CAA CAA Cost Accounting & Management 3

Question 1

When using the high-low method to separate mixed costs, what are the two data points used?

Accepted Answer

Highest and lowest activity levels

Answer

The high-low method uses the highest and lowest activity levels (and their corresponding costs) to estimate variable and fixed cost components.

Question 2

In a make-or-buy decision, which costs are most relevant to the analysis?

Accepted Answer

Differential costs and opportunity costs

Answer

Make-or-buy decisions should focus on incremental (differential) costs and any opportunity costs foregone by choosing one alternative.

Question 3

Which transfer pricing method sets the internal price equal to the selling price in the external market?

Accepted Answer

Market-based transfer pricing

Answer

Market-based transfer pricing uses the external market price as the internal transfer price, preserving competitive signals within the firm.

Question 4

Equivalent units of production in process costing are used to:

Accepted Answer

Convert partially completed units into a whole-unit equivalent for cost averaging

Answer

Equivalent units express partially completed inventory in terms of fully completed units so that unit costs can be accurately calculated.

Question 5

A company's operating leverage factor is 5. If sales increase by 10%, operating income will increase by:

Accepted Answer

50%

Answer

Operating leverage factor × % change in sales = % change in operating income; 5 × 10% = 50%.

(CAA) Certified Accounting Analyst Practice Test