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UNIVERSITY OF NUEVA CACERES

Financial Management I
Final Examination

I. Multiple Choice. Select the best answer among the options. Show/Give your solution if
necessary.

1. Fame Company has the following budget formula for factory overhead costs:

FOH Company = P5,000,000 per month + P300 unit of product.

If the company plans to produce 50,000 units in January, how much is the budgeted factory
overhead cost?
a. P20,000,000 c. P5,000,000
b. P15,000,000 d. P5,050,300

2. Hershey Company has budgeted sales of P90,000 units in January; 120,000 units in February;
and 180,000 in March. The company has 20,000 units on hand on January 1. If Hershey
Company requires an ending inventory of finished goods equal to 20% of the following month’s
sales, the budgeted production during February should be:
a. 96,000 c. 120,000
b. 108,000 d. 132,000

3. Ernie Trading Co. budgeted merchandise purchases of 40,000 units next month. The expected
beginning inventory is 12,000 units and the desired inventory at the end of next month is
15,000 units. Budgeted sales in units for next month is:
a. 37,000 c. 55,000
b. 43,000 d. 52,000

4. Edil Producers, Inc. will start its commercial operations on January 01,200A. the sales forecast
per the sales manager’s estimates for its first year of operations is 50,000 units. However, the
production manager estimated that only 80% of the sales forecast can be produced with the
available workforce and equipment. The product will be sold for P20 per unit. The budgeted
peso sales for Edil Producers, Inc.’s initial year of operation is:
a. P800,000 c. P50,000
b. P1,000,000 d. P40,000

ITEMS 5 and 6 ARE BASED ON THE FOLLOWING INFORMATION:

Nicely Wyn Corporation has the following budgeted production for four months:
April 50,000
May 40,000
June 45,000
July 60,000

Each unit of product requires 2 pieces of raw materials. The desired ending raw materials
inventory for each month is 130% of the following month’s production needs, plus 20,000
pieces. (The April 1 inventory meets this requirement.)
The product is processed in two departments (Dept. A and Dept. B) and the direct labor
standards are as follows:

Hours per Unit Rate per Hour Labor Cost per


Unit
Department A 6 P30 P180
Department B 2 P40 P80

5. What is the budgeted purchases of raw materials in June?


a. 51,000 c. 120,000
b. 84,000 d. 129,000

6. What is the budgeted direct labor cost for the month of May?
a. P13,000,000 c. P10,400,000
b. P11,700,000 d. P7,200,000

7. Which of the following statements is correct?


a. Budgets ensure goal congruence between superiors and subordinates.
b. Budgets define responsibility centers and promote communication and coordination
among organization segments.
c. Budgets foster the planning of operations and facilitate the fixing of blame for missed
budget predictions.
d. Budgets foster the planning of operations, provide a framework for performance
evaluation, and promote communication and coordination among organization
segments.

8. It involves the forecasting of realizable results over a definite period or periods, the planning
and coordination of the various operations and functions of the business to attain realizable
results, and control of variations from the approved plan.
a. Cost control c. Internal control
b. Budgeting d. Vouching

9. Which of the following statements regarding budgeting is incorrect?


a. Planning and control are the essential features of the budgeting process.
b. Capital expenditures budget shows the availability of idle cash for investment.
c. Budgeting provides a measuring device to which subsequent performances are
compared and evaluated.
d. Budget preparation is not the sole responsibility of any one organizational segment
and is prepared by combining the efforts of many individuals.

10. Which of the following is not a primary purpose of preparing a budget?


a. To communicate the company’s plans throughout the entire business organization
b. To provide a basis for comparison of actual performance
c. To control revenues and expenses during a given period
d. To make sure that the company expands its operations

11. Barat Company began its operations on January 1 of the current year. Budgeted sales for the
first quarter are P240,000, P300,000, and P420,000, respectively, for January, February and
March. Barat Company expects 20% of its sales on cash and the remainder on account. Of
the sales on account, 70% are expected to be collected in the month of sale, 25% in the
month following the sale, and the remainder in the following month. How much should Barat
receive from sakes in March?
a. P304,800 c. P388,800
b. P294,000 d. P295,200

12. Lopez Company has a collection schedule of 60% during the month of sales, 15% in the
following month, and 15% subsequently. The total credit sales in the current month of
September were P80,000 and total collections in September were P57,000. What were the
credit sales in July?
a. P90,000 c. P45,000
b. P30,000 d. P32,000

13. The formula for compound value is:


a. 𝐹𝑉𝑁 = 𝑃𝑉(1 + 𝑖)
𝑃𝑉
b. 𝐹𝑉𝑛 =
(1+𝑖)
c. 𝐹𝑉𝑛 = 𝑃𝑉(1 + 𝑖)𝑛
(1+𝑖)
d. 𝐹𝑉𝑛 =
𝑃𝑉

14. What is the future value of P1,000 compounded annually at 8% for 5 years?
a. P1080 c. P1460
b. P1400 d. P1800

15. What is the present value of P1,000 to be received in eight (8) years discounted at 9%?
a. P500 c. P550
b. P502 d. P607

II. Problem Solving

Prepare the schedule of future value of an investment of P500,000 compounded at 10% a)


annually, b) semi-annually, and c) quarterly, for 4 years. Select your best option and give your
justification. Show your solution.

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