MANAGEMENT ADVISORY SEVICES REVIEWERS / TESTBANKS

6. A local JPIA chapter wants to rent a half for P3,000 a day to hold a Bingo
1. The term "committed costs" refers to costs that fund raiser. Every session of bingo requires a caller for P200. There are
a. are likely to respond to the amount of attention devoted to them by a supplies that are needed that cost P3 per person playing bingo. On average
specified manager each bingo player spends P20 and 1,000 people attend each session.
b. are governed mainly by past decisions that established the present P10,000 in prizes are awarded each session. Total cost for 1 session can be
levels of operating and organizational capacity and that only change classified as:
slowly in response to small changes in capacity Fixed Costs-Variable Costs FixedCosts-Variable Costs
c. fluctuate in total in response to small changes in the rate of utilization a. P 13,200-P 3 c. P
of capacity 3,000-P 13,200
b. P 13,200-P 3,000 d. P
d. management decides to incur in the current period to enable the
10,000-P 3,200
company to achieve objectives other than the filling of orders placed by
customers 7. Which is not a common accounting classification of costs?
a. By the method of payment for the expenditure
2. Which of the following is likely to be a discretionary cost in most b. By the objective of expenditure
organizations? c. By behavior
a. managerial training programs c. d. By the function incurring the expenditure
managerial labor costs
b. factory utilities d. 8. The principal advantage of the scatter-diagram method over the high-low
factory rent method of cost estimation is that the scatter-diagram method
a. includes costs outside the relevant range
3. A cost driver
b. considers more than two points
a. causes fixed costs to rise because of production
c. can be used with more types of costs than the high-low method
changes
d. gives a precise mathematical fit of the points to the line
b. has a direct cause-effect relationship to a cost
c. can predict the cost behavior of a variable, but not
a fixed, cost 9. Which statement is true?
d. is an overhead cost that causes distribution costs to a. A variable cost remains constant on a per-unit basis as production
change in distinct increments with changes in production volume increases
b. A fixed cost remains constant on a per-unit basis as production
4. Costs that are incurred for monitoring and inspecting are: changes
a. prevention costs c. c. The relevant range is valid for all levels of activity
appraisal costs d. An indirect cost can be easily traced to a cost object.
b. detection costs d.
failure costs Pure Foods wishes to analyze the fixed and variable components of the
semi-variable costs. The following information is available:
5. The cost estimation method that gives the most mathematically precise cost Output
production equation is Output
a. The high-low method c. Month Units Costs Month Units
The scatter-graph method Costs
b. The contribution margin method d. January 1,000 P 12,000April 800 P 11,000
February 700 10,000May 1,400 18,750
The regression analysis
March 1,100 14,000June 1,200 15,000 b. coordinating the accounting information system
c. setting goals and objectives for an entity
10. Using the high-low method, which one of the following is correct. d. analyzing financial statements
application
a. Variable costs is P 15 per unit c. Fixed costs is P 18. The treasurer function is usually not concerned with
1,250 per month a. investors relation c.
b. Variable costs is P 10 per unit d. Fixed costs is P financial reports
1,000 per month b. short-term financing d.
credit extension and collection of bad debts
11. BSP Company earned P 100,000 on sales of P 1,000,000. It earned P
130,000 on sales of P 1,100,000. Total fixed costs are 19. The following characterized management advisory services, except
a. P0 b. P 200,000 c. P 420,000 d. P a. It involves decision for the future
900,000 b. It broader in scope and varied in nature
c. It utilizes more junior staff than senior members of
12. Which of the following is a prevention cost? the firm
a. Inspecting and testing materials c. quality audits d. It relates to specific problems where expert help is
b. Packaging inspection d. cost of recalls required

13. Which of the following costs is an internal failure cost? 20. Under which ethical standard of conduct does the managerial accountant
a. Packaging inspection c. quality engineering have the responsibility to disclose fully all relevant information that could
b. Rework d. lost sales reasonably be expected to influence an intended user’s understanding of the
reports, comments and recommendations presented?
