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Free ACCA Management Accounting Practice Questions & Answers
400 exam-style Management Accounting questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 391
In the context of divisional performance, why might a manager choose to lease rather than buy an asset?
Select an option first.
Correct answer: B — Leasing reduces the capital employed in the division, potentially improving ROCE metrics
Explanation: B is correct: if a manager is measured on ROCE, keeping assets off the balance sheet through operating leases reduces the capital employed denominator, artificially inflating ROCE. This is a form of goal-incongruent behaviour driven by a narrow performance metric. A is wrong — leasing is not always cheaper than buying when total cost is considered. C is wrong — leased assets still have cost implications in performance reports. D is wrong — tax treatment of leases is complex and varies.
Question 392
A not-for-profit charity's key objective is to maximise beneficiary reach. Which performance measure best reflects effectiveness?
Select an option first.
Correct answer: C — Percentage of target beneficiaries actually reached
Explanation: C is correct: effectiveness = achieving intended outcomes. If the goal is to reach a target population, the percentage of that population actually served directly measures whether the charity is achieving its mission. A is wrong — cost per beneficiary measures efficiency (output per input). B is wrong — revenue measures fundraising success, not mission impact. D is wrong — administrative ratio measures economy/overhead control.
Question 393
Which of the following is a key limitation of EVA as a performance measure?
Select an option first.
Correct answer: B — It requires numerous subjective accounting adjustments, making it complex and potentially inconsistent
Explanation: B is correct: EVA requires multiple adjustments to accounting profit (capitalising R&D, reversing certain provisions, adjusting for goodwill etc.) — some of which involve judgement. This complexity can make EVA difficult to explain to managers and opens the door to inconsistent application. A is wrong — EVA uses economic profit (adjusted from accounting profit), not pure cash flows. C is wrong — EVA charges the full WACC including cost of equity. D is wrong — EVA can and should be tracked over time.
Question 394
A company's payable days are 65. Industry average is 40. What might this indicate?
Select an option first.
Correct answer: B — The company may be stretching its suppliers, which could damage supplier relationships
Explanation: B is correct: paying much later than the industry norm (65 vs 40 days) may indicate the company is using supplier credit aggressively — squeezing working capital from the supply chain. While this conserves cash, it can damage supplier relationships and result in less favourable terms or supply disruption. A is wrong — customer collection is a receivable days issue. C is wrong — payable days don't directly reflect profitability. D is wrong — gearing is about long-term debt.
Question 395
A performance report shows an adverse labour efficiency variance of $6,000 and a favourable labour rate variance of $2,000. What is the most useful management action?
Select an option first.
Correct answer: C — Investigate both variances together — the favourable rate may have caused the adverse efficiency (cheaper labour being less skilled)
Explanation: C is correct: variances can be interdependent — cheaper labour (favourable rate) may have been less experienced, taking longer than standard (adverse efficiency). Both should be investigated together to understand the root cause and decide whether the trade-off is worthwhile. A is wrong — favourable variances can also have undesirable causes. B is wrong — net offset hides important information. D is wrong — increasing volume doesn't address the efficiency issue.
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Question 396
The 'financial perspective' of the Balanced Scorecard answers which question?
Select an option first.
Correct answer: B — How do we look to our shareholders?
Explanation: B is correct: the financial perspective of the BSC asks 'how do we look to our shareholders?' — covering measures like revenue growth, profitability, ROCE and cash flow that demonstrate financial performance to capital providers. A is wrong — that is the customer perspective. C is wrong — that is the internal process perspective. D is wrong — that is the learning and growth perspective.
Question 397
A supermarket chain wants to measure performance of each store. Which combination of measures best covers all four BSC perspectives?
Select an option first.
Correct answer: B — Sales per sq ft (financial), mystery shopper score (customer), out-of-stock rate (internal), staff training completion (learning)
Explanation: B is correct: this combination covers all four perspectives with relevant, store-level measures: financial (sales per sq ft), customer (mystery shopper satisfaction), internal process (out-of-stock rate = operational excellence), and learning & growth (training completion). A is wrong — only two perspectives covered. C is wrong — electricity and rent are operational costs, not a BSC spread. D is wrong — these are investor ratios, not store-level operational BSC measures.
Question 398
Interest cover of 1.5 times suggests:
Select an option first.
Correct answer: B — There is modest but limited headroom — operating profit is only 1.5 times interest, leaving little buffer for profit decline
Explanation: B is correct: interest cover of 1.5x means PBIT is 1.5 times interest. While technically solvent on interest payments, a 33% fall in profit would leave the company unable to cover interest — indicating financial fragility and relatively high financial risk. A is wrong — 1.5x is quite tight; comfortable cover is typically 3x or above. C is wrong — 1.5x means interest IS covered. D is wrong — no debt would mean infinite interest cover.
Question 399
Which of the following best describes the concept of 'economic profit'?
Select an option first.
Correct answer: B — Profit after deducting both explicit costs and the opportunity cost of all capital employed
Explanation: B is correct: economic profit deducts a charge for all capital used (both debt and equity) from accounting profit — reflecting the true cost of resources including the opportunity cost of shareholders' equity. EVA operationalises this concept. A is wrong — inventory method doesn't define economic profit. C is wrong — gross profit ignores overheads and capital cost. D is wrong — statutory profit ignores the cost of equity.
Question 400
A division's performance report shows controllable profit of $180,000 and non-controllable allocated costs of $40,000. What is the divisional net profit?
Select an option first.
Correct answer: C — $140,000
Explanation: C is correct: divisional net profit = controllable profit − non-controllable allocated costs = $180,000 − $40,000 = $140,000. This figure represents the division's full contribution to group overhead recovery, though the manager should only be assessed on the $180,000 controllable figure. A is wrong — $180,000 is controllable profit only. B is wrong — $220,000 adds rather than deducts. D is wrong — $40,000 is the allocated cost.
Question 401
A company has net profit of $300,000, revenue of $2,000,000, and capital employed of $2,500,000. All ratios are needed. Which statement is correct?
Select an option first.
Correct answer: C — ROCE = 15%; net profit margin = 12%; asset turnover = 1.25x — and DuPont confirms: 12% × 1.25 = 15%
Explanation: C is correct: ROCE = $300,000 / $2,500,000 = 12%. Net profit margin = $300,000 / $2,000,000 = 15%. Asset turnover = $2,000,000 / $2,500,000 = 0.8x. DuPont: 15% × 0.8 = 12% ✓. Wait — let me recheck: ROCE = 300/2,500 = 12%. Margin = 300/2,000 = 15%. AT = 2,000/2,500 = 0.8. DuPont: 15% × 0.8 = 12% ✓. So answer B is correct. B is correct: ROCE = 12%; net profit margin = 15%; asset turnover = 0.8x — and DuPont confirms: 15% × 0.8 = 12%.
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