You correctly answered 18 out of 30 questions with an accuracy of 60.0%.

You gained 320 experience points!

Problem:
Maria Agnes Calay won a grant from Small Enterprise Business last month.
Together with her adviser, Alexander Grande III, they proposed to set up a La
Presa Inn and Resort in their barangay. Their business proposal is extensive,
environmental friendly and helps nearby barangays earn livelihood projects.
La Presa
La Presa is an upland barangay in Tuba, Benguet between the twin peaks of Mt. .
Cabuyao and Sto Tomas. They grow very good strawberries, lettuces and some
crops grown in high altitude places.
Project proponents
Xander Grande is the heir to the Grande Hotel. He has an extensive experience
in running hotel chains. He recently returned from his studies in London School of
Economics where he specialized in corporate finance. He runs his own
investment company called Malaya Investments with his staff, Orly.
Mang Boboy Calay is the leader of the La Presa project. He is high school
graduate but is street smart farmer. He does not like finance and management
jargons but can execute business strategies flawlessly if he understands the
concept.
Manong Bangky is in charge of the Bangky Souvenirs business. He sells La
Presa stuffed toys made in Benguet. He has 2 best sellers items, the Kambal na
Strawberry and Pusong Strawberry.
Judy is the owner of the La Presa Restaurant uses 5,000 wanton per month for
its famous Soup no. 5. Current costs are:
Ingredients cost

P4.00

Labor and other variable expenses

2.00

Mirasol runs the Strawberya Enterprises that manufactures and bottles vegetable
mixtures used for baking. Monthly production averages 200,000 bottles per
month for the three quarters of the current year. Each bottle sells for P20 in the
market. The annual fixed costs for Strawberya is P7,200,000 evenly distributed
on a twelve month period.
The first quarter of the year is a critical period for Strawberya. It is during this
quarter of the year where the demand of the product is expected to go down due
to seasonal variation. During this period, the demand is estimated to be an
average of 40,000 bottles per month.
On the belief that the company will be saved from greater losses, management is
considering to shutdown operations during the first quarter of the following year.
A decision to shutdown would decrease the fixed assets by 30%. However,
during the shut down period, additional cost of P140,000 is needed for security
and insurance. To restart operations again, the company will spend another
P50,000.
The following data concerning production cost per bottle are gathered from the
records of Strawberya Enterprises:
Direct materials
Direct labor
Variable overhead
Variable selling
expenses
Total variable costs

7
4
3
2
16

Dona Soledad owns and operate the Grande Manufacturing, an agricultural and
processing company. It expects to spend P400,000 in 2016 in appraisal costs if it
does not change its incoming materials inspection method. If it decides to
implement a new receiving method, it will save P40,000 in fixed appraisal costs
and variable costs of P0.40 per unit of finished product. The new method involves
P60,000 in training costs and an additional P160,000 in annual equipment rental.
It takes two units of material for each finished product.

Internal failure costs average P80 per failed unit of finished goods. During 2015,
5% of all completed items had to reworked. External failure costs average P200
per failed unit. The companys average external failures are 1% of units sold. The
company carries no ending inventories, because all jobs are on a per order basis
and a just-in-time inventory ordering method is used.
Answer More Challenges

Question 1
Mang Boboy in one of the meetings with investors asked Xander what is the
impact of the increase in the discount rate. What is the best answer of Xander:
it is impossible to tell what happens to the factors
present value factors remain constant
present value factors increase
present value factors decrease
Management Advisory Services - Capital Budgeting (Easy)

Question 2
After Xander explained the concept of discount rate, Mang Boboy asked again
about the difference of that discount rate with the discount rate of the Bangko
Sentral ng Pilipinas. What will be Xanders best answer?
specified percentage of a commercial banks deposit liabilities that must be
deposited in the central bank.
rate that the central bank charges for loans granted to commercial banks
rate that commercial banks charge for loans granted to the public.

ratio of excess reserves to legal reserves that are deposited in the central
bank.
Management Advisory Services - Uncategorized (Uncategorized)

Question 3
Bangky Souvenirs Company is planning to sell two lines of stuffed toys, Pusong
Strawberry and Kambal na Strawberry in the coming Christmas. The company
budgets the following sales figures:

Units sold
Revenues P200 and P100 per unit
Variable costs P120 and P70 per
unit
Contribution margin P80 and P30
Fixed costs
Operating income

Pusong
Kambal na
Strawberry
Strawberry
600
400
120,000
40,000
72,000
28,000
48,000

12,000

Total
1,000
160,000
100,000
60,000
45,000
15,000

What is the breakeven point in units?

1,000
1,250
750
800
Management Advisory Services - Uncategorized (Uncategorized)

Question 4
Bangky Souvenirs Company is planning to sell two lines of stuffed toys, Pusong
Strawberry and Kambal na Strawberry in the coming Christmas. The company
budgets the following sales figures:
Pusong

Kambal na

Total

Units sold
Revenues P200 and P100 per unit
Variable costs P120 and P70 per
unit
Contribution margin P80 and P30
Fixed costs
Operating income

Strawberry
Strawberry
600
400
120,000
40,000
72,000
28,000
48,000

12,000

1,000
160,000
100,000
60,000
45,000
15,000

What is the breakeven point in sales pesos?

200,000
100,000
150,000
120,000
Management Advisory Services - Uncategorized (Uncategorized)

Question 5
Ka Sebio offers to sell Judy dumplings at P5 each. If Judy buys dumplings, he
can eliminate P4,000 per month in fixed making costs. He thinks he can also earn
an additional P3,000 per month in contribution margin by adding three tables
where the wantons had been made.
Should Judy accept the offer from Ka Sebio?
Yes, buying is cheaper by 12,000
Yes, buying is cheaper by 22,000
No, making is cheaper by 12,000
No, making is cheaper by 22,000
Management Advisory Services - Uncategorized (Uncategorized)

Question 6
Since the La Presa residents are farmers, how will you best describe what do we
mean when we say committed costs

are likely to respond to the amount of attention devoted to them by a specified

manager
are governed mainly by past decisions that established the present levels of
operating and organizational capacity and that only change slowly in response to
small changes in capacity
management decides to incur in the current period to enable the company to
achieve objectives other than the filling of orders placed by customers
fluctuate in total in response to small changes in the rate of utilization of
capacity
Management Advisory Services - Financial Management (Average)

Question 7
How much is the shutdown costs of the Strawberya Enterprises?
1,260,000
1,400,000
1,450,000
1,350,000
Management Advisory Services - Uncategorized (Uncategorized)

Question 8
How much is the shutdown savings of Strawberya Enterprises?
350,000
1,800,000
1,400,000
1,350,000
Management Advisory Services - Uncategorized (Uncategorized)

Question 9
What is the shutdown point of the Strawberya Enterprises?
125,000
75,000
85,000
87,500
Management Advisory Services - Uncategorized (Uncategorized)

Question 10
What is the net effect on appraisal costs for Grande Manufacturing 2016,
assuming the new receiving method is implemented and that 800,000 material
units are received?
15,000
25,000

20,000

40,000

Management Advisory Services - Uncategorized (Uncategorized)

Question 11
How much will internal failure costs of Grande Manufacturing change , assuming
800,000 units of materials are received and that the new receiving method
reduces the amount of unacceptable product units in the manufacturing process
by 10%.
80,000

75,000

100,000

120,000

Management Advisory Services - Uncategorized (Uncategorized)

Question 12
How much will external failure costs of Grande Manufacturing change , assuming
800,000 units of materials are received and that product failures with customers
are cut in half with the new receiving method?
80,000
200,000
100,000
120,000
Management Advisory Services - Uncategorized (Uncategorized)

Question 13
Performance results for 4 geographic divisions of Grande Manufacturing
company are:
Division

