MANAGENT ACCOUNTING Question And Answers
- Give examples for cash flow from financing activities.
Answer:- Sale of stock (positive cash flow)
Repurchase of company stock (negative cash flow)
Issuance of debt, such as bonds (positive cash flow)
Repayment of debt (negative cash flow)
Payment of dividends(negative cash flow)
- Define marginal cost.
Answer:- Marginal cost is the cost incurred for producing one additional unit of a product or service.
- What is contribution?
Answer:- Contribution = Sales − variable costs
- What is P/V ratio?
Answer:- P/V Ratio (Profit Volume Ratio) is the ratio of contribution to sales which indicates the contribution earned with respect to one rupee of sales. It also measures the rate of change of profit due to change in volume of sales.
- Give the formula for P/V ratio.
Answer:- P/V ratio =Contribution x100/sales (*Contribution means the difference between sale price and variable cost).
- What is breakeven point?
Answer:- The break-even point (BEP) or break-even level represents the sales amount—in either unit (quantity) or revenue (sales) terms—that is required to cover total costs, consisting of both fixed and variable costs to the company. Total profit at the breakeven point is zero.
- Give the formula breakeven point.
Answer:- Breakeven point = Fixed expenses /p/v ratio.
- What do you understand by limiting factor?
Answer:- In management accounting, limiting factors refer to the constraints in availability of production resources (e.g. shortages in labor, machine hours or materials) that prevent a business from maximizing its sales.
- What is sales mix?
Answer:- A sales mix is the variety of products sold by a company.
- What is working capital?
Answer:- Working capital is the capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.
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