Management Accounting & Services Jeff-Mike Smith V.

Sule
Preweek Lecture April 26, 2024, 6:30 PM – 9:30 PM

INSTRUCTION: On the scannable form, shade the letter of the best answer. If the answer is not
among the choices, shade “E”.

1. Which function is most directly related to management by objectives?

a. Planning.
b. Control.
c. Decision making.
d. Reporting.

2. Managerial accounting is similar to financial accounting in that

a. both are governed by generally accepted accounting principles.
b. both deal with economic events.
c. both concentrate on historical costs.
d. both classify reported information in the same way.

3. Which of the following is NOT one of the Institute of Management Accountants' five Standards of Ethical
Conduct?
a. Competence
b. Confidentiality
c. Independence
d. Integrity

4. ______________ is an example of a line position.

a. Controller for Robinsons Supermarket
b. Chief financial officer of a shipping company
c. Store manager for Jollibee
d. Human resources manager for National University

5. The annual insurance premium for the factory building would be a:

a. fixed cost, period cost, and indirect cost with regard to units of product.
b. fixed cost, product cost, and direct cost with regard to units of product.
c. variable cost, product cost, direct cost with regard to units of product.
d. fixed cost, product cost, indirect cost with regard to units of product.

6. A cost-predicting equation determined through regression analysis

a. always gives close predictions.
b. will not work any better than one obtained using the high-low method.
c. can be used only for costs that vary with sales or production.
d. could be severely affected by outliers.

7. Looking at the following scatter diagrams we can conclude that

₱ ₱
| ** | **
| * ** | ** *
| *** * | * *
| * * | **
| |
| |
|__________________ |__________________
activity activity
Cost A Cost B

a. cost A will be easier to predict than cost B.

 b. cost B will be easier to predict than cost A.
c. cost A is out-of-control.
d. cost B has no fixed component.

8. Predicting costs at activity levels that are outside the relevant range is called
a. association.
b. correlation.
c. extrapolation.
d. none of the above.

9. Supply costs at Coulthard Corporation's chain of gyms are listed below:

Client-Visits Supply Cost

March ........................ 12,855 ₱23,598
April ........................... 12,283 23,278
May ........................... 13,104 23,742
June ........................... 12,850 23,607
July ............................ 12,493 23,415
August ....................... 12,794 23,562
September................. 12,686 23,496
October ..................... 12,765 23,541
November ................. 13,018 23,687

Management believes that supply cost is a mixed cost that depends on client-visits. Using the high-low
method to estimate the variable and fixed components of this cost, those estimates would be closest to:
a. ₱1.85 per client-visit; ₱23,547 per month
b. ₱1.77 per client-visit; ₱557 per month
c. ₱0.55 per client-visit; ₱16,579 per month
d. ₱0.57 per client-visit; ₱16,273 per month

10. During the month of July, direct labor cost totaled ₱12,000 and direct labor cost was 30% of prime cost. If
total manufacturing costs during July were ₱86,000, the manufacturing overhead was:
a. ₱46,000
b. ₱40,000
c. ₱28,000
d. ₱74,000

11. The idle time cost of assembly line workers in a manufacturing company is usually included as a part of:
a. selling cost.
b. direct labor cost.
c. administrative cost.
d. manufacturing overhead cost.

12. Which of the following is a weakness of the quick-and-dirty scattergraph method of analyzing mixed cost?
a. It is impossible to determine variable cost per unit.
b. Only two data points are used and the rest are ignored in drawing the scattergraph.
c. Different people will have different answers even though they are analyzing the same set of data.
d. Both B and C above

13. Dodero Company produces a single product which sells for ₱100 per unit. Fixed expenses total ₱12,000 per
month, and variable expenses are ₱60 per unit. The company's sales average 500 units per month. Which
of the following statements is correct?
a. The company's break-even point is ₱12,000 per month.
b. The fixed expenses remain constant at ₱24 per unit for any activity level within the relevant range.
c. The company's contribution margin ratio is 40%.
d. Responses A, B, and C are all correct.

14 – 15. The Company, which has only one product, has provided the following data concerning its most
recent month of operations:

Selling price...................................................... ₱81

 Units in beginning inventory ........................... 0
Units produced ................................................ 7,300
Units sold ......................................................... 7,000
Units in ending inventory ................................ 300

Variable costs per unit:

Direct materials ............................................ ₱20
Direct labor................................................... ₱30
Variable manufacturing overhead ............... ₱7
Variable selling and administrative .............. ₱11

Fixed costs:
Fixed manufacturing overhead .................... ₱65,700
Fixed selling and administrative ................... ₱21,000

14. The total contribution margin for the month under the variable costing approach is:
a. ₱91,000 b. ₱168,000 c. ₱105,000 d. ₱25,300

15. What is the total period cost for the month under the variable costing approach?
a. ₱65,700 b. ₱163,700 c. ₱98,000 d. ₱86,700

16. Factors that have led to a global market for manufacturing and service firms are
a. improved transportation and communications systems.
b. improved telemarketing and communications.
c. improved distribution and transportation systems.
d. None of these factors have contributed.

17. Which of the following approaches have led to advancements in the manufacturing environment?
a. theory of constraints c. JIT manufacturing
b. computer-integrated manufacturing d. all of these

18. Continuous improvement is

a. critical in a dynamic environment.
b. important to finding and maintaining a competitive advantage.
c. an effort to find ways to increase overall efficiency, improve quality, and reduce costs.
d. all of these.

19. In a performance report,

a. differences between actual costs and allowed costs are always undesirable.
b. expenditures of less than allowed amounts are undesirable.
c. expenditures of more than allowed amounts are not permitted to occur.
d. expenditures of less than allowed amounts are desirable.

20. Holt Company's variable expenses are 70% of sales. At a ₱300,000 sales level, the degree of operating
leverage is 10. If sales increase by ₱60,000, the degree of operating leverage will be:
a. 12
b. 10
c. 6
d. 4

21. A company makes a single product that it sells for $16 per unit. Fixed costs are ₱76,800 per month and the
product has a contribution margin ratio of 40%. If the company's actual sales are ₱224,000, its margin of
safety is:
a. ₱32,000
b. ₱96,000
c. ₱128,000
d. ₱192,000

22. Which of the following duties is usually assigned to the controller?

a. receiving, maintaining custody of, and disbursing monies and securities
 b. directing the granting of credit to clients
c. investing the organization's funds
d. tax planning

23. Error costs can be defined as

a. the costs associated with the measurements required by the cost management system.
b. unit costs assigned based on activities.
c. the costs associated with making poor decisions based on bad cost information.
d. none of these

24. Which of the following is a trait of an activity-based cost management system?

a. allocation-intensive c. non-unit-based drivers
b. narrow and rigid product costing d. focus on managing costs

25. The cost item least likely to appear in a performance report based on responsibility accounting techniques
for the supervisor of an assembly line in a large manufacturing situation is:
a. materials c. direct labor
b. repairs and maintenance d. other indirect labor e. supervisor's salary

26. Responsibility reports should possess all of the following characteristics except:
A. being issued with regularity D. being stated only in pesos for operating
B. fitting the organization chart management
C. being consistent in form and content each E. comparing budgeted with actual figures
time they are issued

27. Of most relevance in deciding how or which costs should be assigned to the responsibility center is the
degree of:
A. variability B. controllability C. avoidability D. causality E. linearity

28. Common size financial statements help an analyst to:

a. Evaluate financial statements of companies within a given industry of the approximate same size.
b. Determine which companies in a similar industry are at approximately the same stage of development.
c. Compare the mix of assets, liabilities, capital, revenue, and expenses within a company over a period of
time or between companies within a given industry without respect to size.
d. Ascertain the relative potential of companies of similar size in different industries.

29. What effect will the issuance of common stock for cash at year-end have on the following ratios?
Return on Total Assets Debt-to-Equity Ratio
a. Increase Increase
b. Increase Decrease
c. Decrease Increase
d. Decrease Decrease

30. The following information relates to Diwata Corporation for last year:

Price earnings ratio ................ 15

Dividend payout ratio ............ 30%
Earnings per share ................. ₱5

What is Konbu's dividend yield ratio for last year?

a. 1.5%
b. 2.0%
c. 4.5%
d. 10.0%

31. The usual starting point for a master budget is:

a. the direct materials purchase budget.
b. the budgeted income statement.
c. the sales forecast or sales budget.
d. the production budget.
32 – 33 Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and
ending inventory levels are planned for the year.
Beginning Inventory Ending Inventory
Finished goods (units) 20,000 30,000
Raw material (grams) 50,000 40,000

Each unit of finished goods requires 7 grams of raw material.

32. If the company plans to sell 270,000 units during the year, the number of units it would have to
manufacture during the year would be:
a. 300,000 units
b. 270,000 units
c. 260,000 units
d. 280,000 units

33. How much of the raw material should the company purchase during the year?
a. 1,960,000 grams
b. 1,950,000 grams
c. 1,970,000 grams
d. 2,000,000 grams

34 – 35 Rotan Corporation keeps careful track of the time required to fill orders. The times recorded for a
particular order appear below:

Hours
Move time 3.2
Wait time 10.9
Queue time 5.1
Process time 1.2
Inspection time 0.2

34. The delivery cycle time was:

a. 19.2 hours
b. 20.6 hours
c. 8.3 hours
d. 3.2 hours

35. The throughput time was:

a. 4.6 hours
b. 9.7 hours
c. 20.6 hours
d. 16 hours

36. Matt Company uses a standard cost system. Information for raw materials for Product RBI for the month
of October follows:

Standard price per pound of raw materials ₱1.60

Actual purchase price per pound of raw materials ₱1.55
Actual quantity of raw materials purchased 2,000 pounds
Actual quantity of raw materials used 1,900 pounds
Standard quantity allowed for actual production 1,800 pounds

What is the materials purchase price variance?

a. ₱90 favorable
b. ₱90 unfavorable
c. ₱100 favorable
d. ₱100 unfavorable

37. Costs which can be eliminated in whole or in part if a particular business segment is discontinued are
called:
a. sunk costs.
 b. opportunity costs.
c. avoidable costs.
d. irrelevant costs.

38. Otlum Corporation manufactures five different products. All five of these products must pass through a
stamping machine in its fabrication department. This machine is Kinsi's constrained resource. Kinsi would
make the most profit if it produces the product that:
a. uses the lowest number of stamping machine hours.
b. generates the highest contribution margin per unit.
c. generates the highest contribution margin ratio.
d. generates the highest contribution margin per stamping machine hour.

39. Hodge Inc. has some material that originally cost $74,600. The material has a scrap value of $57,400 as is,
but if reworked at a cost of $1,500, it could be sold for $54,400. What would be the incremental effect on
the company's overall profit of reworking and selling the material rather than selling it as is as scrap?
a. -$79,100
b. -$21,700
c. -$4,500
d. $52,900

40. Milford Corporation has in stock 16,100 kilograms of material R that it bought five years ago for $5.75 per
kilogram. This raw material was purchased to use in a product line that has been discontinued. Material R
can be sold as is for scrap for $3.91 per kilogram. An alternative would be to use material R in one of the
company's current products, S88Y, which currently requires 2 kilograms of a raw material that is available
for $7.60 per kilogram. Material R can be modified at a cost of $0.77 per kilogram so that it can be used as
a substitute for this material in the production of product S88Y. However, after modification, 4 kilograms
of material R is required for every unit of product S88Y that is produced. Milford Corporation has now
received a request from a company that could use material R in its production process. Assuming that
Milford Corporation could use all of its stock of material R to make product S88Y or the company could sell
all of its stock of the material at the current scrap price of $3.91 per kilogram, what is the minimum
acceptable selling price of material R to the company that could use material R in its own production
process?
a. $0.88
b. $3.03
c. $4.57
d. $3.91

41. Banfield Corporation makes three products that use compound W, the current constrained resource. Data
concerning those products appear below:

VP YI WX
Selling price per unit $248.04 $230.66 $505.44
Variable cost per unit $190.71 $172.14 $388.80
Centiliters of compound W 3.90 3.80 8.10

Rank the products in order of their current profitability from most profitable to least profitable. In other
words, rank the products in the order in which they should be emphasized.
a. WX, VP, YI
b. YI, VP, WX
c. WX, YI, VP
d. VP, WX, YI

42. Dahl Company can borrow funds at 15% interest. Since the company's tax rate is 40%, its after-tax cost of
interest is only 9%. Thus, the company reasons that if it can earn $70,000 per year before interest and
taxes on a new investment of $500,000, then it will be better off by $25,000 per year.
a. The company's reasoning is correct.
b. The company's reasoning is not correct, since the after-tax cost of interest would be 6 percent, rather
than 9%.
c. The company's reasoning is not correct, since interest is not tax-deductible.
d. The company's reasoning is not correct, since it would be worse off by $3,000 per year after taxes.
43. Amster Corporation has not yet decided on the required rate of return to use in its capital budgeting. This
lack of information will prevent Amster from calculating a project's:

