IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 551:

  Associated Supply, Inc. is considering introducing a new product that will require a $250,000 investment of capital. The necessary funds would be raised through a bank loan atan interest rate of 8%. The fixed operating costs associated with the product would be $122,500, while the contribution margin percentage would be 42%. Assuming a selling price of $15 per unit, determine the number of units (rounded to the nearest whole unit) Associated would have to sell to generate earnings before interest and taxes (EBIT) of 32% of the amount of capital invested in the new product.

  A. 35,318 units.
  B. 32,143 units.
  C. 25,575 units.
  D. 23,276 units.
  B. 32,143 units.

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  Explanation

• Question 552:

  What strategy induces intermediaries to promote and sell the firm's products?

  A. Pull
  B. Push
  C. Focus
  D. Differentiation
  B. Push

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  Explanation

  One issue in distribution channel design is the degree of emphasis on a push strategy versus a pull strategy. A push strategy uses the firm's sales force and sales promotion resources to persuade channel intermediaries to stock, promote, and sell the firm's products. It is indicated Vivien customers have little brand loyal, impulse buying is common, and the benefits of me product are well known.

• Question 553:

  The statement of income for Dimmell Co presented below represents the operating results for the fiscal year just ended Dimmell had sales of 1,800 tons of product during the current year the manufacturing capacity of Dimmell's facilities is 3,000 tons of product

  

  Ignore the facts presented in ar other question and now assume Dimell estimates that the per ton selling price would decline 10% next year variable costs would increase $40 per ton and the fixed costs would not change What sales volume in dollars would be required to earn an atter4ax net income of $94500 next year

  A. $1,140,000
  B. $825,000
  C. $1,500,000
  D. $1,350,000
  D. $1,350,000

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  Explanation

• Question 554:

  An interest swap covers a 3-year period with annual payments on a $1 million notional principal amount. Party X agrees to pay a fixed rate of 8.5% to Party Z, who will in return pay to X a floating rate equal to the London Interbank Offered Rate (LIBOR) in effect. LIBOR is the rate offered by major London banks on large dollar deposites. The contract is initiated on January 1, Year 1. The first payment is due on December 21, Year

  1. The following are the floating rates on LIBOR over the 3-year period:

  Time LIBOR 1/1/Year 1 8.00% 1/1/Year 2 9.00% 1/1/Year 3 9.50% 1/1/Year 4 8.50%

  What is the net payment made to the party that recognized a net gain on the contract?

  A. $0
  B. $10,000 to X
  C. $ 15,000 to X
  D. $15, 000 to Z
  B. $10,000 to X

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  Explanation

  Party X owed $85,000 ($1,000,000 x .o85) for each of 3 years, a total of $255,00 ($85,000 x 3). Party Z owed $80,000 ($1,000,000 x .08) for Year 1,$90,000( $1,000,000 x .09) for Year 2, and $95,000 ($1,000,000 x .095) for Year 3, a total of

  $265,000. Consequently, Party X received a net cash inflow of $ 10,000. DQZ Telecom is considering a project for the coming year that will cost $50 million. DQZ plans to use the following combination of debt and equity to finance the

  investment.

  Issue $15 million of 20-year bonds at a price of $101, with a coupon rate of 8%, and flotation costs of 2% of par.

  Use $35 million of funds generated from earnings. The equity market is expected to earn 12% U.S. Treasury bonds are currently yielding 5%. The beta coefficient for DQZ is estimated to be .60.DQZ is subject to an affective corporate income

  tax rate of 40%.

• Question 555:

  Which of the following represents a firm's average gross receivables balance?

  I. Days' sales in receivables x accounts receivable turnover.

  II.

  Average daily sales x average collection period. Ill. Net sales-average gross receivables.

  A. l only.
  B. l and II only.
  C. II only.
  D. II and Ill only.
  C. II only.

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  Explanation

  A firm's average gross receivables balance can be calculated by multiplying average daily sales by the average collection period (days' sales outstanding). Alternatively, annual credit sales can be divided by the accounts-receivable turnover (net credit sales ?average accounts receivable) to obtain the average balance in receivables.

