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Father Saturnino Urios University
MANAGEMENT ADVISORY SERVICES

PRE- QUALIFYING EXAMINATION
Name: ___________________________________________ Date: _________________
INSTRUCTIONS: SHADE THE LETTER OF YOUR ANSWER. AVOID ANY ERASURES TO VALIDATE YOUR
ANSWER. GOD BLESS YOU!
Problems 1-3. SUCCESS Manufacturing Inc.'s accounting records reflect the following inventories:
Dec. 31, 2005 Dec. 31, 2006
Raw materials inventory P100,000 P 80,000
Work in process inventory 130,000 145,000
Finished goods inventory 125,000 115,000
During 2006, SUCCESS purchased P950,000 of raw materials, incurred direct labor costs of P125,000, and
incurred manufacturing overhead totaling P160,000.
1.How much is raw materials transferred to production during 2006 for SUCCESS Manufacturing?
a. P1,240,000
b. P970,000
c. P950,000
d. P930,000
2.How much is total manufacturing costs incurred during 2006 for SUCCESS?
a. P1,240,000
b. P1,255,000
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c. P1,235,000
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d. P1,250,000
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3.Assume SUCCESS Manufacturing’s cost of goods manufactured for 2006 amounted to P1,200,000. How
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much would it report as cost of goods sold for the year?
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a. P1,210,000
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b. P1,250,000
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c. P1,325,000
d. P1,190,000
4.Cost of goods sold applies to
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a. only merchandisers' income statements.

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b. only manufacturers' income statements.

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c. both manufacturers’ and merchandisers' income statements.

d. manufacturers, merchandisers, and service companies.
5.How is cost of goods manufactured calculated?
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a. Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP
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b. Direct materials used + direct labor + manufacturing overhead – beginning WIP + ending WIP
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c. Beginning WIP + direct materials used + direct labor + manufacturing overhead – ending
WIP
d. Direct materials used + direct labor + manufacturing overhead – ending WIP – beginning WIP
6. A materials requisition slip showed that total materials requested were P42,500 with P1,500 of this
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amount consisting of indirect materials. What entry is made to record the transfer of materials
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from the storeroom?

a. Work in Process Inventory ......................................................... 41,000
Manufacturing Overhead .......................................................... 1,500
Raw Materials Inventory .................................................. 42,500
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b. Work in Process Inventory .............................................................. 42,500

Raw Material Inventory ......................................................... 42,500
c. Direct Materials ............................................................................... 41,000
Indirect Materials ............................................................................ 1,500
Work in Process Inventory .................................................... 42,500
d. Manufacturing Overhead ................................................................ 42,500
Raw Materials Inventory ....................................................... 42,500
7. During 2006, YES Manufacturing expected Job 51 to cost P300,000 of overhead, P500,000 of
material, and P200,000 in labor. YES applied overhead based on direct labor cost. Actual
production required an overhead cost of P280,000, P550,000 in materials used; and P220,000 in
labor. All of the goods were completed. What amount was transferred to Finished Goods?
a. P1,070,000
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b. P1,100,000
c. P1,000,000
d. P1,050,000
8. During 2006, YAHOO Manufacturing expected Job 59 to cost P300,000 of overhead, P500,000 of
material, and P200,000 in labor. YAHOO applied overhead based on direct labor cost. Actual
production required an overhead cost of P280,000, P550,000 in materials used; and P220,000 in
labor. All of the goods were completed. How much is the amount of over/under applied
overhead?
a. P50,000 underapplied
b. P50,000 overapplied
c. P20,000 underapplied
d. P20,000 overapplied
9. BRAVO provided the following information from its accounting records for 2006:
Expected production 30,000 labor hours
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Actual production 28,000 labor hours
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Budgeted overhead
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Actual overhead P1,450,000
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How much is the overhead application rate if BRAVO bases the rate on direct labor hours?
a. P51.79 per hour
b. P48.33 per hour
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c. P50 per hour

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d. P46,67 per hour

10. Which one of the following is a similarity of both a job order and a process cost system?
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a. They both track direct materials and direct labor, but not manufacturing overhead.
b. They both track conversion costs, but not materials.
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c. They both track the same three manufacturing cost elements – direct materials, direct
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labor, and manufacturing overhead.

d. They both are used for the same type of inventory production items.
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11. How are costs assigned in a process cost system?

a. To only one work in process account
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b. To work in process and finished goods inventory

c. To work in process, finished goods, and cost of goods sold
d. To multiple work in process accounts
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12. In the Carter Company, there are 1,000 units in beginning work in process, 9,000 units started into
production, and 800 units in ending work in process 40% completed. How many physical units are
to be accounted for?
a. 10,000
b. 9,200
c. 10,800
d. 8,800
13. Hace, Inc. began March with 650 units in beginning work in process, 11,400 units started into
production, and 500 units in ending work in process that are 30% completed. How many physical
units are to be accounted for?
a. 11,550
b. 12,050
c. 11,900
d. 11,250
Problems 14-15. Materials costs of P200,000 and conversion costs of P214,200 were charged to a
processing department in the month of September. Materials are added at the beginning of the process,
while conversion costs are incurred uniformly throughout the process. There were no units in beginning
work in process, 100,000 units were started into production in September, and there were 8,000 units in
ending work in process that were 40% complete at the end of September.
14.What was the total amount of manufacturing costs assigned to those units that were completed and
transferred out of the process in September if the weighted average method is used?
a.P184,000
b.P391,000
c.P414,200
d.P425,200
15. What was the total amount of manufacturing costs assigned to the 8,000 units in the ending work in
process if the weighted average method is used?
a.P16,000
b.P7,200
c.P13,600
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d.P23,200
16. Which of the following is not a benefit of activity-based costing?
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a. More accurate product costing
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b. Enhanced control over overhead costs
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c. Better management decisions
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d. Less costly to use
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17.Each of the following is a limitation of activity-based costing except that

a. it can be expensive to use.
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b. it is more complex than traditional costing.

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c. more cost pools are used.

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d. some arbitrary allocations continue.

18. Veronica Co. produces 3 products, Products Rain, Snow, and Wind. Product Rain requires 80 machine setups,
Product Snow requires 60 setups, and Product Wind requires 180 setups. Veronica has identified an
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activity cost pool with allocated overhead of P384,000 for which the cost driver is machine setups. How
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much overhead is assigned to each product?

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Rain Snow Wind

a. P128,000 P128,000 P128,000
b. P80,000 P60,000 P180,000
c. P96,000 P72,000 P216,000
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d. P72,000 P128,000 P184,000

The following data was recorded by Happy Hollows Company for it shipping department:
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Month # of employees Employee Expense

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January 25 P55
February 17 P40
March 22 P50
April 20 P45
May 15 P35
June 18 P40
July 23 P60
19. Using the high-low method, how much is the variable portion of employee expense?
a. P0.50
b. P2.50
c. P2
d. P3.13
20.Why is identification of a relevant range important?
a. It is required under GAAP.
b. Cost behavior outside of the relevant range is not linear, which distorts CVP analysis.
c. It directly impacts the number of units of product a customer buys.
d. It is a cost that is incurred by a company that must be accounted for.
A division sold 200,000 calculators during 2006:
Sales P2,000,000
Variable costs:
Materials P200,000
Order processing 150,000
Billing labor 110,000
Delivery costs 180,000
Selling expenses 60,000
Total variable costs 700,000
Fixed costs 1,000,000
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21. How much is the contribution margin per unit?
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a. P1.00 eH w
b. P3.50
c. P8.50
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d. P6.50
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22. Max Company uses 10,000 units of Part A in producing its products. A supplier offers to make Part A
for P7. Max Company has relevant costs of P8 a unit to manufacture Part A. If there is excess
capacity, the opportunity cost of buying Part A from the supplier is
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a. P0.
b. P10,000.
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c. P70,000.
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d. P80,000
23. Rosen, Inc. has 10,000 obsolete calculators, which are carried in inventory at a cost of P20,000. If the
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calculators are scrapped, they can be sold for P1.10 each (for parts). If they are repackaged, at a
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cost of P15,000, they could be sold to toy stores for P2.50 per unit. What alternative should be
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chosen, and why?

a. Scrap; profit is P1,000 greater.
b. Repackage; revenue is P5,000 greater than cost.
c. Scrap; incremental loss is P9,000.
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d. Repackage; receive profit of P10,000.

