MA2 Revision

MA2 – Management Accounting Revision
MA2 – REVISION
Section 1: Management Information/ Cost Behaviour/ Budgets and Variances/

Materials
Q1: Which of the following is an example of planning?
A. Using last year's results to set objectives

B. Reviewing strategic aims following a change in the economic conditions
C. Buying new equipment
D. Using internal reports on past performance to review performance
Q2: Which TWO of the following are reasons for a business to undertake product costing?
A. To assess product profitability

B. To determine how much of a product should be made
C. To decide what price should be charged
D. To determine how much raw material should be purchased
Q3: The following costs are incurred in producing 1,000 units of product X.
• Labour $1,500
• Raw materials $250
• Rent $400
• Packaging $50
• Supervisor wages $500
What is the total cost per unit?
Q4: Production costs of product Z vary depending on the level of activity. Costs recorded at various
levels of activity have been as follows:
• 25 units $1,600
• 10 units $750
• 37 units $2,100
• 18 units $1,250
What is the cost of 43 units?
A. $2,400
B. $2,580
C. $3,225
D. $2,451
Q5: In 20X1, a company budgeted to produce 3,750 units. Variable costs were budgeted to be $67,500
and fixed costs were budgeted at $53,190. Actual production was 3,150 units at a total cost of $108,905.
What is the total variance to the flexed budget?
A. $11,785 favourable
B. $985 favourable
C. $11,785 adverse
D. $985 adverse
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Q6: Which of the following would be the best way to display production rates over the last 10 years?
A. Bar chart
B. Line Graph
C. Pie Chart
D. Table
Q7: In which of the following situations would a written report be the best way of communicating?
A. When speed is essential

B. When communicating complex information
C. When the information can’t be sent electronically
D. When the information must remain confidential
Q8: Which of the following terms is used to describe products that are partly made?
A. Inventory
B. Materials
C. Work in Progress
D. Bought-in inventory
Q9: On 1 September there were 600 units of inventory in warehouse A, valued at $3.50 each. During
September the following receipts and issues occurred.
• 15 Sep Receipt 500 units @ $3.75

• 24 Sep Receipt 400 units @ $3.80
• 27 Sep Issue 500 units
What is the total value of the units issued on 27 September using the LIFO method of valuation?
A. $1,875
B. $1,895
C. $1,880
D. $1,900
Q10: The following information is available for a company’s inventory.
• Average daily usage 2,500kg

• Minimum daily usage 2,000kg
• Maximum daily usage 3,100kg
• Lead time 4-7 days
• Reorder quantity 30,000kg
What is the reorder level for this company?
Q11: Managers use financial information to help them plan, control and make decisions. The following
pieces of information would be used by managers for which of those purposes?
Reviewing actual spend against budgeted figures
A. Planning
B. Control
C. Decision-making
Determining where spending cuts can be made
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A. Planning
B. Control
C. Decision-making
Setting the price at which a new product will be sold
A. Planning
B. Control
C. Decision-making
Identifying an opportunity to produce a new product
A. Planning
B. Control
C. Decision-making
Q12: Which TWO of the following are characteristics of useful management information?
A. Financial
B. Internal
C. Easy to use
D. User-targeted
Q13: Are the following costs direct or indirect costs incurred at a furniture manufacturer?
Hire of a piece of equipment for a particular job
A. Direct
B. Indirect
Fabric coverings for chairs
A. Direct
B. Indirect
Salary paid to the factory supervisor
A. Direct
B. Indirect
Food for the staff canteen
A. Direct
B. Indirect
Q14: A restaurant incurs daily fixed costs of $900.00 On a day where 178 customers were served, the
restaurant incurred total costs of $1,725.00. What is the variable cost per customer served (to the nearest
cent)?
Q15: Which of the following best describes a flexible budget?
A. A budget that has been prepared but not yet approved

B. A budget that can be altered in specific situations
C. A budget that changes in line with actual activity levels
D. A budget that includes a degree of cushioning to prevent funds being reallocated elsewhere
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Q16: Should the factors listed below influence your decision over whether or not a variance should be
investigated?
The size of the variance
A. Yes
B. No
The personnel to which the variance relates
A. Yes
B. No
Whether it is a favourable or adverse variance
A. Yes
B. No
The trend of the variance
A. Yes
B. No
Q17: A company produces products which are sold in various locations around the world. It groups these
locations into six distinct areas. What would be the best way for this company to present information
relating to the proportion of total revenue originating from each of these locations?
A. Line chart
B. Bar chart
C. Pie chart
D. Table
Q18: Which control level is calculated using the formula shown below?
Reorder level + reorder quantity – (minimum usage x minimum lead time)
A. Minimum inventory level

B. Maximum inventory level
C. Total inventory level
D. Average inventory level
Q19: Pear Co estimates its annual demand for its product to be 6,000 units. Order costs are $8 per order
and the holding costs are $0.20 per unit per month. Pear Co would like to minimise the costs of inventory
so needs to know the economic reorder quantity to achieve this.
Calculate the economic order quantity for Pear Co.
Q20: For what purpose would the Chief Executive Officer (CEO) require information?
A. Costing
B. Strategy
C. Control
D. Investment
Q21: Which of the following is the MOST likely cost unit for a car part manufacturer?
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A. Factory rent
B. Engineer’s wages
C. Car battery
D. Sales catalogue
Q22: Which of the following statements describes the behaviour of fixed costs?
A. Costs that change when production volumes change

