NFJPIA_Mockboard 2011_MAS - 2011 NATIONAL CPA MOCK BOARD EXAMINATION In partnership with the Professional Review Training Center Inc and Isla Lipana Co

NFJPIA_Mockboard 2011_MAS - 2011 NATIONAL CPA MOCK BOARD...

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Unformatted text preview: 2011 NATIONAL CPA MOCK BOARD EXAMINATION In partnership with the Professional Review & Training Center, Inc. and Isla Lipana & Co. MANAGEMENT ADVISORY SERVICE S INSTRUCTIONS: Select the best answer for each of the following questions. Mark only one answer for each item on the answer sheet provided. AVOID ERASURES. Answers with erasures may render your examination answer sheet INVALID. Use PENCIL NO.2 only. GOODLUCK! 1. 2. Which of the following is not classifiable as a management advisory service by CPA? a. Systems design. b. Project feasibility study. c. Make or buy analysis. d. Assistance in budget preparation. a. b. c. d. the sequence of master file records is not relevant timeliness is a major issue a single handling of the data is desired economy of scale can be gained because of high volumes of transactions The primary purpose of management advisory services is: a. To conduct special studies, preparation of recommendations, development of plans and programs, and provision of advice and assistance in their implementation. b. To provide services or to fulfill some social need. c. To improve the client’s use of its capabilities and resources to achieve the objectives of the organization. d. To earn the best rate of return on resources entrusted to its care with safety of investment being taken into account and consistent with the firm’s social and legal responsibilities. 8. 3. A cost system that first traces costs to activities and then traces cost from activities to products a. Job order cost system. b. Process cost system. c. Activity-based cost system. d. Flexible cost system. 4. The payback method assumes that all cash inflows are reinvested to yield a return equal to a. Zero b. the Discount Rate c. The Time-Adjusted-Rate-of-Return d. The Cost-of-Capital 10. 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. 5. Why do the NPV method and the IRR method sometimes produce different rankings of mutually exclusive investment projects? a. The NPV method does not assume reinvestment of cash flows while the IRR method assumes the cash flows will be reinvested at the internal rate of return. b. The NPV method assumes a reinvestment rate equal to the discount rate while the IRR method assumes a reinvestment rate equal to the internal rate of return. c. The IRR method does not assume reinvestment of the cash flows while the NPV assumes the reinvestment rate is equal to the discount rate. d. The NPV method assumes a reinvestment rate equal to the bank loan interest rate while the IRR method assumes a reinvestment rate equal to the discount rate. 6. The least risky strategy for converting from a manual to a computerized accounts receivable system would be a a. Direct conversion c. Parallel conversion b. Pilot Conversion d. Data based conversion 7. The batch processing of business transactions can be the appropriate mode when An integrated set of computer programs that facilitates the creation, manipulation, and querying of integrated files is called a(n) a. Compiler b. Operating system c. Assembly language d. Database management system 9. Opportunity costs: a. Are treated as period costs under variable costing. b. Have already been incurred as a result of past action. c. Are benefits that could have been obtained by following another course of action. d. Do not vary among alternative courses of action. 11. The ratio that measures a firm’s generate earnings is a. Times interest earned. b. Sales to working capital. c. Days’ sales in receivables. d. Operating asset turnover. ability to 12. When a firm prepares financial reports by using absorption costing, it may find that a. Profits will always increase with increase in sales. b. Profits will always decrease with decreases in sales. c. Profit may decrease with increased sales even if there is no change in selling price and costs. d. Decreased output and constant sales result in increased profit. 