IFA Management Accounting & Budgeting 3

Question 1

Which variance measures the difference between the actual price paid for materials and the standard price, multiplied by actual quantity purchased?

Accepted Answer

Material price variance

Answer

The material price variance = (Standard price – Actual price) × Actual quantity purchased.

Question 2

A rolling budget is best described as:

Accepted Answer

A budget continuously updated by adding a new period as the most recent period ends

Answer

Rolling budgets extend the planning horizon by appending a new future period each time a current period closes.

Question 3

Under marginal costing, which of the following costs is treated as a period cost and NOT included in closing inventory valuation?

Accepted Answer

Fixed production overhead

Answer

Marginal costing charges fixed production overheads as period costs in the income statement rather than carrying them in inventory.

Question 4

Activity-based costing (ABC) improves overhead allocation by:

Accepted Answer

Using cost drivers that reflect the actual consumption of resources by each product

Answer

ABC traces overhead costs to activities and then to products using cost drivers that reflect how each product demands those activities.

Question 5

A company budgeted sales of 5,000 units but actually sold 4,500 units at a higher-than-budgeted price. The sales volume variance is:

Accepted Answer

Adverse, because fewer units were sold than budgeted

Answer

The sales volume variance depends solely on the difference in units sold (4,500 vs. 5,000), making it adverse; price effects are captured separately.

(IFA) Institute of Financial Accountants Certification Practice Test