lOMoARcPSD|43612528

MAS First Preboard Examination Batch 95

BS Accountancy (University of the Philippines Visayas)

Scan to open on Studocu

Studocu is not sponsored or endorsed by any college or university

Downloaded by Chua Advik ([email protected])
 lOMoARcPSD|43612528

CPAR
CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

MANAGEMENT ADVISORY SERVICES FEBRUARY 16, 2024

First Pre-board Examination – Batch 95 8:00 am to 11:00 am

Instructions: Choose the BEST answer for each of the following items. Mark only one answer for each
item on the Special Answer Sheet provided. Strictly no erasure allowed. Use Pencil No. 1 only.

1. Which of the following is not part of the current focus of management accounting?
a. It emphasizes the use of cost information for strategic decision making.
b. It measures and reports quality costs as well as nonfinancial measures of quality such
as defect rates.
c. It emphasizes the use of aggregated average cost information for individual products.
d. It tries to determine why activities are performed and how well they are performed.

2. The Institute of Management Accountants issues

a. Statements on Accounting Research for Managers.
b. Statements on Management Accounting.
c. Statements on Managerial and Cost Accounting.
d. Cost Accounting Standards.

3. The actions that follow are associated with a firm’s accounting information system. Which
of the following actions belong to management accounting?
a. Preparing a report that details profit by customer
b. Preparing an income statement that complies with generally accepted accounting
principles
c. Voluntarily reporting safety costs to potential and existing investors
d. Research to determine how to report an uninsured facility destroyed by flood

4. A company has the following production data for a recent month.

Direct labor ₱250,000
Actual overhead 350,000
Direct materials used 400,000
Warehousing 40,000

The company’s prime cost for the month is

a. ₱600,000. c. ₱650,000.
b. ₱640,000. d. ₱750,000.

ITEMS 5 and 6 ARE BASED ON THE FOLLOWING:

The controller of a company has decided to estimate the fixed and variable components
associated with the company’s shipping activity. She has collected the following data for
the past six months:
Packages Shipped Total Shipping Costs
10 ₱ 800
20 1,100
15 900
12 900
18 1,050
25 1,250

5. Using the high and low points method of cost segregation, the total cost of shipping if 14
packages are shipped is:
a. ₱420 c. ₱700
b. ₱920 d. ₱500

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 2 of 11

6. The data were run in a spreadsheet regression routine, and the output showed the
following, among others:

Constant 509.911894
R Squared 0.969285285
Number of observations 6
X Coefficient 29.405286

Considering the given output of the spreadsheet regression routine, which of the following
is correct?
a. R2, the coefficient of determination, tells us that about 96.9 percent of total shipping
costs is explained by the number of packages shipped.
b. The Constant 509.911 is the variable cost per package shipped.
c. The X Coefficient 29.405 is the fixed shipping cost.
d. The Coefficient of Correlation (r) is 29.405.

7. The current focus of management accounting can best be described as

a. a system that achieves relevance by making financial accounting information
more useful to internal users.
b. having emphasis on activity-based costing and process value analysis.
c. lacking a customer orientation.
d. having emphasis on assigning manufacturing costs to products so that inventory cost
can be reported to external users.

8. A company uses four hours of direct labor to produce a product unit. The standard direct
labor cost is P20 per hour. This period the company produced 20,000 units and used 84,160
hours of direct labor at a total cost of P1,599,040. What is its labor rate variance for the
period?
a. ₱83,200 F c. ₱84,160 F
b. ₱84,160 U d. ₱ 960 F

ITEMS 9 to 11 ARE BASED ON THE FOLLOWING:

A company produces coat racks. The projected sales for the first quarter of the coming year
and the beginning and ending inventory data are as follows:

Unit sales 100,000

Unit price ₱15
Units in beginning inventory 8,000
Units in targeted ending inventory 12,000

The coat racks are molded and then painted. Each rack requires four kilos of metal, which
costs ₱2.50 per kilo. The beginning inventory of materials is 4,000 kilos. The company wants
to have 6,000 kilos of metal in inventory at the end of the quarter. Each rack produced
requires 30 minutes of direct labor time, which is billed at ₱9 per hour.

9. The budgeted production for the first quarter is:

a. 100,000 c. 96,000
b. 104,000 d. 92,000

10. The budgeted purchases of direct materials for the first quarter are:
a. ₱1,040,000 c. ₱1,045,000
b. ₱ 205,000 d. ₱1,035,000

11. The direct labor cost budget for the first quarter is
a. ₱936,000 c. ₱900,000
b. ₱468,000 d. ₱450,000

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 3 of 11

12. The actions that follow are associated with a firm’s accounting information system. Which
of the following actions belong to financial accounting?
a. Reporting on the trends in defect rates to the plant manager
b. Determining the cost of dropping a product
c. Determining the cost of producing a new product
d. Determining the cost of bad debts for the balance sheet

ITEMS 13 to 15 ARE BASED ON THE FOLLOWING:

A company expects to receive cash from sales of ₱45,000 in March. In addition, it expects
to sell property worth ₱3,500. Payments for materials and supplies are expected to total
₱10,000, direct labor payroll will be ₱12,500, and other expenditures are budgeted at
₱14,900. On March 1, the cash account balance is ₱1,230.

13. The cash balance on March 31 would be:

a. ₱12,330 c. ₱11,100
b. ₱ 8,830 d. ₱49,730

14. Assume that the company wanted a minimum cash balance of ₱15,000 and that it could
borrow from the bank in multiples of ₱1,000 at an interest rate of 12 percent per year. What
would the company’s adjusted ending balance for March be?
a. ₱15,000 c. ₱12,330
b. ₱15,330 d. ₱ 3,000

15. How much interest would the company owe in April assuming that the entire amount
borrowed in March would be paid back?
a. ₱ 360 c. ₱3,360
b. ₱3,000 d. ₱ 30

16. Which of the following pertains to CMA?

a. The oldest and best-known certification
b. Is concerned with internal auditing only
c. Qualifying exam covers economics, finance, and management
d. Must be licensed by the government to practice

17. A moving, twelve-month budget, updated monthly, is

a. always used by firms that prepare a master budget.
b. a continuous budget.
c. a master budget.
d. not used by industrial firms.

18. To determine the standard cost per unit of output for a particular input, the manager must
a. know the price per unit of input.
b. know the quantity of input used per unit of output.
c. know the total budgeted output.
d. All of the above.

19. A currently attainable standard is one that

a. relies on maximum efficiency.
b. is based only on historical experience.
c. can be achieved under efficient operating conditions.
d. makes no allowances for normal breakdowns, interruptions, less than perfect skills,
and so on.

20. Standard costing systems are adopted

a. to enhance operational control.
b. to imitate most other firms.
c. to encourage purchasing managers to take advantage of purchase discounts.

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 4 of 11

d. so that the weighted average method can be used for process manufacturers.

21. In a global economy,

a. the trade of goods and services is focused on trade between or among countries on
the same continent.
b. the international movement of labor is prohibited except for multilingual persons.
c. the international flows of capital and information are common.
d. all of the above happen in a global economy.

22. Financial accounting

a. is primarily concerned with internal reporting.
b. is more concerned with verifiable, historical information than is managerial accounting.
c. focuses on the parts of the organization rather than the whole.
d. is specifically directed at management decision-making needs.

23. Which of the following statements is true?

a. Management accounting is a subset of cost accounting.
b. Cost accounting is a subset of both management and financial accounting.
c. Management accounting is a subset of both cost and financial accounting.
d. Financial accounting is a subset of cost accounting.

24. Which of the following is not an advantage of budgeting:

a. It forces managers to plan.
b. It improves communication and coordination.
c. It guarantees an improvement in organizational efficiency.
d. It provides a standard for performance evaluation.

25. The sum of the material price variance (calculated at point of purchase) and material
quantity variance equals
a. the total cost variance.
b. the material mix variance.
c. the material yield variance.
d. no meaningful number.

26. Which of the following statements is false?

a. A primary purpose of cost accounting is to determine valuations needed for external
financial statements.
b. A primary purpose of management accounting is to provide information to managers
for use in planning, controlling, and decision making.
c. The act of converting production inputs into finished products or services necessitates
cost accounting.
d. Two primary hallmarks of cost and management accounting are standardization of
procedures and use of generally accepted accounting principles.

27. Which of the following statements regarding standard cost systems is true?
a. Favorable variances are not necessarily good variances.
b. Managers will investigate all variances from standard.
c. The production supervisor is generally responsible for material price variances.
d. Standard costs cannot be used for planning purposes since costs normally change in
the future.

28. In a standard cost system, Work in Process Inventory is ordinarily debited with
a. actual costs of material and labor and a predetermined overhead cost for overhead.
b. standard costs based on the level of input activity (such as direct labor hours worked).
c. standard costs based on production output.
d. actual costs of material, labor, and overhead.

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 5 of 11

29. A purpose of standard costing is to

a. replace budgets and budgeting.
b. simplify costing procedures.
c. eliminate the need for actual costing for external reporting purposes.
d. eliminate the need to account for year-end underapplied or overapplied manufacturing
overhead.

USE THE FOLLOWING INFORMATION FOR QUESTIONS 30–33.

A company uses a standard cost system for its production process and applies overhead
based on direct labor hours. The following information is available for August when the
company made 4,500 units:

Standard:
DLH per unit 2.50
Variable overhead per DLH ₱1.75
Fixed overhead per DLH ₱3.10
Budgeted variable overhead ₱21,875
Budgeted fixed overhead ₱38,750

Actual:
Direct labor hours 10,000
Variable overhead ₱26,250
Fixed overhead ₱38,000

30. Using the one-variance approach, what is the total overhead variance?
a. ₱6,062.50 U c. ₱9,687.50 U
b. ₱3,625.00 U d. ₱6,562.50 U

31. Using the two-variance approach, what is the controllable variance?

a. ₱5,812.50 U c. ₱4,375.00 U
b. ₱5,812.50 F d. ₱4,375.00 F

32. Using the two-variance approach, what is the non-controllable variance?

a. ₱3,125.00 F c. ₱3,875.00 F
b. ₱3,875.00 U d. ₱6,062.50 U

33. Using the three-variance approach, what is the spending variance?

a. ₱4,375 U c. ₱ 8,000 U
b. ₱3,625 F d. ₱15,750 U

34. A company provides a personalized training program that is popular with many companies.
The number of programs offered over the last five months, and the costs of offering these
programs, as well as some other figures computed based on the given data are as follows:

Programs Offered (x) Costs Incurred (y)

June 55 ₱15,400
July 45 14,050
Aug. 60 18,000
Sept. 50 14,700
Oct. 75 19,000

Ʃx 285
Ʃy 81,150
Ʃxy 4,719,250
Ʃx2 16,775

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 6 of 11

If the company computed the cost of offering 65 programs using the method of least
squares instead of the high and low points method, the result would be

a. ₱17,350 c. ₱472 lower

b. ₱294 higher d. ₱766 higher

35. Historical experience should be used with caution in setting standards because
a. most companies have very poor records.
b. ideal standards are always better than historical standards.
c. they may not be achievable by operating personnel.
d. they may perpetuate operating inefficiencies.

36. Under variable costing, which costs are included in product cost?
a. All variable costs and fixed allocations of product costs, except for fixed overhead.
b. All variable and fixed allocations of product costs, including direct materials, direct
labor, and both variable and fixed overhead.
c. All variable product costs except for variable overhead.
d. All variable product costs, including direct materials, direct labor, and variable
overhead.

