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Management Services (MS)

FINAL PRE-BOARD EXAMINATION
CPA Review TRINIDAD/ALENTON/URO
April 29 & 30, 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 the Krizen buys tennis balls at P25 per dozen from its
exam is good for three (3) hours. Good luck! wholesaler. Krizen will sell 35,000 dozens of tennis balls
evenly throughout the year. Krizen desires a 12% percent
1. John Company’s master budget shows straight-line return on investment (cost of capital) on its inventory
depreciation on factory equipment of P258,000. The investment. In addition, rent, insurance and related taxes
master budget was prepared at an annual production for each dozen tennis balls in inventory amounts to P0.50.
volume of P103,200 units of product. This production The cost per order is P8. Krizen uses a 350-day year.
volume is expected to occur uniformly throughout the
year. During September, John Company produced 5. What is the average number of tennis balls does
8,170 units and the accounts reflected actual Krizen maintain?
depreciation on factory equipment of P20,500. The a. 200 tennis balls c. 2,400 tennis ball
company controls manufacturing costs with a flexible b. 400 tennis balls d. 4,800 tennis balls
budget. The flexible budget amount for depreciation
on factory machinery for September would be 6. How often shall Krizen place the orders within a year?
a. P19,475 a. Every 4 days c. Every 6 days
b. P20,425 b. Every 5 days d. Every week
c. P20,500
d. P21,500 7. The type of investment risk that is not diversifiable
and affects the value of a portfolio is
2. Joseph Corporation experienced the following year- a. Market risk c. Interest-rate risk
over-year changes: b. Nonmarket risk d. Purchasing power risk

Net profit margin Increased 25% 8. Buendia Avenue invested in a four-year project.
Total asset turnover Increased 40% Buendia’s cost of capital is 8 percent. Additional
Total assets Decreased 10% information on the project is as follows:
Total equity Increased 40%
Year Post-tax cash inflow PV of P1 at 8%
Using DuPont analysis, what is the year-over-year 1 P2,000 0.926
change in return on equity (ROE)? 2 2,000 0.857
a. Increased 95.0% c. Increased 12.5% 3 2,400 0.794
b. Increased 63.0% d. Increased 10.0% 4 2,600 0.735

3. A manufacturer uses a standard cost system with Assuming a net present value of P2,500, what is the
overhead applied based upon direct labor hours. The project’s payback period?
manufacturing budget for the production of 5,000 a. Between 2 years and 2.5 years
units for the month of May included the following b. Between 2.5 years and 3 years
information: c. Between 3 years and 3.5 years
d. Between 3.5 years and 4 years
Direct labor (10,000 hours at P15 per P150,000
hour) 9. The first order of 500 units incurred P120,000 of labor
Variable overhead 30,000 costs; the next order of 500 units required an
Fixed overhead 80,000 additional P72,000 of labor costs. What percentage of
learning occurred?
During May, 6,000 units were produced and the fixed a. 80% c. 90%
overhead budget variance was P2,000 favorable. Fixed b. 85% d. 95%
overhead during May was
a. Under-applied by P2,000 10. An adequate system of financial controls is most
b. Under-applied by P16,000 likely to detect fraud perpetrated by a
c. Over-applied by P16,000 a. Single manager
d. Over-applied by P18,000 b. Single employee
c. Group of managers in collusion
4. In Year 3, gross profit margin remained unchanged d. Group of employees in collusion
from Year 2. But, in Year 3, the company’s net profit
margin declined from the level reached in Year 2. This 11. In the cost prediction line function, Y = a + bX, where
could have happened because, in Year 3, X is based on the units produced, which is inversely
a. Common corporate tax rate increased related with X?
b. Common share dividends increased a. a c. a / X
c. Cost of goods sold increased relative to sales b. b d. b / X
d. Sales increased at a faster rate than operating
expenses

