Management Advisory Services (MAS) is one of the most formula-intensive subjects in the CPA board exam. With 70 MCQs in 3 hours, you need to have these formulas at your fingertips. This cheat sheet covers all essential MAS formulas organized by topic.
MAS Exam Structure
Per BOA Resolution No. 30, Series of 2022, MAS is administered on Day 1 (Morning Session):
- Questions: 70 MCQs
- Duration: 3 hours
- Distribution: Approximately 30% Theory, 70% Problem-Solving
Cost Accounting Fundamentals
Cost Behavior Formulas
High-Low Method (for separating mixed costs)
Variable Cost per Unit = (Highest Cost - Lowest Cost) / (Highest Activity - Lowest Activity)
Fixed Cost = Total Cost - (Variable Cost per Unit × Activity Level)
Total Cost = Fixed Cost + (Variable Cost per Unit × Activity Level)
Least Squares Regression Method
b (Variable Cost) = [n∑XY - (∑X)(∑Y)] / [n∑X² - (∑X)²]
a (Fixed Cost) = (∑Y - b∑X) / n
Where:
X = Activity level (independent variable)
Y = Total cost (dependent variable)
n = Number of observations
Cost Classifications
Cost-Volume-Profit (CVP) Analysis
Basic CVP Formulas
Contribution Margin
Contribution Margin (CM) = Sales - Variable Costs
CM per Unit = Selling Price per Unit - Variable Cost per Unit
CM Ratio = CM / Sales = CM per Unit / Selling Price per Unit
Break-Even Point
Break-Even in Units = Fixed Costs / CM per Unit
Break-Even in Pesos = Fixed Costs / CM Ratio
Alternative: Break-Even in Pesos = Break-Even Units × Selling Price
Target Profit
Units for Target Profit = (Fixed Costs + Target Profit) / CM per Unit
Sales for Target Profit = (Fixed Costs + Target Profit) / CM Ratio
Target Profit After Tax
Target Profit Before Tax = Target Profit After Tax / (1 - Tax Rate)
Units = (Fixed Costs + Target Profit Before Tax) / CM per Unit
Margin of Safety
Margin of Safety (Units) = Actual Sales Units - Break-Even Units
Margin of Safety (Pesos) = Actual Sales - Break-Even Sales
Margin of Safety Ratio = Margin of Safety / Actual Sales
Operating Leverage
Degree of Operating Leverage (DOL) = Contribution Margin / Operating Income
% Change in Operating Income = DOL × % Change in Sales
Multi-Product CVP
Weighted Average CM per Unit = Σ(CM per Unit × Sales Mix %)
Break-Even (Total Units) = Fixed Costs / Weighted Average CM per Unit
Break-Even per Product = Total BE Units × Sales Mix %
Standard Costing and Variance Analysis
Direct Materials Variances
Materials Price Variance (MPV) = (Actual Price - Standard Price) × Actual Quantity Purchased
or = AQ × (AP - SP)
Materials Quantity Variance (MQV) = (Actual Quantity Used - Standard Quantity Allowed) × Standard Price
or = SP × (AQ - SQ)
Total Materials Variance = MPV + MQV
or = (AP × AQ) - (SP × SQ)
Direct Labor Variances
Labor Rate Variance (LRV) = (Actual Rate - Standard Rate) × Actual Hours
or = AH × (AR - SR)
Labor Efficiency Variance (LEV) = (Actual Hours - Standard Hours Allowed) × Standard Rate
or = SR × (AH - SH)
Total Labor Variance = LRV + LEV
Variable Overhead Variances
Variable Overhead Spending Variance = Actual VOH - (Actual Hours × Standard VOH Rate)
Variable Overhead Efficiency Variance = (Actual Hours - Standard Hours) × Standard VOH Rate
Total VOH Variance = Actual VOH - (Standard Hours × Standard VOH Rate)
Fixed Overhead Variances (4-Variance Method)
