MANAGEMENT ADVISORY SERVICES
INTEGRATED REVIEW
JOHN PAULO Q. PARTACALAO, CPA
Part 1.0 Management Accounting
Mode: Lecture and Drills
1.1
Management
concepts
accounting
and
cost
1. It is a field of accounting that provides
financial information and nonfinancial
information
to
an
organization’s
managers and other internal decision
makers
a.
b.
c.
d.
Cost accounting
Bookkeeping
Managerial accounting
Financial accounting
2. The main focus of managerial accounting
is:
a.
b.
c.
d.
Decision making
Preparation of financial statements
Preparation of budgets
Documenting cash flows
3. Which is not an objective of management
accounting?
a. Maximation of profit and minimization
of costs
b. Measuring
the
performance
of
managers of subunits
c. Providing information for planning
and decision making
d. Providing assistance in directing and
controlling operations
4. The setting of objectives and the
identification of methods to achieve those
objectives is called
a.
b.
c.
d.
Planning
Controlling
Decision making
Performance evaluation
5. Which of the following statement is
correct?
a. Managers carry out their planning
function
by
mobilizing
the
organization’s
resources
and
overseeing day-to-day operations.
b. Managers carry out their decisionmaking
function
by
obtaining
feedback to ensure that the plans are
being followed.
c. The
planning,
directing
and
motivating, and controlling functions
of a manager are kept separate from
such
manager’s
decision-making
activities.
d. The manager’s planning function
involves setting of the organization’s
goals and identifying alternatives and
selecting the alternative that best
furthers such goals set for the
organization.
6. The primary objective of management
accounting is to provide:
a. Stockholders and potential investors
with useful information for decision
making
b. Banks and other creditors with
information useful in making credit
decisions
c. Management with useful information
for planning and control of operations
d. Supervising government agencies
with information about the company’s
management affairs
7. Management accounting information
a. Uses historical cost as the basis for
reports to managers who are making
decisions about future courses of
action
b. Should be developed and provided
only if the benefits exceed its costs
c. Does not reflect the financial criteria
of verifiability or consistency
d. Should serve the basic needs of
investors and creditors
8. The American Institute of Management
Accountants came up with the Standards
of Ethical Conduct for Management
Accountants which have four sections,
namely
a. Competence,
confidentiality,
integrity, and objectivity
b. Competence, security, integrity, and
objectivity
c. Competence,
confidentiality,
integrity, and maturity
d. Competition, confidentiality, integrity,
and objectivity
9. Which of the following statements is true
when comparing managerial accounting
to financial accounting?
a. Managerial accounting places more
emphasis on precision than financial
accounting
b. Both are highly dependent on timely
information
c. Both rely on the same accounting
information system
d. Managerial accounting is concerned
with external decision makers
10. Which of the following statements is/are
true regarding financial and managerial
accounting?
I.
II.
Both are mandatory
Both rely on the same underlying
financial data
Both emphasize the segments of an
organization, rather than just looking
at the organization as a whole
Both are geared to the future, rather
than to the past
III.
IV.
a.
b.
c.
d.
I, II,
Only
Only
Only
III, and IV
II, III, and IV
II and III
II
11. Which of the following statement is false?
a. Managerial accounting need not
mostly conform to PFRS.
b. Financial accounting reports focus on
subunits of the organization.
c. Managerial accounting is not required.
d. Managerial accounting focus on the
needs of internal users.
12. For internal users, managers are more
concerned with receiving information that
is:
a. Completely objective and verifiable
b. Completely accurate and precise
c. Relevant, flexible, and immediately
available
d. Relevant completely accurate, and
precise
a. Planning and control of costs
b. Supporting management planning
c. Compliance with SEC reporting
requirements
d. Determining the cost of products
15. 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
decision making
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.
16. Internal reports must be communicated
a. Daily
b. Monthly
c. Annually
d. As needed
17. The treasurer function is usually not
concerned with
a.
b.
c.
d.
13. Which of the following statements is
correct?
a. A
CPA
can
readily
render
management advisory services to the
public?
b. A CPA with MBA and DBM degrees is
automatically qualified to render
management advisory services.
c. Competence as a standard in the
rendition of management advisory
services by a CPA may be equated to
having excellent scholarly preparation
to include the usually baccalaureate
degree, an MBA and other post
graduate studies.
d. Adequate training and experience in
both the analytical approach and
process in a particular undertaking
are requisites for the CPA to be
involved in a management advisory
service engagement.
14. Managerial accounting provides data to
achieve all of the following major
objectives except:
Investor relations
Financial reports
Short-term financing
Credit extension and collection of bad
debts
18. Which of the following duties is usually
assigned to the controller?
a.
b.
c.
d.
Directing the grant of credit to clients
Investing the organization’s funds
Tax planning
Independently evaluating the firm’s
financial statements
19. If a distinction is made between cost
accounting and managerial accounting,
managerial accounting is more oriented
toward
a. Valuation of inventory
b. Analysis
of
variances
including
spoilage
c. Financial reporting to third parties
d. Planning and controlling aspects of
the management process
20. In a broad sense, cost accounting can be
defined within the accounting system as
a. Internal and external reporting that
may be used in making nonroutine
decisions and in developing pans and
policies
b. External reporting to the government,
various
outside
parties,
and
stockholders
c. Internal
reporting
for
use
in
management planning and control,
and external reporting to the extent of
its product-costing function satisfies
external reporting requirements
d. Internal reporting for use in panning
and controlling routine operations
21. Which of the following statements is
false?
a. Management accounting is an integral
part of the controller’s function in an
organization
b. The Standards of Ethical Conduct for
Management Accountants include
concepts related to competence,
confidentiality,
integrity,
and
objectivity
c. Modern cost accounting plays a role in
planning new products, evaluating
operational processes, and controlling
costs.
d. The Chief Operating Officer is
primarily responsible for management
accounting and financial accounting.
a. Total fixed costs remain constant and
per-unit fixed costs increase
b. Total fixed costs remain constant and
per-unit fixed costs decrease
c. Total fixed costs remain constant and
per-unit fixed costs remain constant
d. Total fixed costs increase and per-unit
fixed costs increase
26. Lamang Company changed its cost
structure by increasing fixed costs and
decreasing its per-unit variable costs. The
change:
a. Increases risk and increases potential
profit
b. Increases risk and decreases potential
profit
c. Decreases
risk
and
decreases
potential profit
d. Decreases risk and increases potential
profit
27. The indifference point is the level of
volume at which a company
a. Earns the same profit under different
operating scheme
b. Earns no profit
c. Earns its target profit
d. Any of the above
28. Operating leverage is the relative mix of
22. Which of the following costs is not always
considered to be expired immediately
upon being recognized?
a. Salesmen’s commission
b. Depreciation expense for factory
equipment
c. Cost of goods sold
d. Salary of the company president
23. Cost behavior analysis is a study of how
a firm's cost
a. relate to competitor’s cost
b. relate to general price level changes
c. respond to changes in activity levels
within the company
d. respond to changes in the gross
national product
24. An item or event that has a cause-effect
relationship with the insurance of a
variable cost is called a
a.
b.
c.
d.
mixed cost
Predictor
direct cost
costs driver
25. As volume increases,
a. Revenues earned and manufacturing
costs
b. Fixed and variable costs
c. High-volume
and
low-volume
products
d. Manufacturing costs and period costs
29. Cost estimation is the process of
a. Estimating the relationship between
costs and the cost drivers that cause
those costs
b. Documenting costs in terms of direct
and indirect costs
c. Summarizing past costs into fixed and
variable components
d. All of the given choices
30. Which of the following methods may be
used to estimate costs?
a.
b.
c.
d.
Account analysis
High-low method
Engineering method
All of the given choices
31. Harem Company uses an annual cost
formula for overhead of P72,000 + P1.60
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’s budgeted overhead for the
month is :
a.
b.
c.
d.
P12,800
P18,800
84,800
774,000
35. Total period costs:
a.
b.
c.
d.
P67,000
P45,000
P22,000
P18,000
36. Sunk costs
a. Are relevant costs
b. Can be changed by a decision made
now or to be made in the future
c. Are irrelevant for decision-making
purposes
d. Are decreases in costs from one
alternative to another
32. Irma Company manufactures office
furniture During the most productive
month of the year, 3,500 desks were
manufactured at a cost of P84,400. In its
slowest month, the company made 1,100
desks at a cost of P46,000. Using the
high-low method of cost estimation, the As part of a cost study, the cost accountant of
total fixed costs in August are:
Shinly Corporation has recorded the cost of
operations at seven different levels of materials
a. P56,000
usage. The records show the following:
b. P28,400
c. P17,600
Kilos of materials
Costs of operation
d. P38,400
80
P800
60
480
20
320
33. At sales level of P300,000, Jamaica
Company’s gross margin is P15,000 less
than its contribution margin, its net
income is P50,000, and its selling and
administrative expenses total P120,000.
At this sales level, its contribution margin
would be:
a. P250,000
b. P155,000
c. P170,000
d. P185,000
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
Depreciations Administrative
Building
Salaries of administrative
personnel
Depreciation – Delivery
equipment
Overtime Pay- factory workers
Rework costs
34. Total product costs:
a.
b.
c.
d.
P67,000
P45,000
P22,000
P18,000
5,000.00
2,000.00
6,000.00
1,000.00
4,000.00
8,000.00
12,000.00
3,000.00
20,000.00
2,000.00
1,500.00
2,500.00
37. Using the high-low method, the variable
cost of operations per kilo of materials
used is:
a.
b.
c.
d.
P8.00
P9.14
P16.00
P10.00
38. Using the high-low method, the fixed cost
of operations is:
a.
b.
c.
d.
P320
P103
P160
P206
39. It is the measure of the co-variation
between the dependent and independent
variables
a.
b.
c.
d.
Correlation
Ratio
Standard error
Variance
40. In cost accounting, the term relevant
range refers to the range over which
a.
b.
c.
d.
Relevant costs are incurred
Production should be confined
Total fixed costs fluctuate
Cost relationships are valid