Management Services

1. T/F

I. In MAS, it involves decision making of practitioner for the management to

meet its goals.
II. A CPA’ scope of management services is broad and covers financial and non-
financial engagement including audit engagements, as this is within the
expertise of CPA.

2. The chief management accountant traditionally performs these functions except:

a. • The establishment and implementation of the financial planning process.
b. • Financial and management reporting and interpretation.
c. • Protection of company resources and economic evaluation.
d. • Preparation of proposals for product research
e. • All of the above

3. Correlation is the term frequently used in conjunction to regression analysis and is measure
by value of coefficient of correlation r. Which statement is correct?
a. r is always positive
b. • r is measured from negative 1 to zero
c. • An r of -.80 has greater / stronger linear association (between X and Y)
THAN +.40
d. • An r that is nearest to -1 indicates weakest linear association
e. • None of the abov

4. T/F

I. In throughput costing, using SD cost, all variances including direct labor

variances must be closed to Cost of sales if the said variances are immaterial.
II. When units sold exceeded, the units produced, then income under direct costing
will be higher than absorption costing income
5. Contribution margin is the excess of revenue over the
a. • Direct cost
b. • Cost of sales
c. • Variable cost
d. • Variable Mfg cost

6. Activity Based Costing:

a. Initial phase in converting to JIT environment
b. Is a two phased allocation system of Direct labor cost to Main products which
that identifies activity cost pools and cost drivers
c. Uses direct labor cost as primary cost driver
d. None of the above

7. T/F

I. Practical capacity is the maximum activity the company can achieve

given the usual kinds of interruptions.

II. Theoretical capacity is the absolute maximum that a plant can produce,
 with no interruptions or problems at all

8. Which of the following is not an accepted principle of effective budgeting?

a. • Communication of results

b. • Flexibility

c. • Responsibility accounting

d. • Top management support

9. What is the opportunity cost of making a component part in factory given no

alternative use?

a. • Total Variable cost

b. Equal to selling price of the component part

c. • Variable manufacturing cost

d. • No opportunity cost

10. A purchasing clerk has three potential firms to buy materials from for production.
If all firms charge the same price, the material cost is

a. sunk cost •

b. relevant cost

c. • committed cost

d. • None of the above

11. Which of the following item is least likely to appear in a performance evaluation
report of managers of an assembly line?

a. • Materials

b. • Supervisory salaries

c. • Depreciation expense

d. • Repairs

12. T/F

I. The criteria for evaluating the performance of responsibility centers

should be carefully selected because the manager’s behavior are
affected by such criteria that are used to judge their performance.
 II. To make goal setting effective and worthwhile, the goals should be
specific, objective and verifiable.

13. A balanced scorecard is a strategic management performance metric that helps

companies identify and improve their internal operations to help their external
outcomes. It measures past performance data and provides organizations with
feedback on how to make better decisions in the future. The four perspectives of
a balanced scorecard are the following except:

a. Financial •

b. learning and growth •

c. business processes •

d. Environmental

14. What is the primary objective of financial management?

a. To maximize the shareholders wealth.

b. To increase shareholder’s profit •

c. To meet company’s goals such optimization o resources

d. All of the above

15. It reflects the market’s valuation of new investment.

a. Market to Book value ratio

b. • Market ratio

c. • Q-ratio

d. • MPS

16. T/F

I. In conservative strategy, credit sales decrease, collection rate

increase, AR balance decrease, bad debts decrease and collection
expense decrease.

II. The indispensable 5Cs of credit shall be followed in credit policy.

17. T/F
 I. A draft is a working capital technique that increase payable float.

II. A direct way to prepare a cash budget for manufacturing firm is to

include projected sales and purchases, percentages of collections
and terms of payments.

18. It is the sum of all discounted value of several payments due at the beginning of
the term, with first payment to be made at the beginning of the period.

a. • Present Value •

b. Present value of an ordinary annuity •

c. Present value of an annuity due •

d. Future Value

19. A higher dividend payout ratio entail?

a. • Higher marginal cost of capital

b. • Higher investment opportunity

c. • Lower marginal cost of capital

d. • No effect in cost of capital

20. T/F

I. The higher the financial leverage, the higher financial risk and the
higher the cost of capital.

II. Higher debt ratio, the higher the DFL and Required rate of return. The
greater the degree of Financial Leverage, the greater the fluctuations
in EPS.

21. It is the hybrid of debt and equity?

a. • Commercial paper

b. • Ordinary shares

c. • Preferred stock

d. • Bonds

22. T/F
 I. If there is a positive NPV, IRR is higher than the cost of capital.

II. If annual net cash inflow is equal to the cost of investment, then, NPV
is zero.

23. T/F

I. If NPV is negative, company usually rejects the project. While, if ARR

is greater than cost of capital, company accept the project. Last, if
Profitability index is greater than 1, accept the project.

II. If IRR on investment is zero, its annual cash flows is equal to its
required investment.

24. The sector of financial market where financial instruments issued by govt and
corporations that will mature beyond one year from issuance date are traded in

a. • Debt market

b. • Long term market

c. • Stock market

d. • Capital market

25. Government agency that regulates and supervises the issuance of pre-need and
HMO industry which is governed by DOF.

a. BOI •

b. Insurance commission •

c. SEC

d. BIR

26. This theory assumes that the driver of interest rates are the savings and
investment flows.

a. • Interest rate theory

b. • Market Segmentation theory

c. • Biased expectation theory

d. • Market theory
27. Risk premium is also called:

a. • Credit spread

b. • Risk addictive

c. • Debt spread

d. • Risk spread

28. Which of the following is essentially unsecured?

a. • Treasury bills

b. • Repurchase agreement

c. • Commercial papers

d. • Certificate deposits

29. T/F

I. Creditors have voice in management, thru its voting power.

II. Shareholders are prioritized during liquidation process of the

corporation. It is superior to debt in terms of claims from corporate s
assets.

30. Cryptocurrency or use of virtual currency is

a. • Allowed by law in the Philippines

b. • Easy to counterfeit and easy to be use in trade to small

and big companies

c. • Centralized system based on blockchain technology

d. • None of the abov

31. An auditor uses regression analysis to evaluate relationship between utility cost
and machine hours. The following information is available based from monthly
cost and machine hours of the company:

• Intercept: 3,000

• Regression is .90
 • Correlation coefficient is .80

• SD error 2,000

• No of observations: 1,000

What is the expected annual utility cost of the company if it has 150 machines,
and it will use 5,000 hours for next year?

32. ABC Corp manufactures several lines of skiing equipment. Its Canada plant
makes a single model, the GENOCIDE-25 ski. The following data are available
for 2013: Sales is 38,000 units at P 70 per unit; production is 39,000 units;
Standard manufacturing variable cost is P 15 per unit; standard fixed overhead
cost is P 25 per unit. The selling and administrative expenses are as follows:
Fixed cost totaled P 600,000 and variable cost per unit is P 8.00. ABC Corp use
normal activity and budgeted fixed cost of P 2,000,000. Fifty percent of the
budgeted fixed cost pertains to manufacturing cost and this is used to set its
standard manufacturing fixed cost per unit. There were no beginning inventories.
What is the adjusted net income under the standard absorption costing?

33. ABC Corp has the following data in year 2020: Sales 400,000; Variable cost
300,000 and Net loss 50,000. If the company wants to have a profit ratio of 10%
of sales in year 2021, how much is the additional sale needed by ABC Corp to
meet the target profit ratio?

34. What is the total manufacturing cost of the company under ABC?

35. Fixed overhead was budgeted at P 500,000 and 25,000 direct labor hours were
budgeted. IF FOH (Fixed Overhead) volume variance and FOH spending
variance were P 15,000 (favorable) and P 16,000 (unfavorable), respectively,
what is the FOH applied?

36. The following information was extracted from X Corp’s cash budget for July 2019.
The following data are as follows: Excess of cash available over disbursements
is P 1,700, cash balance as of July 1, 2019 is P 5,000 and a total cash
 disbursement for July is P 22,500. The business can only borrow in round figures
of P 1,000 amounts. If the business is required to maintain a minimum cash
balance of P 100,000, how much money should be borrowed in July?

37. X Corp has budgeted sales (in units) for the upcoming quarter as follows: Jan is
15,000; Feb is 18,000 and March is 16,500 units. The ending FG inventory for
each month equals 50% of the next months budgeted sales. Additionally, 3
pounds of DM (Direct Materials) are required to produce each FG (Finished
Goods) unit processed. The ending DM inventory for each month equals 200%
of next month's production requirements. If DM cost P4.00 per kilos and must be
paid for in the month of purchased, the budgeted DM purchases (in pesos) for
January are?

38. The store that the company should consider selling is (A store that contributes a
loss to the company as a whole)?

a. Store 1

b. Store 1 and 3

c. Store 2

d. None of the Above

39. X Corp. has considerable excess manufacturing capacity. A special job order’s
cost sheet includes the following manufacturing overhead cost: fixed cost of P
30,000 and variable cost of P 40,000. The job will require additional cost if
accepted amounting to P 5,000 representing external design cost. What is the
total amount to be included in the calculation to determine the minimum
acceptable price for the job?

40. Segment X sells its product at SP of 300 per unit. Variable Cost to produce per
unit is 120 per unit. Fixed cost is 100,000. X operates at full capacity. What is the
minimum price that should be charged to another segment for each unit of
product to be transferred?
 a. • 120

b. • 300

c. • 120 plus allocated cost of FC

d. • 120 plus opportunity cost and other variable cost

41. X Corp is in the process of improving its efficiency / productivity through

implementation of new technology and equipment’s. At the end of the year, the
company provided the following data: production in units is 50,000 with selling
price of P 10/ unit. The relevant inputs are as follows: Materials (in unit) of 25,000
with cost of P 2.00 per unit; labor hours of 5,000 hrs and labor rate of P 10/ hour.
Compute the productivity ratio of the company as to materials.

a. • 10

b. • 2

c. • 50%

d. • 200

42. If the company wants to achieve a residual income of P 40,000 using an imputed
interest charge of 15%, what will be the selling price per unit of 20,000 units sold
; where its costs and expenses totaled P 250,000, working capital used totaled P
300,000 and PPE-net amounted to P 100,000.

a. • 5.00

b. • 15.50

c. • 35.00

d. • 17.50

43. Any one of these different product lines can be produced by Bubble Mills, Inc.,
with the present equipment in one of the divisions. The annual depreciation of
the equipment is P6,400; and the annual cost to operate the equipment,
regardless of product line manufactured, is P4,600.

Product A is expected to yield sales revenue of P71,000 a year with increased

costs of production amounting to P42,000. Product B should yield sales revenue
of P46,000 a year with increased costs of P15,000. Product C should yield sales
revenue of P117,000 with increased costs of P96,000.

How much is the sunk costs of the company?

44. X Corp has P 24,000,000 in sales last year. The company's net income was P
400,000, its total assets turnover was 6 and the company's ROE was 15%. The
company is financed entirely with debt and common equity. What is the
company's debt ratio?

a. • 50%

b. • 33%

c. • 67%

d. • None of the above

45. X Corp’s net accounts receivable were P 250,000 at Dec 31, 2019 and P 300,000
at Dec 31, 2020. Net cash sales for 2020 are P 100,000 and the accounts
receivable turnover for 2020 was 5. What were the company's total net sales for
2020?

46. It is the policy of the corporation to maintain current ratio of 1.5 to 1.0. It’s current
liabilities are 400,000 and present current ratio is 2 to 1. How much is the
maximum level of new short term loans it can secure without violating the policy?

a. • 533,333

b. • 300,000

c. • 400,000

d. • 200,000

47. The sales director of ABC Corp suggest the following credit terms. He estimated
the following:

• Sales will increase by at least 20%

• AR turnover will be reduced to 8 times from present turnover of 10 times.

• Bad debts will increase to 1.5%. Current bad debts are 1%.

• Current sales is 900,000

• Variable cost ratio is 55%.

• Desired rate of return is 20%

• Fixed expenses is P 150,000

What is the net advantage of changing the credit terms?

48. The following are the three suppliers of ABC corp with different credit terms:
Purchase from A with credit terms of 1.5/15, net 30; Purchase from D with credit
terms of 1/10, net 30;and Purchase from E with credit terms of 2/10, net 60. The
company may obtain a bank loan offering 20% interest rate.