14. One of the ways managerial accounting differs from financial accounting is a. Objectivity b. competence
that managerial accounting c. confidentiality d. integrity
a. is bound by generally accepted accounting
principles Hanson Company manufactures two different types of receivers, a regular
b. classifies information in different ways Model R and a special features Model S. The company has limited
c. does not use financial statements resources. On an annual basis it has a total of 480 direct labor-hours and a
d. deals only with economic events total of 300 lbs. of material available for use in the manufacture of these
receivers. The company uses linear programming to determine a production
15. Managerial accounting places considerable weight on: schedule that will maximize the company’s profit.
Based on the company’s current data on selling prices and production costs,
a. generally accepted accounting principles
it is estimated that the sale of Model R will contribute P7 profit per unit and
b. the financial history of the entity
the sale of Model S will contribute P10 profit per unit. Resources used in
c. ensuring that all transactions are properly recorded
the production of the two receivers are as follows. (Let Model S = S and
d. detailed segment reports about departments, products and customers
Model R = R.)
Model S
16. The cost management function is usually under Model R
a. the chief information officer c. purchasing Raw materials used per unit 5 lbs.
manager 3 lbs.
b. controller d. treasurer Labor used per unit 6 hours
4 hours
17. Planning is a function that involves 21. The objective function for Hanson Company can be expressed as
a. hiring the right people for a particular job
 a. 5S + 3R < = 300 c. 26. Using the program evaluation and review technique (PERT), the expected
6S + 4R < = 480 time for completion of Phase 1 should be
b. Max = 7R + 10S d. a. 20 weeks b. 19 weeks c. 18 weeks
Min = 5S + 3 R d. 24 weeks

22. A beverage stand can sell either softdrinks or coffee on any given day. If the Moon, Inc. manufactures product X and product Y, which are processed as
stand sells softdrinks and the weather is hot; it will make P2,500; if the follows:
weather is cold, the profit will be P1,000. If the stand sells coffee and the Type A machine Type B machine
weather is hot, it will make P1,900; if the weather is cold, the profit will be Product X 6 hours 4 hours
Product Y 9 hours 5 hours
P2,000. The probability of cold weather on a given day at this time is 60%.
27. The contribution margin is P12 for product X and P7 for product Y. The
The expected payoff if the vendor has perfect information is:
available time daily for processing the two products is 120 hours for
a. P3,900 b. P1,360 c. P2,200 d.
P1,960 machine Type A and 80 hours for machine Type B. What is the best
combination of product that will maximize profit?
23. Soft Inc. has a target total labor cost of P 3,600 for the first four batches of a a. 10X, 10Y b. 15X, 5Y c. 20X, 0Y
product. Labor is paid P10 an hour. If Soft expects an 80% learning curve, d. 0X, 20Y
how many hours should the first batch take?
28. Linear programming is used most commonly to determine
a. 360 hours b. 140.63 hours c. 57.6 hours
d. 230.4 hours a. The fastest timing
b. The best use of scarce resources
c. The most advantageous prices
24. Critical Path Method (CPM) is a technique for analyzing, planning, and
d. The mix of variable that will result in the largest quantity
scheduling large, complex projects by determining the critical path from
single time estimate from each event in a project. The critical path:
a. Is the shortest path from the first event to the last event for a project The network below describes the interrelationships of several activities
b. Is an activity within the path that requires the most number of time necessary to complete a project. The arrows represent the activities. The
c. Has completion that reflects the earliest time to complete the project numbers between the arrows indicate the number of months to complete
d. Is the maximum amount of time an activity may be delayed without each activity.
delaying the total project beyond its target completion time 2
4 2 4
25. A company is designing a new regional distribution warehouse. To 4
minimize delays in loading and unloading trucks, an adequate number of Start 1 6 5 End
loading docks must be built. The most relevant technique to assist in 2
6 3 4 5
determining the proper number docks is
a. Cost-volume-profit analysis c. PERT / CPM
29. The shortest time to complete the project is
analysis
b. Queuing theory d. Linear a. 10 months b. 12 months c. 16 months
programming d. 28 months

AJ Construction Inc. is considering a three-phase research project. The time 30. Super Company is preparing 2011 budget and, taking into consideration the
estimates for completion of Phase 1 of the project are: recent pace of economic recovery, has developed several sales forecasts and
Pessimistic 29 weeks the estimated probability associated with each sales forecasts. To determine
Most likely 25 weeks the sales forecasts to be used for 2011 budgeting purposes, which of the
Optimistic 15 weeks following techniques should Super use?
 a. Expected value analysis c. Monte Carlo c. Zap finances short-term assets with long term debt while Zing finances
simulation short-term assets with short-term debt.
b. Continuous probability simulation d. Sensitivity Analysis d. Zap has low ratio of short-term debt to total debt while Zing has a high
ratio of short-term debt to total debt.
31. The expected value of perfect information is the
a. Difference between the expected profit under certainty and the 36. All of these factors are used in credit policy administration, except:
expected monetary value of the best act under uncertainty. a. Credit standards c. Terms of trade
b. Difference between the expected profit under certainty and the b. Peso amount of receivables d. Collection
expected opportunity loss policy
c. Sum of the conditional profit (loss) for the best event of each act times
the probability of each events occurring 37. The use of safety stock by a firm will:
d. Same as the expected profit under certainty a. Reduce inventory costs c. Increase
inventory costs
A dough distributor has decided to increase its daily muffin purchases by 100 b. Have no effect on inventory costs d. None of
boxes. A box of muffins costs P 2 and sells for P 3 through regular stores. Any the above
boxes not sold through regular stores are sold through Dough’s thrift store for
P 1. Dough assigns the following probabilities to selling additional boxes. 38. Which of the following statements is correct for a firm that currently has
Additional sales probabilities
total costs of carrying and ordering inventory that is 50% higher than total
60 .40
100 .60 carrying costs?
32. What is the expected value of Dough’s decision to buy 100 additional boxes a. Current order size is greater than optimal c. Current
order size is less than optimal
of muffins?
b. Per unit carrying costs are too high d. The
a. P 28 b. P 40 c. P 52 d. P optimal order size is currently being used
68
39. The Spades Company has an inventory conversion period of 75 days, a
33. As a company becomes more conservative with respect to working capital
receivables conversion period of 38 days, and a payable payment period of
policy, it would tend to have a(n)
30 days. What is the length of the firm’s cash conversion cycle?
a. Increase in the operating cycle.
a. 83 days b. 113 days c. 67 days
b. Decrease in the operating cycle.
d. 45 days
c. Increase in the ratio of current assets to current liabilities.
d. Increase in the ratio of current liabilities to noncurrent liabilities.
40. Samaritan Supplies, Inc. has P5 million in inventory and P2 million in
34. Temporary working capital supports accounts receivable. Its average daily sales are P100,000. The company has
a. The cash needs of the company c. Payment of long P1.5 million in accounts payable. Its average daily purchases are P50,000.
term debt. What is the length of the company’s inventory conversion period?
b. Acquisition of capital equipment d. Seasonal a. 120 days b. 90 days c. 50 days
peaks d. 40 days

35. Zap Company follows an aggressive financing policy in its working capital 41. Rawson Corporation’s order quantity for Material T is 5,000 lbs. If the
management while Zing Corporation follows a conservative financing company maintains a safety stock of T at 500 lbs., and its order point is
policy. Which one of the following statements is correct? 1,500 lbs. What is the lead time assuming daily usage is 50 lbs.?
a. Zap has a low current ratio while Zing has a high current ratio. a. 30 days b. 100 days c. 10 days
b. Zap has less liquidity risk while Zing has more liquidity risk. d. 20 days
 42. Refer to # 16; what would be the total annual carrying costs assuming the
carrying cost per unit is P8.40?
a. P 42,000 b. P 25,200 c. P 4,200
d. P 46,200
43. Simile Inc. has a total annual cash requirement of P 9,075,000 which is to
be paid uniformly. Simile has the opportunity to invest the money at 24%
per annum. The company spends, on the average, P40 for every cash
conversion to marketable securities. What is the optimal cash conversion
size?
a. P55,000 b. P60,000 c. P45,000
d. P75,500
44. Palm Company’s budgeted sales of the coming year are P 40,500,000 of
which 80% are expected to be credit sales at terms of n/30. Palm estimates
that a proposed relaxation of credit standards will increase credit sales by
20% and increase the average collection period from 30 days to 40 days.
