Here are 100 rapid-fire CMA Part 1 questions with answers covering the topic from US CMA part 1, formatted as one-liners, fill-in-the-blanks, True/False, and Odd One Out.
Section A: Financial Reporting under US GAAP
1. Under U.S. GAAP, what is the primary objective of financial reporting?
Answer: To provide useful information to existing and potential investors, lenders, and other creditors.
2. Intracompany transactions between a parent and its wholly owned subsidiary must be __________ when preparing consolidated financial statements.
Answer: Eliminated.
3. Under ASC 606, revenue is recognized when the entity satisfies a __________ by transferring control of a promised good or service.
Answer: Performance obligation.
4. True or False: Under U.S. GAAP, internal research and development costs are generally capitalized as intangible assets.
Answer: False (they are generally expensed as incurred).
5. Which voting stock ownership level requires equity consolidation under U.S. GAAP?
Answer: More than 50%.
6. Under U.S. GAAP, comprehensive income includes net income plus __________.
Answer: Other comprehensive income.
7. Fill in the blank: A decline in market value alone does not trigger impairment under U.S. GAAP; the carrying amount must exceed the __________ future cash flows.
Answer: Undiscounted.
8. Which of the following is NOT a component of other comprehensive income? (a) Foreign currency translation adjustments, (b) Unrealized gains on available-for-sale securities, (c) Net income, (d) Pension liability adjustments.
Answer: (c) Net income.
9. True or False: Under U.S. GAAP, LIFO inventory valuation is permitted.
Answer: True.
10. Legal fees incurred to successfully defend a patent should be __________ as part of the intangible asset's cost.
Answer: Capitalized.
11. Under ASC 606, how many steps are in the revenue recognition model?
Answer: Five.
12. Fill in the blank: The __________ method is required for equity consolidation when an investor has significant influence but not control.
Answer: Equity.
13. True or False: Under U.S. GAAP, inventory write-downs are reversed if the market value later recovers.
Answer: False (write-downs create a new cost basis; reversal is not permitted under U.S. GAAP).
14. Which financial statement reports changes in a company's equity during a period?
Answer: Statement of changes in equity (or statement of stockholders' equity).
15. Under U.S. GAAP, which cost flow assumption results in the highest net income during periods of rising prices?
Answer: FIFO.
16. Fill in the blank: The primary qualitative characteristics of useful financial information are relevance and __________.
Answer: Faithful representation.
17. True or False: Under U.S. GAAP, a company must use the same inventory costing method for all inventories with similar characteristics.
Answer: True.
18. Which of the following is a financing cash flow under U.S. GAAP? (a) Dividends received, (b) Dividends paid, (c) Interest received, (d) Purchase of equipment.
Answer: (b) Dividends paid.
19. Under U.S. GAAP, how are prior period adjustments reported?
Answer: As an adjustment to the beginning balance of retained earnings (net of tax).
20. Fill in the blank: The __________ assumption assumes that the entity will continue in operation long enough to realize its assets and discharge its liabilities.
Answer: Going concern.
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Section B: Cost Classification & Types of Overheads
21. Prime cost consists of direct materials plus __________.
Answer: Direct labor.
22. Fill in the blank: __________ is a method of dealing with overheads that involves spreading common costs over cost centers on the basis of benefit received.
Answer: Overhead apportionment.
23. Which classification distinguishes between direct cost and indirect cost?
Answer: By element (or traceability).
24. True or False: Salaries paid to delivery drivers are a part of prime cost.
Answer: False (they are selling & distribution overhead).
25. Which of the following is an example of a manufacturing overhead? (a) Direct materials, (b) Factory rent, (c) Sales commissions, (d) CEO salary.
Answer: (b) Factory rent.
26. Fill in the blank: __________ is anything for which a separate measurement of cost is required.
Answer: Cost object.
27. Absorption costing is also referred to as __________ costing.
Answer: Full.
28. True or False: Administrative overheads are part of prime cost.
Answer: False.
29. Which of the following is NOT a functional classification of cost? (a) Manufacturing cost, (b) Administrative cost, (c) Selling cost, (d) Sunk cost.
Answer: (d) Sunk cost.
30. Fill in the blank: A __________ is a cost that changes in total in direct proportion to changes in the level of activity.
Answer: Variable cost.
31. Which of the following costs is a period cost? (a) Direct materials, (b) Direct labor, (c) Sales commissions, (d) Factory utilities.
Answer: (c) Sales commissions.
32. True or False: Conversion cost equals direct labor plus manufacturing overhead.
Answer: True.
33. Fill in the blank: __________ costs are costs that have already been incurred and cannot be changed by any future decision.
Answer: Sunk.
