FL_1_MAF MANAGEMENT ACCOUNTING FUNDAMENTALS PRACTICE EXAM
QUESTIONS AND CORRECT ANSWERS GRADE A
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QUESTION 1
What is the primary focus of management accounting compared to financial accounting?
A) Providing information to external stakeholders
B) Compliance with GAAP or IFRS
C) Providing information for internal decision-making
D) Reporting on past financial performance
ANSWER: C) Providing information for internal decision-making
EXPLANATION: Management accounting focuses on providing timely, relevant information
to managers for planning, controlling, and decision-making within the organization, unlike
financial accounting which serves external users.
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QUESTION 2
Which of the following is a period cost in a manufacturing company?
A) Direct materials
B) Direct labor
C) Factory rent
D) Sales commission
ANSWER: D) Sales commission
,EXPLANATION: Period costs are non-manufacturing costs (selling and administrative
expenses) that are expensed in the period incurred. Sales commission is a selling expense,
not a product cost.
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QUESTION 3
The contribution margin is calculated as:
A) Sales revenue - Fixed costs
B) Sales revenue - Variable costs
C) Sales revenue - Cost of goods sold
D) Gross profit - Operating expenses
ANSWER: B) Sales revenue - Variable costs
EXPLANATION: Contribution margin = Sales revenue - All variable costs (both
manufacturing and non-manufacturing). It represents the amount available to cover fixed
costs and contribute to profit.
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QUESTION 4
Which cost behavior pattern remains constant in total within the relevant range?
A) Variable cost
B) Fixed cost
C) Mixed cost
D) Step cost
ANSWER: B) Fixed cost
,EXPLANATION: Fixed costs remain constant in total within the relevant range of activity,
regardless of changes in production volume or activity level.
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QUESTION 5
A cost that has both fixed and variable components is called:
A) Direct cost
B) Indirect cost
C) Mixed cost
D) Sunk cost
ANSWER: C) Mixed cost
EXPLANATION: Mixed costs (or semi-variable costs) contain both fixed and variable
elements. For example, a utility bill might have a fixed monthly charge plus a variable
charge based on usage.
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QUESTION 6
Which of the following is NOT a manufacturing cost?
A) Direct materials
B) Direct labor
C) Manufacturing overhead
D) Selling expenses
ANSWER: D) Selling expenses
EXPLANATION: Manufacturing costs include direct materials, direct labor, and
manufacturing overhead. Selling expenses are period costs, not product costs.
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QUESTION 7
The break-even point in units is calculated as:
A) Fixed costs ÷ Contribution margin ratio
B) Fixed costs ÷ Contribution margin per unit
C) Sales revenue ÷ Contribution margin per unit
D) Variable costs ÷ Contribution margin ratio
ANSWER: B) Fixed costs ÷ Contribution margin per unit
EXPLANATION: Break-even point in units = Total fixed costs ÷ Contribution margin per unit.
This is the sales level where total revenue equals total costs (zero profit).
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QUESTION 8
Which costing system is most appropriate for custom-made products?
A) Process costing
B) Job-order costing
C) Activity-based costing
D) Standard costing
ANSWER: B) Job-order costing
EXPLANATION: Job-order costing is used when products are manufactured in distinct
batches or jobs (custom orders), allowing costs to be traced to specific jobs.
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QUESTION 9
QUESTIONS AND CORRECT ANSWERS GRADE A
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QUESTION 1
What is the primary focus of management accounting compared to financial accounting?
A) Providing information to external stakeholders
B) Compliance with GAAP or IFRS
C) Providing information for internal decision-making
D) Reporting on past financial performance
ANSWER: C) Providing information for internal decision-making
EXPLANATION: Management accounting focuses on providing timely, relevant information
to managers for planning, controlling, and decision-making within the organization, unlike
financial accounting which serves external users.
---
QUESTION 2
Which of the following is a period cost in a manufacturing company?
A) Direct materials
B) Direct labor
C) Factory rent
D) Sales commission
ANSWER: D) Sales commission
,EXPLANATION: Period costs are non-manufacturing costs (selling and administrative
expenses) that are expensed in the period incurred. Sales commission is a selling expense,
not a product cost.
---
QUESTION 3
The contribution margin is calculated as:
A) Sales revenue - Fixed costs
B) Sales revenue - Variable costs
C) Sales revenue - Cost of goods sold
D) Gross profit - Operating expenses
ANSWER: B) Sales revenue - Variable costs
EXPLANATION: Contribution margin = Sales revenue - All variable costs (both
manufacturing and non-manufacturing). It represents the amount available to cover fixed
costs and contribute to profit.
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QUESTION 4
Which cost behavior pattern remains constant in total within the relevant range?
A) Variable cost
B) Fixed cost
C) Mixed cost
D) Step cost
ANSWER: B) Fixed cost
,EXPLANATION: Fixed costs remain constant in total within the relevant range of activity,
regardless of changes in production volume or activity level.
---
QUESTION 5
A cost that has both fixed and variable components is called:
A) Direct cost
B) Indirect cost
C) Mixed cost
D) Sunk cost
ANSWER: C) Mixed cost
EXPLANATION: Mixed costs (or semi-variable costs) contain both fixed and variable
elements. For example, a utility bill might have a fixed monthly charge plus a variable
charge based on usage.
---
QUESTION 6
Which of the following is NOT a manufacturing cost?
A) Direct materials
B) Direct labor
C) Manufacturing overhead
D) Selling expenses
ANSWER: D) Selling expenses
EXPLANATION: Manufacturing costs include direct materials, direct labor, and
manufacturing overhead. Selling expenses are period costs, not product costs.
, ---
QUESTION 7
The break-even point in units is calculated as:
A) Fixed costs ÷ Contribution margin ratio
B) Fixed costs ÷ Contribution margin per unit
C) Sales revenue ÷ Contribution margin per unit
D) Variable costs ÷ Contribution margin ratio
ANSWER: B) Fixed costs ÷ Contribution margin per unit
EXPLANATION: Break-even point in units = Total fixed costs ÷ Contribution margin per unit.
This is the sales level where total revenue equals total costs (zero profit).
---
QUESTION 8
Which costing system is most appropriate for custom-made products?
A) Process costing
B) Job-order costing
C) Activity-based costing
D) Standard costing
ANSWER: B) Job-order costing
EXPLANATION: Job-order costing is used when products are manufactured in distinct
batches or jobs (custom orders), allowing costs to be traced to specific jobs.
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QUESTION 9
