Comprehensive Practice Set for Management Services
- 1. NAME : MANAGEMENT SERVICES PA1 1. Which of the following groups would be least likely to receive detailed management accounting reports? A. Managers B. Sales representatives C. Stockholders D. Production supervisors 2. As teamwork has become more prominent in the last few years, differences between staff and line management: A. Have increased B. Have become more important relative to promotions C. Have diminished D. Have only been evident in employee reward system 3. For a simple regression analysis that is used to estimate the total factory overhead, an internal auditor finds that the line of regression that intersects with the y-axis is P 5,000 while the slope of the line is 0.20. The independent variable amounts to P 900,000 for month. What is the estimated amount of factory overhead for the month? A. P92,500 B. P180,000 C. P185,000 D. P230,000 For items 4 and 5: Orlando Company incurred the following factory overhead costs for the second quarter of the year: Machine Hours Factory Overhead April 150 P4,200 May 120 P3,600 June 180 P4,800 4. Using high-low method, how much is the fixed factory overhead cost for the second quarter? A. P1,200 B. P2,400 C. P3,600 D. P4,800 5. Which of the following equations shall be used under least-squares method? A. 12,600=3a+69,300b B. 1,926,000 = 3 a + 69,300b C. 1,890,000=450a+69,300b D. 1,926,000 = 450 a + 69,300 b 6. Regression analysis is superior to other cost behavior analysis techniques because it A. Examines only one variable B. Produces measures of probable error C. Is not a simple sampling technique D. Considers all the points in the regression line 7. Which of the following statements is false regarding learning/experience/productivity/efficiency curve? A. Learning curves differ from company to company B. Changes in personnel can change the learning curve C. Learning curves can always be used for indirect labor D. The learning curve may spike for a short time even if it is going to drop in the long run 8. Cost-volume-profit (CVP) analysis is MOST essential in the determination of the A. Production level that is equal to sales B. Volume of operations in order to break-even C. Variable costs necessary to equal fixed costs D. Relationship between revenues and costs at various levels of operations 9. Determine the least accurate statement regarding assumptions and relationships in CVP analysis. A. Fixed costs are always constant B. Fixed cost per unit varies with volume C. Net loss is unrecovered fixed costs D. At breakeven, fixed cost is simply recovered 10. Product Bagul has sales of P200,000, a contribution margin ratio of 20% and a margin of safety of P80,000. What is Bagul’s fixed cost? A. P16,000 B. P24,000 C. P80,000 D. P96,000 11. Macchiato Company manufactures a single product. Unit variable production costs are P20 and fixed production costs are P150,000. Macchiato uses a
- 2. normal activity of 10,000 units to set its standard costs. Macchiato began the year with no inventory, produced 11,000 units, and sold 10,500 units. Ending inventory under absorption costing is: A. P10,000 B. P15,000 C. P17,500 D. P20,000 12. Maki Company’s production facility has an ideal capacity of 12,500 units, which was used as the basis for the normal capacity of 10,000 units. The company was able to produce 11,000 units during the period. Fixed manufacturing costs were P 200,000 while variable manufacturing costs were also P 200,000. The volume or capacity variance is: A. P20,000 unfavorable B. P24,000 favorable C. P20,000 favorable D. P40,000 favorable For items 13 and 14: Cami Company is preparing its annual profit plan. The controller estimates the amount of overhead that should be allocated to the individual product lines from the information given as follows: Wall Mirrors Specialty Windows Units produced 25 25 Material moves per product line 5 15 Direct labor hours per unit 200 200 Budgeted materials handling costs P50,000 13. Under a traditional costing system, what would be the materials handling costs allocated to one unit of wall mirrors? A. P500 B. P2,000 C. P1,000 D. P5,000 14. Under ABC, what would be the materials handling costs allocated to one unit of wall mirrors? A. P500 B. P1,500 C. P1,000 D. P2,500 15. In the budgeting and planning process for a firm, which one of the following should be completed first? A. Sales budget B. Cost management plan C. Financial budget D. Strategic plan 16. Strategic planning is A. setting standards for the use of important but hard-to-find materials. B. planning activities for promoting products for the future. C. planning for appropriate assignments of resources. D. stating and establishing long-term plans. 17. The master budget embraces the impact of A. Operating and financing decisions B. Operating and managerial decisions C. Financing and managerial decisions D. Operating, managerial, and financing decisions 18. The steps to follow when preparing the operating budget are A. Revenue budget, production budget, and direct materials purchases budget. B. Costs of goods sold budget, production budget, and cash budget. C. Revenue budget, overhead budget, and production budget. D. Revenue budget, cash inflows, and production expenditures. 19. When actual performance varies from the budgeted performance, managers will be more likely to revise future budgets if the variances were A. Small B. Controllable rather than uncontrollable C. Favorable rather than unfavorable D. Uncontrollable rather than controllable 20. In probability analysis, expected value may be considered as a A. Simple average B. Weighted average C. Moving average D. Geometric average