Fixed Overhead Budget Variance = Actual FOH - Budgeted FOH
Fixed Overhead Volume Variance = Budgeted FOH - Applied FOH
or = (Normal Hours - Standard Hours Allowed) × FOH Rate
Total FOH Variance = Actual FOH - Applied FOH
Variance Summary Table
Capital Budgeting
Time Value of Money
Present Value (Single Sum)
PV = FV / (1 + r)^n
or = FV × PV Factor
PV Factor = 1 / (1 + r)^n
Future Value (Single Sum)
FV = PV × (1 + r)^n
Present Value of Annuity
PVA = PMT × [(1 - (1 + r)^-n) / r]
or = PMT × PVA Factor
Future Value of Annuity
FVA = PMT × [((1 + r)^n - 1) / r]
Capital Budgeting Methods
Net Present Value (NPV)
NPV = Σ[Cash Flows / (1 + r)^t] - Initial Investment
NPV = PV of Cash Inflows - PV of Cash Outflows
Decision Rule: Accept if NPV > 0
Internal Rate of Return (IRR)
IRR is the rate where NPV = 0
Approximation using interpolation:
IRR = Lower Rate + [(NPV at Lower Rate / (NPV at Lower - NPV at Higher)) × (Higher Rate - Lower Rate)]
Decision Rule: Accept if IRR > Required Rate of Return
Payback Period
Simple Payback = Initial Investment / Annual Cash Flow (if uniform)
If uneven cash flows: Accumulate until investment is recovered
Payback = Years before full recovery + (Unrecovered amount / Cash flow in recovery year)
Discounted Payback Period
Same as payback but using discounted cash flows instead of nominal cash flows
Profitability Index (PI)
PI = PV of Cash Inflows / Initial Investment
or = (NPV + Initial Investment) / Initial Investment
or = 1 + (NPV / Initial Investment)
Decision Rule: Accept if PI > 1
Accounting Rate of Return (ARR)
ARR = Average Annual Accounting Income / Average Investment
Average Investment = (Initial Investment + Salvage Value) / 2
or = Initial Investment / 2 (if no salvage)
Depreciation Tax Shield
Tax Shield = Depreciation × Tax Rate
After-Tax Cash Flow = Before-Tax Cash Flow × (1 - Tax Rate) + Depreciation Tax Shield
Working Capital Management
Cash Management
Operating Cycle
Operating Cycle = Days in Inventory + Days in Receivables
Days in Inventory = 365 / Inventory Turnover = Average Inventory / (COGS / 365)
Days in Receivables = 365 / Receivables Turnover = Average AR / (Credit Sales / 365)
Cash Conversion Cycle
Cash Conversion Cycle = Operating Cycle - Days in Payables
Days in Payables = 365 / Payables Turnover = Average AP / (Purchases / 365)
Optimal Cash Balance (Baumol Model)
Optimal Cash = √(2 × F × T / i)
Where:
F = Fixed cost per transaction
T = Total cash needed for the period
i = Interest rate (opportunity cost)
Miller-Orr Model
Spread = 3 × ∛[(3 × F × σ²) / (4 × i)]
Return Point = Lower Limit + (Spread / 3)
Upper Limit = Lower Limit + Spread
Where:
F = Fixed cost per transaction
σ² = Variance of daily cash flows
i = Daily interest rate
Receivables Management
Cost of Credit Terms
Cost of Foregoing Discount = [Discount % / (100% - Discount %)] × [365 / (Payment Period - Discount Period)]
Example: Terms 2/10, n/30
Cost = (2/98) × (365/20) = 37.24%
Inventory Management
Economic Order Quantity (EOQ)
EOQ = √(2 × D × O / C)
Where:
D = Annual demand in units
O = Ordering cost per order
C = Carrying cost per unit per year
Reorder Point
Reorder Point = (Average Daily Demand × Lead Time) + Safety Stock
Safety Stock = (Maximum Daily Demand - Average Daily Demand) × Lead Time
Total Inventory Cost
Total Cost = Ordering Cost + Carrying Cost
= (D/Q × O) + (Q/2 × C)
Where Q = Order quantity
Financial Management
Cost of Capital
Cost of Debt (After-Tax)
After-Tax Cost of Debt = Interest Rate × (1 - Tax Rate)
Yield to Maturity approach:
PV of Bond = Σ[Interest / (1 + Kd)^t] + [Face Value / (1 + Kd)^n]
After-Tax Kd = Kd × (1 - T)
Cost of Preferred Stock
Cost of Preferred Stock = Annual Dividend / Net Proceeds
= Dp / Pp(1 - F)
Where F = Flotation cost percentage
Cost of Common Equity
CAPM Approach:
Ke = Rf + β(Rm - Rf)
Where:
Rf = Risk-free rate
β = Beta (systematic risk)
Rm = Market return
(Rm - Rf) = Market risk premium
Dividend Growth Model (Gordon Model):
Ke = (D1 / P0) + g
Where:
D1 = Expected dividend = D0(1 + g)
P0 = Current stock price
g = Growth rate
Bond Yield Plus Risk Premium:
Ke = Kd + Risk Premium (typically 3-5%)
Weighted Average Cost of Capital (WACC)
WACC = (Wd × Kd × (1-T)) + (Wp × Kp) + (We × Ke)
Where:
Wd, Wp, We = Weights of debt, preferred, and equity
Kd, Kp, Ke = Costs of each component
T = Tax rate
Leverage Analysis
Degree of Operating Leverage (DOL)
DOL = (Sales - Variable Costs) / (Sales - Variable Costs - Fixed Costs)
= Contribution Margin / EBIT
= % Change in EBIT / % Change in Sales
Degree of Financial Leverage (DFL)
DFL = EBIT / (EBIT - Interest)
= % Change in EPS / % Change in EBIT
Degree of Total Leverage (DTL)
DTL = DOL × DFL
= CM / (EBIT - Interest)
= % Change in EPS / % Change in Sales
Stock Valuation
Dividend Discount Model
Zero Growth: P0 = D / Ke
Constant Growth (Gordon): P0 = D1 / (Ke - g)
Non-Constant Growth:
P0 = PV of dividends during non-constant period + PV of terminal value
Performance Measurement
Return on Investment (ROI)
ROI = Operating Income / Average Operating Assets
= Margin × Turnover
= (Operating Income / Sales) × (Sales / Operating Assets)
Residual Income (RI)
RI = Operating Income - (Average Operating Assets × Minimum Required Return)
= Operating Income - Capital Charge
Economic Value Added (EVA)
EVA = NOPAT - (Invested Capital × WACC)
Where:
NOPAT = Net Operating Profit After Taxes = EBIT × (1 - Tax Rate)
Balanced Scorecard Perspectives
Quick Reference Card
CVP Essentials
- CM = S - VC
- BE (units) = FC / CM per unit
- BE (pesos) = FC / CM ratio
- Target units = (FC + Target Profit) / CM per unit
Variance Mnemonics
- Price/Rate variances: Use ACTUAL quantity
- Quantity/Efficiency variances: Use STANDARD price/rate
- Favorable: Actual < Standard (for costs)
Capital Budgeting Rules
- NPV: Accept if > 0
- IRR: Accept if > Required Rate
- PI: Accept if > 1
- Payback: Accept if < Target Period
Cost of Capital
- WACC = Σ(Weight × After-tax Cost)
- Debt: Always multiply by (1 - T)
- Preferred/Equity: No tax adjustment
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Sources
- BOA Resolution No. 30, Series of 2022 - Official MAS syllabus and Table of Specifications
- Horngren, C.T., et al. Cost Accounting: A Managerial Emphasis - Standard cost accounting reference
- Brigham, E.F. & Houston, J.F. Fundamentals of Financial Management - Financial management formulas
- Garrison, R.H., et al. Managerial Accounting - Management accounting concepts
These formulas are aligned with the BOA-prescribed syllabus for MAS. Practice with actual problems to build computational speed.