CA Managerial Accounting & Budgeting 2

Question 1

A company has fixed costs of $120,000, variable costs of $8 per unit, and sells each unit for $20. What is the break-even point in units?

Accepted Answer

10,000 units

Answer

Break-even units = Fixed costs / (Selling price - Variable cost) = $120,000 / ($20 - $8) = 10,000 units.

Question 2

Which budgeting approach builds the budget from zero each period, requiring justification for every expenditure?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting starts from a 'zero base' each period, requiring managers to justify all expenses rather than simply adjusting prior-year figures.

Question 3

In a standard costing system, an unfavorable direct labor efficiency variance means:

Accepted Answer

More hours were worked than the standard allowed

Answer

Labor efficiency variance is unfavorable when actual hours worked exceed standard hours allowed for the actual output produced.

Question 4

The master budget's starting point in a manufacturing company is typically the:

Accepted Answer

Sales budget

Answer

The sales budget is prepared first because all other budgets—production, materials, labor, and overhead—depend on projected sales volume.

Question 5

Which cost behavior pattern remains constant in total but varies per unit as production volume changes?

Accepted Answer

Fixed cost

Answer

Fixed costs remain constant in total regardless of volume, so the per-unit cost decreases as more units are produced.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Managerial Accounting & Budgeting 2