Management Accounting Flashcards
7 cards from real CA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Management Accounting flashcards as text
Which costing method assigns all manufacturing costs (fixed and variable) to products?
Answer: Absorption costing
Absorption costing (full costing) includes both fixed and variable manufacturing overhead in product costs, as required by GAAP for external reporting.
A company has a contribution margin ratio of 40% and fixed costs of $200,000. What is the break-even point in sales dollars?
Answer: $500,000
Break-even sales = Fixed costs ÷ Contribution margin ratio = $200,000 ÷ 0.40 = $500,000.
What does a favorable direct materials price variance indicate?
Answer: Materials were purchased at a lower price than standard
A favorable materials price variance means actual purchase price was less than the standard price per unit of material.
In activity-based costing (ABC), what is a cost driver?
Answer: A factor that causes a change in the cost of an activity
A cost driver is the factor (such as machine hours or number of setups) that causes overhead costs to be incurred in an activity.
Which budget is typically prepared first in the master budget process?
Answer: Sales budget
The sales budget is prepared first because all other operating budgets depend on the sales forecast.
What is the purpose of a flexible budget?
Answer: To compare actual costs to budgeted costs at the actual activity level
A flexible budget adjusts budgeted amounts to the actual level of activity, allowing for meaningful variance analysis.
Under variable costing, which of the following is treated as a period cost?
Answer: Fixed manufacturing overhead
Under variable costing, fixed manufacturing overhead is expensed in the period incurred rather than included in inventory cost.