Based on a 360-day year, the proposed relaxation of credit to standards will
result in an expected increase in the average accounts receivable balance of
a. P540,000 b. P900,000 c.P2,700,000
d. P1,620,000
45. If a firm is given a trade credit terms of 2/10, net 30, then the cost to the
firm failing to take the discounts and pay instead its obligation at the end of
the maturity date is:
a. 2% b. 30% c. 36.7% d.
10%
46.) Depreciation is incorporated explicitly in the discounted cash flow analysis of an
investment proposal because it
A. Is a cash inflow.
B. Is a cost of operations that cannot be avoided.
C. Reduces the cash outlay for income taxes.
D. Represents the initial cash outflow spread over the life of the investment.
47.) Assume that the old equipment must be sold in order to purchase the new
equipment. Given a constant effective corporate income tax rate and straight-line
depreciation on both disposed and newly purchased pieces of equipment, the
depreciation tax shield during the later years of a capital project, assuming the old
equipment was not yet fully depreciated when it was disposed of, is generally
A.) Less than that during the earlier years.
B.) Not determinable from the information given.
C.) Greater than that during the earlier years.
D.) The same as that during the earlier years.
48.) Future, Inc. is in the enviable situation of having unlimited capital funds. The
best decision rule, in an economic sense, for it to follow would be to invest in all
projects in which the
a.) Internal rate of return is greater than zero.
b.) Net present value is greater than zero.
c.) Accounting rate of return is greater than the earnings as a percent of sales.
d.) Payback reciprocal is greater than the internal rate of return.
49.) Kore Industries is analyzing a capital investment proposal for new equipment to
produce a product over the next 8 years. The analyst is attempting to determine the
appropriate "end-of-life" cash flows for the analysis. At the end of 8 years, the
equipment must be removed from the plant and will have a net book value of zero, a
tax basis of P75,000, a cost to remove of P40,000, and scrap salvage value of
P10,000. Kore’s effective tax rate is 40%. What is the appropriate "end-of-life" cash
flow related to these items that should be used in the analysis?
a. P27,000 inflow
b. P18,000 outflow
c. P45,000 outflow
d. P12,000 inflow
50.) Barker, Inc. has no capital rationing constraint and is analyzing many
independent investment alternatives. Barker should accept all investment proposals
a. That provide returns greater than the before-tax cost of debt.
b. That have a positive net present value.
c. If debt financing is available for them.
d. That have positive cash flows.
51.) The rankings of mutually exclusive investments determined using the internal
rate of return method (IRR) and the net present value method (NPV) may be
different when
a. The lives of the multiple projects are equal and the size of the required
investments is equal.
b. The required rate of return equals the IRR of each project.
c. The required rate of return is higher than the IRR of each project.
d. Multiple projects have unequal lives and the size of the investment for
each project is different.
52. All of the following items are included in discounted cash flow analysis except
a. Future operating cash savings.
b. The future asset depreciation expense.
c. The current asset disposal price.
d. The tax effects of future asset depreciation.
53.) A firm is considering a capital project for which the following information is
available: An existing piece of equipment that would be disposed of to make room
for new equipment has a historical cost of P370,000. It has a salvage value of
P10,000 and has been depreciated on a straight-line basis for 16 of the estimated 18
years of its useful life. The new equipment has a cost of P500,000 and the firm
expects it will have to devote P20,000 in cash and P24,000 in accounts receivable to
the new project. The firm’s effective tax rate is 40%. The required net initial Questions 5 through 8 are based on the following information: Elvin Corporation
investment in the new project is manufactures and sells T-shirts inspired with college names and slogans. Last year,
a. P534,000 the shirts sold for P7.50 each, and the variable expenses was P2.25 per unit. The
b. P518,000 company needed to sell 20,00 shirts to breakeven. The net operating income last year
c. P544,000 was P8,400. Elvin’s expectations for the coming year include the following:
d. P498,000 - The selling price of the t-shirts would be P9.00
54.) If income tax considerations are ignored, how is depreciation handled by the - Variable expenses would increase by one-third.
following capital budgeting techniques? - Fixed expenses will increase by 10%.
A. Excluded...Included...Excluded
C. Included...Excluded...Included 59. The number of t-shirts Elvin Corporation must sell to breakeven in the coming
B. Excluded...Excluded...Included year is:
D. Included...Included...Included b. 17,500 b. 19,250 c. 20,000
d. 22,000
55. The following are inherent to management accounting:
1. External report 60. Sales for the coming year are expected to exceed last years by 1,000 units. if this
2. Historical information occurs, Elvin’s sales volume in the coming year will be:
3. Contribution approach income statement c. 22,600 units b. 21,960 units c. 23,400 units d. 21,000
4. Generally accepted accounting principle units
5. prospective financial statements
a. All of them b. 2,3,5 c. 3,5 d. 61. If Elvin wishes to earn P22,500 in net operating income for the coming year, the
1.2,5 company’s sales volume in pesos must be:
d. 217,750 b. P257,625 c. P207,000 d.
56. What is the study of the need for activities and whether they are operating P229,500
efficiently called?
a. Direct and indirect cost management 62. The selling price needed next year to maintain the same contribution margin
b. Activity-based management ratio as last year is:
c. Variable and fixed cost management e. P9.00 b. P8.25 c. P10.00 d.
d. Total quality management P9.75

57. Which of the following is the appropriate procedure to apply overhead to
production using normal costing?
a. Assign actual direct material and direct labor costs plus an amount
representing “normal” manufacturing overhead to products.
b. Assign “normal” direct material and direct labor costs plus an amount
representing “normal” manufacturing overhead to products.
c. Assign actual direct material and direct labor costs plus an amount
representing “normal” manufacturing overhead to products.
d. All of the above answers are correct.
58. PJ Company’s direct labor is 30% of its conversion cost. If the direct materials
costs last week was P52,500 and the manufacturing overhead cost was P21,000,
compute the cost of the direct labor for the week.
a. P75,000 b. P9,000 c. P30,000 d.
P6,300
63. W Company had a net operating income of P75,000 using variable costing and a
net operating income of P57,000 using absorption costing. Variable production
costs were P15 per unit. Total fixed manufacturing overhead was P120,000 and
10,000 units were produced. During the year, the inventory level:
f. Increased by 1,200 units. c. Decreased by
1,500 units.
g. Increased by 1,500 units. d. Decreased by 1,200
units.
64. An activity-based costing system that is designed for internal decision-making
will not conform to generally accepted accounting principles because:
h. Some manufacturing costs (the cost of idle capacity and organization
sustaining costs) will not be assigned to products.
i. Some nonmanufacturing costs are assigned to products.
j. First-sage allocation may be based on subjective interview data.
 k. All of the above are reasons why an activity-based costing system that is 69. B Company is preparing its budget for 2006. For 2005, the following were
designed for internal decision-making will not conform to generally reported:
accepted accounting principles.
65. JKL Company has a standard of 15 parts of component X costing P1.50 each. Sales (100,000 units) P1,000,000
JKL purchases 14,010 units of component X for P22,125. JKL generated a P220 Cost of goods sold 600,000
favorable price variance and a P3,375 favorable quantity variance. If there were Gross profit 400,000
no changes in the component inventory, how many units of finished product Operating expenses* 240,000
were produced? Net Income P 160,000
a. 994 units b. 1,650 units c. 1,000 units *including depreciation of P40,000
d. 1,160 units
Selling prices will increase by 10% and sales volume in units will decrease by
66. Shown below is the sales forecast for C Inc., for the first four months of the 5%. The cost of goods sold as a percent of sales will increase to 62%. Other than
coming year: depreciation, all operating costs are variable. B will budget a net income for
Jan Feb Mar 2006 of
Apr a. P167,100 b. P167,500
Cash Sales P15,000 P 24,000 P 18,000 P 14,000 c. P168,000 d. P176,000
Credit Sales 100,000 120,000 90,000 70,000
Questions 16 through 19 are based on the following information: A Industries
On average, 50% of credit sales are paid for in the month of the sale, 30% in employs a standard cost system in which direct materials inventory is carried at
the month following sale, and the remainder is paid two months after the month standard cost. A has established the following standards for the prime costs of one
of the sale. Assuming there are no bad debts, the expected cash inflow in March unit of product.
