Management Accounting Flashcards
7 cards from real CA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Management Accounting flashcards as text
Which method of joint cost allocation uses the relative sales value of each product at the split-off point?
Answer: Sales value at split-off method
The sales value at split-off method allocates joint costs based on each product's proportional market value at the point where products separate.
What is the primary advantage of using standard costs in a manufacturing environment?
Answer: They provide a benchmark for measuring performance and controlling costs
Standard costs provide a predetermined benchmark that allows management to identify and investigate variances from expected performance.
Under the weighted-average method of process costing, how are beginning WIP costs treated?
Answer: They are combined with current period costs and spread over all equivalent units
The weighted-average method blends beginning WIP costs with current period costs, then divides by total equivalent units (completed + ending WIP).
What is residual income in the context of divisional performance evaluation?
Answer: Operating income minus a minimum required return on invested assets
Residual income = Operating income − (Minimum required rate of return × Invested assets), measuring profit in excess of the capital charge.
Which budgeting approach requires managers to justify every expenditure from zero each period?
Answer: Zero-based budgeting
Zero-based budgeting (ZBB) starts from a zero base each period, requiring justification for all spending rather than just changes from prior year.
A company manufactures two products on the same machine. How should the opportunity cost be considered when one product requires more machine time?
Answer: Maximize contribution margin per unit of the constrained resource
When a resource is constrained, managers should rank products by their contribution margin per unit of the bottleneck resource to maximize profit.
What is the formula for Return on Investment (ROI) in divisional performance measurement?
Answer: Operating income ÷ Invested assets
ROI = Operating income ÷ Invested assets, measuring how effectively a division uses its assets to generate profit.