Page: 1
/ 14
Total 1336 questions
IMANET CMA Certified Management Accountant Exam Practice Test
Question 1
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
Answer : D
If Stewart had sufficient idle capacity to manufacture its annual requirements of both bearings, it would be willing to pay no more than $10.50 ($3.75 + $4.50 + $2.25) for a unit of B18. Since the given fixed cost will continue if the idle capacity is not used, Stewart would increase its costs by paying more than the unit variable cost ($3.74 +$4.50+$2.25=$10,50). However, Stewart must purchase some bearings because it has insufficient idle capacity to produce its requirements. The given supplier's prices for B12 and B18 result in a loss per machine hour of $1.20 and $1.00, respectively. At those prices, Stewart should manufacture all its requirements of B12 and purchase some units of B18 . Assuming the given price of B12 is held constant, Stewart would benefit from purchasing B12 only if the loss per hour from buying B18 exceeded $1.20 per hour, or $3.60 per bearing (3 hrs. x $1.20). The maximum price for B18 is thus $ 14.10 ($10.50+ $3.60).
Question 2
The segmented income statement for a retail company with three product lines is presented below:
The company buys the goods in the three product lines directly from manufacturers' representatives. Each product line is directed by a manager whose salary is included in the administrative expenses. Administrative expenses are allocated to the three product lines equally because the administration is spread evenly among the three product lines. Salaries represent payments to the workers in each product line and therefore are traceable costs of each product line. Advertising promotes the entire company rather than the individual product lines. As a result, the advertising is allocated to the three product lines in proportion to the sales revenue. Commissions are paid to the salespersons in each product line based on 2% of gross sales. Rent represents the cost of the retail store and warehouse under a lease agreement with 5 years remaining. The product lines share the retail and warehouse space, and the rent is allocated to the three product lines based on the square footage occupied by each of the product lines. The company buys the goods in the three product lines directly from manufacturers' representatives. Each product line is directed by a manager whose salary is included in the administrative expenses. Administrative expenses are allocated to the three product lines equally because the administration is spread evenly among the three product lines. Salaries represent payments to the workers in each product line and therefore are traceable costs of each product line. Advertising promotes the entire company rather than the individual product lines. As a result1 the advertising is allocated to the three product lines in proportion to the sales revenue. Commissions are paid to the salespersons in each product line based on 2% of gross sales. Rent represents the cost of the retail store and warehouse under a lease agreement with 5 years remaining. The product lines share the retail and warehouse space, and the rent is allocated to the three product lines based on the square footage occupied by each of the product lines. The segmented income statement for this retail company does not facilitate performance evaluation because it does not distinguish between controllable and uncontrollable costs. The only costs and expenses controllable at the product-line level for this retail company are
Answer : C
Commissions, cost of sales, and salaries are all traceable to each of the product lines and are therefore controllable. Administrative expenses are common or corporate-level expenses, advertising does not promote a specific product line, and rent is paid on a building shared by all product lines.
Question 3
A firm often factors its accounts receivable. Its finance company requires a 6% reserve and charges a 1.4% commission on the amount of the receivables. The remaining amount to be advanced is further reduced by an annual interest charge of 15%. What proceeds (rounded to the nearest dollar) will the firm receive from the finance company at the time a $100,000 account due in 60 days is factored?
Answer : C
The factor will withhold $6,000 ($100000 x 6%) as a reserve against returns and allowances and $1,400 ($100,000 x 1.4%) as a commission. The remaining $92,600 will be reduced by interest at the rate of 15% annually. The interest charge should be $2,315, assuming a 360-day year [($92,600 x .15) x (60-day payment period 360 days)]. The proceeds to be received by the seller equal $90,285 ($92,600 - $2,315)
Question 4
Multi Frame Company has the following revenue and cost budgets for the two products it sells:
The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at $975,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, Multi Frame rounds to the nearest cent and unit.The total number of units needed to break even if sales were budgeted at 150,000 units of plastic frames and 300,000 units of glass frames with all other costs remaining constant is
Answer : C
The unit contribution margins for plastic frames and glass frames are $5 ($10 ---$2--- $3) and $7 ($15 --- $3 --- $5), respectively. If the number of plastic frames sold is 50% of the number of glass frames sold, a composite unit will contain one plastic frame and two glass frames. Thus, the composite unit contribution margin will be $19 ($5 + $7 + $7), and the breakeven point in units will be 153,947 [3 units x ($975,000 + $19)]. Barnes Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented in the next column.
Question 5
A large firm that seeks specialization advantages by focusing marketing efforts on a sub segment of a marketing segment is engaged in
Answer : B
Niche marketing is a specialized strategy that directs marketing efforts toward customers in a market segment who want a unique set of benefits. Niche marketing typically appeals to smaller firms with limited resources, but larger firms also engage in niche marketing. It is attractive to these firms due to its cost effectiveness, the result of focusing marketing funds on a targeted group. Niche customers have unique wants and will pay higher prices for their satisfaction. Moreover, an ideal niche attracts little if any competition, has growth and profit potential, and confers production and marketing advantages that derive from specialization (e.g., knowledge of customers). The Internet is especially conducive to niche (and microfiche) marketing because websites may be established cheaply.
Question 6
A firm in a declining industry ordinarily adopts one of four strategies. A firm that follows a?
Answer : B
A leadership strategy is pursued by a firm that believes it can achieve market share gains to become the dominant firm. An assumption is that additional investment can be recovered A second assumption is that success will put the firm in a better position to hold its ground or subsequently to follow a harvest strategy, This strategy may entail aggressive pricing. marketing, or other investments that raise the stakes for competitors; reducing competitors' exit barriers by acquisitions of their capacity or products, assuming their contracts, and producing spare parts and generic versions of goods for them; demonstrations of strength and risk*vet to remain in the industry and publicizing accurate data about the reality of future decline so as to dispel competitors' uncertainly.
Question 7
When using the net present value method for capital budgeting analysis1 the required rate of return is called all of the following except the
Answer : A
The rate used to discount future cash flows is sometimes called the cost of capital, the discount rate, the cutoff rate, or the hurdle rate. A risk1ree rate is the rate available on risk-free investments such as government bonds. The risk-free rate is not equivalent to the cost of capital because the latter must incorporate a risk premium.
All Official Question Types