IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 1081:

  A working capital technique that increases the payable float and therefore delays the outflow of cash is

  A. Concentration banking.
  B. A draft.
  C. Electronic Data Interchange (EDI).
  D. A lockbox system.
  B. A draft.

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  Explanation

  Payment by draft, a three-party instrument in which the drawer orders the drawer to pay money to the payee, is a means of slowing cash outflows. A check is the most common type of draft. Check float arises from the delay between expenditure and the clearing of the check through the banking system.

• Question 1082:

  Which one of the following reasons is not a significant reason for planning in an organization?

  A. Promoting coordination among operating units
  B. Forcing managers to consider expected future trends and conditions
  C. Developing basis for controlling operations
  D. Monitoring profitable operations
  D. Monitoring profitable operations

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  Explanation

  Monitoring profitable operations is not a significant reason for planning. Monitoring is a control function, whereas planning has a control purpose that precedes control in the planning-control cycle. Planning establishes standards against which is the control function compares preliminary or final results.

• Question 1083:

  All of the following are the rates used in net present value analysis except for the

  A. Cost of capital.
  B. Hurdle rate.
  C. Discount rate.
  D. Accounting rate of return.
  D. Accounting rate of return.

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  Explanation

  The NPV is the excess of the present values of the estimated cash inflows over the net cost of the investment. The discount rate used is sometimes the cost of capital or other hurdle rate designated by management. This rate is also called the required rate of return. The accounting rate of return is never used in NPV analysis because it ignores the time value of money; it is computed by dividing the accounting net income by the investment.

• Question 1084:

  Strategic marketing involves

  A. Market opportunity analysis
  B. Developing a brand
  C. Developing a brand mage
  D. Delivering value
  A. Market opportunity analysis

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  Explanation

  The strategic marketing stage includes choosing target markets. These signets provide the best marketing opportunities. A "marketing opportunity is an area of buyer need or potential interest in which a company can perform profitably" (Kotler, Marketing Management). Market opportunity analysis determines whether benefits (value) can be communicated effectively to the target markets, the communication can be done with a cost effective promotional mix and distribution strategy, the firm has the necessary resources, and the firm can provide the chosen value better than its possible competitors.

• Question 1085:

  Advertising budgets tend to decrease as a percentage of sales when

  A. Market share is already high.
  B. Clutter from noncompetitive messages exists.
  C. Products are new.
  D. Substitutability is high.
  A. Market share is already high.

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  Explanation

  Advertising costs to maintain share decline as a percentage of sales when that share is large. [increasing market share is more costly.

• Question 1086:

  Epaulets perception may preclude the decision maker from seeing the correct problem. Which of the following is an example of faulty perception?

  A. A person's needs do not influence what is observed.
  B. A person does not see what (s) he is trained to see.
  C. Group pressure may influence which problems are perceived.
  D. A person does not see what (s) he expects to see.
  C. Group pressure may influence which problems are perceived.

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  Explanation

  The inability to see all aspects of a situation may prevent accurate problem definition. This inability may be caused by faulty perception. Faulty perception includes group pressure influencing which problems are perceived or how the problems are defined.

• Question 1087:

  Which of the following is not a cost of decentralization?

  A. Dysfunctional decision making owing to disagreements of managers regarding overall goals and subgoals of the individual decision makers
  B. A decreased understanding of the overall goals of the organization.
  C. Increased costs for developing the information system.
  D. Decreased costs of corporate-level staff services and management talent
  D. Decreased costs of corporate-level staff services and management talent

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  Explanation

  The costs of centralized staff may actually decrease under decentralization. On the other hand, the corporate staff and the various services they provide may have to be duplicated in venous divisions, thereby increasing overall costs. Suboptimal decisions may result from disharmony among organizational goals, subgoals of the division, and the individual goals of managers. The overall goals of the firm may more easily be misunderstood because individual managers may not see the larger picture. Moreover, the information system necessary for adequate reporting in a decentralized mode will tend toward redundancy, which increases costs.

• Question 1088:

  Mercken Industries is contemplating four projects, Project P, Project Q, Project P, and Project S. The capital costs and estimated after-tax net cash flows of each mutually exclusive project are listed below. Mercken's desired after-tax opportunity cost is 12%, and the company has a capital budget for the year of $450,000. Idle funds cannot be reinvested at greater than 12%.

  

  If Mercken is able to accept only one project, the company would choose

  A. Project P.
  B. Project 0 because it has the highest net present value.
  C. Project P because it has the highest internal rate of return.
  D. Project P because it has the shortest payback period.
  B. Project 0 because it has the highest net present value.

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  Explanation

  Because unused funds cannot be invested at a rate greater than 12%, the company should select the investment with the highest net present value. Project Q is preferable to P because its return on the incremental $45000 invested ($235,000 cost of Q--$190,000 cost of P) is greater than 12%.

• Question 1089:

  Brown and Company uses the internal rate of return (IRR) method to evaluate capital projects. Brown is considering four independent projects with the following lRRs:

  

  Brown's cost of capital is 13%. Which one of the following project options should Brown accept based on IRR?

  A. Projects I and II only.
  B. Projects Ill and IV only.
  C. Project IV only.
  D. Projects I, II, Ill and IV.
  B. Projects Ill and IV only.

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  Explanation

  When sufficient funds are available, any capital project whose internal rate of return (IRR) exceeds the company cost of capital should be accepted.

• Question 1090:

  Kallert Manufacturing currently uses the company's budget only as a planning tool The company decided that it would be beneficial to also use budgets for control purposes. In order to implement this change, the management accountant must

  A. Appoint a budget director
  B. Organize a budget committee
  C. Develop forecasting procedures.
  D. Synchronize the budgeting and accounting system with the organizational structure.
  D. Synchronize the budgeting and accounting system with the organizational structure.

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  Explanation

  A budget can be many tools in one. It can be used for planning, communications, motivation, and control. An internal control structure includes the accounting system. For the budgetary process to serve effectively as a control function, it must be integrated with that system and the organizational structure The budget provides the standards for evaluating the data generated by the accounting system. Budgets also directly supply certain internal accounting data Examples are standard costs. Relating the budgeting and accounting systems to the organizational structure will therefore enhance control by transmitting data and assigning variances to the proper organizational subunits.