MAS Flashcards
Analysts use horizontal and vertical analysis to better comprehend a company’s financial statements. Which of the following is an example of a vertical, common-size analysis?
Commission expense in 2023 is 8% of sales.
It indicates that the input’s actual price (AP) was less than the standard price (SP) per unit.
Favorable price variance
Penthouse Corp. has the following information in its first year of operations in 201A:
Units produced
20,000
Units sold
19,000
Selling price per unit
P150
Direct material costs
20
Direct labor
15
Variable manufacturing overhead
50
Variable selling costs
20
Fixed manufacturing costs
P460,000
Fixed administrative costs
300,000
Using variable costing, compute for the net income.
P95,000
In national income terms, which of the following pertains to aggregate demand?
Total expenditures on consumer goods and investment, including government and foreign expenditures, during a given period
The market price of a commodity is beyond the control of individual buyers and sellers in a perfect competition. Which of the following explains the given statement?
Many firms are selling homogenous products.
Pag-asa Corp. plans to borrow P1,000,000 funds from Unlad Inc. The risk-free rate imposed on the loan is 6%. Unlad’s debt margin is ½ of the imposed risk-free rate. How much interest rate should Unlad Inc. impose on Pag-asa Corp.?
9%
Veluz Company acquired a machine with a seven (7) year projected useful life and no salvage value. In each of the seven (7) years, the machine is estimated to generate P90,000 in cash flows from operations net of income taxes. Veluz’s expected rate of return is 12%. Information on present value factors is as follows:
Present value of P1 at 12% for 7 periods: 0.452
Present value of an ordinary annuity of P1 at 12% for 7 periods: 4.564
Assuming a positive net present value of P22,691, what is the cost of the machine?
P388,069
A project costing P260,000 will produce the following annual cash benefits and salvage value:
Old Equipment
New Equipment
Revenue
P199,841
P260,000
Cash operating costs
85,699
69,720
Annual depreciation
40,000
50,000
Income tax, 46%
What is the incremental annual cash income after taxes?
P45,714
Sparks Plug Corporation budgets factory overhead costs of P600,000 for the coming year. The following data are available: budgeted annual overhead for planned production – P600,000; budgeted annual direct labor hours – 60,000; and actual direct labor hours applied to the job – 600 hours. Compute for the predetermined overhead rate.
P10 per direct labor hour
A bottle of white vinegar is sold at a price of P250 with a variable cost of P50 per bottle. The fixed expense of the business is P20,000 per year. Compute for the required sales to earn a profit of P50,000 in annual terms.
P87,500
Jason Cruz issued a 72-day Treasury bill with P8,000 par value and an annual interest rate of 6%. What is the price of the said investment?
P7,905.14
Queens Corp. data is shown in the table below. The distinction between average and ending inventories is insignificant. Current assets are comprised mainly of cash, receivables, and inventories.
Current ratio
3.0
Quick ratio
1.0
Current liabilities
P763,421
Inventory turnover (based on cost of sales)
8 times
Gross profit margin
35%
What were Queens Corp.’s net sales for the year?
P18,791,902
The total fixed costs of Talisman Designs amount to P120,000. The total variable costs equal P20,000. For this month, they produced a total output of 1,000 pieces. What is the average fixed cost?
P120
Which of the following does absorption costing do?
It includes fixed and variable manufacturing overhead as an inventoriable cost.
Benjamin keeps its ending finished goods inventory at 65% of the next month’s budgeted sales and ending raw material inventories at 50% of the next month’s budgeted production needs. Three (3) pounds of materials are required for each product unit. The production budget is, in units: May, 1,000; June, 1,200; July, 1,300; and August, 1,600. What would be the raw material purchases in June?
3,750 pounds
Adore Inc. is a monopoly company that wants to maximize revenue. Which strategy should they use to achieve this goal?
Produce more units at a higher price.
Why do perfectly competitive firms refuse to charge a price lower than the market price?
It would mean lower revenue and profit.
As a gadget enthusiast, Sophia knows that she can get a laptop at a lower price if she finds another business that has a better deal. Which type of pricing strategy is being described?
Price matching
Women’s footwear is sold at a price of P200 per pair with a variable cost of P40 per unit. The fixed expense of the business is P60,000 per year. Compute for the profit for sales of 500 units.
P20,000
Jolene desires to sell her shares from Jolly Been Foods Corporation. To do so, she finds a stockbroker, such as FB Capital Securities Inc., to sell her shares. In return, a commission will be paid to the broker. This is an example of:
Conventional Brokerage
Women’s footwear is sold at a price of P200 per pair with a variable cost of P40 per unit. The fixed expense of the business is P60,000 per year. Compute for the break-even point in units and values.
375 units; P75,000
Penthouse Corp. has the following information in its first year of operations in 201A:
Units produced
20,000
Units sold
19,000
Selling price per unit
P150
Direct material costs
20
Direct labor
15
Variable manufacturing overhead
50
Variable selling costs
20
Fixed manufacturing costs
P460,000
Fixed administrative costs
300,000
Using absorption costing, compute for the cost of goods sold (COGS).
