ACCA Management Accounting Techniques 4

Question 1

Which budgeting approach requires every line item to be justified from scratch each period, regardless of prior spending?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting requires managers to justify all expenditures anew each period, eliminating the assumption that prior budgets are a valid baseline.

Question 2

A company produces 10,000 units and absorbs overheads at $5 per unit. Actual overheads are $48,000. What is the over/under absorption?

Accepted Answer

$2,000 over-absorbed

Answer

Absorbed overheads = 10,000 × $5 = $50,000; actual = $48,000; so overheads are over-absorbed by $2,000.

Question 3

When comparing marginal and absorption costing profit, if inventory levels increase during the period:

Accepted Answer

Absorption costing reports higher profit than marginal costing

Answer

When inventory rises, absorption costing defers more fixed costs in closing inventory, resulting in a higher profit than marginal costing.

Question 4

The margin of safety percentage is calculated as:

Accepted Answer

(Actual sales − Breakeven sales) ÷ Actual sales × 100

Answer

Margin of safety % = (Actual or budgeted sales − Breakeven sales) ÷ Actual or budgeted sales × 100, showing the cushion before losses begin.

Question 5

In an ABC system, which of the following is a batch-level cost?

Accepted Answer

Machine set-up costs incurred each time a new batch runs

Answer

Batch-level costs, like machine set-up, are incurred once per batch regardless of the number of units in that batch.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA Management Accounting Techniques 4