MANAGEMENT SERVICES TRINIDAD/ALENTON/URO

FIRST PRE-BOARD EXAMINATION August 5, 2022

Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of
70 items only. The exam is good for three (3) hours. Good luck!

1. Which of the following definitions best characterizes benchmarking?

a. A technique that examines product and process attributes to identify areas for improvements.
b. The comparison of existing activities with the best levels of performance in other, similar
organizations.
c. The development of the most effective methods of completing tasks in a particular industry.
d. The complete redesign of a process within an organization.

2. Black Co.'s breakeven point was P780,000. Variable expenses averaged 60% of sales. and the margin of
safety was P130,000. What was Black's contribution margin?
a. P 364,000 c. P 910,000
b. P 546,000 d. P1,300,000

3. Farrow Co. is applying for a loan in which the bank requires a quick ratio of at least 1:1. Farrow's quick ratio
is 0.8. Which of the following actions would increase Farrow's quick ratio?
a. Purchasing inventory through the issuance of a long-term note.
b. Implementing stronger procedures to collect accounts receivable at a faster rate.
c. Paying an existing account payable.
d. Selling obsolete inventory at a loss.

4. Assume that Kish Inc. hired you as a consultant to help estimate its cost of capital. You have obtained the
following data: D0 = P0.90; P0 = P27.50; and g = 7.00% (constant). Based on the DCF approach, what is the
cost of equity from retained earnings if it costs the company P2 to issue a share of stock?
a. 3.50% c. 10.53%
b. 10.27% d. 10.50%

5. Nighthawk Inc. is considering disposing of a machine with a book value of P22,500 and an estimated
remaining life of three years. The old machine can be sold for P6,250. A new machine with a purchase price
of P68,750 is being considered as a replacement. It will have a useful life of three years and no residual
value. It is estimated that the annual variable manufacturing costs will be reduced from P43,750 to P20,000
if the new machine is purchased. The net differential increase or decrease in cost for the entire three years
for the new equipment is:
a. P8,750 increase c. P8,750 decrease
b. P31,250 decrease d. P2,925 decrease

6. The cost structure of an organization refers to the which of the following?

a. proportion of fixed and variable costs to total costs.
b. proportion of total revenue to total costs.
c. proportion of profits to total costs.
d. None of the answers is correct.

7. Based on the following data for the current year, what is the inventory turnover?
Net sales on account during year P500,000
Cost of merchandise sold during year 330,000
Accounts receivable, beginning of year 45,000
Accounts receivable, end of year 35,000
Inventory, beginning of year 90,000
Inventory, end of year 110,000

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 a. 3.3 c. 3.7
b. 8.3 d. 3.0

8. Ocampo Company is a manufacturer of its only one product line. It had sales of P500,000 with a
contribution margin ratio of 20 percent. Its margin of safety ratio was 25 percent.
What are the company’s fixed costs?
a. P 75,000 c. P100,000
b. P80,000 d. P125,000

9. Montemayor Co. had the following economic information for the year 2022:
Sales(50,000 units @ P20) P1,000,000
Variable manufacturing costs 400,000
Fixed costs 250,000
Income tax rate 40 percent

Montemayor budgets its 2023 sales at 60,000 units or P1,200,000. The company anticipates an increased
competition; hence, an additional P75,000 advertising costs is budgeted in order to maintain its sales target
for 2023.

How many units are required as sales in 2023 in order to equal the 2022 after-tax profit?
a. 56,250 c. 66,250
b. 6,250 d. 10,417

10. Camel Company had a margin of safety ratio of 25%, variable costs of 45% of sales, fixed costs of
P495,000, a break-even point of P900,000, and operating income of P165,000 for the current year. What
are the current year's sales?
a. P 1,000,000 c. P 1,200,000
b. P 1,500,000 d. P 2,000,000

11. Rafa Nadal Co. provides two products, Tennis Balls and Racquet. Tennis balls accounts for 75% percent of
total sales, variable cost as a percentage of selling price are 50% for Tennis balls and 70% for Racquet.
Total fixed costs last year were P7,500,000.
If the selling price, sales mix and variable cost ratios will remain unchanged but the amount of fixed costs
will increase by 30 percent in the coming year, what amount of peso sales would be necessary to generate
an operating profit of P1,250,000?
a. P31,428,571 c. P24,444,444
b. P25,000,000 d. P19,444,444

12. The best characterization of an opportunity cost is that it is

a. relevant to decision making but is not usually reflected in accounting records
b. not relevant to decision making and is not usually reflected in accounting records
c. relevant to decision making and is usually reflected in accounting records
d. not relevant to decision making and is usually reflected in accounting records

13. Fila Company currently sells 2,000 units of product ZEE for P8 each; variable cost is P5 each. A foreign
customer has offered P6.50 per unit for 500 units of product ZEE. The manager believes that if they accept
the special order, they will lose some sales at the regular price. Determine the number of units they could
lose before the order become unprofitable.
a. 250 units. c. 1,000 units.
b. 750 units. d. 500 units

14. AFM, Inc. manufactures jet engines for an aircraft assembler on a cost-plus basis. The cost of a particular
jet engine that the company manufactures is shown below:
Direct materials P20,000,000
Direct labor 15,000,000
Overhead:
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 Supervisor’s salary 2,000,000
Fringe benefits on direct labor 1,500,000
Depreciation 1,200,000
Rent 1,100,000
Total P40,800,000

If production of this engine were discontinued, the production capacity would be idle, and the supervisor
would be laid off. When asked to bid on the next contract for the engine, the minimum unit price that AFM
Inc. should bid is
a. P38,500,000 c. P40,800,000
b. P36,500,000 d. P39,700,000

15. An appropriate transfer price between two divisions (both profit centers) of the Reyno Corporation can be
determined from the following data:
Fabrication Division
Market price of subassembly P125
Variable cost of subassembly P 75
Excess capacity (in units) 750
Assembling Division
Number of units needed 1,000
What is the minimum transfer price acceptable to the Fabrication Division?
a. P 75.00 c. P100.00
b. P 87.50 d. P112.50

16. Consider the following statements about absorption- and variable-costing net income:
I. Yearly income reported under absorption costing will differ from income reported under variable
costing if production and sales volumes differ.
II. In the long-run, total income reported under absorption costing will often be close to that reported
under variable costing.
III. Differences in income under absorption and variable costing can often be reconciled by multiplying
the change in inventory (in units) by the variable manufacturing overhead cost per unit.

Which of the above statements is (are) true?

a. I only c. III only
b. II only d. I and II

Use the following information for the next two questions.

King Corporation produces a single product. The following cost structure applied to its first year of operations:
Variable costs:
Selling expenses P2 per unit
Production P4 per unit
Fixed costs (total cost incurred for the year):
Selling expenses P14,000
Production P20,000

17. Assume for this question only that during the current year King Corporation manufactured 5,000 units and
sold 3,800. There was no beginning or ending work-in-process inventory. How much larger or smaller would
King Corporation's income be if it uses absorption rather than variable costing?
a. The absorption costing income would be P6,000 larger.
b. The absorption costing income would be P6,000 smaller.
c. The absorption costing income would be P4,800 larger.
d. The absorption costing income would be P4,000 smaller.

18. Assume for this question only that King Corporation produced 5,000 units and sold 4,500 units in the
current year. If King uses absorption costing, it would deduct period costs of
a. P24,000 c. P34,000
b. P27,000 d. P23,000
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19. Which of the following best describes a firm's external funding requirement?
a. Growth in assets minus growth in liabilities minus net income
b. Growth in assets minus the current year's retained earnings
c. Growth in assets minus growth in current liabilities minus net income
d. Growth in assets minus growth in current liabilities minus the year's retained earnings

20. Which of the following statements contradicts the philosophy underlying the just-in-time operating
environment?
a. The work force must become multiskilled in order to operate many different machines and perform
other tasks in the work cell.
b. A customer order triggers the purchase of materials and the activation of the production process.
c. Large inventories are maintained in order to fulfill customer orders on a timely basis.
d. Flexible work cells are created to increase productivity.

