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CMA Part 2 Practice Exam 3

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Question 1 of 10

1. Question

A company currently makes a part with these per-unit costs: Direct Materials $10, Direct Labor $15, Variable Overhead $5, Fixed Overhead $12 (all $12 is unavoidable). An outside supplier offers the part for $34. Should the company make or buy?

Buy; it saves $2 per unit.
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Make; it saves $4 per unit.
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Make; it saves $10 per unit.
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Question 2 of 10

2. Question

A company has excess capacity and receives a special order for 1,000 units at $20 each. Per-unit variable costs are $15. To fulfill the order, an additional $2,000 in total shipping costs will be incurred. What is the effect on operating income?

Increase of $5,000
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Increase of $3,000
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Decrease of $5,000
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Increase of $2,000
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Question 3 of 10

3. Question

A manufacturer has 5,000 partially finished units (sunk cost: $40,000). The units can be sold as-is for $50,000 or processed further for an additional $20,000 and sold for $75,000. What should the firm do?

Sell as-is; it is $5,000 more profitable.
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Process further; it is $5,000 more profitable.
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Process further; it is $15,000 more profitable.
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Sell as-is; it is $15,000 more profitable.
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Question 4 of 10

4. Question

A segment has a contribution margin of $40,000 and fixed costs of $50,000, of which $30,000 are allocated and will continue if the segment is dropped. What is the impact of eliminating the segment?

Income increases by $10,000.
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Income decreases by $20,000.
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Income decreases by $10,000.
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Income increases by $20,000.
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Question 5 of 10

5. Question

Which of the following is a key assumption underlying Cost-Volume-Profit (CVP) analysis?

Fixed costs change in proportion to volume.
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Total revenue and total cost behave linearly within the relevant range.
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Inventory levels change significantly during the period.
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The company sells multiple products with a variable sales mix.
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Question 6 of 10

6. Question

Target costing is best described as:

Adding a standard markup percentage to total product cost.
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Setting the price based on what competitors charge.
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Calculating the maximum allowable cost by subtracting the desired profit from the market price.
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Pricing based on the perceived value of the product to the customer.
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Question 7 of 10

7. Question

A company sets high prices based on the prestige and status its product conveys, regardless of production costs. This pricing strategy is:

Skimming pricing
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Penetration pricing
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Prestige pricing
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Cost-plus pricing
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Question 8 of 10

8. Question

Which of the following costs is irrelevant in a short-term decision to accept a special order?

Direct materials needed for the order.
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Variable shipping costs for the order.
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The book value of existing equipment.
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Overtime labor required to produce the order.
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Question 9 of 10

9. Question

If the price elasticity of demand for a product is 1.5, a 10% increase in price will result in:

A 15% increase in quantity demanded.
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A 15% decrease in quantity demanded.
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A 1.5% decrease in quantity demanded.
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A 10% decrease in quantity demanded.
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Question 10 of 10

10. Question

In the COSO ERM framework, ‘Risk Appetite’ is best defined as:

The maximum amount of risk a firm can physically absorb.
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The types and amount of risk an organization is willing to accept in pursuit of value.
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The risk remaining after management has taken action to reduce it.
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A specific tolerable deviation from a performance target.
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Next: CMA Part 2 Practice Exam 4

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CMA Part 1

Practice Exam 1
Practice Exam 2
Practice Exam 3
Practice Exam 4
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Practice Exam 6
Practice Exam 7
Practice Exam 8
Practice Exam 9
Practice Exam 10

CMA Part 2

Practice Exam 1
Practice Exam 2
Practice Exam 3
Practice Exam 4
Practice Exam 5
Practice Exam 6
Practice Exam 7
Practice Exam 8
Practice Exam 9
Practice Exam 10

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