Management Accounting: practice problems and exam questions

Costs, contribution margins, break-even points and the accounting concepts behind managerial decisions.

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Cram pack (PDF)Formula sheets, method steps and practice problems with full solutions, ready to print.

Topics in this course

  1. Break-even analysisbreak-even units · target profit · margin of safetycalculations
  2. Financial accountingkey terms and facts · applying the concepts · cases and analysismultiple choice

Exam tips for Management Accounting

  • Separate fixed and variable costs before you do anything else.
  • Contribution margin per unit = price − variable cost per unit.
  • Break-even volume = fixed costs / contribution margin per unit.

Worked examples

Break-even analysisEasy
Q€revenuetotal costfixed costQ = ?

A company sells a product for €36 per unit. The variable cost is €30 per unit and fixed costs are €15 000 per month. How many units Q must it sell per month to break even?

F = €15 000p = €36v = €30

Find Q (units)

Show hints
  1. At break-even, total revenue equals total cost.
  2. Each unit contributes p − v towards the fixed costs.
  3. p − v = €6.
Show the answer and the step-by-step solution

Cost-volume-profit: each unit sold earns a contribution margin, price minus variable cost per unit. Profit = Q·(p − v) − F, where F is the fixed cost. At the break-even point profit is zero, so Q = F/(p − v).

Contribution margin per unit

p − v = 36 − 30 = €6

Break-even quantity

Q = F/(p − v) = 15 000/6 = 2 500

Answer

Q = 2 500 units
Financial accountingMedium

A company pays its insurance for next year in advance. How is the payment recorded at the year end?

  1. AAs revenue
  2. BAs an expense of the current year in full
  3. CAs a liability
  4. DAs a prepaid expense (asset)
Show hints
  1. The benefit has not been used yet.
  2. Two wrong answers are now crossed out. One of the remaining two is right.
Show the answer and explanation

Why this is the answer

The unused part of the payment is an asset (prepayment) and becomes an expense in the period it covers.

Answer

D · As a prepaid expense (asset)

How practising works

  • “Practise this course” mixes problems from all its topics, like a real exam.
  • Every problem has new values, so you learn the method instead of an answer.
  • Stuck? Open a small hint first, and the full explanation only when you need it.
  • Mock exams are timed and have no hints, and you get your score and a full review at the end.

Calculators for this course

Break-even point calculator

Related courses

Business FundamentalsCorporate FinanceFinancial AccountingMicroeconomicsInvestments and ValuationCFA Level I quantitative methods and fixed income practice
Practise this course for freePractise this courseTake a mock exam5 free problems every day. No card needed.