Certified Management Accountant Trivia 4 — Questions and Answers
Question 1: A company has fixed costs of $200,000, a selling price of $50 per unit, and variable costs of $30 per unit. What is the breakeven point in units?
- 4,000 units
- 6,667 units
- 10,000 units (Correct answer)
- 2,500 units
Correct answer: 10,000 units
Breakeven units = Fixed costs ÷ Contribution margin per unit = $200,000 ÷ ($50 − $30) = 10,000 units.
Question 2: Which type of variance measures the difference between actual hours worked and standard hours allowed, multiplied by the standard wage rate?
- Labor rate variance
- Labor efficiency variance (Correct answer)
- Variable overhead spending variance
- Fixed overhead volume variance
Correct answer: Labor efficiency variance
The labor efficiency variance = (Actual hours − Standard hours allowed) × Standard rate, measuring workforce productivity.
Question 3: Which concept describes the minimum return a company must earn on a new investment to satisfy its investors?
- Internal rate of return
- Weighted average cost of capital (Correct answer)
- Return on equity
- Payback period
Correct answer: Weighted average cost of capital
The weighted average cost of capital (WACC) represents the minimum required return that must be earned to create value for all capital providers.
Question 4: In the context of the CMA exam, 'throughput' in Theory of Constraints refers to:
- Total units produced in a period
- The rate at which the system generates money through sales (Correct answer)
- Total manufacturing costs incurred
- The number of employees in production
Correct answer: The rate at which the system generates money through sales
In Theory of Constraints, throughput is defined as sales revenue minus totally variable costs (primarily direct materials), representing the rate of generating money.
Question 5: Which of the following best describes 'management by exception'?
- Managers review all transactions regardless of size
- Managers focus attention on results that deviate significantly from planned performance (Correct answer)
- All employees can approve transactions under a set dollar threshold
- Managers delegate all decisions to subordinates
Correct answer: Managers focus attention on results that deviate significantly from planned performance
Management by exception directs managerial attention to significant variances from budgeted or standard performance, saving time on routine results.
Question 6: Under absorption costing, which of the following costs is included in product cost but excluded under variable costing?
- Direct materials
- Direct labor
- Variable manufacturing overhead
- Fixed manufacturing overhead (Correct answer)
Correct answer: Fixed manufacturing overhead
Absorption costing treats fixed manufacturing overhead as a product cost, while variable costing treats it as a period cost expensed immediately.
Question 7: A manager who controls both revenues and costs of a business unit is responsible for a:
- Cost center
- Revenue center
- Profit center (Correct answer)
- Investment center
Correct answer: Profit center
A profit center manager is accountable for both revenues and costs, with performance measured by the segment's profit contribution.
Certified Management Accountant Trivia 4
A company has fixed costs of $200,000, a selling price of $50 per unit, and variable costs of $30 per unit.
What is the breakeven point in units?