Updated Mar-2023 Pass CMA-Strategic-Financial-Management Exam - Real Practice Test Questions
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NEW QUESTION 31
Assuming mere are no other imitations, should AMI accept the one-time order from a financial perspective?
Explain your answer
Essay
Apex Manufacturing lnc. (AMI) is a Canada-based company that manufactures a manufactures and unique part for aircrafts. It has few competitors in the market. The company is exposed to exchange rate risk because about 90% of its products are exported to the U.S, and most of its sales contracts are in U.S. dollars. AMI has the capacity to manufacture 1,500 units of the part per year. For the year just ended. AMI manufactured and sold 1,000 units. The operating results are shown below.
Recently, A new customer made a one-area order of 500 units of the part at $1.200 per unit. The CTO asked the controller to analyze this offer. AMI is considering adjusting its sales price next year in a recent meeting, the CFO suggested to use the market-based approach for pricing decisions, bat the controller insisted that the cost-based approach is more favorable to the company.
Answer:
Explanation:
See the explanation for the answer.
Explanation
As the price offered is $1200 which is greater than the contribution per unit of $1000, the project should be accepted.
It will increase the profits of me company by $100,000
(500 X $200)
NEW QUESTION 32
Plenary Inc specializes in overnight package delivery. Total packages delivered last year were 10 000.000. and this quantity is expected to remain unchanged in the coming year. Unit contribution margin is $4,50 and total fixed costs are S40.000,000. The firm's 300 delivery truck drivers are seeking a S10 000 raise in annual salary In addition to a current base salary of $45 000 per year, the drivers receive a commission of $0 50 per package delivered If the firm grants the $10,000 salary increase to each driver and seeks to maintain the same level of pre-tax operating profit what is the maximum amount of commission the firm can pay its drivers per package delivered?
- A. $0.0
- B. $0.35
- C. $0.20
- D. $0.30
Answer: C
NEW QUESTION 33
IF a company does not have a code of conduct, the company most likely
- A. must find another way to express its ethical principles
- B. is missing important guidance on ethical decision making
- C. can use its statement of values instead to implement ethics in daily decision making
- D. will lack an expressed statement of values regarding ethical behavior
Answer: B
NEW QUESTION 34
An accountant is employed in the financial reporting department of a publicly-traded company. The company s compensation plan includes a year-end bonus based on the entity's financial performance and stock option rewards based on individual performance Using iMAs Statement of Ethical Professional Practice, identify the ethical Issues, if any, that may Be presented by this company s compensation plan.
- A. The pan could threaten the accountant s competence
- B. The plan could threaten the accountant s credibility
- C. No significant potential threats are presented by the plan
- D. The plan could threaten the accountant's integrity
Answer: D
NEW QUESTION 35
Custom Ceramics produces two hand-painted items a large bowl and a large platter. Relevant information for each of these items is shown below
- A. The company should produce only bowls because the contribution margin per bowl is higher.
- B. The company should produce only platters because the contribution margin per painting hour is higher
- C. The company should produce only platters because the variable cost per platter is lower
- D. The company should produce only bowls because the sales price per Bowl is higher
Answer: B
NEW QUESTION 36
Accounts receivable turnover increases from 4.0 times to 6.0 times. It all sales are on account when one of the following must decrease?
- A. Accounts receivable
- B. Days sales in receivables
- C. Cash
- D. Sales
Answer: B
NEW QUESTION 37
Amy Curtin sells used cars of a reliable bona Curtin has no knowledge of me history or any or the specific cars She believes that the brand is reliable, and is considering whether it is acceptable to offer only this general Information rather than specific information regarding me cars when trying to complete each sale The company has always preferred to make the sale and worry about any warranty issues later and there are no legal disclosure requirements in their jurisdiction Curtin considers herself to be an ethical person but she does not want to lose out on any potential sales of vehicles that are most likely in good mechanical condition Which one of the following statements best represents what Curtin should consider related to the meaning of ethics?
- A. Ethics is driven by compliance with a set of regulations or laws
- B. Ethics is about the integrity of the decision making process to resolve issues
- C. Ethics is about being consistent with the ethical tone set by the organization
- D. Ethics is about decisions where the relevant policies are informal and not documented
Answer: B
NEW QUESTION 38
Essentials inc. operates two segments. Segment A and Segment B information about the revenues and costs for Essentials tot the previous year (by segment) is shown below The above analysis shows that Segment A is not profitable if Segment A is dropped, the revenues associated with the account will be lost and the related variable costs win be eliminated Also, the space freed by this product line will be rented for $40.000. The operating profit (loss) after dropping Segment A will be
- A. $90.000
- B. $5,000
- C. ($35,000)
- D. $50.000
Answer: B
NEW QUESTION 39
Which one of the following moral philosophies states that the morality of an action is inherent and not based on the consequences of the action?
- A. Relativism
- B. Deontology
- C. Teleology
- D. Utilitarianism
Answer: B
NEW QUESTION 40
In an Enterprise Risk Management environment, which one of the following is the best example of risk sharing?
- A. Establishing operational limits
- B. Self-insuring against loss
- C. Outsourcing business processes
- D. Reallocating capital among operating units
Answer: C
NEW QUESTION 41
The best discount rate to the use for evaluate of investment opportunities is the
- A. average market interest rate
- B. risk-free interest rate
- C. opportunity cost of capital
- D. cost of the company's debt
Answer: C
NEW QUESTION 42
Which one or the following costs Is a variable product cost?
- A. Promotional materials distributed to raise brand awareness
- B. Plant manager s salary for a computer chip manufacturer
- C. Payroll taxes based on the hourly wages of plant personnel
- D. Office rent in a temporary staffing company
Answer: C
NEW QUESTION 43
A corporation's board of directors has just declared its next regular quarterly cash dividend. The record date for this dividend will occur
- A. after the ex-dividend date and after the payment date
- B. before the payment date and after the ex-dividend date
- C. before the ex-dividend date and after the payment date
- D. before the ex-dividend date and before the payment date
Answer: D
NEW QUESTION 44
Identify and explain two ways for AMI to hedge its exchange rate risk.
Essay
Apex Manufacturing lnc. (AMI) is a Canada-based company that manufactures a manufactures and unique part for aircrafts. It has few competitors in the market. The company is exposed to exchange rate risk because about 90% of its products are exported to the U.S, and most of its sales contracts are in U.S. dollars. AMI has the capacity to manufacture 1,500 units of the part per year. For the year just ended. AMI manufactured and sold 1,000 units. The operating results are shown below.
Recently, A new customer made a one-area order of 500 units of the part at $1.200 per unit. The CTO asked the controller to analyze this offer. AMI is considering adjusting its sales price next year in a recent meeting, the CFO suggested to use the market-based approach for pricing decisions, bat the controller insisted that the cost-based approach is more favorable to the company.
Answer:
Explanation:
See the explanation for the answer.
Explanation
Either enter into a forward contact for the used Or enter into a money market hedge to get the receivable at the current spot rate and take the loan in used to be paid by the customer when they are due for their payments.
NEW QUESTION 45
The production process of a company s main product yields a by-product Production costs or $700,000 are incurred during this process and $300,000 m additional costs are incurred to finalize the main product. The by-product can be sold for $200 000 without further processing A manager proposed the conversion of the by-product into another product that would cost $100,000 and generate revenue of $250,000. When deciding on this proposal the company should
- A. evaluate whether other nonfinancial factors outweigh the Si 50.000 in incremental income
- B. treat the $100,000 conversion cost as the marginal cost 1o produce the new product
- C. ignore the $200 000 sales revenue for the by-product because it Is irrelevant
- D. select an approbate cost allocation method to allocate the $1 100 000 joint costs
Answer: B
NEW QUESTION 46
When evaluating a capital Budgeting proposal, an advantage of using the payback method is that Bits process
- A. assesses the liquidity of the project.
- B. objectively determines if the proposal should be accepted or rejected.
- C. considers the time value of money.
- D. incorporates all of the project's cash inflows and outflows
Answer: A
NEW QUESTION 47
Identify the market structure in which OLI operates and explain how OLi's pricing is affected by this mantel structure Essay Online Learning Inc. lOLI) is a privately-held company based in the IUC that specializes in providing online courses in English as a Second Language (ESL). OLI is trying to set up a new sales office in a foreign country.
It needs a business license to operate in that country. The license normally lakes six months to obtain. An official of that country said that he could expedite the process for a fee of €300.
OLI estimates the new sales office can bring €300,000 incremental profit annually OLI has just launched a new online 40-houi course to help adult ESL learners master basic business English. The price of the new course is €500 per student, the variable cost is €300 per student, and the total fixed cost of the new course is
€300.000 per year OLI spent €200.000 to develop the new course before launching it. There are many online course providers in the marketplace, and each has its own feature However, OLI's highly qualified staff and good reputation have enabled it to charge a premium price compared to its major competitors. Recent market research indicates that if OLI raises the price of its new business English course by 10V the student enrollment would decrease by 5V A regional airlines company in Asia has approached OLI and offered to enroll 1.000 of its employees in the new course if OLI would agree to a special price of €350 per employee If OLI accepts this offer, an additional €10,000 onetime cost would be required to temporally expand its capacity to accommodate the new students.