is: Standard Quantity Standard Price Standard
l. P138,000 b. P122,000 c. P119,000 Cost
d. P108,000 Direct materials 8 pounds P1.80 per pound 14.40
Direct labor 0.25 hour P8.00 per hour
67. T Company budgeted sales on account of P120,000 for July, P211,000 for 2.00
August, and P198,000 for September. Collection experience indicates that none
of the budgeted sales will be collected in the month of the sale, 60% will be During May, A purchased 160,000 pounds of direct materials at a cost of
collected the month after the sale, 36% in the second month, and 4% will be P304,000. The total direct labor for May were P37,800. A manufactured 19,000
uncollectible. The cash receipts from accounts receivable that should be units of product during May using 142,500 pounds of direct materials and 5,000
budgeted for September would be: direct labor hours.
a.P169,800 b. P147,960 c. P197,880 70. The direct materials price variance for May is
d.P194,860 a. P16,000 F b. P16,000 UF c. P14,250 F d.
P14,250 UF
68. P Company budgets on an annual basis for its fiscal year. The following
beginning and ending inventory levels (in units) are planned for the next year: 71. The direct materials quantity variance for May is
Beginning Ending a. P14,400 UF b. P1,100 F c. P17,100 UF
Raw Materials 40,000 50,000 d. P17,100 F
Finished goods 80,000 50,000
72. The direct labor rate variance for May is
Three pounds of materials are needed to produce each unit of finished product. a. P2,200 F b. P1,900 UF c. P2,000 UF
If P Company plans to sell 480,000 units during next year, the number of units it d. P2,090 F
would have to manufacture during the year would be
m. 440,000 units b. 480,000 units c. 510,000 units d. 73. The direct labor efficiency variance for May is
450,000 units a. P2,200 F b. P2,000 F c. P2,000 UF
d. P1,800 UF
 81. CDE Company manufactures communication satellites used in TV in signal
F Glass Works uses a standard cost system in which manufacturing overhead is transmission. The firm currently purchases one component for its satellite from a
applied to units of product on the basis of direct labor-hours. Each unit requires two European firm. A CDE engineering team has found a way to use the company’s
standard hours of labor for completion. The denominator activity for the year was own component, namely Part No. A200 instead of the European component.
based on budgeted production of 200,000 units. Total overhead was budgeted at However, the CDE component must be modified at a cost of P500 per part. The
P900,000 for the year, and the fixed overhead rate was P3.00 per unit. The actual European component costs P8,900 per part. CDE’s part no A200 costs P5,100
data pertaining to the manufacturing overhead for the year are presented below: before it is modified. CDE currently uses 10 of the European component per
Actual production 198,000 units year. How much is the annual differential cost between CDE’s two production
Actual DLH 440,000 alternatives?
Actual variable overhead P352,000 a. P33,000 b. P37,000 c.P34,000
Actual fixed overhead P575,000 d. P35,000
74. The standard hours allowed for actual production for the year total
a. 247,500 b. 396,000 c. 400,000 82. M Company plans to discontinue a department that has a contribution margin of
d. 495,000 P24,000 and P48,000 in fixed costs. Of the fixed costs, P21,000 cannot be
eliminated. The effect of this discontinuance on M’s net operating income would
75. F’s variable overhead efficiency variance for the year is be a(n)
a. P33,000 UF b. P35,200 F c. P35,200 a. Decrease of P3,000 c. Decrease
UF d. P3,000 F of P24,000
b. Increase of P3,000 d. Increase
76. F’s variable overhead spending variance for the year is of P24,000
a. P20,000 UF b. P22,000 F c. P22,000
UF d. P20,000 F The T Company has 500 obsolete microcomputers that are carried in inventory at a
total cost of P720,000. If these microcomputers are upgraded at a total cost of
77. F’s fixed overhead budget variance for the year is P100,000, they can be sold for a total of P160,000. As an alternative, the
a. P19,000 F b. P25,000 F c. P25,000 microcomputers can be sold in their present condition for P50,000.