Which of the two suppliers has a better or attractive offer for ABC Corp?

a. • None of them

b. • D

c. • E

d. • A

49. IN order to buy a new car, X plans to save half of his annual salary of 100,000 at
the end of each year for the next 10 years which pays 12% rate interest. How
much will be his account after 10 years?

a. • 982,729

b. • 1,754,874

c. • 877,436

d. • 565,022

50. X Corp paid dividends to OS last year by 2.20 per share. The current market
price of Ordinary Shares is 40 per share and investors expect that dividend to
grow by 6% by next year. Cost to issue OS is 5% of market value. What is the
cost of new common stock?

a. • 11.83%

b. • 11.50%

c. • 12.14%

d. • 11.79%

51. For a sales level of 3,000,000; X Corp has DOL of 2x, DTL of 3x and CM ratio is
 60%. Compute the Fixed cost.

52. Which of the three capital structures will give the highest MPPS (market price per
share)?

a. • Debt ratio of 0%

b. • Any of the above

c. • Debt ratio of 20%

d. • Debt ratio of 30%

53. The following data are available for X Company:

• Ave Selling price of 16 per unit

• Variable cost per unit of 11

• Units sold is 200,000

• Fixed cost is 800,000

• Interest expense is 50,000

What is the DFL (Degree of Financial Leverage)?

a. • 2.50 times

b. • 2.33 times

c. • 5 times

d. • 1.33 times
54. At present, total outstanding shares of X Corp is 100,000 shares. X Corp issued
additional 200,000 share at 20 per share. A, a current holder of 40,000 shares.
A must be given the option of to buy for how many shares? (Stockholders have
preemptive right)

a. • 40,000 shares

b. • 200, 000 shares

c. • 80,000 shares

d. • 50,000 shares

55. Net cost of investment is 100,000. Profitability index is 1.3 while cost of capital is
10%. Useful life is 10 years. Use up to two decimal places for the PVF. What is
the ARR?

a. • 30%

b. • 22.34%

c. • 21.17%

d. • 42.35%

56. X Corp plans to invest in new equipment costing 290,000 with no salvage value.
The project will save 160,000 in cash operating cost for each of the next 3 years,
at which time the machine can still be sold at 40,000 cash (even if the machine
is fully depreciated). Tax rate is 40%. The minimum desired rate of return is 16%.
Assuming that at the end of year 2, overhaul cost to be incurred by X is 5,000
(tax deductible). SLM is used for tax purposes. Pls use up to 4 decimal places
for the PVF. What is the NPV?

a. • 9,231.40

b. • 5,114.20

c. • 8,589.60

d. • 17,573.20

57. Data are as follows: In year 2020, sales are 150,000 units with Selling price per
unit of 10 and VC per unit iof 6.50 per unit. Fixed cost is 155,000 and Interest
cost is 90,000. Q3. Assume that the company expects to have sales increase by
20%, what will be the resulting change in EBIT in year 2021?

a. • 25%
 b. • 28.38%

c. • 33.33%

d. • 26.45%

58. Budgeted sales in units are as follows: Jan is 35,000; Feb is 26,000 and March
is 32,000. The company’s policy is to have ending inventory of 10% of the
following period’s sales. What quantity of production be schedule for February?

a. • 25,300

b. • 25,700

c. • 26,700

d. • 25,700

59. A businessman borrowed P 50,000 today from bank with interest rate of 8%
compounded quarterly repayable in equal quarterly installment for 10 years.
Payments made at the end of each quarter. Find the quarterly payment.

a. • P1,827.79 per quarter

b. • None of the above

c. • P1,655.33 per quarter

d. • P1,255,25 per quarter

60. X Corp would like to borrow from Y Corp. The risk free rate is 6% with current
inflation rate of 2%. In the following year the inflation rate will increase by 1%.
How much is the interest rate that Y should impose to X?

a. • 5%

b. • 7%

c. • 4%

d. • 6%

61. A 1,000 Treasury bills with 91 days period can be purchased at 995. What is the
annualized discount rate?

a. • 60%
 b. • 5%

c. • 2%

d. • 1.98%

62. Find the value of 1,000 bonds with annual interest rate of 5% making semiannual
interest payment for 2 years, after which the bonds matures and principal must
be repaid. Yield to maturity is 3%.

63. X Corp paid dividends to OS last year by 2.20 per share. The current market
price of Ordinary Shares is 40 per share and investors expect that dividend to
grow by 6% by next year. Cost to issue OS is 5% of market value. What is the
cost of new common stock?

64. A stock has expected return of 12.25%. Beta of 1.15 and risk free rate of 5%.
What is the market risk premium?

a. • 6.30%

b. • 8%

c. • None of the above

d. • 10.50%

65. X Company, a division of a major oil company, provides various services to the
operators of oil fields in the Middle East. Data concerning the most recent year
appear below:

• Sales- P18,000,000

• Net operating ratio- 30%

• Average Operating assets- P36,000,000

Compute the return on investment (ROI) for X Company.

a. • None of the above

b. • 25%

c. • 15%

d. • 20%