Certified Management Accountant
(CMA) Practice Exam Questions And
Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A Instant Download
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1. Which financial statement primarily reports a company’s financial position
at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
Rationale: The balance sheet presents assets, liabilities, and equity at a
specific date.
2. What is the primary objective of cost accounting?
A) External reporting compliance
B) Tax preparation
C) Internal cost control and decision support
D) Stock valuation
Rationale: Cost accounting focuses on internal planning, control, and
decision-making.
3. In activity-based costing, costs are assigned to products based on:
A) Machine hours only
, B) Direct labor hours
C) Sales revenue
D) Actual consumption of activities
Rationale: ABC assigns costs based on resource usage by activities.
4. Which budgeting method starts from zero each period?
A) Incremental budgeting
B) Flexible budgeting
C) Rolling budgeting
D) Zero-based budgeting
Rationale: ZBB requires justification of all expenses from scratch.
5. Contribution margin is defined as:
A) Revenue minus fixed costs
B) Gross profit minus expenses
C) Sales revenue minus variable costs
D) Net income minus taxes
Rationale: Contribution margin covers fixed costs and profit.
6. A favorable variance occurs when:
A) Actual costs exceed budgeted costs
B) Revenue is lower than expected
C) Actual results are better than budgeted results
D) Fixed costs increase
Rationale: Favorable variance indicates better-than-expected
performance.
7. Which inventory valuation method assumes last purchased items are sold
first?
A) FIFO
B) Weighted average
C) Specific identification
D) LIFO
Rationale: LIFO assumes most recent costs are expensed first.
, 8. Break-even point is where:
A) Profit is maximized
B) Revenue exceeds fixed costs
C) Total revenue equals total costs
D) Variable costs equal fixed costs
Rationale: Break-even means zero profit or loss.
9. Which of the following is a prime cost?
A) Indirect labor + overhead
B) Direct materials + direct labor
C) Overhead + selling costs
D) Administrative expenses
Rationale: Prime costs are direct materials and labor.
10.Internal controls are primarily designed to:
A) Increase revenue
B) Reduce taxes
C) Safeguard assets and ensure accurate reporting
D) Improve marketing
Rationale: Controls protect assets and ensure reliability.
11.Which financial ratio measures liquidity?
A) Debt-to-equity ratio
B) Gross margin
C) Current ratio
D) Earnings per share
Rationale: Current ratio measures ability to meet short-term obligations.
12.Standard costing is used to:
A) Determine stock prices
B) Compare actual costs to predetermined standards
C) Eliminate fixed costs
D) Increase revenue directly
Rationale: It helps evaluate cost performance.
(CMA) Practice Exam Questions And
Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A Instant Download
1. Which financial statement primarily reports a company’s financial position
at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
Rationale: The balance sheet presents assets, liabilities, and equity at a
specific date.
2. What is the primary objective of cost accounting?
A) External reporting compliance
B) Tax preparation
C) Internal cost control and decision support
D) Stock valuation
Rationale: Cost accounting focuses on internal planning, control, and
decision-making.
3. In activity-based costing, costs are assigned to products based on:
A) Machine hours only
, B) Direct labor hours
C) Sales revenue
D) Actual consumption of activities
Rationale: ABC assigns costs based on resource usage by activities.
4. Which budgeting method starts from zero each period?
A) Incremental budgeting
B) Flexible budgeting
C) Rolling budgeting
D) Zero-based budgeting
Rationale: ZBB requires justification of all expenses from scratch.
5. Contribution margin is defined as:
A) Revenue minus fixed costs
B) Gross profit minus expenses
C) Sales revenue minus variable costs
D) Net income minus taxes
Rationale: Contribution margin covers fixed costs and profit.
6. A favorable variance occurs when:
A) Actual costs exceed budgeted costs
B) Revenue is lower than expected
C) Actual results are better than budgeted results
D) Fixed costs increase
Rationale: Favorable variance indicates better-than-expected
performance.
7. Which inventory valuation method assumes last purchased items are sold
first?
A) FIFO
B) Weighted average
C) Specific identification
D) LIFO
Rationale: LIFO assumes most recent costs are expensed first.
, 8. Break-even point is where:
A) Profit is maximized
B) Revenue exceeds fixed costs
C) Total revenue equals total costs
D) Variable costs equal fixed costs
Rationale: Break-even means zero profit or loss.
9. Which of the following is a prime cost?
A) Indirect labor + overhead
B) Direct materials + direct labor
C) Overhead + selling costs
D) Administrative expenses
Rationale: Prime costs are direct materials and labor.
10.Internal controls are primarily designed to:
A) Increase revenue
B) Reduce taxes
C) Safeguard assets and ensure accurate reporting
D) Improve marketing
Rationale: Controls protect assets and ensure reliability.
11.Which financial ratio measures liquidity?
A) Debt-to-equity ratio
B) Gross margin
C) Current ratio
D) Earnings per share
Rationale: Current ratio measures ability to meet short-term obligations.
12.Standard costing is used to:
A) Determine stock prices
B) Compare actual costs to predetermined standards
C) Eliminate fixed costs
D) Increase revenue directly
Rationale: It helps evaluate cost performance.
