ACCA Management Accounting Techniques 2 — Questions and Answers
Question 1: A company has fixed costs of $120,000 and a contribution margin ratio of 40%. What is the breakeven point in sales revenue?
- $300,000 (Correct answer)
- $280,000
- $480,000
- $200,000
Correct answer: $300,000
Breakeven sales = Fixed costs ÷ Contribution margin ratio = $120,000 ÷ 0.40 = $300,000.
Question 2: Which costing method treats fixed production overheads as period costs rather than product costs?
- Marginal costing (Correct answer)
- Absorption costing
- Activity-based costing
- Standard costing
Correct answer: Marginal costing
Marginal costing charges fixed production overheads entirely to the period in which they are incurred, not to products.
Question 3: In a standard costing system, a favorable material usage variance means:
- Less material was used than the standard allowed (Correct answer)
- Material cost per unit was lower than standard
- More material was purchased than planned
- The actual output exceeded budgeted output
Correct answer: Less material was used than the standard allowed
A favorable material usage variance occurs when actual material consumed is less than the standard quantity allowed for actual output.
Question 4: A company uses throughput accounting. Which cost is treated as a 'totally variable cost'?
- Direct materials (Correct answer)
- Direct labor
- Variable overheads
- Fixed overheads
Correct answer: Direct materials
In throughput accounting, only direct materials are considered truly variable; labor and overheads are treated as fixed operating expenses.
Question 5: What does the term 'life cycle costing' refer to in management accounting?
- Tracking costs across all stages from design to disposal (Correct answer)
- Depreciating assets over their useful life
- Costing products only during the production phase
- Allocating overheads using activity drivers
Correct answer: Tracking costs across all stages from design to disposal
Life cycle costing accumulates and manages costs across all phases: design, development, production, marketing, and disposal.
Question 6: Under activity-based costing, a cost driver is best described as:
- A factor that causes changes in the cost of an activity (Correct answer)
- The total overhead allocated to a product
- The fixed cost per unit of output
- The contribution per unit of limiting factor
Correct answer: A factor that causes changes in the cost of an activity
A cost driver is any factor whose change causes a corresponding change in the total cost of a related cost pool or activity.
Question 7: A product has a selling price of $50, variable cost of $30, and the company faces a shortage of machine hours. To maximize profit, management should rank products by:
- Contribution per machine hour (Correct answer)
- Total contribution per unit
- Selling price per machine hour
- Gross profit per unit
Correct answer: Contribution per machine hour
When a single resource is scarce, products should be ranked by contribution per unit of the limiting factor (machine hour).
ACCA Management Accounting Techniques 2
A company has fixed costs of $120,000 and a contribution margin ratio of 40%.
What is the breakeven point in sales revenue?