CPAR Management Advisory Services Final Pre-Board PDF

CPAR CPA REVIEW SCHOOL OF THE PHILIPPINES Manila MANAGEMENT ADVISORY SERVICES APRIL 27 AND 30, 2022 Final Pre-board Examination Instructions: Choose the BEST answer for each of the...

CPAR CPA REVIEW SCHOOL OF THE PHILIPPINES Manila MANAGEMENT ADVISORY SERVICES APRIL 27 AND 30, 2022 Final Pre-board Examination Instructions: Choose the BEST answer for each of the following items. 1. That type of accounting which deals with how accounting and other financial data can be used for decision-making in controlling, monitoring, and directing business activity is called a. management accounting c. financial accounting b. responsibility accounting d. general accounting 2. In financial accounting, certain rules and regulations must be followed on how financial statements must be presented to readers. In managerial accounting, no such restrictions generally apply because it is a. an entirely different field that need not observe the broad guidelines in financial accounting. b. designed to provide management with non-financial information for decision-making. c. designed to provide accounting and other financial data to assist management in making business decisions. d. a discipline that does not require preparation of financial statements. 3. In comparing management and financial accounting, which of the following more accurately describes management accounting information? a. comparable, verifiable, monetary b. budgeted, informative, adaptable c. required, estimated, internal d. historical, precise, useful 4. Which of the following is not an objective of management accounting? a. maximization of profit and minimization of costs. b. measuring the performance of managers of subunits. c. providing information for planning and decision making. d. providing assistance in directing and controlling operations. 5. Cost is the monetary measure of the amount of resources given up in obtaining goods and services. Costs may be classified as unexpired or expired. Which of the following costs is not always considered to be expired immediately upon being recognized? a. salesmen’s commission b. depreciation expense for factory equipment MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 2 of 18 c. cost of goods sold d. salary of the company president 6. It refers to anything (a product, product line, a business segment) for which cost is computed. a. Cost object c. Cost control b. Cost driver d. Cost variance 7. An activity that adds costs to the product or service, but does not make such product or service more valuable to customers is called a. non-value-adding activity. c. costly activity. b. value-adding activity. d. valuable activity. 8. Product costs or inventoriable costs a. are charged to expense when products become part of the finished goods inventory. b. include only the prime costs of producing a product. c. are treated as assets before the products are sold. d. include only the conversion costs of producing the products. ITEMS 9 to 15 ARE BASED ON THE FOLLOWING INFORMATION: Data about Annabelle Company’s production and inventories for the month of June are as follows: Purchases – direct materials P143,440 Freight in 5,000 Purchase returns and allowances P 2,440 Direct labor 175,000 Actual factory overhead 120,000 Inventories: June 1 June 30 Finished goods P 68,000 P 56,000 Work in process 110,000 135,000 Direct materials 52,000 44,000 Annabelle Company applies factory overhead to production at 80% of direct labor cost. Over– or underapplied overhead is closed to cost of goods sold at year-end. The company’s accounting period is on the calendar year basis. 9. Annabelle Company’s prime cost for June was a. P154,000. c. P198,000. b. P329,000. d. P315,000. Direct materials inventory, June 1 P52,000 Add Purchases P143,440 Freight in 5,000 Total P148,440 Less Purchase returns & allowances 2,440 146,000 MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 3 of 18 Total materials available for use P198,000 Less Direct materials inventory, June 30 44,000 Direct materials used P154,000 Direct labor 175,000 Total prime costs P329,000 10. Annabelle Company’s conversion cost for June was a. P315,000. c. P329,000. b. P295,000. d. P444,000. Direct labor P175,000 Applied factory overhead (P175,000 x 80%) 140,000 Conversion costs P315,000 11. For the month of June, Annabelle Company’s total manufacturing cost was a. P469,000. c. P644,000. b. P444,000. d. P449,000. Materials P154,000 Direct labor 175,000 Applied factory overhead 140,000 Total manufacturing costs P469,000 