NATIONAL MOCK BOARD EXAMINATION 2017

MANAGEMENT SERVICES
Items 1 to 6 are based on the following information
Italian Corporation provides the following information for the month of February based on the production
of 20,000 units:
Direct materials P 50,000
Direct labor 30,000
Variable factory overhead costs 20,000
Fixed factory overhead costs 25,000
Variable selling and administrative expenses 40,000
Fixed selling and administrative expenses 15,000

1. What is the unit product cost under variable costing?

A a. P 5.00
b. P 6.25
c. P 7.00
d. P 8.00

2. What selling price will earn a gross profit of P 2.50 per unit under absorption costing?
B a. P 3.75
b. P 8.75
c. P 9.50
d. P 10.50

3. Under full costing, what is the costs of goods manufactured if work-in-process inventory increased by P
15,000?
B a. P 85,000
b. P 110,000
c. P 115,000
d. P 140,000

4. Assuming that production and sales are equal, what is the company’s margin of safety based on a unit
selling price of P 12.00?
D a. 8,000 units
b. P 60,000
c. P 84,000
d. P 144,000

5. If the present sales is P 75,000 (5,000 units), what is the required increase in unit sales to break-even for
the month?
A a. 15,000 units
b. 20,000 units
c. None, since the company is currently earning profit
d. None, since the company is currently at its break-even point

6. How many units were sold if variable costing profit is higher than absorption costing profit by P 2,500?
D a. 18,000 units
b. 18,889 units
c. 21,111 units
d. 22,000 units
7. Which of the following terms does not refer to the same type of variance from the rest of the choices?
C a. Rate variance
b. Price variance
c. Usage variance
d. Spending variance

8. Alfredo Company produces three products (A1, B2 and C3) in the same plant. Fixed overhead costs are
applied to products based on direct labor pesos. Per unit data for the three products are as follows:
A1 B2 C3
Selling price P 160 P 64 P 90
Production costs:
Variable production costs 94 34 62
Fixed overhead applied 48 24 27
“Special rubbing” hours needed 6 3 2

Assume that these three products all must be “rubbed” by one of five highly skilled employees. Total production
is limited by these five employees. What should be the priority ranking (highest to lowest) of the three products
to maximize profits?

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 Highest Middle Lowest
D a. B2 C3 A1
b. C3 B2 A1
c. A1 B2 C3
d. C3 A1 B2

9. Which sequence reflects decreasing level of responsibility?

C a. Profit center, investment center, revenue center
b. Revenue center, profit center, investment center
c. Investment center, profit center, revenue center
d. Investment center, revenue center, profit center

10. Lasagna Company’s operations for April disclosed the following data relating to direct labor:
Actual cost P 10,000
Rate variance (favorable) 1,000
Efficiency variance (unfavorable) 1,500
Standard cost P 9,500

If the contracted labor rate is P 5.50, then what is the actual labor rate?
B a. P 6.00
b. P 5.00
c. P 4.50
d. P 4.00

11. In microeconomics, what will affect the demand of a product rather than its supply?
C a. Increasing labor productivity
b. Increasing costs of materials
c. Increasing average household income
d. Increasing market price of the product

12. Which of these correlation coefficients represents the weakest relationship between two variables?
C a. + 0.50
b. - 0.80
c. - 0.05
d. + 1.05

13. A retail manager is preparing a budget for the coming year and is considering the various costs of retail
store. What is the best approach for the manager to take when budgeting for the cost of the store’s
merchandise?
C a. The total costs will stay the same as last year, but the unit cost will change with each sale
b. The total cost of merchandises sold for the year and the unit cost will remain constant with each
sale
c. The total cost of merchandises sold for the year will depend on the amount of sales, but the
unit cost of each sale will stay fairly constant
d. The total costs will stay the same as last year, and the unit cost will remain constant with each
sale

14. An investment center’s return on sales is 20% when its return on investment (RoI) is 25%. What is the
center’s investment turnover?
D a. 0.05
b. 0.45
c. 0.80
d. 1.25

15. CPAs are in a more advantageous position than members of other professions to render MAS because
A a. The CPA is already familiar with the client and its business and enjoys the confidence of the client
b. CPAs are professionals with recognized standing
c. Most CPAs are highly trained and educated
d. Only CPAs may render MAS

Items 16 to 18 are based on the following information

Marinara Company uses a standard costing system in the manufacture of its single product. The 35,000
units of raw material in inventory were purchased for P 105,000, and two units of raw material are required to
produce one unit of final product. In November, the company produced 12,000 units of product. The standard
allowed for material was P 60,000, and there was an unfavorable quantity variance of P 2,500.

16. What is Marinara’s standard price for one unit of material?

B a. P 2.00
b. P 2.50
c. P 3.00
d. P 5.00

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 17. How many units were used to produce November output?
D a. 12,000 units
b. 12,500 units
c. 23,000 units
d. 25,000 units

18. What was the materials price variance for the units used in November?
A a. P 12,500 unfavorable
b. P 11,000 unfavorable
c. P 3,500 unfavorable
d. P 2,500 unfavorable

19. When there is no excess capacity, the minimum acceptable transfer price must cover
D a. Opportunity costs only
b. Variable and fixed manufacturing costs
c. Variable costs associated with the transfer
d. Variable manufacturing costs plus contribution margin foregone on lost regular units.
20. Under the master budget, which of the following shall be classified as a financial budget?
B a. Sales budget
b. Capital budget
c. Materials budget
d. Production budget

21. The following cost data for different hours of operations are made available to you by Carbonara
Manufacturing Company for your analysis:
Number of Months 10
Sum of Hours 350
Sum of Costs 1,000
Sum of Hours x Costs 39,200
Sum of Hours Squared 14,250
Using the least-squares method, what is the value of the slope of the cost line?
A a. P 2.10 per hour
b. P 26.50 per month
c. P 316.00 per year
d. P 735.00 for 10 months

22. How should the monthly rental of a factory machine be treated?

D a. Direct product cost under absorption costing
b. Indirect product cost under variable costing
c. Direct period cost under absorption costing
d. Indirect period cost under variable costing

23. Under the three-variance method for analyzing factory overhead, budget or spending variance is computed
by subtracting from actual factory overhead costs incurred the
A a. Budget allowance based on actual hours
b. Budget allowance based on normal hours
c. Budget allowance based on standard hours
d. Budget allowance based on budgeted hours

24. Spaghetti Company manufactures a single product. The company keeps inventory of raw materials at 50%
of the coming month’s budgeted production. Each unit of product requires 3 pounds of materials. The
production budget is (in units): May, 1,000; June, 1,200; July, 1,300; August, 1,600.

Determine the raw materials purchases in June.

C a. 3,450 pounds
b. 3,600 pounds
c. 3,750 pounds
d. 4,350 pounds

25. Which of the following matters is most likely the concern of a controller rather than a treasurer?
A a. The company is already late in filing its periodic tax returns
b. The company is in default of an account payable to a supplier
c. The company is guilty of unplanned material bank overdraft
d. The company is in need of financing from external sources

26. Profit ÷ Margin of Safety =

C a. Break-even point
b. Contribution margin
c. Contribution margin ratio
d. No meaningful or useful amount

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 27. For convenience purposes, insignificant amounts of production variances are closed to the
A a. Cost of goods sold only
b. Cost of goods sold and finished goods inventory
c. Cost of goods sold, finished goods inventory and work in process
d. Cost of goods sold, finished goods inventory, work in process and direct materials

28. Charlie Chan produces two products, A and B. Relevant data follow:
Product A Product B
Direct materials P 28 P 25
Direct labor 3 2
Variable overhead 6 4
Variable selling expenses 4 2
Fixed costs P 50,000
Production/sales (units) 2,000 1,000
The company allocates fixed costs the basis on the direct labor cost. What should be the selling price of
Product B if the markup based on full cost is 30%?
B a. P 59.00
b. P 59.15
c. P 60.00
d. P 63.15

