No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

MS02 - PREWEEK LECTURE

COST CONCEPTS, COST BEHAVIOR AND CVP ANALYSIS

H2K and Associates, a local auditing and tax services firm in Metro Manila decided to expand its influence
in the provinces surrounding the National Capital Region. Hanabi, the company’s senior partner, believes
that it is strategically advantageous to start the expansion in the areas of Cavite provinces.

Since the new branch enters into an unknown market, Hanabi decided to operate for two months to test the
environment and before determining how much to charge per hour on an ongoing basis. As a temporary
measure, the branch adopted an hourly charge of P100, half the amount charged by H2K and Associates
for professional services.

The new branch opened on July 1. During July, the branch incurred 240 hours of auditing and tax services.
The next month, the activity was 300 hours. Costs under these levels of activity are as follows:

Professional hours 240 hours 300 hours

Salaries:
Senior accountant P5,000 P5,000
Office assistant 2,400 2,400
Internet and software subscriptions 700 850
Consulting by senior partner 2,800 6,000
Depreciation (equipment) 4,800 4,800
Supplies 3,620 4,400
Administration 1,000 1,000
Rent (offices) 4,000 4,000
Utilities 1,328 1,460

1. The branch’s monthly fixed costs amount to:

a. P8,600
b. P425
c. P9,025
d. P12,189

2. Kagura, the chief operating officer of the branch, has estimated that the branch will average 344
professional hours per month. If the branch is to be operated as a non-profit organization, how much
will it need to charge per professional hour?
a. P96.03
b. P97.27
c. P87.06
d. P71.03

3. Harith Corporation incurs annual fixed costs of P250,000 in producing and selling a single product.
Estimated unit sales are 150,000. The company projects its income tax rate at 40 percent. What is the
maximum amount that Harith can expend for variable costs per unit if the sales price per unit is
estimated at P5.50 and supposing it has a target profit before tax of P125,000?
a. P3.70
b. P3.83
c. P2.44
d. P3.00

1|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

4. For its most recent fiscal year, a firm reported that its contribution margin was equal to 30 percent of
sales and that its net income amounted to 15 percent of sales. If its fixed costs for the year were
P60,000, how much was the margin of safety?
a. P150,000
b. P600,000
c. P200,000
d. P 50,000

5. Chang’e Company manufactures a single product. In the prior year, the company had sales and net
income amounting to P300,000 and P50,000, respectively. Chang’e expects its variable to fixed cost
structure to maintain at 40:60, respectively, and sales price per unit to remain the same in the current
year, however total sales are expected to increase by 20%. If the current year projections are realized,
net income should exceed the prior year’s net income by:
a. 100 percent.
b. 20 percent.
c. 80 percent.
d. 50 percent.

6. As projected net income increases the

a. degree of operating leverage declines.
b. break-even point goes down.
c. margin of safety stays constant
d. contribution margin ratio goes up.

7. The following data pertain to two types of products being manufactured by Alucard Corporation:

Selling Price CM Ratio

Endless Battle 150 60%
Haas Claw 500 40%

Annual fixed costs are budgeted at P738,000 while sales mix ratio is retained at 70:30 between Endless
Battle and Haas Claw, respectively. What is the monthly breakeven point of Alucard Corporation for
Endless Battle?
a. 6,000 units
b. 5,591 units
c. 500 units
d. 350 units

ACTIVITY-BASED MANAGEMENT
8. All of the following describe activity-based management, except
a. the ideal standard quantity for non-value-added activities is zero
b. application of activity-based costing and value-chain analysis in analyzing and evaluating business
activities
c. an approach used by an entity to achieve competitive advantage
d. consists of organization-wide efforts to install and make permanent climate where employees
continuously improve their ability to achieve customer satisfaction.

