CHIANG KAI SHEK COLLEGE
NAME
2
SCORE
COURSE/YEAR
Multiple Choice. Choose the best answer. Write your letter choice in CAPITAL LETTER in the
answer sheet provided above. No erasures allowed.
1. A company uses two major material inputs in its production. To prepare its manufacturing
operations budget, the company has to project the cost changes of these material inputs. The
cost changes are independent of one another. The purchasing department provides the
following probabilities associated with projected cost changes.
Cost Change
Material 1
Material 2
3% increase
0.3
0.5
5% increase
0.5
0.4
10% increase
0.2
0.1
The probability that there will be a 3% increase in the cost of both Material 1 and Material 2 is
(E)
A. 15%
C. 40%
B. 20%
D. 80%
CIA 1194, 0597
2. Ryerson Company has three sales departments, each contributing the following percentages
of total sales: clothing, 50%; hardware, 30%; and household sundries about 20%. In the past,
the clothing, hardware, and household sundries department had error rates of about 2%, 5%
and 2.5%. A random corporate audit has found a weekly damaged goods rate of sufficient
magnitude to alarm Ryerson’s management. The probability (rounded) that this rate occurred
in the clothing department is (M)
A. 1%
C. 33-1/3%
B. 25%
D. 50%
CMA 1292
3. Sago Co. uses regression analysis to develop a model for predicting costs. Two different cost
drivers (machine hours and direct materials weight) are under consideration as the
independent variable. Relevant data were run on a computer using one of the standard
regression programs, with the following results:
Machine hours
Direct materials weight
Y intercept coefficient
2,500
4,600
B coefficient
5.0
2.6
R2
0.70
0.50
Quiz No.
Which regression equation should be used?
A. y = 2,500 + 3.5x
B. y = 2,500 + 5.0x
C. y = 4,600 + 1.3x
D. y = 4,600 + 2.6x
AICPA 1192
4. The results of regressing Y against X are as follows:
Intercept
Slope
When the value of X is 10, the estimated value of Y is
A. 6.78
C. 20.63
B. 8.05
D. 53.84
Coefficient
5.23
1.54
CMA 0408
5. Soft, Inc. has a target total labor cost of P3,600 for the first four batches of a product. Labor is
paid P10 an hour. If Soft expects an 80% learning curve, how many hours should the first
batch take? (D)
A. 57.6 hours.
C. 230.4 hours.
B. 140.63 hours.
D. 360 hours.
Bobadilla
6. A manufacturing company required 800 direct labor hours to produce the first lot of four units
of a new motor. Management believes that a 90% learning curve will be experienced over four
lots of production. How many direct labor hours will be required to manufacture the next 12
units?
A. 1,792
C. 2,016
B. 1,944
D. 2,160
CMA 0408
7. Hovland has estimated the first batch of product will take 40 hours to complete. A 90%
learning curve is expected. If labor is paid $15 per hour, the target labor cost for 4 batches of
product is (E)
A. $600.
C. $2,160.
B. $1,944
D. $2,400
D, L & H 9e
8. The Webb Company's new process will be carried out in one department. The production
process has an expected learning curve of 80%. The costs subject to the learning effect for the
first batch produced by the process were $10,000. Using the simplest form of the learning
function, the cumulative average cost after the sixteenth batch is: (E)
A. $3,276.80
D. $8,000.00
B. $4,096.00
E. $10,000.00
C. $5,120.00
AICPA adapted
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CHIANG KAI SHEK COLLEGE
9. BG plc has recently developed a new product. The nature of BG plc's work is repetitive, and it
is usual for there to be an 80% learning effect when a new product is developed. The time
taken for the first unit was 22 minutes. Assuming that an 80% learning effect applies, the time
to be taken for the fourth unit is nearest to (D)
A 9.91 minutes.
D 15.45 minutes.
B 9.97 minutes.
E 17.60 minutes.
C 14.08 minutes.
CIMA 0503
10. Moss Point Manufacturing recently completed and sold an order of 50 units that had costs as
shown in the below.
Direct materials
$1,500
Direct labor (1,000 hours X $8.50)
8,500
Variable overhead (1,000 hours x $4.00)
*4,000
Fixed overhead
**1,400
$15,400
* Applied on the basis of direct labor hours.
** Applied at the rate of 10% of variable cost.
The company has now been requested to prepare a bid for 350 units of the same product.
If an 80% learning curve is applicable, Moss Point’s total cost on this order would be estimated
at (D)
A. $26,400
C. $37,950
B. $31,790
D. $54,120
CMA, Adapted
11. Under frost-free conditions, Cal Cultivators expects its strawberry crop to have a $60,000
market value. An unprotected crop subject to frost has an expected market value of $40,000.
If Cal protects the strawberries against frost, then the market value of the crop is still expected
to be $60,000 under frost-free conditions and $90,000 if there is a frost. What must be the
probability of a frost-free condition for Cal to be indifferent to spending $10,000 for frost
protection?
A. 0.200
C. 0.750
B. 0.667
D. 0.800
12. Kane Corp. estimates that it would incur a $100,000 cost to prepare a bid proposal. Kane
estimates also that there would be an 80% chance of being awarded the contract if the bid is
low enough to result in a net profit of $250,000. What is the expected value of the payoff?
A. $0
C. $180,000
B. $150,000
D. $220,000
AICPA 0592
Quiz No.
2
13. The Teeners’ Club sells fresh hot cider at Recto football games. The frequency distribution
of the demand for cups of hot cider per game is presented below:
Unit sales volume
Probability
10,000
0.10
20,000
0.15
30,000
0.15
40,000
0.40
50,000
0.20
The hot cider is sold for P35.00 a cup and the cost per cup is P20.00. Any unsold hot cider
is discarded because it will spoil before the next game.
What is the estimated demand for hot cider at the next football game if a deterministic
approach based on the most likely outcome is used?
A. 16,000
C. 40,000
B. 34,500
D. 50,000
Bobadilla
14. Pongo Company’s managers are attempting to value a piece of land that they own. One
potential occurrence is that the old road that borders the land gets paved. Another possibility
is that the road does not get paved. A third outcome is that the road might be destroyed and
completed replaced by a new road. Based on the following future states of nature, their
probabilities, and subsequent values of the land, what is the expected value of the land?
Future States of Nature (SN)
Probability
SN 1: Current road gets paved
0.5
SN 2: Road does not get paved
0.4
SN 3: Current road destroyed and replaced with new road
0.1
Estimate of land value under each possible future state of nature: (E)
Value if SN 1
$200,000
Value if SN 2
$100,000
Value if SN 3
$550,000
A. $133,333
C. $225,000
B. $195,000
D. $283,333
Gleim
The next two questions are based on the following information.
Gleim
Poppin' Corn Co. has gross profits of $50 for each box of popcorn it sells. Poppin' Corn also has a
$20 holding fee for each box of popcorn it does not sell, and a $25 loss of goodwill for every box of
popcorn it is unable to provide to its customers. Managers are expecting to produce 1,000 boxes
next month.
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CHIANG KAI SHEK COLLEGE
15. What is Poppin' Corn's expected net profit if demand is predicted to be 950 boxes?
A. $45,000
C. $46,500
B. $46,250
D. $47,500
16. What is Poppin' Corn's expected net profit if demand is predicted to be 1,100 boxes?
A. 47,000
C. 48,000
B. 47,500
D. 50,000
17. Schippi Inc. is developing a new type of watch. The optimistic time to complete the project is 7
weeks, the most likely time is 13 weeks, and the pessimistic time is 16 weeks. Using PERT,
how long is the expected duration of this activity?
A. 6 weeks.
C. 12.5 weeks.
B. 7 weeks.
D. 13 weeks.
Gleim
18. California Building Corporation uses the critical path method to monitor construction jobs. The
company is currently 2 weeks behind schedule on Job#181, which is subject to a $10,500-perweek completion penalty. Path A-B-C-F-G-H-I has a normal completion time of 20 weeks, and
critical path A-D-E-F-G-H-I has a normal completion time of 22 weeks. The following activities
can be crashed.
Activities
Cost to Crash – 1Week
Cost to Crash – 2 Weeks
BC
$ 8,000
$15,000
DE
10,000
19,600
EF
8,800
19,500
California Building desires to reduce the normal completion time of Job#181 and, at the same
time report the highest possible income for the year. California Building should crash (M)
A. Activity BC 2 weeks.
B. Activity EF 2 weeks.
C. Activity BC 1 week and activity EF 1 week.
D. Activity DE 1 week and activity EF 1 week.
CMA 1288
2
Which item below would be part of a linear programming formulation of this problem?
A. Maximize: Contribution < 4A + 5B.
C. Subject to: 2.5A + 4B < 60.
B. Subject to: A = 0.
D. Subject to: 4A + 5B = 130.
CIA 1191
20. ABC Craft Co. is evaluating the profitability of a new product. If the product becomes
successful the present value of future cash flow (excluding investment) is estimated to be
P3,000,000. If the product is not successful the present value of the condition is estimated at
P500,000. The required investment is P1,500,000.
What are the probabilities that would have to be assigned to the successful and not successful
to be indifferent between the two actions – invest and do not invest? (M)
RPCPA 1085
A.
B.
C.
D.
Successful
40%
45%
50%
60%
Not successful
60%
55%
50%
40%
Answer Sheet
1. A
6. A
11. D
16. B
2. C
7. B
12. C
17. C
3. B
8. B
13. C
18. D
4. C
9. B
14. B
19. C
5. B
10. D
15. C
20. A
19. The data below were gathered on two different machine centers and two products.
Product Hours per Unit
A
B
Hours Available
Machine Center 1
2.5
4
60
Machine Center 2
6
3
70
Contribution per unit
$4
$5
Quiz No.
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