Professional Documents
Culture Documents
2. Michael Company began its operations on Jan. 1,2008 and produces a single product that sells for
P10/unit. Michael uses the actual (historical) cost system. In 2008, 100,000 units were produced and 80,000
units were sold. There was no work-in-process inventory at Dec. 31, 2008. Manufacturing costs and selling
and administrative expenses for 2008 were as follows:
What would be Michael's finished goods inventory at Dec. 31, 2008 under absorption
costing method?
a. 80,000 b. 104,000 c. 110,000 d. 210,000
3. Hope Company manufactures Part P for use in its production cycle. The cost per unit for
10,000 units of part P are as follows:
Direct materials 3
Direct labor 15
Variable overhead 6
Fixed overhead 8
32
Hope can buy 10,000 units of Part P at P30 per unit. If Hope buys Part P. the released facilities
could be used to save P45,000 in relevant costs in the manufacture ofPart T. In addition, P5/unit of
the fixed overhead applied to Part P would be totally eliminated. What alternative is more desirable
and by what amount is it more desirable?
a. Manufacture P10,000
b. Manufacture P15,000
c. Buy P35,000
d. none of the choices
4. Bonifacio Company makes and sells a popular product and its average annual sales is 14,000 units at
P65 each. Details of its costs are as follows:
Variable manufacturing costs per unit 37
Variable selling expenses per unit 8
Annual fixed manufacturing overhead 112,000
Annual fixed selling and administrative 65,000
Sales are expected to go down to 1,200 units during the next three months due to road construction.
Hence, management plans to close for three months and avoid 60% of all fixed costs. But additional
shut down costs of P10,500 will be incurred. The company should operate since its expected sales in 3
months exceed
a. 803 units b. 1,000 units c. 574 units d. 790 units
5. Right Corporation projects the following transactions for 2009, its first year of operations:
6. KC Corporation is planning to invest P80,000 in a three-year project. KC's expected rate of return is
10%. The present value of P1 is at 10% for one year is .909, for two years is .826, and for three years is
.751. The cash flow, net of income tax, will be P30,000, for the first year (present value of P27, 270) and
P36,000 for the second year (present value of of P29,736). Assuming the rate of return is exactly 10%, what
will be the cash flow, net of income tax, for the third year?
a. P22,000 b. P22, 994 c. P30,618 d. 27,270
7. The Dec. 31, 2007 balance sheet of Cyber Inc is presented below. These are only accounts in Cyber's
balance sheet. Amounts indicated by a question mark (?) can be calculated from the additional
information
given below:
Assets: Liability and Stockholders Equity:
Cash P25,000 Current ratio (at year end) 1.5 to 1
Accounts receivable (net) ? Total liabilities divided by total stockholders' equity 0.8
Inventory ? Inventory turnover (based on ending inventory) 10.5x
Total 432,000
What was Cybers Dec. 31, 2007 inventory?
a. 21,000 b. 30,000 c. 70,000 d. 88,000
8. The Heaven Co. makes and sells a single product called Zoom. Overhead costs are applied to products
on a basis of direct labor hours. The following data applies to the company's activities for the month of
November:
Units of material R will be required evenly throughout the year. The order point is
a. 1,600 b. 2,400 c. 3,200 d. 3,600