9. Value engineering
a. Is a basis for cost planning and product costing
b. Is a systematic approach to reaching targeted cost levels during value chain analysis without
reducing customer satisfaction
c. Is a way of understanding how a company generates output
d. Determines what is done, by whom, at what costs and the value added by each activity
2|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

10. Which of the following statements about activity-based costing is not true?
a. Activity-based costing is useful for allocating marketing and distribution costs.
b. Activity-based costing is more likely to result in minor differences from traditional costing systems
if the firm manufactures only one product rather than multiple products.
c. In activity-based costing, cost drivers are what cause costs to be incurred.
d. Activity-based costing differs from traditional costing systems in that products are cross-subsidized

11. Value-added activities

a. Shall be removed or eliminated
b. Cannot be distinguished from non-value added activities
c. Involve usage of resources that customers are willing to pay for
d. Cause additional costs to a product without affecting the selling price

12. Process value analysis is a key component of activity-based management that links product costing
and
a. Activity pools
b. Accumulation of heterogenous cost pools
c. External financial reporting
d. Continuous improvement

PRODUCT COSTING
Three new corporations (Balmond, Axe, Yurnero) began its operations on January 1 of the current year.
The following shows the costs information at 100,000 activity level of each company during the calendar
year:

Balmond Corp. Axe Incorporated Yurnero Ltd.

Production in units 100,000 100,000 100,000
Selling price P10 P10 P10
Fixed manufacturing costs 100,000 200,000 300,000
Variable manufacturing costs 300,000 200,000 100,000
Total fixed costs 400,000 400,000 400,000
Total variable costs 400,000 400,000 400,000

13. If the actual sales level for the current year is 70,000 units, which company will report the highest profit
before tax if full costing is used?
a. Balmond
b. Axe
c. Yurnero
d. All companies will have the same income

14. If the actual sales level for the current year is 70,000 units, which company will report the highest profit
before tax if variable costing is used?
a. Balmond
b. Axe
c. Yurnero
d. All companies will have the same income

3|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

15. During the most recent year, Claude Company had a net income of P90,000 using variable costing
and P84,000 using full costing. The fixed overhead application rate was P6 per unit. There were no
ending inventories. If 22,000 units were produced last year, then sales for last year were:
a. 15,000 units.
b. 21,000 units.
c. 23,000 units.
d. 28,000 units.

16. When comparing absorption costing with variable costing, which of the following statements is not
true?
a. Absorption costing enables managers to increase operating profits in the short run by increasing
inventories.
b. When sales volume is more than production volume, variable costing will result in higher operating
profit.
c. A manager who is evaluated based on variable costing operating profit would be tempted to
increase production at the end of a period in order to get a more favorable review.
d. Under absorption costing, operating profit is a function of both sales volume and production volume.

17. A single-product company prepares income statements using both absorption and variable costing
methods. Manufacturing overhead cost applied per unit produced in 2021 was the same as in
2020. The 2021 variable costing statement reported a profit whereas the 2021 absorption costing
statement reported a loss. The difference in reported income could be explained by units produced in
2021 being
a. Less than the activity level used for allocating overhead to the product.
b. In excess of the activity level used for allocating overhead to the product
c. In excess of units sold in 2021.
d. Less than units sold in 2021.

BUDGETING
18. The master budget embraces the impact of
a. Operating and financing decisions
b. Operating and managerial decisions
c. Managerial and financing decisions
d. Operating, financing and managerial decisions

19. Which of following shows the proper order when preparing an operations budget
a. Cost of goods sold budget, production budget and cash budget
b. Revenue budget, overhead budget and production budget
c. Revenue budget, production budget, and direct materials purchases budget
d. Revenue budget, cash inflows, cash outflows from productions, cash budget

20. Which of the following describes Kaizen Budgeting?

a. The budget is based on only one level of activity
b. The budget is based on many levels of activity so that the budget may be adjusted based on actual
activity
c. The budget is based not on the existing system, but on the changes or improvements that are to
be made
d. A product’s revenues and expenses are estimated over its entire life cycle starting from research
and development phase up to customer support phase

4|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

21. In the preparation of a cash budget with clear-cut information on sources and uses of funds, all of the
following would be classified as a cash flow under investing activities, except
a. Collection of loan from an associate
b. Construction of new facility
c. Sale of intangible assets
d. Dividends received on stock investment

STANDARD COSTS AND VARIANCE ANALYSIS

22. The materials mix variance for a product is P450 favorable and the materials yield variance is P150
unfavorable. This means that
a. the materials price variance is P300 favorable.
b. the materials quantity variance is P300 favorable
c. the total materials cost variance is definitely P300 favorable.
d. the materials price variance is also unfavorable, but the amount cannot be determined from the
given information.

23. Wanwan Company uses a standard costing system in the production of its only product. Production
cost estimates that 2 units of raw materials are required to produce one unit of final product.

During September of the current year, 42,000 units of raw materials inventory were purchased for
P63,000 and the company were able to produce 14,400 units of product. The standard cost allowed
for materials was P36,000, and there was an unfavorable usage variance of P1,500.

The materials price variance for the units used in September was
a. P10,500 unfavorable
b. P10,500 favorable
c. P7,500 favorable
d. P7,500 unfavorable

24. Angela Company manufactures one product with a standard direct manufacturing labor cost of two
hours at P24.00 per hour. During August, 2,000 units were produced using 4,100 hours at P24.50 per
hour.

The unfavorable direct labor efficiency variance was:

a. P2,050
b. P2,400
c. P2,450
d. P4,450

25. The variance which shows the over or under-utilization of plant facility is called
a. Quantity variance
b. Efficiency variance
c. Volume variance
d. Yield variance

26. Variance analysis would be appropriate basis for performance evaluation of

a. Cost centers
b. Revenue centers
c. Profit centers
d. Both A and C

5|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

DIFFERENTIAL ANALYSIS
27. Alice Company is currently operating at P15,000 profit. The sales manager has received a special order
for 5,000 units of product, which normally sells for P35 per unit. Costs associated with the product are
as follows:

Direct material P6
Direct labor 10
Variable overhead 3
Variable selling 2
Applied fixed overhead 4

The special order would allow the use of a slightly lower grade of direct material, thereby lowering the
price per unit to P4.50 and selling expenses would be decreased by P1. If Alice wants this special order
to increase the total net income for the firm to P40,000, what sales price must be quoted for each of
the 5,000 units?
a. P23.50
b. P24.50
c. P27.50
d. P34.00

28. Guinevere Corporation is operating at 90% capacity. The company manager is considering making
the product named, “Holy Crystal” which is now being purchased for P1,100 each, a price that is
projected to increase in the near future. The plant has the equipment and labor force required to
manufacture the product. The design engineer estimates that each component requires P400 of direct
materials and P300 of direct labor. The plant overhead is 200% of direct labor peso cost, and 40% of
the overhead is fixed cost. A decision to manufacture “Holy Crystal” will result in a gain or (loss) for
each component of
a. (P200)
b. P160
c. P40
d. P280

29. The term relevant cost is most likely applied to all of the following decision situations, except
a. Replacement of machinery
b. Acceptance of special order.
c. Product pricing
d. To outsource or to insource the manufacturing process of a component part

30. Which of the following is NOT relevant in a make-or-buy decision about a part the entity uses in some
of its products?
a. The reliability of the outside supplier.
b. The number of units of the part needed each period.
c. The outside supplier’s minimum relevant costs to make the part.
d. The alternative uses of owned equipment used to make the part.

31. A product-line or department should be dropped if

a. It has negative incremental profit.
b. It has a negative contribution margin.
c. It is not essential to the company’s product line.
d. Dropping it will increase the total profit of the company.

6|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

32. A company operated at a profit of P50,000, last month. Due to ongoing lockdowns in local areas brought
by the pandemic, its sales reduced by 70%. The company owner is now considering whether to close
its stores temporarily in the coming month. Doing so will reduce fixed costs by 80%. Restarting the
operation is estimated to require a minimal amount of P2,500. Assuming the degree of operating
leverage of the company is maintained at 2 times and the contribution margin ratio is 30%, what is the
shutdown point?
a. P125,000
b. P166,667
c. P58,333
d. P141,667

COST OF CAPITAL
33. Generally, the most expensive source of financing for a firm is
a. Bonded indebtedness
b. Preference shares
c. Retained earnings
d. Ordinary shares

34. This pertains to the incremental return one must expect to receive from assuming risk
a. Risk discount
b. Risk premium
c. Risk-free rate of return
d. Market rate of return