• Question 556:

  An example of an internal nonfinancial benchmark is the

  A. Labor rate of comparably skilled employees at a major competitor's plant.
  B. Average actual cost per pound of a specific product at the company's most efficient plant becoming the benchmark for the company's other plants.
  C. Company setting a benchmark of $50,000 for employee training programs at each of the company's plants.
  D. Percentage of customer orders delivered on time at the company's most efficient plant becoming the benchmark for the company's other plants.
  D. Percentage of customer orders delivered on time at the company's most efficient plant becoming the benchmark for the company's other plants.

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  Explanation

  Benchmarking "involves continuously evaluating the principle of best-in-class organizations and adapting company processes to incorporates the best of these practices." It "analyzes and measures the key outputs of a business proves or function against the best and also identifies the underlying key actions and root causes that contribute to the performance difference "(SMA 4V). The percentage of orders delivered on time at the company's most efficient plant is an example of an internal nonfinancial benchmark.

• Question 557:

  Which of the following is not a risk of double-benefit positioning?

  A. The brand image may become too narrow.
  B. Customers may not believe the firm's claims.
  C. The brand image may become indistinct.
  D. Customers may perceive that competitors also offer one of the benefits.
  D. Customers may perceive that competitors also offer one of the benefits.

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  Explanation

  Some market researchers argue that double-benefit market positioning is preferable, especially if customers perceive that competitors also provide a particular benefit. Thus, offering multiple benefits may be advantageous if the result is a more distinctive position for the product. The following are risks of this approach: (1) the brand image lacks charily in the minds of customers (under positioning), (2) the brand image is too narrow (over positioning), (3) the brand image may be confused in customers' perceptions because the value proposition has too many benefits (confused positioning), and (4) customers may not believe the firm's claims (doubtful positioning).

• Question 558:

  A mail-order confectioner sells fine candy in one-pound boxes. It has the capacity to produce 600,000 boxes annually, but forecasts that it will produce and sell only 500,000 boxes in the coming year. The costs to manufacture and distribute the candy are detailed below. The organization has invested capital of $6,750,000.

  

  The confectioner has been asked by a retailer to submit a bid for a special order of 40,000 one-pound boxes of candy; this is a one-time order that will not be repeated. While the candy would be almost identical, the candy ingredients would be $0.45 less. The total distribution costs for the entire order would be $32,000. Special setup costs required by this order would amount to $60,000. There would be no other changes in costs, rates, or amounts. The minimum selling price per one-pound box that the confectioner would bid on this special order would be

  A. $7. 05
  B. $8.85
  C. $9.05
  D. $9.55
  A. $7. 05

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  Explanation

  The minimum selling price equals the incremental costs of the special order (variable manufacturing costs, variable packaging costs, distribution costs, and setup costs) divided by the units ordered. The fixed costs do not change because the manufacturer has excess capacity. Total variable manufacturing costs are $190,000 [40,000 x ($4. 85 - $.45+ $.35)], distribution costs are $32,000, and setup costs are $60,000. Thus, the minimum unit price is $7. 05 [$190,000 + $32,000 + $60,000) / $40,000].

• Question 559:

  The Hopkins Company has estimated that a proposed project's 10-year annual net cash benefit, received each year end. will be $2,500 with an additional terminal benefit of $5,000 at the end of the 10th year. Assuming that these cash inflows satisfy exactly Hopkins' required rate of return of 8%, calculate the initial cash outlay

  A. $16,775
  B. $19,090
  C. $25,000
  D. $30,000
  B. $19,090

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  Explanation

  If the 8% return exactly equals the present value of the future flows ., NPV is zero), then simply determine the present value of the future inflows. Thus, Hopkins Company's initial cash outlay is $19,090 [($2,500)(PVIFA at 8% for 10 periods) + ($5J00)(PVlF at 8% for 10 periods ($2,500)(6. 710) + ($5,000)(.463)].

• Question 560:

  During which stage of the product life cycle will prices most like' be reduced to the lowest possible level?

  A. Introductory stage.
  B. Growth stage.
  C. Maturity stage.
  D. Dechnestage
  C. Maturity stage.

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  Explanation

  During the maturity stage, many competitors are in market, Given a decline in absence of growth or negative growth, the industry also may have excess capacity. For these and other reasons, competitive rivalry will be strong. Firms may attempt to modify the market, the product, or the marketing mix. Thus, price competition (an lament of the marketing mix) will be most intense during the maturity stage