Management Accounting MCQ questions
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margin of safety
margin of profit
margin of loss
margin of income
Difference between Breakeven Point vs. Margin of Safety Break-even point (BEP) is the level of sales where a total of fixed and variable cost equals total revenues. In other words, the breakeven point is a level where the company neither makes profit nor loss.
The margin of safety is a financial ratio that measures the amount of sales that exceed the break-even point. In other words, this is the revenue earned after the company or department pays all of its fixed and variable costs associated with producing the goods or services.
interactive control systems
diagnostic control systems
The following points highlight the top ten techniques of performance evaluation. The techniques are: 1.Budgetary Control and Reporting 2.Balanced Scorecard 3.Variance Analysis 4.Contribution Margin 5.Return on Capital Employed (ROCE) 6.Residual Income (RI) 7.Value Added 8.Bench Marking 9.Ratio Analysis 10.
Sunk cost is a cost which is already incurred. It cannot be changed by any current or future action. For example if a new machine is purchased to replace an old machine; the cost of old machine would be sunk cost. Irrelevant costs are fixed costs, sunk costs, book values, etc.
And the new machine are not yet acquired, so we do not have either book value or disposable price or whatever. Now if we sold the old machine right now, we would have an accounting loss of 432, why? Because the book value of the machine is 480, this is the original cost less accumulated depreciation.
An irrelevant cost is a cost that will not change as the result of a management decision. However, the same cost may be relevant to a different management decision. Consequently, it is important to formally define and document those costs that should be excluded from consideration when reaching a decision.
$20 per unit
$30 per unit
$50 per unit
$40 per unit
While the contribution margin per unit formula is a very helpful matrix for managers to consider while maximizing their profits. Making decisions solely on basis of it, or even cutting out on products that have the lowest contribution margin might not always be the right thing to do.
Contribution margin (CM) is the amount by which sales revenue exceeds variable costs. It is the net amount that sales 'contribute' towards periodic fixed costs and profits. It is expressed either as total contribution margin, contribution margin per unit or contribution margin ratio.