IAB Management Accounting & Analysis 5

Question 1

Residual income (RI) is calculated as:

Accepted Answer

Operating income − (Required rate of return × Average operating assets)

Answer

RI subtracts an imputed capital charge (required return × assets) from operating income, measuring value earned above the minimum required.

Question 2

In throughput accounting, which resource is referred to as the 'constraint' or 'bottleneck'?

Accepted Answer

The resource with the highest utilization that limits overall output

Answer

The bottleneck (constraint) is the resource whose capacity limits the system's overall throughput rate.

Question 3

A company spends $5,000 on a machine that is now obsolete. This $5,000 is BEST classified as a:

Accepted Answer

Sunk cost

Answer

A sunk cost is already incurred and cannot be recovered; it is irrelevant to future decisions.

Question 4

What does a favorable fixed overhead volume variance indicate?

Accepted Answer

Actual production exceeded the standard volume used to set the overhead rate

Answer

Fixed overhead volume variance = Budgeted − Applied overhead; a favorable result means actual output exceeded the denominator volume.

Question 5

Which type of standard is considered most motivating because it is achievable with reasonable efficiency?

Accepted Answer

Currently attainable standard

Answer

Currently attainable (practical) standards assume efficient but realistic performance, motivating employees without setting impossible targets.

(IAB) International Association of Bookkeepers Certification Practice Test