IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 571:

  Maloney Company uses a 12% hurdle rate for all capital expenditures and has done the following analysis for four projects for the upcoming year

  

  Which projects should Maloney undertake during the upcoming year if it has only $12,000,000 of investment funds available?

  A. Projects 1 and 3.
  B. Projects 1, 2, and 4.
  C. Projects 1 and 4.
  D. Projects 1 and 2.
  D. Projects 1 and 2.

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  Explanation

  With only $12,000,000 available and each project costing $4,000,000 or more, no more than two projects can be undertaken. Accordingly, projects should be selected because they have the greatest NPVs and profitability lily indexes.

• Question 572:

  None of the following items are deductible in calculating taxable income except

  A. Estimated liabilities for product warranties expected to be incurred in the future
  B. Dividends on common stock declared but not payable until next year.
  C. Bonus accrued but not paid by the end of the year to a cash-basis 90% shareholder
  D. Vacation pay accrued on an employee-by-employee basis.
  D. Vacation pay accrued on an employee-by-employee basis.

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  Explanation

  Sec.162(a) states that a deduction is allowed for the ordinary and necessary expenses incurred during the year in any trade or business. A corporation may therefore deduct a reasonable amount for compensation Accrued vacation pay is a form of compensation that results in an allowable deduction for federal income tax purposes

• Question 573:

  The margin amounts of interest to Bombastic Bathrooms at the start of theory' of constraints (TOC) analysis are, respectively,

  A. $150, $115, $260, $265.
  B. $150, $130, $180, $190.
  C. $80, $60, $110, $120.
  D. $50$25,$65,$55.
  B. $150, $130, $180, $190.

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  Explanation

  A theory of constraints (TOO) analysis proceeds from the assumption that only direct materials costs are truly variable in the short run. This is called throughput, or super variable, costing. The relevant margin amount is throughput margin, which equals price minus direct materials. Thus, margin figures of interest to Bombastic Bathrooms are $150 for brass ($250 --$100), $130 for chrome ($220 --$90), $180 for nickel ($375-- $195), and $190 for aluminum ($400 --$210).

• Question 574:

  When assessing a competitor's strengths and weaknesses, a firm may use the three-factor model for assessing a competitor's current and future market shares, in accordance with the suggestion of the consulting firm, Arthur D. Little. The factors included in this assessment are market share, mind share and

  A. Innovation share.
  B. Heart share.
  C. Critical share.
  D. Reaction share.
  B. Heart share.

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  Explanation

  Arthur D. Little suggests a three-factor model for assessing a competitor's current and future market shares. Market share is the share of the target market. Mind share is the percentage of customers who name the firm as the first "that comes to mind" in the industry. Heart share is the percentage of customers who name the firm as the one from which they "would prefer to buy." A competitor that improves its mind share and heart share will ultimately increase its market share and profits.

• Question 575:

  Obligations issued by federal agencies other than the U.S. Treasury Department are

  A. Guaranteed by the U.S. government but not by the agency issuing the security.
  B. Guaranteed neither by the agency issuing the security nor by the U.S. government.
  C. Guaranteed by the agency issuing the security but not by the U.S. government.
  D. Not easily marketed.
  C. Guaranteed by the agency issuing the security but not by the U.S. government.

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  Explanation

  Obligations issued by the Treasury Department are insured by the full faith and credit of the U.S. government. However, obligations of other federal agencies (agency securities) are guaranteed only by the issuing agency, not the federal government. Exceptions are securities issued by the Government National Mortgage Association (Ginny Mae), which have the full backing of the U.S. government.

• Question 576:

  A brand may be developed in many ways. Which brand development strategy introduces new products in the same category under the same brand?

  A. Brand extension
  B. Line extension
  C. Flanker branding
  D. Co-branding
  B. Line extension

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  Explanation

  One effective means of developing and marketing new products is the use of line extensions (new products in an already served category) and brand extensions. The concept behind extension is that consumers are already familiar with the firm's major brand names. Thus, if a new product carries the same brand name, it will be more likely to succeed. Carrying an established brand name enables a new product to more easily fill a niche in the marketplace. Furthermore, extensions make efficient use of promotional costs because customers are already familiar with the quality of the products created and manufactured under the brand. Most new products are line extensions.

• Question 577:

  When a multiproduct plant operates at full capacity, quite often decisions must be made as to which products to emphasize. These decisions are frequently made with a short-run focus. In making such decisions, managers should select products with the highest

  A. Sales price per unit.
  B. Individual unit contribution margin.
  C. Sales volume potential.
  D. Contribution margin per unit of the constraining resource.
  D. Contribution margin per unit of the constraining resource.

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  Explanation

  In the short run, many costs are fixed. Hence, contribution margin (revenues -- all variable costs) becomes the best measure of profitability. Moreover, certain resources are also fixed. Accordingly, when deciding which products to produce at

  full capacity, the criterion should be the contribution margin per unit of the most constrained resource.

  This approach maximizes total contribution margin.

• Question 578:

  Increased competition, technological innovation, and a shift from mass production of standardized products to custom prockiced products in many inductees have increased the need for productivity improvement and flexibility of production systems. In response to these demands, organizations have increased their reliance on automation and the use of advanced technologies in their operations. Which other following is an example of the use of automation and advanced technologies?

  A. Flexible manufacturing system (FMS).
  B. Just-in-b me (JIT) system
  C. Master budgeting system (MBS).
  D. Economic order quantity (EOQ).
  A. Flexible manufacturing system (FMS).

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  Explanation

  Flexible manufacturing is the capacity of computer-controlled machinery to perform many different programmed functions. By eliminating machine setup time, strengthening control, and automating handling processes, flexible manufacturing permits the efficient production of small numbers of different products by the same machines A company can therefore more accurately match output filth consumer tastes and avoid long production runs of identical goods. A flexible

  manifesting system consists of two or more computer- controlled machines linked by automated handling devices such as robots and transport systems.

• Question 579:

  The use of an accelerated method instead of the straight-line method of depreciation in computing the net present value of a project has the effect of

  A. Raising the hurdle rate necessary to justify the project.
  B. Lowering the net present value of the project.
  C. Increasing the present value of the depreciation tax shield.
  D. Increasing the cash outflows at the initial point of the project.
  C. Increasing the present value of the depreciation tax shield.

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  Explanation

  Accelerated depreciation results in greater depreciation in the early years of an asset's life compared with the straight-line method. Thus, accelerated depreciation results in lower income tax expense in the early years of a project and higher income tax expense in the later years. By effectively deferring taxes, the accelerated method increases the present value of the depreciation tax shield.

• Question 580:

  Which concept of costs includes only explicit costs?

  A. Economic.
  B. Opportunity
  C. Accounting.
  D. Sunk.
  C. Accounting.

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  Explanation

  The accounting concept of costs includes only explicit costs, i.e., those that represent actual outlays of cash, the allocation of outlays of cash, or commitments to pay cash. Examples include the incurrence of payables and the satisfaction of payables.