01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international © Back to My Studies (/mystudies/) You ran out of time and your session was automatically submitted. + If you need help with an ExamSuccess question, please ask in our Student Forums (/student-forums/) and be sure to include the Question ID displayed above the question. Thank you! + When you are done reviewing your answers, simply close this page. You scored 57 correct out of 100 (57%) questions in Review - Part 1 Mock Exam #1 (100 Questions in 3 Hours). The average score on this mock exam is 57%. Below is a review of your answers, with the incorrectly answered questions first, followed by the correctly answered questions: 3. Question ID: CMA1 M1 Q48 (Topic: Budget Methodologies) ‘Simson Company's master budget uses straight-line depreciation on factory equipment of $258,000. The master budget was prepared at an annual production volume of 103,200 units of product. This production volume is expected to occur uniformly throughout the year. During September, Simson produced 8,170 units of product, and the accounts reflected actual depreciation on factory machinery of $20,500. Simson controls manufacturing costs with a flexible budget. The flexible budget amount for depreciation on factory machinery for September should be + A. $20,425. + B. $21,500 + C. $19,475 + D. $20,500. This question is answered correctly on the first attempt by 55% of students. Correct Answer Explanation for B: The annual straight-line depreciation in the master budget is $258,000, which is equal to $258,000 + 12, or $21,500 monthly. Straight-line depreciation is a fixed cost. Fixed costs in the flexible budget are exactly the same as they are in the master, or static, budget because fixed costs do not vary with changing levels of activity, as long as the activity remains within the relevant range. Thus, Simson Company's monthly flexible budget amount for depreciation is the same as its monthly master budget amount: $21,500. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! wre01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international 4. Question ID: CMA1 M1 Q07 (Topic: Long-Term Contracts) Pell Co. builds new homes on lots that it owns the title to. The company normally obtains a signed sales contract before it begins construction on a home, so it usually does not build “on spec,” that is, speculatively. The contracts contain a provision allowing buyers to change their minds and cancel the contract during the construction period if they pay a fee. The customers make progress payments during construction, but they do not receive title to the property until construction is complete and the sale is closed. The following data pertain to Pell's home construction jobs that commenced during 20X5: Home 4 Home 2 Contract price $420,000 $300,000 Cost incurred during 20X5 240,000 230,000 Estimated costs to complete 120,000 40,000 Billed to customers during 20X5 150,000 270,000 Received from customers during 20X5 90,000 250,000 What amount of gross profit (loss) should Pell report in its 20X5 income statement? + A. $80,000. + B. $65,500. * C. $0. + D. $340,000. This question is answered correctly on the first attempt by 38% of students. Correct Answer Explanation for C: Because Pell owns the property on which it builds the homes and the customers do not obtain control of the assets until construction is complete, Pell recognizes revenue, costs, and gross profit from these construction contracts at a point in time, that is, when the contract is fulfilled and the title is turned over to the customer. Both homes have estimated gross profit as of the end of 20X5. Home 1's estimated gross profit is $60,000 ($420,000 - $240,000 - $120,000) and Home 2's estimated gross profit is $30,000 ($300,000 - $230,000 - $40,000). However, neither home is complete, so no gross profit will be recognized until the contracts have been completely fulfilled. Therefore, the gross profit to report on Pell's 20X5 income statement is zero. 5. Question ID: CMA1 M1 Q94 (Topic: Data Mining) In data mining, the difference between training data and validation data is hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! am01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international + A. training data is a dataset with known outcomes. Validation data is a dataset for which the outcomes are known but initially hidden. * B. training data is offline data. Validation data is online, real-time data. * C. training data is used by trainee data scientists to learn data mining Validation data is used to check their work. * D. training data is used to make decisions. Validation data is used to validate the results of the decisions made. This question is answered correctly on the first attempt by 38% of students. Correct Answer Explanation for A: Training data is used with a supervised leaming algorithm to “train” the algorithm about the relationship between the predictor variables and the outcome variable in data. Training data is a dataset in which the value of the outcome to be predicted is already known, for example whether or not a particular customer made a purchase. The “trained” algorithm is then applied to validation data, or data for which the outcome is already known but is initially hidden, to see if the algorithm works properly. 8, Question ID: CMA1 M1 Q55 (Topic: Data Governance) Which of the following is not a component of a governance system over information and technology according to COBIT® 2019? * A. Organizational structures. * B. People, skills, and competencies. * C. Risk assessment, + D. Processes. This question is answered correctly on the first attempt by 52% of students. Correct Answer Explanation for C: Risk assessment, the process of identifying, analyzing, and managing the risks that have the potential to prevent the organization from achieving its objectives, is a component of an internal control system, according to Internal Control - integrated Framework, the internal control framework of COSO, the Committee of Sponsoring Organizations. It is not a component of a governance system over information and technology according to COBIT® 2019. 9. Question ID: CMA1 M1 Q99 (Topic: Transaction Controls) The control objective that reduces the probability of a fictitious transaction being recorded in the accounting records is: hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! air01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal * A. accuracy. + B. completeness. + C, authorization, + D. validity. This question is answered correctly on the first attempt by 33% of students. Correct Answer Explanation for D: Validity is a transaction control objective that, in financial reporting, means all recorded transactions fairly represent the economic events that occurred, are lawful, and have been executed in accordance with management's authorization. Validity means that all of the events that are recorded in the financial statements actually occurred, Reducing the probability of a fictitious transaction being recorded in the accounting records is not an example of the transaction control objective of validity. Achieving the objective of validity would reduce the probability of a fictitious (non existent) transaction being recorded. 10. Question ID: CMA1 M1 Q60 (Topic: Data Governance) According to COBIT® 2019, data governance is the responsibility of * A. the board of directors. * B. every employee. * C. the organization’s senior management. + D. management of the IT department. This question is answered correctly on the first attempt by 36% of students. Correct Answer Explanation for A: According to COBIT® 2019, data governance is the responsibility of the board of directors under the leadership of the chair of the board. 12, Question ID: CMA1 M1 Q21 (Topic: Forecasting and Regression Analysis) The North By Northeast (NBNE) Heating Oil Company is developing its heating oil demand forecast for next winter's heating season so that it can have adequate supplies available for its customers. North By Northeast has developed historical data on its customers’ heating oil usage during the heating season for the past ten years, The best method NBNE could use in developing its demand forecast for the coming heating season would include hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 4m01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international * A. performing a regression analysis using historical census data for its service area for the past ten years as the independent variable and heating oil demand during the heating season as the dependent variable and using the resulting equation to forecast heating oil demand for the coming heating season. + B. assigning probabilities to each possible demand level and calculating the expected value of demand to use as the forecast for heating oil demand * C. performing a time series regression analysis to determine the trend of heating oil usage per heating season over the past ten years and using the resulting equation to forecast heating oil demand for the coming heating season, * D. performing causal forecasting multiple regression analysis using ten years of historical data on average outside temperatures during the heating season and number of heating oil customers along with its ten years of usage data to determine whether temperature forecasts and forecasts of number of customers will be useful for forecasting heating oil supplies needed. This question is answered correctly on the first attempt by 25% of students. Correct Answer Explanation for Heating oil demand can be affected by outside temperature and by number of customers. In other words, there is a cause-and-effect relationship between each of those factors and heating oil demand. But before using temperature and customer forecasts to forecast heating oil demand, a multiple regression analysis should be performed and used to evaluate the strength of the historical relationships between each of the variables and heating oil demand 14. Question ID: CMA1 M1 Q72 (Topic: Multiple Performance Measures) Financial performance measures such as Return on Investment and Residual Income are indicators of the firm's performance. + A, concurrent * B. lagging * C. leading + D. extemal This question is answered correctly on the first attempt by 29% of students. Correct Answer Explanation for B: Financial performance measures are lagging indicators of the firm’s performance because they focus on short-term, historical performance rather than long-term, future performance. Non-financial and operational indicators that measure the basic performance of the company and improvements it is making in those indicators are leading indicators because they provide the prospect of increased future economic value for shareholders. Financial, non-financial, and operational indicators all are important for measuring performance. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 57201722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international 15. Question ID: CMA1 M1 Q31 (Topic: Long-Term Contracts) Xander Co. builds custom homes on its customers’ lots using the plans provided by the owners. The following data pertain to Xander Co.'s home construction jobs that commenced during 20X5: Home 4 Home 2 Contract price $ 420,000 $300,000 Cost incurred during 20X5 240,000 280,000 Estimated costs to complete 120,000 40,000 Billed to customers during 20X5 150,000 270,000 Received from customers during 20X5 90,000 250,000 What amount of gross profit (loss) should Xander report in its 20X5 income statement? + A. $22,500. * B. $(20,000). + C. $20,000. + D. $40,000. This question is answered correctly on the first attempt by 43% of students. Correct Answer Explanation for C: Since Xander builds custom homes on lots belonging to its customers, its customers obtain control over time as the performance obligations in the contract are being satisfied. Revenue and gross profit are recognized as the customer obtains control of the asset, so the revenue and gross profit are recognized over time. Home 2 has an estimated loss of $20,000, calculated by subtracting costs incurred to date ($280,000) and estimated costs to complete ($40,000) from the contract price ($300,000). Xander should recognize the full $20,000 estimated loss from Home 2 in 20X5. Since revenue and gross profit are recognized over time, Xander should also recognize a portion of the estimated profit from Home 1 in 20X5. The estimated profit from Home 1 is $60,000 ($420,000 contract price minus $240,000 cost incurred minus $120,000 estimated costs to complete). Since 2/3 of the costs have been incurred ($240,000 cost incurred divided by total expected cost of $360,000), Xander will recognize 2/3 of the estimated profit on Home 1 this period, or $40,000. For both homes, the net estimated gross profit that Xander will recognize in the current period is $20,000 (the $20,000 loss on Home 2 and the $40,000 profit on Home 1). hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! ar01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international 16. Question ID: CMA1 M1 Q33 (Topic: Data Life Cycle and Records Management) Which of the following is not a governance issue related to data capture? * A. Monitoring the company’s performance on its contracts for data acquired from outside organizations. * B. Monitoring accuracy of data input internally through data entry. * C. Monitoring the function of devices used to receive transmitted data. + D. Monitoring the quality and adequacy of input data used in data synthesis. This question is answered correctly on the first attempt by 32% of students. Correct Answer Explanation for D: Monitoring the quality and adequacy of input data used in data synthesis is a data governance issue related to data synthesis, not to data capture. Data capture is the process of creating new data values that have not existed before within the organization, 18, Question ID: CMA1 M1 Q23 (Topic: Regression Analysis) The results of a time series regression analysis of historical sales for XYZ Company for 10 years are as follows: Y-intercept 2203.5 Variable coefficient 94.97576 R? 0.89844 R 0.94786 Standard error 102.5411 Which of the following statements is not correct about the information that can be leamed from the results of the regression analysis: + A.A reasonable sales forecast for Year 11 is $3,248. * B. The slope of the regression line is 94.97576. * C. Approximately 89.8% of the variation in sales can be explained by the passage of time. + D. Approximately 10.2% of the variation in sales can be explained by economic cycles. This question is answered correctly on the first attempt by 41% of students. Correct Answer Explanation for D: hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! mm01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal The statement “Approximately 10.2% of the variation in sales can be explained by economic cycles" is incorrect. It is true that 10.2% of the variation in sales (100% - 89.8%) is explained by something other than the passage of time. However, that 10.2% could be explained by any number of factors, not only economic cycles. 20. Question ID: CMA1 M1 Q41 (Topic: Manufacturing Input Variances -- Direct Materials) The standard direct material cost per unit for a product is calculated as follows: 10.5 liters at $2.50 per liter. Last month the actual price paid for 12,000 liters of material used was 4% above standard and the direct material usage variance was $1,815 favorable. No inventory of material is held. What was the actual production last month (in units)? + A. 726 units. + B. 1,142 units. + C. 1,188 units. + D.1,212 This question is answered correctly on the first attempt by 38% of students Correct Answer Explanation for D: Step 1: Use the Quantity (usage) variance formula to find the standard quantity of direct material for the actual production. (AQ — SQ) « SP = -1,815 (12,000 — SQ) * 2.50 = -1,815 Solve for SQ: 12,000 - SQ= SQ = -12,726 SQ = 12,726 726 Step 2: Divide the standard quantity for the actual production (12,726) by the standard number of liters per unit (10.5) to find the actual number of units produced. 12,726 + 10.5 = 1,212 units 26. Question ID: CMA1 M1 Q86 (Topic: Safeguarding Controls) To avoid potential errors and irregularities, a well-designed system of internal accounting control in the accounts payable area should include segregation of which of the following functions from each other? * A. Check signing and cancellation of payment documentation. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! sr01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international + B. Cash disbursements and vendor invoice verification + C, Physical handling of merchandise received and preparation of receiving reports. * D. Vendor invoice verification and merchandise ordering. This question is answered correctly on the first attempt by 36% of students. Correct Answer Explanation for B: Segregating functions ensures that no single individual is given too much responsibility so that no employee is in a position to both perpetrate and conceal irregularities. In general, different people should always perform the four functions of authorizing a transaction, recordkeeping, keeping physical custody of the related asset, and periodically reconciling the physical assets to the recorded amounts for those assets. The person who verifies vendor invoices—an authorization function—should not also be responsible for cash disbursements—a custody function. A person in that situation could verify a false invoice (one that they themselves created and submitted) and make payment (to themselves) 31. Question ID: CMA1 M1 Q50 (Topic: Warranties) Vadis Co. sells three-year extended warranties as separate performance obligations when it sells appliances. Service under the warranty is performed by an independent repair technician under a contract with Vadis. Based on experience, warranty costs are estimated at $30 for each appliance sold. When should Vadis recognize these warranty costs? + A. The warranty costs should be recognized when the warranties are sold along with the appliances. + B. The warranty costs should be recognized evenly over the life of the warranty. * C. The warranty costs should be recognized when payments are made to the repair technician. + D. The warranty costs should be recognized when the service calls are performed. This question is answered correctly on the first attempt by 31% of students. Correct Answer Explanation for D: This is a service-type warranty. Warranty expenses for service-type warranties should be recognized as period costs when incurred. The costs are incurred when the service calls are performed. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! err01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal Note that the revenue for a service-type warranty is usually recognized on a straight- line basis over the life of the warranty contract, However, if costs under the contracts have historically been incurred on some basis other than a straight-line basis, for example higher costs toward the end of the warranty period, then the revenue should be recognized over the contract period in proportion to the expected costs. If the extended warranty picks up after the manufacturer's warranty expires, recognition of the extended warranty revenue does not begin until after the manufacturer's warranty has expired (because costs will not be incurred until after the manufacturer's warranty has expired). 