ACCA Management Accounting Techniques 3 — Questions and Answers
Question 1: Which of the following is an example of a stepped fixed cost?
- Warehouse rental that doubles when a second warehouse is required (Correct answer)
- Direct materials cost
- Sales commission paid per unit sold
- Variable electricity based on machine usage
Correct answer: Warehouse rental that doubles when a second warehouse is required
Stepped fixed costs remain constant within a range but increase in steps when activity exceeds a certain level, such as needing an additional warehouse.
Question 2: In variance analysis, the sales volume variance measures the difference between:
- Budgeted and actual units sold, valued at standard profit or contribution (Correct answer)
- Actual revenue and budgeted revenue
- Standard and actual selling price per unit
- Actual units sold and breakeven units
Correct answer: Budgeted and actual units sold, valued at standard profit or contribution
The sales volume variance = (Actual sales volume − Budgeted sales volume) × Standard profit per unit (absorption) or standard contribution (marginal).
Question 3: A budget that is updated continuously by adding a new period as each period ends is called a:
- Rolling budget (Correct answer)
- Zero-based budget
- Flexible budget
- Incremental budget
Correct answer: Rolling budget
A rolling (or continuous) budget always covers a set period ahead by dropping the most recent period completed and adding a new future period.
Question 4: The transfer price that maximizes overall group profit when there is no external market for the intermediate product is:
- Marginal cost of the supplying division (Correct answer)
- Market price of the intermediate product
- Full cost plus a mark-up
- Negotiated price agreed between divisions
Correct answer: Marginal cost of the supplying division
When no external market exists, transferring at marginal (variable) cost ensures the buying division makes decisions in the group's best interest.
Question 5: Target costing sets the product cost as:
- Target selling price minus desired profit margin (Correct answer)
- Actual production cost plus a mark-up
- Standard cost based on engineering estimates
- Variable cost plus a contribution margin
Correct answer: Target selling price minus desired profit margin
Target cost = Target selling price − Required profit, so the company must design or re-engineer the product to meet this cost.
Question 6: Which of the following correctly describes a favorable fixed overhead volume variance?
- Actual output was greater than budgeted output (Correct answer)
- Actual fixed overheads were less than budgeted
- Actual hours worked exceeded budgeted hours
- Fixed overhead absorption rate was overstated
Correct answer: Actual output was greater than budgeted output
The fixed overhead volume variance is favorable when actual production volume exceeds budgeted production, absorbing more overhead than planned.
Question 7: In throughput accounting, Return per Factory Hour (RPFH) is calculated as:
- Throughput per unit ÷ Time on bottleneck resource per unit (Correct answer)
- Sales revenue ÷ Total machine hours available
- Contribution per unit ÷ Direct labor hours per unit
- Net profit ÷ Total factory hours worked
Correct answer: Throughput per unit ÷ Time on bottleneck resource per unit
RPFH = (Selling price − Material cost) per unit ÷ Time required on the bottleneck resource per unit.
ACCA Management Accounting Techniques 3
Which of the following is an example of a stepped fixed cost?