IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 541:

  In which industry structure is differentiation anent, and all sellers charge the same price?

  A. Monopoly
  B. Monopolistic competition
  C. Oligopoly
  D. Pure competition
  D. Pure competition

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  Explanation

  An industry consists of firms selling products or services that are substitutes. One way to describe an industry considers the number of sellers and the extent of differentiation of products and services. In pure competition, differentiation is absent and the same prices are charged by all sellers.

• Question 542:

  Which of the following statements is most likely correct for a project costing $50,000 and returning $14,000 per year for 5 years?

  A. NPV = $36,274.
  B. NPV = $20,000.
  C. IRR=14%.
  D. IRR is greater than 10%.
  D. IRR is greater than 10%.

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  Explanation

  The total cash inflows are only $70,000 (5 x $14,000). Thus, whatever the discount rate, the j1NPVwill be less than $20000 ($70,000--$50,000).The return in the first year is $14,000, or28% of the initial investment. Since the same $14,000 flows in each year, the IRR is going to be greater than 10% (actually, it is almost 14%).

• Question 543:

  What is the weighted average cost of capital for a firm with 40% debt. 20% preferred stock, and 40% common equity if the respective costs for these components are 8% after- tax, 13% after-tax, and 17% before-tax'? The firm's tax rate is 35%

  A. 1022%
  B. 10.52%
  C. 1148%
  D. 1260%
  D. 1260%

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  Explanation

• Question 544:

  If a retailer's terms of trade are 3/10, net 45 with a particular supplier, what is the cost on an annual basis of not taking the discount? Assume a 360-day year.

  A. 24. 00%
  B. 37. 11%
  C. 36. 00%
  D. 31.81%
  D. 31.81%

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  Explanation

• Question 545:

  The difference between the sales price and total variable costs is

  A. Gross operating profit.
  B. Net profit.
  C. The breakeven point.
  D. The contribution margin.
  D. The contribution margin.

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  Explanation

  Contribution margin equals sales revenue minus all variable costs. It is the portion of sales available for covering fixed costs and profit.

• Question 546:

  Rational decision making is a multistep process. In which stage of this process will effective communication to persons affected by the decision be most important?

  A. Evaluating possible solutions.
  B. Defining the problem.
  C. Following up.
  D. Gathering relevant information.
  C. Following up.

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  Explanation

  A decision cannot be communicated to affected parties until it has been made. Effective communication is vital to successful implementation of the change resulting from the decision. Follow-up to evaluate the decision will determine whether the decision was correct. One reason desired results may not be obtained is lack of effective commune captions.

• Question 547:

  Information processing for decision making is characterized by two styles: anaI3, tic and intuitive. Which of the following is a characteristic of the intuitive style?

  A. Unstructured.
  B. Objective.
  C. Detailed.
  D. Deductive.
  A. Unstructured.

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  Explanation

  The intuitive style of information processing for decision making is subjective, inductive, non routine, and unstructured. Intuitive people may rely on hunches and reach decisions without explicitly applying a formal process. The thinking or analytic style of decision making is objective, deductive, precise, detailed, logical, and repetitive. It tends to prevail in the traditional organization.

• Question 548:

  A company has two divisions, A and B, each operated as a profit center. A charges B $35 per unit for each unit transferred to B. Other data follow:

  

  A is planning to raise its transfer price to $50 per unit Division B can purchase units at $40 each from outsiders, but doing so would idle A's facilities now committed to producing units for B. Division A cannot increase its sales to outsiders. From the perspective of the company as a whole, from whom should Division B acquire the units, assuming B's market is unaffected?

  A. Outside vendors
  B. Division A, but only at the variable cost per unit
  C. Division A, but only until fixed costs are covered, then from outside vendors,
  D. Division A, despite the increased transfer price.
  D. Division A, despite the increased transfer price.

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  Explanation

  Opportunity costs are $0 because A's facilities would be idle if B did not purchase from A. Assuming fixed costs are not affected by the decision, the intracompany sale is preferable from the company's perspective because A's $30 variable unit cost is less than the outside vendors price of $40.

• Question 549:

  When calculating the cost of capital, the cost assigned to retained earnings should be

  A. Zero.
  B. Lower than the cost of external common equity.
  C. Equal to the cost of external common equity.
  D. Higher than the cost of external common equity.
  B. Lower than the cost of external common equity.

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  Explanation

  Newly issued or external common equity is more costly than retained earnings. The company incurs issuance costs when raising new, outside funds.

• Question 550:

  A limitation of transfer prices based on actual cost is that they

  A. Charge inefficiencies to the department that is transferring the goods
  B. Can lead to suboptimal decisions for the company as a whole.
  C. Must be adjusted by some markup
  D. Lack clarity and administrative convenience.
  B. Can lead to suboptimal decisions for the company as a whole.

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  Explanation

  The optimal transfer price of a selling division should be set at a point that will have the most desirable economic effect on the firm as a whole while at the same time continuing to motivate the management of every division to perform efficiently Setting the transfer price based on actual costs rather than standard costs would give the selling division little incentive to control costs.