MAS 2 Flashcards
(47 cards)
Based on economic principles, the problem of “free-riding” refers to the
situation wherein some people (free-riders) do not contribute any but still
benefit from the actions that others undertake. This often happens when people
pursue their own private interests and do not contribute voluntarily to the
public interest. Which of the following is an example of free-riding?
a. A housekeeper clearing a house
b. A tax evader enjoying national security
c. A consumer paying for pollution control
d. An individual who buys a ticket for a basketball match
b. A tax evader enjoying national security
The following information relates to the production department of the Seo Yul
Company for the first quarter:
Actual variable overhead P 68,500
Variable overhead application rate P 0.50 per hour
Total overhead application rate P 1.50 per hour
Variable spending variance P 8,000 unfavorable
Fixed volume variance P 5,000 favorable
What were the actual hours worked in this department during the quarter?
a. 137,000
b. 121,000
c. 127,000
d. 119,000
b. 121,000
Financial managers who require an increase in return for a given increase in
risk are said to be:
a. risk-indifferent
b. risk-seeking
c. risk-averse
d. risk-free
c. risk-averse
King’s Star Corporation manufactures two products: X and Y. The company has
4,000 hours of machine time available and can sell no more than 800 units of
Product X. Other pertinent data follow.
Product X Product Y
Selling price P 8.00 P 19.00
Variable cost 3.00 5.00
Fixed cost 3.50 6.25
Machine time per unit 2 hours 3 hours
Which of the following is the right objective function?
a. Maximize Z = 8X + 19Y
b. Maximize Z = 5X + 14Y
c. Maximize Z = 1.50X + 7.75Y
d. Minimize Z = 6.50X + 11.25Y
b. Maximize Z = 5X + 14Y
A company is experiencing a sharp increase in sales activity and a steady increase in production, so management has adopted an aggressive working capital policy. Therefore, the company’s current level of net working capital.
a. Would most likely be the same as in any other type of business condition as business cycles tend to balance out over time.
b. Would most likely be lower than under other business conditions in order that the company can maximize profits while minimizing working capital investment.
c. Would most likely be higher than under other business conditions so that there will be sufficient funds to replenish assets.
d. Would most likely be higher than under other business conditions as the company’s profits are increasing.
b. Would most likely be lower than under other business conditions in order that the company can maximize profits while minimizing working capital investment.
All of the following describe key performance indicators (KPIs) in a balanced
scorecard system, except:
a. A small set of critical data points
b. A good way to get a quick sense of an organization’s strategy
c. A term describing all the measures used in an organization in the
process of running the business
d. Measures that indicate to the executive team and other stakeholders whether the organization is on track to accomplishing its strategic objectives
c. A term describing all the measures used in an organization in the
process of running the business
All of the following describe key performance indicators (KPIs) in a balanced
scorecard system, except:
a. A small set of critical data points
b. A good way to get a quick sense of an organization’s strategy
c. A term describing all the measures used in an organization in the
process of running the business
d. Measures that indicate to the executive team and other stakeholders whether the organization is on track to accomplishing its strategic objectives
c. A term describing all the measures used in an organization in the
process of running the business
At 40% capacity, overhead cost is computed to be P 1,450; at 75% capacity,
overhead cost is P 2,150. The fixed overhead cost at 80% capacity will be:
a. P 20
b. P 650
c. P 1,600
d. P 2,250
b. P 650
A company is expected to have unsold units on its first year of operations, then:
a. Sales must be below breakeven point
b. Manufacturing variances are expected to be mostly unfavorable
c. Profit under absorption costing must be higher than the profit under variable costing
d. Decision to accept or reject a special order on the unsold units
shall include an element of opportunity cost
c. Profit under absorption costing must be higher than the profit under variable costing
Park Jin Co. has current assets of P 400,000 and current liabilities of P 500,000.
Current ratio will be increased by
a. The purchase of P 100,000 of inventory on account
b. The payment of P 100,000 of accounts payable
c. The collection of P 100,000 of accounts receivable
d. Refinancing a P 100,000 long-term loan with short-term debt
a. The purchase of P 100,000 of inventory on account
Park Jin Co. has current assets of P 400,000 and current liabilities of P 500,000.