34. Which of the following is an example of a semi-variable cost? (a) Direct materials, (b) Factory rent, (c) Electricity bill with a fixed minimum charge plus usage charge, (d) Sales commission based on units sold.
Answer: (c) Electricity bill with a fixed minimum charge plus usage charge.
35. True or False: A cost driver is any factor that causes a change in the total cost of an activity.
Answer: True.
36. Fill in the blank: The __________ is the rate at which a system generates money through sales, according to the Theory of Constraints.
Answer: Throughput.
37. Which of the following is NOT a type of overhead? (a) Manufacturing overhead, (b) Selling overhead, (c) Distribution overhead, (d) Prime overhead.
Answer: (d) Prime overhead.
38. True or False: Overhead absorption is the process of assigning overhead costs to cost objects.
Answer: True.
39. Fill in the blank: Under-absorption of overheads occurs when the overheads absorbed are __________ than the actual overheads incurred.
Answer: Less.
40. Which of the following is an example of a cost allocation base? (a) Direct labor hours, (b) Machine hours, (c) Units produced, (d) All of the above.
Answer: (d) All of the above.
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Section C: Absorption Costing, Variable Costing & Super-Variable Costing
41. Under absorption costing, fixed manufacturing overhead is treated as a __________ cost.
Answer: Product.
42. True or False: Under variable costing, fixed manufacturing overhead is expensed as a period cost.
Answer: True.
43. When production exceeds sales, which costing method reports higher net income?
Answer: Absorption costing.
44. Fill in the blank: The difference between absorption costing net income and variable costing net income equals the change in inventory multiplied by the __________ fixed manufacturing overhead rate.
Answer: Unit.
45. Super-variable costing treats only __________ as a variable cost.
Answer: Direct materials.
46. True or False: Under super-variable costing, all labor and overhead costs are treated as fixed period costs.
Answer: True.
47. Which costing method is also known as throughput costing?
Answer: Super-variable costing.
48. Fill in the blank: Under variable costing, the contribution margin equals sales revenue minus __________ costs.
Answer: Variable.
49. True or False: Absorption costing is required for external financial reporting under U.S. GAAP.
Answer: True.
50. Which of the following is NOT a characteristic of variable costing? (a) Fixed manufacturing overhead is a period cost, (b) Product costs include only variable manufacturing costs, (c) Net income is affected by changes in inventory levels, (d) It is useful for internal decision-making.
Answer: (c) Net income is affected by changes in inventory levels (this is a characteristic of absorption costing).
51. Fill in the blank: Gross margin is to absorption costing as __________ margin is to variable costing.
Answer: Contribution.
52. True or False: Super-variable costing values ending inventory at the total of direct materials, direct labor, and variable overhead.
Answer: False (only direct materials).
53. Under absorption costing, how is fixed manufacturing overhead treated when units are sold?
Answer: It is expensed as part of cost of goods sold.
54. Fill in the blank: The reconciliation between absorption costing income and variable costing income involves the change in inventory multiplied by the fixed overhead __________.
Answer: Rate.
55. True or False: Throughput costing and super-variable costing are the same concept.
Answer: True.
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Section D: Throughput Accounting
56. In throughput accounting, throughput is calculated as sales revenue minus __________.
Answer: Direct materials cost.
57. Fill in the blank: The throughput accounting ratio (TPAR) equals throughput return per hour divided by __________ per hour.
Answer: Factory cost.
58. True or False: In throughput accounting, direct labor is treated as a factory cost.
Answer: True.
59. Which of the following is NOT a basic measure in the Theory of Constraints? (a) Throughput, (b) Inventory, (c) Operating expenses, (d) Gross margin.
Answer: (d) Gross margin.
60. Fill in the blank: A TPAR greater than __________ indicates that the product is profitable.
Answer: 1.0.
61. True or False: Throughput accounting focuses on maximizing the output of the bottleneck resource.
Answer: True.
62. Return per factory hour is calculated as throughput divided by __________.
Answer: Time on bottleneck resource.
63. Fill in the blank: In throughput accounting, all costs other than direct materials are considered __________ costs.
Answer: Factory (or fixed).
64. True or False: Throughput accounting is a costing method used for external financial reporting.
Answer: False.
65. Which of the following is the correct formula for throughput? (a) Sales – Direct materials, (b) Sales – All variable costs, (c) Sales – Total costs, (d) Sales – Direct labor.
Answer: (a) Sales – Direct materials.
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Section E: JIT, Kaizen & Cost of Quality
66. True or False: JIT production is driven by customer orders.
Answer: True.
67. Fill in the blank: In a JIT system, inventory is viewed as a __________.
Answer: Waste (or liability).
68. Which of the following is NOT a characteristic of JIT? (a) Significant reduction in inventory, (b) Higher quality products in a shorter time, (c) Allowing minor defects without correction, (d) Eliminating rework costs.
Answer: (c) Allowing minor defects without correction.
69. True or False: Kaizen refers to continuous improvement.
Answer: True.
70. Fill in the blank: The cost of inspection at various stages of production is an example of a(n) __________ cost.
Answer: Appraisal.
71. Costs incurred to detect poor-quality goods are called __________ costs.
Answer: Appraisal.
72. True or False: Prevention costs are incurred to keep defects from occurring.
Answer: True.
73. Which of the following is an example of an internal failure cost? (a) Warranty repairs, (b) Rework, (c) Inspection, (d) Training.
Answer: (b) Rework.
74. Fill in the blank: External failure costs are incurred __________ the product is delivered to the customer.
Answer: After.
75. True or False: Increasing prevention costs typically reduces appraisal, internal failure, and external failure costs over time.
Answer: True.
76. Which of the following is NOT a cost of quality category? (a) Prevention, (b) Appraisal, (c) Internal failure, (d) Prime cost.
Answer: (d) Prime cost.
77. Fill in the blank: The cost of training employees for quality improvement is classified as a __________ cost.
Answer: Prevention.
78. True or False: Under JIT, a company relies on long-term consumer forecasts to drive production.
Answer: False.
79. Kaizen costing focuses on cost reduction during the __________ stage of a product's life cycle.
Answer: Manufacturing (or production).
80. Fill in the blank: The cost of rework in a quality-improvement program is categorized as a(n) __________ failure cost.
Answer: Internal.
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Section F: Mixed Review & Odd One Out
81. Odd One Out: Which of the following is not a period cost? (a) Sales commissions, (b) Administrative salaries, (c) Direct materials, (d) Advertising expense.
Answer: (c) Direct materials.
82. Fill in the blank: The __________ method of costing includes only direct materials, direct labor, and variable manufacturing overhead in product costs.
Answer: Variable.
83. True or False: Throughput accounting is used for external financial reporting under U.S. GAAP.
Answer: False.
84. Odd One Out: Which is not a component of the cost of quality? (a) Prevention, (b) Appraisal, (c) Prime cost, (d) External failure.
Answer: (c) Prime cost.
85. Fill in the blank: The three basic measures in the Theory of Constraints are throughput, inventory, and __________.
Answer: Operating expenses.
86. True or False: Under JIT, materials are purchased in large quantities to obtain quantity discounts.
Answer: False.
87. Odd One Out: Which is not a characteristic of absorption costing? (a) Fixed overhead is a product cost, (b) Net income is affected by production volume, (c) It is used for internal decision-making only, (d) It is required for external reporting.
Answer: (c) It is used for internal decision-making only.
88. Fill in the blank: Under U.S. GAAP, the equity method is used when an investor owns __________ of the voting stock of an investee.
Answer: 20–50%.
89. True or False: Super-variable costing and throughput costing are identical concepts.
Answer: True.
90. Odd One Out: Which of the following is not a type of overhead? (a) Manufacturing overhead, (b) Selling overhead, (c) Administrative overhead, (d) Prime overhead.
Answer: (d) Prime overhead.
91. Fill in the blank: The primary purpose of cost accounting is to provide information to management for __________.
Answer: Decision-making.
92. True or False: Under U.S. GAAP, LIFO is an acceptable inventory valuation method.
Answer: True.
93. Odd One Out: Which is not a JIT benefit? (a) Reduced inventory, (b) Increased lead times, (c) Improved quality, (d) Reduced waste.
Answer: (b) Increased lead times.
94. Fill in the blank: In throughput accounting, the TPAR is calculated by dividing the return per factory hour by the __________ per factory hour.
Answer: Factory cost.
95. True or False: Kaizen costing is applied during the design phase of a product.
Answer: False (Kaizen is continuous improvement during production; target costing is used during design).
96. Odd One Out: Which is not a cost of quality? (a) Prevention, (b) Appraisal, (c) Internal failure, (d) Sunk cost.
Answer: (d) Sunk cost.
97. Fill in the blank: Under variable costing, fixed selling and administrative expenses are treated as __________ costs.
Answer: Period.
98. True or False: Absorption costing must be used for external financial reporting under U.S. GAAP.
Answer: True.
99. Odd One Out: Which is not a type of cost classification? (a) By element, (b) By function, (c) By behavior, (d) By color.
Answer: (d) By color.
100. Fill in the blank: The five-step model for revenue recognition under ASC 606 begins with identifying the __________ with a customer.
Answer: Contract.
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