CIMA BA2 Fundamentals of Management Accounting: mock exams and practice questions

Sample question 1 · A · The context of management accounting

Harlow Kitchens Ltd employs both financial accountants and management accountants. Which of the following statements describes management accounting rather than financial accounting?

1. A It must follow the formats and rules set by company law and accounting standards so that results can be compared between companies
2. B It produces information mainly for internal managers, in whatever format is most useful, and often looks forward to future periods
3. C It reports mainly to shareholders and other external users on the results of past accounting periods
4. D It is required by law for every limited company and its output is normally subject to external audit

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Answer: B. Management accounting provides information for managers inside the organisation to help them plan, control and make decisions. It has no legally required format, uses financial and non-financial data, and is often about the future.

Financial accounting records past transactions and reports them to external users (shareholders, lenders, tax authorities) in a format set by company law and accounting standards, and is usually audited.

Sample question 2 · B · Costing

Timbercraft Ltd makes wooden dining tables in a single factory. Which of the following is a direct cost of a table?

1. A The salary of the supervisor who oversees all production in the factory
2. B The oak boards cut and fitted into each table
3. C Depreciation of the sawing machines used for all products
4. D Rent of the factory building

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Answer: B. A direct cost can be identified with, and measured for, a specific cost unit (here, one table): direct materials, direct labour and direct expenses. Indirect costs (overheads) are incurred for several cost units together and must be shared out (absorbed) using an overhead absorption rate. The oak in each table is direct material; supervision, depreciation and rent are production overheads.

Sample question 3 · C · Planning and control

Bramwell Ltd plans to produce 8,000 units of its product next month. Each unit needs 3 kg of material M, which costs $4.50 per kg. Inventory of material M is expected to be 5,200 kg at the start of the month, and the company wants to reduce it to 4,000 kg by the end of the month. What is the material purchases budget for the month, in $?

1. A $102,600
2. B $113,400
3. C $108,000
4. D $126,000

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Answer: A. | Material M | kg |
|---|---|
| Usage (8,000 units × 3 kg) | 24,000 |
| Add: closing inventory | 4,000 |
| Less: opening inventory | (5,200) |
| Purchases | 22,800 |

Purchases budget = 22,800 kg × $4.50 = $102,600.

Because inventory is being reduced by 1,200 kg, purchases are lower than usage.