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Use the following information for the next two questions. b. 560 units, decrease, decrease
c. 1,680 units, decrease, increase
Joy Company provides the following information based on its d. 2,240 units, increase, decrease.
accounting records:
Use the following information for the next two questions.
Current assets P2,000,000
Non-current assets 7,000,000 Marvin Company manufactures plugs used in its
Current liabilities 1,000,000 manufacturing cycle at a cost of P36 per unit that includes
Non-current liabilities 4,000,000 P8 of fixed overhead. Marvin needs 30,000 of these plugs
Pretax operating profit 1,500,000 annually, and King Company has offered to sell these units
Pretax cost of equity 15% to Marvin at P33 per unit. If Marvin decides to purchase the
Pretax cost of debt 5% plugs, P60,000 of the annual fixed overhead applied will be
Tax rate 40% eliminated, and the company may be able to rent the facility
previously used for manufacturing the plugs.
The carrying amount and the market values above amounts
do not differ significantly. 18. If Marvin Company purchases the plugs but does not
rent the unused facility, the company would
12. What is Joy Company’s weighted average cost of a. Save P3 per unit c. save P2 per unit
capital (WACC)? b. Lose P6 per unit d. lose P3 per unit
a. 6%
b. 9% 19. If the plugs are purchased and the facility rented,
c. 10% Marvin Company wishes to realize P100,000 in
d. Cannot be determined from the given information savings annually. To achieve this goal, the minimum
annual rent on the facility must be
13. What is Joy Company’s economic value added (EVA)? a. P10,000 c.P70,000
a. P180,000 c. P90,000 b. P40,000 d.P190,000
b. P120,000 d. P0
20. Quino’s Supply is considering introducing new
14. What JIT system is implemented, one can expect that product that will require a P250,000 investment. The
absorption costing income is necessary funds would be raised through a bank loan
a. Almost always nil at an interest rate of 8%. The fixed operating costs
b. Equal to variable costing income associated with the product would be P122,500 while
c. More than variable costing income the contribution margin percentage would be 42%.
d. Less than variable costing income Assuming a selling price of P15 per unit, determine
the number of units Quino would have to sell to
15. In microeconomics, a decrease in the price of a generate earnings before interest and taxes of 32%
commodity causes its of the amount of capital invested in the new product.
a. Supply to increase and demand to decrease a. 35,318 c. 32,143
b. Supply to increase and demand to increase b. 25,575 d. 23,276
c. Quantity supplied to increase and quantity
demanded to decrease 21. According to IMA of Ethical Professional Practice what
d. Quantity supplied to decrease and quantity should a management accountant do if a significant
demanded to increase ethical situation can’t be resolved?
a. The accountant should try to rationalize and
16. PRTC produces bicycles in a highly competitive understand the position of the other party.
market. During the past year, the company has b. The accountant should say nothing about the
added 30% mark-up on the P250 manufacturing cost matter until he or she has retired.
for one of its most popular models. A new competitor c. The accountant should confront the guilty party and
manufactures a similar model, has established a demand the unethical action be stopped.
P300 selling price, and its seriously eroding PRTC’s d. The accountant should first discuss the matter with
market share. Management now desires to use the immediate supervisor.
target-costing approach to remain competitive and is
willing to accept 20% return on sales. If target Use the following information for the next two questions.
costing is used, which of the following choices
correctly denotes (1) the price that PRTC will charge A company is estimating its costs based on past information.
and the (2) company’s target cost? The total costs incurred by the company at different levels
of output were as follows:
Selling Price Target Cost Output (units) 160,000 185,000 190,000
a. P300 P240 Total costs P2,420,000 P2,775,000 P2,840,000
b. P300 P250
c. P325 P240 The company uses the high-low method to separate total
d. P325 P250 costs into their fixed and variable elements. Ignore inflation.

17. Muji Enterprises uses 84,000 units of Part J in 22. The estimated total costs for an output of 205,000
manufacturing activities over a 300-day work year. units is:
The usual lead time for the part is 6 days; a. P2,870,000 c.P3,064,211
occasionally, however, the lead time has gone as b. P3,050,000 d.P3,080,857
high as 8 days. The company now desires to adjust
its safety stock policy. The increase in safety stock 23. The company has now established that there is a
size and the likely effect on stockout costs and stepped increase in fixed costs of P30,000 when
carrying costs, respectively, would be output reaches 180,000 units. The estimate of total
a. 560 units, decrease, increase

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costs for an output of 175,000 units using the straight-line method over a 5-year life with no
additional information is: salvage value at the end of 5 years. Assuming a 40%
a. P2,645,000 c.P2,615,000 income tax rate, the machine’s payback period is:
b. P2,275,000 d.P2,630,000 a. 3.13 years c. 3.68 years
b. 3.21 years d. 4.81 years
24. Uniqlo Company manufactures a single product. In
the prior year, the company had sales of P90,000, Use the following information for the next two questions.
variable costs of P50,000, and fixed costs of P30,000.
Uniqlo expects its cost structure and sales price per A firm with an 18% cost of capital is considering the
unit to remain the same in the current year, however following projects (on January 1, Year 1): (Round off the
total sales are expected to increase by 20 percent. If present value factors in four decimal places.)
the current year projections are realized, net income
should exceed the prior year’s net income by: January 1, December 31, Project
a. 100 percent c. 20 percent Year 0 - Cash Year 5 - Cash Internal
b. 80 percent d. 50 percent Outflow Inflow Rate-of-
Return
25. The cost of scrap, rework and tooling changes in a Project P3,500,000 P7,400,000 16%
product quality cost system are categorized as a(n): A
a. External failure cost. c. Prevention cost. Project P4,000,000 P9,950,000 ?
b. Training cost. d. Internal failure cost. B

