Are You Ready to Take the Exam? Test Your Knowledge with These 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 practice 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. You can also take this free CMA Simulation Exam, which is available through Prometric.

CMA Exam Part 1:

  1. A company uses negotiated transfer prices between divisions. All of the following are advantages for this type of transfer pricing model except that negotiated transfer prices
    1. achieve goal congruence.
    2. are simple and quick to implement.
    3. are useful for evaluating individual division performance.
    4. allow divisions to make their own decisions.

    Correct answer b. A disadvantage of negotiated transfer prices is that it takes time for managers from each division to negotiate a price.


  2. The data entry staff of National Manufacturing Inc. has responsibility for converting all of the plant’s shipping information to computerized records. The information flow begins when the shipping department sends a copy of a shipping order to the data entry staff. A data entry operator scans the shipping order information onto a hand-held data storage device. Verification clerks then check the computerized record with the original shipping orders. When a given batch of files has been reviewed and corrected, as necessary, the information is uploaded to the company’s mainframe system at the home office.

    The most effective way to visualize and understand this set of activities would be through the use of a

    1. program flowchart.
    2. decision table.
    3. document flowchart.
    4. Gantt chart.

    Correct answer c. Flowcharting is the representation of a process using pictorial symbols. A document flowchart would be an effective way to visualize how the document (a copy of a shipping order) flows through various departments.


  3. An analysis of historical hotel occupancy data concluded that the decline in food and beverage revenue was due mostly to the low hotel occupancy. This is an example of
    1. descriptive analytics.
    2. diagnostic analytics.
    3. predictive analytics.
    4. prescriptive analytics.

    Correct answer b. It is an example of diagnostic analytics. Diagnostic analysis describes the reason for the historical results.


CMA Exam Part 2:

  1. An accountant has determined that last year, a company had earnings before interest and tax of $750,000, interest expense of $125,000, and an income tax rate of 40%. What was the company’s degree of financial leverage last year?
    1. 0.80.
    2. 1.20.
    3. 1.67.
    4. 2.00.

    Correct answer b. 1.20 = $750,000 earnings before interest and tax / ($750,000 earnings before interest and tax - $125,000 interest expense).


  2. The term “beta” can best be described as the
    1. variability or standard deviation of the investment returns
    2. investment return’s sensitivity to changes in the market’s returns
    3. investment return’s sensitivity to changes in interest rates
    4. weighted-average return of an investment portfolio.

    Correct answer b. Choice b is correct because beta describes an investment’s sensitivity to market movements.