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OVERVIEWManagement Advisory Services The following characterize management advisory services except A. involve decision for the future B. broader in scope and varied in nature C. utilize more junior staff than senior members of the firm D. relate to specific problems where expert help is required Wh...

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Ma n a g e me n t Ad v i s o r ySe r v i c e s-J . Ro c a b o , CP A OVERVI EW Ma n a g e me n t Ad v i s o r ySe r v i c e s 1 .T h ef o l l o wi n gc h a r a c t e r i z ema n a g e me n t a d v i s o r ys e r v i c e se x c e p t A.i n v o l v ed e c i s i o nf o r t h ef u t u r e B. b r o a d e r i ns c o p ea n dv a r i e di nn a t u r e C.u t i l i z emo r ej u n i o rs t a fft h a ns e n i o rme mb e r so f t h efi r m D.r e l a t et os p e c i fi cp r o b l e mswh e r ee x p e r t h e l pi sr e q u i r e d

COST VOL UMEPROF I TANAL YSI S Br e a k e v e nPo i n t 5 . Sc r a mb l e dBr a i nCo mp a n yh a sfi x e dc o s t so fP9 0 , 0 0 0 .Atas a l e sv o l u meo fP3 0 0 , 0 0 0 ,r e t u r n o ns a l e si s1 0 %;a taP5 0 0 , 0 0 0v o l u me ,r e t u r no ns a l e si s2 2 %. Wh a ti st h eb r e a k e v e n v o l u me ? A.P1 2 0 , 0 0 0 C.P2 2 5 , 0 0 0 * B. P2 0 0 , 0 0 0 D.P4 5 0 , 0 0 0

2 . Wh i c ho f t h ef o l l o wi n gi sn o t c l a s s i fi a b l ea sama n a g e me n t a d v i s o r ys e r v i c eb yCP A? A.Sy s t e msd e s i g n . C.Ma k eo r b u ya n a l y s i s . B. Pr o j e c t f e a s i b i l i t ys t u d y . D.As s i s t a n c ei nb u d g e t p r e p a r a t i o n .

6. Bush Electronics, Inc. had the following sales results for 2004:

Ma n a g e r i a l Ac c o u nt i n g 3 .T h ef o l l o wi n ga r ei n h e r e n t t oe i t h e rma n a g e me n t a c c o u n t i n go r fi n a n c i a l a c c o u n t i n g : 1 . Ex t e r n a l r e p o r t 2 . Hi s t o r i c a l i n f o r ma t i o n 3 . Co n t r i b u t i o na p p r o a c hi n c o mes t a t e me n t 4 . Ge n e r a l l ya c c e p t e da c c o u n t i n gp r i n c i p l e s 5 . Pr o s p e c t i v efi n a n c i a l s t a t e me n t s Which of the foregoing are related to management accounting and financial accounting, respectively? Ma n a g e me n t Ac c o u n t i n g F i n a n c i a l Ac c o u n t i n g A. 1 , 2 , 5 3 , 4 B. 3 , 5 1 , 2 , 4 C. 2 , 3 1 , 4 , 5 D. 3 1 , 2 , 4 , 5 COSTBEHAVI OR 4 .T o t a l p r o d u c t i o nc o s t sf o rCa r e r a ,I n c .a r eb u d g e t e da tP2 3 0 , 0 0 0f o r5 0 , 0 0 0u n i t so fb u d g e t e d o u t p u ta n dP2 8 0 , 0 0 0f o r6 0 , 0 0 0u n i t so fb u d g e t e do u t p u t .Be c a u s eo ft h en e e df o ra d d i t i o n a l f a c i l i t i e s ,b u d g e t e dfi x e dc o s t sf o r6 0 , 0 0 0u n i t sa r e2 5 % mo r et h a nb u d g e t e dfi x e dc o s t sf o r P5 0 , 0 0 0u n i t s .Ho wmu c hi sCa r e r a ’ sb u d g e t e dv a r i a b l ec o s t p e ru n i t o f o u t p u t ? A.P1 . 6 0 C.P3 . 0 0 B. P1 . 6 7 D.P5 . 0 0

Ma y2 0 0 5

TVs e t s CDp l a y e r Pe s os a l e sc o mp o n e n t r a t i o 0 . 3 0 0 . 3 0 Co n t r i b u t i o nma r g i nr a t i o 0 . 4 0 0 . 4 0 Bu s hE l e c t r o n i c s , I n c . h a dfi x e dc o s t so f P2 , 4 0 0 , 0 0 0 . The break-even sales in pesos for Bush Electronics, Inc. are: T Vs e t s CDp l a y e r A. P1 , 8 0 0 , 0 0 0 P1 , 8 0 0 , 0 0 0 B P1 , 8 0 0 , 0 0 0 P1 , 8 0 0 , 0 0 0 C. P1 , 5 0 0 , 0 0 0 P1 , 5 0 0 , 0 0 0 D. P1 , 5 3 1 , 9 1 5 P1 , 5 3 1 , 9 1 5

Ra d i o s 0 . 4 0 0 . 6 0

Ra d i o s P3 , 6 0 0 , 0 0 0 P1 , 6 0 0 , 0 0 0 P2 , 0 0 0 , 0 0 0 P2 , 0 4 2 , 5 5 3

7. Glareless Company manufactures and sells sunglasses. Price and cost data are as follows: Se l l i n gp r i c ep e rp a i r o f s u n g l a s s e s Va r i a b l ec o s t sp e rp a i ro f s u n g l a s s e s : Ra wma t e r i a l s Di r e c t l a b o r Ma n u f a c t u r i n go v e r h e a d Se l l i n ge x p e n s e s T o t a l v a r i a b l ec o s t sp e r u n i t An n u a l fi x e dc o s t s : Ma n u f a c t u r i n go v e r h e a d Se l l i n ga n da d mi n i s t r a t i v e T o t a l fi x e dc o s t s Fo r e c a s t e da n n u a l s a l e sv o l u me( 1 2 0 , 0 0 0p a i r s ) I n c o met a xr a t e

P2 5 . 0 0 P1 1 . 0 0 5 . 0 0 2 . 5 0 1 . 3 0 P1 9 . 8 0 P1 9 2 , 0 0 0 2 7 6 , 0 0 0 P4 6 8 , 0 0 0 P3 , 0 0 0 , 0 0 0 4 0 % Pa g e1o f 3 9

Ma n a g e me n t Ad v i s o r ySe r v i c e sJ . Ro c a b o , CP A Gl a r e l e s sCo mp a n ye s t i ma t e st h a ti t sd i r e c t l a b o rc o s t swi l l i n c r e a s e8p e r c e n tn e x t y e a r .Ho w ma n yu n i t swi l l Gl a r e l e s sh a v et os e l l n e x t y e a rt or e a c hb r e a k e v e n ? A. 9 7 , 5 0 0u n i t s C.8 3 , 5 7 2u n i t s B. 1 0 1 , 7 4 0u n i t s D.8 6 , 2 5 0u n i t s

8 . Ma d e lCo mp a n yma n u f a c t u r e sas i n g l ee l e c t r o n i cp r o d u c tc a l l e dWa l a s t i k .Wa l a s t i ks e l l sf o r P9 0 0p e ru n i t .I n2 0 0 0 ,t h ef o l l o wi n g variable costs were incurred to produce each

Walastik device. Di r e c t l a b o r P1 8 0 Di r e c t ma t e r i a l s 2 4 0 F a c t o r yo v e r h e a d 1 0 5 Se l l i n gc o s t s 7 5 T o t a l v a r i a b l ec o s t s P6 0 0 Ma d e l i ss u b j e c t t o4 0p e r c e n t i n c o met a xr a t e , a n da n n u a l fi x e dc o s t sa r eP6 , 6 0 0 , 0 0 0 .Ex c e p t f o ra no p e r a t i n gl o s si n c u r r e di nt h ey e a ro f i n c o r p o r a t i o n , t h efi r mh a sb e e np r o fi t a b l eo v e rt h e l a s t fi v ey e a r s . I n2 0 0 1 ,as i g n i fi c a n tc h a n g ei nMa d e l ’ sp r o d u c t i o nt e c h n o l o g yc a u s e da1 0 %i n c r e a s ei n a n n u a lfi x e dc o s t sa n da2 0 %u n i tc o s ti n c r e a s ei nt h ed i r e c tl a b o rc o mp o n e n ta sar e s u l to f h i g h e rs k i l l e dd i r e c tl a b o r .Ho we v e r , t h i sc h a n g ep e r mi t t e dt h er e p l a c e me n t o f ac o s t l yi mp o r t e d c o mp o n e n twi t hal o c a lc o mp o n e n t .T h ee ff e c twa st or e d u c eu n i tma t e r i a lc o s t sb y2 5 %. T h e r eh a sb e e nn oc h a n g ei nt h eWa l a s t i ks e l l i n gp r i c e .

The annual sales units required for Madel to breakeven are: 2 0 0 0 2 0 0 1

A. 2 2 , 0 0 0 2 0 , 8 4 0

B. 2 2 , 0 0 0 2 2 , 4 0 7

C. 1 4 , 0 0 0 2 2 , 4 0 7

D. 1 4 , 0 0 0 2 0 , 8 4 0

Pr o fi tPl a n n i n g 9 . Si g n a lCo .ma n u f a c t u r e sas i n g l ep r o d u c t .F o r2 0 0 0 ,t h ec o mp a n yh a ds a l e so fP9 0 , 0 0 0 , v a r i a b l ec o s t so fP5 0 , 0 0 0 ,a n dfi x e dc o s t so fP3 0 , 0 0 0 .Si g n a le x p e c t si t sc o s ts t r u c t u r ea n d s a l e sp r i c ep e ru n i tt or e ma i nt h es a mei n2 0 0 1 ,h o we v e rt o t a l s a l e sa r ee x p e c t e dt oj u mpb y 2 0 %.I ft h e2 0 0 1p r o j e c t i o n sa r er e a l i z e d ,n e ti n c o mei n2 0 0 1s h o u l de x c e e dn e ti n c o mei n 2 0 0 0b y A.1 0 0 % C.2 0 % B. 8 0 % D.5 0 %

Ma y2 0 0 5

1 0 .Si x T woCo n v e n i e n c eSt o r ec u r r e n t l yo p e n so n l yMo n d a yt h r o u g hSa t u r d a y . Si x T woi s c o n s i d e r i n go p e n i n go nSu n d a y s .T h ea n n u a l i n c r e me n t a l fi x e dc o s t so fSu n d a yo p e n i n g sa r e e s t i ma t e da tP3 9 , 0 0 0 .Si x T wo ’ sg r o s sma r g i no ns a l e si s2 5p e r c e n t .Si x T woe s t i ma t e st h a t 6 0p e r c e n t o f i t sSu n d a ys a l e st oc u s t o me r swo u l db ema d eo no t h e rd a y si f t h es t o r e swe r en o t o p e no nSu n d a y s .Th eo n e d a yv o l u meo fSu n d a ys a l e st h a two u l db en e c e s s a r yf o rSi x T wo t oa t t a i nt h es a mewe e k l yo p e r a t i n gi n c o mea st h ec u r r e n t s i x d a ywe e ki s Pa g e2o f 3 9

Ma n a g e me n t Ad v i s o r ySe r v i c e sJ . Ro c a b o , CP A A.P6 , 0 0 0 B. P5 , 0 0 0

