Instruction: You Have 3 Hours To Complete This Examination Including Accomplishing The Google Answer Sheet
Instruction: You Have 3 Hours To Complete This Examination Including Accomplishing The Google Answer Sheet
Instruction: You Have 3 Hours To Complete This Examination Including Accomplishing The Google Answer Sheet
1. Which of the following is the least accurate method of splitting a semi-variable expense?
2. As part of a cost study, the cost accountant of MM Company has recorded the cost of
operations at seven different levels of materials usage. The following summations are
computed:
Using the least square method, what is the average rate of variability per kilo?
a. P8.69
b. P8.76
c. P10.84
d. P11.64
a. one
b. two
c. three
d. four
4. Rex Company has budgeted its factory overhead at P15,875 when it operates at 70% of
normal capacity. At 80% capacity, the budgeted overhead is P17,000. What is the flexible
budget of factory at 96% capacity?
a. P18,840
b. P18,800
c. P20,400
d. P21,771
5. Last year, the net income of Nelson Company was P125,000. This year, management
anticipates a substantial increase in units to be sold.
Assuming all other factors being constant, what would be the effect of the increase in units
sold on the contribution margin ratio and margin of safety ratio?
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MOCK CPA BOARD EXAMINATION: MANAGEMENT ADVISORY SERVICES
c. Increase No effect
d. No effect Decrease
6. Singsing Company manufactures and sells college rings embossed with college names and
slogans. Last year, the rings sold for P75 each and the variable costs to manufacture and sell
them were P22.50 per unit. The company needed to sell 20,000 rings to break even. The net
income last year was P50,400.
The company expects the following changes for the coming year:
1. The selling price of the rings will be P90
2. Variable costs per unit will increase by one-third
3. Fixed cost will increase by 10%
For the company to break even the coming year, the company should sell
a. 21,600 units
b. 22,600 units
c. 21,250 units
d. 19,250 units
7. RR Company sells a product to P35 unit and the variable production and selling costs are P21
per unit. If the company adopts a 40% increase in selling price of its products, other factors
being constant, by how many percent can sales decline before profits decline?
a. 40%
b. 50%
c. 75%
d. 100%
8. If a company’s variable cost ratio is 40% and selling price is P5 and fixed costs are P8,000,
which equation below represents the computation of units to be sold to realize a profit of
P12,000?
9. The management of Fritz Company performed cost studies and projected following annual
costs based on 40,000 units of production and sales.
What unit selling price will yield a 10% profit from sales of 40,000 units?
a. P33.50
b. P35.00
c. P40.00
d. P50.00
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MOCK CPA BOARD EXAMINATION: MANAGEMENT ADVISORY SERVICES
10. White Company manufactures two products, A and B, accounting for 70% and 30% of the
total peso sales of the company. Variable costs as a percentage of sales are 60% for product
A and 80% for product B. Total fixed costs amount to P340,000.
If fixed costs are increased by 10%, what should be the peso sales to realize a net income of
P34,000?
a. P1M
b. P1.2M
c. P1.25M
d. P1.5M
a. All variable costs are inventoriable under the variable costing method
b. All variable costs are period costs under the absorption costing method
c. All fixed costs are inventoriable under the direct costing method
d. All fixed costs are period costs under the direct costing method
a. one
b. two
c. three
d. four
12. Sales and costs data for Mariposa Company’s new product are as follows:
There was no inventory at the beginning of the year. Normal capacity is 12,500 units.
During the year 12,000 units were manufactured.
13. Why is direct costing not in accordance with the generally accepted accounting principles?
a. Direct costing ignores the concept of lower of cost or market when valuing inventory
b. Net earnings are always understand when using direct costing because the ending
inventory does not include the fixed production cost
c. Direct costing procedure is not well known in the industry
d. Fixed manufacturing costs are assumed to be period costs
14. King Trading had a net income after taxes of P37,500 using direct costing method for a given
month. Beginning and ending inventories for the month are 13,000 and 18,000 units
respectively. Income tax rate is 25%. The fixed overhead is P200,000 per month at a normal
capacity of 100,000 units per month.
