IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 641:

  Which of the following is not an example of synergy?

  A. A shopping mall with several businesses providing different products and performing different services.
  B. A store provides warranties on automobile parts in order to maximize customer value.
  C. A manufacturing company hires a new manager with technological experience lacking in the company.
  D. Military Humvees are converted into sports utility vehicles for sale to civilians.
  B. A store provides warranties on automobile parts in order to maximize customer value.

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  Explanation

  Synergy occurs when the combination of formerly separate elements has a greater affect than the sum of their individual effects. It is unclear here whether the store is a car dealership or a parts shop. Therefore, this is seen more as an operational service strategy that seeks to gain a competitive advantage and maximize customer value by providing services such as warranties, rather than market synergy. Market synergy arises when products or services have positive complementary effects( i.e., a parts shop and a service warranty on parts).

• Question 642:

  The interest rate on the bonds is greater to Rogers. Inc. for the second alternative consisting of pure debt than it is for the first alternative consisting of both debt and equity because the

  A. Diversity of the combination alternative creates greater risk for the investor.
  B. Pure debt alternative would flood the market and be more difficult to sell.
  C. Pure debt alternative carries the risk of increasing the probability of default,
  D. Combination alternative carries the risk of increasing dividend payments.
  C. Pure debt alternative carries the risk of increasing the probability of default,

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  Explanation

  As a larger proportion of an entity's capital is provided by debt, the debt becomes riskier and more expensive. Hence, it requires a higher interest rate

• Question 643:

  Which of the following best describes a market synergy?

  A. Technology transfer from one product to another.
  B. Bundling of product distributed through the same channels.
  C. Production of multiple products at one facility.
  D. Use of complementary management skills to achieve entry into a new market.
  B. Bundling of product distributed through the same channels.

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  Explanation

  Market synergy arise when products or services have positive complementary effects. Shopping malls reflect this type of synergy. Also, bundling of product, distribution through the same distribution channels, and usage of the same sales force are other examples of market synergies.

• Question 644:

  A company is designing a new regional distribution warehouse. To minimize delays in loading and unloading trucks, an adequate number of loading docks must be built. The most relevant technique to assist in determining the proper number of docks is

  A. Linear programming.
  B. Decision trees.
  C. The Monte Carlo method.
  D. Queuing theory.
  D. Queuing theory.

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  Explanation

  Queuing theory is a group of mathematical models for systems involving waiting lines. In general, a queuing system consists of a waiting line and a service facilely (loading docks in this case). The objective of queuing theory is to minimize the total cost of the system, including both service and waiting costs, for a given rate of arrivals.

• Question 645:

  The internal rate of return (IRR) is the

  A. Hurdle rate.
  B. Rate of interest for which the net present value is greater than 1.0.
  C. Rate of interest for which the net present value is equal to zero.
  D. Rate of return generated from the operational cash flows.
  C. Rate of interest for which the net present value is equal to zero.

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  Explanation

  The IRR is the interest rate at which the present value of the expected future cash inflows is equal to the present value of the cash outflows for a project. Thus1 the IRR is the interest rate that will produce a net present value (NPV) equal to zero. The IRR method assumes that the cash flows will be reinvested at the internal rate of return.

• Question 646:

  During which stage in the development of an advertising message does the firm decide which benefits to emphasize?

  A. Message evaluation.
  B. Message execution.
  C. Generation of an effective message.
  D. Determination of social responsibility.
  C. Generation of an effective message.

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  Explanation

  The advertising message is the result of a creative strategy that reflects four developmental stages. Generating an effective message includes deciding which benefits to emphasize and researching the target audience. It also may involve testing alternative advertisements. An alternative is to use a deductive framework for generating messages. For example, a message may reflect a combination of rewards (ego, rational, social, or sensor) and experiences (result-of-use, in-use, or incidental-to-use).

• Question 647:

  Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study, at a cost of $26,000, to determine which product will be more profitable. The results of the study follow.

  

  The costs associated with the two products have been estimated by Gleason's cost accounting department and are shown as follows:

  

  Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset.The advertising expense estimated by Gleason for the introduction of the new products is an example of a(n)

  A. Conversion cost.
  B. Discretionary cost.
  C. Committed cost.
  D. Opportunity cost.
  B. Discretionary cost.

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  Explanation

  Discretionary costs refer to fixed costs that are not absolutely necessary to operate in the current period. The level of these costs is subject to a decision made by management each period. A key characteristic of discretionary costs is that there is no clearly measurable relationship between input (the costs) and output. Advertising is a good example of a discretionary fixed cost.

• Question 648:

  Junk bonds are

  A. Securities rated at less than investment grade.
  B. Worthless securities.
  C. Securities that are highly risky but offer only low yields.
  D. Considered illegal since the collapse of the Drexel Burnham Lambert firm
  A. Securities rated at less than investment grade.

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  Explanation

  Junk bonds are high-risk and therefore high-yield securities that are normally issued when the debt ratio is very high. Thus, the bondholders have as much risk as the holders of equity securities. Such bonds are not highly rated by credit evaluation companies. Junk bonds have become accepted because of the tax deductibility of the interest paid.

• Question 649:

  Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study, at a cost of $26,000, to determine which product will be more profitable. The results of the study follow.

  

  The costs associated with the two products have been estimated by Gleason's cost accounting department and are shown as follows:

  

  Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset.Assuming that Gleason elects to produce the frozen dessert, the profit that would have been earned on the breakfast rolls is a(n)

  A. Deferrable cost.
  B. Sunk cost.
  C. Avoidable cost.
  D. Opportunity cost.
  D. Opportunity cost.

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  Explanation

  An opportunity cost is the maximum return that could have been earned on the next best alternative use of a resource. In this case, the lost profit on the rolls is an opportunity cost. Regis Company manufactures plugs used in its manufacturing cycle at a cost of $36 per unit that includes $8 of fixed overhead

• Question 650:

  Which of the following statements does not properly describe a Eurodollar deposit?

  A. Eurodollar deposits are U.S. dollar deposits in bank outside of the U.S.
  B. Eurodollar deposits are outside the direct control of the U.S. monetary authorities.
  C. Eurodollar deposits rates tend to be lower than domestic U.S. rates on equivalent instruments.
  D. Interest rates on Eurodollar deposits are tied to the London Interbank Offer Rate (LIBOR).
  C. Eurodollar deposits rates tend to be lower than domestic U.S. rates on equivalent instruments.

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  Explanation

  Eurodollar are U.S. dollars on deposit in a foreign bank. These deposits are created when a check is drawn on a dollar deposit in a U.S. bank and then deposited in a bank outside the U.S. This amount is then available for lending by the foreign bank to its customers. However, the depositors still hold claims denominated in dollars. Because Eurodollar are outside the direct control of the U.S. monetary authorities, U.S. banking regulations with respect to reserves, insurance, interest ceilings etc. do no apply. The absence of these costs means that Eurodollar deposits rates tend to be higher, not lower, than domestic U.S. rates on equivalent instruments.