CPA Management Accounting & Strategy 3

Question 1

Which budgeting approach requires managers to justify all expenditures from a zero base each period rather than using prior-year figures?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting (ZBB) requires justifying every line item anew each period, eliminating the automatic carry-forward of prior spending.

Question 2

A company's degree of operating leverage (DOL) is 4. If sales increase by 10%, operating income will increase by:

Accepted Answer

40%

Answer

DOL multiplies the percentage change in sales to determine the percentage change in operating income: 4 × 10% = 40%.

Question 3

Porter's Five Forces model identifies which factor as a force that can reduce industry profitability by enabling buyers to demand lower prices?

Accepted Answer

Bargaining power of buyers

Answer

Bargaining power of buyers is high when buyers are concentrated, purchase large volumes, or can easily switch suppliers, pressuring prices down.

Question 4

A responsibility center where a manager is evaluated on both revenues generated and costs incurred is called a:

Accepted Answer

Profit center

Answer

A profit center manager controls both revenues and costs but not the capital invested in the center.

Question 5

Which inventory management technique aims to minimize holding costs by receiving goods just as they are needed in production?

Accepted Answer

Just-in-time (JIT)

Answer

JIT inventory minimizes holding costs by coordinating deliveries to arrive precisely when needed, reducing on-hand inventory levels.

(CPA) Certified Practicing Accountant Practice Test