CGA Management Accounting & Strategy 2 — Questions and Answers
Question 1: Which costing method assigns overhead based on the actual activities that drive costs rather than a single plant-wide rate?
- Job-order costing
- Activity-based costing (ABC) (Correct answer)
- Process costing
- Standard costing
Correct answer: Activity-based costing (ABC)
Activity-based costing assigns overhead by identifying cost drivers for each activity pool, giving more accurate product costs than a single allocation base.
Question 2: A company has fixed costs of $200,000, a selling price of $50 per unit, and variable costs of $30 per unit. What is the break-even point in units?
- 4,000 units
- 6,667 units
- 10,000 units (Correct answer)
- 40,000 units
Correct answer: 10,000 units
Break-even units = Fixed costs ÷ Contribution margin per unit = $200,000 ÷ ($50 − $30) = 10,000 units.
Question 3: In the balanced scorecard framework, the 'internal business process' perspective primarily focuses on:
- Customer satisfaction scores and retention rates
- Shareholder return on equity
- Efficiency and quality of key operational processes (Correct answer)
- Employee training hours and skill development
Correct answer: Efficiency and quality of key operational processes
The internal process perspective examines how well the company performs critical operations that create customer and shareholder value.
Question 4: A firm follows a cost leadership strategy. Which of the following actions is MOST consistent with that strategy?
- Launching a premium product line with unique features
- Investing heavily in R&D to differentiate the brand
- Continuously improving production efficiency to lower unit costs (Correct answer)
- Targeting a narrow niche of high-income customers
Correct answer: Continuously improving production efficiency to lower unit costs
Cost leadership requires relentless focus on reducing costs below competitors while maintaining acceptable quality and margins.
Question 5: What does the term 'relevant cost' mean in managerial decision-making?
- A cost that appears on the income statement
- A future cost that differs between decision alternatives (Correct answer)
- A historical cost used for budgeting
- A fixed cost that cannot be avoided
Correct answer: A future cost that differs between decision alternatives
Relevant costs are future-oriented and differ between alternatives, making them the only costs that should influence a decision.
Question 6: Which variance measures the difference between the actual hours worked and the standard hours allowed, multiplied by the standard labor rate?
- Labor rate variance
- Labor efficiency variance (Correct answer)
- Variable overhead spending variance
- Fixed overhead volume variance
Correct answer: Labor efficiency variance
Labor efficiency variance = (Actual hours − Standard hours allowed) × Standard rate, reflecting how efficiently labor was used.
Question 7: A strategic map in the balanced scorecard is best described as:
- A geographic representation of market territories
- A visual diagram showing cause-and-effect links among strategic objectives (Correct answer)
- A financial ratio dashboard for investor reporting
- A flowchart of the production process
Correct answer: A visual diagram showing cause-and-effect links among strategic objectives
A strategy map illustrates how objectives across the four BSC perspectives connect causally to drive overall organizational performance.
CGA Management Accounting & Strategy 2
Which costing method assigns overhead based on the actual activities that drive costs rather than a single plant-wide rate?