IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 1:

  The characteristics of Venture capital include all of the following except

  A. Initial pinnate placement for the majority of issues
  B. A minimum holding period of 5 years for new securities
  C. The use of common stock for most placements.
  D. A lack of humidity for a period of time.
  B. A minimum holding period of 5 years for new securities

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  Explanation

  The concept of venture (risk) capital appestat new enterprises that might not be able to obtain funds in the usual capital markets because of the friskiness Of new products, Such companies somberness toy to place `scantiest. normality common stock, with venture captive firms. These are normally private percents of the securities and thus not subject to SEC regulator. The venture capitalists risk low liquidity for their investments until the young `corporation becomes successful. The payoff may be substantial if the company does succeed There is no minimum holding period for venture capital investments,

• Question 2:

  Which one of the following is true regarding a relevant range?

  A. Total variable costs will not change.
  B. Total fixed costs will not change.
  C. Actual fixed costs usually fall outside the relevant range.
  D. The relevant range cannot be changed after being established.
  B. Total fixed costs will not change.

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  Explanation

  The relevant range is the range of activity over which unit variable costs and total fixed costs are constant. The incremental cost of one additional unit of production will be equal to the variable cost.

• Question 3:

  Data regarding four different products manufactured by an organization are presented as follows. Direct material and direct labor are readily available from the respective resource markets. However, the manufacturer is limited to a maximum of 3000 machine hours per month.

  

  The product that is the most profitable forth manufacturer in this situation is

  A. Product A.
  B. Product B.
  C. Product C.
  D. Product.D
  B. Product B.

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  Explanation

  When resources are limited, maximum profits are achieved by maximizing the dollar contribution margin per limited or constraining factor. In this situation, machine hours are the constraining factor. Product B has a contribution margin per machine hour of $28 [4 x ($18--$11)], which is greater than that of Product A [3 x($15-- $7) = $24], Product C [2 x ($20-- $10) = $20], or Product D [3 x ($25 --$16) = $27].

• Question 4:

  Specialty Cakes, Inc. produces two types of cakes, a round cake and a heart-shaped cake. Total fixed costs for the firm are $92,000 Variable costs and sales data for these cakes are presented below

  

  How many cakes will be required to reach the breakeven point?

  A. 8.000 round cakes and 12. 000 heart-shaped cakes
  B. 9.000 round cakes and 11.000 heart-shaped cakes
  C. 10.000 round cakes and 10,000 heart-shaped cakes
  D. 23,000 round cakes and 18.400 heart-shaped cakes
  A. 8.000 round cakes and 12. 000 heart-shaped cakes

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  Explanation

• Question 5:

  Stroll, Inc. is in the process of making an investment decision. It has identified the following alternative investment opportunities: real estate, stocks, bonds, or mutual funds. After determination of the investment alternatives, Stroll will go through all of the following logical steps of the decision analysis model, except:

  A. Obtaining information about the investment alternatives.
  B. Evaluating the investment alternatives.
  C. Selecting an alternative which best fits the investment criteria.
  D. Defining the problem of high unused cash balance.
  D. Defining the problem of high unused cash balance.

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  Explanation

  The parameters of what to do with high unused cash balances are set forth as a result of the investment choice that is eventually made. It is not an appropriate factor in the decision whether to undertake an investment to begin with.

• Question 6:

  lrwinn Co. is considering an investment in a capital project. The sole outlay will be $800,000 at the outset of the project and the annual net after-tax cash inflow will be $216,309.75 for 6 years. The present value factors at lrwinn's 8% cost 01 capital are What is the breakeven time (BET)?

  

  A. 3. 70 years.
  B. 4. 57 years.
  C. 5. O0years.
  D. 6. O0years.
  B. 4. 57 years.

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  Explanation

  Breakeven time is a more sophisticated version of the payback method. Breakeven time is `defined as the period required for the discounted cumulative cash inflows on a project to equal the discounted cumulative cash outflows (usually the

  initial cost). Thus, it is the time necessary for the present value of the discounted cash flows to equal zero. This period begins at the outset of a project, not when the initial cash outflow occurs.

  Accordingly, the BET is calculated as follows:

  

  Amount required in year 5:

  

• Question 7:

  Which of the following is the most significant reason that domestic governments and international organizations seek to eliminate cartels?

  A. The increased sales price reduces the amount of corporate tax revenues payable to the government
  B. True competition keeps prices as low as possible, thus increasing efficiency in the marketplace
  C. Small business cannot survive or grow without government protection
  D. The economic stability of developing countries depends on a global free market
  B. True competition keeps prices as low as possible, thus increasing efficiency in the marketplace

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  Explanation

  A cartel is an organization of sellers (e.g., the oil cartel OPEC) who undertake joint action to maximize member's profits by controlling the supply and therefore the price of their product. Under the laws of many nations, such collusive conduct is illegal when engaged in by firma subject to those laws. The reason is that, as a result of the monopolistic and anticompetitive practices of cartels, supply is lower, prices re high, competition is restrained, and the relevant. Industry is less efficient. Accordingly, governmental and international organizations seek to protect consumers and the health of the domestic and global economy through anti-cartel efforts.

• Question 8:

  Which condition does not increase the threat of new competitor entry into the industry?

  A. Strong brand identity
  B. Existing firms do not enjoy the cost advantages of vertical integration.
  C. Few proprietary product differences.
  D. Low capital requirements.
  A. Strong brand identity

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  Explanation

  Strong brand identity decreases the threat that new competitors will enter an industry. New competitors have difficulty because potential customers are loyal to established firms in the industry.

• Question 9:

  Austin Manufacturing, which is subject to a 40% income tax rate, had the following operating data for the period just ended.

  

  Management plans to improve the quality of its sole product by (1) replacing a component that costs $3. 50 with a higher-grade unit that costs $5. 50, and (2) acquiring a $180,000 packing machine. Austin will depreciate the machine over a 10year life with no estimated salvage value by the straight-line method of depreciation. If the company wants to earn after-tax income of $172,800 in the upcoming period, it must sell

  A. 19,300 units.
  B. 21,316 units.
  C. 22,500 units.
  D. 23,800 units.
  C. 22,500 units.

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  Explanation

• Question 10:

  What is the opportunity cost of making a component part in a factory given no alternative use of the capacity?

  A. The variable manufacturing cost of the component.
  B. The total manufacturing cost of the component.
  C. The total variable cost of the component.
  D. Zero.
  D. Zero.

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  Explanation

  Opportunity cost is the benefit forgone by not selecting the best alternative use of scarce resources. The opportunity cost is zero when no alternative use is available.