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MOCK CPA BOARD EXAMINATION: MANAGEMENT ADVISORY SERVICES
a. P45,000
b. P50,000
c. P60,000
d. P86,000
16. The results of Cougar Company’s first year of operations disclosed the following:
a. P102,900
b. P109,200
c. P113,200
d. P121,000
17. What accounts for the profit difference between absorption costing and direct (variable)
costing method?
a. The difference in variable production costs charged against the income for the period
b. The difference in the fixed costs incurred
c. The difference in inventory valuation
d. The difference in sales revenue
Which costing method would show a higher operating income and by how much?
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20. Of the 6,000 units produced by ITEL Corporation during July, 5000 units were sold at P45
per unit. Other costs during the month were:
Materials P40,000
Direct labor 50,000
Fixed factory overhead 30,000
Variable factory overhead 36,000
Gen. and Adm. Expenses (all fixed) 60,000
How much variable cost and fixed costs were charged against the income for the period?
(using direct costing method)
21. Which of the following is best identified with a standard cost system?
a. Management by objective
b. Management by exception
c. Management by perception
d. Management by intuition
22. The following information was made available to you by Coronet Co. which is using a
standard cost system:
a. P1,500 unfavorable
b. P1,400 favorable
c. P1,400 unfavorable
d. P1,540 unfavorable
23. Extel Company uses a standard cost system. The following data pertain to its direct labor:
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Actual direct labor hours (including idle time of 200 hours) 20,000
Standard direct labor hours allowed for the actual production 21,000
Unfavorable labor rate variance P3,000
Total payroll P126,000
a. P7,380 favorable
b. P8,610 favorable
c. P6,150 favorable
d. P6,300 favorable
24. As regards the introduction of standard cost into an accounting system, work in process may
be charged with all the following except
25. Romel Company uses a standard cost system. The following data pertain to factory
overhead:
Controllable Volume
a. P4,200 U P2,700 F
b. P4,200 F P2,700 U
c. P4,000 U P7,500 F
d. P4,000 F P7,500 U
a. P1,000 U
b. P1,300 U
c. P300 F
d. P1,300 F
27. Which of the following capacity levels will result in the lowest standard factory overhead
cost per unit?
a. Maximum capacity
b. Practical capacity
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28. The following information pertains to overhead for the month of April:
a. P120 U
b. P700 U
c. P900 U
d. P900 F
29. TY Company uses a standard cost system. The following information pertains to factory
overhead for the month of October:
a. P4,340 U
b. P4,340 F
c. P4,430 F
d. P4,430 U
30. A Company controls its costs by comparing its actual monthly production cost with the
standard costs. The technique that is most likely used in the
a. Correlation analysis
b. Differential analysis
c. Variance analysis
d. Regression analysis
31. A Company owns equipment that is used to manufacture important parts for its production
process. The company plans to sell the equipment for P10,000 and to select one of the
following alternatives:
The company should quantitatively analyze the alternatives by comparing the cost of
manufacturing the parts
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MOCK CPA BOARD EXAMINATION: MANAGEMENT ADVISORY SERVICES
32. Rig Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity. The
company’s plant manager is considering making the headlights now being purchased for P11
each, a price that is not expected to change in the near future. The company has the
equipment and labor force required to manufacture the headlights. The design engineer
estimates that each headlight requires P4.00 of direct materials and P3.00 of direct labor.
The company’s overhead rate is 200% of direct labor pesos and 40% of the overhead is fixed
cost.
A decision by the company to manufacture the headlight will result in a gain (loss) for each
headlight of
a. (P2.00)
b. P1.60
c. P2.80
d. P0.40
33. Which of the following is TRUE for a firm that uses “direct costing”?
34. Lucky Company manufactures all the component parts used in its production of product A.
However, to save on cost, the company is planning to buy one of the component parts from
an outside supplier who has offered to sell 2,000 units at P35 per unit. The cost to
manufacture one unit of this particular component part is:
Lucky is considering the offer because it will save P10,000 in relevant costs. What is the
cost savings if Lucky Company buys from the outside supplier?
a. P4,000
b. P10,000
c. P20,000
d. P26,000
35. Marble Company is selling three products, product RED, product WHITE and product
BLUE. The company sells 3 units of RED for every unit of BLUE, and 2 units of WHITE
for every unit of RED. Fixed costs are P720,000.
