Management Accounting Updated Exam
Questions and Correct Answers
Direct Cost - CORRECT ANSWER✅✅✅Costs directly attributable to a specific cost object
(e.g., product, project). Examples: raw materials, direct labor.
Indirect Cost - CORRECT ANSWER✅✅✅Costs not directly attributable to a specific cost
object; shared across multiple objects. Examples: utilities, depreciation.
Simultaneous Direct and Indirect Costs - CORRECT ANSWER✅✅✅A cost can be both
direct and indirect depending on the context (e.g., rent can be direct for a department and indirect
for the organization).
Order Costing System - CORRECT ANSWER✅✅✅Used by entities producing customized
orders. Tracks costs per job or project. Examples: construction, bespoke manufacturing.
Process Costing System - CORRECT ANSWER✅✅✅Used by entities with continuous
production processes. Costs are averaged over units. Examples: food production, chemicals.
Direct costing method - CORRECT ANSWER✅✅✅Allocates costs directly to production
departments.
Step-Down method - CORRECT ANSWER✅✅✅Allocates costs sequentially, partially
recognizing inter-department support.
Reciprocal Method - CORRECT ANSWER✅✅✅Fully allocates costs considering mutual
support between departments.
Unit contribution margin - CORRECT ANSWER✅✅✅Formula: Selling Price - Variable
Costs. Used for short-term decision-making but unsuitable for product mix decisions if
constraints exist.
,Non-Financial Performance Indicators (NFPI) - CORRECT ANSWER✅✅✅Measures that
assess performance beyond financial results. Examples: On-time arrival rates (efficiency),
Customer satisfaction scores (service quality).
Standard Costing - CORRECT ANSWER✅✅✅Predetermined cost for manufacturing a
product or service. Used for budgeting and variance analysis.
Advantages of standard costing - CORRECT ANSWER✅✅✅Simplifies cost control,
facilitates variance analysis, and enhances performance evaluation.
Disadvantages of standard costing - CORRECT ANSWER✅✅✅Can become outdated if
assumptions change and may not reflect actual costs.
Flexible budget - CORRECT ANSWER✅✅✅Adjusted for actual activity levels. Useful for
variance analysis.
Flexible budget variance - CORRECT ANSWER✅✅✅Difference between flexible budget
and actual results.
Volume variance - CORRECT ANSWER✅✅✅Impact of actual production volume on costs
and revenues.
Price variance - CORRECT ANSWER✅✅✅Difference between actual and standard costs of
inputs.
Efficiency variance - CORRECT ANSWER✅✅✅Variance due to the usage of resources.
Relevant costs - CORRECT ANSWER✅✅✅Costs directly affected by a decision.
Examples: incremental costs, avoidable costs.
, Fixed costs - CORRECT ANSWER✅✅✅Costs that do not change with production volume
in the short term (e.g., rent).
Break-even analysis - CORRECT ANSWER✅✅✅Determines the minimum sales volume
needed to cover costs. Formula: (Fixed Costs + Desired Profit) ÷ Contribution Margin per Unit.
Delivery cost analysis - CORRECT ANSWER✅✅✅Compares options for outsourcing or
insourcing delivery services, including fixed-rate offers vs. mileage compensation.
Cost-Based Pricing - CORRECT ANSWER✅✅✅Covering direct and indirect costs while
ensuring a profit margin.
Customer willingness to pay - CORRECT ANSWER✅✅✅Determined by market demand.
Competitor pricing - CORRECT ANSWER✅✅✅Ensuring competitiveness within the local
market.
Break-even quantity - CORRECT ANSWER✅✅✅Volume of output at which total revenues
equal total costs (no profit, no loss).
Opportunity Cost - CORRECT ANSWER✅✅✅Cost of benefits sacrificed by choosing one
alternative over another.
Equivalent units - CORRECT ANSWER✅✅✅Used in process costing to assign costs to
partially completed units by converting them to equivalent fully completed units.
Activity-Based Costing (ABC) - CORRECT ANSWER✅✅✅A costing method allocating
overhead to specific activities, then assigning costs to products based on their activity use.
Controllability in Performance Measurement - CORRECT ANSWER✅✅✅Extent to which
a manager can influence costs or revenues under their responsibility.
