ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 41 – May 2021 CPALE  Summary Lecture (11 May 2021)

MANAGEMENT ADVISORY SERVICES C.P. Lee  E.S Arañas  K.L. Manuel

ReSA Batch 41
MAS SUMMARY LECTURE (MCQS)
MAS-01: Management Accounting vs. Financial Management
1. Managerial accounting is very similar to financial accounting in this particular aspect.
D a. Users of reports c. Emphasis between past and future
b. Type of data provided to users d. Reliance on the accounting database
2. A position on the organizational chart that is directly related to achieving the basic objectives of an
organization.
C a. Controller c. A line position
b. Chief financial officer d. A staff position

MAS-02: Cost Behavior with Regression Analysis

3. In the standard regression equation y = a + bx, the letter b is best described as a(n)
D a. Independent variable c. Constant coefficient
b. Dependent variable d. Variable coefficient
4. Simple regression analysis provides the means to evaluate a line of regression which is fitted to a plot of
data and represents
A a. The way costs change in respect to the independent variable.
b. The way costs change in respect to the dependent variable.
c. The variability of expense with pesos of operations.
d. The variability of expense with pesos of production.

MAS-03: Cost-Volume-Profit Analysis

5. A company pays a 5% sales commission on each unit sold. If a graph is prepared, with vertical axis
representing ‘per-unit cost’ and horizontal axis representing ‘unit sales,’ how would a line that depicts sales
commissions be drawn?
B a. As a vertical line. c. As a straight diagonal line, sloping upward to the right.
b. As a horizontal line. d. As a straight diagonal line, sloping downward to the right.
6. Which of the following is NOT an assumption of CVP analysis?
D a. Costs may be separated into separate fixed and variable components.
b. Total revenues and total costs are linear in relation to output units.
c. The unit selling price, unit variable costs, and fixed cost are known.
d. There will be a change between beginning and ending levels of inventory.
7. If Company A has a higher degree of operating leverage than Company B, then
D a. Company A is less risky
b. Company B is less profitable
c. Company A has higher fixed operating expenses
d. Company A’s profits are more sensitive to percentage changes in sales

MAS-04: Absorption & Variable Costing with Pricing Decision

8. Under variable costing, which of the following expenses are excluded from inventory costs?
D a. Direct manufacturing labor and variable manufacturing overhead
b. Direct materials and variable manufacturing overhead
c. Direct materials and manufacturing labor
d. Marketing and administrative
9. In target costing
A a. The market price of the product is taken as a given
b. Only raw materials, labor, and variable overhead cannot exceed a threshold target
c. Only raw materials cannot exceed a threshold target
d. Raw materials are recorded directly to cost of goods sold

MAS-05: Relevant Costing with Linear Programming

10. In a decision-making case, which of the following costs is NOT likely to contain a relevant cost component?
D a. Labor cost c. Factory overhead cost
b. Selling cost d. Depreciation cost of an existing asset
11. Which management technique is NOT associated with maximizing the use of limited resources (i.e.,
scarcity)?
D a. Linear programming c. Incremental analysis – best product combination
b. Capital rationing – profitability index d. Program Evaluation and Review Technique – CPM

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY MAS
11 May 2021: SUMMARY LECTURE

MAS-06: Budgeting with Probability Analysis

12. Individual budget schedules are prepared to develop an annual comprehensive or master budget. The
budget schedule that would provide the necessary input data for the direct labor budget would be the
D a. Sales forecast c. Schedule of cash receipts and disbursements
b. Raw materials purchases budget d. Production budget
13. Expected value in decision analysis is
A a. An arithmetic mean using the probabilities as weights.
b. A standard deviation using the probabilities as weights.
c. The standard deviation divided by the coefficient of variation.
d. A measure of the difference between best possible outcome and outcome of the original
decision
MAS-07: Standard Costing with GP Variance Analysis
14. A difference between standard costs used for cost control and the budgeted costs of the same
manufacturing effort can exist because
A a. Standard costs represent what costs should be, whereas budgeted costs are expected actual
costs
b. Budgeted costs are historical costs, whereas standard costs are based on engineering studies
c. Budgeted costs include some slack, whereas standard costs do not
d. Standard costs include some slack, whereas budgeted costs do not
15. Variance analysis should be used
A a. To understand why variances arise
b. To encourage employees to focus on meeting standards
c. As the only source of information for performance evaluation
d. To administer appropriate disciplinary action to employees that do not meet standards
16. The production department should generally be responsible for material price variances that resulted from
B a. Purchases made in uneconomical lot-sizes. c. Purchase of the wrong grade of materials.
b. Rush orders arising from poor scheduling. d. Changes in the market prices of raw materials.

MAS-08: Responsibility Accounting & Transfer Pricing

17. Which of these items will LEAST likely appear in the internal performance report prepared by a profit
center manager?
D a. Intersegment and external sales c. Direct variable cost
b. Discretionary fixed cost d. Committed fixed cost
18. A firm earning a profit can increase its return on investment by
D a. Increasing sales revenue and operating expenses by the same peso amount
b. Decreasing sales revenues and operating expenses by the same percentage
c. Increasing investment and operating expenses by the same peso amount
d. Increasing sales revenues and operating expenses by the same percentage
19. Residual income is a better measure for performance evaluate of an investment center manager than
return on investment because
B a. The problems associated with measuring the asset base are eliminated
b. Desirable investment decisions will not be neglected by high-return divisions
c. Only the gross book value of assets needs to be calculated
d. The arguments about the implicit cost of interest are eliminated
20. In theory, the optimal method for establishing a transfer price is
D a. Flexible budget cost c. Budgeted cost with or without a markup
b. Incremental cost d. Market price

MAS-09: Economics
21. The most effective FISCAL policy program for reducing demand-pull inflation is to:
A a. Decrease government spending and increase taxes
b. Increase government spending and decrease taxes
c. Increase both government spending and taxes
d. Decrease the money supply
22. If a large percentage increase in the price of a good results in a small percentage reduction in the quantity
demanded of the good, demand is said to be
B a. Horizontal c. Relatively elastic
b. Relatively inelastic d. Income proof
23. Monopolistic competition is characterized by
A a. A relatively large group of sellers who produce differentiated products
b. A relatively small group of sellers who produce differentiated products
c. A monopolistic market where the consumer is persuaded that there is perfect competition
d. A relatively large group of sellers who produce a homogenous product

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY MAS
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24. If people expect the price of coffee to rise next month, the demand for coffee will
B a. Decrease now c. Stay the same now and increase next month
b. Increase now d. Stay the same now and next month

MAS-10: ABC, Balanced Scorecard & Strategic Cost Management

25. An example of a value-added activity is:
D a. Inspections c. Inventory storage
b. Machinery repair d. Engineering design
26. Using the balanced scorecard approach, an organization evaluates managerial performance based on
B a. A single ultimate measure of operating results, such as residual income
b. Multiple financial and nonfinancial measures
c. Multiple nonfinancial measures only
d. Multiple financial measures only
27. Which of the following quality tools is another term for gradual yet continuous improvement?
B a. Theory of constraints c. Six-sigma
b. Kaizen d. Lean manufacturing
28. Which of the four quality costs would be the MOST damaging to a company’s ability to build a reputation
as a world-class manufacturer of quality products?
D a. Appraisal costs c. Internal failure costs
b. Prevention costs d. External failure costs

MAS-11: Quantitative Techniques

29. In a PERT network, slack is the
D a. Most likely time estimate for an activity
b. Average of the time estimates for an activity
c. Path that requires the longest completion time
d. Time an activity can be delayed without causing delay to the entire project
30. What is the cost factor that is LEAST likely to be affected by the learning curve?
A a. Materials c. Indirect labor
b. Direct labor d. Variable overhead
31. The EOQ is the order quantity that results in
C a. No inventory shortages c. The minimum total annual inventory costs
b. Maximum inventory costs d. The maximum total annual inventory costs

MAS-12: Working Capital Management

32. As a company becomes more conservative in working capital policy, it would tend to have a (an)
B a. Decrease in acid test ratio
b. Increase in the ratio of current assets to units of output
c. Increase in the ratio of current liabilities to non-current liabilities
d. Increase in funds invested in common stock and a decrease in funds invested in securities
33. Which of the following is true about a firm’s float?
D a. A firm strives to minimize the float for both cash receipts and cash disbursements
b. A firm strives to maximize the float for both cash receipts and cash disbursements
c. A firm strives to maximize the float for cash receipts and minimize the float for cash
disbursements.
d. A firm strives to maximize the float for cash disbursements and minimize the float for cash
receipts.
34. An increase in sales resulting from an increased cash discount for prompt payment is expected to cause:
A a. A decrease in cash conversion cycle c. An increase in operating cycle
b. A decrease in purchase discounts taken d. An increase in average collection period
35. An entity obtaining short-term financing with trade credit will pay a higher percentage financing cost when
D a. Discount percentage is lower c. Items purchased have a lower price
b. Items purchased have a higher price d. Supplier offers a longer discount period

MAS-13: Costs of Capital, Leverage & Capital Structure

36. If k is the cost of debt and t is the marginal tax rate, the after-tax cost of debt (Ki) is best represented by
the formula
D a. Ki=k/t c. Ki=k(t)
b. Ki=k/(1-t) d. ki=k(1-t)
37. The term “beta” can best be described as the
D a. Weighted-average return of an investment portfolio
b. Variability of standard deviation of the investment returns
c. Investment return’s sensitivity to changes in interest rates
d. Investment return’s sensitivity to changes in the market’s returns

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38. If a company is profitable and is effectively using leverage, which one of the following ratios is likely to be
the largest?
C a. Return on total assets c. Return on common equity
b. Return on operating assets d. Return on total equity
39. When establishing optimal capital structure, firms should strive to
D a. Maximize the marginal cost of capital c. Minimize the amount of debt financing used
b. Maximize the amount of equity financing d. Minimize the weighted average cost of capital

MAS-14: Capital Budgeting with Investment Risks and Returns

40. Capital budgeting is concerned with
A a. Analysis of long-range decisions
b. Analysis of short-range decisions
c. Scheduling of office personnel in office buildings
d. Decisions affecting only capital-intensive industries
41. For a certain capital project, the return that investors demand for investing in a firm is known as:
D a. DCF rate of return c. Payback
b. Net present value d. Cost of capital
42. All other factors being equal, a large number is preferred to a smaller number for all these capital project
evaluation measures, EXCEPT:
A a. Payback period c. Net present value
b. Profitability index d. Internal rate of returns
43. What relationship does risks and returns normally have?
A a. Direct relationship c. Spurious relationship
b. Inverse relationship d. Illicit and discreet relationship

MAS-15: Financial Statement Analysis

44. A company has an acid-test ratio of 1.5 to 1.0. Which will cause this ratio to deteriorate for the company?
C a. Sale of equipment at a loss c. Borrowing short-term loan from a bank
b. Sale of inventory on account d. Payment of cash dividends previously declared
45. Identify the set of ratios that is most useful in evaluating solvency.
D a. Debt ratio, current ratio, and TIE c. Debt ratio, quick ratio, and TIE
b. Debt ratio, TIE, and RoA d. Debt ratio, TIE, and cash flow to debt
46. How is the average inventory balance used in the calculation of each of the following?
Acid-test ratio Inventory Turnover
C a. Numerator Numerator
b. Numerator Denominator
c. Not used Denominator
d. Not used Numerator
47. Additional funds needed (AFN) are best described as:
D a. The amount of assets required per peso of sales
b. Funds that are obtained automatically from routine business transactions
c. A forecasting approach in which the forecasted percentage of sales for each item is held
constant
d. Funds that a firm must raise externally through borrowing or by selling new
common/preferred stock

MAS-16: Various Topics in MAS

48. The Standards of Ethical Professional Practice for management accountants comprise of (A) competence,
(B) confidentiality, (C) integrity and (D) credibility. “Credibility” requires management accountant to:
D a. Maintain an appropriate level of professional expertise by continually developing knowledge
and skills and perform duties in accordance with relevant laws, regulations, and technical
standards
b. Keep information confidential unless disclosure is authorized or legally required
c. Mitigate actual conflicts of interest and refrain from engaging in any conduct that would
prejudice carrying out duties ethically
d. Communicate information fairly and objectively and disclose all relevant information
expected to influence an intended user’s understanding of the reports, analysis and
recommendations
49. Consulting services differ fundamentally from CPA’s function of attesting to another party’s assertions in
the sense that
B a. The client develops findings, conclusions and recommendations.
b. The work is generally performed only for the use and benefit of the client.
c. The nature and scope of work is determined solely by the consulting services practitioner.
d. The practitioner expresses a conclusion about reliability of assertion that is responsibility of
assertor.

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50. In project feasibility studies, the explicit statements about the possible future behavior of certain variables
affecting a project which serve as the premise for projecting probable financial results.
B a. Theories c. Conclusion
b. Assumptions d. Recommendation

KAHOOT (MCQs)
1. Which financial executive is primarily responsible for both management and financial accounting?
B a. Treasurer c. Chief financial officer
b. Controller d. Auditor
2. In contrast to the position of a treasurer, the controller is primarily a
B a. Line function c. Managerial position
b. Staff function d. Rank-and-file position
3. A management accountant who fails to comply with applicable law or legislation is acting contrary to which
of the following ethical standards?
A a. Competence c. Integrity
b. Confidentiality d. Credibility
4. Process value analysis is a key component of activity-based management that links product costing and
B a. Reduction of the number of cost pools c. Accumulation of heterogeneous cost pools
b. Continuous improvement d. Overhead rates based on broad averages
5. JIT is based on notion that ‘work is initiated only in response to customer orders.’ This practice is
described as
A a. Demand-pull c. Supply-pull
b. Demand-push d. Supply-push
6. Total Quality Management (TQM) should be viewed as
C a. Goal centered and standard driven c. Customer centered and employee driven
b. Policy centered and procedure driven d. Management centered and technology driven
7. A company that wants to be known as a world-class manufacturer of quality products shall spend more
heavily on this type of quality costs.
B a. Appraisal costs c. Internal failure costs
b. Prevention costs d. External failure costs
8. A data point that falls far away from other data points in a scatter diagram is called a (an)
A a. Outlier c. Standard deviation
b. Margin of error d. Coefficient of determination
9. The cost function derived by the simple least squares method is
A a. Linear c. Parabolic
b. Curvilinear d. Derived from the maximum and minimum points
10. It is the measure of the co-variation between the dependent and independent variables.
C a. Ratio c. Correlation
b. Variance d. Standard error
11. The correlation coefficient that indicated the weakest linear association between two variables is
B a. -0.73 c. 0.12
b. -0.11 d. 0.35
12. The slope of the cost line does NOT in any way affect
A a. Fixed costs c. Break-even peso sales
b. Margin of safety d. Degree of operating leverage
13. To which function of management is cost-volume-profit (CVP) analysis most applicable?
A a. Planning c. Organizing
b. Directing d. Controlling
14. Distinction between absorption costing and variable costing is most important for which type of industry?
A a. Manufacturing c. Retail
b. Marketing d. Service
15. Which one of the following considers the impact of fixed overhead costs?
A a. Full absorption costing c. Direct costing
b. Marginal costing d. Variable costing
16. In determining the lowest price that can be quoted for a special order that will use idle capacity within a
production area, the best allocation method to use is
B a. Process costing c. Job order costing
b. Variable costing d. Absorption costing
17. Comparing actual results with a budget based on achieved (actual) volume is possible with the use of a
D a. Monthly budget c. Rolling budget
b. Master budget d. Flexible budget
18. What is a budget that describes the long-term position, goals, and objectives of an entity?
D a. Capital budget c. Cash management budget
b. Operating budget d. Strategic budget

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19. The budget method that maintains a constant twelve month planning horizon by adding a new month on
the end as the current month is completed is called
C a. An operating budget c. A continuous (rolling) budget
b. A capital budget d. A master budget
20. The budget schedule that would provide the necessary input data for the direct labor budget would be the
D a. Sales forecast c. Schedule of cash receipts and disbursements
b. Raw materials purchases budget d. Production budget
21. Pro forma financial statements are part of budgeting process. Normally, the last pro forma statement
prepared is the
C a. Income statement c. Statement of cash flows
b. Statement of cost of goods sold d. Statement of manufacturing costs
22. A firm most often uses a standard costing system in conjunction with:
A a. Flexible budgets c. Target (hurdle) rate of return
b. Management by objectives d. Participative management programs
23. The difference between actual overhead incurred and budgeted overhead at actual hours worked.
D a. Efficiency variance c. Volume variance
b. Controllable variance d. Spending variance
24. A variance measuring the under-utilization or over-utilization of the plant is called
C a. Mix variance c. Volume variance
b. Efficiency variance d. Yield variance
25. Variance analysis would be appropriate to measure performance in
D a. Cost centers c. Investment centers
b. Profit centers d. Cost, profit and investment centers
26. The format for internal reports in a responsibility accounting system is prescribed by the:
A a. Management c. Accounting system
b. Shareholders d. Generally accepted accounting principles
27. The most fundamental responsibility center affected by the use of market-based transfer prices is a(n)
D a. Production center c. Cost center
b. Investment center d. Profit center
28. Common costs are
D a. Direct costs c. Controllable costs
b. Current costs d. Indirect costs
29. Which of the following is NOT a unit-based cost driver?
C a. Machine hours c. Number of setups
b. Number of units d. Direct labor hours
30. A balanced scorecard is primarily concerned with
B a. Staff c. Systems
b. Strategy d. Structure
31. Which balanced scorecard performance measure would be part of those used for internal business
processes perspective?
A a. Cycle time c. Customer retention
b. Employee satisfaction d. Return on investment
32. Working capital management involves investment and financing decisions related to:
C a. Sales and credit c. Current assets and current liabilities
b. Current assets and capital structure d. Property, plant, equipment and current liabilities
33. The firm’s financing requirement can be separated into
A a. Seasonal and permanent c. Current liabilities and long-term funds
b. Current assets and fixed assets d. Current liabilities and long-term debts
34. A decrease in inventory order costs will tend to
B a. Increase the reorder point c. Decrease the holding cost percentage
b. Decrease the economic order quantity d. Have no effect on the economic order quantity
35. A company would be willing to have a low inventory turnover ratio if the
B a. Lead time is short c. Inventory order costs is low
b. Cost of stock out is high d. Carrying cost of inventory is high
36. Short-term, unsecured promissory notes issued by large firms are known as:
A a. Commercial paper c. Bankers’ acceptances
b. Agency securities d. Repurchase agreements
37. Generally, the most expensive source of financing for a firm is:
D a. Debt c. Retained earnings
b. Preferred stock d. New common stock
38. Using the Capital Asset Pricing Model (CAPM) approach of computing the cost of common equity and
retained earnings, which among the following formulas is correctly stated?
C a. KRF + (KM) β c. KRF + (KM - KRF) β
b. (KRF + KM) β d. (KM - KRF) β

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39. Which of the following is NOT a component used in calculating the cost of capital?
B a. Cost of long-term debt c. Cost of common stock
b. Cost of short-term debt d. Cost of retained earnings
40. The type of risk that is not diversifiable and affects the value of a portfolio is
B a. Purchasing-power risk c. Nonmarket risk
b. Market risk d. Interest-rate risk
41. External capital requirements (i.e., AFN) are LOWER for entities with which one of the following
characteristics?
D a. Lower profit margins c. Higher sales growth rates
b. Lower retention ratios d. Lower capital intensity ratios
42. Times-interest-earned (TIE) ratio is primarily an indication of
B a. Liquidity c. Profitability
b. Solvency d. Asset management
43. Financial statement analysis is LEAST associated with
D a. Common-size income statement c. Liquidity and profitability
b. Gross profit variance d. Productivity
44. The payback method assumes that all cash inflows are reinvested to yield a return equal to
D a. The discount rate c. The internal rate of return
b. The hurdle rate d. Zero
45. Which capital budgeting method assumes that the funds are reinvested at the company’s cost of capital?
C a. Payback c. Net present value
b. Accounting rate of return d. Time adjusted rate of return
46. Most definitions of consultancy would include such services related to the following, EXCEPT:
A a. Legal advisory c. Corporate strategy
b. Information technology d. Systems and operations management
47. When a country imports more than it exports, the country
B a. Has negative net imports c. Is suffering from inflation
b. Has negative net exports d. Is experiencing an income boom
48. If the average inventory is determined to be 500 units (including safety stock of 100 units), then what is
the economic order quantity?
C a. 400 units c. 800 units
b. 600 units d. 1,000 units
49. If a capital project has a hurdle rate higher than its internal rate, then its profitability index is
B a. Less than 0 c. More than the cost of capital
b. Less than 1 d. More than the net present value
50. In present value problems, unless stated otherwise, cash flows are assumed to be received
A a. At the end of the period c. In the middle of a time period
b. At the beginning of the period d. Evenly over a time period

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