Target return on
investment

Actual return on
investment

Return on sales

A
B
C
D

18%
16%
14%
12%

18.1%
20.0%
15.8%
11.0%

8%
8%
6%
9%

The division with the best performance is:

A
B
C
D
Management Advisory Services - Uncategorized (Uncategorized)

Question 14
Grande Manufacturing Company has developed a new product for spacecraft
that includes the manufacture of a complex part. The manufacturing of this part
requires a high degree of technical skill. Management believes there is a good
opportunity for its technical force to learn and improve as it becomes accustomed
to the production process. The production of the first unit requires 10,000 direct
labor hours. If an 80% learning curve is used, the cumulative direct labor hours
requires for producing a total of 8 units would be:
29,520
40,960
64,000
80,000
Management Advisory Services - Uncategorized (Uncategorized)

Question 15
The construction of La Presa Inn involves environmental costs. Which of the
following fail to be captured and reported by a company's accounting system as
an environmental cost?
Off-site remediation costs
remediation costs

Hidden costs

Monitoring costs

Abatement costs

Management Advisory Services - Responsibility Accounting (Difficult)

Question 16

On-site

Agnes keeps P500 in here piggy bank and she would like to invest. She has two
choices. Investment #1 yields a return of 8% compounded annually while
Investment #2 yields 7.75% compounded monthly. Which would she choose and
why?
She will choose the 7.75% yield because it has a higher effective annual rate.
She will choose the 7.75% yield because it has a lower effective annual rate..
She will choose the 8% yield because it has a higher effective annual rate.
cannot tell
Management Advisory Services - Valuing Stocks & Bonds (Difficult)

Question 17
Xander is managing Malaya Investment, a firm that pays corporate taxes on its
net income (T = 0.375) but operates in an otherwise perfect capital market
environment. Malaya Investment has a perpetual expected cash inflow each year
() of P150, which can be larger or smaller, but is never less than P50 per year.
The cost of capital is 12%. What is Xanders net worth? Note that the amounts
are in million pesos.
781.25
1,230

1,250

791.25

Management Advisory Services - Capital Structure (Difficult)

Question 18
Orly, Inc. attempts to capture the impact of all the relevant dimensions connected
with debt financing by using the net-benefit-to-leverage factor (T*). T* is assumed
to be derived from a linear approximation to the actual net-benefit-to-leverage
relationship over some relevant range of values for the leverage ratio L. Orlys
unleveraged value (VU) is P100M (M = million) and it estimates T* to be 0.2. It

issues P20M in debt. According to the corporate tax view of capital structure,
what is its gain to leverage (GL)?
104,500,000
104,000,000

103,500,000

103,000,000

Management Advisory Services - Capital Structure (Average)

Question 19
Malaya Investments borrows P500 and its leveraged firm value is P1,000. Its cost
of equity and debt are 12% and 8%. Its corporate tax rate is 30%. What is its
weighted average cost of capital?
12.00%
20.00%
8.80%

11.60%

Management Advisory Services - Capital Structure (Average)

Question 20
In one of the meetings in Malaya Investment, an investor asked Orly what affects
the size of a firms minimum cash balance. Which will not be included as his
answer.
the availability of long-term investment opportunities
how quickly and cheaply a firm can raise cash when needed
how accurately the firms managers can predict when cash payment
requirements will occur
how much precautionary cash the firms managers want to have for
emergencies
Management Advisory Services - Financial Management (Easy)

Question 21

Mang Boboy will sell his old truck to finance the La Presa Inn. When disposing of
the old truck and replacing it with a new one, tax effect on
loss on sale of the old asset reduces the basis of the new asset
gain on sale of the old asset reduces the basis of the new asset
gain on sale of the old asset increases the basis of the new asset
gain on sale of the old asset increases the basis of the new asset and loss on
sale of the old asset reduces the basis of the new asset
Management Advisory Services - Capital Budgeting (Easy)

