Management Accounting MCQ Quiz - Objective Question with Answer for Management Accounting - Download Free PDF
Last updated on Jun 24, 2025
Latest Management Accounting MCQ Objective Questions
Management Accounting Question 1:
Comprehension:
CastildaCo manufactures toy robots. The company uses a standard marginal costing system and values inventory at standard cost.
Standard Cost Card – Toy Robot
| Item | Cost per unit ($) | Details |
|---|---|---|
| Selling Price | 120.00 | |
| Direct Material | 20.00 | 1 material per unit |
| Direct Labour | 48.00 | 6 hours @ $8 per hour |
| Production Overhead | 24.00 | |
| Standard Contribution | 28.00 |
Activity Levels (in units)
| Activity | Budget | Actual |
|---|---|---|
| Sales | 25,600 | 25,000 |
| Production | 26,000 | 25,000 |
Actual Sales Revenue and Variable Costs
| Item | Amount ($) |
|---|---|
| Sales Revenue | 3,066,880 |
| Direct Material (purchased & used) | 532,800 |
| Direct Labour (150,000 hours) | 1,221,000 |
| Variable Production Overhead | 614,000 |
Variances
| Variance Type | Amount ($) | Nature |
|---|---|---|
| Total Direct Materials Variance | 12,800 | Adverse |
| Direct Labour Rate Variance | 21,000 | Adverse |
| Direct Labour Efficiency Variance | 10,000 | Favourable |
| Total Variable Production Overhead Variance | 48,000 | Favourable |
Which of the following would most likely result in an adverse direct labour rate variance but a favourable efficiency variance?
Answer (Detailed Solution Below)
Management Accounting Question 1 Detailed Solution
Correct Answer: C
Explanation:
Using higher grade (more skilled) labour typically means paying a higher hourly rate, which causes an adverse rate variance.
However, because they work faster or more efficiently, they use fewer hours, leading to a favourable efficiency variance.
Management Accounting Question 2:
Comprehension:
CastildaCo manufactures toy robots. The company uses a standard marginal costing system and values inventory at standard cost.
Standard Cost Card – Toy Robot
| Item | Cost per unit ($) | Details |
|---|---|---|
| Selling Price | 120.00 | |
| Direct Material | 20.00 | 1 material per unit |
| Direct Labour | 48.00 | 6 hours @ $8 per hour |
| Production Overhead | 24.00 | |
| Standard Contribution | 28.00 |
Activity Levels (in units)
| Activity | Budget | Actual |
|---|---|---|
| Sales | 25,600 | 25,000 |
| Production | 26,000 | 25,000 |
Actual Sales Revenue and Variable Costs
| Item | Amount ($) |
|---|---|
| Sales Revenue | 3,066,880 |
| Direct Material (purchased & used) | 532,800 |
| Direct Labour (150,000 hours) | 1,221,000 |
| Variable Production Overhead | 614,000 |
Variances
| Variance Type | Amount ($) | Nature |
|---|---|---|
| Total Direct Materials Variance | 12,800 | Adverse |
| Direct Labour Rate Variance | 21,000 | Adverse |
| Direct Labour Efficiency Variance | 10,000 | Favourable |
| Total Variable Production Overhead Variance | 48,000 | Favourable |
Calculate Sales volume variance, Standard contribution on actual sales and Sales price variance.
Answer (Detailed Solution Below)
16,800 Fav, 716,800, 5,120 Adv
Management Accounting Question 2 Detailed Solution
Correct Answer: A
Explanation:
Management Accounting Question 3:
Comprehension:
Proposal: Cab Co is considering the implementation of a new computerised taxi tracking system. The expected costs and benefits related to this system are as follows:
Implementation Costs and Related Expenditures:
(a) The system would cost $2,100,000 to implement (initial investment).
(b) Depreciation on the system would be $420,000 per year.
(c) A total of $75,000 has already been spent on staff training to evaluate the system (sunk cost). If implemented, additional training costs of $425,000 would be incurred in Year 1.
(d) Sales are expected to increase by $200,000 per year as a result of the system.
(e) Vehicle running cost savings are expected, estimated at 1% of total sales.
(f) Six new staff members would be hired to manage the system, at a total cost of $120,000 per year.
(g) A maintenance contract would be required at $75,000 per year for 5 years.
(h) Interest cost on borrowing to fund the project is estimated at $150,000 per year (note: not included in DCF as per financial management principles).
(i) Sales projections:
- If the system is implemented, sales are expected to rise to $11 million in Year 1, and then increase by 5% annually.
- If not implemented, sales will remain at $10 million annually.
