ACCA AK Management Accounting (MA) Costing 2

Question 1

A company uses activity-based costing (ABC). Which of the following is the best cost driver for the quality inspection activity?

Accepted Answer

Number of inspections performed

Answer

Under ABC, cost drivers should have a cause-and-effect relationship with the activity. The number of inspections performed directly drives quality inspection costs, making it the most appropriate cost driver.

Question 2

A product has a variable cost of £8 per unit and a selling price of £12 per unit. Fixed costs are £20,000 per month. What is the breakeven point in units?

Accepted Answer

5,000 units

Answer

Contribution per unit = £12 − £8 = £4. Breakeven point = Fixed costs ÷ Contribution per unit = £20,000 ÷ £4 = 5,000 units.

Question 3

Which of the following describes a step cost?

Accepted Answer

A cost that remains fixed over a range of activity but jumps to a higher level once that range is exceeded

Answer

A step cost (or step-fixed cost) remains constant within a relevant range of activity but increases by a discrete amount when activity exceeds that range — for example, hiring an additional supervisor when production exceeds capacity.

Question 4

The margin of safety represents:

Accepted Answer

The excess of budgeted or actual sales over the breakeven point

Answer

The margin of safety measures how far sales can fall before the organisation reaches its breakeven point. It is calculated as budgeted (or actual) sales minus breakeven sales, expressed in units, revenue, or as a percentage.

Question 5

In standard costing, what does a favourable material usage variance indicate?

Accepted Answer

Less material was used than the standard allowed for the actual output

Answer

A favourable material usage variance means that actual quantity of material used was less than the standard quantity allowed for the actual level of output. This indicates efficient use of materials.

ACCA Applied Knowledge Practice Test

ACCA Applied Knowledge Practice Test

ACCA AK Management Accounting (MA) Costing 2