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:
Company Background: Cab Co owns and operates 350 taxis and generated sales of $10 million in the last financial year.
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.
Financial Information: Cost of capital: 10% per annum
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:
Company Background: Cab Co owns and operates 350 taxis and generated sales of $10 million in the last financial year.
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.
Financial Information: Cost of capital: 10% per annum
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:
Company Background: Cab Co owns and operates 350 taxis and generated sales of $10 million in the last financial year.
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.
Financial Information: Cost of capital: 10% per annum
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
Correct Answer: A
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:
The following question is taken from the January to June 2014 exam period.
A company has prepared flexed budgets at two activity levels. The cost per unit of three. costs is given below. All three costs behave in a linear manner with respect to activity.
| Activity level (units) | ||
| 10,000 | 15,000 | |
| Cost | ||
| X | $3.0 per unit | $2.0 per unit |
| Y | $1.0 per unit | $1.0 per unit |
| Z | $3.5 per unit | $3.0 per unit |
Is each of the costs variable, semi-variable or fixed?
Answer (Detailed Solution Below)
| X | Y | Z |
| Fixed | Variable | Semi-Variable |
Management Accounting Question 7 Detailed Solution
The Correct Option is option 3
Additional Information:
- The key to the question is to understand that for variable costs the cost per unit is constant, whilst for fixed costs the total cost is constant. Cost X can quickly be identified as a fixed cost as the total cost between the two output levels is unchanged (10,000 units x $3 = 15,000 units x $2). Cost Y is a variable cost because the cost per unit is constant. Cost Z meets neither of these criteria because it contains elements of both fixed and variable cost, and therefore is a semi variable cost.
Management Accounting Question 8:
Which of the following processes occurs at the business planning stage?
Answer (Detailed Solution Below)
Management Accounting Question 8 Detailed Solution
The Correct Option is option 4
- The planning stage involves establishing objectives and selecting appropriate strategies to achieve those objectives. The other business processes occur after production has started or ended.
Management Accounting Question 9:
Comprehension:
CastildaCo manufactures toy robots. The company uses a standard marginal costing system and values inventory at standard cost.
Standard Cost Card – Toy Robot
| Item | Cost per unit ($) | 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 ($) | Nature |
|---|---|---|
| Total Direct Materials Variance | 12,800 | Adverse |
| Direct Labour Rate Variance | 21,000 | Adverse |
| Direct Labour Efficiency Variance | 10,000 | Favourable |
| Total Variable Production Overhead Variance | 48,000 | Favourable |
Which of the following would most likely result in an adverse direct labour rate variance but a favourable efficiency variance?
Answer (Detailed Solution Below)
Management Accounting Question 9 Detailed Solution
Correct Answer: C
Explanation:
Using higher grade (more skilled) labour typically means paying a higher hourly rate, which causes an adverse rate variance.
However, because they work faster or more efficiently, they use fewer hours, leading to a favourable efficiency variance.
Management Accounting Question 10:
Comprehension:
CastildaCo manufactures toy robots. The company uses a standard marginal costing system and values inventory at standard cost.
Standard Cost Card – Toy Robot
| Item | Cost per unit ($) | 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 10 Detailed Solution
Correct Answer: A
Explanation:
Management Accounting Question 11:
Comprehension:
Company Background: Cab Co owns and operates 350 taxis and generated sales of $10 million in the last financial year.
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.
Financial Information: Cost of capital: 10% per annum
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 11 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 12:
Comprehension:
Company Background: Cab Co owns and operates 350 taxis and generated sales of $10 million in the last financial year.
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.
Financial Information: Cost of capital: 10% per annum
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 12 Detailed Solution
Correct Answer: A
Explanation:
Management Accounting Question 13:
Comprehension:
Company Background: Cab Co owns and operates 350 taxis and generated sales of $10 million in the last financial year.
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.
Financial Information: Cost of capital: 10% per annum
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 $11 million sales in Year 1.
Answer (Detailed Solution Below)
Management Accounting Question 13 Detailed Solution
Correct Answer: C
Explanation:
| Item | Amount ($'000) |
|---|---|
| Sales (with tracking system) | 11,000 |
| Vehicle running cost savings (1%) | 110 |
Management Accounting Question 14:
Comprehension:
Company Background: Cab Co owns and operates 350 taxis and generated sales of $10 million in the last financial year.
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.
Financial Information: Cost of capital: 10% per annum
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 14 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
\text{Incremental Sales} = \$11,000,000 - \$10,200,000 = \boxed{\$800,000}
Management Accounting Question 15:
Comprehension:
Company Background: Cab Co owns and operates 350 taxis and generated sales of $10 million in the last financial year.
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.
Financial Information: Cost of capital: 10% per annum
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 15 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).