CPAR CPA REVIEW SCHOOL OF THE PHILIPPINES Manila MANAGEMENT ADVISORY SERVICES Final Pre-board Examinaton - SOLUTIONS fl Sales 80,000 Add fished goods ending inventory 18,000 Less finished goods beginning inventory 16.000 Production 33,000 x materials per unit 5 Materials requirement 5000 ‘Add RM ending inventory 23,000 Less RM beginning i 27,000 Purchases Hitg00 7. Operating net cash inflow after tax but before lease amortization (P7,500 x 60%) ‘Ad tax savings due to lease amortization (5,000 x 40%) Net cash inflows, x PYF Present value a Present value of cash infows (P7.4 mx 0.4371) Cash outflow Net present value Saturday, Apri 18, 2015 P 4,500 2000 P 6500 174 10, _ PVF of Project Bis 0.4020 (4,000,850), which is closest to 0.4019, the PVF for 20%, five periods. 14 700,000 30% P 240,000 200,000 x 30% 80.000 (400,000) x 40% 160,000} Expected contribution P110.000 12. The annuai benefits 6,000 which is equal to the interest income P12,000 (P100,000 x 2 days x 6%) - P8,000 (P500 « 12) cost. 13. The ammount is equal to July's collections in September plus August's collections in September. ‘This amount is P149,600 [(26% « 120,000) + (80% = F211, 000)} 7, (700 units} « P10 (1 ~ 02) » 98 = Pé.860 18. 37 x 386/25 = 45.2% 19. 50,000/450,000 = 11.1% 21. 300,000/800,000 = 60% 10,000 22, 300,000 ~ (500,000 x 18%) = 24. Net operating profit after taxes (60,000,000 x 60%) Less Capital charge on invested capital (120,000,000 ~ P20,000,000) x 10% Economic value added 28. Net operating profit after taxes + Depreciation expense — Change in net working capital = Capital expenditures Free cash flow 35. 1,000x20 = 20,000 36,000,000 45,000,000, (10,000,000) (12.090,000) Pzaoo.0u0 36,000,000 +40,000,000 (226,000,000cPaR MANAGEMENT ADVISORY SERVICES Final Pr-boord Examisation SOLUTIONS — Ap 6, 2018 Page 20f pages 38. Cost of goods sold 200,000 Add inventory, 2731/16 42,000 Less invertory, 116 (30,000 Purchases P312,000, ‘Add accounts payable, 1/1/16 20,000 Less accounts payable, 12/31/16 (P312,000/12) (26,000 Budgeted cash payments 306,000. 40. Variable cost par sales office (500,000 - 70.000)+5 P 86,000 acnumber of sales offices 7 Total variable costs 607,000 _ Add fred costs 70,000 Total budgeted costs PB72,000 44, 14,100 — (1,000 x 4)] x P12 = P1,200 4. ‘input quantity — Spoilage = Output amount X=0.2X= 2 yds, 0.8X=2 yas, X=25 yds. Thus, the siandard direct materia! cost per unit of finished product is P7.50 (2.5 yds. x P3) 48, ‘The cost of capital is equal to 8.22% [(12%% x P.970,000 / P4,470,000) + 7% (1 - 25%) x P2,500,000 / P4,470,000)), 47, The debeto-equity ratio is equal to 1.28 (P2,530,000 / P 1,970,000). 48, Sales = VC +FC + NI P25X = P16X + P585,000 + .t0{P25X) P8.5X = P585,000 X= $0,000 50. Sales=VC+FC+NI {P25 x 80,000) = (P16 « 80,000) + (P585,000 +dvertisng) + PO 52. Beginning invantory (20% x P 1,062,500) P212,500 ‘Add ening inventory (18% * P1459,000) _ 262,620 Total 475,120 +2 Average inventory 2550 Anventory turmover = (Pt 062,500 x 70%) + 297,560 = 3.13, 53. Special price P58, Less relevant costs: Variable manufacturing Pag Overtime cost 8 48 Contribution margin Po x Units ordered 50,000 Incremental operating income iforder is accepted 500.000 54. Revenue from the special order (50,000 units x P58) 2,900,000 Less relevant costs: Variable manufacturing (50,000 x PA8) 2,400,000, Opportunity cost: lost CM from regular customers (20,000 units x P100~40))__1,200,000 _3,600,000 Decrease in operating income if order is accepted 2 700,000| “cra | 2o fe scn tomate suis son 8.208 MANAGEMENT ADVISORY SERVICES Page 3 of & pages 55. OM= 5 x 25,000 = 125,000; CMR = 125/500 = 25%; Fixed casts = 125,000 ~ 25,000 = 190,000 (Operating Income = (600,000 x 25' 50,000} - 100,000 = 59,000 oT. Purchase price Pa Relevant unit cost to make: Variable (P20 ~ P5) PIS Avoidabie fred cost 2 Loss por unitif keypads are purchased Ba 58. Rlovant costto make (60,000x 17) P. 640,000 . Less desired annual savings 0,000 "Should be" net cost to buy 770,000 Less purchase cost (50,000 x P24) 4,200,000 Minimum annual rental income 430.900 61. Sales, July 24,000 ‘Add ending invertory (30,000 x 30%) +3,000 12,000, Less beg, inventory (24,000 x20%)+3.000 10,200 Production, July 25800 62. Product Y should be sold atthe splt-off point, while Products X and Z should be processed further: x ¥ Zz Units sales price if processed further P100 PBO -P?S. Unit sales price at spit-ott 80 _45 60 Increase in sales value if processed further? 20. P15 = P15 Less additional processing cost 15 2 10 Profit (loss) if processed further Ps @€5 Ps ‘The most profitable acton is to sel Product Y at the split off point and process further Products X and Z Total gross profit is computed as follows: Sales: Product X (5,000 units x P'100) Y (3,000 unts x ? 45) Z (2,000 units xP 75) Less costs: ‘Additonal processing cost: Product X (5,000 units x P15) Z (2.000 unt x P10} Joint product costs Gross profit: (P785,000 --295,000) 64, Direct labor hours 9.600 Quality control cost rate per direct labor hour P20 Total quatty control cost Big2.000 65. Inspection of materials deliveries 20 classes x P500 per class Inspection of goods in process 12,000 units x 910 per unit Final inspection 100 orders x P200 per order Total quay control cost P500,000 136,000 150,000 3735.000 P 75,000 20,000 -200,000 ‘P295,000 ‘490.000 P 10,000 120,600 20.000 P159,000MANAGEMENT ADVISORY SERVICES CPAR Fiat Prevosré Examination SOLLIIONS = Apt 18,2078 Page 4 of pages 67, _Leaming curve perventage = 140 + 200 = 20% Batches Cumutative Cost per Unit 400 units 200 200 units (200x 70%) 140 400 units (140% 70%} 98 Total cast of 400 units (4 batches) = 400 x P98 = 239,200 88. 14 = 25% 69, Sales (60,000 units x Pa) P4g0,000 Less cost of goods sold (60,000 x P4) 240,000 Gross income 240,000, ‘Less non-manufactring costs ‘4P169,000 + 2] + [P2x 60,000) 200,000 income - absorption costing P.40,000 70, Sales (60,000 units x Pe} 4g0.000 Less variable costs (60,000 x P3+P2) _300,000 Contribution margin 180,000 Less fixed costs ({P200,000 + 160,000) = 2) 180,000 Income ~ variable costing po