CIMA Fundamentals of management accounting Sample Questions:

1. Which of the following best describes a step cost?

A) A cost which remains constant until activity reaches a critical level; thereafter the cost increases to a higher level and the total cost remains constant until the next critical activity level is reached.
B) A cost which increases per unit until activity reaches a critical level; thereafter the cost increases to a higher level and the unit cost remains constant until the next critical activity level is reached.
C) A cost which increases steadily until activity reaches a critical level; thereafter the cost increases to a higher level and the total cost remains constant until the next critical activity level is reached.
D) A cost which remains constant until activity reaches a critical level; thereafter the cost increases to a higher level and the unit cost remains constant until the next critical activity level is reached.

2. In investment appraisal, the internal rate of return is

A) the rate at which the present value of a project's cash inflows is equal to the present value of its cash outflows
B) the rate at which a project's cash inflows is equal to its cash outflows
C) the target rate of return for all investment proposals
D) the rate at which the present value of a project's cash inflows is zero

3. Data for the latest period for a company which makes and sells a single product are as follows:

There were no budgeted or actual changes in inventories during the period.
The variable overhead expenditure variance for the period was:

A) $462 adverse.
B) $2,202 adverse.
C) $462 favourable.
D) $2,202 favourable.

4. Refer to the Exhibit.

PD manufactures a product in a process operation. Normal loss is 5% of input and occurs at the end of the process. The following data is available for the month of August:
Scrapped units have no value.
There was no opening or closing work in progress for August.
What is the value of the abnormal gain in August?

A) $1,880
B) $893
C) Nil
D) $1,816

5. Refer to the exhibit.

A) £250 adverse
B) £260 adverse
C) Fabex Ltd. manufactures a household detergent called "Clear". The standard data for one of the chemicals used in production (chemical XTC) is as follows:
(a) 50 litres used per 100 litres of 'Clear' produced
(b) Budgeted monthly production is 1000 litres of 'Clear'.
The closing inventory of chemical XTC for November valued at standard price was as follows:
Actual results for the period during December were as follows:
(a) 500 litres of chemical XTC was purchased for £1300.
(b) 550 litres of chemical XTC was used.
(c) 900 litres of 'Clear' was produced.
It is company policy to extract the material price variance at the time of purchase.
What is the total direct material usage variance (to the nearest whole number)?
D) £260 favourable
E) £250 favourable

Solutions: