50 Scenario-Based MCQ Questions covering the listed topics from US CMA Part 1: depreciation, impairment, deferred tax, receivable age analysis, overhead allocations, variances, budgeting, segment reporting, ROI/RI, responsibility centers, risks, leverage, controls, analytics, learning curve, EMV, EVPI, etc.
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50 Scenario-Based MCQs
Depreciation & Impairment
1. A company purchased machinery for $300,000 with a useful life of 10 years and no salvage value. After 4 years, remaining useful life was revised downward to 3 more years. Straight-line method is used. What is the revised annual depreciation? A. $30,000
B. $50,000
C. $75,000
D. $60,000
Answer:
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2. A cash-generating unit (CGU) has carrying value of $950,000. The recoverable amount (higher of fair value less cost to sell $700,000 OR value-in-use $750,000) is $750,000. What is the impairment loss? A. $950,000
B. $200,000
C. $750,000
D. $50,000
Answer:
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Deferred Tax
3. A firm records accelerated depreciation for tax but straight-line for books. This temporary difference creates: A. Deferred tax liability
B. Deferred tax asset
C. Permanent tax difference
D. No tax impact
Answer:
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Receivables Aging
4. 60-day overdue accounts total $80,000 with expected uncollectible rate 6%. What is estimated allowance? A. $4,800
B. $6,000
C. $3,600
D. $1,800
Answer:
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Overhead Allocation
5. Step-down method first allocates service department S1 to S2 and production departments P1 & P2. If S1 cost = $100,000 and allocation percentages are S2 20%, P1 40%, P2 40%, how much is allocated to P1 in the first step? A. $20,000
B. $40,000
C. $50,000
D. $60,000
Answer:
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6. Reciprocal method uses simultaneous equations to allocate service costs. This method is preferred because: A. It is simple to apply
B. It fully recognizes inter-service use
C. It uses arbitrary percentages
D. It ignores overhead sharing
Answer:
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Over/Under-applied Overhead
7. Actual overhead = $520,000; applied OH = $500,000. Result? A. $20,000 overapplied
B. $20,000 underapplied
C. Balanced
D. Must be closed to COGM
Answer:
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Capacity
8. Maximum capacity under ideal production with no downtime refers to: A. Normal capacity
B. Practical capacity
C. Theoretical capacity
D. Actual capacity
Answer:
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Cash Flows & Budgeting
9. Depreciation is added back to Net income in operating cash flow because: A. It represents cash paid
B. It is a non-cash expense
C. It occurs only in investing
D. It is a financing item
Answer:
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10. A company expects January Sales $200,000; 30% cash, 70% collected next month. Expected February cash receipts from January sales: A. $140,000
B. $200,000
C. $60,000
D. $100,000
Answer:
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Raw Material Budget
11. Production requires 4 kg per unit. Expected production 10,000 units. RM opening stock 5,000 kg; closing desired 8,000 kg. Required purchase? A. 37,000 kg
B. 43,000 kg
C. 48,000 kg
D. 40,000 kg
Answer:
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Flexible Budget & Variances
12. Actual output = 4,000 units; standard 1.5 hrs per unit; actual hours = 5,800. Labour efficiency variance at $20/hr? A. 20,000 U
B. 16,000 U
C. 20,000 F
D. 16,000 F
Answer:
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13. Standard VOH = $6 per hr, actual hours = 7,200; standard hours allowed = 7,000. VOH efficiency variance? A. $1,200 U
B. $1,200 F
C. $600 F
D. $600 U
Answer:
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14. Fixed OH spending variance occurs due to: A. Change in hours worked
B. Change in capacity
C. Change in actual FOH spending
D. Change in efficiency
Answer:
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Segment Reporting / ROI / RI / Responsibility Centers
15. A division earns operating income $300,000, average assets $2,000,000. ROI? A. 10%
B. 15%
C. 20%
D. 30%
Answer:
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16. RI with required return 12%? Income $300,000; assets $2M.
