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IMA CMA Part 1 Practice Test

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Question 1 of 10

Objective Evaluate responsibility centers, segments, and transfer pricing C. Performance Management (20%)

A regional profit-center manager controls selling prices, sales volume, and variable operating costs. Allocated corporate fixed costs are outside the manager's authority. Which measure is most appropriate for evaluating the manager's controllable operating performance?

Concept tested:

Source:IMA CMA Content Specification Outlines and Learning Outcome Statements — effective September 1, 2024

Question 2 of 10

Objective Apply recognition, measurement, and valuation concepts A. External Financial Reporting Decisions (15%)

A company purchases a 5% equity interest in a publicly traded company and does not have significant influence. The investment has a readily determinable fair value. Under U.S. GAAP, what measurement basis is generally applied to the equity investment after initial recognition?

Concept tested:

Question 3 of 10

Objective Build annual profit plans and financial projections B. Planning, Budgeting, and Forecasting (20%)

As the finance manager for a rapidly expanding retail chain, you're tasked with building the annual profit plan for the upcoming fiscal year. Senior management has emphasized the need for a clear and concise projection of the company's financial performance to secure a significant capital investment. Which top-level analysis document is most critical for demonstrating the anticipated profitability and justifying the investment request?

Concept tested:

Question 4 of 10

Objective Evaluate governance, risk, compliance, and control design E. Internal Controls (15%)

A board is strengthening its internal-control framework after identifying heightened fraud risk in revenue recognition. Before management designs additional controls, what should it do first?

Concept tested:

Question 5 of 10

Objective Allocate overhead and analyze capacity D. Cost Management (15%)

A logistics company wants to allocate human-resources support cost to distribution centers. HR effort is driven mainly by employee headcount and recruiting activity. Which allocation base is most defensible?

Concept tested:

Question 6 of 10

Objective Assess finance transformation and automation F. Technology and Analytics (15%)

A manufacturing company is implementing a new ERP system to automate its accounts payable processes, aiming for increased efficiency and reduced errors. The system development life cycle includes requirements gathering, process automation, and innovative applications. To ensure successful implementation and maximize business value, which factor is MOST critical to consider during the transformation decision?

Concept tested:

Question 7 of 10

Objective Distinguish major U.S. GAAP and IFRS differences A. External Financial Reporting Decisions (15%)

A U.S. parent prepares its consolidated financial statements under U.S. GAAP. A foreign subsidiary prepares local statutory statements under IFRS and uses an inventory treatment that differs from the treatment required by U.S. GAAP. What should the parent do when preparing the U.S.-GAAP consolidated statements?

Concept tested:

Question 8 of 10

Objective Evaluate budgeting concepts and methodologies B. Planning, Budgeting, and Forecasting (20%)

A manufacturer is beginning its annual planning cycle. Management wants one coordinated plan that links the sales budget to production, direct materials, direct labor, manufacturing overhead, selling and administrative expenses, capital expenditures, cash needs, and projected financial statements. Which budgeting framework should coordinate those components?

Concept tested:

Question 9 of 10

Objective Evaluate system controls, security, backup, and continuity E. Internal Controls (15%)

ABC Company recently implemented a new ERP system, but lacks automated data backup procedures, creating a significant operational risk. The company's internal controls outline emphasizes general accounting controls, application controls, technology controls, backups, and business continuity, requiring control responses to address risks with prevention, detection, correction, or recovery. Considering the potential for data loss and the need for a robust solution, what is the most appropriate action for ABC Company to take immediately?

Concept tested:

Question 10 of 10

Objective Use job, activity-based, life-cycle, and other costing systems D. Cost Management (15%)

A custom machine shop uses job-order costing and applies manufacturing overhead at $20 per direct labor hour. Job R-42 incurred $22,000 of direct materials and 400 direct labor hours at $35 per hour. What total manufacturing cost should be assigned to Job R-42?

Concept tested:

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Cheat Sheets

Question 1 A regional profit-center manager controls selling prices, sales volume, and variable operating costs. Allocated corporate fixed costs are outside the manager's authority. Which measure is most appropriate for evaluating the manager's controllable operating performance?

Answer choices

A. Total assets assigned by corporate
B. Net income after all corporate allocations
C. Contribution margin
D. Sales revenue alone

Correct answer

Contribution margin

Contribution margin reflects both revenue and variable costs that the profit-center manager can influence. Measures that include uncontrollable corporate allocations or ignore controllable costs can distort performance evaluation.

Wrong-answer review

A. Total assets assigned by corporate: The asset base is not within the manager's stated authority.
B. Net income after all corporate allocations: Corporate allocations outside the manager's control can make this measure unfair for managerial evaluation.
D. Sales revenue alone: Sales alone ignores the manager's responsibility for variable costs.

Extra learning features

Why candidates miss this

The choice of ‘Sales revenue alone’ is tempting because it’s a simple metric. However, it ignores the variable costs that the manager controls, leading to a distorted view of performance. The decisive clue is the manager’s authority over ‘variable operating costs,’ which highlights the need for a more comprehensive measure. Likely wrong answer: Sales revenue alone Review focus: IMA CMA Content Specification Outlines and Learning Outcome Statements — effective September 1, 2024

Objective/domain: C. Performance Management (20%)

Question 2 A company purchases a 5% equity interest in a publicly traded company and does not have significant influence. The investment has a readily determinable fair value. Under U.S. GAAP, what measurement basis is generally applied to the equity investment after initial recognition?

