MANAGEMENT ADVISORY SERVICES BATCH MAY 2022

PREWEEK MATERIALS

1. Which of the following characterizes MAS engagements?

I. Services are limited only to accounting and finance.
II. Engagements are non-recurring.
III. Services requires rendition of decision for the client. recommends only
IV. Human relations play a vital role on the engagement.
A. II, III and IV only D. II and IV only
B. I, II and IV only E. II and III only
C. III and IV only
2. Which of the following is primarily related to management accounting?
(1) Prospective and future information.
(2) External and government reporting.
(3) GAAP and PFRS
(4) Benchmarking
A. 1 and 4 only D. 2 and 3 only
B. 2 and 4 only E. None from 1 to 4
C. 1, 2 and 4 only
operations
3. Which of the following is a line position rather than a staff position?
I. Head legal counsel of San Miguel Corporation
II. Store head manager of Jolibee Foods Corporation
III. New security guard of one of the stores of SM Supermalls
A. I and II D. I, II and III
B. II and III E. Answer not given
C. I and III
4. Which of the following is not within the controller’s function?
I. Banking and custody of funds III. Risk management
II. Protection of assets
A. I and II D. I, II and III
B. II and III E. Answer not given
C. I and III
5. Which of the following is a variable cost?
Sales volume 1,000 units 2,000 units
Maintenance costs P 4,000 P 4,000
Indirect labor 6,000 12,000
Utilities expense 8,000 13,000
Insurance costs 3,000 6,000
A. Maintenance costs and insurance costs
B. Insurance costs and utilities expense
C. Indirect labor only
D. Indirect labor and insurance costs
E. All of the costs
6. S1: Least-square method cannot detect outliers by just applying its procedures on segregating
mixed costs.
S2: High-low method is being criticized by just choosing two points out of the total points available.
This method provides precise cost estimation.
S3: A correlation of -0.90 has a stronger relationship of dependent and independent variables as
compared with a correlation of 0.88.
A. True, false, true D. False, true, false
B. False, false, true E. True, true, true
C. True, true, false

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Preweek Materials (Batch May 2022)
7. BANE CORP. budgets its total production costs at P220,000 for 75,000 units of output and P275,000
for 100,000 units of output. Since additional facilities are needed to produce 100,000 units, fixed
costs are budgeted at 20% more than for 75,000 units. What is BANE’s budgeted variable cost per
unit of output? 100 000
A. P1.10 C. P2.20
B. P1.20 D. P2.75
8. Which of the following statements is True?
A. A shift in sales mix toward less profitable products will cause the overall break-even point to fall.
B. One way to compute break-even point is to divide total sales by the cost margin ratio.
C. Once the break-even point has been reached, net income will increase by the unit contribution
margin for each additional unit sold.
D. As sales exceed the break-even point, a high contribution margin ratio will result in lower profits
than will a low contribution margin ratio.
9. GERMANY INC. has a degree of operating leverage of 4. It’s sales for the upcoming year is P500,000.
What are GERMANY’s breakeven sales?
A. P375,000 C. P2,000,000
B. P125,000 D. P 500,000
Use the following information in answering the next item(s):
GERMANY INC. produces two kinds of pens: marker pens and ballpens. They are being produced and
sold at 3:2 ratio. The following information are related to the two products:
MARKER PENS
Selling price 40 50
Unit variable costs 20 30
GERMANY’s monthly fixed costs are P100,000 CM = 20 20
10. What are the annual breakeven sales of GERMANY?
A. P220,000 C. P2,640,000
B. P217,391 D. P2,608,696
11. How many monthly units of PENS should GERMANY shall sell if it wants a before tax return on sales of
10%?
A. 3,490 units C. 2,564 units Fixed cost percentage = WACMR - ROS
B. 1,567 units D. 6,401 units
12. One of the purposes of standard costs is to
A. Minimize the use of budgets.
B. Control costs and motivate and measure efficiencies.
C. Avoid reliance upon actual costs.
13. The Tarn Corporation makes a variety of leather goods. It uses standards costs and a flexible budget
to aid planning and control. Budgeted variable overhead at a 45,000-direct labor hour level is P
27,000. During April material purchases were P 241,900. Actual direct labor costs incurred were P
140,700. The direct-labor usage variance was P 5,100 unfavorable. The actual average wage rate was
P 0.20 lower than the average standard wage rate. The company uses a variable overhead rate of
20% of standard direct-labor cost for flexible budgeting purposes. Actual variable overhead for the
month was P 30,750. What were the standard hours allowed during the month of April?
A. 51,950 C. 48,550
B. 56,925 D. 60,320
14. Which one of the following statements is correct regarding absorption costing and variable costing?
A. Overhead costs are treated in the same manner under both costing methods.
B. If finished goods inventory increases, absorption costing results in higher income.
C. Variable manufacturing costs are lower under variable costing.
D. Gross margins are the same under both costing methods.
Use the following information in answering the next item(s):
The following information was extracted from the first year absorption-based accounting records of
BENGUET CORP.
Total fixed costs incurred P100,000
Total variable costs incurred 50,000
Total period costs incurred 70,000
Total variable period costs incurred 30,000
Units produced 20,000
Units sold 12,000
Unit sales price P12
15. What is Cost of Goods Sold for BENGUET CORP.’s first year?
A. P80,000 Compute unit cost first
B. P90,000
C. P48,000
D. can’t be determined from the information given

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Preweek Materials (Batch May 2022)
16. If BENGUET CORP. had used variable costing in its first year of operations, how much income (loss)
before income taxes would it have reported?
A. (P6,000) C. P26,000
B. P54,000 D. P2,000
17. Based on variable costing, if BENGUET CORP. had sold 12,001 units instead of 12,000, its income
before income taxes would have been
A. P9.50 higher C. P8.50 higher
B. P11.00 higher D. P8.33 higher
18. Determine the following statements whether true or false:
I. The longer the time period covered by a budget, the more useful the budget will be for
controlling operations.
II. The budget for a retailer is likely to be more complex than that for a manufacturer because a
retailer has a wider variety of customers.
III. A purchases budget is normally prepared after the company has forecast how much cash it will
have available to pay for purchases.
IV. The purchases budget is prepared before the sales budget because the company cannot
estimate what it will sell until it has some idea of what will be on hand.
A. B. C. D.
Statement I False True True True
Statement II False False False True
Statement III False False False True
Statement IV False True False True
Use the following information in answering the next item(s):
BEECH CORP. is located in a small town in the rural west. Data regarding the store's operations
follow:
• Sales are budgeted at P290,000 for November, P310,000 for December, and P210,000 for
January.
• Collections are expected to be 65% in the month of sale, 33% in the month following the sale,
and 2% uncollectible.
• The cost of goods sold is 80% of sales.
• The company purchases 70% of its merchandise in the month prior to the month of sale and
30% in the month of sale. Payment for merchandise is made in the month following the
purchase.
• Other monthly expenses to be paid in cash are P21,100.
• Monthly depreciation is P21,000.
• Ignore taxes.
Statement of Financial Position
October 31
Assets:
Cash P 25,000
Accounts receivable
(net of allowance for uncollectible accounts) 77,000
Inventory 162,400
Property, plant and equipment
(net of P624,000 accumulated depreciation) 1,026,000
Total assets P1,290,400

Liabilities and Stockholders’ Equity:

Accounts payable P 239,000
Common stock 740,000
Retained earnings 311,400
Total liabilities and stockholders’ equity P1,290,400
19. The excess (deficiency) of cash available over disbursements for December would be:
A. P46,600 C. P13,700
B. P19,200 D. P32,900
20. The net income for December would be:
A. P13,700 C. P40,900
B. P32,900 D. P19,900
21. The accounts receivable balance, net of uncollectible accounts, at the end of December would be:
A. P102,300 C. P83,200
B. P198,000 D. P108,500

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Preweek Materials (Batch May 2022)
22. Collins Company uses 12,000 units of a part in its production process. The costs to make a part are:
direct material, P15; direct labor, P27; variable overhead, P15; and applied fixed overhead, P32.
Eichholtz has received a quote of P60 from a potential supplier for this part. If Collins buys the part,
75 percent of the applied fixed overhead would continue. Collins Company would be better off by
A. P30,000 to manufacture the part. C. P60,000 to buy the part.
B. P348,000 to buy the part. D. P216,000 to manufacture the part.
23. Tyler Company currently sells 1,000 units of product M for P1 each. Variable costs are P0.40 and
avoidable fixed costs are P400. A discount store has offered P0.80 per unit for 400 units of product M.
The managers believe that if they accept the special order, they will lose some sales at the regular
price. Determine the number of units they could lose before the order became unprofitable.
A. 267 units C. 600 units
B. 500 units D. Some other number.
24. P Co. has only 25,000 hours of machine time each month to manufacture its two products. Product X
has a contribution margin of P50, and Product Y has a contribution margin of P64. Product X requires
5 hours of machine time, and Product Y requires 8 hours of machine time. If P wants to dedicate 80
percent of its machine time to the product that will provide the most income, P will have a total
contribution margin of
A. P250,000. C. P210,000.
B. P240,000. D. P200,000.
25. Which of the following statements about investment decision models is true?
A. The discounted payback rate takes into account cash flows for all periods.
B. The payback rule ignores all cash flows after the end of the payback period.
C. The net present value model says to accept investment opportunities when their rates of return
exceed the company's incremental borrowing rate.
D. The internal rate of return rule is to accept the investment if the opportunity cost of capital is
greater than the internal rate of return.
Use the following information in answering the next item(s):
RUBY INC. is considering on replacing its old machine with a new, high-performing machine.
Information in relation to this decision is as follows:
Old Machine New Machine
Cost 200,000 280,000
Residual value 20,000 20,000
Useful life 10 years 8 years
The old machine was bought 4 years ago and now has a current market value of P100,000. If the new
machine will be bought, the company will save P40,000 in cash operating costs but increase in
working capital of P5,000 is required. If the new equipment is not purchased, repair of the old unit
will have to be made at an estimated cost of P10,000. Both machines are depreciated under straight-
line method. The tax rate and cost of capital is 30% and 12%, respectively.
26. For capital budgeting purposes, what is the net investment in the new, high-performing machine?
A. P186,400 C. P169,600
B. P185,000 D. P148,000
27. What is payback period?
A. 4.49 years C. 5.76 years
B. 5.24 years D. None from the choices
28. Compute the new, high-performing machine’s net present value.
A. P1,200 C. P28,025
B. P15,892 D. P6,729
29. Mondale Motors has forecasted the following year-end balance sheet:
Assets: Liabilities and Equity:
Cash and marketable securities P 300 Notes payable P 800
Inventories 500 Accounts payable 400
Accounts receivable 700 Total current liabilities 1,200
Total current assets P1,500 Long-term debt 3,000
Net fixed assets 5,000 Stockholders’ equity 2,300
Total assets P6,500 Total liabilities and equity P6,500
The company also forecasts that its days sales outstanding (DSO) on a 360-day basis will be 35 days.
Now, assume instead that Mondale is able to reduce its DSO to the industry average of 30 days
without reducing its sales. Under this scenario, the reduction in accounts receivable would generate
additional cash. This additional cash would be used to reduce its notes payable. If this scenario were
to occur, what would be the company’s current ratio? (M1**) AR TO = 360/35 = 10.29 New CA = 1500 - 100
A. 1.35 D. 1.17 Sales = 10.29 x P700 New CL = 1200 - 100
New current ratio = 1.27
B. 1.27 E. 2.45 New AR = P7200 x 30/360 = 600
Old AR = 700
C. 1.00 Decrease = 100

