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Practice Test 12 - CPA Bar

20 questions. Answer them in any order, then submit to see your score and every explanation.

  1. A company hedges 100% of its forecasted foreign currency revenues with forward contracts. Actual revenues come in 30% below forecast due to weaker demand. Which risk management concern does this situation reveal?
  2. Current pricing: $60 per unit, variable cost $36, total CM $1,200,000 at 50,000 units. Analysis: a 15% price increase to $69 reduces volume 25% to 37,500 units (new CM $1,237,500); a 10% price decrease to $54 increases volume 30% to 65,000 units (new CM $1,170,000). Which pricing recommendation is best supported by the data?
  3. A manufacturing plant, North Ridge Plastics, applies variable manufacturing overhead based on machine-hours and tracks spending and efficiency variances monthly. The variable overhead standard is $6.00 per machine-hour, and the standard machine-hours allowed are 1.5 hours per unit. In June, the plant produced 8,000 units; actual machine-hours were 13,200 and actual variable overhead was $85,800. Management wants to address the overhead variance to improve budget accuracy, focusing on variable overhead spending rather than efficiency. How should the overhead variance be addressed to improve budget accuracy?
  4. A division manager with a current ROI of 22% is considering a new investment with an expected ROI of 17%. The company's cost of capital is 10%. The manager declines the project. Which statement best describes the concern with this decision?
  5. A manufacturing company, Apex Tools, uses a standard costing system with variance tracking by purchase order and production batch. The standard for Alloy A is $5.00 per pound, and 2.0 pounds are allowed per finished unit. During May, Apex produced 10,000 units; it purchased and used 20,500 pounds of Alloy A at $5.30 per pound. The materials price variance was flagged as significant versus policy thresholds and management asked for a corrective action focused specifically on the price variance. What corrective action should be taken based on the material price variance analysis?
  6. A manufacturing plant is classifying costs for a new product line of wooden stools. The wages of the production line workers can be traced to stools using time tickets, while the wages of the plant janitorial staff cannot be traced to any single product line. What is the correct classification of the janitorial staff wages?
  7. Thornfield Co. operates at full capacity of 5,000 units per month. Variable costs are $18 per unit, fixed costs are $120,000 per month, and the selling price is $48 per unit. What is the contribution margin per unit and operating income at full capacity?
  8. A public company, BrightPath Education Services, compares FY2025 metrics to industry averages during a year of increased marketing to drive enrollments. BrightPath: revenue growth 9%, operating margin 8%, customer acquisition cost $420 per student. Industry average: revenue growth 6%, operating margin 10%, customer acquisition cost $350 per student. How does the company's financial performance compare to the industry average?
  9. An ERM assessment identifies: Risk 1 (probability 80%, impact $200,000), Risk 2 (probability 20%, impact $1,500,000), Risk 3 (probability 50%, impact $400,000). Management proposes prioritizing Risk 1 because it has the highest probability. Which concern does this raise?
  10. Sunrise Products' ABC analysis assigns $120,000 of overhead to Product Y, which has 4,000 units of production. What is the ABC overhead cost per unit for Product Y?
  11. A private professional services firm has seen net profits decline and is reviewing shareholder returns. Selected year-end data (in thousands): Net income 180; Average equity 1,800. ROE is 180/1,800 = 10.0%; industry benchmark is 12.5\%. What insight does the ROE provide regarding the company's profitability?
  12. A company's DSO has increased from 32 days to 58 days over two years. Which of the following is the most likely business implication?
  13. A board of directors evaluates its internal control system by relying exclusively on management self-assessment reports that consistently show all controls as effective. No independent verification is performed. Which concern does this evaluation process raise?
  14. In what way does the annual budgeting process most effectively contribute to the identification and evaluation of business risks?
  15. A company's ERP system requires VP of Finance approval for purchase orders exceeding $500,000. Reviewing the AP log, an analyst finds eight purchase orders from the same vendor, all between $480,000 and $499,000, processed within a single month. What type of control concern does this pattern most clearly suggest?
  16. Based on this data, which of the following is the most likely root cause for the decline in the company's Return on Assets?
  17. Two business units use different definitions of revenue: Business Unit A records cash collected, while Business Unit B records invoiced amounts. When the CFO consolidates both reports, the combined revenue figure is not comparable to prior periods. Which data governance failure does this illustrate?
  18. A company's revenue has grown 30% over three years but its return on invested capital (ROIC) has declined from 16% to 9% over the same period. Which strategic conclusion is most appropriate?
  19. A manufacturing company, BluePeak Paints, uses standard costing with material variances tracked by lot. The standard for Pigment P is $14.00 per gallon and 0.30 gallons are allowed per finished unit. In February, BluePeak produced 40,000 units and used 13,000 gallons purchased at $15.20 per gallon. The controller asks the newly licensed CPA to recommend a corrective action focused specifically on the unfavorable material price variance. What corrective action should be taken based on the material price variance analysis?
  20. A company uses machine hours to allocate quality inspection overhead but finds inconsistent results across products. An analyst proposes using number of defect inspections as the cost driver instead. Which of the following best justifies this change?

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