Quiz
CMA- GLEIM MCQ - Part 1 (1st Batch)
Questions in this quiz (100)
1[1] Gleim #: 1.1.1 -- Source: CMA 691 3-2
Each organization plans and budgets its operations for slightly different reasons. Which one of
the following is not a significant reason for planning?- AProviding a basis for controlling operations.
- BForcing managers to consider expected future trends and conditions.
- CEnsuring profitable operations.
- DChecking progress toward the objectives of the organization.
2[2] Gleim #: 1.1.2 -- Source: CMA 697 3-11
When developing a budget, an external factor to consider in the planning process is- AA change to a decentralized management system.
- BThe implementation of a new bonus program.
- CNew product development.
- DThe merger of two competitors.
3[3] Gleim #: 1.1.3 -- Source: CMA 692 3-11
Which one of the following is usually not cited as being an advantage of a formal budgetary
process?- AForces management to evaluate the reasonableness of assumptions used and goals
identified in the budgetary process. - BEnsures improved cost control within the organization and prevents inefficiencies.
- CProvides a formal benchmark to be used for feedback and performance evaluation.
- DServes as a coordination and communication device between management and
subordinates.
- AForces management to evaluate the reasonableness of assumptions used and goals
4[4] Gleim #: 1.1.4 -- Source: CIA 1194 III-54
The major objectives of any budget system are to- ADefine responsibility centers, provide a framework for performance evaluation, and
promote communication and coordination among organization segments. - BDefine responsibility centers, facilitate the fixing of blame for missed budget predictions,
and ensure goal congruence between superiors and subordinates. - CFoster the planning of operations, provide a framework for performance evaluation, and
promote communication and coordination among organization segments. - DFoster the planning of operations, facilitate the fixing of blame for missed budget
predictions, and ensure goal congruence between superiors and subordinates.
- ADefine responsibility centers, provide a framework for performance evaluation, and
5[5] Gleim #: 1.1.5 -- Source: CMA 1291 3-21
A planning calendar in budgeting is the- ACalendar period covered by the budget.
- BSchedule of activities for the development and adoption of the budget.
- CCalendar period covered by the annual budget and the long-range plan.
- DSales forecast by months in the annual budget period.
6[6] Gleim #: 1.1.6 -- Source: CMA 1292 3-8
A budget manual, which enhances the operation of a budget system, is most likely to include- AA chart of accounts.
- BDistribution instructions for budget schedules.
- CEmployee hiring policies.
- DDocumentation of the accounting system software.
7[7] Gleim #: 1.1.7 -- Source: CIA 590 IV-14
One of the primary advantages of budgeting is that it- ADoes not take the place of management and administration.
- BBases the profit plan on estimates.
- CIs continually adapted to fit changing circumstances.
- DRequires departmental managers to make plans in conjunction with the plans of other
interdependent departments.
8[8] Gleim #: 1.1.8 -- Source: CMA 692 3-7
The budget that describes the long-term position, goals, and objectives of an entity within its
environment is the- ACapital budget.
- BOperating budget.
- CCash management budget.
- DStrategic budget.
9[9] Gleim #: 1.1.9 -- Source: CMA 697 3-20
Which one of the following best describes the role of top management in the budgeting
process? Top management- AShould be involved only in the approval process.
- BLacks the detailed knowledge of the daily operations and should limit their involvement.
- CNeeds to be involved, including using the budget process to communicate goals.
- DNeeds to separate the budgeting process and the business planning process into two
separate processes.
10[10] Gleim #: 1.1.10 -- Source: Publisher
An advantage of participative budgeting is that it- AMinimizes the cost of developing budgets.
- BReduces the effect on the budgetary process of employee biases
- CYields information known to management but not to employees.
- DEncourages acceptance of the budget by employees.
11[11] Gleim #: 1.1.11 -- Source: CMA 683 4-2
The primary role of the budget director and the budgeting department is to- ASettle disputes among operating executives during the development of the annual operating
plan. - BDevelop the annual profit plan by selecting the alternatives to be adopted from the
suggestions submitted by the various operating segments - CJustify the budget to the executive committee of the board of directors.
- DCompile the budget and manage the budget process.
- ASettle disputes among operating executives during the development of the annual operating
12[12] Gleim #: 1.1.12 -- Source: CMA 693 3-22
Which one of the following is not considered to be a benefit of participative budgeting?- AIndividuals at all organizational levels are recognized as being part of the team; this results
in greater support of the organization. - BThe budget estimates are prepared by those in direct contact with various activities.
- CManagers are more motivated to reach the budget objectives since they participated in
setting them. - DWhen managers set the final targets for the budget, senior management need not be
concerned with the overall profitability of current operations.
- AIndividuals at all organizational levels are recognized as being part of the team; this results
13[13] Gleim #: 1.1.13 -- Source: CMA 1292 3-23
The budgeting technique that is most likely to motivate managers is- ATop-down budgeting.
- BZero-based budgeting.
- CProgram budgeting and review technique.
- DBottom-up budgeting.
14[14] Gleim #: 1.1.14 -- Source: CMA 1292 3-13
When comparing performance report information for top management with that for lower-level
management,- ATop management reports are more detailed.
- BLower-level management reports are typically for longer time periods.
- CTop management reports show control over fewer costs.
- DLower-level management reports are likely to contain more quantitative data and less
financial data.
15[15] Gleim #: 1.1.15 -- Source: CMA 0205
In the budgeting and planning process for a firm, which one of the following should be
completed first?- ASales budget.
