FORBIDDEN JUTSU – MAS

Compiled by: Monkey D Luffy

1. If a firm's net income does not change as its volume changes, the firm('s)
a. must be in the service industry. c. sales price must equal P0.
b. must have no fixed costs. d. sales price must equal its variable costs.

2. If activity-based costing is implemented in an organization without any other changes being effected, total
overhead costs will
A. be reduced because of the elimination of non-value-added activities.
B. be reduced because organizational costs will not be assigned to products or services.
C. be increased because of the need for additional people to gather information on cost drivers and cost
pools.
D. remain constant and simply be spread over products differently.

3. The process of choosing among competing alternatives is called

a. controlling c. decision making
b. planning d. performance evaluation

4.As projected net income increases the

A. degree of operating leverage declines.
B. margin of safety stays constant.
C. break-even point goes down.
D. contribution margin ratio goes up.

5. Which of the following is an advantage of using variable costing?

a. Variable costing complies with Generally Accepted Accounting Principles.
b. Variable costing complies with the National Internal Revenue Code.
c. Variable costing is most relevant to long-run pricing strategies.
d. Variable costing makes cost-volume-profit relationships more easily apparent.

6. 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

7. Natsu Corp. had an unfavorable materials usage variance of P900. What amounts of this variance should be
charged to each department?
Purchasing Warehousing Manufacturing
A. P0 P0 P900
B. P0 900 P0
C. P300 P300 P300
D. P900 P0 P0

8. A basic tenet of variable costing is that period costs should be currently expensed. What is the rationale behind
this procedure?
A. Period costs are uncontrollable and should not be charged to a specific product.
B. Period costs are generally immaterial in amount and the cost of assigning the amounts to specific products
would outweigh the benefits.
C. Allocation of period costs is arbitrary at best and could lead to erroneous decision by management.
D. Because period costs will occur whether production occurs, it is improper to allocate these costs to
production and defer a current cost of doing business.

9. 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.

10. Absorption costing differs from variable costing in all of the following except
a. treatment of fixed manufacturing overhead.
b. treatment of variable production costs.
c. acceptability for external reporting.
d. arrangement of the income statement

11. If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in
A. higher income and assets
B. higher income but lower assets
C. lower income but higher assets
 D. lower income and assets

12. How will a favorable volume variance affect net income under each of the following methods?
Absorption Variable
A. reduce no effect
B. reduce increase
C. increase no effect
D. increase reduce

13. Which of the following is an advantage of using variable costing?

A. Variable costing complies with Generally Accepted Accounting Principles.
B. Variable costing complies with the National Internal Revenue Code.
C. Variable costing is most relevant to long-run pricing strategies.
D. Variable costing makes cost-volume-profit relationships more easily apparent.

14. Siopao House makes bite-size siopao. Which of the following could be a constraint at Siopao House?
A. The siopao steamer
B. The workers who mix the ingredients
C. The workers who prepare the siopao for steaming
D. Any of the above could be the constraint

15. The opportunity cost of making a component part in a factory with excess capacity for which there is no
alternative use is
A. the total manufacturing cost of the component.
B. the total variable cost of the component.
C. the fixed manufacturing cost of the component.
D. zero.

16. The process of choosing among competing alternatives is called

A. controlling
B. planning
C. decision making
D. performance evaluation

17. As projected net income increases the

a. degree of operating leverage declines. c. break-even point goes down.
b. margin of safety stays constant. d. contribution margin ratio goes up.

18. All other factors equal, a large number is preferred to a smaller number for all capital project evaluation
measures except
A. net present value
B. payback period
C. internal rate of return
D. profitability index

19. The return paid for the use of borrowed capital is referred to as
A. Cash dividends
B. Stock dividends
C. Interest
D. Principal payment

20. Variance analysis would be appropriate to measure performance in

a. profit centers c. cost centers
b. investment centers d. all of the choices

21. 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

22. 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.
23. Why would a firm generally choose to finance temporary assets with short-term debt?
A. Matching the maturities of assets and liabilities reduces risk.
B. Short-term interest rates have traditionally been more stable than long-term interest rates.
C. A firm that borrows heavily long term is more apt to be unable to repay the debt than a firm that borrows
heavily short term.
D. Financing requirements remain constant.

