Certified Management Accountant Certified Management Accountant MCQ 4

Question 1

Which inventory valuation method typically results in the lowest taxable income during a period of rising prices?

Accepted Answer

LIFO

Answer

During rising prices, LIFO assigns the most recent (higher) costs to COGS, reducing taxable income compared to FIFO or weighted average.

Question 2

When evaluating a capital project, the payback period method is criticized primarily because it:

Accepted Answer

Ignores cash flows occurring after the payback date and the time value of money

Answer

The payback method ignores all cash flows after the payback period is reached and does not adjust for the time value of money.

Question 3

A flexible budget differs from a static budget because it:

Accepted Answer

Adjusts revenue and cost estimates for the actual level of activity achieved

Answer

A flexible budget recalculates expected revenues and costs at the actual output level, enabling meaningful variance analysis.

Question 4

The Sarbanes-Oxley Act (SOX) Section 302 requires corporate officers to:

Accepted Answer

Personally certify the accuracy of financial reports and the effectiveness of disclosure controls

Answer

SOX Section 302 mandates that CEOs and CFOs personally certify the accuracy of financial statements and the design of disclosure controls and procedures.

Question 5

In cost-volume-profit analysis, the margin of safety represents:

Accepted Answer

The excess of budgeted sales over break-even sales

Answer

Margin of safety = Budgeted (or actual) sales − Break-even sales, showing how much sales can decline before a loss occurs.

Certified Management Accountant Practice Test

Certified Management Accountant Practice Test

Certified Management Accountant Certified Management Accountant MCQ 4