MONDRIAAN AURA COLLEGE Refresher I Management Advisory Services MAS - ! "#
!#
It is an offer of service# service# $hen acce%ted acce%ted or a%%roved& a%%roved& it 'ecomes a contract(a) contract(a) agreement# a# Confirmation )etter
c# Engagement )etter
'# Contract
d# *ro%osa) )etter )etter
C*As C*As in management advisory services %ractice m(st o'serve o'serve the the ethica) ethica) re+(irements re+(irements the acco(ntancy acco(ntancy %rofessio e,ce%t as to
.#
a# Inde%endence
c# Incom%ati')e occ(%ation
'# Contingent fees fees
d# None of the a'ove a'ove
$hich of the the fo))o/ing ty%es of management services is not direct)y direct)y re)ated to acco(nting and and finance f(nctions0 a# Cost ana)ysis of ma1or investment decision
c# Design& insta))ation or revie/ of '(dgetary s
'# Long range range %)anning
d# 2a)(ation of ca%ita) ca%ita) stoc3 of com%anies for % or sa)es
4#
5#
$hich of the the fo))o/ing ty%es of management services is norma))y re)ated to acco(nting and finance0 a# Management a(dit
c# Costs determination of a)ternatioves in co))ective 'argain
'# Mar3eting forecasts forecasts
d# None of the a'ove
$hich of the fo))o/ing statements is not tr(e0 a# In the rendition of MAS& MAS& inde%endence m(st 'e o'served so as to maintain maintain the essentia) re+(isites re+(isites of im%art im%art ia)ity and o'1ectivity# o'1ectivi ty# '# A)) %rovisions of of the Code of *rofessiona) Ethics are a%%)ica')e to the %ractice of MAS e,ce%6t e,ce%6t those r()es re)ated to e,%ression of an o%inion on financia) statements# statements# c# MAS seves on)y on)y in the areas areas of acco(nting acco(nting and finance# finance# d# 7efore acce%ting acce%ting an engagement& a %ractitioner %ractitioner sho()d notify the c)ient of any reservations reservations he has regarding regarding antici%ated 'enefits#
8#
$hich of the fo))o/ing fo))o/ing is not a characteristic characteristic of management management services0 a# A /ider variety of assignments are enco(ntered in MAS than in a(dit# '# MAS engagement engagement are rec(rring rec(rring c# MAS %in%oint actions to to 'e ta3en& the 'enefit of /hich /i)) 'e received received in the f(t(re# d# In MAS engageents& engageents& the nat(re nat(re of /or3 invo)ved re+(ires re+(ires a )esser need for 1(nior assistance# assistance#
9#
$hich of the the fo))o/ing fo))o/ing is not a characteristic characteristic of MAS0 a# MAS is 'road in sco%e '# MAS invo)ves %ro')em-so)ving affecting affecting the f(t(re o%erations of the the c)ient# c# 7eneficiary of services is management#
d# MAS re%etitive re%etitive as far as te same c)ient is concerned# :#
$hich of the fo))o/ing is not a +(a)ification +(a)ificat ion of a C*A C*A in MAS %ractice0 a# ;ami)iarity ;ami)iarity /it the c)ient
=#
"#
""#
Com%etence in management advisory services is ac+(ired 'y a# Ed(cation
c# Act(a) %erformance of mana
'# A(diting and other other e,%eriences e,%eriences
d# A)) of these
>he fo))o/ing fo))o/ing characteristics characteristics refer refer to ;inancia) Acco(nting e,ce%t a# *rovides information to e,terna) (sers
c# ?as no e,terna))y im%osed standards#
'# Em%hasi@es on o'1ective data
d# Generates genera) genera) %(r%ose financia) stateme stateme
>hat 3ind of acco(nting concerned concerned /ith %roviding %roviding information information to management management in ma3ing ma3ing decisions a'o(t a'o(t the o%erations of the '(siness#
"!#
a# Re Res%onsi'i)ity acco(nting
c# Ma Management acco(nting
'# Cost acco(nting acco(nting
d# Correct ans/er ans/er not given
