CFC Cost Accounting & Management 5

Question 1

A flexible budget differs from a static budget in that it:

Accepted Answer

Adjusts revenues and costs for the actual level of activity

Answer

A flexible budget recalculates expected revenues and variable costs based on the actual activity level achieved, enabling meaningful variance analysis.

Question 2

The 'reciprocal method' of service department cost allocation is considered most accurate because it:

Accepted Answer

Fully recognizes mutual services provided between service departments

Answer

The reciprocal method uses simultaneous equations to capture the full extent of services exchanged between service departments.

Question 3

When evaluating a capital-intensive production line, which cost behavior pattern would fixed manufacturing overhead costs exhibit on a per-unit basis as volume increases?

Accepted Answer

Decrease per unit

Answer

Fixed costs remain constant in total, so per-unit fixed cost decreases as more units spread the cost over a larger base.

Question 4

Which inventory valuation approach is MOST likely to result in the lowest cost of goods sold during a period of rising prices?

Accepted Answer

FIFO

Answer

Under FIFO during rising prices, older (cheaper) costs flow into COGS first, resulting in lower COGS and higher gross profit.

Question 5

In transfer pricing, the minimum transfer price a selling division should accept is:

Accepted Answer

Variable cost plus opportunity cost

Answer

The minimum acceptable transfer price equals variable cost plus any opportunity cost (contribution margin foregone from external sales).

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Cost Accounting & Management 5