12. For June, Annabelle Company’s cost of goods transferred to the finished goods inventory account was a. P579,000 c. P469,000. b. P461,000. d. P444,000. Total manufacturing costs P469,000 Add Work-in-process inventory, June 1 110,000 Total work-in-process P579,000 Less Work-in-process inventory, June 30 135,000 Cost of goods manufactured (or cost of goods transferred to the finished goods inventory account) P444,000 13. Annabelle Company’s cost of goods sold for June was a. P441,000. c. P456,000. b. P481,000. d. P444,000. Cost of goods manufactured P444,000 Add Finished goods inventory, June 1 68,000 Cost of goods available for sale P512,000 Less Finished goods inventory, June 30 56,000 Cost of goods sold P456,000 14. The amount of over/underapplied overhead factory for the month of June was a. P140,000 overapplied. c. P20,000 overapplied. b. P120,000 underapplied. d. P20,000 underapplied. MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 4 of 18 Actual factory overhead P120,000 Applied factory overhead 140,000 Overapplied factory overhead P 20,000 15. The cost of goods sold for the month of June should be increased (decreased) by the amount of over/ under-applied factory overhead of a. P20,000. c. (P120,000). b. (P20,000). d. P0. Over/underapplied factory overhead is closed to the cost of goods sold at year-end. 16. For decision-making purposes, relevant costs are a. variable past costs. b. all fixed and variable costs. c. anticipated future costs that will differ among various alternatives. d. costs incurred within the relevant range of production. 17. An income or benefit that is given up when one alternative is selected over another is called a. loss. c. relevant cost. b. opportunity cost. d. differential cost. 18. When production (in units) decreases, the average cost per unit of product increases. This increase in the average cost per unit is due to the a. increase in variable cost per unit. b. increase in fixed cost per unit. c. increase in total variable costs. d. increase in total fixed costs. 19. The following data were collected from the records of the Receiving Department of a company: Number of Receiving and Month Items Received Handling Costs January 2,800 P17,500 February 2,000 12,500 March 1,190 7,450 April 5,200 32,500 May 4,410 27,600 June 4,016 25,100 The receiving and handling cost is most likely to be a a. step cost. c. fixed cost. b. variable cost. d. semi-variable cost. MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 5 of 18 Definitely, the costs are not fixed, since the total amounts are not constant. The receiving and handling costs change directly with the change in the numbers of items received and the costs per item are relatively constant at P6.25 per unit. The costs therefore are variable costs. ITEMS 20 to 22 ARE BASED ON THE FOLLOWING INFORMATION: Meng Company is preparing a flexible budget for next year and requires a breakdown of the factory maintenance cost into the fixed and variable elements. The maintenance costs and machine hours (the selected cost driver) for the past six months are as follows: Maintenance Costs Machine Hours January P15,500 1,800 February 10,720 1,230 March 15,100 1,740 April 15,840 2,190 May 14,800 1,602 June 10,600 1,590 20. If Meng Company uses the high-low method of analysis, the estimated variable rate of maintenance cost per machine hour is a. P7.23. c. P5.46. b. P8.73. d. P5.33. Cost Machine Hours High (April) P15,840 2,190 Low (February) 10,720 1,230 Differences P 5,120 960 P5,120 Variable rate per hour = = P5.33 per hr. 960 The lowest number of hours (1,230) does not correspond to the lowest cost (10,600). In this case, the cost driver or activity level prevails. 21. The average annual fixed maintenance cost amounts to a. P4,160. c. P49,920. b. P8,320. d. P 5,120. High Low Total cost P15,840 P10,720 Less variable cost: (2,190 x P5.33) 11,680 (1,230 x P5.33) 6,560 Monthly fixed cost P 4,160 P4,160 Average annual fixed maintenance costs = P4,160 x 12 = P49,920 MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 6 of 18 22. What is the average rate per hour at a level of 1,500 machine hours? a. P5.33 c. P7.23 b. P8.11 d. P5.46 Variable cost (1,500 x P5.33) P 8,000 Fixed cost 4,160 Total cost P12,160 ÷ Machine hours 1,500 Average rate per hour P 8.11 23. The coefficient of correlation that indicates the strongest linear association between the dependent and independent variables is a. – 0.08 c. – 0.80 b. 0.40 d. 0.04 24. If the coefficient of correlation between two variables is –0.95, how might a scatter diagram of these variables appear? a. A least squares line that slopes up to the right. b. A least squares line that slopes down to the right. c. Random points d. A least squares line that slopes down to the left. 25. Under absorption costing, fixed manufacturing overhead could be found in all of the following except the a. work-in-process account. b. finished goods inventory account. c. Cost of Goods Sold. d. period costs. 26. 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. 27. A total variance is best defined as the difference between total a. actual cost and total cost applied for the standard output of the period. b. standard cost and total cost applied to production. c. actual cost and total standard cost of the actual input of the period. d. actual cost and total cost applied for the actual output of the period. 28. Ronald Corp. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Ronald applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance a. will be unfavorable. b. will be favorable. MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 7 of 18 c. will depend upon the capacity measure selected to assign overhead to production. d. is impossible to determine without additional information. Use the following information for questions 29–31. Timothy Company has the following information available for October when 3,500 units were produced (round answers to the nearest peso). Standards: Material 3.5 pounds per unit @ P4.50 per pound Labor 5.0 hours per unit @ P10.25 per hour Actual: Material purchased 12,300 pounds @ P4.25 Material used 11,750 pounds 17,300 direct labor hours @ P10.20 per hour 29. What is the labor rate variance? a. P875 F c. P865 U b. P865 F d. P875 U RV = (P10.20 – P10.25) x 17,300 hours = P865 F 30. What is the material quantity variance? a. P2,250 F c. P225 F b. P2,250 U d. P2,475 U QV = [11,750 – (3,500 X 3.5)] x P4.50 = P2,250 F 31. Assume that the company computes the material price variance on the basis of material issued to production. What is the total material variance? a. P2,850 U c. P5,188 F b. P5,188 U d. P2,850 F PV = (P4.25 – P4.50) x 11,750 = P2,937.50 F QV = 2,250.00 F Total materials cost variance P5,187.50 F 32. Actual fixed overhead is P33,300 (12,000 machine hours) and fixed overhead was estimated at P34,000 when the predetermined rate of P3.00 per machine hour was set. If 11,500 standard hours were allowed for actual production, applied fixed overhead is a. P33,300 c. P34,500 b. P34,000 d. P36,000 Applied fixed OH = 11,500 x P3 = P34,500 MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 8 of 18 Use the following information for questions 33–36. Standard Company has developed standard overhead costs based on a capacity of 180,000 machine hours as follows: Standard costs per unit: Variable portion 2 hours @ P3 = P 6 Fixed portion 2 hours @ P5 = 10 P16 During April, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following data relate to April: Actual machine hours used were 165,000. Actual overhead incurred totaled P1,378,000 (P518,000 variable plus P860,000 fixed). All inventories are carried at standard cost. 33. The variable overhead spending variance for April was a. P15,000 U. c. P38,000 F. b. P23,000 U. d. P38,000 U. 34. The variable overhead efficiency variance for April was a. P15,000 U. c. P38,000 F. b. P23,000 U. d. P38,000 U. 35. The fixed overhead spending variance for April was a. P40,000 U. c. P60,000 F. b. P40,000 F. d. P60,000 U. 36. The fixed overhead volume variance for April was a. P60,000 U. c. P100,000 F. b. P60,000 F. d. P100,000 U. SOLUTION TO NOS. 33 TO 36: AVAR OH P518,000 AH @ Std var Rate (165,000 x P3) 495,000 23,000 U Sp. Var SVAR OH (80,000 x 2 hrs x P3) 480,000 15,000 U Eff. Var AFxOH P860,000 BFxOH (180,000 x P5) 900,000 40,000 F Fx. Sp. Var SFxOH (80,000 x 2hours x P5) 800,000 100,000 U Volume Var 37. The sum of the labor mix and labor yield variances equals a. the labor efficiency variance. b. the total labor variance. c. the labor rate variance. MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 9 of 18 d. nothing because these two variances cannot be added since they use different costs 38. Total quality management is inseparable from the concept of a. ISO certification. b. centralized organizational structure. c. continuous improvement. d. the product life cycle. 39. 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. 40. Coffin Company’s cost of compliance is P58,000. Appraisal cost is P21,000 and failure cost is P32,000. The company’s total quality cost is a. P53,000. c. P90,000. b. P79,000. d. P111,000. Total Quality Costs = Compliance costs plus Failure costs = P58,000 + P32,000 = P90,000. 