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24. It costs Lannon Fields P14 of variable costs and P6 of allocated fixed costs to produce an industrial
trash can that sells for P30. A buyer is Mexico offers to purchase 2,000 units at P18 each. Lannon has
excess capacity and can handle the additional production. What effect will acceptance of the offer have
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on net income?
a. decrease P4,000
b. increase P4,000
c. increase P36,000
d. increase P8,000
25. The cost to produce Part A was P10 per unit in 2005. During 2006, it has increased to P11 per unit. In
2006, Supplier Company has offered to supply Part A for P9 per unit. For the make-or-buy decision,
a. incremental revenues are P2 per unit.
b. incremental costs are P1 per unit.
c. net relevant costs are P1 per unit.
d. differential costs are P2 per unit.
Problems 26-30. Green Company sells its product for P11,000 per unit. Variable costs per unit are:
manufacturing, P6,000; and selling and administrative, P125. Fixed costs are: P30,000
manufacturing overhead, and P40,000 selling and administrative. There was no beginning
inventory at 1/1/05. Production was 20 units per year in 2005 – 2007. Sales was 20 units in 2005,
16 units in 2006, and 24 units in 2007.
26.Income under absorption costing for 2006 is

a. P 8,000.
b. P14,000
c. P16,000
d. P22,000.
27. Income under absorption costing for 2007 is

a. P33,000.
b. P39,000
c. P41,000
d. P47,000.
28. Income under variable costing for 2006 is
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a. P 8,000.
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b. P14,000
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c. P16,000 eH w
d. P22,000.
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29. Income under variable costing for 2007 is
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a. P33,000.
b. P39,000
c. P41,000
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d. P47,000.
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30.For the three years 2005-7,

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a. absorption costing income exceeds variable costing income by P6,000.

b. absorption costing income equals variable costing income.
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c. variable costing income exceeds absorption costing income by P6,000.

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d. absorption costing income may be greater than, equal to, or less than variable costing
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income depending on the situation.
Problems 31-32. The Wood Division of Fir Products, Inc. manufactures wood moldings and sells them
externally for P100. Its variable cost is P40 per unit, and its fixed cost per unit is P14. Fir's president
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wants the Wood Division to transfer 5,000 units to another company division at a price of P54.
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31.Assuming the Wood Division has available capacity of 5,000 units, the minimum transfer price it
should accept is
a. P14.
b. P40.
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c. P54.
d. P100.
32.Assuming the Wood Division does not have any available capacity, the minimum transfer price it
should accept is
a. P14.
b. P40.
c. P54.
d. P100.
33.At January 1, 2004, Barry, Inc. has beginning inventory of 4,000 widgets. Barry estimates it will sell
35,000 units during the first quarter of 2004 with a 10% increase in sales each quarter. Barry’s
policy is to maintain an ending inventory equal to 25% of the next quarter’s sales. Each widget
costs P1 and is sold for P1.50. How much is budgeted sales revenue for the third quarter of
2004?
a. P57,525
b. P63,000
c. P63,525
d. P42,350
34. Waco’s Widgets plans to sell 22,000 widgets during May, 19,000 units in June, and 20,000 during
July. Waco keeps 10% of the next month’s sales as ending inventory. How many units should Waco
produce during June?
a.18,900
b.21,000
c. 19,100
d. 19,000
35. Which one of the following statements about a profit center responsibility report is correct?
a. It shows budgeted and actual controllable revenues and costs.
b. Noncontrollable fixed costs are reported.
c. It provides the same information as a cost center responsibility report.
d. All fixed costs are deducted from controllable margin.
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36.What is the purpose of determining return on investment?
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a. To assess a company’s controllable margin
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b. To determine which costs are controllable
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c. To assess performance of an investment center
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d. To determine profitability of a profit center
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Problems 37-39. Bridgeware Company has a materials price standard of P6.00 per pound. Two thousand
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pounds of materials were purchased at P6.60 a pound. The actual quantity of materials used was 2,000
pounds, although the standard quantity allowed for the output was 1,800 pounds.
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37.Bridgeware Company's materials price variance is

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a. P120 U.
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b. P1,200 U.
c. P1,080 U.
d. P1,200 F.
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38.Bridgeware Company's materials quantity variance is

