Management Accounting Flashcards
6 cards from real ACCA AK practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Management Accounting flashcards as text
Which of the following is an example of a 'fixed cost'?
Answer: Factory rent paid monthly regardless of output
A fixed cost remains constant in total regardless of the level of activity within the relevant range. Factory rent does not change with output volume.
Prime cost is calculated as:
Answer: Direct materials + Direct labour + Direct expenses
Prime cost (or direct cost) = Direct materials + Direct labour + Direct expenses. It excludes all indirect costs (overheads).
Which cost classification is most relevant when deciding whether to shut down a product line?
Answer: Relevant (incremental) cost
Relevant costs are future incremental cash flows that change as a result of a decision; sunk costs are past and irrelevant. Shutdown decisions focus on relevant costs and revenues.
A production overhead absorption rate (OAR) is typically calculated as:
Answer: Budgeted overhead ÷ Budgeted activity
The OAR is set at the start of the period using budgeted figures: Budgeted overhead ÷ Budgeted activity level (e.g., machine hours or labour hours).
If actual overhead incurred is £50,000 and absorbed overhead is £45,000, the result is:
Answer: Under-absorption of £5,000
Under-absorption occurs when absorbed overhead is less than actual overhead (£45,000 < £50,000). The £5,000 shortfall is added back to cost of sales.
Which of the following statements about marginal costing is correct?
Answer: Only variable costs are included in the cost of a unit of product
Under marginal costing, only variable costs are charged to units; fixed overheads are treated as period costs and written off in full in the period incurred.