Answer:
Explanation:
See the explanation for the answer.
Explanation
The market is quite sensitive to prices as the change in price is affecting me demand However the company has less opportunity over here to increase the prices for its premium service as the customers would be willing to pay less and get the same service from the competitor.
NEW QUESTION 48
A management accountant overheard the company's procurement manager discussing a kickback payment for one of the company s recent projects. The procurement manager promised to pay a share to the other person II the arrangement was kept confidential According to the IMA Statement of Ethical Professional Practice which one of the following is the most appropriate action for the management accountant to take?
- A. Report the information directly to a nigh-level company executive since it is a serious matter
- B. Take no action since the incident is not related to the accounting department
- C. Call the company's ethics helpline and report the matter anonymously
- D. Discuss the incident with his or her own attorney and consider disassociating from the company
Answer: A
NEW QUESTION 49
Abex Employment Agency has requested an increase in the firm's line of credit, and the bank is reviewing Abex's sales and collections history Although the firm's sales have increased the bank is concerned about the credit quality of the firm's customers Based on the following information calculate the average collection period for the firm Use a 365-day year in your calculations.
- A. 99 days
- B. 88 days
- C. 101 days
- D. 80 days
Answer: D
NEW QUESTION 50
Below is the income statement and balance sheet for a retail corporation.
What is the corporation's return on equity in Year 2?
- A. 23%
- B. 48%
- C. 26%
- D. 39%
Answer: B
NEW QUESTION 51
If a CMA is asked to conduct a financial assessment of a company owned by a close relative, what would be the proper response under the credibility standard of the IMA Statement of Ethical Professional Practice?
- A. Provide an assessment that is timely and accurate despite the personal relationship
- B. Keep information confidential except when authorized By the relative
- C. Advise all parties of a potential conflict of interest
- D. Communicate the existence of a constraint that might preclude responsible judgment
Answer: C
NEW QUESTION 52
Company Y records a receivable from a foreign customer in Company Y's functional currency. The receivable is due in 90 days and is to be paid in the customer s currency. This is an example of which type of risk exposure?
- A. Translation risk
- B. Transaction risk
- C. Foreign investment risk
- D. Economic risk
Answer: B
NEW QUESTION 53
Javier makes hand-looted learner dog collars. The materials cost $10 per collar and the collars are sold for $50 each. Javier sells me collars at a local farmer's market mat charges S100 per month for space rental if Javier's income tax rate is 30%, how many collars must Javier sell each year to earn $1,000 net income?
- A. 0
- B. 1
- C. 2
- D. 3
Answer: D
NEW QUESTION 54
Calculate AMI's degree of operating leverage. Show your calculations.
Essay
Apex Manufacturing lnc. (AMI) is a Canada-based company that manufactures a manufactures and unique part for aircrafts. It has few competitors in the market. The company is exposed to exchange rate risk because about 90% of its products are exported to the U.S, and most of its sales contracts are in U.S. dollars. AMI has the capacity to manufacture 1,500 units of the part per year. For the year just ended. AMI manufactured and sold 1,000 units. The operating results are shown below.
Recently, A new customer made a one-area order of 500 units of the part at $1.200 per unit. The CTO asked the controller to analyze this offer. AMI is considering adjusting its sales price next year in a recent meeting, the CFO suggested to use the market-based approach for pricing decisions, bat the controller insisted that the cost-based approach is more favorable to the company.
Answer:
Explanation:
See the explanation for the answer.
Explanation
$1m/$0.5,
2 times
contribution/operating income
They can simply revalue their assets and hence ask for a higher price for their company or they re structure their financing structure by either issuing fleets or reducing me equity by paying a special one off dividend.
NEW QUESTION 55
Calculate QDDs financial leverage ratio show your calculations
Essay
Quality Digital Design (QDD) Inc is a public-traded technology company Selected financial data of QDD for the prior year are as follows
QDD's stock was trading at $160 per share at the beginning of the yea: and at $176 per share by the end of the year. The company paid dividends of S5 per share. The company "s stock had a beta of 1 4 The stock market provided a total return of 12% last year, well above the 3% risk free rate of return QDD is considering the issuance of $200 million of bonds to fund the repurchase of $200 million of its stock.
QDD is evaluating the bond, including its term structure, maturity, and whether it should be callable obtaining the lowest coupon interest is an important objective of QDD. The CFO has estimated that sales for the current year would remain the same as last year and the new bond would add S12 million in annual interest payments.
Answer:
Explanation:
See the explanation for the answer.
Explanation
NEW QUESTION 56
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