CMA II Quiz

Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory's purchasing department?

• Machine-hours

• Number of orders processed

• Direct labour hours

• Cost of materials purchased

Genius Electronics manufactures a variety of electronic gadgets for use in the home. Which of the following would probably be the most accurate measure of activity to use for allocating the costs of inspecting the finished products at Genius?

• Inspection time

• Machine hours

• 
  Direct labour hours

• 
  Number of setup

A ______ is a cost estimate derived by subtracting a desired profit margin from a competitive market price.

• Fixed cost

• Variable cost

• Target cost

• None of the choices

Where a gap exists between the current estimated cost levels and the target cost, it is essential that this gap be closed. Efforts to close a target cost gap are most likely to be successful at the design stage. It is far easier to ‘design out’ cost during the pre-production phase than to ‘control out’ cost during the production phase.

• TRUE

• FALSE

The following statements relate to life-cycle costing:

(i) It helps forecast a product’s profitability over its entire life.
(ii) It takes into account a product’s total costs over its entire life.
(iii) It focuses on the production of monthly profit statements throughout a product’s entire life.

Which of the statements are true?

• (i) only

• (i) and (ii) only

• (i) and (iii) only

• (i), (ii) and (iii)

Which of the following costs would be included to find the life-cycle cost of a product?

(i) Research and development costs
(ii) Production costs
(iii) Distribution costs
(iv) Marketing costs

• (i), (ii) and (iv) only

• (ii), (iii) and (iv) only

• (i) and (iii) only

• All of the above

If an investment of RM1000 generates a profit of RM200, what is the return on investment?

• 20%

• 10%

• 15%

• 25%

Transfer pricing is used when divisions of an organisation need to charge other divisions of the same organisation for goods and services they provide to them.

• TRUE

• FALSE

What are the methods commonly used for determining transfer prices?

• 
  Value-based method

• Profit split method

• Resale-value method

• Market-based method

The term “budget slack” refers to the

• 
  Deliberate over-estimation of costs and under-estimation of revenues in a budget.

• Difference between the budgeted output and the breakeven output.