P2,052,000
Which of the following expresses the relationship between risk and return?
Direct relationship
Which of the following pertains to the difference between Gross National Product (GNP) and Gross Domestic Product (GDP)?
GNP measures what is produced and earned by a nation’s people and property while GDP measures what is produced and earned in the domestic economy.
The following ratios were computed from Guido Company’s financial statements for 202X:
Return on asset
36%
Asset turnover
1.6 times
What was the company’s profit margin ratio?
22.5%
Women’s footwear is sold at a price of P200 per pair with a variable cost of P40 per unit. The fixed expense of the business is P60,000 per year. Compute for the profit-volume (P/V) ratio (Contribution Margin Ratio).
80%
The owner of a premium coffee shop desires to achieve a profit of P100,000 by selling 1,000 cups of coffee. The fixed cost involved in acquiring the coffee beans is P60,000, while the variable cost per cup is P100. Determine the price per cup of coffee.
P260
In planning its 202X operations based on a sales forecast of P7,000,000, Villa Inc. prepared the following data:
Cost and Expenses
Variable
Fixed
Direct materials
P1,600,000
Direct labor
1,400,000
Factory overhead
600,000
900,000
Selling expenses
240,000
360,000
Administrative expenses
60,000
140,000
P3,900,000
P1,400,000
What would be the amount of peso sales at the break-even point?
P3,160,984
The American multinational investment bank and financial services holding company J.P. Morgan Chase & Co. expanded its business in the Philippines. Which type of Foreign Direct Investment (FDI) is demonstrated?
Horizontal
Sparks Plug Corporation budgets factory overhead costs of P600,000 for the coming year. The following data are available: budgeted annual overhead for planned production – P600,000; budgeted annual direct labor hours – 60,000; and actual direct labor hours applied to the job – 600 hours. Compute for the overhead cost applied to the job.
P6,000 per direct labor hour
Management accounting is considered successful when it:
Helps managers improve their decision
Luz Corporation has 1,000 obsolete lanterns in stock, with a manufacturing cost of P20,000. If the lanterns cost P5,000 to rework, they might be sold for P9,000. The lanterns might be sold for P1,000 if they are discarded. What alternative is more desirable, and what are the total relevant costs of the alternative?
Rework with a total cost of P5,000
Neo Company is considering a certain project with the following projected cash income after taxes for four (4) years, the life of the project: year 1, P11,000; year 2, P9,000; year 3, P8,000; year 4, P7,000. What is the payback period if the project requires an investment of P25,000 with a salvage value of P5,000?
2.625 years
The following information is available for ATS Company. Based on this information, the management is considering eliminating product line C. They assumed that by operating only product lines A and B, they would have higher profits. It was also determined that if product line C is discontinued, 80% of the fixed overhead can be avoided, and 70% of the fixed selling and administrative expenses can also be avoided.
Product A
Product B
Product C
Sales
P200,000
P600,000
P400,000
Cost of Goods Sold
Direct Materials
50,000
150,000
160,000
Labor
40,000
80,000
100,000
Variable Overhead
20,000
40,000
30,000
Fixed Overhead
10,000
30,000
70,000
Total
120,000
300,000
360,000
Gross Profit
80,000
300,000
40,000
Selling and Administrative
Variable
24,000
60,000
20,000
Fixed
16,000
80,000
60,000
Total
40,000
140,000
80,000
Net Income (Loss)
P40,000
160,000
(40,000)
Based on the above data, should product line C be continued or eliminated?
The net loss to continue product C is P40,000. If product C is eliminated, the net loss to be absorbed by the entire company will decrease to P32,000 or a net differential cost of P8,000. Therefore, it is better to eliminate the product line than to continue it.
PMG Resort is contemplating closing its operations temporarily. Due to lockdowns brought by the COVID-19 pandemic, the expected demand of the club was reduced, which is expected to last for six (6) months. Assume the typical monthly operating revenues and costs of the company’s operations are as follows:
Selling price per membership
P800
Variable costs per membership
540
Contribution margin
260
Fixed costs per month
P300,000
Fixed costs avoided if stop operations
140,000
Additional costs during the shutdown period for six (6) months
80,000
Estimated restarting costs
200,000
If it continues operating, the company will be forced to reduce the membership selling price by 12.50%. Determine the shutdown costs and shut down savings.
The shutdown costs are P1,240,000, while the savings is P560,000.
JKJ Corp.’s actual data for 201A is given as follows:
Units produced 50,000
Units Sold 48,000
Selling price per unit P400
Direct materials cost 60
Direct labor 40
Variable manufacturing overhead 120
Variable selling costs 40
Fixed manufacturing costs P1,200,000
Fixed Administrative costs 600,000
Compute for the selling and administrative costs under absorption costing.