A. $60,000
B. $40,000
C. $70,000
D. $36,000
Answer:
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17. A cost center is evaluated based on: A. Profit
B. Asset turnover
C. Cost control
D. ROI
Answer:
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Risk / Controls / Ethics
18. Responsibility for managing operational risk belongs to: A. Internal audit
B. Line management
C. External auditors
D. Board
Answer:
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19. Accepting tickets from vendor while selecting suppliers is: A. Stewardship
C. Benchmarking
D. Occupational fraud
Answer:
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20. Inherent limitation of internal control example: A. Segregation of duties
B. Collusion
C. Authorization
D. Reconciliation
Answer:
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Diseconomies of Scale
21. External diseconomies arise from: A. Poor coordination internally
B. High employee turnover
C. Higher industry-wide input cost
D. Machine breakdowns
Answer:
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22. Not a BSC perspective: A. Customer
B. Learning & Growth
C. Competitor strategy
D. Financial
Answer:
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Liquidity & Leverage
23. High debt-to-equity affects: A. Liquidity
B. Solvency
C. ROA
D. Sales growth
Answer:
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Data Analytics / Integrity
24. Data integrity ensures: A. Speed of computing
B. Completeness, accuracy, consistency
C. Volume reduction
D. Confidentiality only
Answer:
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Virus Types
25. A virus that disguises as normal software: A. Worm
B. Trojan horse
C. Spyware
D. Ransomware
Answer:
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Internal Controls
26. Example of control environment: A. Bank reconciliation
B. Management integrity & ethical tone
C. Password control
D. Purchase authorization
Answer:
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27. Output control technique: A. Batch totals
B. Exception reports
C. Input validation
D. Log-in checks
Answer:
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Visualization
28. Visual tool to show parts-to-whole: A. Scatter plot
B. Histogram
C. Pie chart
D. Control chart
Answer:
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Correlation & Regression
29. r = 0.88 means: A. Weak positive relation
B. Strong positive relation
C. No relation
D. Perfect negative relation
Answer:
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Learning Curve
30. 80% learning curve means: A. Avg time decreases 80% each batch
B. Each time unit reduces to 80% of previous
C. Labour cost increases 20%
D. Production output 80%
Answer:
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Expected Monetary Value
31. EMV = Profit × Probability: Option A: $100k @ 40%, B: $80k @ 60%. Which chosen? A. A
B. B
C. Equal
D. Cannot decide
Answer:
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EVPI
32. EV under certainty = 90k; EMV best alternative = 70k. EVPI? A. 20k
B. 30k
C. 70k
D. 80k
Answer:
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Manufacturing Bottlenecks
33. A CNC machine with limited hours that constrains output is: A. Cost driver
B. Bottleneck resource
C. Joint product
D. Fixed input
Answer:
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Additional 17 Question True or False:
34. Overapplied OH decreases COGS → Answer:
35. Segment report based on management approach → Answer:
36. Data analytics prevents rather than detects fraud → Answer:
37. Sole focus on ROI can cause dysfunctional decisions → Answer:
38. Benchmarking vs industry = competitive benchmarking
39. Financial leverage increases EPS variability
40. Operating leverage increases business risk
41. Internal control feature: reasonable assurance
42. Phishing is social engineering attack
43. Reciprocal method uses simultaneous equations
44. Adequate working capital avoids liquidity crisis
45. Contribution margin used in CVP analysis
46. Variable OH spending variance relates to rates
47. Efficiency variance relates to usage
48. Safety stock protects against uncertainty
49. Step-down partially recognizes service departments
50. Conflict of interest minimized via independent review
Answers.....
Below are 50 Scenario-Based MCQ Questions with Answers covering the listed topics from US CMA Part 1: depreciation, impairment, deferred tax, receivable age analysis, overhead allocations, variances, budgeting, segment reporting, ROI/RI, responsibility centers, risks, leverage, controls, analytics, learning curve, EMV, EVPI, etc.
50 Scenario-Based MCQs (with Answers & Explanations)
Depreciation & Impairment
1. A company purchased machinery for $300,000 with a useful life of 10 years and no salvage value. After 4 years, remaining useful life was revised downward to 3 more years. Straight-line method is used. What is the revised annual depreciation? A. $30,000
B. $50,000
C. $75,000
D. $60,000
Answer: C
Explanation: Initial dep = 300,000/10 = 30,000. Accum dep 4 years = 120,000. NBV = 180,000. Revised dep = 180,000/3 = 60,000.
2. A cash-generating unit (CGU) has carrying value of $950,000. The recoverable amount (higher of fair value less cost to sell $700,000 OR value-in-use $750,000) is $750,000. What is the impairment loss? A. $950,000
B. $200,000
C. $750,000
D. $50,000
Answer: B
Deferred Tax
3. A firm records accelerated depreciation for tax but straight-line for books. This temporary difference creates: A. Deferred tax liability
B. Deferred tax asset
C. Permanent tax difference
D. No tax impact
Answer: A
Receivables Aging
4. 60-day overdue accounts total $80,000 with expected uncollectible rate 6%. What is estimated allowance? A. $4,800
B. $6,000
C. $3,600
D. $1,800
Answer: A
Overhead Allocation
5. Step-down method first allocates service department S1 to S2 and production departments P1 & P2. If S1 cost = $100,000 and allocation percentages are S2 20%, P1 40%, P2 40%, how much is allocated to P1 in the first step? A. $20,000
B. $40,000
C. $50,000
D. $60,000
Answer: B
6. Reciprocal method uses simultaneous equations to allocate service costs. This method is preferred because: A. It is simple to apply
B. It fully recognizes inter-service use
C. It uses arbitrary percentages
D. It ignores overhead sharing
Answer: B
Over/Under-applied Overhead
7. Actual overhead = $520,000; applied OH = $500,000. Result? A. $20,000 overapplied
B. $20,000 underapplied
C. Balanced
D. Must be closed to COGM
Answer: B
Capacity
8. Maximum capacity under ideal production with no downtime refers to: A. Normal capacity
B. Practical capacity
C. Theoretical capacity
D. Actual capacity
Answer: C
Cash Flows & Budgeting
9. Depreciation is added back to Net income in operating cash flow because: A. It represents cash paid
B. It is a non-cash expense
C. It occurs only in investing
D. It is a financing item
Answer: B
10. A company expects January Sales $200,000; 30% cash, 70% collected next month. Expected February cash receipts from January sales: A. $140,000
B. $200,000
C. $60,000
D. $100,000
Answer: A
Raw Material Budget
11. Production requires 4 kg per unit. Expected production 10,000 units. RM opening stock 5,000 kg; closing desired 8,000 kg. Required purchase? A. 37,000 kg
B. 43,000 kg
C. 48,000 kg
D. 40,000 kg
Answer: B
(10,000×4 + 8,000 – 5,000 = 43,000)
Flexible Budget & Variances
12. Actual output = 4,000 units; standard 1.5 hrs per unit; actual hours = 5,800. Labour efficiency variance at $20/hr? A. 20,000 U
B. 16,000 U
C. 20,000 F
D. 16,000 F
Answer: B
(SH = 6,000; AH = 5,800 → 200 F × $20 = 4,000 F? Wait) Correction: (6000-5800)*20 = 4,000 F (Correcting key) → Answer corrected: C
13. Standard VOH = $6 per hr, actual hours = 7,200; standard hours allowed = 7,000. VOH efficiency variance? A. $1,200 U
B. $1,200 F
C. $600 F
D. $600 U
Answer: A
14. Fixed OH spending variance occurs due to: A. Change in hours worked
B. Change in capacity
C. Change in actual FOH spending
D. Change in efficiency
Answer: C
Segment Reporting / ROI / RI / Responsibility Centers
15. A division earns operating income $300,000, average assets $2,000,000. ROI? A. 10%
B. 15%
C. 20%
D. 30%
Answer: B
16. RI with required return 12%? Income $300,000; assets $2M.
A. $60,000
B. $40,000
C. $70,000
D. $36,000
Answer: A
17. A cost center is evaluated based on: A. Profit
B. Asset turnover
C. Cost control
D. ROI
Answer: C
Risk / Controls / Ethics
18. Responsibility for managing operational risk belongs to: A. Internal audit
B. Line management
C. External auditors
D. Board
Answer: B
19. Accepting tickets from vendor while selecting suppliers is: A. Stewardship
B. Conflict of interest
C. Benchmarking
D. Occupational fraud
Answer: B
20. Inherent limitation of internal control example: A. Segregation of duties
B. Collusion
C. Authorization
D. Reconciliation
Answer: B
Diseconomies of Scale
21. External diseconomies arise from: A. Poor coordination internally
B. High employee turnover
C. Higher industry-wide input cost
D. Machine breakdowns
Answer: C
Balanced Scorecard
22. Not a BSC perspective: A. Customer
B. Learning & Growth
C. Competitor strategy
D. Financial
Answer: C
Liquidity & Leverage
23. High debt-to-equity affects: A. Liquidity
B. Solvency
C. ROA
D. Sales growth
Answer: B
Data Analytics / Integrity
24. Data integrity ensures: A. Speed of computing
B. Completeness, accuracy, consistency
C. Volume reduction
D. Confidentiality only
Answer: B
Virus Types
25. A virus that disguises as normal software: A. Worm
B. Trojan horse
C. Spyware
D. Ransomware
Answer: B
Internal Controls
26. Example of control environment: A. Bank reconciliation
B. Management integrity & ethical tone
C. Password control
D. Purchase authorization
Answer: B
27. Output control technique: A. Batch totals
B. Exception reports
C. Input validation
D. Log-in checks
Answer: B
Visualization
28. Visual tool to show parts-to-whole: A. Scatter plot
B. Histogram
C. Pie chart
D. Control chart
Answer: C
Correlation & Regression
29. r = 0.88 means: A. Weak positive relation
B. Strong positive relation
C. No relation
D. Perfect negative relation
Answer: B
Learning Curve
30. 80% learning curve means: A. Avg time decreases 80% each batch
B. Each time unit reduces to 80% of previous
C. Labour cost increases 20%
D. Production output 80%
Answer: B
Expected Monetary Value
31. EMV = Profit × Probability: Option A: $100k @ 40%, B: $80k @ 60%. Which chosen? A. A
B. B
C. Equal
D. Cannot decide
Answer: B
(A=40k, B=48k)
EVPI
32. EV under certainty = 90k; EMV best alternative = 70k. EVPI? A. 20k
B. 30k
C. 70k
D. 80k
Answer: A
Manufacturing Bottlenecks
33. A CNC machine with limited hours that constrains output is: A. Cost driver
B. Bottleneck resource
C. Joint product
D. Fixed input
Answer: B
Additional 17 True or False...
34. Overapplied OH decreases COGS → Answer: True
35. Segment report based on management approach → Answer: True
36. Data analytics prevents rather than detects fraud → Answer: False
37. Sole focus on ROI can cause dysfunctional decisions → Answer: True
38. Benchmarking vs industry = competitive benchmarking
39. Financial leverage increases EPS variability
40. Operating leverage increases business risk
41. Internal control feature: reasonable assurance
42. Phishing is social engineering attack
43. Reciprocal method uses simultaneous equations
44. Adequate working capital avoids liquidity crisis
45. Contribution margin used in CVP analysis
46. Variable OH spending variance relates to rates
47. Efficiency variance relates to usage
48. Safety stock protects against uncertainty
49. Step-down partially recognizes service departments
50. Conflict of interest minimized via independent review
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