Practice Test Geeks(CPM) Certified Professional Manager Practice Test
← All CPM Flashcard Decks

Financial Management & Budgeting Flashcards

7 cards from real CPM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Management & Budgeting flashcards as text

  1. A manager notices that actual labor costs exceeded the budget by 12% for three consecutive months. Which corrective action addresses the root cause most directly?

    Answer: Conduct a variance analysis to identify whether hours or rates drove the overage

    Variance analysis separates rate variance from efficiency variance, revealing whether the cause is pay rates or excess hours worked.

  2. Which budgeting approach requires every expense to be justified from zero each budget cycle regardless of prior-year spending?

    Answer: Zero-based budgeting

    Zero-based budgeting starts from a 'zero base' each period, requiring justification for all expenditures rather than simply adjusting prior figures.

  3. A department's fixed costs are $50,000/month and variable costs are $20 per unit. If 2,000 units are produced, what is the total cost?

    Answer: $90,000

    Total cost = $50,000 fixed + ($20 × 2,000) variable = $50,000 + $40,000 = $90,000.

  4. What does the current ratio measure in financial analysis?

    Answer: Short-term liquidity by comparing current assets to current liabilities

    The current ratio (current assets ÷ current liabilities) indicates an organization's ability to meet short-term obligations.

  5. A manager must choose between two projects: Project A yields $80,000 NPV and Project B yields $95,000 NPV but requires twice the capital. With limited funds, which principle guides the decision?

    Answer: Capital rationing and profitability index

    Capital rationing uses the profitability index (NPV ÷ investment) to rank projects when funds are limited, favoring the highest return per dollar invested.

  6. Which financial statement shows the organization's financial position at a specific point in time?

    Answer: Balance sheet

    The balance sheet presents assets, liabilities, and equity as of a specific date, reflecting the organization's financial position at that moment.

  7. An unfavorable budget variance occurs when:

    Answer: Actual expenses exceed budgeted expenses or actual revenue falls short of budget

    An unfavorable variance means performance is worse than planned — spending more than budgeted or earning less than projected.