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Sample ICSAN Management Accounting Practice Questions

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1A manufacturing firm in Lagos has the following output and total costs for two recent months: Month 1 (10,000 units: ₦250,000 total cost); Month 2 (15,000 units: ₦325,000 total cost). Using the high-low method, what is the estimated total cost for a month where 12,000 units are produced?

A.₦280,000

B.₦270,000

C.₦290,000

D.₦300,000

Explanation: Using the high-low method: Variable Cost per unit = (₦325,000 - ₦250,000) / (15,000 - 10,000) = ₦75,000 / 5,000 = ₦15 per unit. Total Fixed Cost = ₦250,000 - (10,000 * ₦15) = ₦100,000. Total Cost for 12,000 units = ₦100,000 + (12,000 * ₦15) = ₦100,000 + ₦180,000 = ₦280,000.

2Which of the following descriptions best fits a 'step-up' fixed cost?

A.A cost that increases by a constant amount for each additional unit of output produced.

B.A cost that remains constant up to a certain level of activity, and then increases by a lump sum to a new level where it remains constant until the next capacity limit is reached.

C.A cost containing both a fixed and a variable component, such as electricity costs.

D.A cost that increases exponentially with output due to diminishing returns.

Explanation: A step-up fixed cost is constant for a given range of activity but increases by a lump sum (e.g., adding another warehouse or supervisor) once a threshold or capacity limit is breached.

3A direct factory worker is paid an overtime premium. In which of the following circumstances would this overtime premium be classified as a direct cost?

A.When the overtime is worked at the specific request of a customer to complete a special rush job.

B.When the overtime is worked due to general labour shortages in the local industrial area.

C.When the overtime is due to machine breakdown in the preceding production line.

D.Overtime premiums are always classified as indirect costs regardless of the circumstances.

Explanation: Normally, overtime premium is classified as an indirect cost (production overhead). However, if the overtime is specifically requested by a customer for a particular job, the premium is directly traceable and charged as a direct cost to that job.

4How is 'conversion cost' defined in management accounting?

A.The sum of direct materials cost and direct labour cost.

B.The sum of direct labour cost and production overheads.

C.The sum of prime costs and administrative overheads.

D.The total cost required to acquire raw materials and transport them to the factory.

Explanation: Conversion costs represent the costs required to convert raw materials into finished products. This consists of direct labour plus all manufacturing (production) overheads.

5Which of the following best describes a 'sunk cost'?

A.A cost that can be saved or avoided by choosing an alternative course of action.

B.A cost that has already been incurred by a past decision and cannot be recovered or changed by any future decision.

C.The value of the benefit sacrificed when one alternative is chosen in preference to another.

D.An estimated future cost that will vary depending on the decision made.

Explanation: A sunk cost is a historical cost that has already been incurred. It cannot be recovered or influenced by future decisions, and is therefore irrelevant for decision-making.

6An opportunity cost is best defined as:

A.The actual cash outflow required to implement a new project.

B.The value of the benefit sacrificed when one course of action is chosen in preference to the next best alternative.

C.The difference in total costs between two competing investment alternatives.

D.A cost that has already been committed and cannot be cancelled by management.

Explanation: Opportunity cost represents the lost contribution or benefit of the next best alternative foregone when a specific option is selected.

7How does fixed cost per unit behave as the level of activity increases?

A.It decreases as activity increases.

B.It increases as activity increases.

C.It remains constant regardless of the activity level.

D.It changes in direct proportion to the volume of output.

Explanation: Total fixed costs remain constant within the relevant range. Therefore, as volume increases, the same total fixed cost is spread over more units, causing fixed cost per unit to decline.

8Within the relevant range, variable cost per unit will generally:

A.Decrease as the level of activity increases.

B.Remain constant as the level of activity changes.

C.Increase as the level of activity increases.

D.Fluctuate randomly with output.

Explanation: By definition, variable cost per unit remains constant within the relevant range, assuming no economies of scale, quantity discounts, or production efficiencies.

9Which of the following represents the prime cost of a product?

A.The total of direct materials and direct labour costs only.

B.The total of direct materials and production overheads.

C.The sum of all direct production costs (direct materials, direct labour, and direct expenses).

D.The sum of direct materials, direct labour, and all production overheads.

Explanation: Prime cost is the summation of all direct manufacturing costs, which include direct materials, direct labour, and direct expenses.

10A firm has total maintenance costs of ₦180,000 for 4,000 machine hours and ₦220,000 for 6,000 machine hours. What is the fixed cost portion of this semi-variable cost?

A.₦100,000

B.₦80,000

C.₦120,000

D.₦140,000

Explanation: Variable cost rate = (₦220,000 - ₦180,000) / (6,000 - 4,000) = ₦40,000 / 2,000 = ₦20 per machine hour. Fixed cost = Total Cost - Variable Cost = ₦180,000 - (4,000 hours * ₦20) = ₦180,000 - ₦80,000 = ₦100,000.

About the ICSAN Management Accounting Exam

This practice exam covers cost classification, costing methods, budgetary control, variance analysis, relevant costs decision-making, and performance measurement.

Exam sponsor: Institute of Chartered Secretaries and Administrators of Nigeria. The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Assessment

100 multiple-choice questions

Time Limit

3 hours

Passing Score

50%

Exam / Certification Fees

Free

Exam sponsor website

Reported exam pass rate: ~75%. estimated pass rate This describes exam candidates, not OpenExamPrep users or results from using our resources. Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Official sources

Official ICSAN Website

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

20%

Cost Classification & Behaviour

Fixed, variable, and semi-variable costing, cost allocation, and cost-volume-profit analysis.

20%

Costing Methods (Absorption & Marginal)

Comparing absorption and marginal costing methods, activity-based costing (ABC), and inventory valuation.

20%

Budgetary Control & Variance Analysis

Preparation of master budgets, flexed budgets, standard costing, and calculating material/labour variances.

20%

Decision-Making & Relevant Costs

Short-term decision-making, make-or-buy analyses, and limiting factor optimization.

20%

Performance Measurement & Scorecards

Financial and non-financial metrics, Divisional ROI/RI, and the Balanced Scorecard framework.

Preparing for the ICSAN Management Accounting Exam

What You Need to Know

Passing score: 50%
Assessment: 100 multiple-choice questions
Time limit: 3 hours
Exam / certification fees: Free Official sources

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Frequently Asked Questions

What is the format of the ICSAN Management Accounting exam?

The exam consists of 100 multiple-choice questions covering all five content domains.

What is the passing score for the ICSAN Management Accounting exam?

Candidates must score at least 50% to pass the exam.

Free Practice Questions for ICSAN Management Accounting

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