Q. In a flexible budget, costs are adjusted based on which of the following?
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A.
Actual sales volume
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B.
Projected sales volume
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C.
Historical sales volume
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D.
Standard costs
Solution
A flexible budget adjusts costs based on actual sales volume, allowing for better performance evaluation.
Correct Answer:
A
— Actual sales volume
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Q. In a flexible budget, what is adjusted based on actual activity levels?
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A.
Fixed costs
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B.
Variable costs
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C.
Total costs
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D.
Sales revenue
Solution
In a flexible budget, variable costs are adjusted based on actual activity levels.
Correct Answer:
B
— Variable costs
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Q. In budgeting, what is the purpose of a variance report?
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A.
To forecast future sales
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B.
To compare actual performance against budgeted performance
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C.
To calculate tax obligations
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D.
To determine fixed costs
Solution
A variance report compares actual performance against budgeted performance to identify discrepancies.
Correct Answer:
B
— To compare actual performance against budgeted performance
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Q. In marginal costing, which of the following costs is treated as a period cost?
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A.
Direct materials
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B.
Direct labor
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C.
Variable manufacturing overhead
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D.
Fixed manufacturing overhead
Solution
In marginal costing, fixed manufacturing overhead is treated as a period cost and is expensed in the period incurred.
Correct Answer:
D
— Fixed manufacturing overhead
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Q. What does CVP analysis primarily help management to determine?
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A.
The total cost of production
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B.
The contribution margin
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C.
The break-even point
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D.
The return on investment
Solution
CVP analysis helps management determine the break-even point, where total revenues equal total costs.
Correct Answer:
C
— The break-even point
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Q. What does CVP analysis primarily help managers understand?
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A.
The relationship between cost, volume, and profit
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B.
The impact of fixed costs on profitability
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C.
The break-even point of a product
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D.
The effect of taxes on net income
Solution
CVP analysis helps managers understand the relationship between cost, volume, and profit.
Correct Answer:
A
— The relationship between cost, volume, and profit
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Q. What is the main focus of variance analysis?
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A.
To compare actual costs to budgeted costs
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B.
To determine the break-even point
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C.
To classify costs into fixed and variable
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D.
To allocate overhead costs
Solution
Variance analysis primarily focuses on comparing actual costs to budgeted costs to identify discrepancies.
Correct Answer:
A
— To compare actual costs to budgeted costs
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Q. What is the primary difference between direct and indirect costs?
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A.
Direct costs can be traced to a specific cost object, while indirect costs cannot
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B.
Indirect costs are always variable, while direct costs are fixed
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C.
Direct costs are always fixed, while indirect costs are variable
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D.
There is no difference; they are interchangeable terms
Solution
The primary difference is that direct costs can be traced directly to a specific cost object, while indirect costs cannot.
Correct Answer:
A
— Direct costs can be traced to a specific cost object, while indirect costs cannot
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Q. What is the primary purpose of cost classification in management accounting?
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A.
To determine the selling price of products
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B.
To facilitate cost control and decision making
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C.
To prepare financial statements
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D.
To calculate tax liabilities
Solution
Cost classification helps in organizing costs into categories that aid in cost control and decision making.
Correct Answer:
B
— To facilitate cost control and decision making
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Q. Which costing method is most appropriate for a company that produces custom-made products?
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A.
Job order costing
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B.
Process costing
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C.
Activity-based costing
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D.
Standard costing
Solution
Job order costing is suitable for companies that produce custom-made products, as it tracks costs for each individual job.
Correct Answer:
A
— Job order costing
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Q. Which of the following best describes the term 'opportunity cost'?
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A.
The cost of the next best alternative foregone
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B.
The total cost of production
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C.
The fixed costs incurred regardless of production
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D.
The variable costs associated with production
Solution
Opportunity cost refers to the cost of the next best alternative that is foregone when a decision is made.
Correct Answer:
A
— The cost of the next best alternative foregone
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Q. Which of the following is a key component of cost control?
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A.
Setting performance standards
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B.
Increasing production volume
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C.
Reducing selling prices
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D.
Eliminating fixed costs
Solution
Setting performance standards is a key component of cost control, as it provides benchmarks for evaluating performance.
Correct Answer:
A
— Setting performance standards
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Q. Which of the following is a method of cost control?
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A.
Standard costing
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B.
Absorption costing
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C.
Job order costing
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D.
Process costing
Solution
Standard costing is a method of cost control that compares actual costs to standard costs.
Correct Answer:
A
— Standard costing
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Q. Which variance measures the difference between actual costs and standard costs for direct materials?
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A.
Sales variance
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B.
Material price variance
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C.
Labor efficiency variance
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D.
Overhead variance
Solution
The material price variance measures the difference between actual costs and standard costs for direct materials.
Correct Answer:
B
— Material price variance
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