ICARE Preweek MAS

No. 125 Brgy.
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
MANAGEMENT ADVISORY SERVICES

PREWEEK LECTURE
SOURCES: AICPA/RPCPA/CMA/Various Test Banks
MANAGEMENT ACCOUNTING CONCEPTS
1. Which of the following statements about management or financial accounting is false?

a. Financial accounting must follow GAAP.
b. Management accounting is not subject to regulatory reporting standards.
c. Both management and financial accounting are subject to mandatory recordkeeping
requirements.
d. Management accounting should be flexible.
2. Which of the following statements is true?

a. Financial accounting is most concerned with meeting the needs of internal users.
b. Managerial accounting is highly regulated by rules and regulations.
c. Financial accounting is most concerned with addressing the needs of the firm as a whole.
d. Financial accounting is most concerned with addressing the needs of individual departments of the
firm.
3. A position in the organization chart that is directly related to achieving the basic objectives of an
organization is called:
a. a staff position.
b. a line position.
c. chief finance officer.
d. controller.
4. At Bugs Enterprises, the controller is responsible for directing the budgeting process. In this role, the
controller has significant influence with executive management as individual department budgets are
modified and approved. For the current year, the controller was instrumental in the approval of a
particular line manager’s budget without modification , even though significant reductions were made
to the budgets submitted by other line managers. As a token of appreciation, the line manager has
given the controller a gift certificate for a popular local restaurant. In considering whether or not to
accept the certificate, the controller should refer to which section of IMA’s Statement of Ethical
Professional Practice?
a. Competence
b. Integrity
c. Confidentiality
d. Credibility
COST BEHAVIOR
1. When cost relationships are linear, total variable prime costs will vary in proportion to changes in
a. direct labor hours.
b. total overhead cost.
c. total material cost.
d. production volume.
2. Kuroko, Inc. wishes to determine the fixed portion of its annual maintenance expense (a semi-variable
expense), as measured against direct labor hours for the first three months of the year. The inspection
costs are fixed; the adjustments necessitated by errors found during inspection account for the variable
portion of the maintenance costs. Information for the first quarter is as follows:
Direct Labor Hours Maintenance Costs

January 34,000 P61,000
February 31,000 58,500
March 34,000 61,000
Based on the information above, the annual fixed portion of Kuroko, Inc.’s maintenance expense,
rounded to the nearest pesos?
a. P28,330
b. P32,780
c. P131,120
d. P393,360
1|P a g e JBUGATAN/JSARIPADA
No. 125 Brgy. San Sebastian
Mobile : 0927 283 8234
Telephone : (043) 723 8412
3. The Marugame Corporation used regression analysis to predict the annual cost of indirect materials.
The results were as follows:
Indirect Materials Cost

Explained by Units Produced
Constant P19,885
Standard error of Y estimate P9,560
R - squared 0.7832
No. of observations 22
Degrees of freedom 20
X coefficient(s) 3.75
Standard error of coefficient(s) 2.5576
The linear cost function is _____.

a. Y = P19,885 + P3.75X
b. Y = P9,560 + P2.56X
c. Y = P9,560 + P3.75X
d. None of these answers is correct.
4. Which of the following methods may be used to estimate costs by using time-and-motion
studies to approximate labor time?
a. Regression analysis
b. Engineering method
c. Account analysis
d. High-low method
5. Weaknesses of the high-low method include all of the following except

a. the mathematical calculations are relatively complex.
b. Only two observations are used to develop the cost function.
c. The high and low activity levels may not be representative.
d. the method does not detect if the cost behavior is nonlinear
COST-VOLUME-PROFIT ANALYSIS
1. The amount of total costs probably will not vary significantly in decision situations in which:
a. the time span is quite short and the change in units of output is quite large
b. the time span is quite long and the change in units of output is quite large
c. the time span is quite long and the change in units of output is quite small
d. the time span is quite short and the change in units of output is quite small
2. For a multiple-product company, a shift in sales mix from products with high contribution-margin
percentages toward products with low contribution-margin percentages causes the breakeven point to
be:
a. lower
b. higher
c. unchanged
d. undeterminable
3. At a specific level of activity, an equal percentage increase in selling price and variable cost per unit
while fixed costs remaining constant will most likely result to
a. increase in breakeven point in units
b. increase in breakeven point in peso
c. no change in breakeven point in peso
d. no change in breakeven point in units
Mobile : 0927 283 8234
Telephone : (043) 723 8412
4. Emilia Corporation manufactures and sells keychain embossed with Spotify Music Codes. Last year,
the keychain sold for P150 each, and the variable cost to manufacture them was P45 per unit. The
company needed to sell 40,000 keychains to break-even. The net income last year was P100,800.
The company expects the following for the coming year:

