Management Accounting Test Answers

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What is the difference between break even sales and break even per units?
CM Ratio is for break even units and CM Unit is for break even sales
BE sales uses fixed costs BE units uses variable costs
BE units uses fixed costs and BE sales uses variable costs
No difference
In break even sale Fixed Cost is divided by Contribution margin ratio ,And in Break even per unit fixed cost is divided by unit contribution margin.


The difference between the budgeted sales and the break-even sales, is known as ....?
the margin of safety
the actual variance
the gross profit margin
the contribution margin
the margin call


The contribution margin is calculated by ...?
deducting variable costs from gross profit
deducting all fixed costs from sales
deducting all costs from sales
deducting variable costs from total costs
deducting all variable costs from sales


In a "Cost of Quality" report, which of the following is a nonconforming cost, as opposed to a conforming cost?
Appraisal costs
Internal Costs
External failure reworking costs
Prevention Costs


Breakeven $ is calculated by which formula?
'Variable costs' ÷ 'Contribution margin ratio'
'Total costs' ÷ 'Contribution margin ratio'
'Fixed costs' ÷ 'Variable cost %'
'Fixed costs' ÷ 'Contribution margin ratio'


Which of the following factors is irrelevant when using the payback method?
The incidence of cash flows arising from the project
Initial investment
Cash flow arising from the project
Depreciation of the initial asset acquired


A budget that is continuously updated by adding a new incremental period and dropping off the period just completed, is known as ...?
a rolling budget
a master budget
a static budget
a period budget
an operating budget


Which of the following is more a management accounting function than a financial accounting function?
Statutory compliance
Tax accounting
Financial statement preparation
Auditing
Cost accounting


The contribution margin (CM) is calculated by deducting all the .................... costs from sales?
Variable
Discretionary
Prime
Conversion
Fixed


Using Variable costing .IF fixed cost is 2500, variable cost is 3500, profit is 2000, what will be the sales price?
2500
5000
8000
9000
7000


SG&A is the acronym for ...?
Selling, Goods And Accruals
Selling, General And Administration
Special Goods And Assets
Special Goals And Aims
Selling, General And Accounting


Under responsibility accounting, the bottling plant of a soft drink company will most likely be treated as .....?
a cost center
an investment center
a profit center
a revenue center


You are given the cost/volume information below: 1 unit/$ 15, 10 units/$150, 100 units/$1500. What type of a cost is being described?
mixed cost
variable cost
step cost
rent cost
fixed cost


True or False: Depreciation Expense can be ignored when computing the accounting rate of return.
False
True


If production increases, fixed cost per unit...
remains the same
decreases
increases


What is the formula for the contribution margin?
sales - variable costs
sales - fixed costs - variable costs
sales - fixed cost
sales - expenses
fixed cost - variable cost


A Learning curve shows that as experience increases the amount of time taken to perform a function ________.
experience has no link with time
none of these
remains the same
decreases
increases


Which of the following reports would be a produced under the management accounting function rather than the financial accounting function?
Notes to the financial statements
Equity Statement
Income Statement
Balance sheet
Variance report


True or False: Depreciation Expense is a negative cash flow that needs to be discounted.
False
True


The time value of money focuses on:
cash flow
earnings per share
net income
current earnings


Which of the following is a monetary objective rather than a non-monetary objective?
to achieve a targeted return on investment
to increase the production output per employee
to reduce product delivery times to customers
to reach a targeted % occupancy rate for a hospital
to conduct a specific number of inspections per shift


A subsidiary ledger containing only those accounts related to manufacturing costs is known as ....?
Accounts receivable ledger
Fixed assets schedule
Factory ledger
Branch ledger
Accounts payable ledger


Which one of the following statements about budgeting is NOT true?
Budgeting is a key ingredient in good decision-making.
Budgeting is an executive responsibility.
Budgeting is a bookkeeping task.
Budgeting helps managers determine the resources needed to meet their goals and objectives.
The focus of budgeting is planning.


True or False: Activity based costing is recommended for the allocation of SG&A expenses in order to determine the true profitability of a product or a customer.
False
True


True or False: Decreasing a company's fixed expenses should reduce the break-even point.
False
True


If sales are 100,000 variable costs are 40,000 and fixed costs are 10,000, what is contribution margin?
40,000
50,000
90,000
30,000
60,000


Marginal cost is:
None of these
The fixed cost of units
The variable cost of units
The cost of one extra unit produced


What is the most important purpose of a balanced scorecard?
set priorities
develop cause-and-effect linkages
develop strategy
Measure performance


True or False: The value of inventory under full costing is higher then variable costing.
True
False


The profit center's revenues and expenses are held separate from the main company's in order to determine their profitability?
False
True


Which of the following is more the management accounting function than a financial accounting function?
The information produced allows outsiders to judge the overall past performance of a business
It is focused on producing a limited set of specific prescribed financial statements in accordance with generally accepted accounting principles
The information produced is not made public and is used for internal decision making only
The central outputs are audited financial statements
It is focused on producing the balance sheet and income statement


Which statement best describes the current role of the managerial accountant?
Managerial accountants facilitate the decision-making process within an organization.
Managerial accountants are primarily information collectors.
Managerial accountants make the key decisions within an organization.
Managerial Accountants are solely staff advisors in an organization.
Managerial accountants prepare the financial statements for an organization.


The comprehensive budget that covers all the activities of the organisation and which integrates the individual budgets that cover each of the subsidiary functions, is known as the ...?
master budget
operating expenses budget
cashflow budget
sales budget
capital expenditure budget


Sale is 100, variable cost is =? ,fixed cost is 20, profit is 25, what will the variable cost be using marginal costing?
45
35
75
65
55


Which of the following is NOT a type of internal benchmark?
Control charts
Pareto Diagrams
Cause and Effect (fishbone) diagram
Government economic indicators


The most likely strategy to reduce the breakeven point would be to:
increase both fixed costs and the contribution margin
Decrease fixed costs and increase the contribution margin
decrease both fixed costs and the contribution margin
increase fixed costs and decrease the contribution margin


The time value of money primarily focuses on ...?
accrual net income.
earnings per share.
current earnings.
accounting net income.
future cash flow predictions.


Opportunity cost in management accounting is best described as ...?
The economic value derived from the chosen opportunity
All the financial and non-financial costs in relation to sourcing and trialing new opportunities.
The economic value of what is given up when a person chooses one option over another.
The cost of analyzing various opportunities.
The amount of money required to invest in an opportunity


If marginal costing toal sales is $10000, total variable cost is $5000, and total fixed cost is $2500, what will the profit be?
2500
8500
7500
4500
5000


The project should be accepted if its Profitability index is greater then
3
1
0
2
4


A company is considering building a factory in Lahore. Which one of the following is a sunk cost to the decision?
The business rates of the factory
The cost of the investigation so far
The wages rate of the workers
None of these.


True or False: The standard cost of direct materials is the cost the manufacturer should have used to make the good output.
True
False


True or False: If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined with the fixed expenses in order to compute the point at which the company will earn $30,000.
True
False


Variable costs do NOT include:
variable manufacturing overhead
direct materials
direct labor
rent


True or False: While depreciation does not result in a payment of cash, tax depreciation does reduce the cash payments for income taxes.
True
False


The Discounted Payback Period is the length of time required for an investment's discounted cash flows to equal its initial cost. True or False?
False
True


True or False: In zero base budgeting, each item is redefined from zero instead of using last year's budget as a base.
True
False


True or False: Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions.
False
True


Which of the following is not considered to be an appropriate form of finance for capital investment projects?
Issuance of share capital
Bank overdraft
Leasing
Issue of debenture


True of False: A general rule for profit maximization in the short run is: If the additional revenues exceed the additional expenses, do it.
False
True


Which of the mentioned payroll cost(s) represent direct labor?
Hourly pay to factory Cleaning employees
Hourly pay to administrative employees
Hourly pay to production employees and Salaries to production managers
Hourly pay to security employees


Which is the correct set of equations for cost objects?
prime costs = direct labor + direct materials, conversion cost = direct labor + manufacturing overhead
prime costs = direct labor + manufacturing overhead, conversion costs = direct labor + direct materials
prime costs = direct materials + manufacturing overhead, conversion costs = direct labor + direct materials


Which cost remains constant in total, but vary per unit?
fixed costs
variable costs
period costs
product costs


Which of the following businesses would generally use job/order costing rather than process costing?
Manufacturing instant coffee
Baking bread
Building houses
Manufacturing bags of cement
Manufacturing canned fruit


Partly finished goods that a manufacturer may have on hand at the end of an accounting period is known as ...?
Merchandise inventory
Work in progress
Material on hand
Finished goods


True or False: Setup cost is an example of a batch-level cost.
False
True


What is the equation to calculate a difference in variance analysis?
Standard - Actual = Difference
Standard + Actual = Difference
Standard = Actual + Difference
Standard = Actual - Difference


True or False: Break-even analysis is useful for companies that sell products, but it is not useful for companies that provide services.
True
False


True or False: If a company has mixed expenses, the fixed component can be combined with the company's fixed expenses and the variable component can be combined with the company's variable expenses.
True
False


Which of the following would NOT be classified as a production department?
assembly
painting
machining
stores


The break-even point is the level of sales that ....?
ensures a sustainable net profit
meets the expected sales target
will result in no profit or loss.
is exactly equal to the fixed costs
is needed to pay the bank loans


Product and service costing information is prepared for...
manufacturing companies with inventory
manufacturing companies without inventory
all of these
service providers
merchandising companies


The project should be accepted if NPV of the Cash flow is...
Negative
1
Positive
0


Working capital is ...?
cash at bank
current assets less current liabilities
the total of all the investments of the business
money held on the business premises
all the assets of the organisation


Manufacturing costs typically consist of ...?
production and shipping costs
direct materials, direct labor, and administrative costs
direct materials, direct labor, and manufacturing overhead
production and marketing costs
direct materials, direct labor, marketing and administrative costs


If a product cost $50 and the required mark-up was 50%, what would the selling price be?
$25.00
$250.00
$100.00
$52.50
$75.00


Sunk cost is best defined as...
the cost which has already been incurred in the past any future or present action could not affect it
a cost which changes due to volume
a cost which is incurred due to increase in the volume of production
a cost which remains fixed
a cost which will incurred in the future


Indirect costs that cannot be easily and economically traced to a finished product are known as ....?
product costs
material costs
factory overheads
service costs
labor costs


True or False: Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs.
False
True


The appropriate and careful selection of financial resources results in ...?
greater profitability
a higher skilled workforce
improvement in the brand image
increased production
more efficient work groups


Which of the following is an example of qualitative data ...?
net income
inventory cost
customer satisfaction
net worth
product cost


What order of inventory classification best describes the manufacturing process?
None of these
Raw material-Work in process- Finished Goods
work in Process- Finished Goods
Raw material- Finished Goods work in process


Complete the sentence - Perpetuity is the annuity that lasts...?
3 years
1 years
Forever
10 years
5 years


True or False: In variable costing, variable costs are considered for product costing inventory valuation and other allied management decisions.
True
False


Costs that cannot be easily or economically traced accurately to the final product are known as ...?
Indirect costs
Product costs
Direct costs
Service costs
Manufacturing costs


Which of the following costs would NOT be an element of product (manufacturing) costs?
Factory overhead costs
Material costs
Financial costs
Labor costs


True or False: Actual Costing is the system of costing in which actual cost incurred during the period is charged to the product.
False
True


True or False: BOTH variable and fixed manufacturing overhead are included in the Absorption Costing Method
True
False


Which option below correctly completes the statement: Involvement in the budgeting process should _____.
be restricted to top-level management
include the management and the people responsible for achieving the budgeted outcomes
be restricted to qualified accountants
be open to everyone in the organisation who thinks they have some good ideas
never include people below tactical level management


What is the name given to the difference between the actual cost of a product's inputs and the standard cost of one of the product's inputs?
Variance
Difference


True or False: In calculating the cash flow in capital budgeting, depreciation is added back in the net profit to arrive at the cash flow figure.
True
False


Which of the following is the best example of discretionary cost?
Research, Rent of Building
Advertising, Research
Depreciation, Advertising
Deprecation, Rent of building


Net present value (NPV) is best defined as:
The difference between the present value of cash inflows and the present value of cash outflows
The difference between cash out flow and inflow
The different between the cash inflow and present value of cash outflow


Fixed Expense + Target Income / Unit of Contribution Margin is the formula for:
Purchase volume in units required to pay target expense
None of these
Sale volume in units required to earn target income
Sale volume in Dollars Required to earn target income


A company can accelerate its cash receipts by all of the following except:
writing off receivables
selling receivables to a factor
accepting national credit cards for customer purchases
offering discounts for early payment


How do you calculate the break even point?
fixed cost ÷ sales
variable costs ÷ fixed costs
fixed costs ÷ variable costs
sales ÷ variable costs
fixed cost ÷ contribution margin ratio


Should a project be accepted if the NPV is -632?
Yes - The project should be accepted
No - The project should not be accepted


Which of the following would NOT be a labor-related cost?
Depreciation on staff cafeteria equipment
Long-service leave
Payroll taxes
Workers accident insurance
Holiday leave


A company makes computers. Which one of the following is likely to be a Variable Cost?
The salary of the managing director
Salary of the accounts manager
The wages of shop workers paid by piece rate
The salary of the factory manager
Salary of the Admin manager


The management accounting function produces a variety of financial reports set by the needs of management.
False
True


Contribution Margin/Net Income is the formula for
Operating leverage
Break even point


If profit is 10000 Dollars ,and fixed cost is 25000 Dollars ,and variable cost is 40000 dollars what will be the sales price?
65000 dollars
85000 dollars
75000 dollars
80000 dollars
70000 dollars


Which of the following alternatives is generally chosen from a cost-benefit analysis? The one that shows the ...
lowest cost to benefit ratio
highest cost to benefit ratio
highest benefit, regardless of the cost
lowest benefit to cost ratio
highest benefit to cost ratio


Break-even analysis assumes that over the relevant range:
Total fixed costs are nonlinear
Unit revenues are nonlinear
Unit variable costs are unchanged
Total costs are unchanged


What is the formula for breakeven?
Variable cost ÷ contribution margin %
Fixed costs ÷ gross profit %
Total costs ÷ contribution margin %
Fixed costs ÷ contribution margin %
Fixed cost ÷ net profit %


True or False: The original cost of an asset presently in use is generally not relevant in the decision to replace the asset.
True
False


Management by exception means ...?
that management can delegate all responsibilities
that management can concentrate on significant matters that require attention
that management can concentrate on investigating areas not included in the reports
that management provides different reports for different stakeholders
that management can report in a no-fault environment


If profit under absorption costing is 4000, and profit under variable costing is 2000, and contribution margin is 5000 under variable costing, what will be the OPERATING LEVERAGE?
3
2.5
4.5
4
2


Which of the following statements regarding graphs of fixed and variable costs is true?
Fixed costs can be represented by a straight line starting at the origin and continuing through each data point.
Variable costs can be represented by a straight line where costs are the same for each data point.
Variable costs are zero when production is equal to zero.
Fixed costs are zero when production is equal to zero.
Fixed and Variable costs are curvilinear form above zero on the “Y” axis.


Fixed expense+target income /Contribution margin ratio is the formula of
Sales volume in dollars required to earn target income
Sales volume in units require to earn target in income


If sales were $100,000, variable costs $70,000 and fixed costs $10,000: What is contribution margin?
$70,000
$30,000
$100,000
$20,000
$90,000


If sales were $100,000, contribution margin $60,000 and fixed costs $30,000: What would the variable costs be?
$30,000
$90,000
$40,000
$70,000
$10,000


How do you calculate the Contribution Margin?
sales - fixed costs
sales - (variable costs + fixed costs)
fixed costs - sales
sales - variable costs
variable costs - sales


If the profitability index of the project is greater than 1 then this project should be...?
NOT accepted
Accepted


What is a hurdle rate?
In capital budgeting, hurdle rate is the minimum rate that a company expects to earn when investing in a project.
The rate which company earns after investing in Stock Exchange in securities.
Bank interest rate is also called the hurdle rate.


How do you calculate breakeven in units?
fixed costs ÷ variable costs
fixed costs ÷ contribution margin per unit
fixed costs ÷ unit sales
variable costs ÷ contribution margin per unit
variable costs ÷ unit sales


The project with shorter payback period should be...
Accepted
Not accepted


How do you calculate the breakeven point in monetary value?
fixed costs ÷ sales
fixed costs ÷ contribution margin ratio
sales - variable costs
variable costs ÷ contribution margin ratio
variable costs ÷ sales


Which of the following is NOT generally treated as a fixed cost in management accounting?
Direct materials
Management salaries
Rent
Property rates
Depreciation on equipment


How do you calculate the margin of safety?
sales - fixed sales - break even sales
sales - fixed costs
break even sales - sales
sales - variable costs
sales - break even sales


True or False: If a company's sales were to triple, some fixed expenses are likely to increase.
True
False


Which of the following BEST describes target costing?
Setting standard cost for the purpose of target customer
None of these
Setting a cost by subtracting a desired profit margin from a competitive market price
Setting a cost by adding desired profit margin from a competitive market price


At the breakeven point, the contribution margin equals the total of the .........?
variable costs
fixed costs
sales revenues
selling and administrative costs


How do you calculate the Margin of Safety?
break even sales - fixed costs
fixed costs - variable costs
total sales - fixed costs
total sales - break even sales
total sales - variable costs


Net terminal value is=
All of these
value after payment of interest amount
Repayment of capital payment + interest due on it or surplus arising after the repayment of capital amount with interest
value after payment of capital payment


True or False: Activity based costing is considered to be a traditional costing method.
True
False


Which of the following is NOT generally identified as a reporting center under responsibility accounting?
cost center
equity center
profit center
investment center
revenue center


How to you calculate breakeven in sales?
variable costs ÷ sales
fixed costs ÷ sales
fixed costs ÷ contribution margin ratio
contribution margin ÷ fixed costs
variable costs ÷ contribution margin ratio


Out of pocket cost requires
cash expenditure
expenditure of fixed cost
None of these
expenditure of variable cost


The best example of committed cost is...
Advertising, Research
Depreciation, Rent of building
Depreciation, Research
Advertising, Rent of building


The Scattergraph method is...
relatively less accurate method of analyzing mixed cost than the high and low method.
not an accurate method of analyzing mixed cost than high and low method
a more accurate method of analysing mixed costs than the high-low method
none of these.


Which of the following specialist information systems is management accounting least engaged?
Material requirement planning
Management information system
Cost accounting
Operational budgets
Double-entry bookkeeping system


If the selling price was $100 per unit, the variable cost was $50 per unit and the fixed cost was $10,000 what would be the sales break even point in units?
300
200
400
100
500


Under responsibility accounting, reports that show the budget and actual figures along with the variances that may arise, is known as ......?
compliance reports
performance reports
statutory reports
cost/benefit analysis reports
financial statements


Which of the following is NOT a job or process costing used in management accounting?
Operation costing
Accumulation costing
Job/order costing
Process costing
Joint or by-product costing


A business sells a product for $30 per unit. The variable cost of production per unit is $18 and the fixed cost has been calculated at $8 per unit. The contribution per unit is ...?
$4
$30
$12
$8
$22


Malik makes plastic windows and doors. Which one of the following is likely to be a Fixed Cost?
All of these
The cost of heating the factory
Non of these
The labor cost of assembly
Sales commission


What is the flow of costs after direct materials, direct labor and manufacturing overhead is utilized?
work in process, cost of goods sold, finished goods
finished goods, work in process, cost of goods sold
cost of goods sold, finished goods, work in process
Work in Process, finished goods, cost of goods sold


True or False: The most relevant amounts for making a decision are found in the general ledger.
True
False


Which of the following correctly completes the statement? "As production increases within the relevant range ..."
fixed and variable cost stay the same in total.
fixed costs will vary in total.
variable costs will vary on a per unit basis.
none of the other four answers is true.
variable costs will vary in total.


If a budgeted expense for the month was $100 and the actual was $110, the variance would be ....?
+9.09% and unfavorable
-10% and unfavorable
+110% and favorable
+10% and unfavorable
+10% and favorable


In capital budgeting using profitability index if Npv of the cash flow is 2000, and initial investment is 2500, what will be the profitability index?
.8
2.25
.825
1.25
.85


Which one of the following is a Period Cost?
Variable Overhead
Fixed Overhead
Direct labor
Raw material


Definition of cost accounting
The establishment of budget standard cost and actual cost of operation process activities or products and the analysis of the variance profitability or the social use of funds.
Cost accounting deals in the cost of producing the good
cost accounting deals in cost of the products,like raw material ,labor and Factory overhead
all of the above
none of the above


