Management Advisory Services Preliminary Examination

Kings College of the Philippines

NAME: P.E. Score:

Instructions: D. change but direction cannot be determined.

#1-7: Write TRUE if the statement is correct or FALSE if E. none of the above
otherwise 12. In calculating the break-even point for a multi-product
#8-65: Encircle the letter of the correct answer. company, which of the following assumptions are
commonly made?
1. Objectivity requires a practitioner to be, among other I. Selling prices are constant.
things, honest and candid within the constraints of client II. Variable expenses are constant per unit.
confidentiality. III. The sales mix is constant.
2. When carrying out their planning activities, managers A. I and II
obtain feedback to ensure that the plan is actually B. I and III
carried out and is appropriately modified as C. II and III
circumstances change. D. I, II, and III
3. Manufacturing overhead is an indirect cost with respect E. None of the above
to units of product. 13. Operating Income can be properly obtained thru the
4. Committed fixed costs cannot be reduced to zero following computations except:
without seriously impairing the company's long term A. Contribution Margin-Fixed Costs
goals. B. Total revenues-Total Expenses
5. The contribution income statement organizes costs C. Margin of Safety x Contribution Margin ratio
according to behavior. D. Gross Margin-Operating Expenses
6. When viewed over the long term, accumulated net E. None of the Above
operating income will be the same for variable and 14. If fixed costs rise while other variables stay constant
absorption costing if there are no ending inventories at A. The breakeven point rises
the end of the term. B. Degree of Operating Leverage increases
7. The contribution margin represents the amount available C. Total profit declines
to contribute toward covering fixed expenses and toward D. All of these (A, B, and C)
profits for the period. E. Only A and C
8. Compared to financial accounting, managerial accounting 15. Primary Concepts under activity based management
places more emphasis on: include the following, except:
A. the flexibility of information. A. Activity analysis
B. the precision of information. B. Total quality Management
C. the timeliness of information. C. Activity based costing
D. both A and C above. D. Cost Driver Analysis
E. both B and C above. E. Answer not given
9. Which of the following is true regarding the theory of 16. Which is a purpose of standard costs?
constraints? A. Replace budgets
A. The theory of constraints does not apply to B. Serve as basis for product costing for external
companies with multiple products because of reporting
capacity measurement difficulties. C. Eliminate accounting for under or over applied
B. In any profit-seeking company, there must be at factory overhead at end of period
least one constraint. D. Simplify costing procedures and expedite cost
C. Constraints or bottlenecks stop organizations from reports
selling an infinite number of units or services. E. Both a and c
D. both A and B above. 17. Which factor may not be considered in deciding whether
E. both B and C above. to investigate a variance or not?
10. Product costs appear on the balance sheet: A. The amount of variance and the cost of investigation
A. only if goods are partially completed at the end of B. Type of variance, whether favorable or unfavorable
the period. C. The trend of variance overtime
B. only if goods are unsold at the end of a period. D. The possibility that investigation will eliminate future
C. only if goods are partially completed or are unsold at occurrence of the variance
the end of a period. E. All should be considered
D. only in merchandising firms. 18. Which of the following is true?
E. None of the above A. The management information system is part of an
11. If a company increases its selling price by P2 per unit due organization’s overall accounting system
to an increase in its variable labor cost of P2 per unit, the B. The cost accounting system is part of an
break-even point in units will: organization’s overall accounting system
A. decrease. C. Management accounting accumulates cost
B. increase. information for both cost accounting and financial
C. not change. accounting

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Kings College of the Philippines
D. Two primary hallmarks of cost and management C. Is a way of understanding how a company generates
accounting are standardization of procedures and its output
use of generally accepted accounting principles D. Determines what is done, by whom, at what cost in
E. None of the above time and other resources, and the value added by
19. Which of the statement is incorrect? each activity
A. In a variable costing income statement, variable E. Both B and D
selling and administrative expenses are used both in 25. One of the major assumptions limiting the reliability of
the computation of contribution margin and break-even analysis is that
operating income A. Unit variable costs and total fixed costs will vary
B. When using a variable costing system, the directly with the change in units sold
contribution margin discloses the excess of revenues B. There is a relevant range in which the various
over variable costs. relationships are true for a given period of time
C. In an income statement prepared as an internal C. Productive efficiency will increase as more units are
report using the variable costing method, fixed FOH produced
is used in the computation of operating income and D. Changes in inventory are significant in amount
contribution margin. E. None of the above
D. Using absorption costing, fixed manufacturing 26. A calculation used in CVP analysis is the break-even
overhead costs are best described as indirect point. At this point, total revenue equals total costs.
product cost. Beyond the break-even point, operating income will
E. Both C and D increase by the
20. The following costs may be controllable at certain levels A. Variable cost per unit for each additional unit
of management within a manufacturing concern except, B. Selling price per unit for each additional unit
A. Insurance costs of plant and equipments C. Contribution margin per unit for each additional unit
B. Power rates imposed by the electric cooperative or D. Gross Profit per unit for each additional unit
the power supplier in the area E. Undetermined
C. Basic salary of factory workers
D. Monthly maintenance cost of factory equipment 27. Macks Company sells a single product at a selling price of
covered by an annual contract P15.00 per unit. Last year, the company's sales revenue
E. All of the above are controllable was P225,000 and its net operating income was P18,000.
21. The performance of investment center should be If fixed expenses totaled P72,000 for the year, the break-
evaluated based on even point in unit sales was
A. Amount of investment A. 15,000 D. 13,100
B. Return on Investment B. 9,900 E. 12,000
C. Residual Value of Investment C. 14,100
D. Average Investment
E. Both B and C 28. Sales in Macks Company declined from P100,000 per
22. Which of the following statements about a balanced year to P80,000 per year, while net operating income
scorecard is incorrect? declined by 300 percent. Given these data, the company
A. A primary purpose of a balanced scorecard is to give must have had an operating leverage of:
managers a way to forecast future performance. A. 15 D. 30
B. In a balanced scorecard, measurements should be B. 7 E. 12
directly linked to organizational strategy and values C. 2.7
C. A balanced scorecard can be used at multiple
organizational levels by redefining the categories 29. During January, a company’s direct materials costs for
and measurements the production of Product X were as follows:
D. Using the balanced scorecard approach, an
organization evaluates managerial performance Std. unit price P12.50
based on single ultimate measure of operating Std. qty allowed for actual 6,300
production units
results, such as residual income
Actual unit purchase price P13
E. All of the above are correct Qty. Purchased and used for 6,900
23. Siomitos make bite-size siomai. Which of the following actual production units
could be a constraint at Siomitos? The total materials cost variance is
A. The siomai steamer
B. The workers who mix the ingredients A. P89,700 unfavorable
C. The workers who prepare the siomai for steaming B. P78,750 favorable
D. Both B and C C. P10,950 unfavorable
E. Any of A, B and C D. P7,500 unfavorable
24. Value engineering E. P7,500 favorable
A. Is a systematic approach to reaching targeted cost
levels during the value chain analysis 30. A manufacturer of portable DVD players buys
B. Is a basis for cost planning and product costing components from subcontractors for assembly into DVD
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Management Advisory Services Preliminary Examination
Kings College of the Philippines
players. Each player requires 6 units of Part A, which has D. P12,500 underapplied
a standard cost of P100 per unit. During January, the E. P15,000 overapplied
company’s record showed the following with respect to
Part A: 34. The following labor standards have been established for
a particular product:
Purchases 15,000 units
Purchase Price P110/unit Std. labor-hours per unit of output ........ 8.0 hrs
Units of players produced 2,000
Std. labor rate ............................. P13.10 per hr
Units of Part A used in 12,400
production
For the month of January, the company incurred The following data pertain to operations concerning the
materials usage variance of product for the last month:
A. P40,000 unfavorable Actual hours worked .................... 4,000 hours
B. P40,000 favorable Actual total labor cost ........................ P53,000
C. P150,000 favorable Actual output ................................... 400 units
D. P150,000 unfavorable
E. P1,200,000 favorable What is the labor efficiency variance for the month?
A. P10,600 Unfavorable
31. Macks Company’s standard cost system contains the B. P11,080 favorable
following overhead costs, computed based on a monthly C. P11,080 unfavorable
normal volume of 25,000 units or 50,000 direct labor D. P10,480 unfavorable
hours: E. P10,480 favorable

Variable FOH P12 35. Macks, Inc. has provided the following data for last year's
Fixed FOH 8 operations:
Total P20
The following information pertains to the month of Sales .......................................................... P100,000
January 2021 Net operating income ................................ P6,000
Average operating assets ........................... P40,000
Actual FOH costs incurred Stockholders’ equity .................................. P25,000
- Variable P316,680
Minimum required rate of return ............... 10%
- Fixed 225,000
Actual Production 26,000 units
Actual Direct Labor Hours Worked 54,600 Macks’ residual income is:
The total FOH cost Variance is: A. P2,000
B. P4,000
A. P25,000 unfavorable C. P3,500
B. P17,000 unfavorable D. P2,500
C. P21,680 unfavorable E. P4,500
D. P21,680 favorable
E. P4,680 unfavorable 36. The Northern Division sells goods internally to the
Southern Division of the same company. The prevailing
32. Based on the above data, using the two-variance external price of Northern Division’s product is P500 per
method, the controllable variance is unit plus transportation. It costs P100 per unit to
A. P21,680 unfavorable transport the goods to Southern.
B. P4,680 unfavorable
C. P4,680 favorable Northern incurs the following costs per unit in producing
D. P29,680 unfavorable the goods:
E. P15,600 unfavorable
Materials P250
Direct Labor 75
33. Macks Corporation uses a predetermined FOH rate based
Storage and handling 60
on direct labor hours. For the month of January, the Total P385
following are the budgeted and actual data for Macks If the market-based transfer pricing method is to be
Corp. used, the transfer price must be set at

