CPFM Cost Management and Analysis 2

Question 1

A company allocates fixed manufacturing overhead based on machine hours. If actual production exceeds the budgeted level, what is the most likely overhead variance result?

Accepted Answer

Favorable volume variance

Answer

Producing more units than budgeted over-absorbs fixed overhead, creating a favorable volume variance.

Question 2

Which costing method assigns overhead to products based on the activities that drive costs?

Accepted Answer

Activity-based costing

Answer

Activity-based costing traces overhead through cost drivers tied to specific activities.

Question 3

A relevant cost for a decision must be:

Accepted Answer

Future-oriented and differs between alternatives

Answer

Relevant costs are future costs that differ among the options being considered.

Question 4

What does the contribution margin represent?

Accepted Answer

Sales revenue minus variable costs

Answer

Contribution margin is sales revenue less variable costs, available to cover fixed costs and profit.

Question 5

In a make-or-buy decision, which cost should generally be ignored?

Accepted Answer

Unavoidable allocated fixed overhead

Answer

Unavoidable fixed overhead continues regardless of the decision, so it is irrelevant.

CPFM Practice Test

CPFM Practice Test

CPFM Cost Management and Analysis 2