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THEORY
6. 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
9. 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.
10. 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.
(PRODUCT COSTING)
11. 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
12. 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
(CAPITAL BUDGETING)
16. 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
17. Leo Corporation 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.
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
24. 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.
25. 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
26. 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
(QUANTITATIVE METHODS)
27. 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.
MANAGEMENT ADVISORY SERVICES - THEORIES
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28. 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.
29. 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.
31. 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.
(INFORMATION SYSTEMS)
32. The basic principles of accounting information system include all the following, except
A. flexible structure.
B. cost awareness.
C. implementation.
D. useful output.
(DECISION MAKING)
36. 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.
(ECONOMICS)
37. 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.
38. 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.
39. 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.
41. 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.
MANAGEMENT ADVISORY SERVICES - THEORIES
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(CAPITAL BUDGETING)
45. 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.
46. The City of Malabon 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.
(MANAGERIAL ACCOUNTING)
49. 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.
68. 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.
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