OCT Cpale 2019 MAS - For review purposes in taking the cpa board exam PDF

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Management Accounting Objectives, Role & Scope of Management Accounting The approaches and activities of managers in short-run and long-run planning and control decisions that increase value for customers and lower costs of products and services are known as A. cost management C. enterprise reso...

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PHIL. CPA LICENSURE EXAMINATION

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Management Accounting Objectives, Role & Scope of Management Accounting 1. The approaches and activities of managers in short-run and long-run planning and control decisions that increase value for customers and lower costs of products and services are known as A. cost management C. enterprise resource planning B. customer value management. D. value chain management Horngren

Cost-Volume-Profit Analysis 6. A firm is analyzing a relaxation of credit standards that is expected to increase sales 10%. The firm is currently selling 400 units at an average sale price per unit of P575, and the variable cost per unit is P400 at the current sales volume. The average cost per unit is P425. What is the additional profit contribution from sales if credit standards are relaxed? A. P6,000 C. P16,000 B. P7,000 D. P23,000 Gitman

2.

7.

Reliable Repair Shop has a monthly target operating income of P30,000. Variable expenses are 40% of sales and monthly fixed expenses are P7,500. Assume the repair shop reaches its target. By what percentage will its operating income fall if sales volume declines by 12%? C. Decline by 15% A. Decline by 10% B. Decline by 11% D. Decline by 16%

8.

Star Corporation manufactures and sells two products: A and B. The operating results of the company are as follows: Product A Product B Sales in units 2,000 3,000 Sales price per unit P100 P50 Variable costs per unit 70 30 In addition, the company incurred total fixed costs in the amount of P90,000. If the company would have sold a total of 6,000 units, how many of those units would you expect to be Product B? A. 3,000 C. 3,600 B. 3,500 D. 4,000 Barfield

9.

Dana sells a single product at P20 per unit. The firm’s most recent income statement revealed unit sales of 100,000, variable costs of P800,000, and fixed costs of P400,000. If a P4 drop in selling price will boost unit sales volume by 20%, what will the company experience? A. An P80,000 drop in profitability. B. A P240,000 drop in profitability. C. A P400,000 drop in profitability. D. No change in profit because a 20% drop in sales price is balanced by a 20% increase in volume. Hilton

3.

Using product cost information to determine sales prices is an example of A. controlling and planning. C. directing. B. controlling, directing, and planning. D. directing and controlling.

Braun & Tietz

The managerial accountant of XYZ Group Consulting reported the following information about the sales budget for the period ending December 31, 2019: XYX Group Consulting Sales Budget Period Ending December 31, 2019 Quarter 1 2 3 4 Total Number of units sold 1,000 1,200 975 1,600 4,775 Per-unit Price P32 P28 P33 P38 Total Sales P32,000 P33,600 P32,175 P60,800 158,575 Observe the Sales Budget and determine which primary responsibility the managerial accountant uses to determine which quarter generated the most per-unit product sales data in order to adjust the marketing strategy? A. Analyzing. C. Directing. B. Controlling. D. Planning. Braun and Tietz

Cost Behavior 4. When 40,000 units are produced, fixed costs are P16 per unit. Therefore, when 80,000 units are produced, fixed costs will A. decrease to P8 per unit. C. increase to P32 per unit. B. remain at P15 per unit. D. total P640,000 Horngren* 5.

The average fixed cost curve always has a negative slope because A. Total fixed costs always decrease. B. Marginal costs are below average fixe costs. C. Average variable costs exceed marginal costs. D. Total fixed costs do not change as output increases. October 2019

Boyes & Melvin Page 1 of 8

PHIL. CPA LICENSURE EXAMINATION

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Standard Costing & Variance Analysis 10. Orange Furniture’s purchasing manager obtained a special price on an MDF material from a new supplier, resulting in a direct-material price variance of P9,500 F. The MDF produced more waste than normal, as evidenced by a direct-material quantity variance of P2,000 U. Since it was also difficult to use, it slowed worker efficiency, generating a P2,500 U labor efficiency variance. To help remedy the situation, the production manager used senior line employees, which gave rise to a P9,00 U direct labor rate variance. If overall product quality did not suffer, what variance amount is best used in judging the appropriateness of the purchasing manager’s decision to acquire substandard material? A. P4,100 F C. P7,000 F B. P5,000 F D. P7,500 F Hilton The next three questions are based on the following information. Horngren Daisy Corporation manufactured 55,000 units of product during September. The following fixed overhead data relates to Actual Static Budget Production 55,500 units 55,000 units Machine-hours 985 hours 1,100 hours Fixed overhead costs for September P50,500 P50,600 11. What is the flexible budget amount? A. P50,500 B. P50,600

