CPA Canada PM Elective Sample Questions & Practice Test

CPA Canada Performance Management elective preparation should connect strategy, governance, cost behaviour, controls, incentives, and operating decisions. The candidate should explain how a measure or control changes behaviour, not just calculate a variance.

This page includes 12 original Performance Management sample questions for initial review. They are not official CPA Canada questions and do not reproduce module-assessment cases.

What Performance Management practice should test

• selecting measures that support strategy rather than distort behaviour
• analyzing cost behaviour, capacity, bottlenecks, and operational trade-offs
• identifying control weaknesses and governance consequences
• turning variance or KPI analysis into a practical management recommendation

How to use this Performance Management preview

Use the 12-question set below to test whether you can move from a metric to the behaviour it creates. Performance Management misses usually come from treating KPIs, variances, and controls as calculations only instead of management decisions.

Before the sample set, use the CPA Canada Performance Management Cheat Sheet to review KPI design, cost behaviour, bottlenecks, control trade-offs, and recommendation traps.

Sample Exam Questions

Try these 12 original sample questions for CPA Canada Performance Management. They are designed for self-assessment and are not taken from the live exam.

Question 1

Topic: KPI design

A call centre rewards agents only for calls handled per hour. Complaints and repeat calls are increasing. What is the best recommendation?

• A. Add quality, first-call resolution, customer satisfaction, and rework measures to balance speed
• B. Keep the measure because speed is always the main goal
• C. Remove all individual measures permanently
• D. Reward the agents with the shortest calls only

Best answer: A

Explanation: Performance Management questions often test behavioural consequences. A speed-only KPI can encourage rushed service and repeat work, so balanced measures are needed.

Question 2

Topic: cost behaviour

A manager treats all overhead as fixed when deciding whether to accept a large order, but overtime and inspection costs would increase. What is the issue?

• A. All overhead is always irrelevant
• B. Incremental overhead caused by the order should be included in the decision
• C. Variable costs should be ignored when capacity exists
• D. Inspection costs are never controllable

Best answer: B

Explanation: The key is whether the cost changes because of the decision. Some overhead may be fixed, but overtime and inspection costs caused by the order are relevant.

Question 3

Topic: bottleneck management

A production line is constrained by one testing machine. Which measure best supports product-mix decisions?

• A. Sales price per unit
• B. Total gross margin by product
• C. Contribution margin per testing-machine hour
• D. Number of customers per product

Best answer: C

Explanation: When a resource is constrained, the decision should use contribution per unit of the bottleneck resource rather than total unit margin.

Question 4

Topic: variance analysis

Material price variance is favourable, but material usage variance is unfavourable and defects increased. What is the best interpretation?

• A. The purchasing department definitely performed well
• B. The production team alone caused the issue
• C. The favourable price may be linked to lower-quality inputs and higher waste, requiring investigation
• D. Variances should be ignored because they offset

Best answer: C

Explanation: Variances should be interpreted together. A favourable price can cause quality or efficiency problems, so the candidate should investigate the driver.

Question 5

Topic: governance

A nonprofit board receives financial reports but no service-outcome measures. What is the performance-management weakness?

• A. Financial reports are illegal for nonprofits
• B. The board may not know whether resources are achieving the mission
• C. Service outcomes are irrelevant if cash is controlled
• D. The board should receive only donor names

Best answer: B

Explanation: Performance management is not limited to profit. A mission-driven organization needs measures that connect resources to outcomes.

Question 6

Topic: control environment

A branch manager can approve discounts, override credit limits, and write off receivables without review. What is the main concern?

• A. The manager is too close to operational decisions
• B. Discounts are always bad
• C. Credit limits are unnecessary
• D. Excess authority without review increases risk of errors, bias, or abuse

Best answer: D

Explanation: The issue is control design and oversight. Concentrated authority can create risk even if no problem has yet been proven.

Question 7

Topic: balanced scorecard

A retailer wants measures for a new online channel. Which set is most balanced?

• A. Revenue only
• B. Website visits only
• C. Sales, gross margin, conversion, returns, fulfilment time, customer satisfaction, and system uptime
• D. Number of employees in the e-commerce team only

Best answer: C

Explanation: A balanced view connects financial outcomes with customer, process, and capability measures. Revenue alone can hide poor returns, delivery problems, or weak reliability.

Question 8

Topic: outsourcing

A company can outsource payroll processing at a lower cost, but the vendor has weak security controls. What should the recommendation include?

• A. Outsource because lower cost is decisive
• B. Reject all outsourcing permanently
• C. Ignore security because payroll is administrative
• D. Compare cost savings with confidentiality, control, service, transition, and compliance risks

Best answer: D

Explanation: Performance Management recommendations should connect efficiency to control and risk. Payroll data is sensitive, so security and service controls matter.

Question 9

Topic: target setting

A sales target is set much higher than market growth and staff say they can meet it only by relaxing credit standards. What is the best response?

• A. Reassess the target, credit-risk controls, incentives, and market assumptions
• B. Keep the target because stretch goals are always good
• C. Remove credit review to increase sales
• D. Reward sales even if cash is never collected

Best answer: A

Explanation: Targets influence behaviour. If a target encourages poor credit decisions, the performance system may be misaligned with cash and risk objectives.

Question 10

Topic: process improvement

A warehouse has long picking times and frequent shipping errors. Which information is most useful for improvement?

• A. Total annual sales only
• B. Detailed process steps, error causes, cycle time, rework, staffing, layout, and system data
• C. The CEO’s opinion only
• D. Prior-year tax expense

Best answer: B

Explanation: Operational improvement needs driver-level information. A broad financial number does not reveal where errors or delays occur.

Question 11

Topic: responsibility accounting

A department manager is evaluated on corporate head-office costs allocated by revenue. What is the concern?

• A. The manager may be held accountable for costs outside their control
• B. All allocations are illegal
• C. Revenue should never be measured
• D. Head-office costs should always be ignored

Best answer: A

Explanation: Responsibility accounting should evaluate managers on controllable factors. Uncontrollable allocations can distort performance and incentives.

Question 12

Topic: recommendation

A company wants to cut maintenance to meet a quarterly target, but downtime is already rising. What is the best recommendation?

• A. Cut maintenance immediately because targets must be met
• B. Delay all maintenance until next year
• C. Capitalize maintenance costs
• D. Evaluate critical maintenance, downtime costs, safety, customer impact, and alternative savings before cutting

Best answer: D

Explanation: Performance Management answers should avoid short-term fixes that damage operations. The recommendation should consider cost, risk, reliability, and service impact.

Performance Management answer checklist

Mini Glossary

• KPI: Key performance indicator used to monitor progress toward an objective.
• Bottleneck: The limiting resource that constrains output.
• Responsibility accounting: Measuring managers based on areas they can influence.
• Balanced scorecard: A performance framework that combines financial and non-financial measures.

Related CPA Canada routes

• CPA Canada Core 2
• CPA Canada Finance
• CPA Canada CFE Day 3
• U.S. CPA BAR

In this section

• CPA Canada PM Elective Cheat Sheet
  Review CPA Canada Performance Management reminders for KPI design, cost behavior, bottlenecks, governance, controls, incentives, and recommendation quality.