CA Management Accounting 2

Question 1

Which costing method assigns all manufacturing costs (fixed and variable) to products?

Accepted Answer

Absorption costing

Answer

Absorption costing (full costing) includes both fixed and variable manufacturing overhead in product costs, as required by GAAP for external reporting.

Question 2

A company has a contribution margin ratio of 40% and fixed costs of $200,000. What is the break-even point in sales dollars?

Accepted Answer

$500,000

Answer

Break-even sales = Fixed costs ÷ Contribution margin ratio = $200,000 ÷ 0.40 = $500,000.

Question 3

What does a favorable direct materials price variance indicate?

Accepted Answer

Materials were purchased at a lower price than standard

Answer

A favorable materials price variance means actual purchase price was less than the standard price per unit of material.

Question 4

In activity-based costing (ABC), what is a cost driver?

Accepted Answer

A factor that causes a change in the cost of an activity

Answer

A cost driver is the factor (such as machine hours or number of setups) that causes overhead costs to be incurred in an activity.

Question 5

Which budget is typically prepared first in the master budget process?

Accepted Answer

Sales budget

Answer

The sales budget is prepared first because all other operating budgets depend on the sales forecast.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Management Accounting 2