Management Accounting MCQs

✅ The correct answer is option A.
Project’s expected monetary loss or gain by discounting all cash outflows and inflows, using required rate of return is classified as net present value. Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

✅ The correct answer is option D.
Translation of organization strategy, and mission into performance measures to provide framework for strategy implementation is termed as balanced scorecard. A balanced scorecard is a strategic management performance metric used to identify and improve various internal business functions and their resulting external outcomes. Balanced scorecards are used to measure and provide feedback to organizations.

✅ The correct answer is option C.
Costs which are related to different functions of value chain of company, such as marketing and manufacturing costs are considered as business function costs. Business function costs are the total sum of all expenses both fixed and variable for a specific step in the value chain. In other words, it’s the total cost associated with each step a product takes from the manufacturer to the consumer.

✅ The correct answer is option D.
An investment of money in idle inventory, in place of investing same amount of money somewhere else is an example of opportunity cost. Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another.

✅ The correct answer is option D.
Capital budgeting method to analyze information of financials include internal rate of return, accrual accounting rate of return and net present value. The process involves analyzing a project’s cash inflows and outflows to determine whether the expected return meets a set benchmark. The major methods of capital budgeting include throughput, discounted cash flow, and payback analyses.

✅ The correct answer is option D.
In static budget, difference between corresponding budgeted amount and actual result is called static budget variance. Static budget variances are the differences between what a company or individual thought it would spend in its budget versus what it actually did.

✅ The correct answer is option B.
Price variance = Actual price input – Budgeted price of input
= $150 – $80 = $70.

✅ The correct answer is option C.
Rupee amount for required return of investment is subtracted from income to calculate residual income. Residual income is excess income generated more than the minimum rate of return. Residual income is a measurement of internal corporate performance, whereby a company’s management team evaluates the income generated relative to the company’s minimum required return.

✅ The correct answer is option D.

✅ The correct answer is option A.
Buying of goods or services from suppliers or vendors of some other country instead of local supplier is classified as outsourcing. Outsourcing is the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company’s own employees and staff. Outsourcing is a practice usually undertaken by companies as a cost-cutting measure.