ACCA AK Management Accounting 2 — Questions and Answers
Question 1: Which budgeting approach requires managers to justify all expenditure from a zero base each period?
- Incremental budgeting
- Rolling budgeting
- Zero-based budgeting (Correct answer)
- Activity-based budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting (ZBB) starts from scratch each period — every cost must be justified afresh rather than simply adding a percentage to last year's budget.
Question 2: A flexible budget is one that:
- Can be altered by any manager at any time
- Is adjusted to reflect the actual level of activity achieved (Correct answer)
- Covers a rolling 12-month period
- Is set without reference to past performance
Correct answer: Is adjusted to reflect the actual level of activity achieved
A flexible budget is restated for the actual activity level achieved, allowing a fair comparison with actual costs and meaningful variance analysis.
Question 3: Which of the following is a direct cost?
- Factory supervisor salary
- Machine depreciation
- Raw materials used in a product (Correct answer)
- Electricity for the production facility
Correct answer: Raw materials used in a product
A direct cost can be directly traced to a specific cost unit. Raw materials used are directly attributable to a product, unlike overheads which are indirect.
Question 4: The difference between budgeted profit and actual profit explained by volume sold is the:
- Price variance
- Volume variance (Correct answer)
- Efficiency variance
- Mix variance
Correct answer: Volume variance
The sales volume variance measures the impact on profit of selling more or fewer units than budgeted. It uses the standard profit margin per unit.
Question 5: Contribution is calculated as:
- Sales revenue − Total costs
- Sales revenue − Variable costs (Correct answer)
- Sales revenue − Fixed costs
- Gross profit − Overheads
Correct answer: Sales revenue − Variable costs
Contribution = Sales revenue − Variable costs. It represents the amount available to cover fixed costs and generate profit.
Question 6: The break-even point in units is calculated as:
- Fixed costs ÷ Contribution per unit (Correct answer)
- Variable costs ÷ Selling price
- Total costs ÷ Sales revenue
- Fixed costs ÷ Selling price per unit
Correct answer: Fixed costs ÷ Contribution per unit
Break-even units = Fixed costs ÷ Contribution per unit. At this output level, total contribution exactly equals total fixed costs, so profit is zero.
ACCA AK Management Accounting 2
Which budgeting approach requires managers to justify all expenditure from a zero base each period?