32. Question ID: CMA1 M1 Q52 (Topic: Data Life Cycle and Records Management) Benefits of having and following a documented record retention or records management policy include all of the following with the exception of: * A. The organization's compliance with all federal, state, and local regulations regarding document and data retention and destruction will be ensured * B. Accessibility of records will be maintained. * C. Records that are no longer of value will be destroyed at the appropriate time. + D. Records will be protected. This question is answered correctly on the first attempt by 27% of students. Correct Answer Explanation for Compliance with all regulations regarding document and data retention and destruction cannot be ensured by having and following a documented records management policy because errors and omissions do occur. However, having a documented policy that is consistently followed does increase the probability of the organization's compliance with regulations. 37. Question ID: CMA1 M1 Q18 (Topic: Business Continuity Planning) ‘A major mutual fund company maintains a facility separate from its operations center that has the same computer equipment and the same data and communications links as are in its regular operations center. In the event of a disaster, the facility could be made operational by restoring current data to it. The site described is a + A. warm site. + B. mobile site. * C. cold site. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! ovr01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international + D. hot site. This question is answered correctly on the first attempt by 23% of students. Correct Answer Explanation for A: The site described is a warm site. A warm site has the computer equipment and necessary communications links installed, but it does not have live data. If use of the warm site is required because of a disaster, current data needs to be restored to it The difference between a hot site and a warm site is that a hot site has current, live data replicated to it in real time by automated data communications so it can be made operational instantly, whereas a warm site does not have live data. A warm site needs to have current data restored to it from backups before it can become operational, The difference between a warm site and a cold site is that a warm site has the computer equipment and communications links installed, whereas a cold site does not have any equipment or communications links installed, In the event of a disaster, in a cold site, the computer and communications facilities would need to be installed quickly and data restored to it in order to become operational. A mobile site is a disaster recovery site on wheels, and it may be a hot, warm, or cold site. 39. Question ID: CMA1 M1 Q46 (Topic: Multiple Input Variances) GreenGro Company produces lawn fertilizer. The standard costs and inputs for a 500-pound batch of fertilizer are below. Standard Input Qty per Batch Standard Cost Chemical (inPounds) perPound Total Cost Nitrogen 120 $ 0.250 $ 30.00 Phosphorus 10 17.984 179.84 Potassium 40 2.440 97.60 Filler (inert ingredients) 330 0490 © _161.70 500 $469.14 The beginning materials inventory was zero. The quantities purchased and used during the current period are shown below. A total of 150 batches were produced during the current period. Qty. Purchased Total ty. Used. Chemical (inPounds) Purchase Price —_(in Pounds) Nitrogen 20,000 $ 5,600 18,400 Phosphorus 4,300 23,595, 4,500 hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! wire01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international Potassium 7,500 17,625 6,450 Filler (inert ingredients) 50,000 22,500 48,650 78,800 $69,320 75,000 The materials yield variance for this operation is + A $3,565.46 unfavorable, + B. $3,565.46 favorable. * C. zero, + D. $781.50 unfavorable. This question is answered correctly on the first attempt by 51% of students. Correct Answer Explanation for C: The materials yield variance formula is (AQ— SQ) x waspSM. The Actual Quantity used is given in the question: 75,000 pounds. The Standard Quantity is also 75,000, calculated as follows: Std. Input Qty, Std. Qty. for per Batch x Actual #ofBatches= Production Nitrogen 120 * 150 = 18,000 Phosphorus 10 x 150 = 4,500 Potassium 40 * 150 = 6,000 Filler (inert ingredients) 330 * 150 = 49,500 Total Standard Quantity 75,000 Itis not necessary to calculate waspSM, since 75,000 - 75,000, which is (AQ - SQ), is zero, and zero multiplied by anything else is zero. So it does not make any difference what waspSM is. The materials yield variance for the operation must be zero. 42. Question ID: CMA1 M1 Q69 (Topic: Accounts Receivable) The following information pertains to Tara Co.'s accounts receivable at December 31, 20X5: Days Amount Estimated Outstanding Outstanding —_—Credit Losses 0-60 $120,000 1% 61-120 90,000 2% hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! sare01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international Over 120 100,000 6% During 20X5, Tara wrote off $7,000 in receivables and recovered $4,000 that had been written off in prior years. Tara's December 31, 20X¢4 allowance for credit losses was $22,000. Tara's measurement of expected credit losses is based on relevant information about past events including historical experience, using its accounts receivable aging report, as well as information about current conditions and reasonable and supportable forecasts that affect the collectibility of the outstanding balances. The other relevant information is reflected in the estimated credit losses for each grouping of aged accounts receivable. What amount of credit loss expense should Tara report at December 31, 20X5? * A. $3,000 expense. * B. $10,000 expense. * C, $13,000 gain. * D. $10,000 gain This question is answered correctly on the first attempt by 38% of students. Correct Answer Explanation for D: The required ending balance in the allowance for credit losses account, based on the aging schedule and the other relevant information used to estimate the percentage of each group of accounts that will become credit losses, is: Amt. Est. Credit Outstanding Losses 0-60 days $120,000 x 0.01 = $1,200 61-120 days 90,000 x 0.02 = 1,800 Over 120 100,000 x 0.08 = 6,000 days Required ending balance $9,000 The ending balance in the allowance for credit losses account before credit loss expense is recorded is as follows: Beginning balance in allowance account (22,000) credit balance Receivables written off 7,000 debit transaction , , credit Recoveries of accounts written off in prior years (4,000) transaction Ending balance before recording credit loss expense (19,000) credit balance hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 3172‘ora, 11:20 am (CMA Part 1 Mock Exam MCQs - HOCK inleratonal To adjust a 19,000 credit balance in the allowance account to a 9,000 credit balance, a 10,000 debit will be required. The other side of the entry will be a 10,000 credit to the credit loss expense account, which is a gain. 44. Question ID: CMA1 M1 Q30 (Topic: Governance Principles) The term “agency problem” describes * A. problems that arise due to the methods used to compensate management. * B. problems that arise due to the fact that the managers of a corporation and the owners of the corporation are different people. * C, legal problems caused by the use of independent contractors in place of employees. + D. problems that can arise from the use of outside agents to negotiate international deals. This question is answered correctly on the first attempt by 67% of students. Correct Answer Explanation for B: In a publicly-held corporation in which the shareholders own the corporation but managers operate the business, problems arise because the priorities and concerns of the managers are different from the priorities and concerns of the owners, the shareholders. The managers are concerned with what will benefit them personally and lead to increased salary, bonuses, power, and prestige. The shareholders’ priorities lie with seeing the value of their investments in the corporation increase. The priorities of the shareholders and the priorities of the managers can easily be in conflict with one another, because what benefits the managers may not benefit the owners. 51. Question ID: CMA1 M1 Q42 (Topic: Overhead Variances) ‘A company operates a standard costing system. Last month actual fixed overhead expenditure was 2% below budget and the fixed overhead expenditure variance was $1,250. What was the actual fixed overhead expenditure for last month? + A. $62,500, + B. $63,750 + C. $62,475, + D. $61,250. This question is answered correctly on the first attempt by 40% of students. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! aire01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international Correct Answer Explanation for D: The basic variance formula is: Actual - Budget = Variance Let X = Fixed Overhead Budget amount Since the actual expenditure was 2% below the budget, the actual fixed overhead incurred was 0.98X. 0.98X — X = -1,250 -0.02X = -1,250 X = 62,500 The Fixed Overhead Budget amount is $62,500. Since the Actual fixed overhead expenditure amount is 2% below the Budget amount, the Actual amount is $62,500 = (1 = 0.02) = $61,250. 53, Question ID: CMA1 M1 Q88 (Topi Transformation) Technology-enabled Finance ‘An example of an appropriate task for Robotic Process Automation (RPA) is * A. writing instructions for a process. * B. auditing the accounts receivable function. * C, monitoring inventory levels and placing orders. + D. applying paint to new cars being manufactured on an assembly line. This question is answered correctly on the first attempt by 37% of students. Correct Answer Explanation for C: Any task that is high volume, rules-driven, and repeatable qualifies for Robotic Process Automation. Monitoring inventory levels and automatically placing orders at the appropriate point are tasks that can be done with Robotic Process Automation (RPA). 