CA Management Accounting 4

Question 1

Which method of joint cost allocation uses the relative sales value of each product at the split-off point?

Accepted Answer

Sales value at split-off method

Answer

The sales value at split-off method allocates joint costs based on each product's proportional market value at the point where products separate.

Question 2

What is the primary advantage of using standard costs in a manufacturing environment?

Accepted Answer

They provide a benchmark for measuring performance and controlling costs

Answer

Standard costs provide a predetermined benchmark that allows management to identify and investigate variances from expected performance.

Question 3

Under the weighted-average method of process costing, how are beginning WIP costs treated?

Accepted Answer

They are combined with current period costs and spread over all equivalent units

Answer

The weighted-average method blends beginning WIP costs with current period costs, then divides by total equivalent units (completed + ending WIP).

Question 4

What is residual income in the context of divisional performance evaluation?

Accepted Answer

Operating income minus a minimum required return on invested assets

Answer

Residual income = Operating income − (Minimum required rate of return × Invested assets), measuring profit in excess of the capital charge.

Question 5

Which budgeting approach requires managers to justify every expenditure from zero each period?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting (ZBB) starts from a zero base each period, requiring justification for all spending rather than just changes from prior year.

(CA) Certified Accountant Practice Test