CPA Management Accounting & Strategy 2 — Questions and Answers
Question 1: Which costing method allocates overhead using multiple cost drivers to better reflect cause-and-effect relationships?
- Job-order costing
- Activity-based costing (Correct answer)
- Process costing
- Variable costing
Correct answer: Activity-based costing
Activity-based costing (ABC) uses multiple cost drivers tied to specific activities, improving overhead allocation accuracy.
Question 2: A company has fixed costs of $200,000, a selling price of $50, and variable cost per unit of $30. What is the break-even point in units?
- 4,000 units
- 6,667 units
- 10,000 units (Correct answer)
- 5,000 units
Correct answer: 10,000 units
Break-even = Fixed costs / Contribution margin per unit = $200,000 / ($50 - $30) = 10,000 units.
Question 3: The balanced scorecard's 'learning and growth' perspective focuses primarily on:
- Return on investment and EVA
- Customer retention and satisfaction
- Process efficiency and cycle time
- Employee skills and organizational capability (Correct answer)
Correct answer: Employee skills and organizational capability
The learning and growth perspective addresses human capital, information capital, and organizational capital that enable strategy execution.
Question 4: When a company uses the theory of constraints (TOC), the primary goal is to:
- Minimize all direct labor costs
- Maximize throughput while managing inventory and operating expense (Correct answer)
- Eliminate non-value-added activities
- Achieve zero defects in production
Correct answer: Maximize throughput while managing inventory and operating expense
TOC focuses on maximizing throughput (sales minus truly variable costs) while controlling inventory and operating expenses.
Question 5: A strategic business unit (SBU) with high market share in a slow-growth industry is classified in the BCG matrix as a:
- Star
- Question mark
- Cash cow (Correct answer)
- Dog
Correct answer: Cash cow
Cash cows have high relative market share in low-growth markets, generating excess cash with minimal investment needed.
Question 6: Which transfer pricing method uses the price that an unrelated party would charge for a comparable transaction?
- Cost-plus method
- Comparable uncontrolled price method (Correct answer)
- Resale price method
- Profit split method
Correct answer: Comparable uncontrolled price method
The comparable uncontrolled price (CUP) method benchmarks transfer prices against actual market transactions between independent parties.
Question 7: Under a standard costing system, a favorable materials price variance occurs when:
- Actual quantity used exceeds standard quantity allowed
- Actual price paid is less than the standard price (Correct answer)
- Standard quantity allowed exceeds actual quantity used
- Actual production exceeds budgeted production
Correct answer: Actual price paid is less than the standard price
Materials price variance = (Standard price - Actual price) × Actual quantity; it is favorable when actual price is below standard.
CPA Management Accounting & Strategy 2
Which costing method allocates overhead using multiple cost drivers to better reflect cause-and-effect relationships?