MAS 2nd Monthly Assessment hehehehe PDF

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REO CPA ReviewDECEMBER 2021 Assessment Assume the information below for Ramer Company, for Matson Company, and for their common industry represents a recent year. Industry Ramer Matson Average Current ratio 3 2 3. Accounts receivable turnover 5 8 6. Inventory turnover 6 8 6. Times interest earned 9 ...

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DECEMBER 2021 Assessment 1. Assume the information below for Ramer Company, for Matson Company, and for their common industry represents a recent year. Industry Ramer Matson Average Current ratio 3.50 2.80 3.00 Accounts receivable turnover 5.00 8.10 6.00 Inventory turnover 6.20 8.00 6.10 Times interest earned 9.00 12.30 10.40 Debt-to-equity ratio 0.70 0.40 0.55 Return on investment 0.15 0.12 0.15 Dividend payout ratio 0.80 0.60 0.55 Earnings per share P3.00 P2.00 -The attitudes of both Ramer and Matson concerning risk are best explained by the A. Current ratio and earnings per share. B. Current ratio, accounts receivable turnover, and inventory turnover. C. Debt/equity ratio and times interest earned. D. Dividend payout ratio and earnings per share. 2. Bisbee Corporation's abbreviated common-size income statements for Year 1's actual results and Year 2's anticipated results are shown below. Year 1 Year 2 Sales 100% 100% Cost of Goods Sold 50% 50% Selling and administrative expense 40% ? Operating income 10% ? Bisbee estimates that units sold will increase by 5% in Year 2 with no price increase to its customers and no anticipated cost increases from its vendors. Assume selling and administrative expenses are 5% variable and 95% fixed. If all predictions materialize, Bisbee should expect selling and administrative expenses in Year 2 to be A. less than 40% of sales. C. greater than 40%, but no more than 42% of sales. B. greater than 42% of sales. D. 40% of sales. 3. Assume that a company's total debt to total assets ratio is currently 50%. It plans to purchase fixed assets either by using borrowed funds for the purchase or by entering into an operating lease. The company's debt to asset ratio as measured by the balance sheet will A. Increase if the assets are purchased, and remain unchanged if the assets are leased. B. Increase whether the assets are purchased or leased. C. Increase if the assets are purchased, and decrease if the assets are leased. D. Remain unchanged whether the assets are purchased or leased. 4. A company has 100,000 outstanding common shares with a market value of P20 per share. Dividends of P2 per share were paid in the current year and the company has a dividend payout ratio of 40%. The price to earnings ratio of the company is: A. 2.5 B. 4 C. 10 D. 50 5. Selected information regarding Dyle Corporation’s outstanding equity is shown below. Common stock, P10 par value, 350,000 shares outstanding Preferred stock, P100 par value, 10,000 shares outstanding Preferred stock dividend paid Common stock dividend paid Earnings per common share Market price per common share Dyle's yield on common stock is A. 16.66%. B. 16.88%. C. 11.11%. D. 20.00%.

P3,500,000 1,000,000 60,000 700,000 3 18

6. On January 1, Esther Pharmaceuticals had a balance of 10,000 shares of common stock outstanding. On June 1, the company issued an additional 2,000 shares of common stock for cash. A total of 5,000 shares of 6%, P100 par, nonconvertible preferred stock was outstanding all year. Esther's net income was P120,000 for the year. The basic

earnings per share for the year were A. P10.75.

B. P8.06.

C. P7.50.

D. P10.00.

7. Which one of the following statements about the price-earnings (P-E) ratio is correct? A. A company with high growth opportunities ordinarily has a high P-E ratio. B. A P-E ratio has more meaning when a firm has losses than when it has profits. C. A P-E ratio expresses the relationship between a firm's market price and its net sales. D. A P-E ratio has more meaning when a firm has abnormally low profits in relation to its asset base. 8. At the end of its fiscal year on December 31, 20X0, Merit Watches had total shareholders' equity of P24,209,306. Of this total, P3,554,405 was preferred equity. During the 20X1 fiscal year, Merit's net income after tax was P2,861,003. During 20X1, Merit paid preferred share dividends of P223,551 and common share dividends of P412,917. At December 31, 20X1, Merit had 12,195,799 common shares outstanding and the company did not sell any common shares during the year. What was Merit Watch's book value per share on December 31, 20X1? A. P1.91. B. P2.20. C. P2.17. D. P1.88. 9. The following information concerning Arnold Company's common stock was included in the company's financial reports for the last two years. Year 2 Year 1 Market price per share on December 31 P60 P50 Par value per share 10 10 Earnings per share 3 3 Dividends per share 1 1 Book value per share on December 31 36 34 Arnold's dividend yield in Year 2 A. failed to provide a positive return to the investors. B. is the same as Year 1.

