REVITALIZE

Mock Board and Diagnostic Examination

MAS

1. B.- 5.00
Actual Costs (AH x AR) 10,000
Less: Favorable Rate variance 1,000
Actual Hours x standard rate 11,000
Divided by: Standard rate 5.50
Actual hours 2,000
Actual costs/ actual hours 5.00
2. C. Increasing average household income
3. C. -0.05
4. D. -1.25
Investment turnover = ROI divided by ROS
Sales/ Asset = Income/ Asset divided by Income/ Sales
Investment turnover = 25% / 20% equals 1.25
5. B. -2.50
Standard allowed for material 60,000
Divide by standard quantity
(Produced x units required or material)
12,000 x 2 24,000
Standard rate 2.50
6. D.- 25,000 units
Unfavorable quantity variance 2,500
Divided by standard rate 2.50
Difference in quantity 1,000
Add: Standard quantity 24,000
Actual quantity 25,000
7. A. - 12,500 unfavorable
Actual price (105,000/35,000) 3.00
Less: Standard price 2.50
Change in price 0.50
Actual quantity 25,000
Unfavorable price variance 12,500
8. D. - Variable manufacturing costs plus contribution margin foregone on lost regular units
9. B. - Capital budget
10. A. - P 2.10 per hour
Number of Months = N
Sum of Hours = X
Sum of Costs = Y
Sum of Hours x Costs = XY
Sum of Hours Squared = X2
 Y= NA + BX
XY= AX + BX2
1,000=10A+350B or A= 100 35B
39,200=350A+14,250B
Substitute the first equation to the second equation.
39,200=350 (100 -35B) +14,250B
39,200=35,000 12,250B + 14,250B
4,200=2,000B
B=2.1
11. A.- Budget allowance based on actual hours
12. B.- 59.15
Product A Product B
Direct labor x units
(3 x 2,000) 6,000
(2 x 1,000) 2,000
Fixed cost allocated to B
(50,000 x 2,000/8,000)= 12,500
Costs of B = {(25+2+4+2+(12,500/1,000)} x 130% = 59.15
13. A. -21,400
July (60,000 x 4%) = 2,400
August (70,000 x 10%) = 7,000
September (80,000 x 15%) = 12,000
Total = 21,400
14. A. -42,250
December (85,000 x 29%) = 24,650
November (100,000 x 14%) = 14,000
October (90,000 x 4%) = 3,600
Receivable 12/31/2015 = 42,250
15. D. -2,300 unfavorable
Actual overhead (22,000+4,100) = 26,100
Less: BASH
Budgeted fixed overhead 20,000
Standard Variable overhead
((19,000 x .1) x 2) 3,800 = 23,800
Controllable Variance unfavorable = 2,300
16. A. -100 credit
Actual variable overhead = 4,100
Less: actual hours x standard rate
2,100 x 2 = 4,200
Variable spending variance = 100 favorable (credit)
17. B. P 1,000 under-applied
BASH (see no.15) = 23,800
Standard costs
19,000 x .1 x ( 2 variable costs + [20,000 fixed costs/ (20,000 x .1)])
 1,900 x (2 + 10) = 22,800
Fixed overhead volume variance- unfavorable under-applied = 1,000
18. A. - The break-even point remains the same
19. B. - 6.0 times
Revenues (1.2 M/ 40%) = 3,000,000
Variable COS ( 50% of revenue) = 1,500,000
Variable OE (20% of revenue) = 600,000
Contribution margin = 900,000
Divided by: EBIT
(3,000,000 x 5%) = 150,000
Degree of operating leverage = 6.0
20. C. - Investment center, profit center, revenue center
21. D. - Variable costs as a percentage of net sales decrease
22. B. - Cost of the new machine and salvage value of the old machine
23. B. 19,000
Expected cash flow for October = 107,000
Less: Collections per month
October (90,000 x 50%) = 45,000
September (80,000 x 30%) = 24,000
August (95,000 x 20%) = 19,000
Cash sales for October = 19,000
24. C. - Payment of current tax obligations
25. C. 7,000 units
Sales in units (900,000/50) = 18,000
Selling price per unit = 50
Variable cost
(495,000/ 18,000) = 27.5
Contribution margin per unit = 22.5
Fixed costs/ Contribution margin = 247,500/22.5
Breakeven point units = 11,000
Margin of safety (sales-BE point) = 7,000
26. C.- 7,000 units
Operating income (236,250/ (100%-25%)) = 315,000
Fixed costs = 247,500
Total = 562,500
Divided by: Contirbution margin per unit = 22.5
Should be sales in units = 25,000
Present sales = 18,000
Increase in sales = 7,000
27. B. - Increases the price level and decreases the purchasing power of money
28. A. - 20
Use high-low method
