Management Accounting MCQs

✅ The correct answer is option B.
Payback period is multiplied for constant increase in yearly future cash flows to calculate net initial investment. Net investment is the amount spent by a company or an economy on capital assets, or gross investment, less depreciation. Net investment helps give a sense of how much money a company is spending on capital items used for operations, such as property, plants, equipment, and software.

✅ The correct answer is option C.
Net initial investment is divided by uniform increasing in future cash flows to calculate payback period. The payback period refers to the amount of time it takes to recover the cost of an investment. Simply put, the payback period is the length of time an investment reaches a breakeven point. The desirability of an investment is directly related to its payback period.

✅ The correct answer is option C.
In manufacturing companies, revenue and cost drivers are categorized under number of units sold. Revenue and cost drivers are the individual elements that make up those gross numbers. They are different in each business model. Most managers usually can identify specific drivers, but they often don’t use them as key management tools.

✅ The correct answer is option C.
Value added manufacturing time = Manufacturing cycle efficiency × Total manufacturing time
= 0.725 × 45
= 32.625.

✅ The correct answer is option A.
Level of used input to achieve a determined level of output is termed as efficiency. Efficiency is the (often measurable) ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result.

✅ The correct answer is option A.
Actual price of material is less than budgeted price, this means that price variance is favourable. A price variance is the difference between the actual revenue or cost and the budgeted revenue or cost because of a difference between the actual unit price and the budgeted unit price.

✅ The correct answer is option A.
Division of all costs related to customers on basis of different cost allocation bases or cost drivers is called customer cost hierarchy. The cost hierarchy is a classification system used in activity-based costing that designates activities based on how easily they can be traced to a product.

✅ The correct answer is option C.
Static budget amount = Flexible budget amount – Sales volume variance
= $7500 – $6500 = $1,000.

✅ The correct answer is option A.
Quantity of manufactured goods are sold at which total cost equal, is known as breakeven point. The break-even point can be defined as a point where total costs (expenses) and total sales (revenue) are equal. Break-even point can be described as a point where there is no net profit or loss.

✅ The correct answer is option D.
Categories of cash flows include net initial investment, cash flow from operations after paying taxes and cash flow from terminal disposal after paying taxes.