A. Historical cost with no subsequent remeasurement
B. Fair value with changes recognized in net income, subject to applicable guidance
C. Amortized cost using the effective-interest method
D. Lower of cost or net realizable value

Fair value with changes recognized in net income, subject to applicable guidance

Objective/domain: A. External Financial Reporting Decisions (15%)

Question 3 As the finance manager for a rapidly expanding retail chain, you're tasked with building the annual profit plan for the upcoming fiscal year. Senior management has emphasized the need for a clear and concise projection of the company's financial performance to secure a significant capital investment. Which top-level analysis document is most critical for demonstrating the anticipated profitability and justifying the investment request?

A. Projected balance sheet detailing asset and liability positions
B. Cash flow projection outlining expected liquidity needs
C. Statement of changes in equity reflecting shareholder investment activity
D. Pro forma income statement forecasting revenue and expense performance

Pro forma income statement forecasting revenue and expense performance

Objective/domain: B. Planning, Budgeting, and Forecasting (20%)

Question 4 A board is strengthening its internal-control framework after identifying heightened fraud risk in revenue recognition. Before management designs additional controls, what should it do first?

A. Wait for the external auditor to prescribe the controls
B. Perform a structured risk assessment of the relevant financial-reporting objectives
C. Replace all accounting policies regardless of risk
D. Focus only on operational cost reductions

Perform a structured risk assessment of the relevant financial-reporting objectives

Objective/domain: E. Internal Controls (15%)

Question 5 A logistics company wants to allocate human-resources support cost to distribution centers. HR effort is driven mainly by employee headcount and recruiting activity. Which allocation base is most defensible?

A. Machine hours
B. Corporate marketing spend
C. Distribution-center employee headcount, adjusted when recruiting workload differs materially
D. Square footage only

Distribution-center employee headcount, adjusted when recruiting workload differs materially

Objective/domain: D. Cost Management (15%)

Question 6 A manufacturing company is implementing a new ERP system to automate its accounts payable processes, aiming for increased efficiency and reduced errors. The system development life cycle includes requirements gathering, process automation, and innovative applications. To ensure successful implementation and maximize business value, which factor is MOST critical to consider during the transformation decision?

A. Prioritizing immediate cost reductions through system upgrades, regardless of potential disruptions.
B. Considering requirements, controls, testing, implementation, monitoring, and business value.
C. Focusing solely on the technical aspects of the system integration, minimizing stakeholder involvement.
D. Establishing a centralized data warehouse for all financial information.

Considering requirements, controls, testing, implementation, monitoring, and business value.

Objective/domain: F. Technology and Analytics (15%)

Question 7 A U.S. parent prepares its consolidated financial statements under U.S. GAAP. A foreign subsidiary prepares local statutory statements under IFRS and uses an inventory treatment that differs from the treatment required by U.S. GAAP. What should the parent do when preparing the U.S.-GAAP consolidated statements?

A. Adjust the subsidiary's reporting amounts as necessary so the consolidated statements conform to the parent's U.S. GAAP reporting framework.
B. Retain every IFRS accounting treatment unchanged because the subsidiary prepared valid local statutory statements.
C. Use whichever treatment produces the higher consolidated income for the period.
D. Use the subsidiary's local tax treatment because tax reporting overrides the parent's consolidation framework.

Adjust the subsidiary's reporting amounts as necessary so the consolidated statements conform to the parent's U.S. GAAP reporting framework.

Source: IMA CMA Content Specification Outlines — effective September 1, 2024

Question 8 A manufacturer is beginning its annual planning cycle. Management wants one coordinated plan that links the sales budget to production, direct materials, direct labor, manufacturing overhead, selling and administrative expenses, capital expenditures, cash needs, and projected financial statements. Which budgeting framework should coordinate those components?

A. Flexible budget
B. Master budget
C. Continuous (rolling) budget
D. Zero-based budget

Master budget

Question 9 ABC Company recently implemented a new ERP system, but lacks automated data backup procedures, creating a significant operational risk. The company's internal controls outline emphasizes general accounting controls, application controls, technology controls, backups, and business continuity, requiring control responses to address risks with prevention, detection, correction, or recovery. Considering the potential for data loss and the need for a robust solution, what is the most appropriate action for ABC Company to take immediately?

A. Review existing manual procedures for data recovery and update them to reflect current business needs.
B. Implement a daily automated backup system and test its functionality monthly.
C. Conduct a risk assessment to determine the potential impact of data loss and implement controls accordingly.
D. Consult with an IT security specialist to determine the most cost-effective backup solution for the company’s size and risk profile.

Implement a daily automated backup system and test its functionality monthly.

Question 10 A custom machine shop uses job-order costing and applies manufacturing overhead at $20 per direct labor hour. Job R-42 incurred $22,000 of direct materials and 400 direct labor hours at $35 per hour. What total manufacturing cost should be assigned to Job R-42?

A. $36,000
B. $44,000
C. $30,000
D. $52,000

$44,000

IMA CMA Part 1 Practice Test

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A regional profit-center manager controls selling prices, sales volume, and variable operating costs. Allocated corporate fixed costs are outside the manager's authority. Which measure is most appropriate for evaluating the manager's controllable operating performance?

A company purchases a 5% equity interest in a publicly traded company and does not have significant influence. The investment has a readily determinable fair value. Under U.S. GAAP, what measurement basis is generally applied to the equity investment after initial recognition?

A board is strengthening its internal-control framework after identifying heightened fraud risk in revenue recognition. Before management designs additional controls, what should it do first?

A logistics company wants to allocate human-resources support cost to distribution centers. HR effort is driven mainly by employee headcount and recruiting activity. Which allocation base is most defensible?

A custom machine shop uses job-order costing and applies manufacturing overhead at $20 per direct labor hour. Job R-42 incurred $22,000 of direct materials and 400 direct labor hours at $35 per hour. What total manufacturing cost should be assigned to Job R-42?

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