ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 44  Oct 2022 CPALE  30 July 2022  8:00 - 11:00 AM

MANAGEMENT SERVICES FIRST PRE-BOARD EXAMINATION

INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
Set A
1. Strategic analysis to operating income may be based on the following components,
except
B a. Price-recovery component
b. Cost-recovery component
c. Productivity component
d. Growth component

2. Alchemy Company is assessing the potential loss from a computer virus. The
following table lists three possible scenarios, the expected loss under each
scenario, and the likelihood of each scenario.
Scenario Expected Loss Likelihood
Minor P 100,000 30%
Moderate P 600,000 50%
Significant P 2,000,000 20%

If Alchemy actually experiences a loss of P 2,000,000 from this virus, what is

the unexpected loss from the virus?
B a. P 2,000,000
b. P 1,270,000
c. P 1,100,000
d. P 730,000

3. In responsibility accounting, revenue centers may include this performance

measure in their respective performance report.
C a. Residual income
b. Income statement
c. Variance analysis
d. Economic value added

4. Autistic Inc., a bearings manufacturer, has the capacity to produce 7,000

bearings per month. The company is planning to replace a portion of its labor-
intensive production process with a highly automated process, which would
increase Autistic’s fixed manufacturing costs by P 30,000 per month and reduce
its variable costs by P 5 per unit.

Autistic’s Income Statement for an average month is as follows.

Sales (5,000 units at P 20 per unit) P 100,000

Variable manufacturing costs P 50,000
Variable selling costs 15,000 65,000
Contribution margin 35,000

Fixed manufacturing costs 16,000

Fixed selling costs 4,000 20,000
Operating income P 15,000

If Autistic installs the automated process, the company’s monthly operating

income would be:
D a. P 40,000
b. P 30,000
c. P 20,000
d. P 10,000

5. An invalid way to compute direct materials variance in standard costing is:

B a. Materials quantity variance = materials mix variance + materials
yield variance
b. Materials quantity variance = (actual quantity purchased – standard
quantity) x standard price
c. Materials price variance = actual quantity consumed x (actual price
– standard price)
d. Materials price variance = actual quantity purchased x (actual price
– standard price)

Page 1 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam

6. Jang Uk Company (JUC) manufactures ice-makers for installation in refrigerators.

The costs per unit, for 20,000 units of ice-makers, are as follows:
Direct materials P 7
Direct labor 12
Variable overhead 5
Fixed overhead 10
Total costs P 34

Mu-Deok, Inc. (MDI) has offered to sell 20,000 ice-makers to JUC for P 28 per
unit. If JUC accepts MDI’s offer, the plant would be idled and fixed overhead
amounting to P 6 per unit could be eliminated.

The total relevant costs associated with the manufacture of ice-makers shall be
C a. P 480,000
b. P 560,000
c. P 600,000
d. P 680,000

7. A decrease in the income tax rate normally affects the

D a. Break-even sales
b. Margin of safety in units
c. Degree of operating leverage
d. Required peso sales to achieve a post-tax profit

8. Souls, Inc. sells its microcomputers using bid pricing it develops its bids on
a full cost basis. Full cost includes estimated material, labor, variable
overheads, fixed manufacturing overheads, and reasonable incremental computer
assembly administrative costs, plus a 10% return on full cost. Souls believes
bids in excess of P 1,050 per computer are not likely to be considered.

Souls’ current cost structure, based on its normal production levels, is P 500
for materials per computer and P 20 per labor hour. Assembly and testing of each
computer requires 17 labor hours. Souls expects to incur variable manufacturing
overhead of P 2 per labor hour, fixed manufacturing overhead of P 3 per labor
hour, and incremental administrative costs of P 8 per computer assembled.