B. Costs that remain the same when production volumes change
C. Costs that change suddenly then remain stable over a range of production volumes
D. Costs that have a minimum value then increase with production volumes
Q23: Production costs of product Z vary depending on the level of activity. Costs have been recorded at
various levels of activity as follows:
• 25 units $1,500
• 10 units $750
• 37 units $2,100
• 18 units $1,150
What is the variable cost per unit?
Q24: The budgeted cost of materials for 500 units of product X was $5.59 per unit. There was a variance
of $350 (favourable). What was the actual cost of materials per unit?
A. $5.52
B. $6.29
C. $4.89
D. $5.66
Q25: Which of the following would be the best way to display budget against actual outcomes for the
past year?
A. Bar chart
B. Line Graph
C. Pie Chart
D. Table
Q26: What is the double entry for the issue of direct materials from inventory?
A. Dr Material control account Cr Work in progress

B. Dr Material control account Cr Production overhead
C. Dr Work in progress Cr Material control account
D. Dr Production overhead Cr Material control account
Q27: Which TWO of the following are required in order to calculate the Economic Order Quantity
(EOQ)?
A. Cost of holding a unit of inventory for the period

B. Average inventory
C. Cost of ordering a consignment
D. Purchases in the current period
Q28: The following information is provided for the inventory of a business:
• Average usage 2,500kg
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• Minimum usage 2,000kg

• Maximum usage 3,100kg
• Lead time 4-7 days
• Re-order quantity 30,000kg
What is the minimum inventory level that the business should hold?
Q29: Why would a business prefer to hold low volumes of inventory?
A. Because the cost of ordering inventory is high

B. Because the amount you use doesn’t vary
C. Because the cost of holding inventory is very high
D. Because you can only order a set amount
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Section 2: Labour/ Other expenses/ Job and Batch costing/ Service costing
Q1: A company has 5,750 employees at the start of the year. During the year the company expands and
hires 750 more employees. In addition, 300 employees resigned and were replaced. What is the labour
turnover?
A. 4.9%
B. 5.2%
C. 4.6%
D. 5.5%
Q2: Which of the following costs are MOST likely to be incurred by an attempt to reduce employee
turnover?
A. Recruitment costs
B. Training and development costs
C. Loss of output
D. Low production volumes
Q3: Company ABC budgeted to make 500 units in May. Each unit was budgeted to take one hour. Actual
production volume was 550 and the total actual time taken was 530 hours. What is the efficiency ratio?
A. 94%
B. 104%
C. 106%
D. 96%
Q4: A machine is bought for $10,000. The residual value at the end of its life is $1,000. Over its five
year life it will produce 270,000 units over 10,000 production hours. If straight-line depreciation is used,
what is the annual depreciation in Year 4?
Q5: Which of the following is an absolute requirement in job costing?
A. A client asks the company to quote for a job

B. Use of a composite cost unit
C. Job specific cost control procedures are put in place
D. All direct costs of the job are coded to the job code
Q6: A client has asked a company to quote for a job where the costs will be as follows:
• Direct material $750

• Direct labour $1,095
• Other expenses $350
• Production overhead $570
If the price charged is $3,500 what is the profit?
Q7: Which of the following is a reason to use batch costing rather than job costing?
A. It is one clearly defined job

B. Large numbers of a standard item are being made
C. The costs cannot be divided into units
D. There is no clearly defined unit
Q8: Which of the following would be the most appropriate cost unit for a hotel?
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A. Cost per hour worked by customer-facing staff

B. Cost per member of staff
C. Cost per room night
D. Cost per guest
Q9: Which of the following is a service centre in a manufacturing company?
A. Production
B. Sales
C. Maintenance
D. Shipping
Q10: Which of the following payment types apply to the type of worker?
Wages based on hours
A. Pieceworker
B. Factory worker
Wages based on units of work
A. Pieceworker
B. Factory worker
Q11: At the start of last year, Dugga Diggers Co employed 150 employees. During the course of the year
20 employees resigned; however, they were all replaced immediately. An additional 20 employees were
also hired to allow Dugga Diggers Co to expand into the neighbouring district. What is the labour
turnover rate of Dugga Diggers Co?
A. 13.33%
B. 12.90%
C. 12.50%
D. 00.00%
Q12: Mihir works for an organisation which operates a differential piecework scheme. Mihir is paid a
basic rate of $1.50 per unit produced. He is also paid a premium for any output over 100 units. The rates
of this premium are as follows:
Output Premium per unit