- 3. 21. A difference between standard costs used for production and the budgeted costs of the same effort can exist because A. Standard costs represent what costs should be, whereas budgeted costs are expected actual costs B. Budgeted costs are historical costs, whereas standard costs are based on engineering studies C. Budgeted costs include some slack, whereas standard costs do not D. Standard costs include some slack, whereas budgeted costs do not For items 22 and 23: Mercado has a budgeted normal monthly capacity of 5,000 labor hours with a production of 4,000 units. Standards are: Materials 2 kilos at P1.00 Labor P8.00 per hour Factory overhead at normal capacity Fixed expenses P5,000 Variable expenses P1.50 per labor hour During November, actual factory overhead totaled P11,250 and 4,500 labor hours cost P33,750. Production during the month was 3,500 units using 7,200 kilos of materials at a cost of P1.20 per kilo. 22. What was the material purchase price variance? A. P1,440U B. P3,440U C. P204F D. P2,187.50F 23. What was the labor efficiency variance? A. P2,250U B. P1,000U C. P2,187.50F D. P62.50F For items 24 to 26: Jessie Company uses a standard cost system and prepared the following budget for May when 24,000 machine hours of activity were projected: variable overhead, P48,000; fixed overhead: P240,000. Actual data for May were: Standard machine hours allowed for output attained: 25,000 Actual machine hours worked: 24,000 Variable overhead incurred: P50,000 Fixed overhead incurred: P250,000 24. What was the standard variable overhead rate for May? A. P2.00 B. P2.08 C. P5.00 D. P5.21 25. What were the variable-overhead (A) spending and (B) efficiency variances, respectively? A. P0, P0 B. P0, P2,000 U C. P2,000 U, P0 D. P2,000 U, P2,000 F 26. What were the fixed-overhead (A) budget and (B) volume variances, respectively? A. P0, P10,000 F B. P10,000 F, P0 C. P10,000 U, P0 D. P10,000 U, P10,000 F 27. A primary consideration in tracing a cost in responsibility accounting is A. Whether it is fixed or variable B. Whether it is production or administrative C. Who or what caused the cost to be incurred D. Where in the organizational structure the cost occurred 28. Managerial performance can be measured in many ways, including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is that A. Residual income can be computed without regard to identifying an investment base B. Goal congruence is more likely to be promoted by using residual income C. Residual income is well understood and often used in the financial press D. ROI does not take into consideration both the investment turnover ratio and return-on-sales percentage 29. Residual income is a better measure for performance evaluation than return on investment because A. The problems associated with measuring the asset base are eliminated
- 4. B. Desirable investment decisions will not be neglected by high-return divisions C. Only the gross book value of assets needs to be calculated D. The arguments about the implicit cost of interest are eliminated 30. A firm earning a profit can increase its return on investment by A. Increasing sales revenue and operating expenses by the same peso amount B. Decreasing sales revenues and operating expenses by the same percentage C. Increasing investment and operating expenses by the same peso amount D. Increasing sales revenues and operating expenses by the same percentage For items 31 to 34: The following is available for an investment center of Maki Corporation for 2024: Sales P100,000 Operating expenses 85,000 Average operating assets 40,000 Stockholder’s equity 25,000 Required rate of return 18% 31. Determine the operating profit margin. A. 15% B. 25% C. 37.5% D. 60% 32. What is the assets turnover? A. 1.5x B. 2.5x C. 3.5x D. 4x 33. What is the return on investment? A. 15% B. 25% C. 37.5% D. 60% 34. What is the residual income? A. P7,200 B. P7,800 C. P9,600 D. P15,000 35. The minimum transfer price generally is equal to the A. Opportunity costs plus incremental costs B. Opportunity costs less additional outlay costs C. Opportunity costs divided by the additional outlay costs D. Opportunity costs times 125% plus the additional outlay costs 36. The following information is available for Maki Enterprises for 2024: Net operating profit after taxes 36,000,000 Depreciation expense 15,000,000 Change in net working capital 10,000,000 Capital expenditures 12,000,000 Invested capital (total assets – current liabilities) 100,000,000 Weighted