Souls has received a request from a school board for 200 computers. Using the
full-cost criteria and desired level of return, which one of the following prices
should be recommended to Soul’s management for bidding purposes?
D a. P 874.00
b. P 882.00
c. P 961.40
d. P 1,026.30

9. Market-based pricing does not consider

B a. Competitive rivalries
b. Internal capacity limits
c. Customer needs and wants
d. Customers reactions to pricing strategies

10. A certain job required a total payroll of P 600 based on 50 labor hours but
should have taken only 40 hours at a rate of P 16 per hour. Under a standard
costing system, which of the following is an incorrect journal entry?
A a. Debit to labor efficiency variance for P 120
b. Credit to labor rate variance for P 200
c. Credit to accrued payroll for P 600
d. Debit to work-in-process for P 640

11. The starting point for creating a master budget for a proprietary secretarial
school would be
D a. Preparing the student recruiting budget
b. Estimating salaries of the instructors
c. Preparing a capital expenditure budget
d. Forecasting enrollment

Page 2 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam
12. Both high-low method and least-squares regression method always come up with a
A a. Cost function
b. Fixed cost that is equal to the variable cost
c. Fixed cost that is lower than the variable cost
d. Fixed cost that is higher than the variable cost

13. The financial statements have just arrived showing a P 3,000 loss on the new
stadium job that was budgeted to show a P 6,000 profit for Songrim Company.
Actual and budgeted information relating to the materials for the job are as
follows:
Actual Budget
Bricks-number of bundles 3,000 2,850
Bricks-cost per bundle P 7.90 P 8.00
Which is a correct statement regarding the stadium job for Songrim?
A a. The material price variance was favorable by P 300
b. The material price variance was unfavorable by P 300
c. The flexible budget variance was unfavorable by P 900
d. The material efficiency variance was favorable by P 1,200

14. The correct sequence in a typical budgeting process shall be:

B a. Materials budget, production budget, sales budget
b. Sales budget, production budget, materials budget
c. Production budget, sales budget, materials budget
d. Sales budget, materials budget, production budget

15. The following cost information is for a sales volume of 6,300 units:
Direct materials per unit P 8
Total direct labor P 54,000
Fixed manufacturing overhead P 30,000
Variable manufacturing overhead 120% of direct labor
Fixed selling and administrative costs P 50,000
Variable selling and administrative costs P 5 per unit
Calculate cost of goods sold using variable costing.
A a. P 169,200
b. P 199,200
c. P 200,700
d. P 280,700

16. Most tools and techniques in financial management are based on the following
fundamental theories or principles, except:
C a. Time value of money is considered
b. Ethical behavior is always relevant
c. Accrual basis is preferred over cash basis
d. Trade-off between risks and returns shall be taken into account

17. Naksu Industries is a multidivisional firm that evaluates its managers based on
the return on investment (ROI) earned by their divisions. The evaluation and
compensation plans use a targeted ROI of 15% (equal to the cost of capital) and
managers receive a bonus of 5% of basic compensation for every one-percentage
point that the division’s ROI exceeds 15%.

Jin Mu, manager of the Consumer Product Division, has made a forecast of the
division’s operations and finances for next year that indicates the ROI would be
24%. In addition, new short-term programs were identified by the Consumer
Products Division and evaluated by the finance staff as follows:
Program Projected ROI
A 13%
B 19%
C 22%
D 31%
Assuming no restrictions on expenditures, what is the optimal mix of new programs
that would add value to Naksu Industries?
B a. A, B, C and D
b. B, C and D
c. C and D
d. D only

Page 3 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam

18. In probability analysis, expected value may be considered as a

C a. Simple average
b. Moving average
c. Weighted average
d. Geometric average

19. A firm has projected sales of 20,000 and 22,000 units for the next two periods
(periods X1 and X2, respectively). The firm maintains an ending finished goods
inventory equal to 15% of the next period’s projected sales. Each unit requires
2 hours of direct labor at a cost of P 15 per hour.

