Free CMA Part 1 Knowledge Quiz by HOCK

Free CMA Part 1 Knowledge Quiz by HOCK

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Answer 30 questions covering key topics and receive instant feedback on your performance. Whether you are just starting studying or want to assess your knowledge, this quiz is a great way to estimate your exam readiness.

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16%

Which of the following statements is accurate with respect to the reporting of Comprehensive Income?

Comprehensive Income Per Share must be reported.

Comprehensive Income must be presented as a single continuous statement including both Net Income and Other Comprehensive Income.

The balance of Accumulated Other Comprehensive Income is represented in the Shareholders' Equity section of the balance sheet.

The Accumulated Other Comprehensive Income account is a temporary account and is closed out every year.

Selected financial information for Kristina Company for the year just ended is shown below.

Net income	$2,000,000
Increase in accounts receivable	300,000
Decrease in inventory	100,000
Increase in accounts payable	200,000
Depreciation expense	400,000
Gain on the sale of available-for-sale debt securities	700,000
Cash received from the issue of common stock	800,000
Cash paid for dividends	80,000
Cash paid for the acquisition of land	1,500,000
Cash received from the sale of available-for-sale debt securities	2,800,000

Assuming the indirect method is used, Kristina’s cash flow from operating activities for the year is:

$1,700,000

$2,000,000

$2,400,000

$3,100,000

International Industries, Inc. purchased a laser additive manufacturing (LAM) 3-D production machine for £900,000. The machine was expected to have a life of 10 years, but the expected life of the laser component of the equipment was only 5 years. The cost allocated to the laser component was £220,000, with a residual value of £10,000. The cost allocated to the main part of the machine was £680,000 with a residual value of £20,000. Both the laser and the main part of the LAM machine are being depreciated using straight line depreciation.

At the end of 5 years, International Industries replaced the laser at a cost of £250,000. No residual value was assigned to the replacement laser. The original laser was sold for £2,000.

International Industries uses IFRS for its financial reporting.

What is the future annual depreciation charge on the LAM machine, including the laser, after the replacement of the laser?

£116,000

£115,000

£118,000

£114,000

A publicly-traded corporation that prepares financial statements using U.S. GAAP declares a 5% stock dividend on its 100,000 shares outstanding of $10 par value stock. The current market price is $18 per share. The company has retained earnings of $2,650,000. What is the impact on retained earnings?

Decrease of $40,000.

Decrease of $50,000.

Decrease of $90,000.

No impact.

Stander Construction Company signed a contract with the state of Ohio to build a short stretch of highway for $42 million. During 20X1, $8 million was spent and company officials anticipated that another $24 million would be needed to complete the work. During 20X2, another $13 million was spent and current information indicated that another $14 million would be required to finish the project. The contract contained a clause indicating that the state of Ohio owns the work-in-process as the highway is being constructed. Using the cost-to-cost input method to calculate Stander's progress toward satisfaction of the performance obligation, what amount of profit should the company recognize in 20X2?

Zero

$1,700,000

$4,200,000

$2,600,000

The management of a food-processing company is analyzing its internal strengths and weaknesses as part of its strategic planning process. Which one of the following is most likely considered a strategic internal variable for the company?

Changes in the legal code for food processors.

The economic forces that regulate the local labor supply.

Technological changes in food-processing methods.

The culture at the company’s food-processing plant.

A manufacturing company has the opportunity to submit a bid for 20 units of a product on which it has already produced two 10-unit lots. The production manager believes that the learning experience observed on the first two lots will continue for at least the next two lots. The direct labor required on the first two lots was as follows.

5,000 direct labor hours for the first lot of 10 units

3,000 additional direct labor hours for the second lot of 10 units

The learning rate experienced by the company on the first two lots of this product using the Cumulative Average-Time Learning Model is

40.0%

60.0%

62.5%

80.0%

According to recent focus sessions, Norton Corporation has a "can't miss" consumer product on its hands. Sales forecasts indicate either excellent or good results, with Norton's sales manager assigning a probability of .6 to a good results outcome. The company is now studying various sales compensation plans for the product and has determined the following contribution margin data.

	Contribution Margin
If sales are excellent and
Plan 1 is adopted	$300,000
Plan 2 is adopted	370,000

If sales are good and
Plan 1 is adopted	240,000
Plan 2 is adopted	180,000

On the basis of this information, which of the following statements is correct?

Plan 2 should be adopted because it is $10,000 more attractive than Plan 1.

Plan 1 should be adopted because it is $8,000 more attractive than Plan 2.

Plan 1 should be adopted because of the sales manager's higher confidence in good results.

Either Plan should be adopted, the decision being dependent on the probability of excellent sales results.

A company has an annual master budget that shows straight-line manufacturing depreciation cost of $516,000 for the year. The master budget shows a production volume of 206,400 units and production is expected to occur uniformly throughout the year. The capacity for the facility is 215,000 units. During February, the company produced 16,340 units of product and actual manufacturing depreciation cost recorded was $40,500. The company controls manufacturing costs with a flexible budget. The flexible budget amount for manufacturing depreciation cost for March would be

$39,216

$40,500

$40,850

$43,000

Over the past several years, McFadden Industries has experienced the following regarding the company's shipping expenses.

Fixed costs	$16,000
Average shipment	15 pounds
Cost per pound	$0.50

Shown below are McFadden's budget data for the coming year.

Number of units shipped	8,000
Number of sales orders	800
Number of shipments	800
Total sales	$1,200,000
Total pounds shipped	9,600

McFadden's expected shipping costs for the coming year are

$4,800

$20,800

$20,000

$16,000

Savior Corporation assembles backup flash drive systems for personal computers. For the first quarter, the budget for sales is 67,500 units. Savior will finish the fourth quarter of last year with an inventory of 3,500 units, of which 200 are obsolete. The target ending inventory is 10 days of sales (based upon 360 days). What is the budgeted production for the first quarter?

75,000

71,700

71,500

64,350

The CEO of a company was satisfied with the company’s gross margin performance compared with the master budget. The company achieved 100% of its budgeted gross profit, as shown below.

	Budget	Actual
Unit sales	10,000	11,000

Revenue	$12,000,000	$13,000,000
Cost of revenue	8,000,000	9,000,000
Gross profit	$ 4,000,000	$ 4,000,000

The CFO analyzed the company’s performance using a flexible budget and pointed out that

gross profit should have been $600,000 higher based on the actual unit sales.

revenue missed the budget goal by $200,000.

sales of 11,000 units should have generated a gross profit of $4,800,000.

the higher cost of revenue is offset by some of the positive revenue variance.

At the beginning of the year, Douglas Company prepared the following monthly budget for direct materials.

Units produced and sold	10,000	15,000
Direct material	$15,000	$22,500

At the end of the month, the company's records showed that 12,000 units were produced and sold and $20,000 was spent for direct materials. The variance for direct materials is

$2,000 favorable.

$2,000 unfavorable.

$5,000 favorable.

$5,000 unfavorable.

MinnOil performs oil changes and other minor maintenance services (e.g., tire pressure checks) for cars. The company advertises that all services are completed within 15 minutes for each service. On a recent Saturday, 160 cars were serviced resulting in the following labor variances: rate, $19 unfavorable; efficiency, $14 favorable. If MinnOil's standard labor rate is $7 per hour, determine the actual wage rate per hour and the actual hours worked.

Wage Rate $7.50/hour; Hours Worked 38.00.

Wage Rate $6.55/hour; Hours Worked 42.00.

Wage Rate $6.67/hour, Hours Worked 42.71.

Wage Rate $7.45/hour, Hours Worked 42.00.

Azoran Inc. budgets and applies production overhead costs on the basis of direct labor hours. The following information is available:

Predetermined standard variable overhead application rate:		$7.50 per DLH
Flexible budget for variable overhead:		$270,000
Budgeted fixed overhead:		$630,000
Actual fixed overhead incurred:		$621,000
Variable overhead spending variance:		$16,650 unfavorable
Budgeted production in units:		5,000 units
Standard direct labor hours allowed per unit:		6 DLH per unit
Actual direct labor hours used:		37,000 DLH
Standard direct labor hours allowed for actual output:		36,000 DLH

What is the actual variable overhead incurred per direct labor hour used?

$294,150.

$7.95 per direct labor hour.

$7.50 per direct labor hour.

$7.75 per direct labor hour.

A restaurant chain has 30 different hamburger choices and has recently added the Come Hungry, a quadruple burger, to its menu for a three-month trial period. The product’s partial income statement after three months is shown below.

Sales	$	550,000
Variable costs		375,000
Product advertising (2/3 for product launch, 1/3 ongoing)		180,000
Allocated fixed direct restaurant costs		120,000
Profit (loss) before allocation of corporate costs	$	(125,000)

The effect on the company’s profit because of the addition of this new product was to

decrease income by $5,000.

increase income by $115,000.

decrease income by $125,000.

increase income by $175,000.

For several years, Northern Division of Marino Company has maintained a positive residual income. Northern is currently considering investing in a new project that will lower the division’s overall return on investment (ROI) but increase its residual income. What is the relationship between the expected rate of return on the new project, the firm’s cost of capital, and the division’s current ROI?

The expected rate of return on the new project is higher than the division's current ROI but lower than the firm's cost of capital.

The firm's cost of capital is higher than the expected rate of return on the new project but lower than the division's current ROI.

The expected rate of return on the new project is higher than the firm's cost of capital but lower than the division's current ROI.

The division's current ROI is higher than the expected rate of return on the new project but lower than the firm's cost of capital.

Taylor Corporation is determining the cost behavior of several items in order to budget for the upcoming year. Past trends have indicated the following dollars were spent at three different levels of output.

	Unit Levels
	10,000	12,000	15,000
Cost A	$25,000	$29,000	$35,000
Cost B	10,000	15,000	15,000
Cost C	15,000	18,000	22,500

In establishing a budget for 14,000 units, Taylor should treat Costs A, B, and C, respectively, as

semi-variable, fixed, and variable.

variable, fixed, and variable.

semi-variable, semi-variable, and semi-variable.

variable, semi-variable, and semi-variable.

A paper manufacturer produces letter-sized paper and legal-sized paper as joint products and lignin as a byproduct. The letter-sized paper sells for $7.50 per ream and the legal-sized paper sells for $10.00 per ream.

The packaged lignin can be sold for $240 per pound. Packaging and shipping costs for the lignin are $16 per pound and sales commissions are 10% of the sales price. The net revenue of the byproduct serves to reduce joint processing costs for the joint products.

Joint costs are allocated to joint products on the basis of the constant gross profit (gross margin) method. Information for one processing run follows.

Joint processing costs	$1,750,000
Letter-sized paper produced (reams)	200,000
Legal-sized paper produced (reams)	100,000
Lignin produced (pounds)	1,000

What is the cost allocated to the legal-sized paper?

$604,000

$613,600

$620,000

$700,000

A company is implementing an activity-based budgeting system. Set-up overhead is allocated based on set-up hours and manufacturing overhead is allocated based on direct manufacturing labor hours. Budget information is listed in the table below.

Cost driver information	Product A	Product B
Number of units per batch	50	25
Set-up time per batch	1.75 hours	1.25 hours
Direct manufacturing labor time per batch	1.00 hours	0.75 hours

The company plans to produce 1,000 units of Product A and 750 units of Product B. The activity rates are $100 per set-up hour and $150 per direct manufacturing labor hour. What is the total budgeted overhead?

$10,063

$13,625

$15,125

$22,188

Assuming that there is a constant contribution margin per unit, the change in period-to-period operating income when using variable costing can be explained by the change in the

unit sales level multiplied by the unit sales price.

finished goods inventory level multiplied by the unit sales price.

unit sales level multiplied by the unit contribution margin.

finished goods inventory level multiplied by the unit contribution margin.

Vincent Hospital has installed a new computer system. The system was designed and constructed based on the anticipated number of hours of usage required by the various hospital departments according to projections made by the departmental managers. Virtually all of the operating costs of the system are fixed. What would be the most systematic and rational manner in which to allocate the new computer system costs to the various hospital departments?

To each department equally.

By the anticipated number of hours of usage.

By actual usage by each department.

By the revenue generated in each department.

Title IV, Section 404 of the Sarbanes-Oxley Act requires management to assess the adequacy of the company’s internal control over financial reporting and report on it as part of its annual report filed with the SEC. The SEC’s guidance for the management assessment of internal control over financial reporting tells management to focus on

using a bottom-up approach to selecting controls for testing.

key controls, the controls needed to adequately address the risk of a material misstatement in the financial statements.

performing the four types of internal control tests.

the design of the system.

Which of the following is incorrect with respect to access controls?

Keys as physical controls are the weakest and also the most expensive form of access controls.

Some access controls overlap between logical and physical access controls.

Some access controls can be used to maintain employee time and attendance records.

A combination of strategies will provide the strongest form of access controls.

Which of the following statements regarding encryption is true?

A message encrypted with Company Q's public key can only be decrypted with Company Q's private key.

Secret key systems use two different keys, one for encryption and one for decryption.

It is impossible to intercept encrypted data sent over the Internet.

Encryption is a 100% guarantee that data being transmitted cannot be read by an unintended third party.

When management of the sales department has the opportunity to override the system of internal controls of the accounting department, a weakness exists in

risk management.

information and communication.

monitoring.

the control environment.

Artificial intelligence can be used in which of the following?

Bank reconciliations.

Physical access controls.

Distributed ledgers.

Enterprise performance management (EPM).

A smart contract can introduce several risks. Which of the following is not one of the potential risks with a smart contract?

Credibility risk.

Operational risk.

Technical risk.

Cybersecurity risk.

In which of the following situations is logistic regression the most appropriate technique to use?

Estimating the total sales revenue for the next fiscal year based on historical sales data.

Predicting whether a loan applicant will default on a loan based on their credit score, income, and employment history.

Determining the average time customers spend on a website based on their browsing behavior.

Calculating the optimal reorder quantity for inventory management based on past demand.

Which of the following data visualization tools would be most effective for revealing a relationship or the lack of a relationship between two variables?

Scatter plot.

Histogram.

Boxplot.

Dot plot.

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