IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 81:

  A firm has daily cash receipts of $300,000 and is interested in acquiring a lockbox service in order to reduce collection time. Bank l's lockbox service costs $3,000 per month and will reduce collection time by 3 days. Bank 2's lockbox service costs $5,000 per month and will reduce collection time by 4 days. Bank 3's lockbox service costs $500 per month and will reduce collection time by 1 day. Bank 4's lockbox service costs $1,000 per month and will reduce collection time by 2 days. If money market rates are expected to average 6% during the year, and the firm wishes to maximize income, which bank should the firm choose?

  A. Bank 1. B. Bank2.
  C. Bank3.
  D. Bank4.
  D. Bank4.

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  Explanation

  Because collections made using Bank 4's lockbox service will be accelerated by 2 days at a rate of $300,000 per day, the firm will have an additional $600,000 to invest. At a rate of 6%, the interest earned will be $36,000 per year. However, the bank will charge $12,000 ($1,000 per month x 12 months) for its services. Thus, the firm will gain $24,000 ($36,000 --$12,000).

• Question 82:

  A mail-order confectioner sells fine candy in one-pound boxes. It has the capacity to produce 600000 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 selling price per pound that the confectioner should charge for a one-pound box of candy to obtain a 20% rate of return on invested capital is

  A. $9.70
  B. $11.05
  C. $11.50
  D. $11.86
  D. $11.86

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  Explanation

• Question 83:

  Everything else being equal, a highly leveraged firm will have earnings per share. ListA ListB

  A. More Lower
  B. More Less volatile
  C. Less Less volatile
  D. Less Higher
  C. Less Less volatile

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  Explanation

  Earnings per share is less volatile in less highly leveraged firms. Lower fixed costs result in less variable earnings when sales fluctuate.

• Question 84:

  The internal rate of return for a project can be determined

  A. If the internal rate of return is greater than the firm's cost of capital.
  B. Only if the project cash flows are constant.
  C. By finding the discount rate that yields a net present value of zero for the project.
  D. By subtracting the firm's cost of capital from the project's profit ability index.
  C. By finding the discount rate that yields a net present value of zero for the project.

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  Explanation

  The IPR is a capital budgeting technique that calculates the interest rate that yields a net present value equal to $0. It is the interest rate that will discount the future cash flows to an amount equal to the initial cost of the project. Thus1 the higher the IRR, the more favorable the ranking of the project.

• Question 85:

  Kator Co. is a manufacturer of industrial components. One of their products that is used as a subcomponent in auto manufacturing is KB-96. This product has the following financial structure per unit.

  

  KatorCo. has received a special, one-time order for 1,000 KB-96 parts. Assume that Kator is operating at full capacity and that the contribution margin of the output that would be displaced by the special order is $10,000. Using the original data, the minimum price that is acceptable for this one-time special order is in excess of

  A. $60
  B. $70
  C. $87
  D. $100
  A. $60

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  Explanation

  Given no excess capacity, the price must cover the incremental costs. The incremental costs for KB-96 equal $50 ($20 direct materials + $15 direct labor + $12 variable overhead + $3 shipping and handling).Opportunity cost is the benefit of the next best alternative use of scarce resources. Because acceptance of the special order would cause the company to forgo a contribution margin of $10,000, that amount must be reflected in the price. Hence, the minimum unit price is $60 [$50 unit incremental cost +($10,000 lost CM / 1,000 units )].

• Question 86:

  The capital budgeting process contains several stages. At which stage are financial and non financial factors addressed?

  A. Identification and definition.
  B. Selection.
  C. Search.
  D. Information-acquisition.
  D. Information-acquisition.

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  Explanation

  During the information-acquisition stage of the capital budgeting process, quantitative financial factors are given the most scrutiny. These include initial investment and periodic cash inflow. Nonfinancial measures, both quantitative and qualitative, are also identified and addressed. Examples include the need for additional training on new equipment and uncertainty about technological developments and competitors' actions.

• Question 87:

  The ordering costs associated with inventory management include

  A. Insurance costs, purchasing costs, shipping costs, and spoilage.
  B. Obsolescence, setup costs, quantity discounts lost, and storage costs.
  C. Purchasing costs, shipping costs, setup costs, and quantity discounts lost.
  D. Shipping costs, obsolescence, setup costs, and capital invested.
  C. Purchasing costs, shipping costs, setup costs, and quantity discounts lost.

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  Explanation

  Ordering costs are costs incurred when placing and receiving orders. Ordering costs include purchasing costs, shipping costs, setup costs for a production run, and quantity discounts lost.

• Question 88:

  Customer satisfaction is related to the degree of customer loyally. High customer loyally

  A. Requires a high degree of satisfaction of other stakeholders.
  B. Results when quality, service, and price increase.
  C. Depends on the effectiveness of the firm's core business processes.
  D. Is directly proportional to customer expectations.
  C. Depends on the effectiveness of the firm's core business processes.

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  Explanation

  High customer loyally is an emotional as well as rational bond that develops when a firm provides high customer value. To obtain such loyally, the firm needs to develop a value proposition that has superior competitiveness in the target market segment. Crucially, it must be supported by an effective value delivery system, the accumulation of all the experiences the customer has with the offering. Thus, brand value must be supported by core business processes that actually deliver the promised customer value.

• Question 89:

  Exhibit The variance of actual contribution margin from budgeted contribution attributable to unit variable cost changes is?

  

  A. $165,000 favorite
  B. $137,000 favorable
  C. $137,000 unfavorable
  D. Zero, because actual wit variable costs were the same as budgeted unit variable costs
  D. Zero, because actual wit variable costs were the same as budgeted unit variable costs

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  Explanation

  The proper procedure is to calculate variable costs by multiplying actual units sold by the budgeted costs per unit. The budgeted costs of Xenox and Xeon were $3 and $7 50, respectively the actual costs (130 x $3 = $390 and 130 x $750 = $975) were identical to budgeted variable costs at the actual volume. Thus, the variance was zero

• Question 90:

  In an insourcing vs. outsourcing situation, which of the following qualitative factors is usually considered?

  A. Special technology.
  B. Skilled labor.
  C. Special materials requirements.
  D. All of the answers are correct.
  D. All of the answers are correct.

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  Explanation

  Special technology may be available either within or outside the firm that relates to the particular product. The firm may possess necessary skilled labor or the supplier may.

  Special materials requirements may also affect the decision process because one supplier may have monopolized a key component. Another factor to be considered is that assurance of quality' control is often a reason for making rather than

  buying.