CA Managerial Accounting & Budgeting 4

Question 1

The net present value (NPV) method accepts a project when NPV is:

Accepted Answer

Greater than or equal to zero

Answer

A non-negative NPV means the project returns at least the required rate of return, so it creates value or at minimum breaks even on a present-value basis.

Question 2

Which of the following costs is most likely a sunk cost when deciding whether to replace old equipment?

Accepted Answer

Original purchase price of the old machine

Answer

The original purchase price of existing equipment is a sunk cost—it has already been paid and cannot be recovered regardless of the decision made.

Question 3

In the balanced scorecard framework, the 'internal business processes' perspective focuses on:

Accepted Answer

The processes at which the company must excel to satisfy customers

Answer

The internal business process perspective identifies critical operations that must perform well to deliver customer value and achieve financial objectives.

Question 4

A company's return on investment (ROI) can be improved by:

Accepted Answer

Increasing net operating income while reducing invested assets

Answer

ROI = Net operating income / Invested assets, so ROI rises when income increases and/or invested assets decrease.

Question 5

Which costing method is most appropriate for a law firm that tracks costs per client engagement?

Accepted Answer

Job-order costing

Answer

Job-order costing accumulates costs for individual jobs or engagements, making it ideal for service firms like law firms with distinct client matters.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Managerial Accounting & Budgeting 4