Payback Net Present Value Internal Rate of Return

A) No No No
B) Yes Yes Yes
C) No Yes Yes
D) No Yes No

44. If income taxes are ignored, how is depreciation used in the following capital budgeting techniques?

Internal Rate of Return Net Present Value

A) Excluded Excluded
B) Excluded Included
C) Included Excluded
D) Included Included

45. The Malaise Prevention Agency is a non-profit organization that does all of its own informational printing.
The printing press that Malaise currently is using needs a $20,000 overhaul. This will extend the useful life
of the press by 8 years. As an alternative, Malaise could buy a brand new modern press for $45,000. The
new press would also last 8 years. The annual operating expenses of the old press are $12,000. The annual
operating expenses of the new press will only be $7,000. The old press is not expected to have a salvage
value in 8 years. The new press is expected to have a $6,000 salvage value in 8 years. Malaise's discount
rate is 14%. The net present value of the decision to buy the new press instead of overhauling the old
press is closest to:
a. $301
b. $(301)
c. $4,195
d. $(46,089)

46. Data from Buker Corporation's most recent balance sheet and income statement appear below:

This Year Last Year

Accounts receivable $101,000 $125,000
Inventory $155,000 $153,000
Sales on account $662,000
Cost of goods sold $399,000

The average sale period for this year is closest to:

a. 142.0 days
b. 3.6 days
c. 140.9 days
d. 3.7 days

47. Which of the following goods would you expect to have the largest income elasticity of demand?
a. rice.
b. toothpaste.
c. beer.
d. stereo equipment.

48. If college enrollments drop by 10% when textbook prices double; textbooks and enrollments are
__________ goods and their cross price elasticity is __________.
a. complementary; -0.5
b. substitute; 5
c. complementary; -0.1
d. substitute; 0.5

49. 14. When calculating the cost of capital, the cost assigned to retained earnings should be
a. Zero.
b. Equal to the cost of external common equity.
c. Lower than the cost of external common equity.
 d. Higher than the cost of external common equity.

50. Transfers between units often have lower packaging, advertising, and delivery costs than similar sales to
external customers. This can be a problem for which of the following transfer pricing systems?
a. Negotiated
b. Market-based
c. Standard-based
d. Cost-based

51. The maintenance subcycle of Kaizen costing is defined by what sequence?

a. establish-do-check-act
b. establish-act-do-check
c. do-act-establish-check
d. check-do-plan-act

52. If a company decreases the variable expense per unit while increasing the total fixed expenses, the total
expense line relative to its previous position will:
a. shift downward and have a steeper slope.
b. shift downward and have a flatter slope.
c. shift upward and have a flatter slope.
d. shift upward and have a steeper slope.

53. Information about Sargent Company's direct material costs is as follows:

Standard unit price ₱3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450
Materials purchase price variance (unfavorable) ₱240

What was the actual purchase price per unit, rounded to the nearest penny?
A. ₱3.06 B. ₱3.11 C. ₱3.45 D. ₱3.75 E. ₱3.60

54. A project has a NPV of ₱30,000 when the cutoff rate is 10%. The annual cash flows are ₱41,010 on an
investment of ₱100,000. The profitability index for this project is
a. 1.367.
b. 3.333.
c. 2.438.
d. 1.300.

55. Genco Company produces three products from a joint process costing ₱100,000. The following information
is available:

Costs to Selling Price

Selling Price Process After Further
Units at Split-off Further Processing
----- ------------ ------- ---------
A 2,000 ₱25 ₱60,000 ₱50
B 3,000 ₱30 ₱60,000 ₱45
C 5,000 ₱40 ₱80,000 ₱60

Which products should be sold without further processing?

a. B only.
b. A and B.
c. B and C.
d. A, B, and C.

56. Danner Inc. has projected sales to be ₱100,000 in June, ₱90,000 in July, and ₱70,000 in August. Danner
collects 50% of a month's sales in the month of sale, 30% in the month following the sale, and 16% in the
second month following the sale. Cash collections in August would be
a. ₱35,000.
b. ₱62,000.
 c. ₱78,000.
d. ₱86,000.