35. The Capital Asset Pricing Model (CAPM) assumes that the expected
a. Rate of return of investment is proportional to its beta
b. Risk premium on an investment is proportional to its beta
c. Rate of return on the investment is dependent on the risk-free rate
d. Rate of return on an investment is dependent on the risk-free rate and market-rate of return

36. A company with a beta of 1 suggests

a. that the company’s stocks are more volatile than the market
b. that the company’s stocks are less volatile than the market
c. that the company’s stocks are as volatile as the market
d. that the company’s stocks are not affected by the market

37. A company with a beta of 0 suggests

a. that the company’s stocks are more volatile than the market
b. that the company’s stocks are less volatile than the market
c. that the company’s stocks are as volatile as the market
d. that the company’s stocks are not affected by the market

RISK AND RETURN

38. Risks that cause variability of expected returns of individual or portfolio of stocks that is associated with
the market as whole
a. Symmetric risk
b. Asymptomatic risk
c. Systematic risk
d. Unsystematic risk

7|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

39. Diversification is a sound solution in reducing this type of risk

a. Portfolio risk
b. Beta risk
c. Systematic risk
d. Unsystematic risk

40. All of the following describes systematic risks, except

a. Risks caused by a drop in a country’s GDP
b. Risks caused by a change in fiscal policy of the Government
c. Risks caused by the price changes of oil and related products in the world market
d. Risks caused by ongoing law suits against the company

41. Which of the following statements is correct regarding portfolio risk?

a. It is possible to reduce portfolio risk to zero through increasing the extent of diversification
b. As the number of securities selected randomly held in the portfolio increases, the total risk of the
portfolio is reduced at a decreasing rate
c. As the number of securities selected randomly held in the portfolio increases, the total risk of the
portfolio is reduced at an increasing rate
d. This represents the weighted average of the expected returns on the securities comprising that
portfolio with weights being the proportion of total funds invested in each security

The following probability distribution for the returns on stocks A and B are provided:

State of Economy Probability Return on Stock A Return on Stock B

Peak 10% 5% 50%
Growth 15% 10% 30%
Recession 55% 15% 10%
Trough 20% 20% -10%

The variance on Stock A is .00263, the variance on Stock B is .04200, the standard deviation on Stock A
is 5.12%, and the standard deviation on Stock B is 20.49%.

42. The expected return of Stock A

a. 12.50%
b. 13.00%
c. 14.25%
d. 20.00%

43. The expected return of Stock B

a. 12.50%
b. 13.00%
c. 14.25%
d. 20.00%

44. Portfolio return of Stocks A and B if the available funds are invested 75% for Stock A and 25% for Stock
B
a. 13.63%
b. 13.94%
c. 14.25%
d. 13.00%

8|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

MANAGEMENT ADVISORY SERVICES CONCEPTS

45. A person who is qualified by education, experience, technical ability, and temperament to advise or
assist businessmen on a professional basis in identifying, defining, and solving specific management
problems involving the organization, planning, direction, control, and operation of a firm is called a
a. Management Consultant. c. Accounting Technician.
b. Certified Public Accountant. d. Management Accountant.

46. Consulting services differ fundamentally from CPA’s function of attesting to the assertions of other
parties. In a consulting service,
a. the practitioner expresses a conclusion about the reliability of a written assertion that is the
responsibility of the assertor.
b. the work is generally performed only for the use and benefit of the client.
c. the client develops findings, conclusions, and recommendations.
d. the nature and scope of work is determined solely by the consulting services practitioner.

QUANTITATIVE TECHNIQUES
47. Burlington Inc is attempting to predict the profitability of a new product line. The marketing
department has developed three different forecasts of annual demand and their replaced probabilities
of occurrence for the coming year - low (.2), medium (.5), and high (.3). In order to develop an
estimate of the annual profit figure for the new product line, Burlington Inc. should employ:
a. PERT-CPM techniques
b. Expected Value analysis
c. Correlation and regression analysis
d. Linear Programming

48. JT Co. packages nuts in cans. Pecans, cashews, brazil nuts, hazelnuts, and peanuts are all sold in
individual cans as well as in combinations and mixtures. JT wants to package the nuts so that it can
maximize its profits while considering market demand. In addition, there are limited supplies for these
types of nuts. The technique JT should employ is:
a. PERT-CPM techniques
b. Expected Value analysis
c. Correlation and regression analysis
d. Linear Programming

49. When using the graphic method of solving linear programming problem, the optimal solution will
always be at:
a. Minimum value of X
b. X and Y intercept
c. A corner point described by the feasible area
d. Point of inception.