Assuming that all inventory standards are currently met, what is the direct labor
budget for period X1?
B a. P 600,000
b. P 609,000
c. P 690,000
d. P 699,000

20. The balanced scorecard provides an action plan for achieving competitive success
by focusing management attention on critical success factors. All of the
following are critical success factors commonly focused upon in the balanced
scorecard, except
B a. Employee innovation and learning
b. Competitor business strategies
c. Financial performance measures
d. Internal business processes

21. If 200,000 machine hours are budgeted for variable overhead at a standard rate
of P 5 per machine hour, but 220,000 machine hours were actually used at an
actual rate of P 6 per machine hour, what is the variable overhead efficiency
variance?
B a. P 100,000 favorable
b. P 100,000 unfavorable
c. P 320,000 favorable
d. P 320,000 unfavorable

22. 100% - breakeven ratio =

B a. No meaningful ratio
b. Safety margin ratio
c. Variable cost ratio
d. Contribution margin ratio

23. Soul Shifter Industries is a multi-product company that currently manufactures

30,000 units of Part 730 each month for use in production. The facilities now
being used to produce Part 730 have fixed monthly overhead costs of P 150,000,
and a theoretical capacity to produce 60,000 units per month. If Soul Shifter
were to buy Part 730 from an outside supplier, the facilities would be idle and
40% of fixed costs would continue to be incurred. There are no alternative uses
for the facilities. The variable production costs of Part 730 are P11 per unit.
Fixed overhead is allocated based on planned production levels.

If Soul Shifter Industries continues to use 30,000 units of Part 730 each month,
it would realize a net benefit by purchasing Part 730 from an outside supplier
only if the supplier’s unit price is less than:
A a. P 14.00
b. P 13.00
c. P 12.50
d. P 12.00

24. Which of the following examples correctly correlates a unit of activity and a
variable cost at a coffee shop chain?
D a. Number of employees and power usage
b. Number of tables and pounds of coffee
c. Number of coffee makers and employees
d. Number of customers and disposable cups

Page 4 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam
25. A company has the following cost information:
Units produced and sold 20,000
Variable cost of goods sold P 12 per unit
Total variable selling expense P 16,000
Fixed selling and administrative expense P 22,700
Total variable administrative expense P 44,000
Fixed manufacturing expense P 60,000

Determine the sales revenue that results in contribution margin of P 125,000.

D a. P 300,000
b. P 365,000
c. P 381,000
d. P 425,000

26. For the next quarter, Go Food Company plans to spend P 30,000 on wages for
employees and P 15,000 on new ovens. How do these projected expenses compare?
C a. Both would be recorded as an operating activity.
b. Both would be recorded as an investing activity.
c. Money spent on wages would be recorded as an operating activity,
while money spent on ovens would be recorded as an investing activity.
d. Money spent on ovens would be recorded as an operating activity,
while money spent on wages would be recorded as an investing activity.

27. Hanbada Company uses flexible budgets. Hanbada’s normal capacity is 2,800 violins
per year. At this level of activity, budgeted manufacturing overhead is P 89,600
variable and P 252,000 fixed. Hanbada’s actual overhead costs were P 350,000
when 3,150 violins were produced. If Hanbada uses a flexible budget, what is the
difference between actual and budgeted costs?
C a. P 8,400 favorable
b. P 8,400 unfavorable
c. P 2,800 favorable
d. P 2,800 unfavorable

28. The following explanations appeared on last week’s variance report for JT
Engineering’s purchasing department. Which of these explanations could reflect
negatively on the purchasing department?
A a. Rush order
b. Quantity discount
c. Repeat customer credit
d. Regular supplier on strike

29. The standard cost sheet for King Industries shows the following unit costs for
direct materials and direct labor for each package of wrapping paper made:
Direct materials: 100 square feet of paper at P 0.05 P 5.00
Direct labor: 1 standard hours at P 8 P 8.00
Total standard materials and labor costs per package P 13.00
During the month of November, 150,000 square feet of paper was used to produce
1,425 packages of wrapping paper, and the following actual costs were incurred:
Paper purchased: 175,000 square feet at P 0.06 per square foot P 10,500
Direct labor: 1,390 hours at P 8.10 per hour P 11,259
The standard selling price per package is P 39. King expects to sell 1,100
packages during December. Actual revenue results from December are as follows:
Actual revenue: 1,065 packages sold at P 40 per package = P 42,600

What are the sales price and volume variances for King Industries? (The volume
variance in this context means the effect on revenue, not on contribution margin)
A a. P 1,065 favorable and P 1,365 unfavorable
b. P 1,065 unfavorable and P 1,365 favorable
c. P 1,365 favorable and P 1,065 favorable
d. P 1,365 unfavorable and P 1,065 favorable

30. Profit under absorption costing is higher than variable costing profit when
A a. Inventory level increases during the period
b. Units produced are lower than units sold
c. Just-in-time system is implemented
d. Capacity variance is favorable

Page 5 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam
Items 31 and 32 are based on the following information
The following data pertain to Ejector Company's operations last year:
Sales P 900,000
Net operating income 36,000
Contribution margin 150,000
Average operating assets 180,000
Stockholders’ equity 100,000
Plant, property, & equipment 120,000

31. Ejector's return on investment for the year was:

C a. 4%
b. 15%
c. 20%
d. 36%

32. If the residual income for the year was P 9,000, the minimum required rate of
return must have been:
B a. 4%
b. 15%
c. 20%
d. 36%

33. In relevant costing, fixed production costs are usually considered irrelevant in
short-term decision making, unless they become
B a. Committed
b. Avoidable
c. Controllable
d. Combinable with variable costs

34. A company has the following information:

Units produced and sold 15,000
Variable costs per unit P 12
Fixed manufacturing expense P 48,000
Fixed selling and administrative expenses P 72,000

What selling price will result in operating income of P 300,000?

C a. P 20
b. P 28
c. P 40
d. P 48

35. Unfavorable volume variance means that

C a. Actual production is lower than actual sales
b. Budgeted production is higher than actual sales
c. Budgeted production is higher than actual production
d. Budgeted production may have been lower than budgeted sales

36. Shin Hari Department Store expects to generate the following sales figures for
the next three months:
July August September
Expected sales P 480,000 P 560,000 P 600,000

Shin Hari's gross profit rate is 45%. At the end of each month, Shin Hari wants
a merchandise inventory balance equal to 30% of the following month's expected
sales, stated at cost. What peso amount of merchandise inventory should Shin
Hari plan to purchase in August?
B a. P 257,400
b. P 314,600
c. P 320,000
d. P 327,800

37. A role that is most likely a line function is the

A a. Store manager for Rustan’s
b. Controller for a manufacturing company
c. Chief financial officer of a merchandising company
d. Human resources manager for a community university

Page 6 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam
Items 38 and 39 are based on the following information
Whale Company produces a single product. Last year, Whale manufactured 15,000
units and sold 12,000 units. Production costs for the year were as follows:
Direct materials P 150,000
Direct labor 180,000
Variable manufacturing overhead 135,000
Fixed manufacturing overhead 210,000
Sales totaled P 840,000 for the year, variable selling expenses totaled P 60,000,
and fixed selling and administrative expenses totaled P 180,000. There were no
units in the beginning inventory. Assume that direct labor is a variable cost.
38. What would be the contribution margin per unit?
C a. P 39
b. P 35
c. P 34
d. P 25
39. Under absorption costing, the carrying value on the balance sheet of the ending
inventory for the year would be:
A a. P 135,000
b. P 105,000
c. P 93,000
d. P 0

40. Which of the following transfer pricing models would be best for when a company
is producing an intermediate product at full capacity and the company wants to
encourage the purchasing department to purchase externally if possible?
B a. Full cost
b. Market price
c. Variable cost
d. Negotiated price

Items 41 and 42 are based on the following information

The manufacturing capacity of Tansu Company’s facilities is 30,000 units of
product a year. A summary of operating results for calendar Year 1 is as follows:
Sales (P 50 per unit) P 900,000
Variable manufacturing and selling costs (495,000)
Contribution margin 405,000
Fixed costs (247,500)
Operating income P 157,500
41. What is Tansu’s margin of safety in year 1?
C a. 11,000 units
b. 9,000 units
c. 7,000 units
d. 5,000 units
42. Assume a tax rate of 25%, how many more units shall be sold in year 2 to earn an
after-tax profit of P 236,250?
C a. 25,000 units
b. 21,500 units
c. 7,000 units
d. 3,500 units

43. Setting goals and objectives is most associated with the management function of
A a. Planning
b. Directing
c. Motivating
d. Controlling

44. Atty. Woo wishes to prepare a budget that will enable her to compare the amount
actually spent to service 20,000 clients with the amount that should have been
spent to service 20,000 clients. Which budgeting system would be the most
appropriate system for Atty. Woo to use?
B a. A master budgeting system
b. A flexible budgeting system
c. A zero-based budgeting system
d. A continuous or rolling budgeting system

Page 7 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam
45. A product line without any shutdown cost shall expect its shutdown point to be
A a. Equal with the breakeven point
b. lower than the breakeven point
c. Higher than the breakeven point
d. Different from the breakeven point

Items 46 and 47 are based on the following information

Extraordinary Hospital performs blood tests in its laboratory. The following
standards have been set for each blood test performed:
Standard Quantity or Hours Standard Price or Rate
Direct materials 2.0 plates P 2.75 per plate
Direct labor 0.2 hours P 15.00 per hour
Variable overhead 0.2 hours P 7.00 per hour
During May, the laboratory performed 1,500 blood tests. On May 1 there were no
direct materials (plates) on hand; after a plate is used for a blood test it is
discarded. Variable overhead is assigned to blood tests on the basis of direct labor
hours. The following events occurred during May:
➢ 3,600 plates were purchased for P 9,540
➢ 3,200 plates were used for blood tests
➢ 340 actual direct labor hours were worked at a cost of P 5,550

46. What is the materials quantity variance for May?

A a. P 550 unfavorable
b. P 720 favorable
c. P 1,650 favorable
d. P 1,660 unfavorable

47. What is the labor efficiency variance for May?

B a. P 600 favorable
b. P 600 unfavorable
c. P 515 favorable
d. P 515 unfavorable

48. A multiple regression equation has

B a. More than one dependent variable
b. More than one independent variable
c. More than one amount for total fixed cost
d. More than one amount for total variable cost

49. Jang Gang Company estimates that monthly sales will be as follows:
January P 100,000
February 150,000
March 180,000

Historical trends indicate that 40% of sales are collected during the month of
sale, 50% are collected in the month following the sale, and 10% are collected
two months after the sale. Jang Gang’s accounts receivable balance as of December
31 totals P 80,000 (P 72,000 from December’s sales and P 8,000 from November’s
sales). The amount of cash Jang Gang can expect to collect during the month of
January is:
C a. P 68,000
b. P 100,000
c. P 108,000
d. P 120,000

50. Crown Prince, Inc. produces educational materials for children. They pride
themselves in serving their customers better than their competitors and have
been able to grow their business by keeping a focus on customer service. Crown
Prince has recently adopted a balanced scorecard performance measurement system.

Which of the following would be the primary measure used by Crown Prince in their
balanced scorecard?
A a. Number of repeat sales by current customers
b. Timeliness of new products to market
c. Gross margin
d. Cycle time

Page 8 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam
51. The receipt of raw materials for its production of certain products and the
shipping of the completed goods to its customers is under the control of the
warehouse supervisor. The warehouse supervisor’s time is spent approximately 70%
on receiving activities and 30% on shipping activities. Separate staffs of
employees are employed for the receiving and shipping functions. The labor-
related costs for the warehousing function are:
Warehouse supervisor’s salary P 65,000
Receiving clerk’s wages P 85,000
Shipping clerk’s wages P 67,000
Employee benefit costs (40% of salary and wage costs) P 86,800
The company utilizes a responsibility accounting system for reporting the
performance of business segments. All costs on the report are classified as
period or product costs, The total labor-related costs attributable to product
costs under the control of the warehouse supervisor would appear on the
responsibility accounting performance report as
A a. P 119,000
b. P 152,000
c. P 238,800
d. P 303,800

52. If a firm has a significant overapplied overhead at the end of the period, then
which of the following statements is true?
B a. The accountant should credit overhead and debit a combination of cost
of goods sold, WIP inventory, and finished goods inventory for the
overapplied amount.
b. The accountant should debit overhead and credit a combination of cost
of goods sold, work-in-process (WIP) inventory, and finished goods
inventory for the overapplied amount.
c. The accountant should credit overhead and debit cost of goods sold
for the overapplied amount.
d. The accountant should debit overhead and credit cost of goods sold
for the overapplied amount.

53. Yin-Yang provides the following summary of its total budgeted production costs
at three production levels.
10,000 units 15,000 units 20,000 units
Cost A P 1,420 P 2,130 P 2,840
Cost B 1,550 2,200 2,900
Cost C 1,000 1,000 1,000
Cost D 1,630 2,445 3,260
The cost behavior of each of the Costs A through D, respectively, is:
A a. variable, semi-variable, fixed, and variable.
b. variable, fixed, fixed, and variable.
c. semi-variable, variable, fixed, and variable.
d. variable, semi-variable, fixed, and semi-variable.

54. Ryusu produces three inexpensive socket wrench sets that are popular with do-it-
yourselfers. Budgeted information for the upcoming year is as follows.
Model Selling Price Variable Cost Estimated Sales Volume
No. 109 P 10.00 P 5.50 30,000 sets
No. 145 15.00 8.00 75,000 sets
No. 153 20.00 14.00 45,000 sets
Total fixed costs for the socket wrench product line amounted P 961,000. If the
company’s actual experience remains consistent with the estimated sales volume
percentage distribution, and the firm desires to generate total operating income
of P 161,200, how many Model No. 153 socket sets will Ryusu have to sell?
B a. 26,000
b. 54,300
c. 155,000
d. 181,000
55. Under the variable costing method, which of the following is always expensed in
its entirety in the period in which it is incurred?
D a. Straight-line depreciation of factory machine
b. Sum-of-the-years depreciation of office equipment
c. Declining-balance depreciation of delivery vehicle
d. All of the choices

Page 9 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam

Items 56 to 60 are based on the following information

Assassin Company would like to estimate the variable and fixed components of its
maintenance costs and has compiled the following data for the last five months
of operations.
Labor Hours Maintenance Cost
January 160 P 617
February 130 553
March 180 596
April 190 623
May 110 532
Total 770 P 2,921

56. Using the high-low method, the estimated variable cost per labor hour for
maintenance is closest to:
B a. P 0.83
b. P 1.14
c. P 1.30
d. P 1.84

57. Using the high-low method, the estimated total fixed cost per month for
maintenance is closest to:
B a. P 0
b. P 407
c. P 440
d. P 470

58. Using the least-squares regression method, the estimated variable cost per labor
hour for maintenance is closest to:
A a. P 1.09
b. P 1.52
c. P 1.88
d. P 1.96

59. Using the least-squares regression method, the estimated total fixed cost per
month for maintenance is closest to:
B a. P 470
b. P 416
c. P 400
d. P 378

60. Using the least-squares regression equation, the total maintenance cost for
March is:
B a. On the regression line
b. Below the regression line
c. Above the regression line
d. Outside the relevant range

61. Four Seasons Company has a cost-benefit policy to investigate any variance that
is greater than P 1,000 or 10% of budget, whichever is larger. Actual results
for the previous month indicate the following:
Budget Actual
Raw Material P 100,000 P 89,000
Direct labor P 50,000 P 54,000

The company should investigate

B a. The labor variance only
b. The material variance only
c. Both the material variance and the labor variance
d. Neither the material variance nor the labor variance

