CMA Exam Practice Questions
To provide candidates with a brief view of some of the types of questions on the CMA® (Certified Management Accountant) exam, below are five questions – with correct answers and explanations for each.
You can also check out these additional practice multiple-choice and essay questions (in PDF format) and try the interactive practice quiz, available on the IMA® (Institute of Management Accountants) website, to test your skills and expertise.
CMA Exam Part 1:
1. A fundamental difference between U.S. GAAP and IFRS is that
- reversal of inventory write-downs is permitted under IFRS; however, reversal of inventory write-downs is prohibited under U.S. GAAP.
- distribution costs are included in cost of sales under U.S. GAAP; however, distribution costs are excluded from cost of sales under IFRS.
- inventory is generally valued at the lower of cost or market under IFRS; however, inventory is generally valued at the lower of cost or net realizable value under U.S. GAAP.
- marketing costs are included in cost of sales under U.S. GAAP; however, marketing costs are excluded from cost of sales under IFRS.
- Correct answer a.
- b. and d. are not the differences between U.S. GAAP and IFRS.
- c. Inventory is generally valued at the lower of cost or market under U.S. GAAP; however, inventory is generally valued at the lower of cost or net realizable value under IFRS.
2. When properly developed and administered, budgets provide the following advantages to the organization except to:
- provide a structure for measuring performance.
- motivate managers and other employees.
- ensure that the organization makes a profit.
- promote the efficient allocation of resources.
- Correct answer c. Successful budgets would provide all the advantages mentioned except to ensure profit to the organization.
3. Of the following pairs of variances found in a flexible budget report, which pair is most likely to be related?
- Material price variance and variable overhead efficiency variance.
- Labor rate variance and variable overhead efficiency variance.
- Material usage variance and labor efficiency variance.
- Labor efficiency variance and fixed overhead volume variance.
- Correct answer c. Efficiency variances, sometimes referred to as usage variances, measure quantity used. Material usage and labor efficiency (usage) are likely to be related, e.g., poor quality material will likely cause excess usage and require additional labor.
CMA Exam Part 2:
4. The call provision in some bond indentures allows
- the issuer to exercise an option to redeem the bonds.
- the bondholder to exchange the bond, at no additional cost, for common shares.
- the bondholder to redeem the bond early by paying a call premium.
- the issuer to pay a premium in order to prevent bondholders from redeeming bonds.
- Correct answer a. A call provision is a feature in an indenture that permits the issuer to repurchase securities at a fixed price before maturity.
5. A company is in the process of evaluating a major product line expansion. Using a 14% discount rate, the firm has calculated the present value of both the project’s cash inflows and cash outflows to be $15.8 million. The company will likely evaluate this project further by
- taking a closer look at the expansion’s contribution margin.
- comparing the internal rate of return vs. the accounting rate of return.
- comparing the internal rate of return vs. the company’s cost of capital.
- comparing the internal rate of return vs. the company’s cost of capital and hurdle rate.
- Correct answer d. Since the company has already evaluated the cash flows (net present value) of the project using a hurdle rate of 14%, the next logical step would be to compare the internal rate of return to the hurdle and the cost of capital.