Certified Management Accountant
Exam Practice Questions And Correct
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Rationale 2026 Q&A| Instant Download
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1. A manufacturing firm uses absorption costing. If production exceeds
sales during a period, which outcome is most likely?
A. Profit decreases due to higher fixed costs expensed
B. Profit increases due to fixed overhead being deferred in inventory
C. Profit remains unchanged regardless of inventory levels
D. Variable costs are capitalized as expenses
B
Under absorption costing, fixed manufacturing overhead is included in
inventory, so unsold units defer fixed costs and temporarily increase
reported profit when production exceeds sales.
2. Which costing method assigns only variable manufacturing costs to
products?
A. Absorption costing
B. Standard costing
C. Activity-based costing
D. Variable costing
,D
Variable costing treats only variable manufacturing costs as product costs
while expensing fixed manufacturing overhead in the period incurred.
3. A favorable variance in direct material price indicates that:
A. More materials were used than expected
B. Materials were purchased at a lower cost than standard
C. Output was below budget
D. Labor efficiency improved
B
A favorable price variance arises when actual purchase prices are lower
than the standard price.
4. Which budgeting approach adjusts budgets continuously by adding a
new period as one period ends?
A. Zero-based budgeting
B. Rolling budgeting
C. Static budgeting
D. Incremental budgeting
B
Rolling budgets are continuously updated by extending the budget horizon
as each period concludes.
5. Contribution margin is best defined as:
A. Sales minus fixed costs
B. Sales minus total costs
C. Sales minus variable costs
D. Fixed costs minus variable costs
C
Contribution margin represents revenue remaining after deducting
variable costs and is used to cover fixed costs and profit.
, 6. Which financial statement best reflects a company’s financial position
at a point in time?
A. Income statement
B. Cash flow statement
C. Statement of retained earnings
D. Balance sheet
D
The balance sheet presents assets, liabilities, and equity at a specific date,
showing financial position.
7. Break-even point occurs when:
A. Revenue equals total fixed costs
B. Contribution margin equals fixed costs
C. Variable costs equal fixed costs
D. Profit equals variable costs
B
Break-even is achieved when total contribution margin exactly covers fixed
costs, resulting in zero profit.
8. In cost-volume-profit analysis, an increase in fixed costs will:
A. Lower break-even point
B. Increase break-even point
C. Have no effect on profit
D. Reduce variable cost per unit
B
Higher fixed costs require more units sold to cover costs, raising the break-
even point.
9. Which of the following is a non-financial performance measure?
A. Net income
B. Return on investment
, C. Customer satisfaction score
D. Earnings per share
C
Customer satisfaction is a qualitative measure of performance rather than
a financial metric.
10. A flexible budget is most useful because it:
A. Ignores cost behavior
B. Adjusts for actual activity levels
C. Eliminates all variances
D. Focuses only on fixed costs
B
Flexible budgets adjust costs based on actual output, enabling meaningful
variance analysis.
11. Which type of cost remains constant per unit but changes in
total with activity?
A. Fixed cost
B. Variable cost
C. Mixed cost
D. Sunk cost
B
Variable costs remain constant per unit but vary in total with changes in
production volume.
12. Which inventory method assumes the most recently purchased
goods are sold first?
A. FIFO
B. LIFO
C. Weighted average
D. Specific identification
Exam Practice Questions And Correct
Answers (Verified Answers) Plus
Rationale 2026 Q&A| Instant Download
1. A manufacturing firm uses absorption costing. If production exceeds
sales during a period, which outcome is most likely?
A. Profit decreases due to higher fixed costs expensed
B. Profit increases due to fixed overhead being deferred in inventory
C. Profit remains unchanged regardless of inventory levels
D. Variable costs are capitalized as expenses
B
Under absorption costing, fixed manufacturing overhead is included in
inventory, so unsold units defer fixed costs and temporarily increase
reported profit when production exceeds sales.
2. Which costing method assigns only variable manufacturing costs to
products?
A. Absorption costing
B. Standard costing
C. Activity-based costing
D. Variable costing
,D
Variable costing treats only variable manufacturing costs as product costs
while expensing fixed manufacturing overhead in the period incurred.
3. A favorable variance in direct material price indicates that:
A. More materials were used than expected
B. Materials were purchased at a lower cost than standard
C. Output was below budget
D. Labor efficiency improved
B
A favorable price variance arises when actual purchase prices are lower
than the standard price.
4. Which budgeting approach adjusts budgets continuously by adding a
new period as one period ends?
A. Zero-based budgeting
B. Rolling budgeting
C. Static budgeting
D. Incremental budgeting
B
Rolling budgets are continuously updated by extending the budget horizon
as each period concludes.
5. Contribution margin is best defined as:
A. Sales minus fixed costs
B. Sales minus total costs
C. Sales minus variable costs
D. Fixed costs minus variable costs
C
Contribution margin represents revenue remaining after deducting
variable costs and is used to cover fixed costs and profit.
, 6. Which financial statement best reflects a company’s financial position
at a point in time?
A. Income statement
B. Cash flow statement
C. Statement of retained earnings
D. Balance sheet
D
The balance sheet presents assets, liabilities, and equity at a specific date,
showing financial position.
7. Break-even point occurs when:
A. Revenue equals total fixed costs
B. Contribution margin equals fixed costs
C. Variable costs equal fixed costs
D. Profit equals variable costs
B
Break-even is achieved when total contribution margin exactly covers fixed
costs, resulting in zero profit.
8. In cost-volume-profit analysis, an increase in fixed costs will:
A. Lower break-even point
B. Increase break-even point
C. Have no effect on profit
D. Reduce variable cost per unit
B
Higher fixed costs require more units sold to cover costs, raising the break-
even point.
9. Which of the following is a non-financial performance measure?
A. Net income
B. Return on investment
, C. Customer satisfaction score
D. Earnings per share
C
Customer satisfaction is a qualitative measure of performance rather than
a financial metric.
10. A flexible budget is most useful because it:
A. Ignores cost behavior
B. Adjusts for actual activity levels
C. Eliminates all variances
D. Focuses only on fixed costs
B
Flexible budgets adjust costs based on actual output, enabling meaningful
variance analysis.
11. Which type of cost remains constant per unit but changes in
total with activity?
A. Fixed cost
B. Variable cost
C. Mixed cost
D. Sunk cost
B
Variable costs remain constant per unit but vary in total with changes in
production volume.
12. Which inventory method assumes the most recently purchased
goods are sold first?
A. FIFO
B. LIFO
C. Weighted average
D. Specific identification
