MANAGEMENT SERVICES (MS) 21.

NOTE: Ending > Beginning, P>S, Ay > Vy

1 A 25 B ∆ Income = (2,000 – 0) 64,000 ÷ 10,000
2 A 26 C
3 B 27 C 23. MS x CMR = profit MS = 1,200 ÷ 25%
4 A 28 B
5 D 29 A 26. Total relevant unit cost to make: 14 + 18 + 40% (18 x
6 D 30 A 0.75) + 60% [60% (18 x 0.75)]
7 B 31 D
8 D 32 D 27. Make: 42.26 Buy: 45
9 C 33 B
30. LRV: 83,000 (11.8 -12)
10 C 34 D
11 D 35 A
31. LEV (usage): [83,000 – 10,000 (8)] 12
12 B 36 C
13 C 37 A 32. AFOH (V): 556,100 BAAH (V): 83,000 (6)
14 C 38 B
15 D 39 B 33. BAAH (V) 83, 000 (6) BASH (V): 80,000 (6)
16 C 40 B
17 A 41 C 36. CM per hour
18 C 42 A Product A: 12 ÷ 3 hours = P 4 (2nd)
19 B 43 C Product B: 2 x (60/10) = P 12 (1st)
20 C 44 A Product C: 5 ÷ 2 hours = P 2.5 (3rd)
21 B 45 B
22 B 46 C 37. Distribution of limited 20,000 hours
23 C 47 D Product B: 4,000 hrs ← 24,000 u ÷ (60/10)
24 C 48 C Product A: 6,000 hrs ← 2,000 u x 3 hrs/u
Product C: 10,000 hrs ← 5,000 u x 2 hrs/u
2. DOL = CM ÷ profit = CMR ÷ profit ratio
DOL = 40% + 8% 38. 24,000 u (2) + 2,000 u (12) + 5,000 u (5)

4. Sell: P 340,000 40. 98% (70,000 x 60%) + (68,000 x 40%)

Process: 520,000 – 150,000 = P 370,000
6. The “sum of the squared value of costs” 41. 60,000 (60% x 98%) + 60,000 (40%)
(4,259 is not used in least-squares method.
43. MPPV: 15,000 (2 – 2.5) + 10,000 (2.1 – 2.5)
7. If closing stocks exceed opening stocks, then production
must be higher than sales. 44. MPUV: 13,000 (2 – 2.5) + 10,000 ( 2.1- 2.5)

8. Production: 100,000 + 10,000 – 20,000 Material B 45. MQV: [925,000 – 2,000) – 11,000 (2)] 2.5
Purchases:
90,000 (3) + 24,000 – 22,000 46. DM Var.: 2,500 U (MQV) + 10,500 F (MPUV)

9. Product B’s variable costs: P 155,000 48. RoI = MARgin x TURnover

= 80,000 + 50,000 + 15,000 + 10,000 24% = 15 % x Turnover
Product B’s avoidable fixed costs: P 36, 000
= 60% (35,000) + 50% (30,000) MS Quiz 3
Product B’s segment margin: Date: within 2nd week of August (earliest )
200,000 – 155,000 – 36,000 Coverage: 07, 08, 09 & El (Macroeconomics)
10. Choice A affects quantity supplied (not supply). Choices B NOTE: all problems, no theories
and D affect demand.
MS Quiz 4
11. Sales: (90,000 + 30,000) ÷ (20 – 12) Date: within 4th week of August (earliest )
∆ Coverage: 10, 11& 12
12. BEP (now): 90,000 + 8 = 11,250 units (@20) NOTE: all problems, no theories
BEP (now): 90,000 ÷ 10 = 9,000 units (@22)
MS Quiz 5
13. Residual Income = (+) → RoI > minimum RoI Date: within first week of September
Residual Income = zero → RoI = minimum RoI Coverage: 01 to 12. A to F (all topics!)
Residual Income = (-) → RoI < minimum RoI NOTE: all theories, no problems

14. Controller has no authority over the shipping clerk; Line

authority exists in choices B and D.

15. Scrap: 10% x 50,000 = P 5,000

Modify: 25,000 – 14,200 = P 10,800

18. TMC: 23,000 + 6,000 – 7,000 = 22,000

DMused: 22,000 – 16,000 – 3,000 = 3,000
DMending: 5,000 + 17,000 – 3,000 = P 19,000

20. Unit VC: (8,000 – 5,000) ÷ (3,000 – 1,500)

Annual fixed costs: [5,000 – 1,500(2)] 12
 MS Final Preboard Exam solutions to selected items (October 2014 batch)
1. Sell: P 6 ( 1,000 units) = P 6,000 36. Cost of debt: 5% (1 – 0.4)
Process: P 10 (1,000 units) – 2,000 = P 8,000 Equity weight: (2M + 7M) – 1M – 4M = 50%
Joint costs are considered irrelevant. WAAC: 50% (3%) + 50% (15%)
WACC is based on equity and long-term debts.
2. Present cash OUT: cost of new machine
Present cash IN: salvage of old machine 37. EVA: 60% (1.5M) – 9% (9M – 1M)

