Well done! You pass our mock exam in Section A – Objective Test Questions.

Please scroll down for suggested answers.

The objective test questions in Section A aim for a broad coverage of the Management Accounting (MA) / FMA syllabus, hence all areas of the syllabus must be studied.

Great care should be taken in the following subjects while examiner stated students performed relatively weak –

Calculation of abnormal gain or loss
Financial performance by explaining financial ratios
High low analysis
Unable to calculate NPV, IRR and payback in capital budgeting
Unable to calculate standard cost variances, difficult in reconciling actual and budgeted figures
Unable to calculate residual income and return on capital employed

Management Accounting pass rate is the lowest among all papers in Applied Knowledge Module. On average, half of the marks is from numeric questions while another half is from conceptual questions.

It is noted that students are relatively weak in calculation.

So, what’s the exam tips to you?

Practice makes perfect!

Number entry questions can be improved by practicing as many questions as possible in different formats.

It really helps your performance and chance to pass!

In addition, remember to attempt all questions as there are no negative marks for incorrect answers.

Suggested answers:

2 levels of production activities are: Level 1, 3,000 units with cost $6,750; Level 2, 5,000 units with cost $9,250. Variable production cost per unit & total fixed production cost both remain constant. What is the variable production cost per unit?

Answer: $1·25

Which sampling method would be used to test the proportion of people who smoke cigarettes in different age groups?

Answer: Stratified sampling

A group of 60 trainee accountants were asked about their favourite sport. The results are: Rugby 15; Cricket 12; Swimming 12; Tennis 11; Athletics 10. The data is to be presented in a pie chart. What will be the angle of the segment represents rugby?

Answer: 90°

Which statements are correct? (1) Strategic information is mainly used by senior management in an organisation; (2) Productivity measurements are examples of tactical information; (3) Operational information is required frequently by its main users

Answer: 1, 2 and 3

Which of the following describes target costing? It is a method of costing that …

Answer: Sets a target cost by subtracting a desired profit margin from a market price

2 processes (A and B) data was as follows: Process A: Normal loss as % of input is 5, Input 5,500, Output 5,200; Process B: Normal loss as % of input is 8, Input 4,000, Output 3,700. For each process, was there an abnormal loss or an abnormal gain?

Answer: Process A is abnormal loss, Process B is abnormal gain

GRE operates a process costing system. Last month, it had WIP 300 units (60% complete and valued at $1,710. 2,000 units were completed and transferred to warehouse. The cost per equivalent unit was $10. It uses FIFO method of cost allocation. What was the total value of the 2,000 units transferred to the finished goods warehouse last month?

Answer: Total value of 2,000 units transferred to finished goods warehouse was $19,910

The process account for is as follows: Costs arising 624,000; Finished output (10,000 units) 480,000; Closing WIP (4,000 units) 144,000. The closing WIP was complete to the same degree for all elements of cost. No opening WIP. Which one is correct?

Answer: The percentage degree of completion of closing work-in-progress (WIP) is 75%

P & Q are production cost centres and X & Y are service cost centres. The overhead for each is: P 95000, Q 82000, X 46000, Y 30000. X costs are allocated to P 40%, Q 40% & Y 20%. Y costs are allocated to P 30%, Q 60% & X 10%. Which one is correct?

Answer: Production cost centre P overhead is 127,000 after reapportionment service cost

Product demand is 12,500 units for 3 months. Each unit purchase price $15 and ordering costs are $20 per order placed. The annual holding cost of 1 unit of product is 10% of its purchase price. What is the Economic Order Quantity (nearest unit)?

Answer: 1,155

Which one of the following groups of workers would be classified as indirect labour?

Answer: Maintenance workers in a shoe factory

A company uses a machine hour rate to absorb production overheads, which were budgeted to be $130,500 for 9,000 machine hours. Actual overheads incurred were $128,480 and 8,800 machine hours were recorded. Which one is correct?

Answer: The total under absorption of production overheads is $880

Recently, a supplier invoiced A Co for some materials that had actually been ordered and sent to another customer, B Co. Which control procedures below within A Co should ensure that it only pays invoices in respect of goods that is has received?

Answer: Matching all purchase invoices against goods received notes

Which of the following is NOT an acceptable method of accounting for by-products?

Answer: Pre-separation costs are apportioned to the by-product to calculate its profit

A process operates with a normal loss of 5% of input.All losses have a realisable value of $38 per litre. Last month 10,000 litres were input & output were 9,200 litres. Process costs were $456,000. There was no WIP. What was process account entry? for abnormal loss last month?

Answer: The credit entry for abnormal loss last month was $13,800

A process produces 2 joint products A and B in equal physical quantities. A and B are sold at split off point for $5/kg and $8/kg respectively. If joint costs are apportioned on a relative sales value basis, which of the following statements is true?

Answer: Both products will have the same return on sales ratio (operating margin)

The correlation coefficient (r) for measuring the connection between two variables (x and y) has been calculated as 0·6. How much of the variation in the dependent variable (y) is explained by the variation in the independent variable (x)?

Answer: 36%

Which of the following could be included in a time series based sales forecast?

(1) Trend;

(2) Seasonal variation;

(3) Cyclical variation;

(4) Random fluctuation

Answer: 1, 2 and 3 only

Which of the following refers to “budget slack”?

Answer: The deliberate over-estimation of costs in a budget

What is the budgeted cost of goods sold given the following for next budget period (in $’000)? Sales 5,000; Fixed manufacturing costs 2,000; Variable manufacturing costs are 40% of sales revenue. Inventory levels are expected to remain constant.

Answer: $4,000,000

Which of the following describes a flexible budget?

Answer: A set of budgets showing costs and revenues at different levels of activity

Which of the following is a feature of a fixed budget?

Answer: A budget for a single level of activity

Standard cost of the only product is ($/unit): Price 118; Direct labour (4 hours) 80; Material 21 (3 kg); Fixed overhead 5; Profit 12. Budgeted production and sales were 8,000 units, whilst actual were 6,000 units. What is the flexed budget profit?

Answer: $62,000

A $10,000 adverse material variance by subtracting its flexed budget material cost from its actual material cost is found. 1. An increase in material prices; 2. An increase in raw material usage per unit; 3. Units produced being greater than budgeted

Answer: Only 1 and 2 caused the variance

Which of the following factors is least likely to motivate managers to achieve higher levels of performance?

Answer: A top-down approach to budgeting

Using a discount rate of 10% the net present value (NPV) of a project is $50,000 and using a discount rate of 13% the NPV is negative $10,000. What is the internal rate of return (IRR) of the project?

Answer: 12.5%

Profit is $36,000 under absorption costing. What is profit for next period given marginal costing with information below? In units: Production 14,000, sales 12,000; Fixed costs $63,000, Sales $12,000. Normal level is 14,000 units per period.

Answer: $27,000

A firm uses standard marginal costing. Last period, actual sales units 5,000; Standard contribution per unit $60; Sales price variance $5,000 Adverse; Sales volume contribution variance $8,000 Favourable. What was actual contribution for the period?

Answer: $295,000

Fiedler identified psychologically distant managers (PDMs) and psychologically close managers (PCMs). Which are PCMs? 1.Task-oriented; 2.Judge subordinates on the basis of performance; 3.People-oriented; 4.Prefer informal over formal meetings

Answer: 3 and 4

A bank benchmarks the performance of its recruitment department with that of a leading recruitment agency. What type of benchmarking is the bank using?

Answer: Functional benchmarking

A company borrows $10,000 repayable in five years’ time and immediately uses the loan to repay its overdraft. What will be the effect on the company’s capital gearing and current ratios?

Answer: Capital gearing Increase and current ratio Increase

A division earns an annual operating profit of $200,000 and has a return on investment of 20% per year. What is its residual income at an imputed annual interest rate of 15%?

Answer: $50,000

Which of the following are suitable measures of performance at the strategic level? (1) Residual income; (2) Revenue growth; (3) Monthly variance reports

Answer: 1 and 2

The following statements have been made about value analysis. (1) It seeks the lowest cost method of achieving a desired function; (2) It always results in inferior products; (3) It ignores esteem value. Which is/are true ?

Answer: 1 only

Which of the following best describes the mission of an organisation?

Answer: The primary reason for the existence of an organisation