CIVECON Reviewer

Examination no. 1

Questionnaire:

1. Find the net income.

Given:
Accounts Payable Php 42, 031.00
Accounts Receivable Php 78,125.00
Owners Equity Php 80,043.00
Labor Cost Php 34,948.00
Sales Revenue Php 102,042.00
Cost of Production Php 23,713.00
Income Taxes Php 10,339.00

2. A machine part requires the making of several holes in each piece.

Two methods are available:
The first consists of laying out the position of the holes with dividers and a center
punch then drilling. In this method, a workman, who is paid P28.00 an hour, can
complete 2 pieces per minute.
The other method is to make a drill jig costing P3, 000.00 for use in the holes. A
worker in this method is paid P24.00 an hour, and can complete 6 pieces per minute.
All other costs are the same for both methods.
Determine the comparative costs for making 24,000 pieces. Assume that the cost of the
drill jig is charged to this operation.

3. At the end of each year, a worker invests $ 3,000 into an account that draws 6% interest.
The worker makes every payment for the next 40 years except for the payment at the end
of year 10. That is, no money is invested at the end of year 10, how much money will be
in the account at the end of 40 years?

4. The following alternatives are to be considered for a research. Find the present worth for
each option to support the research that requires 20 years of service life. Assume an interest
rate of 6%. Which of the two options is less expensive in terms of their present value?

Option A Option B
First Cost $ 40,000 $ 21,000
Salvage value $ 2,100 $ 3,900
Annual Maintenance $ 1,100 $ 1,900
Useful Life (in years) 20 10
Answer sheet:
---------------------------
Solution for number 1
---------------------------

Sales Revenue Php 102,042.00

Cost of Production (Php 23,713.00)
Income Taxes (Php 10,339.00)
Labor Cost (Php 34,948.00)

Net income = Php 33,042.00

---------------------------
Solution for number 2
---------------------------
First method:
28 1 1 .
= ( )( ) (24,000 ) = 5,600
1 60 . 2 .
Second method
24 1 1 .
= 3,000 + ( )( ) (24,000 ) = 4,600
1 60 . 6 .

Answer:
First method: Php 5,600
Second method: Php 4,600
The second method is better since it provides less cost.
---------------------------
Solution for number 3
---------------------------
$3000 $3000

0 Year 10 40
(1+0.06)40 1
F40total = $ 3,000 [ ] = $309,523.93
0.06
F@10 = $ 3,000(1.0640 ) = $ 30, 857.15

Ftotal = $309,523.93 - $ 30, 857.15

* Calculate the total future value and subtract the future value for year 10 to satisfy what is asked for.

Answer: $ 278,666.78
---------------------------
Solution for number 4
---------------------------
Option A Option B
(1+0.06)20 1 (1+0.06)20 1
P1100 = $ 1,100 [ 0.06(1.06)20 ] =$ 12,616.91 P1800 = $ 1,800 [ 0.06(1.06)20 ] =$ 20,645.86
2100 3900
P2100 = 1.0620 = $ 654.79 P3900 = 1.0610 = $ 2,177.74
20645.86
P1800(2) = = $ 11,528.54
1.0610
PoptionA = 40,000 + 12616.91 + 654.79 2,177.74
P3900(2) = = $ 1,216.04
1.0610
20000
P20000 = 1.0610 = $ 11,167.90

PoptionB = 20,645.86 + 2,177.74 + 11,528.54

+11,167.90
*Return all value to their present value using the interest rate given to get the total present value.

Answer: Option A = $ 53,271.70

Option B = $ 45,520.04 (Less expensive)