IMANET IMANET Certifications IMANET-CMA Questions & Answers

• Question 81:

  Ordinarily, the most appropriate basis on which to evaluate the performance of a division manager is the division's

  A. Contribution margin.

  B. Net revenue minus controllable division costs.

  C. Gross profit

  D. Net income minus the division's fixed costs.

  Correct Answer: B

  Managerial performance should be evaluated on the basis of those factors controllable by the manager. Managers may control revenues, costs, and/or investment in resources A well-designed responsibility accounting system establishes responsibility centers within the organization

• Question 82:

  The budget that describes the long-term position, goals, and objectives of an entity within its environment is the

  A. Capital budget

  B. Operating budget

  C. Cash management budget.

  D. Strategic budget

  Correct Answer: D

  Strategic budgeting is a form of long-range planning based on identifying and specifying organizational goals and objectives. The strengths and weaknesses of the organization risk levels are assessed. The influences of environmental factors are forecast to derive the best strategy for reaching the organization's objectives.

• Question 83:

  The controller of JoyCo has requested a quick estimate of the manufacturing supplies needed for the Morton Plant for the month of July when production is expected to be 470,000 units to meet the ending inventory requirements and sales of 475 .000 units. JoyCo's budget analyst has the following actual data for the last 3 months:

  

  Using these data and the high-low method to develop a cost estimating equation, the estimate or needed manufacturing supplies for July would be

  A. $652,500

  B. $681,500

  C. $749,180

  D. $752,060

  Correct Answer: D

  The fixed and variable portions of mixed costs may be estimated by identifying the highest and the lowest costs within the relevant range. The difference in cost divided by the difference in activity is the variable rate. Once the variable rate is found, the fixed portion is determinable April and March provide the highest and lowest amounts. The difference in production was 90,000 units (540,000 April - 450,000 March), and the difference in the cost of supplies was $130,500 ($853,560 - $723,060). Hence, the unit variable cost was 145 ($130,500 + 90,000 units). The total variable costs for March must have been $652,500 (450.000 units x $145 VC per unit), and the fixed cost must therefore have been $70,560 ($723,060 - $652,500). The probable costs for July equal $681,500 (470,000 units x $145 VC per unit) and $70,560 of fixed costs, a total of $752,060.

• Question 84:

  Kallert Manufacturing currently uses the company's budget only as a planning tool The company decided that it would be beneficial to also use budgets for control purposes. In order to implement this change, the management accountant must

  A. Appoint a budget director

  B. Organize a budget committee

  C. Develop forecasting procedures.

  D. Synchronize the budgeting and accounting system with the organizational structure.

  Correct Answer: D

  A budget can be many tools in one. It can be used for planning, communications, motivation, and control. An internal control structure includes the accounting system. For the budgetary process to serve effectively as a control function, it must be integrated with that system and the organizational structure The budget provides the standards for evaluating the data generated by the accounting system. Budgets also directly supply certain internal accounting data Examples are standard costs. Relating the budgeting and accounting systems to the organizational structure will therefore enhance control by transmitting data and assigning variances to the proper organizational subunits.

• Question 85:

  All types of organizations can benefit from budgeting. A major difference between governmental budgeting and business budgeting is that

  A. Business budgeting is required by the SEC.

  B. Governmental budgeting is usually done on a zero-base

  C. Business budgeting can be used to measure progress in achieving company objectives, whereas governmental budgeting cannot be used to measure progress in achieving objectives.

  D. Governmental budgeting usually represents a legal limit on proposed expenditures

  Correct Answer: D

  A governmental budget is a legal document adopted in accordance with procedures specified by applicable laws. It must be complied with by the administrators of the governmental unit included in the budget. Because the effectiveness and efficiency of governmental efforts are difficult to measure in the absence of the profit- centered activity that characterizes business operations, the use of budgets in the appropriation process is of major importance

• Question 86:

  Activity scheduling information for the installation of a new computer system is given below.

  

  For this project, the critical path is

  A. A-C

  B. B-E

  C. A-D-E

  D. B-D-C

  Correct Answer: C

  The critical path is the longest path because it defines the minimum duration of the project. A-D-E(4+6+5 15)is the critical path.

• Question 87:

  A company's product has an expected 4-year life cycle from research, development, and design through its withdrawal from the market. Budgeted costs are Upstream costs (RandD. design) $2,000,000 Manufacturing costs 3.000.000 Downstream costs (marketing, distribution, customer service) 1,200.000 After-purchase costs 1.000.000 The company plans to produce 200.000 units and price the product at 125% of the whole- life unit cost. Thus, the budgeted unit selling price is

  A. $15

  B. $31

  C. $36

  D. $45

  Correct Answer: D

• Question 88:

  FuIford Company applies the target pricing and costing approach. The following information about costs and revenues of Fulford's product are available for the year just ended. Unit sates 60,000 Unit selling price $ 400 Cost of goods sold 13,200.000 Value-chain operating costs excluding production 7,920.000 Fulford plans to increase unit sales to 80000 by reducing the product's unit price to $320. If Fulford desires a unit target operating income of 12%, by what amount must it reduce the full cost per unit?

  A. $32.00

  B. $38.40

  C. $70.40

  D. $80.00

  Correct Answer: C

• Question 89:

  If a U.S. manufacturer's price in the U.S. market is below an appropriate measure of costs and the seller has a reasonable prospect of recovering the resulting loss in the future through higher prices or a greater market share, the seller has engaged in

  A. Collusive pricing

  B. Dumping.

  C. Predatory pricing D. Price discrimination.

  Correct Answer: C

  Predatory pricing is intentionally pricing below cost to eliminate competition and reduce supply. Federal statutes and many state laws prohibit the practice. The U.S. Supreme Court has held that pricing is predatory when two conditions are met: (1) The seller's price is below an appropriate measure of its costs," and (2) it has a reasonable prospect of recovering the resulting loss through higher prices or greater market share.

• Question 90:

  Several surveys point out that most managers use full product costs, including unit fixed costs and unit variable costs, in developing cost-based pricing. Which one of the following is least associated with cost-based pricing?

  A. Price stability

  B. Price justification.

  C. Target pricing.

  D. Fixed-cost recovery.

  Correct Answer: C

  A target price is the expected market price of a product, given the company's knowledge of its customers and competitors. Hence, under target pricing, the sales price is known before the product is developed. Subtracting the unit target profit margin determines the long-term unit target cost. If cost-cutting measures do not permit the product to be made at or below the target cost, it will be abandoned.