Certified Management Accountant Certified Management Accountant MCQ 3

Question 1

Return on investment (ROI) for a business segment is best calculated as:

Accepted Answer

Operating income divided by average invested assets

Answer

Segment ROI = Operating income / Average invested assets, measuring how efficiently the segment uses its asset base to generate profit.

Question 2

Residual income is calculated as operating income minus:

Accepted Answer

A minimum required return on invested assets

Answer

Residual income = Operating income − (Required rate of return × Invested assets), measuring earnings in excess of the minimum acceptable return.

Question 3

Which of the following best describes a sunk cost?

Accepted Answer

A past cost that cannot be recovered regardless of the decision made

Answer

Sunk costs are historical costs already incurred and irrelevant to future decisions because they cannot be changed by any current or future action.

Question 4

A company uses activity-based costing. Which step comes immediately after identifying activities in the ABC implementation process?

Accepted Answer

Assigning costs to activity cost pools

Answer

After identifying activities, the next step is to assign (accumulate) overhead costs into activity cost pools before selecting cost drivers.

Question 5

A company is deciding whether to make or buy a component. Which cost is most relevant to this decision?

Accepted Answer

Variable production cost of making the component

Answer

Variable production costs are avoidable if the component is outsourced, making them the most relevant incremental cost for a make-or-buy decision.

Certified Management Accountant Practice Test