CMA Practice Test 1

A manufacturing company is reviewing its monthly performance report. Revenue increased compared with the previous month, but production costs also increased. The management accountant explains that higher sales do not always mean higher profit if variable costs rise quickly.

The company reviews its budget, contribution margin, and cost behavior. Some costs change with production volume, while others remain fixed in the short term. Understanding this difference helps managers make better decisions about pricing, production, and cost control.

Management also compares actual results with budgeted figures. A variance can be favorable or unfavorable depending on whether the result improves or reduces performance. The goal is not only to find differences, but also to understand why they happened and what action should be taken.

Management Accounting and Cost Control

Questions

Q1. What is the main topic of the passage?

Q2. Why might higher sales not always mean higher profit?

Q3. A cost that changes with production volume is usually called:

Q4. A cost that remains stable in the short term is usually called:

Q5. If a product sells for 100 and variable cost is 60, what is the contribution margin per unit?

Q6. If budgeted cost is 50,000 and actual cost is 55,000, the cost variance is:

Q7. Why do managers compare actual results with budgeted figures?

Q8. A favorable variance generally means:

Q9. Understanding cost behavior helps managers make decisions about:

Q10. The author’s view of management accounting is best described as: