Accounting Q&A · Cost and Management Accounting · Topic 24
Work through the questions, then reveal the answers to check your reasoning.
25 short-answer questions. Try each question before revealing its answer.
Worked example
A subscription service earns 48 per customer per month and incurs 18 of incremental monthly service cost. Monthly contribution is 30 before acquisition cost and fixed platform costs.
Core concepts
1. What is strategic management accounting?
Using internal and external information to support strategy and competitive decisions.
2. Why analyse the value chain?
To see where costs arise and where activities create value for customers.
3. What is benchmarking?
Comparing a defined process or measure with an appropriate reference point.
4. Why compare like-for-like benchmarks?
Different scope, volumes or service levels can make headline figures misleading.
5. How does automation change cost structure?
It can replace variable labour with capacity, support and depreciation costs.
6. Why revisit allocation drivers after automation?
Labour hours may no longer represent how products consume overhead.
7. What is a shared service centre?
A unit that consolidates common activities such as payroll or accounts payable.
8. How can a shared service centre measure output?
Track transaction volumes, service time and accuracy using clearly defined measures.
9. What is a rolling forecast?
A forecast updated regularly and extended as each period passes.
10. How does a forecast differ from a target?
A forecast estimates likely outcomes. A target states the desired result.
Worked applications
11. What is monthly recurring revenue?
Recurring subscription revenue expressed as a monthly measure under a defined policy.
12. Why document how recurring revenue is calculated?
Different treatment of discounts, trial accounts or one-off charges affects comparability.
13. What is customer churn?
The proportion of customers lost over a stated period using a defined base.
14. A service starts with 500 customers and loses 20. What is simple customer churn?
4% of opening customers.
15. Revenue per customer is 50 and incremental service cost is 22. What is unit contribution?
28 before fixed and acquisition costs.
16. An automation project saves 10,000 annually but adds annual support costs of 3,000. What is annual incremental saving?
7,000 before the investment outlay and other effects.
17. Why separate acquisition cost from servicing cost?
They are driven by different activities and affect customer economics at different times.
18. What is a useful data control for dashboards?
Reconcile totals to source records and document each measure’s definition.
19. Why assign ownership of key data fields?
An owner can maintain quality, resolve errors and approve changes.
Review and exam practice
20. What risk arises when using an AI tool to draft forecasts?
It may invent assumptions or misread data. Verify inputs and calculations and protect confidential information.
21. How can cloud costs behave?
Some charges vary with use while minimum commitments or subscriptions remain fixed over a period.
22. Why include resilience in supplier analysis?
Disruptions can cause delays and lost contribution that the unit quote omits.
23. What does scenario planning test?
How coordinated changes in demand, capacity or costs affect a plan.
24. Why report uncertainty with point estimates?
A range shows how sensitive the decision is to assumptions.
25. What should a modern cost model review check?
Check the business model, resource drivers, data controls, incentives and how the result will be used.