UF d. P19,000 UF 83. The sunk cost in this situation
a. P720,000 b. P160,000 c. P50,000
78. The fixed overhead applied in F’s production for the year is d. P100,000
a. P484,200 b. P575,000 c. P594,000 84. What is net advantage or disadvantage to the company from upgrading the
d. P800,000 computers rather than selling in their present condition?
a. P110,000 advantage c.
79. F’s overhead volume variance for the year is P10,000 advantage
a. P6,000 UF b. P19,000 F c. P25,000 F b. P660,000 disadvantage d. P60,000
d. P55,000 UF advantage
85. Suppose the selling price of the upgraded computers has not been set. At what
80. Following is information relating to K Company’s X Division last year: selling price per unit would the company be as well off upgrading the computers
Sales P500,000 as if it just sold the computers in their present condition?
Variable expenses 300,000 a. P100 b. P770 c. P300 d.
Traceable fixed expenses 50,000 P210
Average operating assets 100,000
Minimum required rate of return 6% 86. F Caterers quotes price of P60 per person for a dinner party. This price includes
X’s residual income was the 6% sales tax and the 15% service charge. Sales tax is computed on the food
a. P144,000 b. P150,000 c. P156,000 plus service charge. The service charge is computed on the food only. At what
d. P200,000 amount does F Caterers price the food?
a. P55.40 b. P50.00 c.P47.40
d. P49.22
 Material moves (total) 20 80
87. Which is NOT a common accounting classification of costs? Direct labor hours per unit 1 2
a. By the method of payment for the expenditure.
b. By the objective of expenditure. Material handling costs total $200,000. Under ABC, the material handling costs
c. By behavior. allocated to each unit of Model A would be:
d. By the function incurring the expenditure. a. $10
b. $200
88. Introducing income taxes into cost-volume-profit analysis c. $333
a. raises the break-even point. d. Some other number
b. lowers the break-even point.
c. increases unit sales needed to earn a particular target profit.
d. decreases the contribution margin percentage. 93. Buchanan Company currently sells 4,000 units of product Q for $1 each.
Capacity is 5,000 units. Variable costs are $0.40 and avoidable fixed costs
89. The principal advantage of the scatter-diagram method over the high-low method are $400. A chain store has offered $0.80 per unit for 400 units of Q. If
of cost estimation is that the scatter-diagram method Buchanan accepts the order, the change in income will be a
a. includes costs outside the relevant range. a. $60 decrease.
b. considers more than two points. b. $80 decrease.
c. can be used with more types of costs than the high-low method. c. $160 increase.
d. gives a precise mathematical fit of the points to the line. d. $480 increase.

90. Looking at the following scatter diagrams we can conclude that 94. An imposed budget
$ $ a. is the same as a static budget.
| ** | ** b. can lead to poor performance.
| * ** | ** * c. is best for planning purposes.
| *** * | * * d. eliminates the need for a sales forecast.
| * * | **
| | 95. If the present value of the future cash flows for an investment equals the required
| | investment, the IRR is
|__________________ |__________________ a. equal to the cutoff rate.
activity activity b. equal to the cost of borrowed capital.
Cost A Cost B c. equal to zero.
a. cost A will be easier to predict than cost B. d. lower than the company's cutoff rate of return.
b. cost B will be easier to predict than cost A.
c. cost A is out-of-control. 96. Which of the following combinations is possible?
d. cost B has no fixed component. Profitability Index NPV IRR
------------------- -------- -------------------------
91. The cost to repair a unit of product that fails after it is sold is a(n) a. greater than 1 positive equals cost of capital
a. appraisal cost. b. greater than 1 negative less than cost of capital
b. external failure cost. c. less than 1 negative less than cost of capital
c. internal failure cost. d. less than 1 positive less than cost of capital
d. prevention cost.
