CA Managerial Accounting & Budgeting 5

Question 1

Which variance measures the difference between the actual overhead incurred and the overhead applied to production?

Accepted Answer

Overall overhead variance

Answer

The overall (total) overhead variance is the difference between actual overhead costs incurred and overhead applied to units produced at the standard rate.

Question 2

A company uses process costing. Equivalent units of production (EUP) are calculated to:

Accepted Answer

Convert partially completed units into a meaningful whole-unit measure

Answer

EUP translates partially completed work-in-process units into an equivalent number of fully completed units for cost-per-unit calculations.

Question 3

When a product line is being considered for elimination, which of the following is LEAST relevant to the decision?

Accepted Answer

Historical allocated corporate overhead charged to the line

Answer

Allocated corporate overhead is a common fixed cost that will continue regardless of whether the product line is dropped, making it irrelevant to the decision.

Question 4

The cash budget is most important for:

Accepted Answer

Planning to ensure the company has sufficient liquidity to meet obligations

Answer

The cash budget forecasts cash inflows and outflows to ensure the company can meet its short-term financial obligations and plan for borrowing or investing excess cash.

Question 5

In a make-or-buy decision, qualitative factors that favor making a component in-house include:

Accepted Answer

Desire to maintain proprietary control over production technology

Answer

Maintaining proprietary control and protecting trade secrets are key qualitative reasons a company might choose to manufacture a component internally rather than outsource it.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Managerial Accounting & Budgeting 5