ReSGQ - The Review School of ecountomog + Planagement Services ~ MS-A: MANAGEMENT ACCOUNTING MANAGEMENT ~ the process of planning, organizing, and controlling tasks to realize the objectives of the organization, | BASIC FUNCTIONS OF MANAGEMENT Panning involves PLANNING setting immediate and long-term objectives. ! =)! dleciding which alternative is best sulted to attain the set objectives. organizing involves: ‘ORGANIZING deciding how to utilize available resources as plans are carried out ——! _ - tackling activities necessary to achieve objectives such as staffing, subordinating, rane directing and motivating ; Controlling involves: CONTROLLING | - comparing actual performance with set plans or standards. 2 deciding what corrective actions to take should there be any deviation (variance) between actual and planned performance NOTE: decision-making is an inherent function of management; all management functions would require certain amount of decision-making MANAGEMENT BY OBJECTIVES vs. MANAGEMENT BY EXCEPTION MANAGEMENT BY OBJECTIVES i a procedure in which a subordinate and » supervisor agree on goul and the methods of achieving them and develop a plan in accordance with that agreement. The subordinate is then evaluated with reference to the agreed plan at the end of the period MANAGEMENT BY EXCEPTION fs a technique of highlighting those which vary significantly from plans ana standards in line with the management principle that executive time should be spent 0” items that ace non-routine and are identified as top priority MANAGEMENT ACCOUNTING - an application of appropriate techniques and concepts in processing historic: ‘and projected economic data of an entity to assist management in establishing plan to ‘meet economic objectives and in making rational decisions with a view toward achievinc) the objectives. (American Association of Accountants) MANAGEMENT ACCOUNTING vs. FINANCIAL ACCOUNTING FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING ) 1, User of information Primarily for external users Exclusively for internal users (manageme & 2. Guiding principles Generally Accepted Accounting Principle Management wants and neéds © 3. Optional/Mandatory Mandatory (especially for public entit Discretionary or optional { 4: Type of information . Primarily monetary (financial).in nature Monetary and non-monetary 5, Emphasis of reports Reliability (precision of data) Relevance (timeliness of data) ® 6, Purpose/End result Financial reporting and compliance Decision-making 7. Source of data "From company’s (internal) info system From internal and external sources A 8. Amount of detail Compressed and simplified Extensive and detailed F 9. Focus of information - Focus mainly on business as a whole Focus on segments and business as 2 whole F 10. Frequency Periodic (annually, quarterly) As frequent as need arises 11, Time orientation Mainly historical (past) data Future-oriented using current and past data 12. Unifying mode! Assets = Liabilities + Equity No unifying mogel or equation ceili lwetticiakituied ke heron: > aay MRR UL eaten pine siemece Sol eee ee nciee ) D sreeate congestion Sr) Reese SE wanil age.t of 4 pages tcehnological 4c ernie ts, Pag 1 ne rome faces jnew ISO SE 4 Ce oyeukves th MQE Rochers Moke! Due to ree eng. Marasemert fcrountw's “ech ome mpollty of qitibt) conitay lear duc : hos, o Nes ledme, Canty rot Conguitons. play, LIF wh y ae et ticoton hee nn T-Rereaig OMT Nowa i theo P neonprdetivery o aved J wpodoe ettee ZT ethan (michel) | nates Em Ridge rea me Sree < feat, i nonce, COs de ease (Weg pacie ts) Sen Sm enn 1 cig Tivo : Slices me ceecnee over = Sane Con Try EeSUs Us Paeal Sino Drea Mi - : MANAGEMENT ACCOUNTING © PF® = S8>> Page 3 of 4 pages &ReSA - the Review School of Uccourtoneg MS-A MANAGEMENT ACCOUNTING 1 12. 13. 14. 15. 16. 17. 18. ‘The controller primarily ‘a. Occuples a line position b. Occupies a staff position ©. Occupies a non-supervisory rank-and-file position d. Has no or very little influence in the decision-making process _ A staff position ‘a. Is more often superior in authority to a line position b. Is exercised downward in doing the command function . Is directly involved in carrying out the basic company objectives d._ Is supportive in nature, providing Services and assistance to other company segments Which of the following statements is true? ‘a. The controller performs primarily a line function ~ b. The treasurer performs primarily a line function c._The primary functions of a controller are the basically the same as those of a treasurer d. Managers with staff functions are directly involved in the provision of goods and services Which of the following is most likely a line position? : ‘a. VP for Research of a conglomerate firm BL Store manager of a retail convenience outlet - 9H VEE) ogc Chief financial officer of a merchandising company . Human resources manager for an educational institution Controllers are usually NOT concerned with a. Preparation of tax returns b. Reporting to government c. Protection of assets Ss 4. Investor relations - quecty oF +E" Treasurers are usually NOT concerned