GREY Company is a manufacturer of industrial products and employs a calendar year for financial reporting
purposes. These questions present several of Grey’s transactions during the year. Assume that total quick assets
exceeded total current liabilities both before and after each transaction described. Further assume that Grey has
positive profits during the year and a credit balance throughout the year in its retained earnings account.

23. Payment of a trade account payable of P64,500 would

A. Increase the current ratio but the quick ratio would not be affected.
B. Increase the quick ratio but the current ratio would not be affected.
C. Increase both the current and quick ratios.
D. Decrease both the current and quick ratios.

24. The purchase of raw materials for P85,000 on open account would
A. Increase the current ratio
B. Decrease the current ratio
C. Increase net working capital
D. Decrease net working capital

25. The collection of a current accounts receivable of P29,000 would

A. Increase the current ratio
B. Decrease the current ratio and the quick ratio
C. Increase the quick ratio
D. Not affect the current or quick ratios

26. Obsolete inventory of P125,000 was written off during the year. This transaction
A. Decreased the quick ratio
B. Increased the quick ratio
C. Increased net working capital
D. Decreased the current ratio

27. The issuance of new shares in a five-for-one split of common stock

A. Decreases the book value per share of common stock
B. Increases the book value per share of common stock
C. Increases total shareholders’ equity
D. Decreases total shareholders’ equity

28. 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.

29. 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.

30. A basic tenet of variable costing is that period costs should be currently expensed. What is the rationale behind
this procedure?
a. Period costs are uncontrollable and should not be charged to a specific product.
b. Period costs are generally immaterial in amount and the cost of assigning the amounts to specific
products would outweigh the benefits.
c. Allocation of period costs is arbitrary at best and could lead to erroneous decision by management.
d. Because period costs will occur whether production occurs, it is improper to allocate these
costs to production and defer a current cost of doing business.

31. 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.

32. The following information regarding fixed production costs from a manufacturing firm is available for the
current year:
Fixed costs in the beginning inventory P16,000
Fixed costs incurred this period 100,000

Which of the following statements is not true?

a. The maximum amount of fixed production costs that this firm could deduct using absorption costs in the
current year is P116,000.
b. The maximum difference between this firm's the current year income based on absorption costing and its
income based on variable costing is P16,000.
c. Using variable costing, this firm will deduct no more than P16,000 for fixed production costs.
d. If this firm produced substantially more units than it sold in the current year, variable costing will probably
yield a lower income than absorption costing.

33. Absorption costing differs from variable costing in all of the following except
a. treatment of fixed manufacturing overhead.
b.treatment of variable production costs.
c. acceptability for external reporting.
d. arrangement of the income statement

34. If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in
a. higher income and assets. c. lower income but higher assets.
b. higher income but lower assets. d. lower income and assets.

33. How will a favorable volume variance affect net income under each of the following methods?
Absorption Variable
a. reduce no effect
b. reduce increase
c. increase no effect
d. increase reduce

34. 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
B. neither effectively nor efficiently.
C. effectively but not efficiently.
D. efficiently but not effectively.

35. 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

36. In the balanced scorecard framework, a survey of employee satisfaction is a potential measure in which of the
four perspectives?
A. Financial
B. Customer
C. Internal business processes
D. Learning and growth

37. A company’s rate of return on investment (ROI) is equal to the

A. Percentage of profit on sales divided by the capital employed turnover rate.
B. Percentage of profit on sales multiplied by the capital employed turnover rate.
C. Investment capital divided by the capital employed turnover rate.
D. Investment capital multiplied by the capital employed turnover rate.

38. The primary reason for adopting Total Quality Management (TQM) is to achieve
A. Greater customer satisfaction.
B. Reduced delivery time.
C. Reduced delivery charges.
D. Greater employee participation.
39. ERZA Inc. has two divisions: the Handles Division which manufactures JOPM handles, and the Assembly
Division which assembles various parts to produce JOPMs, the main product of Erza, Inc.

The Handles Division currently has excess capacity of 1,500 units. It produces handles at variable cost of
P70. The handles can be sold in the outside market for P100.

The Assembly Division requires 1,400 handles for the JOPMs that it produces. It can buy such handles from
outside suppliers at P100 or it can just buy them from the Handles Division.

What is the natural bargaining range for the two divisions regarding the transfer price of handles?
A. Between P70 and P100
B. Between P100 and P170
C. Any amount less than P100
D. P70 is the only acceptable price.

40. In a PERT network, the critical path is the path that

A. has the most number of activities.
B. requires the longest time to complete.
C. requires the shortest time to complete.
D. has the most slack.

41. 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
B. Certified Public Accountant
C. Accounting Technician
D. Management Accountant

42. 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.

43. As a consultant the CPA/MAS practitioner should

A. conduct his engagement as if he is a member of the client’s organization.
B. exercise administrative control over the client’s staff to avoid unnecessary delays in implementation.
C. encourage dependence of client on the consultant’s staff so as to pinpoint clear responsibility in
implementing systems.
D. not take responsibility for making decisions and policy judgments in MAS engagements.
44. 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.
45. The basic principles of accounting information system include all the following, except
A. flexible structure.
B. cost awareness.
C. implementation.
D. useful output.

46. 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.
47. Management accounting is considered successful when it
A. helps managers improve their decisions
B. is in accordance with GAAP
C. is relevant
D. is accurate

48. 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

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

A. Internal focus
B. Broad-based and multidisciplinary
C. Subjective information may be used
D. Historical orientation

50. 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.

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
B. superior goods
C. complementary 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 employm32` nt.
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.

56. A city ordinance that freezes rent prices may cause

A. The demand curve for rental space to fall.
B. The supply curve for rental space to rise.
C. The quantity demanded of rental space exceed the quantity supplied.
D. The quantity supplied of rental space exceed the quantity demanded.
57. If a group of consumers decide to boycott a particular product, the expected result would be
A. An increase in the product price to make up lost revenue.
B. A decrease in the demand for the product.
C. An increase in product supply because of increased availability.
D. That demand for the product would become completely inelastic.

58. It is a systematic gathering and analysis of data concerning a proposed project and the formulation of conclusion
therefrom for the purpose of determining whether or not the project is viable, and if so, its degree of
profitability.
A. Budgeting
B. Feasibility Study
C. Viable Costing
D. Profit Planning

59. A significant cost of quality that is not recorded in the accounting records is the
A. failure cost for a customer complaint center.
B. cost of reworking products to bring them up to specification.
C. opportunity costs of forgone future sales.
D. appraisal cost for product equipment.

60. In macroeconomic terms, aggregate demand is the

A. Demand for money by the 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 a 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.

61. In a decentralized company in which divisions may buy goods from one another, the transfer pricing system
should be designed primarily to
A. increase the consolidated value of inventory.
B. allow division managers to buy from outsiders.
C. minimize the degree of autonomy of division managers.
D. aid in the appraisal and motivation of managerial performance.

62. When a profitable corporation sells an asset at a loss, the after-tax cash flow on the sale will
A. exceed the pre-tax cash flow on the sale.
B. be less than the pre-tax cash flow on the sale.
C. be the same as the pre-tax cash flow on the sale.
D. increase the corporation's overall tax liability.

63. Juvia Corp. has a sales goal of P500,000 for the coming year. Based on this level of activity, Proficient budgets
its total expenses at P450,000. Actual sales are P480,000 and actual costs are P460,000. Proficient
Corporation’s operations were
A. Both efficient and effective. .
B. Neither efficient nor effective.
C. Efficient but not effective
D. Effective but not efficient.

