IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 961:

  The benefits of a just-in-time system for raw materials usually include

  A. Elimination of nonvalue-adding operations
  B. Increase in the number of suppliers,thereby ensuring competitive bidding.
  C. Maximization of the standard delivery quality,thereby lessening the paperwork for each delivery.
  D. Decrease in the number of deliveries required to maintain production.
  A. Elimination of nonvalue-adding operations

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  Explanation

  Nonvalue0adding activities are thise that do not add to customer value or satisfy an organization need.inventory activities are inherently nonvalue-adding.thus,a system,such as JIT,that promotes lean production and reduces inventory and its attendant procedures(storage,handling,etc.)also redces nonvalue-adding activities.

• Question 962:

  The following information applies to Brandon Company:

  

  A cash payment equal to 40% of purchases is made at the time of purchase1 and 30% is paid in each of the next 2 months. Purchases for the previous November and December were $150,000 per month. Payroll is 10% of sales in the month it occurs, and operating expenses are 20% of the following month's sales (July sales were $220,000). Interest payments were $20,000 paid quarterly in January and April. Brandon's cash disbursements for the month of April were

  A. $140,000.
  B. $152,000.
  C. $200,000.
  D. $254,000.
  D. $254,000.

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  Explanation

• Question 963:

  The modeling technique to be used for situations involving a sequence of events with several possible outcomes associated with each event is

  A. Queuing theory.
  B. Simulation.
  C. Linear programming.
  D. Decision tree analysis.
  D. Decision tree analysis.

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  Explanation

  Decision tree analysis is useful when the most beneficial series of decisions is to be chosen. The possible decisions for each decision point, the events that might follow from each decision, the probabilities of these events, and the quantified outcomes should be known.

• Question 964:

  Bakker Industries sells three products (Products 611.613. and 615) that it manufactures in a factory consisting of one department Both labor and machine time are applied to the products. Bakker's management is planning its production schedule for the next several months. There are labor shortages in the community. Some of the machines will be out of service for extensive overhauling Available machine and labor time for each of the next 6 months is listed below. Monthly Capacity Availability

  

  What is the excess (deficiency) for labor hours?

  A. (100) hours
  B. 300 hours.
  C. 700 hours
  D. 1.800 hours.
  B. 300 hours.

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  Explanation

  The excess (deficiency) for labor hours in a given department is found by initial' multipl'4ng the labor hours required to produce a product by the demand for that product. The totals would then be 1.000 for product 611,400 for product 613, and

  2. 000 for product 615. The totals are then added together to get 3,400 hours. This number is then subtracted from labor hours available, 3,700. to get an excess of 300 labor hours.

• Question 965:

  An organization would usually offer credit terms of 2/101 net 30 when

  A. The organization can borrow funds at a rate exceeding the annual interest cost.
  B. The organization can borrow funds at a rate less than the annual interest cost.
  C. The cost of capital approaches the prime rate.
  D. Most competitors are offering the same terms, and the organization has a shortage of cash.
  D. Most competitors are offering the same terms, and the organization has a shortage of cash.

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  Explanation

  Because these terms involve an annual interest cost of over 36%, a company would not offer them unless it desperately needed cash. Also, credit terms are typically somewhat standardized within an industry. Thus, if most companies in the industry offer similar terms. a firm will likely be forced to match the competition or lose market share.

• Question 966:

  Tonya, Inc. has a cost of capital of 15% and is considering the acquisition of a new machine that costs $800,000 and has a useful life of 5 years. Tonya projects that earnings and cash flow will increase as follows:

  

  Interest rate factors at 15% are as follows:

  

  What is the payback period of this investment?

  A. 1.Syears.
  B. 3. Oyears.
  C. 3. 3 years.
  D. 4. 0 years.
  B. 3. Oyears.

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  Explanation

  The payback method is simply the time required to recover the investment. It does not consider the time value of money or returns after the payback period. When cash flows are not uniform, a cumulative calculation is necessary. Thus, 3. 0 years is the payback period ($320,000 in the first year, $280,000 in the second year, and $200,000 in the third year).

• Question 967:

  JJ Motors, Inc. employs 45 sales personnel to market its line of luxury automobiles. The average car sells for $23,000, and a 6% commission is paid to the salesperson. JJ Motors is considering a change to a commission arrangement that would pay each salesperson a salary of $2,000 per month plus a commission of 2% of the sales made by that salesperson. The amount of total monthly car sales at which JJ Motors would be indifferent as to which plan to select is

  A. $2250,000
  B. $3000.000
  C. $1500,000
  D. $1250,000
  A. $2250,000

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  Explanation

• Question 968:

  The Frame Supply Company has just acquired a large account and needs to increase its working capital by $100,000. The controller of the company has identified the four sources of funds given below.

  1. Pay a factor to buy the company's receivables, which average $125,000 per month and have an average collection period of 30 days. The factor will advance up to 80% of the face value of receivables at 10% and charge a fee of 2% on all receivables purchased. The controller estimates that the firm would save $24,000 in collection expenses over the year Assume the fee and interest are not deductible in advance

  2. Borrow $110000 from a bank at 12% interest A 9% compensating balance would be required.

  3. Issue $110,000 of 6-month commercial paper to net $100,000 (New paper would be issued every 6 months.)

  4. Borrow $125,000 from a bank on a discount basis at 20%. No compensating balance would be required. Assume a 360-day year in all of your calculations. The cost of Alternative 1. to Frame Supply Company is

  A. 10.0%
  B. 12. 0%
  C. 132%
  D. 16. 0%
  D. 16. 0%

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  Explanation

  The factor will advance $100,000 ($125,000 x 80%). This amount is the average balance outstanding throughout the year. Thus, annual interest will be $10,000 ($100,000 x 10%). In addition, the company will pay an annual fee of $30,000 ($125,000 per month x 2% x 12 months), so the total annual net cost is $16,000 ($10,000 ?$30,000 - $24,000 savings). Hence, the annual cost is 16% ($16,000 ?$100,000 loan).

• Question 969:

  A strategic group analysis does all but which of the following?

  A. Determines what mobility barriers exist
  B. Forecasts future group actions and trends
  C. Considers how the firm compares with the competitors within the chosen strategic group
  D. Predicts reaction patterns to events such as competitive attacks
  C. Considers how the firm compares with the competitors within the chosen strategic group

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  Explanation

  An overall industry analysis, not a strategic group analysis, considers how the firm compares with the competitors within the chosen strategic group, e.g., on the basis of its scale of operations, the intensity of group rivalry, and the differences in the ability of the group members to implement their strategies.

• Question 970:

  A small retail business would most likely finance its merchandise inventory with

  A. Commercial paper
  B. A terminal warehouse receipt loan.
  C. A line of credit.
  D. A chattel mortgage.
  C. A line of credit.

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  Explanation

  A small retail store would not have access to major capital markets. In fact, the only options available, outside of owner financing, are bank loans and a line of credit from suppliers. It is this latter alternative that is most often used because it permits the store to finance inventories for 30 to 60 days without incurring interest cost. A line of credit is an arrangement between a bank and a borrower in which the bank commits itself to lend up to a certain maximum amount to the borrower in a given period.