41. E Co. has the following expected pattern of collections on credit sales: 70 percent collected in the month of sale, 15 percent in the month after the month of sale, and 14 percent in the second month after the month of sale. The remaining 1 percent is never collected. At the end of May, E Co. has the following accounts receivable balances: From April sales P21,000 From May sales 48,000 E’s expected sales for June are P150,000. What were total sales for April? a. P150,000 c. P70,000 b. P72,414 d. P140,000 April sales = P21,000 ÷ 15% = P140,000. 42. Budgeted sales for K Inc. for the first quarter of 2023 are shown below: January 35,000 February 25,000 March 32,000 The company has a policy that requires the ending inventory in each period to be 10 percent of the following period’s sales. Assuming that the company follows this policy, what quantity of production should be scheduled for February? a. 24,300 units c. 25,000 units MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 10 of 18 b. 24,700 units d. 25,700 units February sales 25,000 Add ending inventory (32,000 x 10%) 3,200 Total 28,200 Less beginning inventory (25,000 x 10%) 2,500 Production 25,700 43. Production of Product X has been budgeted at 200,000 units for May. One unit of X requires 2 kgs. of raw material. The projected beginning and ending materials inventory for May are: Beginning inventory 2,000 kgs. Ending inventory 10,000 kgs. How many kgs. of material should be purchased during May? a. 192,000 c. 408,000 b. 208,000 d. 416,000 Production 200,000 X materials required per unit 2 Production requirement 400,000 Add materials ending inventory 10,000 Total 410,000 Less beginning materials inventory 2,000 Budgeted materials purchases 408,000 44. The weighted average cost of capital that is used to evaluate a specific project should be based on the a. mix of capital components that was used to finance a project from last year. b. overall capital structure of the corporation. c. cost of capital for other corporations with similar investments. d. mix of capital components for all capital acquired in the most recent fiscal year. 45. Tiger Inc. bought a piece of machinery with the following data: Useful life 6 years Yearly net cash inflow P45,000 Salvage value –0– Internal rate of return 18% Cost of capital 14% Present Value factors, 6th year: 14% 0.456 18% 0.370 MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 11 of 18 Present value factors, 6 periods: 14% 3.889 18% 3.498 The initial cost of the machinery was a. P175,000 c. P20,520 b. P157,410 d. P16,650 Initial cost = P45,000 x 3.498 = P157,410 46. An investment project is expected to yield P10,000 in annual revenues, has P2,000 in fixed costs per year, and requires an initial investment of P5,000, with an estimated useful life of 5 years. Given a cost of goods sold of 60 percent of sales, what is the payback period in years? a. 2.50 c. 2.00 b. 5.00 d. 1.25 Cost of investment P5,000 ÷ Net cash inflows: Revenues P10,000 - Cost of goods sold (60%) 6,000 Gross profit P 4,000 - Fixed costs 2,000 2,000 Payback period 2.50 years 47. A project has an initial cost of P100,000 and generates a present value of net cash inflows of P120,000. What is the project’s profitability index? a. 0.20 c. 0.80 b. 1.20 d. 5.00 Profitability index = P120,000 ÷ P100,000 = 1.20 48. All other things being equal, as the time period for receiving an annuity lengthens, a. the related present value factors increase. b. the related present value factors decrease. c. the related present value factors remain constant. d. it is impossible to tell what happens to present value factors from the information given. 49. In evaluating the performance of a profit center manager, he/she should be evaluated on a. all revenues and costs that can be traced directly to the unit. b. all revenues and costs under his/her control. c. the variable costs and the revenues of the unit. d. the same costs and revenues on which the unit is evaluated. 50. Office Products Inc. manufactures and sells various high-tech office automation products. Two divisions of Office Products Inc. are the Computer MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 12 of 18 Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a “super chip,” that can be used by both the Computer Division and other external customers. The following information is available on this month’s operations in the Computer Chip Division: Selling price per chip P50 Variable costs per chip P20 Fixed production costs P60,000 Fixed SG&A costs P90,000 Monthly capacity 10,000 chips External sales 6,000 chips Internal sales 0 chips Presently the Computer Division purchases no chips from the Computer Chips Division, but instead pays P45 to an external supplier for the 4,000 chips it needs each month. Assume that next month’s costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the appropriate transfer price range for a possible transfer of the super chip from one division to the other? a. P45 to P50 c. P20 to P45 b. P20 to P50 d. P30 to P45 51. ABC Corp. is composed of three operating divisions. Overall, the ABC Corp. has a return on investment of 20%. Division A has a return on investment of 25%. If ABC Corp. evaluates its managers on the basis of return on investment, how would the Division A manager and the ABC Corp. president react to a new investment that has an estimated return on investment of 23%? a. Division A manager – ACCEPT; ABC Corp. president – ACCEPT b. Division A manager – ACCEPT; ABC Corp. president – REJECT c. Division A manager – REJECT; ABC Corp. president – ACCEPT d. Division A manager – REJECT; ABC Corp. president – REJECT 52. Presently, the Alligator Division of Animal Crackers Co. has a profit margin of 30%. If total sales rise by P100,000, both the numerator and the denominator of the profit margin will increase. The net result will be a. an increase in the profit margin ratio to above 30%. b. a decrease in the profit margin ratio to below 30%. c. no change in the profit margin ratio. d. a change in the profit margin ratio that cannot be determined from this information. 53. A division of Lucky Co. reported a return on investment of 20% for a recent period. If the division's asset turnover was 5, its profit margin must have been a. 100% c. 25% MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 13 of 18 b. 4% d. 2% 54. Z Division of XYZ Corp. has the following information for 2022: Assets available for use P1,800,000 Target rate of return 10% Residual income P 270,000 What was Z Division's return on investment for 2022? a. 15% c. 25% b. 10% d. 20% Residual income P270,000 Desired income (P1,800,000 x 10%) 180,000 Actual income P450,000 ROI = P450,000 ÷ P1,800,000 = 25% 55. K Co. uses 10,000 units of a part in its production process. The costs to make a part are: direct material, P12; direct labor, P25; variable overhead, P13; and applied fixed overhead, P30. K Co. has received a quote of P55 from a potential supplier for this part. If K Co. buys the part, 70 percent of the applied fixed overhead would continue. K Co. would be better off by a. P50,000 to manufacture the part. b. P150,000 to buy the part. c. P40,000 to buy the part. d. P160,000 to manufacture the part. Relevant costs to make: Materials P12 Labor 25 Variable overhead 13 Fixed overhead (P30 x 30%) 9 Total P59 Cost to buy 55 Net advantage of BUYING P 4 X number of units 10,000 Total net advantage of BUYING P40,000 Use the following information for questions 56 and 57. R Corp. sells a product for P18 per unit, and the standard cost card for the product shows the following costs: Direct material P 1 Direct labor 2 Overhead (80% fixed) 7 Total P10 MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 14 of 18 R received a special order for 1,000 units of the product. The only additional cost to R would be foreign import taxes of P1 per unit. 56. If R is able to sell all of the current production domestically, what would be the minimum sales price that R would consider for this special order? a. P18.00 c. P5.40 b. P11.00 d. P19.00 Regular price of P18 plus import tax of P1 = P19 57. Assume that R has sufficient idle capacity to produce the 1,000 units. If R wants to increase its operating profit by P5,600, what would it charge as a per-unit selling price? a. P18.00 c. P11.00 b. P10.00 d. P16.60 Relevant cost (P1 + P2 + + tax P1) x 1,000 = P 5,400 Desired profit 5,600 Total P11,000 ÷ Number of units 1,000 Selling price P 11 58. Handy Combs, Inc. makes and sells brushes and combs. It can sell all of either product it can make. The following data are pertinent to each respective product: Brushes Combs Units of output per machine hour 8 20 Selling price per unit P12.00 P4.00 Product cost per unit Direct material P1.00 P1.20 Direct labor 2.00 0.10 Variable overhead 0.50 0.05 Total fixed overhead is P380,000. The company has 40,000 machine hours available for production. What sales mix will maximize profits? a. 320,000 brushes and 0 combs b. 0 brushes and 800,000 combs c. 160,000 brushes and 600,000 combs d. 252,630 brushes and 252,630 combs MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 15 of 18 BRUSHES COMBS Selling price P 12 P 4 Variable costs per unit (P1 + P2 + P0.5) 3.50 (P1.2 + P0.10 + P0.05) 1.35 CM per unit P8.50 P2.65 X units per machine hour 8 20 CM per hour P 68 P 53 Brushes’ CM per hour is higher. The company should use all the available 40,000 hours to produce 320,000 units of brushes (40,000 x 8). 59. Just-in-time (JIT) inventory systems a. result in a greater number of suppliers for each production process. b. focus on a “push” type of production system. c. can only be used with automated production processes. d. result in inventories being either greatly reduced or eliminated. 60. A firm estimates that its annual carrying cost for material X is P0.30 per kilo If the firm requires 50,000 kilos per year, and ordering costs are P100 per order, what is the EOQ (rounded to the nearest kilo)? a. 5,774 kilos c. 1,732 kilos b. 4,082 kilos d. 1,225 kilos 2 𝑥 50,000 𝑥 𝑃100 EOQ = √ = 5,774 𝑃0.30 61. A company annually consumes 10,000 units of Part C. The carrying cost of this part is P2per year and the ordering costs are P100. The company uses an order quantity of 500 units. If the company operates 200 days per year, and the lead time for ordering Part C is 5 days, what is the order point? a. 250 units c. 500 units b. 1,000 units d. 2,000 units Daily usage (10,000 units ÷ 200 days) 50 x Lead time 5 Order point 250 Use the following information for questions 62 and 63. The following information relates to financial projections of Big Co. for 2023: Projected sales 60,000 units Projected variable costs P2.00 per unit Projected fixed costs P50,000 per year Projected unit sales price P7.00 62. How many units would Big Co. need to sell in 2023 to earn a profit before taxes of P10,000? a. 25,714 c. 8,571 b. 10,000 d. 12,000 MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 16 of 18 Fixed costs P50,000 Desired profit 10,000 Total P60,000 ÷ CM per unit (P7 – P2) 5 Required sales 12,000 63. If Big Co. achieves its projections in 2023, what will be its degree of operating leverage? a. 6.00 c. 1.68 b. 1.20 d. 2.40 Contribution margin (60,000 x P5) P300,000 ÷ Profit before tax (P300,000 – P50,000) 250,000 Degree of operating leverage 1.20 64. In a CVP graph, the area between the total cost line and the total fixed cost line yields the a. fixed costs per unit. c. profit. b. total variable costs. d. contribution margin. 65. Which of the following statements about activity-based costing is NOT true? a. Activity-based costing is useful for allocating marketing and distribution costs. b. Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. c. Activity-based costing seeks to distinguish batch-level, product- sustaining, and facility-sustaining costs, especially when they are not proportionate to one another. d. Activity-based costing differs from traditional costing systems in that products are not cross-subsidized. 66. 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. that demand for the product would become completely inelastic. d. an increase in product supply because of increased availability. 67. A target in the balanced scorecard framework is a. a statement of what the strategy must achieve and what is critical to its success. b. a key action program required to achieve strategic objectives. c. the level of performance or rate of improvement needed in the performance measure. d. a diagram of the cause-and-effect relationships between strategic objectives. MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 17 of 18 68. Which of the following formulas can often reconcile the difference between absorption- and variable-costing net income? a. Ending inventory units x predetermined variable-overhead rate per unit. b. Ending inventory units x predetermined fixed-overhead rate per unit. c. Change in inventory units x predetermined fixed-overhead rate per unit. d. Change in inventory units x predetermined variable-overhead rate per unit. 69. A supply curve illustrates the relationship between a. price and consumer tastes. c. supply and demand b. price and quantity demanded. d. price and quantity supplied 70. Newton Corporation is offered trade credit terms of 3/15,net 45. The firm does not take advantage of the discount, and it pays the account after 67 days. Using a 365-day year, what is the nominal annual cost of not taking discount? a. 18.2% c. 21.71% b. 23.48% d. 26.45% 3 365 97 x 67−15 = 21.71% - end - MANAGEMENT ADVISORY SERVICES BATCH 91 FINAL PREBOARD Page 18 of 18 - END -