Free IMA CMA Part 2 (Strategic Financial Management) Business Decision Analysis Practice Questions
Decision Analysis on CMA Part 2 covers cost-volume-profit analysis and relevant costing for short-term decisions (make-or-buy, special orders, drop-or-keep, sell-or-process-further), pricing methods, and marginal analysis. This is the most heavily weighted Part 2 section at 25%.
Sample Questions
Question 1
Easy
Larkspur Inc. sells a single product for $60 per unit with variable cost of $36 per unit. What is the contribution margin ratio?
Solution
A is correct. Contribution margin per unit = $60 − $36 = $24. Contribution margin ratio = $24 ÷ $60 = 0.40, or 40%.
Question 2
Medium
Glenbrook Industries reported sales of $800,000, fixed costs of $240,000, and a contribution margin ratio of 40%. What is Glenbrook's margin of safety in dollar terms?
Solution
C is correct. Breakeven sales = Fixed costs / CM ratio = $240,000 / 0.40 = $600,000. Margin of safety = Actual sales − Breakeven sales = $800,000 − $600,000 = $200,000.
Question 3
Hard
Linwood Components is launching Product Z. Marketing projects annual sales of 20,000 units at $60 per unit. Linwood requires a 15% return on the $400,000 investment in the product line. Engineering currently estimates the unit cost at $62. Using target costing, by how much must Linwood reduce its per-unit cost to achieve the required return?
Solution
C is correct. Required profit = 0.15 × $400,000 = $60,000. Total target revenue = 20,000 × $60 = $1,200,000. Allowed total cost = $1,200,000 − $60,000 = $1,140,000. Target unit cost = $1,140,000 / 20,000 = $57. Required reduction = $62 − $57 = $5.