MAC1501 Ultimate Exam Guide 2025|Peactice Question
and Solution |A+
QUESTION 1
Which of the following best describes management accounting?
A. Preparation of tax returns for government authorities
B. Provision of information for external financial reporting
C. Provision of internal information for planning and decision-making
D. Recording only historical transactions
Answer: C
Rationale: Management accounting focuses on providing relevant financial and non-financial
information to internal managers. It is used for planning, controlling, and decision-making
rather than external reporting.
QUESTION 2
Which of the following is a variable cost?
A. Rent
B. Insurance
C. Raw materials
D. Salaries of managers
Answer: C
Rationale: Variable costs change directly with production levels. Raw materials increase when
production increases and decrease when production decreases.
QUESTION 3
Fixed costs are best described as:
A. Costs that change with output
B. Costs that remain constant regardless of production
C. Costs that only occur once
D. Costs that are avoidable in the short term
Answer: B
,Rationale: Fixed costs remain constant in total regardless of production levels within a relevant
range. Examples include rent, insurance, and salaries of permanent staff.
QUESTION 4
Break-even point occurs when:
A. Profit is at maximum
B. Revenue equals total cost
C. Variable cost is higher than revenue
D. Fixed costs are zero
Answer: B
Rationale: At break-even point, total revenue equals total costs, meaning the business makes
neither profit nor loss.
QUESTION 5
Contribution per unit is calculated as:
A. Selling price + variable cost
B. Selling price – variable cost
C. Fixed cost ÷ units produced
D. Total cost ÷ sales
Answer: B
Rationale: Contribution per unit is the amount left after subtracting variable costs from selling
price. It contributes towards fixed costs and profit.
QUESTION 6
Which of the following is an indirect cost?
A. Direct materials
B. Direct labour
C. Factory rent
D. Raw materials
Answer: C
,Rationale: Factory rent is an overhead cost because it cannot be traced directly to a specific
product.
QUESTION 7
Prime cost consists of:
A. Direct materials and direct labour
B. Indirect costs and overheads
C. Fixed and variable costs
D. Selling and distribution costs
Answer: A
Rationale: Prime cost includes all direct production costs, specifically direct materials and
direct labour.
QUESTION 8
Which cost increases as production increases?
A. Fixed cost
B. Variable cost
C. Rent
D. Insurance
Answer: B
Rationale: Variable costs increase with production because they are directly linked to output
levels.
QUESTION 9
Management accounting is mainly used by:
A. External auditors
B. Government agencies
C. Internal management
D. Tax authorities
Answer: C
, Rationale: Management accounting provides internal information to managers for decision-
making and control.
QUESTION 10
Indirect materials include:
A. Steel used in manufacturing
B. Fabric in clothing
C. Lubricants used in machines
D. Wood used in furniture
Answer: C
Rationale: Indirect materials are not part of the final product but are used in the production
process, such as lubricants and cleaning supplies
QUESTION 11
Which of the following is NOT a characteristic of fixed costs?
A. Remains constant in total
B. Changes per unit when output changes
C. Does not vary with production level
D. Includes rent and salaries
Answer: B
Rationale: Fixed costs remain constant in total regardless of production level. However, cost per
unit changes as output changes, making option B incorrect as a characteristic.
QUESTION 12
Which cost is directly traceable to a product?
A. Factory rent
B. Direct materials
C. Indirect labour
D. Depreciation
Answer: B
Rationale: Direct materials can be specifically identified and traced to a product, making them a
direct cost.
and Solution |A+
QUESTION 1
Which of the following best describes management accounting?
A. Preparation of tax returns for government authorities
B. Provision of information for external financial reporting
C. Provision of internal information for planning and decision-making
D. Recording only historical transactions
Answer: C
Rationale: Management accounting focuses on providing relevant financial and non-financial
information to internal managers. It is used for planning, controlling, and decision-making
rather than external reporting.
QUESTION 2
Which of the following is a variable cost?
A. Rent
B. Insurance
C. Raw materials
D. Salaries of managers
Answer: C
Rationale: Variable costs change directly with production levels. Raw materials increase when
production increases and decrease when production decreases.
QUESTION 3
Fixed costs are best described as:
A. Costs that change with output
B. Costs that remain constant regardless of production
C. Costs that only occur once
D. Costs that are avoidable in the short term
Answer: B
,Rationale: Fixed costs remain constant in total regardless of production levels within a relevant
range. Examples include rent, insurance, and salaries of permanent staff.
QUESTION 4
Break-even point occurs when:
A. Profit is at maximum
B. Revenue equals total cost
C. Variable cost is higher than revenue
D. Fixed costs are zero
Answer: B
Rationale: At break-even point, total revenue equals total costs, meaning the business makes
neither profit nor loss.
QUESTION 5
Contribution per unit is calculated as:
A. Selling price + variable cost
B. Selling price – variable cost
C. Fixed cost ÷ units produced
D. Total cost ÷ sales
Answer: B
Rationale: Contribution per unit is the amount left after subtracting variable costs from selling
price. It contributes towards fixed costs and profit.
QUESTION 6
Which of the following is an indirect cost?
A. Direct materials
B. Direct labour
C. Factory rent
D. Raw materials
Answer: C
,Rationale: Factory rent is an overhead cost because it cannot be traced directly to a specific
product.
QUESTION 7
Prime cost consists of:
A. Direct materials and direct labour
B. Indirect costs and overheads
C. Fixed and variable costs
D. Selling and distribution costs
Answer: A
Rationale: Prime cost includes all direct production costs, specifically direct materials and
direct labour.
QUESTION 8
Which cost increases as production increases?
A. Fixed cost
B. Variable cost
C. Rent
D. Insurance
Answer: B
Rationale: Variable costs increase with production because they are directly linked to output
levels.
QUESTION 9
Management accounting is mainly used by:
A. External auditors
B. Government agencies
C. Internal management
D. Tax authorities
Answer: C
, Rationale: Management accounting provides internal information to managers for decision-
making and control.
QUESTION 10
Indirect materials include:
A. Steel used in manufacturing
B. Fabric in clothing
C. Lubricants used in machines
D. Wood used in furniture
Answer: C
Rationale: Indirect materials are not part of the final product but are used in the production
process, such as lubricants and cleaning supplies
QUESTION 11
Which of the following is NOT a characteristic of fixed costs?
A. Remains constant in total
B. Changes per unit when output changes
C. Does not vary with production level
D. Includes rent and salaries
Answer: B
Rationale: Fixed costs remain constant in total regardless of production level. However, cost per
unit changes as output changes, making option B incorrect as a characteristic.
QUESTION 12
Which cost is directly traceable to a product?
A. Factory rent
B. Direct materials
C. Indirect labour
D. Depreciation
Answer: B
Rationale: Direct materials can be specifically identified and traced to a product, making them a
direct cost.