Variable overhead = (2,150-1,450)/ (75-40)
= 20
29. C. - Investors expect to be paid more for exposure to higher risk
30. A. 5,000 favorable
Overhead spending variance 15,000 unfavorable
Less: Overhead efficiency variance 20,000 favorable
Controllable variance 5,000 favorable
31. D. 13.8%
Use the CAPM formula
=risk free rate + [(expected return risk free rate) x beta]
=9% + [15%-9%] x .8
=9% + 4.8%
=13.8%
32. A. 5,000 net advantage of the company
Make Buy
Variable cost (1,000x70) 70,000
Fixed cost 15,000 15,000
Purchase price (1,000x75) 75,000
Total 85,000 90,000
Yes, costs to make is less than cost to buy
33. A. -152,000
Costs (100,000 + (3,000,000 x 0.01% x 360) = 208,000
Additional funds (3,000,000 x 2 x 6%) = 360,000
Net benefit = 152,000
34. A. - The demand curve for P&A Soap to shift right
35. C. -9.8%
=Dividends/ (Fair value of share underwriting cost)
=10/ (107-5)
=9.8%
36. B. -1.06
Sales (500,000 x 3) = 1,500,000
Variable costs (500,000 x 0.60) = 300,000
Fixed Costs = 110,000
EBIT = 1,090,000
Interest = 60,000
EBT = 1,030,000
EBIT/ EBT = 1.06
37. C. - Minimum ROI is lower than the segments ROI
38. B. 180,000
After tax profit (1,500,000 x (100%-40%)) = 900,000
Less: Total assets current liabilities x WACC
(2,000,000+7,000,000 1,000,000) x 9%* = 720,000
Economic value added = 180,000
After tax cost of debt (5% x 60%) = 3%
Equity (2M+7M-1M-4M) = 4,000,000
*WACC
 Debt = rate x noncurrent liabilities / (noncurrent liabilities + equity)
=3% x (4,000,000/ (4,000,000+4,000,000)
=1.5%
Equity = rate x equity / (noncurrent liabilities + equity)
= 15% x (5,000,000/ (4,000,000+4,000,000)
=7.5%
Total =9%
39. C. 411,000 potatoes
Potato chips plans to sell 80,000
Add: Desired ending inventory 18,000
Less: Beginning inventory 15,000
Potato chips to produce 93,000
Multply by the number of potatoes per chips 5
Potatoes needed to produced 415,000
Add: Desired ending inventory 23,000
Less: Beginning inventory 27,000
Plans to purchase 411,000
40. C. -1,150,000
Income before tax (100,800/70%) 144,000
Add: Fixed costs less decrease in salaries (396,000 80,000) 316,000
Should be contribution margin 460,000
Divided by contribution margin ratio 40%*
Sales in volume 1,150,000
*CM ratio= (100% (20/40) ( 10%))
41. B. -40%
Dividend ratio = Dividend/ Price x Price/ Earnings
= 12% x 5
= 60%
Plowback ratio = 100%-60% = 40%
42. B. -40%
MPS = Increase in savings / increase in income
= 500 (2,800-2,500) / 500
= 40%
43. A. -3,333,333 decrease
Old policy = (50,000,000/360) x 70% x 75 days =7,291,667
New policy = ((50,000,000 x 95%)/360) x 60% x 50 days =3,958,333
Decrease in accounts receivable =3,333,333
44. D. -810,000
Days of A/R = (60% x 10) + (40% x 30)
= 18 days
Amount of A/R = 150 units x 300 each x 18 days = 810,000
45. C. -Material price variance
46. C. -There are time delays in processing transactions in a batch system
47. A. -15,000 units
Selling price (75,000/5,000) = 15.00
Variable production cost (50,000 +30,000+20,000)/20,000 = 5.00
Variable selling expense (40,000/5,000) = 8.00
Contribution margin = 2.00
BE point = Fixed overhead divided by contribution margin
(25,000+15,000)/2 = 20,000
Increase in sales in units = 20,000 -5,000 = 15,000
48. D. -22,000 units
Fixed costs per unit = Fixed overhead costs/ production = 25,000/20,000= 1.25
Difference in units = Difference in profit/ FC/unit = 2,500/1.25 = 2,000
Since variable costing profit is higher, sales is greater than production
Production of 20,000 plus 2,000 difference = 22,000 units
49. B. - Income under absorption and variable costing to be equal
50. D. - The net disadvantage of making the part is P147,000
Relevant costs (avoidable) Make Buy
Direct materials 17.8
Direct labor 19.0
Variable OH 1.0
Fixed OH (17.10-8.20) 8.9
Opportunity costs (273,000/70,000) 3.9
Purchase price 48.50
Total relevant costs 50.6 48.50
The company should buy rather than buy of 2.10 per unit or P 147,000.