Cab Co aims to maximise shareholder wealth and has evaluated a proposed computerised taxi tracking system using the following investment appraisal measures:
Internal Rate of Return (IRR): 14%
Return on Average Capital Employed (ROCE): 20%
Payback Period: 4 years Cost of capital: 10%
Which of the following statements is TRUE?
Answer (Detailed Solution Below)
Management Accounting Question 3 Detailed Solution
Correct Answer: B
Explanation:
-
"The project is worthwhile because the IRR is a positive value"
This is incorrect because a positive IRR alone does not make a project worthwhile. The IRR must exceed the company’s cost of capital for the project to be financially viable and to increase shareholder value. -
"The project is not worthwhile because the IRR is less than the ROCE"
This is incorrect because the IRR should be compared to the cost of capital, not the ROCE. ROCE is an accounting measure and does not take into account the time value of money. A lower IRR than ROCE does not necessarily mean the project is unviable. -
"The project is not worthwhile because the payback is less than five years"
This is incorrect because the payback method does not consider profitability or time value of money. Also, the cut-off period for payback is arbitrary, and we are not told what Cab Co considers an acceptable payback period.
Management Accounting Question 4:
Comprehension:
Proposal: Cab Co is considering the implementation of a new computerised taxi tracking system. The expected costs and benefits related to this system are as follows:
Implementation Costs and Related Expenditures:
(a) The system would cost $2,100,000 to implement (initial investment).
(b) Depreciation on the system would be $420,000 per year.
(c) A total of $75,000 has already been spent on staff training to evaluate the system (sunk cost). If implemented, additional training costs of $425,000 would be incurred in Year 1.
(d) Sales are expected to increase by $200,000 per year as a result of the system.
(e) Vehicle running cost savings are expected, estimated at 1% of total sales.
(f) Six new staff members would be hired to manage the system, at a total cost of $120,000 per year.
(g) A maintenance contract would be required at $75,000 per year for 5 years.
(h) Interest cost on borrowing to fund the project is estimated at $150,000 per year (note: not included in DCF as per financial management principles).
(i) Sales projections:
- If the system is implemented, sales are expected to rise to $11 million in Year 1, and then increase by 5% annually.
- If not implemented, sales will remain at $10 million annually.
Calculate the present value of the maintenance costs over 5 years:
The maintenance contract costs $75,000 per year for 5 years.
Use a discount rate of 10% and assume payments are made annually in arrears.
Answer (Detailed Solution Below)
Management Accounting Question 4 Detailed Solution
Correct Answer: A
Explanation:
Management Accounting Question 5:
Comprehension:
Proposal: Cab Co is considering the implementation of a new computerised taxi tracking system. The expected costs and benefits related to this system are as follows:
Implementation Costs and Related Expenditures:
(a) The system would cost $2,100,000 to implement (initial investment).
(b) Depreciation on the system would be $420,000 per year.
(c) A total of $75,000 has already been spent on staff training to evaluate the system (sunk cost). If implemented, additional training costs of $425,000 would be incurred in Year 1.
(d) Sales are expected to increase by $200,000 per year as a result of the system.
(e) Vehicle running cost savings are expected, estimated at 1% of total sales.
(f) Six new staff members would be hired to manage the system, at a total cost of $120,000 per year.
(g) A maintenance contract would be required at $75,000 per year for 5 years.
(h) Interest cost on borrowing to fund the project is estimated at $150,000 per year (note: not included in DCF as per financial management principles).
(i) Sales projections:
- If the system is implemented, sales are expected to rise to $11 million in Year 1, and then increase by 5% annually.
- If not implemented, sales will remain at $10 million annually.
Calculate the value of savings in vehicle running costs in Year 1:
Vehicle running cost savings are estimated at 1% of total sales, based on $11 million sales in Year 1.
Answer (Detailed Solution Below)
Management Accounting Question 5 Detailed Solution
Correct Answer: C
Explanation:
| Item | Amount ($'000) |
|---|---|
| Sales (with tracking system) | 11,000 |
| Vehicle running cost savings (1%) | 110 |
Top Management Accounting MCQ Objective Questions
Management Accounting Question 6:
Fast Co had 3,000 employees at the beginning of 20X8. At the end of 20X8 there were 3,500 employees. 120 employees resigned in the year and were immediately replaced. Additional employees were recruited for new jobs during the year.
What is the labour turnover rate to two decimal places?
