CPA CPA Cost Accounting & Budgeting 2

Question 1

Which budgeting approach requires managers to justify every expenditure from a zero base each period, rather than using prior-year spending as a baseline?

Accepted Answer

Zero-based budgeting (ZBB)

Answer

Zero-based budgeting requires every expense to be justified and approved for each new period without reference to prior budgets.

Question 2

The break-even point in units is calculated as:

Accepted Answer

Fixed costs divided by contribution margin per unit

Answer

Break-even units equal total fixed costs divided by the contribution margin per unit (selling price minus variable cost per unit).

Question 3

A favorable materials price variance combined with an unfavorable materials quantity variance most likely indicates:

Accepted Answer

Purchase of lower-quality materials that caused more waste

Answer

Purchasing lower-quality materials at a cheaper price (favorable price) often results in more waste or defects, causing an unfavorable quantity variance.

Question 4

In process costing, 'equivalent units of production' are used to:

Accepted Answer

Convert actual units started into a common measure accounting for completion percentage

Answer

Equivalent units convert partially completed units into a whole-unit measure so that costs can be assigned accurately to units at various stages of completion.

Question 5

Which of the following is an example of a capital budgeting decision?

Accepted Answer

Deciding whether to purchase new manufacturing equipment

Answer

Capital budgeting involves evaluating long-term investment decisions such as purchasing equipment, facilities, or other long-lived assets.

(CPA) Certified Practicing Accountant Practice Test

(CPA) Certified Practicing Accountant Practice Test

CPA CPA Cost Accounting & Budgeting 2