with ‘a. Financial reporting b. Short-term financing ¢. Cash custody and banking Credit extension and collection of bad debts Which of the following is NOT addressed by the Standards of Ethical Conduct for Management Accountants? a. Integrity —bonccky b. Objectivity c, Competence d._ Independence Management accounting information is deemed most successful if it a. Is accurate b. Is easily understood by the user c.Helps managers improve their decisions d. Helps creditors evaluate the company's ability to pay its debts Page 4 of 4 pages07/ ef 2ele (2) RSA. The Review School of bacountancy « Management Services MS-B: MANAGEMENT ADVISORY SERVICES (MAS) MAS ~ refers to the consulting services performed by CPAs and other financial advisors to improve client’s use of its capabilities and resources to achieve business objectives. Within CPA firms, MAS departments are kept independent from other departments like audit and tax. Typical examples of MAS engagements include financial planning, computer installation and wealth management. CHARACTERISTICS OF MAS ENGAGEMENTS Broad in scope Involves problem solving Involves varied assignments Engagements are usually non-recurring Relates to the future (.e., forward looking) Engagements usually require highly qualified staft Human relations play a vital role in each engagement Services are rendered for the management that is usually a third-party client BROAD STAGES IN MAS ENGAGEMENTS 1) ANALYSIS STAGE - involves determining facts and circumstances, identifying objectives, and defining the problem or opportunity for improvement 2) DESIGN STAGE - involves evaluating possible solutions, communicating findings and presenting recommendations 3) IMPLEMENTATION STAGE - jnvolves scheduling actions and providing technical assistance in the implementation of the recommendations. (NOTE: to maintain independence, the business advisor shall NOT implement the recommendations but provide technical assistance only in the . implementation. SPECIFIC STAGES IN MAS ENGAGEMENT Negotiating the engagement Preparing for and starting the engagement ‘Conducting the engagement Preparing and presenting the reports and recommendations Implementing the recommendations Evaluating the engagement Post engagement follow-up MANAGEMENT CONSULTANT - refers to a’ person who is qualified by education, experience, technical expertise to advise and assist businessmen on a professional basis in identifying and solving specific management problems regarding business ‘operations. REASONS FOR HIRING MANAGEMENT CONSULTANTS ‘A consultant is considered independent, objective and detached to the problems of the organization. + Aconsultant possesses special knowledge and skills that are not normally available from company personnel + Acorisultant serves as a catalyst for much needed changes that are not normally perceived by ‘company personnel. + Incertain business situations, hiring consultants are less expensive than hiring full-time managers. FACTORS FOR THE EMERGENCE & GROWTH OF MANAGEMENT CONSULTANCY Lack of competent staff ‘Trend towards industrialization Growth in size and complexities of business firm ‘Complexities in managing and conducting a business Emergence of new management solutions and techniques Need for adequate and timely information for management decision-making DOCUMENTS USED TO FORMALIZE MANAGEMENT CONSULTANCIES & MAS ENGAGEMENTS CONTRACT - a legal document often prepared by the client, incorporating a proposal letter or ‘engagement letter prepared by the business advisor. + PROPOSAL LETTER ~ an offer of service which, if accept contractual agreement. + ENGAGEMENT LETTER - a contractual agreement used when the client has already agreed that the business advisor will conduct the engagement. + CONFIRMATION LETTER - a brief and concise statement of agreement previously reached with & cchent. sd and approved by the client, becomes a Page 1 of 4 pagesew. KeSO - the Review School of Cacomntoney MS-B MANAGEMENT ADVISORY SERVICES ‘ MANAGEMENT ADVISORY SERVICES by CPAs . Management consultancy is not limited to CPAs. However, CPAS have distinct advantages over other business sdvisors as they are already familiar with the client and its business, and they enjoy the client's ‘Onfuance: CPAS are members of a profession with recognized standing and equipped with technical know-how ac culatiig and taxation, ESSENTIAL ATTRIBUTES THAT MAKE A CPA QUALIFIED TO RENDER MAS. + Technical competence ; Professional independence, objectivity and integrity + Analytical ability and ‘experience in solving business problems * Familiarity with the client's finance, control systems and business problems ‘SCOPE OF MAS BY CPAS MAS engagements are usually connected with the services rendered by CPAs in the areas pf auditing, tax, and accounting, and may involve activities such as: + Introducing new ideas, concepts, and methods to management. + Counseling management in its analysis, planning, organizing, operating and controlling functions. + Reviewing and suggesting improvement of’ policies, procedures, systems, methods,. and ‘organizational relationships: + Conductirig special studies, proposing pians and programs, and providing guidance and technical assistance in their implementation, TYPES OF CLIENTS SERVED BY CPAs IN MAS ENGAGEMENTS + Private-owned business firms. + Professtonal associations or organizations + Governmental agencies and organizations + Not-for-profit nongovernmental organizations: *+ Others organizations like labor unions and religious groups VARIOUS TYPES OF MANAGEMENT ADVISORY SERVICES BY CPAS + Management Accounting-Related Services This involves providing assistance to management related to planning and controlling business . operations as well as decision-making. (Examples: cost reduction studies, cost accounting systems, financial statement analysis, budgeting, variance analysis and responsibility accounting) + Financial Management-Related Services This involves the study of working capital and long-term capital requirements as well as analysis and study of capital investment proposals. (Examples: capital budgeting, working capital management, study on cost of capital and optimal capital structure) + Design and Appraisal of Accounting System This involves development of an accounting system for a newly- organized firm or the revision, partial or complete, of an existing accounting system. (Examples: systems engagement and accounting software Selection and implementation. + Globai-Risk Management Solutions : This involves managing the totality of risks ~ financial, operational and systems -- and over-all strategy to improve financial and business performance. (Examples: financial risk management, strategic risk management, systems risk management, compliance risk management and internal ‘audit services) + Transaction Services This involves services related to mergers, acquisition, divestitures, Joint ventures and strategic alliances. (Examples: due diligence services to uncover potential financial and strategic risks and rewards) + Other Services: Project feasibility studies Financial advisory services Operations research (quantitative methods) Industrial engineering Project finance and privatization Valuation services Business recovery services Dispute analysis and investigations Computer risk management Organization and personnel General management Marketing consultation Page 2 of 4 pagesKeSQ - The Review School of Gccourtoncy MS-B MANAGEMENT ADVISORY SERVICES MAS PRACTICE STANDARDS CPAs performing management consulting and other advisory services are considered in the practice of ‘accountancy and are bound by the Code of Ethics for Professional Accountants. Consider the following MAS Practice Standards: 1 2 3 Personal Characteristics - in performing MAS, a practitioner must act with integrity and objectivity and be independent in mental attitude. Competence - engagements are to be performed by a practitioner having competence in the analytical approach and process, and in the technical subject matter under consideration. Client Benefit -a practitioner should notify the client, before accepting the engagement, of any reservations he may have concerning the realization of the anticipated benefits. Due Professional Care - the MAS practitioner shall exercise due professional care by observing rules. and regulations applicable to specific MAS engagements. Understanding with Client - before undertaking the engagement, a practitioner is to inform his client of all significant matters related to the engagement. Planning & Supervision - the MAS practitioner shall adequately plan and supervise an engagement in ‘@ manner that provides reasonable assurance that the work is conducted in accordance with the under professional standards and rules of conduct. Sufficient Relevant Data - sufficient relevant data are to be obtained, documented and evaluated in developing conclusions and recommendations. Communication of Results - all significant matters relating to the result of the engagement (e.9., principal findings, major facts and assumptions used) are to be communicated to the client. MULTIPLE-CHOICE QUESTIONS (with suggested answers) What is the primary purpose of Management Advisory Services? ‘a. To help clients identify their problems b. To help clients maximize their resources ©. To reach and service more potential clients by the CPA firm d. To improve the client's use of its capabilities and resources to achieve business objectives Which of the following is NOT a characteristic of Management Advisory Services (MAS)? ‘a. MAS is broad in scope b. Beneficiary of service is management . MAS is repetitive as far as the same client is concerne d,_ MAS involves problem-solving affecting future operations of the client Which of the following is NOT a qualification of a CPA in MAS practice? ‘a. Auditor of the client b. Analytical experience in problem solving . Professional independence, objectivity and integrity 4d. Familiarity with the client's financial accounting and internal control systems . Which of the following statements is true? Strict adherence to generally accepted accounting principles in MAS is required In a management services engagement, the independent CPA