ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 48 October 2024 CPALE 03 August 2024 8 – 11 AM
MANAGEMENT SERVICES FIRST PRE-BOARD EXAMINATION
SOURCES: ReSA (34 items), Foreign Test Banks (18 items), CMA Materials (18 items)
INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
Set A
Items 1 to 8_are based on the following information
Olympics Company presented the following data pertaining to the 2024 operations
of its lone branch in Project 8, Quezon City:
Sales P 1,200,000
Variable Costs (480,000)
Contribution Margin P 720,000
Fixed Costs (600,000)
Profit P 120,000
1. Based on the income statement above, the company is most likely using
C a. Full costing
b. GAAP costing
c. Variable costing
d. Absorption costing
2. If sales increase by 5%, then profit will increase by:
C a. 20%
b. 25%
c. 30%
d. 35%
3. If the unit selling price is P 10, then monthly cost function is expressed as:
A a. Y = 50,000 + 4X
b. Y = 600,000 + 4X
c. Y = 600,000 + 6X
d. Y = 600,000 + 7.2X
4. Under responsibility accounting, the Project 8 lone branch is most likely to
be organized as either a
D a. Cost center or a profit center
b. Cost center or a revenue center
c. Profit center or a revenue center
d. Profit center or an investment center
5. If the unit selling price is P 5, then the margin of safety is:
B a. 20,000 units
b. 40,000 units
c. 180,000 units
d. 200,000 units
6. If 70% of the fixed costs shall remain even if the branch is discontinued,
then segment margin is:
C a. P 300,000
b. P 480,000
c. P 540,000
d. P 580,000
7. If a favorable production cost variance of P 5,000 has yet to be considered,
then after adjusting for such variance,
A a. Profit shall be higher than P 120,000
b. Sales shall be adjusted to P 1,205,000
c. Fixed cost shall be higher than P 600,000
d. Variable cost shall be higher than P 480,000
8. If assets turnover is 2.5 times, then return on investment (ROI) shall be:
B a. 4%
b. 25%
c. 40%
d. The exact ROI cannot be determined from the given information
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
9. Under the variable costing method, which of the following is always expensed
in its entirety in the period in which it is incurred?
D a. Straight-line depreciation of factory machine
b. Sum-of-the-years depreciation of office equipment
c. Declining-balance depreciation of delivery vehicle
d. All of the choices
10. Paris Department Store expects to generate the following sales figures for the
next three months:
July August September
Expected sales P 480,000 P 560,000 P 600,000
Paris gross profit rate is 45%. At the end of each month, Paris wants a
merchandise inventory balance equal to 30% of the following month's expected
sales, stated at cost. What peso amount of merchandise inventory should Paris
plan to purchase in August?
B a. P 257,400
b. P 314,600
c. P 320,000
d. P 327,800
11. Using the balanced scorecard, ‘market share’ is normally used as a measure for
A a. Customer perspective
b. Financial perspective
c. Learning and growth perspective
d. Internal business process perspective
Items 12 to 14 are based on the following information
Track Company uses 8,000 units of a certain part in production each year.
Presently, this part is purchased from an outside supplier at P 12 per unit. For
some time now there has been idle capacity in the factory that could be utilized
to make this part. The following information has been assembled on the unit costs
of making this part internally:
Direct materials P 3.25
Direct labor 2.75
Variable manufacturing overhead 2.00
Fixed manufacturing overhead 5.00
The fixed manufacturing overhead listed above represents an allocation of
existing costs to this part. However, there would be an increase of P 12,000 in
fixed manufacturing overhead costs for the salary of a new supervisor.
12. If Track chooses to make the part instead of buying it outside, the change in
the company's operating income per year would be:
C a. P 8,000 increase
b. P 8,000 decrease
c. P 20,000 increase
d. P 20,000 decrease
13. Assuming other things stay the same, at what price per unit from the outside
supplier should Track be indifferent to buying or making the part?