RED 1.70
WHITE 2.00
BLUE 2.90
How many units of WHITE would the company sell at the even point?
a. 360,000
b. 216,000
c. 108,000
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d. 72,000
36. A costing procedure under which costs are classified as fixed or variable is the
a. Absorption costing
b. Direct costing
c. Relevant costing
d. Imputed costing
37. The standard unit price is used in the calculation of which of the following variances?
38. The manufacturing capacity of Vilma Sandok’s facilities is 30,000 units of product a year. A
summary of operating results for the year ended December 31, 2009 is as follows:
A foreign distributor offered to buy 15,000 units at P90 per unit during 2010. Assume that
all of Vilma’s costs would be at the same levels and rates in 2010 as in 2009. Assume further
that the company expects to sell the same number of units in 2010 (excluding the special
order). What would be the differential operating income, if Vilma accepted the special
order?
a. P390,000
b. P705,000
c. P840,000
d. P855,000
39. In a make or buy decision, the decision process favors the use of total costs versus unit costs.
The primary reason is that
40. Spenvy Company’s regular selling price for its product is P10 per unit. Variable costs are P6
per unit. Fixed costs total P1 per unit based on 10,000 units, and remain unchanged within
the relevant range of 50,000 units total capacity of 200,000 units. After sales of 80,000 units
were projected for the year, a special order was received for an additional 10,000 units.
To increase its operating income by P10,000, what price per unit should the company charge
for this special order?
a. P7.00
b. P8.00
c. P10.00
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d. P11.00
a. P1,825,000
b. P1,352,000
c. P1,285,000
d. P1,232,000
43. When preparing the series of annual operating budgets, management usually starts the
process with the:
a. cash budget.
b. budgeted balance sheet.
c. capital budget.
d. sales budget.
e. production budget.
Questions 44 and 45 concern Paradise Company, which budgets on an annual basis for its
fiscal year. The following beginning and ending inventory levels (in units) are planned for
the fiscal year of July 1, 2019 through June 30, 2020.
July 1, 2009 June 30, 2010
Raw materiala 40,000 50,000
Work-in-process 10,000 10,000
Finished goods 80,000 50,000
a
Two (2) units of raw material are needed to produce each unit of finished product.
44. If Paradise Company plans to sell 480,000 units during the 2019-2020 fiscal year, the number
of units it would have to manufacture during the year would be:
a. 440,000 units.
b. 480,000 units.
c. 510,000 units.
d. 450,000 units.
45. If 500,000 finished units were to be manufactured during the 2019-2020 fiscal year by
Paradise Company, the units of raw material needed to be purchased would be:
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a. 1,000,000 units.
b. 1,020,000 units.
c. 1,010,000 units.
d. 990,000 units.
46. The Jung Corporation’s budget calls for the following production:
Each unit of product requires three pounds of direct material. The company’s policy is to
begin each quarter with an inventory of direct material equal to 30% of that quarter’s direct
material production requirements. Budgeted direct material purchases for the third quarter
would be:
a. 114,600 pounds.
b. 89,400 pounds.
c. 38,200 pounds.
d. 29,800 pounds.
47 Continuous budget:
a. drops the current month or quarter and adds a future month or a future quarter as the
current month or quarter is completed.
b. presents a statement of expectations for a period but does not present a firm commitment.
c. presents the plan for only one level of activity and does not adjust to changes in the level
of activity.
d. presents the plan for a range of activity so that the plan can be adjusted for changes in
activity.
e. classifies budget requests by activity and estimates the benefits arising from each activity.
47. The indifference discount rate in comparing two independent projects is called:
48. Maxwell Company has an opportunity to acquire a new machine to replace one of its present
machines. The new machine would cost P90,000 have a five-year life, and no estimated
salvage value. Variable operating costs would be P100,000 per year. The present machine
has a book value of P50,000 and a remaining life of five years. Its disposal value now is
P5,000 but it would be zero after five years. Variable operating costs would be P125,000 per
year. Ignore present value calculations and income taxes.
Considering the five years in total, what would be the difference in profit before income
taxes by acquiring the new machine as opposed to retaining the present one?
a. P10,000 decrease
b. P15,000 increase
c. P35,000 increase
d. P40,000 increase
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49. Ludwill Inc., purchased a new machine on January 1, 2019 for P350,000. The machine is
expected to have a useful life of 8 years and no salvage value. Straight-line depreciation is to
be used. The present value of the cash flow generated by the machine was calculated to be
P371,120 using a time-adjusted rate of return of 14%. The present value of an ordinary
annuity of P1 in arrears for 8 periods at 14% is 4.639. The present value of P1 for 8 periods
at 14% is 0.351. What was the annual cash flow, net of income taxes, that was used in the
calculation of the present value?
a. P122,850
b. P75,447
c. P130,263
d. P80,000
50. Management of a company does not want to violate a working capital restriction contained in
its bond indenture. If the firm’s current ratio falls below 2.0 to 1, technically it will have
defaulted. The firms current ratio is now 2.2 to 1. If current liabilities are P200 million, the
maximum new commercial paper that can be issued to finance inventory expansion is
a. P20 million
b. P40 million
c. P240 million
d. P180 million
51. Which one of the following transactions does not change the current ratio and does not
change the total current assets?
Cavite, Inc. reported net income of P300,000 for 2019. Changes occurred in several balances
sheet accounts as follows:
Additional Information:
During 2019, Cavite sold equipment costing P25,000 with accumulated depreciation of
P12,000, for a gain of P5,000
In December 2019 Cavite purchase equipment costing P50,000 with P20,000 cash and a
12% note payable of P30,000
Depreciation expense for the year was P52,000
52. In Cavite’s 2019 statement of cash flows, net cash provided by operating activities should be
a. P340,000
b. P347,000
c. P352,000
d. P357,000
53. In Cavite’s 2019 statement of cash flows, net cash used in investing activities should be
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MOCK CPA BOARD EXAMINATION: MANAGEMENT ADVISORY SERVICES
a. P2,000
b. P12,000
c. P18,000
d. P20,000
55. An analysis of clerical costs in the billing department of Craig Company indicates that total
unit (variable and fixed) processing costs will be P.50 per account processed at an activity
level of 32,000 accounts. When only 22,000 accounts are processed, the total cost of
processing is P12,500. Given these data, at a budgeted level of 25,000 accounts
a. Processing costs will total P8,750
b. Fixed processing costs will be P10,400
c. The variable processing costs will equal P.35 per account processed
d. Processing costs will total P14,975
A proposed investment is not expected to have any salvage value at the end of its 5-year life. For
present value purposes, cash flows are assumed to occur at the end of each year. The company
uses a 12% after tax target rate of return.
56. The accounting rate of return based on the average investment is:
a. 84.9%
b. 34.4%
c. 40.8%
d. 12%
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a. P304,600
b. P212,320
c. (P70,000)
d. P712,320
60. Which statement about the internal rate of return of the investment is true?
a. The IRR is exactly 12%
b. The IRR is over 12%
c. The IRR is under 12%
d. No information about the IRR can be determined
61. Alphaville sells 50,000 units of “yo” a top-of-the-line garden sprinkler. These were taken
from the company’s records:
Accounts Receivable, P129,000
Days sales outstanding, 15 days
Contribution margin ratio, 49%
Profit for the period was P485,040
The ending receivables balance is the average balance during the year. Assume a 360-day
year. All sales are on credit. Determine the company’s breakeven revenue:
a. P2,106,122
b. P1,032,000
c. P1,320,000
d. P2,061,122
62. Division A is considering a project that will earn a rate of return which is greater than the
imputed interest charge for the invested capital, but less than division’s historical return on
invested capital. Division B is considering a project that will earn a rate of return that is
greater than the division’s historical return on invested capital, but less than the imputed
interest charge for invested capital. If the objective is to maximize residual income, should
these divisions accept or reject their projects?
A B
a. Accept Accept
b. Reject Accept
c. Reject Reject
d. Accept Reject
63. An organization has an opportunity to establish a zero balance account system using four
different regional banks. The total amount of the maintenance and transfer fees is estimated
to be P8,000 per annum. The organization believes that it will increase the float on its
operating disbursements by an average of two days, and its cost of short-term funds is 4%.
Assuming the organization estimates its average daily operating disbursements to be
P80,000, what decision should the organization make regarding this opportunity?
a. Do not open the zero balance accounts due to the additional cost of P8,000
b. Do not open the zero balance accounts due to an excess of costs over benefits of P1,600
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65. The economic order quantity for inventory is higher for an organization that has
a. Lower annual unit sales
b. Higher fixed inventory ordering costs.
c. Higher annual carrying costs as a percentage of inventory value.
d. A higher purchase price per unit of inventory.
66. A consultant recommends that a company hold funds for the following two reasons.
Reason 1: Cash needs can fluctuate substantially throughout the year
Reason 2: Opportunities for buying at a discount may appear during the year.
The cash balances used to addressed the reasons given above are correctly classified as
Reason 1 Reason 2
a. Speculative balances Speculative balances
b. Speculative balances Precautionary balances
c. Precautionary balances Speculative balances
d. Precautionary balances Precautionary balances
67. Gild Company has been offered credit terms of 3/10, net 30. Using a 365-day year, what
is the nominal cost of not taking advantage of the discount if the firm pays on the 35th day
after the purchase?
a. 14.2%
b. 32.2%
c. 37.6%
d. 45.2%
68. Deming Corporation utilizes the capital asset pricing model (CAPM) to estimate the cost
of its common stockholder equity. Calculate the CAMP given the following: the risk-free
rate of return is 5%, the expected rate of return is 10% and firm’s beta is 1.
a. 11%
b. 10%
c. 5%
d. 15%
69. Davis Corporation is considering establishing a lockbox system. The bank will charge
P30,000 annually for the service, which will save the firm approximately P15,000 in
processing costs. The lockbox system will reduce the float for cash receipts by 2 days.
Assuming that the average daily cash receipts are equal to P400,000, and short-term
interest costs are 4%, calculate the benefit or loss from adopting the lockbox system.
a. P30,000 loss
b. P15,000 loss
c. P12,000 benefit
d. P17,000 benefit
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70. A Company has an outstanding one-year bank loan of P500,000 at a stated interest rate of
8%. The company is required to maintain a 20% compensating balance in its checking
account. The company would maintain a zero balance in this account if the requirement
did not exist. What is the effective interest rate of the loan?
a. 8%
b. 10%
c. 20%
d. 28%
71. Layton Corporation has an average accounts payable balance of P850,000 and its cost of
goods sold for the year is P8,750,000. Using a 365-day year, calculate the firm’s payables
deferral period.
a. 25.50 days
b. 30.50 days
c. 35.46 days
d. 42.33 days
74. Mr. Rey Carlos, a CPA Firm’s partner-in-charge of quality assurance and review is
arguing with Mr. Ruben Fortuna, the consulting partner, regarding the question of
independence as Mr. Fortuna is presently rendering consulting services to T. Ang and
Nga Co., an audit client of the firm. Related to this issue of independence, all of the
following statements are not valid except
a. Independence is never sacrificed for as long as the auditor/consultant is correct in his
decisions for the client.
b. A CPA who renders both audit and consulting services to a client by virtue of his
competence/expertise and extensive knowledge of the client’s business is in the best
position to render decisions for the client and should do so.
c. The client is the ultimate decision maker and the auditor and/or consultant should not
make decisions for the client.
d. It is up to professional judgment and discretion of the auditor/consultant to render
decisions for the client for as long as his professional fees are commensurate to the
benefit that the client will derive from the engagement.
75. A company obtaining short-term financing with trade credit will pay a higher percentage
financing cost, everything else being equal, when
a. The discount percentage is lower.
b. The items purchased have a higher price.
c. The items purchased have a lower price.
d. The suppliers offer a longer discount period.
END OF EXAMINATION.
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