Certified Management Accountant (CMA)
Exam Questions And Correct Answers
(Verified Answers) Plus Rationales
2025/2026 Q&A | Instant Download Pdf
1. Which of the following is considered a controllable cost by a
department manager?
A) Plant depreciation
B) Direct labor
C) Property taxes
D) Insurance
Rationale: Direct labor is a cost that department managers can
directly influence, whereas depreciation, taxes, and insurance are
typically fixed or allocated costs.
2. The primary purpose of variance analysis is to:
A) Increase production
B) Reduce sales
C) Identify areas of performance deviation
D) Determine product pricing
Rationale: Variance analysis helps management pinpoint deviations
between planned and actual performance to take corrective action.
3. Which of the following best defines the contribution margin?
A) Total revenue minus total fixed costs
B) Total revenue minus total variable costs
C) Sales minus variable costs
D) Fixed costs minus variable costs
,Rationale: Contribution margin shows how much revenue is available
to cover fixed costs and contribute to profit.
4. In capital budgeting, which method does not consider the time
value of money?
A) Net Present Value (NPV)
B) Internal Rate of Return (IRR)
C) Profitability Index
D) Payback Period
Rationale: The payback period only measures how long it takes to
recover the initial investment, ignoring the time value of money.
5. A company using absorption costing includes which of the
following in product costs?
A) Direct materials only
B) Direct materials and direct labor only
C) Direct materials, direct labor, and both variable and fixed
manufacturing overhead
D) Direct materials, direct labor, and variable manufacturing
overhead only
Rationale: Absorption costing includes all manufacturing costs, both
variable and fixed, in product costs.
6. Which financial statement shows a company's financial position
at a specific point in time?
A) Income statement
B) Statement of cash flows
C) Statement of retained earnings
D) Balance sheet
,Rationale: The balance sheet presents assets, liabilities, and equity as
of a specific date.
7. The formula for economic order quantity (EOQ) is:
A) √(2DS / H)
B) D × S ÷ H
C) √(2DS / H)
D) H ÷ (2DS)
Rationale: EOQ minimizes total inventory costs using the formula:
EOQ = √(2DS / H), where D = demand, S = ordering cost, H = holding
cost.
8. What is the main advantage of a flexible budget?
A) Easier to prepare
B) Less detailed than static budgets
C) Adjusts for actual levels of activity
D) Requires no variance analysis
Rationale: A flexible budget allows comparison of actual costs and
revenues to a budget that reflects actual activity levels.
9. Which of the following is an example of an intangible asset?
A) Land
B) Equipment
C) Goodwill
D) Inventory
Rationale: Goodwill is an intangible asset because it does not have a
physical form.
, 10. Which ratio measures a company’s ability to meet short-term
obligations using current assets?
A) Debt-to-equity ratio
B) Profit margin
C) Inventory turnover
D) Current ratio
Rationale: Current ratio = Current Assets ÷ Current Liabilities,
indicating short-term liquidity.
11. Which costing method is most appropriate for service
companies?
A) Job-order costing
B) Process costing
C) Activity-based costing
D) Variable costing
Rationale: Service companies often use variable costing to track costs
directly associated with services rather than products.
12. The primary purpose of the balanced scorecard is to:
A) Monitor cash flow
B) Measure organizational performance across multiple
perspectives
C) Calculate profit margins
D) Assess risk exposure
Rationale: The balanced scorecard evaluates performance financially
and non-financially, including customer, internal process, learning,
and growth perspectives.
Exam Questions And Correct Answers
(Verified Answers) Plus Rationales
2025/2026 Q&A | Instant Download Pdf
1. Which of the following is considered a controllable cost by a
department manager?
A) Plant depreciation
B) Direct labor
C) Property taxes
D) Insurance
Rationale: Direct labor is a cost that department managers can
directly influence, whereas depreciation, taxes, and insurance are
typically fixed or allocated costs.
2. The primary purpose of variance analysis is to:
A) Increase production
B) Reduce sales
C) Identify areas of performance deviation
D) Determine product pricing
Rationale: Variance analysis helps management pinpoint deviations
between planned and actual performance to take corrective action.
3. Which of the following best defines the contribution margin?
A) Total revenue minus total fixed costs
B) Total revenue minus total variable costs
C) Sales minus variable costs
D) Fixed costs minus variable costs
,Rationale: Contribution margin shows how much revenue is available
to cover fixed costs and contribute to profit.
4. In capital budgeting, which method does not consider the time
value of money?
A) Net Present Value (NPV)
B) Internal Rate of Return (IRR)
C) Profitability Index
D) Payback Period
Rationale: The payback period only measures how long it takes to
recover the initial investment, ignoring the time value of money.
5. A company using absorption costing includes which of the
following in product costs?
A) Direct materials only
B) Direct materials and direct labor only
C) Direct materials, direct labor, and both variable and fixed
manufacturing overhead
D) Direct materials, direct labor, and variable manufacturing
overhead only
Rationale: Absorption costing includes all manufacturing costs, both
variable and fixed, in product costs.
6. Which financial statement shows a company's financial position
at a specific point in time?
A) Income statement
B) Statement of cash flows
C) Statement of retained earnings
D) Balance sheet
,Rationale: The balance sheet presents assets, liabilities, and equity as
of a specific date.
7. The formula for economic order quantity (EOQ) is:
A) √(2DS / H)
B) D × S ÷ H
C) √(2DS / H)
D) H ÷ (2DS)
Rationale: EOQ minimizes total inventory costs using the formula:
EOQ = √(2DS / H), where D = demand, S = ordering cost, H = holding
cost.
8. What is the main advantage of a flexible budget?
A) Easier to prepare
B) Less detailed than static budgets
C) Adjusts for actual levels of activity
D) Requires no variance analysis
Rationale: A flexible budget allows comparison of actual costs and
revenues to a budget that reflects actual activity levels.
9. Which of the following is an example of an intangible asset?
A) Land
B) Equipment
C) Goodwill
D) Inventory
Rationale: Goodwill is an intangible asset because it does not have a
physical form.
, 10. Which ratio measures a company’s ability to meet short-term
obligations using current assets?
A) Debt-to-equity ratio
B) Profit margin
C) Inventory turnover
D) Current ratio
Rationale: Current ratio = Current Assets ÷ Current Liabilities,
indicating short-term liquidity.
11. Which costing method is most appropriate for service
companies?
A) Job-order costing
B) Process costing
C) Activity-based costing
D) Variable costing
Rationale: Service companies often use variable costing to track costs
directly associated with services rather than products.
12. The primary purpose of the balanced scorecard is to:
A) Monitor cash flow
B) Measure organizational performance across multiple
perspectives
C) Calculate profit margins
D) Assess risk exposure
Rationale: The balanced scorecard evaluates performance financially
and non-financially, including customer, internal process, learning,
and growth perspectives.
