CCM Financial Acumen and Budget Control 3

Question 1

In cost-volume-profit (CVP) analysis, the contribution margin is best defined as:

Accepted Answer

Selling price per unit minus variable cost per unit

Answer

Contribution margin measures how much each unit sold contributes to covering fixed costs and generating profit after variable costs are deducted.

Question 2

A project has a Net Present Value (NPV) of -$45,000. What does this indicate for the investment decision?

Accepted Answer

The project destroys value at the required discount rate and should be rejected

Answer

A negative NPV means the present value of cash outflows exceeds inflows at the required rate, indicating the investment would destroy shareholder value.

Question 3

What is the purpose of a cash flow forecast in commercial management?

Accepted Answer

To identify future periods where cash inflows may not cover outflows, enabling proactive funding arrangements

Answer

Cash flow forecasting reveals timing mismatches between receipts and payments, allowing managers to arrange short-term financing before a deficit occurs.

Question 4

Which type of cost remains constant in total regardless of changes in production volume within a relevant range?

Accepted Answer

Fixed cost

Answer

Fixed costs such as rent and insurance do not change with production volume within the relevant range, though per-unit fixed cost decreases as output rises.

Question 5

A commercial manager is comparing two suppliers: Supplier A offers 2/10 net 30 terms. What does this mean?

Accepted Answer

A 2% discount is available if payment is made within 10 days; otherwise full payment is due in 30 days

Answer

2/10 net 30 is a trade credit term offering a 2% early-payment discount within 10 days, with the net amount due by day 30.

(CCM) Certified Commercial Manager Practice Test

(CCM) Certified Commercial Manager Practice Test

CCM Financial Acumen and Budget Control 3