C. has declined compared to Year 1. D. has increased compared to Year 1.

10. The interest expense for a company is equal to its earnings before interest and taxes (EBIT). The company's tax rate is 40%. The company's times-interest earned ratio is equal to A. 1.2. B. 2.0. C. 1.0. D. 0.6. 11. A company has provided the following data pertaining to one of its products. Year Unit Sales Unit Sales Price Gross Profit Margin 1 1,000 P50 45% 2 1,200 P55 48% Which one of the following statements is correct? A. The cost per unit sold decreased 3% during year 2. B. The cost per unit increased during year 2, in line with the increase in unit sales. C. The peso amount of gross profit increased by 3% during year 2. D. The percentage increase in the sales price exceeded the percentage increase in the cost per unit sold during year 2. 12. The dividend yield ratio is calculated by which one of the following methods? A. Earnings per share divided by dividends per share. B. Market price per share divided by dividends per share. C. Dividends per share divided by earnings per share D. Dividends per share divided by market price per share. 13. Interstate Motors has decided to make an additional investment in its operating assets which are financed by debt. Assuming all other factors remain constant, this increase in investment will have which one of the following effects? A. Operating income margin will not change; operating asset turnover will decrease; and return on operating assets will decrease. B. Operating income margin will not change; operating asset turnover will increase; and return on operating assets will decrease. C. Operating income margin will decrease; operating asset turnover will decrease; and return on operating assets will decrease. D. Operating income margin will increase; operating asset turnover will not change; and return on operating assets will increase.

14. When budgets are used to evaluate performance and to set limits on spending, the process will often result in departments adding something "extra" to ensure the budgets will be met. This "extra" is A. Budgetary slack. C. Continuous budgeting. B. Management by objectives. D. Strategic planning. 15. Budgetary slack can best be described as A. The elimination of certain expenses to enhance budgeted income. B. A plug number used to achieve a pre-set level of operating income. C. The planned overestimation of budgeted expenses. D. The planned underestimation of budgeted expenses. 16. All of the following are disadvantages of authoritative budgeting as opposed to participatory budgeting, except that it A. may limit the acceptance of proposed goals and objectives. B. reduces the time required for budgeting. C. may result in a budget that is not possible to achieve. D. reduces the communication between employees and management. 17. The following sequence of steps are employed by a company to develop its annual profit plan. • Planning guidelines are disseminated downward by top management after receiving input from all levels of management. •

A sales budget is prepared by individual sales units reflecting the sales targets of the various segments. This provides the basis for departmental production budgets and other related components by the various operating units. Communication is primarily lateral with some upward communication possible.

•

A profit plan is submitted to top management for coordination and review. Top management's recommendations and revisions are acted upon by middle management. A revised profit plan is resubmitted for further review to top management.

•

Top management grants final approval and distributes the formal plan downward to the various operating units.

This outline of steps best describes which one of the following approaches to budget development? A. Bottom-up approach. C. Total justification of all activities by operating units. B. Top-down approach. D. Imposed budgeting by top management. 18. Helen Thomas, Amador Corporation's vice president of planning, has seen and heard it all. She has told the corporate controller that she is ". very upset with the degree of slack that veteran managers use when preparing their budgets." Thomas has considered implementing some of the following activities during the budgeting process. 1. Develop the budgets by top management and issue them to lower-level operating units. 2. Study the actual revenues and expenses of previous periods in detail. 3. Have the budgets developed by operating units and accept them as submitted by a company-wide budget committee. 4. Share the budgets with all employees as a means to reach company goals and objectives. 5. Use an iterative budgeting process that has several "rounds" of changes initiated by operating units and/or senior managers. Which one of these activities should Amador implement in order to best remedy Thomas's concerns, help eliminate the problems experienced by Amador, and motivate personnel? A. 2 and 4. B. 1 only. C. 2, 4 and 5. D. 2 and 3. 19. When developing a budget, an external factor to consider in the planning process is A. The merger of two competitors. C. A change to a decentralized management system. B. New product development. D. The implementation of a new bonus program. 20. A company uses participative budgeting. In order to more easily meet budgetary goals, the controller underestimates the amount of revenue and overestimates fixed selling and administrative expenses. This is an example of A. budgetary slack. B. flexible budgeting. C. budgetary variance. D. zero-based budgeting. 21. Flexible budgets A. Are used to evaluate capacity use. B. Are budgets that project costs based on anticipated future improvements.