 The selling price of the key rings will be P180.
 Variable manufacturing cost per unit will increase by one third.
 Fixed cost will increase by 20%.
 The income tax rate will remain unchanged.
For the company to have the same profit as last year for the coming year, the company should sell
a. 42,000 units
b. 48,000 units
c. 37,333 units
d. 42,840 units
5. The following data pertain to the two products manufactured by BARUSU, Inc.
PRODUCT SELLING PRICE VC PER UNIT

REM 480 280
RAM 1,500 800
Fixed cost totals P1,200,000 annually. The expected sales mix in units is 60% for Product REM and
40% for Product RAM. How many units of the Product REM per month must BARUSU sell to break-
even?
a. 3,000 units
b. 1,800 units
c. 150 units
d. 250 units
ACTIVITY BASED COSTING
1. Value-chain analysis is a key component of activity-based management that links product costing and
a. Reduction of the number of cost pools
b. Continuous improvement
c. Accumulation of heterogeneous cost pools
d. Overhead rates based on broad averages
2. Symptoms of an outdated cost system include all of the following except:

a. The outcome of the bids is difficult to explain
b. Products that are difficult to produce show high profits
c. Customers complain about price increases
d. The accounting department spends a lot of time on special projects
3. A set of activities that a firm operating in a specific industry performs in order to deliver a valuable
product for the market.
a. Life cycle
b. Value chain
c. Lean manufacturing activities
d. Queueing activities
4. In Activity-based Costing, which of the following would be considered a value-added activity?

a. Storage of raw materials
b. Engineering designs
c. Accounting process and bookkeeping
d. Quality control inspections
5. Setup time for a product is 8 hours. A firm that uses Just-In-Time Manufacturing and Enterprise
Resource Planning produces the same product has reduced setup time to 45 minutes. Setup labor is
P250 per hour. Value-added costs are
a. P2,000
b. P1,812.50
c. P250
d. P187.50
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BUDGETING AND FINANCIAL PLANNING
1. The budget process involves doing all the following except:

a. establishing specific goals
b. executing plans to achieve the goals
c. periodically comparing actual results with the goals
d. dismissing all managers who fail to achieve operational goals specified in the budget
2. Budgeting supports the planning process by encouraging all of the following activities except:
a. requiring all organizational units to establish their goals for the upcoming period
b. increasing the motivation of managers and employees by providing agreed-upon expectations
c. directing and coordinating operations during the period
d. improving overall decision making by considering all viewpoints, options, and cost reduction
possibilities
3. When management seeks to achieve personal departmental objectives that may work to the detriment
of the entire company, the manager is experiencing:
a. budgetary slack
b. padding
c. goal conflict
d. cushions
4. Budgets need to be fair and attainable for employees to consider the budget important in their normal
daily activities. Which of the following is not considered a human behavior problem?
a. Setting goals among managers that conflict with one another.
b. Setting goals too tightly making it difficult to meet performance expectation.
c. Allowing employees, the opportunity to be a part of the budget process.
d. Allowing goals to be so low that employees develop a “spend it or lose it” attitude.
5. The process of developing budget estimates by requiring all levels of management to estimate sales,
production, and other operating data as though operations were being initiated for the first time is
referred to as:
a. flexible budgeting
b. continuous budgeting
c. zero-based budgeting
d. master budgeting
6. A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all
times is termed:
a. flexible budgeting
b. continuous budgeting
c. zero-based budgeting
d. master budgeting
7. For January, sales revenue is P700,000; sales commissions are 5% of sales; the sales manager's
salary is P96,000; advertising expenses are P90,000; shipping expenses total 2% of sales; and
miscellaneous selling expenses are P2,100 plus 1/2 of 1% of sales. Total selling expenses for the
month of January are
a. P157,100
b. P240,600
c. P183,750
d. P182,100
8. For February, sales revenue is P700,000; sales commissions are 5% of sales; the sales manager's
salary is P96,000; advertising expenses are P80,000; shipping expenses total 2% of sales; and
miscellaneous selling expenses are P2,500 plus 1/2 of 1% of sales. Total selling expenses for the
month of February are:
a. P151,000
b. P227,500
c. P225,000
d. P231,000
9. At the beginning of the period, the Cutting Department budgeted direct labor of P155,000, direct
material of P165,000 and fixed factory overhead of P15,000 for 9,000 hours of production. The
department actually completed 10,000 hours of production. What is the appropriate total budget for the
department, assuming it uses flexible budgeting?
a. P416,000
b. P370,556
c. P368,889
d. P335,000
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Telephone : (043) 723 8412
10. Tamaraw Manufacturers, Inc. projected sales of 78,000 machines for 2012. The estimated January 1,
2012, inventory is 6,500 units, and the desired December 31, 2012, inventory is 7,000 units. What is
the budgeted production (in units) for 2012?
a. 77,500
b. 71,000
c. 78,500
d. 71,500
STANDARD COSTING AND VARIANCE ANALYSIS
1. The best characteristics of a standard cost system is

a. all significant unfavorable variances should be reviewed
b. all variances from standard, significant or not, should be investigated
c. standard can pinpoint responsibility and help motivation
d. standard cost involves cost control which is cost reduction
2. A difference between standard costs used for cost control and budgeted costs
a. Can exist because standard costs must be determined after the budget is prepared.
b. Can exist because standard costs represent what costs should have been while budgeted
costs represent expected actual costs.
c. Can exist because budgeted costs should be verified first by actual activities while standard costs
are based on projected costs.
d. Can exist because establishing budgeted costs involves employee participation and standard costs
do not
3. Which one of the following terms best describes the rate of output which qualified workers can achieve
as an average over the working day or shift, without over-exertion, provided they adhere to the specified
method of working and are well motivated in their work?
a. Standard unit
b. Standard performance
c. Standard hours
d. Standard time
4. Management scrutinizes variances because

a. It is desirable under conventional knowledge on good management
b. Management needs to determine the benefits foregone by such variances
c. Management desires to detect such variances to be able to plan for promotions.
d. Management recognizes the need to know why variances happen to be able to make
corrective actions and fairly reward good performers.
5. Which department is typically responsible for a materials quantity variance?

a. Warehouse department
b. Production department
c. Purchasing department
d. Sales department
6. Eris Greyrat, the new cost analyst of Boreas Corporation was asked by the vice president to make a
cost analysis of the company’s shipping expenses. She discovered from the historical records that the
company have been using a monthly cost formula, Y=10,000 + 0.50x, in estimating its shipping
expenses. The company uses the no. of lbs. shipped as cost driver for shipping expenses. The net
weight of the orders shipped is determined by the number of shipments. The company’s shipments
average 12 lbs. per shipment. Other information extracted from the records are as follows:
Planned Actual
Shipments 1,000 1,100
Sales order 1,000 960
Units shipped 10,000 10,500
Sales 360,000 288,000
Total lbs shipped 12,000 14,100
The actual shipping costs for last month amounted to P16,500. The appropriate monthly flexible budget
allowance adjusted for actual input for shipping costs for purposes of performance evaluation would be
a. 16,000
b. 16,600
c. 16,300
d. 17,050
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Telephone : (043) 723 8412
7. Using the same information in the previous number, how much is the spending variance?
a. 550 adverse
b. 550 favorable
c. 200 credit
d. 200 unfavorable
8. Roxy Cement Corporation is one of the largest retailer of cement products in Luzon. Average cost data
provided by the production and sales department in the prior years are as follows:
Purchased price per kg of cement P18.00
Kilograms per bag of good quality cement 40 kgs
Allowance for spoiled cement 2.5% of good units
Freight from supplier P0.30/kg
Freight to customer P5/bag
Purchase discount from supplier 1.5%
Cash discounts to customer 2%
If the spoiled portion of the cement products is still sold at a price lower than the normal selling price,
what is the standard cost per bag of good quality cement that Roxy should use in its cost analysis sheet
(nearest peso)?
a. 704
b. 740
c. 703
d. Cannot be determined
9. Zenith Appliances direct material costs data for the last month follows:
Actual quantity purchased 20,000
Actual unit purchased price P1.80
Materials purchase price variance – favorable 7,200
Standard quantity allowed for actual production 20,500
Actual quantity used 19,000
The quantity variance for the last month is

a. 1,080 favorable
b. 1,080 unfavorable
c. 3,240 favorable
d. 3,240 unfavorable
10. Lilia Furniture Inc. direct labor costs data for the last month follows:
Actual labor costs 760,000
Standard labor rate per hour P80.00
Labor efficiency variance – unfavorable 36,000
Standard hours required per unit of output 1.50
Actual number of output produced 6,000
The rate variance for the last month is

a. 4,000 favorable
b. 4,000 unfavorable
c. 40,000 favorable
d. Cannot be determined since the information is lacking
FINANCIAL STATEMENT ANALYSIS
1. Which of the following transactions would be classified as a use of funds?

a. Sale of a factory at loss
b. Purchase of inventory on account
c. Discounting a notes receivable
d. Payment of principal of a bonded indebtedness
2. Liquidity is also known as

a. Short-term solvency
b. Stability
c. Bankruptcy shield
d. Sustainability
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3. In determining a firm’s cash conversion cycle, which one of the following combinations is necessary?
a. Receivable turnover, payable turnover and asset turnover
b. Cash turnover, credit sales and working capital
c. Asset turnover, return on sales and equity multiplier
d. Collection period, inventory period and deferral period
4. The granting of share warrants would most likely result to

a. Increase in earnings per share
b. Increase in price-earnings ratio
c. Decrease financial leverage ratio upon exercise
d. Increases equity ratio at the date of grant
5. FS analysis is least associated with

a. Common-size financial statements
b. Solvency and performance evaluation
c. Variance analysis
d. Productivity
6. A service company's working capital at the beginning of December 2021 was P70,000. The following
transactions occurred during the month:
Performed services on account P30,000