renders technical advice A non-CPA Is prohibited under the revised accountancy law to engage in professional management advisory services practice 4. A CPA in management services engagement may take position that would impair its independence if the client is not his audit client concurrently. Which of the following is NOT an area in MAS practice? a, Conducting special studies b, Marketing and public relations work ¢._ Introducing new ideas, concepts and methods 4d. Reviewing and suggesting improvement of policies, procedures, systems and methods Management Services of CPAs cover atl the following, EXCEPT ‘a. Project feasibility study cc. System design and implementation b. Audit, tax and legal services d. Organizational development and planning ‘The MAS engagement that involves providing assistance to management in relation to planning, controlling and decision making ‘a. Financial management Taxation b. Management accounting Financial accounting This engagement invaives the review of compliance with regulatory requirement and ethical conduct standards. a, Strategic risk management . Operational and systems risk management b. Financial risk management d, Compliance risk management These involve services related to mergers, acquisitions, divestitures, joint ventures, spin-off and strategic alliance ‘a. Strategic risk management Compliance risk management b. Due diligence'audit d, Financial risk management Page 3 of 4 pagesKeSQ the Review School of Gecomtancy MS-B MANAGEMENT ADVISORY SERVICES 10. Management consultancy 8 “a. Te limited to CPAs € Canbe practiced by anybody D. Is not limited to CPAs d.__ Te exclusive tothe CPA profession GP most detintions of consultancy’ would include services related to the folowing, EXCEPT cP 3. Information technology Legal advisory ©. Corporate strategy «. ~ Systems and operations management 412, Which ofthe following is NOT common reason for hing a management consultant? © 7" "a, To render an independent opinion b. To provide specialized skills and experience <. To serve as a catalyst for needed changes in the workplace 4. To implement solutions and decide on business matters on behalf of the client 13. It Is an offer of service which, if accepted and approved by the client, becomes @ contractual agreement. D a. Contract Engagement letter b. Confirmation letter d. Proposal letter 14, The engagement letter generally includes the following, EXCEPT 2 a. Objectives and benefits b> Fees and bing arrangement Scope of the work and role ofthe consultant d._ Personnel wo will be assigned 0 the engagement team 15, The MOST important factor in selecting an engagernent team Isto assign consultants c a. ' With prior experience in the client's industry ._ With @ combination of Skils and experiences in Various business functional arees as well as in afferent industries With the appropriate skils, experiences and types of thinking to deal eectively with the clients protien 4. Who are likely to employ diferent approaches to problem solving, such as. highly imaginative thinking, Or unusual skll in the interpretation Sd. Use, of paetia ey Statistical data GH Factors that must be considered when defining the target level of competence’ of management consultants inchide the following, EXCEPT D 2. Scope of practice area © Service variety b.. Client requirement d. Investment required 17. The following are considered in determining the scope of services that a CPA may perform, EXCEPT D ‘a. Independence c.-Requirement for specialization b. Competence 4. Range of fees that the CPA will earn ‘PAs a business consultant, the CPA practitiover shovla cc ¥ “a, Encourage dependence of ‘lent: on the consuitant’s staff so. as to. pinpoint clear Fesponsibilty im implementing systeme. b. Exercise administrative contra! over the client's staff to avoid unnecessary delays in mplementation. Not ake responsibility for making decisions and policy judgments in MAS engagements. d. Conduct his engagement as ithe isa member of the cients orgariseten, 19, Which of the following statements is NOT acceptable? © * a, ACPA provides consulting services to an existing audit client . ACPA offers and provides consulting Services to two major competing ctents: ACPA shares with @ new clent substantial Information regarding ensther erent belonging to samme industry 4. ACPA represents three major players in rationalizing the industry's incentives before the Government public hearings 20.4 management advisory services engagement generally involves the following activities in’ what particular order? (NOTE: this question was given/asked in the 1996 CPA Licensure Examinations) T. Post engagement follow-up 1, Tmplementirg the recommendation LIK, Conducting the engagement TV. Negotiating the engagement Preparing for and starting the engagement VI; Evaluating the engagement Vil, Preparing and presenting the report and recommendation VILVI,V,1V, 111,11 and 1 TUVYVEVIT and 1 IV,1I,V,VIALVIT and 1 1V,V,TU,MI,11,VI and 1 Page 4 of 4 pages“© GS) ese. The Retiny EE of Geico, « 2Macsngunsdi Seve : PE Fon Ms- ; CONTEMPORARY ISSUES IN MANAGEMENT ACCOUNTING Business Process Reengineering (BPR) Continuous Improvement Kaizen Tustin-Time (IT) Total Quality Management (TQM) | Computer-integrated | Manufacturing (CIM) | m identifies its eritleal success. 2) Studies the best practices of other | firms forthe identified cca factors 3) Implements those improvements io the firm's process to | match or exceed performance of other firms. Si nl Any series of steps followed to cary obt business Redesigning or elimination of ‘process to reduce costs and opportunites for errors. Features of BPR: 1) to improvement 2) Business process is | diagrammed in detats, analyzed thoroughly and redesigned completely 3) Simplification of | business process 4) Elimination of non: value -added activites, | This is the constant effort to: 1) eliminate waste, 2) reduce response time, 3) simpy the design | ‘of both products and processes, 4) and improve quality and customer service. While often also called as *kaizen,”continuous improvement can also be done through BPR. ‘Kaizen’ refers to the process of cost reduction during the manufacturing phase of an existing Product. “This process takes place gradually, ar through smal! continual improvements rather than through radical change. | Reengineering, on the other hand, isa bit more drastic, often involving the complete redesign of | 2 process in hopes of finding a creative new way to accomplish an objective. Generally | ‘control the entire production process | ‘allowing hour-by-hour manufacturing management; CIM employs the use of state-of-the-art equipment that help firms meet the challenge of global competition; CIM has a significant effect | on the compasition and behavior of product costs, | NOTE: The rate at which technology is changing means that the iif cycles of most products are | becoming shorter, enabling manufacturers to produce a more diverse set of products. [IT Js based on a “demand:-pull” system; inventories are purchased or produced only as needed | | tor production or sale; ina JIT system, inventories are reduced to the minimum level and, in | some cases, reduced t0 zera (|e, elimination of non-value-adked costs). JIT Purchasing ~ raw materials are received just in time for production; goods for sale are received just in time for delivery (sale) JT Manufocturing - manufactured meters are conpeted just tine for reduction —_ pr aCe a iMeeoe aan ec pony ik See integrate all organizational functions (marketing, finance, design, engineering, production, customer service, etc.) to focus ‘on. meeting CUSTOMER expectation and business objectives. TQM requires management to ‘develop policies that ensure products and services exceed customer's expectations; it i a formal effort to improve quality throughaut an organization's value chain, ‘Theory of Constraints Pipe eset, ‘Computer-Aided ‘Manufacturing (CAM) (Toc) eal bats Computer-Aided Design The value chain is @ sequence of activities that work together eae ae cal ‘organization; the term “value” refers to the increase in the usefulness of the product or service iue to the customer. foC considers the effective management of constraints as @ ) key to success in meeting business | objectives; ToC is considered as a process of continuous improvement. CAD is the use of computers in product development, analysis, design modification to lee i MY and beirrance of ei ef implement and control production, Flexible Manufacturing System (FMS) Time-Based ‘Competition ‘Cross:Functional Teams FIG is @ computerized network of automated equipment that produces one or more groups of _parts Or variations of a product in a flexible manner. —_ | Time-based. competition relates to “doing things faster" fo Gain a competitive edge — by | reducing the time (¢.9., lead time, response time, on time and downtime) that it takes to | vanufgcture a product and transporting It to the market more quickly. CCross-functional_ managerial. teams. bring together production and “operations rianagers, | marketing managers, purchasing and materiakhanding specialists, design engineers, quality ‘management personnel, and managerial accountants to focus their varied expertise and, experience on virtually al management issues. | Operational Auditing | @k.a. management audit and performance audit) Effectiveness pemaency. Economy 10 identify/ monitor costs of a proluct i noigout Hs We a -] The use of intemet as a competitive tool in conducting business _ ‘Operational audit is conducted to evaluate the effectiveness and/or efficency of operations; “operational” implies focus on operations, as opposed to financial postion; "management | implies that information obtained in the audit process is useful to management decision making; | ‘performance’ implies evaluation of the performance of persons or units in meeting the entity's an entity uses its resources to achieve its goals. This refers to an entity's success in maximizing the use of limited resources to achie Page 1 of 4 pagesRS - The Reviiw School of decourtoncy Ms-D CONTEMPORARY ISSUES in MANAGEMENT ACCOUNTING MULTIPLE:CHOICE QUESTIONS (Sources; CMA/CIA/AICPA/Various texts and test banks) Se Ra ee te alvelieh spimnigaie eave Job in training system zeto cost system p, fob in transit system d. zero inventories system Gf 3: gent yates Lage oa ies ert purcixetcrese € Sm nd ios ene purchase orders Bie seca artes Fe ey prc pat et Lage afc ene Renan rose ofons Ia end nce more eh esd leo waft vlan te A a, Receive more frequent deliveries of materials ¢ . 