- BFinancial budget.
- CCost management plan.
- DStrategic plan.
16[16] Gleim #: 1.1.16 -- Source: CMA 0205
Which one of the following is most important to a successful budgeting effort?- AExperienced analysts.
- BIntegrated budget software.
- CReliable forecasts and trend analyses.
- DTop management support.
17[17] Gleim #: 1.1.17 -- Source: Publisher
An improperly executed budget process might have the effect(s) of- ADisregard of overall company goals.
- BInflated budget requests.
- CMeeting short-term but not long-term goals.
- DAll of the answers are correct.
18[18] Gleim #: 1.1.18 -- Source: Publisher
The major disadvantage of a budget produced by means of a top-down process is- AImpairment of goal congruence.
- BLack of involvement by upper-level management.
- CInconsistency with strategic plans.
- DAbsence of a significant motivational effect.
19[19] Gleim #: 1.1.19 -- Source: Publisher
A budget helps a company control costs by setting cost guidelines. However, a budget also
performs the function(s) of- APlanning.
- BMotivating.
- CCommunicating.
- DAll of the answers are correct.
20[20] Gleim #: 1.1.20 -- Source: Publisher
Ineffective budget control systems are characterized by- AUse of budgets as a planning but not a control tool.
- BUse of budgets for harassment of individuals rather than motivation.
- CLack of timely feedback in the use of the budget.
- DAll of the answers are correct.
21[21] Gleim #: 1.1.21 -- Source: Publisher
Which of the following statements regarding budgets is false?- ABudgets present organizational plans in a formal, logical, and integrated manner.
- BBudgets are used only as a planning function.
- CBudgets may be developed for cash flows or labor usage.
- DA budget is a plan that contains a quantitative statement of expected results.
22[22] Gleim #: 1.1.22 -- Source: CMA 0408 2-001
All of the following are advantages of the use of budgets in a management control system
except that budgets- AForce management planning.
- BProvide performance criteria.
- CPromote communication and coordination within the organization.
- DLimit unauthorized expenditures.
23[23] Gleim #: 1.1.23 -- Source: CMA 0408 2-003
All of the following are criticisms of the traditional budgeting process except that it- AMakes across-the-board cuts when early budget iterations show that planned expenses are
too high. - BIncorporates non-financial measures as well as financial measures into its output.
- COveremphasizes a fixed time horizon, such as one year.
- DIs not used until the end of the budget period to evaluate performance.
- AMakes across-the-board cuts when early budget iterations show that planned expenses are
24[24] Gleim #: 1.1.24 -- Source: CMA 0408 2-005
The following sequence of steps is employed by a company to develop its annual profit plan:
Planning guidelines are disseminated downward by top management after receiving input
from all levels of management.
A sales budget is prepared by individual sales units reflecting the sales targets of the
various segments. This provides the basis for departmental production budgets and other
related components by the various operating units. Communication is primarily lateral with
some upward communication possible.
A profit plan is submitted to top management for coordination and review. Top
management’s recommendations and revisions are acted upon by middle management. A
revised profit plan is resubmitted for further review to top management.
Top management grants final approval and distributes the formal plan downward to the
various operating units.
This outline of steps best describes which one of the following approaches to budget
development?- AImposed budgeting by top management.
- BBottom-up approach.
- CTop-down approach.
- DTotal justification of all activities by operating units
25[25] Gleim #: 1.1.25 -- Source: CMA 0408 2-006
All of the following are advantages of top-down budgeting as opposed to participatory
budgeting, except that it- AIncreases coordination of divisional objectives
- BReduces the time required for budgeting.
- CMay limit the acceptance of proposed goals and objectives.
- DFacilitates implementation of strategic plans.
26[26] Gleim #: 1.1.26 -- Source: CMA 0408 2-007
In developing the budget for the next year, which one of the following approaches would
produce the greatest amount of positive motivation and goal congruence?- APermit the divisional manager to develop the goal for the division that in the manager’s
view will generate the greatest amount of profits. - BHave senior management develop the overall goals and permit the divisional manager to
determine how these goals will be met. - CHave the divisional and senior management jointly develop goals and objectives while
constructing the corporation’s overall plan of operation. - DHave the divisional and senior management jointly develop goals and the divisional
manager develop the implementation plan.
- APermit the divisional manager to develop the goal for the division that in the manager’s
27[27] Gleim #: 1.1.27 -- Source: CMA 0408 2-008
Which one of the following is not an advantage of a participatory budgeting process?- ACoordination between departments.
- BCommunication between departments.
- CCost congruence.
- DControl of uncertainties.
28[28] Gleim #: 1.1.28 -- Source: CMA 0408 2-010
Which one of the following statements concerning approaches for the budget development
process is correct?- AThe top-down approach to budgeting will not ensure adherence to strategic organizational
goals. - BTo prevent ambiguity, once departmental budgeted goals have been developed, they should
remain fixed even if the sales forecast upon which they are based proves to be wrong in the
middle of the fiscal year. - CWith the information technology available, the role of budgets as an organizational
communication device has declined. - DSince department managers have the most detailed knowledge about organizational
operations, they should use this information as the building blocks of the operating budget.
- AThe top-down approach to budgeting will not ensure adherence to strategic organizational
29[29] Gleim #: 1.1.29 -- Source: CMA 0408 2-011
Rock Industries has four divisions. In the quest to develop a more achievable budget for the
coming year, the chief executive officer has elected to develop the company’s budget by using
a decentralized bottom-up budget approach. Chip Jones is production manager in one of the
divisions. Jones’ involvement in the budget process this year will probably- ABe negligible.
- BRequire development of a production budget that is forwarded to the Budget Department.
- CRequire development of a production budget after receiving the division’s projected sales
forecast. - DRequire development of a production budget based on the prior year’s manufacturing
activity.
30[30] Gleim #: 1.1.30 -- Source: CMA 0408 2-012
Marietta Thomas, Amador Corporation’s vice president of planning, has seen and heard it all.
She has told the corporate controller that she is “....very upset with the degree of slack that
veteran managers use when preparing their budgets.” Thomas has considered implementing
some of the following activities during the budgeting process.
1. Develop the budgets by top management and issue them to lower-level operating units.
2. Study the actual revenues and expenses of previous periods in detail.
Have the budgets developed by operating units and accept them as submitted by a
company-wide budget committee.
3.
4. Share the budgets with all employees as a means to reach company goals and objectives.
Use an iterative budgeting process that has several “rounds” of changes initiated by
operating units and/or senior managers.
5.
Which one of these activities should Amador implement in order to best remedy Thomas’
concerns, help eliminate the problems experienced by Amador, and motivate personnel?- A1 only.
- B2 and 3.
- C2 and 4.
- D2, 4, and 5.
31[31] Gleim #: 1.1.31 -- Source: CMA 0408 2-013
Budgeting problems where departmental managers are repeatedly achieving easy goals or
failing to achieve demanding goals can be best minimized by establishing- APreventive controls.
- BA policy that allows managers to build slack into the budget.
- CParticipative budgeting where managers pursue objectives consistent with those set by top
management. - DBetter communication whereby managers discuss budget matters daily with their superiors.
32[32] Gleim #: 1.1.32 -- Source: CMA 0408 2-015
Which one of the following items would most likely cause the planning and budgeting system
to fail? The lack of- AHistorical financial data.
- BInput from several levels of management.
- CTop management support.
- DAdherence to rigid budgets during the year.
33[33] Gleim #: 1.1.33 -- Source: CMA 0408 2-016
All of the following are disadvantages of top-down budgeting as opposed to participatory
budgeting, except that it- AMay result in a budget that is not possible to achieve.
- BMay limit the acceptance of proposed goals and objectives.
- CReduces the communication between employees and management.
- DReduces the time required for budgeting.
34[34] Gleim #: 1.1.34 -- Source: CMA 0408 2-017
Suboptimal decision making is not likely to occur when- AThere is little congruence among the overall organization goals, the subunit goals, and the
individual goals of decision makers. - BGoals and standards of performance are set by the top management.
- CGuidance is given to subunit managers about how standards and goals affect them.
- DThe subunits in the organization compete with each other for the same input factors or for
the same customers.
- AThere is little congruence among the overall organization goals, the subunit goals, and the
35[35] Gleim #: 1.1.35 -- Source: CMA 0408 2-018
All of the following statements concerning standard costs are correct except that- ATime and motion studies are often used to determine standard costs.
- BStandard costs are usually set for one year.
- CStandard costs can be used in costing inventory accounts.
- DStandard costs are usually stated in total, while budgeted costs are usually stated on a perunit
basis.
36[36] Gleim #: 1.1.36 -- Source: CMA 0408 2-019
One approach for developing standard costs incorporates communication, bargaining, and
interaction among product line managers; the immediate supervisors for whom the standards
are being developed; and the accountants and engineers before the standards are accepted by
top management. This approach would best be characterized as a(n)- AImposed approach.
- BCentralized top-down approach.
- CEngineering approach.
- DTeam development approach.
37[37] Gleim #: 1.1.37 -- Source: CMA 0408 2-020
When compared with ideal standards, practical standards- AProduce lower per-unit product costs.
- BResult in a less desirable basis for the development of budgets.
- CIncorporate very generous allowance for spoilage and worker inefficiencies.
- DServe as a better motivating target for manufacturing personnel.
38[38] Gleim #: 1.1.38 -- Source: CMA 0408 2-021
Diana Stinson, Cherry Valley, Inc.’s factory manager, had lost her patience. Six months ago,
she appointed a team from the production and service departments to finalize the allocation of
costs and setting of standard costs. They were still feuding, so she hired Brennan and Rose, a
large consulting firm, to resolve the matter.
All of the following are potential consequences of having the standards set by Brennan and
Rose except that- ABrennan and Rose may not fully understand Cherry Valley’s manufacturing process,
resulting in suboptimal performance. - BEmployees could react negatively since they did not participate in setting the standards
- CThere could be dissatisfaction if the standards contain costs that are not controllable by the
unit held responsible. - DThe standards may appear to lack management support
- ABrennan and Rose may not fully understand Cherry Valley’s manufacturing process,
39[39] Gleim #: 1.1.39 -- Source: CMA 0408 2-022
Jura Corporation is developing standards for the next year. Currently XZ-26, one of the
material components, is being purchased for $36.45 per unit. It is expected that the
component’s cost will increase by approximately 10% next year and the price could range from
$38.75 to $44.18 per unit, depending on the quantity purchased. The appropriate standard for
XZ-26 for next year should be set at the- ACurrent actual cost plus the forecasted 10% price increase.
- BLowest purchase price in the anticipated range to keep pressure on purchasing to always
buy in the lowest price range. - CHighest price in the anticipated range to ensure that there are only favorable purchase price
variances. - DPrice agreed upon by the purchasing manager and the appropriate level of company
management.
