IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 91:

  When only differential manufacturing costs are taken into account for special-order pricing, an essential assumption is that

  A. Manufacturing fixed and variable costs are linear.
  B. Selling and administrative fixed and variable costs are linear.
  C. Acceptance of the order will not affect regular sales.
  D. Acceptance of the order will not cause unit selling and administrative variable costs to increase.
  C. Acceptance of the order will not affect regular sales.

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  Explanation

  Granting a lower-than-normal price for a special order has potential ramifications for regular sales because other customers may demand the same price. Thus, the decision to consider differential manufacturing costs only should be based on a determination that all other costs are not relevant, that is, that these other costs do not vary with the option chosen.

• Question 92:

  The technique that measures the estimated performance of a capital investment by dividing the project's annual after4ax net income by the average investment cost is called the

  A. Average rate of return method.
  B. Internal rate of return method.
  C. Capital asset pricing model.
  D. Accounting rate of return method.
  D. Accounting rate of return method.

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  Explanation

  The accounting rate of return is calculated by dividing the annual after-tax net income from a project by the book value of the investment in that project. The time value of money is ignored.

• Question 93:

  Fitzgerald Company is planning to acquire a $250,000 machine that will provide increased efficiencies, thereby reducing annual operating costs by $80,000. The machine will be depreciated by the straight-line method over a 5-year life with no salvage value at the end of 5 years. Assuming a 40% income tax rate, the machine's payback period is

  A. 3. 13 years.
  B. 8.33 years.
  C. 3. 68 years.
  D. 5. 21 years.
  C. 3. 68 years.

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  Explanation

• Question 94:

  Harper and her band want to put on a concert. They have looked at two varies a small one and a large one, and have compiled the following information

  

  The variable cost per customer for both venues s $2 The band will charge $10 per customer for the small venue or $14 for U large venue. what is the breakeven point of the large venue?

  A. 358
  B. 375
  C. 381
  D. 417
  D. 417

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  Explanation

• Question 95:

  An example of a carrying cost is

  A. Disruption of production schedules.
  B. Quantity discounts lost.
  C. Handling costs.
  D. Spoilage.
  D. Spoilage.

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  Explanation

  Inventory costs fall into three categories: order or set-up costs, carrying (holding) costs, and stock out costs. Carrying costs include storage costs for inventory items plus opportunity cost (i.e., the cost incurred by investing in inventory rather than making an income-earning investment). Examples are insurance, spoilage, interest on invested capital, obsolescence, and warehousing costs.

• Question 96:

  Catherine and Co. has extra cash at the end of the year and is angling the beltways invest the funds. The company should invest in a project only if the

  A. Expected return on the project exceeds the return on investments of comparable risk.
  B. Return on investments of comparable risk exceeds the expected return on the project.
  C. Expected return on the project is equal to the return on investments of comparable risk.
  D. Return on investments of comparable risk equals the expected return on the project.
  A. Expected return on the project exceeds the return on investments of comparable risk.

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  Explanation

  Investment risk is anal wed in terms of the probability that the actual return on an investment will be lower than the expected return. Comparing a project's expected return with the return on an asset of similar risk helps determine whether the project is worth investing in. If the expected return on a project exceeds the return on an asset of comparable risk, the project should be pursued.

• Question 97:

  Geary Manufacturing has assembled the data appearing in the next column pertaining to two products. Past experience has shown that the unavoidable fixed manufacturing factory overhead included in the cost per machine hour averages $10. Geary has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. Total machine capacity is 50,000 hours.

  

  If Geary Manufacturing desires to follow an optimal strategy, it should produce a

  A. 25,000 electric mixers and purchase all other units as needed.
  B. 20000 blenders and 15,000 electric mixers, and purchase all other units as needed.
  C. 20,000 blenders and purchase all other units as needed.
  D. 28,000 electric mixers and purchase all other units as needed.
  B. 20000 blenders and 15,000 electric mixers, and purchase all other units as needed.

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  Explanation

• Question 98:

  Richardson Motors uses 10 units of Part No. T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented as follows:

  

  Materials handling, which is not included in manufacturing overhead, represents the direct variable costs of the receiving department that are applied to direct materials and purchased components on the basis of their cost. Richardson's annual manufacturing overhead budget is one-third variable and two-thirds fixed. Simpson Castings, one of Richardson's reliable vendors, has offered to supply T305 at a unit price of $30,000.If Richardson Motors purchases the ten T305 units from Simpson Castings, the capacity Richardson used to manufacture these parts would be idle. Should Richardson decide to purchase the parts from Simpson, the out-of- pocket cost per unit of T305 would

  A. Decrease $6,400.
  B. Increase $3,600.
  C. Increase $9,600.
  D. Decrease $12,400.
  C. Increase $9,600.

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  Explanation

  The out-of-pocket cost of making the part equals the total manufacturing cost minus the fixed overhead, or $26400 {$42,400 -[(2 + 3) x $24,000]}. The cost of the component consists of the $30,000 purchase price plus the $6,000 (20% of cost) of variable receiving costs, or a total of $36,000. Thus, unit out-of-pocket cost would increase by $9,600 if the components were purchased.

• Question 99:

  Market targeting is the process of evaluating and selecting market segments. A firm that elects full market coverage

  A. Reduces its costs by differentiated marketing.
  B. Ordinarily bases its approach on product specialization.
  C. Targets a super segment.
  D. May adopt an undifferentiated marketing approach based on a single offering.
  D. May adopt an undifferentiated marketing approach based on a single offering.

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  Explanation

  Full market coverage provides all the products wanted by all customer groups. This approach is possible only for a very large firm. Undifferentiated marketing covers the market by mass distribution and advertising of one offering. Costs of RandD, production, transportation, inventory, marketing research, and product management are minimized, and a lower price can be charged to attract price sensitive buyers.

• Question 100:

  A weak competitor in a high-growth market is sometimes called a

  A. Dog.
  B. Question mark.
  C. Cash cow.
  D. Star.
  B. Question mark.

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  Explanation

  A weak competitor En a high-growth market is called a question mark. They need large amounts cash to finance growth. However, if market share increases substantially. the question mark can become a star.