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INTEGRATED REVIEW 2: Management Advisory Services (MAS)#1 | Basic Framework of Management Accounting & Costs in Management Accounting 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 ...

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INTEGRATED REVIEW 2: Management Advisory Services (MAS) #1 | Basic Framework of Management Accounting & Costs in Management Accounting

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 (CRC-ACE, May 2018 Batch) 2. Costs that cannot be changed by any decision made now or in the future are A. Sunk costs B. Indirect costs C. Avoidable costs D. Fixed costs (CRC-ACE, May 2018 Batch) 3. Management accountants must satisfy their users; therefore, they should all do the following, EXCEPT A. Provide them with high quality information B. Provide specialized information that specific managers can use C. Focus on preparing information for external financial reporting D. Continuously strive to provide better quality information faster and at a lower cost (RESA, May 2018) 4. It is an approach to continuous improvement that focuses on serving customers and uses frontline 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 (RESA, May 2018) 5. The drivers that explain changes in costs as units produced changed are called: A. Non-unit-level drivers B. Activity based cost drivers C. Unit-level drivers D. All of these (PRTC, May 2018)

6. 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 (PRTC, May 2018) 7. Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that is parallel to the horizontal axis? A. Total direct material costs B. A consultant paid P75 per hour with a maximum fee of P1,200 C. Employees who are paid P10 per hour and guaranteed a minimum weekly wage of P200 D. Rent on exhibit space at a convention (PRTC, May 2018) 8. Harem Company uses an annual cost formula for overhead of P72,000 + 1.60 for each direct labor hour worked. For the upcoming month, Karla plans to manufacture 96,000 units. Each unit requires five minutes of direct labor. Harem Company’s budgeted overhead for the month is A. P 12,800 B. P 18,800 C. P 84, 800 D. P 774, 000 (Bobadilla, 2011) 9. The controller of Jema Company has requested a quick estimate of the manufacturing supplies that it needs for the month of July when the expected production are 470,000 units. Below are the actual data from the prior three months of operations. Production in Units Manufacturing Supplies March 450, 000 P 723, 060 April 540, 000 853, 560 May 480, 000 766, 560 Using these data and the high-low method, what is the reasonable estimate of the cost of manufacturing supplies that would be needed for July? (Assume that this activity is within the relevant range) A. P 805,284 B. P 1,188,756 C. P 755,196 D. P 752,060

(Bobadilla, 2011) 10. The Overland Company wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data: Month Electricity Cost Direct Labor Hours January P 6,750 1,500 April 7,500 1,700 July 8,500 2,000 October 7,250 1,600 Using the high-low method, what is the reasonable equation? A. Y= P 750 + P5.00X B. Y= P1,500 + P3.50X C. Y= P 750 + P3.50X D. Y= P1,500 + P5.00X (Bobadilla, 2011)

11. 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.

12. 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

13. Management accounting A. is more concerned with the future than is financial accounting. B. is less concerned with segments of a company than is financial accounting. C. is more constrained by rules and regulations than is financial accounting.

D. all of the above are true. 14. 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

15. The plans of management are often expressed formally in: A. financial statements.

C. budgets.

B. ledgers.

D performance reports.

16. The person MOST likely to use ONLY financial accounting information is a A. factory shift supervisor.

C. current shareholder.

B. manager.

D. vice president of operations.

17. Control measures should A. be set and not changed until the next budget cycle. B. be flexible to allow for employees who are slackers. C. be kept confidential from employees so that competitors don’t have an opportunity to gain a competitive advantage. D. be linked by feedback to planning. 18. 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.

19. A well-conceived plan allows managers the ability to A. not make decisions again until the next planning session. B. keep lower-level managers from implementing change. C. underestimate costs so that actual operating results will be favorable when comparisons are made.

D. take advantage of unforeseen opportunities. 20. Management accounting A. focuses on estimating future revenues, costs, and other measures to forecast activities and their results. B. provides information about the company as a whole. C. reports information that has occurred in the past that is verifiable and reliable. D. provides information that is generally available only on a quarterly or annual basis. 21. 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 decisionmaking. 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 (Roque, 2016) 22. The basic accounting records that are used to provide data for external accounting. In combining and reporting these data to management, however, the accountant can relax the verifiability constraint necessary in public financial reporting and instead prepare data which, although not adequately verifiable for external reporting, are more useful to management. This principle of management accounting considers the following factors are more important than others. A. B. C. D.

Verifiability, objectivity, and accuracy Conservatism Relevance, flexibility and timeliness Consistency and disclosure (Roque, 2016)

23. These costs are long-term in nature and cannot be eliminated even for short periods of time without affecting the profitability or long-term goals of the firm

A. B. C. D.

Avoidable costs Committed fixed costs Variable costs Controllable costs (Roque, 2016)

For numbers 24 to 26, Meng Company is preparing a flexible budget for next year and requires a breakdown of the factory maintenance cost into the fixed and variable elements. The maintenance cost and machine hours (the selected cost driver) for the past 6 months are as follows:

January February March April May June

Maintenance Costs 15,500 10,720 15,100 15,840 14,800 10,600

Machine Hours 1800 1230 1740 2190 1602 1590

24. If Meng Company uses the high low method of analysis, the estimated variable rate of maintenance cost per machine hour is A. Php 7.23 B. Php 8.73 C. Php 5.46 D. Php5.33 (Roque, 2016) 25. The average annual fixed maintenance cost amounts to A. Php 4,160 B. Php 8,320 C. Php 49,920 D. Php 5,120 (Roque, 2016) 26. What is the average rate per hour at a level of 1500 machine hours? A. Php 5.33 B. Php 8.11 C. Php 7.23

D. Php 5.46 (Roque, 2016) For numbers 7 and 8, RTW Company, in producing Lot No. 647 which called for 2,500 dresses, Style No. 34, incurred costs as follows: Materials, P240/dress; Labor, P165/dress; Factory Overhead, P135/dress. When the lot was completed, inspection rejected 200 spoiled dresses which were sold for P324 each. 27. Assuming spoilage is normal what is cost per unit of good output? A. Php 540 B. Php 324 C. Php 558.78 D. Php 586.96 28. Assuming spoilage is abnormal, what is the cost per unit of good output? A. Php 540 B. Php 324 C. Php 558.78 D. Php 586.96 (PRIA Handout, 2018) For numbers 9 and 10, The following data for the month of September were taken from the cost records of Department A of NLP which uses average costing:

Work in process, beginning (All materials, 50% converted) Materials Labor Factory Overhead Put into Production Materials Labor Factory Overhead Units completed and transferred Units in process, End (all materials, 60% converted) 29. The unit cost of material for the month is A. P 5.00

Unit 500

Cost P 2,400 1,500 760

5,000 25,100 19,380 14,900 4,800 700

B. P 5.50 C. P 4.00 D. P 4.50

30. The equivalent production for labor is A. 7200 B. 5220 C. 4970 D. 5500 (PRIA Handout, 2018) 31. Which of the following is/are false? A. Managerial accounting is as concerned with providing information to stockholders as it is with providing information to managers. B. Managerial accounting focuses more on the segments of an organization rather than on the organization as a whole. C. Managerial accounting need not follow the Generally Accepted Accounting Principles (GAAP). D. Managerial accounting is not mandatory, i.e., not required by any external law or regulation. (Roque, 2016) 32. In which of the following aspects is managerial accounting similar to financial accounting? A. Users of reports B. Emphasis between the past and future C. Type of data provided to users D. Reliance on the accounting database (Roque, 2016) 33. An activity that causes resources to be consumed is called a A. Non-value-added activity B. Cost driver C. Just-in-time activity D. Extracurricular activity (Roque, 2016) For numbers 34 to 35: The following are costs incurred by Abtina Manufacturing Corporation during the previous month:

Direct materials Indirect materials Direct labor Indirect labor Factory utilities Advertising costs Sales commissions Depreciation on administration building Salaries of administrative personnel Depreciation - delivery equipment Overtime pay - factory workers Rework cost on defective products discovered during quality inspection

P 5,000 2,000 6,000 1,000 4,000 8,000 12,000 3,000 20,000 2,000 1,000 2,500 (Roque, 2016)

34. Total product costs: A. P67,000 B. P45,000 C. P22,000 D. P18,000 35. Total period costs: A. P67,000 B. P45,000 C. P49,000 D. P22,000

For number 36: Maco Corporation’s Research and Development Department was able to develop a new product – a flashlight powered by solar energy. After reviewing the data prepared by the company’s controller, Maco’s management is confident that the new product will contribute profit to the company. The data prepared by the controller are as follows:

Suggested selling price Costs: Materials Parts fabrication (P10 per hour) Assembly (P6 per hour) Variable overhead (P4 per hour) Fixed overhead (P3 per hour) Tota cost

P200 P60 40 18 28 21 P167

The total research and development costs incurred to develop the new product amounted to P200,000. The company is planning to spend half of this amount for promotion and advertising. The company’s fixed overhead includes rent, equipment depreciation, and salaries of factory supervisors. (Roque, 2016) 36. For Maco’s new flashlight, total prime costs amount to A. P118 B. P167 C. P146 D. P107 For numbers 37 to 39: Frances Corporation conducted a regression analysis of its factory overhead costs. The analysis yielded the following cost relationship: Total factory overhead cost = P50,000 per month + 5H* *H = number of direct labor hours, the selected cost driver for overhead costs Each unit of product requires 6 direct labor hours. The company’s normal production is 20,000 units of product per year. (Roque, 2016) 37. The total overhead cost for a month’s production of 2,000 units is A. P60,000 B. P50,000 C. P110,000 D. P0 38. The predetermined fixed overhead rate per hour is

A. B. C. D.

P6.00 P5.00 P2.50 P0.42

39. The total predetermined factory overhead rate per hour is A. P5.00 B. P7.50 C. P10.00 D. P35.00 40. The following costs were incurred in February: Direct materials ......................... $43,000 Direct labor ............................... $16,000 Manufacturing overhead ........... $37,000 Selling expenses ........................ $17,000 Administrative expenses ........... $26,000 Conversion costs during the month totaled: a. $59,000 A. $80,000 B. $53,000 C. $139,000 (Garrison 12th edition) 41. Management accounting includes the following processes, except: A. measurement. B. interpretation. C. communication. D. delegation. (ROQUE, 2016)

42. In JIT, the flow of goods is controlled by a "pull" approach. It means that, A. work is initiated only in response to customer orders. B. customers are pulled to buy more units to reduce the company's inventory. C. production supervisors see to it that there is always something to do to keep everyone busy. D. warehouses should always be full to be sure that customer demands are always met. (ROQUE)

43. Under which ethical standard of conduct does the managerial accountant have the responsibility to refrain from either actively or passively subverting the attainment of an organization's legitimate and ethical objectives? A. integrity B. objectivity C. competence D. confidentiality (Bobadilla, 2012)

44. Which of the following involves decision making? A. B. C. D.

Controlling Planning Directing All of the above (Roque, 2016)

45. Management accounting involves the following except: A. B. C. D.

Determine cost behavior Assist in developing company’s prices for external transactions only Assist in profit planning None of the above (ROQUE, 2016)

46. Fixed cost that would be considered a direct cost is A salary of the sales manager when the cost object is the sales department. B salary of the controller when the cost object is a unit of product. C. fees of the Board of Directors when the cost object is the Production Department. D. the rental cost of the finished goods warehouse when the cost object is the Accounting Department. (ROQUE)

47. Utility costs at Service, Inc. are a mixture of fixed and variable components. Records indicate that utility costs are an average of $0.40 per hour at an activity level of 9,000 machine hours and $0.25 per hour at an activity level of 18,000 machine hours. Assuming that this activity is within the relevant range, what is the expected total utility cost if the company works 13,000 machine hours? A. $4,225 B. $5,200 C. $4,000 D. $3,250 (PRIA Handout) 48. Overhead applied was 130,000 while actual overhead was 126,000. Which of the following is true? A. B. C. D.

Direct Labor activity was overestimated Overhead was underapplied by 4000 Overhead was overapplied by 4000 The difference is reported as a loss (DE LEON, 2016)

49. City cruiser accepted a special order of 100 bikes for 558 each. Their normal selling price is 698. While their product cost is 564 consisting of Direct Materials - 372, Direct Labor - 90, Manufacturing Overhead - 102, Fixed portion of Overhead - 90 per unit. In accepting the special order, it would require additional P34 direct cost and P2,400 fixed overhead cost. Assuming this order would have no effect on other sales. What would be the incremental overhead costs in accepting the special order? A. B. C. D.

2,400 2,502 3,600 5,800

50. Craft Manufactures order using job order cost system. For the month just ended, it registered the following data, Beginning work in process (5 partially completed jobs) - 300,000 Orders completed (18) - 2,400,000 Orders Shipped (14) - 2,000,000

Materials requisitioned for the month - 1,700,000 Direct Labor Cost - 800,000 Factory Overhead Rate - 150% of Direct Labor Cost

The ending work in process inventory was A. 1,400,000 B. 500,000 C. 1,600,000 D. 700,000 51. Which of the following is not an objective of management accounting? A. B. C. D.

maximization of profit and minimization of costs. measuring the performance of managers of subunits. providing information for planning and decision making. providing assistance in directing and controlling operations. (Roque, 2016)

52. Which of the following statements about management or financial accounting is false? A. B. C. D.

Management accounting should be flexible. Financial accounting must follow GAAP. Management accounting is not subject to mandatory reporting standards. Both management and financial accounting are subject to mandatory recordkeeping requirements. (Roque, 2016)

53. 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. B. C. D.

management accounting responsibility accounting financial accounting general accounting (Roque, 2016)

54. Which of the following statements is false? A. Cost accounting is a tool of both financial and managerial accounting.

B. Managerial accounting draws heavily on economics, statistics, operations research, and other disciplines as necessary in providing accounting and financial information. C. In management accounting, emphasis is given to identifying or matching cost with functions, projects, or responsibilities rather than with time periods. D. Financial accounting provides information to individuals within the business organization, while management accounting provides information to parties outside the business entity. (Roque, 2016) 55. Management accounting differs from financial accounting in that financial accounting is. A. B. C. D.

involved more heavily in decision analysis future oriented concerned primarily with external financial reporting concerned with qualitative information. (Roque, 2016)

56. The following information is available for Ana manufacturing Company when it produced 2,100 units in the month of February: Standard Material: 2 pounds per unit @ 4.00 per pound Labor: 3 hours per unit Variable overhead: P15 per hour Actual Material: 4,500 pounds purchased @ P17,100 Labor: 6,400 direct labor hours What is the materials purchase price variance? A. B. C. D.

P900 favorable P900 unfavorable P840 favorable P840 unfavorable (ReSA 1st Preboard, 2014)

57. Based on the information in the previous number, how did the company factory workers perform in February? A. B. C. D.

P100 efficient P100 inefficient 100 hours efficient 100 hours inefficient (ReSA 1st Preboard, 2014)

58. Spleen Com...