40[40] Gleim #: 1.1.40 -- Source: CMA 0408 2-023
Which one of the following will allow a better use of standard costs and variance analysis to
help improve managerial decision-making?- ACompany A does not differentiate between variable and fixed overhead in calculating its
overhead variances. - BCompany B uses the prior year’s average actual cost as the current year’s standard.
- CCompany C investigates only negative variances.
- DCompany D constantly revises standards to reflect learning curves.
- ACompany A does not differentiate between variable and fixed overhead in calculating its
41[41] Gleim #: 1.1.41 -- Source: CMA 0408 2-024
After performing a thorough study of Michigan Company’s operations, an independent
consultant determined that the firm’s labor standards were probably too tight. Which one of the
following facts would be inconsistent with the consultant’s conclusion?- AA review of performance reports revealed the presence of many unfavorable efficiency
variances. - BMichigan’s budgeting process was well-defined and based on a bottom-up philosophy.
- CManagement noted that minimal incentive bonuses have been paid in recent periods.
- DProduction supervisors found several significant fluctuations in manufacturing volume,
with short-term increases on output being followed by rapid, sustained declines.
- AA review of performance reports revealed the presence of many unfavorable efficiency
42[42] Gleim #: 1.2.42 -- Source: CMA 1291 4-27
Automite Company is an automobile replacement parts dealer in a large metropolitan
community. Automite is preparing its sales forecast for the coming year. Data regarding both
Automite’s and industry sales of replacement parts as well as both the used and new automobile
sales in the community for the last 10 years have been accumulated. If Automite wants to
determine whether its sales of replacement parts are dependent upon the industry sales of
replacement parts or upon the sales of used and new automobiles, the company should employ- ASimulation techniques.
- BCorrelation and regression analysis.
- CStatistical sampling.
- DTime series analysis.
43[43] Gleim #: 1.2.43 -- Source: CMA 1285 5-27
The correlation coefficient that indicates the weakest linear association between two variables
is- A–0.73
- B–0.11
- C0.12
- D0.35
44[44] Gleim #: 1.2.44 -- Source: CMA 1289 5-14
Correlation is a term frequently used in conjunction with regression analysis and is measured
by the value of the coefficient of correlation, r. The best explanation of the value r is that it- AIs always positive.
- BInterprets variances in terms of the independent variable.
- CRanges in size from negative infinity to positive infinity.
- DIs a measure of the relative relationship between two variables.
45[45] Gleim #: 1.2.45 -- Source: CMA 697 4-26
A regression equation- AEstimates the dependent variables.
- BEncompasses factors outside the relevant range.
- CIs based on objective and constraint functions.
- DEstimates the independent variable.
46[46] Gleim #: 1.2.46 -- Source: CIA 593 III-64
What coefficient of correlation results from the following data?
X Y
1 10
2 8
3 6
4 4
5 2- AA. 0
- BB. –1
- CC. +1
- DD. Cannot be determined from the data given.
47[47] Gleim #: 1.2.47 -- Source: CMA 1290 4-27
In the standard regression equation y = a + bx, the letter b is best described as a(n)- AIndependent variable
- BDependent variable.
- CConstant coefficient
- DVariable coefficient.
48[48] Gleim #: 1.2.48 -- Source: CMA 1290 4-28
The letter x in the standard regression equation is best described as a(n)- AIndependent variable
- BDependent variable
- CConstant coefficient.
- DCoefficient of determination
49[49] Gleim #: 1.2.49 -- Source: CIA 1194 II-46
In regression analysis, which of the following correlation coefficients represents the strongest
relationship between the independent and dependent variables?- A1.03
- B–.02
- C–.89
- D.75
50[50] Gleim #: 1.2.50 -- Source: CIA 595 II-46
The internal auditor of a bank has developed a multiple regression model which has been used
for a number of years to estimate the amount of interest income from commercial loans. During
the current year, the auditor applies the model and discovers that the r 2 value has decreased
dramatically, but the model otherwise seems to be working okay. Which of the following
conclusions are justified by the change?- AChanging to a cross-sectional regression analysis should cause r 2 to increase.
- BRegression analysis is no longer an appropriate technique to estimate interest income.
- CSome new factors, not included in the model, are causing interest income to change.
- DA linear regression analysis would increase the model’s reliability.
51[51] Gleim #: 1.2.51 -- Source: Publisher
The least exact method for separating fixed and variable costs is- AThe least squares method
- BComputer simulation
- CThe high-low method
- DMatrix algebra.
52Jackson Co. has the following information for the first quarter of its year:
Machine Cleaning
Hours Expense
January 2,100 $ 900
February 2,600 1,200
March 1,600 800
April 2,000 1,000
[52] Gleim #: 1.2.52 -- Source: Publisher
(Refers to Fact Pattern #1)
Using the high-low method, what is Jackson’s variable cost of cleaning per machine hour?- A$.40
- B$.48
- C$2.00
- D$2.50
53[53] Gleim #: 1.2.53 -- Source: Publisher
(Refers to Fact Pattern #1)
Using the high-low method, what is Jackson’s fixed cost?- A$160
- B$320
- C$640
- D$1,040
54[54] Gleim #: 1.2.54 -- Source: Publisher
(Refers to Fact Pattern #1)
Jackson’s management expects machine hours for the month of May to be 1,400 hours. What is
their expected total cost for the month of May using the high-low method?- A$560
- B$650
- C$720
- D$760
55[Fact Pattern #2]
In preparing the annual profit plan for the
coming year, Wilkens Company wants to
determine the cost behavior pattern of the
maintenance costs. Wilkens has decided to use
linear regression by employing the equation y
= a + bx for maintenance costs. The prior
year’s data regarding maintenance hours and
costs and the results of the regression analysis
are as follows.
Average cost per hour $ 9.00
a 684.65
b 7.2884
Standard error of a 49.515
Standard error of b .12126
Standard error of the estimate 34.469
r 2 .99724
Hours of Maintenance
Activity Costs
January 480 $ 4,200
February 320 3,000
March 400 3,600
April 300 2,820
May 500 4,350
June 310 2,960
July 320 3,030
August 520 4,470
September 490 4,260
October 470 4,050
November 350 3,300
December 340 3,160
Sum 4,800 $43,200
Average 400 $ 3,600
[55] Gleim #: 1.2.55 -- Source: CMA 1290 4-29
(Refers to Fact Pattern #2)
Based upon the data derived from the regression analysis, 420 maintenance hours in a month
would mean that Wilkens Co.’s maintenance costs (rounded to the nearest dollar) would be
budgeted at:- A$3,780
- B$3,600
- C$3,790
- D$3,746
56[56] Gleim #: 1.2.56 -- Source: CMA 1290 4-30
(Refers to Fact Pattern #2)
The percentage of Wilkens Co.’s total variance that can be explained by the regression equation
is- A99.724%
- B69.613%
- C80.982%
- D99.862%
57[57] Gleim #: 1.2.57 -- Source: Publisher
(Refers to Fact Pattern #2)
If Wilkens Company uses the high/low method of analysis, the equation for the relationship
between hours of activity and maintenance cost would be- Ay = 400 + 9.0x
- By = 570 + 7.5x
- Cy = 3,600 + 400x
- Dy = 570 + 9.0x
58Alpha Company produces several different products and is making plans for the introduction of a
new product which it will sell for $6 a unit. The following estimates have been made for
manufacturing costs on 100,000 units to be produced the first year:
Direct materials $500,000
Direct labor $40,000 (the labor rate is $4/hour)
Overhead costs have not been established for the new product, but monthly data on total production
and overhead cost for the past 24 months have been analyzed using simple linear regression. The
following results were derived from the simple regression and provide the basis for overhead cost
estimates for the new product.
Dependent variable (y) -- Factory overhead costs
Independent variable (x) -- Direct labor hours
Computed values:
y-intercept $40,000
Coefficient of independent variable $2.10
Coefficient of correlation 0.953
Standard error of estimate $2,840
Standard error of regression coefficient 0.42
Mean value of independent variable $18,000
Coefficient of determination 0.908
[58] Gleim #: 1.2.58 -- Source: Publisher
(Refers to Fact Pattern #3)
What percentage of the variation in Alpha’s overhead costs is explained by the independent
variable?- A90.8%
- B42%
- C48.8%
- D95.3%
59Gleim #: 1.2.59 -- Source: Publisher
(Refers to Fact Pattern #3)
Alpha’s total overhead cost for an estimated activity level of 20,000 direct labor hours would be- A$42,000
- B$82,000
- C$122,000
- D$222,000
60[60] Gleim #: 1.2.60 -- Source: CIA 1194 III-59
The manager of the assembly department of a company would like to estimate the fixed and
variable components of the department’s cost. To do so, the manager has collected information
on total cost and output for the past 24 months. To estimate the fixed and variable components
of total cost, the manager should use- ARegression analysis
- BGame theory
- CSensitivity analysis
- DQueuing theory
61Gleim #: 1.2.61 -- Source: CIA 1195 II-30
A division uses a regression in which monthly advertising expenditures are used to predict
monthly product sales (both in millions of dollars). The results show a regression coefficient for
the independent variable equal to 0.8. This coefficient value indicates that- AThe average monthly advertising expenditure in the sample is $800,000.
- BWhen monthly advertising is at its average level, product sales will be $800,000.
- COn average, for every additional dollar in advertising you get $0.80 in additional sales.
- DAdvertising is not a good predictor of sales because the coefficient is so small.
62[62] Gleim #: 1.2.62 -- Source: CMA 1289 4-11
All of the following are assumptions underlying the validity of linear regression output except- AThe errors are normally distributed.
- BThe mean of the errors is zero
- CCertainty.
- DThe standard deviation of the errors is constant
63Gleim #: 1.2.63 -- Source: CMA 1292 3-3
In determining cost behavior in business, the cost function is often expressed as y = a + bx.
Which one of the following cost estimation methods should not be used in estimating fixed and
variable costs for the equation?- AGraphic method.
- BSimple regression.
- CHigh and low point method.
- DMultiple regression
64[64] Gleim #: 1.2.64 -- Source: CMA 0408 1-136
For cost estimation, simple regression differs from multiple regression in that simple regression
uses only- AOne dependent variable, while multiple regression uses all available data to estimate the
cost function - BDependent variables, while multiple regression can use both dependent and independent
variables - COne independent variable, while multiple regression uses more than one independent
variable - DOne dependent variable, while multiple regression uses more than one dependent variable
- AOne dependent variable, while multiple regression uses all available data to estimate the
65[65] Gleim #: 1.2.65 -- Source: CMA 0408 1-137
A company has accumulated data for the last 24 months in order to determine if there is an
independent variable that could be used to estimate shipping costs. Three possible independent
variables being considered are packages shipped, miles shipped, and pounds shipped. The
quantitative technique that should be used to determine whether any of these independent
variables might provide a good estimate for shipping costs is- AFlexible budgeting
- BLinear programming.
