ACCA Management Accounting 4 — Questions and Answers
Question 1: In a balanced scorecard, which perspective focuses on measures such as employee satisfaction and skills development?
- Financial perspective
- Customer perspective
- Internal business process perspective
- Learning and growth perspective (Correct answer)
Correct answer: Learning and growth perspective
The learning and growth perspective of the balanced scorecard addresses employee capabilities, information systems, and organizational culture.
Question 2: What is the purpose of a rolling budget?
- To budget only for capital expenditure projects
- To continuously update the budget by adding a new period as the most recent period ends (Correct answer)
- To fix the annual budget at the start of the year and not revise it
- To allocate overhead costs using ABC principles
Correct answer: To continuously update the budget by adding a new period as the most recent period ends
A rolling (continuous) budget is regularly updated by extending it by one period as each period passes, keeping the planning horizon constant.
Question 3: Which of the following would cause an adverse labor efficiency variance?
- Workers were paid a higher wage rate than standard
- Workers took longer than the standard time to produce actual output (Correct answer)
- More units were produced than budgeted
- Fewer workers were employed than planned
Correct answer: Workers took longer than the standard time to produce actual output
An adverse labor efficiency variance occurs when more hours are worked than the standard hours allowed for the actual output produced.
Question 4: A company has sales of $500,000, variable costs of $300,000, and fixed costs of $150,000. What is the margin of safety as a percentage of sales?
- 10%
- 20%
- 25% (Correct answer)
- 30%
Correct answer: 25%
Contribution = $200,000; breakeven sales = $150,000 ÷ ($200,000/$500,000) = $375,000; MOS% = ($500,000 − $375,000) ÷ $500,000 = 25%.
Question 5: Environmental management accounting differs from traditional management accounting primarily because it:
- Uses only financial measures of performance
- Identifies and allocates environmental costs that are often hidden in overheads (Correct answer)
- Ignores long-term costs in decision making
- Focuses solely on reducing direct labor costs
Correct answer: Identifies and allocates environmental costs that are often hidden in overheads
Environmental management accounting makes environmental costs visible by separating them from general overhead rather than hiding them in overhead pools.
Question 6: Under absorption costing, when production volume exceeds sales volume in a period, profit will be:
- Lower than under marginal costing
- Equal to marginal costing profit
- Higher than under marginal costing (Correct answer)
- Impossible to determine without more information
Correct answer: Higher than under marginal costing
When production exceeds sales, absorption costing defers some fixed overhead in closing inventory, resulting in higher profit than marginal costing.
Question 7: Which of the following is NOT a characteristic of a zero-based budget (ZBB)?
- All expenditure must be justified from scratch each period
- Prior year spending levels are used as a starting point (Correct answer)
- Activities are ranked by priority
- Decision packages are prepared and evaluated
Correct answer: Prior year spending levels are used as a starting point
ZBB explicitly rejects the use of prior-year spending as a base; every cost must be justified anew each budget period.
ACCA Management Accounting 4
In a balanced scorecard, which perspective focuses on measures such as employee satisfaction and skills development?