CMA PRACTICE TEST QUESTIONS WITH VERIFIED
ANSWERS
Which of the following budgeting methods is often associated with participative
budgeting where input is collected from lower-level managers? - Answers - Incremental
budgeting
What is the primary purpose of managerial accounting information? - Answers - To help
managers make decisions
Which of the following is a disadvantage of a centralized organizational structure? -
Answers - Slower response to local market conditions
What does the term "contribution margin" represent in cost-volume-profit analysis? -
Answers - The amount of revenue available to cover fixed costs and contribute to profits
What is the formula to calculate the current ratio? - Answers - Current assets divided by
current liabilities
Which inventory costing method typically results in the lowest reported net income
during a period of rising prices? - Answers - LIFO (Last-In, First-Out)
What is the formula for calculating the earnings per share (EPS) ratio? - Answers - Net
income divided by average number of shares outstanding
Which variance measures the difference between the actual cost of materials used and
the standard cost of materials for the actual production level? - Answers - Materials
price variance
What type of cost changes with changes in the level of activity within the relevant
range? - Answers - Variable cost
Which financial statement reports the financial position of a company as of a specific
date? - Answers - Balance sheet
What is the formula for calculating return on investment (ROI)? - Answers - Net income
divided by average total assets
Which type of cost changes in total with changes in the level of activity but remains
constant per unit? - Answers - Fixed cost
What is the formula for calculating the payback period? - Answers - Initial investment
divided by annual net cash inflow
ANSWERS
Which of the following budgeting methods is often associated with participative
budgeting where input is collected from lower-level managers? - Answers - Incremental
budgeting
What is the primary purpose of managerial accounting information? - Answers - To help
managers make decisions
Which of the following is a disadvantage of a centralized organizational structure? -
Answers - Slower response to local market conditions
What does the term "contribution margin" represent in cost-volume-profit analysis? -
Answers - The amount of revenue available to cover fixed costs and contribute to profits
What is the formula to calculate the current ratio? - Answers - Current assets divided by
current liabilities
Which inventory costing method typically results in the lowest reported net income
during a period of rising prices? - Answers - LIFO (Last-In, First-Out)
What is the formula for calculating the earnings per share (EPS) ratio? - Answers - Net
income divided by average number of shares outstanding
Which variance measures the difference between the actual cost of materials used and
the standard cost of materials for the actual production level? - Answers - Materials
price variance
What type of cost changes with changes in the level of activity within the relevant
range? - Answers - Variable cost
Which financial statement reports the financial position of a company as of a specific
date? - Answers - Balance sheet
What is the formula for calculating return on investment (ROI)? - Answers - Net income
divided by average total assets
Which type of cost changes in total with changes in the level of activity but remains
constant per unit? - Answers - Fixed cost
What is the formula for calculating the payback period? - Answers - Initial investment
divided by annual net cash inflow
