IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 701:

  Assume that the Plastics Division has excess capacity and it has negotiated a transfer price of $5. 60 per plastic component with the Entertainment Division. This price will

  A. Cause the Plastics Division to reduce the number of commercial plastic components it manufactures.
  B. Motivate both divisions as estimated profits are shared.
  C. Encourage the Entertainment Division to seek an outside source for plastic components
  D. Demotivate the Plastics Division causing mediocre performance
  B. Motivate both divisions as estimated profits are shared.

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  Explanation

  Given that the Plastics Division (the seller) has excess capacity, transfers within the company entail no opportunity cost. Accordingly, the transfer at the negotiated price will improve the performance measures of the transferor. Purchasing internally at below the market price also benefits the transferee, so the motivational purpose of transfer pricing is achieved. The goal congruence purpose is also achieved because the internal transaction benefits the company.

• Question 702:

  A sampling plan must determine the

  I. Size of the sample.

  II. Stratification method used. Ill. Random sampling method.

  IV.

  Sampling unit.

  A. II, Ill, and IV only.
  B. I and IV only.
  C. I, II, and Ill only.
  D. I and Ill only.
  B. I and IV only.

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  Explanation

  The sampling plan is based on determination of the sampling unit (such as choice of lips of people to be interviewed), the size of the sample needed to achieve reliable results at reasonable cost, and the sampling method (e.g., simple random sampling, stratified sampling, or judgment sampling).

• Question 703:

  At the introduction stage of an innovative product, the profit growth is normally slow due to

  A. Expensive sales promotion
  B. High competition
  C. A mass market
  D. Available alternatives
  A. Expensive sales promotion

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  Explanation

  The introduction stage is characterized by slow sales growth and lack of profits because of the high expenses of promotion and selective distribution to generate awareness of the product and encourage customers to try it. Thus, the per-customer cost is high. Competitors are few, basic versions of the product are produced, and higher-income customers (innovators) are usually targeted. Cost-plus are charged. They may initially be high to permit cost recovery when unit sales are low. The strategy is to infiltrate the market, plan for financing to cope with losses, build supplier relations, increase production and marketing efforts, and plan for competition.

• Question 704:

  Which of the following is a favorable condition for a firm competing in a profitable, expanding industry?

  A. The firm doest not have a string customer base.
  B. A few suppliers who can restrict supply.
  C. Competitors find it difficult to acquire the firm's customers.
  D. The firm has high costs relative to other firms in the industry.
  C. Competitors find it difficult to acquire the firm's customers.

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  Explanation

  A firm that has successfully differentiated its products through developing a desirable image, better services, cost leadership, the features of the product, or other means is in a favorable competitive position. Competitors find if difficult to acquire the firm's customers, for example, by price cutting. The reason is that the firm's products are perceived to have few substitutes, and brand loyalty is high. Furthermore, barriers to entry are favorable to the firm. These barriers beter competitors from entering the market. Existing firms can increase market share and emphasize cutting costs and increasing value.

• Question 705:

  All of the following items are included in discounted cash flow analysis except

  A. Future operating cash savings.
  B. The current asset disposal price.
  C. The future asset depreciation expense.
  D. The tax effects of future asset depreciation.
  C. The future asset depreciation expense.

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  Explanation

  Discounted cash flow analysis, using either the internal rate of return (IRR) or the net present value (NPV) method, is based on the time value of cash inflows and outflows. All future operating cash savings are considered, as well as the tax effects on cash flows of future depreciation charges. The cash proceeds of future asset disposals are likewise a necessary consideration. Depreciation expense is a consideration only to the extent that it affects the cash flows for taxes. Otherwise, depreciation is excluded from the analysis because it is a noncash expense.

• Question 706:

  A characteristic of the payback method (before taxes) is that it

  A. Incorporates the time value of money.
  B. Neglects total project profitability.
  C. Uses accrual accounting inflows in the numerator of the calculation.
  D. Uses the estimated expected life of the asset in the denominator of the calculation.
  B. Neglects total project profitability.

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  Explanation

  The payback method calculates the number of years required to complete the return of the original investment. This measure is computed by dividing the net investment required by the average expected cash flow to be generated, resulting in the number of years required to recover the original investment. Payback is easy to calculate but has two principal problems: it ignores the time value of money, and it gives no consideration to returns after the payback period. Thus, it ignores total project profitability.

• Question 707:

  The operations research approach to evaluating solutions includes all of the following except

  A. Testing of a mathematical model.
  B. Formulating a mathematical model.
  C. Constructing a quantitative model.
  D. Recognizing the complete system in which the problem operates.
  C. Constructing a quantitative model.

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  Explanation

  Operations research is an overall approach that applies a variedly of scientific and mathematical techniques. It involves the following: recognition of the complete system, including interrelationships, in which the problem operates; formulation of a mathematical model; testing of the model; and implementation of the optimal solution as produced by the model. Simulation requires the construction of a quantitative model.

• Question 708:

  A company with $280,000 of fixed costs has the following data:

  

  Assume three units of A are sold for each unit of B sold. How much will sales be in dollars of product B at the breakeven point?

  A. $200,000
  B. $240,000
  C. $280,000
  D. $840,000
  B. $240,000

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  Explanation

• Question 709:

  The following data pertains to XYZ Company for the current year of operations.

  

  How many units does XYZ Company need to produce and sell to make a before-tax profit of 10% of sales?

  A. 65000 units.
  B. 36. 562 units.
  C. 90,000 units.
  D. 25,000 units.
  C. 90,000 units.

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  Explanation

• Question 710:

  Behavioral scientists have identified human tendencies that can erode the quality of decision making. Which of the following best describes a behavioral decision error referred to as "framing error"?

  A. Evaluating positive information favorably and negative information unfavorably.
  B. Getting locked into losing courses of action because of personal commitment.
  C. Evaluating the probabilities of outcomes as point estimates instead of ranges.
  D. Becoming overconfident because of past successes.
  A. Evaluating positive information favorably and negative information unfavorably.

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  Explanation

  How information is presented influences both its interpretation and the resulting behavior. Framing error is the tendency to evaluate positively presented information favorably and negatively presented information unfavorably.