A202 FINAL EXAM STRATEGIC BUSINESS ANALYSIS SET A MAY 2025

INSTRUCTIONS: Select the correct answer for each of the following questions. Write only the CAPITAL LETTER
on the first page on your green booklet. God bless, examinees.
If you are positive, you’ll see opportunities instead of obstacles

1. Management accounting ______________________.

A. Is governed by generally accepted accounting principles. B. Draws from disciplines other than accounting.
C. Is geared primarily to the past rather than the future.
D. Places more emphasis on precision of data compared with financial accounting which does not.

2. Controllership has attained special recognition in corporate management as business expands in complexity and reach, and as the
controller exerts influence for management to take organization’s goals. Controllership and treasurership constitute corporate
finance. These are among the controller’s traditional functions:
1. Tax management. 5. Reporting to government regulatory agencies.
2. Financial reporting and interpretation. 6. Risk management.
3. Credit management. 7. Economic appraisal.
4. Sourcing and investing of funds. 8. Planning for control.
A. All eight items. B. Items 1, 2, 5, 7, and 8 only. C. Items 1, 2, 3, 4, 5, 7, and 8 only. D. 2, 3, 5, and 7, and 8 only.

3. A management advisory services engagement involves the following activities in what order?
I. Post-engagement follow-up. II. Implementing the recommendation. III. Conducting the engagement.
IV. Negotiating the engagement. V. Preparing for and starting the engagement. VI. Evaluating the engagement.
VII. Preparing and presenting report and recommendations.
[Link], VI, V, IV, III, II and I. [Link], IV, V, VI, VII, I and II. [Link], III, V, VI, II, VII, and I. [Link], V, III, VII, II, VI, and I.

4. Anney is the CEO of a large company. She has always produced the master budget with the help of the CFO. As her company has
grown, her employees and managers seem more resistant to adhering to the budget. What would you suggest to help Anney’s
company have an effective budget?
A. She should employ a bottom-to-top approach in planning the budget.
B. She should use research and analysis to help plan the budget.
C. She should prepare a continuous budget rather than a static budget.
D. She should begin his budget planning with the most recent sales forecasts.

5. In order to assure better management acceptance, the flow of input data for budgeting should begin in which area?
A. Top management B. Budget committee C. Accounting department D. Lower levels of management

6. All of the following statements concerning the relationship between the sales budget and the annual profit plan are correct except:
A. The sales budget is an input for preparing the selling expense budget.
B. Without an accurate sales budget a company is less likely to have an accurate annual profit plan.
C. It does not matter when the sales budget is developed while preparing the annual profit plan as it only impacts budgeted sales
revenue. D. The sales budget is an input for preparing the production budget.

7. Which of the following statements correctly describes the impact of finished goods inventory on the production budget?
A. An increase in beginning finished goods inventory increases the units needed to be produced.
B. An increase in desired ending inventory of finished goods inventory decreases the units needed to be produced.
C. An increase in desired ending inventory of finished goods inventory increases the units needed to be produced.
D. A decrease in beginning finished goods inventory decreases the units needed to be produced.

8. Which of the following statements is correct concerning the cash budget?

A. Increasing the percentage of inventory purchased on credit relative to inventory purchased for cash would decrease expected cash
disbursements in a cash budget.
B. Increasing the percentage of inventory purchased on credit relative to inventory purchased for cash would increase expected cash
receipts in a cash budget.
C. Increasing the percentage of inventory purchased on credit relative to inventory purchased for cash would increase expected cash
disbursements in a cash budget.
D. Increasing the percentage of inventory purchased on credit relative to inventory purchased for cash would decrease expected cash
receipts in a cash budget.