21. A primary purpose of a balanced scorecard is to give

a. managers a way to judge past performance.
b. stockholders a way to judge current performance.
c. managers a way to forecast future performance.
d. stockholders a way to tie strategy to profitability.

22. The vertical distance between the total cost line and the total revenue line represents:
a. fixed cost.
b. variable cost.
c. profit or loss at that volume.
d. the safety margin.

23. Dana sells a single product at P20 per unit. The firm's most recent income statement revealed unit sales
of 100,000, variable costs of P800,000, and fixed costs of P400,000. If a P4 drop in selling price will boost
unit sales volume by 20%, the company will experience:
a. no change in profit because a 20% drop in sales price is balanced by a 20% increase in volume.
b. an P80,000 drop in profitability.
c. a P240,000 drop in profitability.
d. a P400,000 drop in profitability.

24. All other things being equal, a company that sells multiple products should attempt to structure its sales
mix so the greatest portion of the mix is composed of those products with the highest:
a. selling price. c. contribution margin.
b. variable cost. d. gross margin.

25. McAfee, which began business at the start of the current year, had the following data:

Planned and actual production: 40,000 units

Sales: 37,000 units at P15 per unit
Production costs:
Variable: P4 per unit
Fixed: P260,000
Selling and administrative costs:
Variable: P1 per unit
Fixed: P32,000

The contribution margin that the company would disclose on an absorption-costing income statement is:
a. P370,000. c. P166,500.
b. P147,000. d. P0.

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26. The management philosophy known as theory of constraints is most closely tied to:
a. cash management
b. contribution margin analysis
c. standard costing systems
d. organizational bottlenecks

Use the following information for the next two questions.

Entertainment Solutions Corporation manufactures and sells FM radios. Information on the prior year's
operations (sales and production Model A1) is presented below:

Sales price per unit P30

Costs per unit:
Direct material 7
Direct labor 4
Overhead (50% variable) 6
Selling costs (40% variable) 10
Production in units 10,000
Sales in units 9,500

27. The Model B2 radio is currently in production and it renders the Model A1 radio obsolete. If the remaining
500 units of the Model A1 radio are to be sold through regular channels, what is the minimum price the
company would accept for the radios?
a. P30 c. P18
b. P27 d. P4

28. Assume that the remaining Model A1 radios can be sold through normal channels or to a foreign buyer for
P6 per unit. If sold through regular channels, the minimum acceptable price will be
a. P30 c. P10
b. P33 d. P4

29. Harris Manufacturing incurs annual fixed costs of P250,000 in producing and selling a single product.
Estimated unit sales are 125,000. An after-tax income of P75,000 is desired by management. The company
projects its income tax rate at 40 percent. What is the maximum amount that Harris can expend for variable
costs per unit and still meet its profit objective if the sales price per unit is estimated at P6?
a. P3.37 c. P3.00
b. P3.59 d. P3.70

Use the following information for the next two questions.

Robert’s Medical Equipment Company manufactures hospital beds. Its most popular model, Deluxe, sells for
P5,000. It has variable costs totaling P2,800 and fixed costs of P1,000 per unit, based on an average production
run of 5,000 units. It normally has four production runs a year, with P400,000 in setup costs each time. Plant
capacity can handle up to six runs a year for a total of 30,000 beds.

A competitor is introducing a new hospital bed similar to Deluxe that will sell for P4,000. Management believes
it must lower the price in order to compete. Marketing believes that the new price will increase sales by 25% a
year. The plant manager thinks that production can increase by 25% with the same level of fixed costs. The
company currently sells all the Deluxe beds it can produce.

30. What is the annual operating income from Deluxe at the current price of P5,000?
a. P24,000,000 c. P22,400,000
b. P23,200,000 d. P22,000,000

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31. What is the annual operating income from Deluxe if the price is reduced to P4,000 and sales in units
increase by 25%?
a. P8,400,000 c. P3,400,000
b. P8,000,000 d. P3,000,000

32. The local video store’s business increased by 12% after the movie theater raised its prices from P65 to
P70. Thus, relative to movie theater admissions, videos are
a. substitute goods
b. superior goods
c. complementary goods
d. public goods

33. All of the following are complementary goods except

a. margarine and butter
b. Cameras and rolls of film
c. VCRs and video cassettes
d. Razors and razor blades

34. Which of the following methods of costing jibes with CVP analysis?
a. Variable costing
b. Absorption costing
c. Activity-based costing
d. Just-in-time costing

35. Jojo Company has a contribution margin ratio of 60% and fixed cost of P109,200. The company is in the
20% tax bracket?
What should be the sales revenue to generate a net income after taxes of 28% of the total contribution
margin?
a. P280,000 c. P325,000
b. P300,000 d. P350,000

36. Which of the following statements is FALSE?

a. Under the absorption costing, profits are influenced by the production volume
b. Under the variable costing, profits are influenced by the sales volume
c. Under the absorption costing, the determination of the income is in accordance with the principle of
matching costs against revenue
d. Under the variable costing method, income measurement is in accordance with the principle of
matching costs against revenue

37. What accounts for the profit difference between absorption costing and variable costing?
a. The difference in the inventory valuation
b. The difference in the variable costs charges to period costs
c. The difference in fixed costs charged to period costs
d. The difference in the lower of cost and the net realizable value

38. Grimes is studying the profitability of a change in operation and has gathered the following information:

Current Anticipated
Operation Operation
Fixed costs P38,000 P48,000
Selling price P16 P22
Variable cost P10 P12
Sales (units) 9,000 6,000

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 Should Grimes make the change?
a. Yes, the company will be better off by P6,000.
b. No, because sales will drop by 3,000 units.
c. No, because the company will be worse off by P4,000.
d. No, because the company will be worse off by P22,000.

39. In the context of making a decision, which of the following statements regarding relevant costs is correct?
a. An opportunity cost is not a relevant cost.
b. A traceable fixed cost cannot be a relevant cost.
c. A variable cost cannot be a sunk cost.
d. A sunk cost is not a relevant cost.

40. In comparing management accounting with financial accounting, which of the following statements is
true?
a. Both use historical costs as their primary unit of measurement.
b. Both depend on the double-entry system of accounting.
c. Both require adherence to GAAP.
d. Financial accounting reports are more objective, whereas management accounting reports are more
subjective.

41. Using regression analysis, Fairfield Co. graphed the following relationship of its most expensive product
line's sales with its customers' income levels:
If there is a strong statistical relationship between the sales and customers' income levels, which of the
following best represents the correlation coefficient for this relationship?
a. - 1.03 c. +0.93
b. - 0.95 d. +1.02

Use the following information for the next two questions.

Operational budgets are used by a retail company for planning and controlling its business activities. Data
regarding the company's monthly sales for the last 6 months of the year and its projected collection patterns are
shown below.
The cost of merchandise averages 40% of its selling price. The company's policy is to maintain an inventory
equal to 25% of the next month's forecasted sales. The inventory balance at cost is P80,000 as of June 30.

