US CMA & ACCA (MA) focused question covering costing, budgeting, variance analysis, performance measurement, financial statements, and decision-making.
PART A – 40 MCQs (Conceptual + Numerical Logic)
1. Cash Flow Statement
1. Interest paid under US GAAP is classified as:
A. Investing
B. Financing
C. Operating
D. OCI
Answer: C
2. Increase in accounts receivable results in:
A. Increase in operating cash flow
B. Decrease in operating cash flow
C. No effect
D. Financing cash flow
Answer: B
2. Cash Budget
3. Cash budget primarily focuses on:
A. Profitability
B. Liquidity
C. Solvency
D. Leverage
Answer: B
4. Depreciation is excluded from cash budget because it is:
A. Sunk cost
B. Historical cost
C. Non-cash item
Answer: C
3. Production & Purchase Budget
5. Production budget depends on:
A. Sales forecast and desired inventory
B. Purchase budget
C. Cash budget
D. Capital budget
Answer: A
6. Purchase budget calculates quantity of:
A. Finished goods
B. Direct materials
C. Labor hours
D. Overheads
Answer: B
4. Flexible Budget
7. Flexible budget adjusts costs based on:
A. Budgeted sales
B. Actual activity level
C. Standard cost
D. Capacity utilization
Answer: B
8. Flexible budget variance isolates:
A. Volume variance
B. Price variance
C. Efficiency & spending variance
D. Fixed cost variance
Answer: C
5. Job Order & Process Costing
9. Job order costing is suitable for:
A. Cement industry
B. Oil refinery
C. Custom furniture
D. Chemical plants
Answer: C
10. Process costing averages costs over:
A. Jobs
B. Batches
C. Units
D. Orders
Answer: C
6. Overhead Applied Rate
11. Predetermined overhead rate is based on:
A. Actual overhead / actual activity
B. Budgeted overhead / budgeted activity
C. Actual overhead / budgeted activity
D. Budgeted overhead / actual activity
Answer: B
12. Over-applied overhead means:
A. Applied < Actual
B. Applied > Actual
C. Budgeted < Actual
D. Fixed cost variance
Answer: B
7. Inventory Over/Under-valuation
13. Under-absorption of overhead causes inventory to be:
A. Overvalued
B. Undervalued
C. Correctly valued
D. Written off
Answer: B
8. Abnormal Losses
14. Abnormal process loss is:
A. Included in product cost
B. Charged to P&L
C. Capitalized
D. Deferred
Answer: B
9. Activity-Based Costing (ABC)
15. ABC reduces:
A. Prime cost
B. Conversion cost
C. Cross-cost subsidization
D. Variable costs
Answer: C
16. Cost pool in ABC refers to:
A. Activity group
B. Department
C. Job
D. Product line
Answer: A
17. Cost driver measures:
A. Output
B. Consumption of activity
C. Profitability
D. Efficiency
Answer: B
10. Overhead Allocation
18. Cost tracing uses:
A. Cause-and-effect
B. Arbitrary basis
C. Equal sharing
D. Judgment
Answer: A
19. Apportionment is used when cost:
A. Can be directly traced
B. Benefits multiple cost centers
C. Is irrelevant
D. Is sunk
