SULTAN KUDARAT STATE UNIVERSITY

Tacurong City Campus

Management Accounting
Final Examination

INSTRUCTION - Select the best answer by SHADING the letter of your choice.
1. Thrust company expects sales of P4,400,000 in June, P5,300,000 in July, and P6,100,000 in August. On
average, 30% of its sales are cash, 50% of credit sales are collected after one month and 45% are collected
after two months. The remainder are written off to bad debts in the third month after the sale.

What are the expected cash inflow for August and expected receivable balances on August 31?

Cash inflow August 31 AR balance

a. P 5,050,000 P7,140,000
b. P4,084,000 P6,093,500
c. P1,830,000 P7,232,000
d. P5,071,000 P6,279,000

2. Obsolete inventory of P125,000 was written off during the year. This transaction
a. Decreased the quick ratio
b. Increased the quick ratio
c. Increased net working capital
d. Decreased current ratio

3. All of the following relates to balanced scorecards learning and growth perspective, except
a. How do we achieve greater employee satisfaction?
b. What new products do we create?
c. How do we provide information system with updated technology?
d. How will we motivate and power out employees?

4. On January 1, 2009, the River Companys beginning inventory was P400,000. During 2009, River purchased
P1,900,000 of additional inventory . On December 31, 2009, Rivers ending inventory was P500,000. What is
the inventory turnover for 2009?
a. 4.6
b. 4.0
c. 3.8
d. 3.6
5. A company uses 10,000 units of products per year at a unit cost of P1. Cost per order is P25, and carrying
cost is 12 % of average inventory cost. How many orders must be placed each year?
a. 10
b. 8
c. 5
d. 4

6. X company manufactures a line of computer chairs. The annual demand for chairs is estimated to be 5,000
units the annual cost to hold one unit of inventory is P10 per year, and the cost to initiate a production is
P1,000. There are no computer chairs on hand run and X has scheduled 4 equal production runs of computer
 chairs for the coming years, the first of which is to be run immediately. X has 250 business days per year.
Sales occur uniformly throughout the year, and production start up is within one day. If X does not maintain
a safety stock, the estimated total carrying cost for the coming year is
a. P5,000
b. 6,250
c. P4,000
d. P10,250

7. Bell company changed from a traditional manufacturer philosophy to just-in-time philosophy. What are the
expected effect of this change as a percentage of total assets reported on Bells balance sheet?

Inventory turnover inventory percentage

a. Decrease decrease
b. Decrease increase
c. Increase decrease
d. Increase increase

8. If a company has higher dividend payout ratio, if all else is equal, it will have
a. A higher marginal cost of capital
b. A lower marginal cost of capital
c. A higher investment opportunity schedule
d. A lower investment opportunity schedule.

9. NN Motor company uses 4,500 units of Part X-14 each year. The cost of placing one order of Part X-14 is
P1.00. Also assume that when the waste and efficiency caused by inventories is considered, the cost to carry
an inventory is P1.60 per unit. Under these conditions, what would be the Economic order Quantity?
a. 75
b. 80
c. 95
d. 100

10. The ABC company uses the direct method in determining net cash provided by operating activities. During
the year, operating expenses were P260,000, prepaid expenses increased by P20,000, and accrued expenses
payable increased by P30,000. Cash payments for operating expenses were
a. 270,000
b. 310,000
c. 210,000
d. 250,000

11. The use of EOQ analysis in inventory management can be modified to improve the management of inventory
by
a. Employing a minimum safety stock level because delivery times and inventory usage levels do not
conveniently match quantitative formulas.
b. Purchasing inventory only once year in order to save on ordering costs
c. Purchasing inventory on a monthly basis in order to save on carrying costs
d. Eliminating semi-variable costs from any consideration in the EOQ analysis due to the difficulty of
estimating these costs.
12. BIG Toys, an large manufacturer of toys and dolls uses large quantities of flesh-colored cloth in its doll
production process. Throughout the year, the firm uses 1,250,000 square yards of this cloth. The fixed cost
of placing and receiving an order are P2,000, which includes a P1,500 set up charge at the mill. The price of
the cloth is P2.50 per square yard, and the annual cost of carrying this inventory item is 20% of the price.

BIG maintains a 12,500-square yard safety stock. The cloth supplier requires a 2-week lead time from order
to delivery. Using a 52-week year, what is the reorder point?
a. 60,577 square yards
b. 48,077 square yards
c. 100,000 square yards
d. 62,500 square yards

13. A method of delaying disbursement by a corporation with a liquidity problem would be to

a. Install a lock box system
b. Pay its bills through the use of checks
c. Utilize a concentration banking program
d. Take as many cash discounts as possible.

14. Conservative working capital management strategies involve

a. Low risk, low return
b. Low risk, high return
c. High risk, high return
d. Moderate risk, moderate return

15. An increase in inventory carrying costs will

a. Have no effect in the economic order quantity
b. Increase the economic order quantity
c. Decrease the economic order quantity
d. Decrease the number of orders issued per year.

16. Wreckage Corporation plans to tighten its credit policy. Below is the summary of changes that took place
OLD NEW
Average number of days collection 75 days 50 days
Ratio of credit to total sales 70% 60%

Projected sales for the coming years is P100 million, and it was estimated that the new policy will reduce
sales by 5% if implemented. Assuming a 360-day year, what is the effect of the new policy on accounts
receivable?
a. Decrease of 13 million
b. No change
c. Decrease of 5 million
d. Decrease of P6,666,667

17. Which of the following would tend to increase holdings of inventory quantity in the future?
a. Increased computer control
b. Increased rate of sales growth
c. Standardization of products
d. Limited variety of products
18. Which of the following is the spontaneous use of financing?
a. Notes payable
b. Long-term debt
c. Prepaid interest
d. Trade credit

19. Which of the following is incorrect

a. Profitability varies directly with liquidity
b. The greater the risk, the greater the potential for larger return
c. Long-term financing has less liquidity risk than short- term financing, but has a higher explicit cost,
hence lower return
d. More current asset lead to greater liquidity, but yield lower return

20. The primary concern of working capital management is the trade off between
a. Financial risk and profitability
b. Interest rate risk and profitability
c. Liquidity risk and profitability
d. Purchasing power risk and cash flow minimization

21. Changing a firms credit terms for 2/20, net 60 to 2/10 net 30 will generally,
a. Increase the average collection period and increase sales
b. Increase the average collection period and reduce sales
c. Reduce the average collection period and increase sales
d. Reduce the average collection period and reduce sales

22. An increase on sales resulting from an increased cash discount for prompt payment would be expected to
cause
a. An increase in operating cycle
b. An increase in average collection period
c. A decrease in the cash conversion cycle
d. A decrease in purchase discounts taken.

23. PERT and CPM methods are used for

a. Determining the optimal product mix
b. Project planning and control
c. Determining product costs
d. Determining the number of servers needed in a fast-foods restaurant

24. In PERT, slack is the

a. Uncertainty associated with time estimates
b. Difference between the latest starting time and earliest finishing time
c. Path that has the largest amount of time associated with it
d. Number of days an activity can be delayed without forcing delay in the entire project.

25. A company is planning a multi-phase construction project. The time estimates for a particular phase of the
project are:
Optimistic 2 months
Most likely 4 months
Pessimistic 9 months
 Using PERT, the expected completion time for this particular project would be
a. 4 months
b. 5 months
c. 4.5 months
d. 9 months

Items 26 through 28 are based on the following

A PERT network diagram for a system project is presented below. The number above the arrows in the
diagram are the expected values in weeks of the time to perform each activity in the systems project.

A
B E F

26. The critical path for the systems project is

a. A-B-C-D
b. A-B-C-E-F
c. A-B-D-E-F
d. A-B-E-F

27. An activity that does not have a slack time for the system project is
a. B-D
b. D-E
c. C-F
d. E-F

28. A reduction in the time to perform activity D-F from 6 weeks to 3 weeks would reduce the expected lead
time to complete the entire system project by
a. 3 weeks
b. 2 weeks
c. 1 week
d. 4 weeks

29. The Gantt chart below shows that the project is

 a. Complete
b. Ahead of schedule
c. On schedule
d. Behind schedule

30. In 2009 Jackie Corporations net income was P800,000 and in 2010, it was P200,000. What percentage
increase in net income must Jackie achieve in 2010 to offset the 2010 decline in the net income?
a. 60%
b. 300%
c. 400%
d. 600%