IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 331:

  What type of synergy exists when products or services have positive complementary effects?

  A. Market synergy
  B. Cost Synergy
  C. Technological synergy
  D. Management synergy
  A. Market synergy

  ---

  Explanation

  Market synergy arises when products or services have positive complementary effects Shopping mails reflect this type of synergy.

• Question 332:

  A project requires an initial cash investment at its inception of $10,000, and no other cash outflows are necessary. Cash inflows from the project over its 3-year life are $6,000 at the end of the first year, $5,000 at the end of the second year, and $2,000 at the end of the third year. The future value interest factors for an amount of $1 at the firm's desired rate of return of 8% are

  

  The present value interest factors for an amount of $1 for three periods are as follows:

  

  The modified IRR (MIRR)for the project is closest to

  A. 8%
  B. 9%
  C. 10%
  D. 12%
  D. 12%

  ---

  Explanation

• Question 333:

  The maximum benefit forgone by using a scarce resource for a given purpose and not for the next-best alternative is called?

  A. Opportunity cost.
  B. Sunk cost.
  C. Incremental cash flow.
  D. Net initial investment.
  A. Opportunity cost.

  ---

  Explanation

  An opportunity cost is the maximum benefit forgone by using a scarce resource for a given purpose and not for the next-best alternative. In capital budgeting, the most basic application of this concept is the desire to place the company's limited funds in the most promising capital project(s).

• Question 334:

  Which one of the following transactions does not change either the current ratio or the total current assets?

  A. A cash advance is made to a divisional office.
  B. A cash dividend is declared.
  C. Short-term notes payable are retired with cash.
  D. A fully depreciated asset is sold for cash.
  A. A cash advance is made to a divisional office.

  ---

  Explanation

  The current ratio is calculated by dividing current assets by current liabilities. Thus, any transaction that changes current assets or current liabilities changes the current ratio. A cash advance to a divisional office does not change current assets because the cash (a current asset) will be replaced by a receivable (a current asset). Current liabilities are also unaffected, so the cash advance affects neither the current ratio nor total current assets.

• Question 335:

  Donnelly Corporation manufactures and sells T-shirts imprinted with collage names and slogans. Last year, the shirts sold for $7. 50 each, and the variable cost to manufacture them was $2. 25 per unit, The company needed to sell 20.000 shirts to break even. The net income last year was $5,040. Donnelly's expectations for the coming year include the following: The sales price of the T-shirts will be $9 Variable cost to manufacture will increase by one-third Fixed costs will increase by 10% The income tax rate of 40% will be unchanged

  Sales for the coming year are expected to exceed last year's by 1000 units. If this occurs. Donnelly's sales volume in the coming year will be?

  A. 22,600 units.
  B. 21,960units.
  C. 23. 400 units.
  D. 21,000 units.
  A. 22,600 units.

  ---

  Explanation

  Because last year's after-tax profit was $5,040, pretax net income must have been $8.400 [$5,040 ?(1 --40% tax rate)] Because fixed costs have been fully recovered at the BEP, all of the UCM beyond that sales level is included in pretax net income. The UCM was $5. 25, so the units sold in excess of the 20,000-unit BEP equaled 1,600 ($8,400 ?$5. 25). If 21.600 total units were sold last year, an increase of 1.000 units results in sales of 22,600 units

• Question 336:

  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 first operation. Other variable costs are immaterial. Production data for one of its products is presented below:

  

  Operation 1 produces 500 unsolvable units and Operation 2 also produces 500 unsolvable units. The relevant cost of the unsolvable units to Rosecrans is

  A. $24,000
  B. $60,000
  C. $84,000
  D. $120000
  C. $84,000

  ---

  Explanation

  The cost of the unsolvable units in Operation 1 consists solely of the wasted direct materials because idle capacity is available to replace the defective units. As a consequence, Operation 1 can still transfer the maximum 150,000 units that Operation 2 can process, and no throughput contribution is lost. The cost of the unsolvable units in Operation 1 is thus $24000 (500 units x $48 DM). In Operation 2, however, the lost throughput contribution is an opportunely cost because no idle capacity exists to replace the defective units. The cost of the unsolvable units in Operation 2 is $60,000 {(500 units x $48 DM) + [500 units x ($120 unit price --$48 DM cost)]}. Hence, the total relevant cost of the unsolvable units is $84,000 ($24,000 + $60,000). [

• Question 337:

  Advertising media macro timing involves

  A. Scheduling advertising outlays for best effect during a short period.
  B. Considering seasonal and business cycle factors.
  C. Choosing the media to affect a targeted audience.
  D. Choosing the vehicle within a medium for a certain size audience.
  B. Considering seasonal and business cycle factors.

  ---

  Explanation

  Media timing involves considering seasonal and business cycle factors (macro timing). Variables are carryover effects of advertising and habitual behavior (i.e.1 repeat purchasing independent of advertising). The micro timing issue is how to schedule advertising outlays for best effect during a short period.

• Question 338:

  City' Development, Inc. is considering a new investment project which will involve building a large office block in Frankfurt-am-Main. The firm's financial analysis department has estimated that the proposed investment has the following

  estimated rate of return distributions. Rate of Return Probability' (5%) 30%

  10% 50%

  20% 20%

  Calculate the expected rate of return.

  A. 5. 5%
  B. 7. 5%
  C. 10.5%
  D. 117%
  B. 7. 5%

  ---

  Explanation

• Question 339:

  What s the economic order quantity' for an auto dealer selling 3000 cars perinea rata cost of $700 per order and a carrying cost of $125 per automobile?

  A. 130 cars.
  B. 168 cars
  C. 183 cars.
  D. 336 cars.
  C. 183 cars.

  ---

  Explanation

  If a is the variable cost per purchase order, D is the demand in units, and k is the unit carrying cost, the EOQ formula is:

  

• Question 340:

  On January 1 of the current year, Bongo Company issued convertible bonds with $1000 per value and a conversion ratio of 50. Which of the following should be the market price per share of the company's common stock on January 1?

  A. Under$20
  B. $20
  C. Between $20 and $50.
  D. Above $50
  A. Under$20

  ---

  Explanation

  The conversion price, in this case $20 ($1,000 ?50 shares), is normally greater than the market price at the time the bonds are issued. Therefore, the market price must be less than $20.