Certified Management Accountant (CMA)
Practice Exam 1 Questions and correct
Answers (Verified Answers) with Rationales
2025
1. Which of the following is NOT a component of the internal control framework
developed by COSO?
A. Control Environment
B. Strategic Alignment
C. Risk Assessment
D. Monitoring
Rationale: "Strategic Alignment" is not one of the five components of COSO's
internal control framework. The correct components are Control Environment,
Risk Assessment, Control Activities, Information and Communication, and
Monitoring.
2. A company has fixed costs of $100,000 and a contribution margin of 40%.
What is the breakeven sales amount?
,A. $250,000
B. $400,000
C. $250,000
D. $150,000
Rationale: Breakeven Sales = Fixed Costs / Contribution Margin = $100,.4
= $250,000.
3. Which of the following costs is considered a period cost under variable
costing?
A. Direct materials
B. Direct labor
C. Variable manufacturing overhead
D. Fixed selling and administrative expenses
Rationale: Period costs under variable costing include all non-manufacturing
costs such as fixed S&A expenses. These are not included in inventory valuation.
4. Which financial statement provides information about a company's liquidity
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 shows assets, liabilities, and equity at a point in
time, which helps assess liquidity and solvency.
5. In capital budgeting, the IRR is the discount rate that:
A. Maximizes the net present value
B. Minimizes the payback period
C. Makes the NPV of a project equal to zero
D. Equals the cost of capital
Rationale: IRR is the rate that sets the net present value (NPV) of all cash flows
from a project to zero.
6. A company is experiencing favorable direct labor efficiency variance. Which
of the following could explain this?
A. Laborers are paid more than expected
B. Use of lower-skilled workers
C. Poor supervision
D. Use of more skilled and efficient labor
Rationale: A favorable labor efficiency variance means workers took less time
than standard. Skilled laborers could cause this.
7. Which budgeting approach requires each item of expenditure to be justified
from scratch each period?
Practice Exam 1 Questions and correct
Answers (Verified Answers) with Rationales
2025
1. Which of the following is NOT a component of the internal control framework
developed by COSO?
A. Control Environment
B. Strategic Alignment
C. Risk Assessment
D. Monitoring
Rationale: "Strategic Alignment" is not one of the five components of COSO's
internal control framework. The correct components are Control Environment,
Risk Assessment, Control Activities, Information and Communication, and
Monitoring.
2. A company has fixed costs of $100,000 and a contribution margin of 40%.
What is the breakeven sales amount?
,A. $250,000
B. $400,000
C. $250,000
D. $150,000
Rationale: Breakeven Sales = Fixed Costs / Contribution Margin = $100,.4
= $250,000.
3. Which of the following costs is considered a period cost under variable
costing?
A. Direct materials
B. Direct labor
C. Variable manufacturing overhead
D. Fixed selling and administrative expenses
Rationale: Period costs under variable costing include all non-manufacturing
costs such as fixed S&A expenses. These are not included in inventory valuation.
4. Which financial statement provides information about a company's liquidity
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 shows assets, liabilities, and equity at a point in
time, which helps assess liquidity and solvency.
5. In capital budgeting, the IRR is the discount rate that:
A. Maximizes the net present value
B. Minimizes the payback period
C. Makes the NPV of a project equal to zero
D. Equals the cost of capital
Rationale: IRR is the rate that sets the net present value (NPV) of all cash flows
from a project to zero.
6. A company is experiencing favorable direct labor efficiency variance. Which
of the following could explain this?
A. Laborers are paid more than expected
B. Use of lower-skilled workers
C. Poor supervision
D. Use of more skilled and efficient labor
Rationale: A favorable labor efficiency variance means workers took less time
than standard. Skilled laborers could cause this.
7. Which budgeting approach requires each item of expenditure to be justified
from scratch each period?
