CFM CFM Cost Accounting & Management 1

Question 1

Which costing method assigns overhead costs to products based on the activities that drive those costs?

Accepted Answer

Activity-based costing (ABC)

Answer

Activity-based costing identifies cost drivers for each overhead activity and allocates costs to products based on their actual consumption of those activities.

Question 2

Contribution margin is calculated as:

Accepted Answer

Revenue - Variable Costs

Answer

Contribution margin = Revenue - Variable Costs, showing how much revenue contributes to covering fixed costs and generating profit after variable costs are recovered.

Question 3

At the break-even point, a company's:

Accepted Answer

Net income equals zero and total revenue equals total costs

Answer

Break-even is the output level where total revenue equals total costs (fixed + variable), resulting in zero profit or loss.

Question 4

Which type of cost remains constant in total regardless of changes in production volume within a relevant range?

Accepted Answer

Fixed cost

Answer

Fixed costs (e.g., rent, salaries of permanent staff) do not change with production volume within a relevant range, making per-unit fixed cost decrease as volume increases.

Question 5

What is a 'sunk cost' and how should it affect future business decisions?

Accepted Answer

A cost already incurred that cannot be recovered; it should be ignored in future decisions

Answer

Sunk costs are irretrievable past expenditures and should not influence future decisions; only relevant incremental future costs and benefits should drive decision-making.

CFM - Certified Finance Manager Practice Test

CFM - Certified Finance Manager Practice Test

CFM CFM Cost Accounting & Management 1