101-120 units $0.25
121-140 units $0.50
141 units and above $1.00
How much will Mihir be paid in a week when he produces 124 units?
Q13: What is the capacity utilisation ratio of Bee Co if it has calculated that its efficiency ratio is 95%
and its production volume ratio is 102.8%?
A. 108.21%
B. 92.41%
C. 197.80%
D. 97.66%
Q14: Rhino Co calculates depreciation using the straight-line method. It purchases an asset for $180,000.
This asset is depreciated over eight years and has a residual value of $20,000. What is the net book value
of the asset after six years?
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A. $80,000
B. $60,000
C. $100,000
D. $40,000
Q15: Are the following items of expenditure examples of capital expenditure or revenue expenditure?
Purchase of building
A. Revenue expenditure
B. Capital expenditure
Paying rent on a building
Paying employees
Repair of door to building
Q16: WorkWhere Co has a job with a total cost of $8,000 and the company uses a profit mark up of
20%. What is the selling price for this job?
A. $1,600
B. $9,600
C. $6,667
D. $6,400
Q17: A manufacturing organisation has three departments: A, B and C. A batch of 500 products has just
been produced using $150 of materials. Labour costs were as follows:
• Department A 15 hours at $4 per hour

• Department B 30 hours at $5 per hour
• Department C 50 hours at $6 per hour
Based on normal levels of activity, the budgeted production overheads are as follows:
Department Budgeted overheads ($) Budgeted activity

A 5,000 2,000 labour hours
B 6,000 4,000 labour hours
C 7,500 5,000 labour hours
Selling and administration overheads are charged at 20% of the production cost. What is the cost per unit
of an item in this batch?
Q18: The following information relates to a specific job due to be carried out by an organisation:
• Productive hours: 540

• Wage rate: $10
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• It is also estimated that idle time will make up 10% of the total time paid.
What is the estimated labour cost for this job?
A. $6,000
B. $5,400
C. $5,940
D. $4,860
Q19: For which TWO of the following organisations would service costing be MOST appropriate?
A. Hairdresser
B. Film studio
C. Accountancy firm
D. Cake manufacturer
Q20: A factory worker received $350 for a week’s work. The $350 comprised $280 for work producing
200 completed items and $70 for work on 100 items which were 50% complete at the end of the week.
Which TWO are the correct accounting entries?
A. Dr Bank: $350, Cr Production: $350

B. Dr WIP: $350, Cr Labour control account: $350
C. Dr Labour control account: $350, Cr Bank: $350
D. Dr Bank: $350, Cr Production: $280, Cr WIP: $70
Q21: Which of the following is an indirect cost of production for a pen and pencil manufacturer?
A. Ink for the pens

B. Wages of pencil quality control staff
C. Factory rent
D. Depreciation of office equipment
Q22: Which of the following is a definition of depreciation?
A. A way of matching the cost of a non-current asset to the periods in which it is used
B. The charge to the accounts made for an asset in the time since it was purchased
C. A way of matching the cost of current assets to the period in which they are used
D. The value of a non-current asset as shown on the statement of financial position
Q23: A machine is bought for $10,000. The residual value at the end of its life is $1,000. Its useful life is
five years. In the first year the machine produces 27,000 units. In subsequent years production falls by
10% each year. Depreciation is based on the number of units produced. What is the annual depreciation
in Year 3? (Work to the nearest whole unit.)
Q24: A business has the following departments and costs. Which department should be responsible for
these costs?
Delivery costs
A. Buildings management
B. Selling and distribution
Utility bills
A. Buildings management
B. Selling and distribution
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Q24: Which TWO of the following are items of revenue expenditure rather than capital expenditure?
A. Employer’s pension contributions

B. Purchase of a vehicle
C. Depreciation
D. Legal expenses on the purchase of a new property
Q25: For which of the following would job costing be most appropriate?
A. Hospital
B. Bespoke kitchen cabinet maker
C. Mug and plate manufacturer
D. Restaurant
Q26: Which TWO of these statements relating to cost control for a specialist job are TRUE?
A. Underestimating the amount of labour required doesn’t affect the cost.

B. If too much material is bought for a specialist job it can be used elsewhere.
C. If overtime is required by the job it will increase the cost
D. All of the equipment rental that is needed is charged to the job
Q27: A restaurant expects to sell 280 meals in a week. Costs are:
• Ingredients $150
• Kitchen staff wages $400
• Waiting staff wages $350
• Rent $400
• Other expenses $200
What is the cost per unit of a meal (to two dp)?
Q28: The total cost of a job is $60,000. The profit margin is 25%. What is the selling price for this job (to
the nearest whole number)?
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Section 3: Absorption Costing/ Marginal Costing/ Process Costing
Q1: Which TWO of the following are reasons why an organisation may decide to use absorption costing?
A. To allocate the fixed costs of production to units

B. To determine how much inventory to maintain
C. To know how profitable a product is
D. To help to plan production levels
Q2: A business producing product Z has a production process that involves two staff remotely overseeing
the operation of five machines. Which of the following is the most suitable basis for absorption costing?
A. Estimated production
B. Machine hours
C. Labour hours
D. Raw materials used
Q3: Direct Co has apportioned its overheads to two production departments and two service departments
as follows:
• Production dept A $112,500

• Production dept B $150,000
• Cleaning $22,500
• Maintenance $20,000
The cleaning department spends 30,000 hours cleaning production department A, 15,000 hours cleaning
production department B and 15,000 hours cleaning the maintenance department.
The maintenance department spends 6,000 hours on production department A, 6,000 hours on production
department B and 3,000 hours on the cleaning department.
Using the direct method of reapportionment, what is the total overhead amount apportioned to production
department A?
Q4: A factory produces three products: A, B and C.
Direct costs per unit Number of units produced

A $60 700
B $75 900
C $25 1,500
Indirect costs are allocated using direct costs as a basis. If the total indirect costs are $27,500 what is the
indirect cost per unit allocated to product B?
A. $11.22
B. $4.68
C. $14.03
D. $8.87
Q5: A company makes a product where all the direct costs are of equal importance. Which of the
following would be the best basis on which to calculate the absorption rate for this product?
A. Labour hours
B. Material cost
C. Prime cost
D. Machine hours
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Q6: On what basis would a business apportion the following costs?
Employee restaurant
A. Floor area
B. Number of employees
Rent
A. Floor area
B. Number of employees
Q7: The costs of product X are as follows:
• Materials $25
• Labour $20
• Other direct expenses $10
• 250 units of product X have been sold at a price of $100.
• Fixed costs for the period have been $7,500.
What is the profit for the period?
Q8: Which of the following is an example of a normal loss?
A. Machine down time

B. Expected evaporation in the process
C. Staff holiday
D. Sale of scrap material
Q9: A process results in scrap which has no sale value. Which of the following is the correct way to
make the entry into the process account for scrap?
A. No entry required
B. Dr Process account Cr Scrap account
C. Dr Scrap account Cr Process account
D. Dr Process account Cr Sales account
Q10: A process has two joint products X and Y. 2,750 units of X are produced and 3,500 units of Y.
• The selling price of X is $10

• The selling price of Y is $25.
• Production costs are allocated on the basis of sales revenue.
What are the production costs of X if the total production costs are $15,000 (to the nearest whole
number)?
Q11: An organisation uses absorption costing. When preparing the costing, a specific item of overhead is
charged directly to a specific production department. Which of the terms below best describes how this
overhead has been dealt with?
A. Allocation
B. Apportionment
C. Absorption
D. Re-apportionment
Q12: Which of the following units would be the most appropriate basis upon which to apportion heating
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and lighting costs?
A. Machine hours
B. Labour hours
C. Number of employees
D. Relative floor areas
Q13: Production centre A has incurred the following production overhead costs.
• Budgeted overheads $220,000

• Actual overheads $235,100
• Absorbed overheads $230,000
Which of the following statements is true for Production centre A?
A. Overheads have been under-absorbed by $10,000

B. Overheads have been over-absorbed by $5,100
C. Overheads have been under-absorbed by $5,100
D. Overheads have been over-absorbed by $10,000
Q14: Crank Co is a manufacturing organisation consisting of three production centres supported by a

maintenance team and a canteen. The information below relates to the production overheads that have
been allocated to maintenance and the canteen.
Maintenance Canteen
Prod’n Overheads allocated $120,000 $64,000
In addition, the following information is available:
Production Centre 1 2 3
Time spent servicing machinery 500 hours 300 hours 200 hours
Number of employees 120 30 50
What is the total amount of these overheads that will need to be reapportioned to Production centre 2?
Q15: The following information is available for the month of November:
• Opening inventory 100 units

• Production 400 units
• Sales 500 units
Which of the TWO following statements are true for November?
A. Profit will be higher under marginal costing than under absorption costing
B. Profit will be the same under both absorption and marginal costing
C. Closing inventory valuation will be higher under absorption costing than marginal costing
D. Opening inventory valuation will be higher under absorption costing than marginal costing
Q16: Do the statements below relate to absorption costing or marginal costing?
Required for inventory valuation under IAS 2
A. Absorption costing
B. Marginal costing
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Fixed costs treated as a period cost
B. Marginal costing
Easier for managers to understand
B. Marginal costing
Shows the lowest price at which a product can be sold in the long term
B. Marginal costing
Q17: Pear Co manufactures a product that passes through one process, Process P. During the month of
July, the following related to Process P.
• Materials 12,000 tonnes at $2.50 per tonne

• Direct labour $8,000
• Process overheads $10,750
• Normal losses 5% of input
• Process output 11,300
• All losses have a scrap value of $1.25.
What is the full cost value of the normal losses credited to Process P for July?
A. $500
B. $750
C. $1,000
D. $600
Q18: Using information from previous question, what is the full cost value of the abnormal loss or
abnormal gain for the month of July (to the nearest whole $)?
Q19: Which TWO of the following statements about joint products are TRUE?
A. It is a product that is produced in collaboration with another organisation

B. It is a product that requires input from two or more processes
C. It is when two or more products of significant value that are produced simultaneously
D. They are products that will only become separately identifiable following a split-off point
Q20: Process 1 results in two products, Product Why and Product Zee, the sales values of which are as
follows:
• Product Why: $1.73 per kg

• Product Zee: $56.02 per kg
Which of the below statements best describes the relationship between these two products?
A. Product Why is a by-product of Product Zee

B. Product Zee is a by-product of Product Why
C. Products Why and Zee are joint products
D. There is not enough information to determine whether or not these products are related
Q21: Which TWO of the following are apportioned by absorption costing?

