IMANET-CMA Online Practice Questions and Answers

Simulation, a widely used technique in decision modeling, is a

A. Process of modeling in which real activities are represented in mathematical form.

B. Tool used for allocating scarce resources.

C. Technique used to add random behavior to simulate uncertain.

D. Technique used to map out possible actions given probabilistic events.

A manufacturer contemplates a change in technology that would reduce fixed costs from $800,000 to $700 .000. However, the ratio of variable costs to sales will increase from 68% to 80%.Whatwill happen to break-even level of revenues?

A. Decrease by $301,470.50

B. Decrease by $500,000

C. Decrease by $1,812,500

D. Increase by $1,000,000

The statement of income for Dimmell Co. presented be represents the operating results for me fiscal year just ended. Dirnmell had sales of 1.800 tons of product during the current year the manufacturing capacity of Dimmells facilities is 3000 tons of products.

Dimmell is considering replacing a highly labor intensive process with an automatic machine. This would result in an increase of $58,500 annually in manufacturing fixed costs The variable manufacturing costs would decrease $25 per ton The new breakeven volume in tons would be?

A. 990 tons.

B. 1.224 tons

C. 1.554 tons

D. 612 tons

Oradell Company sells its single product at a price of $60 per unit and incurs the following van able costs per unit of product:

Oradell's annual fixed costs are $880.000, and Oradell is subject to a 30% income tax rate. If prime costs increased by 20% and all other values remained the same. Oradell Company's contribution margin (to the nearest whole percent) is?

A. 30

B. 76

C. 20

D. 24

A company sells two products, X and Y. The sales mix consists of a composite unit of 2 units of X for even 5 units of Y (2:5). Fixed costs are $49,500 The unit contribution margins for X and Y are $2.50 and $1.20. respectively. If the company had a profit of $22,000. the unit sales must have been?

A. 5.000 12,500

B. 13.000 32,500

C. 23.800 59,500

D. 32.500 13,000

The profitability index (present value index)

A. Represents the ratio of the discounted net cash outflows to cash inflows.

B. Is the relationship between the net discounted cash inflows less the discounted cash outflows divided by the discounted cash outflows.

C. Is calculated by dividing the discounted profits by the cash outflows.

D. Is the ratio of the discounted net cash inflows to discounted cash outflows.

Rohan Transport is considering two alternative busses to transport people between cities that are in the Southeastern U.S., such as Baton Rouge and Gainesville. A gas-powered bus has a cost of $55,000, and will produce end-of-year net cash flows of $22,000 per year for 4 years. A new electric bus will cost $90,000, and will produce cash flows of $28000 per year for 8 years. The company must provide bus service for 8 years, after which it plans to give up its franchise and to cease operating the route. Inflation is not expected to affect either costs or revenues during the next 8 years. If Rohan Transports cost of capital is 16%, by what amount will the better project increase the company's value?

A. $6,556

B. $(14,432)

C. $13,112

D. $31,632

Geary Manufacturing has assembled the data appearing in the next column pertaining to two products. Past experience has shown that the unavoidable fixed manufacturing factory overhead included in the cost per machine hour averages $10. Geary has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. Total machine capacity is 50,000 hours.

If Geary Manufacturing desires to follow an optimal strategy, it should produce a

A. 25,000 electric mixers and purchase all other units as needed.

B. 20000 blenders and 15,000 electric mixers, and purchase all other units as needed.

C. 20,000 blenders and purchase all other units as needed.

D. 28,000 electric mixers and purchase all other units as needed.

American Coat Company estimates that 60,000 special zippers will be used in the manufacture of men's jackets during the next year. Reese Zipper Company has quoted a price of $.60 per zipper. American would prefer to purchase 5,000 units per month, but Reese is unable to guarantee this delivery schedule. To ensure availability of these zippers, American is considering the purchase of all 60,000 units at the beginning of the year. Assuming American can invest cash at 8%1 the company's opportunity cost of purchasing the 60,000 units at the beginning of the year is

A. $1,320

B. $1,440

C. $2,640

D. $2,880

Assume that the Entertainment Division is able to purchase a large quantity of video cards from an outside source at $8.70 per unit. The Video Cards Division, having excess capacity, agrees to lower its transfer price to $8.70 per unit. This action would

A. Optimize the profit goals of the Entertainment Division while subverting the profit goals of Parkside.

B. Allow evaluation of both divisions on the same basis.

C. Subvert the profit goals of the Video Cards Division while optimizing the profit goals of the Entertainment Division.

D. Optimize the overall profit goals of Parkside.