CA Management Accounting 5

Question 1

Which type of cost center is evaluated solely on its ability to control costs without revenue responsibility?

Accepted Answer

Expense center (cost center)

Answer

A cost center manager is held responsible only for controlling costs; no revenue or asset decisions fall within their authority.

Question 2

What is target costing?

Accepted Answer

Working backward from a target selling price to determine an allowable product cost

Answer

Target costing = Target selling price − Desired profit margin; it drives design and engineering teams to achieve the required cost structure.

Question 3

In a make-or-buy decision, which of the following is NOT relevant?

Accepted Answer

Sunk costs already spent on existing equipment

Answer

Sunk costs have already been incurred and cannot be changed by any future decision, making them irrelevant to make-or-buy analysis.

Question 4

What does a balanced scorecard measure beyond traditional financial metrics?

Accepted Answer

Performance across financial, customer, internal process, and learning/growth perspectives

Answer

The balanced scorecard (Kaplan & Norton) translates strategy into four perspectives: financial, customer, internal business processes, and learning & growth.

Question 5

When using the high-low method to estimate a cost function, which data points are used?

Accepted Answer

The observations with the highest and lowest activity levels

Answer

The high-low method uses only the highest and lowest activity-level data points to calculate variable cost per unit and total fixed costs.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Management Accounting 5