- CLinear regression
- DVariable costing
66[66] Gleim #: 1.2.66 -- Source: CMA 0408 1-138
Slawford Manufacturing developed the following multiple regression equation, utilizing many
years of data, and uses it to model, or estimate, the cost of its product.
Cost = FC + (a × L) + (b × M)
Where: FC = fixed costs
L = labor rate per hour
M = material cost per pound
Which one of the following changes would have the greatest impact on invalidating the results
of this model?- AA significant reduction in factory overheads, which are a component of fixed costs.
- BRenegotiation of the union contract calling for much higher wage rates
- CA large drop in material costs, as a result of purchasing the material from a foreign source.
- DA significant change in labor productivity
67[67] Gleim #: 1.2.67 -- Source: CMA 0408 1-139
In order to analyze sales as a function of advertising expenses, the sales manager of Smith
Company developed a simple regression model. The model included the following equation,
which was based on 32 monthly observations of sales and advertising expenses with a related
coefficient of determination of .90.
Sales = $10,000 + (2.5 × Advertising expenses)
If Smith Company’s advertising expenses in one month amounted to $1,000, the related point
estimate of sales would be- A$2,500
- B$11,250
- C$12,250
- D$12,500
68[68] Gleim #: 1.2.68 -- Source: CMA 0408 1-140
The results of regressing Y against X are as follows:
Coefficient
Intercept 5.23
Slope 1.54
When the value of X is 10, the estimated value of Y is- A6.78
- B8.05
- C20.63
- D53.84
69[69] Gleim #: 1.3.69 -- Source: CMA 697 4-25
Corrigon Industries is preparing a bid for a special project requiring the production of 35,000
units. The engineering personnel have advised that the units can be produced in groups with the
first group consisting of 1,000 units. A review of prior experience indicates that the direct labor
time needed per unit will be progressively smaller by a constant percentage rate as experience
is gained in the production process. The quantitative method that would best estimate
Corrigon’s total cost for the project is- ALinear programming.
- BDynamic programming.
- CLearning curve analysis.
- DTime series analysis.
70[70] Gleim #: 1.3.70 -- Source: CMA 1293 4-24
The average labor cost per unit for the first batch produced by a new process is $120. The
cumulative average labor cost after the second batch is $72 per product. Using a batch size of
100 and assuming the learning curve continues, the total labor cost of four batches will be- A$4,320
- B$10,368
- C$2,592
- D$17,280
71[Fact Pattern #4]
Moss Point Manufacturing recently
completed and sold an order of 50 units that
had costs as shown in the next column.
The company has now been requested to
prepare a bid for 150 units of the same
product.
Direct materials $ 1,500
Direct labor (1,000 hours × $8.50) 8,500
Variable overhead (1,000 hours ×
$4.00)*
4,000
Fixed overhead** 1,400
$15,400
*Applied on the basis of direct labor hours.
**Applied at the rate of 10% of variable cost.
[71] Gleim #: 1.3.71 -- Source: CMA 1288 5-19
(Refers to Fact Pattern #4)
If an 80% learning curve is applicable, Moss Point’s total cost on this order would be estimated
at- A$26,400
- B$32,000
- C$38,000
- D$41,800
72[72] Gleim #: 1.3.72 -- Source: CMA 1288 5-20
(Refers to Fact Pattern #4)
If Moss Point had experienced a 70% learning curve, the bid for the 150 units would- AShow a 30% reduction in the total direct labor hours required with no learning curve.
- BInclude increased fixed overhead costs.
- CBe 10% lower than the total bid at an 80% learning curve.
- DInclude 6.40 direct labor hours per unit at $8.50 per hour.
73[73] Gleim #: 1.3.73 -- Source: Publisher
A particular manufacturing job is subject to an estimated 90% learning curve. The first unit
required 50 labor hours to complete. What is the cumulative average time per unit after four
units are completed?- A50.0 hours.
- B45.0 hours.
- C40.5 hours
- D40.0 hours
74[74] Gleim #: 1.3.74 -- Source: Publisher
A particular manufacturing job is subject to an estimated 80% learning curve. The first unit
required 50 labor hours to complete. What is the cumulative average time per unit after eight
units are completed?- A20.0 hours.
- B25.6 hours.
- C32.0 hours.
- D40.0 hours
75[75] Gleim #: 1.3.75 -- Source: Publisher
A particular manufacturing job is subject to an estimated 80% learning curve. The first unit
required 50 labor hours to complete. If the learning curve is based on a cumulative average time
per unit assumption, what is the time required to complete the second unit?- A30.0 hours.
- B40.0 hours
- C45.0 hours
- D50.0 hours
76[76] Gleim #: 1.3.76 -- Source: CIA 1187 III-41
A learning curve of 80% assumes that direct labor costs are reduced by 20% for each doubling
of output. What is the incremental cost of the sixteenth unit produced as an approximate
percentage of the first unit produced?- A41%
- B31%
- C51%
- D64%
77[77] Gleim #: 1.3.77 -- Source: Publisher
Red Baron, Inc. is a new competitor in the production of airplane propellers. Red Baron has to
train its employees in the process of making propellers. To increase the speed of learning, Red
Baron will give a bonus to the employee with the lowest cumulative average time per unit after
eight units are completed. Lucy took 50 hours to complete the first unit, and she is subject to an
80% learning curve. Sally took 60 hours to complete the first unit, and she is subject to a 70%
learning curve. Marcy took 40 hours to complete the first unit, and she is subject to a 90%
learning curve. Patty took 55 hours to complete the first unit, and she is subject to a 75%
learning curve. Which employee will receive the bonus?- ALucy
- BSally
- CMarcy
- DPatty
78[78] Gleim #: 1.3.78 -- Source: CMA 692 4-5
Lake Corporation manufactures specialty components for the electronics industry in a highly
labor intensive environment. Arc Electronics has asked Lake to bid on a component that Lake
made for Arc last month. The previous order was for 80 units and required 120 hours of direct
labor to manufacture. Arc would now like 240 additional components. Lake experiences an
80% learning curve on all of its jobs. The number of direct labor hours needed for Lake to
complete the 240 additional components is- A360.0
- B187.2
- C307.2
- D256.0
79[79] Gleim #: 1.3.79 -- Source: CMA 696 4-7
It is estimated that a particular manufacturing job is subject to an 80% learning curve. The first
unit required 50 labor hours to complete. What is the cumulative average time per unit after
completing four units?- A50.0 hours
- B40.0 hours
- C32.0 hours
- D30.0 hours
80[80] Gleim #: 1.3.80 -- Source: CMA 1291 4-22
A company plans to bid on a special project that calls for a total of 24,000 units. The units will
be produced in lots, with the first lot consisting of 750 units. Based on prior experience, the
direct labor time needed per unit of product will be progressively smaller by a constant
percentage rate as experience is gained in the manufacturing process. The quantitative method
that would best estimate the company’s total cost for the project is- ALearning curve techniques
- BDifferential calculus
- CDiscounted cash flow techniques.
- DLinear programming
81[81] Gleim #: 1.3.81 -- Source: CMA 1294 4-28
Seacraft, Inc. received a request for a competitive bid for the sale of one of its unique boating
products with a desired modification. Seacraft is now in the process of manufacturing this
product but with a slightly different modification for another customer. These unique products
are labor intensive and both will have long production runs. Which one of the following
methods should Seacraft use to estimate the cost of the new competitive bid?- AExpected value analysis.
- BLearning curve analysis.
- CRegression analysis
- DContinuous probability simulation.
82[82] Gleim #: 1.3.82 -- Source: CMA 1289 4-7
The technique used to predict the change in direct labor hours as a new process stabilizes is- ASimple regression
- BMultiple regression
- CTime series analysis
- DLearning curve analysis
83[Fact Pattern #5]
LCB, Inc. is preparing a bid to the Department of the Navy to produce engines for rescue boats. The
company has manufactured these engines for the Navy for the past 3 years on an exclusive contract
and has experienced the following costs:
Cumulative Total Cumulative Costs
Units Produced Materials Labor
10 $ 60,000 $120,000
20 120,000 192,000
40 240,000 307,200
At LCB, variable overhead is applied on the basis of $1.00 per direct labor dollar. Based on
historical costs, LCB knows that the production of 40 engines will incur $100,000 of fixed overhead
costs. The bid request is for an additional 40 units; all companies submitting bids are allowed to
charge a maximum of 25% above full cost for each order.
[83] Gleim #: 1.3.83 -- Source: CMA 688 5-9
(Refers to Fact Pattern #5)
In order to ensure that the company would not lose money on the project, LCB’s minimum bid
for the 40 units would be- A$760,800
- B$608,640
- C$885,800
- D$708,640
84Gleim #: 1.3.84 -- Source: CMA 688 5-7
(Refers to Fact Pattern #5)
LCB’s rate of learning on the 3-year engine contract is- A75.5%
- B79.0%
- C80.0%
- D62.6%
85[85] Gleim #: 1.3.85 -- Source: CMA 688 5-8
(Refers to Fact Pattern #5)
The maximum bid price that LCB, Inc. could submit to the Department of the Navy for the 40
units is- A$760,800
- B$608,640
- C$885,800
- D$708,640
86Donehart Corporation produces agricultural vehicles. Most of the component parts for these vehicles
are subcontracted to reliable vendors. The final assembly of all vehicles is accomplished at
Donehart’s plant. Donehart’s Engineering Department has developed a new fuel injection system
that can be produced in-house because of the availability of production capacity. The first production
run of the new fuel injection system has already been completed in-house. This 80-unit production
run took 60 direct labor hours per unit to produce based on the cumulative average labor hours per
fuel injection unit. Donehart has experienced an 80% learning curve with similar products, and this
experience indicates that learning tends to cease by the time 640 systems are produced. Donehart’s
direct labor cost (including employee benefits) is $18 per direct labor hour. Donehart’s management
must decide whether to continue producing the fuel injection system or to subcontract the work.
Donehart’s purchasing agent has received a proposal from Midland, Inc., a company specializing in
fuel injection systems. From past contracts, Midland has proven to be efficient and reliable. The
terms of Midland’s proposal are outlined below.
- Donehart must supply all materials required for the fuel injection system units.
- The first 80 units produced by Midland will require direct labor input at the rate of 56 hours per
unit. Current direct labor cost is $20 per hour.
- The direct labor cost charged to Donehart will be the hourly rate in effect at the time the work is
performed. Midland is currently negotiating its labor contract, which includes a 4% increase in
direct labor cost and should be applicable when Donehart signs the contract.
- A learning curve factor of 75% will be applied through the first 640 units produced, and all
benefits derived from the learning factor will accrue to Donehart.
- Donehart must pay the actual labor cost incurred plus a 5% margin.