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A. Administration expenses
B. General maintenance
C. Bought in parts
D. Factory foreman’s salary
Q22: In a month a factory produces 10,000 units of a product. Raw materials cost $5,000, labour costs
$2,500 and other costs are $500. Opening inventory is valued at $2,000 and closing inventory at $1,700.
What is the cost of sales?
Q23: Under absorption costing, which of the following bases would be BEST suited to the apportionment
of building maintenance costs?
A. Units produced
B. Labour hours
C. Floor area
D. Number of employees
Q24: Which costs are used to calculate a predetermined absorption rate?
A. Actual
B. Previous year's actual
C. Budget
D. A mixture
Q25: A factory building houses three production departments and a canteen for the factory workers.
Employee and cost numbers are as follows:
Employees $
Production line 1 55 275,000
Canteen 8 75,000
What Canteen costs are apportioned to Production line 3?
Q26: Which of the following shows how to calculate the contribution of a product?
A. Sales income – fixed costs = contribution

B. Fixed costs + variable costs = contribution
C. Sales income – all costs = contribution
D. Sales income – variable cost = contribution
Q27: Production costs of product Z recorded at various levels of activity are shown as follows:
• 25 units $1,500
• 10 units $750
• 37 units $2,100
• 18 units $1,150
What is the marginal cost of a unit of product Z? (Hint: remember the high low method)
Q28: Which of the following statements relating to absorption costing and marginal costing is TRUE?
A. Inventory value is higher under marginal costing

B. Marginal costing includes all the costs of production
C. Marginal costing values inventory at the total variable cost
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D. Marginal costing includes an element of fixed costs
Q29: When considering marginal costing and absorption costing, if inventory levels increase during a
period, which of the following statements is TRUE?
A. Marginal costing will show a higher profit

B. The profit shown by both methods of accounting will be the same
C. An adjustment will be required
D. Absorption costing will show a higher profit
Q30: When would a business use process costing?
A. When the products are made in a continuous flow

B. When there is a process in place
C. When lots of different items are produced
D. When you can’t use absorption costing
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Section 4: CVP Analysis/ Short-term decision making/ Capital Investment

Appraisal techniques/ Discounted cash flow analysis
Q1: Which of the following best defines the breakeven point?
A. The amount needed to sell to achieve a certain level of profit

B. The number of units needed to be sold to cover all costs
C. Unit sales required to meet target profit
D. The marginal cost of producing one more unit
Q2: A business sells product Z. The fixed costs of the business are $75,000. The contribution of the
product is $15 and the business hopes to sell 7,500 units. What is the margin of safety in units?
Q3: If the selling price of a unit of product increases, but nothing else changes, which of the following
describes the impact of this on the breakeven point?
A. No change
B. More units need to be sold to breakeven
C. Fewer units need to be sold to breakeven
D. The margin of safety decreases
Q4: A business sells product B. The fixed costs of the business are $125,000. The variable cost of
product B is $25 and the required profit is $50,000. Expected production is 12,500 units. What is the
selling price of product B?
Q5: During the year ABC Co makes products W, X, Y and Z. Labour is a limiting factor. With the
following contribution per unit and labour hours per unit, in which order should the company prioritise
production to maximise profit?
• W $5 0.5 hours
• X $3 1.0 hour
• Y $2 0.25 hours
• Z $10 0.75 hours
Q6: A business has received an urgent order for one of its products, Product X. In order to produce this
the business can stop producing Product Y and lose contribution of $10,000 or it can bring in additional
workers at a cost of $7,500, or it can ask its workforce to work overtime at a cost of $8,500. The cost of
producing Product X would normally be $6,500. What is the relevant cost?
Q7: Which of the following would be an adjustment required to obtain the cash flow figure from the
profit figure?
A. Depreciation
B. Overdraft interest
C. Bank charges
D. Contribution
Q8: A company is considering investing in a new piece of machinery costing $100,000. The discount rate
is 8% and net cash flows are as follows.
• Year 1 $40,000
• Year 2 $40,000
• Year 3 $35,000
• Year 4 $30,000
The discount rates factors are as follows:

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• Year 0: 1
• Year 1: 0.926
• Year 2: 0.857
• Year 3: 0.794
• Year 4: 0.735
What is the discounted payback period?
A. 2 years and 30 weeks

B. 3 years and 2 weeks
C. 2 years and 38 weeks
D. 2 years and 50 weeks
Q9: What does IRR calculate?
A. The time period by which an investment will produce the required rate of return
B. What the Net Present Value is at a given cost of capital
C. Whether or not to invest in a project
D. The rate of return which will result in an NPV of zero
Q10: The current plans for a product result in a margin of safety of 1,000 units. Will this margin of safety
increase or decrease as a result of these scenarios?
Breakeven point in units 2,500 units: Expected level of sales 4,200 units
A. Increase the margin of safety

B. Decrease the margin of safety
Breakeven point in units 3,500 units: Expected level of sales 4,200 units
A. Increase the margin of safety