Purchased supplies on account 5,000
Consumed supplies 4,000
Purchased office equipment for cash 2,000
Paid short-term bank loan 6,500
Paid salaries 10,000
Accrued salaries 3,500
What is the amount of working capital at the January 1, 2022?

a. P47,500
b. P80,500
c. P50,500
d. P90,000
7. The net sales of Tessia Co. in 1990 is total, P580,600. The cost of goods manufactured is P480,000.
The beginning inventories of goods in process and finished goods are P82,000 and P65,000,
respectively. The ending inventories are, goods in process, P75,000, finished goods, P55,000. The
selling expenses is 5%, general and administrative expenses 2.5% of cost of sales, respectively. The
net profit in the year 1990 is
a. P45,725
b. P83,000
c. P53,850
d. P90,000
8. Selected information from the accounting records of the Kathlyn Co. is as follows:
Net A/R at December 31, 2020 P900,000

Net A/R at December 31, 2021 1,000,000
Accounts receivable turnover 5 to 1
Inventories at December 31, 2020 1,100,000
Inventories at December 31, 2021 1,200,000
Inventory turnover 4 to 1
What was the gross margin for 2021?

a. P150,000
b. P300,000
c. P200,000
d. P400,000
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9. Selected data from the year-end financial statements of World Cup Corp. are presented below. The
difference between average and ending inventories is immaterial.
Current ratio 2.0

Quick ratio 1.5
Current liabilities P600,000
Inventory turnover (based on cost of sales) 8 times
Gross profit margin 40%
World’s net sales for the year were

a. P1.2 million
b. P4.0 million
c. P2.4 million
d. P6.0 million
10. Tempest Plastics has the following data:
Assets: P100,000 Interest rate: 8.0%

Debt ratio: 40.0% Total assets turnover: 3.0
Profit margin: 6.0% Tax rate: 40%
What is Tempest’s EBIT?

a. P12,000
b. P30,000
c. P18,000
d. P33,200
WORKING CAPITAL MANAGEMENT
1. Ellie Foods Inc. 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. 50 days.
c. 60 days.
d. 40 days.
2. An organization has an opportunity to establish a zero balance account system using four different
regional banks. The total amount of the maintenance and transfer fees is estimated to be P6,000 per
annum. The organization believes that it will increase the float on its operating disbursements by an
average of four days, and its cost of short term funds is 4.5%. Assuming the organization estimates its
average daily operating disbursements to be P40,000 what decision should the organization make
regarding this opportunity?
a. Establish the zero balance account system because it results in estimated net savings of
P1,200.
b. Do not establish the zero balance account system because it results in estimated additional net
costs of P6,000.
c. Do not establish the zero balance account system because it results in estimated additional net
costs of P1,200.
d. Establish the zero balance account system because it results in estimated net savings of P7,200.
3. A company plans to tighten its credit policy. The new policy will decrease the average number of days
in collection from 75 to 50 days and reduce the ratio of credit sales to total revenue from 70 to 60%.
The company estimates that projected sales would be 5% less if the proposed new credit policy were
implemented. The firm’s short-term interest cost is 10%.
What effect would the implementation of this new credit policy have on income before taxes?
a. P2,500,000 decrease
b. P 83,334 increase.
c. P2,166,667 decrease
d. P 33,334 increase.
4. A minimum checking account balance that a firm must maintain with a commercial bank is a
a. Transaction balance
b. Precautionary balance
c. Compensating balance
d. Speculative balance
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5. Determining the appropriate level of working capital for a firm requires

a. Evaluating the risks associated with various levels of fixed assets and the types of debt used to
finance these assets.
b. Offsetting the benefit of current assets and current liabilities against the probability of
technical insolvency.
c. Changing the capital structure and dividend policy of the firm.
d. Maintaining short-term debt at the lowest possible level because it is generally more expensive
than long-term debt.
INVESTMENT, RISK AND RETURNS
1. Derivative Company has a large amount of variable rate financing due in one year. Management is
concerned about the possibility of decreases in short-term rates. Which of the following would be most
viable action for the expected interest fluctuation and to hedge the investment risk?
a. Buy Treasury notes in the futures market
b. Sell Treasury notes in the futures market
c. Buy an option to purchase Treasury bonds
d. Sell an option to purchase Treasury bonds
2. Which of the following techniques is used to value stock options?

a. Monte Carlo Simulation
b. Weighted-average method
c. Zero-coupon method
d. Expected earnings method.
3. Mihoyou Inc. has two investments, Stock A and Stock B. Stock A has a standard deviation 10% and
an expected return of 8%. Stock B has a standard deviation of 4% and an expected return of 6%. Which
of the investments is riskier relative to its expected rate of return?
a. Stock A
b. Stock B
c. Both investments have the same level of risk
4. The following probability distribution for the returns on stocks A and B are provided:
State of Economy Probability Return on Stock A Return on Stock B