C.P7 , 5 0 0 D.P4 , 5 0 0

1 1 .Go r i l l a , Co .p r o v i d e st wop r o d u c t s ,Ma n dW.Ma c c o u n t sf o r6 0p e r c e n t o ft o t a l s a l e s ,v a r i a b l e c o s ta sap e r c e n t a g eo fs e l l i n gp r i c ea r e6 0 %f o rM a n d8 5 %f o rW.T o t a lfi x e dc o s t sa r e P2 2 5 , 0 0 0 .I ffi x e dc o s t swi l li n c r e a s eb y3 0p e r c e n t ,wh a ta mo u n to fp e s os a l e swo u l db e n e c e s s a r yt og e n e r a t ea no p e r a t i n gp r o fi t o f P4 8 , 0 0 0 ? A.P1 , 3 5 0 , 0 0 0 C.P1 , 1 3 5 , 0 0 0 B. P4 8 6 , 4 2 5 D.P9 1 0 , 0 0 0 1 2 .Mo u n t Pa r k , I n c . h a dt h ef o l l o wi n ge c o n o mi ci n f o r ma t i o nf o rt h ey e a r 2 0 0 2 : Sa l e s ( 5 0 , 0 0 0u n i t s@ P2 0 ) P1 , 0 0 0 , 0 0 0 V a r i a b l ema n u f a c t u r i n gc o s t s 4 0 0 , 0 0 0 F i x e dc o s t s 2 5 0 , 0 0 0 I n c o met a xr a t e 4 0p e r c e n t Mo u n tPa r kb u d g e t si t s2 0 0 3s a l e sa t6 0 , 0 0 0u n i t so rP1 , 2 0 0 , 0 0 0 .T h ec o mp a n ya n t i c i p a t e s i n c r e a s e dc o mp e t i t i o n ;h e n c e ,a na d d i t i o n a lP7 5 , 0 0 0a d v e r t i s i n gc o s t si sb u d g e t e di no r d e rt o ma i n t a i ni t ss a l e st a r g e t f o r2 0 0 3 . Wh a ti st h ea mo u n to fp e s os a l e sn e e d e df o r2 0 0 3i no r d e rt oe q u a lt h ea f t e r t a xi n c o mei n 2 0 0 2 ? A. P1 , 1 2 5 , 0 0 0 C.P1 , 1 8 7 , 5 0 0 B. P1 , 3 2 5 , 0 0 0 D.P1 , 3 8 7 , 5 0 0 13. Larz Company produces a single product. It sold 25,000 units last year with the following results: Sa l e s P6 2 5 , 0 0 0 Va r i a b l ec o s t s P3 7 5 , 0 0 0 Fi x e dc o s t s 1 5 0 , 0 0 0 5 2 5 , 0 0 0 Ne t i n c o meb e f o r et a x e s P1 0 0 , 0 0 0 I n c o met a x e s 4 0 , 0 0 0 Ne t i n c o me P6 0 , 0 0 0 I na na t t e mp tt oi mp r o v ei t sp r o d u c ti nt h ec o mi n gy e a r ,L a r zi sc o n s i d e r i n gr e p l a c i n ga c o mp o n e n tp a r t i ni t sp r o d u c t t h a t h a sac o s t o fP2 . 5 0wi t han e wa n db e t t e rp a r t c o s t i n gP4 . 5 0 p e ru n i t .An e wma c h i n ewi l l a l s ob en e e d e dt oi n c r e a s ep l a n tc a p a c i t y .Th ema c h i n ewo u l d c o s tP1 8 , 0 0 0wi t hau s e f u l l i f eo f 6y e a r sa n dn os a l v a g ev a l u e .Th ec o mp a n yu s e ss t r a i g h t l i n e d e p r e c i a t i o no na l l p l a n t a s s e t s . I fL a r zwi s h e st oma i n t a i nt h es a mec o n t r i b u t i o nma r g i nr a t i oa f t e ri mp l e me n t i n gt h ec h a n ge s , wh a ts e l l i n gp r i c ep e ru n i to fp r o d u c tmu s ti tc h a r g en e x ty e a rt oc o v e rt h ei n c r e a s e dma t e r i a l c o s t s ?

Ma y2 0 0 5

Pa g e3o f 3 9

Ma n a g e me n t Ad v i s o r ySe r v i c e sJ . Ro c a b o , CP A A.P2 7 . 0 0 B. P2 5 . 0 0