Question 22
Orly was reviewing an investment report for the French investors of La Presa Inn.
Which of the following changes would not decrease the present value of the
future depreciation deductions on a specific depreciable asset?
a decrease in the rate of depreciation
an increase in the life expectancy of the depreciable asset
a decrease in the discount rate
a decrease in the marginal tax rate
Management Advisory Services - Capital Budgeting (Average)

Question 23
Grande Corporation manufactures a product through a continuous process in
different departments. As their cost accountant, you are given the production data
of Department A to accumulate costs and prepare the necessary reports:
Work-

in

process,

May

1,

2011(30%

Units
15,000

tocomplete)
Units started and completed
Work-in process, May,31,2011 (50% complete)
Normal lost units discovered at the end of
process

60,000
3,000
2,000

Costs
P78,000
P85,000
P45,000

Materials
Conversion
Work-in process cost, May 1, 2011

Materials are added at the start of the production while conversion costs are
evenly distributed during the production process.
Compute the current total unit cost for materials and conversion:
3.14
2.45
2.23
2.53
Management Advisory Services - Uncategorized (Uncategorized)

Question 24
Grande Company produces two products in a single factory. The following
production and cost information has been determined:
Units produced
Material moves (total)
Testing time (total)
Direct labor hour per unit

Model 1
10, 000
100
250
1

Model 2
2, 000
40
125
5

The controller has determined total overhead to be P480,000. P140,000 relates

to material moves; P150,000 relates to testing; the remainder is related to labor
time. If Grande uses activity-based costing to allocate overhead to each model,
what would overhead per unit be for Model 1?
40
29.50
24
12
Management Advisory Services - Activity Based Costing (Difficult)

Question 25

With respect to debt financing, which of the following statements is most accurate
from the perspective of the firm seeking funds?
short-term loans are less risky and usually less expensive than equity
short-term loans are more risky and usually less expensive than long-term
loans
short-term loans are more risky and usually more expensive than equity
short-term loans are more risky and usually more expensive than long-term
debt
Management Advisory Services - Financing Decisions (Difficult)

Question 26
Debt is generally the least expensive source of capital. This is primarily due to
The tax deductibility of interest payments
Fixed interest payments
Its position in the priority of claims on assets and earnings in the event of
liquidation
The secured nature of a debt obligation
Management Advisory Services - Financial Statement Analysis (Difficult)

Question 27
Which of the following is taken into account by the net-present-value method?
A Project's Immediate Cash Flows (Yes): Cash Flows During a Project's Life
(Yes); Time Value of Money (No)

A Project's Immediate Cash Flows (No): Cash Flows During a Project's Life
(Yes); Time Value of Money (No)
A Project's Immediate Cash Flows (No): Cash Flows During a Project's Life
(Yes); Time Value of Money (Yes)
A Project's Immediate Cash Flows (Yes): Cash Flows During a Project's Life
(Yes); Time Value of Money (Yes)
A Project's Immediate Cash Flows (Yes): Cash Flows During a Project's Life
(No); Time Value of Money (No)
Management Advisory Services - Capital Budgeting (Difficult)

Question 28
Malaya Investments got a bond for a coupon rate of 6%. The yield to maturity is
7%. The bond has a remaining life of 20 years and makes semi-annual coupon
payments? What is this bonds current market value?
640.65
252.57
1,000.00
893.22
Management Advisory Services - Valuing Stocks & Bonds (Difficult)

Question 29
Grande Company presented the following information:
Units to be sold
Total costs of the units
Fixed capital
investments
Variable capital on sales

50,000 units
P550,000
P1,000,000
20%

What would be the selling price in order to produce a 20% return on investment?
15.625
15.652
16.525
15.256
Management Advisory Services - Transfer Pricing (Difficult)

Question 30
For a given level of tax collections, prices, and interest rates, a decrease in
governmental purchases will result in
increase in aggregate demand
increase in aggregate supply
decrease in aggregate demand
decrease in aggregate supply
Management Advisory Services - Uncategorized (Uncategorized)
Answer More Challenges