CNA CNA Managerial Accounting 2 — Questions and Answers
Question 1: A favorable materials price variance occurs when:
- Actual price paid exceeds standard price
- Standard price exceeds actual price paid (Correct answer)
- Actual quantity used exceeds standard quantity
- Standard quantity exceeds actual quantity used
Correct answer: Standard price exceeds actual price paid
A favorable materials price variance results when the actual price paid for materials is less than the standard price, reducing costs.
Question 2: The balanced scorecard approach to performance measurement typically includes all of the following perspectives EXCEPT:
- Financial
- Customer
- Internal business processes
- Market share ranking (Correct answer)
Correct answer: Market share ranking
The four balanced scorecard perspectives are Financial, Customer, Internal Business Processes, and Learning & Growth — market share ranking is not one of them.
Question 3: Which cost remains constant in total regardless of changes in activity level within the relevant range?
- Variable cost
- Semi-variable cost
- Fixed cost (Correct answer)
- Step cost
Correct answer: Fixed cost
Fixed costs do not change in total as activity levels fluctuate within the relevant range, though they change on a per-unit basis.
Question 4: Residual income is calculated as divisional operating income minus:
- Total revenue times cost of capital
- Invested capital times required rate of return (Correct answer)
- Net assets times tax rate
- Gross profit times hurdle rate
Correct answer: Invested capital times required rate of return
Residual income = Divisional Operating Income − (Invested Capital × Required Rate of Return), measuring profit above the cost of capital employed.
Question 5: In a make-or-buy decision, which costs are most relevant to the analysis?
- Sunk costs and allocated overhead
- Avoidable costs and opportunity costs (Correct answer)
- Historical costs and depreciation
- Administrative costs and financing costs
Correct answer: Avoidable costs and opportunity costs
Make-or-buy decisions focus on avoidable costs that differ between alternatives and any opportunity costs of using internal resources.
Question 6: When a company operates at full capacity, the transfer price for an internal sale should generally be set at a minimum of:
- Variable cost only
- Full absorption cost
- Variable cost plus lost contribution margin (Correct answer)
- Selling price to external customers
Correct answer: Variable cost plus lost contribution margin
At full capacity, the minimum transfer price equals variable cost plus the contribution margin sacrificed by not making an external sale.
CNA CNA Managerial Accounting 2
A favorable materials price variance occurs when: