Start learning →

ACCA Skills Level Differential Analysis — practice questions

Explore 15 free Differential Analysis questions in ACCA Skills Level Management Accounting. Open each question or exercise to read its content, reference answers and available explanation.

Practise Differential Analysis with Quill →

Differential Analysis questions and exercises with answers

Showing questions 1–15 of 15.

Sort costs by whether they matterRead the answer and worked solution →Tap the odd one in each decision setRead the answer and worked solution →Pick the better option each roundRead the answer and worked solution →Match each appraisal to its outputRead the answer and worked solution →Why is a sunk cost ignored in a differential analysis?Read the answer and worked solution →A component can be bought in for $34.20 with an inbound shipping charge of $3.70. What is the relevant cost of buying one unit?Read the answer and worked solution →Cost of goods sold for a product line is $480,000 and 25% of it is fixed. What is the variable cost of goods sold?Read the answer and worked solution →Operating expenses for a product line are $500,000 and 40% of them are fixed. What are the variable operating expenses?Read the answer and worked solution →Equipment can be leased out for $2,400 a year for four years and then returned to its manufacturer for $100 of scrap value. What is the income from leasing?Read the answer and worked solution →Equipment can be sold for $10,000 with a 2% commission payable on the sale. What is the income from selling?Read the answer and worked solution →Keeping an existing machine carries variable operating costs of $21,000 a year for the next six years. What is the result under the keep option?Read the answer and worked solution →A proposed asset is expected to generate income of $75,000 over a useful life of five years. What is its average annual income?Read the answer and worked solution →Average annual income from a proposed asset is $15,000 and the average investment is $60,000. What is the average rate of return?Read the answer and worked solution →What is the present value of $1.00 to be received in three years at an interest rate of 6%?Read the answer and worked solution →What is the future value of $1.00 in three years at an interest rate of 6%?Read the answer and worked solution →

Worked practice questions

Sort costs by whether they matter

Read exercise and reference answers
Left
Include
Items
  1. Item
    Bought-in price
    Answer
    Include
  2. Item
    Inbound shipping
    Answer
    Include
  3. Item
    Sales commission
    Answer
    Include
  4. Item
    Scrap proceeds
    Answer
    Include
  5. Item
    New machine price
    Answer
    Include
  6. Item
    Fixed overhead
    Answer
    Ignore
  7. Item
    Old machine cost
    Answer
    Ignore
  8. Item
    Site restoration
    Answer
    Ignore
Right
Ignore
Instructions
Swipe left to include the cost in the comparison, right to leave it out.
_Source: Jonick, Principles of Managerial Accounting, section 9.1 Introduction_

Open this exercise →

Tap the odd one in each decision set

Read exercise and reference answers
Questions
  1. Items
    1. Split a mixed cost
    2. Make or buy
    3. Lease or sell
    4. Keep or replace
    Odd item
    Split a mixed cost
  2. Items
    1. Original cost
    2. Sales commission
    3. Site restoration
    4. Fixed overhead
    Odd item
    Sales commission
  3. Items
    1. Net present value
    2. Rate of return
    3. Cash payback
    Odd item
    Net present value
  4. Items
    1. Customer loyalty
    2. Employee morale
    3. Vendor relations
    4. Tariff of $800
    Odd item
    Tariff of $800
Instructions
One item in each row breaks the pattern. Tap it.
_Source: Jonick, Principles of Managerial Accounting, section 9.7 Accept Business at Reduced Price_

Open this exercise →

Pick the better option each round

Read exercise and reference answers
Questions
  1. Question
    Cases cost $36.40 to make in house or $37.90 to buy in.
    Choices
    1. Make them
    2. Buy them in
    Correct choice
    Make them
  2. Question
    A four year lease returns $9,700; an outright sale returns $9,800.
    Choices
    1. Lease it out
    2. Sell it
    Correct choice
    Sell it
  3. Question
    Keeping the machine costs $126,000; replacing it costs $143,000.
    Choices
    1. Keep the old one
    2. Buy the new one
    Correct choice
    Keep the old one
  4. Question
    Selling the batch now earns $19,500; processing on earns $21,600.
    Choices
    1. Sell it now
    2. Process it further
    Correct choice
    Process it further
  5. Question
    A special order adds $180,000 of revenue and $125,800 of extra cost.
    Choices
    1. Accept the order
    2. Reject the order
    Correct choice
    Accept the order
  6. Question
    A loss making line still brings in revenue above its variable costs.
    Choices
    1. Drop the line
    2. Keep selling it
    Correct choice
    Keep selling it
Instructions
Tap the alternative with the better financial outcome.
_Source: Jonick, Principles of Managerial Accounting, section 9.2 Make or Buy a Component Part_

Open this exercise →

How to practise

  1. Choose a Differential Analysis question and try to work out your answer.
  2. Open the question to check the correct answer and read its worked solution.
  3. Continue in the app for bite-sized lessons, explanations and review with Quill. You can start without creating an account.

More Management Accounting topics

Cost Volume Profit AnalysisVariable Costing AnalysisVariance AnalysisActivity-Based Costing