1- Hour Crash Course for the

CMA Exam
March 13, 2018
4pm EDT | 8pm GMT

Troubleshooting Audio Troubleshooting Video

Most technical issues that arise have to do with audio. The Video streaming issues are usually caused by a poor internet connection.
majority of audio issues can be resolved by trying one or more of You can check your connection here.
the following:
• Run the "Audio Wizard" found in the Meeting menu at Poor Connection?
the top left of this window; or • Use a wired connection to your router/modem. WIFI is slower and can
• Double check that your computer speakers are not be affected by other devices that connect to your network.
muted; or • Update your browser, Adobe flash player, and Adobe Connect plugin.
• Exit and re-enter the meeting room.

CMA Crash Course 1

 Agenda

• Welcome
• CMA Exam Overview
• Test-Taking Tips for the CMA Exam
• Hot Topics on the CMA Exam
• Wiley CMAexcel 11th Hour Final Review
• Raffle
• Q&A with the Expert

CMA Crash Course 2

 Introductions

Lead Presenter Moderator

Steve Smith, Ph.D., CMA Julie Snow
Associate Professor, Senior Product Marketing
Deloitte Fellow Manager at Wiley
Brigham Young University

CMA Crash Course 3

 CMA Exam Overview

Each part – 4 hours

• 100 multiple choice questions (3 hours)

• Two 30 minute essay questions (1 hour)

• CMA Exam Contents Specification Outline

https://www.imanet.org/-/
media/f2e090eb04954cfe8f0fbb1654281262.ashx

CMA Crash Course 4

 CMA Exam Overview

Part 1: Financial Planning, Performance and Control

• External Financial Reporting Decisions (15%)

Analysis of a wide variety of a company’s financial statements to assess performance.
• Planning, Budgeting, and Forecasting (30%)
Preparing the financial plan (control, authorization, resource commitment, and needs) for a specific
period of time or project.
• Performance measurement (20%)
A focus on comparing actual results to planned results and recommending interventions when
necessary.
• Cost management (20%)
Addressing the reporting, analysis, and management of costs incurred by an organization.
• Internal controls (15%)
An in-depth look at implementing procedures and processes needed to ensure data security, protect
an organization’s assets, and meet legal and reporting requirements.

CMA Crash Course 5

 CMA Exam Overview

Part 2: Financial Decision Making

• Financial Statement Analysis (25%)

Leveraging financial accounting skills needed to analyze financial statements for internal and external
stakeholders.
• Corporate Finance (20%)
Managing a company’s short-term and long-term financing needs.
• Decision Analysis (20%)
Emphasis on making decisions based on analytical techniques and innovative methodologies.
• Risk Management (10%)
Identifying, assessing, and minimizing risks within an organization.
• Investment Decisions (15%)
Analyzing capital investment decisions using quantitative and qualitative techniques.
• Professional Ethics (10%)
Understanding, complying with, managing, and leading in accordance with a professional code of
conduct.

CMA Crash Course 6

 Test-Taking Tips for the CMA Exam

• Manage your time

• 180 minutes ÷ 100 MC questions = 1.8 minutes per question
• Easier thought: About 33 questions per hour

• Read all choices carefully

• But try to answer the question before reading the choices

• Answer every question

• No penalty for wrong answers
• Randomized MC: don’t be strategic with choices

• Make sure you’re answering the right question

• Some choices are correct but off topic
• Others are only partly true
• Watch out for unnecessary information
• Watch out for “NOT”

CMA Crash Course 7

 Test-Taking Tips for the CMA Exam

• Don’t over-analyze
• CMA Exam typically doesn’t try to trick you

• Essay tips
• Organize: introduction, body, conclusion
• Use key words from the question in your solution
• Essay key: application of concepts to real business situations

Important: CONFIDENCE
You belong here.
You can do it!
CMA Crash Course 8
 Let’s look at some specific topics: Reminders and practice

Part 1
Job Order Costing and Overhead Allocation
Sales and Direct Cost Variances

Part 2
Bonds
Marginal Analysis

Appendix
Transfer Pricing

CMA Crash Course 9

 Job-Order Costing and Overhead Allocation

• Reminders
• Actual costing vs. normal costing
• Overhead costs applied under normal costing
• Predetermined overhead rate = Budgeted overhead cost ÷
Expected cost driver activity
• Treatment of over- and under-applied overhead
• Usually closed to COGS, but not always
• Other options: pro-rate, use actual costing

CMA Crash Course 10

 Job-Order Costing and Overhead Allocation

Barr Mfg. provided the following information from its accounting records for
2017:
Expected production 60,000 labor hours
Actual production 56,000 labor hours
Budgeted overhead $900,000
Actual overhead $870,000

How much is the overhead application rate if Barr bases the rate on direct labor
hours?
Budgeted OH rate =
a. $16.07 per hour Budgeted OH/Expected
b. $15.00 per hour driver activity
c. $14.50 per hour
d. $15.54 per hour
$900,000 / 60,000 DLH =
$15.00 per hour

CMA Crash Course 11

 Job-Order Costing and Overhead Allocation

Barnes Company applies overhead on the basis of machine hours. Given the
following data, compute overhead applied and the under- or over-application of
overhead for the period:
Estimated annual overhead cost $3,000,000
Actual annual overhead cost $2,970,000
Estimated machine hours 300,000
Actual machine hours 295,000
Overhead
Actual Applied
a. $2,950,000 applied and $20,000 overapplied
b. $3,000,000 applied and $20,000 overapplied
$2,970,000 $2,950,000
c. $2,950,000 applied and $20,000 underapplied $20,000
d. $2,970,000 applied and neither under- nor overapplied Under-applied
Budgeted OH rate = Budgeted OH/Expected driver activity
$3,000,000 / 300,000 MH = $10.00 per hour
$10 × 295,000 MH = $2,950,000 applied OH
Actual OH = $2,970,000 - $2,950,000 = $20,000 under-applied OH
CMA Crash Course 12
 Job-Order Costing and Overhead Allocation

Stalk Products has $27,000 of underapplied overhead at the end of the year.
Management has asked you what the impact on income will be if you prorate the
underapplied overhead to the appropriate accounts. What will you tell them?

a. Income will be higher if the underapplied overhead is prorated than if it is closed to

Cost of Goods Sold.
b. Income will be lower if the underapplied overhead is prorated than if it is closed to
Cost of Goods Sold.
c. Income will be the same regardless of which method is used.
d. The answer depends on the reason that the underapplied exists.

Overhead WIP Inventory Finished Goods Cost of Goods Sold

Some of it Some of it Some
All ofof
it it
Actual Applied here here here ––
here
COGSup,
COGS up
less,
Income
Under- Closing
Income
down
applied OH entry
down less

CMA Crash Course 13

 Standard Costing and Variances

• Reminders
• Think carefully about what each variance means
• Then change only that variable
• Remember: actual price is only used when a price
variance is being computed
• For all other variances, price is kept constant at standard (SP)
• Use the structure you’re comfortable with
• Algebraic simplifications can speed things up, but don’t
sacrifice accuracy for speed

CMA Crash Course 14

 Standard Costing and Variances

Assume the actual sales volume is 69,000 units and the budgeted sales
volume is 70,000 units. If the actual sales price is $6 and the budgeted
sales price is $6.50, what is the sales volume variance?

a. $6,500 unfavorable
b. $6,500 favorable
c. $6,000 unfavorable
d. $6,000 favorable

AQ × AP AQ × EP EQ × EP
69,000 × $6.00 69,000 × $6.50 70,000 × $6.50
$414,000 $448,500 $455,000

$34,500 U $6,500 U

Shortcuts:
Sales volume variance = (AQ – EQ) × EP = (69,000 – 70,000) × $6.50 = $6,500 Unfavorable
Sales price variance = (AP – EP) × AQ = ($6.00 - $6.50) × 69,000 = $34,500 Unfavorable

CMA Crash Course 15

 Standard Costing and Variances

Sositup Inc. uses the following standards for a single batch of pasta
sauce:
Ingredient Amount Price Total
Onions 5 lbs. $2/lb. $10
Tomatoes _______
5 lbs. $3/lb. $15
10 lbs. $25

In the previous month, 100 batches of sauce were produced, with the
following actual ingredient usage:
Onions 600 lbs.
Tomatoes _______
900 lbs.
1,500 lbs.
The direct materials mix variance for the previous month is:

a. $150 Favorable ∑AQ × A%i × SPi ∑AQ × S%i × SPi

1,500 × 600/1,500 × $2 = $1,200 1,500 × 5/10 × $2 = $1,500
b. $150 Unfavorable 1,500 × 5/10 × $3 = $2,250
1,500 × 900/1,500 × $3 = $2,700
c. $1,950 Favorable $3,900 $3,750
d. $1,950 Unfavorable
$150 U
CMA Crash Course 16
 Standard Costing and Variances

Sositup Inc. uses the following standards for a single batch of pasta
sauce:
Ingredient Amount Price Total
Onions 5 lbs. $2/lb. $10
Tomatoes _______
5 lbs. $3/lb. $15
10 lbs. $25

In the previous month, 100 batches of sauce were produced, with the
following actual ingredient usage:
Onions 600 lbs.
Tomatoes _______
900 lbs. SQA: 100 batches × 10
1,500 lbs. lbs. each = 1,000 lbs.

The direct materials yield variance for the previous month is:

a. $1,250 Unfavorable ∑AQ × S%i × SPi ∑SQA × S%i × SPi

1,500 × 5/10 × $2 = $1,500 1,000 × 5/10 × $2 = $1,000
b. $1,250 Favorable 1,500 × 5/10 × $3 = $2,250 1,000 × 5/10 × $3 = $1,500
c. $700 Unfavorable $3,750 $2,500
d. $700 Favorable
$1,250 U
CMA Crash Course 17
 Q&A

CMA Crash Course 18

 Bonds

• Reminders
• Valuation: PV of interest payments + PV of face value
• Discounted at market rate
• If required rate of return > coupon rate  discount
• If required rate of return < coupon rate  premium

CMA Crash Course 19

 Bonds

A 15-year, 8% annual-pay bond has a par value of $1,000. What should

this bond be trading for if it were being priced to yield 9% on an
annual rate?

a. $1,000.00 9% Required rate of return > 8% coupon rate

b. $935.61  Discount (trading value < $1,000)
c. $919.39
d. $1,085.60

PV (face value): PV (interest):

= $1,000 × PV (n=15, 9%) = ($1,000 × 0.08) × PVA (n=15, 9%)
= $1,000 × 0.27454 = $80 × 8.06069
= $274.54 = $644.85

$274.54 + $644.85 = $919.39

CMA Crash Course 20

 Bonds
10% Required rate of return > 9% coupon rate
 Discount (trading value < $1,000)

Jane Thorpe has been offered a seven-year bond issued by Barone,

Inc., at a price of $943.22. The bond has a coupon rate of 9 percent and
pays the coupon semiannually. Similar bonds in the market will yield
10 percent today. Should she buy the bonds at the offered price? (Do
not round intermediate computations. Round your final answer to the
nearest dollar.)

a. Yes, the bond is worth more at $1,015.

b. No, the bond is only worth $921.
c. Yes, the bond is worth more at $951.
d. No, the bond is only worth $912.
PV (face value): PV (interest):
= $1,000 × PV (n=14, 5%) = ($1,000 × 0.09)/2 × PVA (n=14, 5%)
= $1,000 × 0.50507 = $45 × 9.89864
= $505.07 = $445.44

$505.07 + $445.44 = $950.51  $951 > $943.22

CMA Crash Course 21

 Marginal Analysis

• Keep or drop, make or buy, special order,

equipment replacement, sell or process further

• Reminders
• Identify relevant (i.e., marginal) revenues/costs, ignore
everything else
• Past, constant across alternatives
• Full capacity means opportunity cost

CMA Crash Course 22

 Marginal Analysis

A company has a process that results in 24,000 pounds of Product A that can be
sold for $8 per pound. An alternative would be to process Product A further at a
cost of $160,000 and then sell it for $14 per pound. Should management sell
Product A now or should Product A be processed further and then sold?

a. Process further, the company will be better off by $16,000.

b. Sell now, the company will be better off by $16,000.
c. Process further, the company will be better off by $144,000.
d. Sell now, the company will be better off by $160,000.

Marginal revenue:
$14 - $8 = $6 × 24,000 = $144,000

Marginal cost:
$160,000

$144,000 - $160,000 = ($16,000)  Sell now

CMA Crash Course 23

 Marginal Analysis

Sala Co. is contemplating the replacement of an old machine with a new one. The
following information has been gathered:
Old Machine New Machine

Price $300,000 $600,000

Accumulated depreciation 90,000 -0-

Remaining useful life 10 years -0-

Useful life -0- 10 years

Annual operating costs $240,000 $180,600

If the old machine is replaced, it can be sold for $24,000.

