IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 191:

  The following information applies to Oxford Company:

  

  A cash payment equal to 50% of purchases is made at the time of purchase1 and 25% is paid in each of the next 2 months. Purchases for the previous November and December were $140,000 per month. Payroll for a month is 10% of that month's sales, and other operating expenses are 15% of the following month's sales (July sales were $210,000). Interest payments were $25,000 paid quarterly in January and April. Oxford's cash disbursements for the month of April were

  A. $130,000
  B. $140,000
  C. $210,000
  D. $235,000
  D. $235,000

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  Explanation

• Question 192:

  Bombastic Bathrooms manufacturers a certain style of plumbing fixture in four materials. Price and cost data for each are given below:

  

  The constraint in Bombastic manufacturing process is the

  A. Boring department.
  B. Machining department.
  C. Finishing department.
  D. Inspection and packing activity.
  B. Machining department.

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  Explanation

  The constraint is the part of a process that holds up the rest of the process. Since Bombastic Bathrooms is producing equal quantities of the four fixtures, the machining department is the bottleneck. It requires a total of 19 hours for one of each model to move through. The boring department requires 18, finishing 11, and inspection and packing 4.

• Question 193:

  Which of the following qualitative factors favors the buy choice in an insourcing vs. outsourcing decision?

  A. Maintaining a long-run relationship with suppliers is desirable.
  B. Quality control is critical.
  C. Idle capacity is available.
  D. All of the answers are correct.
  A. Maintaining a long-run relationship with suppliers is desirable.

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  Explanation

  The maintenance of long-run relationships with suppliers may become paramount in a make-or-buy decision. Abandoning long-run supplier relationships may cause difficulty in obtaining needed parts when terminated suppliers find it advantageous not to supply parts in the future.

• Question 194:

  The human tendency to judge positively-presented information favorably and negatively- presented information unfavorably is known as

  A. Bounded rationality.
  B. Framing error.
  C. Escalation.
  D. Overconfidence.
  B. Framing error.

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  Explanation

  Three problems that arise in decision making are framing error, escalation, and overconfidence. Framing error is the human tendency to judge positively-presented information favorably and negatively-presented information unfavorably.

• Question 195:

  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.Assume the rental opportunity does not exist and Richardson Motors could use the idle capacity to manufacture another product that would contribute $104,000 per month. If Richardson chooses to manufacture the ten T305 units in order to maintain quality control, Richardson's opportunity cost is

  A. $68,000.
  B. $88,000.
  C. $8,000.
  D. $(96,000).
  C. $8,000.

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  Explanation

  For 10 units, the additional cost of purchasing is $96,000. However, the net effect of purchasing is a gain of $8,000($104,000 contribution from making another product - $96,000). Opportunity cost is the benefit from the next best alternative use of the resources. Hence, the company's opportunity cost of making the part is $8,000.

• Question 196:

  A company that sells its single product for $40 per unit uses cost-volume-profit analysis in its planning. The compans after-tax net income for the past year was $1.1 88,000 after applying an effective tax rate of 40%. The projected costs for manufacturing and selling its single product in the coming year are in the next column.

  

  The dollar sales volume required in the coming year to earn the same after4ax net income as the past year is

  A. $20,160,000
  B. $21,600,000
  C. $23,400,000
  D. $26,400,000
  B. $21,600,000

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  Explanation

• Question 197:

  Find the required rate of return for equity investors of a firm with a f of 1.2 when the ask- free rate is 6%, the market risk premium is 4%, and the return on the market is 10%.

  A. 4. 80%
  B. 6%
  C. 10%
  D. 10.80%
  D. 10.80%

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  Explanation

  The capital asset pacing model adds the risk-free rate to the product of the coefficient (a erasure of risk) and the difference between the market return and the risk-free rate. Thus, the required rate of return is 10.8% [6% + 1.2(4%)].

• Question 198:

  Shown below is a forecast of sales for Cooper Inc. for the first 4 months of the year (all amounts are in thousands of dollars).

  

  On average, 50% of credit sales are paid for in the month of sale, 30% in the month following the sale, and the remainder is paid 2 months after the month of sale. Assuming there are no bad debts1the expected cash inflows for Cooper in March is

  A. $138,000
  B. $122,000
  C. $119,000
  D. $108,000
  C. $119,000

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  Explanation

  Cash inflows for March would consist of 50% of March credit sales ($90 x 50% = 30% of February credit sales ($120 x 30% = $36), plus 20% of January credit sales ($100 x 20% = $20), plus sales for March of $18. Consequently, total collections equal $119,000.

• Question 199:

  Firms that sell products worldwide are most likely to have the lowest costs with a marketing mix that is

  A. Adapted to each market.
  B. Standardized for all markets.
  C. A combination of new and adapted products in each market
  D. A combination of standardized products and adapted promotions.
  B. Standardized for all markets.

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  Explanation

  Firms that operate globally must choose a marketing program after considering the need for adaptation to local circumstances. The possibilities lie on a continuum from a purely standardized marketing mix to a purely adapted marketing mix. The former chooses to standardize products, promotion, and distribution. The latter adapts the elements of the mix to each local market. Worldwide standardization of all elements should be the lowest cost marketing strategy. However, even well-established global brands ordinarily undergo some adaptation to local markets.

• Question 200:

  A company has made the decision to finance next year's capital projects through debt rather than additional equity. The benchmark cost of capital for these projects should be

  A. The before-tax cost of new-debt financing.
  B. The after-tax cost of new-debt financing
  C. The cost of equity financing.
  D. The weighted-average cost of capital.
  D. The weighted-average cost of capital.

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  Explanation

  A weighted average of the costs of all financing sources should be used, with the weights 11determined by the usual financing proportions. The terms of any financing raised at the time of initiating a particular project do not represent the cost of capital for the firm. When a firm achieves its optimal capital structure, the weighted-average cost of capital is minimized