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
Which variance measures the difference between the actual overhead incurred and the overhead applied to production?
Answer: Overall overhead variance
The overall (total) overhead variance is the difference between actual overhead costs incurred and overhead applied to units produced at the standard rate.
A company uses process costing. Equivalent units of production (EUP) are calculated to:
Answer: Convert partially completed units into a meaningful whole-unit measure
EUP translates partially completed work-in-process units into an equivalent number of fully completed units for cost-per-unit calculations.
When a product line is being considered for elimination, which of the following is LEAST relevant to the decision?
Answer: Historical allocated corporate overhead charged to the line
Allocated corporate overhead is a common fixed cost that will continue regardless of whether the product line is dropped, making it irrelevant to the decision.
The cash budget is most important for:
Answer: Planning to ensure the company has sufficient liquidity to meet obligations
The cash budget forecasts cash inflows and outflows to ensure the company can meet its short-term financial obligations and plan for borrowing or investing excess cash.
In a make-or-buy decision, qualitative factors that favor making a component in-house include:
Answer: Desire to maintain proprietary control over production technology
Maintaining proprietary control and protecting trade secrets are key qualitative reasons a company might choose to manufacture a component internally rather than outsource it.
Economic value added (EVA) is calculated as:
Answer: Net operating profit after tax minus (WACC × invested capital)
EVA = NOPAT minus (Weighted average cost of capital × Invested capital), measuring value created above and beyond investors' required return.
A company produces two products sharing a common resource. To maximize profit, it should prioritize the product with the higher:
Answer: Contribution margin per unit of the constrained resource
When a resource is constrained, profit is maximized by producing the product that generates the highest contribution margin per unit of the scarce resource consumed.