To provide candidates with a brief view of some of the types of questions on the CMA® (Certified Management Accountant) exam, here are five questions – with correct answers and explanations for each.
CMA Exam Part 1:
1. An accountant gathered the following information in order to prepare the statement of cash flows for the current year. Net income of $456,900 includes a deduction of $45,600 for depreciation expense. The company issued $300,000 of dividends this year and purchased one new building for $275,000. The balance sheets from the current period and prior period included the following balances.
| Prior Year | Current Year | ||||
| Accounts receivable, net | $ 56,860 | $ 45,300 | |||
| Accounts payable | 12,900 | 10,745 | |||
| Inventory | 186,700 | 194,320 |
Using the indirect method, what is the amount of cash provided by operating activities?
- $202,500.
- $405,205.
- $504,285.
- $521,405.
| Net income | $ 456,900 | |
| Depreciation on fixed assets | 45,600 | |
| Decrease in accounts receivable, net | 11,560 | |
| Increase in inventory | (7,620) | |
| Decrease in accounts payable | (2,155) | |
| Cash provided by operating activities | $ 504,285 |
2. A company sells a product that is aimed at the broad mass market but is perceived as unique throughout its industry. The company is earning above-average returns on the product. Which one of the following is the most appropriate term for the competitive strategy followed by the company?
- Market focus.
- Financial leadership.
- Cost focus.
- Differentiation.
2. Correct answer: d. The differentiation strategy is aimed at the broad mass market and involves the creation of a product or service that is perceived throughout its industry as unique. Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting brand loyalty lowers customers’ sensitivity to price. Increased costs can usually be passed on to the buyers.
3. A project manager has been asked to provide an explanation regarding a $2,220 favorable material variance on a playground equipment project. After further analysis, the project manager was able to break down the material variance to an unfavorable price variance of $1,700 and a favorable quantity variance of $3,920. The best explanation of the variances is that the
- decision by the purchasing department to use a new supplier resulted in the purchase of the materials for a lower price.
- excellent scheduling by the production department enabled the purchasing department to reduce shipping costs.
- purchasing department purchased a higher-quality material, resulting in less wasted materials.
- human resources department failed to hire adequately trained workers, causing materials to be wasted.
CMA Exam Part 2:
1. The CFO of a machine parts manufacturer is considering splitting the company’s stock, which is currently selling at $80 per share. The stock currently pays a $1 per share dividend. If the split is two-for-one, the CFO may expect the post-split price to be
- exactly $40, regardless of dividend policy.
- greater than $40, if the dividend is changed to $0.45 per new share.
- greater than $40, if the dividend is changed to $0.55 per new share.
- less than $40, regardless of dividend policy.
2. A company invests in a project with expected cash inflows of $9,000 per year for four years. All cash flows occur at year-end. The required return on investment is 9%. If the project generates a net present value (NPV) of $3,000, what is the amount of the initial investment in the project?
- $11,253.
- $13,236.
- $26,160.
- $29,160.
| Present value of cash inflows | $9,000 x 3.24 | = | $29,160 | ||||
| Initial investment | $29,160 - $3,000 | = | $26,160 |
For more information about taking the CMA exam, please visit https://www.imanet.org/cma-certification/taking-the-exam.