Management Accounting MCQs

✅ The correct answer is option C.
In standard costing, standard quantity allocation is multiplied to standard overhead rates for allocating overhead costs. Overhead costs refer to those expenses associated with running a business that can’t be linked to creating or producing a product or service.

✅ The correct answer is option D.
Fixed cost = Contribution margin per unit × Breakeven per unit
= $500 × $35 = $17,500.

✅ The correct answer is option A.
An energy, machine maintenance, indirect materials and engineering support are considered as variable overhead cost. Variable overhead costs tend to be higher when a business is engaged in a greater number of transactions, a higher level of production, or other situations in which more business events take place. The opposite of fixed overhead costs such as payroll and insurance, which generally remain static.

✅ The correct answer is option D.
An effect of fixed cost to change in operating income is classified as operating leverage. Operating leverage is a cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue. A business that generates sales with a high gross margin and low variable costs has high operating leverage.

✅ The correct answer is option B.
In cost-plus pricing, ‘plus’ refers to a component named as markup. Cost-plus pricing, also called markup pricing, is the practice by a company of determining the cost of the product to the company and then adding a percentage on top of that price to determine the selling price to the customer.

✅ The correct answer is option A.
Costs that behaves as irrelevant costs in process of decision making are classified as past costs. A past cost is money that has already been spent. These funds cannot be recovered, so the related cost is irrelevant for decision-making purposes. A past cost is also known as a sunk cost.

✅ The correct answer is option A.
Annual earned income is divided from a project by capital invested to calculate accrual accounting rate of return. The accrual accounting rate of return takes the accounting rate of return calculation and applies the accrual method of accounting.

✅ The correct answer is option C.
Type of outcomes, which can never be measured in numerical terms in books of accounts are classified as qualitative factors. Qualitative factors are outcomes from certain actions that are difficult or impossible to measure.

✅ The correct answer is option C.

✅ The correct answer is option B.
An ability of an organization, to offer its services or products that must be perceived by customers as unique and superior, in comparison to its competitors is called product differentiation. Product differentiation (or just differentiation) is a marketing process of differentiating an offering (product or service) from others in the market, to make it more appealing to the target audience.