rd

ARTS CPA REVIEW

3 Floor, Ala Moana Commercial Complex, Maharlika Highway, Santiago City
0917-5723900
e-mail address: jonathandeveyra_ARTS@yahoo.com.ph

26TH BATCH
MANAGEMENT ADVISORY SERVICES ACCT. SAMUEL U. ITCHON, JR.

SUMMARY LECTURE (2) MAS – 25A

OPERATING & FINANCIAL BUDGETING
1. After careful planning, Change Style, Inc. has decided to switch to a just-in-time inventory
system effective on July 1 of the current year. As of July 1, the corporation has 70 units of
product in inventory. It has 1,000 labor hours available for the month of July. These hours
could produce 250 units of product. Customer demand for July is 200 units. If just-in-time
principles are correctly followed, how many units should Change Style Inc. plan to produce
in July?
a. 200 c. 180
b. 130 d. 250
Demand 200
Less beginning inventory 70
Production 130

2. Ideally, the number of units that should be produced in a just-in-time manufacturing system
is equal to
a. the maximum productive capacity for the current period.
b. actual customer demand for the current period.
c. budgeted customer demand for the current period.
d. budgeted customer demand for the following period

3. The projected sales price for a new product (which is still in the development stage of the
product life cycle) is P50. The company has estimated the life-cycle cost to be P30 and the
first-year cost to be P60. On this type of product, the company requires a P12 per unit
profit. What is the target cost of the new product?
a. P60 c. P38
b. P30 d. P43
Projected sales price P50
Less required profit 12
Target cost P38

4. The preparation of an organization's budget

a. forces management to look ahead and try to see the future of the organization.
b. requires that the entire management team work together to make and carry out the
yearly plan.
c. makes performance review possible at all levels of management.
d. all of the above.

5. Ivory Company has the following expected pattern of collections on credit sales: 70 percent
collected in the month of sale, 15 percent in the month after the month of sale, and 14
percent in the second month after the month of sale. The remaining 1 percent is never
collected. At the end of May, Ivory Company has the following accounts receivable
balances:
From April sales P21,000
From May sales 48,000

Ivory's expected sales for June are P150,000. What were total sales for April?
a. P150,000 c. P 70,000
b. P 72,414 d. P140,000
A/R balance from April sales P 21,000
 Page 2

÷ uncollected portion (100% - 70% - 15%) 15%

April sale P140,000
6. Bali Company has a policy of maintaining an inventory of finished goods equal to 30 percent
of the following month's sales. For the forthcoming month of March, Bali has budgeted the
beginning inventory at 30,000 units and the ending inventory at 33,000 units. This suggests
that
a. February sales are budgeted at 10,000 units less than March sales.
b. March sales are budgeted at 10,000 units less than April sales.
c. February sales are budgeted at 3,000 units less than March sales.
d. March sales are budgeted at 3,000 units less than April sales.

ITEMS 7 to 11 ARE BASED ON THE FOLLOWING INFORMATION:

The cost of goods sold section of Dale Corporation’s operating budget for 2015 is presented below:

Materials: Inventory, January 1 (16,000 units) P 960,000

Purchases 9,120,000
Available for use P10,080,000
Inventory, December 31 (18,500 units) 1,184,000 P 8,896,000
Labor 784,000
Factory overhead: Variable P 2,009,600
Fixed 1,120,000 3,129,600
Cost of goods manufactured (140,000 units) P12,809,600
Add finished goods inventory, January 1 (9,300 units) 744,000
Cost of goods available for sale P13,553,600
Less finished goods inventory, December 31 (3,300 units) 301,600
Budgeted cost of goods sold P13,255,000