B. Decrease the margin of safety
Q11: An organisation manufactures and sells a single product. The selling price is $15.00 and the
variable cost of sales is $1.50. If fixed costs are budgeted at $56,250, what is the organisation’s
breakeven point, to the nearest whole unit?.
Q12: The following information relating to Q Company is available.
• Selling price $25.00 per unit

• Variable costs $10.00 per unit
• Breakeven point 3,000 units
Calculate the total annual fixed costs that will be incurred by Q Company.
Q13: An organisation implements efficiency measures which lead to a reduction in both the total fixed
costs and the unit variable costs associated with selling Product A.
If the organisation makes no change to the selling price of Product A and the sales volume remains
constant, what will be the effect on the margin of safety?
A. Increase
B. Decrease
C. No change
D. There is not enough information to answer the question
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Q14: Which of the below is calculated using the following equation?
Fixed costs / Contribution per unit
A. Breakeven point
B. Margin of safety
C. Net profit ratio
D. Total contribution
Q15: Which TWO of the following costs are relevant in a decision making process?
A. Sunk costs
B. Opportunity costs
C. Committed costs
D. Avoidable costs
Q16: A special contract currently under consideration at Bee Company requires three skilled employees
for the duration of the contract: two years. It would cost $35,000 per year per employee to hire new staff
on a two year fixed contract.
An alternative would be to train three existing members of staff at a total one-off cost of $50,000. The
cost of replacing the existing employees would be $85,000 per year.
A supervisor will also be required to work on this contract. A suitable existing member of staff has
agreed to take this role. She is currently paid $50,000 per year and it is anticipated that she will spend 5%
of her time supervising this contract.
What is the relevant labour cost of the special contract?
Q17: Shelby invests $35,000 in a bank account for six years. Interest is paid at a rate of 7% compound
interest per year. How much will Shelby have in the bank at the end of the six years?
A. $37,450.00
B. $52,525.56
C. $49,700
D. $17,525.56
Q18: An investment is made for one year at a return of 17%. The total amount of cash returned at the end
of the year is $3,393. Calculate the amount of interest earned.
A. $576.81
B. $493.00
C. $2,816.19
D. $2,900.000
Q19: Which TWO of the following are advantages of using the Internal Rate of Return (IRR) to appraise
capital investment projects?
A. IRR considers the time value of money

B. IRR uses profits rather than cashflows
C. IRR is easy for non-financial managers to compare against target percentages
D. IRR considers the relative sizes of projects
Q20: What is the IRR for a project that has an NPV of $13 at 8% and an NPV of -$2 at 9% (to two
decimal places)?
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Q21: An organisation expects to sell 50,000 units of Product X in a month. The fixed costs are $100,000
and the variable costs are $3 per unit. If the selling price is $7.50, what is the margin of safety?
A. 55.6%
B. 44.4%
C. 73.3%
D. 33.3%
Q22: XYZ Co makes product UV and wishes to make a profit of at least $10,000. The selling price of a
unit is $10, variable costs are $2 and fixed costs are $25,000. How many units does XYZ Co need to sell
to achieve its target profit?
Q23: ABC Co has a product with fixed costs of $100,000 and required profit of $75,000. Variable costs
for the product are $12 per unit. If demand is for 20,000 units what is the selling price?
A. $8.75
B. $17.00
C. $20.75
D. $15.75
Q24: A company has sales that are constant throughout the year. Production levels are maintained at the
same volume as sales each month, so inventory holdings are close to nil. The company has identified that
labour will be a limiting factor over the next two months due to summer holidays. How will this affect
sales?
A. Sales will fall

B. Sales will increase
C. Sales will be unaffected
D. Sales may vary
Q25: During the year XYZ Co can sell 100,000 units of product Z. Each unit requires 0.75kg of raw
materials of which 97,000kg are available. Each unit also requires 0.5 labour hours of which 30,000 are
available. What is the limiting factor?
A. Sales
B. Raw materials
C. Labour
D. No limiting factor
Q26: Which of the following are relevant or irrelevant costs for a project?
Inventory which would otherwise be scrapped
A. Relevant cost
B. Irrelevant cost
Employees taken on especially for the project
A. Relevant cost
B. Irrelevant cost
Q27: ABC Co has some spare capacity and decides to make a batch of product Y. Product Y requires a
raw material which ABC Co has in inventory, but will not be replaced. What is the relevant cost of the
raw material if it has no resale value?
A. Past purchase cost
21 | P a g e
B. Current purchase cost