The net advantage (disadvantage) of replacing the old machine is

a. $18,000
b. $24,000 Marginal savings:
c. $(6,000) ($240,000 - $180,600) × 10 years = $594,000
d. $(60,000) Marginal cost:
$600,000 - $24,000 = $576,000
$594,000 - $576,000 = $18,000 advantage
CMA Crash Course 24
 Marginal Analysis

Abel Company produces three versions of baseball bats: wood, aluminum, and hard
rubber. A condensed segmented income statement for a recent period follows:
Wood Aluminum Hard Rubber Total

Sales $500,000 $200,000 $65,000 $765,000

Variable expenses 325,000 140,000 58,000 523,000

Contribution margin 175,000 60,000 7,000 242,000

Fixed expenses 75,000 35,000 22,000 132,000

Net income (loss) $100,000 $25,000 $(15,000) $110,000

Assume none of the fixed expenses for the hard rubber line are avoidable. What will be
total net income if the line is dropped?
a. $125,000
b. $103,000
c. $105,000
d. $140,000
Marginal change: $7,000 lost contribution margin
Net income: $110,000 - $7,000 = $103,000

CMA Crash Course 25

 Appendix: Transfer Pricing

• Reminders
• Optimal transfer price: variable cost plus opportunity
cost
• Seller has excess capacity: variable cost
• Seller has no excess capacity: market price
• Common on the CMA: what is the range of acceptable
transfer prices?
• Watch out for savings opportunities from internal sales
• These will affect available transfer prices

CMA Crash Course 26

 Transfer Pricing

Electronic Division makes a part that sells externally for $50.00 per unit. It has a
variable production cost of $22.00 per unit, a variable selling and administrative
cost of $7.00 per unit, a fixed production cost of $1,000,000 per year, and a fixed
selling and administrative cost of $500,000 per year. Production capacity is
250,000 units per year. Electronic Division is selling all it can produce externally
at $50.00 per unit. One-half of the variable selling and administrative cost can be
eliminated on units transferred to the Digital Division. Digital Division can buy
the part externally at $48.00 per unit and uses 30,000 parts annually. Should a
transfer take place, and if so what are the rational limits on the range of transfer
prices? No excess capacity!
a. No transfer should take place.
b. A transfer should take place at $46.50. Savings!
c. A transfer should take place at $48.
d. A transfer should take place between $46.50 and $48.
Floor = External price to selling division less savings from internal transfer =
$50.00 – ($7/2) = $46.50
Ceiling = External price to buying division = $48.00

CMA Crash Course 27

 Transfer Pricing

The Selling Division’s unit sales price is $25 and its unit variable cost is $15. Its
capacity is 10,000 units. Fixed costs per unit are $6. Current outside sales are
8,000 units.

What is the Selling Division’s opportunity cost per unit from selling 2,000 units
to the Purchasing Division?
“At variable cost”
a. $10
b. $25
c. $4
Capacity needed = 2,000 units
d. $0
Capacity to fill the order = 10,000 – 8,000 = 2,000 units
Opportunity cost = 0

CMA Crash Course 28

 Transfer Pricing

The Selling Division’s unit sales price is $25 and its unit variable cost is $15. Its
capacity is 10,000 units. Fixed costs per unit are $6. Current outside sales are
8,000 units.

What is the Selling Division’s opportunity cost per unit from selling 3,000 units
to the Purchasing Division?
“At variable cost”
a. $10
b. $25
c. $4 Capacity needed = 3,000 units
d. $0 Capacity to fill the order = 10,000 – 8,000 = 2,000 units
Opportunity cost PER UNIT = Sales price – Variable cost =
$25 - $15 = $10

CMA Crash Course 29

 https://www.efficientlearning.com/cma/products/cma-11th-hour-final-review/

CMA Crash Course 30

 Wiley CMAexcel 11th Hour Review: Hot Topics

Part 1 Part 2
Accounts Receivable Basic Financial Statement Analysis
Income Taxes Financial Ratios
Inventory Profitability Analysis
Leases Portfolio Rates of Return
Forecasting Techniques Bonds
Financial Budgets Cost of Capital
Operational Budgets Stocks, Preferred Stock, and Stock Options
Budgeting Analysis Raising Capital
Overhead Variance Analysis Accounts Receivable and Inventory
Sales and Direct Cost Variances Cash and Marketable Securities
Transfer Pricing Short-Term Financing
Profitability Management International Corporate Financial Issues
Absorption and Direct Costing Cost-Volume-Profit Analysis
Joint and By-Product Costing Marginal Analysis
Job Order Costing and Overhead Allocation Pricing and Costing Tools
Process Costing Capital Budgeting
Support Department Allocation NPV and IRR
Supply Chain Management Risk Analysis in Capital Investment
Internal Auditing Professional Ethics for the Organization
Information Systems Controls

https://www.efficientlearning.com/cma/products/cma-11th-hour-final-review/

CMA Crash Course 31

 Raffle

CMA Crash Course 32

 Q&A with the Expert

CMA Crash Course 33

 Thank You
Please take 5 minutes to
Provide Your Feedback

CMA Crash Course 34