CA Cost Accounting & Management 3

Question 1

A budget that automatically adjusts to reflect the actual level of activity achieved is called a:

Accepted Answer

Flexible budget

Answer

A flexible budget recalculates budgeted costs at the actual output level, enabling meaningful variance analysis by comparing like-for-like activity.

Question 2

Which statement about throughput accounting is CORRECT?

Accepted Answer

It maximizes the rate at which inventory is converted to sales above material cost

Answer

Throughput accounting (Theory of Constraints) focuses on maximizing throughput (sales minus direct material costs) while treating most costs as fixed.

Question 3

The overhead volume variance measures the difference between:

Accepted Answer

Budgeted fixed overhead and absorbed fixed overhead

Answer

The volume variance arises because actual production volume differs from budgeted volume, causing under- or over-absorption of fixed overhead.

Question 4

In joint product costing, the 'net realizable value method' allocates joint costs based on:

Accepted Answer

Expected selling price less further processing costs after split-off

Answer

The NRV method deducts post-split-off costs from final selling prices to estimate value at the split-off point, then uses those NRVs to allocate joint costs.

Question 5

A company's break-even point in units will DECREASE if:

Accepted Answer

Fixed costs decrease

Answer

Fewer units are needed to break even when fixed costs fall, since each unit still contributes the same margin toward a smaller fixed cost burden.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA Cost Accounting & Management 3