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# OCTOBER 2014 Batch’s MS Quiz 3

## 1. C 10. D 19. D 28. D

2. A 11. A 20. C 29. A
3. A 12. B 21. D 30. C
4. A 13. D 22. C 31. A
5. C 14. A 23. C 32. D
6. B 15. A 24. C 33. C
7. A 16. D 25. C 34. A
8. A 17. B 26. C 35. A
9. D 18. D 27. C

## > FIRST stage: overhead costs are assigned to activities

> SECOND stage: overhead costs are assigned to products based on activities done for/by the product.

8. Return on investment (RoI) = Margin x Turnover ‘Margin’ is a percentage or profit based on sales

12. Choice ’B’ is an example of appraisal costs Choice ‘C’ is an example of Internal failure costs

Choice ‘D’ is an example of prevention costs Choice ‘p’ is an example of external failure costs

16. Four (4) perspectives of the Balanced Scorecard: (1) Financial perspective (2) Customer perspective (3) Internal Business
Processes perspective (4) Learning & Growth perspective

## FISCAL Policy: (implemented by the government)

 Taxes: vs.
 Government Spending: vs.

## MONETARY Policy: (implemented by Central Bank)

 Reserve Ratio: vs.
 Lending Rates: vs.

*During recession, money supply should be increased ( ) to give the economy monetary relief in the face of economic slowdown that
is caused by declining GDP growth.

** In case of inflation, money should be taken away from economy ( ) to prevent consumers from buying commodities, which
causes the demand-pull inflation.

26. ORDERING COSTS usually include purchasing costs, shipping & handling costs, quantity discount lost
CARRYING COSTS usually include storage, rent, security, interest (opportunity cost/cost of capital), spoilage, depreciation,
obsolescence, insurance, and property taxes.

29. Applied FOH = P 176, 000 (P 240,000 ÷ P 160, 000) = P 264, 000 vs. Actual FOH = P 256,000

30. Total input costs: 900 (1.5) + 600 ((2.75) ÷ 600 (15) = P 12, 000

Total productivity factor: 3,000 units ÷ P 12,000 = 0.25 units per peso input

## TOTAL P 26,400 *32,000 – 12,500

32. DL & VFOH: (24,500** - 12,500) ÷ (8.5 + 4) = 960 hours 960 hrs ÷ 150 units – 6.4 hrs per unit

## 33. Traditional costing: P10,000 X 35% = p 35,000

ABC: 10,000 (30/300) + 800 (500./20) ÷ 100 (100/10) + 12 (200/2) ÷ 5 (20/1) ÷ 18 (480/12) = P24,020

## 34. Manufacturing Cycle Efficiency (MCE) ratio: 6 ÷ (6 + 1 + 1 + 1) = U.67

35. Total ordering costs: (18,000/600) 15 = 450 Total carrying costs: (600/2) 1.50 = 450
ReSA - The Review School of Accountancy

MS Quiz 2

## Items 19 to 23 are based on the following information

Michell, Inc. evaluates manufacturing overhead in its factory by using variance analysis. The following information applies
to the month of May:

Actual Budget

## b. P1,000 unfavorable d. P3,300 unfavorable

ReSA – The Review School of Accountancy Management Services

MS Quiz 3

## 1. The obligation to accomplish a task or achieve an objective is

a. Strategy c. Responsibility

## b. Authority d. Core competency

2. What is the slack time of the critical path through a PERT network?

## a. A reliable market price c. Variable cost plus percentage mark-up

b. Actual cost plus a percentage mark-up d. Budgeted full cost plus a percentage mark-up

## 5. Activity-based costing (ABC) first assigns costs to

a. Products c. Activities

## c. The buying division if it is operating at capacity

7. Which of the following would tend to benefit from the effect of unanticipated inflation?

a. Borrowers c. Savers

## 8. A company’s rate of return on investment (Rol) is equal to the

a. Percentage of the profit on sales multiplied by the capital employed turnover rate

## d. Investment capital divided by the capital employed turnover rate

9. Generally, individual department rates rather than plantwide rate for applying overhead would be

used if

## b. A company’s manufacturing operations are all highly automated

c. Manufacturing overhead is the largest cost component of its product cost

d. the manufactured products differ in the resources consumed from the individual departments

in the plant

10. The use of the graphic method as a means for solving linear programming problems

## d. Can be used when there are more that two restrictions

11. In comparison with firms that use plantwide overhead rates and departmental overhead rates, companies that have adopted
activity-based costing will typically use:

a. More cost pools and more cost drivers b. Fewer cost pools and more cost drivers

b. More cost pools and fewer cost drivers d. Fewer cost pools and fewer cost drivers

12. In the cost of quality, which of the following is an example of appraisal cost?

## c. Cost of reworking defective parts detected by the quality assurance group

d. Labor cost of product designers whose task is to design components that will not break under

## b. Small outputs, smaller inputs d. Few inputs, fewer outputs

14. What is the most accurate method of allocating service department costs?

## d. Customer performance measures are excluded

17. the economic order quantity for inventory is higher for an organization that has

## c. Higher purchase price per unit of inventory

d. Higher annual carrying costs as percentage of inventory value

## a. Will not be affected by contracts that include the indexing of payments

b. enhances the positive relationship between the price level and purchasing power of money

c. Increases the price level, which benefits those entitled to receive a certain amount of money

d. Increase the price level, which is negatively related to the purchasing power of money

## b. Customer service d. Rework of defective items

20. The imputed interest rate used in the residual income approach to performance evaluation is described as

## d. Marginal after-tax costof capital on new equity capital

21. Which of the following would not be included in th calculation of the GDP?

## b. An automotive worker’s wages d. Purchase of common stock

22. To determine the inventory reorder point, calculations normally include the

## b. Carrying cost d. Economic order quantity

23. All other things being equal, if a division’s traceable fixed expenses increase, then

## d. The overall company profit will remain the same

24. If a government were to use only a fiscal policy to stimulate the economy from a recession, it would

## b. Batch cost (yes); value-added cost (yes); production cost (no)

c. Batch cost (yes); value-added cost (no); production cost (yes)

## a. Insurance costs, shipping costs, storage costs and obsolescence

b. Purchasing cost, shipping costs, set up costs and quantity discount lost

c. Storage costs, insurance costs, interest on capital invested and purchasing order costs

27. The most effective fiscal program to help reduce demand-pull inflation would be to

## d. Increase taxes and decrease government spending

28. The balanced scorecard and value-based management are techniques that are being used by a number of corporations. In
comparison to the balanced scorecard, value-based management focuses on

## b. Financial measures d. Both financial and nonfinancial measures

29. Two companies have prepared the following budgets data for 2014:

Company X Company Y

## Budgeted direct labor cost P160,000

The actual overhed cost and the actual level of activity for 2014 for each firm are shows as follows:

Company X Company Y

## b. Over-applied by P16,000 d. Under-applied by P16,000

30. Silva Company produced 3,000 units of Product X last week. The inputs to the productin process for Product X were as follows:

## b. 5.00 units per hour d. 0.33 units per peso unit

MS Quiz 4

INSTRUCTIONS: Choose the letter-choice that corresponds to your best answer. No need for a special answer sheet. Checking and
discussions sha; start 15 minutes before time. Start now and ANSWER EFFICIENTLY

## Items 1 and 2 based on the following information

Nadal Co. is negotiating for the purchase of equipment that would cost P 100,000 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 is ten years, with no
residual value and would be depreciated by the straight-line method.

## b. 4.4 years d. 5.0 years

2. What is the accrual accounting rate of return based on the initial investment?

a. 30% c. 12%

b. 20% d. 10%

3. An organization offers its customers credit terms of 5/10 net 20. One-third of the customers take the cash discount and the
remaining customers pay on day 20. An average, 20 units are sold per day, priced at P10,000 each. The rate of sales is uniform
throughout the year. Using a 360-day year, what is the organization’s DSO (days’ sales outstanding) in accounts receivable, rounded to
the nearest full day?

a. 13 days c. 17 days

b. 15 days d. 20 days

## Items 4 and 5 based on the following information

The Rafa Corporation projects the following for the year 2014:

## Effective corporate income tax rate 40%

4. What is the expected common stock dividend per share for Rafa Corporation for 2014?

a. P 2.10 c. P 2.70

b. P 2.34 d. P 3.90

5. If Rafa Corporation’s common stock is expected to trade at a price/earnings ratio of eight, what would the market price per share(to
the nearest peso)?

a. P 125 c. P 68

b. 72 d. P 56

6. The management of Federer Corporation is considering a lockbox system. The bank will charge P 10,000 annually for the service,
which will save the firm approximately P 5,000 in processing costs. The lockers system will reduce the float for cash receipts by 3
days. Assuming the average daily cash receipts atre equal to P 100,000, and short-term interest costs are 5%, calculate the benefit or
loss from adapting the lockbox system.

## a. P 5,000 loss c. P 10, 000 benefit

b. P10,000 loss d. P 5,000 benefit

7. During 2014, Djokovie purchased P 1,920,000 of inventory. The 2014 costs of good sold was P 1, 800, 000 and the ending
inventory at December 31, 2014 was P 360,000. What was the 2014 inventory turnover?

a. 5.0 c. 6.0

b. 5.3 d. 6.4

8. Murray Company has been offered trade credit terms of 3/15, net 45. The firm does not take advantage of the discount, and it pays
the account after 67 days. Using 365-day year, what is the nominal cost of not taking the discount?

a. 18.20 % c. 23.48 %

b. 21.71% d. 26.45 %

9. tennis Co. has P 2,500,000 in inventory and P 2,000,000 in accounts receivable. Its average daily sales are P 100,000. The firm’s
payable deferral period is 30 days and average daily cost of sales are P 50,000. What is the length of the firm’s cash conversion
period?

## a. 100 days c. 50 days

b. 60 days d. 40 days

24. A decision to close Suburban Store would result in a monthly increase (decrease) in operating income of

a. (P10,800) c. (P1,200)

b. (P6,000) d. P4,000

25. Robert considering a promotional campaign at Suburban Store that would not affect Urban Store. Increasing annual promotional
expense at Suburban Store by P 60,000 in order to increase this store’s sales by 10% would result in a monthly increase (decrease) in
operating income during the year (rounded) of

a. (P,5000) c. P487

b. (P1,400) d. P7,000

## Items 26 to 0 are based on the following information

Joey Company marks up all merchandise at 25 percent of gross purchase price. All purchases are made on account with term
of 1/10, net 60. Purchase discounts, which are recorded as miscellaneous income, are always taken. Normally, 60 percent of each
month’s purchases are paid for in the month of purchase, while the other end of each month are kept at 30 percent of the next month’s
projected cost of goods sold.

Terms for sales on the account are 2.10, net/30. Cash sales are not subject to discount. Fifty percent month’s sales on account
are collected during the month of sal, 45 percent are collected in the succeeding month, and the remainder is usually uncollectible.
70% of the following of the collections in the month of sale subject to discount, while 10% of the collections in the succeeding month
are subject to discount.

## 26. Projected gross purchases for January are

a. P1,400,000 c. P1,472,000

b. P1,470,000 d. P1,248,000
27. Projected inventory at the end of December are

a. P420,000 c. P552,000

b. P441,600 d. P393,750

## 28. Projected payments to suppliers during February are

a. P1,551,200 c. P1,528,560

b. P1.535,688 d. P1,509,552

29 Projected sales discount to be taken by customers making remittances during February are

a. P5,250 c. P13,250

b. P11,900 d. P15,925

## 30. Projected total collections from customers during February are

a. P1,875,000 c. P1,511,750

b. P1,861,750 d. P1,188,100

## Items 31 and 32 are based on the following information

Henderson Manufacturing recently completed and sold an order of 50 units that had the following costs:

## **Applied at the rate of 10% of variable cost

The company has been requested to prepare a bid for 150 units of the same product.

31. If an 80% learning curve is applied, Henderson total cost on the bid0order for 150-units would be

a. P26,400 c. P38,000

b. P32,000 d. P41,800

32. If Henderson Manufacturing had experienced a 70% learning curve, the bid for the 150 units would

a. Show a 30% reduction in the total labor hours required with mo learning curve

## c. Be 10% lower than the total bid at an 80% learning curve

d. Include 6.40 direct labor hours per unit at P8.50 per hour

33. Jon Jones, Inc. previously used a traditional cost system that allocated all factory overhead costs to products based on 350 percent
of direct labor cost. The company had just implemented an ABC system that traces indirect costs to products based on consumption of
major activities as indicated below:

## Setup 10,000 hours P100,000 100 hours

Production order 2,000 orders P 200,000 12 orders

## Parts administration 12,000 parts P480,000 18 parts

Usinig Activity Based Costing (ABC) rather than the traditional cost system what would have been the total cost assigned to Product
X?

## b. Lower by P1.980 d. Lower by P11,980

34. what is the manufacturing cycle efficiency when the processing time is six hours and inspection, waiting (queue before delivery),
and move time one hour each?

a. 0.67 c. 0.78

b. 0.75 d. 0.88

35. Aldo uses an economic order quantity model and has determined an optimal order size of 600 units. Annual demand is 18,000
units, ordering costs are P15 per order, and holding costs are P1.50 per unit. What is Aldo’s annual ordering and holding costs?

a. P900 c. P9,900

b. P1,350 d. P27,450