Cost Accounting & Management 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 Cost Accounting & Management flashcards as text
Which costing method treats fixed manufacturing overhead as a period cost rather than a product cost?
Answer: Variable costing
Variable (marginal) costing expenses fixed manufacturing overhead in the period incurred, unlike absorption costing which includes it in product cost.
A company has a favorable materials price variance but an unfavorable materials usage variance. The MOST likely cause is:
Answer: Workers used more material due to poor quality purchases at lower prices
Purchasing cheaper, lower-quality materials creates a favorable price variance but often leads to more waste, causing an unfavorable usage variance.
Under Activity-Based Costing, a cost pool for 'machine setups' would use which cost driver?
Answer: Number of setups
Number of setups is the most logical driver for a setup cost pool because setup costs are caused by each production run, not by volume.
In a process costing system, equivalent units of production (EUP) are used to:
Answer: Convert partially completed units to a whole-unit equivalent for cost assignment
EUP converts work-in-process units at various completion stages into the equivalent number of fully completed units for cost calculation.
The 'contribution margin ratio' is best defined as:
Answer: Contribution margin divided by sales revenue
The contribution margin ratio (C/S ratio) shows the proportion of each sales dollar that contributes toward covering fixed costs and profit.
Which of the following is a characteristic of a 'relevant cost' in decision-making?
Answer: It is a future cost that differs between alternatives
Relevant costs must be future-oriented and differ between the options being evaluated; sunk costs are irrelevant regardless of the decision.
When a company operates at full capacity and must choose between two products, the decision rule is to maximize:
Answer: Contribution margin per unit of limiting factor
When a limiting factor (scarce resource) exists, ranking products by contribution margin per unit of that limiting factor maximizes total profit.