'b. Hold large inventones (o serve as buffers Pe ot tes pecan asta d. Need workers with fewer skills / Rconventional manufacturer Is more likely than 4 just-in-time manufacturer to c 2, Have a short production cycle © Hold large inventories to serve as buffers . Produce goods in small batches 1. Receive more frequent deliveries of materials [il of the following are characteristics of a just-n-timie manufacturing environment, EXCEPT D 2. Frequent deliveries of materials . "Little or n0 jnventory of finished product Manufacturing cells Longer production cycle He Which of the following Is a characteristic of jiss-in- ime (31T) inventory management systems? a. JET users determine the optimal level of safety siocks b. JIT is applicable only to large companies ¢. _JTT does not really increase overall economic efficiency because it’ merely shifts inventory levels further up the supply chair: IIT relies heavily on. good-aualty CA} Allof the following are potential financie! banents of justin nie, EXCEPT ateniais a Reducing the risk of obsolescence © Lomer investments in inventories Reducing manufacturing lead tine i. * Lower Investments in plant space for inventories a7 Nhe the folowing do atime TF} operons ry rat 2. Discretionary fixed costs ©. Avoidable costs b. Non-value-adding costs 4, Direct costs \Wl-implemented just-in-time production and purchasing techhiques ‘a. Result in large stockpiles of jnventory to keep:production nunning b. Strengthen 3 company’s ability to compete sn the marketplace Increase a rellance on long-term customer forecasts d, Reduce a company’s competitive edie JB: The emyieling and continuing improving effort by everyone in the organization to understand, meet and exceed the expectation of customers. ; ic ‘2. Justintime manufacturing & Total quaity management 6. Conventional manufacturing 4: Total quantity management Which of the following 3t the core of the definition of tote quality management (TQM)? 8 . Customer surveys ©” Employee satisfaction bb. Continuous improvernent , Supplier inspections AAT ray tn fo eng TA 0 hes a. Greater customer Satisfaction & Recuced delivery charges b. Reduced delivery time . Greater employee participation TQM should be viewed 2s A ’. Customer centered and employee driven Management centered and technology driven 1b. Policy centered and procedure driven d._ Goal centered and standard driven « Jn which of the following organizations ces total quality management (TQM) work best? ° a, Hierarchal ©. Teanis of people from the same specialty ». Specialists working individually Teams of people from different specialties 59 renee ay rn 9 oe 2. Mest follow a. proce pees pe cessful Involves some lower-level managers and all senior executives b. Takes from three ta fixe wears. . 15.4 bottom up process, with senior management )volved only inthe: finat phasé- Page 2of 4 pagReSU - The Review School of Cccowrtancy MS-D CONTEMPORARY ISSUES in MANAGEMENT ACCOUNTING ‘A traditional quality control process in mafufacturing consists of mass inspection of goods only at the end of a | production process. A rajor deficiency of this traditional quality control process is that D 3. Tt is ewpensive to do the imspectiangiat the end of the process | b. It isnot possible to rework defective tems © Itis not 100% effective 4d. ft does not focus on jmproving the entire production process et Under soa quay manacemers (TQM) apo Measurement occurs throughout the process and errors are caught and corrected atthe source b Quality control is performed by highly trained inspectors at the end of the production process: c. Upper management assumes the: primary responsibility for the quality of the products and services d. -Alarge number of suppliers are used in order to obtain the lowest possible prices: Dac stile OBA PME MES EA Ton Fri oe ive vou aa seis Res i cece MMs id ses 2 epee eee eer a c. Reducing the supplier base: Gd. Selecting suppliers based on price and their capability and willingness to imprave quality, cost, Se a eee eee 29: The process of instuting procedires and then obtaining feedback to ensure that al pars ofthe organization are functioning effectively and moving toward overall company goals. Decentralization © Panning 'b. Benchmarking 4. Control 29. Which ofthe folowing quay tools is another term for continuous improvement? 3. Theory of constraints © Sixsigma be Kaizen d, ean manufacturing BF Rrooktas compares how tasks are performed internally against the best practices of industry leaders is ey ‘a. Process value analysis ©. Benchmarking b. Reengineering 1d. None of the above 9. 