ACCA AS Performance Management (PM)

Question 1

A company manufactures two products, X and Y.
Product X has a contribution per unit of £15 and requires 3 machine hours.
Product Y has a contribution per unit of £20 and requires 5 machine hours.
If machine hours are the binding constraint, which product should be prioritised?

Accepted Answer

Product X, because it has higher contribution per limiting factor

Answer

Product Y, because it has higher total contribution per unit

Answer

Both products equally, as they have the same contribution ratio

Answer

Neither can be determined without knowing fixed costs

Question 2

What is the primary purpose of a flexed budget?

Accepted Answer

To adjust the original budget to reflect the actual level of activity achieved

Answer

To forecast next year's revenue based on current trends

Answer

To set aspirational targets that are unlikely to be achieved

Answer

To calculate the cash flow requirements for the period

Question 3

In a standard costing system, a favourable material usage variance indicates that:

Accepted Answer

Fewer materials were used than the standard quantity for actual production

Answer

Materials were purchased at a price lower than standard

Answer

More units were produced than budgeted

Answer

Material costs in total were under budget

Question 4

Which of the following is a characteristic of a cost centre?

Accepted Answer

The manager is responsible for costs only

Answer

The manager is responsible for both costs and revenues

Answer

The manager is responsible for costs, revenues, and investment decisions

Answer

The manager has no accountability for any financial measures

Question 5

A company has a target profit of £80,000, fixed costs of £120,000, and a contribution to sales ratio of 40%. What level of sales revenue is needed to achieve the target profit?

Accepted Answer

£500,000

Answer

£200,000

Answer

£300,000

Answer

£800,000

Question 6

In the context of transfer pricing, which of the following is the most appropriate transfer price when there is a perfectly competitive external market for the intermediate product?

Accepted Answer

Market price

Answer

Marginal cost of production

Answer

Full cost plus a markup

Answer

Negotiated price between divisions