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Applied Management Accounting Flashcards

6 cards from real AAT L4 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Applied Management Accounting flashcards as text

  1. A company's total overhead is £200,000. It has two departments: Machining (absorbs on machine hours: 40,000 hrs) and Assembly (absorbs on labour hours: 25,000 hrs). Product Z uses 3 machine hours and 2 labour hours. Machining overhead rate is £3/hr and Assembly is £2/hr. What overhead is absorbed by one unit of Product Z?

    Answer: £13

    Product Z absorbs (3 × £3) + (2 × £2) = £9 + £4 = £13 of overhead per unit.

  2. In throughput accounting, which of the following is classified as 'totally variable cost'?

    Answer: Raw material costs

    In throughput accounting (Theory of Constraints), only raw material costs are classified as truly variable; all other costs (including direct labour) are treated as fixed in the short term.

  3. A rolling budget is being prepared. The current quarter's budget shows sales of £500,000. The business expects 3% sales growth each quarter. What will the budgeted sales be for the quarter that is two periods ahead?

    Answer: £530,450

    Quarter +1: £500,000 × 1.03 = £515,000. Quarter +2: £515,000 × 1.03 = £530,450.

  4. A company uses target costing for a new product. The expected selling price is £80. The required profit margin is 25% on selling price. Current estimated cost is £68. What is the cost gap?

    Answer: £8

    Target cost = £80 × (1 − 0.25) = £60. Cost gap = Estimated cost − Target cost = £68 − £60 = £8.

  5. Which transfer pricing method sets the internal transfer price equal to the marginal cost of the supplying division?

    Answer: Marginal cost transfer pricing

    Marginal cost transfer pricing sets the price at the variable (marginal) cost of production in the supplying division, which optimises group-wide decisions but provides no contribution to the supplying division.

  6. Sensitivity analysis in decision-making is best described as:

    Answer: Testing how sensitive the outcome is to changes in each key variable

    Sensitivity analysis examines how much a key variable (e.g., selling price, volume, cost) can change before a decision changes, helping identify which assumptions are most critical.