MAC3761 ASSESSMENT 1 OF 2026 EXPECTED SOLUTIONS
1. Which of the following best describes the primary focus of strategic management accounting?
a) Recording historical financial transactions
b) Providing information for internal decision-making to achieve long-term competitive advantage
c) Ensuring compliance with tax regulations
d) Preparing external financial statements
Answer: b
Explanation: Strategic management accounting focuses on internal decision support, competitor
analysis, and long-term strategy rather than historical record-keeping or external compliance.
2. A company’s variable cost per unit is R12 and fixed costs total R80 000. If the selling price per unit is
R20, what is the break-even point in units?
a) 4 000 units
b) 6 667 units
c) 10 000 units
d) 12 000 units
Answer: c
Explanation: Break-even (units) = Fixed costs ÷ Contribution per unit = R80 000 ÷ (R20 – R12) = R80 000 ÷
R8 = 10 000 units.
3. Which of the following is NOT a characteristic of activity-based costing (ABC)?
a) Identifies cost drivers for each activity
b) Allocates overhead using a single plant-wide rate
c) Traces costs to products based on activities consumed
d) Provides more accurate product costing in complex environments
Answer: b
Explanation: ABC avoids single plant-wide rates; it uses multiple activity cost pools and drivers. A single
rate is a feature of traditional costing.
,4. When calculating the direct material price variance, which of the following is used?
a) Actual quantity purchased × (Actual price – Standard price)
b) Standard quantity allowed × (Actual price – Standard price)
c) Actual quantity used × (Actual price – Standard price)
d) Standard quantity × Standard price
Answer: a
Explanation: Material price variance = (Actual price – Standard price) × Actual quantity purchased (not
necessarily used).
5. In a just-in-time (JIT) environment, which of the following is most likely to be reduced?
a) Inventory holding costs
b) Supplier reliability
c) Employee training
d) Machine maintenance
Answer: a
Explanation: JIT aims to minimise inventory levels, thereby reducing holding, obsolescence, and
financing costs.
6. ROI (Return on Investment) is calculated as:
a) Net operating income ÷ Sales
b) Sales ÷ Average operating assets
c) Net operating income ÷ Average operating assets
d) Gross profit ÷ Total assets
Answer: c
Explanation: ROI = Net operating income (or controllable margin) divided by average operating assets.
7. Residual income (RI) is superior to ROI for performance evaluation because:
a) RI encourages managers to accept any project that earns above the cost of capital
b) RI is easier to calculate
,c) RI ignores the size of the investment
d) RI uses historical costs only
Answer: a
Explanation: RI motivates managers to invest in projects with positive residual income (above required
return), whereas ROI may discourage profitable projects that lower current ROI.
8. Which of the following is a relevant cost in a make-or-buy decision?
a) Sunk cost of existing machinery
b) Allocated fixed costs that will continue regardless
c) Direct materials that can be avoided if the part is purchased
d) Depreciation on plant already purchased
Answer: c
Explanation: Relevant costs are future, differential, and avoidable. Avoidable direct materials qualify;
sunk costs and unavoidable allocated costs are irrelevant.
9. A favourable labour efficiency variance occurs when:
a) Actual labour hours worked exceed standard hours allowed
b) Actual wage rate is less than standard rate
c) Actual labour hours are less than standard hours allowed for actual output
d) Actual output is less than budgeted output
Answer: c
Explanation: Labour efficiency variance compares actual hours to standard hours allowed. Favourable
means actual hours < standard hours.
10. Under throughput accounting, what is the primary measure of profitability?
a) Throughput contribution minus operating expenses
b) Gross profit margin
c) Net income after tax
d) Cash flow from financing
Answer: a
, Explanation: Throughput accounting focuses on throughput (sales revenue – direct materials) less
operating expenses (excluding materials).
11. Which costing method treats fixed manufacturing overhead as a product cost?
a) Variable costing
b) Direct costing
c) Absorption costing
d) Marginal costing
Answer: c
Explanation: Absorption costing includes fixed manufacturing overhead in product (inventory) costs;
variable/marginal costing treats it as period cost.
12. A company has a target profit of R100 000, fixed costs of R200 000, and a contribution margin ratio
of 40%. Required sales revenue is:
a) R500 000
b) R750 000
c) R300 000
d) R1 000 000
Answer: b
Explanation: Required sales = (Fixed costs + Target profit) ÷ CMR = (200 000 + 100 000) ÷ 0.4 = 300 000 ÷
0.4 = R750 000.
13. Which of the following is a measure of liquidity?
a) Return on equity
b) Current ratio
c) Debt-to-equity ratio
d) Gross profit percentage
Answer: b
Explanation: Liquidity ratios assess short-term solvency; current ratio (current assets/current liabilities)
is a primary example.
1. Which of the following best describes the primary focus of strategic management accounting?
a) Recording historical financial transactions
b) Providing information for internal decision-making to achieve long-term competitive advantage
c) Ensuring compliance with tax regulations
d) Preparing external financial statements
Answer: b
Explanation: Strategic management accounting focuses on internal decision support, competitor
analysis, and long-term strategy rather than historical record-keeping or external compliance.
2. A company’s variable cost per unit is R12 and fixed costs total R80 000. If the selling price per unit is
R20, what is the break-even point in units?
a) 4 000 units
b) 6 667 units
c) 10 000 units
d) 12 000 units
Answer: c
Explanation: Break-even (units) = Fixed costs ÷ Contribution per unit = R80 000 ÷ (R20 – R12) = R80 000 ÷
R8 = 10 000 units.
3. Which of the following is NOT a characteristic of activity-based costing (ABC)?
a) Identifies cost drivers for each activity
b) Allocates overhead using a single plant-wide rate
c) Traces costs to products based on activities consumed
d) Provides more accurate product costing in complex environments
Answer: b
Explanation: ABC avoids single plant-wide rates; it uses multiple activity cost pools and drivers. A single
rate is a feature of traditional costing.
,4. When calculating the direct material price variance, which of the following is used?
a) Actual quantity purchased × (Actual price – Standard price)
b) Standard quantity allowed × (Actual price – Standard price)
c) Actual quantity used × (Actual price – Standard price)
d) Standard quantity × Standard price
Answer: a
Explanation: Material price variance = (Actual price – Standard price) × Actual quantity purchased (not
necessarily used).
5. In a just-in-time (JIT) environment, which of the following is most likely to be reduced?
a) Inventory holding costs
b) Supplier reliability
c) Employee training
d) Machine maintenance
Answer: a
Explanation: JIT aims to minimise inventory levels, thereby reducing holding, obsolescence, and
financing costs.
6. ROI (Return on Investment) is calculated as:
a) Net operating income ÷ Sales
b) Sales ÷ Average operating assets
c) Net operating income ÷ Average operating assets
d) Gross profit ÷ Total assets
Answer: c
Explanation: ROI = Net operating income (or controllable margin) divided by average operating assets.
7. Residual income (RI) is superior to ROI for performance evaluation because:
a) RI encourages managers to accept any project that earns above the cost of capital
b) RI is easier to calculate
,c) RI ignores the size of the investment
d) RI uses historical costs only
Answer: a
Explanation: RI motivates managers to invest in projects with positive residual income (above required
return), whereas ROI may discourage profitable projects that lower current ROI.
8. Which of the following is a relevant cost in a make-or-buy decision?
a) Sunk cost of existing machinery
b) Allocated fixed costs that will continue regardless
c) Direct materials that can be avoided if the part is purchased
d) Depreciation on plant already purchased
Answer: c
Explanation: Relevant costs are future, differential, and avoidable. Avoidable direct materials qualify;
sunk costs and unavoidable allocated costs are irrelevant.
9. A favourable labour efficiency variance occurs when:
a) Actual labour hours worked exceed standard hours allowed
b) Actual wage rate is less than standard rate
c) Actual labour hours are less than standard hours allowed for actual output
d) Actual output is less than budgeted output
Answer: c
Explanation: Labour efficiency variance compares actual hours to standard hours allowed. Favourable
means actual hours < standard hours.
10. Under throughput accounting, what is the primary measure of profitability?
a) Throughput contribution minus operating expenses
b) Gross profit margin
c) Net income after tax
d) Cash flow from financing
Answer: a
, Explanation: Throughput accounting focuses on throughput (sales revenue – direct materials) less
operating expenses (excluding materials).
11. Which costing method treats fixed manufacturing overhead as a product cost?
a) Variable costing
b) Direct costing
c) Absorption costing
d) Marginal costing
Answer: c
Explanation: Absorption costing includes fixed manufacturing overhead in product (inventory) costs;
variable/marginal costing treats it as period cost.
12. A company has a target profit of R100 000, fixed costs of R200 000, and a contribution margin ratio
of 40%. Required sales revenue is:
a) R500 000
b) R750 000
c) R300 000
d) R1 000 000
Answer: b
Explanation: Required sales = (Fixed costs + Target profit) ÷ CMR = (200 000 + 100 000) ÷ 0.4 = 300 000 ÷
0.4 = R750 000.
13. Which of the following is a measure of liquidity?
a) Return on equity
b) Current ratio
c) Debt-to-equity ratio
d) Gross profit percentage
Answer: b
Explanation: Liquidity ratios assess short-term solvency; current ratio (current assets/current liabilities)
is a primary example.