97. Altoona Company is considering replacing a machine with a book value of
92. Genco manufactures two versions of a product. Production and cost information $200,000, a remaining useful life of 4 years, and annual straight-line
show the following: depreciation of $50,000. The existing machine has a current market value of
Model A Model B $175,000. The replacement machine would cost $320,000, have a 4 year
Units produced 200 400 life, and save $100,000 per year in cash operating costs. If the replacement
 machine would be depreciated using the straight-line method and the tax wage rate is $6 per hour. Standard variable overhead cost for a unit of
rate is 40%, what would be the increase in annual income taxes if the product is
company replaces the machine? a. $4.00.
a. $28,000 b. $6.00.
b. $40,000 c. $9.00.
c. $42,000 d. $10.00.
d. $64,000
102. Chippewa paid $32,225 to direct labor for the production of 1,700 units.
98. Direct, step-down, and reciprocal are names for Standards allow 3 labor hours per unit at a rate of $6.50 per hour. Actual
a. the allocation methods most likely to produce goal congruence. hours totaled 5,150. The direct labor rate variance was
b. transfer-pricing methods. a. $1,250 favorable
c. methods for allocating costs of service departments to operating b. $925 favorable
departments. c. $325 favorable
d. alternative organizational structures. d. $325 unfavorable

99. Cascade Company had the following results in June. 103. A company using activity-based overhead rates
a. will usually have higher budget variances than one using a single rate.
Planned Actual b. will usually have higher volume variances than one using a single rate.
------- ------- c. cannot compute fixed and variable components of overhead cost.
Sales $80,000 $78,900 d. should have better information for planning and control than one
Variable costs 50,000 48,500 using a single rate.
------- -------
Contribution margin $30,000 $30,400 104. Variable costing and absorption costing will show the same incomes when there
======= ======= are no
Planned sales were 10,000 units; actual sales were 9,700 units. The sales a. beginning inventories.
price variance is b. ending inventories.
a. $1,100 U. c. variable costs.
b. $1,000 F. d. beginning and ending inventories.
c. $900 U.
d. $400 F. 105. Madison Industries manufactures a single product using standard costing.
Variable production costs are $26 and fixed production costs are $250,000.
100. Alcatraz Division of XYZ Corp. sells 80,000 units of part X to the outside Madison uses a normal activity of 12,500 units to set its standard costs.
market. Part X sells for $40, has a variable cost of $22, and a fixed cost per Madison began the year with 1,000 units in inventory, produced 11,000
unit of $10. Alcatraz has a capacity to produce 100,000 units per period. units, and sold 11,500 units. The standard cost of goods sold under variable
Capone Division currently purchases 10,000 units of part X from Alcatraz costing would be
for $40. Capone has been approached by an outside supplier willing to
supply the parts for $36. What is the effect on XYZ's overall profit if a. $230,000.
Alcatraz REFUSES the outside price and Capone decides to buy outside? b. $299,000.
a. no change c. $506,000.
b. $140,000 decrease in XYZ profits d. $529,000.
c. $80,000 decrease in XYZ profits
d. $40,000 increase in XYZ profits 106. Backflushing, or backflush costing
a. requires significantly less recordkeeping than other methods.
101. Filter Company's budget for overhead costs is: b. can be used by any company.
total overhead cost = $50,000 + ($4 x direct labor hours) c. ignores inventories.
Standard direct labor time is 1.5 hours per unit of product. The standard d. does not distinguish between materials and conversion costs.
107.Which of the following will not impair the independence of a CPA in the
rendition of Management Services?
a. The CPA performs decision-making services for his client.
b. The CPA performs services wherein he is in effect, acting as an
employee of the client.
c. The CPA loses his objectivity and acts in a manner as if he is
advocating for the interest of his client.
d. The CPA does not extend his services beyond the presentation of
recommendations or giving of advice.

108.The type of data processing in which remote terminals provide direct access to
the computer is
a. On-line processing c. Batch processing
b. Remote processing d. Central processing

109.Sequential access means that

a. Data are stored on magnetic tape.
b. The address of the location of data is found through the use of either
an algorithm or an index.
c. Each record can be accessed in the same amount of time.
d. To read record 500, records 1 through 499 must be read first.