IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 341:

  Which one of the following is most relevant to a manufacturing equipment replacement decision?

  A. Original cost of the old equipment.
  B. Disposal price of the old equipment.
  C. Gain or loss on the disposal of the old equipment.
  D. A lump-sum write-off amount from the disposal of the old equipment.
  B. Disposal price of the old equipment.

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  Explanation

  Management decision analysis is based on the concept of relevant costs. Relevant costs differ among decision choices. Thus, incremental or differential costs are always relevant. Because they were incurred in the past, historical costs, such as the original cost of the equipment, are not relevant. Similarly, any gain or loss on the old equipment is not relevant because this amount is based on the historical cost. However, the disposal price of the old equipment is relevant because it involves a future cash inflow that will not occur unless the equipment is disposed of.

• Question 342:

  A manufacturer has been approached by a new customer who wants to place a one-time order for a component similar to one that the manufacturer makes for another customer. Existing sales will not be affected by acceptance of this order. The manufacturer has a policy of setting its targeted selling price at 60% over full manufacturing cost. The manufacturing costs and the targeted selling price for the existing product are presented as follows.

  

  The manufacturer has excess capacity to produce the quantity of the component desired by the new customer. The direct materials used in the component for the new customer would cost the manufacturer $0.25 less than the component currently being made. The variable selling expenses (packaging and shipping) would be the same, or $0.90 per unit. Under these circumstances, the minimum unit price at which the manufacturer would accept the special order is one exceeding.

  A. $8.35
  B. $9.25
  C. $14. 00
  D. $14. 80
  B. $9.25

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  Explanation

  Because the manufacturer has excess capacity and existing sales will be unaffected, the minimum price the manufacturer should be willing to accept is anything above the total variable cost of the unit ($2. 05+$3. 60+$2. 70+$0.90=$9.25), an amount that includes the variable manufacturing cost and the variable selling expenses. The fixed costs are not relevant.

• Question 343:

  Which form of consumer market segmentation may be determined by the status of users?

  A. Geographic.
  B. Behavioral.
  C. Demographic.
  D. Psychographic.
  B. Behavioral.

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  Explanation

  Behavioral segmentation is by regular or special occasions (e.g., holidays, critical life events, transitions, business activities, or holidays), benefits wanted (e.g., price, speed of delivery, quality, or service), status of users (e.g., nonusers and former, potential, or regular users), rate of usage, degree of loyally (e.g., hard-core to switchers), readiness to buy (e.g., from unaware of the product to intending to purchase), or attitude (e.g., from hostile toward the product to enthusiastic).

• Question 344:

  In planning and controlling capital expenditure, the most logical sequence is to begin with

  A. Analyzing capital addition proposals.
  B. Making capital expenditure decisions.
  C. Analyzing and evaluating all promising alternatives.
  D. Identifying capital addition projects and other capital needs.
  D. Identifying capital addition projects and other capital needs.

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  Explanation

  Capital budgeting is a long-term planning process for investments. This process begins with the identification of capital needs, that is, of projects required to achieve organizational goals. The next step is to search for specific investments. The third step is to acquire and analyze information about the potential choices. The fourth step is to select specific investments after considering both qualitative and quantitative factors. The fifth step is to finance the undertakings. The final step is implementation and monitoring.

• Question 345:

  Which one of the following statements concerning cash flow determination for capital budgeting purposes is not correct?

  A. Tax depreciation must be considered because it affects cash payments for taxes.
  B. Book depreciation is relevant because it affects net income.
  C. Sunk costs are not incremental flows and should not be included
  D. Net working capital changes should be included in cash flow forecasts.
  B. Book depreciation is relevant because it affects net income.

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  Explanation

  Tax depreciation is relevant to cash flow analysis because it affects the amount of income taxes that must be paid. However, book depreciation is not relevant because it does not affect the amount of cash generated by an investment.

• Question 346:

  The most common difficulty in problem solving is

  A. Obtaining information.
  B. identifying alternative courses of action.
  C. Defining the problem.
  D. Being aware of the existence of a problem.
  C. Defining the problem.

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  Explanation

  Defining the problem is the most common difficulty in problem solving. Pitfalls in defining problems include defining the problem according to a solution, concentrating on no pertinent areas, and defining problems by their symptoms.

• Question 347:

  In referring to the graph of a firm's cost of capital, if e is the current position, which one of the following statements best explains the saucer or U-shaped curve?

  

  A. The cost of capital is almost always favorably' influenced by increases in financial leverage
  B. The cost of capital is almost always negative' influenced by increases in financial leverage.
  C. The financial markets will penalize firms that borrow even in moderate amounts
  D. Use of at least some debt financing will enhance the value of the firm.
  D. Use of at least some debt financing will enhance the value of the firm.

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  Explanation

  The U-shaped curie indicates that the cost of capital is quite high when the debt-to-equity ratio is quite low. As debt increases, the cost of capital declines as long as the cost of debt is less than that of equity. Eventually, the decline in the cost of capital levels off because the cost of debt ultimately rises as more debt is used. Additional increases in debt (relative to equity) will then increase the cost of capital. The implication is that some debt is present in the optimal capital structure because the cost of capital initially declines when debt is added. However, a point is reached at which debt becomes excessive and the cost of capital begins to rise.

• Question 348:

  A highly risk-averse decision maker will often react to bounded rationality by

  A. Satisfying.
  B. Ignoring the limiting factor.
  C. Attempting to find the optimum solution.
  D. Increasing the number of solutions considered.
  A. Satisfying.

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  Explanation

  Rational decision making is almost always subject to limitations that make the certain determination of the optimal decision impossible. Avery risk-averse decision maker may reactor such uncertainly by satisfying, that is, choosing an adequate course of action that is perceived to be safe. Satisfying thus leads to decisions that are not only less than optimal but also less than the best available.

• Question 349:

  An example of a governmental impediment to global competition is k High storage costs.

  A. Labor regulations.
  B. High information and search costs.
  C. Greater responsiveness by local firms.
  A. Labor regulations.

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  Explanation

  Governmental impediments to global competition are general imposed for the announced purpose of protecting local firms and jobs and developing new industries. They also may have the effect of raising revenue. Examples of impediments are tariffs: duties: quotas: domestic content rules: preferences for local firms regarding procurement, taxes, RandD, labor regulations, and other operating rules: and laws (e.g.. anti-bribery or tax) enacted by a national government that impede national firms from competing globally. These impediments are most ,likely when industries are viewed as crucial

• Question 350:

  The budget data for the Bid well Company appear below.

  

  Budgeted operating income $ 90,000. The Bid well Company's breakeven sales in units are?

  A. 30,000 units.
  B. 91,000 units
  C. B0,000units
  D. 70,000 units.
  D. 70,000 units.

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  Explanation

  The breakeven point in units is found by dividing the fixed costs ($210,000) by contribution margin per unit ($3). Variable costs are $700,000 at 100,000 units, or $7 per Unit. Selling price is $10 per unit. Dividing $210,000 by $3 per unit results in a breakeven point of 70,000 units