>he difference difference 'et/een varia')e costs and fi,ed costs is a# 2aria')e costs %er (nit f)(ct(ate and ficed costs %er (nit are varia')e# '# 2aria')e costs costs %er (nit are are fi,ed over the the re)evant range range and fi,ed costs %er (nit are varia')e# varia')e# c# >ota) varia')e costs are varia')e varia')e over the re)evant rante and fi,ed in the )ong term& /hi)e fi,ed costs never never ch d# 2aria')e costs %er (nit change in varying varying increments& /i)e /i)e fi,ed costs %er (nit change in e+(a) increments#
".#
A C*A C*A sho()d re1ect management advisory services engagement if a# It /o()d re+(ire re+(ire him to ma3e management management decisions for an a(dit c)ient# '# >he %ro%osed engagement engagement is not acco(nting re)ated# c# ?is recommendations recommendations are to 'e s('1ected to to a revie/ 'y the c)ient# c)ient# d# ?e a(dits the financia) statements statements of a s('sidiary of the %ros%ective %ros%ective c)ient#
"4#
>he fo))o/ing characteri@e management advisory services& e,ce%t a# Invo)ves decisions for the f(t(re# '# 7roader in sco%e and varied varied in nat(re# c# Uti)i@e more 1(nior staf than than senior mem'ers mem'ers of the firm# firm# d# Re)ate to s%ecific %ro')ems /here /here e,%ert he)% is re+(ired# re+(ired#
"5#
A C*As C*As sco%e of management services is 'road and covers a)) of the fo))o/ing& e,ce%t a# Change in management engagements#
c# A(dit engagements
'# Com%(teri@ation engagements "8#
d# Re-engineering engagements
A management advisory services engagement genera))y invo)ves the fo))o/ing activities in /hat order0 I#
*ost engagement fo))o/-(%
2#
II#
Im%)ementing the recommendation
2I# Eva)(ating the engagement
III# Cond(cting the engagement
*re%aring for and starting the engagement
2II# *re%aring and re%resenting the re%ort and r
I2# Negotiating the engagement
"9#
a# 2II& 2I& 2& I2& III& II and I
c# I2& III& 2& 2I& II& 2II& and I
'# III& I2& 2& 2I& 2II& I& and II
d# I2& 2& III& 2II& II& 2I& and I
As a cons()tant& the C*A %ractitioner sho()d a# E,ercise administrative contro) over the c)ient
":#
$hich of the fo))o/ing is not a +(a)ification of a C*A in MAS %ractice0 a# ;ami)iarity /it the c)ient
"=#
Identify te fo))o/ing statements as tr(e or fa)se# Statement I
MAS %rinci%a))y invo)ves the cons()tative services to management in his decision ma3ing#
Statement II
MAS cons()tation& (n)i3e MAS engagement& genera))y invo)ves advise of information 'y a C*A /hich an ana)ytica) %rocess is a%%)ied#
Statement III 7eca(se the C*A m(st 'e inde%endnet& he m(st not a))o/ the c)ient to %artici%ate in any %hase o his engagement# Statement I
Statement II
Statement III
a#
"
"
'#
c# d#
!#
"
$hich of the fo))o/ing /i)) not im%air the inde%endence of a C*A in the rendition of management services0 a# >he C*A %erforms decision-ma3ing for his c)ient# '# >he C*A %erforms services /herein he is in effect acting as an em%)oyee of the c)ient# c# >he C*A )osses his o'1ectivity and acts in a manner as if he is advocating for the interest of is c)ient# d# >he C*A does not e,tend his services 'eyond the %resentation of recommendations of giving of advice#
!"#
$hich of the fo))o/ing statements is fa)se0 a# A C*As %rovide management services to go aro(nd the ethica) constraints as mandated 'y the Acco(ntancy '# 7(sinesses hire management cons()tants to he)% define s%ecific %ro')ems and deve)o% so)(tions# c# Inc)(ded in the %ractice of cons()ting is the %rovision of confidentia) service in /ich te identity of the c)ient concea)ed# d# C*As %erforming management services may 'e considered to 'e in the %ractice of management cons()ting#
!!#
$hich of the fo))o/ing statements is not acce%ta')e0 a# C*A re%resents three ma1or %)ayers in the ind(stry in rationa)i@ing the ind(stry
!.#
Indicate the statements as either tr(e or fa)se# Statement I
C*As in MAS %ractice m(st o'serve the genera) %rovision of the Code of *rofessiona) Ethics for C*As& as /e)) as the %rovision thereof of C*As in *(')ic Acco(nting& e,ce%t those %rovision e,%ression of o%inions on financia) statements#
Statement II
Management cons()tancy is an e,c)(sive fie)d of %ractice for C*As and is reg()ated 'y )a/#
Statement III A)tho(gh management services MSB e,tend 'eong the traditiona) acco(nting services& MS %ract ners are sti)) 'o(nd 'y the r()es of %rofessiona) ethics in the %ractice of acco(nting in genera) Statement I
Statement II
Statement III
a#
"
'#
"
"
"
c# d# !4#
In a decision ana)ysis sit(ation& /hich one of the fo))o/ing costs is not )i3e)y to contain a varia')e cost com%one a# La'or
!5#
'# Overhead
c# De%reciation
$hich one of the fo))o/ing is correct regarding a re)evant range0 a# >ota) varia')e cost /i)) not change# '# >ota) fi,ed costs /i)) not change# c# Act(a) fi,ed costs (s(a))y fa)) o(tside the re)evant range# d# >he re)evant range cannot 'e changed after 'eing esta')ished#
!8#
$hich of the fo))o/ing statements is tr(e0 a# >he higher is the %rod(ction /itin the re)evant range& the higher is the fi,ed cost %er (nit# '# >he higher is the %rod(ction /ithin the re)evant range& the higher is the varia')e cost %er (nit# c# >he )o/er is the %rod(ction /itin the re)evant range& the )o/er is the tota) fi,ed cost# d# >he )o/er is the %rod(ction /ithin the re)evant range& the )o/er is the tota) varia')e cost#
d# Se))ing
!9#
As vo)(me increases a# >ota) fi,ed costs remain constant and %er-(nit fi,ed costs increase# '# >ota) fi,ed costs remain constant and %er-(nit fi,ed costs decreases# c# >ota) fi,ed costs remain constant and%er-(nit fi,ed costs remain constant# d# >ota) fi,ed costs increase and%er-(nit costs increase#
!:#
!=#
$ithin the re)evant range& the amo(nt of varia')e cost %er (nit a# Differs at each %rod(ction )eve)#
c# Decreases as %rod(ction inc
'# Increases as %rod(ction increases
d# Remains constant at each %r
Unit fi,ed costs a# Are constant %er (nit regard)ess of (nits %rod(ced or so)d# '# Are determined 'y dividing tota) fi,ed costs 'y a denominator s(ch as %rod(ction vo)(me# c# 2ary direct)y /ith the activity )eve) /hen stated on a %er (nit 'asis# d# Inc)(de 'oth fi,ed and varia')e e)ements#
.#
$hich of the fo))o/ing 'erst descri'es a fi,ed costs0 a# It may change in tota) /hen s(ch change is (nre)ated to changes in %rod(ction# '# It may change in tota) /hen s(ch change is re)ated to changes in %rod(ction# c# It is constant %er (nit of changes in %rod(ction# d# It may change in tota) /hen s(ch change de%ends (%on %rod(ction or /ithin the re)evant range#
stem (r%oses of merger
ing agreements
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ecommendations
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MONDRIAAN AURA COLLEGE Refresher " Management Advisory Services MAS - . "#
$hich of the fo))o/ing does not 'e)ong to the )ist0 a# Common-si@e financia) statements '# *eso and %ercentage changes on financia) statements# c# ;inancia) ratios d# Long-form re%ort
!#
$hen a 'a)ance sheet amo(nt is re)ated to an income statement amo(nt in com%(ting ratio a# >he income statement amo(nt sho()d 'e converted to an average for the year# '# Com%arison /ith ind(stry ratios is not meaningf()# c# >he 'a)ance sheet amo(nt sho()d 'e converted to an average for the year# d# >he ratio )oses its historica) %ers%ective 'eca(se a 'eginning of the year is com'ined /ith an end of the year amo(nt#
.#
A ma1or %ro')em in com%aring %rofita'i)ity meas(res among com%anies is the a# Lac3 of genera) agreement over /hich %rofita'i)ity# '# Differences in the si@e of the com%anies# c# Differences in the acco(nting methods (sed 'y the com%anies# d# Differences in the dividend %o)icies of the com%anies#
4#
In !5& M* Cor%oration
5#
'# 8
c# 4
d# .
>he fo))o/ing common si@e income statement are avai)a')e for S%ar3y Cor%oration for the t/o years ended Decem'er ."& !8& and !5 !8
!5
Sa)es
"
"
Cost of Sa)es
55
9
Gross %rofit on sa)es
45
.
O%erating e,%enses inc)(ding income ta,B
!
":
Net income
!5
"!
>he trend %ercentages for sa)es are as fo))o/s !4
".
!.
"
$hat sho()d 'e the trend %ercentage for gross %rofit on sa)es for !80 a# 5:#5
'# ".
c# "5
d# "=5
Nos 8 and 9 are 'ased on the fo))o/ing data Nory Com%any is %re%aring its common-si@e financia) statements and revea)ed the fo))o/ing information in tho(sands of %esosB Acco(nts receiva')e
*
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Inventory
!&#
>ota) c(rrent assets
.5&#
> t )
:4
t
a# ""#= 9#
'# !.#:
=#
d# 85#.
?o/ /o()d Nory
:#
c# 59#"5
'# =#4
c# !#
d# ..#.
Inde, n(m'ers /o()d %ro'a')y 'e most interested in /hich ratio0 a# >rend ana)ysis
c# 2ertica) ana)ysis
'# Ratio ana)ysis
d# Common-si@e statements
An income statement sho/ing on)y com%onent %ercentages is 3no/n as a# Common %esos statement
c# Common-si@e income statement
'# Condensed income statement
d# Com%arative income statement
"# ?ori@onta)& vetica)& and common-si@e ana)yses are techni+(es that are (sed 'y ana)ysts in (nderta3ing the financia) statemnets of com%anies# $hich of the fo))o/ing is an e,am%)e of vertica)& commonsi@e ana)ysis0 a# Commission e,%ense in !8 is " greater than it /as in !5# '# A com%arison in financia) ratio 'et/een t/o or more firms in the same ind(stry# c# A com%arison in financia) form 'et/een t/o or more firms in different ind(stries# d# Commission e,%ense in !8 is 5 of sa)es# ""# It refers to the %ractice of financing assets /ith 'orro/ed ca%ita)# Its e,tensive (se may im%act on the ret(rn on common stoc3ho)ders< e+(ity to 'e a'ove or 'e)o/ the rate or ret(rn on tota) assets# a# Disco(nting
'# Mortgage
c# Leverage
d# Ar'itrage
"!# Sec(ring of f(nds for investment at a fi,ed rate of ret(rn to f(nd s(%%)iers to enhances the /e)) 'eing of the common stoc3ho)ders is 3no/n as a# ;inancia) )everage
c# *r(dent 'orro/ing
'# ;(nd management
d# ;inancia) ar'itrage
".# In the %rocess of investing of s(r%)(s cash& the term riding the yie)d c(rve refers to a# Diversifying sec(rities %ortfo)io so that the firm has an e+(a) 'a)ance of )ong-term vers(s shortterm sec(rities# '# S/a%%ing different mat(rities of simi)ar +(a)ity de't sec(rities in order to o'tain higher yie)d# c# *(rchasing on)y the )ongest mat(rities for given rates of ret(rn# d# Adherence to the )i+(idity %reference theory of sec(rities investment# "4# $hen com%ared to a de't-to-asset ratio& a de't-to-e+(ity ratio /o()d 'e a# 7e )o/er than the de't-to-asset ratio# '# 7e higher than the de't-to-asset ratio# c# 7e a'o(t the same a the de't-to-asset ratio# d# ?ave no re)ationshi% at a)) to the de't-to-asset ratio# "5# If the ratio of tota) )ia'i)ities to stoc3ho)ders e+(ity increases& a ratio that m(st /o()d a)so increase is a# >ime interest ratio#
c# >ota) )ia'i)itis to tota) assets
'# >he c(rrent ratio#
d# Ret(rn on stoc3ho)ders e+(ity
"8# A meas(re of the com%any
t
Di id
d
t
MONDRIAAN AURA COLLEGE Refresher " Management Advisory Services MAS - 4
"
In a decision-ma3ing case& /ich of the fo))o/ing costs is genera))y not re)evant to the decision0 a# Avoida')e costs
!
.
'# ?istorica) costs
c# O%%ort(nity costs
d# Differentia
In a decision-ma3ing case& /hich of the fo))o/ing costs is not )i3e)y to contain a re)evant cost com%onent0 a# La'or costs
c# De%reciation costs of an e,isting asset
'# Se))ing costs
d# ;actory overhead costs
O%%ort(nity cost is an im%ortant conce%t in decision-ma3ing# >his may 'e descri'ed as a# >he difference in tota) costs 'et/een t/o choices# '# >he contri'(tion to income that is forgone 'y not (sing )imited reso(rces in its 'est a)ternative (se# c# A cost that may arise in the f(t(re# d# A cost that is a)ready 'een inc(rred#
4
5
$hich of the fo))o/ing m(st 'ae considered in determining the re)evance of a %artic()ar cost to a decisionF a# 2erifia'i)ity and acc(racy of the cost
c# Amo(nt of cost
'# *otentia) effect of the cost on the decision
d# Ris3iness of the decision
$hich of the fo))o/ing statements a'o(t re)evant or differentia) cost ana)ysis is correct0 a# A)) varia')e cost are re)evant '# A)) fi,ed cost are irre)evant c# A)) varia')e and fi,ed costs to 'e inc(rred are considered as they change /ith each decision a)ternative# d# A)) f(t(re costs are re)evant#
8#
$hich of the fo))o/ing statements is tr(e0 a# >he higher is the %rod(ction /itin the re)evant range& the higher is the fi,ed cost %er (nit# '# >he higher is the %rod(ction /ithin the re)evant range& the higher is the varia')e cost %er (nit# c# >he )o/er is the %rod(ction /itin the re)evant range& the )o/er is the tota) fi,ed cost# d# >he )o/er is the %rod(ction /ithin the re)evant range& the )o/er is the tota) varia')e cost#
9#
As vo)(me increases a# >ota) fi,ed costs remain constant and %er-(nit fi,ed costs increase# '# >ota) fi,ed costs remain constant and %er-(nit fi,ed costs decreases# c# >ota) fi,ed costs remain constant and%er-(nit fi,ed costs remain constant# d# >ota) fi,ed costs increase and%er-(nit costs increase#
:#
$ithin the re)evant range& the amo(nt of varia')e cost %er (nit
=#
a# Differs at each %rod(ction )eve)#
c# Decreases as %rod(ction inc
'# Increases as %rod(ction increases
d# Remains constant at each %r
Unit fi,ed costs a# Are constant %er (nit regard)ess of (nits %rod(ced or so)d# '# Are determined 'y dividing tota) fi,ed costs 'y a denominator s(ch as %rod(ction vo)(me# c# 2ary direct)y /ith the activity )eve) /hen stated on a %er (nit 'asis# d# Inc)(de 'oth fi,ed and varia')e e)ements#
"#
$hich of the fo))o/ing 'erst descri'es a fi,ed costs0 a# It may change in tota) /hen s(ch change is (nre)ated to changes in %rod(ction# '# It may change in tota) /hen s(ch change is re)ated to changes in %rod(ction# c# It is constant %er (nit of changes in %rod(ction# d# It may change in tota) /hen s(ch change de%ends (%on %rod(ction or /ithin the re)evant range#
""
"!
In a ma3e or '(y decision ana)ysis& the cost to '(y is com%ared /ith the a# >ota) cost to ma3e#
c# 2aria')e man(fact(ring costs#
'# Re)evant cost to ma3e#
d# Cost to %(rchase
*rod(ction of a s%ecia) order /i)) increase the com%any
".
A com%any is considering to acce%t a s%ecia) order /hich /i)) ena')e to (se its c(rrent)y id)e ca%acity# It /ants to cond(ct a differentia) cost ana)ysis so it co()d set the s%ecia) %rice for the order# In its cost ana)ysis& /hich of the fo))o/ing sho()d not 'e inc)(ded0 a# 2aria')e overhead
"4
'# Direct )a'or
c# Direct materia)s
d# De%reciatio
In determining the )o/est %rice that can 'e +(oted for a s%ecia) order that /i)) (se id)e ca%acity /ithin a %rod(ction& area the 'est a))ocation method to (se is
"5
a# *rocess costing
c# A'sor%tion costing
'# o' order costing
d# 2aria')e costing
In a ma3e or '(y decision ana)ysis& the cost to '(y is com%ared /ith the a# >ota) cost to ma3e
c# 2aria')e man(fact(ring costs#
'# Re)evant cost to ma3e
d# Cost to %(rchase
"8
In a ma3e or '(y decision ana)ysis& /ich of the fo))o/ing +(a)itative factors isFare (s(a))y considered0 a# Ass(rance of +(a)ity contro)
c# S%ecia) techno)ogy
'# S3i))ed )a'or
d# A)) of the a'ove
Nos "9 to ! are 'ased on the fo))o/ing information Miss Reeva Ma)aga& a grad(ate of Saint Lo(is University in 7ag(io& is going to Mani)a for the C*A 7oard E,amination at the Ro+(e Rev# Ro+(e Revie/ Schoo) of Acco(ntancyB# She is considering to stay in a dormitory that is 1(st a store
*
:&#
>(ition fee
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7oard and )odging fee
-
Share in food and ho(seho)d e,%enses
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>rans%ortation A(nt
"&9#
Snac3s& etc# /hi)e in schoo)B
4&#
7oo3s (sed in co))ege to 'e (sed d(ring the revie/
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Ne/ revie/ 'oo3s to 'e %(rchased
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C)othes to 'e 'ro(ght to Mani)a
8&#
*ersona) s(%%)ies /hi)e in Mani)a
4#
Other e,%enses for contingencies& gimmic3s& etc#B
.&#
7eing an honor grad(ate& Miss Ma)aga is a Ro+(e Rev Schoo)# She has to %ay the misce))aneo(s fee of on)y * "& for the /ho)e revie/ term# ?er a(nt /i)) sho()der some of her %ersona) s(%%)ies if she /i)) stay in her A(nt
If the a)ternatives are /hether to stay in her A(nt
":
*
A dormitory
"5&"#
.!&#
'#
48&"#
8.&#
c#
55&#
"8&#
d#
"8&#
55&#
$hat is the o%%ort(nity cost in revie/ing in Mani)a0 a# * 4&#
'# * :&#
c# * "8&=#
d# * #
"=
Miss Ma)aga /i)) inc(r some f(t(re costs d(ring her stay in Mani)a# S(ch items& a)tho(gh f(t(re costs& are considered irreve)ant 'ecfa(se they do not differ (nder the a)ternatives# >he tota) amo(nt of s(ch irre)evant 'eca(se they do not differ (nder the a)ternatives# >he tota) amo(nt of s(ch irre)evant f(t(re costs is a# * "8&#
!
'# * 48&"#
c# * 55&#
d# * 8.&#
Inc)(ded in Ms# Ma)agahese costs are ca))ed %ast costs& s(n3 costs& or historica) costs& and amo(nt to a# * "8&#
'# * 49&"#
c# * 55&#
d# * 84&#
) costs
eases od(ction )eve)#
)) stay in A dormitory
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