9. The financing section of a cash budget is needed if there is a cash deficiency or if the ending cash balance is less than
A. the prior years. B. management's minimum required balance.
C. the amount needed to avoid a service charge at the bank. D. the industry average

Accounting 202 Finals Exam STRATEGIC BUSINESS ANALYSIS Page 1 of 4

10. Babee Candy Manufacturers produces and sells a variety of candies, including fudge. In budgeting for production, the company
requires that 20% of the next month's sales be on hand at the end of each month. Budgeted sales of fudge in pounds for the next
four months starting from February to May is: 45,000 (Feb) 60,000 (Mar) 90,000 (Apr) 75,000 (May)
The budgeted production for April would be _____ pounds. A. 87,000 B. 72,000 C. 93,000 D. 105,000

11. Caring Foods has budgeted $1,500,000 in sales of ginger chicken for May. It wants to end every month with inventory equal to 10
days’ worth of the next month's sales (based on a 30-day month). April sales are projected at $1,400,000. The sales price is $5
per box. Inventory at the beginning of April is estimated at 93,400 boxes of ginger chicken. How many boxes of ginger chicken
should Caring Foods manufacture in April? A. 280K boxes B. 273.4K boxes C. 286.6K boxes D. 300K boxes

12. Dee Incorporated has the following production cost information for garden hoses in terms of quantity and cost, respectively:
Direct Materials: 5 pounds; $1.14/pound Direct Labor: 0.8 hours; $12/hour Overhead: 0.8 hours; $9/hour
If Dee plans to make and sell 10,000 garden hoses in the next quarter, what amount would they budget for cost of goods sold in the
budgeted income statement? A. $168,000 B. $57,000 C. $225,000 D. $153,000

13. Edge Company prepares the following budgeted information. Based on this, what is its pro forma income net income?
Budgeted cost of goods sold $4,300,000 Budgeted S&A expense $2,000,000 Budgeted income taxes $800,000
Budgeted manufacturing costs incurred $4,500,000 Budgeted sales revenue $10,000,000
Budgeted interest expense $1,300,000 Budgeted cost of goods manufactured $4,200,000
A. $1,600,000 B. $1,700,000 C. $1,400,000 D. $3,700,000

14. Gaston Company manufactures toy airplanes. Information on the company's labor costs below. The following information applies
to the upcoming month of July 1 the company: 1,200 units Budgeted production and 1,000 units Budget sales.
Sales commissions $5 per plane Administration $10,000 per month
Indirect factory labor $3 per plane Direct factory labor $5 per plane
What amount of budgeted labor cost would appear in the July selling, general, and administrative expense budget?
A. $10,000 B. $16,000 C. $15,000 D. $23,000

15. Happy Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile
requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company
are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Happy has 3,900 pounds of
clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory. What is the total amount to be budgeted for
manufacturing overhead for the month? A. $2,871 B. $2,970 C. $11,484 D. $11,880

16. Indifferent 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, Indifferent Company has the following accounts receivable balances: $21,000 from
April Sales and $48,000 from May Sales. Indifferent’s expected sales for June are $150,000. What were the total sales for April?
A. $72,414 B. $140,000 C. $150,000 D. $70,000

17. Jee Inc. is preparing its cash budget for the fourth quarter. The inventory manager advises that materials purchases will be
$40,000 in October and will increase by 25% for each month thereafter because of the holiday season. Jee purchases in
September were $32,000. It pays for purchases 50% in the month after sale and 50% in the second month after the sale. What are
Jee’s budgeted cash payments for purchases in November? A. $36,500 B. $45,00 C. $36,000 D. $40,000

18. Katipuners Co. reported the following information for 2025:

Budgeted Sales in October $930,000 November $870,000 December $1,080,000
All sales are on credit. Customer amounts on account are collected 50% in the month of sale and 50% in the following month. How
much is the November 30, 2025 budgeted Accounts Receivable? A. $900,000 B. $540,000 C. $465,000 D. $435,000

19. Lowkey Company has the following budgeted sales: January $40,000, February $60,000, and March $50,000. 40% of the sales are
for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. What are the
total expected cash receipts during March? A. $54,000 B. $53,000 C. $52,000 D. $50,000

20. During September, the capital expenditure budget indicates a $400,000 purchase of equipment. The ending September cash
balance from operations is budgeted to be $70,000. The company wants to maintain a minimum cash balance of $30,000. What is
the minimum cash loan that must be borrowed from the bank during September?
A. $450,000 B. $390,000 C. $360,000 D. $330,000

21. The technique that can be used to determine the variable and fixed portions of a company's costs is:

Accounting 202 Finals Exam STRATEGIC BUSINESS ANALYSIS Page 2 of 4

 A. scattergraph method B. poisson analysis C. linear programming D. game theory E. queuing theory

22. The quantitative method that will separate a semi-variable cost into its fixed and variable components with the highest degree of
precision is: A. simplex method B. least squares method C. scattergraph method D. account analysis E. high-low
23. The following relationships pertain to a year's budgeted activity for Maye Company:
High Low
Direct labor hours 400,000 300,000
Total costs. $154,000 $129,000

