IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 1221:

  The cost of funds from retained earnings for Williams, Inc. is

  A. 7. 0%
  B. 7. 6%
  C. 7. 4%
  D. 8.1%
  A. 7. 0%

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  Explanation

• Question 1222:

  Production of a special order will increase gross profit when the additional revenue from the special order is greater than

  A. The direct materials and labor costs in producing the order.
  B. The fixed costs incurred in producing the order.
  C. The indirect costs of producing the order.
  D. The marginal cost of producing the order.
  D. The marginal cost of producing the order.

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  Explanation

  Gross profit will increase if the incremental or marginal cost of producing the order is less than the marginal revenue. Marginal cost equals the relevant variable costs assuming fixed costs are not affected by the special order.

• Question 1223:

  If Carlisle Company did not have preferred stock, the degree of total leverage would

  A. Decrease in proportion to a decrease in financial leverage.
  B. Increase in proportion to an increase in financial leverage.
  C. Remain the same.
  D. Decrease but not be proportional to the decrease in financial leverage.
  A. Decrease in proportion to a decrease in financial leverage.

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  Explanation

• Question 1224:

  A firm's target or optimal capital structure is consistent with which one of the following?

  A. Maximum earnings per share,
  B. Minimum cost of debt.
  C. Minimum risk.
  D. Minimum weighted-average cost of capital
  D. Minimum weighted-average cost of capital

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  Explanation

  Ideally a firm will have a capital structure that minimizes its weighted-average cost of capital This requires a balancing of both debt and equity capital and their associated risk levels.

• Question 1225:

  What happens to the NPV of a 1-year project if fixed costs are increased from $200 to $300, the firm is profitable, has a 35% tax rate and employs a 12% cost of capital?

  A. NPV decreases by $100.
  B. NPV decreases by $89.29.
  C. NPV decreases by $65.
  D. NPV decreases by $58 .05%
  D. NPV decreases by $58 .05%

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  Explanation

  The $100 increase in costs is tax deductible. Therefore, the after-tax effect is only $65. Discounting the $65 decline at 12% (PV factor = .893) results in a decline in NPV of $58.05.

• Question 1226:

  Rosecrans Manufacturing produces kerosene lanterns. The Company can sell all of its output. Each unit sells for $120,and direct materials costing $48 per unit are added at the start of the frit operation. Other variable caste are immaterial. Production data for one of one of its products is presented below:

  

  Rosecrans hires additional workers at a cost of $500,000 per year to expedite setups and materials handling in the bottleneck operation .As a result, the annual output of the bottleneck operation increases by 500 units. The Change in operating income Attributable to the increase in workers is

  A. $50,000
  B. $36,000
  C. $(14,000)
  D. $(20,000)
  C. $(14,000)

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  Explanation

  Operation 2 is the bottleneck because it is functioning at its Capacity. The incremental annual throughput contribution (revenues- direct materials costs) from adding working to Operation 2 is $36. 000[500 units*($120 unit price-$48 DM per unit)] Because the cost of the additional workers is $50,000, the change in Operating income is $(14,000).

• Question 1227:

  A company's breakeven point in sales dollars may be affected by equal percentage increases in both selling price and variable cost per unit (assume all other factors are constant within the relevant range). The equal percentage changes in selling price and variable cost per unit will cause the breakeven point in sales dollars to

  A. Decrease by less than the percentage increase in selling price.
  B. Decrease by more than the percentage increase in the selling price.
  C. Increase by the percentage change in variable cost per unit.
  D. Remain unchanged.
  D. Remain unchanged.

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  Explanation

• Question 1228:

  Which of the following are steps in a customer value analysis (OVA)?

  l. Determining what customers value.

  Il. Having customers rank the relative significance of the elements of customer value.

  Ill. Evaluating Howell the firm and its competitors perform relative to the elements of customer value.

  IV.

  Focusing on performance with respect to each element of customer value.

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

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  Explanation

  The steps in a OVA are to

  Determine what customers value.

  Assign quantitative amounts to the elements of customer value and have customers rank their relative significance.

  Evaluate how well the firm and its competitors perform relative to each element.

  Focus on performance with respect to each element in relation to competitors in a given market segment.

  Repeat the foregoing steps as circumstances change.

• Question 1229:

  A compensating balance

  A. Compensates a financial institution for services rendered by providing it with deposits of funds.
  B. Is used to compensate for possible losses on a marketable securities portfolio.
  C. Is a level of inventory held to compensate for variations in usage rate and lead time?
  D. Is the amount of prepaid interest on a loan?
  A. Compensates a financial institution for services rendered by providing it with deposits of funds.

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  Explanation

  Banks sometimes require a borrower to keep a certain percentage of the face amount of a loan in a no interest-bearing checking account. This requirement raises the effective rate of interest paid by the borrower. This greater rate compensates a bank for services provided and results in greater profit ability for the financial institution. Funds kept as a compensating balance can often be withdrawn if a certain average balance is maintained.

• Question 1230:

  Effective cost capacity management

  A. Minimizes the value delivered to customers
  B. Maximizes required future investments
  C. Matches the firm's resources with current and future market opportunities
  D. Is limited to eliminating short-term worth
  C. Matches the firm's resources with current and future market opportunities

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  Explanation

  According to SMA 4Y, Measuring the Cost of Capacity, maximizing the value created within an organization starts with understanding the nature and capabilities of all of the company's resources. Capacity is defined from several different perspectives. Managing capacity cost starts when a product is first envisioned. It continues through the subsequent disposal of resources downstream. Effective capacity cost management requires supporting effective matching of a firm's resource with current and future market opportunities.