Answer (Detailed Solution Below)
Management Accounting Question 6 Detailed Solution
Explanation:
The labour turnover rate is calculated as follows:
Average no. of employees in period = (3,000 + 3,500) ÷ 2 = 3,250
Labour turnover rate = (Replacements ÷ Average number of employees in period) × 100%
= 120 ÷ 3,250 × 100% = 3.69%
Management Accounting Question 7:
Comprehension:
CastildaCo manufactures toy robots. The company uses a standard marginal costing system and values inventory at standard cost.
Standard Cost Card – Toy Robot
| Item | Cost per unit ($) | Details |
|---|---|---|
| Selling Price | 120.00 | |
| Direct Material | 20.00 | 1 material per unit |
| Direct Labour | 48.00 | 6 hours @ $8 per hour |
| Production Overhead | 24.00 | |
| Standard Contribution | 28.00 |
Activity Levels (in units)
| Activity | Budget | Actual |
|---|---|---|
| Sales | 25,600 | 25,000 |
| Production | 26,000 | 25,000 |
Actual Sales Revenue and Variable Costs
| Item | Amount ($) |
|---|---|
| Sales Revenue | 3,066,880 |
| Direct Material (purchased & used) | 532,800 |
| Direct Labour (150,000 hours) | 1,221,000 |
| Variable Production Overhead | 614,000 |
Variances
| Variance Type | Amount ($) | Nature |
|---|---|---|
| Total Direct Materials Variance | 12,800 | Adverse |
| Direct Labour Rate Variance | 21,000 | Adverse |
| Direct Labour Efficiency Variance | 10,000 | Favourable |
| Total Variable Production Overhead Variance | 48,000 | Favourable |
Which of the following would most likely result in an adverse direct labour rate variance but a favourable efficiency variance?
Answer (Detailed Solution Below)
Management Accounting Question 7 Detailed Solution
Correct Answer: C
Explanation:
Using higher grade (more skilled) labour typically means paying a higher hourly rate, which causes an adverse rate variance.
However, because they work faster or more efficiently, they use fewer hours, leading to a favourable efficiency variance.
Management Accounting Question 8:
Comprehension:
CastildaCo manufactures toy robots. The company uses a standard marginal costing system and values inventory at standard cost.
Standard Cost Card – Toy Robot
| Item | Cost per unit ($) | Details |
|---|---|---|
| Selling Price | 120.00 | |
| Direct Material | 20.00 | 1 material per unit |
| Direct Labour | 48.00 | 6 hours @ $8 per hour |
| Production Overhead | 24.00 | |
| Standard Contribution | 28.00 |
Activity Levels (in units)
| Activity | Budget | Actual |
|---|---|---|
| Sales | 25,600 | 25,000 |
| Production | 26,000 | 25,000 |
Actual Sales Revenue and Variable Costs
| Item | Amount ($) |
|---|---|
| Sales Revenue | 3,066,880 |
| Direct Material (purchased & used) | 532,800 |
| Direct Labour (150,000 hours) | 1,221,000 |
| Variable Production Overhead | 614,000 |
Variances
| Variance Type | Amount ($) | Nature |
|---|---|---|
| Total Direct Materials Variance | 12,800 | Adverse |
| Direct Labour Rate Variance | 21,000 | Adverse |
| Direct Labour Efficiency Variance | 10,000 | Favourable |
| Total Variable Production Overhead Variance | 48,000 | Favourable |
Calculate Sales volume variance, Standard contribution on actual sales and Sales price variance.
Answer (Detailed Solution Below)
16,800 Fav, 716,800, 5,120 Adv
Management Accounting Question 8 Detailed Solution
Correct Answer: A
Explanation:
Management Accounting Question 9:
Comprehension:
Proposal: Cab Co is considering the implementation of a new computerised taxi tracking system. The expected costs and benefits related to this system are as follows:
Implementation Costs and Related Expenditures:
(a) The system would cost $2,100,000 to implement (initial investment).
(b) Depreciation on the system would be $420,000 per year.
(c) A total of $75,000 has already been spent on staff training to evaluate the system (sunk cost). If implemented, additional training costs of $425,000 would be incurred in Year 1.
(d) Sales are expected to increase by $200,000 per year as a result of the system.
(e) Vehicle running cost savings are expected, estimated at 1% of total sales.
(f) Six new staff members would be hired to manage the system, at a total cost of $120,000 per year.
(g) A maintenance contract would be required at $75,000 per year for 5 years.
(h) Interest cost on borrowing to fund the project is estimated at $150,000 per year (note: not included in DCF as per financial management principles).
(i) Sales projections:
- If the system is implemented, sales are expected to rise to $11 million in Year 1, and then increase by 5% annually.
- If not implemented, sales will remain at $10 million annually.
