MASQUERADE (MANAGEMENT SERVICES QUIZ BEE)

EASY QUESTIONS
1. Standard costs are
D a. Used by all manufacturing companies
b. The same as future costs
c. Computed after production begins
d. The ‘should-be’ costs of manufacturing

2. Variable costing regards fixed manufacturing overhead as

C a. An unexpired cost
b. An inventoriable cost
c. A charge against sales
d. A product cost

3. A company’s controller is least concerned with

A a. Investor relations
b. Information processing
c. Financial reporting
d. Regulatory compliance

4. The Standards of Ethical Conduct for management accountants includes concepts related to
B a. Competence, performance, integrity, and reporting
b. Competence, confidentiality, integrity, and objectivity
c. Integrity, experience, reporting, and objectivity
d. Confidentiality, reporting, competence, and objectivity

5. The balanced scorecard of a business entity does NOT include information based on
D a. Investors’ perspective
b. Customers’ perspective
c. Employees’ perspective
d. Government’s perspective

6. Which of the following cost classifications is most relevant to decision making?

C a. Fixed – variable c. Avoidable – unavoidable
b. Joint – common d. Direct – common

7. Working capital financing strategy can be described as either

D a. Inactive or active
b. Passive or active
c. Conservative or progressive
d. Conservative or aggressive

8. Which of the following represents the normal sequence in which the below budgets are prepared?
C a. Sales, balance sheet, income statement
b. Balance sheet, sales, income statement
c. Sales, income statement, balance sheet
d. Income statement, sales, balance sheet

9. Financing decisions primarily deal with

C a. Satisfying shareholders
b. The use of scarce resources
c. How to obtain funds to acquire resources
d. Acquiring equipment and buildings

10. Which of the following is an equation of a variable cost function?

A a. Y = bx
b. Y = a + bx
c. Y=b
d. Y=a

AVERAGE QUESTIONS
1. Moderate Company determines the selling price by marking up variable costs by 60%. If the
company breaks even at P 400,000, what is the amount of fixed cost?
A a. P 150,000
b. P 240,000
c. P 250,000
d. P 640,000
 2. You plan to borrow money from your bank that offers to lend you the money at 10% discounted rate
on a one-year loan with a 15% compensating balance. How much would you have to borrow to have
the use of P 10,000?
D a. P 10,000
b. P 11,111
c. P 12,000
d. P 13,333

3. Eagle Sporting Goods has P 5,000,000 in inventory and P 2,000,000 in accounts receivable. Its
average daily sales are P 100,000. The firm’s payable deferral period is 30 days. What is the length
of the firm’s cash conversion period?
D a. 100 days
b. 60 days
c. 50 days
d. 40 days

4. If the present value of the future cash flows for an investment equals the required investment, the
IRR is
A a. Equal to the hurdle rate
b. Equal to the cost of borrowed capital
c. Equal to zero
d. Lower than the company’s cutoff rate of return

5. For Mc Vet Manufacturing, what would be the total difference between operating income under
absorption costing and variable costing?
Beginning fixed manufacturing overhead in inventory P 47,500
Fixed manufacturing overhead in production 37,500
Ending fixed manufacturing overhead in inventory 12,500
Beginning variable manufacturing overhead in inventory 5,000
Variable manufacturing overhead in production 25,000
Ending variable manufacturing overhead in inventory 7,500

A a. P 35,000
b. P 25,000
c. P 20,000
d. P 2,500

6. The GNP will fall following an increase in

B a. Consumption expenditures
b. Imports
c. Exports
d. Inflation

7. The cost accounting department of McCain Company prepared the following cost analysis report on
direct labor costs for the jobs completed during the previous months:
Payroll costs: P 23,450
Actual hours at labor union contract rate: P 24,175
Standard hours at labor union contract rate: P 23,130
The labor efficiency variance is
D a. P 725 favorable
b. P 725 unfavorable
c. P 1,045 favorable
d. P 1,045 unfavorable

8. The Blue Division of Left Company recorded operating data as follows for the past year:
Sales P 200,000
Net operating income 25,000
Average operating assets 100,000
Gross profit 75,000
Stockholders’ equity 80,000
Residual income 13,000

For the year, the minimum required rate of return set as ‘quota’ for Blue division was
B a. 11%
b. 12%
c. 13%
d. 14%

9. (Current ratio - quick ratio) x current liabilities =

D a. Cash
b. Marketable securities
c. Receivables
d. Inventory
 10. An organization has an inventory order quantity of 10,000 units and a safety stock of 2,000 units.
The cost per unit of inventory is P 5, and the carrying cost is 10% of the average value of inventory.
The annual inventory carrying cost for the organization is
B a. P 3,000
b. P 3,500
c. P 5,000
d. P 6,000

DIFFICULT QUESTIONS
1. Operating leverage is 2x when profit amounts to P 2,000. If sales at this level is P 10,000, then
margin of safety is
C a. 2,500 units
b. 5,000 units
c. 50% of sales
d. Cannot be determined from the given information

2. Assuming P 20,000 net annual cash inflows from a 4-year P 59,120-capital investment project, the
break-even rate of return (IRR) for the project is closest to
C a. 11.1%
b. 12.2%
c. 13.3%
d. 14.4%

3. Obama Corporation manufactures two types of products:

Sales price per unit Variable costs per unit
Product HIT P 120 P 70
Product HOT P 500 P 200

Fixed costs total P 240,000 annually. The expected mix in units is 60% for Product HIT and 40% for
Product HOT. If fixed costs are expected to increase by 25%, how much would be Obama’s break-
even sales?
B a. P 2,000 over-all break-even sales
b. 1,200 units for product HIT
c. 144,000 units for product HIT
d. 400,000 units for product HOT

4. Management of Tancredi Corporation is attempting to estimate the firm’s cost of equity capital.
Assuming the firm has a constant growth rate of 5%, a forecasted dividend of P 2.11, and a stock
price of P 23.12, what is the estimated cost of common equity using the dividend-yield-plus-growth
approach?
C a. 9.1%
b. 12.3%
c. 14.1%
d. 15.6%

5. A quality cost or activity that may be considered as value-added.

C a. Internal failure cost
b. External failure cost
c. Prevention activity that is performed efficiently
d. Cost caused by inefficiency in prevention activities

6. Super Delegates Co. analyzed three months of its cost of operation:

Sum of the units: 60 units
Sum of the costs: P 420
Sum of the units x costs: 8,800
Sum of the units squared: 1,400
Using the least-squares technique, how much is the estimated variable cost of producing 20 units?
B a. P 24
b. P 40
c. P 200
d. P 240

7. A firm maintains a debt-equity ratio of 1.0. The debt consists of bonds with a before tax cost of 9%.
The equity consists of ordinary shares with a cost of 18%. The marginal corporate tax rate is 40%.
What is the weighted average cost of capital?
D a. 8.1%
b. 9.9%
c. 10.8%
 d. 11.7%
8. Grace Company produced 3,000 units of Product CGG last week. The inputs to the production
process for Product CGG were as follows:
900 grams of Material A P 1.50 per gram
600 grams of Material B P 2.75 per gram
600 labor hours P 15.00 per hour

The best productivity measure for a labor manager, whose primary job is employee supervision, is
C a. 0.33 unit per peso input
b. 0.25 unit per peso input
c. 5 units per hour
d. 5 hours per unit

9. Which combination of ratios can be used to derive return on equity?

D a. Market value to book value ratio and total debt to total assets ratio
b. Price to earnings ratio, earnings per share, and net profit margin
c. Price to earnings ratio and return on assets
d. Net profit margin, asset turnover, and equity multiplier

10. Red, Inc. reported the following selected 2008 manufacturing data:
Fixed predetermined overhead rate P 1.00
Denominator (normal) hours 21,000
Actual hours 22,000
Standard hours allowed for output 23,000

Red’s 2008 capacity or volume variance amounted to

C a. P 1,000 favorable
b. P 1,000 unfavorable
c. P 2,000 favorable
d. P 2,000 unfavorable

CLINCHER QUESTIONS
1. Under standard costing, the amount of direct labor cost charged (debited) to Work-In-Process
Inventory is
D a. Aggregate labor payroll
b. Actual labor hours at standard rates
c. Standard labor hours at actual rates
d. Standard labor hours at standard rates

2. A cost estimation method in which a cost line is fit using exactly two data points.
D a. Least-squares regression method
b. Account analysis method
c. Scatter-diagram method
d. High-low method

3. Which function is most directly related to management by objectives?

A a. Planning
b. Control
c. Decision making
d. Reporting

4. A data point that falls far away from other data points in a scatter diagram is called
A a. Outlier
b. Margin of error
c. Standard deviation
d. Coefficient of determination

5. A company practicing Just-In-Time (JIT) philosophy for the manufacture of its lone product shall
expect
D a. Even point to be higher than the non-JIT conventional system’s
b. Standard cost variances to be mostly favorable
c. Most production costs to be irrelevant in decision-making
d. Absorption costing and variable costing income to be equal

6. Which of the following is inconsistent with increased debt financing?

D a. Increase in tax shield
b. Potential increase in Return on Equity (RoE)
c. Increase in degree of financial leverage
 d. Increase in degree of operating leverage

7. In present value problems, unless stated otherwise, cash flows are assumed to be
A a. At the end of the period
b. At the beginning of the period
c. In the middle of a time period
d. Spread out evenly over a time period

8. The slack time of the shortest path through a PERT network is

C a. Zero
b. The minimum slack time
c. The maximum slack time
d. Not determinable without given information

9. Which of the following situations indicates productivity?

C a. Big outputs, bigger inputs
b. Small inputs, smaller outputs
c. Few outputs, fewer inputs
d. Large outputs, larger inputs

10. When a journal entry for a standard costing system that records favorable variances, the variance
account
D a. Causes a credit to Cost of Goods Sold
b. Increases the Operating Income Account
c. Is debited
d. Is credited