OM Financial Management & Budgeting 3

Question 1

Which cost behavior remains constant in total regardless of changes in production volume within the relevant range?

Accepted Answer

Fixed costs

Answer

Fixed costs (e.g., rent, salaries of permanent staff) do not change in total as production volume fluctuates within the relevant range.

Question 2

A nonprofit organization must allocate indirect costs to federal grants. Which federal cost principles document governs this allocation?

Accepted Answer

2 CFR Part 200 (Uniform Guidance)

Answer

2 CFR Part 200 (Uniform Guidance) establishes federal cost principles, audit requirements, and administrative requirements for non-federal entities receiving federal awards.

Question 3

When preparing a cash flow forecast, which item is typically included in operating activities under the indirect method?

Accepted Answer

Depreciation added back to net income

Answer

Under the indirect method, non-cash charges like depreciation are added back to net income because they reduced income but did not use cash.

Question 4

An activity-based costing (ABC) system differs from traditional costing because it:

Accepted Answer

Uses multiple cost drivers to trace overhead to products or services

Answer

ABC identifies multiple cost drivers (e.g., machine setups, purchase orders) to allocate overhead more accurately than single-rate methods.

Question 5

A manager reviewing the budget sees 'favorable variance' on a line item. This MOST likely means:

Accepted Answer

Actual costs were lower than budgeted costs

Answer

A favorable cost variance occurs when actual spending is less than the budgeted amount, improving the financial position.

(OM) Organizational Management Specialty Certification Practice Test

(OM) Organizational Management Specialty Certification Practice Test

OM Financial Management & Budgeting 3