Certified Management Accountant Certified Management Accountant 5

Question 1

Which variance arises when the actual mix of materials used differs from the standard mix?

Accepted Answer

Material mix variance

Answer

The material mix variance isolates the cost impact of substituting one input material for another relative to the standard blend.

Question 2

Target costing determines a product's allowable cost by:

Accepted Answer

Subtracting the desired profit margin from the market price

Answer

Target cost = Target selling price − Desired profit; this market-driven approach forces cost reduction to achieve profitability.

Question 3

A project has an NPV of $0 at a 12% discount rate. If the required return rises to 14%, the NPV will:

Accepted Answer

Become negative

Answer

If NPV = 0 at 12%, that is the IRR; a higher discount rate (14%) produces a negative NPV because future cash flows are discounted more heavily.

Question 4

The theory of constraints (TOC) focuses management attention on:

Accepted Answer

Maximizing throughput by identifying and exploiting the system's bottleneck

Answer

TOC holds that a system's output is limited by its weakest link (constraint), so managers should maximize throughput through that bottleneck.

Question 5

Under a defined benefit pension plan, the pension expense recorded by the employer includes:

Accepted Answer

Service cost, interest cost, and expected return on plan assets among other components

Answer

Defined benefit pension expense comprises service cost, interest on the projected benefit obligation, expected return on assets, and amortization of actuarial gains/losses.

Certified Management Accountant Practice Test

Certified Management Accountant Practice Test

Certified Management Accountant Certified Management Accountant 5