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 of the following BEST describes 'kaizen costing'?
Answer: Continuous incremental cost reduction during the production phase
Kaizen costing applies the kaizen philosophy of continuous improvement to cost management by seeking ongoing small reductions in production costs.
Residual income (RI) is superior to ROI as a divisional performance measure because:
Answer: It encourages managers to accept projects that exceed the company's cost of capital even if they reduce ROI
RI motivates managers to invest in any project earning above the minimum required return, whereas ROI creates an incentive to reject profitable projects that dilute a high existing ROI.
A company produces 10,000 units but its normal capacity is 12,000 units. Under absorption costing, this will result in:
Answer: Under-absorbed fixed overhead
Producing below normal capacity means not all budgeted fixed overhead is absorbed into products, creating an under-absorption (adverse volume variance).
In a make-or-buy decision, which cost is IRRELEVANT to the analysis?
Answer: Depreciation of dedicated machinery that cannot be redeployed or sold
Depreciation on sunk-cost assets that cannot be sold or redeployed is a past committed cost and does not change regardless of whether the component is made or bought.
Environmental management accounting (EMA) differs from traditional management accounting primarily by:
Answer: Separately identifying and tracking environment-related costs often hidden in overheads
EMA makes environmental costs visible by extracting them from general overhead pools, enabling better decisions about pollution control, waste reduction, and resource use.
Which statement about zero-based budgeting (ZBB) is CORRECT?
Answer: Every activity must be justified from scratch each budget period regardless of past expenditure
ZBB requires managers to justify all expenditures anew each period rather than simply rolling forward the prior budget, making it useful for controlling discretionary costs.
The 'margin of safety percentage' is calculated as:
Answer: (Actual sales – Break-even sales) ÷ Actual sales × 100
The margin of safety percentage shows how far actual sales can fall below current levels before the business reaches break-even, expressed as a proportion of actual sales.