Certified Management Accountant Financial Planning 4

Question 1

A company's budgeted contribution margin ratio is 40%. Actual sales were $800,000 and flexible-budget sales were $750,000. What is the sales price variance?

Accepted Answer

$20,000 favorable

Answer

Sales price variance = (Actual revenue − Flexible budget revenue) × contribution margin ratio = ($800,000 − $750,000) × 40% = $20,000 favorable.

Question 2

When a company converts its accrual-basis budgeted income statement to a cash budget, which adjustment is most commonly required?

Accepted Answer

Subtracting capital expenditures and adjusting for changes in working capital

Answer

The cash budget adjusts net income for non-cash charges, timing differences in receivables/payables, capital expenditures, and debt service.

Question 3

Which of the following scenarios would result in a favorable direct materials usage variance?

Accepted Answer

Fewer materials were used than the standard quantity allowed for actual production

Answer

The usage (quantity/efficiency) variance is favorable when actual materials consumed are less than the standard quantity allowed for actual output.

Question 4

A company is preparing its direct labor budget. Budgeted production is 5,000 units, each requiring 2.5 hours at $18 per hour. What is the total direct labor budget?

Accepted Answer

$225,000

Answer

Direct labor budget = 5,000 units × 2.5 hours × $18/hour = $225,000.

Question 5

In a decentralized organization, which budgeting approach is most consistent with maintaining divisional autonomy while ensuring corporate goal alignment?

Accepted Answer

Participative budgeting with negotiated targets

Answer

Participative budgeting with negotiated targets balances divisional input with corporate oversight, promoting alignment without eliminating autonomy.

Certified Management Accountant Practice Test

Certified Management Accountant Practice Test

Certified Management Accountant Financial Planning 4