Answer: B
20. Re-apportionment distributes:
A. Production overhead
B. Service department costs
C. Selling costs
D. Prime costs
Answer: B
11. ROI & Residual Income
21. ROI =
A. Profit ÷ Sales
B. Profit ÷ Assets
C. Sales ÷ Assets
D. Contribution ÷ Sales
Answer: B
22. Residual Income overcomes ROI limitation by considering:
A. Sales volume
B. Cost of capital
C. Gross margin
D. Operating cycle
Answer: B
12. Variance Analysis
23. Material efficiency variance is caused by:
A. Price change
B. Usage inefficiency
C. Wage rate
D. Capacity change
Answer: B
24. Labor efficiency variance focuses on:
A. Hours used vs standard
B. Wage rate
C. Idle time
D. Budgeted hours
Answer: A
25. Variable overhead efficiency variance is driven by:
A. Machine hours
B. Labor efficiency
C. Spending rate
D. Fixed cost
Answer: B
26. Fixed overhead volume variance arises due to:
A. Spending change
B. Capacity utilization
C. Rate change
D. Inflation
Answer: B
13. Responsibility Centers
27. Investment center manager is responsible for:
A. Cost only
B. Revenue only
C. Profit
D. Assets + profit
Answer: D
28. Cost center performance is measured by:
A. ROI
B. Revenue
C. Cost control
D. Market share
Answer: C
14. Cost Concepts
29. Sunk costs are:
A. Relevant
B. Avoidable
C. Irrelevant
D. Incremental
Answer: C
30. Opportunity cost represents:
A. Past cost
B. Explicit cost
C. Foregone benefit
D. Fixed cost
Answer: C
31. Economic cost includes:
A. Explicit only
B. Implicit only
C. Explicit + implicit
D. Historical
Answer: C
15. Capacity Concepts
32. Theoretical capacity assumes:
A. No interruptions
B. Normal downtime
C. Idle time
D. Breakdowns
Answer: A
33. Idle capacity represents:
A. Excess demand
B. Underutilized resources
C. Overhead absorption
D. Full utilization
Answer: B
16. Financial Performance
34. Gross profit =
A. Sales – variable cost
B. Sales – COGS
C. Contribution – fixed cost
D. Net income + tax
Answer: B
35. Contribution margin is useful for:
A. External reporting
B. CVP analysis
C. Tax reporting
D. Balance sheet
Answer: B
36. Break-even sales occur when:
A. Profit is maximum
B. Contribution = fixed cost
C. Revenue = cash inflow
D. Gross margin is zero
Answer: B
17. Liquidity, Solvency & Risk
37. Liquidity measures ability to:
A. Earn profit
B. Pay long-term debt
C. Meet short-term obligations
D. Increase leverage
Answer: C
38. Financial leverage increases:
A. Business risk
B. Operating risk
C. Financial risk
D. Market risk
Answer: C
39. Risk owner is the person who:
A. Identifies risk
B. Accepts risk
C. Is accountable for managing risk
D. Transfers risk
Answer: C
40. High operating efficiency implies:
A. High idle capacity
B. Optimal resource utilization
C. Excess capacity
D. Overcapitalization
Answer: B
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PART B – 10 Fill in the Blanks
41. Raw materials consumed = Opening RM + Purchases – ______
Answer: Closing RM
42. Prime cost includes direct material and ______
Answer: Direct labor
43. Conversion cost = Direct labor + ______
Answer: Manufacturing overhead
44. Joint costs are incurred ______ the split-off point.
Answer: Before
45. By-products have ______ economic value compared to joint products.
Answer: Minor / insignificant
46. EPS = (Net income – ______) ÷ Weighted average shares
Answer: Preference dividends
47. Diluted EPS assumes conversion of ______ securities.
Answer: Potential equity
48. Step-fixed costs remain constant within a ______ range.
Answer: Relevant
49. Super-variable costs change ______ with activity.
Answer: Disproportionately
50. Other comprehensive income includes unrealized gains on ______ securities.
Answer: Available-for-sale (AFS)
✅ Exam Tip (CMA Focus)
• ABC + Variance + ROI/RI = guaranteed high-weight area
• Flexible budget variances always use actual activity
• Sunk ≠ Relevant (CMA loves this trap)
🔢 US CMA NUMERICAL MCQs WITH ANSWERS
1. Material Price Variance
Standard price = $5 per kg
Actual price = $6 per kg
Actual quantity purchased = 8,000 kg
Material price variance is:
A. $8,000 F
B. $8,000 U
C. $5,000 U
D. $6,000 F
✅ Answer: B
Working: (SP − AP) × AQ = (5 − 6) × 8,000 = $8,000 U
2. Material Efficiency Variance
Standard quantity = 2 kg/unit
Actual output = 3,000 units
Actual quantity used = 6,500 kg
Standard price = $4/kg
Material efficiency variance is:
A. $2,000 U
B. $1,800 U
C. $2,400 F
D. $2,000 F
✅ Answer: A
Working: (SQ − AQ) × SP
SQ = 3,000 × 2 = 6,000
(6,000 − 6,500) × 4 = $2,000 U
3. Labor Rate Variance
Standard rate = $20/hour
Actual rate = $18/hour
Actual hours = 4,500
Labor rate variance is:
A. $9,000 F
B. $9,000 U
C. $7,200 F
D. $7,200 U
✅ Answer: A
Working: (SR − AR) × AH = (20 − 18) × 4,500 = $9,000 F
4. Labor Efficiency Variance
Standard hours per unit = 1.5
Actual output = 4,000 units
Actual hours = 6,500
Standard rate = $16
Labor efficiency variance:
A. $4,000 U
B. $6,000 U
C. $8,000 F
D. $6,000 F
✅ Answer: B
Working:
SH = 4,000 × 1.5 = 6,000
(6,000 − 6,500) × 16 = $6,000 U
5. Variable Overhead Spending Variance
Actual VOH = $42,000
Actual hours = 7,000
Standard VOH rate = $5/hour
Spending variance equals:
A. $7,000 U
B. $7,000 F
C. $3,500 U
D. $3,500 F
✅ Answer: A
Working:
AH × SR = 7,000 × 5 = 35,000
42,000 − 35,000 = $7,000 U
6. Variable Overhead Efficiency Variance
Standard hours = 6,000
Actual hours = 6,500
Standard VOH rate = $6
Efficiency variance:
A. $3,000 U
B. $3,000 F
C. $6,500 U
D. $6,500 F
✅ Answer: A
Working: (SH − AH) × SR = (6,000 − 6,500) × 6 = $3,000 U
7. Fixed Overhead Volume Variance
Budgeted FOH = $120,000
Budgeted units = 30,000
Actual units = 27,000
Volume variance is:
A. $12,000 F
B. $12,000 U
C. $9,000 F
D. $9,000 U
✅ Answer: B
Working:
FOH rate = 120,000 ÷ 30,000 = 4/unit
(27,000 − 30,000) × 4 = $12,000 U
8. Predetermined Overhead Rate
Budgeted overhead = $180,000
Budgeted machine hours = 60,000
Predetermined OH rate is:
A. $3/hour
B. $4/hour
C. $2.5/hour
D. $5/hour
✅ Answer: A
9. Over-Applied Overhead
Applied OH = $195,000
Actual OH = $185,000
Over/under-applied overhead equals:
A. $10,000 over-applied
B. $10,000 under-applied
C. $195,000 over-applied
D. $185,000 under-applied
✅ Answer: A
10. Contribution Margin Ratio
Sales = $500,000
Variable costs = $350,000
Contribution margin ratio is:
A. 30%
B. 70%
C. 40%
D. 50%
✅ Answer: A
11. Break-Even Sales (Units)
Fixed costs = $180,000
Contribution per unit = $12
Break-even units:
A. 12,000
B. 15,000
C. 18,000
D. 20,000
✅ Answer: B
12. Break-Even Sales (Dollars)
CM ratio = 40%
Fixed costs = $200,000
Break-even sales revenue:
A. $300,000
B. $400,000
C. $500,000
D. $800,000
✅ Answer: C
13. ROI Calculation
Operating income = $90,000
Average assets = $600,000
ROI equals:
A. 10%
B. 12%
C. 15%
D. 18%
✅ Answer: C
14. Residual Income
Operating income = $150,000
Required return = 12%
Average assets = $1,000,000
Residual income equals:
A. $30,000
B. $120,000
C. $150,000
D. $270,000
✅ Answer: A
15. Cash Budget
Beginning cash = $40,000
Cash receipts = $120,000
Cash payments = $145,000
Ending cash balance:
A. $15,000
B. $25,000
C. $(15,000)
D. $(25,000)
✅ Answer: C
🔥 CMA EXAM SHORTCUTS
• Efficiency variances → Quantity/Hours
• Spending variances → Rate
• FOH volume → Capacity
• Residual income > ROI for decision-making
• Cash budget ignores depreciation
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