Gleim CMA Test Prep: Part 1: Financial Planning, Performance, and Control

(4 questions)

[1] Gleim #: 7.1.1 -- Source: CMA 1296 3-23

The purpose of identifying manufacturing variances and assigning their responsibility to a

person/department should be to

A. Use the knowledge about the variances to promote learning and continuous
improvement in the manufacturing operations.
B. Trace the variances to finished goods so that the inventory can be properly valued at
year-end.
C. Determine the proper cost of the products produced so that selling prices can be
adjusted accordingly.
D. Pinpoint fault for operating problems in the organization.

Answer (A) is correct. The purpose of identifying and assigning responsibility for
variances is to determine who is likely to have information that will enable
management to find solutions. The constructive approach is to promote learning and
continuous improvement in manufacturing operations, not to assign blame.
However, information about variances may be useful in evaluating managers’
performance.
Answer (B) is incorrect. Depending on a cost-benefit determination, variances
either are adjustments of cost of goods sold or are allocated among the inventory
accounts and cost of goods sold. Moreover, the accounting issues are distinct from
supervisory considerations.
Answer (C) is incorrect. Selling prices are based on much more than the cost of
production; for instance, competitive pressure is also a consideration.
Answer (D) is incorrect. By itself, pinpointing fault is not an appropriate objective.
Continuous improvement is the ultimate objective.

[2] Gleim #: 7.1.2 -- Source: CMA 683 4-5

A difference between standard costs used for cost control and the budgeted costs of the
same manufacturing effort can exist because

A. Standard costs represent what costs should be, whereas budgeted costs are expected
actual costs.
B. Budgeted costs are historical costs, whereas standard costs are based on engineering
studies.
C. Budgeted costs include some slack, whereas standard costs do not.
D. Standard costs include some slack, whereas budgeted costs do not.

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 Gleim CMA Test Prep: Part 1: Financial Planning, Performance, and Control
(4 questions)

Answer (A) is correct. In the long run, these costs should be the same. In the short run,
however, they may differ because standard costs represent what costs should be, whereas
budgeted costs are expected actual costs. Budgeted costs may vary widely from standard
costs in certain months, but, for an annual budget period, the amounts should be similar.
Answer (B) is incorrect. Standard costs are not necessarily determined by engineering
studies.
Answer (C) is incorrect. Standard costs are usually based on currently attainable
standards applicable when a process is under control. They are set without regard to
variances or slack.
Answer (D) is incorrect. Budgeted costs include expected deviations from the standards.

[3] Gleim #: 7.1.3 -- Source: Publisher

In a responsibility accounting system, a feedback report that focuses on the difference

between budgeted amounts and actual amounts is an example of

A. Management by exception.
B. Assessing blame.
C. Granting rewards to successful managers.
D. Ignoring other variables for which the budgeted goals were met.

Answer (A) is correct. A responsibility accounting system should have certain

controls that provide for feedback reports indicating deviations from expectations.
Management may then focus on those deviations (exceptions) for either
reinforcement or correction.
Answer (B) is incorrect. The responsibility accounting system should not be used
exclusively to assess blame.
Answer (C) is incorrect. The responsibility accounting system should not be used
exclusively to give rewards.
Answer (D) is incorrect. Feedback reports concentrate on deviations, but not to the
total exclusion of other budgeted variables.

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 Gleim CMA Test Prep: Part 1: Financial Planning, Performance, and Control
(4 questions)

[6] Gleim #: 7.1.6 -- Source: CMA 0408 2-230

Use of a standard cost system can include all of the following advantages except that it

A. Assists in performance evaluation.

B. Emphasizes qualitative characteristics.
C. Permits development of flexible budgeting.
D. Allows employees to better understand what is expected of them.

Answer (A) is incorrect. Standard costing assists in performance evaluation.

Answer (B) is correct. A standard cost system is fully focused on quantitative
factors, not qualitative characteristics.
Answer (C) is incorrect. Standard cost permits the development of flexible
budgeting.
Answer (D) is incorrect. Standard costing allows employees to better understand
what is expected of them.

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