CGA Management Accounting & Strategy 3

Question 1

Which of the following best describes a 'sunk cost'?

Accepted Answer

A cost that has already been incurred and cannot be recovered

Answer

Sunk costs have already been spent and are unrecoverable, so they should be excluded from future decision analysis.

Question 2

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

Accepted Answer

The variable cost plus any lost contribution margin on external sales

Answer

The selling division's minimum acceptable price covers its variable cost plus any opportunity cost from foregone external sales.

Question 3

Which capital budgeting technique explicitly accounts for the time value of money?

Accepted Answer

Net present value (NPV)

Answer

NPV discounts future cash flows at the required rate of return, directly incorporating the time value of money.

Question 4

Under a differentiation strategy, a company primarily creates competitive advantage by:

Accepted Answer

Offering products or services perceived as unique and worth a premium

Answer

Differentiation strategy builds competitive advantage by delivering unique value that customers are willing to pay a premium for.

Question 5

A company's operating leverage ratio is 4. If sales increase by 10%, what is the expected percentage increase in operating income?

Accepted Answer

40%

Answer

Percentage change in operating income = Operating leverage × Percentage change in sales = 4 × 10% = 40%.

(CGA) Certified General Accountant Practice Test