Forecasted Sales
July P775,000
August 750,000
September 825,000
October 800,000
November 850,000
December 900,000

Types of Sales
Cash sales 20%
Credit sales 80%

Collection Pattern for Credit Sales

Month of sale 40%
First month following the sales 57%
Uncollectible 3%

42. The budgeted cost of the company's purchases for the month of August would be
a. P302,500 c. P307,500
b. P305,000 d. P318,750

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43. The company's total cash receipts from sales and collections on account that would be budgeted for the
month of September would be
a. P757,500 c. P793,800
b. P771,000 d. P856,500

44. Purple's Pharmaceutical Delivery Company is a high-volume business that features home delivery services
to elderly shut-ins. Located in Makati City, the company currently uses six delivery trucks to service the
area within a 100-mile radius of the metropolis and suburbs. Each delivery truck can make a maximum of
600 deliveries per month. In June, the demand for these deliveries totaled 3,200, and the company has
been experiencing a 2 percent increase in demand, compounded monthly. In which month must the
company add a seventh delivery truck, given these estimates?
a. August c. February of next year
b. October d. December

45. Choose the best answer, given the following scenario. One way to tell whether your cost accounting system
is distorting product costs is if you discover that:
a. the most complex products you produce are overpriced and the simplest to produce are underpriced.
b. the most complex products you produce are underpriced and the simplest to produce are overpriced.
c. the most complex products you produce are overpriced as are the simplest to produce.
d. the most complex products you produce are underpriced as are the simplest to produce.

46. Engineering design is an activity vital to the success of any motor vehicle manufacturer. Identify the level
at which engineering design would be classified in the cost hierarchy used with ABC for a maker of a line
of automobiles sold throughout the world.
a. Batch-level activity c. Facility-level activity
b. Product-level activity d. Unit-level activity

47. Jones Construction currently uses traditional costing where overhead is applied based on direct labor
hours. Using traditional costing, the applied overhead rate is P20 per direct labor hour.

They are considering a switch to activity-based costing (ABC). The company controller has come up with
preliminary overhead rates for each of the following activities:

Activity Allocation Base Overhead rate

Material delivery and handling Number of deliveries P100 per delivery
Inspections Number of inspections P75 per inspection
Supervision Hours of supervisor time P30 per supervisor hour
Purchasing Number of purchase P60 per purchase order
orders

One of the company's current jobs has the following information available:

Direct labor hours 50 hours

Number of deliveries 2
Number of inspections 3
Hours of supervisor time 2
Number of purchase orders 5

Which of the following statements is true when comparing the total overhead allocated to the job using
traditional versus ABC costing?
a. ABC costing will yield P215 less in overhead cost being allocated to the job.
b. ABC costing will yield P735 less in overhead cost being allocated to the job.
c. ABC costing will yield P545 more in overhead cost being allocated to the job.
d. ABC costing will yield P785 more in overhead cost being allocated to the job.

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48. Budget slack occurs when:
a. employees refuse to abide by the budget.
b. the budget is so difficult to meet that employees slack off from work.
c. employees ask for resources in excess of what they need to meet budget objectives.
d. employees ask for fewer resources than they need to meet budget objectives.

49. May Company goes through two departments in the production process. Each unit requires two direct labor
hours in Department A and one hour in Department B. Labor cost is P8 per hour in Department A and P10
per hour in Department B.

The labor capacity for a normal eight-hour shift for a month is 50,000 direct labor hours each for both
Departments A and B. Overtime is paid at time and a half. What would be the budgeted direct labor cost
for January, assuming a budgeted production of 30,000 units?
a. P900,000 c. P820,000
b. P780,000 d. P420,000

50. Which one of the following is usually not cited as being an advantage of a formal budgetary process?
a. Forces management to evaluate the reasonableness of assumptions used and goals identified in the
budgetary process.
b. Ensures improved cost control within the organization and prevents inefficiencies.
c. Provides a formal benchmark to be used for feedback and performance evaluation.
d. Serves as a coordination and communication device between management and subordinates.