2% Tis. agroach to deveoping new ws (radical redesign) to perform existing atts is called 7a.” Process value analysis Benchmarking . Business Process Re-engineering 1d, None of the above 3 Zin Process Reengineering, two objectives are to simpify and to possibly eliminate 8 a, Value-added activities +. Constraint 'b. Non-value-added activities 4. Non-constraint 74 RD, production and customer service are business functions that are all included as part of A a. The value chain © Marketing i Benchmarking . The supply chain (PB The value chain isthe sequence of business functions in which 2 a. Value is deducted from the products or services of an organization Value is proportionately added to the products or services of an organization Products and services are evaluated with respect to their value to the supply chain d. Usefulness is added to the’products or services of ary organization J6 Which among the following activites is considered as value-added? A a. Processing Storing b. Moving 4. Inspecting A 7, Ther are four broad classes of acts nthe yale chan, Research and developments por of a. Activities related to getting ready to make the product b. Activities related to making the product Activites related to dealing with the customer __ ds Other activities that support the fist three activites jeer aioe apentitirs pean tine tae ages Page 3of4 pages + a eyMS-D ReSU - the Review School of Gecomtoncy CONTEMPORARY ISSUES in MANAGEMENT ACCOUNTING There ae four broad asses of activities in the valve chain. Biting actives part oF c 7 "3, Atle felated to geting zeady to make the preduct ._Aeivtes related ta making the product ©. Atos related to deatieg Wath the customer 4. Other actnies that suppor the rst thee aries JP: There ae four broad classes of activities in the value chain Aocoulitng actvtyis part of o a. Activities related to getting ready to inake the product b. Activities related to making the product Activities related to dealing with the custorner d, Other activities that support the Fist three 2 ities (>: Coniputer integrated manufacturing (C1) pan een ceote rend rsegniton D._ Diagnose the reason fr a defect Acces timely av accurate nfrmationseading production dk Respond fate to changes in customer preferences allows management to do all of the following, EXCEPT As. Kopaior justification for investments my computer integrated manufacturing (CIM) projects is A a. Reduction in the costs of spoilage, réworked units, and scrap D. Lawed book value and deprecation expense for factory equipment Increased working capital a. Stabilization of market share b. The physica! size of the craanization gets smaller d) The number of senior managers decreases, 5 36 and 37-are Hased on the following information Te CrETG, eee ee aA an eaters Toshi be used by Mate Senice cxopeaaiore, manwecusing Pic ee oe ae MA) . Flexible mahutacturing syste FB) Automated toler machines MC), Automated storage and retrieval system (4 0) Computer-aided design ME) Computer-integrated manufacturing f) CAT scanners MIS. G)\ Bar code systeins FH)” Electronic funds transfer 1) Autopilot systems F/S 3) Magnetic-ink character recognition codes Sk) _ Automated reservations systems F)S 1). Document imaging systerns woe sees of automat cy terns ae use cil ies fia 8 a. 8,C DandG € B,C DandJ b 8), Sand do Ha Kandt Which of the above automated systems are used in, manufacturing fiems and which are used in service firms? e Manifacurna Service ® 2 4B, Cand GH, Landa b BO,£andL FJ and L G GD, Band ALF, Gand H 4 &GD,£andG G3, kandL [30 The types of operational aus inclie al othe folling EXCEPT 8 2. Funetional © Organizational b. Financial 4d. Special arrangements (98. Vic of the foiowing ssc NO pact of Economy and efficiency aut c cage b poooneudke ue ‘ae Desired audit risk b. Inherent risk the scope of an operational audit? Financial auclits d Compliance aucits (Over wich type of risk does thie auditor have GREATEST contre? © Control risk d Detection risk Page 4 of 4 page2S The Review Srhoot of QecourHamon + Mlomagemend Services | MS-C: PROJECT FEASIBILITY STUDY PROJECT FEASIBILITY STUDY - is 2 systematic gathering and analysis of the data aimed to find out practicability. ef @ business. undertaking and, if found practicable, to determine the degree of profitability, [pata c : DAAon | OLLECTION | ===> | OATABVALUATION ioc [RECoNMENDATION T oy a (1 Feasibility Study | © <——— Ce USERS OF THE FEASIBILITY STUDY PROJECT PROPONENTS ‘The study would serve as 9 basis for selecting good venture, for implementing activities and for formulating long-range plans CREDITORS & INVESTORS The study would serve as a basis in deciding whether to grant financing and for determining the amount and terms thereof MANAGEMENT t The study would help in ascertaining the feasibility of expansion programs, in deciding on the possibility of taking over existing business, as well as the extent of the capital cutlay required. GOVERNMENT INSTRUMENTALITIES ‘The study would help to ensure that the project meets necessary legal requirements, and would help determine the extent of government incentives that may be granted, GENERAL PUBLIC The study. would ald in mimmizing the risk of business failures, reducing waste of valuable resources, and thereby accelerating economic growth, MAJOR ASPECTS PARTS OF THE FEASIBILITY