CPFM - Certified Professional in Financial Management Cost Management and Analysis Questions and Answers

Question 1

A company is preparing its master budget for the upcoming fiscal year.
After completing the sales budget, which of the following budgets is logically prepared next to determine the required level of manufacturing activity?

Accepted Answer

Production Budget

Answer

Cash Budget

Answer

Direct Materials Budget

Answer

Budgeted Income Statement

Question 2

In a make-or-buy decision analysis, a company must evaluate the relevant costs of each alternative. Which of the following would be considered an irrelevant cost in this decision?

Accepted Answer

The portion of fixed factory overhead that will continue even if the part is purchased externally.

Answer

The purchase price from the outside supplier.

Answer

The variable cost of direct labor required to manufacture the part in-house.

Answer

The opportunity cost of using the production facility for another profitable purpose.

Question 3

A manufacturing firm uses a standard costing system. An analysis of its direct materials variances reveals a significant favorable price variance and a significant unfavorable quantity variance. Which scenario is the most probable cause of this combination of variances?

Accepted Answer

The purchasing manager acquired lower-quality materials at a discounted price, which led to increased waste during production.

Answer

The production team was exceptionally efficient, using fewer materials than the standard allowed.

Answer

The purchasing manager paid more than the standard price for materials of standard quality.

Answer

The standard price for materials was set unrealistically high at the beginning of the period.

Question 4

A company wants to determine the number of units it must sell to achieve a target pre-tax profit of $80,000. The company's product sells for $120 per unit, variable costs are $70 per unit, and total fixed costs are $220,000. How many units must be sold?

Accepted Answer

6,000 units

Answer

4,400 units

Answer

3,143 units

Answer

2,500 units

Question 5

Which of the following is a primary advantage of Activity-Based Costing (ABC) compared to traditional costing methods that use a single, volume-based overhead allocation rate (e.g., direct labor hours)?

Accepted Answer

It provides a more accurate assignment of overhead costs to products, leading to better decision-making.

Answer

It is significantly less complex and cheaper to implement and maintain.

Answer

It is the only method permitted for external financial reporting under GAAP.

Answer

It focuses solely on manufacturing costs and excludes selling and administrative expenses.

Question 6

A cost that has both a fixed and a variable component is known as a:

Accepted Answer

Mixed cost

Answer

Sunk cost

Answer

Step cost

Answer

Differential cost