Certified Management Accountant
(CMA) Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
1. Which of the following is a primary objective of management accounting?
A. Providing financial information to external stakeholders. B. Assisting
management in planning, controlling, and decision-making. C. Ensuring
compliance with generally accepted accounting principles. D. Calculating
the tax liability for the governmental authorities. Rationale: Management
accounting is focused on internal users (management) to provide data for
strategic planning, operational control, and informed decision-making,
unlike financial accounting which targets external users and regulatory
compliance.
2. If a firm's fixed costs are $200,000, the unit selling price is $50, and the unit
variable cost is $30, what is the break-even point in units? A. 10,000 units B.
5,000 units C. 4,000 units D. 2,000 units Rationale: The break-even point in
units is calculated as Fixed Costs / (Selling Price per Unit - Variable Cost
per Unit). Here, $200,000 / ($50 - $30) = $200,000 / $20 = 10,000 units.
3. Which of the following best describes the concept of a "relevant cost"? A. A
cost that has already been incurred and cannot be recovered. B. A future
cost that differs among the decision alternatives. C. A cost that remains
constant regardless of the production volume. D. A cost that is allocated to
various departments based on a percentage. Rationale: Relevant costs are
defined as future costs that differ between alternatives. Sunk costs
(already incurred) and constant costs (those that don't change) are
irrelevant to decision-making.
,4. A company uses a flexible budget to control costs. If actual production is
higher than budgeted production, which of the following is expected? A.
Total fixed costs will increase proportionally. B. Total variable costs will be
higher than in the static budget. C. Total variable costs will remain
unchanged. D. The efficiency variance will always be favorable. Rationale: A
flexible budget adjusts variable costs based on actual activity levels. As
production increases, total variable costs rise linearly, even though
variable cost per unit remains constant.
5. Which of the following is a disadvantage of decentralized organizations? A.
Faster response to local market changes. B. Enhanced employee motivation
and job satisfaction. C. Potential for sub-optimization or goal
incongruence. D. Reduced burden on top management for daily operations.
Rationale: Decentralization allows managers to make local decisions, but
it often leads to sub-optimization, where individual department goals
conflict with the overall objectives of the corporation.
6. Return on Investment (ROI) is calculated as: A. Net Income / Total Assets B.
Operating Income / Average Operating Assets C. Sales / Investment D.
Profit Margin × Asset Turnover Rationale: ROI is a standard performance
measure that relates the income generated by a segment (Operating
Income) to the assets invested to generate that income (Average
Operating Assets).
7. Residual Income (RI) is preferred over ROI by some managers because: A. It
is a percentage and easier to compare across divisions. B. It encourages
investment in projects that exceed the company's cost of capital. C. It
eliminates the need for allocating corporate overhead. D. It is always a
positive number for every division. Rationale: ROI can discourage
managers from accepting profitable projects that have an ROI lower than
their current ROI but higher than the cost of capital. RI forces managers to
accept any project where the return is greater than the required cost of
capital.
, 8. The process of establishing a cost for a product based on the price
customers are willing to pay is called: A. Cost-plus pricing. B. Target costing.
C. Activity-based costing. D. Marginal costing. Rationale: Target costing
starts with a market-determined price and subtracts a desired profit
margin to arrive at a "target cost." The design team must then engineer
the product to meet this cost.
9. Which cost allocation method is most accurate for assigning indirect costs
to products based on their consumption of resources? A. Direct Labor Hour
method. B. Single-plantwide rate method. C. Activity-Based Costing (ABC).
D. Simple departmental allocation. Rationale: Activity-Based Costing
assigns costs to products based on the specific activities they require,
making it significantly more accurate than traditional volume-based
allocation methods.
10.Which of the following is an example of a "value-added" activity? A. Storing
finished goods inventory. B. Assembling product components. C. Inspecting
goods for defects. D. Moving work-in-process between workstations.
Rationale: Value-added activities are those that directly increase the value
of the product to the customer. Assembly is a core process, whereas
inspection, storage, and material handling are non-value-added activities.
11.Under the High-Low method, the variable cost per unit is calculated by: A.
Dividing total fixed costs by total units. B. Subtracting fixed costs from total
costs at the high point. C. Dividing the change in total costs by the change
in units. D. Adding the high cost to the low cost and dividing by two.
Rationale: The High-Low method isolates variable costs by finding the
slope of the cost line, calculated as (Cost at High Activity - Cost at Low
Activity) / (High Activity Units - Low Activity Units).
12.A "favorable" material price variance indicates that: A. More materials were
used than planned. B. Actual material prices were lower than standard
prices. C. Production was more efficient than planned. D. The company
purchased higher-quality materials. Rationale: A price variance is favorable
(CMA) Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
1. Which of the following is a primary objective of management accounting?
A. Providing financial information to external stakeholders. B. Assisting
management in planning, controlling, and decision-making. C. Ensuring
compliance with generally accepted accounting principles. D. Calculating
the tax liability for the governmental authorities. Rationale: Management
accounting is focused on internal users (management) to provide data for
strategic planning, operational control, and informed decision-making,
unlike financial accounting which targets external users and regulatory
compliance.
2. If a firm's fixed costs are $200,000, the unit selling price is $50, and the unit
variable cost is $30, what is the break-even point in units? A. 10,000 units B.
5,000 units C. 4,000 units D. 2,000 units Rationale: The break-even point in
units is calculated as Fixed Costs / (Selling Price per Unit - Variable Cost
per Unit). Here, $200,000 / ($50 - $30) = $200,000 / $20 = 10,000 units.
3. Which of the following best describes the concept of a "relevant cost"? A. A
cost that has already been incurred and cannot be recovered. B. A future
cost that differs among the decision alternatives. C. A cost that remains
constant regardless of the production volume. D. A cost that is allocated to
various departments based on a percentage. Rationale: Relevant costs are
defined as future costs that differ between alternatives. Sunk costs
(already incurred) and constant costs (those that don't change) are
irrelevant to decision-making.
,4. A company uses a flexible budget to control costs. If actual production is
higher than budgeted production, which of the following is expected? A.
Total fixed costs will increase proportionally. B. Total variable costs will be
higher than in the static budget. C. Total variable costs will remain
unchanged. D. The efficiency variance will always be favorable. Rationale: A
flexible budget adjusts variable costs based on actual activity levels. As
production increases, total variable costs rise linearly, even though
variable cost per unit remains constant.
5. Which of the following is a disadvantage of decentralized organizations? A.
Faster response to local market changes. B. Enhanced employee motivation
and job satisfaction. C. Potential for sub-optimization or goal
incongruence. D. Reduced burden on top management for daily operations.
Rationale: Decentralization allows managers to make local decisions, but
it often leads to sub-optimization, where individual department goals
conflict with the overall objectives of the corporation.
6. Return on Investment (ROI) is calculated as: A. Net Income / Total Assets B.
Operating Income / Average Operating Assets C. Sales / Investment D.
Profit Margin × Asset Turnover Rationale: ROI is a standard performance
measure that relates the income generated by a segment (Operating
Income) to the assets invested to generate that income (Average
Operating Assets).
7. Residual Income (RI) is preferred over ROI by some managers because: A. It
is a percentage and easier to compare across divisions. B. It encourages
investment in projects that exceed the company's cost of capital. C. It
eliminates the need for allocating corporate overhead. D. It is always a
positive number for every division. Rationale: ROI can discourage
managers from accepting profitable projects that have an ROI lower than
their current ROI but higher than the cost of capital. RI forces managers to
accept any project where the return is greater than the required cost of
capital.
, 8. The process of establishing a cost for a product based on the price
customers are willing to pay is called: A. Cost-plus pricing. B. Target costing.
C. Activity-based costing. D. Marginal costing. Rationale: Target costing
starts with a market-determined price and subtracts a desired profit
margin to arrive at a "target cost." The design team must then engineer
the product to meet this cost.
9. Which cost allocation method is most accurate for assigning indirect costs
to products based on their consumption of resources? A. Direct Labor Hour
method. B. Single-plantwide rate method. C. Activity-Based Costing (ABC).
D. Simple departmental allocation. Rationale: Activity-Based Costing
assigns costs to products based on the specific activities they require,
making it significantly more accurate than traditional volume-based
allocation methods.
10.Which of the following is an example of a "value-added" activity? A. Storing
finished goods inventory. B. Assembling product components. C. Inspecting
goods for defects. D. Moving work-in-process between workstations.
Rationale: Value-added activities are those that directly increase the value
of the product to the customer. Assembly is a core process, whereas
inspection, storage, and material handling are non-value-added activities.
11.Under the High-Low method, the variable cost per unit is calculated by: A.
Dividing total fixed costs by total units. B. Subtracting fixed costs from total
costs at the high point. C. Dividing the change in total costs by the change
in units. D. Adding the high cost to the low cost and dividing by two.
Rationale: The High-Low method isolates variable costs by finding the
slope of the cost line, calculated as (Cost at High Activity - Cost at Low
Activity) / (High Activity Units - Low Activity Units).
12.A "favorable" material price variance indicates that: A. More materials were
used than planned. B. Actual material prices were lower than standard
prices. C. Production was more efficient than planned. D. The company
purchased higher-quality materials. Rationale: A price variance is favorable
