IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 221:

  Moorhead Manufacturing Company produces two products for which the following data have been tabulated. Fixed manufacturing cost is applied at a rate of $1 .00 per machine hour. The sales manager has had a $160,000 increase in the budget allotment for adverbsing and wants to apply the money to the most profitable product. The products are not substitutes for one another in the eyes of the company's customers.

  

  Suppose the sales manager chooses to devote the entire $160,000 to increased advertising for XY-7, The minimum increase in sales units of XY-7 required to offset the increased advertising is

  A. 640,000 units.
  B. 160,000 units.
  C. 128,000 units.
  D. 80,000 units.
  B. 160,000 units.

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  Explanation

  The contribution margin (CM) for XY-7 is $1 per unit ($4 sales price --$3 variable costs). Thus, 160,000 units of XY-7 will generate an additional $160,000 of CM, which is sufficient to cover the increase in adverting cost

• Question 222:

  If two projects are completely and positively linearly dependent (or positively related), the measure of correlation between them is

  B. + 0.5
  C. +1
  D. 1
  C. +1

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  Explanation

  The measure of correlation when two projects are linearly dependent in a positive way will be +1.0.

• Question 223:

  An automobile compare Thai uses me futures market to set the price Of steel to Protect a profit against price increases is an example of

  A. A short hedge.
  B. A long hedge.
  C. Selling futures to protect the company from loss.
  D. Selling futures to protect against price declines.
  B. A long hedge.

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  Explanation

  A change in prices can be minimize or avoided by hedging. Hedging is the process of using offsetting commitments to cupric or avoid the impact of adverse price movements. The automobile company desires to stabilize the price of steel SG that its cost to the- company will not nose and cut into profits, According the automobile company uses the futures market to create a long hedge, which is a futures contract that is purchased to protect against pence increases.

• Question 224:

  Yipann Corporation is reviewing an investment proposal. The initial cost, as well as other related data for each year. are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its net book value, and there will be no salvage value at the end of the investments life.

  

  Yipann uses a 24% after4axtargetrate of return for new investment proposals. The discount figures for a 24% rate of return are given.

  

  The accounting rate of return for the investment proposal over its life using the initial value of the investment is

  A. 36. 2%
  B. 18.1%
  C. 28.1%
  D. 38.1%
  B. 18.1%

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  Explanation

  The accounting rate of return (or unadjusted rate of return) is computed by dividing the annual increase in accounting net income by the required investment. The average net income over the life of the investment is $19,000 [($15,000 + $17,000 + $19,000 + $21,000 + $23,000) 5 years]. Conse-quently, the accounting rate of return is 18.1% ($19,000 + $105,000).

• Question 225:

  An example of secured short-term financing is

  A. Commercial paper.
  B. A warehouse receipt.
  C. A revolving credit agreement.
  D. Line of credit.
  B. A warehouse receipt.

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  Explanation

  A document of title is usually issued by a bailee covering goods in the bailee's possession or care (UCC 1-201). It represents ownership of the goods and is ordinarily needed to obtain the goods from the baillee. The two major types of documents of title are bills of lading (issued by carriers) and warehouse receipts. A warehouse receipt is issued by a person engaged in the business of storing goods for hire. Security for short-term inventory financing can be arranged if the debtor places its inventory under the control of the lender or its agent (e g , a public warehouse), and the lender holds the warehouse receipts.

• Question 226:

  An assembly plant accumulates its variable and fixed manufacturing overhead costs in a single cost pool, which is then applied to work in process using a single application base. The assembly plant management wants to estimate the magnitude of the total manufacturing overhead costs for different volume levels of the application activity base using a flexible budget formula. If there is an increase in the application activity base that is within the relevant range of activity for the assembly plant, which one of the following relationships regarding variable and fixed costs is true?

  A. The variable cost per unit is constant, and the total fixed costs decrease.
  B. The variable cost per unit is constant, and the total fixed costs increase.
  C. The variable cost per unit and the total fixed costs remain constant.
  D. The variable cost per unit increases, and the total fixed costs remain constant.
  C. The variable cost per unit and the total fixed costs remain constant.

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  Explanation

  Total variable cost changes when changes in the activity level occur within the relevant range. The cost per unit for a variable cost is constant for all activity levels within the relevant range. Thus, if the activity volume increases within the relevant range, total variable costs will increase. A fixed cost does not change when volume changes occur in the activity level within the relevant range. If the activity volume increases within the relevant range, total fixed costs will remain unchanged.

• Question 227:

  Which formula is used to determine the future value that will be available if a given amount of money is invested?

  

  A. Option A
  B. Option B
  C. Option C
  D. Option D
  A. Option A

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  Explanation

  The basic formula used is PV(1 + j)fl = FV i.e., the present value times one plus the interest rate to the nth power equals the future value at the end of the nth time period. When the present amount is known (e.g., A = $100). as well as the interest rate (e.g., i = 10%) and the number of time pentodes (e.g., n = 2). the future value can be calculated as $100(1 + .10)2 $121. A is typical' used in the formula, but it stands (or the PV or FV (whichever is not on the other side of the equals sign).

• Question 228:

  A statement that "80% of our profits come from 20% of our products" is an example of the application of

  A. Pareto analysis
  B. Benchmarking
  C. Value chain analysis
  D. Life-cycle costing
  A. Pareto analysis

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  Explanation

  Pareto analysis assumes that 80% of results are caused by 20% of people or events.

• Question 229:

  A company makes a product that sells for $30. During the coming year, fixed costs are expected to be $180.000, and variable costs are estimated at $26 per unit. How many units must the company sell to break even?

  A. 6,000
  B. 6,924
  C. 45,000
  D. 720,000
  C. 45,000

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  Explanation

  The contribution to overhead per unit is $4. 00. Fixed costs of $180,000 divided by the contribution of $4. 00 gives breakeven sales volume of 45,000 units.

• Question 230:

  All of the following are examples of imputed costs except

  A. The stated interest paid on a bank loan.
  B. The use of the firm's internal cash funds to purchase assets.
  C. Assets that are considered obsolete that maintain a net book value.
  D. Decelerated depreciation.
  A. The stated interest paid on a bank loan.

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  Explanation

  An imputed cost is one that has to be estimated. Its a cost that exists but is not formally recognized in the accounting system and is the result of a process designed to recognize economic reality. An imputed cost is therefore relevant to the decision-making process. For example, the stated interest on a bank loan is not an imputed cost because it is specifically stated and requires a dollar outlay. But the cost of using retained earnings as a source of capital is unstated and has to be imputed.