Trinity University of Asia

Management Accounting & Control

Final Examination

PATRICIA ANNE S. LOPEZ

MBA
Test 1. Answer briefly the following:
1. A Management Accountant is both an information provider and part of
management. Explain.
Also known as corporate accountants, management accountants work within one
specific company.
The role of the management accountant is to perform a series of tasks to ensure
their company’s financial security, handling essentially all financial matters and thus
helping to drive the business’s overall management and strategy.
Management accountants are key figures in determining the status and success of a
company. Some choose to become a Certified Management Accountant (CMA), a similar
credential to CPA, but with a greater focus on cost accounting, financial planning, and
management issues.
Job responsibilities can range widely. Depending on the company, your level of
experience, the time of year and the type of industry, you could find yourself doing any
of the following tasks:

 Budgeting
 Handling taxes
 Managing assets to helping determine compensation and benefits packages
 Aiding in strategic planning
2. What is cost-volume-profit analysis? Why is the relationship of cost, volume and
profit important to management?
Cost-volume-profit (CVP) analysis is a method of cost accounting that looks at
the impact that varying levels of costs and volume have on operating profit. The cost-
volume-profit analysis, also commonly known as break-even analysis, looks to determine
the break-even point for different sales volumes and cost structures, which can be useful
for managers making short-term economic decisions.
The cost-volume-profit analysis makes several assumptions, including that the sales
price, fixed costs, and variable cost per unit are constant. Running this analysis involves
using several equations for price, cost and other variables, then plotting them out on an
economic graph.
 Cost-volume-profit analysis, or CVP, is something companies use to figure out how
changes in costs and volume affect their operating expenses and net income. CVP works
by comparing different relationships, such as the cost of operating and producing goods,
the amount of goods sold, and profits generated from the sale of those goods. By breaking
down costs into fixed versus variable, CVP analysis gives companies strong insight into
the profitability of their products or services.
Uses of CVP analysis
Many companies and accounting professionals use cost-volume-profit analysis to
make informed decisions about the products or services they sell. In this regard, CVP
analysis plays a larger role in managerial accounting than in financing accounting.
Managerial accounting focuses on helping managers -- or those tasked with running
businesses -- make smart, cost-effective moves. Financial accounting, by contrast,
focuses more on painting an economic picture of a company so that outside parties, such
as banks or investors, can determine how financially healthy it is.
Elements of CVP analysis
The three elements involved in CVP analysis are:

1. Cost, which means the expenses involved in producing or selling a product or

service.
2. Volume, which means the number of units produced in the case of a
physical product, or the amount of service sold.
3. Profit, which means the difference between the selling price of a product or
service minus the cost to produce or provide it.
Assumptions when using CVP analysis
When managers use CVP analysis to make business decisions, the following assumptions
are made:

 All costs, including manufacturing, administrative, and overhead costs, can be

accurately identified as either fixed or variable.
 The selling price per unit is constant.
 Changes in activity are the only factors that affect costs.
 All units produced are sold.
3. What is the responsibility accounting? What benefits may be derived from adopting
responsibility accounting?
Responsibility accounting involves a company's internal accounting
and budgeting. The objective is to assist in the planning and control of a company's
responsibility centers—such as decentralized departments and divisions.

Responsibility accounting usually involves the preparation of annual and monthly

budgets for each responsibility center. Then the company's actual transactions are
classified by responsibility center and a monthly report is prepared. The reports will
present the actual amounts for each budget line item and the variance between
the budget and actual amounts.

Responsibility accounting allows the company and each manager of a

responsibility center to receive monthly feedback on the manager's performance.
Benefits can be derived from adopting responsibility accounting:
a. Assigning of Responsibility:
Each and every individual in the organization is assigned some responsibility
and they are accountable for their work. Everybody knows what is expected of
him. The responsibility can easily be identified and satisfactory and unsatisfactory
performances of various persons are known. Nobody can shift responsibility to
anybody else if something goes wrong. So, under this system responsibility is
assigned individually.
b. Improves Performance:
The assigning of tasks to specific persons acts as a motivational factor too.
The person’s in-charge for different activities know that their performance will be
reported to the top management. They will try to improve their performance. On
the other hand, it acts as a deterrent for low performance also because persons
know that they are accountable for their work and they will have to explain for
their low
 c. Helpful in Cost Planning:
Under the system of responsibility accounting, full information is collected
about costs and revenues. This data is helpful in planning of future costs and
revenues, fixing of standards and preparing of budgets.
d. Delegation and Control:
This system enables management to delegate authority while retaining overall
control. The authority is delegated according to the requirements of the task
assigned. On the other hand, responsibility of various persons is fixed which is
helpful in controlling their work. The control remains with top management
because performance of every cost centre is regularly reported to it. So
management is able to delegate authority and at the same time to retain control.
e. Helpful in Decision-Making:
Responsibility accounting is not only a control device but also helpful in
decision-making. The information collected under this system is helpful to
management in planning its future actions. The past performance of various cost
center also helps in fixing their future targets. So this system enables management
to take important decisions.
4. In capital budgeting briefly describe each of the following methods.
a. Payback. refers to the period of time required to recoup the funds expended in an
investment, or to reach the break-even point. For example, a $1000 investment made at the
start of year 1 which returned $500 at the end of year 1 and year 2 respectively would have
a two-year payback period.
b. The accounting rate of return (ARR). is the percentage rate of return expected on an
investment or asset as compared to the initial investment cost. ARR divides the average
revenue from an asset by the company's initial investment to derive the ratio or return that
can be expected over the lifetime of the asset or related project. ARR does not consider the
time value of money or cash flows, which can be an integral part of maintaining a business.
c. The Net Present Value or Net Present Worth. applies to a series of cash flows occurring
at different times. The present value of a cash flow depends on the interval of time between
now and the cash flow. It also depends on the discount rate. NPV accounts for the time
value of money.
 d. Profitability Index. also known as profit investment ratio (PIR) and value investment ratio
(VIR), is the ratio of payoff to investment of a proposed project. It is a useful tool for
ranking projects because it allows you to quantify the amount of value created per unit of
investment.

e. The discount rate is the rate of return used in a discounted cash flow analysis to
determine the present value of future cash flows. In a discounted cash flow analysis, the
sum of all future cash flows (C) over some holding period (N), is discounted back to the
present using a rate of return (r).

Test II. Problems

FINIX CORPORATION
a. What is the Finix's Working Capital? Answer: Php40,000.00
b. What is the Finix's current ratio at December 31, 2017? Answer: 1.97:1
c. What is the Finix's acid ratio at December 31, 2017? Answer: 0.75:1
d. What is the Finix's average collection period for accounts recievable? Answer: 54.79 or 55
days
CALIFORNIA MANUFACTURING COMPANY
a. Budgeted sales volume (in units) for the year Answer: Php2,412,000
b. Variable Cost Ratio Answer: 0.33:1
c. Marginal Income Ratio Answer: 0.67:1
d. Break-even sales in ratio Answer: Php 942,192.00
e. Average of Safety ratio Answer: 0.25:1

KURT COPORATION
a. Expected Cash collections for the month of May Answer: Php 67,200.00
b. Expected cash disbursement for the month of May Answer: Php 68,280.00
c. Cash balance as of May 31 Answer: Php 34,320.00