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Applied Knowledge

Applied Knowledge is the entry level of the ACCA qualification, covering three foundational papers: BT (Business and Technology), MA (Management Accounting), and FA (Financial Accounting). All three exams are 100% computer-based MCQ exams available on demand at Pearson VUE exam centres. Each exam is 2 hours long and you need 50% to pass. The three papers can be sat in any order and provide the foundation for Applied Skills.

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What’s in it.

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Sample questions

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A few questions from this module, with the answer and a full explanation. The complete bank is available when you start practising.

  1. A division has revenue of GBP 8 million, profit of GBP 960,000, and capital employed of GBP 6.4 million. The divisional manager acquires a new machine costing GBP 1.6 million, which is expected to generate additional revenue of GBP 2.4 million and additional profit of GBP 192,000 per year. Calculate the profit margin, asset turnover, and ROI both before and after the acquisition.

    • Before: margin 12%, turnover 1.25x, ROI 15%. After: margin 12%, turnover 1.30x, ROI 15.6%
    • Before: margin 12%, turnover 1.25x, ROI 15%. After: margin 11.08% approximately, turnover 1.30x, ROI 14.4%
      Correct answer
    • Before: margin 15%, turnover 1.25x, ROI 18.75%. After: margin 14.4%, turnover 1.30x, ROI 18.72%
    • Before: margin 12%, turnover 1.25x, ROI 15%. After: margin 14.4%, turnover 1.25x, ROI 18%
    Explanation

    Before: Margin = GBP 960,000 / GBP 8m = 12%. Turnover = GBP 8m / GBP 6.4m = 1.25x. ROI = 12% x 1.25 = 15%.

    After: Revenue = GBP 8m + GBP 2.4m = GBP 10.4m. Profit = GBP 960,000 + GBP 192,000 = GBP 1,152,000. Capital = GBP 6.4m + GBP 1.6m = GBP 8m. \nMargin = GBP 1,152,000 / GBP 10.4m = 11.08% approximately. Turnover = GBP 10.4m / GBP 8m = 1.30x. ROI = GBP 1,152,000 / GBP 8m = 14.4% (or 11.08% x 1.30 = 14.4%). \nThe new machine earns 12% return (GBP 192,000 / GBP 1.6m), which is below the existing ROI of 15%, dragging the overall ROI down to 14.4%. This illustrates the dysfunctional behaviour problem with ROI: a manager might reject this investment even though it earns above the company's cost of capital.

  2. A highly task-oriented manager has been appointed to lead a project team where team members are experienced, the tasks are clearly defined, and the manager has strong formal authority. According to Fiedler's model, how should this be evaluated?

    • The task-oriented leader is inappropriate because experienced team members always need a relationship-oriented leader
    • The manager should change to a relationship-oriented style immediately because Fiedler argues leaders must adapt their style
    • This is a highly favourable situation, and a task-oriented leader is effective in highly favourable situations according to Fiedler, so the match is appropriate
      Correct answer
    • The situation is irrelevant because Fiedler's model only considers the leader's personal traits
    Explanation

    According to Fiedler, this is a highly favourable situation: good leader-member relations (experienced, cooperative team), high task structure (clearly defined tasks), and strong position power (formal authority). Fiedler's research found that task-oriented leaders perform well in both highly favourable and highly unfavourable situations, while relationship-oriented leaders perform better in moderately favourable situations. Since the situation is highly favourable and the leader is task-oriented, the match is appropriate. Fiedler specifically argued that leaders cannot easily change their fundamental style.

  3. A company uses standard costing for three purposes: (1) comparing actual costs with standards to identify inefficiencies, (2) using standard costs as building blocks for the annual budget, and (3) valuing inventory at standard cost to simplify month-end accounting. Match each use to the correct purpose of standard costing.

    • (1) = Pricing decisions; (2) = Cost control; (3) = Responsibility accounting.
    • (1) = Responsibility accounting; (2) = Performance measurement; (3) = Cost control.
    • (1) = Cost control; (2) = Planning and budgeting; (3) = Simplified bookkeeping.
      Correct answer
    • (1) = Simplified bookkeeping; (2) = Cost control; (3) = Planning and budgeting.
    Explanation

    Cost control involves comparing actual with standard costs and investigating variances. Planning and budgeting uses standard costs as building blocks. Simplified bookkeeping allows inventory to be valued at a consistent standard cost.

Frequently asked questions

3 questions
What papers are in ACCA Applied Knowledge?

Applied Knowledge has three papers: BT (Business and Technology), MA (Management Accounting), and FA (Financial Accounting). All three must be passed before progressing to Applied Skills, though they can be sat in any order.

Are Applied Knowledge exams 100% MCQ?

Yes, all three Applied Knowledge exams (BT, MA, FA) are 100% computer-based multiple-choice exams. They are available on demand at Pearson VUE exam centres worldwide, so you can book when you feel ready.

Do I need prior qualifications for Applied Knowledge?

No, ACCA Applied Knowledge is open to anyone and requires no prior qualifications or accounting experience. It is designed as the entry point to the ACCA qualification.