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2026 Statistics
Key Facts: CMA Final Paper 16 Exam
100
Marks (3 Hours)
ICMAI Syllabus 2022 Paper 16
60%
Section A Weight
ICMAI Syllabus 2022
40%
Section B Weight
ICMAI Syllabus 2022
40% / 50%
Paper / Group Pass Mark
ICMAI Examination Rules
Group III
CMA Final Group
ICMAI Syllabus 2022
CMA Final Paper 16 (Strategic Cost Management) is a 100-mark, 3-hour Group III paper under ICMAI Syllabus 2022. It is split into Section A: Strategic Cost Management for Decision Making (60% weight) and Section B: Quantitative Techniques in Decision Making (40% weight). The main paper is primarily descriptive with practical problems; ICMAI does not publish a fixed MCQ count but issues an official MCQ practice bank. Passing requires at least 40% in the paper and 50% aggregate in the group. There is no separate Paper 16 fee. This free prep set offers 100 syllabus-aligned MCQs split 60 to Section A and 40 to Section B.
Sample CMA Final Paper 16 Practice Questions
Try these sample questions to test your CMA Final Paper 16 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.
1Strategic Cost Management (SCM) differs from traditional cost management primarily because it:
A.Links cost analysis to the firm's competitive strategy and long-term value creation
B.Eliminates the need for variance analysis and standard costing
C.Restricts attention to manufacturing overhead allocation
D.Focuses only on recording historical costs for financial statements
Explanation: SCM integrates cost information into the strategic decision framework, analysing costs in the context of value chain, strategic positioning, and cost drivers to sustain competitive advantage. Traditional costing is largely score-keeping for stewardship.
2Porter's value chain analysis classifies the firm's activities into:
A.Fixed activities and variable activities
B.Primary activities and support activities
C.Internal activities and external activities
D.Strategic activities and operational activities
Explanation: Michael Porter's value chain divides activities into primary activities (inbound logistics, operations, outbound logistics, marketing & sales, service) and support activities (firm infrastructure, HR, technology, procurement). Analysing each helps locate sources of cost advantage and differentiation.
3Target costing determines the allowable cost of a product by:
A.Setting price equal to the highest competitor's cost plus a markup
B.Adding the desired profit margin to the estimated production cost
C.Subtracting the desired profit margin from the competitive market-determined selling price
D.Allocating actual costs after production is complete
Explanation: Target cost = Target selling price − Desired profit margin. The market sets the price; the firm then works backward to a cost it must achieve through design and value engineering. This is the reverse of cost-plus pricing.
4A product has a target selling price of Rs. 500 per unit and the company requires a 20% profit margin on the selling price. The target cost per unit is:
A.Rs. 416.67
B.Rs. 420
C.Rs. 480
D.Rs. 400
Explanation: Desired profit = 20% of Rs. 500 = Rs. 100. Target cost = Rs. 500 − Rs. 100 = Rs. 400. Margin is stated on selling price, so it is taken directly on the Rs. 500 price.
5Life cycle costing accumulates a product's costs over which span?
A.From research and development through to abandonment and disposal
B.From the date of the first sale to the date of the last sale
C.Only the manufacturing phase
D.Only the period the product is on sale
Explanation: Life cycle costing captures all costs across the entire product life cycle — R&D and design, introduction, growth, maturity, decline, and disposal — recognising that a large share of total cost is committed at the design stage.
6In the product life cycle, the stage characterised by rapidly rising sales, growing competition, and falling unit costs is the:
A.Introduction stage
B.Growth stage
C.Maturity stage
D.Decline stage
Explanation: The growth stage shows accelerating sales as the product gains acceptance; competitors enter, economies of scale reduce unit costs, and profits typically peak toward its end. Introduction has slow sales; maturity has stable sales; decline has falling sales.
7The theory of constraints (TOC) defines throughput as:
A.Contribution margin minus fixed manufacturing overhead
B.Sales revenue minus all operating expenses
C.Sales revenue minus totally variable (material) cost
D.The total units produced in a period
Explanation: In TOC, throughput = Sales − Totally Variable Cost (essentially direct material), because TOC treats nearly all other costs as operating expense (largely fixed in the short run). The aim is to maximise throughput while reducing inventory and operating expense.
8Under throughput accounting, the Throughput Accounting Ratio (TAR) greater than 1 indicates that a product:
A.Has a negative contribution margin
B.Uses no bottleneck resource
C.Should be discontinued immediately
D.Generates throughput per bottleneck hour exceeding the operating cost per bottleneck hour
Explanation: TAR = Throughput per bottleneck hour ÷ Operating (factory) cost per bottleneck hour. A TAR above 1 means the product earns more throughput per constrained hour than it costs to operate that hour, so it is worth producing and ranking favourably.
9Just-in-Time (JIT) manufacturing primarily aims to:
A.Minimise inventory by producing only as items are demanded
B.Increase batch sizes to gain economies of scale
C.Lengthen production lead times for quality checks
D.Maximise finished goods inventory to avoid stockouts
Explanation: JIT is a demand-pull system that produces goods only when needed, driving inventory toward zero, reducing holding costs, exposing inefficiencies, and shortening lead times. It depends on reliable suppliers and high quality.
10Activity-Based Costing (ABC) assigns overhead to products on the basis of:
A.A single plant-wide volume-based rate
B.Cost drivers that cause the activities consumed by each product
C.The relative sales value of each product
D.Direct labour hours only
Explanation: ABC traces overhead to activities and then to products using cost drivers (e.g., number of setups, inspections, orders) that reflect actual resource consumption. This improves accuracy where products differ in volume and complexity.
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