Free IMA CMA Part 1 (Financial Planning, Performance, and Analytics) Planning, Budgeting, and Forecasting Practice Questions
Planning, Budgeting, and Forecasting on CMA Part 1 covers strategic planning frameworks (SWOT, Porter five forces), budget methodologies (operating, financial, master, flexible, zero-based, activity-based), forecasting techniques (regression, time-series, expected value), and projecting financial statements. This is the most heavily weighted Part 1 section at 20%.
Sample Questions
Question 1
Easy
Zero-based budgeting requires that:
Solution
C is correct. Zero-based budgeting (ZBB) starts each budget cycle from a zero base. Every proposed expenditure, including those funded in prior periods, must be justified from scratch in terms of cost and benefit. This contrasts with incremental budgeting, which uses the prior period's budget as the baseline.
Question 2
Medium
Activity-based budgeting (ABB) differs from traditional functional (line-item) budgeting primarily because ABB:
Solution
D is correct. Activity-based budgeting starts by forecasting the level of outputs, then determines the quantity of each activity (setups, inspections, material moves, customer orders, and so on) needed to produce those outputs, and finally costs each activity using its cost driver rate. Resource requirements are therefore built up from the activities consumed, rather than from prior-period departmental line items adjusted for inflation.
Question 3
Hard
Delta Inc. prepared a master budget for 10,000 units at a selling price of $50, variable cost of $30 per unit, and fixed costs of $80,000. Actual results were 11,000 units sold at $48 per unit, variable cost of $32 per unit, and fixed costs of $85,000. What is the flexible budget variance for operating income?
Solution
D is correct. Build the flexible budget at the actual volume of 11,000 units using budgeted per-unit data: revenue 11,000 × $50 = $550{,}000; variable cost 11,000 × $30 = $330{,}000; fixed cost $80{,}000; flexible-budget operating income = $140{,}000. Actual operating income = (11,000 × $48) - (11,000 × $32) - $85{,}000 = $528{,}000 - $352{,}000 - $85{,}000 = $91{,}000. Flexible budget variance = actual - flexible = $91{,}000 - $140{,}000 = $49{,}000 unfavorable.