PEAK 20% 5% 50%
GROWTH 30% 10% 30%
RECESSION 30% 15% 10%
TROUGH 20% 20% -10%
The variance on Stock A is .00263, the variance on Stock B is .04200, the standard deviation on Stock
S is 5.12%, and the standard deviation on Stock B is 20.49%.
Compute for the portfolio return supposing the funds are invested at a ratio of 50:50 to Stock A and
Stock B, respectively
a. 16.25%
b. 14.38%
c. 17%
5. An investor uses the capital asset pricing model (CAPM) to evaluate the risk-return relationship on a
portfolio of stocks held as an investment. Which of the following would not be used to estimate the
portfolio's expected rate of return?
a. Expected market rate of returns
b. Expected risk premium on the portfolio of stocks
c. Standard deviation of the market returns
d. Interest rate for the safest possible investment
DECENTRALIZATION AND RESPONSIBILITY ACCOUNTING
1. Which of the following is a disadvantage of decentralization?

a. Decisions made by one manager may negatively affect the profitability of the entire
company.
b. Helps retain quality managers.
c. Decision making by managers closest to the operations.
d. Managers are able to acquire expertise in their areas of responsibility.
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2. For higher levels of management, responsibility accounting reports:

a. are more detailed than for lower levels of management
b. are more summarized than for lower levels of management
c. contain about the same level of detail as reports for lower levels of management
d. are rarely provided or reviewed
(For the next three items): The Megatron Corporation reported the following information for its Optimus
Division: Revenues – P1.0M, Operating Costs – P600,000; Taxable income – P200,000, and Operating
Assets – P500,000. Income is defined as operating income.
3. What is the Division's investment turnover ratio?

a. 2.50
b. 2.00
c. 3.33
d. 0.80
4. What is the Division's return on sales?

a. 0.20
b. 0.50
c. 0.40
d. 0.80
5. What is the Division's return on investment?

a. 80%
b. 50%
c. 40%
d. 60%
6. Richmond Enterprises is reviewing its policies and procedures in an effort to enhance goal congruence
throughout the organization. The processes that are most likely to encourage this behavior are
a. Participatory budgeting, reciprocal cost allocation, and management-by-objective performance
evaluation.
b. Reciprocal cost allocation, zero-base budgeting, and standard costing.
c. Cost-based transfer pricing, imposed budgeting, and activity-based costing.
d. Cost-based transfer pricing, management-by-objective performance evaluation, and
participatory budgeting.
7. Division B had an ROI last year of 15%. The division's minimum required rate of return is 10%. If the
division's average operating assets last year were P450,000, then the division's residual income for
last year was:
a. P67,500.
b. P22,500.
c. P37,500.
d. P45,000.
8. Division P of Lightning McQueen Corporation has the capacity for making 75,000 wheel sets per year
and regularly sells 60,000 each year on the outside market. The regular sales price is P200 per wheel
set, and the variable production cost per unit is P130. Division Q of Lightning McQueen Corporation
currently buys 30,000 wheel sets (of the kind made by Division P) yearly from an outside supplier at a
price of P180 per wheel set. If Division Q were to buy the 30,000 wheel sets it needs annually from
Division P at P174 per wheel set, the change in annual net operating income for the company as a
whole, compared to what it is currently, would be:
a. P1,200,000.
b. P450,000.
c. P1,500,000.
d. P270,000.
9. Which of the following is one of the four perspectives of a balanced scorecard?

a. Just in time.
b. Benchmarking.
c. Innovation.
d. Activity-based costing.
10 | P a g e JBUGATAN/JSARIPADA
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10. Shaun, Inc. is a highly automated manufacturing firm. The vice president of operations has decided
that traditional standards are inappropriate for performance measures in an automated environment.
Labor is insignificant in terms of the total cost of production and tends to be fixed. Material quality is
considered more important than minimizing material cost, and customer satisfaction is the number one
priority. As a result, delivery performance measures have been chosen to evaluate performance.
The following information is considered typical of the time involved to complete orders.
Wait time from order being placed to start of production 10.0 days
Wait time from start of production to completion 5.0 days
Inspection time 1.5 days
Process time 3.0 days
Move time 1.5 days
Queue time 1.0 day
What is the manufacturing cycle time and manufacturing cycle efficiency for this order?
a. 12 days and 25%
b. 22 days and 13.6%
c. 22 days and 25%
d. 17 days and 17.6%
DIFFERENTIAL ANALYSIS
1. When applying the cost-benefit approach to a decision, the primary criterion is how well management
goals will be achieved in relation to costs. Costs include all expected
a. variable costs for the courses of action but not expected fixed costs because only the
expected variable costs are relevant.
b. incremental out-of-pocket costs as well as all expected continuing costs that are common to
all alternative courses of action.
c. future costs that differ among the alternative courses of action plus all qualitative
factors that cannot be measured in numerical terms.
d. historical and future costs relative to the courses of action including all qualitative factors that
cannot be measured in numerical terms.
2. When a decision is made in an organization, it is selected from a group of alternative courses of

action. The loss associated with choosing the alternative that does not maximize the benefit is the
a. net realizable value
b. opportunity cost
c. expected value
d. incremental cost
3. In a lean accounting environment, a company accepts a special order to make 200 units of a product
each month for the next two months for P65 per unit. The company normally sells the unit for P85 per
unit with variable costs per unit at P40. The company plans to use excess capacity. By what amount
would this special order increase profit?
a. P8,000 c. P18,000
b. P10,000 d. P26,000
4. Following are the operating results of Rukawa Corporation:
Segment C Segment D Total

Sales P10,000 P15,000 P25,000
Variable cost of goods sold 4,000 8,500 12,500
Fixed cost of goods sold 1,500 2,500 4,000
Gross margin P 4,500 P 4,000 P 8,500
Variable selling and administrative P 2,000 P 3,000 P 5,000
Fixed selling and administrative 1,500 1,500 3,000
Operating income (loss) P 1,000 P (500) P 500
Fixed cost of goods sold are allocated to each segment based on the number of employees. Fixed
selling and administrative expenses are allocated equally. If Segment D is eliminated, P1,500 of fixed
cost of goods sold would be eliminated. Assuming Segment D is closed, the effect on operating income
would be
a. An increase of P500
b.A decrease of P2,000
c. An increase of P2,000
d. A decrease of P2,500
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5. The Micro Company manufactures components for use in producing one of its finished products. When
12,000 units are produced, the full cost per unit is P70, computed as follows:
Direct materials P 10
Direct labor 30
Variable overhead 20
Fixed overhead 10
The Macro Company has offered to sell 12,000 components to Micro Company for P74 each. If Micro
accepts the offer, some of the facilities currently being used to manufacture the components can be
rented as warehouse space for P80,000. However, P6 of the fixed overhead currently applied to each
component would have to be covered by Micro’s other products. What is the differential cost to the
Micro Company of purchasing the components from the Macro Company?
a. P16,000
b. P48,000
c. P40,000
d. P44,000
CAPITAL BUDGETING
1. Which of the following statements is false?

a. The discount rate does not need to be determined in advance for the IRR method
b. The discount rate does not need to be determined in advance for the NPV method
c. The discount rate does not need to be determined in advance for the payback method
d. The discount rate does not need to be determined in advance for the accrual accounting rate of
return method
2. As the number of periods increases for a project having uniform cash flows, the present value of each
future discounted cash flow becomes
a. Smaller
b. Does not change
c. Irrelevant
d. Larger
3. Which of the following statements regarding NPV analysis is true?

a. Uncertainties increase as the peso value of an investment increases
b. The discount rate can be calculated with certainty if it is based on the weighted average cost of
capital
c. Managers should generally accept projects with an NPV greater than zero
d. The timing of incremental revenues and costs is irrelevant in NPV analysis
4. In using the net present value method, only projects with a zero or positive net present value are
acceptable because
a. the return from these projects equals or exceeds the cost of capital.
b. a positive net present value on a particular project guarantees company profitability.
c. the company will be able to pay the necessary payments on any loans secured to finance the
project.
d. of both (a) and (b).
5. The capital budgeting method that calculates the discount rate at which the present value of expected
cash inflows from a project equals the present value of expected cash outflows is the
a. net present value method.
b. accrual accounting rate-of-return method.
c. payback method.
d. internal rate of return.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
(For items 6 and 7)

Management of Louie Corporation is considering the following two potential capital structures for a newly
acquired business.
Option 1
Debt ratio 50%

Bonds 6%
Cost of common stocks 10%
Effective tax rate 15%
Option 2
Debt-to-equity ratio 5:1

Long-term debt 7%
Cost of common stocks 12%
Effective tax rate 15%
6. What is the weighted-average cost of capital for Option 1?

a. 7.55%
b. 6.69%
c. 8.00%
d. 8.37%
7. What is the weighted-average cost of capital for Option 2?

a. 7.55%
b. 6.69%
c. 7.83%
d. 4.18%
8. Ryo Incorporated is currently calculating its weighted-average cost of capital. Ryo Incorporated has
maintained a debt-to-common equity ratio of 3:1. The beta of Ryo Incorporated stock is 0.7, and the
current risk-free rate of return is 4%. The risk premium is 6%. Debt issued by Ryo Incorporated yields
an 11% stated interest rate to investors. The marginal tax rate for Ryo Incorporated is 40%. What is
the weighted-average cost of capital for Ryo Incorporated?
a. 6.18%
b. 10.30%
c. 7.00%
d. 7.45%
9. A tax-exempt foundation, Sincerely Foundation, Inc. intends to invest P1 million in a five-year

project. The foundation estimates that the annual savings from the project will amount to
P315,000. The P1 million asset is depreciable over five (5) years on a straight-line basis. The
foundation’s hurdle rate is 12% and as a consultant of the foundation, you are asked to determine the
internal rate of return and advise if the project should be pursued.
To facilitate computations, below are present value factors:
N=5 12% 14% 16%