Current ratio will be increased by
a. The purchase of P 100,000 of inventory on account
b. The payment of P 100,000 of accounts payable
c. The collection of P 100,000 of accounts receivable
d. Refinancing a P 100,000 long-term loan with short-term debt
a. The purchase of P 100,000 of inventory on account
After investing in a new project, Lee Company discovered that its residual income
remained unchanged. Which one of the following must be true about the new project?
a. The net present value of the new project must have been positive.
b. The return on investment (ROI) of the new project must have been
equal to the firm’s cost of capital.
c. The net present value of the new project must have been negative.
d. The return on investment (ROI) of the new project must have been less
than the firm’s cost of capital.
b. The return on investment (ROI) of the new project must have been
equal to the firm’s cost of capital.
After investing in a new project, Lee Company discovered that its residual income
remained unchanged. Which one of the following must be true about the new project?
a. The net present value of the new project must have been positive.
b. The return on investment (ROI) of the new project must have been
equal to the firm’s cost of capital.
c. The net present value of the new project must have been negative.
d. The return on investment (ROI) of the new project must have been less
than the firm’s cost of capital.
b. The return on investment (ROI) of the new project must have been
equal to the firm’s cost of capital.
What is the benefit for a firm with daily cash receipts of P 15,000 to be able
to speed up collections by 2 days, assuming an 8% annual return on short-term
investments and no cost to the company to speed up collections?
a. P 2,400 daily benefit
b. P 2,400 annual benefit
c. P 15,000 annual benefit
d. P 30,000 annual benefit
b. P 2,400 annual benefit
Which of the following correctly describes theoretical capacity?
a. Theoretical capacity is the level of output that the organization actually achieves in a period.
b. Theoretical capacity is the amount of capacity that management
predicts the organization will produce in the period.
c. Theoretical capacity represents the level of output if all policy
constraints and scheduling limitations are removed. It also assumes
that no productivity is lost due to breakdowns, errors, etc.
d. Theoretical capacity represents the level of output that can be
realistically achieved based on current management policies, as well
as based on machine and labor scheduling expectations.
c. Theoretical capacity represents the level of output if all policy
constraints and scheduling limitations are removed. It also assumes
that no productivity is lost due to breakdowns, errors, etc.
If a firm pays a constant dividend of P 10 and the required rate of return or
discount rate is equal to 10%, what is the price of the stock using the zero-
growth dividend model?
a. P 1
b. P 10
c. P 50
d. P 100
If a firm pays a constant dividend of P 10 and the required rate of return or
discount rate is equal to 10%, what is the price of the stock using the zero-
growth dividend model?
a. P 1
b. P 10
c. P 50
d. P 100
d. P 100
Workers temporarily unemployed but who normally find jobs quickly are called:
a. Cyclically unemployed
b. Seasonally unemployed
c. Frictionally unemployed
d. Structurally unemployed
c. Frictionally unemployed
Jang Gang Company planned to produce 3,000 units of its single product, S-
Ejector, during November. The standard specifications for one unit of S-Ejector
include 6 pounds of materials at P 0.30 per pound. Actual production in November
was 3,100 units of S-Ejector. The accountant computed a favorable direct
materials purchase price variance of P 120. Based on these variances, one could
conclude that:
a. More materials were purchased than were used
b. More materials were used than were purchased
c. The actual cost of materials was less than the standard cost
d. The actual usage of materials was less than the standard allowed
c. The actual cost of materials was less than the standard cost
Which of the following is likely to encourage a firm to increase the amount of
debt in its capital structure?
a. The firm’s earnings become more volatile
b. The firm’s assets become less liquid
c. The corporate tax rate increases
d. The personal tax rate increases
c. The corporate tax rate increases
Park Dang Gu (PDG) Company plans to discontinue a department that currently
provides a P 24,000 contribution margin and has allocated overhead of P 48,000,
of which P 21,000 cannot be eliminated. PDG’s average income tax rate is 30%.
The effect of this discontinuance on PDG’s after-tax profit would be a(n):
a. Increase of P 2,100
b. Increase of P 3,000
c. Decrease of P 24,000
d. Decrease of P 16,800
a. Increase of P 2,100
If a company’s cash conversion cycle increases, then the company:
a. Becomes more profitable
b. Incurs more shortage or stockout costs
c. Increases its investment in working capital
d. Reduces its payable deferral period (age of payable)
c. Increases its investment in working capital
If a capital project has a hurdle rate higher than its internal rate, then its
profitability index is:
a. Higher than the net present value
b. Higher than the cost of capital
c. Less than zero
d. Less than one
d. Less than one
If the investment turnover decreased by 20% and profit margin decreased by 30%,
then return on investment would:
a. Increase by 30%
b. Decrease by 20%
c. Decrease by 44%
d. Decrease by 50%
c. Decrease by 44%
