CPA CFE Management Accounting

Question 1

A company uses activity-based costing (ABC). Which of the following best describes a cost driver in an ABC system?

Accepted Answer

A factor that causes a change in the cost of an activity

Answer

The total overhead cost allocated to a product

Answer

The profit margin on each unit sold

Answer

The fixed cost per unit of production

Question 2

What is the primary purpose of a flexible budget?

Accepted Answer

To adjust budgeted amounts for the actual level of activity achieved

Answer

To set a fixed spending limit for each department

Answer

To forecast next year's capital expenditures

Answer

To eliminate all budget variances

Question 3

In a standard costing system, a favorable labor efficiency variance indicates that:

Accepted Answer

Fewer labor hours were used than standard for the actual output

Answer

Workers were paid less than the standard wage rate

Answer

More units were produced than budgeted

Answer

Material costs were lower than expected

Question 4

Which of the following is a characteristic of a relevant cost for decision-making purposes?

Accepted Answer

It is a future cost that differs between decision alternatives

Answer

It is a sunk cost that has already been incurred

Answer

It is a fixed cost that remains unchanged regardless of the decision

Answer

It is a historical cost recorded in the accounting records

Question 5

A company is operating below capacity and receives a special order at a price below normal selling price. The order should be accepted if:

Accepted Answer

The special order price exceeds the variable cost per unit and no other qualitative factors override

Answer

The special order price exceeds total cost per unit including allocated fixed overhead

Answer

The special order price equals the normal selling price

Answer

The company has no excess capacity

Question 6

What does the contribution margin ratio represent?

Accepted Answer

The percentage of each sales dollar available to cover fixed costs and generate profit

Answer

Net income as a percentage of sales

Answer

Total variable costs as a percentage of total costs

Answer

Gross margin divided by operating expenses