Cab Co aims to maximise shareholder wealth and has evaluated a proposed computerised taxi tracking system using the following investment appraisal measures:
Internal Rate of Return (IRR): 14%
Return on Average Capital Employed (ROCE): 20%
Payback Period: 4 years Cost of capital: 10%
Which of the following statements is TRUE?
Answer (Detailed Solution Below)
Management Accounting Question 9 Detailed Solution
Correct Answer: B
Explanation:
-
"The project is worthwhile because the IRR is a positive value"
This is incorrect because a positive IRR alone does not make a project worthwhile. The IRR must exceed the company’s cost of capital for the project to be financially viable and to increase shareholder value. -
"The project is not worthwhile because the IRR is less than the ROCE"
This is incorrect because the IRR should be compared to the cost of capital, not the ROCE. ROCE is an accounting measure and does not take into account the time value of money. A lower IRR than ROCE does not necessarily mean the project is unviable. -
"The project is not worthwhile because the payback is less than five years"
This is incorrect because the payback method does not consider profitability or time value of money. Also, the cut-off period for payback is arbitrary, and we are not told what Cab Co considers an acceptable payback period.
Management Accounting Question 10:
Comprehension:
Proposal: Cab Co is considering the implementation of a new computerised taxi tracking system. The expected costs and benefits related to this system are as follows:
Implementation Costs and Related Expenditures:
(a) The system would cost $2,100,000 to implement (initial investment).
(b) Depreciation on the system would be $420,000 per year.
(c) A total of $75,000 has already been spent on staff training to evaluate the system (sunk cost). If implemented, additional training costs of $425,000 would be incurred in Year 1.
(d) Sales are expected to increase by $200,000 per year as a result of the system.
(e) Vehicle running cost savings are expected, estimated at 1% of total sales.
(f) Six new staff members would be hired to manage the system, at a total cost of $120,000 per year.
(g) A maintenance contract would be required at $75,000 per year for 5 years.
(h) Interest cost on borrowing to fund the project is estimated at $150,000 per year (note: not included in DCF as per financial management principles).
(i) Sales projections:
- If the system is implemented, sales are expected to rise to $11 million in Year 1, and then increase by 5% annually.
- If not implemented, sales will remain at $10 million annually.
Calculate the present value of the maintenance costs over 5 years:
The maintenance contract costs $75,000 per year for 5 years.
Use a discount rate of 10% and assume payments are made annually in arrears.
Answer (Detailed Solution Below)
Management Accounting Question 10 Detailed Solution
Correct Answer: A
Explanation:
Management Accounting Question 11:
Comprehension:
Proposal: Cab Co is considering the implementation of a new computerised taxi tracking system. The expected costs and benefits related to this system are as follows:
Implementation Costs and Related Expenditures:
(a) The system would cost $2,100,000 to implement (initial investment).
(b) Depreciation on the system would be $420,000 per year.
(c) A total of $75,000 has already been spent on staff training to evaluate the system (sunk cost). If implemented, additional training costs of $425,000 would be incurred in Year 1.
(d) Sales are expected to increase by $200,000 per year as a result of the system.
(e) Vehicle running cost savings are expected, estimated at 1% of total sales.
(f) Six new staff members would be hired to manage the system, at a total cost of $120,000 per year.
(g) A maintenance contract would be required at $75,000 per year for 5 years.
(h) Interest cost on borrowing to fund the project is estimated at $150,000 per year (note: not included in DCF as per financial management principles).
(i) Sales projections:
- If the system is implemented, sales are expected to rise to $11 million in Year 1, and then increase by 5% annually.
- If not implemented, sales will remain at $10 million annually.
Calculate the value of savings in vehicle running costs in Year 1:
Vehicle running cost savings are estimated at 1% of total sales, based on $11 million sales in Year 1.
Answer (Detailed Solution Below)
Management Accounting Question 11 Detailed Solution
Correct Answer: C
Explanation:
| Item | Amount ($'000) |
|---|---|
| Sales (with tracking system) | 11,000 |
| Vehicle running cost savings (1%) | 110 |
Management Accounting Question 12:
Comprehension:
Proposal: Cab Co is considering the implementation of a new computerised taxi tracking system. The expected costs and benefits related to this system are as follows:
Implementation Costs and Related Expenditures:
(a) The system would cost $2,100,000 to implement (initial investment).
(b) Depreciation on the system would be $420,000 per year.
(c) A total of $75,000 has already been spent on staff training to evaluate the system (sunk cost). If implemented, additional training costs of $425,000 would be incurred in Year 1.
(d) Sales are expected to increase by $200,000 per year as a result of the system.
(e) Vehicle running cost savings are expected, estimated at 1% of total sales.