True or False: A project whose future cash flows are discounted by 10% will have a larger net present value than the same cash flows discounted by 8%.
False
True


If the selling price was $200 and the cost price was $100, what is the Gross Profit %?
33.33%
50%
10%
25%
100%


if ending inventory under absorption costing is 2500, and under variable costing is 1000 what is the difference between the profit under variable costing and absorption costing?
The profit under variable costing will be higher 1500 from absorption costing
The profit under variable costing will be same
The profit under absorption costing will be lower 1500 from variable costing
The profit under absorption costing will be higher 1500 from variable costing


Managment accounting is LEAST concerned with which of the following?
Internal controls.
focusing on particular products and cost centers
Preparing financial statements for prior periods.
decisions about the day to day operations of a business.
Preparing financial reports for future periods.


Which of the following does NOT describe 'Backflush Costing'?
A product costing system generally used in a just-in-time inventory environment or where inventory is kept at a minimum.
A product costing system that usually eliminates separate accounting for work-in-process
A product costing system also called delayed costing, endpoint costing or post-deduct costing.
A costing system that delays recording changes in the status of a product being produced until good finished units appear
A product costing system that requires detailed tracking of costs throughout the production process


A company used the net present value method for evaluating a project. The project requires an immediate cash outlay of $950,000. The company discounted the cash flows by 16% and determined that the net present value of the project was a negative $600. From this information it is likely that the project...
had an internal rate of return that was slightly LESS than 16%
had negative internal rate of return
had positive internal rate of return
had an internal rate of return that was slightly Greater than 16%


A company wishes to evaluate a division which has the following extracts from income statement and statement of financial position. Income statement: $’000 Sales 500 Gross profit 200 Net profit 120 Statement of financial position: $’000 Non current assets 750 Current assets 350 Current liabilities (450) Net assets 650 What is the residual income for the division if the company has a cost of capital of 18%?
5,000
4,000
1,000
2,000
3,000


True or False: Selling expenses should be allocated to the cost of goods sold for external financial reporting.
True
False


Which of the following would NOT be a feature of 'bottom up' budgeting?
management only provide structural budgetary guidelines
goals are generally more realistic
determined by senior management
budget outcomes are more flexible and less ridged
greater involvement by staff at all levels


A budget where past information is not considered relevant for future decisions, is known as a ...?
zero-sum budget
program budget
master budget
global budget
continuous budget


The costs involved in converting raw materials into finished products is known as ...?
Conversion costs
Prime costs
Direct manufacturing costs
Variable costs
Fixed costs


What expenses are NOT included in fixed factory overhead?
insurance and taxes
freight in
depreciation
indirect labor
fringe benefits


'Relevant range' in budgeting and cost accounting relates to the:
the span of activity
the range of inventory valuation methods
the number of projects
the number of accounts
the types of expenses


In management accounting the terms 'cost' and 'expense' can be accurately used interchangeably?
False
True


Which component is included in BOTH prime and conversion costs?
factory overhead
direct materials
direct labor


Which of the following specifically describes an 'expense' rather than a 'cost'?
it is the monetary value that was used up in the generation of revenue for an accounting period
it is the sacrifice of resources where we cease to have the ability to use that resource to buy something else.
it is a measured value that includes unused economic benefit
it is the amount of cash or cash equivalents paid to initially acquire an asset


What is the ideal transfer price that would satisfy both the supplying and receiving segment?
Market price
Fixed price plus variable price
opportunity cost plus the Standard variable cost
Variable price plus profit


Which of the following is NOT a prime cost in management accounting?
Factory overhead costs
Direct materials
Job subcontracting costs
Direct labor


Which of the following bases is a volume-based cost driver in relation to applying overheads?
number of design change orders
number of set-ups
number of inspections
actual units made
number of materials requisitions


A system whereby actual results for each sub-unit is an organisation is measured against budgets and significant differences investigated, is known as...?
financial accounting
cost accounting
responsibility accounting
tax accounting
bookkeeping


Engineered cost is best defined as:
Cost that does not have clear relationship between the input and output of that process
Cost that is related to the newest technology used in the production
Cost that has a clear relationship between the input and output of that process


Which of the following correctly completes the statement: Capital budgets are ...?
prepared for production activities
only prepared by the top-level management
prepared for the acquisition of capital items
prepared for operational activities
the detailed capital investments of the owners


In ABC the assumption is that __________________ use resources or cause costs.
Activites
Indirect cost
All of the above
Products
Direct cost


Which of the following bases is more an activity-based cost driver rather than a volume based cost driver in relation to applying overheads?
actual units made
direct labor costs
materials cost
number of inspections
machine hours


According to full costing method, if cost of sale is 800, Gross profit is 200, and variable cost is 400, what is the contribution margin?
400
700
200
600
300


A company has a capital employed of $200,000. It has a cost of capital of 12% per year. Its residual income is $36,000 What is the company’s return on investment?
50%
40%
10%
30%
20%


Royalties paid are which type of cost?
Semi-variable
Variable
Fixed


Which of the following is NOT used as a treatment of fixed manufacturing costs in management accounting?
Direct costing
Margin costing
Absorption costing


In a manufacturing overhead variance, which is excluded from a two-way variance, as opposed to a three-way?
spending variance
volume (uncontrollable) variance
budget (controllable) variance


What is net profit if the contribution margin was $100,000 fixed costs were $60,000 and variable costs were $30,000?
$10,000
$100,000
$40,000
$70,000
$30,000


Which of the following businesses would generally use process costing rather than job/order costing?
Dressmaking to order
Manufacturing cars
Renovating kitchens
Public accountants
Quick printing/photocopying service


Which of the following cost classification methods is not relevant in decision-making?
Direct and Indirect Cost
Controllable an Uncontrollable cost
Avoidable and unavoidable cost
Fixed and variable cost


The accumulation of the costs incurred in buying and/or making inventory items is known as ....?
Service costs
Direct costs
Product costs
Overheads
Merchandising


When more factory overheads are incurred than have been applied to the product costing, it is known as...?
over-applied overhead
under-applied overhead
depreciation
amortization
under-utilized assets


Rolling budgets are useful when
Future event cannot be forecast reliably
Future events can be forecast ed with assurance
Future events can be forecast reliably
None of the above
All of the above


Which of the following would NOT be treated as a period cost in management accounting?
Selling and distribution costs
Interest and finance costs
Audit and accounting fees
Marketing costs
Material costs


What is the formula for operating leverage?
net income / contribution margin
Contribution margin/net income
contribution margin / fixed expense
Contribution margin/variable expense


If sale is 1000, fixed cost is 200, and profit is 500, what is contribution margin ratio?
40%
50%
80%
30%
70%


Operating Leverage Indicates
how for an organization used fair cost for the period
how for an organization used historical cost for the period
how for an organization used fixed cost for the period
how for an organization used variable cost for the period
how for an organization used current cost for the period


NIFO (Next-In First-Out) is an inventory valuation system where the cost of sale of the item is based on ...?
the cost flow on the chronological order purchases are made
the cost flow in a reverse chronological order
the estimated selling price less any expense incurred to dispose of the good
the cost flow based on a weighted average of unit costs
the cost to replace it rather than on historical cost.


Which of the following would NOT be a reason for setting up a standard cost system?
for management control of costs
for inventory valuation
for motivation of employees
for financial statement auditing purposes


Which of the following asset accounts is NOT used to record and capture the flow of manufacturing costs?
Work in progress
Materials control
Cost of Goods Sold
Finished goods


In throughput accounting if the sale is 100, fixed cost is 25, and variable material cost is 45, what is throughput ?
55
60
30
45
75


Which of the following is *NOT* a benefit likely to arise from the implementation of a ‘just in time’ cost approach?
Reduction in the ordering cost
Reduction in the inventory handling cost
A reduction in production delays as a result of ‘stockouts’.
Reduction in the inventory carrying cost


Goal congruence best describes as
Employees working in the management's interest
Employees working in the organization's interest help to meet the overall goal of the organization
All of these
Employees working in their own personal interest help to meet the overall goal of the organization


Which of the following models for evaluating capital expenditures considers the time value of money by discounting the future cash flows?
Internal Rate of Return
Payback period
Profitability Index
Net present value
Accounting rate of return


A cost classification that identifies the degree to which a cost can be changed in the short term is known as ...?
Discretionary costs
Historical costs
Conversion costs
Prime costs


If contribution margin is 10000 and fixed expense is 8000, net income is 2000 what is OPERATING LEVERAGE?
5
4
80%
20%
6


The total asset turnover ratio is calculated by which formula?
Total assets ÷ Net Annual Sales
Cost of sales ÷ Total assets
Total assets ÷ Cost of good sold
Net Annual Sales ÷ Total assets


Which of the following should you use 'process costing' rather than 'job/product' costing?
Brick and tile manufacturing
producing movies
building yachts to customer specifications
law firms cases
accounting firm audit work


Find EVA (ECONOMIC VALUE ADDED) if operating profit is 10000, weighted averege cost of capital is 12%, and operating assets are 75000.
8500
1000
7500
12000
9500


True or False: A variable expense means that the per unit amount will vary with sales.
True
False


A manufacturing company benchmarks the performance of its accounts receivable department with that of a leading credit card company, what type of benchmarking is the company using?
Continuous benchmarking
None of these
Internal benchmarking
External benchmarking
Functional benchmarking


True or False: If the net present value of a project is $0, the project should be rejected.
True
False


Total fixed costs 150000; contribution margin 60% of revenue per unit; unit price 125; What is break even in units?
2000
2500
Can’t be determined
250,000
1200


Which one of the following is not a technique used for capital investment appraisal?
Discounted cash flow technique
Net present value
Payback method
Accounting rate of return
Capital budgeting.


Internal rate of return is the rate of return at which net present value becomes?
1
positive
negative
0


Which of the following is considered a financial statement budget?
Purchasing budget
Trading account budget
Sales budget
Capital expenditure budget
Production budget


If profit before tax is 10 000, taxation is 35%, and depreciation for the year is 1 000, what will the cash flow be?
6 500
7 500
4 500
5 500
8 500


Which one of the following is not normally a characteristic of major capital expenditure projects?
The project is likely to involve considerable expenditure.
The project is an important part of a company’s strategic planning
The costs can be estimated with a fair degree of certainty.
The benefits from the expenditure will rise over a number of years.


Job/order costing is used when there is a continuous production of similar products. True or false?
False
True


What is break even point if profit is 10000,fixed cost is 25000, and the sale is 60000?
45000
42860
41900
52000


Which of the following is NOT a generally accepted method of valuing inventory for a business?
Standard cost
Liquidation value
Weighted average
Specific identification
FIFO


Which of the following costs is likely to be the minimum price charged for a special order?
Variable cost
Material cost
Fixed cost
All of the above
Labor Cost


Total fixed cost 150000; CM 60% of revenue per unit; Price 125; What is break even in dollars?
1200
250000
120000
2500


Which of the following expense groups is deducted from Gross Profit to calculate the Net Contribution Margin?
Depreciation expense
Fixed factory overheads
Cost of Goods sold
Fixed administration costs
Variable administration and sales expenses


Operating leverage shows...
how an organization used contribution margin
how an organization used variable cost for the period
how an organization used fixed cost for the period
how an organization used net profit for the period


Which of the following would be the appropriate cost driver for the cost Package and Wrapping?
staff hours worked
kilometers traveled
pallets delivered
customers served
machine hours worked


The factory overhead recovery rate is best set based on a ........ analysis?
yearly
monthly
fortnightly
weekly
daily


Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. What was the receivables turnover ratio?
6.4
8.0
4.0
5.3


Which of the following models does NOT use cash flows?
Accounting Rate of Return
Internal Rate of Return
Profitability Index
Net Present Value
Discounted Payback Period


Which of the following is NOT a method used to allocate costs in management accounting?
Normal costing
Indirect costing
Activity-based costing
Standard costing


The formula for material turnover ratio is...
Material consumed / Avg Stock
Gross Operating Profit / Average Operating Assets
Sales / Avg Stock
Average Operating Assets / Avg Stock
Cost of sale / Avg Stock


Which of the following would NOT be classified as a service department in managerial accounting?
repairs
stores
assembly
cafeteria


In variable costing or marginal costing if sale is 100 per unit, material cost 20 per unit, labour cost 10 per unit, variable overhead 10 per unit, fixed overhead 10 per unit, variable selling is expense 10 per unit, what will be the CONTRIBUTION MARGIN?
70
50
80
40
60

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