26. It is estimated that at the end of the year JB will have 30. Using the net-present-value (NPV) method, project
trade payables outstanding of P547,800. This A’s net present value is:
represents 55 days of purchases based on a 365 day a. P316,920 c. P(265,460)
year. All purchases are on credit and are spread b. P23,140 d. P(316,920)
evenly each year. JB is preparing the budget for next
year and estimates that annual purchases will 31. Project B’s internal rate of return is closest to:
increase by 15%. The trade payables days are a. 15% c. 18%
expected to change from 55 days to 50 days due to b. 16% d. 20%
several suppliers offering early settlement discounts.
32. Mandy Company’s budgeted sales and budgeted cost
The budgeted trade payables outstanding at the end of of sales for the coming year are P54,000,000 and
next year will be: P36,000,000, respectively. Mandy has made changes
a. P629,970 c. P692,967 in its inventory system that will increase turnover
b. P498,000 d. P572,700 from its current level of 9 times per year to 12 times
per year. If short-term interest rates average 8%,
27. Datalab Industries has no current debt and has a beta Mandy’s cost savings in the coming year will be
.95 for its common stock. Management is considering a. P20,000 c. P80,000
a change in capital structure to 30% debt and 70% b. P40,000 d. P120,000
equity. This change would increase the beta of the
stock to 1.05, and the after-tax cost of debt will be 33. A manufacturing company required 800 direct labor
7.5%. The expected return on equity (they mean hours to produce the first lot of four units of a new
market rate of return) is 16%, and the risk-free rate motor. Management believes that a 90% of learning
is 6%. Should Datalab’s management proceed curved will be experienced in the next four lots of
with the capital structure change? production. How many direct labor hours will be
a. No, because the cost of equity capital will increase. required to manufacture the next 12 units?
b. Yes, because the weighted average cost of capital a. 1,792 c. 2,016
will decrease. b. 1,944 d. 2,160
c. No, because the weighted average cost of capital
will increase. 34. Mark Company has a payback goal of 3 years on new
d. Yes, because there will be no effect on the weighted equipment acquisitions. A new sorter is being
average cost of capital. evaluated that costs P450,000 and has a 5 year life.
Straight-line depreciation will be used; no salvage is
28. Greenfield, Inc. is considering a 10-year capital anticipated. Mark is subject to a 40% income tax rate
investment project with forecasted revenues of to meet the company’s payback goal, the sorter must
P40,000 per year and forecasted cash operating generate reduction in annual cash operating cost of
expenses of P29,000 per year. The initial cost of the a
equipment for the project is P23,000, and the a. P60,000 c. P150,000
Greenfield expects to sell the equipment for P9,000 b. P100,000 d. P190,000
at the end of the 10th year. The equipment
Use the following information for the next two questions.
depreciates over 7 years. The project requires a
working capital investment of P7,000 at its inception An organization sells a single product for Php 20 per unit,
and another P5,000 at the end of year 5. Assuming a which it purchases at Php 10. Salespeople receive a salary
40% marginal tax rate, the expected net cash flow plus a commission of 5%, last year, the organization’s net
from the project in the 10th year is: income after taxes was Php 201,600. The organization is
a. P32,000 c. P20,000 subject to an income tax rate of 30%. The fixed costs of the
b. P24,000 d. P11,000 organization are
Advertising Php 248,000
29. Switzerland Company is a planning to acquire a Rent 120,000
P250,000 machine that will provide increased Salaries 360,000
efficiencies, thereby reducing annual operating costs Other fixed costs 64,000
by P80,000. The machine will be depreciated by the Total Php 792,000

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32,000 per year. The plant manager is asked to submit

35. What is the breakeven point in unit sales for the a bid and assembles the following data on a proposed
organization? job:
a. 35,200 units c. 79,200 units Direct materials 1,600
b. 72,000 units d. 88,000 units Direct labor (800 hours) 2,400
What amount is the estimated product cost on the
36. The organization is considering changing the proposed job?
compensation plan for sales personnel. If the a. Php 3,200 c. Php 5,600
organization increase the commission to 10% of sales b. Php 4,000 d. Php 7,200
and reduces salaries by Php 160,000, what peso
sales volume must the organization have in order to 42. LMS Co. has the following data:
earn the same net income as last year? OH Cost Budgeted Budgeted Cost Driver
a. Php 2,084,000 c. Php 2,300,000 pool OH Cost level of Cost
b. Php 2,200,000 d. Php 3,260,000 Driver
Direct Php 600 kilos Weight of
37. A company has sales of Php 1,000,000 variable costs materials 24,000 materials
of Php 600,000 and pretax profit of Php 300,000. If Machine set 1,950 65 Number of
the company increased the sales price per unit by up repetitions repetitions
20% reduced fixed costs by 40%, and left variable Machine 209 1 unit Unit of
cost per unit unchanged, what would be the new repair time time*
breakeven point in sales pesos? Inspections 1,620 27 Number of
a. Php 120,000 c. Php 150,000 inspections inspections
b. Php 136,364 d. Php 170,455 *One unit equals 3- minute intervals

38. A company has fixed overhead volume variance that Raw Materials 20 kilos
is Php 100,000 unfavorable. The most likely cause for Machine setup 5 repetitions
this variance is that Machine repair time 0.10 hour
a. Less was produced than planned Inspections 2 inspections
b. More was produced than planned Requirement for job 912:
c. The production supervisory salaries were less than
planned The total overhead cost that should be assigned to job
d. The production supervisory salaries were greater 912 is:
than planned a. Php 800 c. Php 1,070
b. Php 950 d. Php 1,488
39. DEF company uses a standard cost system. The
following budget and the actual results are 43. LBM Company changed from a traditional
summarized: manufacturing philosophy to a just-in-time
Normal Capacity philosophy. What are the expected effects of this
Direct labor hours 36,000 change on LBM’s inventory turnover and inventory as
Variable factory overhead P72,000 a percentage of total assets reported on LBM’s
balance sheet?
Fixed factory overhead P162,000
a. Inventory turnover and inventory percentage will
Total factory overhead per P6.5
decrease.
DLH
b. Inventory turnover and inventory percentage will
increase.
Actual data for july are as follows:
c. Inventory turnover will increase while inventory
Direct labor hours worked 33,000 percentage will decrease.
Total factory overhead P220,500 d. Inventory turnover will decrease while inventory
Standard DLH allowed for 31,500 percentage will increase.
capacity attained
44. The betas and expected returns for three
Using a two-way variance analysis, what is the investments being considered by FAR Company are
controllable variance for July? given below:
a. P 4,500 Favorable c. P13,500 favorable Investment Beta Expected return
b. P 4,500 Unfavorable d. P13,500 Unfavorable A 1.40 12%
B 0.80 11%
40. While an operating budget is a key element in C 1.50 13%
planning and control, it is not likely to
a. Integrate organizational activities The rate of the market is 11% and the risk-free rate is
b. Set out long- range, strategic concepts 6%. If the capital asset pricing model is used for
c. Provide subsidiary planning information. calculating the required rate if return, which investment
d. Establish a commitment of company resources. should the management of FAR make?
a. B only c. B and C only
41. XYZ Co. has two major categories of factory b. A and C only d. A, B, and C
overhead: material handling and quality control. The
costs expected for these categories for the coming 45. Mica is an analyst in the accounting department of
year are as follows: STUDIO. Mica gathered the following data on the
Material handling Php 48,000 stock portfolio portion of STUDIO’s endowment pool:
Quality inspection 80,000 Security Amount invested Expected Beta
return
The plant currently applies overhead based on direct Stock A Php1,000,000 10% 0.80
labor hours. The estimated direct labor hours are