51. Corrigon Industries is preparing a bid for a special project requiring the production of 35,000 units. The
engineering personnel have advised that the units can be produced in groups with the first group consisting
of 1,000 units. A review of prior experience indicates that the direct labor time needed per unit will be
progressively smaller a constant percentage rate as experience is gained in the production process. The
quantitative method that would best estimate Corrigon’s total cost for the project is
a. Linear programming
b. Dynamic programming
c. Learning curve analysis
d. Time series analysis

52. A forecasting technique that is a combination of the last forecast and the last observed value is called
a. Delphi c. Regression
b. Least squares d. Exponential smoothing

53. Philip Enterprises, distributor of video discs, is developing its budgeted cost of goods sold for next year.
Philip has developed the following range of sales estimates and associated probabilities for the year.

Sales Estimate Probability

P 60,000 25%
85,000 40%
100,000 35%

Philip’s cost of goods sold averages 80% of sales. What is the expected value of Philip’s budgeted cost of
goods sold?
a. P85,000 c. P68,000
b. P84,000 d. P67,200

54. Isabel Company would like to prepare a summary cash budget for March. The following information is
available:
• The cash balance at March 1 is estimated to be P3,000.
• March sales, all on account, are estimated to be P50,000. Sales are collected over a two-month
period with 65 percent collected in the month of sale and the remainder in the subsequent month.
February sales on account were P60,000.
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 • Inventory purchases are expected to be P20,000 in March. The company pays for one-half of
inventory purchases in the month of purchase and the remainder in the subsequent month.
February’s purchase are P18,000.
• Cash disbursements for selling and administrative expenses are expected to be P4,000 in March.
• Depreciation expense for March is expected to be P5,000.
• Loan and interest payments for March are expected to be P25,000.

What cash balance is expected by the end of March?

a. P 8,500 c. P (3,500)
b. P 3,500 d. P26,500

55. Virgil Corp. uses a standard cost system. In May, Virgil purchased and used 17,500 pounds of materials at
a cost of P70,000. The materials usage variance was P2,500 unfavorable and the standard materials
allowed for May production was 17,000 pounds. What was the materials' price variance for May?
a. P17,500 favorable.
b. P17,500 unfavorable.
c. P15,000 favorable.
d. P15,000 unfavorable.

Use the following information for the next two questions.

Baby Frames, Inc. evaluates manufacturing overhead by using variance analysis. The following information
applies to the month of May:

Actual Budgeted
Units manufactured 19,000 20,000
Variable OH costs P 4,100 P 2 per DLH
Fixed OH costs P22,000 P20,000; P1 per unit
Direct labor hours 2,100 0.1 hour per frame

56. What is the variable overhead efficiency variance?

a. P200 favorable. c. P400 favorable.
b. P200 unfavorable. d. P400 unfavorable.

57. What is the fixed overhead spending variance?

a. P1,000 favorable. c. P2,000 favorable.
b. P1,000 unfavorable. d. P2,000 unfavorable.

58. Big City Motors is trying to decide whether it should keep its existing car washing machine or purchase a
new one that has technological advantages (which translate into cost savings) over the existing machine.
Information on each machine follows:
Old Machine New Machine
Original cost P9,000 P20,000
Accumulated depreciation 5,000 0
Annual cash operating costs 9,000 4,000
Current salvage value of old machine 2,000 -
Salvage value in 10 years 500 1,000
Remaining life 10 years 10 years

The P4,000 of annual operating costs that are common to both the old and the new machine are an
example of:
a. sunk costs c. future avoidable costs
b. irrelevant costs d. opportunity costs

59. For the past 12 years, the Blue Company has produced the small electric motors that fit into its main
product line of dental drilling equipment. As material costs have steadily increased, the controller of the
Blue Company is reviewing the decision to continue to make the small motors and has identified the
following facts:
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 1. The equipment used to manufacture the electric motors has a book value of P150,000.
2. The space now occupied by the electric motor manufacturing department could be used to eliminate
the need for storage space now being rented.
3. Comparable units can be purchased from an outside supplier for P59.75.
4. Four of the persons who work in the electric motor manufacturing department would be terminated
and given eight weeks’ severance pay.
5. A P10,000 unsecured note is still outstanding on the equipment used in the manufacturing process.

