CAIIB · Advanced Business & Financial Management · Module B — Advanced Concepts of Financial Management
CAIIB ABFM Unit 12 — Decision Making: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper III of the December 2026 cycle (Sunday 13 December 2026)
This is the free practice page for CAIIB ABFM Unit 12 — Decision Making (Module B — Advanced Concepts of Financial Management). The CAIIB Mock Centre holds 141 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
ABFM · Module B141 MCQs in the Mock Centre5 free belowPaper on 13 December
Key facts examiners test from this unit
Financial decisions and CVP analysis — decide products, prices, sourcing and orders on data, with ethics in view; CVP links cost, volume and price to profit.
CVP with activity-based costs — ABC splits "fixed" cost into truly fixed and activity cost; bigger batches cut set-ups but add storage.
Relevant costs — only future costs that differ between alternatives matter; ignore sunk costs; charge opportunity costs when resources are scarce.
Changed since the textbook
The four Labour Codes come into force (21 November 2025). The Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 came into force on 21 November 2025, consolidating 29 central labour laws. Among other changes they provide for fixed-term employment and extend social security to gig and platform workers. Source: King Stubb & Kasiva
SEBI eases value chain ESG disclosures in BRSR (28 March 2025). SEBI's circular of 28 March 2025 made ESG disclosures for a listed company's value chain (upstream and downstream partners accounting for at least 2% of purchases or sales) voluntary from FY 2025-26, with voluntary assessment or assurance from FY 2026-27. BRSR Core may now be verified by a third-party assessment (to standards of the Industry Standards Forum) or by assurance, and a green-credits metric was added from FY 2024-25. Source: Mondaq
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 141 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
A children's cycle sells for ₹8,000 and has a variable cost of ₹7,500; fixed costs are ₹10 lakh a month. If the firm sells 2,500 cycles a month, what is its margin of safety as a percentage of sales?
Why (a): Contribution is ₹500 a cycle, so break-even volume = ₹10 lakh ÷ ₹500 = 2,000 cycles, and the margin of safety is (2,500 − 2,000) ÷ 2,500 = 20% of sales. Dividing the 500-cycle cushion by the break-even volume gives 25%, and 6.25% is the P/V ratio, not the margin of safety. (b) is wrong: 6.25% is the P/V ratio (500 ÷ 8,000). (c) is wrong: 25% divides the cushion by break-even volume, not by sales. (d) is wrong: 80% is break-even volume as a share of sales.
Question 2 of 5
A person owning a diesel car and a petrol car must choose one for a long journey. Which costs are relevant?
Why (a): Only the fuel costs differ between the two choices; road tax and insurance are already incurred and stay the same. (b) is wrong: Road tax is a sunk cost. (c) is wrong: Insurance already paid is sunk. (d) is wrong: The purchase price is a past cost.
Question 3 of 5
A bank uses activity-based costing for its loan products. Which of these is a cost object?
Why (b): In ABC the cost object is whatever is being costed (a product, a service or a customer), here the home-loan product. The number of applications is a cost driver, the total cost gathered for credit appraisal is a cost pool, and credit appraisal itself is an activity. (a) is wrong: The number of applications is a cost driver. (c) is wrong: The total cost gathered for an activity is a cost pool. (d) is wrong: Credit appraisal itself is an activity.
Question 4 of 5
Consider two statements. (1) Traditional absorption costing charges overheads through several activity-based rates. (2) ABC tends to assign more overhead to low-volume, complex products than traditional costing does. Which is correct?
Why (d): Traditional absorption costing spreads overheads with a single volume-based rate, such as direct labour hours, so statement (1) describes ABC rather than the traditional method. Because ABC traces overheads through activities and their drivers, it usually shifts more cost to low-volume, complex products that need many set-ups and orders, so statement (2) is true. (a) is wrong: Statement (1) describes ABC, not traditional absorption. (b) is wrong: Statement (1) is false and statement (2) true. (c) is wrong: ABC does tend to shift overhead to low-volume, complex products.
Question 5 of 5
What is activity-based management (ABM)?
Why (b): ABM uses the information from ABC to analyse activities and measure and improve performance. (a) is wrong: ABM is not a valuation method. (c) is wrong: A single plant-wide rate is traditional absorption. (d) is wrong: ABM looks forward to improving activities.
0 of 5 answered.
Traps in this unit
Judge price cuts by total contribution.
Fixed cost per unit changes with volume.
Same BEP does not mean ABC adds nothing.
Practise all 141 questions on Unit 12. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the ABFM Online Mock Centre unlocks all 4,000+ ABFM questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.