13. The Liberal Marketing Co., is expecting an increase of fixed costs by P78,750 upon moving their place of business to the downtown area. Likewise it is anticipating that the selling price per unit and the variable expenses will not change. At present, the sales volume necessary to breakeven is P750,000 but with the expected increase in fixed costs, the sales volume necessary to breakeven would go up to P975,000. Based on these projections, what Page 1 of 7 were the total fixed costs before the increase of P78,750? a. P341,250 c. P183,750 b. P262,500 d. P300,000 14. Bacolod Corporation had sales of P120,000 for the month of May. It has a margin of safety ratio of 25 percent, and after-tax return on sales of 6 percent. The company assumes its sales constant every month. If the tax rate is 40 percent, how much is the annual fixed costs? a. P36,000 c. P432,000 b. P90,000 d. P360,000 15. At 40,000 units of sales, Luna Corporation had an operating loss of P3.00 per unit. When sales were 70,000 units, the company had a profit of P1.20 per unit. The number of units to breakeven is a. P 35,000 c. P52,500 b. P 45,000 d. P57,647 16. The manager following data: of Seven Fruits Store Meat reviewed Canned Products the 3. Drill press activity 4. Heat treatment activity 5. Quality control inspection activity 6. Issuance of purchase order activity How are the foregoing activities classified? Value-adding Non-value adding a. 1, 2, 5, 6 3, 4 b. 1, 2, 4 3, 5, 6 c. 2, 4, 5 1, 3, 6 d. 2, 3, 4 1, 5, 6 20. The Oilfield plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: Maintenance Inspection P100,000 150,000 The plant currently applies overhead using direct labor hours and expected capacity of 50,000 direct labor hours.The following data have been assembled for use in developing a bid for a proposed job: Direct materials P1,000 Contribution margin ratio Sales mix pesos 40% in 50% 40% 20% 30% 50% Fixed costs, P1,290,000 per month. The breakeven sales for each month is A. P1,677,000 C. P4,500,000 B. P3,000,000 D. P6,000,000 17. Drive Me, Inc. has a total of 2,000 rooms in its nationwide chain of hotels. On the average, 70 percent of the rooms are occupied each day. The company’s operating costs are P21 per occupied room per day at this occupancy level, assuming a 30-day month. This P21 figure contains both variable and fixed cost elements. During October, the occupancy dropped to only 45 percent. A total of P792,000 in operating cost was incurred during the month. What would be the expected operating costs, assuming that the occupancy rate increases to 60 percent during November? a. P1,056,000 c. P846,000 b. P 756,000 d. P829,500 18. The following data relate to Gala Company which sells a single product: Unit selling price P 20.00 Purchase cost per unit 11.00 Sales commission, 10% of 2.00 selling price Monthly fixed costs P80,000 The firm’s salespersons would like to change their compensation from a 10 percent commission to a 5 percent commission plus P20,000 per month in salary. They now receive only commissions. At what sales volume would the two compensation plans be indifferent? a. 12,500 c. 20,000 b. 22,222 d. 22,860 19. Hello Company’s cost allocation and product costing procedures follow activity-based costing principles. The following activities have been identified and classified as being either value- adding or non-value adding as to each product. 1. Raw materials storage activity 2. Design engineering activity Direct labor Machine hours Number of inspections Direct labor hours P4,000 500 4 800 Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500. Using activity-based costing and the appropriate activity drivers, the total cost of the potential job would be a. P2,400 c. P7,400 b. P3,600 d. P7,750 21. 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. P 3 c. P15 b. P10 d. P12 22. Jar Division of Handy, Inc. expects the following result for 2004: Unit sales 70,000 Unit selling price P 10 Unit variable cost P 4 Total fixed cost Total fixed costs Total investment P300,000 P500,000 The minimum required ROI is 15 percent, and divisions are evaluated on residual income. A foreign customer has approached Jar’s manager with an offer to buy 10,000 units at P7 each. If Jar accepts the order, it would not lose any of the 70,000 units at the regular price. Accepting the order would increase fixed costs by P10,000 and investment by P40,000. What is the minimum price that Jar could accept for the order and still maintain its expected residual income? a. P5.00 c. P4.75 b. P5.60 d. P9.00 23. Care Products Company is considering a new product that will sell for P100 and have a variable cost of P60. Expected volume is 20,000 units. New Page 2 of 7 equipment costing P1,500 and having a five-year useful life and no salvage value is needed, and will be depreciated using the straight-line method. The machine has cash operating costs of P20,000 per year. The firm is in the 40 percent tax bracket and has cost of capital of 12 percent. The present value of 1, end of five periods is 0.56743; present value of annuity of 1 for 5 periods is 3.60478. Suppose the 20,000 estimated volume is sound, but the price is in doubt. What is the selling price (rounded to nearest peso) needed to earn a 12 percent internal rate of return? BONUS a. P81.00 c. P70.00 b. P85.00 d. P90.00 24. Jap Company’s unit cost of manufacturing and c. It takes a worker 