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a. P1,200 U.
b. P1,200 F.
c. P1,320 F.
d. P1,320 U.
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39.Bridgeware Company's total materials variance is

a. P2,400 U.
b. P2,400 F.
c. P2,520 U.
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d. P2,520 F.
40. Bark Company is considering buying a machine for P120,000 with an estimated life of ten years and
no salvage value. The straight-line method of depreciation will be used. The machine is
expected to generate net income of P8,000 each year. The cash payback period on this
investment is
a. 15 years.
b. 10 years.
c. 6 years.
d. 3 years.
A company is considering purchasing factory equipment that costs P320,000 and is estimated to have no
salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are
expected to be P90,000 and annual operating expenses exclusive of depreciation expense are expected
to be P38,000. The straight-line method of depreciation would be used.
41.If the equipment is purchased, the annual rate of return expected on this equipment is
a. 32.5%.
b. 3.8%.
c. 7.5%.
d. 16.3%.
42.Trend percentages are a form of:
a. ratio analysis.
b. vertical analysis.
c. horizontal analysis.
d. solvency analysis
43.When preparing a horizontal analysis of financial statements, subtract the:
a. later year amount from the earlier year amount and divide by the later year amount.
b. earlier year amount from the later year amount and divide by the later year amount.
c. earlier year amount from the later year amount and divide by the earlier year amount.
d. later year amount from the earlier year amount and multiply by the earlier year amount.
Problems 44-50. The following information pertains to Greenwich Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.
Assets
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Cash and short-term investments P 40,000
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Accounts receivable (net) eH w 25,000
Inventory 20,000
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Property, plant and equipment 210,000
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Total Assets P295,000
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Liabilities and Stockholders’ Equity

Current liabilities P 60,000
Long-term liabilities 85,000
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Stockholders’ equity-common 150,000

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Total Liabilities and stockholders’ equity P295,000

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Income Statement
Sales P 85,000
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Cost of goods sold 45,000

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Gross margin 40,000

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Operating expenses 20,000

Net income P 20,000
Number of shares of common stock 6,000

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Market price of common stock P20

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Dividends per share .90

Cash provided by operations P30,000
44.What is the current ratio for this company?
a. 1.42
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b. .80
c. 1.16
d. .60
45.What is the receivable turnover for this company?
a. 2.8 times
b. 2 times
c. 3.4 times
d. 3 times
46.What is the inventory turnover for this company?
a. 2 times
b. 2.25 times
c. 1 time
d. .44 time
47.What is the return on assets for this company?
a. 6.8%
b. 10.5%
c. 11.7%
d. 26.7%
48.What is the profit margin for this company?
a. 42.86%
b. 18.75%
c. 23.5%
d. 15.0%
49.What is the return on common stockholders’ equity for this company?
a. 13.3%
b. 5%
c. 23.3%
d. 53.3%
50.What is the price earnings ratio for this company?
a. 6 times
b. 2.5 times
c. 8 times
d. 4 times
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~end of examination~
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“YOUR SUCCESS DEPENDS SOLELY ON YOU. It’s your step to make your days better.”
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-amt,cpa
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Father Saturnino Urios University

MANAGEMENT ADVISORY SERVICES

a. only merchandisers' income statements.

b. only manufacturers' income statements.

c. both manufacturers’ and merchandisers' income statements.

from the storeroom?

b. Work in Process Inventory .............................................................. 42,500

Expected production 30,000 labor hours

c. P50 per hour

d. P46,67 per hour

labor, and manufacturing overhead.

11. How are costs assigned in a process cost system?

b. To work in process and finished goods inventory

17.Each of the following is a limitation of activity-based costing except that

b. it is more complex than traditional costing.

c. more cost pools are used.

d. some arbitrary allocations continue.

much overhead is assigned to each product?

Rain Snow Wind

d. P72,000 P128,000 P184,000

Month # of employees Employee Expense

chosen, and why?

d. Repackage; receive profit of P10,000.

26.Income under absorption costing for 2006 is

27. Income under absorption costing for 2007 is

28. Income under variable costing for 2006 is

30.For the three years 2005-7,

a. absorption costing income exceeds variable costing income by P6,000.

c. variable costing income exceeds absorption costing income by P6,000.

income depending on the situation.

37.Bridgeware Company's materials price variance is

38.Bridgeware Company's materials quantity variance is

39.Bridgeware Company's total materials variance is

Liabilities and Stockholders’ Equity

Stockholders’ equity-common 150,000

Total Liabilities and stockholders’ equity P295,000

Cost of goods sold 45,000

Gross margin 40,000

Operating expenses 20,000

Number of shares of common stock 6,000

Market price of common stock P20

Dividends per share .90

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