CMA (Certified Management Accountant) Practice Questions — All Questions
20 questions
A flexible budget differs from a static budget because it:
- a.Ignores variable costs
- b.Is prepared only after the year ends
- c.Adjusts budgeted amounts for the actual level of activity✓
- d.Never changes
A flexible budget flexes budgeted costs to the actual activity level.
The starting point for most operating budgets is usually the:
- a.Sales (revenue) budget✓
- b.Capital budget
- c.Balance sheet
- d.Cash budget
The sales budget typically drives the rest of the operating budgets.
A budget prepared assuming no prior-year baseline, justifying every expense, is:
- a.Incremental budgeting
- b.Capital budgeting
- c.Zero-based budgeting✓
- d.Flexible budgeting
Zero-based budgeting justifies all expenses from a zero base.
A master budget is:
- a.Only the sales plan
- b.Only the cash forecast
- c.The comprehensive set of an organization's budgets✓
- d.A single department's budget
The master budget aggregates operating and financial budgets.
A favorable variance generally means actual results were:
- a.Not measurable
- b.Worse than budget
- c.Exactly on budget
- d.Better than the budgeted/standard amount✓
A favorable variance means performance beat the standard or budget.
A balanced scorecard evaluates performance using:
- a.Only the cash balance
- b.Financial and non-financial perspectives✓
- c.Only net income
- d.Only stock price
The balanced scorecard adds customer, internal-process, and learning perspectives to financials.
Return on investment (ROI) for a division is generally:
- a.Cash divided by liabilities
- b.Operating income divided by invested capital✓
- c.Total assets only
- d.Sales minus expenses
ROI relates a division's income to the capital invested to earn it.
Residual income is operating income minus:
- a.Depreciation
- b.Cost of goods sold
- c.Taxes only
- d.A capital charge on invested capital✓
Residual income subtracts a required return (capital charge) from operating income.
Contribution margin equals sales revenue minus:
- a.Variable costs✓
- b.Taxes
- c.All fixed costs
- d.Depreciation
Contribution margin is sales minus variable costs; it covers fixed costs and profit.
At the break-even point:
- a.Profit is maximized
- b.Total revenue equals total costs (zero profit)✓
- c.Fixed costs are zero
- d.Variable costs are zero
Break-even is where total revenue exactly covers total costs.
A cost that stays constant in total as activity changes (within a range) is a:
- a.Fixed cost✓
- b.Marginal cost
- c.Opportunity cost
- d.Variable cost
Fixed costs remain constant in total over the relevant range.
Activity-based costing (ABC) assigns overhead based on:
- a.Cost drivers that cause the activities✓
- b.A single plant-wide rate always
- c.Direct labor hours only
- d.Sales revenue
ABC traces overhead using activities and their cost drivers for more accuracy.
Segregation of duties is an internal control that:
- a.Increases fraud risk
- b.Speeds up all transactions
- c.Prevents one person from controlling all parts of a transaction✓
- d.Eliminates the need for audits
Separating authorization, recording, and custody reduces fraud and error risk.
The primary purpose of internal controls is to:
- a.Replace management judgment
- b.Maximize revenue
- c.Provide reasonable assurance about reliable reporting and asset safeguarding✓
- d.Guarantee zero fraud
Internal controls give reasonable (not absolute) assurance over reporting and assets.
A preventive control is designed to:
- a.Correct past errors
- b.Report to regulators
- c.Detect errors after they occur
- d.Stop errors or fraud before they happen✓
Preventive controls aim to stop problems before they occur.
Requiring a manager's approval before large purchases is an example of:
- a.A corrective control
- b.A compensating control
- c.An authorization (preventive) control✓
- d.A detective control
Approval requirements are preventive authorization controls.
The current ratio measures:
- a.Market value
- b.Long-term leverage
- c.Profitability
- d.Short-term liquidity (current assets to current liabilities)✓
Current ratio = current assets / current liabilities, a liquidity measure.
A higher debt-to-equity ratio indicates:
- a.Lower risk always
- b.More cash
- c.Higher liquidity
- d.Greater financial leverage and risk✓
More debt relative to equity means higher leverage and financial risk.
Gross profit margin equals gross profit divided by:
- a.Equity
- b.Total assets
- c.Sales revenue✓
- d.Net income
Gross margin = gross profit / sales.
Inventory turnover measures:
- a.Cash on hand
- b.How many times inventory is sold and replaced in a period✓
- c.Profit per unit
- d.Debt levels
Inventory turnover = COGS / average inventory, showing how fast inventory sells.