C. Percentage of Product Y sale price
D. Nil
Q28: XYZ Co receives an order for product P. The workforce is already at full capacity making product
Q. Extra labour can be bought in at $10 per hour or there is capacity for overtime at time and a half by
workers paid $6 per hour. What is the relevant labour cost per hour?
Q29: Y Co enters into a long-term contract under which they will be paid $75,000 at the end of the
contract in four years’ time. If interest rates are 5%, what is the present value of the contract (to the
nearest hundred dollars)?
A. $75,000
B. $71,400
C. $58,800
D. $61,700
Q30: The following information is given:
Project Initial outflow ($) Income after one year ($) IRR (%) NPV (6%)
A 250,000 280,000 12 14,151
B 50,000 60,000 20 6,604
C 75,000 100,000 31 19,339
D 125,000 150,000 20 16,509
Using IRR and NPV, which project would you choose?
A. Project A
B. Project B
C. Project C
D. Project D
22 | P a g e
Section 5: Cash management/ Cash budget/ Investing & Financing
Q1: Which TWO of the following are items that would be included in the cash flow of a business?
A. Sale of property
B. Depreciation
C. Transfer of money from the current account into a deposit account
D. Purchase of a photocopier
Q2: How would you describe an organisation that has positive cash flow on operations and financing
activities, and negative cash flow relating to investment activities?
A. The company is using cash from operations and from borrowing (or from owner investment) to
expand
B. The company is using cash from operations and from sale of non-current assets to pay down debt
or pay stockholders
C. The company is financing operating cash flow shortages and payments to payables and/or
stockholders via sale of non-current assets
D. The company is using cash generated from operations and from the sale of assets and from
financing to build up a pile of cash
Q3: Which TWO of the following are functions of a Treasury department?
A. New borrowing
B. Bill payment
C. Foreign currency
D. Human resource allocation
Q4: How should public sector organisations (e.g government) manage their cash management approach?
Risk
A. High
B. Medium
C. Low
Liquidity
A. High
B. Medium
C. Low
Q5: In the business cycle, which could be described as a period of high growth with high borrowing?
A. Recession
B. Slump
C. Recovery
D. Boom
Q6: A company has opening receivables at the start of March of $356,789. 5% of receivables will be
written off as irrecoverable debts. Budgeted sales in the month are $875,234 and closing receivables are
expected to be $379,365. How much cash is expected to be received from receivables?
A. $852,658
B. $834,819
C. $897,810
D. $915,649
23 | P a g e
Q7: The following data is available for the sales of a company in 20X1.
• Q1 750
• Q2 800
• Q3 500
• Q4 900
The company uses the three point moving average method. What is the moving average for Quarter 3?
Q8: The sales trend for the year is shown below.

• Q1 $1,500
• Q2 $1,700
• Q3 $2,000
• Q4 $2,300
The seasonal variation for Q3 is 0.95. Using the multiplicative method what is the predicted sales value
for Q3?
Q9: Which of the following types of short-term investment has the lowest risk?
A. Local authority stock

B. Government stock
C. Bank deposit
D. Equities
Q10: How could a business fund a short term cash shortfall?
A. Issue equity (sale of shares)

B. Long term loan
C. Issue bonds
D. Overdraft
Q11: Classify the following receipts or payments as revenue items, capital or drawings.
Payment of salary to employees
A. Revenue items
B. Capital
C. Drawings
Purchase of materials
A. Revenue items
B. Capital
C. Drawings
Payments of dividends to shareholders
A. Revenue items
B. Capital
C. Drawings
Purchase of a fleet of cars
A. Revenue items
B. Capital
C. Drawings
24 | P a g e
Q12: An events company purchased decorations for an event towards the end of 20x4. The decorations
were received and used during 20x4. The company did not pay for these decorations until 20x5. The
costs for the decorations would be included in the accounts for which year if the following accounting
methods were used?
Cash accounting
A. 20x4
B. 20x5
Accruals accounting
A. 20x4
B. 20x5
Q13: Which TWO of the following would be carried out by an organisation’s treasury department?
A. Recruiting appropriately qualified finance staff

B. Advising the organisation on the investments it should make with surplus cash
C. Producing a yearly budget showing the levels of materials required
D. Managing the organisation’s banking requirements
Q14: The following points are relevant to the current economic state of Country Zee.
• Banks are becoming more cautious over lending money

• Demand has dropped
Country Zee is currently at what point of the economic cycle:
A. Boom
B. Recovery
C. Slump
D. Recession
Q15: Do the following statements relate to a production budget or a cash budget?

Based on the output the business expects to produce in the period
A. Production budget
B. Cash budget
Sales and purchases on credit are included at the time of payment
A. Production budget
B. Cash budget
Q16: The following information illustrates the revenue of Bee Co for the summer of this year.
• June $82,000
• July $47,000
• August $63,000
It is anticipated that the payment for the goods provided will arrive as follows:
• 52% in the month of the sale

• 34% in the following month
• 14% will not be received at all
What is the budgeted cash receipts for Bee Co in July?
25 | P a g e
Q17: Which of the following is NOT a possible time series pattern?
A. The trend
B. Seasonal variation
C. Random variation
D. Limited variation
Q18: How is the seasonal variation calculated using the multiplicative model, if T = trend figure, S =
seasonal variation and A = actual figure?
A. S=A/T
B. S=AxT
C. S=A-T
D. S = T+/- S
Q19: Which of the following is a suitable strategy for a short-term cash surplus?
A. Invest the cash surplus in a bank deposit account

B. Use the money to expand into new markets
C. Pay a dividend to shareholders
D. Use the money to upgrade non-current assets
Q20: Which of the following is NOT an example of a money market deposit.
A. Certificate of deposit
B. Government stock/bond
C. Local authority stock
D. Bank deposit
Q21: Which of the following is most important to the survival of a business?
A. Its profit
B. Its ability to pay dividends
C. Its ability to pay debts when they fall due
D. How much cash it has in the bank
Q22: Which of the following describes working capital?
A. Cash available for day-to-day operations

