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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 new interactive practice quiz, available on the IMA® (Institute of Management Accountants) website, to test your skills and expertise.
CMA Exam Part 1:
1. The management of a company has just completed a thorough review of its strategic goals and formulated the company’s long-term plan and short-term objectives. The most appropriate next step for the company is the development of a
a. financial budget.
b. operating budget.
c. capital budget.
d. master budget.
Correct answer d. A master budget translates the organization’s short-term objectives into action steps. An organization determines short-term objectives for the budget period based on strategic goals, long-term objectives and plans, operating results of past periods, and expected future operating and environmental factors including economic, industry, and marketing conditions.
2. Manchester Airlines is in the process of preparing a contribution margin income statement that will allow a detailed look at its variable costs and profitability of operations. Which one of the following cost combinations should be used to evaluate the variable cost per flight of the company’s Boston-Las Vegas flights?
a. Flight crew salary, fuel, and engine maintenance.
b. Fuel, food service, and airport landing fees.
c. Airplane depreciation, baggage handling, and airline marketing.
d. Communication system operation, food service, and ramp personnel.
Correct answer b. The variable costs per flight would include fuel, food service, and landing fees. Other costs mentioned such as salaries, depreciation, marketing, and communications would not vary with individual flights.
3. A computer virus is different from a Trojan horse because the virus can
a. corrupt data.
b. alter programming instructions.
c. replicate itself.
d. erase executable files.
Correct answer c. Viruses are computer programs that propagate themselves from one computer to another without the user’s knowledge. Trojan horses are restricted to a specific computer. These are voluntarily installed as regular programs, but, behind the scenes, they contain codes that a hacker can activate later to take over the computer.
CMA Exam Part 2:
4. All of the following are affected when merchandise is purchased on credit except
a. total current assets.
b. net working capital.
c. total current liabilities.
d. current ratio.
Correct answer b. When merchandise is purchased on credit, accounts payable increases and inventory increases by the same amount so net working capital remains unchanged.
5. A capital investment project has the following expected incremental values next year.
Revenue $1,000,000
Operating costs 200,000
Depreciation 300,000
If the income tax rate is 25%, the incremental after-tax operating cash flow is
a. $125,000.
b. $375,000.
c. $675,000.
d. $900,000.
Correct answer c.
1,000,000 – 200,000 – 300,000 = 500,000 taxable
500,000 – 125,000 (taxes @ .25) = 375,000 + 300,000 = 675,000 (add back depreciation)
You can also check out these additional practice multiple-choice and essay questions (in PDF format) and try the new interactive practice quiz, available on the IMA® (Institute of Management Accountants) website, to test your skills and expertise.
CMA Exam Part 1:
1. The management of a company has just completed a thorough review of its strategic goals and formulated the company’s long-term plan and short-term objectives. The most appropriate next step for the company is the development of a
a. financial budget.
b. operating budget.
c. capital budget.
d. master budget.
Correct answer d. A master budget translates the organization’s short-term objectives into action steps. An organization determines short-term objectives for the budget period based on strategic goals, long-term objectives and plans, operating results of past periods, and expected future operating and environmental factors including economic, industry, and marketing conditions.
2. Manchester Airlines is in the process of preparing a contribution margin income statement that will allow a detailed look at its variable costs and profitability of operations. Which one of the following cost combinations should be used to evaluate the variable cost per flight of the company’s Boston-Las Vegas flights?
a. Flight crew salary, fuel, and engine maintenance.
b. Fuel, food service, and airport landing fees.
c. Airplane depreciation, baggage handling, and airline marketing.
d. Communication system operation, food service, and ramp personnel.
Correct answer b. The variable costs per flight would include fuel, food service, and landing fees. Other costs mentioned such as salaries, depreciation, marketing, and communications would not vary with individual flights.
3. A computer virus is different from a Trojan horse because the virus can
a. corrupt data.
b. alter programming instructions.
c. replicate itself.
d. erase executable files.
Correct answer c. Viruses are computer programs that propagate themselves from one computer to another without the user’s knowledge. Trojan horses are restricted to a specific computer. These are voluntarily installed as regular programs, but, behind the scenes, they contain codes that a hacker can activate later to take over the computer.
CMA Exam Part 2:
4. All of the following are affected when merchandise is purchased on credit except
a. total current assets.
b. net working capital.
c. total current liabilities.
d. current ratio.
Correct answer b. When merchandise is purchased on credit, accounts payable increases and inventory increases by the same amount so net working capital remains unchanged.
5. A capital investment project has the following expected incremental values next year.
Revenue $1,000,000
Operating costs 200,000
Depreciation 300,000
If the income tax rate is 25%, the incremental after-tax operating cash flow is
a. $125,000.
b. $375,000.
c. $675,000.
d. $900,000.
Correct answer c.
1,000,000 – 200,000 – 300,000 = 500,000 taxable
500,000 – 125,000 (taxes @ .25) = 375,000 + 300,000 = 675,000 (add back depreciation)