, the ending inventory for finished goods was 7,000 units. What amount would the company
recognize as income for April using variable costing?
A. P35,000 C. P45,000
B. P36,000 D. P46,000
Fixed cost ₱ 600,000 Net income ₱ 40,000
Divide by: Produce units 300,000 Less: End, Inventory (4,000)
( 2,000 x 2 )
Total 2 Ending inventory for ₱ 46,000
finished goods
Beg, Inventory WIP 5,000
Less: End, Inventory WIP ( 7,000)
Total End, Inventory 2,000

28. Patrick Company (PC) uses flexible budgeting for cost control. PC produced 10,800 units of products during October,
incurring indirect materials costs of P13,000. Its master budget for the year reflected indirect materials costs of P180,000 at a
production volume of 144,000. What indirect materials cost shall be reflected in October’s production flexible budget?

A. P11,700 C. P13,500
B. P13,000 D. P13,975
Indirect Materials ₱ 180,000
Divide by: Production Volume 144,000
Total 12.5
Multiply by: Units produce 10,800
Indirect materials ₱ 135,000

For items 29 – 31:

You assist the Budget Director of Twin Corporation (TC) in formulating their budget. He gave you the following
information:
• TC manufactures and sells only one (1) product. The selling price during the coming month is expected to be at
the prevailing price of P5.00 per unit. Expected sales during the month are 75,000 units of finished goods.
Finished goods expected to be on hand at the beginning and end of the month total 42,000 and 50,000 units,
respectively.

• The direct labor cost is P3.00 per hour. One-fourth (¼) of an hour of direct labor is required to manufacture each
unit of the finished product.
• The factory overhead is applied to the work-in-process based on direct labor hours. Variable and fixed factory
expenses at the planned level of operations are expected to amount to P33,200 and P99,600, respectively.
 • The raw materials expected to be on hand at the beginning of the month total 5,000 gallons. Only one (1) type of
raw material is used to produce the finished goods. One and a half (1½) gallons of raw materials are needed to
manufacture each unit of the finished product. Raw materials are expected to cost P0.18 per gallon in the coming
month. 8,000 gallons are expected to be on hand at the end of the month.

• Variable administrative and selling expenses are P1.00 per unit.

29. How much are the expected peso sales?
A. P75,000 C. P250,000
B. P3,000 D. P375,000
Expected sales ₱ 75,000
Multiply by: Prevailing price 5
Expected peso sales ₱ 375,000

30. How much is the budgeted raw materials purchase cost?

A. P22,410 C. P23,760
B. P22,950 D. P124,500
Projected sales ₱ 75,000 Production needs ( 83,000 x 1.50) ₱ 124,500
Add: End, inventory 50,000 Add: End, Inventory 8,000
Less: Beg, inventory ( 42,000) Less: Beg, Inventory (5,000)
Total ₱ 83,000 Inventory to be manufactured ₱ 127,500
Multiply by: Raw materials expected cost 0.18
Budgeted raw materials purchase cost ₱ 22,950

31. How much is the net profit before tax?

A. P53,000 C. P178,500
B. P103,500 D. P249,500
Direct materials
Raw materials, beg ( 5,000 x 0.18) ₱ 900
Add: Budgeted purchase 22,950
Raw materials available ₱ 23, 850
Less: Raw materials, end ( 8,000 x 0.18) ( 1,440) ₱ 22,410
Direct Labor [ 83,00 x ( 3 x ¼) ] 62,250
Total manufacturing cost ₱ 84,660
Work-in-process
Variable ( 83,000 X 1.60) 132,800 ( 33,200 / 62,250) (3) = 1.60
Cost of goods manufactured ₱ 217,460

Sales ( 75,000 x 5) ₱ 375,000

Cost of goods sold
Finished goods, beg ( 42,000 x 2.62 ) ₱ 110,040 (217,460 / 83,000) =2.62
Add: Cost of goods manufactured 217,460
Cost of goods available for sale ₱ 327,460
Less: Finished goods, end ( 50,000 x 2.62) 131,000 (196,500)
Contribution margin ( 2.38) ₱ 178,500
Less: Operating expenses
Variable administrative & selling expenses 75,000
( 75,000 x 1)
Net income before tax ₱ 103,500

32. Dobby Corporation (DC) is considering an investment in a new project. The project has an estimated cost of
P1,000,000. If DC has a target rate of return of 12%, what must be the project’s return on investment (ROI) to generate
a residual income of P150,000?
A. 12% C. 25%
B. 15% D. 27%

( ROI−Total assets )−( Target rate x Total assets )=Residual Income

( ROI−1,000,000 )−( 12 % x 1,000,000 )=150,000
1,000,000−( 120,000+150,000 )
270,000
=0.27∨27 %
1,000,000
33. The Asahi Company has P2,598,500 in current assets and P1,076,250 in current liabilities. Its initial inventory level is
P326,350, and it will raise funds as additional short-term notes payable and use them to increase inventory. How much
can its short-term debt (notes payable) increase without pushing its quick ratio below 2.0? Do not round off when
computing the percentage. For the final answer, round off to the whole number.
A. P119,650 C. P239,250
B. P215,250 D. P446,000

2,598,500−326 , 350+ x
2=
1,076,250+ x
2 ( 1,076,250 ) + x=2,272,150+ x
 2,152,500+2 x=2,272,150+ x
2 x−x=2,272,150−2,152,500
x=119,650

34. Dan Company has a total assets turnover of 0.30 and a profit margin of 10%. The company president, Lisa Meir, is unhappy
with the current return on assets. She thinks it could be doubled by (1) increasing the profit margin to 15% and
(2) increasing total assets turnover. What new asset turnover ratio, along with the 15% profit margin, is required to
double the return on assets?
A. 35% C. 45%
B. 40% D. 50%
( .30 x 10 % )( 2 )
=0.40∨40 %
15 %

35. In Year 1, Jennie Company’s cash is 15% of sales, accounts receivable is 10% of sales, inventory is 20% of sales,
accounts payable is 30% of sales, and long-term debt is 5% of sales. The company prepares its forecasts and
anticipates that sales will increase from P50,000 in Year 1 to P55,000 in Year 2. Jennie uses the percentage-of-sales
method. What amount would be the required net working capital in Year 2?
A. (P2,750) C. P7,500
B. P5,500 D. P8,250

Cash ( 50,000 x 15% ) ₱ 7,500

Accounts receivable ( 50,000 X 10% ) 5,000
Inventory ( 50,000 x 20%) 10,000
Less: Accounts payable ( 50,000 x 30% ) ( 15,000)
Net working capital year 2 ₱ 7,500

36. Rachelle Corporation is offered trade credit terms of 3/15, net 45. The firm does not take advantage of the discount and
pays the account after 67 days. Using a 365-day year, what is the nominal annual cost of not taking the discount?
A. 18.20% C. 23.48%
B. 21.71% D. 26.45%

3%
Discount =0.03092
97 %
365
Days =7.01923
67−15
Nominal annual cost=0.03092 x 7.01923=0.2171∨21.71 %
37. A division of San Miguel Corporation reported a return on investment of 20% for a recent period. What is its profit
margin if the division’s asset turnover is 5?
A. 100% C. 4%
B. 25% D. 2%

20 %
Profit Margin =4 %
5
38. Below are the accounting records of Jane Corporation for the year ended Dec. 31, 2022:
Net Credit Sales P576,000
Average Materials Inventory 8,000
Average Finished Goods Inventory 12,000
Average Accounts Receivable 80,000
Average Accounts Payable 5,000
Net credit purchases 120,000
Raw materials used 96,000
Gross profit rate 25%
Number of days in a year 360 days
What are the average days in the company’s operating cash conversion cycle?
A. 50 days C. 105 days
B. 75 days D. 45 days

Materials Inventory turnover 30

( 96,000/ 8,000) = 12 ( 360/ 12)
Finished goods Inventory turnover 10
( 576,000 x 75%) / 12,000 = 36 ( 360/36 )
Account receivable turnover 50
( 576,000 / 80,000) = 7.2 ( 360 / 7.2 )
Less: Accounts Payable ( 15 )
( 120,000 / 5,000) = 24 ( 360 / 24 )
 Cash Conversion Cycle 75

39. Liza Manufacturing incurs annual fixed costs of P250,000 in producing and selling a single product. The estimated
units to be sold are 125,000. An after-tax income of P75,000 is the target income of management. The company
projects its income tax rate at 40 percent. What is the maximum amount Liza can expend for variable costs per unit
and still meet its profit objective if the sales price per unit is estimated at P6?
A. P3.37 C. P3.00
B. P3.59 D. P3.70

Before income tax ( 75,000 /60% ) ₱ 125,000 Projected Sales ( 125,000 x 6 ) ₱ 750,000
Add: Fixed cost 250,000 Less: CM ( 375,000)
Contribution Margin ₱ 375,000 Variable cost ₱ 375,000
Variable cost per unit ₱3
( 375,000/ 125,000)

40. For its most recent fiscal year, the company reported a contribution margin of 40 percent of sales and a net income of
10 percent. If its fixed costs for the year were P60,000, what is the margin of safety?
A. P150,000 C. P600,000
B. P200,000 D. P50,000
Sales 100% ₱ 200,000 Fixed costs ₱ 60,000
Less: Variable cost ( 60% ) Divide by: CM Ratio 40%
Contribution margin 40% BEP Units ₱ 150,000
Less: Fixed cost ( 30%) 60,000
Net income 10% Total sales ₱ 200,000
Less: BEP Units ( 150,000 )
Margin of Safety ₱ 50,000

41. Fam Company manufactures a single product. In the prior year, the company reported sales of P90,000, variable costs of
P50,000, and fixed costs of P30,000. Fam expects its cost structure and sales price per unit to remain the same in the
current year. However, total sales are expected to increase by 20 percent. If the current year’s projections are realized,
what should be the percentage of excess net income for the current year over the prior year’s net income?
A. 100 percent C. 20 percent
B. 80 percent D. 50 percent

Sales ₱ 90,000 Sales ( 40,000 x 20% ) ₱ 48,000

Less: Variable cost ( 50,000) Less: Fixed costs ( 30,000 )
Contribution margin ₱ 40,000 Net income ₱ 18,000
Less: Fixed cost (30,000)
Net income ₱ 10,000 Increase in net income ₱ 8,000
Percentage excess 80%
( 8,000 / 10,000)

42. A company is preparing a plan for next year, using cost-volume-profit analysis as its planning tool. Next year’s planned
sales data about its product are as follows:
Selling price P60.00
Variable manufacturing costs per unit 22.50
Variable selling and administrative costs 4.50
Fixed operating costs (60% is manufacturing cost) 148,500
Income tax rate 32%
A. P310,800 C. P330,000
B. P397,500 D. P222,000
Fixed cost operating ₱ 148,500
Add: Desired profit ₱ 22,440 33,000
( 22,440 / ( 1 – 32% )
Total ₱ 181,500
Divide by: Contribution margin 60 – ( 22.50 + 4.50 )/ 60 55%
Required sales ₱ 330,000

43. Part XY is a component that Sedan Corporation uses to assemble motors. The cost to produce one XY is presented as
follows:
Direct Materials P4,000
Materials handling (20% direct materials) 800
Direct labor 32,000
Overhead (150% of direct labor) 48,000
Total manufacturing cost P84,800
Materials handling, which is not included in the manufacturing overhead, represents the direct variable costs of the
receiving department that are applied to direct materials and purchased components based on their cost.
The company’s annual overhead budget is 1/3 variable. Dong Corporation offers to supply XY at a unit price of
P60,000. Should the company buy or manufacture XY?
A. Buy, due to the advantage of P12,800 per unit B. Buy, due to the advantage of P24,800 per unit
C. Manufacture, due to the advantage of P7,200
D. Manufacture, due to the advantage of P19,200

44. An investor can sell an investment now for P10,000. Another

Cost alternative Cost
to make is to hold the investment
to buy for three (3) days,
Difference
after which it can be sold based on the following sales prices and probabilities:
Direct materials ₱ 4,000Probabilities
Sales Price
Materials handling (20% direct materials) P5,000 800 40% 12,000
10,000 20%
Direct labor 12,000 32,000 30%
30,000 10%
Overhead 16,000
Which of the following is the MOST reasonable statement using the probability theory?
A. Cost
Selltothe
buy ₱ 60,000 value of the holding.
investment now because the current sales price exceeds the expected
B. Sell the investment now because there is a 60% chance that the sales price will fall in three (3) days.
[Link]
Hold thecost
investment for three (3) days because the₱ expected
52,800 value of ₱ 72,000exceeds the₱current
holding 19,200 price.
D. Hold the investment for three (3) days because the current sales price exceeds the expected value of the holding.
Multiply by: Variable cost 1/3
45. Song Company (SC) budgeted sales of 400,000 calculators
Total at P40 per unit for 20X1. Variable and fixed manufacturing
₱ 13,600
costs were budgeted at P16 and P10 per unit. A special order offering to buy 40,000 calculators for P23 SC received
each in March 20X1. SC has sufficient plant capacity to manufacture additional quantities; however, the production
would have to be done over time at an estimated additional cost of P3 per calculator. Accepting the special offer would
not affect SC’s normal sales, and no selling expenses would be incurred. What would be the effect on operating profit if
the special order were accepted?
A. P40,000 decrease C. P160,000 increase
B. P120,000 decrease D. P280,000 increase
Variable cost ₱ 16 Price of special order ₱ 23
Manufacturing cost 10 Less: Relevant cost (29)
Additional cost 3 Contribution margin per unit (₱6)
Relevant cost per unit ₱ 29 Multiply by: Units to be sold 40,000
( ₱ 240,000 )
Add: Budgeted sales 400,000
Incremental income, special order ₱ 160,000

46. YG Manufacturing is considering the acquisition of a new machine. The machine can be purchased for P90,000. The
machine will cost P6,000 and P9,000 to transport to YG’s plant and install the machine. Moreover, the machine is
estimated to last 10 years and is expected to have a salvage value of P5,000. Over its 10-year life, the machine is
expected to produce 2,000 units per year with a selling price of P500 and combined material and labor costs of P450
per unit. Government tax regulations permit machines of this type to be depreciated using the straight-line method over
five (5) years with no estimated salvage value. YG has a marginal tax rate of 40%. What is the net 󂂱 23ash flow for the
rd
3 year that YG should use in its capital budgeting analysis?
A. P64,200 C. P68,400
A. P68,000 D. P79,000
Machine purchase cost ₱ 90,000 Operating cash flow [ 2,000 x (500 – 450 ) ] ₱ 100,000
Add: Transportation cost 6,000 Multiply by: Net of tax 60%
Installation cost 9,000 Net of Operating cash flow ₱ 60,000
Total machine cost ₱ 105,000
Depreciation ( 105,000 /5 years ) ₱ 21,000
Multiply by: Depreciation tax 40%
Depreciation expense ₱ 8,400

Operating cash flow net of tax ₱ 68,400

47. Jinky Corporation (JC) is considering the purchase of a new machine that will cost P160,000. The machine has an
estimated useful life of three (3) years. Assume that 30% of the depreciable base will be depreciated in the first year,
40% in the second year, and 30% in the third year. The new machine will have a P10,000 resale value at the end of its
estimated useful life. The machine is expected to save the company P85,000 per year in operating expenses. JC uses
a 40% estimated income tax rate and a 16% hurdle rate to evaluate capital projects.
Discount rates for a 16% rate are as follows:
Year Present Value of P1 Present Value of an Ordinary
Annuity of P1
1 0.862 0.862
2 0.743 1.605
3 0.641 2.246
What is the net present value of JC’s project?
A. P5,842 C. P8,834
B. P6,270 D. P30,910
Year Cost of machine Depreciation Income tax rate Depreciation tax
1 ₱ 160,000 30% 40% ₱ 19,200
 2 160,000 40% 40% 25,600
3 160,000 30% 40% 19,200
Resale value 10,000 60% 6,000

Year PV of P1 Tax operating cash Depreciation tax Net cash flow Discounted
flow at 40% Cash flow
1 0.862 ₱ 51,000 ₱ 19,200 ₱ 70,200 ₱ 60,512
2 0.743 51,000 25,600 76,600 56,914
3 0.641 51,000 25,200 76,200 48,844
₱ 166,270
( 85,000 x 40% ) – Less: Cost of ( 160,000)
85,000 = 51,000 machine
NPV ₱ 6,270

48. Hero Dimagiba receives an income of P18,000 per month and spends P15,500. Hero’s income increased by P2,000
monthly, and he now spends P16,500 monthly. What is Hero’s marginal propensity to save?
A. 0.29 C. 0.71
B. 0.50 D. 1.40
15,500−16 ,500
Marginal Propensity ¿ Save= =0.50
2,000
49. Jun Bulalacao has a disposable income and consumption of P45,000 and P42,000. His disposable income increased
by P2,000, and he now consumes P43,000 monthly. What is Jun’s marginal propensity to consume?
A. 0.33 C. 0.75
B. 0.50 D. 1.33

1,000
Marginal Propensity ¿ Consume= =0.50
2,000

50. An increase in government purchases of goods and services of P20 billion causes the equilibrium gross domestic
product (GDP) to rise by P80 billion. What is the marginal propensity to consume from disposable income, assuming
total taxes and investment are constant?
A. 0.25 C. 1.24
B. 0.75 D. 4.00

80,000,000−20,000,000
Marginal Propensity ¿ Consume= =0.75
80,000,000

END