55. Question ID: CMA1 M1 Q14 (Topic: Budgeting Calculation Questions) CM Printing Company produces paper note pads. One ream of paper will produce 25 note pads. Budgeted production of note pads for the next four months is as follows: September 5,000 pads October 4,000 pads hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! ssir2‘ora, 11:20 am (CMA Part 1 Mock Exam MCQs - HOCK inleratonal November 7,500 pads December 6,000 pads The company wants to maintain monthly ending inventories of paper equal to 25 percent of the following month's production needs. On August 31, 100 reams of paper were in inventory. The cost of the paper is $4 per ream, and the note pads sell for $0.50 per pad. What is the budgeted production in pads for the fourth quarter? + A. Cannot be determined, + B. 17,500 pads. + C, 5,000 pads. + D. 16,500 pads. This question is answered correctly on the first attempt by 37% of students. Correct Answer Explanation for B: The fourth quarter budgeted production is the sum of budgeted production for the months of October, November and December. Those are given in the problem as 4,000 for October, 7,500 for November, and 6,000 for December. The total is 17,500 pads. 56. Question ID: CMA1 M1 Q15 (Topic: Budgeting Calculation Questions) CM Printing Company produces paper note pads. One ream of paper will produce 25 note pads. Budgeted production of note pads for the next four months is as follows: September 5,000 pads October 4,000 pads November 7,500 pads December 6,000 pads The company wants to maintain monthly ending inventories of paper equal to 25 percent of the following month's production needs. On August 31, 100 reams of paper were in inventory. The cost of the paper is $4 per ream, and the note pads sell for $0.50 per pad. What is the budgeted cost of paper to be purchased in September? + A. $480. + B. $560. + C. $800. * D. $140. This question is answered correctly on the first attempt by 63% of students. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 61701722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international Correct Answer Explanation for B: Production needs in September are 200 reams of paper (budgeted production 5,000 pads + 25 pads produced per ream), and in October are 160 reams (budgeted production 4,000 pads + 25 pads produced per ream) According to the inventory policy, the ending inventory for September must be 40 reams (25% of the 160 reams needed for October production). So, the amount of paper to be purchased in September is 200 needed for September production + 40 needed in ending inventory ~ 100 in beginning inventory = 140. The cost of 140 reams is 140 x $4 per ream = $560. 61. Question ID: CMA1 M1 Q00 (Topic: Transaction Controls) The control objective that would reduce the probability of a credit sale being recorded as a cash sale instead of as a receivable is: * A. completeness. + B. authorization. * C. accuracy. * D. valiaity. This question is answered correctly on the first attempt by 43% of students. Correct Answer Explanation for C: Accuracy is a transaction control objective that, in financial reporting, means all valid transactions are accurate, are consistent with the originating transaction data, are correctly classified, and the information is recorded in a timely manner. Reducing the probability of a credit sale being recorded as a cash sale instead of as a receivable is an example of the transaction control objective of accuracy, because it relates to an item being classified correctly and reported in the correct area of the financial statements. 62. Question ID: CMA1 M1 Q59 (Topic: The Financial Statements, Balance Sheet) Trans Co. had the following balances at December 31, 20X5: Cash in checking account $ 35,000 Cash in money market account 75,000 USS. Treasury bill, purchased Nov. 1, 20X5, maturing Feb. 28, 20X6 350,000 hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! wm01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international USS. Treasury bill, purchased Dec. 1, 20X5, maturing Mar. 31, 20X6 400,000 Trans's policy is to treat as cash equivalents all highly-liquid investments with a maturity of three months or less when purchased. What amount should Trans report as cash and cash equivalents in its December 31, 20X5 balance sheet? + A. $860,000. + B. $385,000. * C. $110,000. + D. $460,000. This question is answered correctly on the first attempt by 55% of students. Correct Answer Explanation for C: Only the cash in the checking account ($35,000) and the cash in the money market account ($75,000) are classified as cash and cash equivalents. Both U.S. Treasury bills had maturities of more than three months when they were acquired and therefore do not meet the definition of cash equivalents, although they are current assets. Cash and cash equivalents on the balance sheet will be $110,000. 63. Question ID: CMA1 M1 Q20 (Topic: Statement of Cash Flows Overview) The following information is available from Sand Corp.'s accounting records for the year ended December 31, 20X6: Cash received from customers $870,000 Rent received 10,000 Cash paid to suppliers and employees 510,000 Taxes paid 110,000 Cash dividends paid 30,000 Net cash flow provided by operations for 20X6 was » A. $220,000. » B. $260,000. » C. $250,000. + D. $230,000. This question is answered correctly on the first attempt by 63% of students. Correct Answer Explanation for B: All of the items listed except for cash dividends paid are operating activities. Cash dividends paid is a financing activity. Cash received from customers $ 870,000 hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! ‘e172‘ora, 11:20 am (CMA Part 1 Mock Exam MCQs - HOCK inleratonal Rent received 10,000 Cash paid to suppliers and employees (510,000) Taxes paid (110,000) Net cash flow from operating activities $260,000 69. Question ID: CMA1 M1 Q27 (Topic: Information Systems) Manufacturing input costs are accumulated in the Accounting Information System in the * A. cost accounting system, which is a management reporting system. * B. responsibility reporting system, which is a financial reporting system + C. production reporting system, which is a management reporting system. * D. profitability reporting system, which is a financial reporting system. This question is answered correctly on the first attempt by 39% of students. Correct Answer Explanation for A: Cost accounting systems collect labor, material, and overhead costs that are used to determine the inventory costs of manufactured goods. Their output is used to determine the value of the inventories reported on the balance sheet. Cost accounting systems are also used to report variances from anticipated costs that production managers need to control production. 73. Question ID: CMA1 M1 Q78 (Topic: Preparing the Budget) In the preparation of the annual operating budget, the direct materials usage budget should directly follow preparation of the * A. capital expenditure budget. + B. sales budget. * C. forecasted balance sheet. * D. production budget. This question is answered correctly on the first attempt by 86% of students. Correct Answer Explanation for D: The direct materials usage budget can be prepared only after the production budget has been prepared. Without knowing how many units will be produced, it is not possible to know how much direct materials will be needed for the production. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! sere01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international 75, Question ID: CMA1 M1 Q96 (Topic: System General Controls) Which of the following is not a common cause of accidental damage to a computer- based information system or the data it holds? + A. Interruptions to the power supply. * B. Failure to comply with procedures for the use of organizational information systems. + C. Attempts to carry out tasks beyond the ability of the employee. + D. Inaccurate data entry. This question is answered correctly on the first attempt by 19% of students. Correct Answer Explanation for A: While interruptions to the power supply can cause data corruption, they are not a common cause of it. Data can be protected from corruption due to loss of power with an Uninterruptible Power Supply or even a standby generator. The other three things — inaccurate data entry, attempts to carry out tasks that are beyond the ability of the employee, and failure to comply with procedures for use of the organizational information system — are common causes of data corruption 78. Question ID: CMA1 M1 Q03 (Topic: Information Systems) What is the role of an accounting information system (AIS) in a company's value chain? * A. The AIS is used by management to determine which activities in the company’s value chain are primary activities and which are support activities * B. The AIS provides information to enable the efficient and effective performance of the company's value chain activities. + C, The AIS is a support activity that makes it possible for the organization to perform its primary activities in the value chain. * D. The AIS adds value to the company's products and services. This question is answered correctly on the first attempt by 60% of students. Correct Answer Explanation for B: An organization's accounting information system (AIS) interacts with every process in the value chain. The AIS adds value to the organization by providing accurate and timely information so that all of its primary and support value chain activities can be performed efficiently and effectively. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 2orre01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international 80. Question ID: CMA1 M1 Q92 (Topic: Internet Security) A firm uses a centralized computer system that allows its traveling sales personnel to directly enter new orders and to query the database on old orders. To maintain data integrity in this application, it would be important to have: * A. password protection. * B. uninterruptible power supplies. * C. encryption * D. backup. This question is answered correctly on the first attempt by 34% of students Correct Answer Explanation for C: Encryption should be used to make sure that data is not changed in transit over a network or the Internet. 