MANAGEMENT ADVISORY SERVICES

First Pre-Board Examinations (May 2021 Batch)

09 February 2021  6:00 PM to 9:00 PM Page 7

32. Reply-88 Company uses a standard costing system and a flexible

budget. At a normal level of activity of 15,000 units and 45,000
standard direct labor hours, the standard direct labor cost would be
P 270,000. During June, 42,800 hours were worked to produce 14,000
units at an actual direct labor cost of P 352,000. The direct labor
efficiency variance in June was:
B a. P 12,800 U
b. P 4,800 U
c. P 4,800 F
d. P 7,800 U

33. The person(s) directly responsible for the attainment of

organizational objectives is/are
B a. Staff management
b. Line management
c. Both staff and line management
d. The chief financial officer

34. Kill Me & Heal Me uses FIFO for inventory costing:

Beginning Inventory 300 units

Units Produced 600
Units Sold 600
Prior year Budgeted Fixed Overhead Rate P 50/unit
Current year Budgeted Fixed Overhead Rate P 44/unit

Which of the following statements is true about the difference

between absorption-costing and variable-costing operating income?
A a. Absorption-costing is P 1,800 less than variable-costing
operating income.
b. Absorption-costing is P 1,800 more than variable-costing
operating income.
c. Absorption-costing is P 15,000 less than variable-costing
operating income.
d. Absorption-costing is P 15,000 more than variable-costing
operating income.

35. Which of the following is needed to prepare a zero-based budget?

C a. The amount spent the last period.
b. The percentage change in spending for the last five years.
c. The expected benefits from expenditures to be made.
d. The amount spent by a major competitor the last period.

36. The following information is for Winnie Company:

Product A: Revenue P 4.00
Variable Cost P 1.00

Product B: Revenue P 6.00

Variable Cost P 2.00

Total fixed costs are P 40,000.

What is the break-even point, assuming the sales mix consists of two
units of Product A and one unit of Product B?
D a. 2,000 units of B and 4,000 units of A
b. 2,025 units of B and 4,050 units of A
c. 4,025 units of B and 8,050 units of A
d. 4,000 units of B and 8,000 units of A

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 PAGE 7
C. operating leverage must increase.
D. profit must increase.
45. The following information was taken from Kawit Company’s accounting records for the year
endedDecember 31, 2021:
Increase in raw materials inventory P 15,000
Decrease in finished goodsinventory 35,000
Raw materials purchased 430,000
Direct manufacturing labor payroll 200,000
Factory overhead 300,000
Freight-out 45,000
There was no work in process inventory at thebeginning or end of the year. Kawit’s 2021 cost of
goods sold is
A. P950,000
B. P965,000
C. P975,000
D. P995,000

46. Eagle Sporting Goods has P2.5 million in inventory and P2 million in accounts receivable. Its
average daily sales are P100,000. The firm’s payables deferral period is 30 days and average
daily cost of sales are P50,000. What is the length of the firm’s cash conversion period?
A. 100 days.
B. 60 days.
C. 50 days.
D. 40 days.

47. As projected net income increases the

A. degree of operating leverage declines.
B. margin of safety stays constant.
C. break-even point goes down.
D. contribution margin ratio goes up.

48. A firm has total interest charges of P20,000 per year, sales of P2 million, a tax rate of 40 percent,
and a profit margin of 6 percent. What is the firm’s times-interest-earned ratio?
A. 10 times
B. 11 times
C. 12 times
D. 13 times

49. If a firm has P100 in inventories, a current ratio equal to 1.2, and a quick ratio equal to 1.1, what is
the firm’s Net Working Capital?
A. P0
B. P100
C. P200
D. P1,000

50. XYZ Ltd. has earned 8% Return on Total Assets of P 500,000 and has a Net Profit Ratio of 5%.
Find out the Sales of the firm.
A. P 400,000
B. P 250,000
C. P 800,000
D. P 833,333.

51. Market research and public relations costs are

A. engineered variable costs.
B. discretionary variable costs.
C. committed fixed costs.
D. discretionary fixed costs.

52. Information concerning Averie Corporation's Product A follows:

Sales P 300,000
Variable Costs 240,000
Fixed Costs 40,000
Assuming that Averie increased sales of Product A by 20 percent, what should the profit from
Product A be?
A. P 20,000
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 Cost at Cost at
Cost Item 100 units 140 units
W $ 8,000 $ 10,560
X $ 5,000 $ 5,000
Y $ 6,500 $ 9,100
Z $ 6,700 $ 8,580

Which of the following classifications of these cost items by cost behavior is correct?

Cost W Cost X Cost Y Cost Z

A) variable fixed mixed variable
B) mixed fixed variable mixed
C) variable fixed variable variable
D) mixed fixed mixed mixed

Select one:
A. Choice C
B. Choice B
C. Choice A
D. Choice D
Feedback

Your answer is correct.

The correct answer is: Choice B

Question 79
Incorrect
Mark 0.00 out of 1.00

Remove flag

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 306  Chapter 23(8)/Performance Evaluation for Decentralized Operations

63. The best measure of managerial efficiency in the use of investments in assets is:
a. rate of return on stockholders' equity
b. investment turnover
c. income from operations
d. inventory turnover
ANS: B DIF: Difficult OBJ: 23(8)-04
NAT: AACSB Analytic | IMA-Performance Measurement

64. Two divisions of Halloway Company (Divisions X and Y) have the same profit margins. Division
X's investment turnover is larger than that of Division Y (1.2 to 1.0). Income from operations for
Division X is $50,000, and income from operations for Division Y is $38,000. Division X has a
higher return on investment than Division Y by:
a. using income from operations as a performance measure
b. comparing income from operations
c. applying a negotiated price measure
d. using its assets more efficiently in generating sales
ANS: D DIF: Difficult OBJ: 23(8)-04
NAT: AACSB Analytic | IMA-Performance Measurement

65. The profit margin for Division K is 8% and the investment turnover is 1.20. What is the rate of return
on investment for Division K?
a. 8%
b. 6.7%
c. 7.3%
d. 9.6%
ANS: D DIF: Moderate OBJ: 23(8)-04
NAT: AACSB Analytic | IMA-Performance Measurement

66. The excess of divisional income from operations over a minimum amount of divisional income from
operations is termed:
a. profit margin
b. residual income
c. rate of return on investment
d. gross profit
ANS: B DIF: Easy OBJ: 23(8)-04
NAT: AACSB Analytic | IMA-Performance Measurement

67. Assume that divisional income from operations amounts to $187,000 and top management has
established 15% as the minimum rate of return on divisional assets totaling $1,000,000. The residual
income for the division is:
a. $37,000
b. $28,050
c. $67,000
d. $0
ANS: A DIF: Moderate OBJ: 23(8)-04
NAT: AACSB Analytic | IMA-Performance Measurement

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