IMANET IMANET Certifications IMANET-CMA Questions & Answers

• Question 1321:

  Which of the following is not an example of synergy?

  A. A shopping mail with several businesses providing different products and performing different services

  B. A store provides warranties on automobile parts in order to maximize customer value

  C. A manufacturing company hires a new manger with technological experience lacking in the company

  D. Military Huumvees are converted into sports utility vehicles for sale to civilians

  Correct Answer: B

  Synergy occurs when the combination of formerly separate elements has a greater effect than the sum of their individual effects. It is unclear here whether the store is a car dealership or a parts shop. Therefore, this is seen more as an operational service strategy that seeks to gain a competitive advantage and maximize customer value by providing services such as warranties, rather than market synergy. Market synergy arises when products or services have positive complementary effects. (i.e., a parts shop and a service warranty on parts)

• Question 1322:

  Capacity expansion is also referred to as

  A. Market penetration

  B. Market development

  C. Product development

  D. Diversification

  Correct Answer: A

  Market penetration is growth of existing products or development of existing markets. It occurs in mature firms within an industry

• Question 1323:

  When demand uncertainty is low, firms tend to adopt a strategy of preemptive expansion. The conditions for successful preemption expansion include which of the following?

  A. The firm should avoid market signals that alert competitors to the firm's plans

  B. The expansion should be small relative to the market to minimize risk

  C. Economic of scale should be large relative to demand

  D. The business should be strategically vital to competitors

  Correct Answer: C

  Economics of scale should be large in relation to demand, or the learning-curve effect should give an initial large investor a permanent cost advantage. For example, the preemptive firm may be able to secure too much of the market to allow a subsequent firm to invest at the efficient scale. That is, the residual demand available to be met by the later firm is less than the efficient scale of production. The later firm therefore must choose between intense competition at the efficient scale or a cost disadvantage.

• Question 1324:

  What is the key strategic issues when a firm is considering capacity expansion?

  A. Forecasting long-term demand

  B. Analyzing the behavior of competitors

  C. Identifying options

  D. Avoiding industry overcapacity

  Correct Answer: D

  Whether to expand capacity is a major strategic decision because of the capital required, the difficulty of forming accurate expectations, and the long time frame of the lead times and the commitment. The key forecasting problems are long-term demand and behavior of competitors. The key strategic issue is avoidance of industry overcapacity. Undercapacity in a portable industry trends to be a short-term issue. Profits ordinarily lure additional investors. Overcapacity trends to be a long-term problem because firms are more likely to compete intensely rather than reverse their expansion

• Question 1325:

  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

  Correct Answer: C

  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.

• Question 1326:

  The capital budgeting model that is ordinarily considered the best model for long-range decision making is the

  A. Payback model

  B. Accounting rate of return model

  C. Unadjusted rate of return model

  D. Discounted cash flow model

  Correct Answer: D

  The capital budgeting methods that are generally considered the best for long-range decision making are the internal rate of return and net present value methods. These are both discounted cash flow methods

• Question 1327:

  Capital budgeting techniques are least likely to be used in evaluating the

  A. Acquisition of new aircraft by a cargo company

  B. Design and implementation of a major advertising program

  C. Adoption of a new method of allocating nontraceable costs to produce lines

  D. Sale by a conglomerate of a n unprofitable division

  Correct Answer: C

  Capital budgeting is the process of planning expenditures for investments hat are expected to generate returns over a period of more than one year. Thus, capital budgeting concerns the acquisition or disposal of long-term assets and the financing ramifications of such decisions. The adoption of a new method of allocating nontracble costs to product lines has no effect on a company's cash flows, does not relate to the acquisition of long- term assets , and is not concerned with financing. Hence, capital budgeting is irrelevant to such a decision.

• Question 1328:

  The capital budget is a(n)

  A. Plan to ensure that sufficient funds are available for the operating needs of the company

  B. Exercise that sets the long-range goals of the company including the consideration of external influences

  C. Plan that coordinates and communicates a company's plan for the coming year to all departments and divisions

  D. Plan that assesses the long-term needs of the company for pant and equipment purchases

  Correct Answer: D

  Capital budgeting is the process of planning expenditures for long-lived assets. It involves choosing among investment proposals using a ranking procedure. Evaluations are based on various measures involving rate of return on investment.

• Question 1329:

  Which of the following is a market-oriented definition of a business versus a product- oriented definition of a business?

  A. We make air conditioners and furnaces

  B. We supply energy

  C. We produce movies

  D. We sell men's shirts and pants

  Correct Answer: B

  Business should be defined in market terms, that is, in terms of needs and customer groups. Moreover, a distinction should be made between a target market definition and as strategic market definitions. For example, a target market for a railroad might be freight hauling, but a strategic market might be transportation of any goods and people . Accordingly, stating that a business supplies energy is a market-oriented definition as opposed to the product-oriented definition. Moreover, it is also a strategic market definition.

• Question 1330:

  The first step in the sales planning process is to

  A. Assemble all the data that are relevant in developing a comprehensive sales plan

  B. Develop management guidelines specific to sales planning, including the sales planning process and planning responsibilities

  C. Prepare a sales forecast consistent with specified forecasting guidelines, including assumptions

  D. Secure management commitment to attain the goals specified in the comprehensive sales plan

  Correct Answer: B

  Sales planning is a starting point for many other plans. The resources required, revenues to be earned, and costs to be incurred depend on sales. The sales plan of an operating unit should include as much specific information from that unit's management as possible, but must conform to the strategic plans or corporate management. Thus, top management must provide a context within which operational managers can prepare their plans. Corporate support include economic forecasts, overall market sales forecasts, and capital budgets.