35 minutes to process one 10-liter batch of Bysap. Employees work on eight-hour a day, including one hour per day for rest breaks and cleanup. What is the standard labor time to produce one 10liter batch of Bysap? a. 35 minutes c. 48 minutes b. 40 minutes d. 45 minutes 27. ABC Electronics has the following standard costs and other data: Part Part Zeta Beta Direct materials P 4.00 P80.00 Direct labor 10.00 47.00 selling a given item at an activity level of 10,000 units per month are: Factory overhead Unit standard cost Manufacturing costs Direct materials P39 Direct labor 6 Variable overhead 8 Fixed overhead 9 Selling expenses Variable 30 Fixed 11 The company desires to seek an order for 5,000 units from a foreign customer. The variable selling expenses will be reduced by 40%, but the fixed costs for obtaining the order will be P20,000. Domestic sales will not be affected by the order. Units needed per year Machine hours per unit Unit cost if purchased The minimum break-even price per unit to be considered on this special sale is a. P71 c. P69 b. P75 d. P84 25. Below are a company’s monthly unit costs to manufacture and market a particular product. Manufacturing Costs: Direct materials P2.00 Direct labor 2.40 Variable indirect 1.60 Fixed indirect 1.00 Marketing Costs: Variable 3.00 Fixed 1.50 The company must decide to continue making the product or buy it from an outside supplier. The supplier has offered to make the product at the same level of quality that the company can make it. Fixed marketing costs would be unaffected, but variable marketing costs would be reduced by 30% if the company were to accept the proposal. What is the maximum amount per unit that the company can pay the supplier without decreasing its operating income? a. P8.50 c. P7.75 b. P6.75 d. P6.90 26. Shyr Company is a chemical manufacturer that supplies various products to industrial users. The company plans to introduce a new chemical solution called Bysap, for which it needs to develop a standard product cost. The following labor information is available on the production of Bysap. a. The product, which is bottled in 10-liter containers, is primarily a mixture of Byclyn, salex, and protex. b. The finished product is highly unstable, and one 10-liter batch out of six is rejected at final inspection.Rejected batches have no commercial value and are thrown out. 40.00 P54.00 6,000 4 P50 20.00 P147.00 8,000 2 P150.00 In past years, ABC has manufactured all of its required components; however, this year only 30,000 hours of otherwise idle machine time can be devoted to the production of components. Accordingly, some of the parts must be purchased from outside suppliers. In producing parts, factory overhead is applied at P10 per standard machine hour. Fixed capacity costs that will not be affected by any make-or-buy decision represent 60% of the applied overhead. The 30,000 hours available machine time are to be scheduled so that ABC realizes maximum potential cost savings. The relevant unit production costs that should be considered in the decision to schedule machine time are: a. P54.00 for Beta and P147.00 for Zeta b. P50.00 for Beta and P150.00 for Zeta c. P14.00 for Beta and P127.00 for Zeta d. P30.00 for Beta and P135.00 for Zeta 28. Zapatero, Inc. operates a chain of shoe stores around the country. The stores carry many styles of shoes that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each pair of shoes sold. Sales personnel also receive a small basic salary. The following cost and revenue data relate to Store 9 and are typical of the company’s many sales outlets: Selling price P800 Variable expenses: Invoice costs P360 Sales commission 140 P500 Fixed expenses per year: Rent P1,600,000 Advertising 3,000,000 Salaries 1,400,000 Total P6,000,000 The company is considering eliminating sales commissions entirely in its stores and increasing fixed salaries by P2,142,000 annually. If this change is made, what will be the number of pairs of shoes to be sold by Store 9 to be indifferent to commission basis? a. 25,300 c. 18,505 b. 15,300 d. 21,000 29. Liquid Company manufactures fire hydrants in Oriental Mindoro. The following information pertains to operations during the month of May: Page 3 of 7 Processing time (average per batch) 8.0 hours Inspection time (average per batch) 1.5 hours Waiting time (average per batch) 1.5 hours Move time (average per batch) 1.5 hours Units per batch 20 units The manufacturing cycle efficiency (MCE) is a. 72.7% c. 36.0% b. 64.0% d. 76.0% 30. Using the information in No. 29, what throughput time? The throughput time is a. 12.5 hours c. 8.0 hours b. 4.5 hours d. 9.5 hours 33. Information on Divine’s direct material costs for May is as follows: Actual quantity of direct materials purchased and used Actual cost of