Budgeted FOH (based on budgeted volume P150,000 A. P500

of 50,000 direct labor hrs) B. P600
Actual FOH (for actual DLH of 55,000 hrs) P162,500
C. P385
If FOH is applied to direct labor hours, how much was the
D. P325
over applied or under applied FOH?
E. P825
A. P2,500 overapplied
B. P2,500 underaplied 37. Division Pogi of Macks Company is currently operating at
C. P12,500 overapplied full capacity of 5,000 units. It sells all its production in a
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Management Advisory Services Preliminary Examination
Kings College of the Philippines
perfectly competitive market for P250 per unit. Its the last period was P60,000 and the direct materials cost
variable cost is P170 per unit, while its total fixed cost was P30,000, the direct labor cost was:
amounts to P300,000.
A. P90,000
The minimum transfer price that should be charged to B. P20,000
Division MejoPogi of Macks Company for each unit of product C. P60,000
transferred by Division Pogi is D. P40,000
E. P50,000
A. P230
B. P170
43. Macks Company manufactures wooden rocking chairs. CF
C. P250
identified the following three material costs in its
D. P470
production process for January: P100, 000 for springs for
E. P400
the rocking mechanism; two springs at a cost of P10 each
are used in each chair; P1, 700 for glue used as needed
38. Macks Company sells a single product for P180 per unit.
from one gallon containers; and P500 for stain used to
Last year, it sold 120,000 units and earned profit before
touch up spots on the chairs. The total cost that should
tax of P300,000. Fixed costs amounted to P1,500,000.
have been assigned to indirect material for
Next year, fixed costs is expected to increase by 40%.
January was:
What should the selling price be next year to make the
A. P102,200
same amount of profit before tax of P300,000?
B. P500
A. P180
C. P2,200
B. P252
D. P1,700
C. P5
E. P2,210
D. P185
E. P190
44. A manufacturing company prepays its insurance
coverage for a three-year period. The premium for the
39. Macks Corp. has sales of P300,000, a variable cost ratio
three years is P3, 000 and is paid at the beginning of the
of 80% and a margin of safety of P120,000. What is
first year. Three-fourths of the premium applies to
Macks’ fixed cost?
factory operations and one-fourth applies to selling and
A. P144,000
administrative activities. What amounts should be
B. P24,000
considered product and period costs respectively for the
C. P60,000
first year of coverage?
D. P20,000
E. P36,000 Product Period
A) P1,000 0
40. During the year, Macks Corporation produced 500 units B) P250 P750
of a new product. The new product’s variable and fixed C) P2,250 P750
manufacturing cost per unit were P5 and P3, D) P3,000 0
respectively. At the end of the period, the new product’s E) P750 P250
inventory consisted of 80 units.
45. Macks Company's quality cost report is to be based on
What would be the change in the peso amount of inventory the following data:
at the end of the period if absorption costing were used Supervision of testing and inspection activities ---P29,000
instead of variable costing? Warranty repairs and replacements -----------------P12,000
Net cost of scrap------------------------------------------ P53,000
A. P640 increase Test and inspection of incoming materials ---------P23,000
B. P640 decrease Technical support provided to suppliers-------------P71,000
C. P400 increase Disposal of defective products ------------------------P94,000
D. P240 increase Quality data gathering, analysis, and reporting----P47,000
E. 0 Liability arising from defective products ------------P75,000
Depreciation of test equipment -----------------------P22,000
41. Macks Company wants to establish a selling price that
will yield a gross margin of 30% on sales of a product What would be the total appraisal cost appearing on the
whose cost is P21. How much should the selling price be? quality cost report?
A. P30.00 A. P45,000
B. P27.30 B. P52,000
C. P70.00 C. P25,000
D. P21.30 D. P74,000
E. P37.15 E. P76,000

42. Macks Company's direct labor is 40 percent of its

conversion cost. If the manufacturing overhead cost for
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Management Advisory Services Preliminary Examination
Kings College of the Philippines
46. At a sales level of P365,000, Thor Company's gross E. P85,200
margin is P20,000 less than its contribution margin, its
net operating income is P70,000, and its selling and 50. The gross margin for Macks Company for the first quarter
administrative expenses total P130,000 At this sales of last year was P325,000 when sales were P700,000. The
level, its contribution margin would be: beginning inventory of finished goods was P60,000, and
A. P295,000 the ending inventory of finished goods was P85,000.
B. P180,000 What was the cost of goods manufactured for the first
C. P220,000 quarter?
D. P200,000 A. P375,000.
E. P345,000 B. P350,000.
C. P400,000.
47. Macks Company is a small merchandising firm. During D. P385,000.
the next month, the company expects to sell 500 units. E. P325,000
The company has the following revenue and cost
structure: 51. On January 1, Deadpool Company has 6,500 units of
Selling price per unit ..................................................... P60 Product Easy on hand. During the year, the company
Cost per unit ................................................................. P15 plans to sell 15,000 units of Product Easy, and plans to
Sales commission ..........................................…10% of sales have 5,000 units on hand at year end. How many units of
Advertising expense ............................... P5,000 per month Product Easy must be produced during the year?
Admin expense........... P3,000 per month plus 20% of sales
The expected contribution margin next month is: A. 13,500
A. P13,500 B. 16,500
B. P5,500 C. 15,000
C. P7,300 D. 20,000
D. P22,500 E. 5,000
E. P13,800
52. Chill Company has two divisions, S and T. The company's
48. Batman Company, which has only one product, has overall contribution margin ratio is 30% when sales in the
provided the following data concerning its most recent two divisions total P750,000. If variable expenses are
month of operations: P450,000 in Division S, and if Division S's contribution
Selling price ................................................................. P63 margin ratio is 25%, then sales in Division T must be:
Units in beginning inventory ........................................... 0 A. P75,000
Units produced ......................................................... 4,600 B. P220,000
Units sold ................................................................. 4,400 C. P225,000
Units in ending inventory ............................................ 200 D. P300,000
E. P150,000
Variable costs per unit:
Direct materials ........................................................... P20 53. Last year a company had sales of P400,000, a turnover of
Direct labor ..................................................................P16 2.4, and a return on investment of 36%. The company's
Variable manufacturing overhead ………………………........ P2 net operating income for the year was:
Variable selling and administrative ………………………...... P4 A. P144,000
B. P120,000
Fixed costs: C. P80,000
Fixed manufacturing overhead ............................ P36,800 D. P110,000
Fixed selling and administrative ............................P48,400 E. P60,000

What is the total period cost for the month under the 54. Kings Company has two sales areas: Bet and Cat. During
variable costing approach? April, the contribution margin in the Bet was P90,000, or
A. P66,000 30% of sales. The segment margin in the Cat was
B. P36,800 P25,000, or 10% of sales. Traceable fixed expenses were
C. P102,800 P30,000 in the Bet and P15,000 in the Cat. Kings
D. P85,200 Company reported a total net operating income of
E. P122,000 P52,000. The total sales for Kings Company were:
A. P983,333
49. Based on the previous problem, what is the total period B. P430,000
cost for the month under the absorption costing C. P550,000
approach? D. P480,000
A. P102,800 E. P430,000
B. P66,000
C. P36,800 55. The following information pertains to Kings Company's
D. P48,400 direct labor for January:
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Kings College of the Philippines
Standard direct labor-hours ................................... 21,000 inventory of raw materials of P8,000 and an ending
Actual direct labor-hours ....................................... 20,000 inventory of raw materials of P6,000, what must be the
Favorable direct labor rate variance ...................... P8,400 total for direct labour?
Standard direct labor rate per hour ......................... P6.30 A. P34,000.
What was Kings’ total actual direct labor cost for B. P38,000.
January? C. P36,000.
A. P117,600 D. P45,000.
B. P118,000
C. P134,000
D. P134,400 -----------------------End-----------------------
E. P130,400
We don’t grow when something is easy. We grow when
something is challenging.
56. The following information relates to the break-even point
at Keso Corporation: Good Luck!
Sales pesos ...................... P120,000
Total fixed expenses ......... P30,000
If Keso wants to generate net operating income of
P12,000, what will its sales pesos have to be?
A. P132,000
B. P136,000
C. P168,000
D. P162,000
E. P176,000

57. The following information relates to Hulk Corporation:

Sales at the break-even point ......................... P312,500
Total fixed expenses ....................................... P250,000
Net operating income ..................................... P150,000
What is Hulk’s margin of safety?
A. P62,500
B. P187,500
C. P162,500
D. P100,000
E. P212,500

58. Company X sold 25,000 units of product last year. The

contribution margin per unit was P2, and fixed expenses
totaled P40,000 for the year. This year fixed expenses are
expected to increase to P45,000, but the contribution
margin per unit will remain unchanged at P2. How many
units must be sold this year to earn the same net
operating income as was earned last year:
A. 22,500
B. 27,500
C. 35,000
D. 2,500
E. 3,000

59. Aquaman Company's direct labour cost is 25% of its

conversion cost. If the manufacturing overhead cost for
the last period is P45,000 and the direct materials cost is
P25,000, what is the direct labour cost?
A. P15,000.
B. P60,000.
C. P33,333.
D. P20,000.

60. During the month of May, Bennett Manufacturing

Company purchases P43,000 of raw materials. The
manufacturing overhead totals P27,000 and the total
manufacturing costs are P106,000. Assuming a beginning
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