64. The Lucy Company is about to replace an old fire truck with a new vehicle in an effort to save maintenance and
other operating costs. Which of the following items, all related to the transaction, would not be considered in
the decision?
A. Purchase price of the old vehicle.
B. Savings in operating costs as a result of the new vehicle.
C. Proceeds from disposal of the old vehicle.
D. Future depreciation on the new vehicle.

65. A management decision may be beneficial for a given profit center, but not for the entire company. From the
overall company viewpoint, this decision would lead to
A. goal congruence
B. centralization
C. suboptimization
D. maximization

66. Which of the following is an advantage of equity financing in comparison to debt financing?
A. Issuance costs are greater than for debt.
 B. Ownership is given up with respect to the issuance of common stock.
C. Dividends are not tax deductible by the corporation whereas interest is tax deductible.
D. The company has no firm obligation to pay dividends to common shareholders.

67. Happy Company. is applying for a loan in which the bank requires a quick ratio of at least 1. Happy’s quick
ratio is 0.8. Which of the following actions would increase Happy’s quick ratio?
A. Purchasing inventory through the issuance of a long-term note.
B. Implementing stronger procedures to collect accounts receivable at a faster rate.
C. Paying an existing account payable.
D. Selling obsolete inventory at a loss.

68. Which of the following is used to describe the practice of adding resources to shorten selected activity time on
the critical path of a project?
A. Making adjustments.
B. Project crashing.
C. Slack time.
D. Reengineering.

69. The term cost driver refers to

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.

70. Of the following, which is the best reason for using activity-based costing?
A. to keep better track of overhead costs
B. to more accurately assign overhead costs to cost pools so that these costs are better controlled
C. to better assign overhead costs to products
D. to assign indirect service overhead costs to direct overhead cost pools

71. Which of the following statements represents a similarity between financial and managerial accounting?
A. Both are useful in providing information for external users.
B. Both are governed by GAAP.
C. Both rely heavily on published financial statements.
D. Both draw upon data from an organization’s accounting system.

72. Apoi Inc. will evaluate a potential investment in an advanced manufacturing system by use of the net-present-
value (NPV) method. Which of the following system benefits is least likely to be omitted from the NPV
analysis?
A. Savings in operating costs.
B. Greater flexibility in the production process.
C. Improved product quality.
D. Shorter manufacturing cycle time.

73. A company produces and sells bottled fruit juices. The processes involved in producing the product are done
in the following departments:
Department Capacity per week
Juice extraction 8,000 bottles
Mixing 5,000 bottles
Bottling 10,000 bottles

Demand for the company’s product is about 6,000 bottles per week.
If the company wants to improve its contribution margin and applies the Theory of Constraints, improvement
efforts should be focused on
A. juice extraction department.
B. mixing department.
C. bottling department.
D. sales department.

74. It describes how an organization matches its own capabilities with the opportunities in the marketplace to
accomplish its overall objectives.
A. Planning
B. Strategy
C. Learning and growth perspective
D. Customer perspective
75. Which of the following statement(s) is(are) true?
1. MAS relates to the future.
2. MAS covers a wider area than the usual audit and tax work.
3. Because of the broad scope covered by MAS, a wider variety of assignments are usually encountered.
4. MAS engagements require highly qualified staff.
A. All the statements are true.
B. Only three statements are true.
C. Only two statements are true.
D. Only one statement is true.

76. A company’s rate of return on investment (ROI) is equal to the

A. Percentage of profit on sales divided by the capital employed turnover rate.
B. Percentage of profit on sales multiplied by the capital employed turnover rate.
C. Investment capital divided by the capital employed turnover rate.
D. Investment capital multiplied by the capital employed turnover rate.

