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Financial CMA Exam
Certified Management Accountant (Page 6 )

Updated On: 1-Feb-2026
Page 6 of 270
PDF with 1336 Questions
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Certain phases of the planning process should be formalized for all of the following reasons expect that

  1. Informal plans and goals lack the necessary precision, understanding, and consistency.
  2. Formal plans can act as a constraint on the decision-making freedom of managers and supervisors
  3. Formalization requires the establishment and observance of deadlines for decision making and planning
  4. Formalization provides a logical basis for rational flexibility in planning

Answer(s): B

Explanation:

A formal plan is a prescription for organizational behavior and a set of goals. Management decision making is therefore necessarily constrained by the limitations established I the plan.



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Which one of the following reasons is not a significant reason for planning in an organization?

  1. Promoting coordination among operating units
  2. Forcing managers to consider expected future trends and conditions
  3. Developing basis for controlling operations
  4. Monitoring profitable operations

Answer(s): D

Explanation:

Monitoring profitable operations is not a significant reason for planning. Monitoring is a control function, whereas planning has a control purpose that precedes control in the planning-control cycle. Planning establishes standards against which is the control function compares preliminary or final results.



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Strategic planning, as practiced by most modem organizations, includes all of the following expect

  1. Top-level management predication
  2. A long-term focus
  3. Strategies that will help in achieving long-range goals
  4. Analysis of the current month's actual variances from budget

Answer(s): D

Explanation:

Strategic planning is the process of setting overall organizational objectives and goals. It is a long-term process aimed at charting the future course of the organization. Strategic planning is based on assessing risk levels, evaluating the strengths and weaknesses of the organization, and forecasting the future direction an influences of factors relevant to the organization such as market trends, changes in technology, international competition, and social change. Analysis of the current month's budget variances is not an aspect of strategic planning.



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Strategy is a broad term that usually means the selection of overall objectives. Strategic analysis ordinarily excludes the

  1. Trends that will affect the entity's markets
  2. Target product mix and production schedule to be maintained
  3. Forms of organizational structure that would best serve the entity
  4. Best ways to invest in research, design, production, distribution, marketing, and administrative activities

Answer(s): B

Explanation:

Strategic analysis is the process of long-range planning. It includes identifying organizational objectives, evaluating the strengths and weaknesses of the organization, such as market trends, changes the technology, international competition, and social change. The final step is to derive the best strategy for reaching the objectives. Setting the target product mix and production schedule for the current year is not a concern of strategic analysis because it is short-term activity.



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Which of the following factors is not typical of an industry that faces intense competitive rivalry?

  1. Price-cutting
  2. Large adverting budgets
  3. Frequent introduction of new products
  4. Inelastic demand

Answer(s): D

Explanation:

Rivalry among existing firms will be intense when an industry has many strong competitors. Inelastic demand exists when quality purchased is not greatly affected by price changes. Thus, price cutting does not increase sales for the industry and is therefore atypical of an intensely competitive industry.



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