81. Question ID: CMA1 M1 Q51 (Topic: Income Measurement) Weir uses straight-line depreciation for its property, plant and equipment which, stated at net book value, consisted of the following: Dec. 31,20X5 Dec. 31, 20X4 Land $ 25,000 $ 25,000 Buildings 195,000 195,000 Machinery and equipment 695,000 650,000 $ 915,000 $ 870,000 Less accumulated depreciation 400,000 —370,000 Net property, plant and equipment $515,000 $500,000 Weir's depreciation expense for 20X5 and 20X4 was $55,000 and $50,000, respectively. What amount was debited to accumulated depreciation during 20X5 because of property, plant and equipment disposals? + A. $20,000. + B. $25,000. + C. $10,000 + D. $40,000 This question is answered correctly on the first attempt by 53% of students. Correct Answer Explanation for B: hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! wre01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal The depreciation expense of $55,000 in 20X5 should be added to the accumulated depreciation at the end of 20X4, which was $370,000. The accumulated depreciation at the end of 20XS would have been $425,000 ($370,000 + $55,000) if no assets had been disposed of. However, the accumulated depreciation was only $400,000 at the end of 20X5. That means $25,000 of accumulated depreciation must have been written off as part of asset disposals during 20X5. 85. Question ID: CMA1 M1 Q11 (Topic: Budgeting Calculation Questions) The following information pertains to Boeck Company: Month, Sales Purchases January $30,000 $10,000 February $10,000 $ 5,000 March $20,000 $12,000 Thirty percent of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. Cash is collected from customers in the following manner: Month of sale: 40% Month following sale: 60% Boeck expects to incur labor costs equal to 15 percent of sales and other operating costs of $15,000 per month (including $4,000 of depreciation). Both of these are paid in the month incurred. The cash balance on March 1 is $3,500. A minimum cash balance of $2,500 is required at the end of the month. Money can be borrowed in multiples of $500. How much cash will be disbursed for operations in March? + A. $7,100. + B. $21,100. + C. $10,100. » D. $25,100. This question is answered correctly on the first attempt by 67% of students. Correct Answer Explanation for B: The total cash disbursed for operations in March will include the cash paid to suppliers, the other cash operating costs paid, and the labor costs paid. Cash paid to suppliers: In March the company will need to pay 30% of the March purchases and 70% of the February purchases. This is $3,600 ($12,000 x 0.3) and $3,500 ($5,000 x 0.7), respectively, or $7,100 in total for cash paid to suppliers. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! parr01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international Other cash operating costs: Other cash operating costs are $15,000 less $4,000 of depreciation that is a non-cash expense, for cash disbursed of $11,000. Labor costs: Labor costs are 15% of sales, and March sales are $20,000. $20,000 x 0.15 = $3,000. The total cash disbursed for operations is thus $7,100 + $11,000 + $3,000 = $21,100 86. Question ID: CMA1 M1 Q97 (Topic: Internal Control Introduction and Components) Which of the following is not a part of the control environment of a publicly traded company? * A. The policies regarding the employment and retention of staff. * B. The vacation policy and scheduling of vacations in the delivery department. + C. The manner in which authority and responsibility are assigned. + D. The structure of the organization and its reporting process. This question is answered correctly on the first attempt by 66% of students. Correct Answer Explanation for B: The control environment includes the standards, processes, and structures that provide the foundation for carrying out internal control. Vacation policy and scheduling of vacations are control procedures, but they are not part of the control environment. 87. Question ID: ICMA 10Q.1.029 (Topic: Overhead Allocation) Pane Company uses a job costing system and applies overhead to products on the basis of direct labor cost. Job No. 75, the only job in process on January 1, had the following costs assigned as of that date: direct materials, $40,000; direct labor, $80,000; and factory overhead, $120,000. The following selected costs were incurred during the year. Traceable to jobs: Direct materials $178,000 Direct labor 345,000 $523,000 Not traceable to jobs: Factory materials and supplies $ 46,000 hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! pair01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal Indirect labor 235,000 Plant maintenance 73,000 Depreciation on factory equipment 29,000 Other factory costs 76,000 $459,000 Pane’s profit plan for the year included budgeted direct labor of $320,000 and factory overhead of $448,000. There was no work-in-process on December 31. Pane’s overhead for the year was * A. $24,000 underapplied. + B. $11,000 overapplied. * C. $24,000 overapplied. + D. $11,000 underapplied. This question is answered correctly on the first attempt by 29% of students Correct Answer Explanation for C: The predetermined overhead application rate for the year is $448,000 budgeted factory overhead divided by $320,000 budgeted direct labor = $1.40. When job order costing is used, the cost measurement method used is normal costing. In normal costing, overhead is applied on the basis of the amount of the cost basis actually used. The cost of direct labor actually used was $345,000. Therefore, the applied factory overhead is $1.40 x $345,000 = $483,000. The actual overhead incurred was $459,000. Job No. 75 was the only job in process, so it was the only job that received an overhead allocation. Since $483,000 in overhead was applied to Job No. 75 and the actual overhead incurred was only $459,000, overhead was overapplied by $24,000 ($483,000 - $459,000). 90. Question ID: ICMA 10Q.1.034 (Topic: Spoilage in Process Costing) Juniper Manufacturing uses a weighted-average process costing system at its satellite plant. Goods pass from the Major Assembly Department to the Finishing Department to finished goods inventory. The goods are inspected twice in the Finishing Department. The first inspection occurs when the goods are 30% complete, and the second inspection occurs at the end of production. The following data pertain to the Finishing Department for the month of July. Units Good units started and completed during July 65,000 Normal spoilage - first inspection 2,000 Abnormal spoilage - second inspection 150 hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 2arre01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international Ending work-in-process inventory, 60% complete 15,000 There was no beginning work-in-process inventory in July. Juniper recognizes spoiled units to make the cost of all spoilage visible in its management reporting. Equivalent units used for assigning costs for July are + A. 74,750. + B. 74,000. + C. 76,150. + D. 74,600. This question is answered correctly on the first attempt by 25% of students. Correct Answer Explanation for A: This question is unusual because it does not say at what point in the conversion process the direct materials are added. Since the question does not specify, we must assume that direct materials are added proportionately with conversion costs, and thus the number of EUP for direct materials and the number of EUP for conversion costs are the same. The question says that the first inspection occurs when the units are 30% complete That is the normal spoilage, and 2,000 units are normally spoiled that are 30% complete. Since they are only 30% complete, the number of equivalent units of normal spoilage is 30% of 2,000 units, and this is the same for direct materials and conversion costs, since direct materials are added proportionately with conversion costs. The second inspection occurs when the units are 100% complete, and those spoiled units are the abnormal spoilage. Since the units are complete, the abnormal spoilage is 150 x 100%, or 150 equivalent units. The equivalent units for allocating costs will include both good units and spoiled units, Under the weighted-average method, the total equivalent units are calculated as the number of units completed and EWIP, plus the equivalent units normally and abnormally spoiled. The total equivalent units produced for both direct materials and conversion costs equal good units completed (65,000) plus good units in ending WIP Inventory (15,000 60% = 9,000) plus normally spoiled units (2,000 x 30% = 600) and abnormally spoiled units (150 x 100%). That is 74,750 equivalent units under the weighted average method. See worksheet below. Direct Materials and Conversion Costs Units Completed 65,000 Normal spoilage (2,000 @ 30% complete) 600 Abnormal spoilage (150 @ 100% complete) 150 hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 2sire‘ora, 11:20 am (CMA Part 1 Mock Exam MCQs - HOCK inleratonal Starting of EWIP (15,000 @ 60% complete) 9,000 Total EUP - Weighted Average 74,750 91. Question ID: CMA1 M1 Q24 (Topic: Common Stock) A corporation declared a dividend, a portion of which was liquidating. How does this declaration affect (a) additional paid-in capital and (b) retained earnings? * A. (a) Decrease (b) No effect * B. (a) Decrease (b) Decrease * C. (a) No effect (b) No effect * D. (a) No effect (b) Decrease This question is answered correctly on the first attempt by 40% of students. Correct Answer Explanation for B: Both additional paid-in capital and retained earnings are decreased. The portion of the dividend that is a normal, non-liquidating dividend decreases retained earnings (b), and the portion of the dividend that is a liquidating dividend decreases additional paid-in capital (a), 93. Question ID: CMA1 M1 Q29 (Topic: Probability) A company currently experiences 330 errors in its processing each month. Performance projections for a new machine are shown below: Probability Monthly errors 02 150 03 200 04 250 04 280 Given that each error costs the company $125 to rectify, what are the long-term monthly cost savings that will arise from the purchase of the new machine? + A $6,250. + B. $14,000. + C. $10,000 + D. $22,500. This question is answered correctly on the first attempt by 77% of students. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 2emre01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international Correct Answer Explanation for B: The expected value should be used to determine the projected number of errors with the new machine. An expected value is a weighted average of all the possible outcomes that could occur over a long period of time, weighted according to the probability of each occurring. An expected value will probably not be equal to the actual outcome in any specific period; but over a long period of time, it should approximate the average of the actual outcomes. The expected value of the number of errors per month with the new machine is (0.2 x 150) + (0.3 x 200) + (0.4 x 250) + (0.1 x 280) = 218 With the old machine, the number of errors per month has historically been 330. The expected decrease in the number of errors is 330 - 218, which is 112. Since each error costs the company $125 to rectify, over the long term the average monthly savings that should arise from the purchase of the new machine is 112 * $125, or $14,000 94. Question ID: ICMA 10Q.1.018 (Topic: Budgeting Calculation Questions) Trumbull Company budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Collection experience indicates that 60% of the budgeted sales will be collected the month after the sale, 36% will be collected the second month, and 4% will be credit losses. The cash receipts from accounts receivable that should be budgeted for September would be + A.$194,760 + B. $197,880 + C. $169,800 + D. $147,960 This question is answered correctly on the first attempt by 70% of students. Correct Answer Explanation for C: Collections in September will include 60% of the prior month's (August) sales and 36% of the sales in the month before last month (July). * The sales from August that will be collected will be $126,600 ($211,000 x 60%). * The sales from July that will be collected will be $43,200 ($120,000 x 36%). Total collections during September will be $126,600 + $43,200, or $169,800 in total. 95. Question ID: CMA1 M1 Q75 (Topic: Overhead Allocation) hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 2mm01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international Burnsville Corporation uses a job-order cost system and has two production departments, A and B, Budgeted manufacturing costs for the year are: Department A Department B Direct materials $700,000 $100,000 Direct labor $200,000 $800,000 Manufacturing support $600,000 $400,000 The actual material and labor costs charged to Job No. 432 were as follows: Total Direct Materials $25,000 Direct Labor: Dept. A $ 8,000 Dept. B 12,000 $20,000 Burnsville applies manufacturing support costs to jobs on the basis of direct labor cost using departmental rates determined at the beginning of the year. The total costs associated with Job No. 432 should be: + A. $55,000. + B. $70,000. + C. $75,000. * D. $65,000. This question is answered correctly on the first attempt by 44% of students. Correct Answer Explanation for C: Total manufacturing costs equal the sum of direct costs and overhead (manufacturing support) applied to the job. Direct costs are equal to $25,000 (direct materials) + $20,000 (direct labor) = $45,000. Overhead is applied on the basis of the direct labor cost using predetermined rates at the beginning of the year, so the predetermined rates are based on the budget. The predetermined overhead rate in Department A is the $600,000 of budgeted manufacturing support divided by the $200,000 of budgeted direct labor, or $3 per direct labor dollar. The predetermined overhead rate in Department B is the $400,000 of budgeted manufacturing support divided by the $800,000 of budgeted direct labor, or $0.50 per direct labor dollar. Actual direct labor in Department A was $8,000, so the total overhead applied in Department A was $3 * $8,000, or $24,000. Actual direct labor in Department B was $12,000, so the total overhead applied in Department B was $0.50 x $12,000, or $6,000. hitps ww hockintemational.comimystudies/ema-part--mack-exam-megs! err01722, 11:20 AM COMA Pat + Mack Exam COS - HOCK intemational So, the total cost of the job is $45,000 in direct costs + $24,000 fixed overhead applied in Department A + $6,000 fixed overhead applied in Department B = $75,000 98. Question ID: CMA1 M1 Q36 (Topic: Income Statement) Strand, Inc. incurred the following losses during 20X6: * A.$90,000 write-down of equipment for which management had determined the carrying value was not recoverable * A.$50,000 loss recognized on a long-term contract due to an increase in estimated costs to complete the contract * A $75,000 write-off of obsolete inventory In its 20X6 income statement, how should Strand report the losses? * A. Allof the losses are part of income from continuing operations. If unusual or infrequent, each one is presented separately in the income statement or disclosed in the notes to the financial statements. + B. If unusual and infrequent, the losses are reported separately from income from continuing operations. * C. The $90,000 write-down of equipment is reported as a non-operating impairment loss, the $50,000 loss on a long-term contract is reported as an operating loss, and the $75,000 write-off of obsolete inventory is reported as an unusual loss. * D. All of the losses are reported as losses from discontinued operations. This question is answered correctly on the first attempt by 43% of students. Correct Answer Explanation for A: All of the losses are part of income from continuing operations, since the question does not say that any of the losses pertain to discontinued operations. No information is given as to whether the losses are unusual or infrequent. However, if management considers any of the losses to be unusual or infrequent, those losses would generally be reported as non-operating losses within income from continuing operations. if any of them are unusual or infrequent and material, they should be presented as separate line items or, alternatively, disclosed in the notes to the financial statements. None of the losses can be reported separately from income from continuing operations. 99, Question ID: CMA1 M1 Q80 (Topic: Internal Control Introduction and Components) hitps:twwchockintemational.comimystudies/eme-part- -mack-exam-meqs! 2erre01722, 11:20 AM COMA Pat + Mack Exam COS - HOCK intemational Which of the following is not a preventive control? + A. Customer numbers are verified by the computer before a sales order is accepted to ensure the sales order is from an established company. + B. The accounts receivable subsidiary ledger is reconciled against the general ledger accounts receivable control total. * C, Duties are segregated to make it difficult for an employee to both perpetrate and conceal a fraud. * D. Following payment, all invoices are marked “Paid” to prevent duplicate payment This question is answered correctly on the first attempt by 74% of students. Correct Answer Explanation for B: A preventive control is one that prevents an error from occurring. Reconciling the accounts receivable subsidiary ledger to the general ledger accounts receivable control total does not prevent an error from occurring. It is a detective control because it can help to detect an error after the error has occurred 100. Question ID: CMA1 M1 Q82 (Topic: Theory of Constraints) ZYX Company manufactures shirts. ZYX's production costs are as follows: Direct Materials $7.00 per unit Direct Labor $2.00 per unit Variable Overhead $1.00 per unit Fixed Overhead $0.50 per unit ZYX has an opportunity to accept an order for 200,000 units. ZYX has excess capacity and could produce this order without increasing its production personnel or equipment. The customer has offered $8.50 per unit. ZYX is trying to determine whether it should accept the order, and to do that, it has calculated what its throughput contribution would be for this order. The throughput contribution it has calculated is + A, $(0.50) per unit. * B, $(100,000). + C. $300,000. + D. $100,000. This question is answered correctly on the first attempt by 75% of students. Correct Answer Explanation for C: hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 30vr2sora, 1:20 am COMA Pat + Mack Exam COS - HOCK intemational The throughput contribution margin per unit is the sale price minus the direct materials cost only: $8.50 ~ $7.00 = $1.50 per unit. For an order of 200,000 units, the throughput contribution is $1.50 x 200,000, or $300,000. 1. Question ID: CMA1 M1 Q87 (Topic: Safeguarding Controls) Which of the following control procedures may prevent the failure to bill customers for some shipments? + A. Each sales invoice should be supported by a shipping document. * B. Sales journal entries should be reconciled to daily sales summaries. * C. Each sales order should be approved by authorized personnel + D. Each shipment should be supported by a pre-numbered sales invoice that is accounted for. This question is answered correctly on the first attempt by 68% of students. Correct Answer Explanation for D: Nothing should be shipped unless a sales invoice has first been prepared to support the shipment. If this is not done, shipments could be sent out without issuing an invoice 2. Question ID: CMA1 M1 Q02 (Topic: Learning Curves) Reeves Inc. has developed a new production process to manufacture its product. The new process is complex and requires a high degree of technical skill. However, management believes there is a good opportunity for the employees to improve as they become more familiar with the production process. The production of the first unit requires 100 direct labor hours, If a 70% learning curve is used, the cumulative direct labor hours required to produce a total of eight units would be * A. 560 hours. * B. 196 hours. + C.274 hours. + D. 392 hours This question is answered correctly on the first attempt by 84% of students. Correct Answer Explanation for C: Each time the total number of units produced doubles, the average time required for each unit will be 70% of the average time required for each unit previously when the cumulative average-time learning model is being used. When 8 units have been hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! anre01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal produced, the total number of units produced will have doubled 3 times (2, 4, 8) Since the first unit produced required 100 hours, the formula to calculate the total hours required to produce 8 units is: 100 * (2 x 0.70)° = 274.4 hours. 6. Question ID: CMA1 M1 Q09 (Topic: Budgeting Concepts) ‘Smith & Howard, a manufacturing company, recently changed its budget preparation procedures from a participative (bottom-up) to an authoritarian (top-down) approach. Consider the five possible outcomes below. |. The efforts made by mid-level managers to achieve budget goals will likely increase II, The amount of slack present in the resulting operating budgets will decrease. Ill. The resulting budgets will have more of a tendency to reflect overall company goals rather than individual divisions’ and departmental goals. IV. The company will probably experience a decrease in the cost associated with budget development. V. The number of budget iterations throughout the organizational structure will increase. Which of the above outcomes will Smith & Howard most likely experience from the change in its approach to budget preparation? + A.1, Iland V only. + B, I, ll and IV only, * C. 1, Ill, and IV only. + DA, Ul, Ill, IV and V, This question is answered correctly on the first attempt by 67% of students. Correct Answer Explanation for B: A top-down approach in budget preparation is characterized by * reducing budgetary slack (II), * reflecting more the overall organization's goals because senior management will have better control over the process and more emphasis will be placed on the achievement of top management's strategic plans (III), and * speeding up the budgeting process because fewer iterations will be required since authoritative budget development eliminates the need to meet with lower- level managers to negotiate their budgets, which reduces the development cost (WV). hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! are01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international However, mid-level managers will be less motivated to achieve the budget goals, since they will not see the budget as “theirs.” 7, Question ID: CMA1 M1 Q53 (Topic: Inventory Tracking Methods) The following items were included in Opal Co.'s inventory account at December 31, 20X5: Merchandise out on consignment, at selling price (40% of the selling price is markup) $40,000 Goods purchased, in transit, shipped FOB shipping point, at purchase price 36,000 Goods held on consignment by Opal 27,000 By what amount should Opa''s inventory account at December 31, 20X5 be reduced for presentation on the December 31 financial statements? + A. $51,000 + B. $67,000 + C. $43,000. + D. $103,000. This question is answered correctly on the first attempt by 27% of students Correct Answer Explanation for C: The goods that are out on consignment should be included in Opal's inventory, but at their purchase price, not at their selling price. Since the markup is $16,000 ($40,000 % 0,40), the inventory balance needs to be reduced by $16,000 in order to report the consigned goods at cost. The $36,000 in goods that were purchased FOB shipping point but were still in transit should be included in inventory on the December 31 balance sheet, as title passed when the goods were delivered to the courier. Since they are already included, no adjustment is needed. The $27,000 in goods that are held on consignment by Opal should not be included in Opal's inventory because goods held on consignment still belong to the other company. Thus, in total, Opal should reduce its inventory balance by the $16,000 markup on the merchandise out on consignment and the $27,000 in goods held on consignment, or by $43,000. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 3317201722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK international 11. Question ID: CMA1 M1 Q19 (Topic: Budgeting Calculation Questions) For the month of November, Renewable Paper Products has budgeted sales of letter-sized paper at 40,000 cases at a sales price of $20 per case and legal-sized paper at 10,000 cases at a sales price of $25 per case. Sales personnel receive a salary plus a 5% commission on all letter-sized paper sold if the group meets its monthly letter-sized paper revenue quota of $500,000 and an 8% commission on all legal-sized paper if the group meets its monthly legal-sized paper revenue quota of $300,000. The budgeted sales commissions for the month of November total + A. $60,000 + B. $15,000. + C. $40,000. + D. $52,500, This question is answered correctly on the first attempt by 68% of students. Correct Answer Explanation for C: Only sales of letter-sized paper will generate commissions in November. Sales of legal-sized paper are budgeted at only $250,000 (10,000 cases at $25 per case), which is below the $300,000 sales revenue quota to earn sales commissions on legal-sized paper. Total sales of letter-sized paper are budgeted at 40,000 cases at a sales price of $20, or $800,000, which is greater than the sales revenue quota of $500,000 required for commissions on letter-sized paper. Since commissions are earned on all the sales of a product if the group meets its revenue quota for that product, the budgeted commission expense for November is $800,000 * 5% = $40,000. 13. Question ID: CMA1 M1 Q26 (Topic: Accounting for Income Taxes) A deferred tax liability would result from * A taking the dividends received deduction on an income tax return before it is reflected in financial income. + B. using straight-line depreciation for financial income purposes and an accelerated depreciation method for tax purposes. * C. accruing estimated warranty expenses for financial income purposes but not reporting them as expenses for tax purposes until they are paid * D. capital losses recorded in financial income that are not deductible for tax purposes This question is answered correctly on the first attempt by 64% of students. Correct Answer Explanation for B: hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! sara01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal A deferred tax liability would result from using straight-line depreciation for financial income purposes and an accelerated depreciation method for tax purposes because depreciation expense in the early years of the fixed asset's life would be greater for tax purposes than for financial income purposes. This would result in lower net income on the tax return than on the income statement in the early years of the asset's useful life and a lower amount of tax due in the early years of the asset's life than the amount calculated for financial income purposes. Therefore, the company would have a liability for additional taxes to be paid in the later years of the asset's life, As the fixed asset nears the end of its life, depreciation on the tax return would be lower than the amount calculated under straight-line depreciation for financial income, and thus taxable net income on the tax return would be higher than net income on the GAAP income statement. Therefore, the tax due in the later years of the asset's life would be greater than the amount calculated for those years for financial income, and so the deferred tax liability would reverse and be eliminated. 17. Question ID: CMA1 M1 Q22 (Topic: Regression Analysis) The results of a time series regression analysis of historical sales for XYZ Company for 10 years are as follows: Y-intercept 2203.5 Variable coefficient 94.97576 R? 0.89844 R 0.94786 Standard error 102.54411 The equation of the regression line is + A. 9 = 2203.5x + 94.97576 + B. 9 = 2203.5 + 94.97576x + 102.54411 2203.5 + 94.97576x 102.54411 + 94.786x This question is answered correctly on the first attempt by 65% of students. Correct Answer Explanation for C: A simple regression equation takes the form 9 = a + bx. The variable coefficient is 94.97576, and the variable coefficient is next to the x in the regression formula. The y-intercept, or 2203.5, is the constant coefficient that stands by itself. The term on the left side of the equals sign in the regression equation is J, hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 3517201722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal or “y-hat” because the result of the regression equation is the value of y on the regression line, or the predicted value of y, at any given value of x. Thus, the regression equation is ¥ = 2203.5 + 94.97576x. The standard error of the estimate, or S (the 102.54411 included in the answer choice 7 = 2203.5 + 94.97576x + 102.54411), is not a part of the equation of the regression line. The standard error of the estimate represents the average distance that the actual, observed values fall from the regression line. The standard error of the estimate can give an indication of how well a linear regression works. 