(f) Six new staff members would be hired to manage the system, at a total cost of $120,000 per year.
(g) A maintenance contract would be required at $75,000 per year for 5 years.
(h) Interest cost on borrowing to fund the project is estimated at $150,000 per year (note: not included in DCF as per financial management principles).
(i) Sales projections:
- If the system is implemented, sales are expected to rise to $11 million in Year 1, and then increase by 5% annually.
- If not implemented, sales will remain at $10 million annually.
Calculate the value of incremental sales in Year 1:
Sales are expected to rise from $10 million to $11 million in Year 1.
Answer (Detailed Solution Below)
Management Accounting Question 12 Detailed Solution
Correct Answer: B
Explanation:
To evaluate the financial benefit of implementing the computerised tracking system, we compare projected sales with and without the system in Year 1:
-
Sales without the system:
Base sales = $10,000,000
Expected growth (unrelated to system) = $200,000
Total = $10,200,000 -
Sales with the system:
Projected sales = $11,000,000
Incremental Sales Due to the System: Incremental Sales=$11,000,000−$10,200,000=$800,000
Management Accounting Question 13:
Comprehension:
Proposal: Cab Co is considering the implementation of a new computerised taxi tracking system. The expected costs and benefits related to this system are as follows:
Implementation Costs and Related Expenditures:
(a) The system would cost $2,100,000 to implement (initial investment).
(b) Depreciation on the system would be $420,000 per year.
(c) A total of $75,000 has already been spent on staff training to evaluate the system (sunk cost). If implemented, additional training costs of $425,000 would be incurred in Year 1.
(d) Sales are expected to increase by $200,000 per year as a result of the system.
(e) Vehicle running cost savings are expected, estimated at 1% of total sales.
(f) Six new staff members would be hired to manage the system, at a total cost of $120,000 per year.
(g) A maintenance contract would be required at $75,000 per year for 5 years.
(h) Interest cost on borrowing to fund the project is estimated at $150,000 per year (note: not included in DCF as per financial management principles).
(i) Sales projections:
- If the system is implemented, sales are expected to rise to $11 million in Year 1, and then increase by 5% annually.
- If not implemented, sales will remain at $10 million annually.
Which of the following are relevant costs for a net present value (NPV) evaluation of a proposed computerised taxi tracking system?
1. Initial investment cost of $2,100,000
2. Depreciation of $420,000 per year
3. Future staff training costs of $425,000
4. Past staff training costs of $75,000 already incurred
5. New staff salaries of $120,000 per year
6. Interest cost of $150,000 per year
Answer (Detailed Solution Below)
Management Accounting Question 13 Detailed Solution
Correct Answer: A
Explanation:
-
Initial investment cost of $2,100,000
Relevant – This is a future incremental cash outflow, and is directly related to the decision. -
Depreciation of $420,000 per year
Irrelevant – Depreciation is a non-cash accounting entry, not an actual cash flow. -
Future staff training costs of $425,000
Relevant – This is a future incremental cash outflow tied to the implementation of the system. -
New staff salaries of $120,000 per year
Relevant – These are future cash costs incurred only if the system is implemented. -
Past training costs of $75,000 already incurred
Irrelevant – This is a sunk cost (already spent), and should not influence the decision. -
Interest cost of $150,000 per year
Irrelevant – This is a financing cost, not an operating cash flow. Under NPV, interest is already accounted for through the cost of capital, unless it represents an opportunity cost (which must be separately identified).
Management Accounting Question 14:
A company uses marginal costing. The following variances occurred during the last period when the actual net profit was $40,000:
Materials variance: $900 adverse
Labour variance: $1,000 favourable
Overheads variance: $700 adverse
Sales price variance: $500 favourable
Sales volume contribution variance: $900 favourable
What was the budgeted net profit for the last period?
Answer (Detailed Solution Below)
Management Accounting Question 14 Detailed Solution
Correct Answer: D
Explanation:
Given:
-
Actual net profit = $40,000
-
Materials variance = $900 adverse
-
Labour variance = $1,000 favourable
-
Overheads variance = $700 adverse
-
Sales price variance = $500 favourable
-
Sales volume contribution variance = $900 favourable
Step-by-step reconciliation to budgeted profit:
Management Accounting Question 15:
The purchase price of an inventory item is $25 per unit. In each three-month period, the usage is 20,000 units. The annual holding cost per unit is 6% of the purchase price, and the cost to place an order is $20.
What is the economic order quantity (EOQ) for the inventory item? (Round to the nearest whole unit.)
Answer (Detailed Solution Below)
Management Accounting Question 15 Detailed Solution
Correct Answer: C
Explanation: