CPM P&L Ownership & Cost Reduction 2

Question 1

A plant manager notices that the cost of goods sold (COGS) as a percentage of revenue has crept from 62% to 68% over six months. Which action most directly addresses this variance?

Accepted Answer

Conduct a root-cause analysis on material, labor, and overhead cost drivers

Answer

A root-cause analysis on the three COGS components—material, labor, and overhead—pinpoints the specific driver(s) before corrective action is taken.

Question 2

Which financial metric best measures how efficiently a plant converts revenue into operating profit, excluding interest and taxes?

Accepted Answer

Operating (EBIT) margin

Answer

Operating (EBIT) margin—operating income divided by revenue—reflects the plant's core profitability after all operating costs but before financing and tax effects.

Question 3

During a budget review, a plant manager finds that actual overhead absorption is $120,000 under-absorbed versus the standard. The most likely cause is:

Accepted Answer

Actual production volume was lower than the budgeted volume used to set the overhead rate

Answer

Under-absorption occurs when actual production volume is lower than planned, so fixed overhead is spread over fewer units than the rate assumed.

Question 4

A plant manager wants to reduce conversion costs by 5% without affecting output. Which lever typically yields the fastest results?

Accepted Answer

Eliminating non-value-added steps in the production process through a kaizen event

Answer

Kaizen events can rapidly eliminate waste and non-value-added activities, reducing conversion costs quickly without major capital investment.

Question 5

On a plant P&L, depreciation of manufacturing equipment is classified as:

Accepted Answer

A product cost included in overhead and ultimately in COGS

Answer

Manufacturing equipment depreciation is a product (inventoriable) cost that flows through overhead, into WIP, then finished goods, and finally COGS when product is sold.

(CPM) Certified Plant Manager Practice Test

(CPM) Certified Plant Manager Practice Test

CPM P&L Ownership & Cost Reduction 2