Managerial Accounting & Budgeting 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 Managerial Accounting & Budgeting flashcards as text
The net present value (NPV) method accepts a project when NPV is:
Answer: Greater than or equal to zero
A non-negative NPV means the project returns at least the required rate of return, so it creates value or at minimum breaks even on a present-value basis.
Which of the following costs is most likely a sunk cost when deciding whether to replace old equipment?
Answer: Original purchase price of the old machine
The original purchase price of existing equipment is a sunk cost—it has already been paid and cannot be recovered regardless of the decision made.
In the balanced scorecard framework, the 'internal business processes' perspective focuses on:
Answer: The processes at which the company must excel to satisfy customers
The internal business process perspective identifies critical operations that must perform well to deliver customer value and achieve financial objectives.
A company's return on investment (ROI) can be improved by:
Answer: Increasing net operating income while reducing invested assets
ROI = Net operating income / Invested assets, so ROI rises when income increases and/or invested assets decrease.
Which costing method is most appropriate for a law firm that tracks costs per client engagement?
Answer: Job-order costing
Job-order costing accumulates costs for individual jobs or engagements, making it ideal for service firms like law firms with distinct client matters.
Residual income differs from ROI as a performance measure because residual income:
Answer: Deducts a minimum required return on invested assets from operating income
Residual income = Net operating income minus (Required rate of return × Invested assets), directly penalizing divisions that fail to earn the minimum required return.
The high-low method estimates a cost function using:
Answer: Only the highest and lowest activity levels from the data set
The high-low method uses only the highest and lowest activity data points to estimate variable cost per unit and total fixed costs.