Items 29 and 30 are based on the following information

The Pesto Company has the following historical pattern on its credit sales:
70% collected in the month of sale
15% collected in the first month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
The sales on open account have been budgeted for the last six months of 2016 are shown below:
July P 60,000
August 70,000
September 80,000
October 90,000
November 100,000
December 85,000

29. Determine the projected cash collections in the month of October from third quarter sales.
A a. P 21,400
b. P 43,000
c. P 84,400
d. P 89,100

30. Determine the projected net accounts receivable balance as of January 1, 2017.
A a. P 42,250
b. P 44,100
c. P 44,750
d. P 45,000

31. A decrease in the income tax rate

D a. Increases sales required to earn a particular pre-tax profit
b. Decreases sales required to earn a particular pre-tax profit
c. Increases sales required to earn a particular after-tax profit
d. Decreases sales required to earn a particular after-tax profit
32. What cost segregation technique requires the use of observation and judgement to split the variable and
fixed components of a mixed cost?
C a. High-low method
b. Step down method
c. Scattergraph method
d. Least-Square regression method

Items 33 to 35 are based on the following information

Pomodoro, Inc. evaluates manufacturing overhead in its factory by using variance analysis. The January
information shows the following:
Actual Budget
Number of frames manufactured 19,000 20,000
Variable overhead costs P 4,100 P 2 per hour
Fixed overhead costs P 22,000 P 20,000
Direct labor hours 2,100 0.1 hour per frame
Labor payroll P 10,500 P 4.50 per hour

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 33. What is the overhead controllable variance?
D a. P 2,100 favorable
b. P 2,300 favorable
c. P 2,100 unfavorable
d. P 2,300 unfavorable

34. What is the variable overhead spending variance?

A a. P 100 credit
b. P 300 credit
c. P 100 debit
d. P 300 debit

35. What is the fixed overhead volume variance?

B a. P 1,000 over-applied
b. P 1,000 under-applied
c. P 3,000 over-applied
d. P 3,000 under-applied

36. Which set of terms more accurately describes management accounting information (rather than financial
accounting information)?
C a. Historical, precise, useful
b. Required, estimated, internal
c. Budgeted, informative, adaptable
d. Comparable, verifiable, monetary

37. Asian Company is subject to a 40% income tax rate. The following data pertain to the company’s production
and sales of 45,000 units:
Sales revenue P 1,350,000
Variable costs 810,000
Fixed costs 432,000

How many units must Asian Company sell to earn an after-tax profit of P 180,000?
D a. 42,000
b. 45,000
c. 51,000
d. 61,000

38. A project feasibility study

A a. Is mainly based on assumptions and financial forecasts
b. Ensures the viable realization of a proposed business project
c. Extends up to commissioning of the commercial start-up of the proposed business project
d. Shall include marketing and technical aspects but shall exclude the financial aspect of the
proposed business project
39. A company that adopts a JIT production system shall expect
B a. Break-even point to be higher than shutdown point
b. Income under absorption and variable costing to be equal
c. Most production costs to be irrelevant in decision-making
d. Standard cost variances to be mostly material and unfavorable

40. Bolognese Company, Inc. expects the following monthly results for the coming year:
Shoes Slippers Sandals TOTAL
Sales P 90,000 P 110,000 P 350,000 P 550,000
Variable costs P 50,000 P 30,000 P 160,000 P 240,000
Fixed costs 60,000 40,000 100,000 200,000
Total costs P 110,000 P 70,000 P 260,000 P 440,000
Profit (loss) (P 20,000) P 40,000 P 90,000 P 110,000

Bolognese could avoid P 25,000 in fixed costs by dropping the Shoes segment. However, the managers
believe that if they drop Shoes, sales of each of other lines will fall by 10%.

What will be the company profit if Bolognese drops the Shoes segment?
B a. P 25,000
b. P 68,000
c. P 70,000
d. P 95,000

41. If the demand for a product is price inelastic, then

C a. Increasing the price will decrease the total revenue
b. Increasing the price will not affect the total revenue
c. Decreasing the price will decrease the total revenue

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 d. Decreasing the price will not affect the total revenue

42. Pasta Division reported for 2016 a residual income of P 200,000 when it had P 8,000,000 of average invested
capital and P 1,000,000 of operating income. What was the imputed interest rate?
B a. 2.5%
b. 10.0%
c. 12.5%
d. 20.0%

43. The comparison of a company's practices and performance levels against those of other organizations is most
commonly known as
C a. TQM
b. Kaizen
c. Benchmarking
d. Re-engineering

44. The Standards of Ethical Conduct for management accountants comprise of competence, confidentiality,
integrity and objectivity. Objectivity
D a. Requires management accountants to develop their skills and to do their tasks in accordance
with relevant laws, regulations, and standards
b. Forbids management accountants to act on confidential information they acquire in doing their
work, except when authorized or when legally obligated to do so
c. Refers to the avoidance of conflicts of interest, improprieties of accepting gifts and favors, and
other matters generally associated with professional behavior
d. Is the responsibility to communicate information fairly and objectively and disclose all relevant
information expected to influence an intended user’s understanding of the reports presented

45. Simple regression analysis provides the means to evaluate a line of regression which is fitted to a plot of
data and represents
A a. The way costs change in response to an independent variable
b. The way costs change in response to a dependent variable
c. The variability of expense with pesos of operation
d. The variability of expense with pesos of production

46. Aglio Company makes 70,000 units per year of a part it uses in the products it manufactures. The unit
product cost of this part is computed as follows:
Direct materials P 17.80
Direct labor 19.00
Variable manufacturing overhead 1.00
Fixed manufacturing overhead 17.10
Unit product cost P 54.90

An outside supplier has offered to sell the parts for P 48.50 per unit. If Aglio Company accepts this offer,
the facilities now being used to make the part could be used to make another product that is expected to
contribute an additional margin of P 273,000 per year.

If the parts were purchased from the outside supplier, all of the direct labor cost of the part would be
avoided. However, P 8.20 of the fixed manufacturing overhead cost being applied to the part would
continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead
cost would be applied to the company’s remaining products.

From the given data, which of the following is a correct conclusion?

D a. The total relevant unit cost to make the part is P 46.70
b. The total relevant unit cost to buy the part is P 44.60
c. The net advantage of making the part is P 1.80 per unit
d. The net disadvantage of making the part is P 147,000

47. Variance analysis may be included in the performance report of which of the following responsibility
centers?
D a. Cost center only
b. Cost center and revenue center
c. Cost center, revenue center and profit center
d. Cost center, revenue center, profit center and investment center

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48. For the period just ended, Fettucine Company generated the following operating results in percentages:
Revenues 100%
Cost of sales:
Variable 50%
Fixed 10% 60%
Gross profit (P 1.2 M) 40%
Operating expenses:
Variable 20%
Fixed 15% 35%
Net operating income 5%

What is the degree of operating leverage?

B a. 8.0 times
b. 6.0 times
c. 5.0 times
d. 2.6 times

49. When both the selling price and the variable cost per unit are increased by P 5,
A a. The break-even point remains the same
b. More units need to be sold to break-even
c. Fewer units need to be sold to break-even
d. The contribution margin also increases by P 5

50. For the past ten years, Macaroni Company has produced small gas motors that fit into its main product line
of weed-cutting machine. As material costs have steadily increased, the controller of Macaroni is reviewing
the decision to continue making the small motors and has identified the following:
a. The equipment used to manufacture the gas motors has a book value of P 350,000.
b. The space now occupied by the gas motor manufacturing department could be used to eliminate
the need for storage space now being rented.
c. Units can be purchased from an outside supplier for P 89.95.
d. Five of the persons who work at the gas motor manufacturing department would be terminated
and given severance pay.
e. P 25,000 unsecured note is still outstanding on the equipment used in the manufacturing process.

Which of these items are relevant to the decision that the controller is to make?
B a. A, C and D
b. B, C and D
c. B, C, D and E
d. A, B, D and E

51. Dotonbori Comapany has a standard variable overhead rate of P 5 per machine hour, with each completed
unit expected to take three machine hours to produce. A review of the company's accounting records
found the following:
Actual production: 19,500 units
Variable-overhead efficiency variance: P 9,000 U
Variable-overhead spending variance: P 21,000 F

What was Dotonburi's actual variable overhead during the period?

B a. P 262,500
b. P 280,500
c. P 304,500
d. P 322,500

52. Which of the following techniques does not logically belong with the others?
A a. Product costing.
b. Value engineering.
c. Kaizen costing
d. Continuous improvement.

Items 53 to 55 are based on the following information

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 Kawaguchiko has two divisions: the Cologne Division and the Bottle Division. The Bottle Division produces
containers that can be used by the Cologne Division. The Bottle Division's variable manufacturing cost is P
2, shipping cost is P 0.10, and the external sales price is P 3. No shipping costs are incurred on sales to the
Cologne Division, and the Cologne Division can purchase similar containers in the external market for P
2.60.

53. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the
demands of the Cologne Division. Using the general rule, the transfer price from the Bottle Division to the
Cologne Division would be:
A a. P 2.00
b. P 2.10
c. P 2.60
d. P 2.90

54. Assume the Bottle Division has no excess capacity and could sell everything it produced externally. Using
the general rule, the transfer price from the Bottle Division to the Cologne Division would be:
C a. P 2.10
b. P 2.60
c. P 2.90
d. P 3.00

55. The maximum amount the Cologne Division would be willing to pay for each bottle transferred would be:
C a. P 2.00
b. P 2.10
c. P 2.60
d. P 2.90

56. If a company carries safety stock and its annual carrying costs per unit are P 0.30, what formula yields the
total annual carrying costs?
A a. P 0.30 x [(EOQ ÷ 2) + Safety stock)]
b. P 0.30 ÷ (EOQ + Safety stock)
c. P 0.30 ÷ [(EOQ x 2) + Safety stock)]
d. P 0.30 x (EOQ - Safety stock)

57. Fukishima Corporation, which is subject to a 30% income tax rate, is considering a P 150,000 asset that will
result in the following over its seven-year life:

Total revenue: P 1,190,000

Total operating expenses (excluding depreciation): P 770,000
Total depreciation: P 150,000

What is the accounting rate of return on the initial investment?

B a. 16%
b. 18%
c. 26%
d. 28%

58. Equity capital is considered more expensive than debt capital because
A a. Dividends on equity capital normally does not have tax shield
b. Dividends on equity capital may not be declared given an insufficient corporate earnings
c. Interests on debt capital may not be paid given an insufficient corporate earnings
d. Interests on debt capital are paid uniformly each year based on a fixed amount even in the case
of large corporate earnings

59. Sashimi Company reported the following data at the end of 2015:
Sales (75% on credit) P 300,000
Expenses (26% on credit) 60,000
Accounts receivable (P 4,000 decrease during 2015) 8,000
Total assets 200,000
Shareholders’ equity 150,000

Assuming a 365-day year, what was the average number of days to collect receivables during 2015?
B a. 14.3
b. 16.2
c. 21.9
d. 36.5

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 60. Which of the following is not an area related to the performance of MAS by independent accounting firms?
B a. Improvement of existing policies, methods and procedures
b. Performance of management functions and making decisions
c. Introduction of new ideas, concepts and methods to management
d. Conduct of special studies, preparation of recommendations and formulation of plans and
programs

* * * END OF EXAMINATION * * *

Queen of the Most Holy Rosary, pray for us!

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