B. Acy Bachelor of Accountancy Cost and Managerial Accounting 2 — Questions and Answers
Question 1: Break-even point in units is calculated as:
- Fixed costs divided by selling price per unit
- Fixed costs divided by contribution margin per unit (Correct answer)
- Total costs divided by selling price
- Variable costs divided by contribution margin
Correct answer: Fixed costs divided by contribution margin per unit
Break-even units = Fixed costs ÷ Contribution margin per unit, the point at which total revenue equals total costs.
Question 2: In process costing, equivalent units of production are used to:
- Count total units started
- Allocate costs to partially completed units (Correct answer)
- Determine selling price
- Calculate gross margin
Correct answer: Allocate costs to partially completed units
Equivalent units convert partially completed work-in-process into a whole-unit equivalent to allocate costs fairly.
Question 3: The margin of safety measures:
- The ratio of fixed to variable costs
- How far sales can fall before reaching break-even (Correct answer)
- The difference between standard and actual costs
- The ratio of direct to indirect costs
Correct answer: How far sales can fall before reaching break-even
Margin of safety is the excess of budgeted or actual sales over break-even sales, showing the cushion before a loss.
Question 4: Which budget is typically prepared first in the master budget process?
- Production budget
- Cash budget
- Sales budget (Correct answer)
- Direct materials budget
Correct answer: Sales budget
The sales budget is prepared first because all other budgets depend on projected sales volumes.
Question 5: A favorable material price variance occurs when:
- More materials are used than standard
- Actual price paid is less than standard price (Correct answer)
- Less materials are used than standard
- Actual production exceeds budgeted production
Correct answer: Actual price paid is less than standard price
A favorable price variance results when the actual cost per unit of material is less than the standard cost.
Question 6: Which of the following is an example of a mixed (semi-variable) cost?
- Straight-line depreciation
- Raw materials used in production
- A utility bill with a fixed base charge plus a per-unit charge (Correct answer)
- Sales commissions at a fixed percentage
Correct answer: A utility bill with a fixed base charge plus a per-unit charge
A mixed cost has both a fixed component (base charge) and a variable component (usage charge), combining both behaviors.
B. Acy Bachelor of Accountancy Cost and Managerial Accounting 2
Break-even point in units is calculated as: