Certified Management Accountant Financial Planning 3

Question 1

A company expects to collect 60% of credit sales in the month of sale, 30% in the following month, and 10% in the second month after sale. If June sales are $500,000 and July sales are $600,000, what are total cash collections in July?

Accepted Answer

$510,000

Answer

July collections = 60% × $600,000 + 30% × $500,000 = $360,000 + $150,000 = $510,000.

Question 2

The sales mix variance arises when:

Accepted Answer

The proportion of individual products sold differs from the budgeted mix

Answer

The sales mix variance isolates the profitability effect of shifting the actual sales composition away from the planned product mix.

Question 3

Under zero-based budgeting (ZBB), managers must:

Accepted Answer

Justify every dollar of expenditure from a zero base each period

Answer

ZBB requires that all activities be re-evaluated and justified each budget period rather than simply adjusting prior-year figures.

Question 4

Which of the following is the primary advantage of participative (bottom-up) budgeting?

Accepted Answer

It increases motivation and commitment because managers set their own targets

Answer

Participative budgeting improves goal acceptance and motivation because employees who help set targets feel more accountable for achieving them.

Question 5

A company has budgeted fixed overhead of $240,000 per year and a normal capacity of 80,000 direct labor hours. Actual hours worked were 75,000 and actual fixed overhead was $245,000. What is the fixed overhead spending variance?

Accepted Answer

$5,000 unfavorable

Answer

The fixed overhead spending variance = Actual fixed overhead − Budgeted fixed overhead = $245,000 − $240,000 = $5,000 unfavorable.

Certified Management Accountant Practice Test

Certified Management Accountant Practice Test

Certified Management Accountant Financial Planning 3