direct materials Unfavorable direct materials usage variance Standard quantity of direct materials allowed for May production is the 31. Data Corporation is a highly automated manufacturing firm. The vice president of finance has decidedthat traditional standards are inappropriate for performance measures in an automated environment. Labor is insignificant in terms of the total cost of production and tends to be fixed, material quality is considered more important than minimizing material cost, and customer satisfaction is the number one priority. As a result, production and delivery performance measures have been chosen to evaluate performance. The following information is considered typical of the time involved to complete and ship orders. Waiting Time: From order being placed to start of production 8.0 days From start of production to completion 7.0 days Inspection time 1.5 days 30,000 lbs. P84,000 P 3,000 29,000 lbs For the month of May, Divine’s direct materials price variance was: a. P2,800 favorable c. P6,000 unfavorable b. P2,800 unfavorable d. P6,000 favorable 34. William Furniture Company uses about 200,000 yards of a particular fabric each year. The fabric costs P2.50 per yard. The current policy is to order the fabric four times a year. Incremental ordering costs are about P200 per order, and incremental carrying costs are about P0.75 per yard, much of which represents the opportunity cost of the funds tied up in inventory. How much total annual costs are associated with the current inventory policy? a. P19,550 c. P38,300 b. P18,750 d. P62,500 35. The following direct labor information pertains to the manufacture of Part XW: Number of hours required to make a part 2.5 DLH Number of Direct workers 75 Number of total productive hours per week 3000 Weekly wages per worker P1,000 Processing time Move time 3.0 days 2.5 days The Delivery Cycle Time is A. 22 days C. 11 days B. 14 days D. 7 days 32. Alma Company is a chemical manufacturer that supplies industrial users. The company plans to introduce a new chemical solution and needs to develop a standard product cost for this new solution. The new chemical solution is made by combining a chemical compound (nyclyn) and a solution (salex), boiling the mixture; adding a second compound (protet), and bottling the resulting solution in 20-liter containers. The initial mix, which is 20 liters in volume, consists of 24 kilograms of nyclyn and 19.2 liters of salex. A 20% reduction in volume occurs during the boiling process. The solution is then cooled slightly before 10 kilograms of protet are added; the addition of protet does not affect the total liquid volume. The purchase prices of the raw materials used in the manufacture of this new chemical solution are as follows: Nyclyn Salex Protet P15.00 per kilogram P21.00 per liter P28.00 per kilogram The total standard materials cost of 20 liters of the product is a. P1,043.20 c. P1,304.00 b. P 834.56 d. P1,234.00 Laborers’ fringe benefits treated as direct labor costs 25% of wages What is the standard direct labor cost per unit of Part XW? a. P62.500 c. P41.670 b. P78.125 d. P84.125 36. 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, 2004: Budgeted Actual Units produced 40,000 38,000 Variable manufacturing overhead Fixed manufacturing overhead Direct labor hours P4/DLH P16,400 P20/DLH P88,000 6 minutes/unit 4,200 hours What are the fixed overhead spending and volume variances for the month of April? Spending Volume a P4,000 F P4,000 F b P8,000 U P4,000 U c P4,000 F P8,000 F d P8,000 U P8,000 U 37. Using the information in Number 36, what are the variable overhead spending and efficiency variances for the month of April? Spending Efficiency a P400F P1,600U b P400U P1,600U c P1,200F P 800U d P1,200U P 800F Page 4 of 7 38. Tamaraw Company is negotiating to purchase equipment that would cost P200,000, with the expectation that P40,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipment’s estimated useful life is 10 years, with no salvage value, and would be depreciated by the straight-line method. Tamaraw’s minimum desired rate of return is 12 percent. Present value of an annuity of 1 at 12 percent for 10 periods is 5.65. Present value of 1 due in 10 periods at 12 percent is 0.322. The present value of 1 for 5 periods at 12 percent is 3.60478. The present values of 1 at 12 percent at end of each period are: End of: Period 1 – 0.8928, Period 2 - 0.79719, Period 3 - 0.71178, Period 4 - 0.63552, Period 5 0.56743 Had Roxas used straight-line method of depreciation, what is the difference in net present value provided by the machine at a discount rate of 12 percent? The average accrual accounting rate of return during the first year of asset’s use is a. 20.0 percent ...
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