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FOURTH EVALUATIONS
SAMPLE QUESTIONNAIRES
3. Huntington Garden Company has 100,000 shares of ₱10 par value common stock issued and outstanding. Total
stockholders' equity is P2,800,000 and net income for the year is ₱800,000. During the year the company paid
₱3 per share in dividends on its common stock. The market value of common stock is ₱24. What is the price-
earnings ratio?
A. 3 B. 3.5 C. 4.8 D. 8
4. If a company is profitable and is effectively using leverage, which one of the following ratios is likely to be the
largest?
A. Return on total assets C. Return on total liabilities
B. Return on common stockholders' equity D. Cannot be determined.
5. Clark Company issued bonds with an interest rate of 10%. The company's return on assets is 12%. The
company's return on common stockholders' equity would most likely
A. Increase. B. Decrease. C. Remain unchanged. D. Cannot be determined.
6. Harry Company has 20,000 shares of common stock outstanding. These shares were originally issued at a price
of ₱15 per share. The current book value is ₱25 per share and the current market value is ₱30 per share. The
dividends on common stock for the year totaled ₱45,000. The dividend yield ratio is
A. 9%. B. 7.5%. C. 15%. D. 10%.
7. Brigham Company's net income last year was ₱65,000 and its interest expense was ₱15,000. Total assets at
the beginning of the year were ₱620,000 and total assets at the end of the year were ₱650,000. The company's
income tax rate was 40%. The company's return on total assets for the year was closest to
A. 11.7%. B. 10.2%. C, 12.6%. D. 11.2%.
8. If year one equals ₱800, year two equals ₱840, and year three equals ₱896, the percentage to be assigned for
year three in a trend analysis, assuming that year 1 is the base year, is
A. 100%. B. 89%. C. 105%. D. 112%.
9. A company with ₱60,000 in current assets and ₱40,000 in current liabilities pays a ₱1,000 current liability. As
a result of this transaction, the current ratio and working capital will
A. Both decrease.
B. Both increase.
C. Increase and remain the same, respectively.
D. Remain the same and decrease, respectively.
10. The receivable turnover and inventory turnover ratios are used to analyze
ACTIVITY-BASED COSTING
2. A single predetermined cost driver rate based on total plant direct labor hours is:
a. P 8 per direct labor hour c. P10 per direct labor hour
b. P20 per direct labor hour d. P15 per direct labor hour
3. A predetermined cost driver rate for the Machining Department based on the number of machine hours in that
department is:
a. P 5 per machine hour c. P10 per machine hour
b. P20 per machine hour d. P15 per machine hour
Use the following information for the next three (3) questions.
The following information was extracted from the first year absorption-based accounting records of Cookie
Manufacturing Corp.
Total fixed costs incurred P100,000
Total variable costs incurred 50,000
Total period costs incurred 70,000
Total variable period costs incurred 30,000
Units produced 20,000
Units sold 12,000
Unit sales price P12
3. If the firm had used variable costing in its first year of operations, how much income (loss) before income taxes
would it have reported?
a. (P6,000) b. P54,000 c. P26,000 d. P2,000
4. Based on variable costing, if the company had sold 12,001 units instead of 12,000, its income before income taxes
would have been
a. P9.50 higher. b. P11.00 higher. c. P8.50 higher. d. P8.33 higher.
5. Profit under absorption costing may differ from profit determined under variable costing. How is this difference
calculated?
a. Change in the quantity of all units in inventory times the relevant fixed costs per unit.
b. Change in the quantity of all units produced times the relevant fixed costs per unit.
c. Change in the quantity of all units in inventory times the relevant variable cost per unit.
d. Change in the quantity of all units produced times the relevant variable cost per unit.
6. Alexander Company produces a single product that sells for P 7.00 per unit. Standard capacity is 100,000 units per
year; 100,000 units were produced and 80,000 units were sold during the year. Manufacturing costs and selling and
administrative expenses are presented below. There were no variances from the standard variable costs. Any under or
overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold.
Fixed costs Variable costs
Direct material P 0 P 1.50 per unit produced
Direct labor 0 1.00 per unit produced
Manufacturing overhead 150,000 0.50 per unit produced
Selling and administrative 80,000 0.50 per unit sold
The company had no inventory at the beginning of the year. What is the net income under variable costing?
A. ₱50,000. B. ₱80,000. C. ₱90,000. D. ₱120,000.
CVP ANALYSIS
1. Management is considering replacing an existing sales commission compensation plan with a fixed salary plan.
If the change is adopted, the company’s
a. break-even point must increase. c. margin of safety must decrease.
b. operating leverage must increase. d. profit must increase.
2. Below are income statements that apply to three companies: ABS, GMA, and TV5:
ABS Company GMA Company TV5 Company
Sales P 100 P 100 P 100
Variable costs (10) (20) (30)
Contribution margin P 90 P 80 P 70
Fixed costs (30) (20) (10)
Profit before taxes P 60 P 60 P 60
4. A firm has fixed costs of P200,000 and variable costs per unit of P6. It plans on selling 40,000 units in the coming
year. If the firm pays income taxes on its income at a rate of 40 percent, what sales price must the firm use to obtain
an after-tax profit of P24,000 on the 40,000 units?
a. P11.60 b. P11.36 c. P12.00 d. P12.50
How much will be contributed to profit before taxes by the 1,001st unit sold?
STANDARD COSTING
2. When performing input-output variance analysis in standard costing, “standard hours allowed” is a means of
measuring
a. standard output of standard hours. c. standard output at actual hours.
b. actual output at standard hours. d. actual output at actual hours.
3. The labor mix and labor yield variances together equal the
a. Total labor variance. c. Labor efficiency variance.
1. When using one of the discounted cash flow methods to evaluate the desirability of a capital budgeting project,
which of the following factors is generally not important?
a. method of financing the project under consideration c. timing of cash flows relating to the project
b. impact of the project on income taxes to be paid d. amounts of cash flows relating to the
project
3. The pre-tax cost of capital is higher than the after-tax cost of capital because
a. interest expense is deductible for tax purposes.
b. principal payments on debt are deductible for tax purposes.
c. the cost of capital is a deductible expense for tax purposes.
d. dividend payments to stockholders are deductible for tax purposes.
4. Weighted average cost of capital that is used to evaluate a specific project should be based on the
a. mix of capital components that was used to finance a project from last year.
b. overall capital structure of the corporation.
c. cost of capital for other corporations with similar investments.
d. mix of capital components for all capital acquired in the most recent fiscal year.
5. Using the net present value criterion, which is the most desirable project?
a. Project A b. Project B c. Both projects A and B d. Neither project
8. The interest rate used to find the present value of a future cash flow is the
a. prime rate. b. discount rate. c. cutoff rate. d. internal rate of return.
10. For a project such as plant investment, the return that should leave the market price of the firm’s stock
unchanged is known as the
a. cost of capital. b. net present value. c. payback rate. d. internal rate of
return.