Q1 Strategic Cost Management (BSA 3A)

Name: : __________________________ Date: ________________

Part 1: Multiple Choice

1. ___________________ identifies long-term goals, selects strategies to achieve these goals,

and develops policies and plans to implement the strategies.
a. Long-range planning. b. Budgeting
c. Decision-making d. short-term planning
2. Which of the following statements is/are correct?
a. Managers carry out their planning function by mobilizing the organization’s resources and overseeing day-
to-day operations.
b. Managers carry out their decision-making function by obtaining feedback to ensure that the plans are being
followed
c. The planning, directing and controlling functions of a manager are kept separate from such manager’s
decision-making activities.
d. The manager’s planning function involves setting of the organization’s goals and identifying
alternatives and selecting the alternative that best furthers such goals set for the organization.
3. In comparing financial and management accounting, which of the following more accurately
describes management accounting information?
A. historical, precise, useful B. required, estimated, internal
C. budgeted, informative, adaptable D. comparable, verifiable, monetary
4. The type of accounting which deal with how accounting and other financial data can be used
for decision-making in controlling, monitoring, and directing business activity is called
A. management accounting B. responsibility accounting
C. financial accounting D. general accounting
5. Management accountants help design, develop, install and maintain reporting systems which are aligned with the
structures of the organization. These systems provide information that are useful for decision making. Management
decision processes fall into three categories.
A. Repetitive, non programmed and strategic
B. Repetitive, programmed and strategic
C. Repetitive, non programmed and nonstrategic
D. Non repetitive, non programmed and strategic
6. You are newly appointed as controller of ABC Corporation. Among the jobs your department would do, include the
following:
a. Cash receipts, cash disbursement, general accounting, taxation, financial statements analysis and internal
auditing.
b. Financial reporting, strategic planning, managerial accounting, taxation, financial statement analysis and
internal accounting.
c. Financial accounting, managerial accounting, cost accounting, inventory accounting, Payroll accounting, tax
accounting, and sales forecasting.
d. Tax accounting, internal accounting, internal auditing, general accounting.
7. A decision-making concept, described as “the contribution to income that is foregone by not using a limited source
for its best alternative use.” is called
a. Marginal Cost b. Incremental Cost
b. Potential Cost d. Opportunity Cost
8. The term that refers to costs incurred in the past that are not relevant to a future decision is
a. Full absorption costing
b. Under-allocated indirect cost
c. Sunk cost
d. Incurred marginal cost
9. A managerial accountant who prepares clear reports and recommendations after analyzing
relevant facts is exercising which of the following standards?
A. objectivity C. competence B. integrity D. confidentiality
10. It is an approach to continuous improvement that focuses on serving customers and uses front
line workers to identify and solve problems systematically.
A. ABC system B. Just-in-time (JIT) system C. Total quality management (TQM)
D. Process value analysis
11. The cost behavior method that may use time and motion studies to determine the activities and
amounts for cost behavior analysis is
A. Account analysis method B. Industrial engineering method
C. Regression analysis D. High-low method
12. A management information system should emphasize satisfying
A. external demands for information.
B. external and internal demands for information.
C. internal demands for information.
 D. the Accounting Department's demands for information.
13. In an attempt to resolve an ethical conflict in a publicly-held corporation, if the accountant has unsuccessfully gone
to the board of directors, the next step is to:
A. go to the company president
B. go back to middle management to garner support
C. report the problem to the SEC
D. resign
E. none of the above
14. In an attempt to resolve an ethical conflict when the immediate superior is involved, an accountant should first:
A. go to the next higher level of management B. report the problem to the SEC
C. resign D. go to the company president E. none of the above
15. Vision states
a. Where the workers want to go after work b. That customers are the boss
c. Whether we should use inspection
d. Where the company wants to be in the long run
16. Benchmarking determines
a. Customer requirements b. Process capability
c. How company is doing relative to others d. If management is motivated
17. Employee empowerment involves encouraging and authorizing workers to take initiatives to:
A. improve operations. B. reduce costs.
C. improve product quality. D. improve customer service.
E. all of the above.
18. In which of the following aspects is managerial accounting similar to financial accounting
a. users of report b. emphasis between the past and the future
c. type of data provided d. reliance on the accounting database
19. Managerial accounting places considerable weight on:
a. generally accepted accounting principles. b. the financial history of the entity.
c. ensuring that all transactions are properly recorded.
d detailed segment reports about departments, products, and customers.
20. The benefi ts of a just-in-time system for raw materials usually include
a. Elimination of non-value-added operations.
b. Increase in the number of suppliers, thereby ensuring competitive bidding.
c. Maximization of the standard delivery quantity, thereby lessening the paperwork for each delivery.
d. Decrease in the number of deliveries required to maintain production.
21. The plans of management are often expressed formally in:
A. financial statements. C. budgets.
B. ledgers. D performance reports.
22. The person(s) directly responsible for the attainment of organizational objectives is/are
A. the treasurer. C. the controller.
B the chief financial officer D. management.
23. In financial accounting, certain rules and regulations must be followed on how financial
statements must be presented to readers. In managerial accounting, no such restrictions
generally apply because it is
A. An entirely different field that need not observe the broad guidelines in financial accounting
B. Designed to provide management with non-financial information for decision making.
C. Designed to provide accounting and other financial data to assist management in making business
decisions
D. A discipline that does not require preparation of financial statements
24. The Standards of Ethical Conduct for Management Accountants developed by the Institute of Management
Accountants contain a policy regarding confidentiality that requires management accountants to refrain from
disclosing confidential information
acquired in the course of their work:
A. except when authorized by management.
B. in all situations.
C. except when authorized by management, unless legally obligated to do so.
D. in all cases not prohibited by law.

25. Which of the following statements is true?

A. Under zero-based budgeting, a manager is required to start at zero budget levels each period, as if the
programs involved were being initiated for the first time.
B. The primary purpose of the cash budget is to show the expected cash balance at the end of the budget period.
C. Budget data are generally prepared by top management and distributed downward in an organization.
D. The budget committee is responsible for preparing detailed budget figures in an organization.

Problems
 1. Cabci Company has budgeted sales revenues as follows:
June July August
Credit sales P135,000 P145,000 P 90,000
Cash sales 90,000 255,000 195,000
Total sales P225,000 P400,000 P285,000
Past experience indicates that 50% of the credit sales will be collected in the month of sale and the remaining 5 0% will be
collected in the following month. Purchases of inventory are all on credit and 60% is paid in the month of purchase and 40%
in the month following purchase. Budgeted inventory purchases are:
June P300,000
July 250,000
August 105,000
Other cash disbursements budgeted: (a) selling and administrative expenses of P48,000 each month, (b) dividends of
P103,000 will be paid in July, and (c) purchase of equipment in August for P30,000 cash.
The company wishes to maintain a minimum cash balance of P50,000 at the end of each month. The company borrows
money from the bank at 8% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in
months when there is an excess cash balance. The beginning cash balance on July 1 was P50,000. Assume that borrowed
money in this case is for one month.

Instructions

Prepare a cash budget for the months of July and August.

Solution
Cabci COMPANY
Cash Budget
For the Two Months of July and August
July August
Beginning cash balance P 50,000 P 50,000
Add: Receipts
Collections from customers
June 67,500
July 72,500 72,500
August 45,000
Cash sales 255,000 195,000
Total receipts 395,000 312,500
Total available cash 445,000 362,500
Less: Disbursements
Purchases
June 120,000
July 150,000 100,000
August 63,000
Selling and administrative expenses 48,000 48,000
Dividends 103,000
Equipment purchase 30,000
Total disbursements 421,000 241,000
Excess (deficiency) of available cash over disbursements 24,000 121,500
Financing
Borrowings 26,000
Repayments (26,173)
Ending cash balance P 50,000 P 95,327

2. Scot Company plans to sell 400,000 units of finished product in July 20x1. Management (1)
anticipates a growth rate in sales of 5% per month thereafter and (2) desires a monthly ending
finished-goods inventory (in units) of 80% of the following month's estimated sales. There are
300,000 completed units in the June 30, 20x1 inventory.
Each unit of finished product requires four pounds of direct material at a cost of P11.50 per pound.
There are 1,600,000 pounds of direct material in inventory on June 30, 20x1.
Required:
1. Prepare a production budget for the quarter ended September 30, 20x1
2. Independent of your answer to part "A," assume that Scot plans to produce 1,200,000 units of finished product for
the quarter ended September 30. If the firm desires to stock direct materials at the end of this period equal to 25% of
current production usage, compute the cost of direct material purchases for the quarter.
Answer:
A. Projected sales:
July 400,000
August (400,000 x 1.05) 420,000
September (420,000 x 1.05) 441,000
Quarterly total 1,261,000
Total quarterly sales 1,261,000
Add: Desired 9/30 inventory (463,050* x 80%) 370,440
Total units needed 1,631,440
Less: 6/30 inventory 300,000
Total quarterly production requirement 1,331,440
*October sales: 441,000 x 1.05 = 463,050

B. Material to be used in production (1,200,000 x 4 pounds) 4,800,000

Add: Desired 9/30 inventory (4,800,000 x 25%) 1,200,000
Direct materials needed 6,000,000
Less: 6/30 inventory 1,600,000
Pounds to be purchased during the quarter 4,400,000
Direct material cost per pound x 1.50
Total quarterly cost of purchases 6,600,000