CPA CFE Management Accounting 4

Question 1

What is the difference between a static budget variance and a flexible budget variance?

Accepted Answer

A static budget variance compares actual to original budget; a flexible budget variance compares actual to a budget adjusted for actual volume

Answer

The static budget variance compares actual results to the original budget at the planned activity level. The flexible budget variance isolates spending and efficiency differences by comparing actual results to what the budget would have been at the actual activity level achieved.

Question 2

In a process costing system, how are equivalent units calculated under the weighted average method?

Accepted Answer

Units completed plus equivalent units in ending work in process, without regard to beginning inventory completion

Answer

Under the weighted average method, equivalent units equal units completed and transferred out plus the equivalent units in ending work in process (ending WIP units × percentage complete). Work done in prior periods on beginning WIP is blended with current period work.

Question 3

A company uses kaizen costing. How does this approach differ from standard costing?

Accepted Answer

Kaizen costing targets continuous incremental cost reductions during the production phase

Answer

Kaizen costing focuses on continuous improvement during the manufacturing phase by setting progressively tighter cost reduction targets. Unlike standard costing which measures performance against fixed standards, kaizen costing expects standards to improve over time.

Question 4

What is throughput accounting's definition of throughput?

Accepted Answer

Sales revenue minus totally variable costs (primarily direct materials)

Answer

In throughput accounting (based on TOC), throughput is defined as sales revenue minus totally variable costs, which typically includes only direct materials. Labor and overhead are considered fixed in the short term and are classified as operating expense.

Question 5

Which variance measures the difference between actual fixed overhead incurred and the budgeted fixed overhead?

Accepted Answer

Fixed overhead spending (budget) variance

Answer

The fixed overhead spending (budget) variance is the difference between actual fixed overhead incurred and the budgeted (static) fixed overhead. It identifies whether the company spent more or less on fixed overhead than planned, regardless of production volume.

CPA CFE Practice Test

CPA CFE Practice Test

CPA CFE Management Accounting 4