Management Advisory Services Reviewer - Accounting Course (CPA Board Exam Review) PDF

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MANAGEMENT ADVISORY SEVICES REVIEWERS / TESTBANKS The term "committed costs" refers to costs that a. are likely to respond to the amount of attention devoted to them by a specified manager b. are governed mainly by past decisions that established the present levels of operating and organizational ca...

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MANAGEMENT ADVISORY SEVICES REVIEWERS / TESTBANKS

1.

The term "committed costs" refers to costs that a. are likely to respond to the amount of attention devoted to them by a specified manager b. are governed mainly by past decisions that established the present levels of operating and organizational capacity and that only change slowly in response to small changes in capacity c. fluctuate in total in response to small changes in the rate of utilization of capacity d. management decides to incur in the current period to enable the company to achieve objectives other than the filling of orders placed by customers

2.

Which of the following is likely to be a discretionary cost in most organizations? managerial training programs c. a. managerial labor costs b. factory utilities d. factory rent

3.

A cost driver a. b. c. d.

4.

causes fixed costs to rise because of production changes has a direct cause-effect relationship to a cost can predict the cost behavior of a variable, but not a fixed, cost is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume

Costs that are incurred for monitoring and inspecting are: a. prevention costs c. appraisal costs

detection costs

b.

d.

failure

costs 5.

The cost estimation method that gives the most mathematically precise cost production equation is a. The high-low method c. The scatter-graph method d. b. The contribution margin method The regression analysis

6.

A local JPIA chapter wants to rent a half for P3,000 a day to hold a Bingo fund raiser. Every session of bingo requires a caller for P200. There are supplies that are needed that cost P3 per person playing bingo. On average each bingo player spends P20 and 1,000 people attend each session. P10,000 in prizes are awarded each session. Total cost for 1 session can be classified as: Fixed Costs-Variable Costs FixedCosts-Variable

Costs a.

P 13,200-P 3

c.

P 3,000-P

P 13,200-P 3,000

d.

P 10,000-P

13,200 b.

3,200 7.

Which is not a common accounting classification of costs? a. By the method of payment for the expenditure b. By the objective of expenditure c. By behavior d. By the function incurring the expenditure

8.

The principal advantage of the scatter-diagram method over the high-low method of cost estimation is that the scatter-diagram method a. includes costs outside the relevant range b. considers more than two points c. can be used with more types of costs than the high-low method

d. gives a precise mathematical fit of the points to the line 9.

January February March

Which statement is true? A variable cost remains constant on a per-unit basis as a. production increases b. A fixed cost remains constant on a per-unit basis as production changes c. The relevant range is valid for all levels of activity d. An indirect cost can be easily traced to a cost object. Pure Foods wishes to analyze the fixed and variable components of the semi-variable costs. The following information is available: Output Output Month Units Costs Month Units Costs 1,000 P 12,000 April 800 P 11,000 700 10,000 May 1,400 18,750 1,100 14,000 June 1,200 15,000

10.

Using the high-low method, which one of the following is correct. application a. Variable costs is P 15 per unit c. Fixed costs is P 1,250 per month b. Variable costs is P 10 per unit d. Fixed costs is P 1,000 per month

11.

BSP Company earned P 100,000 on sales of P 1,000,000. It earned P 130,000 on sales of P 1,100,000. Total fixed costs are c. P 420,000 a. P 0 b. P 200,000 d. P 900,000

12.

Which of the following is a prevention cost? c. quality audits a. Inspecting and testing materials b. Packaging inspection d. cost of recalls

13.

Which of the following costs is an internal failure cost? a. Packaging inspection c. quality engineering

b. Rework

d. lost sales

14.

One of the ways managerial accounting differs from financial accounting is that managerial accounting a. is bound by generally accepted accounting principles b. classifies information in different ways c. does not use financial statements d. deals only with economic events

15.

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

16.

The cost management function is usually under a. the chief information officer c. purchasing manager d. treasurer b. controller

17.

Planning is a function that involves a. hiring the right people for a particular job b. coordinating the accounting information system c. setting goals and objectives for an entity d. analyzing financial statements

18.

The treasurer function is usually not concerned with a. investors relation c. financial reports b. short-term financing d. credit extension and collection of bad debts

19.

The following characterized management advisory services, except a. It involves decision for the future b. It broader in scope and varied in nature

It utilizes more junior staff than senior members

c.

of the firm It relates to specific problems where expert help

d.

is required 20.

21.

Under which ethical standard of conduct does the managerial accountant have the responsibility to disclose fully all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, comments and recommendations presented? a. Objectivity b. competence c. confidentiality d. integrity Hanson Company manufactures two different types of receivers, a regular Model R and a special features Model S. The company has limited resources. On an annual basis it has a total of 480 direct labor-hours and a total of 300 lbs. of material available for use in the manufacture of these receivers. The company uses linear programming to determine a production schedule that will maximize the company’s profit. Based on the company’s current data on selling prices and production costs, it is estimated that the sale of Model R will contribute P7 profit per unit and the sale of Model S will contribute P10 profit per unit. Resources used in the production of the two receivers are as follows. (Let Model S = S and Model R = R.) Model S Model R Raw materials used per unit 5 lbs. 3 lbs. Labor used per unit 6 hours 4 hours The objective function for Hanson Company can be expressed as a. 5S + 3R < = 300 c. 6S + 4R < = 480 b. Max = 7R + 10S d. Min = 5S +3R

22.

A beverage stand can sell either softdrinks or coffee on any given day. If the stand sells softdrinks and the weather is hot; it will make P2,500; if the weather is cold, the profit will be P1,000. If the stand sells coffee and the weather is hot, it will make P1,900; if the weather is cold, the profit will be P2,000. The probability of cold weather on a given day at this time is 60%. The expected payoff if the vendor has perfect information is: c. P2,200 a. P3,900 b. P1,360 d. P1,960

23.

Soft Inc. has a target total labor cost of P 3,600 for the first four batches of a product. Labor is paid P10 an hour. If Soft expects an 80% learning curve, how many hours should the first batch take? b. 140.63 hours a. 360 hours c. 57.6 hours d. 230.4 hours

24.

Critical Path Method (CPM) is a technique for analyzing, planning, and scheduling large, complex projects by determining the critical path from single time estimate from each event in a project. The critical path: a. Is the shortest path from the first event to the last event for a project b. Is an activity within the path that requires the most number of time c. Has completion that reflects the earliest time to complete the project d. Is the maximum amount of time an activity may be delayed without delaying the total project beyond its target completion time

25.

A company is designing a new regional distribution warehouse. To minimize delays in loading and unloading trucks, an adequate number of loading docks must be built. The most relevant technique to assist in determining the proper number docks is

a. Cost-volume-profit analysis analysis b. Queuing theory

26.

c. PERT / CPM d. Linear programming

AJ Construction Inc. is considering a three-phase research project. The time estimates for completion of Phase 1 of the project are: Pessimistic 29 weeks Most likely 25 weeks Optimistic 15 weeks Using the program evaluation and review technique (PERT), the expected time for completion of Phase 1 should be a. 20 weeks b. 19 weeks c. 18 weeks d. 24 weeks

Moon, Inc. manufactures product X and product Y, which are processed as follows: Type A machine Type B machine Product X 6 hours 4 hours Product Y 9 hours 5 hours 27. The contribution margin is P12 for product X and P7 for product Y. The available time daily for processing the two products is 120 hours for machine Type A and 80 hours for machine Type B. What is the best combination of product that will maximize profit? a. 10X, 10Y b. 15X, 5Y d. c. 20X, 0Y 0X, 20Y 28.

Linear programming is used most commonly to determine a. The fastest timing b. The best use of scarce resources c. The most advantageous prices d. The mix of variable that will result in the largest quantity The network below describes the interrelationships of several activities necessary to complete a project. The arrows represent the activities. The numbers between the arrows indicate the number of months to complete each activity.

4 Start

4

4

1

5

6 6

29.

2

2

3

4

5

End

2

The shortest time to complete the project is a. 10 months b. 12 months d. 28 months

c. 16 months

30.

Super Company is preparing 2011 budget and, taking into consideration the recent pace of economic recovery, has developed several sales forecasts and the estimated probability associated with each sales forecasts. To determine the sales forecasts to be used for 2011 budgeting purposes, which of the following techniques should Super use? c. Monte Carlo a. Expected value analysis simulation b. Continuous probability simulation d. Sensitivity Analysis

31.

The expected value of perfect information is the a. Difference between the expected profit under certainty and the expected monetary value of the best act under uncertainty. b. Difference between the expected profit under certainty and the expected opportunity loss c. Sum of the conditional profit (loss) for the best event of each act times the probability of each events occurring d. Same as the expected profit under certainty

A dough distributor has decided to increase its daily muffin purchases by 100 boxes. A box of muffins costs P 2 and sells for P 3 through regular stores. Any boxes not sold through regular stores are sold through Dough’s thrift store for P 1. Dough assigns the following probabilities to selling additional boxes. Additional sales probabilities 60 .40

32.

100 .60 What is the expected value of Dough’s decision to buy 100 additional boxes of muffins? a. P 28 b. P 40 c. P 52 d. P 68

33.

As a company becomes more conservative with respect to working capital policy, it would tend to have a(n) a. Increase in the operating cycle. b. Decrease in the operating cycle. c. Increase in the ratio of current assets to current liabilities. d. Increase in the ratio of current liabilities to noncurrent liabilities.

34.

Temporary working capital supports a. The cash needs of the company of long term debt. b. Acquisition of capital equipment peaks

c. Payment d.

Seasonal

35.

Zap Company follows an aggressive financing policy in its working capital management while Zing Corporation follows a conservative financing policy. Which one of the following statements is correct? a. Zap has a low current ratio while Zing has a high current ratio. b. Zap has less liquidity risk while Zing has more liquidity risk. c. Zap finances short-term assets with long term debt while Zing finances short-term assets with short-term debt. d. Zap has low ratio of short-term debt to total debt while Zing has a high ratio of short-term debt to total debt.

36.

All of these factors are used in credit policy administration, except: a. Credit standards c. Terms of trade b. Peso amount of receivables d. Collection policy

37.

The use of safety stock by a firm will: a. Reduce inventory costs inventory costs b. Have no effect on inventory costs the above

c.

Increase d. None of

38.

Which of the following statements is correct for a firm that currently has total costs of carrying and ordering inventory that is 50% higher than total carrying costs? a. Current order size is greater than optimal c. Current order size is less than optimal b. Per unit carrying costs are too high d. The optimal order size is currently being used

39.

The Spades Company has an inventory conversion period of 75 days, a receivables conversion period of 38 days, and a payable payment period of 30 days. What is the length of the firm’s cash conversion cycle? b. 113 days c. 67 days d. 45 days a. 83 days

40.

Samaritan Supplies, Inc. has P5 million in inventory and P2 million in accounts receivable. Its average daily sales are P100,000. The company has P1.5 million in accounts payable. Its average daily purchases are P50,000. What is the length of the company’s inventory conversion period? c. 50 days a. 120 days b. 90 days d. 40 days

41.

Rawson Corporation’s order quantity for Material T is 5,000 lbs. If the company maintains a safety stock of T at 500 lbs., and its order point is 1,500 lbs. What is the lead time assuming daily usage is 50 lbs.? d. 20 a. 30 days b. 100 days c. 10 days days

42.

Refer to # 16; what would be the total annual carrying costs assuming the carrying cost per unit is P8.40? a. P 42,000 c. P 4,200 d. P 46,200 b. P 25,200

43.

Simile Inc. has a total annual cash requirement of P 9,075,000 which is to be paid uniformly. Simile has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. What is the optimal cash conversion size? b. P60,000 c. P45,000 d. P75,500 a. P55,000

44.

Palm Company’s budgeted sales of the coming year are P 40,500,000 of which 80% are expected to be credit sales at terms of n/30. Palm estimates that a proposed relaxation of credit standards will increase credit sales by 20% and increase the average collection period from 30 days to 40 days. Based on a 360-day year, the proposed relaxation of credit to standards will result in an expected increase in the average accounts receivable balance of a. P540,000 b. P900,000 c.P2,700,000 d. P1,620,000

45.

If a firm is given a trade credit terms of 2/10, net 30, then the cost to the firm failing to take the discounts and pay instead its obligation at the end of the maturity date is: a. 2% b. 30% c. 36.7% d. 10%

46.) Depreciation is incorporated explicitly in the discounted cash flow analysis of an investment proposal because it A. Is a cash inflow. B. Is a cost of operations that cannot be avoided. C. Reduces the cash outlay for income taxes. D. Represents the initial cash outflow spread over the life of the investment. 47.) Assume that the old equipment must be sold in order to purchase the new equipment. Given a constant effective corporate income tax

rate and straight-line depreciation on both disposed and newly purchased pieces of equipment, the depreciation tax shield during the later years of a capital project, assuming the old equipment was not yet fully depreciated when it was disposed of, is generally A.) Less than that during the earlier years. B.) Not determinable from the information given. C.) Greater than that during the earlier years. D.) The same as that during the earlier years. 48.) Future, Inc. is in the enviable situation of having unlimited capital funds. The best decision rule, in an economic sense, for it to follow would be to invest in all projects in which the a.) Internal rate of return is greater than zero. b.) Net present value is greater than zero. c.) Accounting rate of return is greater than the earnings as a percent of sales. d.) Payback reciprocal is greater than the internal rate of return. 49.) Kore Industries is analyzing a capital investment proposal for new equipment to produce a product over the next 8 years. The analyst is attempting to determine the appropriate "end-of-life" cash flows for the analysis. At the end of 8 years, the equipment must be removed from the plant and will have a net book value of zero, a tax basis of P75,000, a cost to remove of P40,000, and scrap salvage value of P10,000. Kore’s effective tax rate is 40%. What is the appropriate "end-of-life" cash flow related to these items that should be used in the analysis? a. b. c. d.

P27,000 inflow P18,000 outflow P45,000 outflow P12,000 inflow

50.) Barker, Inc. has no capital rationing constraint and is analyzing many independent investment alternatives. Barker should accept all investment proposals

a. b. c. d.

That provide returns greater than the before-tax cost of debt. That have a positive net present value. If debt financing is available for them. That have positive cash flows.

51.) The rankings of mutually exclusive investments determined using the internal rate of return method (IRR) and the net present value method (NPV) may be different when a. The lives of the multiple projects are equal and the size of the required investments is equal. b. The required rate of return equals the IRR of each project. c. The required rate of return is higher than the IRR of each project. d. Multiple projects have unequal lives and the size of the investment for each project is different. 52. All of the following items are included in discounted cash flow analysis except

a. b. c. d.

Future operating cash savings. The future asset depreciation expense. The current asset disposal price. The tax effects of future asset depreciation.

53.) A firm is considering a capital project for which the following information is available: An existing piece of equipment that would be disposed of to make room for new equipment has a historical cost of P370,000. It has a salvage value of P10,000 and has been depreciated on a straight-line basis for 16 of the estimated 18 years of its useful life. The new equipment has a cost of P500,000 and the firm expects it will have to devote P20,000 in cash and P24,000 in accounts receivable to the new project. The firm’s effective tax rate is 40%. The required net initial investment in the new project is a. b.

P534,000 P518,000

c. d.

P544,000 P498,000

54.) If income tax considerations are ignored, how is depreciation handled by the following capital budgeting techniques? A. Excluded...Included...Excluded C. Included...Excluded...Included B. Excluded.....