average cost of capital 10% What is the amount of the economic value added (EVA)? A. P36,000,000 B. P26,000,000 C. P20,000,000 D. P15,000,000 37. A segment should be kept if segment revenues exceed A. Fixed costs B. Segment variable costs C. Segment variable costs and fixed costs D. Avoidable costs associated with the segment 38. Maki plans to shut down a division with a P 20,000 contribution margin. Overhead allocated is P 50,000, P 5,000 of which cannot be eliminated. What is the increase in income by discontinuing the division? A. P5,000 B. P20,000 C. P25,000 D. P30,000 39. Maki currently sells 10,000 units of product M for P18.00 each. Variable costs are P8.00 per unit. A discount store has offered P16.00 for 4,000 units of product M. If Maki accepts the special order, it will lose some sales at the regular price. Determine the number of units Maki could lose before the order became unprofitable. A. 2,000 units B. 2,667 units
- 5. C. 3,200 units D. 5,000 units 40. Which of the following costs are relevant to a make or buy decision? A. Annual depreciation of the equipment B. Original cost of the production equipment C. The amount that would be received if the production equipment were sold D. The cost of direct materials purchased last month and used to manufacture the component. 41. It is an operational factor that directly affects the economic viability of the organization. A. Key success factor B. Continuous improvement C. Customer focus D. Supply chain 42. Strategy should focus PRIMARILY on the organization’s A. Products B. Customers C. Employees D. Shareholders 43. Which of the following is NOT a way for a company to improve customer response time? A. Use faster delivery procedures B. Purchase material in larger quantities C. Produce the product more quickly D. Increase capacity of bottleneck operations 44. Moscow Manufacturing Corporation has the following information: Moving time: 8 days Inspection time: 2 days Processing time: 10 days Storage time: 30 days What is the manufacturing cycle efficiency (MCE)? A. 20% B. 25% C. 60% D. 80% 45. An Enterprise Resource Planning (ERP) system can best be described as: A. a collection of programs that use a variety of unconnected databases B. a sophisticated means of linking two or more companies to facilitate their planning processes C. a database that is primarily used by a purchasing department to determine the correct amount of a particular supply item to purchase D. a single database that collects data and feeds it into applications that support each of the company’s business activities, such as purchases, production, distribution, and sales 46. Under Theory of Constraints (ToC), improvement efforts should be focused A. Work center that is a constraint B. Cost center that incurs the highest costs C. Work center that has no constraint D. Cost center that has least number of constraints 47. The goal of working capital management is to: A. Pay off short-term debts B. Balance current assets against current liabilities C. Achieve a balance between risk and return to maximize the firm’s value D. Achieve a balance between short-term and long- term assets to achieve the firm’s overall goals 48. For inventory management, ignoring safety stocks, which of the following is a valid computation of the reorder point? A. The Economic Order Quantity B. The anticipated demand during the lead time C. The square root of the anticipated demand during the lead time D. The EOQ multiplied by the anticipated demand during the lead time 49. Ignoring cost and other effects, which of the following measures would tend to reduce the cash conversion cycle? A. Take cash discounts when offered B. Maintain the level of receivable as sales decrease C. Forgo cash discounts that are currently being taken D. Buy more materials to take advantage of price breaks 50. For inventory management, ignoring safety stocks, which of the following is a valid computation of the reorder point? A. The Economic Order Quantity
- 6. B. The anticipated demand during the lead time C. The square root of the anticipated demand during the lead time D. The EOQ multiplied by the anticipated demand during the lead time 51. Which of the following standards of comparison is particularly useful in identifying trends? A. Competitor’s performance B. Past performance C. Predetermined standards D. Forecast 52. A company has an acid-test ratio of 1.5 to 1.0. Which will cause this ratio to deteriorate for the company? A. Sale of equipment at a loss B. Borrowing short-term loan from a bank C. Sale of inventory on account D. Payment of cash dividends previously declared 53. Accounts receivable turnover will normally decrease because of: A. An increase in cash sales in proportional to credit sales B. A change in credit policy to lengthen the period for cash discounts C. A significant sales volume decreases near the end of the accounting period D. The write-off of an uncollectible account (assume the use of allowance for doubtful accounts method) 54. When a company compares its ratios to industry averages, it has a higher current ratio, an average quick ratio, and a low inventory turnover. What is the most reasonable assumption about the company? A. Its current liabilities are too low B. Its average inventory is too high C. Its cash balance is too low D. Its cost of sales is too low 55. A firm has a debt-equity ratio of 50%. It has interest expense of P 500,000 on P 5,000,000 of total debt outstanding. Its tax rate is 40%. If the firm’s RoA is 6%, by how many percentage points is the firm’s RoE greater than its RoA? A. 0.0% B. 3.0% C. 5.2% D. 7.4% 56. Which of the following is NOT a component used in calculating the cost of capital? A. Cost of long-term debt B. Cost of common stock C. Cost of short-term debt D. Cost of retained earnings 57. Maki Company sold 12%, non-convertible preferred stock with a par value of P 50. The stock sold for P 55, and flotation costs were 6% of the market price. Tax rate is 30%. What is Maki’s cost of preferred stock? A. 11.61% B. 10.91% C. 8.12% D. 7.64% 58. Generally, the most expensive source of financing for a firm is: A. Debt B. Retained earnings C. Preferred stock D. New common stock 59. When establishing optimal capital structure, firms should strive to A. Maximize the marginal cost of capital B. Minimize the amount of debt financing used C. Maximize the amount of equity financing D. Minimize the weighted average cost of capital 60. If a high percentage of an entity’s total costs is fixed, the entity’s operating leverage will be A. Low B. Unchanged C. High D. Unable to be determined 61. Positive financial leverage is an indication of: A. Liquidity and solvency are expressed as a single measure B. Yield that shareholders can expect on their investment C. The benefit obtained from the use of borrowed funds D. The rate at which the earnings of a company are expected to grow
- 7. 62. Which of the following financial instruments can be traded in money markets? A. Mortgages B. BSP Treasury Bills C. Preferred stocks D. BSP Treasury Bonds 63. The most important considerations with respect to short-term investments are A. Return and value B. Return and risk C. Risk and liquidity D. Growth and value 64. Maki Company considers replacing old equipment that has a net book value of P 100,000, remaining useful life of 4 years with P 25,000 depreciation each year. The old equipment can be sold for P 80,000. The new equipment costs P 160,000 and has a 4- year useful life. Cash savings on operating expenses before 40% taxes amount to P 50,000 per year. What is the amount of initial net cash outflow in the new equipment? A. P160,000 B. P80,000 C. P72,000 D. P68,000 65. The payback method assumes that all cash inflows are reinvested to yield a return equal to A. The discount rate B. The internal rate of return C. The hurdle rate D. Zero 66. Everything else being equal, the internal rate of return (IRR) of an investment project will be lower if: A. Cash inflows are larger B. The project has a shorter payback period C. The investment cost is lower D. Cash inflows are received later in project life 67. A business cycle is a sequence of economic activities of a nation typically characterized by four phases – recession, recovery, growth and decline. DECLINE refers to A. Most unwelcome stage of business cycle where levels of buying, selling, production and employment typically diminish. B. An ‘upturn’ stage in the business cycle where the economy troughs out and start working its way up to better financial footing. C. The stage in the business cycle where the economy goes through sustained expansion, increased consumer confidence, and high levels of business activity. D. A ‘downturn’ or contraction stage in the business cycle that marks the end of the period of growth and where the economy experiences decreased level of production by businesses and consumer purchases. 68. Which of the following may provide a leading indicator of a future increase in gross domestic product? A. A prolonged period of unemployment and outstanding loans B. A decrease in the issuance of building permits C. An increase in the timeliness of delivery by vendors D. An increase in the average hours worked per week of production workers 69. If the value of US dollar in foreign currency markets changes from US $1 = € 0.95 to US $1 = € 0.90, A. US exports to Europe shall decrease B. The Euro has depreciated against the dollar C. Products imported from Europe to the U.S. will become more expensive D. US tourists in Europe will find their dollars capable of buying more European products 70. Assume that a house is rented by 4 students. When it comes to keeping the house clean, each of the four roommates has an incentive to leave cleaning to the others. As a result, the house is never clean. What is the best solution to this problem of free riding? A. Ask every roommate to clean the house if they dirty it B. Require every roommate to contribute to a cleaning service C. Require each room mate to pay more toward the house rent and groceries D. Assign one roommate the responsibility to keep a watch over the other students ---Nothing Follows---