B. Money tied up in trade assets
C. The number of days it takes for raw materials to turn into payment by trade receivables
D. Accounts receivable and inventory
Q23: Which TWO of the following are objectives of cash budgeting?
A. Anticipate cash shortages and surpluses

B. Ensure that trade receivables are paying on time
C. Ensure that the cash available will allow the overall budget to be met
D. To decide what trade discounts should be offered
Q24: Which TWO of the following tasks are undertaken when preparing a cash budget?
A. Converting sales into cash receipts

B. Calculating the depreciation charge
C. Estimating the cost of utilities
D. Valuing the inventory
26 | P a g e
Q25: From the budget, opening receivables at the start of June are $657,998. Of these, 4.75% will be
written off as irrecoverable debts. Sales in the month are $745,909 and closing receivables are $457,889.
What is the budgeted cash received?
A. $946,018
B. $1,372,652
C. $977,273
D. $914,763
Q26: A company has the following information to prepare a cash budget for April. Sales are increasing
month on month by 5%. Sales are offered with one-month credit, and all customers pay within in the
month after the sale takes place. January sales are $25,000. What figure would be entered as the budgeted
cash receipts from sales for April?
A. $25,000
B. $26,250
C. $27,563
D. $28,940
Q27: Which of the following may be a reason for adverse variances when comparing budgeted with
actual cash payments?
A. The cost of raw materials has increased

B. The sales price has increased
C. Sales volume has decreased
D. Productivity has decreased
Q28: A company wants to buy a machine that will have a useful life of 10 years. The company wishes to
spread payments for the machine over its useful life. What is the MOST SUITABLE way to finance this
purchase?
A. Bank account overdraft

B. Issue shares in the company
C. Purchase on company credit card
D. Loan from the bank
Q29: The sales trend for the year is shown below.

• Q1 $3,400
• Q2 $3,700
• Q3 $4,100
• Q4 $4,400
The seasonal variation for Q2 is 275. Using the additive method, what is the predicted sales value for
Q2?
Q30: Which of these answers shows the correct order of processes to follow to forecast sales revenue?
i. Average seasonal variation

ii. Actual = Trend + Seasonal variation
iii. Trend using three-point average
iv. Seasonal variation for each quarter
A. (iv) (ii) (iii)

B. (i) (iv) (ii)
C. (iv) (i) (ii)
D. (ii) (iii) (i) (iv)
27 | P a g e

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MA2 – Management Accounting Revision

Section 1: Management Information/ Cost Behaviour/ Budgets and Variances/

Q1: Which of the following is an example of planning?

A. Using last year's results to set objectives

A. To assess product profitability

What is the total cost per unit?

What is the cost of 43 units?

What is the total variance to the flexed budget?

A. When speed is essential

• 15 Sep Receipt 500 units @ $3.75

Q10: The following information is available for a company’s inventory.

• Average daily usage 2,500kg

What is the reorder level for this company?

Reviewing actual spend against budgeted figures

Determining where spending cuts can be made

Setting the price at which a new product will be sold

Identifying an opportunity to produce a new product

Hire of a piece of equipment for a particular job

Fabric coverings for chairs

Salary paid to the factory supervisor

Food for the staff canteen

Q15: Which of the following best describes a flexible budget?

A. A budget that has been prepared but not yet approved

The size of the variance

The personnel to which the variance relates

Whether it is a favourable or adverse variance

The trend of the variance

Reorder level + reorder quantity – (minimum usage x minimum lead time)

A. Minimum inventory level

Calculate the economic order quantity for Pear Co.

A. Costs that change when production volumes change

What is the variable cost per unit?

A. Dr Material control account Cr Work in progress

A. Cost of holding a unit of inventory for the period

Q28: The following information is provided for the inventory of a business:

• Average usage 2,500kg

• Minimum usage 2,000kg

Q29: Why would a business prefer to hold low volumes of inventory?

A. Because the cost of ordering inventory is high

Q5: Which of the following is an absolute requirement in job costing?

A. A client asks the company to quote for a job

• Direct material $750

If the price charged is $3,500 what is the profit?

A. It is one clearly defined job

A. Cost per hour worked by customer-facing staff

Q9: Which of the following is a service centre in a manufacturing company?

Wages based on hours

Wages based on units of work

Output Premium per unit

Paying rent on a building

Repair of door to building

• Department A 15 hours at $4 per hour

Department Budgeted overheads ($) Budgeted activity

• Productive hours: 540

What is the estimated labour cost for this job?

A. Dr Bank: $350, Cr Production: $350

A. Ink for the pens

Q22: Which of the following is a definition of depreciation?

A. Employer’s pension contributions

A. Underestimating the amount of labour required doesn’t affect the cost.

Q27: A restaurant expects to sell 280 meals in a week. Costs are:

What is the cost per unit of a meal (to two dp)?

Section 3: Absorption Costing/ Marginal Costing/ Process Costing

A. To allocate the fixed costs of production to units