Present value of P1 0.57 0.52 0.48
Present value of an annuity of P1 3.60 3.40 3.30
Your advice is
a. To proceed due to an estimated IRR of more than 16%.
b. Not to proceed due to an estimated IRR of less than 12%.
c. To proceed due to an estimated IRR of less than 14% but not more than 12%.
d. To proceed due to an estimated IRR of less than 16% but not more than 14%.
10. Arthur Co. is reviewing the following data relating to an energy saving investment proposal:
Cost P50,000
Residual value at the end of 5 years 10,000
Present value of an annuity of 1 at 12% for 5 years 3.60
Present value of 1 due in 5 years at 12% 0.57
What would be the annual savings needed to make the investment realize a 12% yield?
a. P8,189
b. P12,306
c. P11,111
d. P13,889
Mobile : 0927 283 8234
Telephone : (043) 723 8412
QUANTITATIVE TECHNIQUES IN BUSINESS
1. A quantitative technique useful in projecting a firm’s sales and profits is:

a. Probability Distribution Theory
b. Gantt Charting
c. Learning curves
d. Queuing Theory.
2. Which of the following quantitative techniques would be most useful for analyzing the
interrelationships of time and activities to discover potential bottlenecks?
a. PERT-CPM techniques
b. Expected Value analysis
c. Correlation and regression analysis
d. Linear Programming
3. Smuuurrf, Inc. manufactures two products, X and Y. Each product must be processed in each of three
departments: machining, assembling, and finishing. the hours needed to produce one unit of product
per department and the maximum possible hours per department are provided below.
Production hours per unit Maximum Capacity (Hourrs)

X Y
Machining 2 1 420
Assembling 2 2 500
Finishing 2 3 600
The objective function is to maximize profits if profit equals 4X + 2Y. Given the objective function and
constraints, what is the most profitable number of units of X and Y, respectively, to manufacture?
a. 150 and 100
b. 170 and 80
c. 165 and 90
d. 200 and 50
4. The following information applies to a project:
Activity Time (days) Immediate Predecessor

A 10 None
B 6 None
C 8 A
D 4 B
E 12 C, D
The earliest completion time for the project is:

a. 22 days
b. 30 days
c. 28 days
d. 40 days
5. When making a cost time trade off in PERT analysis, the first activity that should be crashed is the
activity:
a. With the largest amount of slack.
b. With the lowest unit crash cost.
c. On the critical path with the maximum possible time reduction
d. On the critical path with the lowest unit crash cost
STRATEGIC COST MANAGEMENT
1. The primary objective of Total Quality Management is to achieve

a. greater customer satisfaction
b. reduced delivery charges.
c. reduce delivery time
d. greater employee participation.
2. Cost of quality would most likely be at the minimum level if the firm focus on
a. appraisal costs
b. internal failure costs
c. prevention costs
d. external failure costs.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
3. Which of the following measures would least likely be used by a firm to measure quality?
a. The percentage of shipments returned by customers because of poor quality.
b. The number of parts shipped per day.
c. The number of defective parts per million.
d. The percentage of products passing quality tests the first time.
4. Dramatic improvements in communication resulting to increased global competition, had forced firms
to
a. completely replace existing cost info0rmation systems.
b. expand existing cost information systems.
c. modify existing cost information systems to handle more data.
d. develop cost management systems to help firms be more competitive
5. The business environment has changed dramatically over the past decade; other significant factors
that the manager must adapt to include
a. a more diverse work force.
b. a renewed sense of ethical responsibility.
c. increased regulation of business by the authority such as the government and industry regulators
d. Both answers a and b
6. Measures of those aspects of the firm’s performance that are crucial to its competitive advantage, and
therefore to its success, are termed
a. cost targets
b. cost drivers
c. critical success factors
d. activity drivers
7. A process for creating competitive advantage in which a firm reorganizes its operating and
management functions, often with the result that jobs are modified, combined, or eliminated, is called
a. Benchmarking
b. reengineering
c. life cycle costing
d. strategic cost management
8. Which of the following is not one of the steps in the life cycle of a product?
a. manufacturing, inspecting, packaging, and warehousing
b. research and development
c. product design including prototyping, target costing, and testing
d. purchasing and receiving
9. In the theory of constraints, an operation or resource where the work performed approaches or
exceeds the available is referred to as
a. A bottleneck
b. Customer-response time
c. A time driver
d. Manufacturing lead time
10. In Leywin Co.’s just-in-time production system, costs per setup were reduced from P38 to P12. In the
process of reducing inventory levels, Leywin found that there were fixed facility and administrative
costs that previously had not been included in the carrying cost calculation. The result was an increase
from P18 to P52 per unit per year. What were the effects of these changes on Leywin’s economic lot
size and relevant costs?
Lot size Relevant costs

a. Decrease Increase
b. Increase Decrease
c. Increase Increase
d. Decrease Decrease
Mobile : 0927 283 8234
Telephone : (043) 723 8412
ECONOMICS
1. The biggest advantage of capitalism is that

a. it forces involuntary exchanges.
b. it generates wealth with the help of government intervention.
c. it creates wealth by letting a person follow his or her self-interest
d. prices hinder in moving assets from high-value to low-value uses.
2. A decrease in demand is represented by

a. A shift inward of the entire demand curve.
b. A shift outward of the entire demand curve.
c. A movement along the demand curve in a northwesterly direction.
d. A movement along the demand curve in a southeasterly direction.
3. If the value of the Chinese Yuan in foreign currency markets changes from 1 RMB = 6 Pesos to 1 RMB
= 4 Pesos
a. Philippine imported products in China will become more expensive
b. The Philippine peso has depreciated against the Chinese Yuan
c. Chinese tourist in the Philippines will find their dollars will buy more Filipino products
d. Chinese exports to Philippines should decrease
4. In national income terms, aggregate demand is the

a. Total expenditures on capital goods by entrepreneurs during the period of full employment
b. Demand for money by the community in a period of full employment
c. Demand that is needed if a country’s economy is to operate at optimum level and the level of
investment is to be raised
d. Total expenditures on consumer goods and investment, including government and foreign
expenditures, during a given period
5. Government budget deficit happens when the government taxes does not exceed transfer payments
and purchases. Which of the following actions would normally be done by the government to cover the
deficit?
a. Imposition of higher indirect taxes
b. Decrease personal income taxes to stimulate economic activity
c. Issue treasury bonds or other government debt instruments
d. Provide social amelioration fund to the citizen to boost productivity

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No. 125 Brgy.

MANAGEMENT ADVISORY SERVICES

MANAGEMENT ACCOUNTING CONCEPTS

1. Which of the following statements about management or financial accounting is false?

2. Which of the following statements is true?

Direct Labor Hours Maintenance Costs

Indirect Materials Cost

The linear cost function is _____.

5. Weaknesses of the high-low method include all of the following except

The company expects the following for the coming year:

PRODUCT SELLING PRICE VC PER UNIT

ACTIVITY BASED COSTING

2. Symptoms of an outdated cost system include all of the following except:

4. In Activity-based Costing, which of the following would be considered a value-added activity?

BUDGETING AND FINANCIAL PLANNING

1. The budget process involves doing all the following except:

STANDARD COSTING AND VARIANCE ANALYSIS

1. The best characteristics of a standard cost system is

4. Management scrutinizes variances because

5. Which department is typically responsible for a materials quantity variance?

The quantity variance for the last month is

The rate variance for the last month is

FINANCIAL STATEMENT ANALYSIS

1. Which of the following transactions would be classified as a use of funds?

2. Liquidity is also known as

4. The granting of share warrants would most likely result to

5. FS analysis is least associated with

Performed services on account P30,000

What is the amount of working capital at the January 1, 2022?

Net A/R at December 31, 2020 P900,000

What was the gross margin for 2021?

Current ratio 2.0

World’s net sales for the year were

10. Tempest Plastics has the following data:

Assets: P100,000 Interest rate: 8.0%

What is Tempest’s EBIT?

WORKING CAPITAL MANAGEMENT

5. Determining the appropriate level of working capital for a firm requires

INVESTMENT, RISK AND RETURNS

2. Which of the following techniques is used to value stock options?

State of Economy Probability Return on Stock A Return on Stock B

DECENTRALIZATION AND RESPONSIBILITY ACCOUNTING

1. Which of the following is a disadvantage of decentralization?

2. For higher levels of management, responsibility accounting reports:

3. What is the Division's investment turnover ratio?

4. What is the Division's return on sales?

5. What is the Division's return on investment?

9. Which of the following is one of the four perspectives of a balanced scorecard?

2. When a decision is made in an organization, it is selected from a group of alternative courses of

4. Following are the operating results of Rukawa Corporation:

Segment C Segment D Total

1. Which of the following statements is false?

3. Which of the following statements regarding NPV analysis is true?

(For items 6 and 7)

Debt ratio 50%

Debt-to-equity ratio 5:1

6. What is the weighted-average cost of capital for Option 1?

7. What is the weighted-average cost of capital for Option 2?

9. A tax-exempt foundation, Sincerely Foundation, Inc. intends to invest P1 million in a five-year

To facilitate computations, below are present value factors:

N=5 12% 14% 16%

QUANTITATIVE TECHNIQUES IN BUSINESS

1. A quantitative technique useful in projecting a firm’s sales and profits is: