MANAGEMENT ADVISORY SERVICES
QUESTIONS AND ANSWERS
THEORY
1. Which of the following costs should consider the tax shield effect in computing the costs of capital?
A A. Cost of debt
B. Cost of common stock
C. Cost of preferred stock
D. Cost of retained earnings
2. Which of the following is not considered in the cash conversion cycle?
B A. Receivable collection period
B. Debt repayment period
C. Inventory conversion period
D. Payable deferral period
3. Cash flows from capital budgeting projects are assumed to be received
C A. At the beginning of the year
B. Evenly during the year
C. At the end of the year
D. At a certain point of the year
4. In the absence of shutdown costs,
B A. Shutdown point is higher than breakeven point
B. Shutdown point is equal to the breakeven point
C. Shutdown point is lower than breakeven point
D. One cannot determine the relationship between shutdown point and breakeven point
5. The balanced scorecard approach does not require looking at performance from which of the
following perspectives?
C A. Customer
B. Employees
C. Competitor
D. Internal business processes
6. Contribution margin ÷ profit after interests and preferred dividends =
C A. Degree of operation leverage
B. Degree of financial leverage
C. Degree of total leverage
D. No meaningful amount
7. If an increase in product price by 5% causes a decrease in quantity demanded by the same
percentage, then the demand for the product is said to be
B A. Elastic
B. Unit-elastic
C. Inelastic
D. Perfectly Elastic
8. Under the high-low method, the unit variable cost closely resembles the math concept of
C A. Y-intercept
B. X-intercept
C. Slope of the line
D. Independent variable
9. Profit under variable costing fluctuates with
A A. Sales only
B. Production only
C. Both sales and production
D. Neither sales nor production
10. The path that has the highest slack time in the PERT network is
C A. Critical path
B. Longest path
C. Shortest path
, 11.Which of the following is an invalid measure of productivity?
C A. Partial operational
B. Partial financial
C. Total operational
D. Total financial
12.Which of the following situations is among the concerns of a controller (as opposed to those of a
treasurer)?
D A. The company is in need of financing from external sources.
B. The company is already late in filing its monthly VAT returns.
C. The company is guilty of unplanned material bank overdraft.
D. The company is in default of its account payable to suppliers.
13. A firm’s working capital financing requirements may be divided into
B A. Aggressive and conservative
B. Seasonal and permanent
C. Current and non-current
D. Internal and external
14. Dividend yield multiplied by price-earnings ratio
A A. Pay-out ratio
B. Retention ratio
C. Equity ratio
D. Earnings per share
15. A term descriptive of managerial accounting.
C A. Historical financial statements
B. Generally accepted accounting principles
C. Discretionary
D. Regulatory
16. Identify the term that does not belong to the group.
A A. Differential cost
B. Prevention cost
C. Appraisal cost
D. Internal failure cost
17. Which of the following capital budgeting techniques is non-discounted?
A A. Simple rate of return
B. Sophisticated rate of return
C. Benefit-cost ratio
D. Net present value
18. Identify the term that does not belong to the group.
A A. Probability analysis
B. Regression analysis
C. High-low method
D. Scattergraph method
19. A system not used in inventory management.
A A. Lockbox system
B. Economic order quantity
C. Materials requirement planning system
D. ABC system
20. A factor that is dealt with by both ‘linear programming’ and ‘best product combination.’
D A. Efficiency
B. Productivity
C. Solvency
D. Scarcity
21. A(n) ________ cost increases or decreases in intervals as activity changes.
a. historical cost
b. fixed cost
c. step cost
d. budgeted cost
ANS: C
, 22. which of the following is not a product cost component?
a. rent on a factory building
b. indirect production labor wages
c. janitorial supplies used in a factory
d. commission on the sale of a product
ANS: D
23. Which of the following always has a direct cause-effect relationship to a cost?
Predicto Cost
r driver
a. yes yes
b. yes no
c. no yes
d. no no
ANS: C
24.The distinction between direct and indirect costs depends on whether a cost
a. is controllable or non-controllable.
b. is variable or fixed.
c. can be conveniently and physically traced to a cost object under
consideration.
d. will increase with changes in levels of activity.
ANS: C
25.Costs that are incurred for monitoring and inspecting are:
a. prevention costs c. appraisal costs
b. detection costs d. failure costs
ANS: C
26.Costs that are incurred to preclude defects and improper processing are:
a. prevention costs c. appraisal costs
b. detection costs d. failure costs
ANS: A
27. Costs that are incurred when customers complain are:
a. prevention costs c. appraisal costs
b. detection costs d. failure costs
ANS: D
28.The estimated maximum potential activity for a specified time is:
a. theoretical capacity c. normal capacity
b. practical capacity d. expected capacity
ANS: A
29. Refer to Zenith Corporation. Assume that Zenith has underapplied overhead of $37,200
and that this amount is material. What journal entry is needed to close the overhead
account? (Round decimals to nearest whole percent.)
a. Debit Work in Process $8,456; Finished Goods $13,294; Cost of Goods
Sold $15,450 and credit Overhead $37,200
b. Debit Overhead $37,200 and credit Work in Process $8,456; Finished
QUESTIONS AND ANSWERS
THEORY
1. Which of the following costs should consider the tax shield effect in computing the costs of capital?
A A. Cost of debt
B. Cost of common stock
C. Cost of preferred stock
D. Cost of retained earnings
2. Which of the following is not considered in the cash conversion cycle?
B A. Receivable collection period
B. Debt repayment period
C. Inventory conversion period
D. Payable deferral period
3. Cash flows from capital budgeting projects are assumed to be received
C A. At the beginning of the year
B. Evenly during the year
C. At the end of the year
D. At a certain point of the year
4. In the absence of shutdown costs,
B A. Shutdown point is higher than breakeven point
B. Shutdown point is equal to the breakeven point
C. Shutdown point is lower than breakeven point
D. One cannot determine the relationship between shutdown point and breakeven point
5. The balanced scorecard approach does not require looking at performance from which of the
following perspectives?
C A. Customer
B. Employees
C. Competitor
D. Internal business processes
6. Contribution margin ÷ profit after interests and preferred dividends =
C A. Degree of operation leverage
B. Degree of financial leverage
C. Degree of total leverage
D. No meaningful amount
7. If an increase in product price by 5% causes a decrease in quantity demanded by the same
percentage, then the demand for the product is said to be
B A. Elastic
B. Unit-elastic
C. Inelastic
D. Perfectly Elastic
8. Under the high-low method, the unit variable cost closely resembles the math concept of
C A. Y-intercept
B. X-intercept
C. Slope of the line
D. Independent variable
9. Profit under variable costing fluctuates with
A A. Sales only
B. Production only
C. Both sales and production
D. Neither sales nor production
10. The path that has the highest slack time in the PERT network is
C A. Critical path
B. Longest path
C. Shortest path
, 11.Which of the following is an invalid measure of productivity?
C A. Partial operational
B. Partial financial
C. Total operational
D. Total financial
12.Which of the following situations is among the concerns of a controller (as opposed to those of a
treasurer)?
D A. The company is in need of financing from external sources.
B. The company is already late in filing its monthly VAT returns.
C. The company is guilty of unplanned material bank overdraft.
D. The company is in default of its account payable to suppliers.
13. A firm’s working capital financing requirements may be divided into
B A. Aggressive and conservative
B. Seasonal and permanent
C. Current and non-current
D. Internal and external
14. Dividend yield multiplied by price-earnings ratio
A A. Pay-out ratio
B. Retention ratio
C. Equity ratio
D. Earnings per share
15. A term descriptive of managerial accounting.
C A. Historical financial statements
B. Generally accepted accounting principles
C. Discretionary
D. Regulatory
16. Identify the term that does not belong to the group.
A A. Differential cost
B. Prevention cost
C. Appraisal cost
D. Internal failure cost
17. Which of the following capital budgeting techniques is non-discounted?
A A. Simple rate of return
B. Sophisticated rate of return
C. Benefit-cost ratio
D. Net present value
18. Identify the term that does not belong to the group.
A A. Probability analysis
B. Regression analysis
C. High-low method
D. Scattergraph method
19. A system not used in inventory management.
A A. Lockbox system
B. Economic order quantity
C. Materials requirement planning system
D. ABC system
20. A factor that is dealt with by both ‘linear programming’ and ‘best product combination.’
D A. Efficiency
B. Productivity
C. Solvency
D. Scarcity
21. A(n) ________ cost increases or decreases in intervals as activity changes.
a. historical cost
b. fixed cost
c. step cost
d. budgeted cost
ANS: C
, 22. which of the following is not a product cost component?
a. rent on a factory building
b. indirect production labor wages
c. janitorial supplies used in a factory
d. commission on the sale of a product
ANS: D
23. Which of the following always has a direct cause-effect relationship to a cost?
Predicto Cost
r driver
a. yes yes
b. yes no
c. no yes
d. no no
ANS: C
24.The distinction between direct and indirect costs depends on whether a cost
a. is controllable or non-controllable.
b. is variable or fixed.
c. can be conveniently and physically traced to a cost object under
consideration.
d. will increase with changes in levels of activity.
ANS: C
25.Costs that are incurred for monitoring and inspecting are:
a. prevention costs c. appraisal costs
b. detection costs d. failure costs
ANS: C
26.Costs that are incurred to preclude defects and improper processing are:
a. prevention costs c. appraisal costs
b. detection costs d. failure costs
ANS: A
27. Costs that are incurred when customers complain are:
a. prevention costs c. appraisal costs
b. detection costs d. failure costs
ANS: D
28.The estimated maximum potential activity for a specified time is:
a. theoretical capacity c. normal capacity
b. practical capacity d. expected capacity
ANS: A
29. Refer to Zenith Corporation. Assume that Zenith has underapplied overhead of $37,200
and that this amount is material. What journal entry is needed to close the overhead
account? (Round decimals to nearest whole percent.)
a. Debit Work in Process $8,456; Finished Goods $13,294; Cost of Goods
Sold $15,450 and credit Overhead $37,200
b. Debit Overhead $37,200 and credit Work in Process $8,456; Finished
