IMANET CMA Certified Management Accountant Exam Practice Test

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Total 1336 questions
Question 1

Polar Company sells refrigeration components both in the U.S. and to a subsidiary located in France. One of the components, Part No. 456, has a variable manufacturing cost of $30. The part can be sold domestically or shipped to the French subsidiary for use in the manufacture of a residential subassembly. Relevant data with regard to Part No. 456 are shown below.

* lf deemed preferable, these units could be sold in the U.S. Polar's applicable income tax rates are 40% in the U.S. and 70% in France.Polar will transfer Part No. 456 to the French subsidiary at either variable manufacturing cost or the domestic market price. On the basis of this information, which one of the following strategies should be recommended to Polar's management?



Answer : C

If the 150,000 components are sold separately in the U.S., the after-tax profit per unit will be $21 [($65-$30)x.6]. The French subsidiary will then purchase150,000 components domestically to include in the subassembly. The per-unit profit on sales of the subassembly will be $12 [($170-$75-$55)x.3]. The total per-unit profit for the consolidated entity from these transactions will therefore be $33 ($21 + $12).


Question 2

On August 15, 19XX, National Corporation announced a 1-for-10 reverse split, the event to occur on September 6, subject to shareholder approval. The stock's closing price on August 14 was $1.375. If nothing changes, at what price would you expect the stock to sell after the stock split is made effective on September 6?



Answer : A

A reverse stock split, like a regular stock split, should not change market capitalization. Thus, if there are 1/10 as many shares outstanding as previously, they should be worth 10 times as much. Thus, the price after the reverse split would be $13.75 (10 x $1375).


Question 3

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

What is product 615's contribution per machine hour?



Answer : A

The contribution per machine hour of a given product is found by initial' calculating the contribution margin. Product 615 has a selling price of $167 and variable costs of $58. This gives a contribution margin of $109 ($167 ---$58). The contribution per machine hour is then found by dividing the contribution per unit by the machine hours required to produce the product, or $109 divided by 2 hours to give a contribution per machine hour of $54.50.


Question 4

If a corp4ration holds a forward contract for the dear, of US. Trashy bonds son 6 months and, during those 6 months, interest rte dine. at the end f the 6 months U value vf me rowed cacti have



Answer : A

Interest rate futures contracts airwave risk-free bonds, such as U.S. Treasury bonds When I interest rates decrease over the pentode a forward contract, the value of the bonds and the forward contract increase


Question 5

A company has two divisions, A and B, each operated as a profit center. A charges B $35 per unit for each unit transferred to B. Other data follow:

A is planning to raise its transfer price to $50 per unit Division B can purchase units at $40 each from outsiders, but doing so would idle A's facilities now committed to producing units for B. Division A cannot increase its sales to outsiders. From the perspective of the company as a whole, from whom should Division B acquire the units, assuming B's market is unaffected?



Answer : D

Opportunity costs are $0 because A's facilities would be idle if B did not purchase from A. Assuming fixed costs are not affected by the decision, the intracompany sale is preferable from the company's perspective because A's $30 variable unit cost is less than the outside vendors price of $40.


Question 6

Which one of the following statements about trade credit is correct? Trade credit is



Answer : C

Trade credit is a spontaneous source of financing because it arises automatically as part of a purchase transaction. The terms of payment are set by the supplier, but trade credit usually requires payment within a short period of time. Trade credit is an important source of credit for all businesses but especially for buyers, such as small businesses, that might not have access to other credit markets. Like all forms of financing, trade credit is subject to the risk of buyer default.


Question 7

A firm has $3 million in total assets and $1.65 million in equity. How much of its $500,000 capital budget should be debt- financed to retain the same debt-equity ratio?



Answer : B

The firm's total assets are $3 million and total equity is $1.65 million. Thus, liabilities are $1.35 million ($3 million - $1.65 million). The current debt-equity ratio is 1.35 to 1.65, or 45% ($1.35 million $3 million) to 55% ($1.65 million $3 million). Thus, to maintain this ratio, 45% of all new investment should come from debt financing. Multiplying 45% times the $500,000 capital budget results in a need for $225,000 in debt financing.


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Total 1336 questions