62. If a company is operating at the break-even point,

A a. Its margin of safety will be equal to zero
b. Its fixed expenses will be equal to its variable expenses
c. Its contribution margin will be equal to its variable expenses
d. Its selling price will be equal to its variable expenses per unit

Page 10 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam

63. After investing in a new project, Lee Company discovered that its residual income
remained unchanged. Which one of the following must be true about the new project?
B a. The net present value of the new project must have been positive.
b. The return on investment (ROI) of the new project must have been
equal to the firm’s cost of capital.
c. The net present value of the new project must have been negative.
d. The return on investment (ROI) of the new project must have been less
than the firm’s cost of capital.

Items 64 to 66 are based on the following information

Pump Company uses 8,000 units of a certain part in production each year.
Presently, this part is purchased from an outside supplier at P 12 per unit. For
some time now there has been idle capacity in the factory that could be utilized
to make this part. The following information has been assembled on the unit costs
of making this part internally:
Direct materials P 3.25
Direct labor 2.75
Variable manufacturing overhead 2.00
Fixed manufacturing overhead 5.00
The fixed manufacturing overhead listed above represents an allocation of
existing costs to this part. However, there would be an increase of P 12,000 in
fixed manufacturing overhead costs for the salary of a new supervisor.

64. If Pump chooses to make the part instead of buying it outside, the change in the
company's operating income per year would be:
C a. P 8,000 increase
b. P 8,000 decrease
c. P 20,000 increase
d. P 20,000 decrease

65. Assuming other things stay the same, at what price per unit from the outside
supplier should Pump be indifferent (on economic grounds) to buying or making
the part?
D a. P 8.00
b. P 8.50
c. P 9.00
d. P 9.50

66. Suppose that the idle capacity (floor space and machinery) is presently being
rented to another company for P 32,000 per year. All the other conditions are
still the same. If Pump chooses to make the part instead of buying it outside,
the net advantage or disadvantage (per year) would be:
C a. P 4,000 advantage
b. P 10,000 advantage
c. P 12,000 disadvantage
d. P 15,000 disadvantage

67. A firm that uses reporting segments shows a bottom line for each segment that
includes traceable fixed costs but not common fixed costs. Which of the following
is this bottom line called?
C a. Controllable costs
b. Operating income
c. Segment margin
d. Net income

68. A paint manufacturing plant has two white pigments that are substitutable for
the same product. Natural pigment costs P 3 per gallon, and artificial pigment
costs P 1 per gallon. Standards call for 60% natural and 40% synthetic, but the
actual ratio used was 50% of each. The actual total quantity of both ingredients
was 30,000 gallons while the budgeted total quantity was 32,000 gallons.

What is the mix variance for these ingredients?

A a. P 6,000 favorable
b. P 6,000 unfavorable
c. P 10,400 favorable
d. P 10,400 unfavorable

Page 11 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam

69. In the preparation of the schedule of Cost of Goods Manufactured, the accountant
incorrectly included as part of manufacturing overhead the rental expense on the
firm’s retail facilities. This inclusion would:
D a. Understate the cost of goods manufactured
b. Have no effect on the cost of goods manufactured
c. Overstate period expenses on the income statement
d. Overstate the cost of goods sold on the income statement

70. If budgeted fixed overhead costs are P 400,000 for 50,000 budgeted direct labor
hours (DLH), and the actual direct labor usage was 48,000 DLH, what was the
actual fixed overhead cost if the underapplied overhead was P 8,000?
C a. P 384,000
b. P 408,000
c. P 392,000
d. P 376,000

- END of EXAMINATION –

NOTE: Summary of answers as well as

solutions and clarifications to selected items are found on page 13.

Page 12 of 13 0915-2303213  resacpareview@gmail.com

 MANAGEMENT SERVICES
ReSA Batch 44 – October 2022 CPALE Batch
30 July 2022  8:00 AM to 11:00 AM MS First Pre-Board Exam

Page 13 of 13 0915-2303213  resacpareview@gmail.com