ACCA AK Management Accounting 3

Question 1

A favourable direct material price variance means:

Accepted Answer

The actual price paid was less than the standard price

Answer

Direct material price variance = (Standard price − Actual price) × Actual quantity. Favourable means actual price < standard price, so less was paid than expected.

Question 2

Which of the following would cause an adverse direct labour efficiency variance?

Accepted Answer

More hours were worked than standard to produce the output

Answer

Labour efficiency variance = (Standard hours − Actual hours) × Standard rate. If actual hours exceed standard hours, the variance is adverse (more time taken than expected).

Question 3

Activity-based costing (ABC) differs from traditional absorption costing because it:

Accepted Answer

Uses multiple cost drivers to allocate overhead more accurately to products

Answer

ABC uses multiple cost drivers (e.g., number of set-ups, machine hours, orders processed) to allocate overhead to products more accurately than a single volume-based OAR.

Question 4

In a standard costing system, a 'standard hour' represents:

Accepted Answer

The time a task should take under efficient operating conditions

Answer

A standard hour is the amount of work that should be performed in one hour under efficient (standard) operating conditions, used as the basis for efficiency variances.

Question 5

Which of the following best describes a 'cost centre'?

Accepted Answer

A unit of the business that is charged with costs only, with no revenue responsibility

Answer

A cost centre is a business unit accountable only for the costs it incurs; it has no direct revenue responsibility. Examples include HR and maintenance departments.

ACCA Applied Knowledge Practice Test

ACCA Applied Knowledge Practice Test

ACCA AK Management Accounting 3