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Created on May 11, 2026 By

CA Sonal Saboo

CMA Inter

Inter Management Accounting PN-12 Quiz 12

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 / 28

Category: Management Accounting PN-12

Which is not properly matched?

a. Cash budget – inflows/outflows

b. Capital budget – fixed asset plans

c. Master budget – overall plan

d. Flexible budget – fixed for all activity

2 / 28

Category: Management Accounting PN-12

In zero-based budgeting, units must

a. accept previous budgets

b. justify all expenditure

c. prepare only supplements

d. ignore activity levels

3 / 28

Category: Management Accounting PN-12

Forecasting is different from budgeting in that

a. forecasting is binding, while budgeting is not

b. budgeting is essentially prediction, while forecasting is commitment

c. forecasting is estimation of future trends, budgeting is a plan/commitment based on that estimate

d. forecasting is short term and budgeting is always long term

4 / 28

Category: Management Accounting PN-12

The ‘Expected Value of Perfect Information (EVPI)’ represents:

a. The cost of obtaining perfect information

b. The maximum amount a decision maker would pay to eliminate uncertainty

c. The average payoff

d. The minimum payoff

5 / 28

Category: Management Accounting PN-12

Sensitivity analysis in decision theory helps to:

a. Evaluate how changes in probabilities or payoffs affect the decision

b. Eliminate bad alternatives

c. Predict exact future outcomes

d. Decide the cost of alternatives

6 / 28

Category: Management Accounting PN-12

A decision tree is useful because it:

a. Simplifies complex decisions by structuring alternatives and outcomes sequentially

b. Ignores probabilities

c. Always leads to optimistic decisions

d. Is used only for investment decisions

7 / 28

Category: Management Accounting PN-12

The Laplace criterion assumes:

a. Decision maker is pessimistic

b. Decision maker assigns equal probabilities to all states of nature

c. Probabilities are known precisely

d. Focus only on worst outcomes

8 / 28

Category: Management Accounting PN-12

In decision theory, a ‘payoff table’ shows:

a. Probabilities of states of nature

b. Outcomes for each alternative under each state of nature

c. Only the best outcome

d. Budgeted costs and revenues

9 / 28

Category: Management Accounting PN-12

Which of the following decision rules is suitable when probabilities of states of nature are unknown and the decision maker is neutral?

a. Maximin

b. Maximax

c. Laplace (Equal probability)

d. Minimax regret

10 / 28

Category: Management Accounting PN-12

Expected monetary value (EMV) is calculated by:

a. Multiplying the payoff by the probability and summing for all states

b. Taking the maximum payoff

c. Subtracting costs from revenues

d. Dividing total payoff by the number of alternatives

11 / 28

Category: Management Accounting PN-12

The minimax regret criterion minimizes:

a. The maximum payoff

b. The maximum loss relative to the best payoff in each state

c. The expected value

d. The minimum loss

12 / 28

Category: Management Accounting PN-12

The maximax criterion is also known as:

a. Optimistic criterion

b. Pessimistic criterion

c. Minimax regret

d. Laplace criterion

13 / 28

Category: Management Accounting PN-12

Which decision-making criterion assumes the decision maker is extremely risk-averse?

a. Maximax

b. Maximin

c. Minimax regret

d. Expected value

14 / 28

Category: Management Accounting PN-12

Which responsibility center allows managers to make decisions on assets employed as well as profits?

a. Cost center

b. Profit center

c. Investment center

d. Expense center

15 / 28

Category: Management Accounting PN-12

Profit center managers are responsible for:

a. Costs only

b. Revenues only

c. Both revenues and costs

d. Investment decisions

16 / 28

Category: Management Accounting PN-12

In responsibility accounting, controllable costs are:

a. Costs over which a manager has direct influence

b. Fixed costs only

c. Sunk costs

d. Costs that cannot be controlled

17 / 28

Category: Management Accounting PN-12

Which of the following is NOT true about responsibility accounting?

a. Encourages accountability

b. Helps in performance evaluation

c. Eliminates all cost variances

d. Facilitates decentralization

18 / 28

Category: Management Accounting PN-12

Which of the following is NOT a responsibility center?

a. Cost center

b. Profit center

c. Investment center

d. Tax center

19 / 28

Category: Management Accounting PN-12

Division Q’s ROI is 18%. Cost of capital is 12%. Should Division Q accept a project with an ROI of 14%?

a. Yes, because project ROI > cost of capital

b. No, because project ROI < divisional ROI

c. Yes, if project is short term

d. No, because project ROI < 20%

20 / 28

Category: Management Accounting PN-12

Division D’s net operating profit after tax (NOPAT) is ₹12 lakhs. Capital charge @ 18% on ₹50 lakhs capital employed. Calculate Economic Value Added (EVA).

a. ₹3.6 lakhs

b. ₹6 lakhs

c. ₹4.5 lakhs

d. ₹3 lakhs

21 / 28

Category: Management Accounting PN-12

Division C’s sales are ₹50 lakhs; net operating profit ₹8 lakhs; average operating assets ₹40 lakhs. Calculate ROI.

a. 10%

b. 20%

c. 14%

d. 18%

22 / 28

Category: Management Accounting PN-12

Division X has operating profit of ₹30 lakhs and operating assets of ₹1.5 crore. Cost of capital is 15%. Calculate Residual Income (RI).

a. ₹9.5 lakhs

b. ₹4.5 lakhs

c. ₹7.5 lakhs

d. ₹10 lakhs

23 / 28

Category: Management Accounting PN-12

Division A has operating profit ₹20 lakhs and average operating assets ₹1 crore. Division B has operating profit ₹15 lakhs and average operating assets ₹75 lakhs. Which division has a higher ROI?

a. Division A: 20%, Division B: 20%

b. Division A: 25%, Division B: 20%

c. Division A: 20%, Division B: 25%

d. Division A: 15%, Division B: 18%

24 / 28

Category: Management Accounting PN-12

The DuPont analysis breaks down ROI into:

a. Profit margin and asset turnover

b. Profit margin and sales growth

c. Asset turnover and working capital

d. Net income and equity

25 / 28

Category: Management Accounting PN-12

Economic Value Added (EVA) is best described as:

a. Net operating profit after tax minus cost of capital employed

b. Operating profit divided by sales

c. Net profit before tax minus fixed cost

d. Total revenue minus total expenses

26 / 28

Category: Management Accounting PN-12

Residual Income (RI) differs from ROI in that RI:

a. Measures absolute profit after deducting a charge for capital cost

b. Ignores capital cost

c. Is a ratio like ROI

d. Always results in negative values

27 / 28

Category: Management Accounting PN-12

Which of the following is the primary objective of divisional performance measurement?

a. Centralized decision-making

b. Evaluate profitability and efficiency of divisions

c. Increase company-wide bureaucracy

d. Eliminate responsibility centers

28 / 28

Category: Management Accounting PN-12

Return on Investment (ROI) as a divisional performance measure is calculated as:

a. Net profit / Total assets

b. Operating profit / Average operating assets

c. Sales / Operating expenses

d. Operating profit / Sales

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Inter PN-12 Management Accounting Quiz 12

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