37. A company incurs annual fixed costs of ₱250,000 in producing and selling its product.
Estimated unit sales for 2025 are 125,000. An after-tax income of ₱75,000 is desired by
management. The company projects its income tax rate at 25 percent. What is the
maximum amount that the company can expend for variable costs per unit and still meet
its profit objective if the sales price per unit is estimated at ₱6?
a. ₱3.44 c. ₱3.20
b. ₱4.00 d. ₱8.80

38. Which of the following best describes the difference between financial and managerial
accounting?
a. Managerial accounting provides information to support decisions, while financial
accounting does not.
b. Managerial accounting is not restricted to generally accepted accounting principles,
while financial accounting is restricted to GAAP.
c. Managerial accounting does not result in financial reports, while financial accounting
does result in financial reports.
d. Managerial accounting is concerned solely with the future and does not record events
from the past, while financial accounting records only events from past transactions.

39. A company manufactures a product that sells for ₱10 per unit. This is its sole product and
it has projected the break-even point at 50,000 units in the coming period. If fixed costs
are projected at ₱100,000, what is the projected contribution margin ratio?
a. 80 percent c. 40 percent
b. 20 percent d. 60 percent

40. The beginning inventory consists of 6,000 units, all of which are sold during the period. The
beginning inventory fixed costs are ₱20 per unit, and variable costs are ₱90 per unit. What
is the difference in income from operations between variable and absorption costing?
a. Variable costing income from operations is ₱540,000 less than under absorption
costing.
b. Variable costing income from operations is ₱660,000 greater than under absorption
costing.
c. Variable costing income from operations is ₱120,000 less than under absorption
costing.
d. Variable costing income from operations is ₱120,000 greater than under absorption
costing.

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 7 of 11

41. Using the following information about a single product company, compute its total actual
cost of direct materials used.

• Direct materials standard cost: 5 kgs. x ₱2 per kg. = ₱10.

• Total direct materials cost variance: ₱15,000 unfavorable.
• Actual direct materials used: 300,000 lbs.
• Actual units produced: 60,000 units.

a. ₱585,000 c. ₱600,000
b. ₱300,000 d. ₱615,000

42. Gross domestic product (GDP) is the

a. total amount of expenditures for consumer goods and investment for a period of time.
b. total purchases by consumers, businesses, government, and foreign entities
c. value of all final goods and services produced by the country by both domestic and
foreign-owned sources.
d. value of all goods and services produced by the country by domestic firms, excluding
those produced by foreign-owned companies.

USE THE FOLLOWING INFORMATION FOR QUESTIONS 43 and 44.

A company has the following standard costs associated with the manufacture and sale of
one of its products:

Direct material ₱3.00 per unit

Direct labor 2.50 per unit
Variable manufacturing overhead 1.80 per unit
Fixed manufacturing overhead ₱4.00 per unit (based on an estimate
of 50,000 units per year)
Variable selling expenses ₱0.25 per unit
Fixed SG&A expense ₱75,000 per year

During 2023, its first year of operations, the company manufactured 51,000 units and sold
48,000. The selling price per unit was ₱25. All costs incurred during the period were equal
to standard. All variances from standard costs are closed to the cost of goods sold during
the period.

43. Income under variable costing amounted to

a. ₱574,600 c. ₱558,600
b. ₱570,600 d. ₱562,600

44. The volume variance under absorption costing is

a. 0 c. ₱4,000 U
b. ₱4,000 F d. ₱8,000 U

45. Which of the following topics is of more concern to management accounting than to cost
accounting?
a. generally accepted accounting principles
b. inventory valuation
c. cost of goods sold valuation
d. impact of economic conditions on company operations

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 8 of 11

USE THE FOLLOWING INFORMATION FOR QUESTIONS 46–48.

Below is an income statement for a company for 2023:

Sales ₱ 400,000
Variable costs ( 125,000)
Contribution margin ₱ 275,000
Fixed costs (200,000)
Profit before taxes ₱ 75,000

46. What is the company’s degree of operating leverage?

a. 3.67 c. 1.45
b. 5.33 d. 2.67

47. What was the company’s margin of safety for 2023?

a. ₱200,000 c. ₱100,000
b. ₱75,000 d. ₱109,091

48. Assuming that the fixed costs are expected to remain at ₱200,000 for 2024 and the sales
price per unit and variable costs per unit are also expected to remain constant, how much
profit before taxes will be produced if the company anticipates 2024 sales rising to 130
percent of the 2023 level?
a. ₱97,500
b. ₱195,000
c. ₱157,500
d. A prediction cannot be made from the information given.

49. It is a sequence of economic activity in a nation’s economy that is typically characterized

by four phases – recession, recovery, growth, and decline – that repeat themselves over
time.
a. Business cycle c. Accounting cycle
b. Operating cycle d. Life cycle

50. A direct cost is one that is

a. Variable with respect to the cost object.
b. Traceable to the cost object.
c. Fixed with respect to the cost object.
d. Allocated to the cost object.

51. A company manufactures and sells 2 products: A and B. The projected information on these
two products for 2025 is:

Product A Product B
Sales in units 4,000 1,000
Sales price per unit ₱12 ₱8
Variable costs per unit 8 4

Total fixed costs for the company are projected at ₱10,000.

How many units would the company need to sell to produce an income before income taxes
equal to 15 percent of sales?
a. 3,449 units of A and 862 units of B
b. 41,388 units of A and 6,898 units of B
c. 48,286
d. 2,500

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 9 of 11

52. Budget slack is a condition in which

a. demand is low at various times of the year.
b. excess machine capacity exists in some areas of the plant.
c. there is an intentional overestimate of expenses or an underestimate of revenues.
d. managers grant favored employees extra time off.

53. The distinction between direct and indirect costs depends on whether a cost
a. is controllable or non-controllable.
b. is variable or fixed.
c. can be conveniently and physically traced to a cost object under consideration.
d. will increase with changes in levels of activity.

54. Budgeted sales for the first six months of 2025 for a company are listed below:

UNITS
January 6,000
February 7,000
March 8,000
April 7,000
May 5,000
June 4,000

The company has a policy of maintaining an inventory of finished goods equal to 40 percent
of the next month’s budgeted sales. If the company plans to produce 6,000 units in June,
what are budgeted sales for July?
a. 3,600 units c. 9,000 units
b. 1,000 units d. 8,000 units

55. A company manufactures toy airplanes. Information on the company’s labor costs follow:

Sales commissions ₱5 per plane

Administration ₱10,000 per month
Indirect factory labor ₱3 per plane
Direct factory labor ₱5 per plane

The following information applies to the upcoming month of July for X Co.:

Budgeted production 1,200 units

Budget sales 1,000 units

What amount of budgeted labor cost would appear in the July selling, general, and
administrative expense budget?
a. ₱10,000 c. ₱15,000
b. ₱16,000 d. ₱23,000

56. A cost driver

a. causes fixed costs to rise because of production changes.
b. has a direct cause-effect relationship to a cost.
c. can predict the cost behavior of a variable, but not a fixed, cost.
d. is an overhead cost that causes distribution costs to change in distinct increments
with changes in production volume.

57. A company manufactures card tables. The company has a policy of maintaining a finished
goods inventory equal to 40 percent of the next month’s planned sales. Each card table
requires 3 hours of labor. The budgeted labor rate for the coming year is ₱13 per hour.
Planned sales for the months of April, May, and June are respectively 4,000; 5,000; and
3,000 units. The budgeted direct labor cost for June for the company is ₱136,500. What
are budgeted sales for July for the company?

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 10 of 11

a. 3,500 units c. 4,000 units

b. 4,250 units d. 3,750 units

58. The most useful information derived from a cost-volume-profit chart is the
a. amount of sales revenue needed to cover enterprise variable costs.
b. amount of sales revenue needed to cover enterprise fixed costs.
c. relationship among revenues, variable costs, and fixed costs at various levels of
activity.
d. volume or output level at which the enterprise breaks even.

59. A company has the following production data for a recent month.
Direct labor ₱250,000
Actual overhead 350,000
Direct materials used 400,000
Warehousing 40,000

The company’s conversion cost for the month is

a. ₱600,000. c. ₱650,000.
b. ₱640,000. d. ₱750,000.

60. On a break-even chart, the break-even point is located at the point where the total
a. revenue line crosses the total fixed cost line.
b. revenue line crosses the total contribution margin line.
c. fixed cost line intersects the total variable cost line.
d. revenue line crosses the total cost line.

61. Mobile technologies deliver productivity and efficiency gains, bring businesses closer to their
clients, and stay connected to them whether they are in the office or travelling. Following
are some of the challenges that may be encountered with mobile technologies, except:
a. Security concerns on potential theft or loss of information
b. Implementing the right mobile technology at the right time is paramount
c. Working patterns will change as the internet becomes more pervasive
d. Faster and more connected workforce across the globe.

62. A firm estimates that it will sell 100,000 units of its sole product in the coming period. It
projects the sales price at ₱40 per unit, the variable cost ratio at 40 percent, and profit at
₱500,000. What is the firm budgeting for fixed costs in the coming period?
a. ₱1,600,000 c. ₱1,100,000
b. ₱2,400,000 d. ₱1,900,000

63. When the number of units manufactured increases, the most significant change in unit cost
will be reflected as a(n)
a. increase in the fixed element.
b. decrease in the variable element.
c. increase in the mixed element.
d. decrease in the fixed element.

64. Period costs

a. are generally expensed in the same period in which they are incurred.
b. are always variable costs.
c. remain unchanged over a given period of time.
d. are associated with the periodic inventory method.

65. A company has the following expected pattern of collections on credit sales: 70 percent
collected in the month of sale, 15 percent in the month after the month of sale, and 14
percent in the second month after the month of sale. The remaining 1 percent is never
collected. At the end of May, the company has the following accounts receivable balances:

Downloaded by Chua Advik ([email protected])

 lOMoARcPSD|43612528

MANAGEMENT ADVISORY SERVICES BATCH 95

FIRST PREBOARD EXAMINATION FEBRUARY 16, 2024
8:00 am to 11:00 am Page 11 of 11

From April sales ₱21,000

From May sales 48,000

The company’s expected sales for June are ₱150,000. What were total sales for April?
a. ₱150,000 c. ₱70,000
b. ₱72,414 d. ₱140,000

66. Since overhead costs are indirect costs,

a. they require some process of allocation.
b. they can be easily traced to production.
c. a predetermined overhead rate is not advantageous.
d. they cannot be allocated.

67. Cryptocurrency is a type of virtual currency that uses cryptography – a method of storing
and transmitting data in unreadable form so that only the intended receivers can read and
process it. This allows cryptocurrency transactions to be carried out in a decentralized
manner by a group of users. The first and most popular cryptocurrency, introduced in 2009,
is the
a. bitcoin c. e-wallet
b. blockchain d. cryptopeso

68. This is about communicating the organization’s managing its key environmental and social
issues. It is about communicating publicly how the company assesses which environmental
or social issues are most significant, how these issues are managed, and how the company
is performing against each of these key issues (performance data).
a. sustainability reporting c. integrated reporting
b. audit report d. ChatGPT

69. A company incurred 2,300 direct labor hours to produce 600 units of product. Each unit
should take 4 direct labor hours. The company applies variable overhead to production on
a direct labor hour basis. The variable overhead efficiency variance
a. will be unfavorable.
b. will be favorable.
c. will depend upon the capacity measure selected to assign overhead to production.
d. is impossible to determine without additional information.

70. The method of least squares was used to develop a cost equation to predict the cost of
maintenance. Monthly data for the past four years were used for the regression.

The following computer output was received:

Intercept ₱5,750
Slope 16
Coefficient of correlation 0.89
Standard error ₱168

The driver used was “number of maintenance hours.”

Which of the following is incorrect?

a. If “x” is the number of maintenance hours, the cost formula is:
Maintenance cost = ₱5,750 + ₱16x
b. Using the results from the regression equation, the cost of maintenance for next year
if 8,400 maintenance hours are predicted is ₱140,150
c. The coefficient of determination is 79.21%.
d. Fixed cost per month is ₱5,750.

- END -

Downloaded by Chua Advik ([email protected])