CMS Manufacturing Cost Analysis 3

Question 1

What is the primary purpose of a cost-volume-profit (CVP) analysis?

Accepted Answer

To understand how changes in costs and volume affect profitability

Answer

CVP analysis examines the relationship between costs, sales volume, and profit to support pricing, production, and planning decisions.

Question 2

Under absorption costing, fixed manufacturing overhead is treated as:

Accepted Answer

A product cost included in inventory until sold

Answer

Absorption costing treats fixed manufacturing overhead as a product cost, meaning it is inventoried and only expensed when goods are sold.

Question 3

A machine costs $200,000, has a salvage value of $20,000, and a useful life of 9 years. What is the annual straight-line depreciation?

Accepted Answer

$20,000

Answer

Straight-line depreciation = (Cost − Salvage) / Life = ($200,000 − $20,000) / 9 = $20,000 per year.

Question 4

Which cost classification separates costs into their fixed and variable components to aid in flexible budgeting?

Accepted Answer

Semi-variable (mixed) cost analysis

Answer

Semi-variable (mixed) costs have both fixed and variable components and must be separated using methods like the high-low method for flexible budget preparation.

Question 5

When evaluating a make-or-buy decision, which costs are most relevant?

Accepted Answer

Avoidable costs that would be eliminated by outsourcing

Answer

Relevant costs in make-or-buy decisions are avoidable costs—those that can be eliminated by choosing to buy externally rather than make in-house.

(CMS) Certified Manufacturing Specialist Practice Test

(CMS) Certified Manufacturing Specialist Practice Test

CMS Manufacturing Cost Analysis 3