77. Management accounting and cost accounting

A. are required for recordkeeping as are financial accounting and tax accounting.
B. provide cost information about products and services, as well as information for internal decision
making.
C. require an entirely separate group of accounts than financial accounting.
D. focus solely on the determination of costs to produce a product or provide a service.

78. Which of the following is a sign that an ABC system may be useful?
A. There are small amounts of indirect costs.
B. Products make diverse demands on resources because of differences in volume, process steps, batch
size, or complexity.
C. Products a company is less suited to produce and sell show small profits.
D. Operations staff agrees with accountants about the costs of manufacturing and marketing products and
services.

79. Which of the following is not an objective of managerial accounting?

A. Providing information for decision making and planning.
B. Maximizing profits and minimizing costs.
C. Assisting in directing and controlling operations.
D. Measuring the performance of managers and subunits.

80. Which of the following terms refers to a performance measurement that is calculated as an investment center’s
after-tax operating income minus the product of its total assets multiplied by the company’s weighted average
cost of capital (WACC)?
A. Economic value added
B. Return on investment
C. Net realizable value
D. Profitability index

81. An auto parts store must maintain inventory of a wide variety of parts to satisfy its diverse customer base. As a
result, the store’s inventory has a high risk of obsolescence. Which of the following features would be most
desirable to the store’s creditors during a financial review of the auto parts store?
A. a high quick ratio
B. a high debt ratio
C. a high number of days sales outstanding in ending trade receivables
D. a low inventory turnover ratio.

82. Which of the following changes would cause a company’s break-even point in sales to increase?
A. The company’s contribution margin rate increases.
B. The company’s variable cost per unit decreases.
C. The company’s total fixed costs increases.
D. The company’s selling price per unit increases.

83. Which of the following costs is deducted from revenues of a manufacturing company in order to determine
gross margin but not deducted from revenues to determine contribution margin?
A. Fixed manufacturing
B. Variable manufacturing
C. Fixed selling and administrative
D. Variable selling and administrative
84. In the cost of quality, liability claims are examples of
A. Prevention costs
B. Appraisal costs
C. Internal failure costs
D. External failure costs

85. The economic order quantity for inventory is higher for an organization that has
A. lower annual unit sales.
B. higher fixed inventory ordering costs.
C. higher annual carrying costs as a percentage of inventory value.
D. a higher purchase price per unit of inventory.

86. Which of the following is not an important aspect of supply chain management?
A. Information technology
B. Accurate forecasts
C. Customer relations
D. Communications

87. It is a tool to achieve large, quick gains in effectiveness or efficiency through redesigning the execution of
specific business functions. It is a method of examining processes to identify and then eliminate, reduce, or
replace functions and processes that add little customer value to products or services. It is designed to bring
radical changes to an organization's operations.
A. Process Identification
B. Downsizing
C. Business Process Reengineering
D. Enterprise Resource Planning System

88. Ongoing efforts to reduce costs, increase product quality, and/or improve production process once
manufacturing has begun is known as
A. cost management
B. kaizen costing
C. target costing
D. life-cycle costing

89. 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.

90. Which of the following best describes tactical profit plans?

A. Detailed, short term, broad responsibilities, qualitative.
B. Broad, short term, responsibilities at all levels, quantitative.
C. Detailed, short term, responsibilities at all levels, quantitative.
D. Broad, long term, broad responsibilities, qualitative.

91. A consultant recommends a company hold funds for the following two reasons:
Reason 1: Cash needs may fluctuate substantially throughout the year.
Reason 2: Opportunity for buying at a discount may appear during the year.
The cash balances used to address the reasons given above are correctly classified as

Reason 1 Reason 2
A. Speculative balances Speculative balances
B. Speculative balances Precautionary balances
C. Precautionary balances Speculative balances
D. Precautionary balances Precautionary balances

92. The contribution income statement differs from the traditional income statement in which of the following
ways?
A. The traditional income statement separates costs into fixed and variable components.
B. The traditional income statement subtracts all variable costs from sales to obtain the contribution margin.
C. Cost-volume-profit relationships can be analyzed more easily from the contribution income
statement.
D. The contribution income statement separates costs into product and period categories.
93. When using a graphical solution to a linear programming problem, the optimal solution will lie in an area
commonly known as the:
A. region of maximization.
B. feasible region.
C. objective region
D. constraint region.

