IMANET IMANET Certifications IMANET-CMA Questions & Answers

• Question 91:

  In which product-mix pricing strategy is it appropriate for the seller to accept any price that exceeds the storage and delivery costs for the product?

  A. By-product pricing.

  B. Optional-product pricing.

  C. Captive-product pricing.

  D. Product-bundle pricing.

  Correct Answer: A

  A by-product is a product of relatively minor importance generated during the production of one or more other products. Its production entails no additional costs. Any amount received above the storage and delivery costs for a by-product allows the seller to reduce the main product's price to make it more competitive.

• Question 92:

  Which of the following pricing policies involves the selling company setting freight charges to customers at the actual average freight cost?

  A. Freight absorption pricing

  B. Uniform delivered pricing

  C. Zone pricing

  D. FOB-origin pricing.

  Correct Answer: B

  In uniform delivered pricing, the company charges the same price, inclusive of shipping costs, to all customers regardless of their location. This price is the company's average actual freight cost. Thus, both nearby and distant customers are charged the same amount. This policy is easy to administer, permits the company to advertise one price nationwide, and facilitates marketing to faraway customers.

• Question 93:

  Market-skimming pricing strategies could be appropriate when

  A. No buyers want the product at a high price.

  B. The costs of producing a small volume are low.

  C. Competitors can easily enter the market

  D. The product is of poor quality.

  Correct Answer: B

  Market-skimming pricing is used when a new product is introduced at the highest price possible given the benefits of the product. For market skimming to work, the product must appear to be worth its price, the costs of producing a small volume cannot be so high that they eliminate the advantage of charging more, and competitors cannot enter the market and undercut the price.

• Question 94:

  Which of the following price adjustment strategies is designed to stabilize production for the selling firm'?

  A. Cash discounts

  B. Quantity discounts.

  C. Functional discounts.

  D. Seasonal discounts

  Correct Answer: D

  Seasonal discounts are designed to smooth production by the selling firm. For example, a ski manufacturer offers seasonal discounts to retailers in the spring and summer to encourage early ordering.

• Question 95:

  Buyer-based pricing involves

  A. Adding a standard markup to the cost of the product.

  B. Determining the price at which the product will earn a target profit.

  C. Basing prices on the product's perceived value

  D. Basing prices on competitors' prices.

  Correct Answer: C

  Buyer-based pricing involves basing prices on the products perceived value rather than on me seller's cost. Nonprice variables in the marketing mix augment the perceived value. For example, a cup of coffee may have a higher price at an expensive restaurant than at a fast food outlet

• Question 96:

  Which one of the graphs depicts the demand curve for presage goods?

  

  

  A. Option A

  B. Option B

  C. Option C

  D. Option D

  Correct Answer: C

  Over some intermediate range of prices, the reaction to a price increase (or prestige goods is an increase, not a decrease, in the quantity demanded. Within this range, the demand curve is upward sloping. The reason is that consumers interpret the higher price to indicate a better or more desirable product. Above some price level, the relation between price and quantity demanded will again become negatively sloped.

• Question 97:

  Jorelle Company's financial staff has been requested to review a proposed investment in new capital equipment. Applicable financial data is presented below. There will be no salvage value at the end of the investment's life and, due to realistic depreciation practices, it is estimated that the salvage value and net book value are equal at the end of each year. All cash flows are assumed to take place at the end of each year. For investment proposals, Jorelle uses a 12% after-tax target rate of return.

  

  Discounted Factors for a 12% Rate of Return

  

  The traditional payback period for the investment proposal is

  A. Over5years.

  B. 2.23 years.

  C. 1.65 years.

  D. 2.83 years.

  Correct Answer: B

• Question 98:

  Jorelle Company financial staff has been requested to review a proposed investment in new capital equipment. Applicable financial data is presented below. There will be no salvage value at the end of the investment's life and, due to realistic depreciation practices, it is estimated that the salvage value and net book value are equal at the end of each year.. All cash flows are assumed to take place at the end of each year. For investment proposals, Jorelle uses a 12% after-tax target rate of return.

  

  Discounted Factors for a 12% Rate of Return

  

  The net present value for the investment proposal is

  A. $106,160

  B. $(97,970)

  C. $356,160

  D. $96,560

  Correct Answer: A

  The NPV is the sum of the present values of all cash inflows and outflows associated with the proposal. If the NPV is positive, the proposal should be accepted. The NPV is determined by discounting each expected cash flow using the appropriate 12% interest factor for the present value of $1. Thus, the NPV is $106,160 [(.89 x $120,000) + (.80 x $108,000) + (.71 x $96,000) + (.64 x $84,000) + (.57 x $72,000) --(1.00 x $250,000)].

• Question 99:

  Jorelle Company's financial staff has been requested to review a proposed investment in new capital equipment. Applicable financial data is presented below. There will be no salvage value at the end of the investment's life and, due to realistic depreciation practices, it is estimated that the salvage value and net book value are equal at the end of each year. All cash flows are assumed to take place at the end of each year. For investment proposals, Jorelle uses a 12% after-tax target rate of return.

  

  Discounted Factors for a 12% Rate of Return

  

  The accounting rate of return on the average investment proposal is

  A. 12.0%

  B. 17.2%

  C. 28.0%

  D. 34.4%

  Correct Answer: D

• Question 100:

  The bailout payback method

  A. Is used by firms with federally insured loans.

  B. Calculates the payback period using the sum of the net cash flows and the salvage value.

  C. Calculates the payback period using the difference between net cash inflow and the salvage value.

  D. Estimates short-term profit ability.

  Correct Answer: B

  The bailout payback period is the length of time required for the sum of the cumulative net cash inflow from an investment and its salvage value to equal the original investment. The bailout payback method measures 11the risk to the investor if the investment must be abandoned. The shorter the period, the lower the risk.