3. Choices A & D: current ratio will decrease 39. Production: 80,000 + 18,000 – 15,000
Choice B: no effect on current ratio DM purchases: 83,000 (5) + 23,000 – 27,000
SUGGESTION: assume amounts with a current ratio
of 4 times as starting point. 40. @ IRR: NPV = 0 or probability index = 1

4. 107,000 = 50% (90,000) + 30% (80,000) + 20%
(95,000) + cash sale
6. Cost: 100,000 + 0.01% (3M x 360) = 208,000
Benefit: 6% (3M x 2 days) = 360,000
8. VFOH: (2,150 – 1,450) ÷ (75 -40) = 20
At 80% capacity: 20(80) = P 1,600
10. ARR: (1,000 – 325) ÷ (6,500 ÷ 2)
41. Weighted average CMR
30% (20%) + 60% (33.33%) + 10% (50%)
Over-all BES: 18,600 ÷ 31% = P 60,000
43. Carrying costs: 100 x (25% x 10) = 250
Stock-out costs: 15% (30x2) 20 = 180
45. Equity: 1.4 M (40÷70) = 800,000
Dividend: 2M – 6% (10M) – 800,000
Dividend payout: 600,000 ÷ 2M

11. A firm is most likely to offer cash discounts when 46. Division Z5’s segment margin
competitor also offers the same and the firm is in 50,000 – 42,000 – 70% (6,400)
Need of cash (i.e., early collection).
48. MQV: 30,000 U = (215,000 – SQ) 2
12. Cost of preferred stock: 10 ÷ (107 – 5) Production: 200,000 ÷ 4
Tax effects are considered only for debts.
50. 300 v [150 days – (300 ÷ 6)]
13. Expert systems are also called “knowledge- based
systems” 52. (6,000 – 4,000) x (100,000 ÷ 5,000)

14. Breakeven pt: 247,500 ÷ 45% = 550,000 54. Investment: 7, 554 – 2,500 = 5,054
Safety margin: 900,000 – 500,000 = 350,000 Payback: 2 + 0.36*years
*(5,054 – 4,200) ÷ 2,400
15. Unit sales: (247,500 + 315,000) ÷ 22.5
Additional sales: 25,000 units – 18,000 units 55. Learning rate: 192 ÷ 240
Units Average Total
17. Depreciation, being a non-cash expense is, not 500 240 P 120,000
Considered in NPV. NPV considers its tax effect. 1,000 192 P 192,000

18. DM purchases: 95,000 + 20,000 – 15,000 57. AFOH (V): 210,000

19. TMC: 257,500 + 10,000 – 7,500 = 260,000
DL: 260,000 – 95,000 – 75,000
21. CM: 500,000 (3- 0.6) = 1.2 m
EBIT: 1.2 M – 110,000 = 1,090,000
DFL: 1,090,000 ÷ (1,090,000 – 60,000)
BAAH (V): 19,000 (10)
58. Based on labor hours: 50% vs 50%
Based on product-level: 33.3% vs. 66.7%
59. Square root of: (2x 35,000 x 8) ÷ [12% (25)
+ 0.50] = 400 dozens

24. AR: (7.2 M ÷ 360) x (36 – 28) = 160,000 inc. 60. 350 days ÷ (35,000 ÷ 4 dozens)
Savings: 6% x 160,000
61. Cost to make: 2 + 12 + 5+ 7 + 3 = 29
25. Residual Income: (+) → RoI > Min. RoI Cost to buy: 27
Residual Income (-) → RoI < Min. RoI
62. Dividend yield x PE ratio = Dividend Pay-out
26. Cash OUT: 30,000 – 2% (50,000 – 20,000)
Cash IN: 500,000 – (50,000 – 20,000) 63. Savings: (75-70) 1,000
Effective rate: 29,400 ÷ 470,000
64. Y = 30,500 + 8x
28. Application rate: 300,000 ÷ (25,000 x 6) = 2
Applied FOH: 162,500 x 2 = 325,000 65. Non- negativity constraint: X, Y ≥ 0

30. “High customer loyalty” applies to monopolistic 67. [(160,000 x .6) – (14% x 200,000)]
Competition rather than perfect competition.
68. Controllable (CON) Variance = Spending (5)
31. (316,000 + 144,000) ÷ (50% - 10%) Variance + Efficiency € Variance

33. Applied FOH: (4,750 x 2) x (80,000 ÷ 10,000) 69. CAPM: 9% + 0.8 (15% - 9%)

70. Non- conformance costs are composed of

internal failure and external failure costs.