MAS-42K (ABC, Balanced Scorecard - Strategic Cost Management)
MAS-42K (ABC, Balanced Scorecard - Strategic Cost Management)
MAS-42K (ABC, Balanced Scorecard - Strategic Cost Management)
CPA Review Batch 42 October 2021 CPA Licensure Exam Week No. 11
What was the manufacturing overhead for CMA Company for last year?
a. Over-applied by P 20,000 c. Over-applied by P 40,000
b. Under-applied by P 20,000 d. Under-applied by P 40,000
3B) CIA Company uses activity-based costing to compute product costs for external reports. The company
has three activity centers and applies overhead using predetermined overhead rates for each activity
center. Estimated costs and activities for the current year are presented below:
Estimated Overhead Cost Expected Activity
Activity 1 P 18,000 1,200
Activity 2 P 57,600 2,400
Activity 3 P 97,200 3,600
Actual costs and activities for the current year were as follows:
Actual Overhead Cost Actual Activity
Activity 1 P 19,500 1,250
Activity 2 P 55,000 2,500
Activity 3 P 90,000 3,750
What was the amount of overhead applied for Activity 2 during the year?
a. P 5,000 over-applied c. P 2,400 over-applied
b. P 5,000 under-applied d. P 2,400 under-applied
5. Productivity Measures
CISA Company manufactures and sells a single product. The following information was made available:
2020 2021
Unit sales (P 60 per unit) 10,000 15,000
Material usage 4,000 pounds 5,000 pounds
Material cost P 5 per pound P 10 per pound
Labor hours 2,000 hours 2,500 hours
Labor cost P 20 per hour P 25 per hour
5A) Determine the operational partial productivity of DIRECT MATERIAL for (1) 2020 and (2) 2021.
a. (1) 2.50 (2) 3.00 c. (1) 0.25 (2) 0.24
b. (1) 5.00 (2) 6.00 d. (1) 0.50 (2) 0.30
5B) Determine the financial partial productivity of DIRECT MATERIAL for (1) 2020 and (2) 2021.
a. (1) 2.50 (2) 3.00 c. (1) 0.25 (2) 0.24
b. (1) 5.00 (2) 6.00 d. (1) 0.50 (2) 0.30
5C) Determine the operational partial productivity of DIRECT LABOR for (1) 2020 and (2) 2021.
a. (1) 2.50 (2) 3.00 c. (1) 0.25 (2) 0.24
b. (1) 5.00 (2) 6.00 d. (1) 0.50 (2) 0.30
5D) Determine the financial partial productivity of DIRECT LABOR for (1) 2020 and (2) 2021.
a. (1) 2.50 (2) 3.00 c. (1) 0.25 (2) 0.24
b. (1) 5.00 (2) 6.00 d. (1) 0.50 (2) 0.30
5E) Determine the total productivity for 2020 as measured in both (1) units and (2) sales pesos.
a. (1) 0.667 (2) 40.00 c. (1) 1.667 (2) 100.00
b. (1) 0.167 (2) 10.00 d. (2) 6.667 (2) 400.00
12. Which balance scorecard perspective is considered to be a lagging (rather than leading) indicator?
a. Customer c. Learning & growth
b. Financial d. Internal business processes
13. What is the correct order of strategy mapping that links the four balanced scorecard perspectives?
a. Financial, customer, internal business processes, learning & growth
b. Internal business processes, learning & growth, financial, customer
c. Learning & growth, internal business processes, customer, financial
d. Customer, financial, learning & growth, internal business processes
14. Which of the following is NOT a component of a typical balanced scorecard report?
a. Strategic objectives c. Strategy initiatives
b. Targets d. Assessment of human resources
15. Which is NOT among the three (3) generic strategies for a company to achieve competitive advantage?
a. Focus c. Market segmentation
b. Cost leadership d. Product differentiation
16. What is the correct formula for manufacturing cycle efficiency (MCE) ratio?
a. Value-added time ÷ Lead time c. Throughput time ÷ Delivery cycle time
b. Value-added time ÷ Throughput time d. Non-value-added time ÷ Throughput time
17. In MCE computation, which of the following is considered as a value-added activity?
a. Inspection time c. Move time
b. Processing time d. Idle time
18. The unyielding and continuing improving effort by everyone in the organization to understand, meet and
exceed the customer expectations and uses front-line workers to solve problems systematically.
a. Just-in-time manufacturing c. Total quality management
b. Conventional manufacturing d. Total quantity management
19. Total Quality Management (TQM) should be viewed as
a. Goal centered and standard driven c. Customer centered and employee driven
b. Policy centered and procedure driven d. Management centered and technology driven
20. What are the four categories of quality costs?
a. Prevention, appraisal, internal failure, and external failure costs
b. Internal failure, external failure, carrying and ordering costs
c. Product liability, warranty, appraisal, and training costs
d. Training, testing, failure, and conformance costs
21. Identify the two (2) CONFORMANCE costs of quality.
a. Prevention and appraisal costs c. Appraisal and internal failure costs
b. Internal and external failure costs d. Prevention and internal failure costs
22. Identify the two (2) NON-CONFORMANCE costs of quality.
a. Prevention and appraisal costs c. Appraisal and internal failure costs
b. Internal and external failure costs d. Prevention and internal failure costs
23. Quality is achieved more economically if the company focuses on
a. Appraisal costs c. Internal failure costs
b. Prevention costs d. External failure costs
24. A quality cost incurred to detect individual units that do not conform to specifications is an example of
a. Appraisal cost c. Internal failure cost
b. Prevention cost d. External failure cost
25. Determine the false statement regarding failure costs.
a. Internal failure costs result from identification of defects during the appraisal process.
b. It is generally better to incur internal failure costs than to incur external failure costs.
c. Internal failure costs include scrap, rejected products, rework and downtime.
d. External failure costs are generally classified as value-added costs.
26. Following are items included in the quality cost report prepared for the last month:
Employee training costs P 50,000
Product testing P 20,000
Equipment maintenance P 80,000
Rework upon inspection P 25,000
a. Appraisal cost is P 25,000 c. External failure cost is P 20,000
b. Prevention cost is P 130,000 d. Internal failure cost is P 105,000
27. In a product’s life cycle, the first symptom of the decline stage is a decline in
a. Product’s prices c. Product’s production cost
b. Product’s sales d. Firm’s inventory level
28. Determine the correct order of target costing process.
a. Market price, desired profit, target cost, cost reduction thru value engineering
b. Cost reduction thru value engineering, target cost, desired profit, market price
c. Target cost, desired profit, market price, cost reduction thru value engineering
d. Market price, target cost, cost reduction thru value engineering, desired profit
29. Value engineering
a. Is a basis for product costing and pricing
b. Determines the outcome and value added by each activity
c. Is a way of understanding how a company generates its output
d. Is a systematic approach to reaching a targeted cost level during a value chain analysis
without reducing customer satisfaction
30. Which of the following is at the core of the definition of total quality management (TQM)?
a. Customer surveys c. Employee satisfaction
b. Continuous improvement d. Supplier inspections
31. A company desiring to achieve radical or drastic improvements in customer relationship management
would most likely undertake:
