IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 941:

  A company is evaluating the possible introduction of a new version of an existing product that will have a 2-year life cycle. At the end of 2 years, this version will be obsolete, with no additional cash flows or salvage value. The initial and sole outlay for the modified product is $6 million, and the company's desired rate of return is 10%. Following are the potential cash flows (assumed to occur at the end of each year) and their probabilities if the product is marketed:

  

  The following interest factors for the present value of $1 at 10% are relevant: Period 1 .909

  2 .826 The project's net present value is

  A. $878,050
  B. $3,242,050
  C. $3,636,000
  D. $6,000,000
  A. $878,050

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  Explanation

• Question 942:

  Developing brand equity in a foreign market may be desirable but is subject to considerable risk. A global firm launching a new product in a new market most likely should

  A. Initially place most of its emphasis on advertising geared to the local culture.
  B. Fully decentralize control of the marketing process.
  C. Avoid creating partnerships with local distribution channels to avoid dilution of the brand.
  D. Balance standardization and customization of the product.
  D. Balance standardization and customization of the product.

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  Explanation

  The firm should determine the ratio of standardization and customization. Products that can be sold virtually unchanged throughout several markets provide a greater profit opportunity for a global firm. However, 1cultural differences may require extensive customization to appeal to markets in different countries

• Question 943:

  The cost described in situation II is a

  A. Prime cost.
  B. Discretionary cost.
  C. Relevant cost.
  D. Imputed cost.
  B. Discretionary cost.

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  Explanation

  A discretionary cost is characterized by uncertainly about the relationship of input (the cost) to output. It also tends to be the subject of a periodic decision regarding the outlay to be made. Research, advertising, and public relations are common examples. Thus, the annual cost of plant service is discretionary because of the difficultly of valuing the output.

• Question 944:

  Henderson, Inc. has purchased a new fleet of trucks to deliver its merchandise. The trucks have a useful life of 8 years and cost a total of $500.000. Henderson expects its net increase in after-tax cash flow to be $150,000 in Year 1, $175,000 in Year 2, $125,000 in Year 3, and $100,000 in each of the remaining years. If the net cash flow is $ 130,000 a year, what is the payback time for Henderson's fleet of trucks?

  A. 3years.
  B. 3. l5years.
  C. 3. 85 years.
  D. 4years.
  C. 3. 85 years.

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  Explanation

  payback period for an investment, ignoring the time value of money, can be found by accumulating each year's net cash flows until the initial investment is recovered. Therefore, dividing the $500,000 initial investment by the annual $130,000 inflow gives a payback time of 3. 85 years.

• Question 945:

  A customer-performance scorecard contains measures of

  l- Customer satisfaction ll- Brand awareness lll- New customers lV- Satisfaction of employees

  A. ll and lll only
  B. ll,lll, and lV only
  C. l, ll, lll, and lV
  D. l, ll, and lll only
  D. l, ll, and lll only

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  Explanation

  A customer-performance scorecard contains measures of new customers, lost customers, customer satisfaction, brand awareness, customer loyalty, identification of positioning and differentiation, and others

• Question 946:

  What is the rate of return for an investor who pays $1,054. 47 for a three-year bond with a 7% coupon and sells the bond 1 year later for $1 .037. 19?

  A. 5%
  B. 5. 08%
  C. 6. 64%
  D. 7%
  A. 5%

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  Explanation

  The investor would have a loss of $17. 28 on the sale ($1,054. 47-- $1 .037. 19). The $17. 28 loss would partial offset the $70 of interest income, reusing in a net return of $52. 72 ($70-- $17. 28). Dividing the $52. 72 by the $1,054. 47 original investment results in a 5% return.

• Question 947:

  Leland Manufacturing uses 10 units of Part Number KJ37 each month in the production of radar equipment. The unit cost to manufacture 1 unit of KJ37 is presented below.

  

  Material handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Leland's annual manufacturing overhead budget is one-third variable and two-thirds fixed. Scott Supply, one of Leland's reliable vendors, has offered to supply Part Number KJ37 at a unit price of $15,000.Assume that Leland Manufacturing does not wish to commit to a rental agreement but could use idle capacity to manufacture another product that would contribute $52,000 per month. If Leland elects to manufacture KJ37 in order to maintain quality control, Leland's opportunity? cost is

  A. $18,000
  B. $(20,000)
  C. $4,000
  D. Some amount other than those given
  C. $4,000

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  Explanation

  Opportunity cost is the maximum alternative earnings that might have been obtained if the productive good service or capacity had been applied to some alternative use. The additional total monthly cost of purchasing the component is $48,000. If the idle facilities could be used to produce a product contributing $52,000 per month, the net benefit opportunity cost of manufacture would be $4,0000.

• Question 948:

  If FLF Corporation must assume a 20% flotation cost on new stock issuances. what is the cost of new common stock'?

  A. 6. 25%
  B. 15%
  C. 16. 25%
  D. 10%
  C. 16. 25%

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  Explanation

• Question 949:

  Stewart Industries has been producing two bearings, components B12 and B18, for use in production.

  

  Stewart's annual requirement for these components is 8,000 units of B12 and 111000 units of B18. Recently, Stewart's management decided to devote additional machine time to other product lines resulting in only 41.000 machine hours per year that can be dedicated to the production of the bearings. An outside company has offered to sell Stewart the annual supply of the bearings at prices of $11.25 for B12 and $13. 50 for B

  18. Stewart wants to schedule the otherwise idle 41,000 machine hours to produce bearings so that the company can minimize its costs (maximize its net benefits).Assume that Stewart's idle capacity of 41,000 machine hours has a traceable avoidable annual fixed cost of $44,000 that will continue if the capacity is not used. The maximum price Stewart would be willing to pay a supplier for component B18 is

  A. $10.50
  B. $14. 00
  C. $14. 50
  D. Some amount other than those given.
  D. Some amount other than those given.

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  Explanation

• Question 950:

  The Childers Company sells widgets. The company breaks even at an annual sales volume of 75. 000 units Actual annual sales volume was 100,000 units, and the company reported a profit of $200,000. The annual fixed costs for the Childers Company are

  A. $800,000
  B. $600,000
  C. $75,000
  D. Insufficient information to determine amount of fixed costs
  B. $600,000

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  Explanation