Which of the items above are relevant to the decision that the controller has to make?
a. 1, 3, and 4 c. 2, 3, 4, and 5
b. 2, 3, and 4 d. 1, 2, 4, and 5

60. Which of the following statements is true when making a decision between two alternatives?
a. Variable costs may not be relevant when the decision alternatives have the same activity levels.
b. Variable costs are not relevant when the decision alternatives have different activity levels.
c. Sunk costs are always relevant.
d. Fixed costs are never relevant.

61. A manager would like to see a decreasing trend in all of the following operating measures except:
a. Customer complaints as a percentage of units sold.
b. Scrap as a percentage of total cost.
c. Setup time.
d. Manufacturing cycle efficiency.

62. Jackson Company has a highly automated manufacturing process. During the most recent month, the
company gathered the following production data:
Wait time during the production process 2 hours
Process time 6 hours
Inspection time 3 hours
Wait time prior to starting production 4 hours
Move time 1 hour

What was Jackson's delivery cycle time?

a. 13 hours. c. 15 hours.
b. 16 hours. d. 12 hours.

63. Bounous Company has two divisions, Division X and Division Y. Division X has a production capacity of
6,000 units of a particular part per month. Division X sells 4,600 units of the part each month to outside
customers at a contribution margin of P36 per unit. Division Y would like to buy 2,000 units of the part each
month from Division X. In computing the lowest acceptable transfer price from the perspective of the
selling division, the lost contribution margin per unit portion of the transfer price computation would be:
a. P10.80 c. P5.40
b. P36.00 d. P25.20

Use the following information for the next three questions.

Holiday Chemical Company uses a standard cost system to collect costs related to the production of its “bowling
ball” fruitcakes. The direct labor standard for each fruitcake is 1.25 hours at a standard cost of P11.00 per hour.
During the month of November, Holiday's fruitcake production used 9,820 direct labor hours at a total direct
labor cost of P106,547. This resulted in production of 8,500 fruitcakes for November.

64. What is Holiday's labor rate variance for November?

a. P8,855 favorable c. P13,047 unfavorable
b. P1,473 favorable d. P14,520 unfavorable

65. What is Holiday's labor efficiency variance for November?

a. P8,855 favorable c. P13,047 unfavorable
b. P10,328 favorable d. P14,520 unfavorable
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66. Assume that 7 ounces of pecans are included in each bowling ball fruitcake. Because Holiday wants only
the best pecans in its fruitcakes, the pecans they buy are inspected and some are discarded as
unacceptable for fruitcake production. The loss rate is expected to be 1 ounce of pecans for every 5 ounces
inspected. Under traditional standard costing, how many ounces of pecans should Holiday use as a
standard quantity per fruitcake?
a. 7.20 c. 8.40
b. 7.80 d. 8.75

67. When considering whether to investigate a variance, managers should consider all of the following except
the variance's:
a. size.
b. pattern of recurrence.
c. trends over time.
d. nature, namely, whether it is favorable or unfavorable.

68. The manufacturing cycle efficiency for PQR Company when the processing time is six hours and
inspection, waiting, and move time are one hour each is:
a. 0.67. c. 0.78.
b. 0.75. d. 0.88.

69. Blacken Company manufactures motorcycles. The company's management accountant wants to calculate
the fixed and variable costs associated with utility cost incurred by the factory. Data for the past five
months were collected.
Utility Machine
Month cost hours
March P30,255 2,200
April 32,750 2,525
May 34,712 2,710
June 31,850 2,410
July 30,720 2,290

Using linear regression, the value of the intercept is

a. P.99 c. P10,630.80
b. P195.35 d. P190,267.00

70. The scatter graph method

a. is the most accurate method
b. has the advantage of objectivity
c. may reveal the presence of outliers
d. none of these are correct

End of Examination

(Pleases ignore the extra answer options in the answer sheet after number 70)

Thank you for participating in

Team PRTC Nationwide Online Open First Pre-Board Examination for October 2022 LECPA!

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