C. Accommodate changes in activity levels. D. Provide for external factors affecting company profitability. 22. One of the primary advantages of budgeting is that it A. bases the profit plan on estimates. B. is continually adapted to fit changing circumstances. C. does not take the place of management and administration. D. requires departmental managers to make plans in conjunction with the plans of other interdependent departments. 23. Granger Company is reviewing its standard machine hours per unit to use in its budget for the upcoming year. The machine manufacturer's specifications indicated a unit could be made in 0.75 hours, and a benchmarking study showed a competitor produced at a speed of 0.78 machine hours per unit. Granger's actual results from last year averaged 0.83 machine hours per unit even though a standard of 0.80 machine hours per unit had been established using engineering studies. The standard Granger should use in its upcoming budget is A. 0.75 machine hours per unit. C. 0.83 machine hours per unit. B. 0.80 machine hours per unit. D. 0.78 machine hours per unit. 24. A company is setting up a new division to sell its products in Africa. An accountant has determined that the new African division will have to sell 250,000 units in order to cover the division’s fixed costs of P365,000. The company is estimating total sales of P475,000 for the new African division. What is the contribution margin per unit for the new African division? A. P0.68. B. P1.46. C. P1.90. D. P0.44. 25. The major feature of zero-based budgeting is that it A. uses the previous year's budget and adjusts it for inflation. B. assumes all activities are legitimate and worthy of receiving budget increases to cover any increased costs. C. focuses on planned capital outlays for property, plant, and equipment. D. evaluates each activity and determines whether it should be maintained as it is, reduced, or eliminated. 26. A continuous profit plan A. Is a plan devised by a full-time planning staff. B. Works best for a company that can reliably forecast events a year or more into the future. C. Is an annual plan that is part of a 5-year plan. D. Is a plan that is revised monthly or quarterly. 27. Which one of the following is least likely to be involved in establishing standard costs for evaluation purposes? A. Industrial engineers. C. Top management. B. Quality control personnel. D. Budgetary accountants. 28. Harper Company's performance report indicated the following information for the past month. Actual total overhead P1,600,000 Budgeted fixed overhead 1,500,000 Applied fixed overhead at P3 per labor hour 1,200,000 Applied variable overhead at P0.50 per labor hour 200,000 Actual labor hours 430,000 Harper's total overhead spending variance for the month was A. P115,000 favorable B. P185,000 unfavorable.

C. P100,000 favorable. D. P200,000 unfavorable.

29. A company applies variable overhead based upon direct labor hours and has a variable overhead efficiency variance that is P25,000 favorable. A possible cause of this variance is that A. less units of finished goods were produced. C. higher skilled labor was used. B. less supplies were used than anticipated. D. electricity rates were lower than expected. Answer the following 3 questions using the information below: Water Control Inc. manufactures water pumps and uses a standard cost system. The standard factory overhead costs per water pump are based on direct labor hours and are as follows: Variable overhead (4 hours at P8/hour) - P32 Fixed overhead (4 hours at P5/hour*) - P20 Total overhead cost per unit P52 * Based on a capacity of 100,000 direct labor hours per month. The following additional information is available for the month of November:

22,000 pumps were produced although 25,000 had been scheduled for production. 94,000 direct labor hours were worked at a total cost of P940,000. The standard direct labor rate is P9 per hour. The standard direct labor time per unit is 4 hours. Variable overhead costs were P740,000. Fixed overhead costs were P540,000. 30. The variable overhead spending variance for November was A. P40,000 unfavorable. B. P48,000 unfavorable. C. P12,000 favorable.

D. P60,000 favorable.

31. The variable overhead efficiency variance for November was A. P96,000 unfavorable. B. P48,000 unfavorable. C. P200,000 unfavorable.D. P60,000 favorable. 32. The fixed overhead spending variance for November was: A. P70,000 unfavorable. B. P460,000 unfavorable.

C. P240,000 unfavorable.D. P40,000 unfavorable.

33. Actual and budgeted information about the sales of a product are presented for June as follows. Units Sales Revenue

Actual 8,000 P92,000

Budget 10,000 P105,000

The sales price variance for June was A. P10,000 unfavorable. B. P10,500 unfavorable.

C. P8,000 favorable.

D. P10,000 favorable.

34. Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are planned manufacturing data for the year and actual data for November of the current year. The company applies overhead based on planned machine hours using a predetermined annual rate. Planning Data Annual November Fixed manufacturing overhead P1,200,000 P100,000 Variable manufacturing overhead 2,400,000 220,000 Direct labor hours 48,000 4,000 Machine hours 240,000 22,000 Data for November Direct labor hours (actual) Direct labor hours (plan based on output) Machine hours (actual) Machine hours (plan based on output) Fixed manufacturing overhead Variable manufacturing overhead

4,200 4,000 21,600 21,000 P101,200 P214,000

The fixed overhead volume variance for November was A. P1,200 unfavorable. B. P10,000 favorable. C. P5,000 favorable. D. P5,000 unfavorable. 35. Lee Manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000 units for the month of June included 10,000 hours of direct labor at P15 per hour, or P150,000. During June, 4,500 units were produced, using 9,600 direct labor hours, incurring P39,360 of variable overhead, and showing a variable overhead efficiency variance of P2,400 unfavorable. The standard variable overhead rate per direct labor hour was A. P3.85 B. P6.00 C. P4.00 D. P4.10...