Certified Management Accountant Certified Management Accountant MCQ 2 — Questions and Answers
Question 1: Which budgeting approach requires managers to justify every expense from zero each period rather than using the prior period as a baseline?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Rolling budgeting
- Activity-based budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting requires all expenses to be justified from scratch each period, eliminating the assumption that prior-year spending is automatically valid.
Question 2: Under absorption costing, fixed manufacturing overhead is treated as:
- A period cost expensed immediately
- A product cost inventoried until goods are sold (Correct answer)
- An administrative expense allocated to departments
- A sunk cost excluded from product cost
Correct answer: A product cost inventoried until goods are sold
Under absorption costing, fixed manufacturing overhead is included in the cost of inventory and only expensed (as COGS) when the related units are sold.
Question 3: A company's contribution margin ratio is 40% and fixed costs are $200,000. What is the break-even point in sales dollars?
- $80,000
- $280,000
- $500,000 (Correct answer)
- $320,000
Correct answer: $500,000
Break-even in sales dollars = Fixed costs / CM ratio = $200,000 / 0.40 = $500,000.
Question 4: Which of the following is an example of an internal failure cost in a quality cost framework?
- Warranty repairs after customer delivery
- Inspection of incoming raw materials
- Rework of defective products before shipment (Correct answer)
- Customer complaint handling
Correct answer: Rework of defective products before shipment
Internal failure costs arise from defects caught before delivery, such as rework, scrap, and re-inspection of reworked items.
Question 5: The economic order quantity (EOQ) model minimizes the sum of which two costs?
- Ordering costs and carrying costs (Correct answer)
- Purchase price and ordering costs
- Carrying costs and stockout costs
- Setup costs and purchase price
Correct answer: Ordering costs and carrying costs
EOQ minimizes total inventory costs by finding the order quantity at which ordering costs equal carrying (holding) costs.
Question 6: In a standard costing system, a favorable direct labor efficiency variance occurs when:
- Actual hours worked exceed standard hours allowed
- Standard hours allowed exceed actual hours worked (Correct answer)
- Actual wage rate exceeds the standard rate
- Standard wage rate exceeds the actual rate
Correct answer: Standard hours allowed exceed actual hours worked
A favorable labor efficiency variance means workers completed the output in fewer hours than the standard allowed, reducing labor costs.
Question 7: Which transfer pricing method sets the internal price equal to what an external customer would pay on the open market?
- Cost-based transfer pricing
- Negotiated transfer pricing
- Market-based transfer pricing (Correct answer)
- Dual transfer pricing
Correct answer: Market-based transfer pricing
Market-based transfer pricing uses the external market price as the internal transfer price, providing an objective benchmark and motivating efficient performance.
Certified Management Accountant Certified Management Accountant MCQ 2
Which budgeting approach requires managers to justify every expense from zero each period rather than using the prior period as a baseline?