MAS-01

Batch 3
MANAGEMENT ADVISORY SERVICES (MAS)

• One of the six CPA board exam subjects (other subjects: AFAR, AUD, FAR, RFBT & TAX)
• Number of items: 70 multiple-choice questions (MCQs), mix of theories and problems
• Topics covered (based on CPA Syllabus effective October 2022):

Part I – MANAGEMENT ACCOUNTING (43%)

 Introduction to Management Accounting

 Cost Concepts and Behavior
 Cost-Volume-Profit Analysis
 Variable and Absorption Costing
 Standard Costing & Variance Analysis
 Financial Planning & Master Budget
 Activity-Based Costing & Activity-Based Management
 Responsibility Accounting
 Balanced Scorecard
 Quantitative Techniques
 Relevant Costing & Differential Analysis

Part II – FINANCIAL MANAGEMENT (40%)

 Financial Statement Analysis

 Working Capital Management & Finance
 Operating Leverage, Financing Leverage and Total Leverage
 Capital Budgeting
 Cost of Capital
 Risks and Returns
 Capital Structure & Long-Term Financing Decision

Parts III, IV & V – “THE OTHERS” (17% - 12 out of 70 items)

 Macroeconomics
 Microeconomics
 Ethical Considerations, among others

Basic consideration in MAS

MANAGEMENT ADVISORY SERVICES- refers to that area of accounting work concerned with
providing advice on technical assistance to help clients improve the use of resources to achieve
their goals.

MANAGEMENT CONSULTANT- 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 the firm.

FACTORS FOR THE EMERGENCE AND GROWTH OF MS CONSULTANCY

1. Growth in size and complexity of business firms
2. Complexities in managing and conducting a business
3. Lack of competent staff
4. Trend towards industrialization
5. Need for adequate and timely information in management decision-making
6. Development of techniques for the solution of management problems, and
businessmen’s awareness of their usefulness

REASONS FOR HIRING MANAGEMENT CONSULTANTS

a. Help define specific problems and define solutions.
b. Provide specialized skills and experience.
c. Provide confidential service in which the entity of the clients is concealed.
d. Train client personnel.
e. Help improve intra-company communications.
f. Render an independent opinion.
g. Help get results.

MAS BY CPAs- CPAs performing management consulting and other advisory services are
considered in the practice of professional accounting and are bound by the Code of Ethics for
Professional Accountants.

CHARACTERISTICS OF MAS
1. Services are rendered for the management.
2. Involves problem solving.
3. Relates to the future.
4. Broad in scope.
5. Involves varied assignments.
6. Engagements are usually none-recurring.
7. Engagements require highly requires qualified staff.
8. Human relations play a vital role in each engagement.

SCOPE OF MAS
MAS are usually related to the services rendered by CPAs in the areas of auditing,
tax, and accounting and may involve activities such as:
  Counseling management in its analysis, planning, organizing, operating and
controlling functions;
 Reviewing and suggesting improvement of policies, procedures, systems,
methods, and organizational relationships;
 Introducing new ideas, concepts, and methods to management: and
 Conducting special studies, proposing plans and programs, and providing
guidance and technical assistance in their implementation.

BROAD AREAS OF MAS

A. AREAS WHICH ARE NORMALLY RELATED TO THE ACCOUNTING AND FINANCE
FUNCTIONS
1. Financial Accounting System Design and Development
2. Management Accounting System Design and Development
3. Development and Establishment of Budgetary Controls

The field covers the following:

1. Cost Accounting
a. Development of standard cost system
b. Cost analysis and control
c. Variance analysis
2. Financial Management
a. Establishment of capital budgeting procedures
b. Study of the cost of capital and cost of debt
c. Financial analysis for project studies
d. Establishment of operating and cash budgets
e. Valuation of common stock for purposes of mergers and sale

B. AREAS WHICH ARE NOT NORMALLY RELATED TO THE ACCOUNTING AND

FINANCE FUNCTIONS:
1. General Management Consultation
a. Management or Operations Audit
b. Measurement of operating Performance
c. Mergers and Acquisitions Programs
d. Development of Compensation Programs
e. Pension Plan Review
f. Special Studies on Industry Potential
g. Long-Range Planning

2. Project Feasibility Studies

- Involves financial, technical and marketing evaluation of proposed projects

3. Organization and Personnel

a. Review of Existing Organization Structure
b. Organization and Administrative Manual Preparation
c. Job Evaluation and Salary Administration
d. Development of Personnel Rating Program
e. Retirement Plan Studies
f. Studies of Cost reduction System
 g. Determining of Cost Alternatives in Collective Bargaining Agreements

4. Industrial Engineering
a. Production, Planning, Scheduling and Control
b. Plan Layout Studies
c. Inventory Management Studies
d. Materials Cost System Design and Development
e. Preventive Maintenance System Design and Development
f. Development of Work Studies
g. Purchasing Management, including Value Analysis

5. Marketing
a. Product Profitability Analysis
b. Pricing Policy Determination
c. Market Forecasting
d. Distribution Cost Analysis
e. Salesmen’s Incentive Compensation Evaluation

6. Operations Research
- Involves the use of mathematical techniques, such as linear programming.
PERT/CPM, queuing theory, simulation, etc. to solve operational problems.

The services listed above are not necessarily exhaustive nor complete. The practitioner
may offer other services not mentioned above depending on the practitioner’s
competence, experience, technical ability, and professional integrity to meet or deliver
such other services he offers.

MAS QUALIFICATIONS BASED ON REQUIRED EXPERTISE

1. Usual Services:
a. Evaluation of form of business organization
b. Analysis of financial and operating statements
c. Design and installation of accounting systems
d. Design for filing system for storing accounting records
e. Suggestions for improvement of internal control
f. Establishment of control to assist management and expedite the audit
process
g. Preparation of insurance claims in case of business interruption
h. Research and evaluation o alternative methods of handling a transaction for
its effect on finance and tax consequences
i. Assistance in the preparation of forecasts and budgets
j. Presentation and explanation of statements
k. Assisting clients on purchase or sale of business
l. Testifying on client’s behalf
m. Determination of the effect of various employee compensation plans on net
income
n. Aid in labor union negotiations
 2. Somewhat Specialized Services:
a. Assisting in the installation of a mechanized accounting system
b. Making a cost analysis of operations
c. Finding sources of capital and figuring the approximate cost of small business
loans, bond issue, and stock issuance
d. Giving advice on dividend policy and plans for expansion
e. Calculations on government contracts and allocating costs in complete with
reporting requirements
f. Advising on accounting and tax matters relative to estate planning
g. Surveying credit losses
h. Assisting in bankruptcy and receivership proceedings
i. Recruiting accounting and bookkeeping personnel for the client
j. Preparing an analysis of paper flow
k. Presenting and analyzing the pros and cons of various retirement and profit-
sharing plans
l. Advising on various wage incentive plans

3. Highly Specialized Services:

a. Reviewing the organization structure
b. Auditing management policies
c. Conducting motion studies
d. Surveying an industry of trade for current trends
e. Evaluating the desirability of a particular are for plant location
f. Preparing market analysis
g. Reviewing an insurance program
h. Advertising on data processing allocations

ADVANTAGES OF CPAs OVER OTHER PROFESSIONALS IN MAS PRACTICE

- They are already familiar with the client and his business, and enjoy the client’s
confidence.
- They are members of a profession with recognized standing and equipped with
technical know-how in accounting and taxation

ANALYTICAL APPROACH AND PROCESS

1. Ascertaining the pertinent facts and circumstances
2. Seeking and identifying objectives
3. Defining the problem or opportunity for improvement
4. Evaluating and determining possible solutions
5. Presenting findings and recommendations

In case the client requests the consultant to proceed, the latter may also be involved in:
6. Planning and scheduling actions
7. Advising and providing technical assistance in implementing

3 BROAD STAGES
 1. Analysis Stage – consists of ascertaining the pertinent facts and circumstances,
seeking and identifying objectives, and defining the problem or opportunity for
improvement.
2. Design Stage – consists of evaluating and determining possible solutions and
presenting findings and recommendations.
3. Implementation Stage – consists of planning and scheduling actions and advising
and providing technical assistance in implementing.

STAGES IN MAS MANAGEMENTS

1. Negotiating the engagements

2. Preparing for and starting the engagement
3. Conducting the engagement
4. Preparing and presenting the reports and recommendations
5. Implementing the recommendations
6. Evaluating the engagements
7. Post engagement follow-up

These stages constitute the specific activities involved in the MAS engagement cycle which,
in general terms, are the following:
1. Pre-engagement considerations
2. Engagement planning
3. Engagement management and execution
4. Engagement conclusion

MANAGEMENT ACCOUNTING vs. FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING

1. User of information Primarily for external users Exclusively for internal users
2. Guiding principles GAAP Principle Management wants &
needs
3. Optional/Mandatory Mandatory Discretionary or optional
4. Type of information Primarily monetary in nature Monetary and non-monetary
5. Emphasis of reports Reliability Relevance (timeliness of data)
6. Purpose/End result Financial reporting & compliance Management decision-making
7. Source of data From company’s info system From internal and external sources
8. Amount of detail Compressed & simplified Extensive and detailed
9. Focus of information As a whole As segments and business as a
whole
10. Frequency Periodic (annually, quarterly) As frequent as the need arises
11. Time orientation Mainly historical (past) data Future-oriented using current data
12. Unifying model Assets = Liabilities + Equity No unifying model or equation
COST accounting, while a separate discipline, is a subset of both management and financial
accounting.

MULTIPLE CHOICE: (Sources: CMA/RPCPA/Various Test Banks)

1) Management accounting:
A) focuses on estimating future revenues, costs, and other measures to forecast
activities and their results
B) provides information about the company as a whole FA
C) reports information that has occurred in the past that is verifiable and reliable FA
D) provides information that is generally available only on a quarterly or annual basis FA

2) Managers use management accounting information to ________ strategy.

A) choose
B) communicate
C) implement
D) All of these answers are correct.
3. Financial accounting:
A) focuses on the future and includes activities such as preparing next year's operating budget
MA
B) must comply with GAAP (generally accepted accounting principles)
C) reports include detailed information on the various operating segments of the business such
as product lines or departments MA
D) is prepared for the use of department heads and other employees MA

4. The person most likely to use ONLY financial accounting information is a:

A) factory shift supervisor MA
B) vice president of operations
C) current shareholder
D) department manager

5.Which of the following people is LEAST likely to use management accounting information?
A) the controller
B) a shareholder evaluating a stock investment
C) the treasurer
D) an assembly department supervisor

6. Financial accounting provides the primary source of information for:

A) decision making in the finishing department
B) improving customer service
C) preparing the income statement for shareholders
D) planning next year's operating budget

7. Which of the following descriptors refers to management accounting information?

A) It is verifiable and reliable.
B) It is driven by rules.
C) It is prepared for shareholders.
D) It provides reasonable and timely estimates.

8. Which of the following statements refers to management accounting information?

A) There are no regulations governing the reports.
B) The reports are generally delayed and historical.
C) The audience tends to be stockholders, creditors, and tax authorities.
D) It primarily measures and records business transactions.

9. Which of the following groups would be LEAST likely to receive detailed management
accounting reports?
A) stockholders
B) sales representatives
C) production supervisors
D) managers

10) Management accounting information includes:

A) tabulated results of customer satisfaction surveys
B) the cost of producing a product
C) the percentage of units produced that are defective
D) All of these answers are correct.

11) Cost accounting:

A) provides information on the efficiency of factory labor
B) provides information on the cost of servicing commercial customers
C) provides information on the performance of an operating division
D) All of these answers are correct.

12. Which of the following types of information are used in management accounting?
A) financial information
B) nonfinancial information
C) information focused on the long term
D) All of these answers are correct.

13. Modern cost accounting plays a role in:

A) planning new products
B) evaluating operational processes
C) controlling costs
D) All of these answers are correct.

14. Cost accounting provides all of the following EXCEPT:

A) information for management accounting and financial accounting
B) pricing information from marketing studies
C) financial information regarding the cost of acquiring resources
D) nonfinancial information regarding the cost of operational efficiencies

15. Management accounting includes all of the following EXCEPT

A) implementing strategies
B) developing budgets
C) preparing special studies and forecasts
D) preparing the statement of cash flows

16. Financial accounting is concerned primarily with:

A) external reporting to investors, creditors, and government authorities
B) cost planning and cost controls
C) profitability analysis
D) providing information for strategic and tactical decisions

17. Financial accounting provides a historical perspective, whereas management accounting

emphasizes:
A) the future
B) past transactions
C) a current perspective
D) reports to shareholders

18. Management accounting is considered most likely to be successful when it:

A) helps creditors evaluate the company's performance
B) helps investors improve their decisions
C) is timely
D) is relevant and reported annually

19. Control measures should:

A) be set and not changed until the next budget cycle
B) be flexible to allow for employees who are slackers
C) be kept confidential from employees so that competitors don't have an opportunity to gain a
competitive advantage
D) be linked by feedback to planning

20. Planning includes all of the following EXCEPT

A) identifying the problem and uncertainties.
B) obtaining information.
C) providing feedback to help with future decision making.
D) making predictions about the future.

21.A detailed financial plan for the future is known as a:

A) budget.
B) performance report.
C) organization chart.
D) segment.

22. A performance report is:

A) a detailed report comparing budgeted data to actual data for a specific time period.
B) a formal statement of plans for the upcoming period.
C) required to be filed monthly by the Securities and Exchange Commission.
D) not used in decentralized organizations.

23. Samantha Galloway is a managerial accountant in the accounting department of

Mustang Industries, Inc. Samantha has just discovered evidence that some of the
corporation's marketing managers have been wrongfully inflating their expense reports
in order to obtain higher reimbursements from the firm. According to the Institute of
Management Accountants' Standards of Ethical Conduct, what should Samantha do
upon discovering this evidence?
A) notify the controller.
B) notify the marketing managers involved.
C) notify the president of the corporation.
D) ignore the evidence because she is not part of the Marketing Department.
24. Some raw materials cannot be easily associated with the finished product and cannot be
traced because their physical association with the finished products is too small in terms of
cost. These are considered:
a. Raw Materials
b. Direct Materials
c. Indirect Materials
d. Supplies

25. Prime cost and conversion cost share what common element of total cost?
A) Direct materials.
B) Direct labor.
C) Variable overhead.
D) Fixed overhead.

26. Manufacturing Cost typically consist of:

A. Direct Materials, Direct Labor, and Manufacturing Overhead
B. Direct Materials, Direct Labor, and Selling Cost
C. Production Cost and Marketing Cost
D. Direct Materials, Direct Labor, and Marketing Expenses

27. It is also called Inventoriable Cost which include each of the manufacturing cost and they
are the costs that are necessary and integral part of producing the finished product
A. Period Cost
B. Product Cost
C. Selling Cost
D. Marketing Cost

28. It is the cost that are identifiable with specific time period rather than salable product and are
deducted outright from revenues under accrual basis of Accounting:
A. Period Cost
B. Product Cost
C. Materials used in Production
D. Indirect Labor

29. It is part of Accounting which involves measuring, recording and reporting of Product Costs
in the company.
A. Cost Accounting
B. Management Accounting
C. Financial Accounting
D. Basic Accounting

30. Prime cost consists of:

A) direct labor and manufacturing overhead.
B) direct materials and manufacturing overhead.
C) direct materials and direct labor.
D) direct materials, direct labor and manufacturing overhead.

31. Depreciation on a personal computer used in the marketing department of a

manufacturing firm would be classified as:
A) a product cost that is fixed with respect to the company's output.
B) a period cost that is fixed with respect to the company's output.
C) a product cost that is variable with respect to the company's output.
D) a period cost that is variable with respect to the company's output.

32. Ross Corporation shipped finished goods to a customer on credit, but the sale was not
recorded and the costs of the finished goods were incorrectly included on the period's
balance sheet as part of the finished goods inventory. Which one of the following
statements is correct concerning the effects of this error?
A) Accounts receivable was not affected, inventory was overstated, sales were
understated, and cost of goods sold was understated.
B) Accounts receivable was understated, inventory was not affected, sales were
understated, and cost of goods sold was understated.
C) Accounts receivable was understated, inventory was overstated, sales were
understated, and cost of goods sold was overstated.
D) Accounts receivable was understated, inventory was overstated, sales were
understated, and cost of goods sold was understated.

33. A cost incurred in the past that is not relevant to any current decision is classified as
a(n):
A) period cost.
B) opportunity cost.
C) sunk cost.
D) differential cost.

34. Lathe operators at KF Manufacturing are hourly employees who are paid time and a
half for hours worked in excess of 40 hours per week. Lester is a lathe operator who
worked 45 hours during the current week and had no idle time. The correct accounting
for the amounts paid to Lester would be:
A) charge only the overtime premium earned to the overhead account.
B) charge the hourly wage earned plus the overtime premium earned to the overhead
account.
C) charge only the overtime premium earned to the direct labor cost for the project
Lester was working on when the overtime was incurred.
D) charge the hourly wage earned plus the overtime premium earned to the direct
labor cost for the project Lester was working on when the overtime was incurred.

35. Compared to financial accounting, managerial accounting places more emphasis on:
A) the flexibility of information.
B) the precision of information.
C) the timeliness of information.
D) both A and C above.

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

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

37. 11. Which of the following business models considers financial, customer, internal operating,
and other measures in the evaluation of performance?
A. Deterministic simulation.
B. Balanced scorecard.
C. Payoff matrix.
D. Decision tree.

38. 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 draw upon data from an organization's accounting system.
D. Both rely heavily on published financial statements.

39.Which of the following employees at American Airlines would not be considered as holding a
line position?
A. Pilot.
B. Chief financial officer (CFO).
C. Flight attendant.
D. Ticket agent.
E. Baggage handler.

40. Which of the following employees would be considered as holding a line position?
A. The controller of Exxon Corporation.
B. The vice-president for government relations of Microsoft.
C. The manager of food and beverage services at Disney's Magic Kingdom.
D. A secretary employed by Hewlett-Packard.
E. None of the above.

41. Which of the following employees at Starbucks would likely be considered as holding a
staff position?
A. The company's chief operating officer (COO).
B. The manager of a store located in Kansas City, Missouri.
C. The company's lead, in-house attorney.
 D. The company's chief financial officer (CFO).
E. Both the company's lead, in-house attorney and the chief financial officer.

42. The chief managerial and financial accountant of an organization is the:

A. chief executive officer (CEO).
B. treasurer.
C. vice-president of accounting.
D. internal auditor.
E. chief financial officer (CFO).

43. Which of the following typically does not relate to the role of a controller?
A. A controller supervises the accounting department.
B. A controller safeguards an organization's assets.
C. A controller oversees the preparation of reports required by governmental
authorities.
D. A controller normally assumes a narrow role within the organization, often preventing
the individual's rise to top management ranks.
E. Choices "B" and "D" above.

44. A controller is normally involved with:

A. preparing financial statements.
B. managing investments.
C. raising capital.
D. safeguarding assets.
E. managing the firm's credit policy.

45. Which of the following is not a function of the treasurer?

A. Safeguarding assets.
B. Managing investments.
C. Preparing financial statements.
D. Being responsible for an entity's credit policy.
E. Raising capital.

46. Managerial accountants:

A. often work on cross-functional teams.
B. are located throughout an organization.
C. are found throughout an organization and work on cross-functional teams.
D. are found primarily at lower levels of the organizational hierarchy.
E. are found primarily at higher levels of the organizational hierarchy.

47. The two dimensions of managerial accounting are:

A. a decision-facilitating dimension and a decision-influencing dimension.
B. a decision-facilitating dimension and a financial-influencing dimension.
C. a decision-influencing dimension and a cost-minimizing dimension.
 D. a cost-minimizing dimension and a profit-maximizing dimension.
E. a decision-influencing dimension and a profit-maximizing dimension.

48. Much of managerial accounting information is based on:

A. a cost-benefit theme.
B. profit maximization.
C. cost minimization.
D. the generation of external information.
E. effectiveness but not efficiency.

49. Which of the following is not normally considered to be an element of e-business?

A. E-budgeting.
B. Supply-chain management.
C. E-commerce.
D. Balanced scorecards.
E. Choices "B" and "D" above.

50. Managerial accounting has changed in recent years because of:

A. the growth of e-business.
B. increased global competition.
C. the emergence of new industries.
D. an increased focus on the customer.
E. all of the above factors.

51. Managerial accounting has changed in recent years because of:

A. a growing service economy in the United States.
B. the growing popularity of cross-functional teams.
C. computer-integrated manufacturing (CIM).
D. time-based competition.
E. all of the above factors.

52. Which of the following statement(s) about just-in-time (JIT) inventory management is
(are) true?

I. The emphasis of JIT is on "pull" manufacturing.

II. Raw materials are purchased just in time to be used in production.
III. JIT is an inventory technique that focuses on reduction of both inventory and
related inventory costs.

A. I only.
B. II only.
C. III only.
D. II and III.
E. I, II, and III.
53.Management accounting
A. Is governed by generally accepted accounting principles
B. Draws from disciplines other than accounting
C. Is geared primarily to the past rather than the future
D. Places more emphasis on precision of data compared with financial accounting

54. Management accounting is an integral part of the management process. As such, it provides
essential information for the following objectives except
A. Maintaining the current level of resources utilization as well as internal and external
communication.
B. Measuring and evaluating performances.
C.Planning strategies and controlling current activities of the organization.
D.Enhancing objectivity in decision making.

55. The chief management accountant called “controller” traditionally performs these functions
except
A. The establishment and implementation of the financial planning process
B.Financial and management reporting and interpretation
C. Protection of company resources and economic evaluation
D.Relate to specific problems where expert help is required

56.The chief management accountant called “controller” traditionally performs these functions
except
A.The establishment and implementation of the financial planning process
B.Financial and management reporting and interpretation
C.Protection of company resources and economic conditions
D.Preparation of proposals for product promotions

1. D
? The one that is not performed traditionally by a controller
 The controller has the following functions: planning and controlling, protection of assets,
reporting, economic appraisal, government relations and evaluation, and tax administration.
What is not included as a function of a controller is choice letter “d”, preparation of proposals
for product promotion, which is more of a function of the marketing manager.

57.Which of the following is a controller’s responsibility?

A.Tax planning and accounting
B.Custodian of funds
C.In-charge of credit and collection
D.Arranging short-term loans and financing

2. A
? A controller’s responsibility
 Choice letter “a” is correct. Tax administration, which includes tax planning and accounting,
is a controller’s responsibility. Choice letters “b”, “c” and “d” are incorrect because
custodianship of funds, credit and collection, and arranging short-term loans and financing
are functions of a treasurer.
58. Management accountants help design, develop, install and maintain reporting systems
which are aligned with the structures of the organization. These systems provide information
that it useful for decision making. Management decision processes fall into three categories.
A. Repetitive, non programmed and strategic
B. Repetitive, programmed and strategic
C.Repetitive, programmed and non strategic
D. Non repetitive, non programmed and strategic

3. A
? The three (3) categories of management decision processes
 The management decision processes may be classified as repetitive, non programmed and
strategic. Strategic decisions gear towards long-term objectives, positions, structures,
orientations, competitive advantage, aims, and aspirations of the company. It deals with the
stability and growth of the company and primarily satisfies the needs and desires of
investors. In contrast, tactical decisions deal with the short-term goals that are normally
related to the profit-making activities of the company. Tactical decisions concerns with
liquidity, profitability, and working capital policies.
Repetitive decisions are those routinary in nature and may be predicted, standardized,
planned and easily controlled. These decisions are normally operating in nature and relate
with the working capital cycle involving transactions with suppliers, customers, employees,
utility companies, government and other entities regularly dealt with by the business. These
repetitive decisions are captured and expressed in standard operating policies that serve
and guide us in standard costing, budgeting, marginal costing, variance investigation and
similar routinary management activities.
Non-programmed decisions are those that are not covered by repetitive and strategic
decisions and deal with both the short-term and long-term objectives of the business. These
decisions are not normally guided by written policies but highly require value judgment of the
implementing manager.

59.In this element of internal control, the object is to gauge the efficiency of the various levels of
people in the organization as well as the quality and quantity of results
A. Records and reports
B. Standards and performance
C. Internal audit
D.Policies and procedure
4. B
? The one that has the purpose of gauging the efficiency of the various levels and people in
the organization as well as the quality and quantity of results
 Standards of performance measure personnel’s efficiency (quality) and productivity
(quantity) by comparing the actual results with established standards. This is important in
controlling and directing operational activities to align actual results with plans (choice letter
“b” is correct).
Choice letter “a” is incorrect because reports and records are communicated results of
performance that are primarily meant to inform based on verifiable and objective records.
Choice letters “c” and “d” are not correct because internal audit deals with the accuracy of
records and operational efficiency, effectiveness, and economy in relation to internal
controls which encompass the policies and procedures set by the organization.

60. As business increases in complexity, the function of controllership has attained top level
recognition in the corporate arena. Many areas related to finance and accounting have been
identified with controllership. One area that violates basic internal control when assigned to
controllership function is
A.Credit collection
B.Internal auditing
C.Low-range financial planning
D.Taxation and reporting to government agencies

61.Ohio Corporation recently implemented a just-in-time (JIT) production system along with a
series of continuous improvement programs. If the firm is now considering adopting a
total quality management (TQM) program, it would likely find that TQM:
A. is consistent with both JIT and continuous improvement.
B. is consistent with JIT but inconsistent with continuous improvement.
C. is consistent with continuous improvement but inconsistent with JIT.
D. is inconsistent with both JIT and continuous improvement.
E. is an antiquated management technique.

Answer: A LO: 7 Type: N

62. Cost management systems tend to focus on an organization's:

A. machines.
B. employees.
C. activities.
D. customers.
E. rules and regulations.

Answer: C LO: 7 Type: RC

63. The value chain of a manufacturer would tend to include activities related to:
A. manufacturing.
B. research and development.
C. product design.
D. marketing.
E. all of the above.

Answer: E LO: 8 Type: RC

64. Which of the following choices correctly depicts activities that would be included in a
manufacturer's value chain?
Research
and Marketing Distribution
Developme
nt
A. Yes Yes No
B. Yes No Yes
C. Yes Yes Yes
D. No Yes No
E. No Yes Yes

Answer: C LO: 8 Type: RC

65. Which of the preceding activities would likely not be considered part of The Gap clothing
company’s value chain?
A. Designing a new product line.
B. Locating and then negotiating terms with a clothing manufacturer.
C. Marketing an existing product line.
D. Distributing goods from regional warehouses to local stores.
E. All of the above activities would be an element in the company’s value chain.

Answer: E LO: 8 Type: RC

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66. The activities performed by a manufacturing organization could be categorized as pre-
production (such as research and development and product design), production-related,
and post-production (such as marketing and customer service). Which activities should
the firm focus on if management understands the value chain concept and desires to
meet organizational goals?
A. Pre-production activities.
B. Production-related activities.
C. Post-production activities.
D. Pre-production, production-related, and post-production activities.
E. Pre-production and production-related activities.

Answer: D LO: 8 Type: N

67. In order for a company to achieve a sustainable competitive advantage, it must perform
value chain activities:
A. at the same quality level as competitors, at the same cost.
B. at the same quality level as competitors, but at a lower cost.
C. at a higher quality level than competitors, at a higher cost.
D. at a higher quality level than competitors, but at no greater cost.
E. at either the same quality level as competitors, but at a lower cost, or at a higher
quality level than competitors, but at no greater cost.

Answer: E LO: 8 Type: RC

68. The process of managing the various activities in the value chain, along with the
associated costs, is commonly known as:
A. activity-based costing.
B. strategic cost management.
C. total quality management.
D. computer-integrated costing.
E. sound management practices (SMP).

Answer: B LO: 8 Type: RC

69. A company has a bottleneck operation that slows production. Which of the following
tools or approaches could the firm use to determine the most cost-effective ways to
eliminate this problem?
A. Linear programming.
B. Theory of constraints.
C. Decision-tree diagrams.
D. Payoff matrices.

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 E. Strategic path analysis (SPA).

Answer: B LO: 8 Type: RC

70. Which of the following can be linked to the relatively recent wave of corporate scandals?
A. Greedy corporate executives.
B. Managers who make over-reaching business deals.
C. Lack of oversight by companies' audit boards and boards of directors.
D. Shoddy work by external auditors.
E. All of the above.

Answer: E LO: 9 Type: RC

71. Which of the following acts strives to improve corporate governance and the quality of
corporate accounting/reporting?
A. Robinson-Patman.
B. Taft-Hartley.
C. Sarbanes-Oxley.
D. Bush-Cheney.
E. Franks-Ashcroft.

Answer: C LO: 9 Type: RC

72.Which of the following statements about the ethical climate of business is false?

A. Greedy corporate executives are, in part, to blame for the relatively recent rash of
corporate scandals.
B. Unethical business behavior can have a negative impact on our economy.
C. The Sarbanes-Oxley Act strives to improve the overall quality of corporate reporting.
D. The Robinson-Patman Act strives to improve the overall quality of corporate
reporting.
E. Corporate scandals have served as the accounting profession’s wake-up call to pay
increased attention to ethical issues in the conduct of business.

Answer: D LO: 9 Type: RC

73. Which of the following is not an ethical standard of managerial accounting?

A. Competence.
B. Confidentiality.
C. Efficiency.
D. Integrity.
E. Credibility.

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 Answer: C LO: 9 Type: RC

74. Which of the following is not an element of competency?

A. To develop appropriate knowledge about a particular subject.
B. To perform duties in accordance with relevant laws.
C. To perform duties in accordance with relevant technical standards.
D. To refrain from engaging in an activity that would discredit the accounting
profession.
E. To prepare clear reports after an analysis of relevant and reliable information.

Answer: D LO: 9 Type: RC

75. Assume that a managerial accountant regularly communicates with business associates
to avoid conflicts of interest and advises relevant parties of potential conflicts. In so doing, the
accountant will have applied the ethical standard of:
A. objectivity.
B. confidentiality.
C. integrity.
D. credibility.
E. unified behavior.

Answer: C LO: 9 Type: RC

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