19, Question ID: CMA1 M1 Q40 (Topic: Manufacturing Input Variances ~- Direct Materials) The standard direct material cost per unit for a product is calculated as follows: 10.5 liters at $2.50 per liter. Last month the actual price paid for 12,000 liters of material used was 4% above standard and the direct material usage variance was $1,815. favorable. No inventory of material is held. What was the direct material price variance for last month? * A. $1,200 unfavorable. * B. $1,200 favorable. + C. $1,212 unfavorable. + D. $1,260. This question is answered correctly on the first attempt by 73% of students. Correct Answer Explanation for A: The price variance formula is (AP - SP) x AQ The actual price was $2.50 x 1.04 = $2.60. The standard price was $2.50. The actual quantity was 12,000 Price variance = (2.60 - 2.50) x 12,000 = $1,200 Unfavorable. 21, Question ID: CMA1 M1 Q79 (Topic: Internal Control Introduction and Components) The primary responsibility for maintaining a system of intemal controls rests with the company's « A. management. * B. internal auditors. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 3607201722, 11:20 AM COMA Pat + Mack Exam COS - HOCK intemational + C. lawyers. + D. accountants. This question is answered correctly on the first attempt by 87% of students. Correct Answer Explanation for A: Though every member of an organization has a role in the functioning of internal controls, the primary responsibility for the maintenance of the internal control system rests with management. 22. Question ID: CMA1 M1 Q95 (Topic: Regression Analysis) An example of a supervised learning algorithm is + A. simple linear regression. + B. Structured Query Language (SQL). * C. clustering * D. visualization. This question is answered correctly on the first attempt by 45% of students. Correct Answer Explanation for A: ‘Simple linear regression is an example of a basic supervised learning algorithm, The x variable (the independent variable) serves as the predictor variable. The y variable (the dependent variable) is the outcome variable in the training and test data where the y value for each x value is known. The regression line is drawn so that it minimizes the sum of the squared deviations between the actual y values and the values predicted by the regression line. Then, the regression line is used to predict the y values that will result for new values of x for which the y values are unknown, 23. Question ID: CMA1 M1 Q63 (Topic: Overhead Allocation) Plymouth Company has two departments: Machining and Assembly. The following estimates were made for the first quarter of 20X7: Machining Assembly Support costs $440,000 $1,360,000 Direct labor hours 45,000 80,000 Number of machine hours 25,000 20,000 A single predetermined cost driver rate based on total plant direct labor hours is + A. $17 per direct labor hour. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 37m01722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal * B. $40 per direct labor hour. + C, $14.40 per direct labor hour, + D. $9.78 per direct labor hour. This question is answered correctly on the first attempt by 78% of students. Correct Answer Explanation for C: A single predetermined cost driver rate is the combined rate for both divisions, called a "plant-wide rate.” Hence it would be the total support costs of the two divisions divided by the total number of direct labor hours: ($440,000 + $1,360,000) + (45,000 + 80,000) = $14.40 per direct labor hour. 24. Question ID: CMA1 M1 Q64 (Topic: Overhead Allocation) Plymouth Company has two departments: Machining and Assembly. The following estimates were made for the first quarter of 20X7: Machining Assembly Support costs $440,000 $1,360,000 Direct labor hours 45,000 80,000 Number of machine hours 25,000 20,000 A predetermined cost driver rate for the Machining department based on the number of machine hours in that department is + A.$17 per machine hour. + B, $17.60 per machine hour. + C, $68 per machine hour. + D. $40 per machine hour. This question is answered correctly on the first attempt by 83% of students. Correct Answer Explanation for B: A predetermined cost driver rate for the Machining department will be the budgeted support costs of the department divided by the budgeted machine hours for the same department: $440,000 + 25,000 = $17.60 per machine hour. 25. Question ID: CMA1 M1 Q43 (Topic: Integrated Reporting) The stakeholders of a local, family-owned gutter installation company include all of the following except + A. employees of the company. hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 3817201722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal * B. suppliers to the company, + C. customers of the company. + D, residents of a neighboring state. This question is answered correctly on the first attempt by 82% of students. Correct Answer Explanation for D: Stakeholders are people or groups that can reasonably be expected to be significantly affected by an organization's business activities, outputs or outcomes, or whose actions can reasonably be expected to significantly affect the ability of the organization to create value over time. Residents of a neighboring state would not be affected by the activities of a business serving a totally different community, and the actions of the out-of-state residents would not significantly affect the ability of the business to create value over time. However, customers, suppliers, and employees would be significantly affected by the company's business activities, and their actions can reasonably be expected to significantly affect the ability of the business to create value over time, 27. Question ID: CIA 1190 IV.15 (Topic: Budgeting Calculation Questions) ‘A company has budgeted sales of 24,000 finished units for the forthcoming 6-month period, It takes 4 pounds of direct materials to make one finished unit. Given the following Direct Materials Finished Units __ (pounds) _ Beginning inventory 14,000 44,000 Target ending inventory 12,000 48,000 How many pounds of direct materials should be budgeted for purchase during the 6- month period? * A. 48,000 + B. 88,000 * C, 100,000 + D. 92,000 This question is answered correctly on the first attempt by 52% of students. Correct Answer Explanation for D: First, we need to determine the production requirements for the given period. The formula is: hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 3017201722, 11:20 AM (CMA Part 1 Mock Exam MCQs - HOCK inleratonal Units in Beginning Inventory + Units Manufactured - Units Sold = Units in Ending Inventory. Let X stand for Units Manufactured: 14,000 + X - 24,000 = 12,000 X= 22,000 Next, we take those 22,000 units to be produced and use it to calculate the number of pounds of direct materials that will be needed for production. 4 units (pounds) of direct materials are needed for each unit of finished goods produced. Thus, we will need 22,000 x 4, or 88,000 pounds of direct materials. Now, we use that in the direct materials inventory formula to calculate the number of units of direct materials that will need to be purchased. Units in Beginning Inventory + Net Units Purchased ~ Units Used in Production = Units in Ending Inventory Let X stand for Units Purchased: 44,000 + X - 88,000 = 48,000 X= 92,000 28. Question ID: ICMA 10.P1.105 (Topic: Manufacturing Input Variances — Direct Labor) Lee Manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included the following information. Direct labor (10,000 hours at $15 per hour) $150,000 Variable overhead 30,000 Fixed overhead 80,000 During May, 6,000 units were produced and the direct labor efficiency variance was $1,500 unfavorable. Based on this information, the actual number of direct labor hours used in May was + A. 12,100 hours. * B. 9,900 hours. * C. 10,100 hours. + D. 11,900 hours. This question is answered correctly on the first attempt by 57% of students. Correct Answer Explanation for A: hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! 4orr2sora, 1:20 am COMA Pat + Mack Exam COS - HOCK intemational The formula for the quantity or efficiency variance is (AQ — SQ) x SP. The standard amount of direct labor per unit is 2 hours (10,000 hours planned divided by planned production of §,000 units). The company actually produced 6,000 units, Therefore, the standard quantity of direct labor for the actual production was 6,000 x 2, or 12,000 hours, The standard price was $15 per hour. We know what the variance was, but we do not know what the actual quantity of direct labor used was. We can use the variance formula and solve for AQ. (AQ— SQ) « SP = Quantity/Direct Labor Efficiency variance (AQ — 12,000) x 15 = 1,500 Solving for AQ: 15AQ — 180,000 = 1,500 15AQ = 181,500 AQ = 12,100 29. Question ID: CMA1 M1 Q04 (Topic: Return on Investment and Residual Income) Perma Corporation's management has determined that the company’s required rate of return on new projects is 8%. The Diddle Division, a highly profitable division, has a current Return on Investment of 13%, The Diddle Division's manager is considering a new project that would involve manufacturing frazzles. The project is expected to require an investment of $1 million and to have an annual Return on Investment of 10%. What is the project's projected Residual Income? + A $0. + B. $(30,000). + C, $20,000, + D. $100,000. This question is answered correctly on the first attempt by 61% of students. Correct Answer Explanation for C: Residual Income is operating income less (assets * required rate of return). Since the projected ROI for the project is 10% and the assets invested in the project equal $1,000,000, the project's projected annual operating income must be $100,000. The company's required rate of return is 8% per year. Thus, the project's projected Residual Income is $100,000 - ($1,000,000 x 0.08), which equals $20,000. 30. Question ID: CMA1 M1 Q06 (Topic: System General Controls) hitps:twwhockintemational.comimystudies/eme-par- -mack-exam-meqs! are