What are the budgeted fixed costs for the year? A. $100,000 B. $25,000 C. $54,000 D. $75,000 E. none of the above

24. For a simple regression-analysis model that is used to allocate factory overhead, an internal auditor finds that the intersection of
the line of best fit for the overhead allocation on the y-axis is $50,000. The slope of the trend line is .20. The independent variable,
factory wages, amounts to $900,000 for the month. What is the estimated amount of factory overhead to be allocated for the
month? A. $910,000 B. $950,000 C. $ 50,000 D. $180,000 E. $230,000
Solution: Factory overhead = $50,000 + .2($900,000) = $230,000

25. Which of the following is true about the assumptions underlying basic CVP analysis?
A. Only selling price is known and constant. B. Only selling price and variable cost per unit are known and constant.
C. Only selling price, variable cost per unit, and total fixed costs are known and constant.
D. Selling price, variable cost per unit, fixed cost per unit, and total fixed costs are known and constant.

26. Nonchalant Custom Jewelry sells a single product. 700 units were sold resulting in $7,000 of sales revenue, $2,800 of variable
costs, and $1,200 of fixed costs. Breakeven point in units is: A. 200 units B. 300 units C. 500 units D. None

27. Olalang Ham, Inc. sells hams during the major holiday seasons. During the current year 11,000 hams were sold resulting in
$220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed costs. The number of hams that must be sold to
achieve $75,000 of operating income is: A. 6,600 hams B. 7,500 hams C. 8,400 hams D. None of the choices

28. Please company sells two products A & B. the sales mix consists of a composite unit of 5 units of A for every 3 units of B (5:3).
Fixed costs amounts to 202,500. The unit contribution margins are P4.80 for A and P10 for B. If sales mix ratio is changed from
5:3 to 3:5, only one of the following statements is not true and that is:
A. The Weighted Average Unit Contribution Margin (WaUCM) will increase to P8.05 C. The WaUCM will not change
B. The Break-even Point (BEP) will decrease to 25,155.28 composite units D. Total Fixed Costs will remain the same

29. Quiet Company sells both lamps and clocks, respectively. Consider the following per unit data:
Selling price $75 and $45 Variable costs $8 and $30 Contribution margin $27 and $15 Sales mix 3 and 1
What is the total revenue in lamps Quiet Company will need to break even if fixed costs are $149,952?
A. $333,720 B. $289,800 C. $351,450 D. $377,600

30. Red Company has the following revenue and cost budgets for the two products it sells.

The budgeted unit sales equal the current unit demand, and total fixed overhead for
the year is budgeted at $975,000. Assume that the company plans to maintain the
same proportional mix. In numerical calculations, Red rounds to the nearest cent and
unit. The total number of frames needed to break even is:
A. 37,500 total frames. C. 112,500 total frames.
B. 162,500 total frames. D. 150,000 total frames.

31. To reduce the break-even point, the company may

A. decrease both fixed cost and the contribution margin B. increase both fixed cost and the contribution margin
C. decrease the fixed cost and increase the contribution margin D. increase the fixed cost and decrease the contribution margin

32. Silent Night Co. manufactures and sells Product A. During the previous month, 77,500 units of Product A were sold. Total fixed
costs amounted to P189,100. Its margin of safety was 15,500 units or P65,875. The variable cost per unit of Product A is
A. P1.20 B. P4.25 C. P0.96 D. P2.44

33. Below is the income statement accounts and amounts for Try Co. for 2010:
Sales P400,000 Fixed Costs P200,000 Variable Costs P125,000
What is the degree of operating leverage for Try Company for 2010? A. 1.67 B. 1.45 C. 5.33 D. 3.67

34. Which of the following would be considered in calculating the incremental operating cash flows from a new project?

Accounting 202 Finals Exam STRATEGIC BUSINESS ANALYSIS Page 3 of 4

 A. The marginal revenues from the new project. B. The installation cost of the old machine.
C. The after-tax proceeds from the sale of the old machine. D. The additional working capital requirements.
35. Ubeliever Company calculated pretax accounting income as $125,000. If depreciation is $15,000 per year, with this amount
already being considered in the calculation of pretax accounting income, and with a tax rate of 25%, calculate the incremental
operating cash flows. A. $108,750 B. $93,750 C. $140,000 D. $125,000

36. A company can sell its existing building for $500,000 in order to purchase a larger facility for $750,000. The existing building was
purchased five years ago for $450,000 and has a current book value of $350,000. The pretax net cash outflow from the purchase
of the new building is A. $100,000. B. $250,000. C. $300,000. D. $400,000.

37. Which of the following rules is CORRECT for capital budgeting analysis?
A. The interest paid on funds borrowed to finance a project must be included in estimates of the project’s cash flows.
B. Only incremental cash flows, which are the cash flows that would result if a project is accepted, are relevant when making
accept/reject decisions.
C. Sunk costs are not included in the annual cash flows, but they must be deducted from the PV of the project’s other costs when
reaching the accept/reject decision.
D. A proposed project’s estimated net income as determined by the firm’s accountants, using generally accepted accounting principles
(GAAP), is discounted at the WACC, and if the PV of this income stream exceeds the project’s cost, the project should be accepted.
E. If a product is competitive with some of the firm’s other products, this fact should be incorporated into the estimate of the relevant
cash flows. However, if the new product is complementary to some of the firm’s other products, this fact need not be reflected in the
analysis.

38. When evaluating a new project, the firm should consider all of the following factors except:
A. Previous expenditures associated with a market test to determine the feasibility of the project, if the expenditures have been
expensed for tax purposes. B. Changes in net operating working capital attributable to the project.
C. Current rental income of a building owned by the firm if it is not used for this project.
D. The decline in sales of an existing product directly attributable to this project.
E. All of the statements above should be considered.

39. How are the following used in the calculation of the net present value of a proposed project? Ignore income tax considerations.
Depreciation expense Salvage value Depreciation expense Salvage value
A. Include Include C. Exclude Exclude
B. Include Exclude D. Exclude Include

40. (Ignore income taxes in this problem.) Vamfire Company invested $100,000 in a two-year project. The cash flow was $40,000 for
the first year. Assuming that the internal rate of return was exactly 12%, what was the cash flow for the second year of the
project? A. $51,247. B. $60,000. C. $64,284. D. $80,652.

41. (Ignore income taxes in this problem.) The following data pertain to an investment in equipment:
Investment in the project $10,000 Net annual cash inflows $2,400 Working capital required $5,000
Salvage value of the equipment $1,000 Life of the project 8 years
At the completion of the project, the working capital will be released for use elsewhere. Compute the net present value of the project
using a discount rate of 10%: A. $606. B. $8,271. C. ($1,729). D. $1,729.

42. The evaluation of an investment having uneven cash flows using the payback method:
A. cannot be done. B. can be done only by matching cash inflows and investment outflows on a year-by-year basis.
C. will product essentially the same results as those obtained through the use of discounted cash flow techniques.
D. requires the use of a sophisticated calculator or computer software.

43. (Ignore income taxes in this problem.) McWill Company's required rate of return on capital budgeting projects is 12%. The
company is considering an investment opportunity which would yield a cash flow of $10,000 in five years. What is the most that
the company should be willing to invest in this project?
A. $36,050. B. $2,774. C. $17,637. D. $5,670.

44. (Ignore income taxes in this problem.) Ate Jo Pharmacy has purchased a small auto for delivering prescriptions. The auto was
purchased for $9,000 and will have a 6-year useful life and a $3,000 salvage value. Delivering prescriptions (which the pharmacy
has never done before) should increase gross revenues by at least $5,000 per year. The cost of these prescriptions to the
pharmacy will be about $2,000 per year. The pharmacy depreciates all assets using the straight-line method. The payback period
for the auto is: A. 3.0 years. B. 1.8 years. C. 2.0 years. D. 1.2 years.

45. Which of the following is not discussed in the text as a method for analyzing risk in capital budgeting?
A. Sensitivity analysis. B. Beta, or CAPM, analysis. C. Monte Carlo simulation. D. Scenario analysis.
E. All of the statements above are discussed in the text as methods for analyzing risk in capital budgeting.

Accounting 202 Finals Exam STRATEGIC BUSINESS ANALYSIS Page 4 of 4