IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 711:

  The before-tax cost of DQZ's planned debt financing, net of flotation costs, in the first year is

  A. 11.80%
  B. 8.08%
  C. 10.00%
  D. 7. 92%
  B. 8.08%

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  Explanation

• Question 712:

  A systematic approach to reaching targeted cost levels during value chain analysis is known as

  A. Value engineering
  B. Life-cycle costing
  C. Process value analysis
  D. Activity analysis.
  A. Value engineering

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  Explanation

  Value engineering is a means of reaching targeted cost levels. It is a systematic approach to assessing all aspects of the value chain cost buildup for a product.

• Question 713:

  The prime rate is the

  A. Size of the commitment fee on a commercial bank loan.
  B. Effective coat of a commercial bank loan.
  C. Effective cost of commercial paper
  D. Pate charged on business loans to borrowers with high credit ratings.
  D. Pate charged on business loans to borrowers with high credit ratings.

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  Explanation

  The prime interest rate is the rate charged by commercial banks to their best (the largest and financially strongest) business customers. It is traditionally the lowest rate charged by banks. However, in recent years, banks have been making loans at still lower rates in response to competition from the commercial paper market.

• Question 714:

  Which changes in costs are most conducive to switching from a traditional inventory ordering system to a just-in-time ordering system?

  

  A. Increasing Increasing
  B. Decreasing Increasing
  C. Decreasing Decreasing
  D. Increasing Decreasing
  B. Decreasing Increasing

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  Explanation

  A JIT system is intended to minimize inventory.thus,if inventory carrying costs are increasing,a JIT system becomes more cost effective.moreover,purchases are frequent in a JIT system.accordingly,a decreasing cost per purchase order is conducive to switching to a JIT system.

• Question 715:

  A firm's new financing will be in proportion to the market value of its current financing shown below

  

  The firm's bonds are currently selling at 80% of par, generating a current market yield of 9%, and the corporation has a 40% tax rate. The preferred stock is selling at its par value and pays a 6% dividend. The common stock has a current market value of $40 and is expected to pay a $1 20 per share dividend this fiscal year. Dividend growth is expected to be 10% per year, and flotation costs are negligible. The firm's weighted-average cost of capital is (round calculations to tenths of a percent)

  A. 130%
  B. 83%
  C. 9.6%
  D. 9.0%
  C. 9.6%

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  Explanation

• Question 716:

  A company has sales of $500,000, variable costs of $300,000, and pretax profit of $150,000. If the company increased the sales price per unit by 10%, reduced fixed costs by 20%1 and left variable cost per unit unchanged1 what would be the new breakeven point in sales dollars?

  A. $88000
  B. $100000
  C. $110,000
  D. $125,000
  A. $88000

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  Explanation

• Question 717:

  A firm has daily cash receipts of $300,000. A bank has offered to provide lockbox service that will reduce the collection time by 3 days. The bank requires a monthly fee of $2,000 for providing this service. If money market rates are expected to average 6% during the year, the additional annual income (loss) of using the lockbox service is

  A. ($24,000)
  B. $12,000
  C. $30000
  D. $54000
  C. $30000

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  Explanation

  Because collections will be accelerated by 3 days at a rate of $300,000 per day, the company will have an additional $900,000 to invest. Ata rate of 6%, the interest earned will be $54,000 per year. However, the bank will charge $24,000 (12 months x $2,000 per month) for its services. Thus, the firm will increase its income by $30000 ($54 .000 -- $24 .000).

• Question 718:

  Condensed monthly operating income data for Korbin, Inc. for May follows

  

  Additional information regarding Korbin's operations follows:

  One-fourth of each store's direct fixed costs would continue if either store is closed.

  Korbin allocates common fixed costs to each store on the basis of sales dollars.

  Management estimates that closing the Suburban Store would result in a 10% decrease in the Urban Store's sales, while closing the Urban Store would not affect the Suburban Store's sales.

  The operating results for May are representative of all months. A decision by Korbin to close the Suburban Store would result in a monthly increase (decrease) in Korbin's operating income of

  A. $(10,800)
  B. $(6,000)
  C. $(1,200)
  D. $4,000
  A. $(10,800)

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  Explanation

  If the Suburban Store is closed, one-forth of its direct fixed costs will continue. Thus, the segment margin that should be used to calculate the effect of its closing on Korbin's operating income is $6,000 {$36,000 contribution margin- [$40,000 direct fixed costs x(1.0-.25)]}. In addition, the sales ( and contribution margin) of the Urban Store will decline by 10% if the Suburban store closes. A 10% reduction in Urban's $48,000 contribution margin will reduce income by $4,800. Accordingly, the effect of closing the Suburban Store is to decrease operating income by $10,800 ($6,000 + $4,800).

• Question 719:

  If a firm uses external financing as a plug item, has a new capital budget of $1 million, a net income of $750,000, and a plowback ratio of 40%. how much should be raised in external funds?

  A. $300,000
  B. $450,000
  C. $550,000
  D. $700,000
  D. $700,000

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  Explanation

  Mumping the 40% plowback ratio times the $750,000 of income produces $300,000 of funds for arrestment. Subtracting the $300,000 from the $1 million needed results in $700,000 to be obtained from external sources.

• Question 720:

  The term relevant cost applies to all the following decision situations except the

  A. Acceptance of a special order.
  B. Manufacture or purchase of component parts.
  C. Determination of a product price.
  D. Replacement of equipment.
  C. Determination of a product price.

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  Explanation

  Relevant costs are those expected future costs that vary with the action taken. All other costs are assumed to be constant and thus have no effect on the decision. Relevant costs are considered in the analysis of decisions to make or buy a product, accept a special order, replace capital equipment, or add or delete a product line. Relevant costing applies to many special decisions but not to determining a product price. This decision involves an evaluation of, among other things, demand, competitors' actions, and total manufacturing and selling costs.