Questions and Correct Answers
Direct Cost - CORRECT ANSWER✅✅✅Costs directly attributable to a specific cost object
(e.g., product, project). Examples: raw materials, direct labor.
Indirect Cost - CORRECT ANSWER✅✅✅Costs not directly attributable to a specific cost
object; shared across multiple objects. Examples: utilities, depreciation.
Simultaneous Direct and Indirect Costs - CORRECT ANSWER✅✅✅A cost can be both
direct and indirect depending on the context (e.g., rent can be direct for a department and indirect
for the organization).
Order Costing System - CORRECT ANSWER✅✅✅Used by entities producing customized
orders. Tracks costs per job or project. Examples: construction, bespoke manufacturing.
Process Costing System - CORRECT ANSWER✅✅✅Used by entities with continuous
production processes. Costs are averaged over units. Examples: food production, chemicals.
Direct costing method - CORRECT ANSWER✅✅✅Allocates costs directly to production
departments.
Step-Down method - CORRECT ANSWER✅✅✅Allocates costs sequentially, partially
recognizing inter-department support.
Reciprocal Method - CORRECT ANSWER✅✅✅Fully allocates costs considering mutual
support between departments.
Unit contribution margin - CORRECT ANSWER✅✅✅Formula: Selling Price - Variable
Costs. Used for short-term decision-making but unsuitable for product mix decisions if
constraints exist.
,Non-Financial Performance Indicators (NFPI) - CORRECT ANSWER✅✅✅Measures that
assess performance beyond financial results. Examples: On-time arrival rates (efficiency),
Customer satisfaction scores (service quality).
Standard Costing - CORRECT ANSWER✅✅✅Predetermined cost for manufacturing a
product or service. Used for budgeting and variance analysis.
Advantages of standard costing - CORRECT ANSWER✅✅✅Simplifies cost control,
facilitates variance analysis, and enhances performance evaluation.
Disadvantages of standard costing - CORRECT ANSWER✅✅✅Can become outdated if
assumptions change and may not reflect actual costs.
Flexible budget - CORRECT ANSWER✅✅✅Adjusted for actual activity levels. Useful for
variance analysis.
Flexible budget variance - CORRECT ANSWER✅✅✅Difference between flexible budget
and actual results.
Volume variance - CORRECT ANSWER✅✅✅Impact of actual production volume on costs
and revenues.
Price variance - CORRECT ANSWER✅✅✅Difference between actual and standard costs of
inputs.
Efficiency variance - CORRECT ANSWER✅✅✅Variance due to the usage of resources.
Relevant costs - CORRECT ANSWER✅✅✅Costs directly affected by a decision.
Examples: incremental costs, avoidable costs.
, Fixed costs - CORRECT ANSWER✅✅✅Costs that do not change with production volume
in the short term (e.g., rent).
Break-even analysis - CORRECT ANSWER✅✅✅Determines the minimum sales volume
needed to cover costs. Formula: (Fixed Costs + Desired Profit) ÷ Contribution Margin per Unit.
Delivery cost analysis - CORRECT ANSWER✅✅✅Compares options for outsourcing or
insourcing delivery services, including fixed-rate offers vs. mileage compensation.
Cost-Based Pricing - CORRECT ANSWER✅✅✅Covering direct and indirect costs while
ensuring a profit margin.
Customer willingness to pay - CORRECT ANSWER✅✅✅Determined by market demand.
Competitor pricing - CORRECT ANSWER✅✅✅Ensuring competitiveness within the local
market.
Break-even quantity - CORRECT ANSWER✅✅✅Volume of output at which total revenues
equal total costs (no profit, no loss).
Opportunity Cost - CORRECT ANSWER✅✅✅Cost of benefits sacrificed by choosing one
alternative over another.
Equivalent units - CORRECT ANSWER✅✅✅Used in process costing to assign costs to
partially completed units by converting them to equivalent fully completed units.
Activity-Based Costing (ABC) - CORRECT ANSWER✅✅✅A costing method allocating
overhead to specific activities, then assigning costs to products based on their activity use.
Controllability in Performance Measurement - CORRECT ANSWER✅✅✅Extent to which
a manager can influence costs or revenues under their responsibility.