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Preweek Materials (Batch May 2022)
30. Delerico Manufacturing Company makes a variety of backpacks. The activity centers and budgeted
information for factory overhead for the year are
Activity Center Overhead Costs Cost Driver Activity Center Rate
Materials Handling P 3,000,000 Weight of materials P 3 00 per pound
Cutting 13,000,000 Number of shapes P30 00 per shape
Assembly 46,000,000 Direct labor hours P120 00per labor hour
Sewing 12,000,000 Machine hours P 80 00 per machine hour
Two styles of backpacks were produced in December, the EasyRider and the Ovenighter The quantities and
other operating data for the month are
Easy Rider Overnighter
Direct materials costs P150,000 P200,000
Direct labor cost P300,000 P 50,000
Direct materials weight in pounds 50,000 15,000
Number of shapes 35,000 15,000
Assembly direct labor hours 7,500 1,200
Sewing machine hours 12,500 1,800
Units produced 5,000 1,000
Calculate the cost per unit for each backpack.
a. EasyRider. P620; Overnighter. P783 c. EasyRider, P783; Overnighter, P620
b. EasyRider, P1,232; Overnighter, P1,240 d. EasyRider, P710; Overnighter, P1,033
31. Which of the following segment performance measures will increase if there is a decrease in the selling
expenses for that segment?
Return on Investment Residual Income
A. Yes Yes
B. No Yes
C. Yes No
D. No No
32. The Valve Division of Fidelity Company produces a small valve that is used by various companies as a
component part in their products. Fidelity Company operates its divisions as autonomous units,
giving its divisional manager great discretion in pricing and other decisions. Each division is expected
to generate a rate of return of at least 14% on its operating assets. The Valve Division has average
operating assets of P700,000. The valves are sold for P5. Variable costs are P3 per valve, and fixed
costs total P462,000 per year. The Division has a capacity of 300,000 units.
How many valves must the Valve Division sell each year to generate the desired rate of return on its
assets?
A. 255,885 C. 280,000
B. 265,000 D. 350,000
33. Division P of Turbo Corporation has the capacity for making 75,000 wheel sets per year and regularly
sells 60,000 each year on the outside market. The regular sales price is P100 per wheel set, and the
variable production cost per unit is P65. Division Q of Turbo Corporation currently buys 30,000 wheel
sets (of the kind made by Division P) yearly from an outside supplier at a price of P90 per wheel set.
If Division Q were to buy the 30,000 wheel sets it needs annually from Division P at P87 per wheel
set, the change in annual net operating income for the company as a whole, compared to what it is
currently, would be:
A. P135,000. C. P600,000.
B. P225,000. D. P750,000.
34. In cash management, which of the following statements is false?
A. Capital costs, delinquency costs, and default costs are costs associated with cash management.
B. Short costs, long costs, and procurement costs are costs associated with optimal cash balance
model approach
C. Obtaining financing services and controlling cash flow are some of the major functions of cash
management.
D. Funds sourcing and custodianship must be done at the lowest possible cost, where excess funds
must be invested for a return that is best in the market.
35. Hep Inc., has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Hep has
the opportunity to invest the money at 24% per annum. The company spends, on the average, P40
for every cash conversion to marketable securities.
What is the optimal cash conversion size? foprmula: square root of annual demand
A. P60,000 C. P45,000
B. P55,000 D. P72,500 9 075 * 2 * 40 / 24% then square root

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36. Lipa company currently has annual sales of P2,000,000. Its average collection period is 40 days, and
bad debts are 5 percent of sales. The credit and collection manager is considering instituting a
stricter collection policy, whereby bad debts would be reduced to 2 percent of total sales, and the
average collection period would fall to 30 days. However, sales would also fall by an estimated
P250,000 annually. Variable costs are 60 percent of sales and the cost of carrying receivables is 12
percent. Assume a tax rate of 40 percent and 360 days per year. What would be the incremental
investment in receivables if the change were made?
A. P(16,667) B. P(45,833)
B. P(27,167) C. P(48,611)

37. Gleim Company, which manufactures a line of appliances, has an annual demand for its HD washing
machine estimated at 7,500 units. The annual cost of carrying one unit of inventory is P200, and the
cost to initiate a production run is P5,000.There are no HD washing machine on hand, and Gleim has
scheduled 5 equal production runs of HD washing machines for the coming year. Gleim has 250
business days per year. Assume that sales occur uniformly throughout the year and that production
is instantaneous.
If Gleim does not maintain a safety stock, the estimated total carrying costs and total set-up costs for
the coming year are:
A. B. C. D.
Carrying costs P150,000 P150,000 P300,000 P300,000
Set-up costs P 5,000 P 25,000 P 5,000 P 25,000

38. RAGNAROK CORP. regularly pays its accounts payable on the twentieth day on the term 2/10, net 30.
What is the annual cost of not availing of the discount? Use 360 days a year.
A. 2.04% C. 36.73%
[(2/98) x (360/10)] = 73.44%
B. 30.02% D. 73.44% 20th - 10 discount = 10 napakinabangan cash

39. A stock has an expected return of 12.25 percent. The beta of the stock is 1.15 and the risk-free rate
is 5 percent. What is the market risk premium?
A. 1.30% C. 6.50%
B. 6.30% D. 7.25%

40. Lake Corporation manufactures specialty components for the electronics industry in a highly labor
intensive environment. Are Electronics has asked Lake to bid on a component that Lake made for Arc
last month. The previous order was for 80 units and required 120 hours of direct labor to
manufacture. Arc would now like 240 additional components. Lake experiences an 80% learning
curve on all of its jobs. The number of direct labor hours needed for Lake to complete the 240
additional components is
A. 187.2 C. 307.2
B. 256.0 D. 360.0
- END OF HANDOUTS -

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Preweek Materials (Batch May 2022)