C.P3 2 . 5 0 D.P2 8 . 3 3

Po i nt o fI nd i ffe r e n c e 1 4 .Ra v i n eSk i Co mp a n yr e c e n t l ye x p a n d e di t sma n u f a c t u r i n gc a p a c i t yt oa l l o wi tt op r o d u c eu pt o 1 5 , 0 0 0p a i r so fc r o s s c o u n t r ys k i so fe i t h e rt h emo u n t a i n e e r i n gmo d e lo rt h et o u r i n gmo d e l . T h es a l e sd e p a r t me n t a s s u r e sma n a g e me n t t h a t it can sell between 9,000 and 13,000 pairs (units) of either product this year. Because the models are very similar, Ravine Ski will produce only one of the two models. The information below was compiled by the accounting department. Mo u n t a i n e e r i n g T o u r i n g Se l l i n gp r i c ep e ru n i t P8 8 0 . 0 0 P8 0 0 . 0 0 Va r i a b l ec o s t sp e ru n i t P5 2 8 . 0 0 P5 2 8 . 0 0 F i x e dc o s t swi l lt o t a lP3 , 6 9 6 , 0 0 0i ft h emo u n t a i n e e r i n gmo d e li sp r o d u c e db u twi l lb eo n l y P3 , 1 6 8 , 0 0 0i f t h et o u r i n gmo d e l i sp r o d u c e d .Ra v i n eSk i i ss u b j e c t t oa4 0 %i n c o met a xr a t e . T h et o t a ls a l e sr e v e n u ea twh i c hRa v i n eSk iCo mp a n ywo u l dma k et h es a mep r o fi to rl o s s r e g a r d l e s so f t h es k i mo d e l i t d e c i d e dt op r o d u c ei s A. P8 , 8 0 0 , 0 0 0 C.P9 , 2 4 0 , 0 0 0 B. P4 , 2 2 4 , 0 0 0 D.P6 , 8 6 4 , 0 0 0 1 5 .Va l l e yo fFi r eCo r p o r a t i o nh a so n ed e p a r t me n tt h a tp r o d u c e st h r e er e p l a c e me n tp a r t sf o rt h e c o mp a n y .Ho we v e r ,o n l yo n ep a r tc a nb ep r o d u c e di na n ymo n t hb e c a u s eo ft h ea d j u s t me n t s t h a tmu s tb ema d et ot h ee q u i p me n t .T h ed e p a r t me n tc a np r o d u c eu pt o1 5 , 0 0 0u n i t so fa n y o n eo ft h et h r e ep a r t si ne a c hmo n t h .T h ec o mp a n ye x p r e s s e st h emo n t h l ya f t e rt a x c o s t / v o l u me / p r o fi tr e l a t i o n s h i p sf o re a c hp a r tu s i n ga ne q u a t i o nme t h o d .Th ef o r ma to ft h e e q u a t i o n sa n dt h ee q u a t i o nf o r e a c hr e p l a c e me n t p a r t a r eg i v e nb e l o w: ( A T R) X( ( SP–VC)x( U) –F C) A TR=a f t e r t a xr a t e V C=v a r i a b l ec o s t F C=fi x e dc o s t s SP = selling price U = units Pa r t Pa r t Eq u a t i o n s AL 4 5 . 6( ( P4 . 0 0–P1 . 2 5 )( U)–P3 3 , 4 0 0 ) BT 6 5 . 6( ( P4 . 0 5–P2 . 5 5 )( U)–P1 5 , 0 0 0 ) GM1 7 . 6( ( P4 . 1 0-P2 . 0 0 ) ( U)P2 2 , 3 6 5 ) T h ep r o d u c t i o na n du n i t s a l e sv o l u mel e v e l a t wh i c hV a l l e ywi l l b ei n d i ff e r e n t a st owh e t h e rPa r t BT 6 2o r GM1 7i sp r o d u c e di s A.7 , 3 6 5 C.1 0 , 3 8 0 B. 4 , 0 9 2 D.1 2 , 2 7 5

Ma y2 0 0 5

Pa g e4o f 3 9

Ma n a g e me n t Ad v i s o r ySe r v i c e sJ . Ro c a b o , CP A 1 6 .BM Mo t o r s ,I n c .e mp l o y s4 0s a l e sp e r s o n n e lt oma r k e ti t sl i n eo fl u x u r ya u t o mo b i l e s .T h e a v e r a g ec a rs e l l sf o rP1 , 2 0 0 , 0 0 0a n da6 %c o mmi s s i o ni sp a i dt ot h es a l e s p e r s o n .BMMo t o r s i sc o n s i d e r i n gac h a n g et oac o mmi s s i o na r r a n g e me n tt h a two u l dp a ye a c hs a l e s p e r s o na s a l a r yo f P2 4 , 0 0 0p e r mo n t hp l u sac o mmi s s i o no f 2 %o f t h es a l e sma d eb yt h a t s a l e s p e r s o n . T h ea mo u n t o f t o t a l c a rs a l e sa t wh i c hBMMo t o r swo u l db ei n d i ff e r e n t a st owh i c hp l a nt os e l e c t i s A.P2 2 , 5 0 0 , 0 0 0 C.P2 4 , 0 0 0 , 0 0 0 B. P3 0 , 0 0 0 , 0 0 0 D.P1 2 , 0 0 0 , 0 0 0 1 7 .Z a p a t e r o ,I n c .o p e r a t e sac h a i no fs h o es t o r e sa r o u n dt h ec o u n t r y .T h es t o r e sc a r r yma n y s t y l e so fs h o e st h a ta r ea l ls o l da tt h es a mep r i c e .T oe n c o u r a g es a l e sp e r s o n n e lt ob e a g g r e s s i v ei nt h e i rs a l e se ff o r t s , t h ec o mp a n yp a y sas u b s t a n t i a l s a l e sc o mmi s s i o no ne a c hp a i r o f s h o e ss o l d .Sa l e sp e r s o n n e l a l s or e c e i v eas ma l l b a s i cs a l a r y . T h ef o l l o wing cost and revenue data relate to Store 9 and are typical of the

company’s many sales outlets: Se l l i n gp r i c e V a r i a b l ee x p e n s e s : I n v o i c ec o s t s Sa l e sc o mmi s s i o n

P8 0 0 P3 6 0 1 4 0 P5 0 0

F i x e de x p e n s e sp e ry e a r : Re n t P1 , 6 0 0 , 0 0 0 Ad v e r t i s i n g 3 , 0 0 0 , 0 0 0 Sa l a r i e s 1 , 4 0 0 , 0 0 0 T o t a l P6 , 0 0 0 , 0 0 0 T h ec o mp a n yi sc o n s i d e r i n ge l i mi n a t i n gs a l e sc o mmi s s i o n se n t i r e l yi ni t ss t o r e sa n di n c r e a s i n g fi x e ds a l a r i e sb yP2 , 1 4 2 , 0 0 0a n n u a l l y . I ft h i sc h a n g ei sma d e ,wh a twi l l b et h en u mb e ro fp a i r so fs h o e st ob es o l db ySt o r e9t ob e i n d i ff e r e n t t oc o mmi s s i o nb a s i s ? A.2 5 , 3 0 0 C.1 8 , 5 0 5 B. 1 5 , 3 0 0 D.2 1 , 0 0 0 Se ns i t i v i t yAn a l y s i s 1 8 .I ffi x e dc o s t si n c r e a s ewh i l ev a r i a b l ec o s t p e ru n i t r e ma i n sc o n s t a n t , t h ec o n t r i b u t i o nma r g i nwi l l b e A.l o we r C.u n c h a n g e d Ma y2 0 0 5

B. h i g h e r

D.u n p r e d i c t a b l e

1 9 .Fi r mDa n dF i r mSa r ec o mp e t i t o r swi t h i nt h es a mei n d u s t r y .F i r mDp r o d u c e si t sp r o d u c t u s i n g l a r g ea mo u n t so fd i r e c tl a b o r .F i r mSh a sr e p l a c e dd i r e c tl a b o rwi t hi n v e s t me n ti nma c h i n e r y . Pr o j e c t e ds a l e sf o rb o t hfi r msa r efi f t e e np e r c e n tl e s st h a ni nt h ep r i o ry e a r .Wh i c hs t a t e me n t r e g a r d i n gp r o j e c t e dp r o fi t si st r u e ? A.Fi r mDwi l l l o s emo r ep r o fi t t h a nF i r mS. B. Fi r mSwi l l l o s emo r ep r o fi t t h a nF i r mD. C.Fi r mDa n dF i r mSwi l l l o s et h es a mea mo u n t o f p r o fi t . D.Ne i t h e rF i r mDn o rF i r mSwi l l l o s ep r o fi t . 2 0 .La s tmo n t h ,Z a mo r aCo mp a n yh a da ni n c o meo fP0 . 7 5p e ru n i twi t hs a l e so f6 0 , 0 0 0u n i t s . Du r i n gt h ec u r r e n t mo n t hwh e nt h eu n i t s a l e sa r ee x p e c t e dt ob eo n l y4 5 , 0 0 0 ,t h e r ei sal o s so f P1 . 2 5p e ru n i t .Bo t ht h ev a r i a b l ec o s tp e ru n i t a n dt o t a l fi x e dc o s t sr e ma i nc o n s t a n t .T h efi x e d c o s t sa mo u n t e dt o A.P8 0 , 0 0 0 C.P2 4 7 , 5 0 0 B. P3 6 0 , 0 0 0 D.P2 1 0 , 0 0 0 2 1 .Th eL i b e r a l Ma r k e t i n gCo . , i se x p e c t i n ga ni n c r e a s eo f fi x e dc o s t sb yP7 8 , 7 5 0u p o nmo v i n gt h e i r p l a c eo f b u s i n e s st ot h ed o wn t o wna r e a .L i k e wi s ei t i sa n t i c i p a t i n gt h a t t h es e l l i n gp r i c ep e ru n i t a n dt h ev a r i a b l ee x p e n s e swi l ln o tc h a n g e . Atp r e s e n t ,t h es a l e sv o l u men e c e s s a r yt o b r e a k e v e ni sP7 5 0 , 0 0 0b u twi t ht h ee x p e c t e di n c r e a s ei nfi x e dc o s t s ,t h es a l e sv o l u me n e c e s s a r yt ob r e a k e v e nwo u l dg ou pt oP9 7 5 , 0 0 0 .Ba s e do nt h e s ep r o j e c t i o n s , wh a twe r et h e t o t a l fi x e dc o s t sb e f o r et h ei n c r e a s eo f P7 8 , 7 5 0 ? A.P3 4 1 , 2 5 0 C.P1 8 3 , 7 5 0 B. P2 6 2 , 5 0 0 D.P3 0 0 , 0 0 0

22. Machan Co.’s year-end income statement is as follows: Sa l e s( 2 0 , 0 0 0u n i t s ) P3 6 0 , 0 0 0 V a r i a b l ec o s t s 2 2 0 , 0 0 0 Co n t r i b u t i o nma r g i n P1 4 0 , 0 0 0 F i x e dc o s t s 1 0 5 , 0 0 0 Ne t i n c o me P3 5 , 0 0 0 Ma n a g e me n ti su n h a p p ywi t ht h er e s u l t sa n dp l a n st oma k es o mec h a n g e sf o rn e x ty e a r .I f ma n a g e me n ti mp l e me n t san e wma r k e t i n gp r o g r a m,fi x e dc o s t sa r ee x p e c t e dt oi n c r e a s eb y Pa g e5o f 3 9

Ma n a g e me n t Ad v i s o r ySe r v i c e sJ . Ro c a b o , CP A P1 9 , 2 0 0a n dv a r i a b l ec o s t st oi n c r e a s eb yP1p e ru n i t .Un i ts a l e sa r ee x p e c t e dt oi n c r e a s eb y 1 5p e r c e n t .Wh a t i st h ee ff e c t o ni n c o mei f t h ef o r e g o i n gc h a n g e sa r ei mp l e me n t e d ? A. De c r e a s eo f P2 1 , 2 0 0 C.I n c r e a s eo f P1 3 , 8 0 0 B. I n c r e a s eo f P1 , 8 0 0 D.I n c r e a s eo f P1 4 , 8 0 0

2 5 .L e me r yCo r p o r a t i o nh a ds a l e so f P1 2 0 , 0 0 0f o rt h emo n t ho f Ma y .I t h a sama r g i no f s a f e t yr a t i o o f2 5p e r c e n t ,a n da f t e r t a xr e t u r no ns a l e so f6p e r c e n t .Th ec o mp a n ya s s u me si t ss a l e s c o n s t a n t e v e r ymo n t h . I f t h et a xr a t ei s4 0p e r c e n t , h o wmu c hi st h emo n t h l yfi x e dc o s t s ? A.P3 6 , 0 0 0 C.P4 3 2 , 0 0 0 B. P9 0 , 0 0 0 D.P3 6 0 , 0 0 0

2 3 .Ca n d y ma nCo mp a n yi sawh o l e s a l ed i s t r i b u t o ro fc a n d y . Th ec o mp a n ys e r v i c e sg r o c e r y , c o n v e n i e n c e ,a n dd r u gs t o r e si nMe t r oMa n i l a .Sma l lb u ts t e a d yg r o wt hi ns a l e sh a sb e e n a c h i e v e db yt h ec o mp a n yo v e rt h ep a s tf e wy e a r swh i l ec a n d yp r i c e sh a v eb e e ni n c r e a s i n g . T h ec o mp a n yi sf o r mu l a t i n gi t sp l a n sf o rt h ec o mi n gfi s c a l y e a r .Pr e s e n t e db e l o wa r et h ed a t a u s e dt op r o j e c t t h ec u r r e n t y e a r ’ sa f t e r t a xn e t i n c o meo f P1 1 0 , 4 0 0 . Ma n u f a c t u r e r so fc a n d yh a v ea n n o u n c e dt h a tt h e ywi l li n c r e a s ep r i c e so ft h e i rp r o d u c t sa n a v e r a g eo f1 5 %i nt h ec o mi n gy e a rd u et oi n c r e a s e si nr a wma t e r i a l( s u g a r ,c o c o a ,p e a n u t s , e t c . )a n dl a b o rc o s t s .Ca n d y ma nCo mp a n ye x p e c t st h a ta l l o t h e rc o s t swi l l r e ma i na t t h es ame

rates or levels as the current year. Candyman is subject to 40 perce...