94. Costs that cannot be changed by any decision made now or in the future are:
A. fixed costs
B. indirect costs
C. avoidable costs
D. sunk costs

95. Which of the following statements does not apply to decision tree analysis?
A. The sum of the probabilities of the events is less than one (1).
B. All of the events are mutually exclusive.
C. All of the events are included in the decision.
D. The branches emanate from a node from left to right.

96. Which of the following performance measures is nonfinancial?

A. Percentage of defective products.
B. Return on investment.
C. Gross profit margin.
D. Economic value-added.

97. At Key Enterprises, the controller is responsible for directing the budgeting process. In this role, the controller
has significant influence with executive management as individual department budgets are modified and
approved. For the current year, the controller was instrumental in the approval of a particular line manager’s
budget without modification , even though significant reductions were made to the budgets submitted by other
line managers. As a token of appreciation, the line manager has given the controller a gift certificate for a
popular local restaurant. In considering whether or not to accept the certificate, the controller should refer to
which section of IMA’s Statement of Ethical Professional Practice?
A. Competence
B. Confidentiality
C. Integrity
D. Credibility

98. Which of the following is one of the four perspectives of a balanced scorecard?
A. Just in time.
B. Innovation.
C. Benchmarking.
D. Activity-based costing.

99. All of the following are benefits of decentralization EXCEPT that it:
A. creates greater responsiveness to local needs
B. decreases management and worker morale
C. leads to quicker decision making
D. sharpens the focus of managers

100. A learning curve is a function:

A. that measures the decline in labor-hours per unit due to workers becoming better at a job
B. that increases at a greater rate as workers become more familiar with their tasks
C. where unit costs increase as productivity increases
D. that is linear

101. Budgeting provides all of the following EXCEPT:

A. a means to communicate the organization's short-term goals to its members
B. support for the management functions of planning and coordination
C. a means to anticipate problems
D. an ethical framework for decision making

102. When cost relationships are linear, total variable prime costs will vary in proportion to changes in
 A. direct labor hours.
B. total material cost.
C. total overhead cost.
D. production volume.

103. Standard costs

A. are estimates of costs attainable only under the most ideal conditions.
B. are difficult to use with a process costing system.
C. can, if properly used, help motivate employees.
D. require that significant unfavorable variances be investigated, but do not require that significant favorable
variances be investigated.

104. Which of the following statements regarding standard cost systems is true?
A. Favorable variances are not necessarily good variances.
B. Managers will investigate all variances from standard.
C. The production supervisor is generally responsible for material price variances.
D. Standard costs cannot be used for planning purposes since costs normally change in the future.

105. In an activity-based costing system, cost reduction is accomplished by identifying and eliminating
All cost drivers Non-value-adding activities
A. No No
B. Yes Yes
C. No Yes
D. Yes No

106. In connection with a standard cost system being developed by Laxus Inc. the following information is being
considered with regard to standard hours allowed for output of one unit of product:
Hours
Average historical performance for the past three years 1.85
Production level to satisfy average consumer
demand over a seasonal time span 1.60
Engineering estimates based on attainable performance 1.50
Engineering estimates based on ideal performance 1.25

To measure controllable production inefficiencies, what is the best basis for Jupiter to use in establishing
standard hours allowed?
A. 1.25
B. 1.50
C. 1.60
D. 1.85

107. The capital budgeting technique known as payback period uses

Depreciation expense Time value of money
A. Yes Yes
B. Yes No
C. No No
D. No Yes

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

109. 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.

110. 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