Since 1977
MANAGEMENT ADVISORY SERVICES
CPA REVIEW
Believe on what you can do, always bear on your mind that you can answer everything to the best that
you can. Always observe HONESTY. GODBLESS!
1. Which of the following is not an objective of managerial accounting?
A. Providing information for decision making and planning.
B. Assisting in directing and controlling operations.
C. Maximizing profits and minimizing costs.
D. Measuring the performance of managers and subunits.
E. All of the above are objectives of managerial accounting
2. Which of the following managerial functions involves a detailed financial and operational
description of anticipated operations?
A. Decision making.
B. Planning.
C. Directing operational activities.
D. Controlling.
3. Control is the process of monitoring the company’s operations to determine whether the
company’s objectives are being achieved. Effective control is achieved through all of the following
except:
A. periodically measuring and comparing company results.
B. assigning responsibility for costs to employees responsible for those costs.
C. constantly monitoring employees to ensure they do exactly as they are told.
D. taking necessary corrective action when variances warrant doing so.
4. Who is the manager in charge of raising cash for operations and managing cash and near-cash
assets?
A. Chief financial officer.
B. Controller.
C. Treasurer.
D. Internal auditor.
5. Which of the following statements most accurately explains the behavior of costs?
A. There is no norm; rather, costs can be fixed, variable, or a combination of both.
B. The majority of costs are variable per unit of production.
C. The majority of costs are fixed per unit of production.
D. Costs can be fixed or variable but usually not a combination of both.
6. A retail manager is preparing a budget for the coming year and is considering the various costs of
the retail store. What is the best approach for the manager to take when budgeting for the cost of
the store's merchandise?
A. The total costs will stay the same as last year, but the unit cost will change with each sale.
B. The total cost of merchandise for the year and the unit cost will remain constant with each sale.
C. The total cost of merchandise for the year will depend on the amount of sales, but the unit cost
of each sale will stay fairly constant.
D. The total costs will stay the same as last year, and the unit cost will remain constant with each
sale.
7. Within the relevant range, if there is a change in the level of the cost driver then
A. total fixed costs and total variable costs will change.
B. total fixed costs and total variable costs will remain the same.
C. total fixed costs will remain the same and total variable costs will change.
D. total fixed costs will change and total variable costs will remain the same.
8. Cost structure refers to the relative proportion of:
A. variable costs to contribution margin.
B. total costs to sales.
C. fixed costs to variable costs.
D. sales price per unit to variable costs per unit.
9. DJH has an average unit cost of P20 at 20,000 units and P13.75 at 40,000 units. What is the
variable cost per unit?
A. P5.00
B. P6.25
C. P7.50
D. P7.75
10. The following data have been collected for four different cost items.
Cost Cost at 100 Cost at 140
Item units units
W P8,000 P10,560
X P5,000 P5,000
Y P6,500 P9,100
Z P6,700 P8,580
Which of the following classifications of these cost items by cost behavior is correct?
Cost W Cost Cost Y Cost Z
X
A. variabl fixed mixed variabl
e e
B. mixed fixed variabl mixed
e
C. variabl fixed variabl variabl
e e e
D. mixed fixed mixed mixed
11. A mixed cost function has a constant component of P20,000. If the total cost is P60,000 and the
independent variable has the value 200, what is the value of the slope coefficient?
A. P200 C. P400
B. P600 D. P40,000
12. In preparing the annual profit plan for the coming year, Wilkens Company wants to determine the
cost behavior pattern of the maintenance costs. Wilkens has decided to use linear regression by
employing the equation y =a + bx for maintenance costs. Based on the prior year's data regarding
maintenance hours and costs, the result of the regression analysis are given below.
Average cost per hour P9.00
A 684.65
B 7.2884
Standard error of a 49.515
Standard error of b .12126
Standard error of the estimate 34.469
R2 .99724
Based upon the data derived from the regression analysis, 420 maintenance hours in a month
would mean the maintenance costs (rounded to the nearest peso) would be budgeted at
A. P3,780 C. P3,790
B. P3,600 D. P3,746
pg. 2
13. Edifer Tools, Inc. uses a semi-automated process in its production. It is faced with a proposal to
completely automate its production. Below are data for these alternative methods:
Complete Semi-
Automation Automated
Materials cost per unit P12.00 P10.50
Labor cost per unit 3.00 15.00
Other variable cost per unit 4.50 3.00
Lease cost per year 75,000 30,000
Maintenance cost per year 15,000 6,000
The cost indifference point is at
A. 3,300 units C. 6,000 units
B. 3,000 units D. 6,300 units
14. The peso amount of sales needed to attain a desired profit is calculated by dividing the
contribution margin ratio into
A. fixed cost
B. desired profit plus fixed cost
C. desired profit
D. desired profit less fixed cost
15. Cost-volume-profit (CVP) analysis is a key factor in many decisions, including choice of product
lines, pricing of products, marketing strategy, and utilization of productive facilities. A calculation
used in a CVP analysis is the breakeven point. Once the breakeven point has been reached,
operating income will increase by the
A. Gross margin per unit for each additional unit sold.
B. Contribution margin per unit for each additional unit sold.
C. Fixed costs per unit for each additional unit sold.
D. Variable costs per unit for each additional unit sold.
16. The contribution income statement:
A. reports gross margin
B. is allowed for external reporting to shareholders
C. categorizes costs as either direct or indirect
D. can be used to predict future profits at different levels of activity
17. Which of the following would decrease contribution margin per unit the most?
A. A 15% decrease in selling price
B. A 15% increase in variable expenses
C. A 15% increase in selling price
D. A 15% decrease in variable expenses
18. If a company’s variable costs are 70% of sales, which formula represents the computation of peso
sales that will yield a profit equal to 10% of sales when P equals sales in pesos for the period and
FC equals total fixed costs for the period?
A. P = .2/FC
B. P = FC/.2
C. P = .27/FC
D. P = FC/.27
19. Kator Co. is a manufacturer of industrial components. One of their products that is used as a
subcomponent in auto manufacturing is KB-96. This product has the following financial structure
per unit.
pg. 3
Selling Price P150
Direct materials P20
Direct labor 15
Variable manufacturing overhead 12
Fixed manufacturing overhead 30
Shipping and handling 3
Fixed selling and administrative 10
Total costs P90
During the next year, KB-96 sales are expected to be 10,000 units. All of the costs will remain the
same except for fixed manufacturing overhead, which will increase by 20 percent and material,
which will increase by 10 percent. The selling price per unit for next year will be P160. Based on
these data, the contribution margin from KB-96 for next year will be:
A. P620,000 C. P750,000
B. P1,080,000 D. P1,100,000
20. Bauan Company had a 25 percent margin of safety. Its after-tax return on sales is 3.6 percent,
and tax rate of 40 percent. What is Bauan’s contribution margin ratio?
A. 9 percent C. 24 percent
B. 14.4 percent D. 62.5 percent
21. The Eagle Company has provided information concerning its projections for the coming year as
follows:
Net sales P10,000,000
Fixed manufacturing costs 1,000,000
Ernie projects variable manufacturing costs of 60% of net sales. Assuming no change in inventory,
what will the projected cost of goods sold be?
A. P5,000,000 C. P7,000,000
B. P6,000,000 D. P8,000,000
22. Molder Company manufactures and sells three products: Good, Bad, and Ugly. Annual fixed costs
are P3,315,000, and data about the three products follow.
Good Bad Ugly
Sales mix in units 30% 50% 20%
Selling price P250 P350 P500
Variable cost 100 150 250
What is the total break-even volume?
A. 17,000 C. 1,700
B. 2,139 D. 9,471
23. Which of the following would produce a labor rate variance?
A. Poor quality materials causing breakage and work interruptions.
B. Use of persons with high hourly wage rates in tasks that call for low hourly wage rates.
C. Excessive number of hours worked in completing a job.
D. An unfavorable variable overhead spending variance.
24. A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency
if
A. the mix of workers used in the production process was more experienced than the normal mix
B. the mix of workers used in the production process was less experienced than the normal mix
C. workers from another part of the plant were used due to an extra heavy production schedule
D. the purchasing agent acquired a very high quality of material that resulted in less spoilage
25. A standard costing system is most often used by a firm in conjunction with
A. management by objectives
B. target (hurdle) rates of return
C. participative management programs
pg. 4
D. flexible budgets
26. Which of the following statements regarding standard cost systems is true?
A. Favorable variances are not necessarily good variances.
B. Managers will investigate all variances from standard.
C. The production supervisor is generally responsible for material price variances.
D. Standard costs cannot be used for planning purposes since costs normally change in the future.
E. None of the above statements is true
27. Compute the variable overhead efficiency variance using the following data:
Standard labor hours per good unit produced 2
Good units produced 1,000
Actual labor hours used 2,100
Standard variable overhead per standard labor hour P3
Actual variable overhead P6,500
A. P200 F C. P300 F
B. P200 U D. P300 U
28. Sullivan Corporation’s direct labor costs for the month of March is as follows:
Standard direct labor hours 42,000
Actual direct labor hours 40,000
Direct labor rate variance – favorable P8,400
Standard direct labor rate per hour P 6.30
What was Sullivan’s total direct labor payroll for the month of March?
A. P243,600 C. P260,000
B. P244,000 D. P260,400
29. Information on Westcott Company’s direct labor costs is as follows:
Standard direct labor hours 10,000
Standard direct labor rate P3.75
Actual direct labor rate P3.50
Direct labor usage variance - unfavorable P4,200
What were the actual hours worked, rounded to the nearest hour?
A. 10,714 C. 11,200
B. 11,120 D. 11,914
30. The following direct manufacturing labor information pertains to the manufacture of Product B.
Time required to make one unit 2 direct labor hours
Number of direct workers 50
Number of productive hours per week, per worker 40
Weekly wages, per worker P500
Workers’ benefits treated as direct manufacturing labor costs 20% of wages
What is the standard direct manufacturing labor cost per unit of Product B?
A. P30 C. P24
B. P15 D. P12
31. Using more highly skilled direct laborers might affect which of the following variances?
a. direct materials usage variance
b. direct labor efficiency variance
c. variable manufacturing overhead efficiency variance
d. all of the above
pg. 5
32. Standard cost
a. are estimates of costs attainable only under the most ideal conditions
b. are difficult to use with a process costing system
c. can, if properly used, help motivate employees
d. requires that significant unfavorable variances be investigated, but do not require that significant
favorable variances be investigated
33. Which of the following statements about the selection of standards is true?
a. Ideal standards tend to extract higher performance levels since they give employees something to
live up to.
b. Currently attainable standards may encourage operating inefficiencies.
c. Currently attainable standards discourage employees from achieving their full performance
potential.
d. Ideal standards demand maximum efficiency which may leave workers frustrated, thus causing a
decline in performance.
e. None of the above statements is true
34. The standard cost of one unit of product includes 2 hours of direct labor at P15.00 per hour. The
company's labor rate variance was P275, favorable. The efficiency variance was P105, unfavorable.
Three-hundred and eighty units were produced. What were the standard labor hours?
a. 774 c. 753
b. 760 d. 767
35. Noli Company applies overhead on a direct labor hour basis. Each unit of product requires 5 direct
labor hours. Overhead is applied on a 30 percent variable and 70 percent fixed basis; the overhead
application rate is P16 per hour. Standards are based on a normal monthly capacity of 5,000 direct
labor hours. During September, Noli produced 1,010 units of product and incurred 4,900 direct labor
hours. Actual overhead cost for the month was P80,000.
What is total annual budgeted fixed overhead cost?
a. P56,000 c. P56,560
b. P672,000 d. P678,720
36. For the month of August, M Company’s records disclosed the following data relating to direct labor:
Actual direct labor cost P10,000
Rate variance 1,000F
Efficiency variance 1,500U
Standard direct labor cost P 9,500
For the month of August, M used 2,000 direct labor hours. The company’s standard direct labor rate
per hour is:
a. P5.50 c. P4.50
b. P4.75 d. P5.00
37. For the month of August, M Company’s records disclosed the following data relating to direct labor:
Actual direct labor cost P10,000
Rate variance 1,000F
Efficiency variance 1,500U
Standard direct labor cost P 9,500
For the month of August, M used 2,000 direct labor hours. The company’s actual direct labor rate per
hour is:
a. P5.50 c. P4.50
b. P4.75 d. P5.00
38. A company produces widgets with budgeted standard direct materials of 2 pounds per widget at P5
per pound. Standard direct labor was budgeted at 0.5 hour per widget at P15 per hour. The actual
usage in the current year was 25,000 pounds and 3,000 hours to produce 10,000 widgets. What was
the direct labor usage variance?
a. P25,000 F c. P30,000 F
b. P25,000 U d. P30,000 U
39. The following information is available from the Tyro Company:
Actual factory O/H P15,000
pg. 6
Fixed O/H expenses, actual P7,200
Fixed O/H expenses, budgeted P7,000
Actual hours 3,500
Standard hours 3,800
Standard variable O/H rate per P2.50
DLH
How much is the flexible budget variance for fixed overhead?
a. P750 F c. P950 F
b. P750 U. d. P200 U
40. The contribution margin ratio always increases when the
a. Variable costs as a percentage of net sales increase.
b. Variable costs as a percentage of net sales decrease.
c. Breakeven point increases.
d. Breakeven point decreases.
41. Regal, Inc. sells product Rainbow for P5 per unit. The fixed costs are P210,000 and the variable
costs are 60% of the selling price. What would be the amount of sales if Regal is to realize a
profit of 10% of sales?
a. P700,000 c. P472,500
b. P525,000 d. P420,000
42. A retail company determines its selling price by marking up variable costs 60%. In addition, the
company uses frequent selling price markdowns to stimulate sales. If the markdowns average
10%, what is the company’s contribution margin ratio?
A. 27.5% C. 30.6%
B. 37.5% D. 41.7%
43. Genco Company has a 30% contribution margin percentage and fixed costs of P30,000. To earn a
10% return on sales, Genco must have sales of
a. P150,000 c. P90,000
b. P100,000 d. P40,000
44. DSP Company earned P100,000 on sales of P1,000,000. It earned P130,000 on sales of
P1,100,000. Total fixed costs are
a. P0 c. P420,000
b. P200,000 d. P900,000
45. Last year, Brown Manufacturing had a contribution margin ratio of 40%. This year, fixed expenses
are expected to remain at P50,000 and sales are expected to increase by P90,000. What should
the contribution margin ratio be this year if the company wishes to increase net income by
P31,500?
a. 78.75% c. 35.00%
b. 40.00% d. 55.56%
46. Trio 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?
a. Decision making.
b. Planning.
c. Coordinating.
d. Controlling.
47. The question "How much information is enough?" for managerial purposes should be answered on
a. a cost/benefit basis.
b. a cost, but not benefit, basis.
c. a benefit, but not cost, basis.
pg. 7
d. neither costs nor benefits, but some other criteria.
48. The unit of measurement used in management accounting is
a. primarily the historical peso.
b. usually current replacement cost.
c. any measurement unit that is useful in a particular situation.
d. the measurement unit used by competing companies.
49. The primary focus of cost management is to
a. help managers make different decisions.
b. calculate product costs.
c. aid managers in budgeting.
d. distinguish between relevant and irrelevant information.
50. A pervasive characteristic of a CPA’s role in a Management Consulting Services engagement is that
of being a(an)
a. Objective advisor
b. Independent practitioner
c. Computer specialist
d. Confidential reviewer
End
pg. 8