ACCA AK Management Accounting 4

Question 1

Which of the following is a characteristic of a 'profit centre'?

Accepted Answer

It is accountable for both revenues and costs

Answer

A profit centre is responsible for both revenues and costs, so its performance is measured by the profit it generates, unlike a cost centre which tracks costs only.

Question 2

Which inventory valuation method charges the most recent purchase prices to cost of sales during a period of rising prices?

Accepted Answer

LIFO (Last In First Out)

Answer

LIFO issues the most recently purchased (and therefore most expensive in a rising price environment) inventory first, resulting in higher COGS and lower closing inventory.

Question 3

Which of the following is included in the cost of conversion under IAS 2?

Accepted Answer

Direct labour and production overheads

Answer

IAS 2 defines cost of conversion as direct labour, direct expenses and a systematic allocation of fixed and variable production overheads.

Question 4

A limiting factor (key factor) is:

Accepted Answer

A resource in short supply that restricts output

Answer

A limiting factor is a scarce resource (e.g., machine hours, labour hours, materials) that constrains the organisation's ability to maximise its objectives.

Question 5

When there is a single limiting factor, the optimal production plan ranks products by:

Accepted Answer

Highest contribution per unit of the limiting factor

Answer

With one limiting factor, products are ranked by contribution per unit of the limiting factor (e.g., contribution per machine hour) to maximise total contribution.

ACCA Applied Knowledge Practice Test

ACCA Applied Knowledge Practice Test

ACCA AK Management Accounting 4