57. The primary difference between a fixed (static) budget and a variable (flexible) budget is that a fixed
budget:
A. cannot be changed after the period begins; while a variable budget can be changed after the period
begins
B. is a plan for a single level of sales (or other measure of activity); while a variable budget consists of
several plans, one for each of several levels of sales (or other measure of activity)
C. includes only fixed costs; while variable budget includes only variable costs
D. is concerned only with future acquisitions of fixed assets; while a variable budget is concerned with
expenses that vary with sales

58. A flexible budget is:

A. appropriate for control of direct materials and direct labor but not for control of factory overhead
B. not appropriate when costs and expenses are affected by fluctuations in volume limits
C. appropriate for any relevant level of activity
D. appropriate for control of factory overhead but not for control of direct materials and direct labor

59. A flexible budget is appropriate for a:

Direct Labor Budget Marketing Budget
A. yes no
B. yes yes
C. no no
D. no yes

60. If a company wishes to establish a factory overhead budget system in which estimated costs can be
derived directly from estimates of activity levels, it should prepare a:
A. discretionary budget C. flexible budget E. cash budget
B. fixed budget D. capital budget

61. Flexible budgeting is a reporting system wherein the:

A. statements included in the budget report vary from period to period
B. budget standards may be adjusted at will
C. planned level of activity is adjusted to the actual level of activity before the variance report is prepared
D. reporting dates vary according to the levels of activity reported upon

62. Flintstone Company uses flexible budgeting for cost control. Flintstone produced 10,800 units of a product
during March, incurring indirect material costs of ₱13,000. Its static budget for the year reflected variable
indirect material costs of ₱180,000 at a production volume of 144,000 units. A flexible budget for March
production would reflect indirect material costs of:
A. ₱13,000 B. ₱13,500 C. ₱13,975 D. ₱11,700

63. A company uses a two-way analysis for overhead variances: spending and idle capacity. The idle capacity
variance is based on the:
A. variable overhead application rate D. total overhead application rate
B. fixed overhead application rate E. volume of total expenses at various activity
C. semivariable overhead application rate levels

64. In analyzing factory overhead variances, an idle capacity variance is the difference between the:
A. master budget application rate and the flexible budget application rate times actual hours worked
B. budget allowance for actual units produced for the period and the amount of applied factory overhead
C. actual amount spent for factory overhead items during the period and the amount applied during the
period
D. actual factory overhead incurred and the budget allowance estimated for the capacity used
E. amount shown in the flexible budget and the amount shown in the master budget

65. The spending variance for variable overhead based on direct labor hours is the difference between the
actual variable overhead cost and the variable overhead cost that should have been incurred for the actual
hours worked. This variance results from:
 A. differences caused by variations in C. differences caused by variations in sales
production volume volume
B. price and quantity differences for overhead D. price differences for overhead costs
costs E. quantity differences for overhead costs

66. In the traditional view of responsibility accounting where individuals are evaluated rather than operating
systems, all of the following dysfunctional results may occur, except:
A. managers tend to take actions that are self-serving rather than beneficial to the company as a whole
B. managers concentrate on meeting the budget rather than the best level of performance that can be
achieved
C. managers tend to focus their attention on long-run targets and ignore the short-term needs of the
company
D. many competent managers leave the company

67. The most effective standards are set following a careful study of products and operating conditions by the:
A. Accounting Department, central management, and the Industrial Engineering Department
B. central management and the employees whose performance is being evaluated
C. Accounting Department and engineering staff
D. Industrial Engineering Department and the employees whose performance is being evaluated
E. central management and the Industrial Engineering Department

68. In analyzing factory overhead variances, the volume variance is the difference between the:
A. actual amount spent for overhead items during the period and the amount applied during the period
B. variable efficiency variance and fixed efficiency variance
C. amount shown in the flexible budget and the amount shown in the master budget
D. master budget application rate and the flexible budget application rate, multiplied by actual hours
worked
E. budget allowance based on standard hours allowed for actual production for the period and the
amount of applied factory overhead during the period

69. The variance resulting from obtaining an output different from the one expected on the basis of input is
the:
A. mix variance C. usage variance E. efficiency variance
B. output variance D. yield variance

70. In its reports to management, a company disclosed the presence of a fixed efficiency variance. The
procedure used to analyze variances was the:
A. four-variance method D. alternative three-variance method
B. mix and yield variances method E. three-variance method
C. two-variance method

"Though no one can go back and make a brand new start, anyone can start from now and make a brand new ending."
– Carl Bard –