Management Accounting & Strategy Flashcards
7 cards from real CGA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Management Accounting & Strategy flashcards as text
A company is operating at full capacity. When evaluating a special order at a price below the normal selling price, which cost must be included in the minimum acceptable price?
Answer: Variable costs plus the opportunity cost of displaced regular sales
At full capacity, accepting a special order means turning away regular sales, so the opportunity cost (lost contribution margin) must be included in the floor price.
Which of the following describes a 'cost center' in responsibility accounting?
Answer: A unit evaluated only on the costs it incurs, without revenue accountability
A cost center manager is held accountable only for controlling costs, not for generating revenue or managing assets.
The internal rate of return (IRR) decision rule states that a project should be accepted when:
Answer: IRR exceeds the required rate of return (hurdle rate)
A project adds value when its IRR exceeds the cost of capital (hurdle rate), meaning it earns more than investors require.
Target costing begins with:
Answer: Setting the market price, subtracting the desired profit, to derive the allowable cost
Target costing works backward from a competitive market price minus required profit margin to establish the cost target the product must meet.
Which of the following is an example of a 'learning curve' effect in cost behavior?
Answer: Average labor time per unit decreasing as cumulative production doubles
The learning curve predicts that average direct labor time per unit falls by a fixed percentage each time cumulative output doubles, as workers become more efficient.
In the context of the balanced scorecard, a 'lag indicator' is best described as:
Answer: An outcome measure that reports results after they have occurred
Lag indicators (e.g., net profit, market share) measure outcomes that have already happened, unlike lead indicators that predict future results.
When a firm pursues a 'focus strategy,' it gains competitive advantage by:
Answer: Concentrating on a specific market segment and serving it better than broader competitors
A focus strategy (Porter) narrows competitive scope to a particular buyer group, geographic market, or product niche, excelling within that segment.