Management Accounting MCQ Questions and Solutions with Explanations | Management

Sum of working capital and current liabilities is equal to current assets.

Rupee amount for required return of investment is subtracted from income to calculate residual income. Residual income is excess income generated more than the minimum rate of return. Residual income is a measurement of internal corporate performance, whereby a company's management team evaluates the income generated relative to the company's minimum required return.

Return on sales is multiplied to investment turnover to calculate return on investment. Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost.

Formal information systems, used in organizations to focus company's learning and attention given to most important strategic issues are known as interactive control system. Interactive Control System is a management system used to provide strategic feedback, track new ideas, trigger new organizational learning, and to properly position the organization for the future: incorporating process data into management interaction, face-to-face meetings with employees, challenging data, assumptions and action plans of subordinates.

Measures that analyze performance of a company, such as residual income, economic value added and customer satisfaction are collectively called diagnostic control systems. Diagnostic Control System is a traditional management control system used to monitor and optimize targets and outcomes: budgets, performance management and measurement, business plans, valuation standards, incentive systems and compensation systems.

Total available assets are subtracted from idle assets to calculate total assets employed.

To calculate breakeven number of units, fixed cost is divided into contribution margin per unit. A break-even analysis is a financial tool which helps you to determine at what stage your company, or a new service or a product, will be profitable. In other words, it’s a financial calculation for determining the number of products or services a company should sell to cover its costs (particularly fixed costs). Break-even is a situation where you are neither making money nor losing money, but all your costs have been covered.

Contribution margin per unit = Selling price × contribution margin percentage
= $5000 × 30% = $1,500.

Total revenue = Contribution margin + Total variable cost
= $13000 + $7000 = $20,000.