Management Accounting

What is the primary purpose of management accounting?

• To assist management in decision-making and control.

• To prepare financial statements for external stakeholders.

• To ensure compliance with tax regulations.

• To manage employee performance evaluations.

Define a cash flow statement and its components.

• A cash flow statement consists of three main components: operating activities, investing activities, and financing activities.

• Profit and loss statement sections

• Revenue streams and expenses

• Balance sheet components

What are the key differences between budgeting and budgetary control?

• Budgeting is the planning phase, while budgetary control is the monitoring and evaluation phase.

• Budgeting is a one-time process, while budgetary control is an annual requirement.

• Budgeting involves only income estimation, whereas budgetary control focuses solely on expenses.

• Budgeting is only for personal finance, while budgetary control is for businesses.

Explain the concept of marginal costing.

• Marginal costing is a method that focuses solely on historical costs.

• Marginal costing includes both fixed and variable costs for decision-making.

• Marginal costing is a costing method that considers only variable costs for decision-making, excluding fixed costs.

• Marginal costing is primarily used for tax calculations and compliance.

How does standard costing help in performance evaluation?

• Standard costing helps in performance evaluation by providing benchmarks for cost comparison, identifying variances, and facilitating analysis for efficiency improvements.

• Standard costing is primarily used for tax reporting purposes.

• Standard costing only applies to manufacturing companies.

• Standard costing eliminates the need for budgeting.

What is the role of variance analysis in management accounting?

• Variance analysis is only used for tax calculations.

• Variance analysis is irrelevant to management decision-making.

• Variance analysis plays a crucial role in identifying performance discrepancies and guiding management decisions.

• Variance analysis focuses solely on historical data without future implications.

Describe the importance of cash flow management in a business.

• Cash flow management has no impact on business growth.

• Cash flow management is only important for large corporations.

• Cash flow management is solely about increasing profits.

• Cash flow management is essential for maintaining liquidity, ensuring obligations are met, and supporting informed financial decisions.

What are the advantages of using marginal costing for decision making?

• Increased fixed costs analysis

• Focus on historical costs

• Complex pricing strategies

• Advantages of marginal costing include simplified cost analysis, better pricing decisions, enhanced focus on variable costs, and effective break-even analysis.

How do fixed and variable costs differ in standard costing?

• Fixed costs vary with production volume, while variable costs remain constant.

• Fixed costs are constant and allocated per unit, while variable costs change with production volume.

• Variable costs are allocated per unit, while fixed costs change with production levels.

• Both fixed and variable costs are constant regardless of production volume.

What is a flexible budget and how is it prepared?

• A flexible budget is prepared by only estimating fixed costs without considering variable costs.

• A flexible budget is a fixed budget that does not change with activity levels.

• A flexible budget is a budget that is set once and remains unchanged throughout the period.

• A flexible budget is a budget that adjusts based on actual activity levels and is prepared by identifying fixed and variable costs, calculating variable costs for actual output, and adding fixed costs.