The actual results for the first quarter of 2015 require the following changes in the budget
assumptions:
 The budgeted production for the year is expected to increase by 5,000 units.
During the first quarter, the company has already produced 25,000 units. The
balance of production will be scheduled in equal segments over the last 3 quarters
of the budget year.
 The expected finished goods inventory on January 1 dropped to only 9,000 units,
but its total value will not be revised anymore. The ending inventory value is
computed using the average manufacturing cost for the year.
 A new Labor Bill passed by Congress is expected to be signed into a law by the
President. The new law will take effect beginning the last quarter of the budget
year, including a provision for an increase of 8% in wage rates.
 The company uses the FIFO method in valuing its materials inventory. During the
first quarter, the company purchased 27,500 units of direct materials for
P1,760,000. The remaining direct materials requirement will be purchased evenly
for the last 9 months of the budget year. Effective July 1, 2015, the beginning of
the third quarter, direct materials cost is expected to increase by 5%. The
assumptions regarding the quantity of materials inventories at the beginning and
end of the year will remain unchanged.
 The variable factory overhead of P2,009,600 includes indirect materials and factory
supplies amounting to P889,600. It is computed at 10% of the cost of materials
used. The balance of the variable factory overhead varies directly with production.
 There will be no change in the budgeted fixed factory overhead cost.

Considering the given actual data for the first quarter, as well as the changes in
assumptions and estimates in the budgeted data for the year, the company’s accountant
prepared a revised budgeted cost of goods sold statement. This revised statement should
show:
7. budgeted materials purchases of
 Page 3

a. P9,696,000. c. P9,280,000.
b. P9,120,000. d. P9,440,000.
It is assumed that each unit of product requires one unit of materials. So, production is equal to
raw materials to be used.
Budgeted raw materials to be used (or production) – 140,000+ 5,000 145,000 units
Add raw materials ending inventory 18,500
Total 163,500
Less raw materials beginning inventory 16,000
Budgeted purchases 147,500
Less actual purchases, 1 st quarter 27,500
Required purchases in the remaining 3 quarters 120,000 units

Cost computation:
First quarter purchases (27,500 units) P1,760,000
Second quarter (120,000/3 or 40,000 x [P1,760,000÷27,500] or P64/unit) 2,560,000
Third and fourth quarters ([40,000/qtr. x 2] x[P64 x 105%]) 5,376,000
Total cost of budgeted purchases P9,696,000

8. budgeted cost of materials inventory at December 31, 2015 of

a. P1,024,000. c. P1,184,000.
b. P1,243,200. d. P1,216,100.
Materials inventory, December 31, 2015 18,500
x Purchase price (P64 x 1.05) P67.20
Cost of materials inventory, December 31, 2015 P1,243,200

The company uses the FIFO method of costing inventory. Thus, the ending inventory should be valued at
the new purchase price of P67.20.

9. the budgeted direct labor cost of

a. P846,720. c. P876,960.
b. P784,000. d. P829,920.
Original labor cost per unit (P784,000 ÷ 140,000 units) P 5.60
th
Labor cost per unit effective on the beginning of the 4 quarter (P5.60 x 108%) P6.048
Budgeted labor cost:
First to third quarters (25,000 + 40,000 + 40,000) x P5.60) P588,000
Fourth quarter (40,000 x P6.048) 241,920
Total budgeted labor cost P 829,920

10. the budgeted cost of goods manufactured of

a. P12,809,600. c. P14,208,000.
b. P13,464,000. d. P12,344,000.
Materials:
Inventory, January 1 P 960,000
Add purchases 9,696,000
Available for use P10,656,000
Less inventory, December 31 1,243,200 P 9,412,800
Labor 829,920
Factory overhead:
Variable:

P
Indirect materials (P9,412,800 x 10%)
941,280
Other variable P2,009,600 – P889,600 x
( ) . 1,160,000
overhead 140,000 145,000
Total variable overhead P2,101,280
Fixed 1,120,000 3,221,280
Budgeted cost of goods manufactured P13,464,000

11. the budgeted cost of goods sold of

a. P13,901,578. c. P13,553,600.
b. P13,252,000. d. P14,208,000.
 Page 4

Cost of goods manufactured (from Item #74) P13,464,000

Add finished goods inventory, January 1 744,000
Total cost of goods available for sale P14,208,000
Less finished goods inventory, December 31
(3,300 units x [P13,464,000 ÷ 145,000]) 306,422
Budgeted cost of goods sold P13,901,578

WORKING CAPITAL MANAGEMENT & FS ANALYSIS

12. At the end of 2015, Gabbuat Company’s total assets was P500,000. In 2016, it earned net
income of P30,000 and paid dividends of P10,000. What is the company’s internal growth
rate?
a. 1% c. 5%
b. 4% d. 9%
Internal growth rate is the percentage increase in assets kept in business.
Increase in assets (P30,000 – P10,000) P 20,000
÷ Total assets, beginning of 200B ÷ 500,000
Internal growth rate 4%

13. A division of Lockman Corporation reported a return on investment of 20% for a recent
period. If the division's asset turnover was 5, its profit margin must have been
a. 100% c. 4%
b. 25% d. 2%
ROS x ATO = ROA
ROS x 5 = 20%
ROS = 20% ÷ 5 = 4%

14. As of the end of 2015, Ice Company had total assets of P375,000 and equity of P206,250.
For 2016, its budget for capital investment projects is P62,500. To finance a portion of the
capital budget, the company may borrow from a bank which set a condition that the loan
would be approved, provided that the 2016’s debt-to-equity ratio should be the same as the
debt-to-equity ratio in 2015.
How much debt should be incurred to satisfy the bank’s condition?
a. P28,125 c. P34,375
b. P62,500 d. P51,138
Total assets P375,000
Less equity 206,250
Debt P168,750

Debt-to-Equity Ratio (P168,750 ÷ P206,250) 81.82%

*Total financing required for the capital budget P62,500

÷181.82%
Amount to be financed by equity P34,375

Amount to be financed by debt without changing

the debt-to-equity ratio (P62,500 – P34,375) P28,125

15. The management of Seymour Corporation asks you to prepare an analysis of the gross
profit variance based on their comparative income statements for 2015 and 2016:
2016 2015 Variance
Sales P990,000 P800,000 P190,000 F
Cost of goods sold 760,000 640,000 120,000 U
Gross profit P230,000 P160,000 P 70,000 F

The only known information given to you is that volume increased from 2015 to 2016 by
10%. The variance in gross profit due to the change in volume is
a. P80,000 favorable. c. P16,000 favorable.
b. P64,000 unfavorable. d. P70,000 favorable.
 Page 5

Sales volume variance P80,000 F

Cost volume variance 64,000 U
Gross profit volume variance P16,000 F

– OR –
200B units @ 200A gross profit per unit
(P160,000 x 110%) P176,000
Less 200A gross profit 160,000
Gross profit volume variance P 16,000 F

16. Last year’s asset turnover of Johvic Company was 3.0. This year, the company’s sales
increased by 25% and average total assets decreased by 5%. What is this year’s asset
turnover?
a. 3.9 c. 3.4
b. 3.6 d. 3.1
Sales
Asset Turnover
= Average Total =3
last year
Assets
Asset Turnover
= 3 x 1.25 = 3.75 = 3.9
this year 1 x 0.95 0.95

17. During the year, Tindugan Company earned net income of P60,000. For next year, it has a
capital budget of P80,000. If the company’s plowback ratio is 30%, how much external
funding is needed for the capital investment project?
a. P80,000 c. P56,000
b. P62,000 d. P98,000
Capital budget P80,000
Fund from net income (P60,000 x 30%) 18,000
External funding needed P62,000

18. The following data are taken from the records of Belle Corporation for the year ended Dec. 31,
2015:
Net credit sales P576,000
Average materials inventory 8,000
Average finished goods inventory 12,000
Average accounts receivable 80,000
Average accounts payable 5,000
Net credit purchases 120,000
Raw materials used 96,000
Gross profit rate 25%
Number of days in a year 360 days
What is the average number of days in the company’s operating cash conversion cycle?
a. 50 days c. 105 days
b. 75 days d. 45 days
Average Age
Turnove
(360 days ÷
r
Turnover)
36
RM RM used P96,000
1 0
Inventory = = 12 times 30 days
. Ave. RM
Turnover P8,000 12
Inventory

Cost of Goods P576,000 x 36

2 FG Inventory
= Sold = 75% 36 times 0 10 days
. Turnover
Ave. FG Inventory P12,000 36

36
3 Net Credit Sales P576,000
A/R Turnover = = 7.2 times 0 50 days
.
Ave. A/R P80,000 7.2

Net Credit 36
4 P120,000
A/P Turnover = Purchases = 24 times 0 (15) days
.
Ave. A/P P5,000 24
Average number of days in the operating cash
75 days
conversion cycle
 Page 6

19. Using the data presented below, calculate the cost of sales for the Alpha Corporation for the
year just ended.
Current ratio 3.5
Acid test ratio 3.0
Current liabilities at year-end P600,000
Beginning inventory P500,000
Inventory turnover 8.0

a. P1,600,000 c. P3,200,000
b. P2,400,000 d. P6,400,000
Cost of sales = Average inventory x Inventory turnover
P500,000 + P300,000*
= x8
2
= P3,200,000

‘ Current assets
* Current ratio = Current
liabilities
Current
3.50 = assets Current assets = 2,100,000
Acid-test ratio = Quick assets
600,000
Current
liabilities
Quick
3.00 = assets Quick assets = 1,800,000
600,000
Inventory, ending 300,000

DECENTRALIZATION & PERFORMANCE EVALUATION

20. Which of the following is necessary for any valid performance measurement?
a. It must be part of the financial accounting system in use.
b. It must be quantifiable.
c. Goal congruence must be promoted by its use.
d. It must be financial in nature.

21. A balanced scorecard

a. records the variances between budgeted and actual revenues and expenses.
b. can be used at multiple organizational levels by redefining the categories and
measurements.
c. is most concerned with organizational financial solvency and business processes.
d. all of the above.

22. Productivity is measured by the

a. total quantity of output generated from a limited amount of input during a time
period.
b. quantity of good output generated from a specific amount of input during
a time period.
c. quantity of good output generated from the quantity of good input used during a
time period.
d. total quantity of input used to generate total quantity of output for a time period.

23. Failure Corporation is a manufacturer of a versatile statistical calculator. The following

information is a summary of defective and returned units for the previous year.
Total defective units 1,000
Number of units reworked 750
Number of customer units returned 150
Profit for a good unit P40
Profit for a defective unit P25
Cost to rework a defective unit P10
Cost of a returned unit P15
Total prevention cost P10,000
 Page 7

Total appraisal cost P5,000

The total quality cost is
a. P15,000. c. P28,500.
b. P15,750. d. P11,250.

24. A small manufacturing company recently stated its sales goal for a period was P100,000. At
this level of activity, its budgeted expenses were P80,000. Its actual sales were P100,000,
but its actual expenses were P85,000. This company operated
a. effectively and efficiently. c. effectively but not efficiently.
b. neither effectively nor efficiently. d. efficiently but not effectively.

ITEMS 25 AND 26 ARE BASED ON THE FOLLOWING:

Computer Solutions Corporation manufactures and sells various high-tech office automation
products. Two divisions of Computer Solutions Corporation are the Computer Chip Division
and the Computer Division. The Computer Chip Division manufactures one product, a "super
chip," that can be used by both the Computer Division and other external customers. The
following information is available on this month's operations in the Computer Chip Division:
Selling price per chip P50
Variable costs per chip P20
Fixed production costs P60,000
Fixed SG&A costs P90,000
Monthly capacity 10,000 chips
External sales 6,000 chips
Internal sales 0 chips

Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead
pays P45 to an external supplier for the 4,000 chips it needs each month.

25. Two possible transfer prices (for 4,000 units) are under consideration by the two divisions: P35 and
P40. Corporate profits would be ___________ if P35 is selected as the transfer price rather than P40,
and the Computer Division purchases from the Computer Chip Division instead of from the external
supplier.
a. P 20,000 larger c. P20,000 smaller
b. P100,000 larger d. the same
Purchase price P45
Less variable cost 20
Savings if acquired from within P25
x number of units 4,000
Increase in profit P100,000

26. Assume, for this question only, that the Computer Chip Division is selling all that it can
produce to external buyers for P50 per unit. How would overall corporate profits be affected
if it sells 4,000 units to the Computer Division at P45? (Assume that the Computer Division
can purchase the super chip from an outside supplier for P45.)
a. no effect c. P20,000 decrease
b. P20,000 increase d. P90,000 increase
Purchase price P45
Cost if purchased from within:
Variable cost P20
Opportunity cost 30 50
Loss per unit P 5
x number of units 4,000
Decrease in profit P20,000

27. The following information is given for the Alpha Division of Sorority Corporation.
Sales P600,000
Var. cost of goods sold 200,000
Fixed manufacturing costs 50,000
Variable selling 30,000
Fixed admin. (50% allocated) 20,000
 Page 8

Fixed selling (20% allocated) 50,000

Assets at cost 800,000
Accumulated depreciation 200,000
If Sorority Corporation uses ROI to evaluate division managers and uses historical cost as
the investment base, the ROI for Alpha Division is:
a. 31.25% c. 41.67%
b. 33.75% d. 45.00%
Sales P600,000
Less cost of goods sold 250,000
Gross margin P350,000
Variable selling P30,000
Fixed selling (P50,000 x 80%)40,000
Fixed admin (P20,000 x 50%) 10,000 80,000
Controllable income P270,000
÷ Assets 800,000
ROI 33.75%

28. The following year-end data pertain to Adan Corporation:

Earning before interest and taxes P 800,000
Current assets 800,000
Non-current assets 3,200,000
Current liabilities 400,000
Non-current liabilities 1,000,000
Adan Corporation pays an income tax rate of 32%. Its weighted-average cost of capital is
10%. What is Adan Corporation’s Economic Value Added (EVA)?
a. P184,000 c. P440,000
b. P144,000 d. P400,000
After-tax operating income (P800,000 x [1 – 0.32]) P544,000
Less desired return on investment:
Total assets (P800,000 + P3,200,000)P4,000,000
Less current liabilities 400,000
Investment base P3,600,000
x Weighted-average cost of capital 10% 360,000
Economic value added P184,000

29. The format for internal reports in a responsibility accounting system is prescribed by:
a. Generally Accepted Accounting Principles
b. The Financial Accounting Standards Board
c. The Philippine Institute of Certified Public Accountants
d. Management

QUANTITATIVE METHODS
30. A company annually consumes 10,000 units of Part C. The carrying cost of this part is P2
per year and the ordering costs are P100. The company uses an order quantity of 500 units.
By how much could the company reduce its total costs if it purchased the economic order
quantity instead of 500 units?
a. P 500 c. P2,500
b. P2,000 d. P 0

EOQ = = 1,000 units

500 units 1,000 units

Carrying cost (500/2)2; (1,000/2)2 P 500 P1,000
Ordering cost (10,000/500) x P100 2,000
(10,000/1,000) x P100 1,000
Total cost P2,500 P2,000

Savings (P2,500 – P2,000) P500

 Page 9

31. In the two following constraint equations, X and Y represent two products (in units)
produced by the Uncommon Products Corporation.

Constraint 1: 3X + 5Y < 4,200

Constraint 2: 5X + 2Y > 3,000
What is the maximum number of units of Product X that can be produced?
a. 4,200 c. 600
b. 3,000 d. 1,400
1,400 units is the only amount that will not cause Constraint 1 to be violated.

32. King Corporation operates its factory 300 days per year. Its annual consumption of Material
Y is 1,200,000 gallons. It carries a 10,000 gallon safety stock of Material Y and its lead time
is 12 business days. What is the order point for Material Y?
a. 10,000 gallons c. 48,000 gallons
b. 38,000 gallons d. 58,000 gallons
Average daily usage (1,200,000 ÷ 300) 4,000
x lead time 12
Lead time usage 48,000
add safety stock 10,000
Order point 58,000

33. The school canteen can sell either halo-halo or mami (hot noodle soup) on any given day.
The contribution margin that the canteen could earn from halo-halo and mami is affected by
the weather, as follows:

CONTRIBUTION MARGIN
Item sold
Hot Weather Cold Weather
Halo-Halo P15,000 P 6,000
Mami 11,400 12,000

If the probability of hot weather on a given day at this time is 60%, which item(s) should
the company sell?
a. Halo-Halo, because this item is salable when weather is hot.
b. Mami, because it has the higher expected payoff.
c. Halo-Halo and mami, so the canteen could maximize contribution margin.
d. 60% halo-halo and 40% mami.
Based on the given data, the expected payoffs are:
Sell halo-halo (15,000 x 60%) + (6,000 x 40%) P11,400
Sell mami (11,400 x 60%) + (12,000 x 40%) 11,640

Therefore, despite the fact that the weather is hot, the canteen should sell mami because it
has the higher expected value or expected payoff.

34. Mr. Javee owns a piece of land that is adjacent to a big area of a vacant lot owned by the
city government. Recently, Mr. Javee heard that the city government has plans about the
vacant lot. He inquired about such plans and he was given the following, including each
plan’s probability of occurrence:
Probability
Plan A – Lease the lot to a businessman who will construct a mall on the lot 60%
B – Construct a theme park on the vacant lot 30%
C – Construct a building that will house some of the city government’s offices 10%

Mr. Javee knows that the value of his land, which he acquired ten years ago at a cost of
only P500 per square meter, will increase depending on which plan would materialize. His
estimates are as follows:
Plan A – P5,000 per square meter
 Page 10

B – 2,000
C – 1,000
What is the expected value of the land?
a. P5,000 c. P2,667
b. P3,000 d. P3,700
Plan AP5,000 x 60% = P3,000
B 2,000 x 30% = 600
C 1,000 x 10% = 100
Expected value P3,700 per square meter

35. Bahalana Company produces and sells Product Z. Each unit of Product Z contributes P5 to
the recovery of fixed costs and generation of profit.Total fixed costs amounts to P200,000
per period. Selling price of Product Z is P20 per unit. For the coming period, the company
believes that there is a 70% chance that the sales of Product Z will be 80,000 units, and a
30% chance that sales will equal 10,000 units. The expected profit from Product Z for the
coming period is:
a. P 95,000 c. P 80,000
b. P250,000 d. P295,000
Expected value of sales volume:
80,000 x 70% 56,000
10,000 x 30% 3,000 59,000
X CM per unit 5
Total CM P295,000
Less fixed costs 200,000
Expected profit P 95,000

BASIC MAS CONCEPTS

36. A person who is qualified by education, experience, technical ability, and temperament to
advise or assist businessmen on a professional basis in identifying, defining, and solving
specific management problems involving the organization, planning, direction, control, and
operation of a firm is called a
a. Management Consultant. c. Accounting Technician.
b. Certified Public Accountant. d. Management Accountant.

37. Consulting services differ fundamentally from CPA’s function of attesting to the assertions of
other parties. In a consulting service,
a. the practitioner expresses a conclusion about the reliability of a written assertion
that is the responsibility of the assertor.
b. the work is generally performed only for the use and benefit of the client.
c. the client develops findings, conclusions, and recommendations.
d. the nature and scope of work is determined solely by the consulting services
practitioner.

38. Which of the following statements is correct?

a. MAS is confined only to such areas as financial accounting, auditing, and tax
services.
b. Because the MAS practitioner must be independent, he must not allow the client to
participate in any phase of his engagement.
c. Although MAS extends beyond the traditional accounting services, CPAs in
the MS practice are still bound by the rules of professional ethics in the
practice of accounting in general.
d. CPAs provide management services to go around the ethical constraints as
mandated by the Accountancy Act.

39. Engagements should be adequately planned, supervised, and controlled. Controlling

involves the measurement of progress in attaining the engagement plan and objectives.
At significant engagement points, progress should be measured in terms of
a. time schedule, accomplishments, and quality of work.
b. accomplishments, time schedule, and expenses incurred.
 Page 11

c. quality of work, number of reports prepared, and time schedule.

d. accomplishments, number of personnel who played a role in the engagement, and
attendance of the participants in the engagement.

40. Which of the following is a characteristic of management advisory services?

a. Services rendered are for third parties.
b. Engagements are usually recurring.
c. Human relations do not play a vital role in each engagement.
d. It involves problem solving.

INFORMATION SYSTEMS/EDP
41. The basic principles of accounting information system include all the following, except
a. flexible structure. c. implementation.
b. cost awareness. d. useful output.

42. Which of the following statements is false?

a. Management accounting is an integral part of the controller’s function in an
organization.
b. The Standard 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 procedures, and controlling costs.
d. The COO (Chief Operating Officer) is primarily responsible for
management accounting and financial accounting.

43. Management accounting is considered successful when it

a. helps managers improve their decisions. c. is relevant.
b. is in accordance with GAAP. d. is accurate.

44. Electronic Fund Transfer (EFT) is a service provided by financial institutions worldwide that
is based on EDI Technology. EFT transaction costs are lower than for manual systems
because documents and human intervention are eliminated from the transaction process.
However, the EFT system has inherent and unique risks, one of which is
a. unauthorized access and activity.
b. inadequate disaster recovery procedures.
c. insufficient online edit checks.
d. improper change control procedures.

45. Which of the following descriptions refers to management accounting information?

a. It is prepared for shareholders.
b. It is reliable and verifiable.
c. It is prepared in accordance with GAAP.
d. It provides reasonable and timely estimates

46. Which of the following is a not a characteristic of management accounting?

a. Internal focus c. Subjective information may be used
b. Broad-based and multidisciplinary d. Historical orientation

47. Which of the following characteristics distinguishes computer processing from manual
processing?
a. Computer processing virtually eliminates the occurrence of computational
error normally associated with manual processing.
b. Errors or fraud in computer processing will be detected soon after their occurrences.
c. The potential for systematic error is ordinarily greater in manual processing than in
computerized processing.
d. Most computer systems are designed so that transaction trails useful for audit
purposes do not exist.
 Page 12

48. What type of computer system is characterized by data that are assembled from more than
one location and records that are updated immediately?
a. Microcomputer system c. Batch processing system
b. Minicomputer system d. Online real-time system

49. A major accounting contribution to the managerial decision-making process in evaluating possible
courses of action is to
a. decide which actions the management should consider.
b. determine the amount of money that should be spent on a project.
c. assign responsibility for the decision.
d. provide relevant revenue and cost data about each course of action.

50. Which of the following refers to “systems design”?

a. It is the process of monitoring, evaluating, and modifying a system.
b. It is the process of learning how the current system functions, determining the needs of
users, and developing the logical requirements of a proposed system.
c. It is the process of developing specifications for hardware, software, manpower,
data resources, and information products required to develop a system.
d. It determines the technical, operational, and economic feasibility of a system.

ECONOMICS
51. Gross domestic product (GDP) is the
a. total amount of expenditures for consumer goods and investment for a period of time.
b. total purchases by consumers, businesses, government, and foreign entities
c. value of all final goods and services produced by the country by both domestic
and foreign-owned sources.
d. value of all goods and services produced by the country by domestic firms, excluding those
produced by foreign-owned companies.

52. As the economy becomes more and more depressed, a company's management decides to slash
spending on research and development. What is the likely effect of this action on net income? Net
income will be
a. higher this period and lower in future periods.
b. higher this period and higher in future periods.
c. lower this period and higher in future periods.
d. lower this period and lower in future periods.

53. Inflation can have positive and negative effects on an economy. Positive effects of inflation include
a. loss in stability in the real value of money and other monetary items over time.
b. uncertainty about future inflation may discourage investment and saving.
c. shortages of goods if consumers begin hoarding in anticipation of price increases in the
future.
d. mitigation of economic recessions and debt relief by reducing the real level of
debt.

54. The local video store’s business increased by 12% after the movie theater raised its prices from P300
to P400. Thus, relative to movie theater admissions, videos are
a. substitute goods c. complementary goods
b. superior goods d. public goods

55. In national income terms, aggregate demand is the

a. demand for money by a community in a period of full employment.
b. total expenditure on capital goods by entrepreneurs during a period of full employment.
c. demand that is needed if the country’s economy is to operate at optimum level and the level
of investment is to be raised.
d. total expenditures on consumer goods and investment, including government and
foreign expenditures, during a given period.

- end –