C. P51,060 D. P55,500

D. The unit product cost changes as a result of changes in the number of units manufactured. G&N 15. When monthly production volume is constant and sales volume is less than production, income determined with variable costing procedures will A. be equal to contribution margin per unit times units sold. B. be equal to income determined using absorption costing. C. always be less than income determined using absorption costing. D. always be greater than income determined using absorption costing. Hansen & Mowen Master Budget 16. Which of the following is TRUE of budgets when they are administered thoughtfully? A. They eliminate subjectivity in performance evaluation. B. They can eliminate the uncertainty faced by a company. C. They promote coordination within the subunits of a company. Horngren D. They are a substitute to the planning and coordination functions of management 17. The following factors should be considered in planning personnel requirements EXCEPT A. Labor laws requirement. B. Number of annual working days. C. Assessment of the supply and demand of manpower and especially of labor in the area. D.

13. What is the fixed overhead spending variance? A. P100 favorable. C. P560 favorable. B. P100 unfavorable. D. P560 unfavorable.

18. Jackson Company has a policy of maintaining an inventory of finished goods equal to 30 percent of the following month’s sales. For the forthcoming month of March, Jackson has budgeted the beginning inventory at 30,000 units and the ending inventory at 33,000 units. This suggests that A. March sales are budgeted at 10,000 units less than April. B. March sales are budgeted at 3,000 units less than April sales. C. February sales are budgeted at 3,000 units less than March sales. D. February sales are budgeted at 10,000 units less than March sales. Raiborn

Variable Costing & Absorption Costing 14. Which of the following statements is true for a company that uses variable costing? A. Income is greatest in periods when production is highest. B. Net operating income moves in the same direction as sales. C. Both variable selling costs and variable production costs are included in the unit product cost.

19. Juan Company has a policy of maintaining an inventory of finished goods equal to 30 percent of the following month’s sales. For the forthcoming month of March, Juan has budgeted the beginning inventory at 30,000 units and the ending inventory at 33,000 units. This suggests that A. March sales are budgeted at 10,000 units less than April. B. March sales are budgeted at 3,000 units less than April sales.

12. What is the amount of fixed overhead allocated to production? A. P50,500 C. P51,060 D. P55,500 B. P50,600

October 2019

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PHIL. CPA LICENSURE EXAMINATION C. February sales are budgeted at 3,000 units less than March sales. D. February sales are budgeted at 10,000 units less than March sales.

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Raiborn

Activity-Based Costing 20. Aqua Company produces two products – Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta’s cost is shared between design and setup costs, while Alpha’s major portions of costs are direct costs. Alpha is using a single cost pool to allocate indirect costs. Which of the following statements is true of Aqua? A. Aqua will overcost Beta’s indirect costs because beta has high indirect costs. B. Aqua will undercost Alpha’s indirect costs because Alpha has high direct costs. C. Aqua will overcost Beta;s direct costs as it is using a single cost pool to allocate indicate costs. D. Aqua will overcost Alpha’s indirect costs as it is using a single cost pool to allocate Horngren 15e indirect costs. Strategic Cost Management 21. Kaizen costing helps to A. reduce product costs of products in the design and development stage. B. keep the target cost as the primary focus after a product enters production. C. keep profit margin relatively stable as product price declines over the product life cycle. D. reduce the cost of engineering change orders during each stage of the product life cycle. Raiborn Responsibility Accounting & Transfer Pricing 22. Which of the following is a disadvantage of a focus on return on investment? A. It can encourage managers to focus on cost cutting efforts. B. It can encourage managers to cut inventories and reduce over all investment. C. It can encourage managers to focus on the long run at the expense of the short run. D. It can produce a narrow focus on divisional profitability at the expense of profitability for Hansen & Mowen the overall firm. 23. The manager of Stock Division projects the following for next year Sales P185,000 Operating income 60,000 Operating assets 375,000

October 2019

The manager can invest in an additional project that would require P40,000 investment in additional assets and would generate P6,000 of additional income. The company’s minimum rate of return is 14%. What of the following statements is TRUE? A. If the manager invests in the additional project, ROI of the division will decrease. B. The manager invests in the additional project, residual income of the division will increase. C. Average investment for Stock Division will decrease if the project is accepted for investment. D. The residual income of the project is less than the residual income of the division without the project therefore the project will be rejected. Hansen & Mowen 24. Tech Corporation manufactures and sells various high-tech office automation products. Two divisions of Tech Corporation are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a “super chip,” that can be used by both the Computer Division and other external customers. The following information is available on this month’s preparations in the Computer Chip Division: Selling price per chip P500 Variable costs per chip P200 Fixed production costs P600,000 Fixed SG&A costs P900,000 Monthly capacity 10,000 chips External sales 6,000 chips Internal sales 0 chilps Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays P450 to an external supplier for the 4,000 chips it needs each month. The next month’s costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other? A. P200 C. P450 B. P350 D. P500 Raiborn Balanced Scorecard 25. What is “strategy mapping” in the balanced scorecard? A. Setting the mission. B. Mapping the business processes. C. Identifying causal links between the four perspectives. D. Agreeing the strategy with the director of the business. Carey, Knowles & Towers-Clark Page 3 of 8

PHIL. CPA LICENSURE EXAMINATION

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26. In which of the four perspectives of a balanced scorecard is the objective “reduce staff turnover” most likely be? A. customer C. internal processes B. financial D. learning and growth Carey, Knowles & Towers-Clark

Financial Management Nature, Objectives & Scope of Financial Management 31. Profit maximization as a goal is not ideal because it does NOT directly consider C. risk and cash flow. A. cash flow and stock price. B. EPS and stock price. D. risk and EPS.

Quantitative Methods 27. The learning curve is also known as a(n) A. experience curve. B. exponential curve.

Financial Statement Analysis 32. Data on Wentz Inc. for 2018 are shown below, along with the payable deferral period (PDP) for the firms against which it benchmarks. The firm’s new CFO believes that the company could delay payments enough to increase its PDP to the benchmark’s average. If this were done, by how much would payables increase? Use a 365-day year. Cost of goods sold P75,000 Payable P 5,000 Payables deferral period 24.33 Benchmark payables deferral period 30.00 A. P764 C. P943 D. P1,164 Brigham & Houston B. P849

C. growth curve. D. production curve.

Heizer & Render

Relevant Costing 28. A company that is operating at full capacity should emphasize those products and services that have the A. highest operating income. B. lowest total per-unit costs. C. highest contribution margin per unit. D. highest contribution margin per unit of scarce resource. Hilton 29. Ruby Co. currently manufactures a subassembly for its main product. The costs per unit are as follows: Direct materials P450 Direct labor 350 Variable overhead 330 Fixed overhead 300 Total P1,430 Gem Inc. has contacted Ruby with an offer to sell 5,000 of the subassemblies for P1,350 each. Ruby will eliminate P850,000 of fixed overhead if it accepts the proposal. What are the relevant costs for Ruby? A. P4,800,000 C. P6,500,000 B. P4,850,000 D. P8,000,000 K&W 30. Ortega Interiors provides design services to residential and commercial clients. The residential services produce a contribution margin of P450,000 and have traceable fixed operating costs of P480,000. Management is studying whether to drop the residential operation. If closed, the fixed operating costs will fall by P370,000 and Ortega’s income will A. decrease by P80,000 C. increase by P80,000 D. increase by P340,000 Hilton B. increase by P30,000 October 2019

Gitman

33. A firm with a cash conversion cycle of 175 days can stretch its average payment period from 30 to 45 days. This will result in a/an A. increase of 15 days in the cash conversion cycle. B. increase of 30 days in the cash conversion cycle. C. decrease of 15 days in the cash conversion cycle. D. decrease of 30 days in the cash conversion cycle. Gitman 34. Maxx is currently selling for P75 per share. If it is selling at a P/E ratio of 50, what is Maxx’s recent earnings per share? A. P0.15 C. P0.67 D. P1.50 Graham, Smart, Megginson B. P0.50 35. You have the following information about a company: Total assets P350,000 Ordinary share equity P175,000 Return on equity 14.5% What are the company’s earnings available for ordinary shareholders? A. P21,875 C. P43,750 B. P25,375 D. P47,632 Hansen & Mowen Page 4 of 8

PHIL. CPA LICENSURE EXAMINATION

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36. Last year Cruz Corp. had P305,000 of assets, P403,000 of sales, P28,250 of net income, and a debt-to-total-assets ratio of 39%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets to P252,500. Sales, costs, and net income would not be affected, and the firm would maintain the same debt ratio (but with less total debt). By how much would the reduction in assets improve the ROE? A. 2.85%. C. 3.16% B. 3.00% D. 3.31% Brigham The next two questions are based on the following information. Hansen & Mowen Luther Corporation had net income of P160,000 and paid dividends to common stockholders of P40,000 in 2018. The weighted-average number of shares outstanding in 2018 was 50,000 shares. Luther Corporation’s common stock is selling for P50 per share on Philippine Stock Exchange. 37. Luther Corporation’s payout ratio for 2018 is C. 25% A. 12.5% B. 20% D. P5 per share. 38. Luther Corporation’s price-earnings rate is A. 3.2 times. B. 5 times.

C. 10 times. D. 15.6 times.

Working Capital Management 39. Which of the following statements is CORRECT? A. If a company follows a policy of “matching maturities,” this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt. B. Net working capital is defined as current assets minus the sum of payables and accruals, and any decrease in the current ratio automatically indicates that net working capital has decreased. C. Net working capital is defined as current assets minus the sum of payables and accruals, and any increase in the current ratio automatically indicates that the net working capital has increased. D. Although short-term (ST) interest rates have historically averaged less than long-term rates, the heavy use of ST debt is considered to be an aggressive strategy because of Brigham the inherent risks associated with using ST financing.

October 2019

40. The Zork Co. has an inventory conversion period of 60 days, an average collection period of 38 days, and a payables deferral period of 30 days. Assume that cost of goods sold is 75% of sales. If Zork’s annual sales are P3,426,255 and all sales are on credit, what is the firm’s investment in accounts receivable? A. P206,514 C. P281,610 D. P356,706 B. P234,675 Brigham 41. A company annually consumes 10,000 units of Part C. The carrying cost of this part is P2 per year and the ordering costs are P100. The company uses an order quantity of 500 units. If the company operates 200 days per year, and the lead time for ordering Part C is 5 days, what is the order point? A. 250 units. C. 1,000 units. B. 500 units. D. 2,000 units. Barfield 42. If Premium Company has a safety stock of 480 units and the average daily demand is 60 units, how may days can be covered if the shipment from the supplier is delayed by 4 days? C. 8 days A. 4 days B. 7 days D. 12 days Horngren Capital Budgeting 43. Based on the following information, what is the initial cash outflow? Purchase and installation of new equipment P120,000 Sale price of replaced equipment 40,000 Book value of replaced equipment 30,000 When the new equipment is installed: Inventory increase 20,000 Accounts payable increase 10,000 Tax rate 30% A. P93,000 C. P147,000 B. P95,000 D. P167,000 Graham, Smart, Megginson 44. Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected: Old Equipment New Equipment Purchase price P75,000 P125,000 Accumulated depreciation 30,000 -0Annual operating costs 100,000 80,000 Page 5 of 8

PHIL. CPA LICENSURE EXAMINATION

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If the old equipment is replaced now, it can be sold for P20,000. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. What is the net cost of the new equipment? A. P25,000 C. P105,000 B. P50,000 D. P125,000 K&W 45. Discounted cash flow techniques for analyzing capital budgeting decisions are NOT normally applied to projects A. that are essential to the business. B. involving replacement of existing assets. C. having useful lives shorter than one year. D. requiring no investment after the first year of life. Lauderbach 46. The internal rate of return method assumes that project funds are reinvested at the A. cost of debt capital. C. hurdle rate. Hilton D. rate of return earned on the project. B. cost of equity capital. The next three questions are based on the following information. Smart & Graham A project requires an initial investment in equipment and machinery of P10 million. The equipment is expected to have a five-year lifetime with no salvage value and w...