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Advanced Management Accounting Questions 153–183 (page: 12)

Updated On: 31-Jan-2026

The discount rate at which the net present value (NPV) is zero is known as the

  1. accounting rate of return
  2. risk adjusted discount rate
  3. internal rate of return
  4. breakeven point

Answer(s): C



DRAG DROP (Drag and Drop is not supported)

Place the correct quality cost classification against each cost described below.

  1. See Explanation section for answer.

Answer(s): A

Explanation:



Which of the following is a correct description of the key features of net present value?

  1. It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.
  2. It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used reflects the risk of the project.
  3. It adjusts the relevant profits of a project to reflect the time value of money. The discount rate used reflects the risk of the project.
  4. It adjusts the relevant cash flows of a project after the deduction of depreciation charges to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.

Answer(s): B



A group consists of two divisions, Alpha and Beta, both of which are profit centers. Alpha sells a product to the external market and also sells it as an intermediate product to Beta.

Beta then processes further before selling the final product to the external market. The current group transfer pricing policy requires Alpha to charge Beta with the variable cost of production.

Which of the following statements is valid?

  1. A two-part tariff would provide a more effective basis for assessing divisional performance.
  2. A dual pricing approach to transfer pricing would increase Beta's total profit and reduce Alpha's.
  3. If Alpha has unfulfilled external demand then the transfer price should always be set at variable cost.
  4. Transfer prices only affect the assessment of performance of investment centres, not of profit centres.

Answer(s): A



A company has just completed the production of the first 16 batches of a product. A learning curve has been observed throughout. The following table gives further details.



To the nearest whole percentage, what rate of learning is implied?

  1. 87%
  2. 8%
  3. 84%
  4. 93%

Answer(s): C



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