CPM P&L Ownership & Cost Reduction 3

Question 1

A plant's fixed costs total $900,000 per month and variable cost per unit is $15. If the selling price is $30 per unit, what is the monthly break-even volume?

Accepted Answer

60,000 units

Answer

Break-even = Fixed Costs ÷ Contribution Margin per Unit = $900,000 ÷ ($30 – $15) = 60,000 units.

Question 2

When evaluating a make-vs-buy decision for a component currently produced in-house, which cost should be EXCLUDED from the analysis?

Accepted Answer

Sunk cost of equipment already purchased and fully depreciated

Answer

Sunk costs are irrelevant to forward-looking decisions because they cannot be recovered regardless of the choice made.

Question 3

A plant manager is reviewing the spending variance for indirect labor. This variance is best described as:

Accepted Answer

The difference between actual indirect labor cost and the budgeted cost for actual output

Answer

A spending variance compares what was actually spent on indirect labor against what was budgeted to be spent for the actual level of output, isolating cost control performance.

Question 4

Total Productive Maintenance (TPM) primarily reduces which P&L line item?

Accepted Answer

Manufacturing overhead and maintenance expense within COGS

Answer

TPM reduces unplanned downtime and maintenance costs, which are captured in manufacturing overhead—a component of COGS.

Question 5

A plant manager is asked to achieve a 10% reduction in material costs. Supplier consolidation and volume leverage is already maximized. The NEXT most effective lever is typically:

Accepted Answer

Design-to-cost engineering to reduce material content or substitute less expensive materials

Answer

Design-to-cost (value engineering) attacks material costs at the specification level, enabling substitutions or reduction in content that procurement negotiations alone cannot achieve.

(CPM) Certified Plant Manager Practice Test

(CPM) Certified Plant Manager Practice Test

CPM P&L Ownership & Cost Reduction 3