P2,520,000
PMG Resort is contemplating closing its operations temporarily. Due to lockdowns brought by the COVID-19 pandemic, the expected demand of the club was reduced, which is expected to last for six (6) months. Assume the typical monthly operating revenues and costs of the company’s operations are as follows:
Selling price per membership
P800
Variable costs per membership
540
Contribution margin
260
Fixed costs per month
P300,000
Fixed costs avoided if stop operations
140,000
Additional costs during the shutdown period for six (6) months
80,000
Estimated restarting costs
200,000
If it continues operating, the company will be forced to reduce the membership selling price by 12.50%. Determine the shutdown point.
3,500 memberships
Vivo Firm manufactures one (1) product. Its sales price is expected to be P200 per unit. Actual sales for November 201A are 1,550 units and 1,700 units for December 201A. Vivo budgets its sales for the next six (6) months for 201B: January – 3,375; February – 3,250; March – 3,440; April – 3,125.
All sales are on account. The company collects its accounts as follows: 70% in the month of the sale, 20% in the month following the sale, and 10% in the second month following the sale. Uncollectible accounts are negligible and can be disregarded. The beginning inventory on January 1, 201B is 340 units. Vivo desires an ending inventory of 10% of the next month’s budgeted sales.
Determine the sales budget for the first quarter of 201B.
P2,013,000
Juan Dela Cruz is planning to invest in the money market. One alternative is to invest in a one (1)-year Treasury bill with a face value of P5,000 and an annual interest rate of 3%. Compute for the market price or market security value.
P4,854.37
A 1-year treasury bill has a coupon rate of 2%, and a 2-year treasury note has a coupon rate of 3%. Based on the pure expectations theory, what is the 1-year interest rate anticipated at t+1 (2nd year)?
4.00980%
Information on Digibytes Company’s direct-material costs is as follows:
Standard unit price
P3.60
Actual quantity purchased
1,600
Standard quantity allowed for actual production
1,450
Materials purchase price variance, favorable
P240
What was the actual purchase price per unit, rounded to the nearest centavo?
P3.45
What is the other term for short-term solvency?
Liquidity
NTC Firm is currently manufacturing part X143, producing 160,000 units annually. The part is used in the production of several products made by the company. The cost per unit for X143 is as follows: Direct material – P36.00; Direct labor – P12.00; Variable manufacturing overhead – P10.00; Fixed manufacturing overhead – P16.00.
Of the total fixed overhead assigned to X143, P352,000 is avoidable (the lease of production machinery and salary of a production line supervisor–neither of which will be needed if the line is dropped). The remaining fixed overhead is a common fixed overhead. An outside supplier has offered to sell the part to NTC for P64. There is no alternative use for the facilities currently used to produce the part.
Should NTC Firm make or buy part X143?
It is better to make the parts because the cost to make is lower than the cost to buy the parts from a supplier. It results in a P608,000 net advantage.
Geo Company, a merchandising firm, is preparing its master budget and has gathered the following data to help budget cash disbursements:
Cost of goods sold
P1,420,000
Desired decrease in inventories
70,000
Desired decrease in accounts payable
150,000
All account payables are for inventory purchases, and all inventories are purchased on account. What are the estimated cash disbursements for inventories for the budget period?
P1,500,000
Ligo Corporation budgets factory overhead cost of P250,000 for the coming year. The following data are available: budgeted annual overhead for planned production – P250,000; budgeted annual direct labor hours – 25,000; and actual direct labor hours applied to the job – 200 hours. Compute for the predetermined overhead rate.
P10 per direct labor hour
Shoefits, Inc. sells with terms 3/10, net 30 days. Net credit sales for the year are P3,600,000, and the average accounts receivable balance is P320,000. Assuming 360 days in a year, what is the average collection period?
32 days
After several years of producing and selling at a capacity of 200,000 units, Met Corp. faced a year with projected sales and production of 152,000 units. A potential customer offered to purchase 28,000 units at a price of P72 each. The normal sales price is P120 each. The following data are available: Direct material – P36.00; Direct labor – P26.00; Variable manufacturing overhead – P8.00; Fixed manufacturing overhead – P15.00.
Compute for the incremental income and decide whether Met Corp. should accept the order.
Given the excess capacity, Met Corp. should accept the offer because it results in a P56,000 increase in income.
Kim de Leon wanted to invest some of his earnings. However, she is risk-averse, and she wanted Surety Bank to manage her future investments. What is the best collective investment scheme (CIS) Kim must take to meet her objective.
Unit Investment Trust Fund (UITF)
The market value of Flores Company’s common stock (book value: P65 million) is projected to be P60 million. In contrast, the market value of its interest-bearing debt (book value: P35 million) is estimated to be P40 million. The average annual before-tax yield on these liabilities is 12%, while the income tax is 40%. The company is projected to pay a P10 dividend per share, while the stock currently trades at P100 per share. Dividend growth is expected to average at 2.5% each year. What is the weighted average cost of capital (WACC) of the company as a whole?
10.38%
According to the capital asset pricing model (CAPM), the expected risk premium of a portfolio varies:
In direct proportion to beta in competitive environment