D a. P 8.00
b. P 8.50
c. P 9.00
d. P 9.50
14. Suppose that the idle capacity (floor space and machinery) is presently being
rented to another company for P 32,000 per year. All the other conditions are
still the same. If Track chooses to make the part instead of buying it outside,
the net advantage or disadvantage (per year) would be:
C a. P 4,000 advantage
b. P 10,000 advantage
c. P 12,000 disadvantage
d. P 15,000 disadvantage
15. If a company is operating at the break-even point, then
A a. Margin of safety will be equal to zero
b. Fixed expenses will be equal to its variable expenses
c. Contribution margin will be equal to its variable expenses
d. Selling price will be equal to its variable expenses per unit
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
16. Field Company has set various goals, and management is now taking appropriate
action to ensure that the firm achieves these goals. One such action is to
reduce outlays for overhead, which have exceeded budgeted amounts. Which of
the following functions best describes this process?
C a. Decision making
b. Organizing
c. Controlling
d. Planning
17. Differential costs can:
C a. Only be fixed costs
b. Only be variable costs
c. Be either fixed or variable
d. Be increments but not decrements
Items 18 to 22 are based on the following information
Gymnastics Hospital performs blood tests in its laboratory. The following
standards have been set for each blood test performed:
Standard Quantity or Hours Standard Price or Rate
Direct materials 2 plates P 2.75 per plate
Direct labor 0.2 hours P 15 per hour
Variable overhead . 0.2 hours P 7 per hour
During May, the laboratory performed 1,500 blood tests. On May 1, there were no
direct materials (plates) on hand; after a plate is used for a blood test it is
discarded. Variable overhead is assigned to blood tests based on direct labor
hours. The following events occurred during May:
3,600 plates were purchased for P 9,540
3,200 plates were used for blood tests
340 actual direct labor hours were worked at a cost of P 5,550
18. What is the materials price variance for May?
A a. P 360 favorable
b. P 360 unfavorable
c. P 740 favorable
d. P 740 unfavorable
19. What is the materials quantity variance for May?
A a. P 550 unfavorable
b. P 720 favorable
c. P 1,650 favorable
d. P 1,660 unfavorable
20. What is the labor rate variance for May?
D a. P 225 favorable
b. P 225 unfavorable
c. P 450 favorable
d. P 450 unfavorable
21. What is the labor efficiency variance for May?
B a. P 600 favorable
b. P 600 unfavorable
c. P 515 favorable
d. P 515 unfavorable
22. What is the variable overhead efficiency variance for May?
B a. P 280 favorable
b. P 280 unfavorable
c. P 350 favorable
d. P 350 unfavorable
23. A local JIT company most likely has a (an)
D a. Negative margin of safety
b. Large amount of budgetary slacks
c. Unfavorable overhead volume or capacity variance
d. Equal amount of profit under both full and direct costing
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
24. Diving Corporation manufactures two products: X and Y. The company has 4,000
hours of machine time available and can sell no more than 800 units of product
X. Other pertinent data follow.
Product X Product Y
Unit selling price P 8.00 P 19.00
Unit variable cost 3.00 5.00
Unit fixed cost 3.50 6.25
Machine time per unit 2 hours 3 hours
Which of the following mathematical expressions is Diving’s constraint function?
B a. 4,000 ≤ 2X + 3Y
b. 4,000 ≥ 2X + 3Y
c. 800 ≤ 2X + 3Y
d. 800 ≥ 2X + 3Y
25. Fixed costs are those costs that
A a. Remain constant as activity changes.
b. Remain constant on a per-unit basis.
c. Vary directly with changes in activity.
d. Vary inversely even if there are no activity changes.
Items 26 and 27 are based on the following information
Swimming Company makes and sells two types of shoes, Plain and Fancy.
Plain Fancy
Unit selling price P 20.00 P 35.00
Variable cost per unit 12.00 24.50
60 percent of the unit sales are Plain and annual fixed expenses are P 45,000.
26. What is the weighted-average unit contribution margin?
B a. P 4.80
b. P 9.00
c. P 9.25
d. P 17.00
27. If the sales mix remains constant, what is the number of units of Fancy that
the company must sell to break even?
A a. 2,000
b. 3,000
c. 3,375
d. 5,000
28. The term "management by exception" is best defined as:
C a. Choosing exceptional managers
b. Investigating unfavorable variances
c. Devoting management hours to review material variances
d. Controlling actions of subordinates through acceptance of management
techniques
29. Basketball Corporation uses an imputed interest rate of 13% in the calculation
of residual income. Division USA, which is part of Basketball, had invested
capital of P 1,200,000 and an ROI of 16%. Division USA's residual income was:
B a. P 24,960
b. P 36,000
c. P 156,000
d. P 192,000
30. Boxing Corporation manufactures and sells a single product. Shown below are
the actual operating results for the first two years of operations:
Year 1 Year 2
Units produced 40,000 40,000
Units sold 37,000 41,000
Absorption costing net operating income P 44,000 P 52,000
Variable costing net operating income P 38,000 ???
Assuming cost structure and selling price were the same for both years, what is
the variable costing net operating income for Year 2?
C a. P 48,000
b. P 50,000
c. P 54,000
d. P 56,000
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
31. Gross profit variance is typically not explained based on
D a. Cost factor
b. Price factor
c. Volume factor
d. Leverage factor
Items 32 to 36 are based on the following information
Cycling Company would like to estimate the variable and fixed components of its
maintenance costs and has compiled the following data for the last five months
of operations.
Labor Hours Maintenance Cost
January 160 P 617
February 130 553
March 180 596
April 190 623
May 110 532
Total 770 P 2,921
32. Using the high-low method of analysis, the estimated variable cost per labor
hour for maintenance is closest to:
B a. P 0.83
b. P 1.14
c. P 1.30
d. P 1.84
33. Using the high-low method of analysis, the estimated total fixed cost per month
for maintenance is closest to:
B a. P 0
b. P 407
c. P 440
d. P 470
34. Using the least-squares regression method, the estimated variable cost per
labor hour for maintenance is closest to:
A a. P 1.09
b. P 1.52
c. P 1.88
d. P 1.96
35. Using the least-squares regression method, the estimated total fixed cost per
month for maintenance is closest to:
B a. P 470
b. P 416
c. P 400
d. P 378
36. Using the least-squares regression equation, the total maintenance cost for
March is:
B a. On the regression line
b. Below the regression line
c. Above the regression line
d. Outside the relevant range
37. The process of strategy mapping in balanced scorecards usually starts with
C a. Customer perspective
b. Financial perspective
c. Learning and growth perspective
d. Internal business process perspective
38. Archery Corporation observed that when 25,000 units were sold, a particular
cost amounted to P 70,000 or P 2.80 per unit. When volume increased by 15%,
the cost totaled P 80,500. The cost that Archery is studying can best be
described as a:
B a. Fixed cost
b. Variable cost
c. Semi-variable cost
d. Discretionary fixed cost
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
39. A flexible budget is used to determine budgeted amounts adjusted for
A a. Actual activity
b. Normal activity
c. Planned activity
d. Standard activity
Items 40 to 42 are based on the following information
Tennis Company has two divisions: the Cute Division and the Boy Division. The
Boy Division produces containers that can be used by the Cute Division. The Boy
Division's variable manufacturing cost is P 2, shipping cost is P 0.10, and the
external sales price is P 3. No shipping costs are incurred on sales to the
Cute Division, and the Cute Division can purchase similar containers in the
external market for P 2.60.
40. The Boy Division has sufficient capacity to meet all external market demands
in addition to meeting the demands of the Cute Division. The transfer price
from the Boy Division to the Cute Division would be:
A a. P 2.00
b. P 2.10
c. P 2.60
d. P 2.90
41. Assume the Boy Division has no excess capacity and could sell everything it
produced externally. The transfer price from the Boy Division to the Cute
Division would be:
C a. P 2.10
b. P 2.60
c. P 2.90
d. P 3.00
42. The maximum amount the Cute Division would be willing to pay for each bottle
transferred would be:
C a. P 2.00
b. P 2.10
c. P 2.60
d. P 2.90
43. A multiple regression equation has:
B a. More than one dependent variable
b. More than one independent variable
c. More than one amount for total fixed cost
d. More than one amount for total variable cost
44. Fencing Manufacturing has 31,000 labor hours available for producing A1 and
B2. Consider the following information:
Product A1 Product B2
Required labor time per unit (hours) 2 3
Maximum demand (units) 6,500 8,000
Contribution margin per unit P 5.00 P 5.70
Contribution margin per labor hour P 2.50 P 1.90
If Fencing follows proper managerial accounting practices in terms of setting a
production schedule, how much contribution margin would the company expect to
generate?
C a. P 31,450
b. P 63,100
c. P 66,700
d. P 78,100
45. In the preparation of the schedule of Cost of Goods Manufactured, the accountant
incorrectly included as part of manufacturing overhead the rental expense on
the firm’s retail facilities. This inclusion would:
D a. Understate the cost of goods manufactured
b. Have no effect on the cost of goods manufactured
c. Overstate period expenses on the income statement
d. Overstate the cost of goods sold on the income statement
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
46. High-tech automation combined with a downsizing of a company's hourly labor
force often results in:
B a. increased fixed costs and increased variable costs
b. increased fixed costs and reduced variable costs
c. reduced fixed costs and increased variable costs
d. reduced fixed costs and reduced variable costs
Items 47 and 48 are based on the following information
Shooting Company produces a single product. Last year, Shooting manufactured
15,000 units and sold 12,000 units. Production costs for the year were as follows:
Direct materials P 150,000
Direct labor 180,000
Variable manufacturing overhead 135,000
Fixed manufacturing overhead 210,000
Sales totaled P 840,000 for the year, variable selling expenses totaled P 60,000,
and fixed selling and administrative expenses totaled P 180,000. There were no
units in the beginning inventory. Assume that direct labor is a variable cost.
47. What would be the contribution margin per unit?
C a. P 39
b. P 35
c. P 34
d. P 25
48. Under absorption costing, the carrying value on the balance sheet of the
ending inventory for the year would be:
A a. P 135,000
b. P 105,000
c. P 93,000
d. P 0
49. Financial management
C a. Recognizes funds on an accrual basis
b. Involves the design and delivery of advice and financial products
c. Involves tasks such budgeting, financial forecasting, cash management
and funds procurement
d. Devotes majority of its attention to the collection and presentation
of business data and financial information
50. Volleyball Company, which applies overhead to production based on machine
hours, reported the following data for the period just ended:
Actual units produced: 14,800
Budgeted fixed overhead: P 780,000
Actual fixed overhead incurred: P 791,000
Planned level of machine-hour activity: 60,000
If Volleyball estimates four hours to manufacture a completed unit, the company's
fixed overhead volume variance would be:
B a. P 10,400 favorable
b. P 10,400 unfavorable
c. P 11,000 favorable
d. P 11,000 unfavorable
51. A scatter diagram of two variables with a coefficient of correlation of + 0.9
will most likely show a line graph that
C a. Is a vertical line
b. Is a horizontal line
c. Slopes downward to the left
d. Slopes downward to the right
52. Rowing Company estimates that it would incur a P 40,000 cost to prepare a bid
proposal. Rowing estimates also that there would be an 75% chance of being
awarded the contract with a projected net profit of P 200,000. What is the
expected value of bidding for this contract?
B a. P 110,000
b. P 140,000
c. P 150,000
d. P 160,000
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
53. What is the pricing method that focuses on eliminating non-value-added costs?
A a. Target costing
b. Cost-plus pricing
c. Predatory pricing
d. Penetration pricing
Items 54 to 56 are based on the following information
Golf Company has the following expected pattern of collections on credit sales:
70 percent collected in the month of sale, 15 percent in the month after the
month of sale, and 14 percent in the second month after the month of sale. The
remaining 1 percent is never collected.
At the end of May, the gross amount of accounts receivable (AR) account has the
following balance:
From April sales P 21,000
From May sales 48,000
AR balance 69,000
54. If above AR balance is expressed net of bad debts, April sales amounted to:
A a. P 150,000
b. P 140,000
c. P 30,000
d. The amount cannot be determined from the given information
55. If above AR balance is gross of bad debts, May sales amounted to:
B a. P 165,517
b. P 160,000
c. P 156,470
d. The amount cannot be determined from the given information
56. If expected sales for June are P 150,000, how much cash will Golf Company
expect to collect in June?
C a. P 127,400
b. P 129,000
c. P 148,600
d. P 152,520
57. Which of the following costs is irrelevant in deciding about a special-order
price if some of the company facilities are currently idle?
B a. Direct labor
b. Equipment depreciation
c. Variable cost of utilities
d. Opportunity cost of production
Items 58 and 59 are based on the following information
The manufacturing capacity of Football Company’s facilities is 30,000 units of
product a year. A summary of operating results for calendar Year 1 is as follows:
Sales (P 50 per unit) P 900,000
Variable manufacturing and selling costs (495,000)
Contribution margin 405,000
Fixed costs (247,500)
Operating income P 157,500
58. What is the margin of safety in year 1?
C a. 11,000 units
b. 9,000 units
c. 7,000 units
d. 5,000 units
59. Assume a tax rate of 25%, how many more units shall be sold in year 2 to earn
an after-tax profit of P 236,250?
C a. 25,000 units
b. 21,500 units
c. 7,000 units
d. 3,500 units
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
60. The purchasing department shall be responsible for an unfavorable materials
quantity variance that arises from
B a. Buying expensive materials
b. Procuring low-quality materials
c. Inadequate training of factory workers
d. Inefficient performance of factory workers
61. Equestrian plans to sell 40,000 units of product no. 75 in June, and each of
these units requires five square feet of raw material. Pertinent data follow:
Product No. 75 Raw Material
Actual June 1 inventory 5,500 18,000 square feet
Estimated June 30 inventory 4,300 ? square feet
If the company purchases 201,000 square feet of raw material during the month,
the estimated raw-material inventory on June 30 would be:
D a. 11,000 square feet
b. 13,000 square feet
c. 23,000 square feet
d. 25,000 square feet
62. If a new project generates a negative residual income (i.e., residual loss),
the
A a. Project's return on investment is less than the target rate.
b. Project's return on investment is greater than the target rate.
c. Project's return on investment is equal to the target rate.
d. Relationship between the project's return on investment and the target
rate cannot necessarily be determined.
63. Hockey Company has 15,000 units in inventory that had a production cost of
P45,000. These units cannot be sold through normal channels due to a significant
technology change. These units could be reworked at a total cost of P 23,000
and sold for P 28,000. Another alternative is to sell the units to a junk
dealer for P8,500.
The relevant cost for Hockey to consider in making its decision is
A a. P 23,000 for reworking the units.
b. P 68,000 for reworking the units.
c. P 45,000 of original product costs.
d. P 8,500 for selling the units to the junk dealer.
64. Financial accounting and management accounting are similar in that both
B a. Are future-oriented
b. Draw accounting information from the same database
c. Comply with Generally Accepted Accounting Principles
d. Produce financial reports published primarily for external users
65. Using the linear cost function, what is the value of the independent variable
given that slope is 5, y-axis intercept is 100 and dependent variable of 200?
A a. 20
b. 60
c. 180
d. 1,100
66. Total material variance – material price variance – material mix variance =
B a. No meaningful amount
b. Material yield variance
c. Material usage variance
d. Material price usage variance
67. In evaluating the profitability of a specific organizational segment, all ____
would be ignored.
C a. Period cost
b. Product cost
c. Allocated cost
d. Segment fixed costs
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
68. 60% of purchases are paid in the month of purchase, while the balance is fully
paid the following month. If July purchases amounted to P 100,000 and total
payments within the month of July amounted to P 92,000, then how much was the
June purchases?
D a. P 32,000
b. P 48,000
c. P 68,000
d. P 80,000
69. A credit balance in the labor spending variance indicates that
C a. Actual labor rate exceeds standard labor rate
b. Actual labor hours exceed standard labor hours
c. This variance increases profit once it is closed to cost of sales
d. This variance decreases profit once it is closed to cost of sales
70. A company recently generated sales of P 250,000 and a degree of operating
leverage of 5x. Breakeven sales must have been
D a. P 50,000
b. P 100,000
c. P 150,000
d. P 200,000
- END of EXAMINATION -
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MANAGEMENT SERVICES
ReSA Batch 48 – October 2024 CPALE Batch
03 August 2024 8:00 AM to 11:00 AM MS First Pre-Board Exam
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