AAT L4 Management Accounting Decision and Control

Question 1

A company manufactures a product with a selling price of £50, variable costs of £30, and fixed costs of £200,000 per year. How many units must be sold to break even?

Accepted Answer

10,000 units

Answer

4,000 units

Answer

6,667 units

Answer

5,000 units

Question 2

A company is considering a special order for 500 units at £35 each. Normal selling price is £50, variable cost is £28 per unit, and the company has spare capacity. Should the order be accepted?

Accepted Answer

Yes, because the price exceeds the variable cost and there is spare capacity

Answer

No, because the price is below the normal selling price

Answer

No, because it will reduce overall profit

Answer

Yes, because it will cover fixed costs

Question 3

Which of the following is a limitation of using standard costing in a modern manufacturing environment?

Accepted Answer

It may be inappropriate where production is customised and non-repetitive

Answer

It helps identify variances from expected performance

Answer

It provides a basis for pricing decisions

Answer

It encourages cost control through variance analysis

Question 4

A product requires 3 kg of material at £4 per kg. During the period, 2,000 units were produced using 6,200 kg at a total cost of £25,420. What is the material price variance?

Accepted Answer

£620 Adverse

Answer

£700 Adverse

Answer

£620 Favourable

Answer

£700 Favourable

Question 5

In a limiting factor scenario, products should be ranked for production based on:

Accepted Answer

Highest contribution per unit of the limiting factor

Answer

Highest selling price per unit

Answer

Highest total contribution

Answer

Lowest variable cost per unit

Question 6

A company uses absorption costing. Opening inventory was 500 units and closing inventory was 800 units. Fixed production overhead is £10 per unit. Compared to marginal costing, absorption costing profit will be:

Accepted Answer

£3,000 higher

Answer

£3,000 lower

Answer

£8,000 higher

Answer

The same

A company manufactures a product with a selling price of £50, variable costs of £30, and fixed costs of £200,000 per year.How many units must be sold to break even?

A company manufactures a product with a selling price of £50, variable costs of £30, and fixed costs of £200,000 per year.
How many units must be sold to break even?