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Created on May 08, 2026 By

CA Sonal Saboo

CMA Inter

Inter Management Accounting PN-12 Quiz 7

This quiz is based on the CMA Management Accounting paper.
Each question is multiple-choice with 4 options, and only 1 option is correct.
Attempt the quiz to test your understanding of CMA MA concepts.

1 / 25

Category: Management Accounting PN-12

MI Ltd. has earned a net profit of ₹15 lakhs after Tax at 30%. Interest cost charged by the financial institutions was ₹10 Lakhs. The Invested capital is ₹ 95 Lakhs of which 55% is debt. The company maintains a weighted average cost of capital of 13%.Compute the Operating Income.

a. ₹ 15 lakhs

b. ₹ 21.43 lakhs

c. ₹ 10 lakhs

d. ₹ 31.43 lakhs

2 / 25

Category: Management Accounting PN-12

The four Perspectives of the Balanced Scorecard are _____________________.

a. 1. Operational Perspective,2. Customers Perspective, 3. Internal business process Perspective and 4. Learning & Growth Perspectives.

b. 1. Financial Perspective, 2. Sellers Perspective, 3. Internal business process Perspective and 4. Learning & Growth Perspectives.

c. 1. Financial Perspective,2. Customers Perspective, 3. Internal business process Perspective and 4. Learning & Growth Perspectives.

d. 1. Financial Perspective,2. Customers Perspective, 3. External process Perspective and 4. Learning & Growth Perspectives.

3 / 25

Category: Management Accounting PN-12

__________________________ can be used: a. To calculate the incremental cost of making extra units of a particular products,b. To set standards for labour,c. To prepare realistic production budgets and to report labour cost variances, andd. To quote contact price.

a. Learning curve theory

b. Return on investment

c. Du Pont ROE

d. Economic Value Added

4 / 25

Category: Management Accounting PN-12

The theory of learning curves will only hold if which of the following conditions apply?

a. The task must be repetitive

b. Production must be at an early stage so that there is room for improvement

c. There is inconsistency in the workforce

d. Both 1 and 2

5 / 25

Category: Management Accounting PN-12

For EVA there 3 responsibility centres, which are

a. Cost centre

b. Profit centre

c. Investment centre

d. All of these

6 / 25

Category: Management Accounting PN-12

A person made a Capital Investment of ₹2,00,000 in a company. Operating profit, after taxes, is ₹28,000. The opportunity cost of that investment is 10%. Calculate EVA.

a. 20,000

b. ₹ 2,800

c. ₹ 8,000

d. ₹ 17,200

7 / 25

Category: Management Accounting PN-12

An investment centre has net assets of ₹8,00,000, and made profits before interest and tax of ₹1,60,000. The notional cost of capital is 12%.Calculate and comment on the RI (Residual Income) for the period.

a. ₹ 1,60,000

b. ₹ 96,000

c. ₹ 64,000

d. ₹ 2,56,000

8 / 25

Category: Management Accounting PN-12

Acme, a division of Ace Manufacturing, has assets of ₹2,25,000 and an operating income of ₹55,000. What is the division’s ROI?

a. 24.44%

b. 23%

c. 25%

d. 50%

9 / 25

Category: Management Accounting PN-12

The main advantages of RI is/are _____________________.

a. It avoids suboptimal decisions as investments are not rejected merely because they lower the divisional manger’s ROI.

b. It maximizes growth of the company and increases shareholders’ wealth by accepting opportunities whichearn a rate of return in excess of the cost of capital.

c. The cost of capital charge on divisional investments ensures that divisional managers are aware of theopportunity cost of funds.

d. All of these

10 / 25

Category: Management Accounting PN-12

RI (Residual Income) =

a. Divisional profit — (Percentage of change in Sales × Divisional investment)

b. Divisional profit — (Percent capital charge × Total investment)

c. Divisional profit — (Percent capital charge × Divisional investment)

d. Total profit — (Percent capital charge × Divisional investment)

11 / 25

Category: Management Accounting PN-12

Return on investment (ROI) is

a. (Profit before tax ÷ Operations management capital employed) × 100

b. (Profit before interest and tax ÷ Total capital employed) × 100

c. (ROE ÷ Operations management capital employed) × 100

d. (Profit before interest and tax ÷ Operations management capital employed) × 100

12 / 25

Category: Management Accounting PN-12

____________ expresses divisional profit as a percentage of the assets employed in the division.

a. ROI

b. EPS

c. ROCE

d. EBITDA

13 / 25

Category: Management Accounting PN-12

Du Pont ROE =

a. Margin on Sales × Asset Turnover × Equity Multiplier

b. Margin of Safety × Asset Turnover × Equity Multiplier

c. Margin on Sales × Inventory Turnover × Equity Multiplier

d. Margin on Sales × Asset Turnover × Debt Multiplier

14 / 25

Category: Management Accounting PN-12

According to Du Pont Analysis a company can increase its Return on Equity if it __________________________.

a. Generates a high Net Profit Margin

b. Effectively uses its assets so as to generate more sales

c. Has a high Financial Leverage

d. All of these

15 / 25

Category: Management Accounting PN-12

Financial leverage means ________________________________.

a. a very basic profitability ratio

b. Total Asset Turnover (Turnover ÷ Total Assets)

c. the use of debt to acquire additional assets or fund projects

d. None of these

16 / 25

Category: Management Accounting PN-12

Asset usage performance means ___________________

a. a very basic profitability ratio

b. Total Asset Turnover (Turnover ÷ Total Assets)

c. the use of debt to acquire additional assets or fund projects

d. None of these

17 / 25

Category: Management Accounting PN-12

According to DuPont methodology, three main financial parameters that drive Return on Equity (ROE) are ______________________________.

a. (1) Employee performance,(2) Asset usage performance, and(3) Financial leverage.

b. (1) Operating performance,(2) Asset usage performance, and(3) Financial leverage.

c. (1) Operating performance,(2) Inventory usage performance, and(3) Financial leverage.

d. (1) Operating performance,(2) Asset usage performance, and(3) Operating leverage.

18 / 25

Category: Management Accounting PN-12

Return on Equity =

a. Net Profit Margin × Asset Turnover Ratio × Financial Leverage

b. Gross Profit Margin × Asset Turnover Ratio × Financial Leverage

c. Net Profit Margin × Inventory Turnover Ratio × Financial Leverage

d. Net Profit Margin × Asset Turnover Ratio × Operating Leverage

19 / 25

Category: Management Accounting PN-12

Which of the following is/are not benefit/s of Decentralization ?

a. Greater awareness of local problems

b. Allows managerial performance to be comparatively evaluated

c. Creates personnel difficulties upon introduction, especially if managers are unwilling to delegate effectively

d. Develops skill level of junior managers

20 / 25

Category: Management Accounting PN-12

Major disadvantages of Decentralization are _________________.

a. Can result in a lack of goal congruence or sub optimization by sub-unit managers

b. Requires more effective communication abilities because decision making is removed from the home office

c. Helps top management recognizes and develop managerial talent

d. Both 1 and 2

21 / 25

Category: Management Accounting PN-12

A company usually determines the appropriate degree of decentralization based on a combination of the ______________________________.

a. Managers’ personal characteristics

b. Nature of decisions required for organizational growth

c. Types of organizational activities in which the company is engaged

d. All of these

22 / 25

Category: Management Accounting PN-12

The scare factors is also known as:

a. Key factor

b. Abnormal factor

c. Linking factor

d. None of the above

23 / 25

Category: Management Accounting PN-12

R&D budget and Capital expenditure budget are examples of:

a. Short-term budget

b. Current budget

c. Long-term budget

d. None of the above

24 / 25

Category: Management Accounting PN-12

Plant utilization budget and Manufacturing overhead budgets are types of:

a. Production budget

b. Sales budget

c. Cost budget

d. None of the above

25 / 25

Category: Management Accounting PN-12

The process of budgeting helps in the control of:

a. Cost of production

b. Liquidity

c. Capital Expenditure

d. All of the above

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Inter PN-12 Management Accounting Quiz 7

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