STUDY MANAGEMENT assists in the selection of the business structure, personnel set-up, and internal policies of the enterprise for an effective operation. MARKETING involves the study of the present and future demand and supply for the product, competition, selling price, and marketing plans for the product. TECHNICAL aims to choose the process to be used, plant capacity, layout; machinery design, materials and other technical factors to attain cost minimization and profit maximization. YAXATION covers the study of tax effects as well as legal tax saving measures and other government incentives applicable to the project Lecat determines. legal capacity anc cestrctions to do business so that legal requirements are met and possible incentives and protection aré availed of FINANCIAL quantifies the esult of marketing, technical, management, taxation and legal aspects and expresses the profitability of the project in peso terms. FINANCING SOURCES determines possible internal and external sources, terms, and condition of financing. ECONOMICS Involves the study of the project's contribution to the national economy as a whole: COMPONENTS OF THE FINANCIAL ASPECT project that serves as the premises for projecting probable results, Realistic assumptions are needed to Provide a definite and specific basis for financial projections. Page 1 of 2 pagesROS - The Rerew School of leconeitaney : Ms-C PROJECT FEASIBILITY STUDY PROJECTED FINANCIAL STATEMENTS ‘The projected financial statements shall include: * Projected income statement ‘+ Projected balance sheet * ‘+ Projected cash flow statement i The periods covered by these statements would normally commence from the pre-operating stage of the project until its first few years of operations, with some provision for business expansion that could lead to extending the life of the project. Using the projected financial statements, evaluation of the project's viability may further be enhanced by developing or applying the meaningful financial ratios or analytical tools dealing with the project's profitability, liquidity, solvency, stability and capital structure, SOURCES OF FINANCING INTERNAL sources - funds generated within the firm. Examples: Retained earnings, sale of fixed assets, and reduction of working capital EXTERNAL sources - funds provided by owners (equity) or creditors (debt). Examples: Issuance of debt securities (bonds) or equity securities (common stock) LIMITATIONS & CONSTRAINTS OF A FEASIBILITY STUDY + Unavailability of required and necessary information. + Incompetence or inexperience of the one making the judgment resulting in erroneous conclusions and ineffective recommendations, + Any significant change in the business environment usually renders results of forecast not coinciding with actual events. WRAP-UP EXERCISES (TRUE ér FALSE; MULTIPLE-CHOICE) I. A project feasibility study ensures the viable realization of a proposed project. 2, One of the common purposes today for coming up with a feasibility study Is to provide prospective Investors objective data for purpose of their investment decision. 3. Which of the following is not an activity covered by feasibility study? a. Activity based accounting of thie endeavor leading to a conclusion b. Collection of data c. Evaluation and analysis of data collected d. Formulation of recommendation 4, The comprehensive process df feasibility study must extend up to the commissioning of commercial start-up of the business. 5. Ina project feasibility study, which of the following statements is false? a. Any change which can materially alter the assumptions used in the preparation of the forecast will render it useless b. The project study is important for government agencies in order to determine entitlement to government incentives c. Project study may also cover the social desirability aspects of a proposed undertaking, d. Since data gathesing is a basic step in its preparation, all the necessary and required {pformation will always be available 6. Among the following major parts of a project feasibility study, which grouping is considered critical? a. Management, financial and social returns b. Technical, financial and environmental aspects Economic benefits, management, financial d. Marketing, engineering/technical and financial 7. The financial aspect of a feasibility study is generally based on projections and forecasts. 8. Ina project feasibility study, which of the following statements is false? . The project is based.on available Information and opinions of the party involved in the preparation of the study. b. The study is primarily a forecast which always tallies with actual events. . The characteristics of a good feasibility study are comprehensiveness, objectivity and simplicity d. One of the parties interested in feasibility studies is the stockholder. ‘Suggested Answers : 1. False* 2. True 3.4 4. False** 5.0 6D 7, True a8 + A project feasibility study does not ensure viable realization of a proposed project. * A project feasibility study does not cover the commissioning of commercial start-up of the business. Page 2 of 2 pages ©