CA Cost Accounting & Management 2

Question 1

Which costing method treats fixed manufacturing overhead as a period cost rather than a product cost?

Accepted Answer

Variable costing

Answer

Variable (marginal) costing expenses fixed manufacturing overhead in the period incurred, unlike absorption costing which includes it in product cost.

Question 2

A company has a favorable materials price variance but an unfavorable materials usage variance. The MOST likely cause is:

Accepted Answer

Workers used more material due to poor quality purchases at lower prices

Answer

Purchasing cheaper, lower-quality materials creates a favorable price variance but often leads to more waste, causing an unfavorable usage variance.

Question 3

Under Activity-Based Costing, a cost pool for 'machine setups' would use which cost driver?

Accepted Answer

Number of setups

Answer

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.

Question 4

In a process costing system, equivalent units of production (EUP) are used to:

Accepted Answer

Convert partially completed units to a whole-unit equivalent for cost assignment

Answer

EUP converts work-in-process units at various completion stages into the equivalent number of fully completed units for cost calculation.

Question 5

The 'contribution margin ratio' is best defined as:

Accepted Answer

Contribution margin divided by sales revenue

Answer

The contribution margin ratio (C/S ratio) shows the proportion of each sales dollar that contributes toward covering fixed costs and profit.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA Cost Accounting & Management 2