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Stock B 250,000 15% 1.40 What are the change in sales due to change in selling
Stock C 3,000,000 8% 0.95 price and change in quantity sold for 2023?
Stock D 450,000 12% 1.50 Sales price Quantity sold
a. P(91,800) P81,800
Stock E 2,500,000 4% 1.00
b. P(90,000) P80,000
Based on the above data, Mica calculated the expected c. P91,800 P(81,800)
return on the stock portfolio to be d. P90,000 P(80,000)
a. 7.4% c. 49.0%
b. 9.8% d. 58.6% 53. The asset to equity ratio for a firm is 1.5, and the
firm has total assets of P6,000,000. Last year, net
46. The return paid for the “use” of borrowed capital is income for the firm was P250,000, and the earnings
referred as per share for the firm was reported as P0.50. If the
a. Interest c. Stock dividends current price-to-earnings ratio is 20, what is the
b. Cash dividends d. Principal payment current market-to-book ratio for the firm?
a. 0.60 c. 1.25
47. Which of the following expresses the relationship b. 0.80 d. 2.50
between risk and return?
a. No relationship c. Inverse relationship 54. A company using the traditional volume-based
b. Direct relationship d. Negative relationship overhead assignment (allocation) method will tend
to:
48. AFAR Company sold 15%, non-convertible preferred a. overstate the cost of low volume products
stock with a par value of Php62.50. The stock sold b. understate the cost of high volume products
for Php68.75 and flotation costs were 7.50% of the c. understate the cost of low volume products
market price. Tax rate is 30%. What is AFAR’s cost d. understate the cost of all products
of preferred stock for cost of capital computation?
a. 9.55% c. 13.64% 55. Visayas Fabricators, Inc. estimates that 60,000
b. 10.15% d. 14.74% special components will be used in the manufacture
of a specialty steel window for the whole next year.
49. AUD Company’s cost of equity is 18%, its before-tax Its supplier quoted a price of P60 per component.
cost of debt is 8%, and its corporate tax rate is 40%. Visayas prefer to purchase 5,000 units per month,
Given the following balance sheet, calculate the but its supplier could not guarantee this delivery
after-tax weighted average cost of capital. schedule. In order to ensure availability of these
Assets components, Visayas is considering the purchase of
Cash Php12,000 all 60,000 units at the beginning of the year.
Accounts receivable 48,000 Assuming Visayas can invest cash at 8%, the
Inventories 24,000 company’s opportunity cost of purchasing the 60,000
Plant and equipment 156,000 units at the beginning of the year is
Total Php240,000 a. P132,000 c. P144,000
Liabilities and Equity b. P150,000 d. P264,000
Accounts payable Php24,000
Accrued taxes due 24,000 56. Assume that the firm whose cost structure is depicted
Long-term debt 48,000 in a breakeven chart expects to produce a loss for
Equity 144,000 the upcoming period. The loss would be shown on
Total Php240,000 the graph:
a. 9.70% c. 14.70% a. by the area immediately above the break-even
b. 10.30% d. 16.80% point.
b. by the area immediately below the total cost line.
50. A reduction in economic activity will be displayed by c. by the area diagonally to the right of the break-
all of the following except: even point.
a. Decreased housing starts. d. by the area diagonally to the left of the break-even
b. Increase in the quantity of unemployment claims. point.
c. Reduction in the amount of luxury purchases.
d. Increase in personal travel. 57. The difference between the revenue or cost
projection that a person provides, and a realistic
51. If a movie theater increases ticket prices for the estimate of the revenue or cost, is called:
matinee shows by 10% and the quantity of tickets a. passing the buck c. false budgeting
demanded decreases by 5% then the demand for b. budgetary slack d. participative budgeting
matinee movie tickets is
a. Inelastic. c.Unitary. 58. Operations of Lady Corporation for two periods
b. Elastic. d.Not related to the change in price. disclosed that when sales increased from P180,000
in 2022 to P216,000 in 2023, the net income increase
52. The following is the summary of sales and cost of by P9,000 (all other factors being constant). Fixed
goods sold for Slim Company: costs remained the same at P25,000. What is the
2023 2022 estimated net income at sales volume level of
Net Sales P810,000 P800,000 P250,000?
Cost of goods 567,000 600,000 a. P50,000 c. P37,500
sold b. P40,000 d. P35,700
Gross profit P243,000 P200,000
59. Under the balanced scorecard concept, employee
satisfaction and retention are measures used under
The unit cost for each product increase by an average
which of the following perspectives?
of 5 percent during 2023.
a. Customer. c. Learning and growth.

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b. Internal business. d. Financial. and the direct labor rate for polishing is P25 per
polishing hour. The expected cost of direct labor for
60. Using regression analysis, Greenstreet Co. graphed Bigger is:
the following relationship of its cheapest product a. P224,000 c. P616,000
line's sales with its customers' income levels. If there b. P560,000 d. P784,000
is a strong statistical relationship between the sales
and customers' income levels, which of the following 66. Loser Company recently entered into a contract in
numbers best represents the correlation coefficient which Loser charges a price of actual cost plus 20%.
for this relationship? If the price charged based on this formula is less than
a. 9.00 c. +0.93 the target price of P4,500,000, Loser is entitled to
b. 0.93 d. +9.00 also receive 50% of the difference between the actual
cost and the cost that would lead to the formula price
61. Which of the following best describes an equaling the target price. Loser incurred an actual
OPPORTUNITY COST? cost of P3,600,000. How much will Loser make from
a. It is usually relevant but is not recorded the books the contract?
b. It is usually relevant and recorded in the books a. P4,320,000 c. P4,410,000
c. It is usually irrelevant but is recorded in the books b. P4,395,000 d. P4,500,000
d. It is usually irrelevant and is not recorded in the
books 67. Which of the following systems is one where the
master and open files are posted, or updated,
62. PORT Company’s normal capacity is 10,000 units per immediately?
month with following costs: a. Microcomputer system
Direct materials P100,000 b. Mainframe computer system
Direct labor 80,000 c. Batch system
d. Real-time system
Variable overhead 50,000
Fixed overhead 40,000 68. A firm has the following balance sheet:
Variable expenses 30,000 Cash P10,000,000
Fixed expenses 20,000 Accounts receivable 10,000,000
Inventories 10,000,000
For the past several months, the company has been Fixed assets 90,000,000
operating at only 80% capacity. To utilize the idle Total assets P120,000,000
capacity, the company is thinking of accepting a Accounts payable P10,000,000
special order for 2,500 units at P30 per unit. Normal Notes payable 20,000,000
selling price is P38 per unit. Additional variable Long-term debt 40,000,000
expenses of 0.75 will be incurred on the special Common stock 40,000,000
order. Retained earnings 10,000,000
Should the company accept the special order? Total liabilities and equity P120,000,000
a. Yes, because there is net advantage of P8,125
b. No, because there is a net disadvantage of P2,000 Fixed assets are being used at 80 percent of capacity;
c. No, because there is a net disadvantage of P4,000 sales for the year just ended were P200M; sales will
d. Yes, because there is a net advantage of P2,125 increase P10M per year for the next 4 years; the profit
margin is 5 percent; and the dividend payout ratio is 60
63. Lubog Company normally sells 4,000 units per percent. Assume that underutilized fixed assets cannot
month. Contribution margin is P5 per unit with annual be sold. What are the total external financing
fixed cost of P120,000. Next quarter, the company requirements for the entire 4 years, that is, the total AFN
expects to sell only 4,000 units. If the company stops for the 4-year period?
operations for one quarter, 60% of the fixed costs a. P 4.00 c. -P 0.80 (surplus)
can be eliminated but additional costs of P1,500 will b. P 2.00 d. -P14.00 (surplus)
be incurred when the company resumes operations.
Fixed expenses, P3,000 per quarter. What is the 69. A hospital records the number of floral deliveries its
shutdown point (in units) for one quarter? patients receive each day. For a one-week period,
a. 3,000 c. 3,300 the records show the following deliveries.
b. 3,150 d. 4,000 Day Number Deliveries
1 15
64. In multiproduct situations, when sales mix shifts 2 27
toward the product with the highest contribution 3 26
margin then: 4 24
a. total revenue will decrease 5 18
b. breakeven quantity will increase 6 21
c. total contribution margin will decrease 7 26
d. operating income will increase
Using exponential smoothing with a smoothing
65. Shabu Khan Manufacturing produces two products, constant of 0.4 to forecast the number of deliveries,
Big and Bigger. Shabu Khan expects to sell 10,000 calculate the forecast of deliveries in the third day.
units of product Bigger and to have an inventory of Assume the forecast for day 1 are 15 deliveries.
2,000 units of Bigger on hand at the end of the a. 19.8 c. 26.4
period. Currently, Shabu Khan has 800 units of b. 22.2 d. 26.6
Bigger on hand. Bigger requires two labor operations,
molding and polishing. Each unit of Bigger requires 70. The Glass Shop, a manufacturer of large windows, is
one hour of molding and two hours of polishing. The experiencing a bottleneck in its plant. Setup time at
direct labor rate for molding is P20 per molding hour

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one of its workstations has been identified as the

culprit. A manager has proposed a plan to reduce
setup time at a cost of P72,000. The change will
result in 8,000 additional windows. The selling price
per window is P18, direct labor costs are P3 per
window, and the cost of direct materials is P5 per
window. Assume all units produced can be sold. The
change will result in an increase in the throughput
contribution of:
a. P104,000
b. P80,000
c. P32,000
d. P8,000

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