a. Kaizen c. Total quality management
b. Benchmarking d. Business process reengineering
32. Which of the following quality tools is another term for gradual yet continuous improvement?
a. Theory of constraints c. Six-sigma
b. Kaizen d. Lean manufacturing
33. “Kaizen costing” refers to
a. Radical cost reductions during the design phase of a product
b. Radical cost reductions during the manufacturing phase of a product
c. Small, continual cost reductions during the design phase of a product
d. Small, continual cost reductions during the manufacturing phase of a product
34. The just-in-time manufacturing (JIT) system is also called the
a. Job-in-training system c. Zero-cost system
b. Job-in-transit system d. Zero-inventories system
35. In JIT system, work is initiated only in response to customer orders. This practice is described as
a. Demand-pull c. Supply-pull
b. Demand-push d. Supply-push
36. Just-in-time purchasing (demand-pull system) requires
a. Smaller and more frequent purchase orders
b. Larger and more frequent purchase orders
c. Smaller and less frequent purchase orders
d. Larger and less frequent purchase orders
37. Which of the following is among the benefits of adopting a JIT system?
a. Increase in the number of suppliers
b. Reduction in the number of deliveries
c. Performance of non-value-added activities
d. Maximization of standard delivery quality
38. The comparison of a company's practices and performance levels against those of other organizations (or
against the best possible level of performance) is most commonly known as
a. Benchmarking c. Comparative analysis
b. Re-engineering d. Continuous improvement
39. The Theory of Constraints suggests that improvement efforts shall be focused on the company’s
a. Value-added activities c. Constraints
b. Non-value-added activities d. Non-Constraints
40. Which of the following scenarios is considered as counter-productive?
a. Same outputs, fewer inputs c. More outputs, fewer inputs
b. More outputs, same inputs d. Fewer outputs, same inputs
8. These activities arise because a company does or maintains a particular type of business or product.
C a. Batch-level activities c. Sustaining activities
b. Facility-sustaining activities d. Unit-level activities
9. Property taxes and insurance is an example of a cost that would be considered to be
D a. Unit-level c. Product-level
b. Batch-level d. Organization-sustaining
10. Which of the following is typically regarded as a cost driver in traditional costing practices?
D a. Number of purchase order processed c. Number of transactions processed
b. Number of customers served d. Number of direct labor hours worked
11. Activity-based costing (ABC)
B a. Applied only to discretionary fixed costs
b. Requires the identification of cost drivers
c. Is used only in just-in-time (JIT) operations
d. Does not help to identify activities as value-adding or non-value-adding
12. A company using activity-based costing
A a. Tries to identify cost drivers
b. Is probably using the JIT philosophy
c. Allocates all costs to individual products
d. Looks for the activity with which total costs are most closely associated
13. What is a cost driver?
D a. Any activity that can be used to predict cost changes
b. The attempt to control expenditures at a reasonable level
c. The person who gathers and transfers cost data to the management accountant
d. Any activity that causes costs to be incurred
14. What is a cost pool?
D a. All costs of a production department
b. Over-applied or under-applied overhead costs
c. The material and labor cost used on a particular job
d. A group of overhead costs driven by the same activity
15. In ABC, preliminary cost allocations assign costs to
D a. Departments c. Products
b. Processes d. Activities
16. In ABC, final cost allocations assign costs to
C a. Departments c. Products
b. Processes d. Activities
17. Iran Manufacturing produces three products. Production and cost information show the following:
Model F Model A Model Q
Units produced 1,000 3,000 6,000
Direct labor hours 2,000 1,000 2,000
Number of inspections 20 30 50
Using ABC, what would be the inspection costs of P 50,000 allocated to each unit of Model F?
B a. P 5.00 c. P 20.00
b. P 10.00 d. Some other number
18. The resource utilized by a given product divided by the total amount of the resource available is called
B a. Activity driver c. Cost object
b. Consumption ratio d. Sustaining activity
19. Syria Inc. produces three products. Production and cost information is as follows:
Model Y Model O Model U
Units produced 2,000 6,000 12,000
Direct labor hours 4,000 2,000 4,000
Number of setups 100 150 250
What would be the consumption ratio for the number of setups?
Y O U Y O U
B a. 40% - 20% - 40% c. 10% - 30% - 60%
b. 20% - 30% - 50% d. Some other numbers
Items 20 and 21 are based on the following information
Zaire Company is preparing its annual profit plan. The controller estimates the amount of overhead that should be
allocated to the individual product lines from the information given as follows:
Wall Mirrors Specialty Windows
Units produced 25 25
Material moves per product line 5 15
Direct labor hours per unit 200 200
Budgeted materials handling costs P 50,000
20. Under a costing system that allocates overhead on the basis of direct labor hours, what would be the materials handling
costs allocated to one unit of wall mirrors?
B a. P 500 c. P 2,000
b. P 1,000 d. P 5,000
21. Under ABC, what would be the materials handling costs allocated to one unit of wall mirrors?
A a. P 500 c. P 1,500
b. P 1,000 d. P 2,500
22. Somalia Co. has used a traditional cost accounting system to apply quality control costs uniformly to all products at a
rate of 15% of direct labor cost. Monthly direct labor cost for its main product is P 30,000. In an attempt to distribute
quality control cost more equitably, Somalia is considering ABC. The monthly data shown below have been gathered for
the main product. The three activities are (1) income materials inspection, (2) in-process inspection, and (3) product
certification. Costs are to be allocated to each activity on the basis of cost drivers.
Activity Cost Driver Cost Rate Quantity for Main Product
(1) Number of types of materials P 12 per type 12 types
(2) Number of units P 0.14 per unit 17,500 units
(3) Number of orders P 77 per unit 30 orders
What is the monthly quality control cost assigned to the main product using ABC?
D a. P 150 per order c. P 404 lower than using the traditional system
b. P 4,500 d. P 404 higher than using the traditional system
23. Afghanistan Company uses ABC to compute product costs for external reports. The company has three activity centers
and applies overhead using predetermined overhead rates for each activity center. Estimated costs and activities for the
current year are presented below for the three activity centers:
Estimated overhead cost Expected activity
Activity 1 P 61,387 2,300
Activity 2 P 34,076 2,800
Activity 3 P 69,075 2,500
Actual costs and activities for the current year were as follows:
Actual overhead cost Actual activity
Activity 1 P 61,392 2,290
Activity 2 P 33,941 2,795
Activity 3 P 69,080 1,340
What was the amount of overhead over or under-applied for Activity 1 during the year?
B a. P 271.90 over-applied c. P 5.00 over-applied
b. P 271.90 under-applied d. P 5.00 under-applied
24. A company using activity-based overhead rates
D a. Will usually have higher budget variances than one using a single rate
b. Will usually have higher volume variances than one using a single rate
c. Cannot compute fixed and variable components of overhead cost
d. Should have better information for planning and control than one using a single rate
25. The use of activity-based costing normally results in
A a. Greater unit costs for low-volume products than is reported by traditional product costing
b. Lower unit costs for low-volume products than is reported by traditional product costing
c. Decreased setup costs being charged to volume products
d. Equalizing setup costs for all product lines
26. Predetermined overhead rates are based on activity measured by
D a. Actual overhead cost and actual activity c. Budgeted overhead cost and actual activity
b. Actual overhead cost and budgeted activity d. Budgeted overhead cost and budgeted activity
27. What is the numerator in computing a predetermined overhead rate?
A a. Budgeted manufacturing overhead cost c. Budgeted activity
b. Actual manufacturing overhead cost d. Fixed manufacturing overhead cost
28. What is the denominator in computing a predetermined overhead rate?
C a. Budgeted manufacturing overhead cost c. Budgeted activity
b. Actual manufacturing overhead cost d. Fixed manufacturing overhead cost
29. A predetermined overhead rate cannot be used
A a. If a company does not budget its overhead costs
b. By a company that uses job-order costing
c. In a multi-product company
d. By a highly automated company where labor is a minor part of product cost
30. Assigning overhead to jobs using a predetermined overhead rate is called
A a. Application c. Product costing
b. Budgeting d. Job-order costing
31. Angola applies overhead based on direct labor cost. It had budgeted factory overhead of P 500,000 and budgeted direct
labor of P 250,000. Actual overhead was P 525,000 while actual labor cost was P 270,000. Overhead was:
A a. Over-applied by P 15,000 c. Over-applied by P 25,000
b. Over-applied by P 20,000 d. Under-applied by P 20,000
32. Sudan Company applies overhead at P 4 per machine hour. During March, it worked 10,000 hours and over-applied
overhead by P 3,000. Actual overhead was:
C a. P 43,000 c. P 37,000
b. P 40,000 d. P 35,000
33. Sahara Company applied overhead at P 6 per direct labor hour. In March, Sahara incurred overhead of P 144,000.
Under-applied overhead was P 6,000. How many direct labor hours did Sahara work?
C a. 25,000 c. 23,000
b. 24,000 d. 22,000
34. Machine hours used to set the predetermined overhead rate were 50,000, actual hours were 48,000, and overhead
applied was P 120,000. Budgeted overhead for the year was:
D a. P 115,200 c. P 120,000
b. P 118,000 d. P 125,000
35. The appropriate method for the disposition of under-applied or over-applied factory overhead
D a. Is to cost of goods sold only
b. Is to finished goods inventory only
c. Is apportioned to cost of goods sold and finished goods inventory
d. Depends on the significance of the amount
36. A report that measures financial and non-financial performance measures for various units in a single report is a(n):
A a. Balanced scorecard c. Imbalanced scorecard
b. Financial report scorecard d. Unbalanced scorecard
37. A balanced scorecard is primarily concerned with
B a. Staff c. Systems
b. Strategy d. Structure
38. Measures of those aspects of the firm’s performance that are crucial to its competitive advantage, and therefore to its
success, are termed:
B a. Cost targets c. Operational controls
b. Critical success factors d. Cost and activity drivers
39. Which one of the following is not one of the perspectives on the business into which critical success factors are commonly
grouped in the balanced scorecard?
B a. Employee innovation and learning c. Internal business processes
b. Competitor business strategies d. Financial performance
40. In balanced scorecard, a survey of employee satisfaction is a potential measure in which of the four perspectives?
D a. Financial c. Internal business processes
b. Customer d. Learning and growth
41. Which is considered to be a performance measurement that is a non-financial rather than a financial measure?
C a. Return on investment c. Customer satisfaction
b. Economic valued-added d. Profit margin
42. Which of the following is an example of an efficiency measure?
C a. The rate of absenteeism
b. The goal of becoming a leader manufacturer
c. The number of insurance claims processed per day
d. The rate of customer complaints
43. Which performance measure would be part of those used for internal business processes perspective?
A a. Cycle time c. Hours of training per employee
b. Employee satisfaction d. Customer retention
44. Which of the following represents value-added time in the manufacturing cycle?
D a. Inspection time. c. Move time.
b. Queue time. d. Process time.
Items 45 to 47 are based on the following information
China Manufacturing Corporation has the following information:
Moving time 8 days
Inspection time 2 days
Processing time 10 days
Storage time 30 days
81. Which of the following is a characteristic of just-in-time (JIT) inventory management systems?
D a. JIT users determine the optimal level of safety stocks
b. JIT is applicable only to large companies
c. JIT does not really increase overall economic efficiency because it merely shifts inventory levels further
up the supply chain
d. JIT relies heavily on good-quality materials
82. All of the following are potential financial benefits of JIT, EXCEPT:
A a. Reducing the risk of obsolescence
b. Reducing manufacturing lead time
c. Lower investments in inventories
d. Lower investments in plant space for inventories
83. Which of the following do just-in-time (JIT) operations try to eliminate?
B a. Discretionary fixed costs
b. Non-value-adding costs
c. Avoidable costs
d. Direct costs
84. Well-implemented just-in-time production and purchasing techniques
B a. Result in large stockpiles of inventory to keep production running
b. Strengthen a company’s ability to compete in the marketplace
c. Increase a reliance on long-term customer forecasts
d. Reduce a company’s competitive edge
85. When product demand exceeds production capacity, what is the first step that managers should take?
C a. Change the throughput of the operations
b. Spend money to eliminate the bottleneck
c. Focus their efforts on constraint identification
d. Apply activity-based management to solve the problem
86. Under Theory of Constraints (TOC), improvement efforts should be focused
A a. Work center that is a constraint
b. Work center that has no constraint
c. Cost center that incurs the highest costs
d. Cost center that has least number of constraints
87. The immediate goal of a TOC analysis is to
B a. Minimize direct materials cost
b. Maximize contribution margin through the constraint
c. Maximize the efficiency of the entire production process
d. Smooth production flow to eliminate backup in the system
88. Under TOC,
C a. No company has constraints
b. Improvement efforts should be focused on non-constraints
c. Efforts that would improve output of a workstation shall be focused on the constraints
d. A company that wants to improve its operation shall focus on workstation with the highest productive
capacity
89. An organization will directly gain all of the following benefits from ToC methodology, EXCEPT:
D a. Reduced bottlenecks
b. Increase profitability
c. Improved quality of products and services
d. Assessment of long-term product profitability
90. It refers to the efforts of a company to employ sustainable business practices regarding its employees and environment.
C a. Value chain analysis
b. Environmental accounting
c. Total quality management
d. Corporate social responsibility
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