50. Which of the following quantitative techniques would be most useful for analyzing the
interrelationships of time and activities to discover potential bottlenecks?
a. PERT-CPM techniques
b. Expected Value analysis
c. Correlation and regression analysis
d. Linear Programming

9|P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

51. Matrix Inc. makes only two products with the following two production constraints representing two
processes and their maximum availability.
2X + 3Y is less than or equal to 18
2X + Y is less than or equal to 10
where X = the units of the first product and Y = the units of the second product

If the profit equation is % = P4X + P2Y, the maximum possible profit is:

a. P24
b. P18
c. P20
d. P21

RESPONSIBILITY ACCOUNTING
52. James Weber is the general manager of the Industrial Product Division, and his performance is
measured using the residual income method. Weber is reviewing the following forecasted information
for his division for next year:

Category Amount ( in thousands)

Working Capital P1,800

Revenue P30,000
Plant and equipment P17,200

If the imputed interest charge is 15% and Weber wants to achieve a residual income target of
P2,000,000, what will costs have to be in order to achieve the target?
a. P9,000,000
b. P10,800,000
c. P25,150,000
d. P25,690,000

For the next item: The supervisor of EZ Department of EZRA Inc. purchases supplies, authorizes repairs
and maintenance service and hires labor for the department. Various costs for the month of May 200A
are given below:

Sales Salaries and commission P 9,850

Salary, supervisor of EZ Department 1,800
Factory heat and light 650
General office salaries 14,200
Depreciation, Factory 750
Supplies, EZ Department 1,430
Repairs and maintenance, EZ Department 820
Factory insurance 460
Labor costs, EZ Department 17,220
Salary of factory superintendent 2,400
Total P49,580

53. The total costs that can be controlled by the supervisor of EZ department is:
a. P19,470
b. P44,960
c. P47,030
d. P44,630

10 | P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

54. In decentralized organizations, it is necessary to prepare reports on the performance of managers.

The term used to describe the reporting process is:
a. responsibility accounting
b. decentralized accounting
c. performance accounting
d. accounting decentralization

55. Residual income:

a. is the net operating income earned above a certain minimum required return on average
operating assets, after considering tax expense
b. is the net operating income earned above a certain minimum required return on average
operating assets, before considering tax expense
c. is the net operating sales earned above a certain minimum required return on average
operating assets, after considering tax rate
d. is the net income earned above a certain minimum required return on average operating
assets, before considering tax rate

56. As a general rule, the best transfer price to use to transfer the costs of a service center to an
operating department is
a. the price charged by an outside company for the same service.
b. the price that encourages goal congruence.
c. one that is based on budgeted variable cost.
d. one that is based on budgeted total cost.

CAPITAL BUDGETING
57. The payback method of capital budgeting approach to the investment decision highlights
a. cash flow over the life of the investment.
b. the liquidity of the investment.
c. the tax savings of the depreciation amounts.
d. having as lengthy payback time as possible.

58. In capital budgeting, sensitivity analysis is used

a. to determine whether an investment is profitable.
b. To see how a decision would be affected by changes in variables.
c. To test the relationship of the IRR and NPV.
d. To evaluate mutually exclusive investments.

59. A capital budgeting tool management can use to summarize the difference in the future net cash
inflows from an intangible asset at two different points in time is referred to as
a. the accrual accounting rate-of-return method.
b. the net present value method.
c. sensitivity analysis
d. the payback method.

11 | P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

60. Platonic is considering an investment in a new cheese-cutting machine to replace its existing cheese
cutter. Information on the existing machine and the replacement machine follow.
Cost of the new machine P40,000
Net annual savings in operating costs 9,000
Salvage value now of the old machine 6,000
Salvage value of the old machine in 8 years 0
Salvage value of the new machine in 8 years 5,000
Estimated life of the new machine 8 years

What is the expected payback period for the new machine?

a. 4.44 years c. 8.50 years
b. 2.67 years d. 3.78 years

61. Merica Co. is considering an investment in a machine that would reduce annual labor costs by
P30,000. The machine has an expected life of 10 years with no salvage value. The machine would be
depreciated according to the straight-line method over its useful life. The company’s marginal tax
rate is 30%. Assume that the company will invest in the machine of it generates a pre-tax internal
rate of return of 16%. What is the maximum amount the company can pay for the machine and still
meet the internal rate of return criterion?
a. P180,000 c. P187,500
b. P210,000 d. P144,996

WORKING CAPITAL MANAGEMENT

62. Which of the following statements is incorrect about working capital policy?
a. A company may hold a relatively large amount of cash if it anticipates uncertain sales levels
in the coming year.
b. Credit policy has an impact on working capital since it has the potential to influence sales
levels and the speed with which cash is collected.
c. Managing working capital levels is important to the financial staff since it influences financing
decisions and overall profitability of the firm
d. Holding minimal levels of inventory can reduce inventory carrying costs and cannot lead t o
any adverse effects on profitability

63. Duke Company has an inventory conversion period of 60 days, a receivables conversion period of 45
days, and a payments cycle of 30 days. What is the length of the firm’s cash conversion cycle?
a. 90 days c. 54 days
b. 75 days d. 105 days

64. Which of the following statements is most correct?

a. A firm that makes 90 percent of its sales on credit and 10 percent for cash is growing at a
rate of 10 percent annually. If the firm maintains stable growth it will also be able to maintain
its accounts receivable at its current level, since the 10 percent cash sales can be used to
manage the 10 percent growth rate.
b. In managing a firm’s accounts receivable it is possible to increase credit sales per day yet still
keep accounts receivable fairly steady if the firm can shorten the length of its collection
period.
c. If a firm has a large percentage of accounts over 30 days old, it is a sign that the firm’s
receivables management needs to be reviewed and improved.
d. Since receivables and payables both result from sales transactions, a firm with a high
receivables-to-sales ratio should also have a high payables-to-sales ratio.

12 | P a g e JBUGATAN/JSARIPADA
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

65. A compensating balance

a. compensates a financial institution for services rendered by providing it with deposit of funds.
b. Is used to compensate for possible losses on a marketable securities portfolio.
c. Is a level of inventory held to compensate for variations in usage rate and lead time.
d. Is the amount of prepaid interest on a loan.

66. Brown & Sons recently reported sales of P100 million, and net income equal to P5 million. The company
has P70 million in total assets. Over the next year, the company is forecasting a 20 percent increase in
sales. Since the company is at full capacity, its assets must increase in proportion to sales. The company
also estimates that if sales increase 20 percent, spontaneous liabilities will increase by P2 million. If the
company’s sales increase, its profit margin will remain at its current level. The company’s dividend payout
ratio is 40 percent. Based on the AFN formula, how much additional capital must the company raise in
order to support the 20 percent increase in sales?
a. P2,000,000
b. P6,000,000
c. P8,400,000
d. P9,600,000

Balanced Scorecard

67. In the cost of quality, liability claims are examples of

a. Prevention costs
b. Internal failure costs
c. Appraisal costs
d. External failure costs

68. Which of the following is one of the four perspectives of a balanced scorecard?
a. Just in time.
b. Benchmarking.
c. Innovation.
d. Activity-based costing.

69. Meliodas, Inc. manufactures and sells luxury cars. From the time an order is placed till the time the car
reaches the customer averages 200 days. These 200 days are spent as follows:
Wait time 50 days
Move time 10 days
Process time 90 days
Queue time 30 days
Inspection time 20 days

What is Meliodas's manufacturing cycle efficiency (MCE) for its cars?

a. 0.55 c. 0.60
b. 0.50 d. 0.65

70. Productivity is measured by the

a. total quantity of output generated from a limited amount of input during a time period.
b. quantity of good output generated from a specific amount of input during a time period.
c. quantity of good output generated from the quantity of good input used during a time period.
d. total quantity of input used to generate total quantity of output for a time period.

13 | P a g e JBUGATAN/JSARIPADA