Management Accounting MCQ Questions and Solutions with Explanations | Management

In static budget, difference between corresponding budgeted amount and actual result is called static budget variance. Static budget variances are the differences between what a company or individual thought it would spend in its budget versus what it actually did.

An analysis and reporting of revenues earned, and incurred costs to earn these revenues from customers is classified as customer profitability analysis. Customer Profitability Analysis is a tool from managerial accounting that shifts the focus from product line profitability to individual customer profitability.

Cost of particular cost object which cannot be traced in economically plausible way is termed as indirect cost. Indirect costs are costs used by multiple activities, and which cannot therefore be assigned to specific cost objects.

Division of all costs related to customers on basis of different cost allocation bases or cost drivers is called customer cost hierarchy. The cost hierarchy is a classification system used in activity-based costing that designates activities based on how easily they can be traced to a product.

In customer cost hierarchy, costs of all incurred activities to sell a unit of product are classified as customer output unit-level costs. Output unit-level costs are the costs of activities performed on each individual unit of a product or service.

Corporate administration costs do not include among major categories of corporate costs. These costs include the accounting, human resources, legal, marketing, and sales functions. When corporate costs are incurred, they are considered to be period costs, and so are charged to expense as incurred.

In customer cost hierarchy, costs of those activities that cannot be traced to distribution channels or individual customers are called corporate-sustaining costs.

Static budget variance = Static budget - Corresponding budgeted amount
= $2500 - $2200 = $300.

In customer cost hierarchy, costs of individual customer support activities are classified as customer-sustaining costs. A customer-sustaining cost is the cost of resources consumed to service a customer regardless of the number of units sold to the customer.

Pricing method used by services companies, such as home repair services, architectural firms and automobile repair services is known as time and material method. The Pricing Methods are the ways in which the price of goods and services can be calculated by considering all the factors such as the product/service, competition, target audience, product's life cycle, firm's vision of expansion, etc. influencing the pricing strategy as a whole.