CPA CFE Management Accounting 2

Question 1

In a balanced scorecard, which perspective focuses on internal business processes?

Accepted Answer

Internal business process perspective

Answer

The internal business process perspective of the balanced scorecard focuses on the critical processes that the organization must excel at to satisfy customers and achieve financial objectives. It includes measures of process efficiency, quality, and cycle time.

Question 2

A company has two products competing for limited machine hours. Which product should be prioritized?

Accepted Answer

The product with the highest contribution margin per machine hour

Answer

When resources are constrained, the optimal decision is to prioritize the product with the highest contribution margin per unit of the constraining resource (machine hour in this case), as this maximizes the total contribution margin generated from the limited capacity.

Question 3

What is the primary difference between absorption costing and variable costing?

Accepted Answer

Variable costing treats fixed manufacturing overhead as a period cost rather than a product cost

Answer

Under variable costing, only variable manufacturing costs are included in product cost. Fixed manufacturing overhead is treated as a period cost and expensed in full in the period incurred. Under absorption costing, fixed manufacturing overhead is included in product cost and allocated to units.

Question 4

A company uses the high-low method to estimate costs. What does this method use to separate fixed and variable components?

Accepted Answer

The highest and lowest cost observations and their corresponding activity levels

Answer

The high-low method estimates variable cost per unit by dividing the difference in costs between the highest and lowest activity levels by the difference in activity levels. Fixed cost is then calculated by subtracting total variable cost from total cost at either point.

Question 5

In transfer pricing, what is the minimum transfer price that the selling division should accept?

Accepted Answer

The variable cost of production plus any opportunity cost of the transfer

Answer

The minimum transfer price equals the incremental cost to produce and transfer plus any opportunity cost (contribution margin foregone on external sales displaced by the internal transfer). If the selling division has excess capacity, the opportunity cost is zero.

CPA CFE Practice Test

CPA CFE Practice Test

CPA CFE Management Accounting 2