1.

Lady Company is considering a capital investment project with the following projected cash flows:
Year Net Cash Flows
0 (P 600,000)
1 P 240,000
2 P 210,000
3 P 200,000
4 P 185,000
Assuming the project cash flows are evenly generated throughout the year, how many months of cash flows is need in year 3
for the purposes of computing the payback period?
a. 3 months
b. 4 months
c. 6 months
d. 9 months
e. 11 months
2. J Lo company has the following information:
Current Ratio 2.5:1
Return on Sales 30%
Inventory Turnover 1.5x
Days Sales Outstanding 110 days
Times Interest Earned 6x
Payables Deferral Period 2 months
Assuming a 360 – day year, how long is J Lo’s cash conversion cycle?
a. 350 days
b. 290 days
c. 270 days
d. 250 days
e. 230 days
3. A company that has a profit can increase its return of investment by
a. Increasing sales and operating expenses by the same amount
b. Increasing average operating assets and operating expenses by the same amount
c. Increasing sales and operating expenses by the same percentage
d. Decreasing operating assets and sales by the same percentage
e. None of the above
4. Usher Company has 10,000 outstanding shares with a market value of P25 each. It just paid a P1 per share dividend.
Dividends are expected to grow at a constant rate of 10%. If floatation costs are 5% of the selling price, the cost of new equity
financing is
a. 14.00%
b. 14.21%
c. 14.40%
d. 14.63%
e. 15.00%
5. Identify the incorrect statement regarding cost estimation.
a. In interpreting regression results, the higher the correlation, the better cost predictions are likely to be.
b. High-low, scatter diagram, and regression analysis are methods of developing formulas to predict mixed costs.
c. An r-squared of 0.91 with a regression equation means that predictions will be accurate 91% of the time.
d. The scatter diagram method is inferior over high-low as the former considers more than just two points of activity
level.
e. A large of standard error of estimate indicates that the amounts forecasted are highly correlated.
6. If the economy is facing demand-pull inflation, which of the following would be a logical action by the government?
a. Increase income taxes
b. Lower the discount rate
c. Buy government securities
d. Increase government spending
e. None of the above.
7. A firm has the following capital structure: 70% debt and 30% equity; interest rate on debt is 12% and on common stock is 14%.
If the WACC is 9.66%, then what is the marginal income tax rate?
a. 32%
b. 35%
c. 31.6%
d. 65%
e. 30%
8. Throughput time is 12 days; lead time is 15 days; value-added time is 3 days; manufacturing cycle efficiency ratio is
a. 11%
b. 20%
 c. 25%
d. 80%
e. 90%
9. The balanced scorecard of Jolibee Corp. does not require looking at performance from which of the following?
a. The owners of Jolibee Corp
b. The competitors of Jolibee Corp such as Golden Arches Corp
c. Its restaurant managers and other employess
d. Internal business process
e. The customers of the corporation
10. A company is in need of a short-term source of funds. Local banks and a finance company have offered the needed funds
under each of the following sets of terms. All involve a one year note.
 Bank One: P 100, 000 note, 12% interest
 Bank Two: P 100,000 note, 10% interest, 20% compensating balance required
 Bank Three: P 110,000, non-interest bearing note, discounted at 11%
 Finance Company: P 100,000 note, 11% interest, with up front charge of six points (6%)
Which option is the most cost-efficient alternative?
a. Bank One
b. Bank Two
c. Bank Three
d. Financial Company
e. None of the above
11. A firm sells on terms of 2/10, net/60. It sells 1,000 units per days at a unit price of P10. On 60% of sales, customers take cash
discount. On the remaining 40%, customer pay, on average in 70 days.

What would be the impact on the balance of accounts receivable if the firm initiates a more aggressive collection policy and is
able to reduce the average payment period of 60 days for those customers not taking cash discount? (Assume that sales
levels are unaffected by the change of policy)
a. Decrease by P 4,000
b. Decrease by P 40,000
c. Decrease by P 240,000
d. Decrease by P 280,000
e. Increase by P 4,000
12. The long-term goal of financial management is to
a. Avoid risk
b. Maximize profits
c. Maximize BOD’s wealth
d. Maximize shareholder’s wealth
e. Maximize the book value of assets
13. Once the government imposes health and safety regulations on certain products, one of the most likely result is
a. Greater consumption of the product
b. Lower prices for the product
c. Greater tax revenues for the government
d. Higher price for the product
e. None of the above
14. In auditing computer-based systems, the integrated test facility (ITF)
a. Allows the auditor to assemble test transactions and run them through the computer system to test the integrity
of controls on a sample data base.
b. Is a set of specialized software roundness that are designed to perform specialized audit tests and store audit
evidence
c. Is a concurrent audit technique that establihed a special set of dummy master files and enters transactions to
test the programs using dummy files during regular processing runs.
d. Uses an audit log to record transactions and data having special audit significance during regular processing
runs,
e. None of the above.
15. A mall-order confectioner sells fine candy in one-pond boxes. It has the capacity to produce 600,000 boxes annually but
forecasts that it will produce an sell only 500,000 boxes in the coming year. The costs to manufacture and distribute the candy
are detailed below. The organization has invested capital of P6.75 million.
Variable costs per pound
Manufacturing P4.85
Packaging 0.35
Distribution 1.80
Total P7.00
Annual fixed costs
Manufacturing overhead P810,000
 Marketing and distribution 270,000
The selling price per pound that the confectioner should charge for a one pound box of candy to obtain a 20% rate of return on
invested capital is
a. P 9.70
b. P 11.05
c. P 11.50
d. P 11.86
e. P 12.00
16. A company’s independent manufacturing division sells 50,000 units to outsiders and transfers 3,000 units to another division.
The product has a perfectly competitive market price of P 7.00. Variable unit cost is P 4.00, fixed costs are P 110,000, and
manufacturing capacity is 44,000 units. The optimal transfer price of the company is
a. P 4.00
b. P 6.00
c. P 6.08
d. P 7.00
e. P 7.08
17. In regression analysis, which of the following which of the following correlation coefficients represents the strongest
relationship between dependent and independent variables?
a. -1.05
b. 1.89
c. -0.03
d. 0.2
e. 0
18. Delphi company has developed a new project that will be marketed for the first time during the next fiscal year. Although the
marketing department estimates that 35,000 units could be sold at P 36 per unit, Delphi’s management has allocated only
enough manufacturing capacity to produce a maximum of 25,000 units if the new product annually. The fixed costs associated
with thenew product are budgeted at P450,000 for the year, which includes P60,000 for depreciationon new manufacturing
equipment. Delphi is subject to a 40% income tax rate. Data Associated with each unit of product are presented on the next
page:
Variable Costs
Direct material P 7.00
Direct labor 3.50
Maunfacturing Overhead 4.00
Selling expenses 1.50
Delphi Company’s management has stipulated that it will not approve the continued manufacture of the new product after the
next fiscal year unless the after-tax profit is atleast P 75,000 the first year. The unit selling price to achieve this target profit
must be at least
a. P 34.60
b. P 36.60
c. P 37.00
d. P 39.00
e. P 40.00
19. What is the break-even point as a percentage of capacity?
a. 45%
b. 50%
c. 55%
d. 67.5%
e. 68.75%
20. A company manufactures a product for its customers by contracting in advance of production. Therefore the company
produces only units that will be sold by the end of each period. During the last periodm the following sales were made and
costs are incurred:
Sales P 40,000 Salespeople’s Salaries P 1,300
Direct Materials 9,050 Insurance (2/3 Factory, 1/3 Office) 1,200
Rent (9/10 Factory, 1/3 office) 3,000 Office Supplies 750
Deprciation on Factory Eqpt. 2,000 Advertising 700
Supervisor (2/3 factory, 1/3 office) 1,200 Depreciation of an office equipt 500
Direct Labor 6,050 Interest on loan 300
What was the gross margin percentage for the last period (rounded to the nearest %)?
a. 41%
b. 44%
c. 46%
d. 49%
e. 50%
21. When sales are constant but production fluctuates,
 a. Net income will be erratic under variable costing
b. Absorption costing will always show a net loss
c. Variable costing will always show a positive net income
d. Net income will be erratic under absorption costing
e. None of the above
22. Qatar Company produces Part G. The costs per unit for 10,000 units for Part G are as follows:
Direct materials P3
Direct labor 15
Variable overhead 6
Factory overhead 8
Bahrain Company has offered to sell Qatar 10,000 units of Part G for P 30 per unit. If Qatar accepts Bahrains offer, the
released facilities could be used to save P 45,000 in relevant costs in manufacturing Part G. In addition, P 5 per unit of fixed
overhead applied to Part G would be totally eliminated. What alternative is more desirable and by what amount is it more
desirable?
a. Manufacture, P10,000
b. Manufacture, P15,000
c. Buy, P 35,000
d. Buy, P 65,000
e. Neither buy or manufacture
23. Cairo manufacturing uses 10 units of Part Kj45 each month in the production of radar equipment. The unit cost to manufacture
one unit of KJ45 is presented below.
Direct materials P 10,000
Materials handling (20% of DM) 200
Direct Labor 8,000
Manufacturing Overhead (150% of DL) 12,000
Materials handling represent the direct variable costs of the Receiving department that are applied to direct materials and
purchased components on their cost. This is a separate charge in addition to manufacturing overhead. Cairo’s reliable
vendors, offered to supply part KJ45 at a unit price of P15,000. If Cairo pruchases the KJ45 units from Scott, the capacity
Cairo used to manufacture these parts will be idle. Should Cairo decide to pruchase the parts from Egypt, the unit cost of KJ45
would:
a. Increase by P 4,800
b. Decrease by P6,200
c. Decrease by P 3,200
d. Increase by P 1,800
e. No changes
24. Management accountant’s role in the control process is to provide
a. Mangers with information that can be used to determine customer satisfaction needs.
b. Investors and creditors information on the financial stability of the company.
c. Managers with relevant infor mation to compare with expectations.
d. Input managers on the best ways to achieve continuous improvement in production.
e. None of these statements.
25. Division A is considering a project that will earn a rate of return which is greater than the imputed interest charge for invested
capital, but less than the division’s historical return on invested capital. Division B is considering a project that will earn a rate
of return that is greater than the imputed interest charge for invested capital. If the objective is to maximize residual income,
should these divisions accepts or reject their projects?
A B
a. Accept Accept
b. Reject Accept
c. Reject Reject
d. Accept Reject
26. Callisto Company’s cost of compliance is P58,000. Appraisal cost is P21,000 and failure cost is P32,000. The company’s total
quality cost is
a. 53,000
b. 79,000
c. 90,000
d. 111,000
e. 120,000
27. The information below relates to costs, revenues and assets anticipated in the Clothing Division of Arellano Corporation:
Sales P4,000,000
Variable Costs 75% of Slaes
Average Assets Employed P12,000,000
Fixed Costs 0
How would each of the following measures be affected if sales rise by P5,000 in the Clothing Division? ROI, Asset Turnover,
Profit Margin
 a. Increase, Increase, Increase
b. Increase, No change, Increase
c. Increase. Increase. No change
d. No change, No change, Increase
e. No change, No change, No change
28. The primary functions of a computerized informations system include
a. Input, processiong and output
b. Input, processing, output and storage
c. Input, processing, output and control
d. Input, processing, output, storage and control
e. None of the above
29. Deadpool Company had a 25,000 unfavorable volume variance, and P18,000 variable overhead spending variance, and
2,000 total underapplied overhead. The fixed overhead variance is
a. 41,000 unfavorable
b. 45,000 favorable
c. 45,000 unfavorable
d. 41,000 favorable
e. 47,000 favorable
30. Which of the following is the most probable reason with a company would experience an unfavorable labor rate variance and
a favorable labor efficiency variance?
a. The mix of workers assigned to the particular job was heavily weighted toward the use of higherly paid,
experienced individuals.
b. The mix of workers assigned to the particular job was heavily weighted toward the use of new, relatively low
paid, unskilled workers.
c. Because of the productive schedule, workers from other production areas were assigned to assist in this
particular process.
d. Defective materials caused more labor to be used in order to produce a standard unit.
e. None of the above
31. Wala Company applies overhead on a direct labor hour basis. Each unit of product requires 5 direct labor hours. Overhead is
applied on a 30 percent variable and 70 percent fixed basis; the overhead application rate is P16 per hour. Standards are based
on a normal monthly capacity of 5,000 direct labor hours.
During September 2006, Wala produced 1,010 units of product and incurred 4,900 direct labor hours. Actual overhead cost for
the month was P80,000.
What is total annual budgeted fixed overhead cost?
a. 56,000
b. 56,650
c. 672,000
d. 678,720
e. 70,000
32. Favorable volume variances may be harmful when:
a. Machine repairs cause work stoppages
b. Supervisors fail to maintain an even flow of work
c. Production in excess of normal capacity cannot be sold
d. There are insufficient sales orders to keep the factory operating at normal capacity
e. None of the follwoing statements
33. With credit terms of 3/8, n/30, what is the customer’s payment decision date?
a. Three days after the invoice is received.
b. The 8th day is the customer’s decision date.
c. Anytime during the period, 8th to the 30th.
d. The 30th day is the primary decision date.
e. The following 30days after the 8th day
34. Samaritan Supplies, Inc. has P5 million in inventory and P2 million in accounts receivable. Its average daily sales are P100,000.
The company has P1.5 million in accounts payable. Its average daily purchases are P50,000. What is the length of the company’s
cash conversion period?
a. 50 days
b. 20 days
c. 30 days
d. 40 days
e. 45 days

35. A major difference between an investment in working capital and one in depreciable assets is that
a. an investment in working capital is never returned, while most depreciable assets have some residual value
b. an investment in working capital is returned in full at the end of a project’s life, while an investment in depreciable
assets has no residual value.
c. an investment in working capital is not tax-deductible when made, nor taxable when returned, while an investment
 in depreciable assets does allow tax deductions.
d. because an investment in working capital is usually returned in full at the end of the project’s life, it is ignored in
computing the amount of the investment required for the project.
e. None of the above.
36. If a company’s required rate of return is 12 percent and in using the profitability index method, a project’s index is greater than
1.0, this indicates that the project’s rate of return is
a. equal to 12 percent. C. less than 12 percent.
b. greater than 12 percent. D. dependent on the size of the investment.
37. Bruell Company is considering to replace its old equipment with a new one. The old equipment had a net book value of P100,000,
4 remaining useful life with P25,000 depreciation each year. The old equipment can be sold at P80,000. The new equipment
costs P160,000, have a 4-year life. Cash savings on operating expenses before 40% taxes amount to P50,000 per year. What
is the amount of investment in the new equipment?
a. P160,000 C. P 80,000 e. None of the above
b. P 72,000 D. P 68,000
38. Zap Manufacturing has an investment opportunity to embark on a project where yearly revenues for five years are to be P400,000
and operating costs of P104,800. The equipment costs P1 million, and straight-line depreciation will be used for book and tax
purposes. No salvage value is expected at the end of the project’s life. The company has a 40 percent marginal tax rate and a
10 percent cost of capital. The equipment manufacturer has offered a delayed payment plan of P560,500 per year at the end of
the first and second years. There will be no changes in working capital.
The present value of annuity of 1 for 5 periods is 3.7908 at 10 percent.

The present values of 1 end of each period at 10 percent are:

Period 1 0.9091
Period 2 0.8264
Period 3 0.7513
Period 4 0.6830
Period 5 0.6209
The net present value if the equipment were purchased is
A. P (87,977) C. P 1,922
B. P (25,310) D. P (61,094)
39. The Shoe Department at the Baton Rouge Department Store is being considered for closure. The following information relates
to shoe activity:
Sales revenue $350,000
Variable costs:
Cost of goods sold 280,000
Sales commissions 30,000
Fixed operating costs 90,000

If 70% of the fixed operating costs are avoidable, should the Shoe Department be closed?
A. Yes, Baton Rouge would be better off by $23,000.
B. Yes, Baton Rouge would be better off by $50,000.
C. No, Baton Rouge would be worse off by $13,000.
D. No, Baton Rouge would be worse off by $40,000.
E. None of the above.
40. When deciding whether to sell a product at the split-off point or process it further, joint costs are not usuallyrelevant because:
A. such amounts do not help to increase sales revenue.
B. such amounts only slightly increase a company's sales margin.
C. such amounts are sunk and do not change with the decision.
D. the sales revenue does not decrease to the extent that it should, if compared with separable processing.
E. such amounts reflect opportunity costs.