[86] Gleim #: 1.3.86 -- Source: Publisher
(Refers to Fact Pattern #6)
If Donehart manufactures the units in-house, what is the average labor hours per unit after
manufacturing 640 units?- A60
- B30.72
- C23.63
- D23.04
87[87] Gleim #: 1.3.87 -- Source: Publisher
(Refers to Fact Pattern #6)
If Donehart manufactures the units in-house, how many total hours will it take to complete
1,000 units?- A8,294.4 hours
- B19,660.8 hours.
- C24,330 hours
- D27,955.2 hours
88[88] Gleim #: 1.3.88 -- Source: Publisher
(Refers to Fact Pattern #6)
If Donehart manufactures the units in-house, how much additional cost will the company incur
after the first batch in order to produce a total of 1,000 units?- A$416,793.60
- B$463,104
- C$503,193.60
- D$559,104
89[89] Gleim #: 1.3.89 -- Source: Publisher
(Refers to Fact Pattern #6)
If Donehart subcontracts the order to Midland, what is the total number of labor hours required
to produce the 640 units on the learning curve?- A15,120 hours
- B18,350 hours
- C19,530 hours
- D35,840 hours
90[90] Gleim #: 1.3.90 -- Source: Publisher
(Refers to Fact Pattern #6)
If Donehart subcontracts the order to Midland, how many hours will it take to complete a unit
after the initial 640 units on the learning curve are finished?- A11.81 hours
- B15.75 hours
- C21.50 hours
- D23.625 hours
91[91] Gleim #: 1.3.91 -- Source: Publisher
(Refers to Fact Pattern #6)
If Donehart subcontracts the order to Midland, how much additional cost will Donehart incur
after the first batch in order to obtain a total of 1,000 units?- A$302,400
- B$330,220.80
- C$390,600
- D$426,535.20
92[92] Gleim #: 1.3.92 -- Source: CIA 1193 III-69
Management of a bookkeeping company observed that the average time spent to perform
identical tasks using a new software package decreases as the number of tasks performed
increases. The following information on the use of the new software was collected.
Number of Total Time to Average Time
Tasks Perform All to Perform
Performed Tasks Each Task
1 10 minutes 10 minutes
2 18 minutes 9 minutes
4 32.4 minutes 8.1 minutes
If this learning effect continues, what is the average time to perform each of the first eight
tasks?- A7.29 minutes.
- B8.1 minutes
- C6.56 minutes
- D5.90 minutes
93[93] Gleim #: 1.3.93 -- Source: CMA 1289 4-10
Learning curves are best used to predict- AUnit material costs
- BOverhead variances
- CTotal unit costs
- DUnit direct labor costs.
94[Fact Pattern #7]
Aerosub, Inc. has developed a new product for spacecraft that includes the production of a complex
part. The manufacture of this part requires a high degree of technical skill. Management believes
there is a good opportunity for its technical force to learn and improve as they become accustomed to
the production process. The production of the first unit requires 10,000 direct labor hours.
Management projects an 80% learning curve and wants to produce a total of eight units.
[94] Gleim #: 1.3.94 -- Source: CMA 0408 1-142
(Refers to Fact Pattern #7)
Upon completion of the eighth unit, Aerosub’s cumulative average direct labor hours required
per unit of the product will be- A5,120 hours
- B6,400 hours
- C8,000 hours
- D10,000 hours
95[95] Gleim #: 1.3.95 -- Source: CMA 0408 1-145
(Refers to Fact Pattern #7)
Upon completion of the eighth unit, Aerosub’s cumulative direct labor hours will be- A29,520 hours.
- B40,960 hours
- C64,000 hours
- D80,000 hours
96[96] Gleim #: 1.3.96 -- Source: CMA 0408 1-149
(Refers to Fact Pattern #7)
After completing the first unit, the estimated total direct labor hours Aerosub will require to
produce the seven additional units will be- A30,960 hours
- B40,960 hours.
- C56,000 hours.
- D70,000 hours.
97[97] Gleim #: 1.3.97 -- Source: CMA 0408 1-144
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 is- A40.0%
- B60.0%
- C62.5%
- D80.0%
98[Fact Pattern #8]
Proper Propeller, Inc. plans to manufacture a newly designed high-technology propeller for
airplanes. Proper Propeller forecasts that as workers gain experience, they will need less time to
complete the job. Based on prior experience, Proper Propeller estimates a 70% cumulative learning
curve and has projected the following costs.
Cumulative number Manufacturing Projections
of units produced Average cost per unit Total costs
1 $20,000 $20,000
2 14,000 28,000
[98] Gleim #: 1.3.98 -- Source: CMA 0408 1-148
(Refers to Fact Pattern #8)
If Proper Propeller produces eight units, the average manufacturing cost per unit will be- A$1,647
- B$6,860
- C$9,800
- D$14,000
99[99] Gleim #: 1.3.99 -- Source: CMA 0408 1-146
(Refers to Fact Pattern #8)
If Proper Propeller produces eight units, the total manufacturing cost will be- A$50,660
- B$54,880
- C$62,643
- D$112,000
100[100] Gleim #: 1.3.100 -- Source: CMA 0408 1-151
(Refers to Fact Pattern #8)
After completing production of the first propeller, the estimated cost for Proper Propeller to fill
an order for seven additional propellers is- A$34,880
- B$54,880
- C$92,000
- D$98,000
Information
- Description
- Part 1: Financial Planning, Performance, and Control
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- Mark Anthony Pusing
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